Einstein Bros 2003 Annual Report Download - page 58

http://www.sec.gov/Archives/edgar/data/949373/000104746904009609/a2132006z10-k.htm[9/11/2014 10:13:55 AM]
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(e) On May 30, 2002, we entered into a Loan and Security Agreement with BET, one of our principal stockholders, which provided for a
$7,500,000 revolving loan facility. The facility was secured by substantially all of our assets. Borrowings under the facility bore interest at
the rate of 11% per annum. The facility was to expire on March 31, 2003. At the time that we entered into this facility, we terminated our
prior revolving loan facility. In February of 2003, BET and we executed an amendment to the facility to extend the maturity of the facility
to June 1, 2003. From February 1, 2003 to June 1, 2003, the facility accrued interest at the rate of 13% per annum. BET received an
extension fee of $187,500 in connection with the amendment, payable at maturity, and an additional fee of $112,500 when the facility was
not paid in full by June 2, 2003.
On June 18, 2003, we entered into a 30-day standstill agreement with BET with respect to this revolving line of credit. The interest rate on
the revolving line of credit increased from 13% to 15% effective June 1, 2003. The debt outstanding under this facility was repaid on
July 8, 2003, with the proceeds of the $160 Million Facility. The AmSouth Revolver has replaced this facility.
Debt issuance costs were amortized using the effective interest method over the term of the Revolving Loan. Interest expense of $270,000,
$360,000 and $0 related to issuance costs has been recorded for the years ended December 30, 2003, December 31, 2002 and January 1,
2002.
(f) On July 8, 2003, we entered into the AmSouth Revolver, a three-year, $15 million senior secured revolving credit facility which is secured
by substantially all of our assets. Interest payments are payable in arrears on the first of each month. The net borrowings under the AmSouth
Revolver bear an interest rate equal to the base rate plus an applicable margin with the base rate being the AmSouth Bank "prime rate" and
the applicable margin being based on our fixed charge coverage ratio with a minimum and maximum applicable margin of 0.5% and 2.5%
respectively. As of December 30, 2003, the interest rate on the net borrowings under the AmSouth Revolver was 5.0%. At December 30,
2003, we had $14 million available under this facility.
The AmSouth Revolver contains certain covenants, which, among others, include certain financial covenants such as limitations on capital
expenditures, operating lease obligations, minimum EBITDA as defined, operating cash flow coverage ratio and minimum net worth. These
covenants are measured on a rolling twelve period basis at each fiscal quarter or annually at year-end. Additional covenant restrictions exist
if the total exposure, as defined in the agreement, exceeds $10.0 million. This debt also contains usual and customary default provisions.
As of the fiscal year ended December 30, 2003, we are in compliance with all such financial covenants.
We are required to pay an unused credit line fee of 0.50% per annum on the average daily unused amount. The unused line fee is payable
monthly in arrears. Additionally, we are required to pay a letter of credit fee based on the average daily undrawn face amount for each letter
of credit issued, of an applicable margin being based on our fixed charge coverage ratio with a minimum and maximum applicable margin
of 2.0% and 4.5% respectively. We had no letters of credit outstanding at December 30, 2003.
Debt issuance costs are capitalized and amortized using the effective interest method over the term of the AmSouth Revolver. Interest
expense of $138,000, $0 and $0 related to issuance costs has been recorded for the years ended December 30, 2003, December 31, 2002
and January 1, 2002.
(g) As a part of the acquisition of the assets of Chesapeake Bagel Bakery, we entered into a note payable to the seller. The note provides for
quarterly payments of interest only at 10% with principal payments of $675,000 and $825,000 in 2003 and 2004, respectively. The note is
due in full on August 31, 2004 and is secured by the related assets of Chesapeake Bagel Bakery.
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(h) In December 1998, Manhattan Bagel Company entered into a note payable of $2,800,000 with the NJEDA at an interest rate of 9% per
annum. The note has a 10-year maturity. Principal is paid annually and interest is paid quarterly. The note is secured by our subsidiary,
Manhattan Bagel Company, Inc. In 2002, we violated the debt coverage ratio associated with this loan. Therefore, the balance outstanding
under this note was classified as current within the December 31, 2002 balance sheet since we did not obtain waivers for such violations,
which resulted in the entire balance being due and payable at the discretion of the holder.
On July 3, 2003, we placed in escrow an advanced funding of the NJEDA note to enact a debt defeasance as allowed for in the agreement.
This advanced funding is shown as restricted cash and the NJEDA note is included in both current portion and long-term portion of debt in
the December 30, 2003 balance sheet in accordance with the payment terms. We anticipate this classification will continue until the
NJEDA note is fully paid from the escrow amount proceeds. The escrow has a maturity date of December 1, 2008.