Einstein Bros 2005 Annual Report Download - page 45

http://www.sec.gov/Archives/edgar/data/949373/000110465906016136/a06-3178_110k.htm[9/11/2014 10:13:03 AM]
2001, as amended between the Bank of New York, as warrant agent and us) were adjusted to reflect the forward stock split;
· Immediately following the forward stock split, but before the one-for-one hundred reverse stock split discussed below, we issued
Greenlight 938,084,289 shares of common stock in exchange for 61,706.237 shares of Series F. These shares of Series F included: i) shares
originally issued as Series F, ii) shares converted into Series F from the $10 million contribution plus accrued interest resulting from the
Bond Purchase Agreement, and iii) shares converted into Series F from the Bridge Loan.
Following the closing of the equity recapitalization, Greenlight beneficially owned 92% of our common stock on a fully diluted basis and
warrants issued pursuant to the Warrant Agreement represented approximately 4.3% of our common stock on a fully diluted basis.
In addition to approving the equity recapitalization, our stockholders also approved the following amendments to our Restated Certificate of
Incorporation:
· effect a one-for-one-hundred reverse stock split following the consummation of the transactions as contemplated by the equity
recapitalization;
· reduce the number of shares of common stock authorized for issuance following the consummation of the effectiveness of the reverse stock
split;
· eliminate the classification of our board of directors; and
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NEW WORLD RESTAURANT GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
· allow our stockholders to take action by written consent of the holders of 80% of our capital stock entitled to vote on such action.
The 1.6610444-for-one forward stock split and the one-for-one hundred reverse stock split have been retroactively reflected in the
accompanying consolidated financial statements and footnotes for all periods presented.
The exchange of the Halpern Denny interest for Series Z resulted in a reduction of our effective dividend rate to that required by the Series F
and as a result of this and other factors, we accounted for this transaction as troubled debt restructuring as required by SFAS No. 15, Accounting by
Debtors and Creditors for Troubled Debt Restructurings. Since a portion of this exchange included the receipt of our common stock and warrants
previously held by Halpern Denny, we did not recognize a gain from troubled debt restructuring.
The exchange of the Greenlight interest into common shares was recorded at fair value (the closing price of our common stock on
September 24, 2003). Because fair value exceeded the negotiated conversion price of the Greenlight conversion of Series F into our common
stock, we recorded a loss on the exchange of approximately $23.0 million.
In connection with the equity recapitalization and because certain debt agreements were not redeemed within a certain period, we issued step-
up warrants to prevent further dilution and entered into Standstill Agreements with holders of our Increasing Rate Notes. Under the terms of the
Standstill Agreements, we agreed to issue additional warrants to purchase shares of our common stock. The Standstill Agreements prevented the
call of the debt until such time as we completed the equity recapitalization. For the year ended December 30, 2003, we recorded $3,132 in interest
expense related to the standstill and step-up warrants representing the fair value of our stock on the date of issuance.
14. MANDATORILY REDEEMABLE SERIES Z PREFERRED STOCK
The major provisions of our Mandatorily Redeemable Series Z Preferred Stock (Series Z) are as follows:
· 2,000,000 shares authorized;
· par value of $0.001 per share;
· mandatory redemption upon the earlier of (i) a merger or change of control or (ii) June 30, 2009;
· shares are non-voting (except for certain limited voting rights with respect to specified events);
· liquidation value is $1,000 per share;
· an annual dividend rate equal to 250 basis points higher than the highest rate paid on our funded indebtedness is payable if the shares are
not redeemed by the redemption date; and