Einstein Bros 2004 Annual Report Download - page 55

http://www.sec.gov/Archives/edgar/data/949373/000104746905006202/a2153240z10-k.htm[9/11/2014 10:13:29 AM]
managing partner. He is also a limited partner and 10% owner in BET. His father-in-law is Bruce Toll, an affiliate of BET. John S. Clark II, a
director, was employed by Greenlight until March 2004. Greenlight beneficially owns approximately 97 percent of our common stock.
Eve Trkla, a director of our company until August 16, 2003, is the Chief Financial Officer of Brookwood Financial Partners, L.P., a former
affiliate of Brookwood. Brookwood designated Ms. Trkla as a director to serve for the period specified in the Stockholders Agreement (which was
terminated as a result of the equity recapitalization).
William Nimmo, a director of our company until June 6, 2003, is a partner in Halpern, Denny and Co., an affiliate of Halpern Denny. Halpern
Denny designated Mr. Nimmo as a director of our company.
On May 30, 2002, we entered into a Loan and Security Agreement (the facility) with BET, which provided for $75,000 revolving loan facility
at 11% interest. The facility was secured by substantially all of our assets. In connection with obtaining the facility, we paid MYFM Capital LLC a
fee of $75. In February 2003, we executed an amendment to the facility to extend the maturity of the facility from March 31, 2003 to June 1, 2003.
From February 1, 2003 to June 1, 2003, the interest rate increased from 11% to 13% per annum. BET and MYFM Capital LLC received an
extension fee of $188 in connection with the amendment, payable at maturity, and an additional $113 because the facility was not paid in full by
June 2, 2003. After June 1, 2003, the interest rate for borrowings under the facility was 15% per annum, and MYFM Capital LLC received a $25
fee for entering into a standstill
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agreement with us. The facility was repaid with the proceeds of issuance of the $160 Million Facility in July 2003, and BET received $3 for
reimbursement of legal fees and expenses.
In July 2003, Greenlight purchased all of the outstanding Einstein/Noah Bagel Corp. 7.25% Convertible Debentures due 2004 from Jefferies.
Upon consummation of the equity recapitalization, we issued 4,337.481 shares of Series F to Greenlight in full payment of the outstanding Bridge
Loan. The shares of Series F were converted into common stock in the equity recapitalization.
On June 25, 2003, we entered into the equity recapitalization with Halpern Denny and Greenlight, pursuant to which the parties agreed to a
recapitalization of our equity structure. Pursuant to the equity recapitalization, we reimbursed Greenlight and Halpern Denny for legal fees and
disbursements incurred in connection with their investment in our company and the equity restructuring in the respective amounts of $226 and
$125.
Greenlight purchased $35,000 and BET purchased $7,500 of our $160 Million Notes. Leonard Tannenbaum purchased an additional $500 of
our $160 Million Notes in the market.
On December 8, 2003, we entered into a consulting agreement with Ms. Jill B. W. Sisson to provide legal, consulting and advisory services to
us and to serve as General Counsel and Secretary. Pursuant to the Agreement, Ms. Sisson is paid $16 per month and, on December 19, 2003, was
granted options to purchase 75,000 shares of common stock pursuant to the 2003 Plan. The options vest in part, upon length of service and in part,
upon the achievement of specified financial goals by us. In addition, Ms. Sisson is eligible to receive annual additional premium compensation
based upon our performance and personal performance. Ms. Sisson will also be reimbursed for reasonable and necessary out-of-pocket expenses.
The agreement provides for non-solicitation of our employees for a year after termination of the agreement, and can be terminated by either party
upon 30 days notice.
During 2002, the holders involved in certain debt and preferred stock financings in 2000 and 2001 became entitled to receive additional
warrants. See Note 13 for additional information.
24. PURCHASE COMMITMENTS
We have obligations with certain of our major suppliers of raw materials (primarily frozen bagel dough and cream cheese) for minimum
purchases both in terms of quantity and pricing on an annual basis. Furthermore, from time to time, we will commit to the purchase price of certain
commodities that are related to the ingredients used for the production of our bagels. On a periodic basis, we review the relationship of these
purchase commitments to our business plan, general market trends and our assumptions in our operating plans. If these commitments are deemed
to be in excess of the market, we will expense the excess purchase commitment to cost of sales, in the period in which the shortfall is determined.
The total of our future purchase obligations at December 28, 2004 was approximately $18,468.
25. LITIGATION