The Company has secured notes receivable from Eatzi's Corporation ("Eatzi's") with a carrying value of
approximately $11.0 million and $20.6 million at June 26, 2002 and June 27, 2001, respectively. Approximately
$6.0 million of the notes receivable is convertible into nonvoting Series A Preferred Stock of Eatzi's at the option
of the Company and matures on December 28, 2006. The remaining note receivable matures on September 28,
2005.
Interest on the convertible note receivable is 10.5% per year with payments due on a quarterly basis until the
principal balance and all accrued and unpaid interest have been paid in full. Interest on the remaining notes
receivable balance is prime rate plus 1.5% per year with payments due on a quarterly basis until the principal
balance and all accrued and unpaid interest have been paid in full. The notes receivable are included in other
assets in the accompanying consolidated balance sheets.
During fiscal 2002 and 2001, certain scheduled payments were not made as the Company continued
negotiations with Eatzi's to restructure the notes receivable. A letter of intent was signed on August 6, 2002 to
divest the Company of its interest in the concept. Under the terms of the letter, Eatzi's has agreed to pay the
Company $11.0 million in cash and to execute a $4.0 million promissory note in consideration for its interest in
the concept. The promissory note will be unsecured and payable only upon the closing of an initial public offering
by Eatzi's. Due to the uncertainty of collecting the $4.0 million promissory note, the Company will establish a
reserve for the entire principal balance. As a result of the divesture, in fiscal 2002 an approximate $8.7 million
impairment charge was recorded in restaurant expenses to reduce the notes to their net realizable value.
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