Einstein Bros 2002 Annual Report Download - page 74

http://www.sec.gov/Archives/edgar/data/949373/000104746903027186/a2116520z10-ka.htm[9/11/2014 10:14:22 AM]
Series F preferred stock has not been redeemed for cash (including payment of any notes issued thereon), BET and Brookwood shall receive
additional warrants equal to a semi-annual increase in aggregate of 1.154% of the fully diluted Common Stock of the Company (excepting certain
options and warrants).
On March 29, 2001, the Company consummated a sale of 5,000 additional shares of its authorized, but unissued, Series F preferred stock to
Halpern Denny in exchange for the sum of $5,000,000. Pursuant to the terms of the Second Series F Preferred Stock and Warrant Purchase
Agreement with Halpern Denny, the Company also sold Halpern Denny five-year warrants to purchase 2,121,028 shares of Common Stock at a
price per share of $0.01 (subject to adjustment as provided in the form of warrant). The Series F Purchase Agreement provides that for so long as
the Series F preferred stock has not been redeemed for cash (including payment of any notes issued thereon), Halpern Denny shall receive
additional warrants equal to a semi-annual increase in aggregate of 0.375% of the fully diluted Common Stock of the Company (excepting certain
options and warrants).
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On June 7, 2001, the Company consummated the sale of 4,000 additional shares of its authorized, but unissued, Series F preferred stock to
Halpern Denny in exchange for the sum of $4,000,000 pursuant to the terms of the Series F Preferred Stock and Warrant Purchase Agreement with
Halpern Denny, dated June 7, 2001. In connection with the agreement, the Company also sold Halpern Denny five-year warrants to purchase an
aggregate of 3,384,629 shares of Common Stock at a price per share of $0.01 (subject to adjustment as provided in the form of warrant). The
Series F Purchase Agreement provides that for so long as the Series F preferred stock has not been redeemed for cash (including payment of any
notes issued thereon), Halpern Denny shall receive additional warrants equal to a semi-annual increase in aggregate of 0.3% of the fully diluted
Common Stock of the Company (excepting certain options and warrants).
In addition, on June 19, 2001, the Company consummated the sale of 21,000 additional shares of its authorized, but unissued, Series F
preferred stock in exchange for $21,000,000, pursuant to the terms of the Third Series F Stock and Warrant Purchase Agreement (the "Third
Purchase Agreement") by and among the Company, Halpern Denny, Greenlight and Special Situations. In connection with the sale of the June 2001
Series F preferred stock, the Company sold warrants to purchase 17,769,305 shares of Common Stock at a price per share of $0.01 (subject to
adjustment as provided in the warrant agreement) pursuant to the Third Purchase Agreement. The warrants have a term of five years and further
provide that they would be exercisable for additional shares under certain events, as set forth in the agreement. The form of these warrants is
substantially identical to the form of the warrants described above including the provisions thereof relating to the increase of the warrant shares,
except that the semi-annual increases are an aggregate of 1.575% of the fully diluted Common Stock (excepting certain options and warrants).
As set forth in a Second Amended Certificate of Designation, Rights and Preferences of Series F preferred stock (the Second Amended
Certificate of Designation), the Series F preferred stock accrues dividends payable in shares of Series F preferred stock at the rate of 16% per
annum for the first year, which rate increases semi-annually at the rate of 2% per annum. The Series F preferred stock, including accrued
dividends, is redeemable three years from the date of issue (the Mandatory Redemption Date). If the Company fails to redeem the Series F
preferred stock at the Mandatory Redemption Date, the Company is entitled to redeem the Series F preferred stock by issuing senior subordinated
notes (the "Senior Notes") to the holders of the Series F preferred stock. The Senior Notes would bear interest at a rate comparable to the dividend
rate under the Series F preferred stock, which rate increases monthly thereafter at the rate of 1% per month and would be due and payable 120 days
from the Mandatory Redemption Date.
The Company, Halpern Denny, Brookwood, Greenlight and Special Situations entered into an agreement which stated that notwithstanding the
provisions concerning the mandatory redemption date of the Series F preferred stock contained in the Second Amended Certificate of Designation,
the Series F preferred stock shall be redeemable on the later of (a) January 18, 2004 for all shares of Series F preferred stock issued on or prior to
March 31, 2001, and June 30, 2004 for all shares of Series F preferred stock issued after March 31, 2001, and (b) the maturity date of any notes
(the "Refinancing Senior Notes"), the proceeds of which are used to repay the outstanding notes issued under the $140 Million Facility, provided
that the indenture for the Refinancing Senior Notes includes language which permits the Company to make certain specified restricted payments (a
"Restricted Payment") (including certain payments to redeem Series F preferred stock) so long as certain covenants contained therein are satisfied.
The amount of any Restricted Payment, together with any aggregate amount of all other Restricted Payments made by the Company and its
subsidiaries must be less than the sum of (x) fifty (50%) percent of the consolidated net income of the Company for the period from the issue date
of the Refinancing Senior Notes to the end of the Company's most recently ended fiscal
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quarter, plus (y) one hundred (100%) percent of the aggregate net cash proceeds received by the Company from the issuance or sale of equity
interests in the Company or any subsidiary, plus (z) one hundred (100%) percent of the net cash proceeds received by the Company from the