Redeemable Preferred Stock |
12 Months Ended |
|---|---|
Jan. 01, 2024 | |
| Other Liabilities Disclosure [Abstract] | |
| Redeemable Preferred Stock | Redeemable Preferred Stock
The Company is authorized to issue 10,000,000 shares of preferred stock with a par value of $0.0001 per share with such designation, rights and preferences as may be determined from time to time by the Company’s Board of Directors. As of January 1, 2024 and January 2, 2023, there were 2,120,000 shares of redeemable preferred stock outstanding, par value $0.0001 per share (the “Series A Junior Preferred Stock”), outstanding. .
As of January 1, 2024 and January 2, 2023, the value of the redeemable preferred stock was $55.6 million and $51.4 million, respectively and the principal redemption amount was $53.0 million. During the years ended January 1, 2024 and January 2, 2023, the Company recorded non-cash interest expense on the redeemable preferred stock in the amount of $4.2 million and $3.9 million, respectively, related to accretion of the preferred stock to its estimated redemption value.
On November 3, 2021, and as part of the Anthony's acquisition, the Company issued 2,120,000 shares of Series A Junior Preferred Stock. The Series A Junior Preferred Stock is redeemable on November 3, 2027 and accrues dividends at 7% per annum compounded quarterly from June 15, 2024 with such rate increasing by an additional 0.35% per quarter commencing with the three month period ending September 30, 2024; provided, however, that in the event that the Credit Agreement is refinanced or repaid in full prior to June 15, 2024 and the Series A Junior Preferred Stock is not redeemed in full on such date, from and after such date, the Series A Junior Preferred Stock shall accrue dividends at 5% per annum, compounded quarterly, until June 15, 2024.
On February 24, 2023, the Company filed an amended and restated certificate of designation, (the “A&R CoD”), which among other matters, added a provision providing that in the event the Company fails to timely redeem any shares of Series A Preferred Stock on November 3, 2027, the applicable dividend rate shall automatically increase to the lesser of (A) the sum of 10% plus the 2% applicable default rate (with such aggregate rate increasing by an additional 0.35% per quarter from and after November 3, 2027), or (B) the maximum rate that may be applied under applicable law, unless waived in writing by a majority of the outstanding shares of Series A Junior Preferred Stock.
The A&R CoD also added a provision providing that in the event the Company fails to timely redeem any shares of Series A Junior Preferred Stock in connection with a Qualified Financing (as defined in the A&R CoD) or on November 3, 2027 (a “Default”), the Company agrees to promptly commence a debt or equity financing transaction or sale process to solicit proposals for the sale of the Company and its subsidiaries (or, alternatively, the sale of material assets) designed to yield the maximum cash proceeds to the Company available for redemption of the Series A Junior Preferred Stock as promptly as practicable, but in any event, within 12 months from the date of the Default. If on or after November 3, 2026, the Company is aware that it is reasonably unlikely to have sufficient cash to timely effect the redemption in full of the Series A Junior Preferred Stock when first due, the Company shall, prior to such anticipated due date, take reasonable steps to engage an investment banking firm of national standing (and other appropriate professionals) to conduct preparatory work for such a financing transaction and sale process of the Company and its subsidiaries to provide for such transaction to occur as promptly as possible after any failure for a timely redemption of the Series A Junior Preferred Stock.
The Series A Junior Preferred Stock ranks senior to the Common Stock and may be redeemed at the option of the Company at any time and must be redeemed by the Company in limited circumstances. The Series A Junior Preferred Stock shall not have voting rights or conversion rights.
For further discussion of the A&R CoD, including certain board and governance rights included in the A&R CoD, please see Part I, Item 1A Risk Factors “We have significant stockholders whose interests may differ from those of our public stockholders.” and Part III, Item 10 Directors and Executive Officers.
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