Einstein Bros 2003 Annual Report Download - page 13

http://www.sec.gov/Archives/edgar/data/949373/000104746904009609/a2132006z10-k.htm[9/11/2014 10:13:55 AM]
We face risks associated with government regulation.
Each of our locations is subject to licensing and regulation by the health, sanitation, safety, labor, building and fire agencies of the respective
states and municipalities in which it is located. A failure to comply with one or more regulations could result in the imposition of sanctions,
including the closing of facilities for an indeterminate period of time, or third-party litigation, any of which could have a material adverse effect on
us and our results of operations.
In addition, our franchise operations are subject to regulation by the Federal Trade Commission. Our franchisees and we must also comply
with state franchising laws and a wide range of other state and local rules and regulations applicable to our business. The failure to comply with
federal, state and local rules and regulations would have an adverse effect on our franchisees and us.
Under various federal, state and local laws, an owner or operator of real estate may be liable for the costs of removal or remediation of certain
hazardous or toxic substances on or in such property. Such liability may be imposed without regard to whether the owner or operator knew of, or
was responsible for, the presence of such hazardous or toxic substances. Although we are not aware of any environmental conditions that require
remediation by us under federal, state or local law at our properties, we have not conducted a comprehensive environmental review of our
properties or operations. We may not have identified all of the potential environmental liabilities at our properties, and any such liabilities that are
identified in the future may have a material adverse effect on our financial condition.
We may not be able to protect our trademarks, service marks and other proprietary rights.
We believe that our trademarks, service marks and other proprietary rights are important to our success and our competitive position.
Accordingly, we devote substantial resources to the establishment and protection of our trademarks, service marks and proprietary rights. However,
the actions taken by us may be 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, service marks and other proprietary rights.
We have a majority stockholder.
Greenlight Capital, L.L.C. owns approximately 92 percent of our common stock on a fully diluted basis. As a result, Greenlight has sufficient
voting power, without the vote of any other stockholders, to determine what matters will be submitted for approval by our stockholders, to approve
actions by written consent without the approval of any other stockholders, to elect all of our board of directors, and to determine whether a change
in control of our company occurs. Greenlight's interests on matters submitted to stockholders may be different from those of other stockholders.
Greenlight is not involved in our day-to-day operations. Greenlight has voted its shares to elect a majority of our current board of directors, one of
whom is a former officer of Greenlight and the remainder of whom are not affiliated with Greenlight.
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We face potential regulatory sanctions, civil and criminal penalties and claims for monetary damages and other relief.
The SEC initiated an investigation relating to the reasons for our delay in filing our Form 10-K for fiscal 2001, the resignation of our former
Chairman, R. Ramin Kamfar, and the termination for cause of our former Chief Financial Officer, Jerold E. Novack. We are cooperating fully with
the SEC's investigation. We are also cooperating fully with a Department of Justice inquiry relating to the same. In addition, in August 2003, the
New York Attorney General commenced on investigation into prior sale of franchisees in New York. See Item 3. "Legal Proceedings." We may be
subject to regulatory sanctions, civil penalties and/or claims for monetary damages and other relief that may have a material adverse effect on our
business, prospects and financial condition.
EXECUTIVE OFFICERS OF THE REGISTRANT
Set forth below is information with respect to our executive officers:
Name Age Position
Paul J.B. Murphy III 49 Acting Chairman, Chief Executive Officer and Director
Susan E. Daggett 43 Chief Operating Officer
Richard P. Dutkiewicz 48 Chief Financial Officer
Jill B. W. Sisson 56 General Counsel and Secretary
Michael J. Mrlik II 46 Executive Vice President Operations
Paul J.B. Murphy III. Mr. Murphy was appointed Acting Chairman and Chief Executive Officer in October 2003. Mr. Murphy joined us in