Einstein Bros 2003 Annual Report Download - page 66

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http://www.sec.gov/Archives/edgar/data/949373/000104746904009609/a2132006z10-k.htm[9/11/2014 10:13:55 AM]
Other long-term liabilities consist of the following:
December 30,
2003
December 31,
2002
(amounts in thousands)
Vendor contractual agreements(a) $ 8,014 $ 8,210
Guaranteed franchisee debt(b) 874 905
Deferred rent 1,509 1,445
$ 10,397 $ 10,560
(a) A strategic supplier of ours provided advance funding in the amount of $10,000,000 to us in 1996 as part of a contract to continue buying
products from the supplier. This contract has an indefinite life. The accounting for this contract is to recognize a reduction of cost of goods
sold based on the volume of purchases of the vendor's product.
(b) In connection with our acquisition of Manhattan, we agreed to guarantee certain loans to franchisees made by two financial institutions.
Each balance sheet date, we evaluate the fair value of such liability. As of December 30, 2003 and December 31, 2002, the fair value of the
liability reflected above is the maximum potential exposure related to such loans pursuant to agreements
F-37
with the financial institutions regarding the established caps on our obligation, which is also our best estimate of future pay-outs we will
make under these guarantees.
12. Derivative Liability
As a result of the Equity Recap executed on September 24, 2003, we no longer have contingently issuable warrants and all issued warrants are
classified as permanent equity. Consequently, we no longer have a warrant derivative liability at December 30, 2003.
The following tables indicates the value of embedded derivatives related to our debt and equity instruments as of December 30, 2003 and
December 31, 2002 and the cumulative impact of changes in the derivative liability within the statement of operations for the years ended
December 30, 2003, December 31, 2002, and January 1, 2002:
December 30, 2003
For the Year Ended
December 30, 2003
Instrument
Value of
Embedded
Derivative
Liability
Cumulative Change
in Fair Value of
Derivatives
(amounts in thousands)
Series F preferred stock $ — $ (52)
Greenlight obligation — 636
Bridge Loan — 502
$140 Million Facility — (93)
Total $ — $ 993
December 30, 2002
For the Year Ended
December 30, 2002
Instrument
Value of
Embedded
Derivative
Liability
Cumulative Change
in Fair Value of
Derivatives