Einstein Bros 2007 Annual Report Download - page 69

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http://www.sec.gov/Archives/edgar/data/949373/000104746908002111/a2183061z10-k.htm[9/11/2014 10:12:02 AM]
Other liabilities $ 8,822 $ 10,841
(a) A strategic supplier of ours provided advance funding in the amount of $10.0 million to us in 1996 as part of a contract to
continue buying products from the supplier. The contract terminates upon fulfillment of contractual purchase volumes. We
account for this contract by recognizing a reduction of cost of goods sold based on the volume of purchases of the vendor's
product.
(b) During 2007, we received $1.7 million in leasehold improvements related to our new corporate headquarters, which is
included in deferred rent.
82
EINSTEIN NOAH RESTAURANT GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
13. MANDATORILY REDEEMABLE SERIES Z PREFERRED STOCK
In September 2003, we completed an equity recapitalization with our preferred stockholders, who held a substantial portion of our common
stock. Among other things, the Halpern Denny Fund III, L.P. ("Halpern Denny") interest in our Mandatorily Redeemable Series F Preferred Stock
("Series F") was converted into 57,000 shares of Series Z Mandatorily Redeemable Preferred Stock ("Series Z"). The major provisions of our
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
•shares may be redeemed in whole or in part at an earlier date at our discretion.
The exchange of the Halpern Denny interest for Series Z resulted in a reduction of our effective dividend rate relative to that required by the
Series F, and as a result of this and other factors, we accounted for this transaction as a troubled debt restructuring. 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 Series Z is recorded in the accompanying consolidated balance sheets at its full face value of $57.0 million, which represents the
total cash payable upon liquidation.
14. STOCKHOLDERS' EQUITY
Common Stock
We are authorized to issue up to 25 million shares of common stock, par value $0.001 per share. As of January 2, 2007 and January 1, 2008,
there were 10,596,419 and 15,878,811 shares outstanding, respectively.
Secondary Public Offering of Our Common Stock
On June 13, 2007, we completed a secondary public offering of 5 million shares of common stock resulting in gross proceeds of $90 million.
After stock issuance costs of $6.7 million related to the offering, we received net proceeds of $83.3 million. Our common stock is now listed on