Einstein Bros 2002 Annual Report Download - page 10

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http://www.sec.gov/Archives/edgar/data/949373/000104746903027186/a2116520z10-ka.htm[9/11/2014 10:14:22 AM]
inadequate to prevent imitation of our products and concepts by others or to prevent others from claiming violations of their trademarks and
proprietary rights by us. In addition, others may assert rights in our trademarks and other proprietary rights.
The holders of our Series F preferred stock control us.
Halpern Denny III, L.P. ("Halpern Denny"), one of the holders of Series F preferred stock, currently beneficially owns 50.1% of our Common
Stock. The other holders of our Series F preferred stock currently beneficially own an aggregate of an additional 39.5% of our Common Stock. In
addition, because the Series F preferred stock has remained outstanding for more than one year, the holders of Series F preferred stock are entitled
to receive additional warrants. In addition, the holders of Series F preferred stock currently have the right to designate up to four members of our
Board of Directors and, in the event that any dividends on the Series F preferred stock are in arrears, or if the Series F preferred stock is not
redeemed in accordance with its terms, the holders of the Series F preferred stock will be entitled to designate at least 50% of the members of our
Board of Directors. Pursuant to applicable law, we have been unable to pay the holders of the Series F preferred stock the dividends that were due
to them on June 30, 2002, September 30, 2002, December 31, 2002 and March 31, 2003. Such dividends are being accrued. This concentration of
voting power could allow Halpern Denny and/or the other holders of the Series F preferred stock to direct our affairs, and may also have the effect
of delaying or preventing a change of control.
10
ITEM 2. PROPERTIES
As of December 31, 2002, we and our franchisees and licensees operated 747 locations as follows:
State
Company-Operated
Franchised/Licensed
Total
Alabama — 2 2
Arizona 22 2 24
California 89 23 112
Colorado 27 2 29
Connecticut 5 4 9
Delaware 2 4 6
District of Columbia 1 6 7
Florida 47 27 74
Georgia 13 9 22
Illinois 35 1 36
Indiana 11 1 12
Kansas 11 — 11
Maryland 12 12 24
Massachusetts 4 2 6
Michigan 18 3 21
Minnesota 10 2 12
Missouri 17 1 18
Nevada 9 2 11
New Hampshire 1 — 1
New Jersey 5 49 54
New Mexico 5 — 5
New York 5 29 34
North Carolina 2 13 15
Ohio 13 2 15
Oregon 6 — 6
Pennsylvania 15 50 65
South Carolina — 4 4
Texas 24 5 29
Utah 20 — 20
Virginia 14 29 43
Washington 5 — 5
West Virginia — 1 1
Wisconsin 12 2 14