Elmer's Restaurants Details Mitzel's Acquisition

PORTLAND-Elmer’s Restaurants Inc. filed its 8-K report with the Securities and Exchange Commission this week detailing its Acquisition of six Mitzel’s American Kitchen restaurants in Washington State that closed in December.

Elmer’s executed the asset purchase agreement on Dec. 14, acquiring substantially all the assets of six Puget Sound locations in consideration for $975,000 in cash and issuance of 130,000 shares of the Company’s restricted common stock, currently valued at $4.87 a share. Elmer’s financed is acquisition by issuing $1.15 million in convertible debt. The seven-year notes bear interest at 10%, and are convertible to common stock after six months at $6.50 per share. Elmer’s may call the notes after three years at premiums of between 1% and 5%, depending on the remaining term. Interest-only payments are made to the holder and $13,690 per month is paid into a sinking fund. The notes are unsecured and subordinate to the Company’s senior secured debt held by Wells Fargo Bank.

The restaurants were purchased from four related parties, Mitzel’s American Kitchens I, Inc. a Washington corporation; Mitzel’s American Kitchens II, Inc. a Washington corporation; MC Poulsbo – Joint Venture, a Washington partnership; and MC Oak Harbor- Joint Venture, a Washington partnership. In connection with the acquisition, Elmer’s agreed to loan $200,000 to Mitzel’s American Kitchen I Inc. and Mitzel’s American Kitchen II Inc. The loan bears interest at 10% per annum, principal and interest payments made monthly on a five year amortization schedule with the balance due in full March 14, 2003. The note is secured by Elmer’s stock valued at $4.00 per share.