SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended March 31, 1995 or
--------------
[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from __________ to __________
Commission file number 0-14837
ELMER'S RESTAURANTS, INC.
(Exact name of registrant as specified in its charter)
Oregon 93-0836824
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
11802 SE Stark
Portland, Oregon 97216
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code: (503) 252-1485
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, no par value
Indicate by check mark whether the Registrant (1) has
filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X
No ___ ---
Indicate by check mark if disclosure of delinquent
filers pursuant to Item 405 of Regulation S-K is not contained
herein, and will not be contained, to the best of Registrant's
knowledge, in definitive proxy or information statement
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. _____
Aggregate market value of Common Stock held by
nonaffiliates of the Registrant at May 19, 1995: $1,469,767.
For purposes of this calculation, officers and directors are
considered affiliates.
Number of shares of Common Stock outstanding at
May 19, 1995: 1,577,472.
<PAGE>
Documents Incorporated by Reference
-----------------------------------
Part of Form 10-K into
Document which incorporated
- -------- ----------------------
1995 Annual Report to Shareholders Parts II and IV
Proxy Statement for 1995 Annual Meeting Part III
of Shareholders
TABLE OF CONTENTS
-----------------
Item of Form 10-K Page
- ----------------- ----
PART I 1
Item 1 - Business 1
Item 2 - Properties 7
Item 3 - Legal Proceedings 8
Item 4 - Submission of Matters to a Vote
of Security Holders 8
Item 4(a) - Executive Officers of the Registrant 8
PART II 10
Item 5 - Market for the Registrant's Common
Equity and Related Stockholder Matters 10
Item 6 - Selected Financial Data 10
Item 7 - Management's Discussion and Analysis
of Financial Condition and Results of 10
Operations
Item 8 - Financial Statements and Supplementary Data 10
Item 9 - Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 10
PART III 11
Item 10 - Directors and Executive Officers of
the Registrant 11
Item 11 - Executive Compensation 11
Item 12 - Security Ownership of Certain Beneficial
Owners and Management 11
Item 13 - Certain Relationships and Related
Transactions 11
PART IV 12
Item 14 - Exhibits, Financial Statement Schedules,
and Reports on Form 8-K 12
SIGNATURES 15
<PAGE>1
PART I
Item 1. Business
- ------ --------
General
- -------
The Company, located in Portland, Oregon, is a
franchisor and operator of full-service, family-oriented
restaurants under the names "Elmer's Pancake & Steak House" and
"Elmer's Colonial Pancake & Steak House." The Company is an
Oregon corporation and was incorporated in 1983. The Company
owns and operates eleven restaurants and franchises 18
restaurants.
Walter Elmer opened the first Elmer's restaurant in
Portland, Oregon in 1960, and the first franchised restaurant
opened in 1966. The Company acquired the Elmer's franchising
operation in January 1984 from the Elmer family. The Company
franchises 18 restaurants in six Western states. Until August
1986 the Company owned and operated only one restaurant, at the
Delta Park location in Portland, Oregon. Since that time the
Company has constructed two restaurants and has acquired eight
other restaurants formerly operated by franchisees. See
"Company-Owned Restaurants." Company-owned restaurants are
located in the Delta Park section of Portland, Oregon;
Beaverton, Gresham, Hillsboro, Medford, Albany and Grants Pass,
Oregon; Palm Springs, California; Boise, Idaho; and Tacoma and
Lynnwood, Washington.
Elmer's Pancake & Steak House
- -----------------------------
Restaurant Format and Menu The Company franchises
--------------------------
or operates a total of 29 full-service, family-oriented
restaurants, with a warm, friendly atmosphere and comfortable
furnishings. Most of the restaurants are decorated in a
colonial style with fireplaces in the dining rooms. They are
free standing buildings, ranging in size from 4,600 to
approximately 8,000 square feet with seating capacities ranging
from 120 to 220. A portion of the dining room in most
restaurants may also be used for private group meetings by
closing it off from the public dining areas. Thirteen of the
restaurants have a lounge with a seating capacity ranging from
15 to 75. The normal hours of operation are from 6 a.m. to 10
or 11 p.m. and to 12 midnight on weekends in restaurants with
lounges.
Each restaurant offers full service, with a host
or hostess to seat guests and handle payments, wait staff to
take and serve orders, and additional personnel to clear and
reset tables.
<PAGE>2
The menu offers an extensive selection of items for
breakfast, lunch, and dinner. The Elmer's breakfast menu,
which is available all day, contains a wide variety of
selections with particular emphasis on pancakes, waffles,
omelettes, crepes, and other popular breakfast items. Each
Elmer's restaurant makes all its breakfast batters and compotes
from scratch and prepares its fruit sauces with fresh fruits
when in season. The lunch menu includes soups made from
scratch, french dips, hamburgers, and sandwiches. Customers at
dinner may choose among steak, seafood, chicken, and, in most
restaurants, filet mignon and prime rib. While most menu
selections are standard to all Elmer's restaurants, restaurants
in different areas include on their menus selections that
appeal to local preferences. Breakfast and lunch selections
generally range in price from $1.85 to $7.25; dinner selections
generally range in price from $5.50 to $11.75. A special
children's menu is offered in most restaurants.
Franchise Operations
- --------------------
Under a franchise agreement a franchisor grants
to a franchisee the right to operate a business in a manner
developed by the franchisor. The franchisee owns the
franchised operation independently from the franchisor and, in
effect, buys the right to use the franchisor's name, format,
and operational procedures. Franchisees benefit from a common
identification, standardized products, and the business
reputation and services that a franchisor may provide, such as
group advertising, management services, product enhancements,
and group buying programs. The franchisor is able to
capitalize on its business concept without, in many cases,
having to invest substantial capital for expanded operations.
Existing Franchisees The existing franchise
--------------------
agreements grant to franchisees the right to operate an
Elmer's restaurant in one specific location for 25 years,
renewable generally for an additional 25-year period. When
they entered into franchising agreements, the existing
franchisees paid initial franchise fees of up to $25,000 plus
additional fees of up to $10,000 if the restaurant had a lounge
serving alcoholic beverages. They pay monthly franchise
royalty fees ranging from one to four percent of the gross
revenues of their restaurants. All but two restaurants must
contribute one percent of gross revenues to a common
advertising pool if required to do so by the Company.
Prospective Franchisees Prospective new franchisees
-----------------------
will pay an initial franchise fee of $35,000. Initial
franchise fees are payable in cash at the execution of the
franchise agreement. Existing franchisees opening new
franchised restaurants may pay a lower initial franchise fee
than new franchisees. For new franchisees, the monthly
<PAGE>3
franchise royalty fee will be four percent of the gross
revenues of the restaurant, with a minimum monthly fee of $500.
A monthly advertising contribution equal to one percent of the
gross revenues of the restaurant will be assessed. The Company
has executed only two franchise agreements involving new
franchisees since instituting the four percent royalty fee in
March 1986, but management believes the fee is competitive with
other similar restaurant franchise royalty fees and is
appropriate in light of the Company's franchise services. It
has been the practice of the Company in recent years to permit
existing franchisees to open new franchises under the royalty
rate that applied to the existing franchises owned by that
franchise. See "Services to Franchisees."
A prospective franchisee who assumes operation of a
previously unsuccessful franchised restaurant may be offered a
reduced initial franchise fee, deferred payment of the
franchise fee, or other concessions the Company deems
appropriate. Pursuant to certain area franchise agreements,
the Company will receive reduced initial franchise fees and
monthly royalty fees from additional restaurants that may be
opened in the areas covered by those agreements. See "Area
Franchise Agreements." In connection with the acquisition of
the Elmer's franchising operation in 1984, the Company also
granted Dale Elmer, a former director of the Company, and
members of the Elmer family the right to operate a total of
three additional restaurants at a franchise royalty fee of two
percent; no restaurants are being operated on this basis.
Management estimates that construction costs for
the standard free-standing building range from approximately
$860,000 to $1,060,000, with actual costs dependent upon local
building requirements and construction conditions, and further
based on configuration and parking requirements. The cost of
the land may vary considerably depending upon the quality and
size of the site, surrounding population density and other
factors. The cost of leasehold improvements and restaurant
equipment, including kitchen equipment, furniture, and trade
fixtures, is estimated by management to range from
approximately $375,000 to $500,000. Inventory and
miscellaneous items such as paper goods, food, janitorial
supplies, and other small wares are estimated initially to cost
between approximately $68,300 and $107,500.
There is no typical elapsed time from the signing of
a franchise agreement until a restaurant is open for business,
although it normally takes 120 days from the receipt of the
building permits to construct a new restaurant facility. Most
restaurants have opened within 12 months of the date of signing
the franchise agreement. Franchisees bear all costs associated
with the development and construction of their restaurants.
<PAGE>4
The Company has added three franchises since August
1987. The last currently operating franchise was added in
November 1994.
Area Franchise Agreements Under previous management,
-------------------------
the Elmer's franchising operation granted exclusive area
franchise agreements, whereby independent entities obtained the
exclusive rights to develop Elmer's restaurants within their
respective areas. Areas covered by these agreements are
Clackamas County, Oregon; Vancouver, Washington; Idaho; and
Montana. The area franchise agreements require the area
franchisee to share with the Company the initial fees and the
franchise royalty fees for each new restaurant in the area.
The Company's share of the initial fees ranges from $2,500 to
$12,500 per restaurant, and its share of the franchise royalty
fees ranges from one to two percent of gross revenues per
restaurant. There are currently two restaurants covered by
area franchise agreements. Under the area franchise
agreements, the Company reserves the right to approve each new
restaurant franchisee. The area franchise agreements hinder or
preclude the Company from opening Company-owned or franchised
restaurants in the areas covered by the agreements. The
Company is not seeking to grant these agreements in the future.
Services to Franchisees The Company makes
-----------------------
available to its franchisees various programs and materials.
The Company provides several manuals to assist franchisees in
ongoing operations, including a comprehensive operations manual
describing kitchen operations, floor operations, personnel
management, job descriptions, and other matters. The Company
has prepared a recipe book for franchisees and maintains a
complete file of menus from all franchised restaurants. The
Company has also prepared a personnel handbook for its Company-
owned restaurants. The Company has developed and maintains a
menu cost-control program and a labor cost-control program at
each of its Company-owned restaurants and has developed and
implemented a training manual and programs for all positions
within the restaurant.
The Company provides both formal and informal ongoing
training. At least one two-day seminar is scheduled each year.
At the seminars, franchisees attend lectures by Company
personnel and guest speakers from the industry as well as
participate in group workshops discussing such topics as cost
control, promotion and food presentation.
The Company provides each franchisee with
specifications for menu items selected by the franchisee for
inclusion on restaurant menus. The Company, however, sells
no food items or like products to the franchisees, except for
certain minor supplies such as guest checks, gift certificates,
and children's menus. The Company does not require franchisees
<PAGE>5
to purchase products from designated or approved sources, other
than requiring that Boyd's Blend Coffee be served in each
restaurant. The Company, however, coordinates franchisees'
purchases to obtain volume discounts. Franchisees bear all
costs involved in the operation of their restaurants.
Periodic on-site inspections and audits are
conducted to ensure compliance with Company standards and to
aid franchisees in improving their sales and profitability.
Company-Owned Restaurants
- -------------------------
The Company owns and operates eleven Elmer's
restaurants, which it has acquired or built over the last
several years. The Company has owned and operated a restaurant
located in the Delta Park section of Portland, Oregon since
January 1984. In August 1986, the Company opened a restaurant
in Tacoma, Washington. In January 1987, the Company began
operation of a restaurant in Lynnwood, Washington and assumed
operation of an Elmer's restaurant in Grants Pass, Oregon that
was in bank foreclosure. In fiscal 1988, the Company acquired
from former franchisees restaurants in Gresham, Albany, and
Medford, Oregon; and Boise, Idaho. In fiscal 1989, the Company
purchased the land and buildings for the Boise and Gresham
restaurants and also purchased, from a former franchisee, an
additional restaurant in Hillsboro, Oregon. Effective May 1,
1989, the Company acquired a franchised Elmer's restaurant in
Palm Springs, California. In July 1991, the Company acquired a
franchised Elmer's restaurant in Beaverton, Oregon.
Employees
- ---------
As of March 31, 1995, the Company employed 174
persons on a full-time basis, of whom 11 were corporate office
personnel and 163 were restaurant personnel. At that date, the
Company also employed 364 part-time restaurant personnel.
Employees of franchised Elmer's restaurants are not included in
these figures. None of the Company's employees is covered by
collective bargaining agreements. The Company believes that
its employee relations are satisfactory.
Trademarks and Service Marks
- ----------------------------
The Company has registered the trademarks and service
marks "Elmer's Pancake & Steak House" and "Elmer's Colonial
Pancake & Steak House" and the Elmer's logo with the U.S.
Patent and Trademark Office. The service mark "Elmer's
Colonial Pancake & Steak House" has also been registered in
certain states.
The Company grants to each of its Elmer's
restaurant franchisees a nonexclusive right to use the
<PAGE>6
trademarks and service marks in connection with and at
each franchise location.
Advertising and Marketing
- -------------------------
Word-of-mouth advertising, new restaurant openings,
and the on-premise sale of promotional products have
historically been the primary methods of restaurant
advertising. The Company employs an advertising consultant to
assist in projecting the Elmer's restaurant concept to the
general public in the Western states, primarily through
magazines, newspapers, and radio and television commercials.
The Company maintains a common advertising pool with its
franchisees. After production costs for the advertising
campaign have been paid out of the common pool, the remaining
money is used for advertising in the various local areas of the
franchised restaurants. The Company-owned restaurants and 16
of the 18 franchised restaurants are required to participate by
contributing one percent of monthly gross revenues.
Competition
- -----------
The restaurant industry is highly competitive and
is often affected by changes in the tastes and eating habits of
the public, by local and national economic conditions affecting
spending habits, and by population and traffic patterns. The
Company competes for potential franchisees with restaurant
franchisors, company-owned restaurants, chains and others. The
Company-owned Elmer's restaurants and the franchised Elmer's
restaurants compete for customers with restaurants from
national and regional chains to local establishments. Some of
the Company's competitors are much larger than the Company,
having at their disposal greater capital resources and greater
abilities to withstand adverse business trends. The Company
believes that the principal competitive factors in its favor
for attracting both restaurant franchisees and restaurant
customers are Elmer's extensive menu, quality of food, service,
and reasonable prices.
Government Regulations
- ----------------------
The Company is subject to various federal, state,
and local laws affecting its business. Its restaurants and
those of its franchisees are subject to various health,
sanitation, and safety standards; federal and state labor laws;
zoning restrictions; and state and local licensing of the sale
of alcoholic beverages, in some cases. Federal and state
environmental regulations have not had a major effect on the
Company's operations to date.
The Company is subject to a number of state laws
regulating franchise operations and sales. For the most part,
<PAGE>7
those laws impose registration and disclosure requirements on
the Company in the offer and sale of franchises but, in certain
cases, also apply substantive standards to the relationship
between the Company and the franchisees. The Company is also
subject to Federal Trade Commission regulations covering
disclosure requirements and sales of franchises.
Item 2. Properties
- ------ ----------
Headquarters
- ------------
The Company's corporate offices are located in
Portland, Oregon and consist of an office facility of
approximately 5,000 square feet rented from Dale Elmer, a
former executive officer and director of the Company. Lease
payments totaled $32,836 for fiscal 1995. The lease expires
November 30, 1996.
Company-Owned Restaurants
- -------------------------
Company-Owned Properties The Company owns the real
------------------------
property upon which the following four Company-owned
restaurants are located. All of the properties are subject to
encumbrances in favor of lending institutions.
<TABLE>
<CAPTION>
Approximate Area
----------------
Location Site Restaurant
- -------- ---- ----------
<S> <C> <C>
Tacoma, Washington 1.3 acres 6,350 sq. ft.
Lynnwood, Washington 1 acre 6,400 sq. ft.
Gresham, Oregon 1 acre 6,300 sq. ft.
Boise, Idaho 1.3 acres 5,500 sq. ft.
</TABLE>
Leased Properties The Company leases the property
-----------------
upon which the following seven Company-owned restaurants are
located. Each lease contains specific terms relating to
calculation of lease payment, renewal, purchase options, if
any, and other matters.
<PAGE>8
<TABLE>
Approximate Area
----------------
<CAPTION>
Location Site Restaurant Expiration
- -------- ---- ---------- ----------
<S> <C> <C> <C>
Grants Pass, Oregon 1 acre 6,350 sq. ft. December 31, 1996
Hillsboro, Oregon 1.2 acres 6,350 sq. ft. January 1, 2002
Medford, Oregon 1.25 acres 6,300 sq. ft. February 1, 1998
Albany, Oregon -- 5,460 sq. ft. February 28, 1998
Palm Springs,
California 1.3 acres 5,500 sq. ft. April 30, 2007
Portland, Oregon
(Delta Park) 1.2 acres 6,350 sq. ft. July 31, 2006
Beaverton, Oregon -- 5,322 sq. ft. August 31, 2006
</TABLE>
Item 3. Legal Proceedings
- ------ -----------------
On April 19, 1994, a former director and employee of
the Company filed a complaint with the Oregon Bureau of Labor
and Industries alleging an unlawful practice on the basis of
sex discrimination by the Company and seeking enforcement
action. The Civil Rights Division of the Bureau commenced an
investigation of the complaint. The former director and
employee, however, subsequently requested a notice of right to
sue from the Bureau, thereby terminating the Bureau's
investigation. The notice of right to sue was issued by the
Bureau on April 10, 1995. Under Oregon law, the former
director and employee has 90 days from the date of the notice
of right to sue to commence a legal action alleging state
statutory discrimination claims. No such action has been
commenced. On May 18, 1994, the former director and employee
filed a similar, federal complaint with the Equal Employment
Opportunity Commission. The Commission is investigating the
complaint. The Company believes that these complaints are
without merit and intends to defend these actions vigorously.
Item 4. Submission of Matters to a Vote of Security Holders
- ------ ---------------------------------------------------
Not applicable.
Item 4(a). Executive Officers of the Registrant
- --------- ------------------------------------
As of March 31, 1995, the executive officers and
other key personnel of the Company were as set forth below.
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Herman Goldberg 70 Chairman of the Board, President
and Chief Executive Officer
<PAGE>9
Juanita Nelson 59 Controller
</TABLE>
The executive officers of the Company are appointed
annually for one year and hold office until their successors
are appointed.
Herman Goldberg, the founder of the Company, has
served as Chairman of the Board since the Company's
organization in June 1983 and as President and Chief Executive
Officer since March 1984.
Juanita Nelson has served as Controller since March
1985. For more than five years prior to joining the Company,
Mrs. Nelson was the Office Manager of the Red Lion Inns and
Thunderbird Motor Inns corporate office.
<PAGE>10
PART II
Item 5. Market for the Registrant's Common Equity and
- ------ Related Stockholder Matters
---------------------------------------------
The information required by this item is included
under "Market Price and Dividends" on page 4 of the Company's
1995 Annual Report to Shareholders and is incorporated herein
by reference.
Item 6. Selected Financial Data
- ------ -----------------------
The information required by this item is included
under "Selected Financial Data" on page 2 of the Company's 1995
Annual Report to Shareholders and is incorporated herein by
reference.
Item 7. Management's Discussion and Analysis of Financial
- ------ Condition and Results of Operations
-------------------------------------------------
The information required by this item is included
under "Management Discussion and Analysis of Financial
Condition and Results of Operations" on pages 2 and 3 of the
Company's 1995 Annual Report to Shareholders and is
incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
- ------ -------------------------------------------
The information required by this item is incorporated
by reference from the Company's 1995 Annual Report to
Shareholders as listed in Item 14 of Part IV of this Report.
Item 9. Changes in and Disagreements with Accountants
- ------ on Accounting and Financial Disclosure
---------------------------------------------
Not applicable.
<PAGE>11
PART III
Item 10. Directors and Executive Officers of the Registrant
- ------- --------------------------------------------------
Information with respect to directors of the Company
is included under "Election of Directors" in the Company's
definitive proxy statement for its 1995 Annual Meeting of
Shareholders filed or to be filed not later than 120 days after
the end of the fiscal year covered by this Report and is
incorporated herein by reference. Information with respect to
executive officers of the Company is included under Item 4(a)
of Part I of this Report. Information with respect to
compliance with Section 16(a) of the Securities Exchange Act is
included under "Compliance with Section 16(a) of the Exchange
Act" in the Company's definitive proxy statement for its 1995
Annual Meeting of Shareholders filed or to be filed not later
than 120 days after the end of the fiscal year covered by this
Report and is incorporated herein by reference.
Item 11. Executive Compensation
- ------- ----------------------
Information with respect to executive compensation is
included under "Compensation" in the Company's definitive proxy
statement for its 1995 Annual Meeting of Shareholders filed or
to be filed not later than 120 days after the end of the fiscal
year covered by this Report and is incorporated herein by
reference.
Item 12. Security Ownership of Certain Beneficial Owners
- -------- and Management
-----------------------------------------------
Information with respect to security ownership of
certain beneficial owners and management is included under
"Voting Securities and Principal Shareholders" and "Election of
Directors" in the Company's definitive proxy statement for its
1995 Annual Meeting of Shareholders filed or to be filed not
later than 120 days after the end of the fiscal year covered by
this Report and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
- ------- ----------------------------------------------
Information with respect to certain relationships
and related transactions with management is included under
"Certain Transactions" in the Company's definitive proxy
statement for its 1995 Annual Meeting of Shareholders filed or
to be filed not later than 120 days after the end of the fiscal
year covered by this Report and is incorporated herein by
reference.
<PAGE>12
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
- ------- Reports on Form 8-K
--------------------------------------------
(a)(1) Financial Statements and Schedules
----------------------------------
The following documents are included in the Company's
1995 Annual Report to Shareholders at the pages indicated and
are incorporated herein by reference. These documents are
included in Exhibit 13.1 to this Annual Report on Form 10-K.
Page in 1995
Annual Report
to Shareholders
---------------
Report of Independent Accountants. . . . . . . . . . . .5
Consolidated Statements of Income
for years ended March 31, 1995, 1994
and 1993 . . . . . . . . . . . . . . . . . . . . . . .5
Consolidated Balance Sheets at
March 31, 1995 and 1994. . . . . . . . . . . . . . . .6
Consolidated Statements of Cash Flows
for years ended March 31, 1995,
1994 and 1993. . . . . . . . . . . . . . . . . . . . .7
Consolidated Statements of Changes in Shareholders'
Equity for years ended March 31, 1995,
1994 and 1993. . . . . . . . . . . . . . . . . . . . .8
Notes to Consolidated Financial Statements . . . . . . .8
No other schedules are included because the required
information is inapplicable or is presented in the financial
statements or related notes thereto.
(a)(2) Exhibits
--------
3.1 Restated Articles of Incorporation of the
Company. Incorporated by reference to
Exhibit 3.1 of the Company's Annual Report
on Form 10-K for the fiscal year ended
March 31, 1988 (the "1988 Form 10-K").
3.2 Bylaws of the Company, as amended. Incorporated
by reference to Exhibit 3.2 of the Company's
Annual Report on Form 10-K for the fiscal year
ended March 31, 1990.
<PAGE>13
10.1 Area Franchisee - Unit Franchisee Agreement
dated July 10, 1978 by and between Elmer's
Colonial Pancake & Steak House, Inc. and Paul H.
and Jacqueline M. Welch, Dale M. and Sandra Lee
Elmer. Incorporated by reference to Exhibit
10.30 of the Company's Registration Statement on
Form S-18, Registration No. 2-98298-S (the "Form
S-18 Registration").
10.2 Employment Agreement dated November 30, 1983 by
and between EP Holding Company, Inc. and Herman
Goldberg and amendments thereto.
10.3 Lease Agreement dated June 18, 1987 by and
between Dale M. Elmer and Sandra Lee Elmer
and Elmer's Pancake & Steak House, Inc., and
addenda thereto. Incorporated by reference to
Exhibit 10.5 of the Company's Annual Report on
Form 10-K for the fiscal year ended March 31,
1989 (the "1989 Form 10-K") and Exhibit 10.3 of
the December 31, 1991 Form 10-Q.
10.4 Agreement dated March 23, 1989 between Elmer's
Restaurants, Inc. and Elmer's of Palm Springs, a
California general partnership consisting of
Larry Sloan, Suzanne Sloan, and Daniel B. Van
Horst. Incorporated by reference to Exhibit
10.18 of the 1989 Form 10-K.
10.5 Amended and Restated Loan Agreement, dated as of
June 7, 1991, between the Company and First
Interstate Bank of Oregon, N.A. and Seventh
Amendment thereto, dated as of May 17, 1995, and
Promissory Note, dated as of May 17, 1995,
issued by the Company to First Interstate Bank
of Oregon, N.A. in connection with the Seventh
Amendment.
10.6 Purchase Warrants exercisable to purchase 5,000
shares of Common Stock of the Company at $1.20
per share from July 1, 1988 to June 30, 1995,
issued to Marvine Bonine, August F. Kalberer and
Paul Welch, respectively. Incorporated by
reference to Exhibit 10.20 of the 1989 Form 10-
K.
10.7 Franchise Agreement between the Company and
Paul H. Welch and Jacqueline M. Welch dated
March 23, 1993. Incorporated by reference to
Exhibit 10.9 of the Company's Annual Report
on Form 10-K for
<PAGE>14
the fiscal year ended March 31, 1993 (the "1993
Form 10-K").
10.8 Franchise Development Option Agreement between
the Company and Paul H. Welch and Jacqueline M.
Welch dated May 3, 1993. Incorporated by
reference to Exhibit 10.10 of the 1993 Form 10-
K.
10.9 Commercial Loan Note, dated May 18, 1995, issued
by the Company to The Bank of California, N.A.
and addendum thereto.
13.1 Portions of 1995 Annual Report to Shareholders
incorporated herein by reference.
22.1 List of Subsidiaries.
27.1 Financial Data Schedule.
(b) Reports on Form 8-K No reports on Form 8-K
-------------------
were filed by the Company during the last
quarter of the fiscal year ended March 31,
1995.
<PAGE>15
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d)
of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ELMER'S RESTAURANTS, INC.
Date: June 28, 1995 By HERMAN GOLDBERG
---------------------------------
Herman Goldberg,
President
Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been signed below by
the following persons on behalf of the registrant and in the
capacities indicated on June 28, 1995.
Signature Title
--------- -----
(1) Principal Executive and
Financial Officer
HERMAN GOLDBERG President, Chief
------------------------- Executive Officer,
Herman Goldberg and Chairman of the Board
(2) Principal Accounting
Officer
JUANITA NELSON Controller
- --------------------------
Juanita Nelson
(3) Directors
HERMAN GOLDBERG Director
- --------------------------
Herman Goldberg
PAUL WELCH Director
- --------------------------
Paul Welch
ZADOC (ZED) MERRILL Director
- --------------------------
Zadoc (Zed) Merrill
<PAGE>
EXHIBIT INDEX
Exhibit Sequential
No. Description Page Nos.
- ------- ----------- ----------
3.1 Restated Articles of Incorporation of the
Company. Incorporated by reference to
Exhibit 3.1 of the Company's Annual Report
on Form 10-K for the fiscal year ended
March 31, 1988 (the "1988 Form
10-K").
3.2 Bylaws of the Company, as amended.
Incorporated by reference to Exhibit 3.2 of
the Company's Annual Report on Form 10-K for
the fiscal year ended March 31, 1990.
10.1 Area Franchisee - Unit Franchisee Agreement
dated July 10, 1978 by and between Elmer's
Colonial Pancake & Steak House, Inc. and
Paul H. and Jacqueline M. Welch, Dale M. and
Sandra Lee Elmer. Incorporated by reference
to Exhibit 10.30 of the Company's Registration
Statement on Form S-18, Registration No. 2-
98298-S (the "Form S-18 Registration").
10.2 Employment Agreement dated November 30, 1983
by and between EP Holding Company, Inc. and
Herman Goldberg and amendments thereto.
10.3 Lease Agreement dated June 18, 1987 by and
between Dale M. Elmer and Sandra Lee Elmer
and Elmer's Pancake & Steak House, Inc., and
addenda thereto. Incorporated by reference to
Exhibit 10.5 of the Company's Annual Report on
Form 10-K for the fiscal year ended March 31,
1989 (the "1989 Form 10-K") and Exhibit 10.3
of the December 31, 1991 Form 10-Q.
10.4 Agreement dated March 23, 1989 between Elmer's
Restaurants, Inc. and Elmer's of Palm Springs,
a California general partnership consisting of
Larry Sloan, Suzanne Sloan, and Daniel B. Van
Horst. Incorporated by reference to Exhibit
10.18 of the 1989 Form 10-K.
<PAGE>
EXHIBIT INDEX
Exhibit Sequential
No. Description Page Nos.
- ------- ----------- ----------
10.5 Amended and Restated Loan Agreement, dated as
of June 7, 1991, between the Company and First
Interstate Bank of Oregon, N.A. and Seventh
Amendment thereto, dated as of May 17, 1995,
and Promissory Note dated as of May 17, 1995
issued by the Company to First Interstate Bank
of Oregon, N.A. in connection with the Seventh
Amendment.
10.6 Purchase Warrants exercisable to purchase
5,000 shares of Common Stock of the Company at
$1.20 per share from July 1, 1988 to June 30,
1995, issued to Marvin Bonine, August F.
Kalberer, and Paul Welch, respectively.
Incorporated by reference to Exhibit 10.20 of
the 1989 Form 10-K.
10.7 Franchise Agreement between the Company and
Paul H. Welch and Jacqueline M. Welch dated
March 23, 1993. Incorporated by reference to
Exhibit 10.9 of the Company's Annual Report
on Form 10-K for the fiscal year ended
March 31, 1993 (the "1993 Form 10-K").
10.8 Franchise Development Option Agreement between
the Company and Paul H. Welch and Jacqueline
M. Welch dated May 3, 1993. Incorporated by
reference to Exhibit 10.10 of the 1993 Form
10-K.
10.9 Commercial Loan Note, dated May 18, 1995,
issued by the Company to The Bank of
California, N.A. and addendum thereto.
13.1 Portions of 1995 Annual Report to Shareholders
incorporated herein by reference.
22.1 List of Subsidiaries.
27.1 Financial Data Schedule.
EXHIBIT 10.2
EP HOLDING COMPANY, INC.
Employment Agreement
--------------------
EMPLOYMENT AGREEMENT is made this 30th day of
November, 1983, between EP HOLDING COMPANY, INC., an Oregon
corporation (the "Company"), and HERMAN GOLDBERG (the
"Employee").
1. Employment, Duties and Acceptance.
---------------------------------
1.1 The Company hereby employs the Employee for the
"term" (as hereinafter defined), to render, during 80 percent
of his working time, services to the Company as Chairman of the
Board, President and Chief Executive Officer of the Company,
and in connection therewith, to perform such duties
commensurate with such office as he shall reasonably be
directed by the Board of Directors of the Company to perform.
1.2 The Employee hereby accepts such employment and
agrees to render the services described above. The Employee
further agrees to accept election and to serve during all or
any part of the Term as an officer or director of the Company
and of any subsidiary or affiliate of the Company, without any
compensation therefor other than that specified in this
Agreement, if elected to any such position by the shareholders
or by the Board of Directors of the Company or of any
subsidiary or affiliate, as the case may be.
1.3 The duties to be performed by the Employee
hereunder shall be performed primarily at the office of the
Company in Portland, Oregon, subject to reasonable travel
requirements on behalf of the Company.
1.4 The Employee shall be entitled to such period of
vacation as is provided from time to time to other senior
executives of the Company.
<PAGE>2
2. Term of Employment.
------------------
The Term of the Employee's employment under this
Agreement (the "Term") shall commence on December 1, 1983, and
shall continue until November 30, 1988, unless terminated
pursuant to Article 4 of this Agreement.
3. Compensation.
------------
3.1 As compensation for the services to be rendered
pursuant to this Agreement, the Company agrees to pay the
Employee, during the Term, a salary at the following annual
rates:
Period Annual Salary
------ -------------
From December 1, 1983
through November 30, 1984 $48,000
From December 1, 1984
through November 30, 1985 $54,000
From December 1, 1985
through November 30, 1988 $60,000
The salary shall be payable in equal monthly installments, less
such deductions or amounts to be withheld as shall be required
by applicable law and regulations.
3.2 The Company shall pay or reimburse the Employee
for all reasonable expenses actually incurred or paid by him
during the Term in the performance of his services under this
Agreement, upon presentation of expense statements or vouchers
or such other supporting information as it may require. The
Company shall also arrange for the issuance of Company gasoline
credit cards to the Employee for the expenses of obtaining
gasoline for his automobile.
3.3 Nothing herein contained shall be construed to
prevent the Company from increasing the Employee's salary
hereunder during the Term or
<PAGE>3
from paying bonuses to him, in the discretion of the Board of
Directors of the Company.
3.4 The Employee shall be entitled to all rights and
benefits for which he shall be eligible under any stock option
plan; bonus, participation or extra compensation plan; pension;
group life, medical and accident insurance; or other so-called
"fringe" benefits which the Company may, in its sole
discretion, provide for him or for its employees generally.
3.5 The provisions of this Agreement relating to
compensation to be paid to the Employee shall be subject to and
limited by any applicable provision of law or regulation which
may from time to time restrict or limit the compensation to be
paid hereunder.
4. Termination.
-----------
4.1 The Company may terminate the Term of this
Agreement, without cause, on sixty (60) days' prior written
notice. If the Company so terminates, the Employee shall be
entitled to the compensation provided herein for the remainder
of the Term.
4.2 The Company may terminate the Term of this
Agreement, with cause, on sixty (60) days' prior written
notice. If the Company so terminates, the Employee shall be
entitled to the compensation provided herein up to the date of
termination.
4.3 "Cause" is defined as conduct indicating
unworthy or illegal or fraudulent motives, or incompetence.
4.4 Without cause, the Employee may terminate the
Term of this Agreement upon sixty (60) days' prior written
notice to the Company. The
<PAGE>4
Employee shall continue to render his services until the
effective date of termination and shall be paid his regular
base salary up to the date of termination.
5. Indemnification.
---------------
The Company will indemnify the Employee, to the
maximum extent permitted by applicable law, against all costs,
charges and expenses incurred or sustained by him in connection
with any action, suit or proceeding to which he may be a party
by reason of his being an officer, director or employee of the
Company or of any subsidiary or affiliate of the Company.
Nothing contained in this Agreement shall limit or preclude any
other rights which the Employee shall otherwise have to
indemnification from the Company or under insurance policies of
indemnification maintained by the Company.
6. Notices.
-------
All notices, requests, consents and other
communications, required or permitted to be given hereunder,
shall be in writing and shall be deemed to have been duly given
if delivered personally or sent by prepaid telegram, or mailed
first-class, postage prepaid, by registered or certified mail
(notices sent by telegram or mailed shall be deemed to have
been given on the date sent), as follows (or to such other
address as either party shall designate by notice in writing to
the other in accordance herewith):
If to the Company, to: EP Holding Company, Inc.
11802 S.E. Stark
Portland, Oregon 97216
If to the Employee to: Herman Goldberg
3800 S.W. Cedar Hills Boulevard
Beaverton, Oregon 97005
7. General.
-------
<PAGE>5
7.1 This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State
of Oregon applicable to agreements made and to be performed
entirely in Oregon.
7.2 The article and section headings contained
herein are for reference purposes only and shall not in any way
affect the meaning or interpretation of this Agreement.
7.3 This Agreement sets forth the entire agreement
and understanding of the parties relating to the subject matter
hereof. No representation, promise or inducement has been made
by either party that is not embodied in this Agreement, and
neither party shall be bound by or liable for any alleged
representation, promise or inducement not so set forth.
7.4 This Agreement, and the Employee's rights and
obligations hereunder, may not be assigned by the Employee.
The Company may assign its rights, together with its
obligations, hereunder in connection with any sale, transfer or
other disposition of all or substantially all of its business
or assets; in any event the obligations of the Company
hereunder shall be binding on its successors or assigns,
whether by merger, consolidation or acquisition of all or
substantially all of its business or assets.
7.5 This Agreement may be amended, modified,
superseded, cancelled, renewed or extended and the terms or
covenants hereof may be waived, only by a written instrument
executed by both of the parties hereto, or in the case of a
waiver, by the party waiving compliance. The failure of either
party at any time or times to require performance of any
provision hereof shall in no manner affect the right at a later
time to enforce the same. No waiver by either party of
<PAGE>6
the breach of any term or covenant contained in this Agreement,
whether by conduct or otherwise, in any one or more instances,
shall be deemed to be, or construed as, a further or continuing
waiver of any such breach, or a waiver of the breach of any
other term or covenant contained in this Agreement.
7.6 If suit or action is instituted to enforce any
of the terms of this Agreement, or if any appeal is taken from
any decision rendered thereunder, the prevailing party shall be
entitled to recover from the other parties such sum as the
court may adjudge reasonable for legal fees in connection with
such suit or action, or appeal therefrom, in addition to all
other sums provided by law.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first above written.
EP HOLDING COMPANY, INC.
By HERMAN GOLDBERG
----------------------------
Title Chairman of the Board
-------------------------
HERMAN GOLDBERG
-------------------------------
Herman Goldberg
<PAGE>1
AMENDMENT TO EMPLOYMENT AGREEMENT
Parties
- -------
Elmer's Restaurants, Inc.
(formerly known as EP Holding Company, Inc.) "Company"
Herman Goldberg "Employee"
Recitals
- --------
1. The Company and Employee are parties to an Employment
Agreement dated November 30, 1983 (the "Employment Agreement").
2. The parties desire to amend certain provisions of the
Employment Agreement.
Agreement
- ---------
In consideration of the mutual promises set forth
herein, the Company and the Employee agree to amend the
Employment Agreement as follows:
1. Section 1.1 of the Employment Agreement is amended to
read as follows:
"1.1 The Company hereby employs the
Employee for the "term" (as hereinafter
defined), to render, on a full-time basis,
services to the Company as Chairman of the
Board, President and Chief Executive
Officer of the Company, and in connection
therewith, to perform such duties
commensurate with such office as he shall
reasonably be directed by the Board of
Directors of the Company to perform."
2. Section 2 of the Employment Agreement is amended to
read as follows:
<PAGE>2
"2. Term of Employment
------------------
The Term of the Employee's employment
under this Agreement (the "Term") shall
commence on December 1, 1983, and shall
continue until May 30, 1992, unless
terminated pursuant to Article 4 of this
Agreement."
3. Section 3.1 of the Employment Agreement is amended to
read as follows:
"3.1 As compensation for the services
to be rendered pursuant to this Agreement,
the Company agrees to pay the Employee,
during the remaining Term, a salary at the
annual rate of $80,000."
4. In all other respects the Employment Agreement shall
remain in full force and effect.
5. This Amendment, including the increase in salary,
shall be effective as of May 30, 1986.
DATED: May 30, 1986
ELMER'S RESTAURANTS, INC.
By HERMAN GOLDBERG
----------------------------
Title President
-------------------------
HERMAN GOLDBERG
-------------------------------
Herman Goldberg
<PAGE>1
SECOND AMENDMENT TO EMPLOYMENT AGREEMENT
Parties
- -------
ELMER'S RESTAURANTS, INC. "Company"
HERMAN GOLDBERG "Employee"
Recitals
- --------
1. The Company and Employee are parties to an Employment
Agreement dated November 30, 1983, as amended by that certain
Amendment to Employment Agreement dated May 30, 1986 (the
"Employment Agreement").
2. The parties desire to amend certain provisions of the
Employment Agreement.
Agreement
- ---------
In consideration of the mutual promises set forth
herein, the Company and the Employee agree to amend the
Employment Agreement as follows:
1. Section 2 of the Employment Agreement is amended to
read as follows:
"2. Term of Employment
------------------
"The Term of the Employee's employment
under this Agreement (the "Term") shall
commence on December 1, 1983, and shall
continue until May 30, 1994, unless
terminated pursuant to Article 4 of this
Agreement."
<PAGE>2
2. Section 3.1 of the Employment Agreement is amended to
read as follows:
"3.1 As compensation for the services
to be rendered pursuant to this Agreement,
the Company agrees to pay the Employee,
during the remaining Term, a salary at the
annual rate of $95,000."
3. In all other respects the Employment Agreement shall
remain in full force and effect.
This Amendment, including the increase in salary, is
dated and shall be effective as of April 1, 1988.
ELMER'S RESTAURANTS, INC.
By HERMAN GOLDBERG
----------------------------
Title President
-------------------------
HERMAN GOLDBERG
-------------------------------
Herman Goldberg
<PAGE>1
THIRD AMENDMENT TO EMPLOYMENT AGREEMENT
Parties
- -------
ELMER'S RESTAURANTS, INC. "Company"
HERMAN GOLDBERG "Employee"
Recitals
- --------
1. The Company and the Employee are parties to an
Employment Agreement dated November 30, 1983, as amended by
those certain Amendments to Employment Agreement dated May 30,
1986 and April 1, 1988 (the "Employment Agreement").
2. The parties desire to amend certain provisions of the
Employment Agreement.
Agreement
- ---------
In consideration of the mutual promises set forth
herein, the Company and the Employee agree to amend the
Employment Agreement as follows:
1. Section 2 of the Employment Agreement is amended to
read as follows:
"2. Term of Employment
------------------
"The Term of the Employee's employment
under this Agreement (the "Term") shall
commence on December 1, 1983, and shall
continue until May 30, 1996, unless
terminated pursuant to Section 4 of this
Agreement."
<PAGE>2
2. Section 4 of the Employment Agreement is amended to
include a new Section 4.5, which shall read as follows:
"4.5 If the Employee is unable to
perform the duties required hereunder
because he dies or becomes "permanently and
totally disabled" (as defined in Section
22(e) of the Internal Revenue Code of 1986,
and amendments thereto), and this Agreement
has not otherwise been terminated pursuant
to Sections 4.1, 4.2 or 4.4 hereof, the
Employee, his personal representative or
estate, as the case may be, shall continue
to receive the regular base salary as
specified in Section 3.1 until the later of
(i) two years after the date of such death
or disability or (ii) May 30, 1996."
3. In all other respects the Employment Agreement shall
remain in full force and effect.
This Amendment is dated and shall be effective as of
July 11, 1991.
ELMER'S RESTAURANTS, INC.
By PAUL WELCH
-----------------------
Paul Welch, Secretary
HERMAN GOLDBERG
--------------------------
Herman Goldberg
<PAGE>1
FOURTH AMENDMENT TO EMPLOYMENT AGREEMENT
DATED: July 14, 1994
BETWEEN: ELMER'S RESTAURANTS, INC., "Company"
an Oregon corporation
AND: HERMAN GOLDBERG "Employee"
Recitals
1. The Company and the Employee are parties to an
Employment Agreement dated November 30, 1983, as amended by
those certain Amendments to Employment Agreement dated May 30,
1986; April 1, 1988; and July 11, 1991 (the "Employment
Agreement").
2. Anita Goldberg is the wife of the Employee and is
also an employee of the Company.
3. The parties desire to amend certain provisions of the
Employment Agreement.
Agreement
In consideration of the mutual promises set forth
herein, the Company and Employee agree to amend the Employment
Agreement as follows:
1. Section 2 of the Employment Agreement is amended to
read as follows:
"2. Term of Employment
------------------
"The Term of the Employee's employment
under this Agreement (the "Term") shall commence on
December 1983 and shall continue until May 30, 1999,
unless terminated pursuant to Section 4 of this
Agreement."
<PAGE>2
2. Section 4.5 of the Employment Agreement is amended to
read as follows:
"4.5 If the Employee is unable to
perform the duties required hereunder
because he dies or becomes "permanently and
totally disabled" (as defined in
Section 22(e) of the Internal Revenue Code
of 1986, and amendments thereto) and this
Agreement has not otherwise been terminated
pursuant to Sections 4.1, 4.2 or 4.4
hereof, the Employee, his personal
representative or estate, as the case may
be, shall continue to receive the regular
base salary as specified in Section 3.1
until the earlier of (i) two years after
the date of such death or disability or
(ii) May 30, 1999; provided that any
amounts otherwise payable pursuant to this
Section 4.5 shall be reduced by the amount
of any cash compensation payable by the
Company to Anita Goldberg, in her capacity
as an employee, for such period."
3. In all other respects the Employment Agreement shall
remain in full force and effect.
This Agreement is dated and shall be effective as of
July 14, 1994.
ELMER'S RESTAURANTS, INC.
By PAUL WELCH
----------------------------
Paul Welch, Secretary
HERMAN GOLDBERG
-------------------------------
Herman Goldberg
<PAGE>1
EXHIBIT 10.5
AMENDED AND RESTATED LOAN AGREEMENT
-----------------------------------
THIS AMENDED AND RESTATED AGREEMENT is entered into as of
the 7th day of June, 1991, between ELMER'S RESTAURANTS, INC.,
an Oregon corporation, with its chief executive office located
at 11802 S.E. Stark, P.O. Box 16595, Portland, Oregon 97216
("Borrower"), and FIRST INTERSTATE BANK OF OREGON, N.A.
("Bank").
1. APPLICATION FOR AND PURPOSE OF LOANS
Borrower has applied to Bank and now renews the
application for financial accommodations (a) to refinance
existing indebtedness for equipment and fixtures and to
extinguish other debt aggregating not more than Sixty-Five
Thousand and No/100 Dollars ($65,000.00) (Loan I, as
hereinafter defined), (b) to finance the purchase of ten (10)
Fisher point of sale/cash register systems (Loan II, as
hereinafter defined), and (c) to finance the purchase of an
aggregate of one hundred thousand (100,000) shares of
Borrower's stock owned by Paul H. Welch and Jacqueline M. Welch
(Loan III, as hereinafter defined).
2. THE LOANS
2.1 (a) Loan I
------
(1) Commitment. Subject to Section 4, on
----------
July 10, 1990, or such other date as Borrower and Bank may
agree ("Closing Date I"), Bank agrees to make Loan I, subject
to the terms, covenants and conditions hereinafter set forth,
in the maximum principal amount of Three Million and No/100
Dollars ($3,000,000.00). Loan I shall be evidenced by a single
promissory note substantially in the form of Exhibit A attached
hereto and by this reference incorporated herein ("Note I").
(2) Term. Loan I shall commence on
----
Closing Date I and shall terminate on the fifth anniversary of
Closing Date I ("Maturity Date I").
(3) Interest Rate. Loan I shall bear
-------------
interest at the rate of eleven and three-quarters percent
(11.75%) per annum. Interest shall be computed on the
outstanding principal amount on the basis of a 365-day or
366-day year, as applicable, and actual days elapsed.
(4) Payments. Loan I shall be payable in
--------
equal, consecutive monthly instalments of both principal and
the full amount of interest due on the unpaid principal balance
<PAGE>2
at the time of payment of each instalment in an amount
sufficient to amortize Loan I by the eighth (8th) anniversary
of Closing Date I, these instalments to commence August 1,
1990, and thereafter be due on the first (1st) day of each
month until Maturity Date I when the aggregate unpaid principal
amount, together with unpaid accrued interest thereon, shall be
due and payable in full.
(5) Prepayment. In any Loan Year (as
----------
hereinafter defined), Borrower may, on any instalment payment
date, prepay without premium or penalty on a non-cumulative
basis up to ten percent (10.0%) of the outstanding balance of
Loan I at the beginning of the Loan Year in which the
prepayment is made. In addition, Borrower may on any
instalment payment date prepay Loan I in whole or in part,
subject to payment of the prepayment fee provided for below.
Any prepayment shall include payment of interest accrued to the
date of prepayment on the amount prepaid and shall be applied
to the most remotely maturing principal instalments. The
prepayment fee, if applicable, shall be equal to the principal
amount prepaid in a Loan Year in excess of the amount which
could be prepaid in such Loan Year without premium or penalty
pursuant to this Section 2.1(a)(5) hereof multiplied by the
following percentage: (1) three percent (3.00%) if Borrower
prepays in the first or second Loan Year; (2) two percent
(2.00%) if Borrower prepays in the third or fourth Loan Year;
or (3) one percent (1.00%) if Borrower prepays in the fifth
Loan Year.
(6) Loan Fee. Borrower has paid to Bank a
--------
loan fee of Ten Thousand and No/100 Dollars ($10,000.00).
(7) Disbursement. Bank shall disburse the
------------
proceeds of Loan I by cashier's check or checks.
(b) Loan II.
-------
(1) Commitment. Subject to Section 4,
----------
Bank agrees to make Loan II, subject to the terms, covenants
and conditions hereinafter set forth, on a nonrevolving basis
from time to time as Borrower requests, in the maximum
aggregate outstanding principal amount of Two Hundred Twenty
Thousand and No/100 Dollars ($220,000.00); provided, however,
that draws under Loan II shall be made upon installation of the
equipment financed by Loan II and the final draw under Loan II
shall be made on or prior to September 30, 1991 (September 30,
1991 or the date of the final draw, if earlier, to be
referenced as "Terming Date II"). On the day after Terming
Date II, the outstanding balance on Terming Date II ("Terming
Balance II") shall be converted into a term loan. Loan II
shall be evidenced by a single promissory note substantially in
<PAGE>3
the form of Exhibit B attached hereto and by this reference
incorporated herein ("Note II").
(2) Term. Loan II shall commence on
----
Closing Date II and shall terminate the fifth anniversary or
Terming Date II ("Maturity Date II").
(3) Interest. Amounts outstanding under
--------
Loan II shall bear interest at the rate of one percent (1.00%)
per annum above Bank's Prime Rate, fully floating. At a
mutually agreeable date, Borrower may elect a fixed rate of
interest to apply to accounts outstanding under Loan II. This
fixed rate of interest shall be determined at the sole
discretion of Bank. Interest shall be computed on the
outstanding principal amount on the basis of a 365-day or
366-day year, as applicable, and actual days elapsed.
Accrued interest on principal amounts
outstanding under Note II shall be payable on the first (1st)
day of each calendar month during which Loan II is outstanding,
commencing August 1, 1991, at Terming Date II and at the time
Loan II is paid in full.
(4) Principal Payments. The principal
------------------
balance of Loan II shall be paid in equal consecutive
instalments of 1/60th of Terming Balance II, commencing the
first (1st) of the month after Terming Date II and thereafter
on the first (1st) day of each month until Maturity Date II
when the aggregate unpaid principal amount of Loan II, together
with unpaid accrued interest thereon, shall be due and payable
in full. Borrower may from time to time prepay Loan II in
whole or in part, without premium or penalty, and any
prepayment shall include payment of interest accrued to the
date of prepayment. Any prepayment shall be applied to the
most remotely maturing principal instalments.
(5) Fee. Borrower shall pay to Bank a
---
nonrefundable fee of Two Thousand and No/100 Dollars
($2.000.00). Payment was made on May 7, 1991.
(c) Loan III.
--------
(1) Commitment. Subject to Section 4,
----------
Bank agrees to make Loan III, subject to the terms, covenants
and conditions hereinafter set forth, on Borrower's request, in
a maximum principal amount of Seventy-Five Thousand and No/100
Dollars ($75,000.00); provided, however, that the draw under
Loan III shall occur no later than July 31, 1991 (July 31, 1991
or the date of the draw, if earlier, to be referenced as
"Terming Date III"). Loan III shall be evidenced by a single
<PAGE>4
promissory note substantially in the form of Exhibit C attached
hereto and by this reference incorporated herein ("Note III").
(2) Term. Loan III shall commence on
----
Closing Date II and shall terminate on the second anniversary
of Terming Date III ("Maturity Date III").
(3) Interest. Loan III shall bear
--------
interest at the per annum fixed rate of interest set by the
Bank in its sole discretion on the Terming Date. Interest
shall be computed on the outstanding principal amount on the
basis of a 365-day or 366-day year, as applicable, and actual
days elapsed.
(4) Payments. Loan III shall be paid
--------
in equal consecutive instalments of both principal and the full
amount of interest due on the unpaid principal balance at the
time of payment of each instalment in an amount sufficient to
amortize Loan III by Maturity Date III, payments to be due
commencing the first (1st) of the month after Terming Date III
and thereafter on the first (1st) day of each month until
Maturity Date III when the aggregate unpaid principal amount of
Loan III, together with unpaid accrued interest thereon, shall
be due and payable in full. Borrower may from time to time
prepay Loan III in whole or in part, without premium or
penalty, and any prepayment shall include payment of interest
accrued to the date of prepayment. Any prepayment shall be
applied to the most remotely maturing principal instalments.
(5) Fee. Borrower shall pay to Bank
---
a nonrefundable fee of Seven Hundred Fifty and No/100 Dollars
($750.00). Payment was made on May 7, 1991.
2.2 Terms Applicable to All Loans.
-----------------------------
(a) Payments. All payments shall be made by
--------
Borrower to Bank not later than 12:00 Noon, Pacific time, on
the date due, at the office of Bank designated by Bank for such
purpose.
If any payment of principal or interest falls
due on a day which is not a Business Day, then such due date
shall be extended to the next following Business Day.
Additional interest shall accrue and be payable for the period
of any such extension. All payments hereunder shall be applied
first to interest, then to principal. If the amount paid in
any instalment is less than the accrued interest then due, the
excess of interest shall be added to and become part of the
principal, and interest shall be charged thereon to the extent
permitted by applicable laws.
<PAGE>5
(b) Security Interests. Borrower's obligations
------------------
hereunder will be secured by all of the following types of
property of Borrower and the Subsidiaries, and the obligations
of each of the Subsidiaries under their respective Guaranties
of the Loans to Borrower will be secured by the following types
of property of each of the Subsidiaries: (a) all accounts, now
existing or hereafter arising; (b) all general intangibles, now
existing or hereafter arising; (c) all inventory, now existing
or hereafter held; (d) all equipment (including but not limited
to fixtures) now or hereafter held; (e) all instruments,
documents of title, policies and certificates of insurance, now
or hereafter owned by Borrower or a Subsidiary or in which
Borrower or a Subsidiary, as the case may be, now has or may
hereafter have an interest; (f) deposits or cash, now existing
or hereafter acquired, which are now or may hereafter be in the
possession of Bank; (g) all chattel paper, now existing or
hereafter arising; and (h) proceeds and products of all of the
foregoing. The security interests required hereunder shall be
granted pursuant to security agreements in substantially the
form of Exhibit D attached hereto and by this reference made a
part hereof (the "Security Agreements"). The security
interests granted by the Security Agreements shall be perfected
security interests subject only to the Permitted Liens (as
hereinafter defined) to the extent perfection can be done
through UCC filings.
(c) Easements. Borrower shall use its best
---------
efforts to deliver, or cause to be delivered, to Bank duly
executed and notarized easements and subordinations
substantially in the form of Exhibit E attached hereto and by
this reference incorporated herein, executed by owner(s),
mortgagee(s), and lessor(s) of any of the premises on which any
of Bank's collateral is located ("Easements").
(d) Guaranties.
----------
(1) The obligations of Borrower hereunder
shall be guaranteed by the Subsidiaries (other than EB, Inc.)
pursuant to continuing guaranty agreements substantially in the
form of Exhibit F attached hereto and by this reference made a
part hereof (the "Guaranties").
(2) From time to time, at the reasonable
request of Bank, Borrower shall cause any of its Subsidiaries
which are material to the business, financial condition, or
operations of Borrower to deliver to Bank a duly executed
Guaranty and a Security Agreement substantially in the forms
contemplated herein.
<PAGE>6
3. REPRESENTATIONS AND WARRANTIES.
With respect to this Amended and Restated Loan Agreement,
Borrower, as of Closing Date II, makes the representations and
warranties below as made applicable to Note II and Note III
(except for the second sentence of Section 3.9 as to which
Borrower represents and warrants no such change since
______________, 19__). As of the original Closing Date,
Borrower represents and warrants that:
3.1 Organization and Standing of Borrower and
-----------------------------------------
Its Subsidiaries. Borrower and its Subsidiaries are
- ----------------
corporations duly organized and validly existing under the laws
of the state of Oregon; each has the power to own its property
and carry on its business as now being conducted and is duly
qualified and authorized to do business and is in good standing
in every state, country, or other jurisdiction in which the
nature of its business and property makes such qualification
necessary, except where the failure to be so qualified and in
good standing has and will have no material adverse effect on
Borrower and its Subsidiaries, taken as a whole.
3.2 Power and Authority. Borrower has full
-------------------
power and authority (corporate or otherwise) to borrow the sums
provided for in this Agreement; to execute, deliver and perform
this Agreement, the Note, the Security Agreement, and any other
instrument or agreement required hereunder; and to perform and
observe the terms and conditions hereof and thereof.
Each Subsidiary has full power and authority
(corporate or otherwise) to execute, deliver and perform the
applicable Loan Documents (as hereinafter defined) and to
perform and observe the terms and conditions thereof.
3.3 Corporate Authorization. All corporate
-----------------------
action on the part of the Borrower, its directors or
stockholders, necessary for the authorization, execution,
delivery and performance of this Agreement, the Note, the
Security Agreement, and any other instrument or agreement
required hereunder has been duly taken.
All corporate action on the part of each
Subsidiary, its directors or stockholders, necessary for the
authorization, execution, delivery and performance of the
applicable Loan Documents has been duly taken.
3.4 Authority of Officers. The officers of
---------------------
Borrower executing this Agreement, the Note, the Security
Agreement, or any other instrument or agreement required
hereunder are duly and properly in office and fully authorized
to execute the same.
<PAGE>7
The officer(s) of each Subsidiary executing the
applicable Loan Documents are duly and properly in office and
fully authorized to execute the same.
3.5 Enforceability. This Agreement, when
--------------
executed and delivered by Borrower, will be a legal, valid and
binding agreement of Borrower, enforceable against it in
accordance with its terms, and the Note and the Security
Agreement, when executed and delivered, will be similarly
valid, binding and enforceable, except, as to each of the
foregoing, to the extent that the enforcement thereof may be
limited by bankruptcy, insolvency, reorganization, or other
similar laws generally affecting creditors' rights and
principles of equity applicable to the availability of the
remedy of specific performance.
The applicable Loan Documents, when executed and
delivered by each Subsidiary, will be legal, valid and binding
agreements of that Subsidiary, enforceable against it in
accordance with their terms, except to the extent that the
enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, or other similar laws generally affecting
creditors' rights and principles of equity applicable to the
availability of the remedy of specific performance.
3.6 Consents or Approvals. No consent or
---------------------
approval of any trustee, issuer or holder of any indebtedness
or obligation of Borrower or any Subsidiary, and no consent,
permission, authorization, order or license of any governmental
authorities is necessary in connection with the execution and
delivery of this Agreement, the Note, the Security Agreement,
any of the Loan Documents, or any instrument or agreement
required hereunder, or any transaction contemplated hereby,
except as may have been obtained and certified copies of which
have been delivered to Bank on or prior to Closing Date.
3.7 Restrictions. There is no charter, bylaw,
------------
or capital stock provision of Borrower or any Subsidiary or any
statute, rule or regulation, or any judgment, decree or order
of any court or agency binding on Borrower or any Subsidiary or
any agreement, instrument, indenture or undertaking to which
Borrower is a party or by which it is bound which would be
contravened, breached or violated by the execution and delivery
of this Agreement, the Note, the Security Agreement, any of the
Loan Documents, or any instrument or agreement hereunder, or by
the performance of any provision, condition, covenant, or other
terms hereof or thereof.
3.8 Litigation. Except as disclosed in the
----------
financial information provided pursuant to Section 3.9, there
<PAGE>8
is no litigation, tax claim, proceeding or dispute pending, or,
to the knowledge of Borrower threatened, against or affecting
Borrower or any Subsidiary or its property, the adverse
determination of which might materially and adversely affect
the financial condition or operations of Borrower and its
Subsidiaries, taken as a whole, or impair the ability of
Borrower or such Subsidiary to perform its obligations
hereunder, or under the Note, any of the Loan Documents, or
instrument or agreement required hereunder or which would
result in the imposition of any lien, charge or encumbrance on
any property of Borrower or such Subsidiary in an amount
greater than One Hundred Thousand and No/100 Dollars
($100,000.00).
3.9 Financial information. All financial
---------------------
statements and other information and data furnished by Borrower
or any Subsidiary to Bank are complete and correct in all
material respects; have been prepared in accordance with
generally accepted accounting principles and practices
consistently applied, except as noted therein; and accurately
and fairly represent the financial condition and the results of
operations of Borrower or such Subsidiary as of such dates.
Since March 31, 1990, there has been no change in the financial
condition or results of operations of Borrower or such
Subsidiary of such a character as to materially impair the
ability of Borrower or such Subsidiary to repay the Loan in
accordance with the terms hereof or perform the obligations
under its Guaranty; and Borrower or such Subsidiary has no
contingent obligations which are material in the aggregate,
except as disclosed in such statements, information, and data,
and except for the obligations hereunder of Borrower and its
Subsidiaries.
3.10 Liens and Encumbrances. The property of
----------------------
Borrower and its Subsidiaries is owned by them free and clear
of liens, encumbrances and leasehold interests, except (a) as
disclosed to Bank in Exhibit G attached hereto and by this
reference incorporated herein and (b) liens permitted by
Section 6.3 hereof [the liens referred to in clauses (a) and
(b) collectively referred to herein as "Permitted Liens"].
3.11 Business Authorizations. Borrower and its
-----------------------
Subsidiaries possess all material patents, patent rights or
licenses, trademarks, trademark rights, tradenames or tradename
rights and copyrights required to conduct their business as now
conducted, to the best of Borrower's knowledge, without
conflict with the rights or privileges of others.
3.12 ERISA. Each of the Borrower and its
-----
Subsidiaries is in compliance with ERISA and has not incurred
any material accumulated funding deficiency within the meaning
<PAGE>9
of ERISA and has not incurred any material liability to the
Pension Benefit Guaranty Corporation (established pursuant to
ERISA) in connection with any employee benefit plan established
or maintained by it.
3.13 Compliance with Laws. The operations of
--------------------
Borrower and its Subsidiaries are in material compliance with
all laws, rules, orders, regulations, and restrictions of any
federal, state, county, municipal, or local (or foreign, if
applicable) government or governmental body or agency
applicable to its operations, specifically including, but not
limited to, any and all laws, regulations, directives, and
orders of any kind regarding ERISA, FLSA, and the handling
and/or treatment of toxic and/or hazardous waste, except where
failure to be in such compliance will have no material adverse
effect on the conduct of business of Borrower and its
Subsidiaries, taken as a whole.
4. CONDITIONS PRECEDENT TO LOANS
4.1 The obligation of Bank to make Loan I is subject
to the condition that, on or prior to Closing Date I, there
shall have been delivered to Bank, in form and substance
satisfactory to Bank and its counsel:
(a) Corporate Resolutions. A copy of a
---------------------
resolution or resolutions passed by the Board of Directors of
Borrower, certified by the Secretary or Assistant Secretary of
Borrower as being in full force and effect on Closing Date I,
authorizing Loan I herein provided for and the execution,
delivery, and performance of this Agreement, Note I, and any
other instrument or agreement required hereunder.
A copy of a resolution or resolutions
passed by the Board of Directors of each Subsidiary certified
by the respective Secretary or Assistant Secretary thereof as
being in full force and effect on Closing Date I, authorizing
the execution, delivery and performance of the applicable Loan
Documents by that Subsidiary.
(b) Certificate of Incumbency. A certificate,
-------------------------
signed by the Secretary or Assistant Secretary of Borrower and
dated Closing Date I, as to the incumbency of the person or
persons authorized to execute and deliver this Agreement,
Note I, or any other instrument or agreement required hereunder
on behalf of Borrower.
A certificate for each Subsidiary, signed
by the Secretary or Assistant Secretary of that Subsidiary and
dated Closing Date I, as to the incumbency of the person or
persons authorized to execute and deliver any of the Loan
<PAGE>10
Documents or any other instrument or agreement required
hereunder on behalf of that Subsidiary.
(c) Legal Opinions. Opinion of Stoel
--------------
Rives Boley Jones & Grey, counsel to Borrower, in substantially
the form of Exhibit H hereto.
(d) Loan Documents. The following loan
--------------
documents duly executed and duly recorded where required
hereunder, which are hereinafter referred to as "Loan
Documents":
(a) Note I;
(b) Security Agreements;
(c) Easement(s);
(d) Guaranty(ies);
(e) UCC financing statements required to
perfect any of Bank's security interests herein provided for.
(e) Insurance Documents. Evidence of
-------------------
insurance required by Section 5.8.
4.2 The obligation of Bank to make Loan II and
Loan III under this Agreement is subject to the condition that,
on or prior to June 7, 1991 ("Closing Date II") (except for
Note III which shall be delivered on or prior to Terming Date
III), there shall have been delivered to Bank, in form and
substance satisfactory to Bank and its counsel:
(a) Corporate Resolutions. A copy of a
---------------------
resolution or resolutions passed by the Board of Directors of
Borrower, certified by the Secretary or Assistant Secretary of
Borrower as being in full force and effect on Closing Date II,
authorizing Loan II and Loan III herein provided for and the
execution, delivery, and performance of this Agreement, Note
II, Note III and any other instrument or agreement required
hereunder.
A copy of a resolution or resolutions
passed by the Board of Directors of each Subsidiary certified
by the respective Secretary or Assistant Secretary thereof as
being in full force and effect on Closing Date II, authorizing
the execution, delivery and performance of the applicable Loan
Documents by that Subsidiary.
(b) Certificate of Incumbency. A
-------------------------
certificate, signed by the Secretary or Assistant Secretary of
<PAGE>11
Borrower and dated Closing Date II, as to the incumbency of the
person or persons authorized to execute and deliver this
Agreement, Note II, Note III or any other instrument or
agreement required hereunder on behalf of Borrower.
A certificate for each Subsidiary,
signed by the Secretary or Assistant Secretary of that
Subsidiary and dated Closing Date II, as to the incumbency of
the person or persons authorized to execute and deliver any of
the Loan Documents or any other instrument or agreement
required hereunder on behalf of that Subsidiary.
(c) Loan Documents. The following loan
--------------
documents duly executed and duly recorded where required
hereunder, which are included in the definition of "Loan
Documents":
(a) Note II;
(b) Note III;
(c) Easement(s), if necessary;
(d) Guaranties.
5. AFFIRMATIVE COVENANTS
Borrower agrees that it will, and will cause its
Subsidiaries to (as to Sections 5.4 and 5.6 through 5.13),
unless Bank waives compliance in writing:
5.1 Use of Proceeds of Loans. Use the proceeds of
------------------------
the Loans only for those purposes specified in Section 1
hereof.
5.2 Repayment. Repay the Loans according to the
---------
terms hereof and the Notes.
5.3 Ratio of Assets to Liabilities. On a
------------------------------
consolidated basis, maintain a ratio of current assets to
current liabilities of at least 1.0 to 1.0. Current assets and
current liabilities shall be determined in accordance with
generally accepted accounting principles consistently applied.
5.4 Notice of Default. Promptly give written notice
-----------------
to Bank of any Event of Default as defined below or any event
which has occurred and is continuing and which, upon a lapse of
time or notice or both, would become an Event of Default.
5.5 Financial Statements and Reports. Deliver to
--------------------------------
Bank in form and detail satisfactory to Bank:
<PAGE>12
(a) As soon as reasonably possible and in any
event within forty-five (45) days after the close of each
month, its consolidated and consolidating (1) balance sheet as
of the end of such periods and (2) statements of income and
retained earnings for such periods and for the portion of the
fiscal year ended with such period, all in comparative form and
all in reasonable detail and certified by the chief financial
officer of Borrower, subject to year-end audit adjustments.
(b) As soon as reasonably possible and in any
event within ninety (90) days after the close of each fiscal
year of Borrower, the consolidated (1) balance sheet of
Borrower as at the end of such fiscal year setting forth in
comparative form the corresponding figures as at the end of the
preceding fiscal year, and (2) statements of income, retained
earnings and statement of cash flows for such fiscal year of
Borrower setting forth in comparative form the corresponding
figures for the previous fiscal year, prepared in conformity
with generally accepted accounting principles applied on a
basis consistent with that of the preceding year or containing
disclosure of the effect on financial position or results of
operations of any change in the application of accounting
principles during the year.
The consolidated balance sheet and income statements
contemplated in this Section 5.5(b) shall be accompanied by a
report and opinion of Coopers & Lybrand or other independent
public accountants of recognized standing approved by Bank,
which report and opinion shall be in accordance with generally
accepted auditing standards relating to reporting and shall be
accompanied by a statement of such accountants that, in making
the audit necessary for the certification of such financial
statements and such report, such accountants have obtained no
knowledge of any Event of Default under Section 7 or under any
other evidence of indebtedness or of any event which, with
notice or lapse of time, or both, would constitute an Event of
Default under Section 7 or under any other evidence of
indebtedness or, if in the opinion of such accountants any such
Event of Default or other event shall exist, shall include a
statement as to the nature and status thereof.
(c) As soon as reasonably possible, and in any
event within forty-five (45) days after the close of each of
the first three fiscal quarters in the case of (1) below and
within ninety (90) days after the close of each fiscal year in
the case of (2) below, submit (1) a quarterly certificate
executed by the chief financial officer of Borrower certifying
compliance by Borrower with the requirements of Sections 5.3,
6.7 and 6.8; (2) an annual certificate executed by the chief
financial officer of Borrower certifying compliance with
<PAGE>13
sections 5.3, 5.15, 6.7 and 6.8; and (3) a statement of the
chief financial officer of Borrower that he has no knowledge of
any Event of Default under Section 7 or under any other
evidence of indebtedness or of any event which has occurred and
is continuing and which, with notice or lapse of time, or both,
would constitute an Event of Default under Section 7 or under
any other evidence of indebtedness, or if in the opinion of the
chief financial officer of Borrower any such Event of Default
or other event shall exist, shall include a statement as to the
nature and status thereof. Each such certificate will be
accompanied by an attached and referenced schedule setting
forth in reasonable detail the computations necessary to
ascertain compliance.
(d) As soon as reasonably possible, and in any
event within forty-five (45) days after the close of each
month, accounts receivable aging of Elmer's Pancake &
Steakhouse, Inc., in such form and detail as may be reasonably
required by Bank.
(e) Such other statement or statements, lists
of property and accounts, budgets, forecasts, or reports as to
Borrower as Bank may reasonably request.
5.6 Preservation of Rights and Properties. Maintain
-------------------------------------
and preserve its existence and all material public rights,
privileges and franchises necessary to conduct its business in
an orderly, efficient and customary manner.
5.7 Payment of Taxes. Pay all obligations,
----------------
including tax claims, at maturity, except such as may be
contested in good faith or as to which a bona fide dispute may
exist.
5.8 Insurance. Maintain for itself such insurance
---------
against loss or damage to its tangible property of the kinds
customarily insured against by corporations similarly situated,
with reputable companies or with the United States government
or any agency or instrumentality thereof, in such amounts and
by such methods as is customary by corporations similarly
situated, and as to all such insurance covering inventory and
equipment in which Bank has a security interest with loss
payable endorsement (BFU 438) in favor of Bank in form
reasonably satisfactory to Bank, and will at all times maintain
or cause to be maintained in full force and effect, with
reputable companies and in such amounts and by such methods as
is customary by corporations similarly situated, public
liability insurance against loss or damage to it for bodily
injury or death in or about any premises occupied by it, and
liability insurance against loss or damage to it for bodily
<PAGE>14
injury or death or injury to property occurring by reason of
the operation by it of any motor vehicle or other equipment.
All such policies of insurance shall contain a
provision that the same shall not be canceled nor the coverage
modified nor the limits changed without first giving thirty
(30) days' written notice thereof to Bank and that no act or
default of Borrower or any other person shall affect the right
of Bank to recover under any such policy or policies in the
case of loss or damage; and a certificate of insurance shall be
provided to Bank by mail, addressed to Corporate Note
Department, 1300 S.W. Fifth Avenue, P.O. Box 3330, Portland,
Oregon 97208.
5.9 Maintenance of Properties, Etc. Maintain its
-------------------------------
properties in such repair, working order and condition and from
time to time make such repairs, renewals, replacements,
additions and improvements thereto, and comply at all times in
all material respects with the provisions of all licenses,
material leases and other material agreements to which it is a
party, so as to prevent any loss or forfeiture thereof or
thereunder unless compliance therewith is being at the time
contested in good faith by appropriate proceedings, except as
to any of the foregoing which would not materially and
adversely affect Borrower and its Subsidiaries, taken as a
whole.
5.10 Inspection. Maintain books, accounts and
----------
records, and prepare all financial statements required
hereunder in accordance with generally accepted accounting
principles and practices consistently applied (except as noted
therein), and in compliance with the regulations of any
governmental regulatory body having jurisdiction thereof; and
permit employees or agents of Bank at any reasonable time and
upon reasonable notice to inspect its properties and, at
reasonable times and upon reasonable notice, to examine or
audit its books, accounts and records and make copies and
memoranda thereof.
5.11 Notice of Litigation. Promptly give notice to
--------------------
Bank of any suit, action or proceeding instituted against it
wherein it might incur a potential liability not covered by
insurance in excess of One Hundred Thousand Dollars
($100,000.00).
5.12 ERISA. As soon as possible and in any event
-----
within thirty (30) days after it knows or has reason to know
that any Reportable Event (as defined in Title IV of ERISA,
other than Reportable Events for which the notice requirement
has been waived) with respect to any Plan has occurred, deliver
to Bank a statement of its Chairman of the Board, President, or
<PAGE>15
Treasurer setting forth details as to such Reportable Event and
the action which it proposes to take with respect thereto,
together with a copy of the notice of such Reportable Event to
the Pension Benefit Guaranty Corporation.
5.13 Compliance with Laws. Conduct its operations
--------------------
and cause those of each Subsidiary to be conducted in material
compliance with all laws, rules, orders, regulations, or
restrictions of any federal, state, county, municipal, or local
(or foreign, if applicable) government or governmental body or
agency applicable to its and their operations, specifically
including but not limited to any law, rule, order, regulation
or restriction relating to ERISA, FLSA, environmental
protection and pollution control (including control, handling,
treatment and disposal of hazardous substances, toxic
chemicals, herbicides and pesticides pursuant to the
Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, the Resource Conservation and Recovery
Act of 1976, as amended by the Hazardous and Solid Waste
Amendments of 1984, the Toxic Substances Control Act, and the
Federal Insecticide, Fungicide and Rodenticide Act and any
similar state statutes and regulations, including but not
limited to the Oregon State Leaking Underground Storage Act),
land use and zoning, energy and industrial facilities siting,
or occupational health and safety, except where the failure to
so comply will not materially and adversely affect Borrower and
its Subsidiaries, taken as a whole.
5.14 SEC Reports. Furnish to Bank promptly a copy of
-----------
each Form 8-K, 10-Q, and 10-K report filed by Borrower with the
Securities and Exchange Commission pursuant to Sections 13 or
15(d) of the Securities Exchange Act of 1934 and Rules issued
thereunder.
5.15 Ratio of Cash Generation to Current Maturities
----------------------------------------------
of Long-Term Debt. On a consolidated annual basis, maintain a
- -----------------
ratio of Cash Generation (as hereinafter defined) to current
maturities of long-term debt of at least 1.75 to 1.0. Said
ratio shall be calculated as of the end of each fiscal year
upon Borrower's consolidated Cash Generation and consolidated
current maturities of long-term debt for each fiscal year.
"Cash Generation" means the sum of (a) net income,
(b) depreciation, and (c) amortization.
6. NEGATIVE COVENANTS
Borrower agrees it will not, and will cause its
Subsidiaries (as to Sections 6.1 through 6.6, 6.8, and 6.9) not
to, without the prior written consent of Bank:
<PAGE>16
6.1 Merger and Liquidation.
----------------------
(a) Liquidate or dissolve, except that this
Section 6.1(a) shall apply solely to Borrower;
(b) Enter into any merger or consolidation
except where the surviving corporation is Borrower or any
wholly owned Subsidiary of Borrower, that has executed and
delivered a Guaranty and Security Agreement; or
(c) Sell, lease, or dispose of all or
substantially all of its assets.
6.2 Contracts, Leases, Indentures, Etc. Enter into
-----------------------------------
any contracts, leases, indentures, or other agreements, except
as permitted under Section 6.6 hereof or otherwise in the usual
course of its business.
6.3 Liens and Encumbrances. Except as in this
----------------------
Agreement provided, create, assume or suffer to exist any
mortgage, encumbrance or other lien (including the lien of an
attachment, judgment or execution) or security interest,
securing a charge or obligation, on or of any of its property,
real or personal, whether now owned or hereafter acquired,
except:
(a) Liens or charges for current taxes,
assessments, or other governmental charges which are not
delinquent or remain payable without any penalty, or the
validity of which is contested in good faith by appropriate
proceedings upon stay of execution of the enforcement thereof.
(b) Deposits or pledges securing (1) statutory
obligations; (2) surety or appeal bonds; (3) bonds for release
of attachment, stay of execution or injunction; or (4)
performance of bids, tenders, contracts (other than for the
repayment of borrowed money) or leases, for purposes of like
general nature in the ordinary course of its business.
(c) Easements, rights of way, covenants,
restrictions and other encumbrances affecting its property,
whether or not currently existing, which (1) do not directly or
indirectly constitute a lien securing an obligation for the
payment of money and (2) have no material adverse effect on the
use of such property for its purposes.
(d) Minor defects and irregularities in the
title to any such property which have no material adverse
effect on the use of such property for its purposes.
<PAGE>17
(e) Statutory and common law liens of landlords
and liens of carriers, warehousemen, mechanics and materialmen
incurred in the ordinary course of business for sums not yet
delinquent or being contested in good faith.
(f) Liens securing debt of Borrower or any
Subsidiary not exceeding the purchase price of assets or
incurred in connection with the purchase of inventory,
supplies, or services from trade creditors on customary credit
terms, provided that each such lien shall be confined to the
assets purchased.
(g) Liens arising from an adverse judgment
except those which have become an Event of Default within the
meaning of Section 7.
(h) Liens contemplated in Section 3.10(a)
hereof.
6.4 Investments and Loan. Make any investment,
--------------------
loan, advance or extension of credit to any person, except in
the ordinary course of business as now and heretofore
conducted; provided, however, this shall not prohibit the
investment of its excess funds in investment grade money market
investments. As used in this Section, the term "person"
includes individuals, partnerships, joint ventures, business
trusts, and corporations.
6.5 Business and Operations. Engage in any business
-----------------------
activities or operations substantially different from or
unrelated to present business activities and operations.
6.6 Capital Expenditures. On a consolidated basis:
--------------------
(a) make or contract to make capital expenditures (other than
acquisition of franchises) in an amount in excess of Two
Hundred Fifty Thousand and No/100 Dollars ($250,000.00) in any
fiscal year, excluding lease rentals; and (b) make franchise
acquisitions aggregating more than Four Hundred Fifty Thousand
and No/100 Dollars ($450,000.00) in any fiscal year (Borrower
to submit to Bank prior to each such acquisition projections
demonstrating compliance hereto, taking into account
consummation of the acquisition); provided, however, that for
the 1992 fiscal year, the maximum capital expenditures (other
than acquisition of franchises) permitted under this Section
6.6 shall be Four Hundred Fifty Thousand and No/100 Dollars
($450,000.00).
6.7 Ratio of Liabilities to Net Worth. Permit the
---------------------------------
ratio of total consolidated liabilities (excluding deferred
income taxes) to consolidated Tangible Net Worth to exceed as
of any fiscal quarter end the applicable ratio set forth below:
<PAGE>18
Fiscal Quarters Ending During: Ratio
----------------------------- ----------
1991 Fiscal Year 5.50:1.00
1992 Fiscal Year 5.25:1.00
1993 Fiscal Year 5.00:1.00
1994 Fiscal Year 4.75:1.00
1995 Fiscal Year 4.50:1.00
6.8 Dividends. Declare or pay, or set apart any
---------
funds for the payment of any dividends (other than dividends
payable in capital stock) on any shares of its capital stock,
or apply any of its funds, property or assets to, or set apart
any funds, property or assets for the purchase, redemption or
other retirement of, or make any other distribution by
reduction of capital or otherwise, in respect of any shares of
its capital stock; provided, however, that Borrower may redeem
its capital stock up to a maximum aggregate purchase price of
One Hundred Fifty Thousand and No/100 Dollars ($150,000.00) in
any fiscal year, except that in the 1992 fiscal year, Borrower
may redeem its capital stock up to a maximum aggregate purchase
price of Two Hundred Fifty Thousand and No/100 Dollars
($250,000.00).
6.9 ERISA. Fail or neglect to satisfy its annual
-----
minimum funding requirements under ERISA.
7. EVENTS OF DEFAULT
Regardless of the terms of the Notes issued hereunder,
upon the occurrence and continuance of any of the following
events ("Events of Default"), Bank may, by prior written notice
to Borrower, terminate any obligation on the part of Bank to
continue the Loans and make all sums of interest and principal
remaining on the Loans immediately due and payable, without
notice of default, presentment or demand for payment, protest
or notice of nonpayment or dishonor, or other notices or
demands of any kind or character, except as herein specified:
7.1 Nonpayment of Interest or Principal. Borrower
-----------------------------------
shall fail to pay any instalment of interest or principal
within five (5) days after the date due.
7.2 Breach of Warranty. Any representation or
------------------
warranty herein or in any agreement, instrument or certificate
executed pursuant hereto or in connection with any transaction
contemplated hereby shall prove to have been false or
misleading in any material respect when made.
7.3 Bankruptcy or Insolvency. Borrower, any
------------------------
Subsidiary, or any guarantor of a Note shall admit in writing
<PAGE>19
its inability to pay its debts generally as they come due, or
shall file any petition or other request for relief under any
bankruptcy, reorganization, insolvency or moratorium law, or
any other law or laws for the relief of, or relating to,
debtors. There shall be filed against Borrower, any
Subsidiary, or any guarantor of a Note an involuntary petition
under any bankruptcy, reorganization, insolvency or moratorium
law, or any other law or laws for the relief of, or relating
to, debtors, and such filing remains undismissed and unstayed
for a period of sixty (60) days.
7.4 Appointment of Receiver. A receiver, custodian
-----------------------
or trustee shall be appointed to take possession of any assets
of Borrower, any Subsidiary or any guarantor of a Note, unless
such appointment is set aside, dismissed, or withdrawn or
ceases to be in effect within sixty (60) days from the date of
said filing or appointment.
7.5 Other Defaults. Borrower, any Subsidiary or any
--------------
guarantor of a Note shall fail to pay when due (including any
grace period with respect thereto) any other obligation for
money borrowed by it in a principal amount in excess of Three
Hundred Thousand and No/100 Dollars ($300,000.00), or any
default shall occur under any other agreement involving the
borrowing of money or the advance of credit in such amount to
which Borrower, any Subsidiary or any guarantor of a Note may
be a party as borrower, if such default gives to the holder of
the obligation concerned the right to accelerate the
indebtedness.
7.6 Final Judgments. Any one or more final
---------------
judgments, orders or decrees for the payment of money in excess
of Three Hundred Thousand and No/100 Dollars ($300,000.00)
(whether singly or in the aggregate) to the extent not covered
by insurance shall be rendered against Borrower, any Subsidiary
or any guarantor and Borrower or such Subsidiary or guarantor
shall not discharge the same or provide for its discharge in
accordance with its terms, or procure a stay of execution
thereof pending appeal, within thirty (30) days after the date
of entry thereof.
7.7 Loan Documents. A Event of Default under any
--------------
Security Agreement.
7.8 Termination of Guaranty. Any Guaranty is
-----------------------
terminated, whether by death or notice.
7.9 Breach of Other Covenants. Borrower shall
-------------------------
breach or default under any other term, covenant or condition
not enumerated in Sections 7.1 through 7.8 of this Agreement if
<PAGE>20
such breach shall continue for thirty (30) days after written
notice thereof to Borrower from Bank.
8. DEFINITIONS
8.1 Defined Terms. Unless otherwise defined in this
-------------
Agreement, the capitalized terms used in this Agreement have
the following meanings:
Business Day means any day of the year on which
------------
commercial banks are open for business in Portland, Oregon.
Closing Date I has the meaning set forth in
--------------
Section 2.1(a)(1).
Closing Date II has the meaning set forth in
---------------
Section 4.2.
Easements has the meaning set forth in Section
---------
2.2(c) of this Agreement.
ERISA means the Employee Retirement Income
-----
Security Act of 1974, as amended from time to time and the
regulations promulgated pursuant thereto.
Events of Default has the meaning set forth in
-----------------
Section 7 of this Agreement.
FLSA means the Fair Labor Standards Act of 1938,
----
as amended from time to time, and the regulations promulgated
pursuant thereto.
Guaranties has the meaning set forth in Section
----------
2.2(d) of this Agreement.
Loan I means the Loan made pursuant to Section
------
2.1(a) of this Agreement.
Loan II means the Loan made pursuant to Section
-------
2.1(b) of this Agreement.
Loan III means the Loan made pursuant to Section
--------
2.1(c) of this Agreement.
Loan(s) means Loan I, Loan II and/or Loan III or
-------
advance(s) made hereunder.
Loan Documents has the meaning set forth in
--------------
Section 4.1(d) of this Agreement.
<PAGE>21
Loan Year means a period from and including an
---------
anniversary of the applicable Closing Date to and excluding the
succeeding anniversary of that Closing Date. For example, the
second Loan Year is the period from and including the first
anniversary of the Closing Date to and excluding the second
anniversary of the Closing Date.
Maturity Date I means the maturity date set
---------------
forth in Section 2.1(a)(2).
Maturity Date II means the maturity date set
----------------
forth in Section 2.1(b)(2).
Maturity Date III means the maturity date set
-----------------
forth in Section 2.1(c)(2).
Note I means the promissory note described in
------
Section 2.1(a)(1).
Note II means the promissory note described in
-------
Section 2.1(b)(1).
Note III means the promissory note described in
--------
Section 2.1(c)(1).
Note(s) means Note I, Note II and/or Note III.
-------
Plan means any employe pension plan maintained
----
by Borrower or any of its Subsidiaries and insured by the
Pension Benefit Guaranty Corporation under Title IV of ERISA.
Prime Rate means Bank's publicly announced prime
----------
rate which is a base rate used to price some loans. It may not
be the lowest rate at which Bank makes any loan. Each change
in said rate is to become effective on the effective date of
each change announced by Bank.
Security Agreement has the meaning set forth in
------------------
Section 2.2(b) of this Agreement.
Subsidiary means any present or future
----------
corporation organized under the laws of any state of the United
States of America, Canada, or any Province of Canada, all of
the outstanding stock of every class of which, except
directors' qualifying shares, shall, at the time as of which
any determination is being made, be owned by Borrower either
directly or through Subsidiaries; any present or future
corporation as is from time to time included in the
consolidated financial statements published by Borrower; or any
present or future corporation or organization not otherwise
<PAGE>22
defined above but which would be a subsidiary according to
generally accepted accounting principles.
Tangible Net Worth means the gross book value of
------------------
Borrower's assets (exclusive of goodwill, patents, trademarks,
trade names, organization expense, treasury stock, unamortized
debt discount and expense, deferred research and development
costs, deferred marketing expenses and other like intangibles)
less (a) reserves applicable thereto and (b) all liabilities
(including accrued but excluding deferred income taxes) , other
than indebtedness subordinated, in a manner satisfactory to
Bank, to Borrower's indebtedness to Bank. Except as otherwise
provided in this Paragraph, all computations required hereby
shall be made on a consolidated basis in accordance with
generally accepted accounting principles consistently applied.
Terming Balance II has the meaning set forth in
------------------
Section 2.1(b)(1) of this Agreement.
Terming Balance III has the meaning set forth in
-------------------
Section 2.1(c)(1) of this Agreement.
Terming Date II has the meaning set forth in
---------------
Section 2.1(b)(1) of this Agreement.
Terming Date III has the meaning set forth in
----------------
Section 2.1(c)(1) of this Agreement.
8.2 Other Definitions. Unless the context otherwise
-----------------
requires:
(a) an accounting term not otherwise defined
has the meaning assigned to it in accordance with generally
accepted accounting principles as in effect in the United
States of America on the date hereof;
(b) "or" is not exclusive;
(c) words in the singular include the plural,
and words in the plural include the singular;
(d) provisions apply to successive events and
transactions; and
(e) "herein," "hereof," and other words of
similar import refer to this Agreement as a whole and not to
any particular section or other subdivision.
<PAGE>23
9. MISCELLANEOUS
9.1 Notices. Except as otherwise expressly provided
-------
herein, any communications between the parties hereto or
notices to be given hereunder or under any of the Loan
Documents shall be given in writing by personal delivery,
telex, telecopier, or mailing the same, postage prepaid, to
Bank at its East Portland Corporate Banking Center, 612 S.E.
Morrison, Portland, Oregon 97214, and to Borrower at 11802 S.E.
Stark, P.O. Box 16595, Portland, Oregon 97216, or to such other
addresses as either party may hereafter indicate pursuant to
this Section 9.1.
Any communication or notice so addressed and mailed
shall be deemed to be given three (3) days after mailing. Any
communication or notice otherwise delivered shall be deemed to
be given when answered-back if telexed, when receipt is
acknowledged if telecopied, or upon delivery.
9.2 Waiver; Amendment. No delay or omission to
-----------------
exercise any right, power or remedy accruing to Bank upon any
breach or default of Borrower under this Agreement shall impair
any such right, power or remedy of Bank, nor shall it be
construed to be a waiver of any such breach or default, or an
acquiescence therein, or of or in any similar breach or default
thereafter occurring; nor shall any waiver of any single breach
or default be deemed a waiver of any other breach or default
theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character on the part of
Bank of any breach or default under this Agreement or any
waiver on the part of Bank of any provision or condition of
this Agreement must be in writing and shall be effective only
to the extent in such writing specifically set forth. All
remedies, either under this Agreement or by law or otherwise
afforded to, Bank, shall be cumulative. Neither this Agreement
nor any provision hereof may be amended, waived, discharged or
terminated orally, but only by an instrument in writing, signed
by the party against whom enforcement of the amendment, waiver,
discharge or termination is sought.
9.3 Survival. All warranties, representations and
--------
covenants made by Borrower herein or in any certificate or
other instrument delivered by it or on its behalf under this
Agreement shall be considered to have been relied upon by Bank
and shall survive the making of any Loan and delivery to Bank
of any Note, regardless of any investigation made by Bank or on
its behalf. All statements in any such certificate or other
instrument shall constitute warranties and representations by
Borrower hereunder.
<PAGE>24
9.4 Successors and Assigns. This Agreement shall
----------------------
inure to the benefit of and be binding upon the successors and
assigns of each of the parties except that Borrower shall not
have the right to assign its rights hereunder or any interest
herein. Bank shall not have the right to assign its rights
hereunder without the consent of Borrower, which consent shall
not be unreasonably withheld; provided, however, that this
Section 9.4 shall not prohibit Bank from selling
participation(s) in the Loans to whom and on such terms as it
desires; provided, further, that any agreement pursuant to
which Bank grants such a participation shall provide that Bank
shall retain the sole right and responsibility to enforce the
obligations of Borrower relating to the Loans including,
without limitation, the right to approve any amendment,
modification or waiver of any provision of this Agreement or
other Loan Documents; provided, further, that such
participation agreement may provide that Bank will not agree to
any modification, amendment or waiver of this Agreement or the
other Loan Documents without the consent of the participant
which would reduce the principal of or rate of interest on such
Loans, reduce any fees or other amounts due hereunder or under
the Loan Documents, or postpone the date fixed for any payment
of principal of or interest on such Loans, or release any
collateral securing, or any Guarantor of, any liability to Bank
hereunder or under the Loan Documents. The granting of any
participation pursuant to this Section shall not affect in any
manner the obligations of Borrower hereunder.
9.5 Attorneys' Fees. In the event of any action at
---------------
law or suit in equity in relation to this Agreement, the Notes,
or any other instrument or agreement required or contemplated
hereunder, the prevailing party, in addition to all other sums
which the other party may be called upon to pay, shall be
entitled to recover such additional sum for the prevailing
party's attorneys' fees incurred therein, as the trial court or
any appellate court adjudges reasonable in said suit or action.
9.6 Governing Laws; Jurisdiction. This Agreement,
----------------------------
the Notes, and any other instrument or agreement required or
contemplated hereunder, shall be governed by, and construed
under, the laws of the State of Oregon without regard to
principles of conflicts of law. Any suit or action in regard
to or arising out of the terms or conditions of this Agreement
shall be litigated in the state or federal courts situated in
the State of Oregon, and Borrower hereby submits to the
jurisdiction of those courts.
9.7 Inconsistent Provisions. The terms of this
-----------------------
Agreement and the Loan Documents shall be cumulative, except to
the extent they are specifically inconsistent with each other,
in which case the terms of this Agreement shall prevail;
<PAGE>25
provided that the insurance requirements for specific
collateral shall be governed by the applicable security
agreement, mortgage, deed of trust, or pledge.
9.8 Counterparts. This Agreement may be executed in
------------
as many counterparts as may be deemed necessary or convenient,
each of which, when so executed, shall be deemed an original,
but all such counterparts shall constitute but one and the same
instrument.
9.9 Amendment and Restatement. This Agreement,
-------------------------
effective ___________, 1991, amends and restates that certain
loan agreement between Borrower and Bank dated as of July 10,
1990 ("1990 Agreement"). To the extent this Agreement is the
same as the 1990 Agreement, it shall be deemed to be a
continuation thereof. To the extent this Agreement is
different from the 1990 Agreement, it shall be deemed to be an
amendment thereof.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement by their duly authorized officers as of the date
first above written.
UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND
COMMITMENTS MADE BY THE BANK AFTER OCTOBER 3, 1989,
CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH ARE NOT
FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR SECURED
SOLELY BY THE BORROWER'S RESIDENCE MUST BE IN WRITING,
EXPRESS CONSIDERATION AND BE SIGNED BY THE BANK TO BE
ENFORCEABLE.
Borrower hereby acknowledges receipt of a copy of this
Agreement.
ELMER'S RESTAURANT, INC.
By HERMAN GOLDBERG
----------------------------
President
FIRST INTERSTATE BANK OF OREGON, N.A.
By xxx
----------------------------
Title Assistant Vice President
-------------------------
<PAGE>
EXHIBIT LIST FOR
ELMER'S RESTAURANT, INC.
------------------------
AMENDED AND RESTATED LOAN AGREEMENT
-----------------------------------
EXHIBIT NO. DESCRIPTION
- ----------- -----------------------------------------
A Note I
B Note II
C Note III
D Security Agreement
E Short Form Easement and Subordination
[TPL-372]
F Continuing Unconditional Guaranty
G Permitted Liens
H Legal Opinion
<PAGE>1
EXHIBIT A
PROMISSORY NOTE
---------------
$_________________ Portland, Oregon
July 10, 1990
FOR VALUE RECEIVED, the undersigned promises to pay
in lawful money of the United States of America, to the order
of FIRST INTERSTATE BANK OF OREGON, N.A. ("Bank"), at its
Oregon Corporate Division ("OCD"), the principal sum of
______________________________________ Dollars ($___________),
together with interest thereon from the date of disbursement at
the per annum interest rate of percent (_____%). Interest
shall be computed on the outstanding principal amount on the
basis of a 365-day or 366-day year, as applicable, and actual
days elapsed.
This Note shall be payable in equal, consecutive
instalments of principal and interest of ___________________
Dollars ($___________), commencing August 1, 1990, and
thereafter on the first (1st) day of each month until
August 10, 1995 ("Maturity Date") when the aggregate unpaid
principal amount of this Note, together with unpaid accrued
interest thereon, shall be due and payable in full.
In any Loan Year (as defined in the Loan Agreement),
undersigned may, on any instalment payment date, prepay without
premium or penalty on a non-cumulative basis up to ten percent
(10.0%) of the balance of the Note outstanding at the beginning
of the Loan Year in which the prepayment is made. In addition,
undersigned may on any instalment payment date prepay the Note
in whole or in part, subject to payment of the fee provided for
in Section 2.4(b) of the Loan Agreement. Any prepayment shall
include payment of interest accrued to the date of prepayment
on the amount prepaid and shall be applied to the most remotely
maturing principal instalments.
All payments shall be made directly to Bank, and the
final payment shall be made in immediately available funds.
All payments hereunder shall be applied first to interest, then
to principal. If the amount paid in any instalment be less
than the accrued interest then due, the excess of interest
shall be added to and become part of the principal, and
interest shall be charged thereon to the extent permitted by
applicable laws.
Upon the occurrence of an Event of Default (as
defined in the Loan Agreement), then, at the option of the
holder of this Note, upon prior written notice, the entire
<PAGE>2
indebtedness represented hereby shall immediately become due
and payable. Failure or delay of the holder to exercise this
option shall not constitute a waiver of the right to exercise
the same in the event of subsequent default, or in the event of
continuance of any existing default after demand for the
performance of the terms hereof.
Undersigned shall pay upon demand any and all
expenses, including reasonable attorneys' fees, incurred or
paid by the holder of this Note after the occurrence of an
Event of Default (or an event which, with the giving of notice
or lapse of time, or both, would become an Event of Default)
and so long as such event is continuing, without suit or action
in attempting to collect funds due under this Note. In the
event an action is instituted in connection with the collection
of this Note, the prevailing party shall be entitled to
recover, at trial or on appeal, such sums as the court may
adjudge reasonable as attorneys' fees, in addition to costs and
necessary disbursements.
All parties to this Note hereby waive presentment,
dishonor, notice of dishonor, and protest. All parties hereto
hereby consent to, and the holder hereof is hereby expressly
authorized to make, without notice, any and all renewals,
extensions, modifications or waivers of the time for or the
terms of payment of any sum or sums due hereunder, or under any
documents or instruments relating to or securing this Note, or
of the performance of any covenants, conditions or agreements
hereof or thereof, or the taking or release of collateral
securing this Note. The liability of all parties on this Note
shall not be discharged by any action consented to above taken
by any holder of this Note.
This Note is made with reference to, and is to be
construed in accordance with, the laws of the State of Oregon.
This Note is subject to the terms and conditions of
that certain loan agreement dated as of July 10, 1990, between
the undersigned and Bank, as amended from time to time ("Loan
Agreement"), and the repayment of this Note is guaranteed by
the Subsidiaries (as defined in the Loan Agreement) of the
undersigned and is secured by the collateral described in the
Security Agreements (as defined in the Loan Agreement) dated
the date hereof and executed by the undersigned and the
Subsidiaries.
ELMER'S RESTAURANT, INC.
By ______________________________
President
<PAGE>1
EXHIBIT B
PROMISSORY NOTE
---------------
Portland, Oregon
June 7, 1991
FOR VALUE RECEIVED, the undersigned promises to pay
in lawful money of the United States of America, to the order
of FIRST INTERSTATE BANK OF OREGON, N.A. ("Bank"), at its
Oregon Corporate Division ("OCD"), the principal sum of Two
Hundred Twenty Thousand and No/100 Dollars ($220,000.00), or so
much thereof as shall have been advanced by Bank to undersigned
and not repaid, together with interest thereon from the date of
each advance at the per annum interest rate set forth in the
Loan Agreement (as hereinafter defined). Principal and
interest shall be payable as set forth in the Loan Agreement.
This Note may be prepaid, at any time and from time
to time, in whole or in part, without penalty or premium. Any
prepayment shall include interest accrued to the date of
prepayment on the amount prepaid. Any prepayment shall be
applied to the most remotely maturing principal instalment(s).
All payments shall be made directly to Bank, and all
payments shall be made in immediately available funds. All
payments hereunder shall be applied first to interest, then to
principal. If the amount paid in any instalment be less than
the accrued interest then due, the excess of interest shall be
added to and become part of the principal, and interest shall
be charged thereon to the extent permitted by applicable laws.
This Note is given to avoid the execution by
undersigned of an individual note for each advance by Bank to
undersigned under Section 2.1(b) of the Loan Agreement. In
consideration thereof, undersigned agrees that Bank's record
entries of transactions pursuant to this Note, together with
Bank's written advice of charges, shall be presumptive evidence
of borrowings, charges, and payments made pursuant hereto.
Upon the occurrence of an Event of Default (as
defined in the Loan Agreement), then, at the option of the
holder of this Note, without prior notice, the entire
indebtedness represented hereby shall immediately become due
and payable. Failure or delay of the holder to exercise this
option shall not constitute a waiver of the right to exercise
the same in the event of subsequent default, or in the event of
continuance of any existing default after demand for the
performance of the terms hereof.
<PAGE>2
Undersigned shall pay upon demand any and all
expenses, including reasonable attorneys' fees, incurred or
paid by the holder of this Note without suit or action in
attempting to collect funds due under this Note. In the event
an action is instituted in connection with the collection of
this Note, the prevailing party shall be entitled to recover,
at trial or on appeal, such sums as the court may adjudge
reasonable as attorneys' fees, in addition to costs and
necessary disbursements.
All parties to this Note hereby waive presentment,
dishonor, notice of dishonor, and protest. All parties hereto
hereby consent to, and the holder hereof is hereby expressly
authorized to make, without notice, any and all renewals,
extensions, modifications or waivers of the time for or the
terms of payment of any sum or sums due hereunder, or under any
documents or instruments relating to or securing this Note, or
of the performance of any covenants, conditions or agreements
hereof or thereof, or the taking or release of collateral
securing this Note. The liability of all parties on this Note
shall not be discharged by any action consented to above taken
by any holder of this Note.
This Note is made with reference to, and is to be
construed in accordance with, the laws of the State of Oregon.
This Note is subject to the terms and conditions of
that certain amended and restated loan agreement dated as of
June 7, 1991, between the undersigned and Bank, as amended from
time to time ("Loan Agreement").
UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND
COMMITMENTS MADE BY THE BANK AFTER OCTOBER 3, 1989,
CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH ARE NOT
FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR SECURED
SOLELY BY THE BORROWER'S RESIDENCE MUST BE IN WRITING,
EXPRESS CONSIDERATION AND BE SIGNED BY THE BANK TO BE
ENFORCEABLE.
Borrower hereby acknowledges receipt of a copy of this
Note.
ELMER'S RESTAURANTS, INC.
By ______________________________
Title ___________________________
<PAGE>1
EXHIBIT C
PROMISSORY NOTE
---------------
Portland, Oregon
____________, 1991
FOR VALUE RECEIVED, the undersigned promises to pay
in lawful money of the United States of America, to the order
of FIRST INTERSTATE BANK OF OREGON, N.A. ("Bank"), at its
Oregon Corporate Division ("OCD") the principal sum of
___________________________ ___________________________ Dollars
($____________), together with interest thereon from the date
hereof at the of _______________ percent (_____%) per annum.
Interest shall be computed on the outstanding principal amount
on the basis of a 365-day or 366-day year, as applicable, and
actual days elapsed.
This Note shall be payable in equal, consecutive
instalments of principal and interest of ____________________
___________________________ Dollars ($___________) commencing
_________ 1, 1991, and thereafter on the first (1st) day of
each month until __________ 1, 1993 ("Maturity Date") when the
aggregate unpaid principal amount of this Note, together with
unpaid accrued interest thereon, shall be due and payable in
full.
This Note may be prepaid, at any time and from time
to time, in whole or in part, without penalty or premium. Any
prepayment shall include interest accrued to the date of
prepayment on the amount prepaid. Any prepayment shall be
applied to the most remotely maturing principal instalment(s).
All payments shall be made directly to Bank, and the
final payment shall be made in immediately available funds.
All payments hereunder shall be applied first to interest, then
to principal. If the amount paid in any instalment be less
than the accrued interest then due, the excess of interest
shall be added to and become part of the principal, and
interest shall be charged thereon to the extent permitted by
applicable laws.
Upon the occurrence of an Event of Default (as
defined in the Loan Agreement), then, at the option of the
holder of this Note, without prior notice, the entire
indebtedness represented hereby shall immediately become due
and payable. Failure or delay of the holder to exercise this
option shall not constitute a waiver of the right to exercise
the same in the event of subsequent default, or in the event of
continuance of any existing default after demand for the
performance of the terms hereof.
<PAGE>2
Undersigned shall pay upon demand any and all
expenses, including reasonable attorneys' fees, incurred or
paid by the holder of this Note without suit or action in
attempting to collect funds due under this Note. In the event
an action is instituted in connection with the collection of
this Note, the prevailing party shall be entitled to recover,
at trial or on appeal, such sums as the court may adjudge
reasonable as attorneys' fees, in addition to costs and
necessary disbursements.
All parties to this Note hereby waive presentment,
dishonor, notice of dishonor, and protest. All parties hereto
hereby consent to, and the holder hereof is hereby expressly
authorized to make, without notice, any and all renewals,
extensions, modifications or waivers of the time for or the
terms of payment of any sum or sums due hereunder, or under any
documents or instruments relating to or securing this Note, or
of the performance of any covenants, conditions or agreements
hereof or thereof, or the taking or release of collateral
securing this Note. The liability of all parties on this Note
shall not be discharged by any action consented to above taken
by any holder of this Note.
This Note is made with reference to, and is to be
construed in accordance with, the laws of the State of Oregon.
This Note is subject to the terms and conditions of
that certain amended and restated loan agreement dated as of
June 7, 1991, between the undersigned and Bank, as amended from
time to time ("Loan Agreement").
UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND
COMMITMENTS MADE BY THE BANK AFTER OCTOBER 3, 1989,
CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH ARE NOT
FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR SECURED
SOLELY BY THE BORROWER'S RESIDENCE MUST BE IN WRITING,
EXPRESS CONSIDERATION AND BE SIGNED BY THE BANK TO BE
ENFORCEABLE.
Borrower hereby acknowledges receipt of a copy of this
Note.
ELMER'S RESTAURANTS, INC.
By ______________________________
Title ___________________________
<PAGE>1
EXHIBIT D
SECURITY AGREEMENT
------------------
July 10, 1990
1. _________________________________________ ("Company")
[Name]
of 11802 S.E. Stark, P.O. Box 16595, Portland, Oregon 97216
- ---------------------------------------------------------------
[Address]
hereby grants to FIRST INTERSTATE BANK OF OREGON, N.A.
("Bank"), to secure payment and performance of all Liabilities
to Bank, a security interest in the following described
personal property:
1.1 All accounts of Company, now existing or
hereafter arising;
1.2 All general intangibles of Company, now existing
or hereafter arising;
1.3 All inventory of Company now or hereafter held;
1.4 All equipment of Company (including but not
limited to fixtures) now or hereafter held;
1.5 All instruments, documents of title, policies
and certificates of insurance, or chattel paper now or
hereafter owned by Company or in which it now has or may
hereafter have an interest;
1.6 Deposits or cash now existing or hereafter
acquired which are now or may hereafter be in the possession of
Bank;
1.7 Proceeds and products of all of the foregoing.
2. As herein used:
2.1 "Collateral" means all property of Company in
which Bank now has, by this agreement acquires or hereafter
acquires, a security interest.
2.2 "Liabilities" mean any and all liabilities of
Company to Bank under the Loan Agreement [any and all
liabilities of Company to pay any amounts pursuant to its
Guaranty (as such term is defined in the Loan Agreement) and
any and all liabilities of Elmer's Restaurants, Inc.
<PAGE>2
("Elmer's") under the Loan Agreement]. "Liabilities" include
obligations to perform acts and refrain from taking action, as
well as obligations to pay money.
2.3 "Loan Agreement" means that certain loan
agreement dated as of July 10, 1990, between Bank and Elmer's,
as amended from time to time.
2.4 Terms used in this agreement which are not
herein defined and which are defined in the Loan Agreement or
Uniform Commercial Code of Oregon, as the case may be, shall
have the meaning therein set forth.
3. Company represents and warrants:
3.1 Company is a corporation, duly organized and
existing under the laws of the state of its incorporation, and
is duly qualified in every state in which it is doing business,
except where the failure to be so qualified and in good
standing has and will have no material adverse effect on
Borrower and its Subsidiaries, taken as a whole.
3.2 The execution, delivery and performance hereof
are within Company's corporate powers, and have been duly
authorized and are not in contravention of law or the terms of
Company's charter, by laws or other incorporation papers, or of
any undertaking to which Company is a party or by which it is
bound.
3.3 Except for Permitted Liens, Company is, and as
to Collateral acquired after the date hereof, Company shall and
(except as permitted hereunder) will be the owner of such
Collateral free from any lien, security interest, encumbrance
or other right, title or interest of any other person, firm or
corporation, and Company shall defend the Collateral against
all claims and demands of all persons at any time claiming the
same or any interest therein adverse to Bank.
3.4 Except for filings with respect to Permitted
Liens (and prior to payment thereof, certain filings securing
obligations being paid with the proceeds of the Loan),
(a) there is no financing statement now on file in any public
office (other than any such financing statement for which a UCC
termination statement has been duly executed and delivered to
Bank) covering any Collateral subject to the security of Bank
herein, or intended so to be, or in which Company is named as
or signs as a debtor or consignee, and (b) so long as Company
[or Elmer's] has any Liabilities to Bank or any credit from
Bank to Company [Elmer's] is available to Company [Elmer's],
Company will not execute and there will not be on file in any
public office any financing statements, except the financing
<PAGE>3
statement filed or to be filed with respect to the security
interest hereby granted to Bank.
3.5 Company shall give Bank written notice of the
location of each place of business it has, and of its chief
executive office if it has more than one place of business.
Except as such notice is given, Company's chief executive
office and only place of business shall be at Company's address
as it appears at the beginning of this agreement.
4. As often as Bank may reasonably require, and insofar
as Collateral consist of accounts or general intangibles
Company shall deliver to Bank schedules of Company's accounts
and general intangibles, including therein such information as
Bank may reasonably require which may include, but not be
limited to, names and addresses of account debtors and aging of
individual accounts and general intangibles. Also, as often as
Bank may reasonably require, and insofar as Collateral consist
of inventory or equipment Company shall deliver to Bank such
lists, descriptions and designations of inventory and equipment
as Bank may reasonably require to identify the nature, extent
and location of Company's inventory and equipment. Such
information shall be submitted for Company and each of its
subsidiaries or related companies.
5. Company shall upon reasonable notice at all
reasonable times and from time to time allow Bank, by or
through any of its officers, agents, attorneys or accountants,
to examine, inspect or make extracts from Company's books and
records and to arrange for verification of Collateral, under
reasonable procedures, directly with account debtors or by
other methods; and shall furnish to Bank upon reasonable
request additional statements of any Collateral, together with
all notes or other papers evidencing the same and any guaranty,
securities or other documents or information relating thereto;
and shall do, make, execute and deliver all such additional and
further acts, things, assurances and instruments as Bank may
require more completely to vest in and assure to Bank its
rights hereunder or in any Collateral.
6. To the extent applicable, the Uniform Commercial Code
of Oregon shall govern security interests provided for herein.
In connection therewith, Company shall take such steps and
execute and deliver such financing statements and other papers
as Bank may from time to time request. Construction, validity
and performance of this agreement shall, to the extent
permissible, be governed by the law of Oregon. If, by reason
of location of Collateral or otherwise, the creation, validity
or perfection of security interests provided for herein are
governed by the law or a jurisdiction other than Oregon,
Company shall take such steps and execute and deliver such
<PAGE>4
papers as Bank may from time to time reasonably request to
comply with such law. Company agrees that a carbon, photocopy
or other reproduction of this security agreement or any
financing statement executed by Company pursuant to this
agreement is sufficient as a financing statement.
7. Insofar as collateral consists of inventory, Company
may not sell inventory except as herein provided. While
Company is not in default hereunder, and insofar as Collateral
consists of inventory, Company may sell inventory, but only in
the ordinary course of its business and only to buyers who
qualify as a buyer in the ordinary course of business. A sale
in the ordinary course of Company's business does not include a
transfer in partial or total satisfaction of a debt or any bulk
sale. Insofar as Collateral consists of accounts or general
intangibles and until Bank requests that account debtors on
Collateral be notified of Bank's security interest, Company
shall continue to collect proceeds thereof. After the
occurrence of an Event of Default and so long as such event is
continuing, Company shall, at the request of Bank, hold the
proceeds received from collection in trust for Bank without
commingling the same with other funds of Company and shall turn
the same over to Bank immediately upon receipt in the identical
form received. Insofar as Collateral consists of accounts or
general intangibles, at any time after the occurrence of an
Event of Default and so long as such event is continuing,
Company shall, at the request of Bank, notify account debtors
of the security interest of Bank in Collateral and Bank may
itself at any time so notify account debtors. In the event
account debtors should thereafter pay Company, even though
directed to pay Bank, Company shall hold the proceeds received
in trust for Bank without commingling the same with other funds
of Company and shall turn the same over to Bank immediately
upon receipt in the identical form received. Insofar as
Collateral consists of deposits or cash and no Event of Default
has occurred and is continuing, Company may withdraw such
Collateral at any time for use in the ordinary course of
business and as otherwise permitted in the Loan Agreement.
8. Company shall maintain Company's equipment in good
condition and repair and preserve the same against waste, loss,
damage or depreciation in value other than by reasonable wear.
Bank may upon reasonable notice enter any premises in which any
equipment may be kept at any reasonable time for the purpose of
inspecting the same. Insofar as Collateral consists of
equipment, Company shall not sell or offer to sell or otherwise
transfer or dispose of equipment or any part thereof or any
interest therein if such equipment is being replaced or is
obsolete and only if the aggregate value of equipment involved
in such transactions is not material. Company shall not permit
any use of any of the equipment in violation of any law or
<PAGE>5
ordinance. Insofar as Collateral consists of equipment,
Company shall not, without the prior written consent of Bank
(which consent shall be given upon the due execution by Company
of appropriate UCC financing statements or similar security
filings for any new jurisdiction), cause or permit Company's
equipment or any part thereof to be taken outside the state of
Oregon or the states in which it is currently doing business or
to be used for hire or under lease. Company shall pay promptly
when due all taxes, license fees and governmental rates and
charges upon or relating to any of the equipment or its use.
At its option, Bank may discharge taxes, liens, security
interests or other encumbrances upon any of the equipment and
may incur expense for maintenance and preservation of the
equipment. Company agrees to pay to Bank upon demand, all sums
incurred or paid for any of said purposes with interest from
the date on which the same were incurred to the date of payment
at the highest rate of any indebtedness of Company to Bank
secured hereby. Payment thereof is secured by Collateral.
9. Insofar as Collateral consists of inventory or
equipment, Company agrees to maintain insurance at all times
with respect to all inventory and equipment against risks of
fire (including so-called extended coverage), theft, sprinkler
leakage and other risks as Bank may reasonably require and,
containing such terms, in such form and for such periods as is
customary by corporations similarly situated and written by
such companies as may be reasonably satisfactory to Bank, such
insurance to be payable to Bank and Company as their interests
may appear. All such policies of insurance shall provide for
thirty (30) days' written minimum cancellation notice to Bank
and at the request of Bank shall be delivered to and held by
it. In the event of failure to provide insurance as herein
provided, Bank may, at Bank's option, provide such insurance
and Company shall pay to Bank, on demand, the cost thereof,
together with interest thereon at the highest rate of any
indebtedness of Company to Bank secured hereby. Payment
thereof is secured by Collateral.
10. Company shall notify Bank of cases involving the
return, rejection, repossession, loss or damage of or to
Collateral or of any request for credit or adjustment or of any
other dispute arising with respect to Collateral if such
return, rejection, repossession, loss, damage or request in the
aggregate involve a material amount; and generally of all
happenings and events materially affecting Collateral or the
value or amount thereof.
11. Any or all of the Liabilities shall, at Bank's
option, be immediately due and payable without notice or demand
upon the occurrence of any of the following events of default
("Events of Default"): (a) an Event of Default under the Loan
<PAGE>6
Agreement; (b) the making by Company of any material
misrepresentation to Bank in connection with the Loan Agreement
or herewith; (c) breach of any of the terms hereof which breach
is not cured within thirty (30) days of written notice from
Bank of such breach.
12. Upon the occurrence of any of the above events of
default and at any time thereafter (such default not having
previously been cured), Bank shall have, in addition to all
other rights and remedies, the remedies of a secured party
under the Uniform Commercial Code of Oregon (regardless of
whether the Code has been enacted in the jurisdiction where
rights or remedies are asserted) including, without limitation,
the rights set forth in this Section 12, the right to require
Company to assemble the Collateral and make it available to
Bank at a place to be designated by Bank which is reasonably
convenient to both parties, and the right to take possession of
the Collateral, and for that purpose Bank may, so far as
Company can give authority therefor, enter upon any premises on
which the Collateral may be situated and remove the same
therefrom. Unless the Collateral is perishable or threatens to
decline speedily in value or is of a type customarily sold on a
recognized market, Bank shall give to Company reasonable prior
written notice of the time and place of any public sale of
Collateral or of the time after which any private sale or any
other intended disposition is to be made. Company agrees that
five days' notice is reasonable notice. Bank may at any time
in its discretion, transfer any securities or other property
constituting Collateral into its own name or that of its
nominee and receive the income thereon and hold the same as
security for Liabilities or apply it on principal or interest
due on Liabilities in such order of preference as Bank may
determine. Insofar as Collateral shall consist of accounts,
general intangibles, insurance policies, instruments, chattel
paper, choses in action or the like, Bank may demand, collect,
receipt for, settle, compromise, adjust, sue for, foreclose or
realize upon Collateral as Bank may determine, whether or not
Liabilities or Collateral are then due, and for the purpose of
realizing Bank's rights therein, Bank may receive, open and
dispose of mail addressed to Company and endorse notes, checks,
drafts, money orders, documents of title or other evidences of
payment, shipment or storage or any form of Collateral on
behalf of or in the name of Company.
13. Any and all deposits or other sums at any time
credited by or due from Bank to Company shall at all times
constitute security for any and all Liabilities and upon the
occurrence of any of the above events of default Bank may apply
or set off such deposits or other sums against Liabilities
without notice and whether or not other Collateral is
considered by Bank to be adequate. If any process is issued or
<PAGE>7
ordered to be served on Bank seeking to seize Company's rights
and interests in any such deposits or other sums, the balance
thereof shall immediately be deemed to have been and shall be
set off against any and all Liabilities, as of the time of
issuance of any such writ or process, whether or not Company or
Bank shall then have been served therewith.
14. Except as required herein or in the Loan Agreement,
Company waives demand, notice, protest, notice of acceptance of
this agreement, notice of loans made, credit extended,
Collateral received or delivered or other action taken in
reliance hereon and all other demand and notices of any
description. With respect both to Liabilities and Collateral,
Company assents to any extension or postponement of the time of
payment or any other indulgence, to any substitution, exchange
or release of Collateral, to the addition or release of any
party or person primarily or secondarily liable, to the
acceptance of partial payments thereon and the settlement,
compromising or adjusting of any thereof, all in such manner
and at such time or times as Bank may deem advisable. Bank
shall have no duty as to the collection or protection of
Collateral or any income thereon, nor as to the preservation of
rights pertaining thereto beyond the safe custody thereof.
Bank may exercise its rights with respect to Collateral without
resorting to or regard to other Collateral or sources of
reimbursement for Liabilities. Bank shall not be deemed to
have waived any of its rights upon or under Liabilities or
Collateral unless such waiver be in writing and signed by Bank.
No delay or omission on the part of Bank in exercising any
right shall operate as a waiver of such right or any other
right. A waiver on any one occasion shall not be construed as
a bar to or waiver of any right on any future occasion. All
rights and remedies of Bank on Liabilities or Collateral
whether evidenced hereby or by any other instrument or papers
shall be cumulative and may be exercised singularly or
concurrently.
15. Company shall pay to Bank on demand any and all
taxes, charges and expenses of every kind and description,
including reasonable attorney fees incurred without suit or
action after the occurrence of an Event of Default (or event
which, with the giving of notice or lapse of time, or both,
would become an Event of Default) and so long as such event is
continuing, paid or incurred by Bank under or with respect to
Liabilities or Collateral, collection or realization of
Liabilities or in protecting or enforcing its rights upon or
under Liabilities or Collateral or this agreement, or in
taking, holding, preparing for sale and selling any of the
Collateral. In the event an action is instituted in connection
herewith, the prevailing party shall be entitled to recover, at
trial or on appeal, such sums as the court may adjudge
<PAGE>8
reasonable as attorneys' fees, in addition to costs and
necessary disbursements. Payment thereof is secured by
Collateral. After deducting all of said expenses, the residue
of any proceeds of collection or sale of Collateral shall be
applied to the payment of principal or interest on Liabilities
in such order of preference as Bank may determine.
16. (a) Except as otherwise expressly provided herein,
any communications between the parties hereto or notices to be
given hereunder shall be given in writing by personal delivery,
telex, telecopier, or mailing the same, postage prepaid, to
Bank at its East Portland Corporate Banking Center, 612 S.E.
Morrison, Portland, Oregon 97214, and to Company at 11802 S.E.
Stark, P.O. Box 16595, Portland, Oregon 97216, or to such other
addresses as either party may hereafter indicate pursuant to
this Section 16(a).
Any communication or notice so addressed and mailed
shall be deemed to be given three (3) days after mailing. Any
communication or notice otherwise delivered shall be deemed to
be given when answered-back if telexed, when receipt is
acknowledged if telecopied, or upon delivery.
(b) If at any time or times by assignment or
otherwise Bank transfers any Liability and Collateral therefor,
such transfer shall carry with it Bank's powers and rights
under this agreement with respect to the Liability and
Collateral transferred and the transferee shall become vested
with said powers and rights whether or not they are
specifically referred to in the transfer. If and to the extent
Bank retains any other Liability or Collateral, Bank will
continue to have the rights and powers herein set forth with
respect thereto.
UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND
COMMITMENTS MADE BY THE BANK AFTER OCTOBER 3, 1989,
CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH ARE NOT
FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR SECURED
SOLELY BY THE COMPANY'S RESIDENCE MUST BE IN WRITING,
EXPRESS CONSIDERATION AND BE SIGNED BY THE BANK TO BE
ENFORCEABLE.
Company hereby acknowledges receipt of a copy of this
Agreement.
_________________________________
By_______________________________
President
<PAGE>9
EXHIBIT E
SHORT FORM EASEMENT AND SUBORDINATION
(Supporting a Security Interest in Personal Property)
_________________________________________________________, hereinafter
SELLER-BANK
called Secured Party, has acquired or expects to acquire from
_____________________________________________________________________,
BUYER-BORROWER
hereinafter called Debtor, a security interest in personal property
that may be affixed or otherwise situate upon
lands or premises occupied by Debtor in _____________________________,
COUNTY
___________________________,
STATE
described as follows:
To induce Secured Party to extend credit to Debtor against such
security interest in personal property and for other valuable
consideration, ______________________________________________________,
OWNER OR MORTGAGEE OF ABOVE DESCRIBED LANDS OR PREMISES
hereinafter called Undersigned hereby consents to Secured Party's
security interest in such property and disclaims any interest in such
property and grants to Secured Party, his assigns and successors in
interest the right to enter upon the above described lands for the
purposes of removing therefrom personal property in which a security
interest is held.
The right hereby granted shall continue until a reasonable time after
the Secured Party, his assigns and successors in interest shall have
received notice in writing from the Undersigned, his assigns or
successors in interest, that Debtor is not in lawful possession of the
lands or premises.
The Undersigned agrees that any lien he might now or hereafter have in
said personal property shall be subject to the security interest
granted by the Debtor to the Secured Party and subject also to the
rights herein granted by the Undersigned to the Secured Party, his
assigns and successors in interest.
In the construction of this agreement, the masculine pronoun shall be
deemed to include the feminine and neuter and the singular shall
include the plural as the circumstances may require.
Dated this _____ day of ________________, 19__.
____________________________________
OWNER OR MORTGAGEE
____________________________________
OWNER OR MORTGAGEE
<PAGE>1
EXHIBIT F
CONTINUING UNCONDITIONAL GUARANTY
---------------------------------
DATED ____________, 1991 at Portland, Oregon
ELMER'S RESTAURANTS, INC. ("DEBTOR")
- -----------------------------------------------------
("GUARANTOR")
- --------------------------------------------------
PRINCIPAL AMOUNT OF THIS GUARANTY _____________________________
____________________________________ Dollars ($_______________)
IN CONSIDERATION of the granting of credit to the
above-named Debtor by FIRST INTERSTATE BANK OF OREGON, N.A.
(hereinafter called "Bank") and for other good and valuable
consideration, Guarantor does hereby unconditionally guarantee
to Bank, its successors and assigns, payment, when due, in
lawful money of the United States of America, of all
obligations of Debtor under that certain amended and restated
loan agreement dated as of __________, 1991, between Debtor and
Bank, as amended from time to time (the "Loan Agreement").
Guarantor agrees that upon any default of Debtor in payment of
Debtor's Indebtedness to Bank or any part thereof when due,
Guarantor will pay to Bank, upon demand, the entire amount of
the Indebtedness of Debtor to the full extent of this Guaranty
without any obligation on the part of Bank to endeavor to
collect such Indebtedness from or proceed against Debtor or any
surety, endorser or other guarantor or to liquidate any
collateral then held by Bank securing payment of such
Indebtedness.
1. Maximum Liability. The liability of Guarantor
-----------------
under this guaranty shall not exceed the Principal Amount set
forth above, plus interest, and any costs, including attorney
fees, that may be incurred in enforcing the payment of the
Indebtedness of Debtor or with the collection or sale of any
collateral held by the Bank securing payment of such
Indebtedness whether or not suit or action is instituted.
2. "Indebtedness" defined. The word Indebtedness
----------------------
as used herein means all obligations of Debtor to pay
principal, interest, fees, expenses, and any other amounts
pursuant to the Loan Agreement.
3. Obligations of and Payments by Debtor. The
-------------------------------------
Principal Amount of this Guaranty shall not operate as a
restriction upon the amount of the Indebtedness of Debtor to
<PAGE>2
Bank, either in the aggregate or at any one time. Bank shall
have and is hereby given the right and privilege to apply all
sums of money or property which it may receive from Debtor, by
setoff, or for Debtor's benefit, to the reduction or payment of
any Indebtedness of Debtor in excess of the amount covered by
this Guaranty, before any such amounts need be applied to the
reduction of the liability of Guarantor created by virtue of
this Guaranty.
4. Bank's Rights in Dealing with Debtor.
------------------------------------
Guarantor consents to any and all interest rate changes and
modifications of terms and extensions of time for the payment
of Debtor's Indebtedness to Bank, or any part thereof, or any
renewals or modifications of instruments evidencing the
Indebtedness or relating to collateral or security for the
Indebtedness. Guarantor authorizes Bank, without notice or
demand and without affecting his liability hereunder, from time
to time to renew, compromise, extend, accelerate or otherwise
change the time for payment of, or otherwise change the terms
of the Indebtedness or any part thereof. Bank may release any
collateral given to Bank by Debtor, with or without
substitution of new collateral, and Bank may release, agree not
to sue, or choose not to proceed against the Debtor's sureties,
endorsers or other guarantors without affecting the liability
of Guarantor herein. Guarantor further waives: (a)
presentment and demand for payment of any of the Indebtedness
of Debtor; (b) protest and notice of dishonor or default with
respect to any of the Indebtedness of Debtor; (c) all other
notices to which he might otherwise be entitled; and (d) any
demand for payment under this Guaranty.
5. Waiver of Acceptance of or Reliance on Guaranty.
----------------------------------------------
This Guaranty shall take effect when received by Bank without
the necessity of any acceptance of the Guaranty by Bank or any
reliance upon the Guaranty by Bank and Guarantor hereby waives
any requirement of acceptance or reliance by Bank.
6. Bank's Rights in Dealing with Collateral of
-------------------------------------------
Debtor. On the nonpayment of the Indebtedness or any part
- ------
thereof, or on the default of Debtor in any other particular,
Bank may, at its option and without in any manner affecting the
liability of Guarantor herein, do any of the following: (a)
choose not to endeavor to realize upon or liquidate any
collateral then held by Bank; (b) sell at public or private
sale, at such time and place, for such price, by such method or
manner and upon such terms as it may deem reasonable, any
collateral now or hereafter held by it; and (c) negotiate and
compromise with Debtor, or any person, firm or corporation
liable upon any collateral now or hereafter held by it.
Guarantor further waives any right to notice of sale of
collateral by Bank whether by public or private sale and
<PAGE>3
further waives the right to object to the method, manner, time,
place and terms of the sale of collateral or the collection of
or realization on Debtor's accounts or general intangibles by
Bank; provided that the foregoing waivers shall not impact the
rights of the Guarantor, or the limitations upon Bank, under
that certain Security Agreement of even date herewith from
Guarantor to Bank.
7. Effect of Certain Events. Without limiting the
------------------------
generality of any other provisions hereof, this Guaranty shall
remain in full force and effect and shall not be in any way
affected by nor shall Guarantor be exonerated or his
liabilities and obligations discharged in whole or in part by
any of the following events: (a) any merger, acquisition,
consolidation or change in structure of Debtor or any sale,
lease, transfer or other disposition of any or all of the
assets or capital stock of Debtor; (b) any claim, defense,
counterclaim or setoff which Debtor may have or assert other
than the defense of payment; (c) any action by Bank which
impairs collateral or limits any rights of Guarantor to seek
subrogation, reimbursement, contribution or indemnity against,
or recourse to, Debtor or any other person with respect to
payments made by Guarantor pursuant to this Guaranty, including
but not limited to any failure by Bank to perfect a security
interest in any collateral or relating to Bank's custody and
preservation of collateral.
8. Subordination of Guarantor's Rights Against
-------------------------------------------
Debtor. Guarantor irrevocably waives, disclaims and
- ------
relinquishes all claims against Debtor which Guarantor
otherwise has or would have by virtue of having executed this
Guaranty, specifically including but not limited to all rights
of indemnity, contribution or exoneration. In the event of the
payment by Guarantor to Bank of any amount whatsoever and the
resultant subrogation of Guarantor to the rights of Bank by
reason of such payment, the amount of the remaining
Indebtedness of Debtor to Bank after the payment by Guarantor
pursuant to this Guaranty shall have priority over any claim
that Guarantor may have against Debtor, whether or not Debtor
is at such time or thereafter becomes insolvent. Guarantor
further expressly subordinates any claim against Debtor upon
any account whatsoever to any claim that Bank may have against
Debtor at any time and for any reason.
9. Guarantor's Familiarity with Debtor. Guarantor
-----------------------------------
is a wholly owned subsidiary of Debtor and is making this
Guaranty at Debtor's request based solely on its familiarity
with and independent investigation of Debtor's financial
condition, affairs and circumstances and not in reliance upon
any investigation or knowledge of Bank. Guarantor represents
that it is fully aware of such conditions, affairs and
<PAGE>4
circumstances and acknowledges that as between itself and Bank,
it will have full responsibility to inform itself as to any
changes in such condition, affairs and circumstances.
Guarantor hereby waives any duty on the part of Bank, and
acknowledges that it is not relying upon and is not expecting
Bank, to disclose to it any fact now or hereafter known by Bank
relating to such condition, affairs or circumstances.
10. Enforceability of Guaranty Not Conditional.
------------------------------------------
The enforceability of this Guaranty is not conditioned upon any
other person or entity also guarantying the payment of Debtor's
Indebtedness to Bank or upon any other act to be performed by
Bank other than the loan by Bank to Debtor pursuant to the
terms of the Loan Agreement or any other person or entity as a
condition to the full enforceability of this Guaranty.
11. Duration of Guaranty. This Guaranty shall
--------------------
continue in full force and effect until payment in full of all
obligations of Debtor under the Loan Agreement.
12. Requirement of Writing. Guarantor understands
----------------------
and agrees that this Guaranty cannot be waived, abandoned,
terminated, released, or modified in any way by Bank except in
writing signed by an authorized agent of Bank. Guarantor
further understands and agrees that it cannot rely in any
respect upon any oral statements or representations relating to
this Guaranty and hereby warrants that it has not so relied.
13. Assignment of Guaranty. Bank may assign this
----------------------
Guaranty and its rights hereunder shall be enforceable by any
assignee of the Indebtedness herein guarantied.
14. Not Affected by Bankruptcy Code. Guarantor
-------------------------------
agrees Guaranty shall remain in full force and effect
notwithstanding any action by or against Bank or concerning any
collateral which is secured to Bank in connection with the
Indebtedness of Debtor in any proceeding in the United States
Bankruptcy Court including, but not limited to: (a) matters
relating to valuation of collateral; (b) election or imposition
of secured or unsecured claim status upon claims by Bank, or
(c) confirmation of any reorganization plan or other payment
plan pursuant to any Chapter of the Bankruptcy Code. In the
event any payment received upon this obligation and paid by any
person or entity including Guarantor shall be deemed by final
order of a court to have been a voidable preference under the
bankruptcy laws of the United States, or a court otherwise
declares that Bank is not entitled to retain any such payment
for any reason, the obligation of Guarantor shall remain as an
obligation due hereunder and shall not be considered as having
been extinguished by said payment or payments notwithstanding
<PAGE>5
any purported cancellation of this Guaranty by Bank or return
of this Guaranty by Bank to Guarantor.
15. Existence of Other Guaranties. Guarantor's
-----------------------------
liability hereunder is several and is independent of any other
guaranties given by Guarantor or any other party at any time
with respect to all or any part of the Debtor's Indebtedness to
Bank. Guarantor's liability hereunder may be enforced
regardless of the existence of any such other guaranties. Such
other guaranties, if any, also remain fully enforceable upon
their own terms.
16. Bank's Right to Setoff. Bank shall have a
----------------------
general lien on and security interest in and a right of setoff
against all property of the Guarantor now or hereafter in
Bank's possession or on deposit with Bank, whether held in a
general or special account, or for safekeeping or otherwise,
and such lien, security interest and right of setoff may be
enforced or exercised without demand upon or notice to
Guarantor.
17. Attorney Fees Recoverable. In the event any
-------------------------
suit or action is instituted to enforce or interpret any of the
terms of this Guaranty, including any action or participation
in or in connection with a case or proceeding under any Chapter
of the Bankruptcy Code or any successor statute, the prevailing
party shall be entitled to such sum as the court may adjudge
reasonable as attorney fees in such suit, action or proceeding
or upon any appeal from any judgment, order or decree entered
therein. Whether or not any court action is involved, all
reasonable attorney fees incurred by Bank after the occurrence
of an "Event of Default" (as such term is defined in the Loan
Agreement), or an event which, with the giving of notice or
lapse of time, or both, would become an Event of Default, and
so long as such event is continuing, that are necessary at any
time in Bank's opinion for the protection of its interests or
enforcement of its rights hereunder shall become a part of the
indebtedness payable on demand.
18. Joint and Several Liability. The word
---------------------------
"Guarantor" and the language of this Guaranty shall, where
there is more than one Guarantor, be construed as plural and be
binding jointly and severally upon all Guarantors. However,
termination by a Guarantor pursuant to paragraph 11 above shall
not affect the liability of any other Guarantor hereunder.
Masculine pronouns include the feminine and neuter.
19. Severability. If any provision of this Guaranty
------------
is declared invalid by any court, the remaining provisions of
the Guaranty shall not be affected thereby and shall remain
fully enforceable.
<PAGE>6
20. Death of Guarantor. The death of Guarantor
------------------
shall not terminate liability hereunder and the Guaranty shall
be binding upon Guarantor's heirs, devisees and personal
representative. This Guaranty shall continue in full force and
effect after Guarantor's death until terminated by a legal
representative of Guarantor in accordance with paragraph 11
above.
21. Sole Agreement. This writing is intended by the
--------------
parties as a final and complete expression of this Guaranty
Agreement. No prior course of dealing between the parties, no
usage of trade, and no oral or extrinsic evidence of any nature
shall be used to supplement or modify any term.
22. Governing Law and Jurisdiction. This Guaranty
------------------------------
shall be construed and enforced according to the laws of the
State of Oregon without regard to the principle of conflicts of
laws. Any suit or action in regard to or arising out of the
terms or conditions of this Guaranty shall be litigated in the
state or federal courts situated in the State of Oregon and
Guarantor hereby submits to the jurisdiction of these courts.
23. Reaffirmation of Security Agreement. Guarantor
-----------------------------------
hereby reaffirms the security agreement executed by Guarantor
in favor of Bank securing Guarantor's obligations under this
Guaranty and Debtor's obligations to Bank under the Loan
Agreement, as amended on the date hereof or heretofore or
hereafter.
24. Notice Pursuant to ORS 41.580. UNDER OREGON
-----------------------------
LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE BY THE BANK
AFTER OCTOBER 3, 1989, CONCERNING LOANS AND OTHER CREDIT
EXTENSIONS WHICH ARE NOT FOR PERSONAL, FAMILY OR HOUSEHOLD
PURPOSES OR SECURED SOLELY BY THE BORROWER'S RESIDENCE MUST BE
IN WRITING, EXPRESS CONSIDERATION AND BE SIGNED BY THE BANK TO
BE ENFORCEABLE.
THE UNDERSIGNED HAS READ THIS GUARANTY. IT
UNDERSTANDS THAT THIS GUARANTY IS EFFECTIVE UNTIL TERMINATED IN
THE MANNER SET FORTH IN PARAGRAPH 11 ABOVE.
_________________________________
Guarantor
_________________________________
Guarantor
<PAGE>1
SEVENTH AMENDMENT TO
AMENDED AND RESTATED LOAN AGREEMENT
-----------------------------------
THIS AMENDMENT TO AMENDED AND RESTATED LOAN AGREEMENT,
made and entered into as of the 17th day of May, 1995, by and
between FIRST INTERSTATE BANK OF OREGON, N.A (hereinafter
referred to as "Bank"), and ELMER'S RESTAURANTS, INC., an
Oregon corporation (hereinafter referred to as "Borrower").
RECITALS:
The parties entered into an amended and restated loan
agreement dated as of June 7, 1991 (as amended from time to
time, "Agreement"), and the parties now desire to amend the
Agreement as hereinafter provided. All capitalized terms used
herein shall have the meanings specified in the Agreement.
NOW, THEREFORE, the parties mutually agree as follows:
1. The Agreement is amended as follows:
(a) Section 1 of the Agreement is amended and
restated as follows:
"1. APPLICATION FOR AND PURPOSE OF LOANS
Borrower has applied to Bank and now renews the
application for financial accommodations (a) to
refinance an existing secured term loan with Bank and
to finance redemption of Borrower's common stock and
working capital in the amount of One Hundred Thousand
and No/100 Dollars ($100,000.00) (Loan I, as
hereinafter defined), (b) to finance the purchase of
ten (10) Fisher point of sale/cash register systems
(Loan II, as hereinafter defined), (c) to finance the
purchase of an aggregate of one hundred thousand
(100,000) shares of Borrower's stock owned by Paul H.
Welch and Jacqueline M. Welch (Loan III, as
hereinafter defined, (d) to finance the remodeling
and/or improvement of Borrower's restaurant in Boise,
Idaho (Loan IV, as hereinafter defined), (e) to
finance the remodeling and/or improvements of
Borrower's restaurants in Medford, Oregon, Beaverton,
Oregon, and Palm Springs, California (Loan V, as
hereinafter defined), and (f) to finance the
remodeling and/or improvements of Borrower's
restaurants in Grants Pass, Oregon, Albany, Oregon,
<PAGE>2
and Palm Springs, California (Loan VI as hereinafter
defined)."
(b) Section 2.1(a) of the Agreement is amended
and restated as follows:
2.1 (a) Loan I
------
(1) Commitment. Subject to Section
----------
4, on May 17, 1995, or such other date as Borrower and
Bank may agree ("Closing Date I"), Bank agrees to make
Loan I, subject to the terms, covenants and conditions
hereinafter set forth, in the principal amount of One
Million Three Hundred Nine Thousand Seven Hundred
Seventy-eight and 21/100 Dollars ($1,309,778.21). Loan I
shall be evidenced by a single promissory note
substantially in the form of Exhibit A attached hereto and
by this reference incorporated herein ("Note I").
(2) Term. Loan I shall commence on
----
Closing Date I and shall terminate on the fifth (5th)
anniversary of Closing Date I ("Maturity Date I").
(3) Interest Rate. Loan I shall bear
-------------
interest at the rate of three-quarters of one percent
(0.75%) per annum above Bank's Prime Rate, fully floating.
"Prime Rate" means Bank's publicly announced prime rate
which is a base rate used to price some loans. It may not
be the lowest rate at which Bank makes any loan. Each
change in said rate is to become effective on the
effective date of each change announced by Bank. Interest
shall be computed on the outstanding principal amount on
the basis of a 365-day or 366-day year, as applicable, and
actual days elapsed.
(4) Payments. Loan I shall be
--------
payable in equal, consecutive monthly installments of
principal of Fifteen Thousand Five Hundred Ninety-two and
60/100 Dollars ($15,592.60), together with accrued and
unpaid interest commencing June 10, 1995, and thereafter
be due on the tenth (10th) day of each month until
Maturity Date I when the aggregate unpaid principal
amount, together with unpaid accrued interest thereon,
shall be due and payable in full.
(5) Prepayment. Loan I can be
----------
prepaid by Borrower at any time, in whole or in part,
without premium or penalty.
<PAGE>3
(6) Loan Fee. On or prior to Closing
--------
Date I, Borrower shall pay to Bank a loan fee of Five
Thousand and No/100 Dollars ($5,000.00).
Attached hereto and by this reference made a part hereof is a
new Exhibit A.
(c) Section 5.15 of the Agreement is amended and
restated as follows:
5.15 Debt Service Coverage Ratio. On a consolidated
---------------------------
annual basis, maintain a Debt Service Coverage Ratio (as
hereinafter defined) of at least 1.20 to 1.00. Said ratio
shall be calculated as of the end of each fiscal year.
'Debt Service Coverage Ratio' means the
ratio of the sum of (a) net income, (b) depreciation,
(c) amortization and (d) interest expense to the sum
of (a) the prior year's current portion of long-term
debt and (b) interest expense.
(d) Section 6.3 of the Agreement is hereby amended
to add the following clauses (i) and (j):
(i) Liens securing debt of Borrower on a pari
passu basis with the Loans hereunder.
(j) The replacement, renewal or extension of
any lien permitted by any of the foregoing clauses.
(e) Section 6.6 of the Agreement is amended and
restated as follows:
"6.6 Capital Expenditures. On a consolidated
--------------------
basis: (a) make or contract to make capital expenditures
(other than acquisition of franchises) in an amount in
excess of Five Hundred Thousand and No/100 Dollars
($500,000.00) in any fiscal year, excluding lease rentals;
and (b) make franchise acquisitions aggregating more than
Four Hundred Fifty Thousand and No/100 Dollars
($450,000.00) in any fiscal year (Borrower to submit to
Bank prior to each such acquisition projections
demonstrating compliance hereto, taking into account
consummation of the acquisition); provided, however, that
for the fiscal year ending March 31, 1995, the maximum
capital expenditures (other than acquisition of
franchises) permitted under this Section 6.6 shall be Six
Hundred Thirty-five Thousand and No/100 Dollars
($635,000.00)."
<PAGE>4
(f) Section 6.7 of the Agreement is amended and
restated as follows:
6.7 Ratio of Liabilities to Net Worth. Permit
---------------------------------
the ratio of total consolidated liabilities (excluding
deferred income taxes) to consolidated Tangible Net Worth
to exceed as of any fiscal quarter end the applicable
ratio set forth below:
For Quarters in Fiscal Year Ending: Ratio
---------------------------------- ---------
March 31, 1995 4.50:1.00
March 31, 1996 4.25:1.00
Thereafter 4.00:1.00
(g) Section 6.8 of the Agreement is amended and
restated as follows:
"6.8 Dividends. Declare or pay, or set apart
---------
any funds for the payment of any dividends (other than
dividends payable in capital stock) on any shares of its
capital stock, or apply any of its funds, property or
assets to, or set apart any funds, property or assets for
the purchase, redemption or other retirement of, or make
any other distribution by reduction of capital or
otherwise, in respect of any shares of its capital stock;
provided, however, that Borrower may redeem its capital
stock up to a maximum aggregate purchase price of Three
Hundred Fifty and No/100 Dollars ($350,000.00) in any
fiscal year."
(h) The following new Section 9.10 shall be inserted
in the Agreement:
"9.10 First Interstate Arbitration Program.
------------------------------------
The parties agree that any dispute which arises between
them shall be resolved in accordance with the First
Interstate Arbitration Program which is set forth in
Exhibit I attached hereto and by this reference made a
part hereof."
2. The obligation of Bank under this Seventh Amendment
is subject to the condition that on or prior to May 17, 1995,
there shall have been delivered to Bank, in form and substance
satisfactory to Bank and its counsel:
(a) Corporate Documentation. Such corporate
-----------------------
documentation and certificates for or from Borrower and any
Subsidiary as Bank shall require.
<PAGE>5
(b) Loan Documents. A new Note I duly executed,
--------------
which shall be included in the definition of "Loan Documents."
3. Except as herein amended, each and all of the terms
and provisions of the Agreement shall be and remain in full
force and effect during the term thereof.
IN WITNESS WHEREOF, the parties hereto have executed
this Amendment to the Agreement, in duplicate, as of the date
first hereinabove written.
UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND
COMMITMENTS MADE BY THE BANK AFTER OCTOBER 3, 1989,
CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH ARE NOT
FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR SECURED
SOLELY BY THE BORROWER'S RESIDENCE MUST BE IN WRITING,
EXPRESS CONSIDERATION AND BE SIGNED BY THE BANK TO BE
ENFORCEABLE.
Borrower hereby acknowledges receipt of a copy of this
Amendment.
ELMER'S RESTAURANTS, INC. FIRST INTERSTATE BANK OF
OREGON, N.A.
By HERMAN GOLDBERG By
------------------------- -----------------------
Title President Title Vice President
---------------------- -----------------
ACKNOWLEDGED:
- ------------
ELMER'S PANCAKE &
STEAKHOUSE, INC.
By HERMAN GOLDBERG
------------------------
Title President
---------------------
Date: May 17, 1995
<PAGE>6
LIST OF ATTACHMENTS
ELMER'S RESTAURANTS, INC.
-------------------------
SEVENTH AMENDMENT TO
AMENDED AND RESTATED LOAN AGREEMENT
EXHIBIT DESCRIPTION
- ------- -----------
A Promissory Note (Note I)
I First Interstate Bank Arbitration Program
<PAGE>
EXHIBIT A
PROMISSORY NOTE
---------------
$1,309,778.21 Portland, Oregon
May __, 1995
FOR VALUE RECEIVED, the undersigned promises to pay
in lawful money of the United States of America, to the order
of FIRST INTERSTATE BANK OF OREGON, N.A. ("Bank"), at its
Eastside Commercial Banking Center ("ESCBC"), the principal sum
of One Million Three Hundred Nine Thousand Seven Hundred
Seventy-eight and 21/100 Dollars ($1,309,778.21), together with
interest thereon from the date hereof at the rate of
three-quarters of one percent (0.75%) per annum above Bank's
Prime Rate, fully floating. "Prime Rate" means Bank's publicly
announced prime rate which is a base rate used to price some
loans. It may not be the lowest rate at which Bank makes any
loan. Each change in said rate is to become effective on the
effective date of each change announced by Bank. Interest
shall be computed on the outstanding principal amount on the
basis of a 365-day or 366-day year, as applicable, and actual
days elapsed.
This Note shall be payable in equal, consecutive
monthly instalments of principal of Fifteen Thousand Five
Hundred Ninety-two and 60/100 Dollars ($15,592.60), commencing
June 10, 1995, and thereafter on the tenth (10th) day of each
month until May 10, 2000 ("Maturity Date") when the aggregate
unpaid principal amount of this Note, together with unpaid
accrued interest thereon, shall be due and payable in full.
This Note may be prepaid by the undersigned at any
time, in whole or in party, without premium or penalty.
All payments shall be made directly to Bank, and the
final payment shall be made in immediately available funds.
All payments hereunder shall be applied first to interest, then
to principal. If the amount paid in any instalment be less
than the accrued interest then due, the excess of interest
shall be added to and become part of the principal, and
interest shall be charged thereon to the extent permitted by
applicable laws.
Upon the occurrence of an Event of Default (as
defined in the Loan Agreement), then, at the option of the
holder of this Note, upon prior written notice, the entire
indebtedness represented hereby shall immediately become due
and payable. Failure or delay of the holder to exercise this
option shall not constitute a waiver of the right to exercise
the same in the event of subsequent default, or in the event of
<PAGE>2
continuance of any existing default after demand for the
performance of the terms hereof.
Undersigned shall pay upon demand any and all
expenses, including reasonable attorneys' fees, incurred or
paid by the holder of this Note after the occurrence of an
Event of Default (or an event which, with the giving of notice
or lapse of time, or both, would become an Event of Default)
and so long as such event is continuing, without suit or action
in attempting to collect funds due under this Note. In the
event an action or arbitration is instituted in connection with
the collection of this Note, the prevailing party shall be
entitled to recover, at trial or on appeal or at arbitration,
such sums as the court or arbitrator may adjudge reasonable as
attorneys' fees, in addition to costs and necessary
disbursements.
All parties to this Note hereby waive presentment,
dishonor, notice of dishonor, and protest. All parties hereto
hereby consent to, and the holder hereof is hereby expressly
authorized to make, without notice, any and all renewals,
extensions, modifications or waivers of the time for or the
terms of payment of any sum or sums due hereunder, or under any
documents or instruments relating to or securing this Note, or
of the performance of any covenants, conditions or agreements
hereof or thereof, or the taking or release of collateral
securing this Note. The liability of all parties on this Note
shall not be discharged by any action consented to above taken
by any holder of this Note.
This Note is made with reference to, and is to be
construed in accordance with, the laws of the State of Oregon.
This Note is subject to the terms and conditions of
that certain loan agreement dated as of June 7, 1991, between
the undersigned and Bank, as amended from time to time ("Loan
Agreement"), and the repayment of this Note is guaranteed by
the Subsidiaries (as defined in the Loan Agreement) of the
undersigned and is secured by the collateral described in the
Security Agreements (as defined in the Loan Agreement) dated
the date hereof and executed by the undersigned and the
Subsidiaries.
ELMER'S RESTAURANT, INC.
By __________________________
President
<PAGE>1
EXHIBIT I
---------
FIRST INTERSTATE BANK ARBITRATION PROGRAM
-----------------------------------------
Binding Arbitration.
- -------------------
A. Binding Arbitration. Upon the demand of any party
-------------------
("Party/Parties"), to a Document (as defined below), whether
made before the institution of any judicial proceeding or not
more than 60 days after service of a complaint, third party
complaint, cross-claim or counterclaim or any answer thereto or
any amendment to any of the above, any Dispute (as defined
below) shall be resolved by binding arbitration in accordance
with the terms of this Arbitration Program. A "Dispute" shall
include any action, dispute, claim or controversy of any kind,
whether founded in contract, tort, statutory or common law,
equity, or otherwise, now existing or hereafter arising between
any of the Parties arising out of, pertaining to or in
connection with any agreement, document or instrument to which
this Arbitration Program is attached or in which it appears or
is referenced or any related agreements, documents, or
instruments ("Documents"). Any Party who fails to submit to
binding arbitration following a lawful demand by another Party
shall bear all costs and expenses, including reasonable
attorneys' fees, (including those incurred in any trial,
bankruptcy proceeding or on appeal) incurred by the other Party
in obtaining a stay of any pending judicial proceeding and
compelling arbitration of any Dispute. The parties agree that
any agreement, document or instrument which includes, attaches
to or incorporates this Arbitration Program represents a
transaction involving commerce as that term is used in the
Federal Arbitration Act, ("FAA") Title 9 United States Code.
THE PARTIES UNDERSTAND THAT BY THIS AGREEMENT THEY HAVE DECIDED
THAT THEIR DISPUTES SHALL BE RESOLVED BY BINDING ARBITRATION
RATHER THAN IN COURT, AND ONCE DECIDED BY ARBITRATION NO
DISPUTE CAN LATER BE BROUGHT, FILED OR PURSUED IN COURT.
B. Governing Rules. Arbitrations conducted pursuant to this
---------------
Arbitration Program shall be administered by the American
Arbitration Association ("AAA"), or other mutually agreeable
administrator ("Administrator") in accordance with the terms of
this Arbitration Program and the Commercial Arbitration Rules
of the AAA. Proceedings hereunder shall be governed by the
provisions of the FAA. The arbitrator(s) shall resolve all
Disputes in accordance with the applicable substantive law
designated in the Documents. Judgment upon any award rendered
hereunder may be entered in any court having jurisdiction;
provided, however that nothing herein shall be construed to be
a waiver by any party that is a bank of the protections
afforded pursuant to 12 U.S.C. 91 or any similar applicable
state law.
<PAGE>2
C. Preservation of Remedies. No provision of, nor the
------------------------
exercise of any rights under, this arbitration clause shall
limit the right of any Party to: (1) foreclose against any real
or personal property collateral or other security, or obtain a
personal or deficiency award; (2) exercise self-help remedies
(including repossession and setoff rights); or (3) obtain
provisional or ancillary remedies such as injunctive relief,
sequestration, attachment, replevin, garnishment, or the
appointment of a receiver from a court having jurisdiction.
Such rights can be exercised at any time except to the extent
such action is contrary to a final award or decision in any
arbitration proceeding. The institution and maintenance of an
action as described above shall not constitute a waiver of the
right of any Party to submit the Dispute to arbitration, nor
render inapplicable the compulsory arbitration provisions
hereof. Any claim or Dispute related to exercise of any
self-help, auxiliary or other rights under this paragraph shall
be a Dispute hereunder.
D. Arbitrator Powers and Qualifications; Awards. The Parties
--------------------------------------------
agree to select a neutral "qualified" arbitrator or a panel of
three "qualified" arbitrators to resolve any Dispute hereunder.
"Qualified" means a practicing attorney, with not less than 10
years practice in commercial law, licensed to practice in the
state of the applicable substantive law designated in the
Documents. A Dispute in which the claims or amounts in
controversy do not exceed $500,000.00, shall be decided by a
single arbitrator. A single arbitrator shall have authority to
render an award up to but not to exceed $500,000.00 including
all damages of any kind whatsoever, costs, fees, attorneys'
fees and expenses. Submission to a single arbitrator shall be
a waiver of all Parties' claims to recover more than
$500,000.00. A Dispute involving claims or amounts in
controversy exceeding $500,000.00 shall be decided by a
majority vote of a panel of three qualified arbitrators. The
arbitrator(s) shall be empowered to, at the written request of
any Party in any Dispute, 1) to consolidate in a single
proceeding any multiple party claims that are substantially
identical or based upon the same underlying transaction; 2) to
consolidate any claims and Disputes between other Parties which
arise out of or relate to the subject matter hereof, including
all claims by or against borrowers, guarantors, sureties and or
owners of collateral; and 3) to administer multiple arbitration
claims as class actions in accordance with Rule 23 of the
Federal Rules of Civil Procedure. In any consolidated
proceeding the first arbitrator(s) selected in any proceeding
shall conduct the consolidated proceeding unless disqualified
due to conflict of interest. The arbitrator(s) shall be
empowered to resolve any dispute regarding the terms of this
arbitration clause, including questions about the arbitrability
of any Dispute, but shall have no power to change or alter the
<PAGE>3
terms of this Arbitration Program. The prevailing Party in any
Dispute shall be entitled to recover its reasonable attorneys'
fees in any arbitration, and the arbitrator(s) shall have the
power to award such fees. The award of the arbitrator(s) shall
be in writing and shall set forth the factual and legal basis
for the award.
E. Miscellaneous. All statutes of limitation applicable to
-------------
any Dispute shall apply to any proceeding in accordance with
this arbitration clause. The Parties agree, to the maximum
extent practicable, to take any action necessary to conclude an
arbitration hereunder within 180 days of the filing of a
Dispute with the Administrator. The arbitrator(s) shall be
empowered to impose sanctions for any Party's failure to
proceed within the times established herein. Arbitrations
shall be conducted in the state of the applicable substantive
law designated in the Documents. The provisions of this
Arbitration Program shall survive any termination, amendment,
or expiration hereof or of the Documents unless the Parties
otherwise expressly agree in writing. Each Party agrees to
keep all Disputes and arbitration proceedings strictly
confidential, except for disclosures of information required in
the ordinary course of business of the Parties or as required
by applicable law or regulation. If any provision of this
Arbitration Program is declared invalid by any court, the
remaining provisions shall not be affected thereby and shall
remain fully enforceable.
<PAGE>7
PROMISSORY NOTE
---------------
$1,309,778.21 Portland, Oregon
May __, 1995
FOR VALUE RECEIVED, the undersigned promises to pay
in lawful money of the United States of America, to the order
of FIRST INTERSTATE BANK OF OREGON, N.A. ("Bank"), at its
Eastside Commercial Banking Center ("ESCBC"), the principal sum
of One Million Three Hundred Nine Thousand Seven Hundred
Seventy-eight and 21/100 Dollars ($1,309,778.21), together with
interest thereon from the date hereof at the rate of
three-quarters of one percent (0.75%) per annum above Bank's
Prime Rate, fully floating. "Prime Rate" means Bank's publicly
announced prime rate which is a base rate used to price some
loans. It may not be the lowest rate at which Bank makes any
loan. Each change in said rate is to become effective on the
effective date of each change announced by Bank. Interest
shall be computed on the outstanding principal amount on the
basis of a 365-day or 366-day year, as applicable, and actual
days elapsed.
This Note shall be payable in equal, consecutive
monthly instalments of principal of Fifteen Thousand Five
Hundred Ninety-two and 60/100 Dollars ($15,592.60), commencing
June 10, 1995, and thereafter on the tenth (10th) day of each
month until May 10, 2000 ("Maturity Date") when the aggregate
unpaid principal amount of this Note, together with unpaid
accrued interest thereon, shall be due and payable in full.
This Note may be prepaid by the undersigned at any
time, in whole or in party, without premium or penalty.
All payments shall be made directly to Bank, and the
final payment shall be made in immediately available funds.
All payments hereunder shall be applied first to interest, then
to principal. If the amount paid in any instalment be less
than the accrued interest then due, the excess of interest
shall be added to and become part of the principal, and
interest shall be charged thereon to the extent permitted by
applicable laws.
Upon the occurrence of an Event of Default (as
defined in the Loan Agreement), then, at the option of the
holder of this Note, upon prior written notice, the entire
indebtedness represented hereby shall immediately become due
and payable. Failure or delay of the holder to exercise this
option shall not constitute a waiver of the right to exercise
the same in the event of subsequent default, or in the event of
<PAGE>8
continuance of any existing default after demand for the
performance of the terms hereof.
Undersigned shall pay upon demand any and all
expenses, including reasonable attorneys' fees, incurred or
paid by the holder of this Note after the occurrence of an
Event of Default (or an event which, with the giving of notice
or lapse of time, or both, would become an Event of Default)
and so long as such event is continuing, without suit or action
in attempting to collect funds due under this Note. In the
event an action or arbitration is instituted in connection with
the collection of this Note, the prevailing party shall be
entitled to recover, at trial or on appeal or at arbitration,
such sums as the court or arbitrator may adjudge reasonable as
attorneys' fees, in addition to costs and necessary
disbursements.
All parties to this Note hereby waive presentment,
dishonor, notice of dishonor, and protest. All parties hereto
hereby consent to, and the holder hereof is hereby expressly
authorized to make, without notice, any and all renewals,
extensions, modifications or waivers of the time for or the
terms of payment of any sum or sums due hereunder, or under any
documents or instruments relating to or securing this Note, or
of the performance of any covenants, conditions or agreements
hereof or thereof, or the taking or release of collateral
securing this Note. The liability of all parties on this Note
shall not be discharged by any action consented to above taken
by any holder of this Note.
This Note is made with reference to, and is to be
construed in accordance with, the laws of the State of Oregon.
This Note is subject to the terms and conditions of
that certain loan agreement dated as of June 7, 1991, between
the undersigned and Bank, as amended from time to time ("Loan
Agreement"), and the repayment of this Note is guaranteed by
the Subsidiaries (as defined in the Loan Agreement) of the
undersigned and is secured by the collateral described in the
Security Agreements (as defined in the Loan Agreement) dated
the date hereof and executed by the undersigned and the
Subsidiaries.
ELMER'S RESTAURANT, INC.
By HERMAN GOLDBERG
----------------------------
President
<PAGE>1
EXHIBIT 10.9
COMMERCIAL LOAN NOTE
$980,000.00 dated effective as of May 18, 1995
The signer of this Note ("Borrower") promises to pay to the order of THE
BANK OF CALIFORNIA, N.A. ("Bank") at its office at 407 SW Broadway,
Portland, OR 97205 or at such other place as Bank may designate in writing,
in lawful money of the United States of America, the principal sum of Nine
Hundred Eighty Thousand and No/100 Dollars ($980,000.00), with interest
thereon from the date the proceeds of the loan evidenced by this Note are
disbursed until maturity, whether scheduled or accelerated: at a
fluctuating rate per annum at all times equal to the rate Bank announces to
be in effect from time to time as its prime rate (the "Prime Rate") plus
0.5%. The Prime Rate is a rate set by Bank based upon various factors
including general economic and market conditions, and is used as a
reference point for pricing certain loans. Bank may price its loans at,
above, or below the Prime Rate.
Interest shall be payable on the last day of each consecutive month
beginning June 30, 1995, and continuing through April 30, 2000. Principal
shall be payable in 59 consecutive monthly instalments of $11,666.67 each,
beginning June 30, 1995, and continuing on the last day of each consecutive
month through April 30, 2000, plus a final instalment equal to the entire
unpaid principal balance and all accrued and unpaid interest on May 31,
2000.
Principal, interest, and all other sums owed Bank under this Note or any
Loan Document (as defined below) shall be evidenced by entries in records
maintained by Bank for such purpose. Each payment on and any other credits
with respect to principal, interest and all other sums outstanding under
this Note or any Loan Document shall be evidenced by entries in such
records. Bank's records shall be conclusive evidence thereof, absent
obvious error.
Notwithstanding the rights given to Borrower pursuant to California Civil
Code Sections 1479 and 2822 or equivalent provisions in the laws of the
state specified in the governing law clause of this document (and any
amendments or successors thereto), to designate how payments will be
applied, Borrower hereby waives such rights and Bank shall have the right
in its sole discretion to determine the order and method of the application
of payments to this and/or any other credit facilities that may be provided
by Bank to Borrower and to revise such application prospectively or
retroactively at its discretion.
<PAGE>2
Borrower has paid or shall pay to Bank no later than June 30, 1995, a
non-refundable fee of $500.00 for the loan evidenced by this Note.
If the proceeds of the loan evidenced by this Note are, at Borrower's
request, to be wire transferred to Borrower or any other individual or
entity ("Person"), such transfer shall be subject to all applicable laws
and regulations, and the policy of the Board of Governors of the Federal
Reserve System on Reduction of Payments System Risk in effect from time to
time ("Applicable Law and Policy"). Borrower acknowledges that, as a result
of Applicable Law and Policy, the transmission of the proceeds of this Note
may be significantly delayed.
Any unpaid payments of principal or interest on this Note shall bear
interest from their respective maturities, whether scheduled or
accelerated, at a fluctuating rate per annum at all times equal to the
Prime Rate plus 2.5%, until paid in full, whether before or after judgment.
Interest and fees shall be calculated for actual days elapsed on the basis
of a 360-day year, which results in higher interest payments than if a
365-day year were used. Each change in the rate of interest shall become
effective on the date each Prime Rate change is announced within the Bank.
In no event shall Borrower be obligated to pay interest at a rate in excess
of the highest rate permitted by applicable law from time to time in
effect.
The occurrence and during the continuance of any of the following shall, at
Bank's option, (1) make all sums of interest, principal and any other
amounts owing under any Loan Documents immediately due and payable without
notice of default presentment or demand for payment, protest or notice of
nonpayment or dishonor or any other notices or demands; and (2) give Bank
the right to exercise any other right or remedy provided by contract or
applicable law:
(A) (i) Borrower shall fail to make any payment of principal or
interest within 5 days of when due under this Note or to pay any
fees or other charges within 5 days of when due, (ii) or Borrower
shall fail to provide Bank with, or to perform any obligation
under this Note or any contract, instrument, addenda or document
executed in connection with this Note, including without
limitation any rate option agreement, guaranty, pledge agreement,
security agreement or deed of trust (including this Note, each a
"Loan Document"), and in the case of this subclause (ii), such
failure continues for 30 days after written notice thereof to
Borrower from Bank.
<PAGE>3
(B) Any representation or warranty made, or financial statement,
certificate or other document provided, by Borrower or any
guarantor ("Guarantor") of the obligations evidenced by this Note
("Obligations") shall prove to have been false or misleading in
any material respect when made.
(C) Borrower or any Guarantor shall fail to pay its debts
generally as they become due or shall file any petition or action
for relief under any bankruptcy, insolvency, reorganization,
moratorium, creditor composition law, or any other law for the
relief of or relating to debtors. An involuntary petition shall be
filed under any bankruptcy law against Borrower or any Guarantor,
or a custodian, receiver, trustee, assignee for the benefit of
creditors, or other similar official, shall be appointed to take
possession, custody or control of the properties of Borrower or
any Guarantor, and such involuntary petition or appointment shall
be consented to by Borrower or remain undismissed or unstayed for
a period of sixty (60) days from the date of filing or
appointment, as the case may be.
(D) Borrower or any Guarantor shall fail to pay when due
(including any grace period with respect thereto) any other
obligation for money borrowed by it in a principal amount in
excess of Three Hundred Thousand and No/100 Dollars ($300,000), or
any default shall occur under any other agreement involving the
borrowing of money or the advance of credit in such amount to
which Borrower or any Guarantor may be a party as borrower, if
such default gives the holder of the obligation concerned the
right to accelerate the indebtedness. The dissolution, termination
of the business or sale of substantially all the assets of
Borrower or any Guarantor (unless, with respect to any Guarantor,
the assets are transferred to Borrower or any wholly-owned
subsidiary of Borrower).
(E) Any one or more final judgments, orders or decrees for the
payment of money in excess of Three Hundred Thousand and No/100
Dollars ($300,000) (whether singly or in the aggregate) to the
extent not covered by insurance shall be rendered against Borrower
or any Guarantor and Borrower or such Guarantor shall not
discharge the same or provide for its discharge in accordance with
its terms, or procure a stay of execution thereof pending appeal,
within thirty (30) days after the date of entry thereof.
(F) Any governmental or regulatory authority shall take
any action which might materially adversely affect the
<PAGE>4
Collateral (as defined in the Loan Documents) or Debtor's ability
to pay the indebtedness or perform its obligation to Bank.
Bank has the right at its sole option to continue to accept interest and/or
principal payments due under the Loan Documents after default, and such
acceptance shall not constitute a waiver of said default or an extension of
the maturity date unless Bank agrees otherwise in writing.
DISPUTE RESOLUTION
(A) MANDATORY MEDIATION/ARBITRATION. Any controversy or claim
between or among the parties their agents, employees and
affiliates, including but not limited to those arising out of or
relating to this Note or any related agreements or instruments
("Subject Documents"), including without limitation any claim
based on or arising from an alleged tort, shall, at the option of
any party, and at that party's expense, be submitted to mediation,
using either the American Arbitration Association ("AAA") or
Judicial Arbitration and Mediation Services, Inc. ("JAMS"). If
mediation is not used, or if it is used and it fails to resolve
the dispute within 30 days from the date AAA or JAMS is engaged,
then the dispute shall be determined by arbitration in accordance
with the rules of either JAMS or AAA (at the option of the party
initiating the arbitra-tion) and Title 9 of the U. S. Code,
notwithstanding any other choice of law provision in the Subject
Documents. All statutes of limitations or any waivers contained
herein which would otherwise be applicable shall apply to any
arbitration proceeding under this subparagraph (a). The parties
agree that related arbitration proceedings may be consolidated.
The arbitrator shall prepare written reasons for the award.
Judgment upon the award rendered may be entered in any court
having jurisdiction. This subparagraph (a) shall apply only if, at
the time of the proposed submission to AAA or JAMS, none of the
obligations to Bank described in or covered by any of the Subject
Documents are secured by real property collateral or, if so
secured, all parties consent to such submission.
(B) JURY WAIVER/JUDICIAL REFERENCE. If the controversy or claim is
not submitted to arbitration as provided and limited in
subparagraph (a), but becomes the subject of a judicial action,
each party hereby waives its respective right to trial by jury of
the controversy or claim. In addition, any party may elect to have
all decisions of fact and law determined by a referee appointed by
the court in accordance with applicable state reference
procedures. The party requesting the reference procedure
<PAGE>5
shall ask AAA or JAMS to provide a panel of retired judges and the
court shall select the referee from the designated panel. The
referee shall prepare written findings of fact and conclusions of
law. Judgment upon the award rendered shall be entered in the
court in which such proceeding was commenced.
(C) PROVISIONAL REMEDIES, SELF HELP, AND FORECLOSURE. No provision
of, or the exercise of any rights under, subparagraph (a) shall
limit the right of any party to exercise self help remedies such
as setoff, to foreclose against any real or personal property
collateral, or to obtain provisional or ancillary remedies such as
injunctive relief or the appointment of a receiver from a court
having jurisdiction before, during or after the pendency of any
mediation or arbitration except to the extent such action is
contrary to a final award or decision in any arbitration
proceeding. At Bank's option, foreclosure under a deed of trust or
mortgage may be accomplished either by exercise of power of sale
under the deed of trust or mortgage, or by judicial foreclosure.
The institution and maintenance of an action for judicial relief
or pursuit of provisional or ancillary remedies or exercise of
self help remedies shall not constitute a waiver of the right of
any party, including the plaintiff, to submit the controversy or
claim to mediation or arbitration.
To the extent any provision of the dispute resolution clause is different
than the terms of this Note, the terms of this dispute resolution clause
shall prevail.
This Note and the Loan Documents shall inure to the benefit of and be
binding upon the successors and assigns of each of the parties except that
Borrower shall not have the right to assign its rights hereunder or any
interest herein. Bank shall not have the right to assign its rights
hereunder without the consent of Borrower, which consent shall not be
unreasonably withheld; provided, however, that this paragraph shall not
prohibit Bank from selling participation(s) in the loan evidenced by this
Note to whom and on such terms as it desires; provided, further, that any
agreement pursuant to which Bank grants such a participation shall provide
that Bank shall retain the sole right and responsibility to enforce the
obligations of Borrower relating to this Note and the Loan Documents,
including, without limitation, the right to approve any amendment,
modification or waiver of any provision of this Note or other Loan
Documents; provided, further, that such participation agreement may provide
that Bank will not agree to any modification, amendment or waiver of this
Agreement or the other Loan Documents without the consent of the
participant
<PAGE>6
which would reduce the principal of or rate of interest on such Loans, or
postpone the date fixed for any payment of principal of or interest on such
Loans, or release any collateral securing, or any Guarantor of, any
liability to Bank hereunder or under the Loan Documents. The granting of
any participation pursuant to this Section shall not affect in any manner
the obligations of Borrower hereunder.
No failure or delay on the part of Bank in exercising any power, right or
privilege under any Loan Document shall operate as a waiver thereof, and no
single or partial exercise of any such power, right or privilege shall
preclude any further exercise thereof or the exercise of any other power,
right or privilege.
Borrower shall pay and protect, defend and indemnify Bank and Bank's
employees, officers, directors, shareholders, affiliates, correspondents,
agents and representatives (other than Bank, collectively "Agents")
against, and hold Bank and each such Agent harmless from, all claims,
actions, proceedings, liabilities, damages, losses, expenses (including,
without limitation, attorneys' fees and costs) and other amounts incurred
by Bank and each such Agent, arising from (i) the matters contemplated by
this Note or any Loan Document or (ii) any contention that Borrower has
failed to comply with any law, rule, regulation, order or directive
applicable to Borrower's sales, leases or performance of services to
Borrower's customers, including without limitation those sales, leases and
services requiring consumer or other disclosures; PROVIDED, HOWEVER, that
this indemnification shall not apply to any of the foregoing to the extent
they have resulted from Bank's or any Agent's gross negligence or willful
misconduct. This indemnification shall survive the payment and satisfaction
of all of Borrower's obligations and liabilities to Bank.
In the event of any action at law or suit in equity in relation to this
Note or any other Loan Document is required or contemplated hereunder, the
prevailing party, in addition to all other sums which the other party may
be called upon to pay, shall be entitled to recover such additional sum for
the prevailing party's attorneys' fees incurred therein, as the arbiter,
trial court or any appellate court adjudges reasonable in said suit or
action.
This Note shall be governed by, and construed in accordance with, the laws
of the State of Oregon.
All terms and conditions set forth in the Financial
Statement/Financial Covenants Addendum(s) attached to this Note
are incorporated by this reference.
<PAGE>7
UNDER OREGON LAW, MOST AGREEMENTS, PROMISES, AND COMMITMENTS MADE BY BANK
AFTER OCTOBER 3, 1989 CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH
ARE NOT FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY THE
BORROWER'S RESIDENCE, MUST BE IN WRITING, EXPRESS CONSIDERATION AND BE
SIGNED BY BANK TO BE ENFORCEABLE.
ELMER'S RESTAURANTS, INC.,
an Oregon corporation
By: HERMAN GOLDBERG
----------------------
Herman Goldberg
Title:President and CEO
<PAGE>8
ADDENDUM TO PROMISSORY NOTE
-FINANCIAL COVENANTS/FINANCIAL STATEMENTS-
THIS ADDENDUM is attached to and made a part of that certain promissory
note executed by Elmer's Restaurants, Inc., an Oregon corporation
("Borrower"), payable to the order of THE BANK OF CALIFORNIA, N.A.
("Bank"), in the principal amount of $980,000.00 and dated effective as of
May 18, 1995 (the "Note").
The following provisions are hereby incorporated into the Note:
1. FINANCIAL COVENANTS. So long as Borrower is indebted to
Bank under this Note and until its performance of all
obligations to Bank, Borrower will, unless Bank otherwise
consents in writing:
1.1 TANGIBLE NET WORTH. Maintain a Tangible Net Worth of
not less than $1,500,000.00.
1.2 PROFITABILITY. Maintain profitable operations on an
annual basis of at least $50,000.00.
1.3 DEBT SERVICE COVERAGE RATIO. Maintain a ratio of income from
operation before interest expense, income taxes, Depreciation,
Amortization and other non-cash charges, for the previous
financial reporting period, to the current portion of long term
debt and interest expense at the time of determination, of at
least 1.20 annually. 'Depreciation' means the annual reduction of
a portion of the cost of a tangible capital asset over the period
of its estimated useful life. 'Amortization' means the periodic
reduction of intangible assets and/or deferred charges over a
specific term.
1.4 LIQUID ASSETS. Maintain Liquid Assets in an aggregate amount
not less than $1,000,000, subject to no Liens. "Liquid Assets"
means Borrower's assets consisting of unrestricted and immediately
available: cash; U.S. government obligations or obligations
guaranteed by the U.S. government or an agency thereof; bank
deposit accounts or money market accounts placed with institutions
selected by Borrower and satisfactory to Bank; public or private
debt instruments rated not less than BBB by a rating agency
acceptable to Bank; and common stock listed on either the New York
Exchange or American Stock Exchange with a price per share of not
less than $10.00 at all times during the term of this Note.
<PAGE>9
2. FINANCIAL STATEMENTS. So long as Borrower is indebted to Bank under this
Note, Borrower shall provide to Bank the following financial information,
which Borrower warrants shall be accurate and complete in all material
respects and prepared in accordance with generally accepted accounting
principles and practices, consistently applied:
2.1 INTERIM FINANCIAL STATEMENTS
As soon as available, but no later than 60 days after the end of
each quarter (other than the last quarter of any fiscal year),
Borrower's balance sheet as of the end of such period, and
Borrower s income statement for such period and for that portion
of Borrower's financial reporting year ending with such period,
prepared and attested by a responsible financial officer of
Borrower as being complete and correct and fairly presenting
Borrower's financial condition and the results of Borrower's
operations.
2.2 YEAR-END FINANCIAL STATEMENTS
As soon as available, but no later than 90 days after the end of
each financial reporting year, a complete copy of Borrower's audit
report, which shall include balance sheet, income statement,
statement of changes in equity and statement of cash flows for
such year, prepared and certified by Coopers & Lybrand LLP, or
other independent certified public accountant selected by Borrower
and reasonably satisfactory to Bank (the "Accountant"). The
Accountant's certification shall not be qualified or limited due
to a restricted or limited examination by the Accountant of any
material portion of Borrower's records or otherwise. The
certification shall include, or be accompanied by, a statement
from the Accountant that during the examination there was observed
no Event of Default, or a statement of the Event of Default if any
is found. Borrower shall not change its financial reporting year
end from the current March 31 without Bank's prior written
consent.
Except as otherwise provided in this Note, accounting terms, and
financial covenants and information, shall be determined and
prepared in accordance with GAAP as in effect on the date of this
Note.
<PAGE>10
3. OTHER FINANCIAL INFORMATION
3.1 Such other statements, lists of property and accounts,
budgets, forecasts, reports or other financial information as Bank
may from time to time reasonably requested.
4. DEFINITIONS
The following definitions shall be applicable to both the singular and
plural forms of the defined terms.
"AFFILIATE" means any Person which directly or indirectly
controls, is controlled by, or is under common control with,
Borrower. "Control", "controlled by" and "under common control
with" means direct or indirect possession of the power to direct
or cause the direction of management or policies (whether through
ownership of voting securities, by contract or otherwise);
provided that control shall be conclusively presumed when any
Person or affiliated group directly or indirectly owns five
percent or more of the securities having ordinary voting power for
the election of directors of a corporation.
"GAAP" means generally accepted accounting principles and
practices consistent with those principles and practices
promulgated or adopted by the Financial Accounting Standards Board
and the Board of the American Institute of Certified Public
Accountants, their respective predecessors and successors. Each
accounting term used but not otherwise expressly defined herein
shall have the meaning given it by GAAP.
"RELATED PERSON" means an Affiliate of Borrower, or any officer,
employee, director or shareholder of Borrower or any Affiliate, or
a relative of any of them.
"TANGIBLE NET WORTH", means the net book value of (a) all
Borrower's assets, exclusive of intangibles, and loans to and
notes and receivables from Related Persons, minus (b) all
Borrower's liabilities determined in accordance with GAAP.
<PAGE>11
IN WITNESS WHEREOF, the undersigned has executed this Addendum the first
date set forth above.
ELMER'S RESTAURANTS, INC.,
an Oregon corporation
By: HERMAN GOLDBERG
----------------------------
Herman Goldberg
Title: President and CEO
<PAGE>2
EXHIBIT 13
<TABLE>
<CAPTION>
Selected Financial Data
For the years ended March 31, 1995 1994 1993 1992 1991
- ----------------------------- -------------- -------------- -------------- ---------------- --------------
<S> <C> <C> <C> <C> <C>
Revenues....................................... $15,223,087 $14,276,483 $13,961,841 $12,780,372 $11,988,543
Net income..................................... 377,771 159,922 98,737 112,293 145,194
Per share data: Net income.................... 0.21 0.08 0.05 0.06 0.07
Total assets................................... 8,137,008 8,285,506 8,566,826 9,245,393 8,819,356
Long-term notes payable, less
current portion.............................. 3,573,613 3,822,338 4,080,657 4,716,164 4,645,971
Total liabilities.............................. 5,180,012 5,507,048 5,807,731 6,539,088 5,996,396
Total shareholders' equity..................... 2,956,996 2,778,458 2,759,095 2,706,305 2,822,960
</TABLE>
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Financial Condition
Liquidity and Capital Resources
The Company's working capital at March 31, 1995 totaled
$180,492, an increase of $74,791 from working capital of $105,701
at March 31, 1994. The increase is primarily due to a reduction in
short-term notes payable.
Principal sources of funds for the Company's operations and
its growth in recent years have included long-term and short-term
debt financing and cash flow from operations. Funds obtained from
debt financing amounted to approximately $518,000, $691,000, and
$134,000 for the fiscal years ended March 31, 1995, ("1995"), 1994
("1994") and 1993 ("1993"), respectively. The long-term debt
incurred in 1995, 1994 and 1993 was due primarily to the
acquisition of equipment and refurbishing of existing restaurants.
Certain of the Company's loan agreements contain restrictive
covenants pertaining to financial ratios, minimum cash flow
coverage, dividends and repurchase of common stock; the most
restrictive of these covenants requires the Company to maintain a
ratio of cash generation (defined as the sum of net income,
depreciation and amortization) to current maturities of long-term
debt of at least 1.3 to 1.0, and restricts the amount of capital
expenditures which the Company may make in any fiscal year.
Funds provided by operating activities totaled approximately
$1,183,000, $910,000 and $1,151,000 in 1995, 1994, and 1993,
respectively.
As of March 31, 1995, the Company had approximately $1,269,000
in cash and cash equivalents. The Company believes that cash and
cash equivalents on hand at March 31, 1995, together with funds
provided from operations, will be sufficient to fund its operations
for the ensuing year.
Capital expenditures of $632,814 for 1995, $782,686 for 1994
and $271,137 for 1993 were primarily for the acquisition of
equipment for and improvements to the Company's existing
restaurants.
The Company anticipates that capital expenditures for the
fiscal year ending March 31, 1996 will be less than those in 1995
due to the completion of the refurbishing of restaurants.
Results of Operations
Revenues
Revenues increased $946,604 (6.6%) for 1995 compared to 1994
due primarily to the operations of the Company-owned restaurants.
<PAGE>3
Revenues increased $314,642 (2.3%) for 1994 compared to 1993 due
primarily to the operations of the company-owned restaurants.
Revenues from operations were $15,223,087, $14,276,483 and
$13,961,841 for 1995, 1994 and 1993, respectively. There were
eleven Company-owned restaurants at March 31, 1995.
Revenues from franchise operations increased $59,701 for 1995,
due primarily to the two new franchised restaurants that opened
during 1995, and $9,346 for 1994 due primarily to increased sales
by franchisees. Franchise operation revenues totaled $605,855,
$546,154 and $536,808 for 1995, 1994 and 1993, respectively, after
elimination of intercompany transactions (see Note 8 of the Notes
to Consolidated Financial Statements).
During 1995 initial license fees of $25,000 were recorded for
a new franchised restaurant in Twin Falls, Idaho that opened in
November 1994. During 1994 license fees of $500 were recorded for
options for future franchised restaurants by a current franchisee.
During 1993 initial license fees of $7,500 were recorded for a new
franchised restaurant in Vancouver, Washington that opened in June
1994.
The low inflation rate over the last three years has not been
a significant factor in the Company's operations.
Operating Costs and Expenses
Cost of restaurant sales increased $593,837 for 1995 compared
to 1994 and $189,351 for 1994 compared to 1993 as a result of
increased sales. Cost of restaurant sales (and as a percentage of
restaurant sales) amounted to $8,960,282 (61.4%), $8,366,445
(60.9%) and $8,177,094 (60.9%) for 1995, 1994 and 1993,
respectively.
Depreciation and amortization totaled $722,775 for 1995, a
decrease of $192,682 from 1994, and $915,457 for 1994, a decrease of
$64,198 from 1993, each decrease due primarily to certain assets
becoming fully depreciated.
General and administrative expenses increased $241,594 in 1995
over 1994 and $166,052 in 1994 over 1993, due primarily to the
increased cost of managing Company-owned restaurants. General and
administrative expenses as a percentage of revenues were 24.6% for
1995, 24.5% for 1994 and 23.9% for 1993. Occupancy costs as a
percentage of revenues were 5.9% for 1995, 6.1% for 1994 and 6.3%
for 1993.
Income From Operations
Income from operations for 1995 totaled $893,374, an increase
of $277,117 (45.0%) from 1994. The increase was due primarily to
the decrease in depreciation and amortization of $192,682 (21.0%)
from 1994 and increased revenues from franchise operations and
license fees of $84,201(15.4%) from 1994.
Income from operations for 1994 totaled $616,257, an increase
of $24,215 (4.1%) from 1993. The increase for 1994 was due
primarily to the decrease in depreciation of certain assets which
became fully depreciated, offset in part by increases in the cost
of restaurant sales and general and administrative expenses.
Other Income and Expenses
Interest income for 1995 increased $13,579 compared to 1994,
due primarily to the increased interest rates of the certificates
of deposit and U.S. Treasury bills held by the Company. Interest
income was $49,169, $35,590 and $39,497 for 1995, 1994 and 1993,
respectively.
Interest expense increased by $20,251 to $380,392 for 1995 due
primarily to a 2.5% increase in the interest rates on certain
long-term debt which are tied to the prime and other market
interest rates. Interest expense decreased $61,161 to $360,141 for
1994 compared to $421,302 for 1993.
Income Taxes
The tax rate on income for 1995 was 33.2% compared to 47.0% in
1994 and 53.0% in 1993. The decreased rate in 1995 was primarily
the result of depreciation differences related to assets with
different book and tax bases and the utilization of alternative
minimum tax credits.
<PAGE>4
Market Price and Dividends
The Company's Common Stock is traded on the Nasdaq SmallCap
System.
High and Low Bid Prices of Common Stock
<TABLE>
<CAPTION>
Years Ended March 31,
-----------------------------
1995 1994
-------------- --------------
High Low High Low
------ ------ ------ ------
<C> <C> <C> <C> <C>
1st Quarter............................. $1-3/4 $1-1/2 $1-1/4 $1-1/8
2nd Quarter............................. 1-3/4 1-3/4 1-1/4 1-1/8
3rd Quarter............................. 2-1/8 1-3/4 1-3/8 1-1/4
4th Quarter............................. 2-1/8 1-5/8 1-5/8 1-1/4
</TABLE>
Prices are as reported by the Nasdaq SmallCap System and
reflect inter-dealer prices, without retail markup, markdown, or
commissions and may not represent actual transactions. Although
the Common Stock is traded on the Nasdaq SmallCap System, there is
a relatively low trading volume and, at times, limited or sporadic
quotations.
The Company has not paid cash dividends on its Common Stock.
The Company intends to retain any future earnings to finance growth
and does not presently intend to pay dividends to the holders of
Common Stock. Additionally, under certain loan agreement
covenants, the Company must obtain written approval prior to
payment of any dividends.
As of May 19, 1995, the Company had 356 shareholders of
record.
<PAGE>5
<TABLE>
Consolidated Statements of Income
<CAPTION>
Years ended March 31, 1995 1994 1993
- --------------------- ----------- ----------- -----------
<S> <C> <C> <C>
Revenues:
Restaurant sales............................. $14,592,232 $13,729,829 $13,417,533
Franchise operations......................... 605,855 546,154 536,808
Initial license fees......................... 25,000 500 7,500
---------- ---------- ----------
15,223,087 14,276,483 13,961,841
---------- ---------- ----------
Costs and expenses:
Cost of restaurant sales:
Food and beverage......................... 4,070,030 3,850,384 3,720,158
Labor and related......................... 4,890,252 4,516,061 4,456,936
Occupancy costs.............................. 902,554 875,816 876,594
Depreciation and amortization................ 722,775 915,457 979,655
General and administrative expenses.......... 3,744,102 3,502,508 3,336,456
---------- ---------- ----------
14,329,713 13,660,226 13,369,799
---------- ---------- ----------
Income from operations.................... 893,374 616,257 592,042
Other income (expense):
Interest income.............................. 49,169 35,590 39,497
Interest expense (Note 5).................... (380,392) (360,141) (421,302)
Gain on disposition of assets................ 3,620 10,216
---------- ---------- ----------
Income before provision for income taxes... 565,771 301,922 210,237
Provision for income taxes (Note 4)............ (188,000) (142,000) (111,500)
---------- ---------- ----------
Net income................................. $ 377,771 $ 159,922 $ 98,737
========== ========== ==========
Per share data:
Net income................................... $ 0.21 $ 0.08 $ 0.05
========== ========== ==========
Weighted average number of shares
outstanding.................................. 1,781,892 1,895,319 1,967,658
========== ========== ==========
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
Elmer's Restaurants, Inc.
We have audited the accompanying consolidated balance sheets
of Elmer's Restaurants, Inc. and Subsidiaries as of March 31, 1995
and 1994, and the related consolidated statements of income,
changes in shareholders' equity, and cash flows for each of the
three years in the period ended March 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of Elmer's Restaurants, Inc. and Subsidiaries as
of March 31, 1995 and 1994, and the consolidated results of their
operations and their cash flows for each of the three years in the
period ended March 31, 1995 in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
Portland, Oregon
May 2, 1995
<PAGE>6
<TABLE>
Consolidated Balance Sheets
<CAPTION>
March 31, 1995 1994
- --------- ---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents (Notes 5).................... $1,269,267 $1,314,090
Accounts receivable, less allowance for
doubtful accounts of $5,000 in 1995
and 1994............................................. 108,401 113,728
Inventories............................................ 212,037 175,301
Prepaid expenses....................................... 113,686 128,792
--------- ---------
Total current assets................................. 1,703,391 1,731,911
Property, buildings and equipment, net (Notes 2 and 5)... 5,101,679 5,080,545
Intangible assets, net (Notes 3 and 5)................... 1,269,332 1,380,427
Other assets............................................. 62,606 92,623
--------- ---------
Total assets......................................... $8,137,008 $8,285,506
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable - current portion (Note 5)............... $ 696,355 $ 846,638
Accounts payable....................................... 593,779 608,004
Accrued payroll and related taxes...................... 144,103 116,463
Accrued expenses....................................... 68,087 55,105
Accrued income taxes (Note 4).......................... 20,575
--------- ---------
Total current liabilities............................ 1,522,899 1,626,210
Notes payable - long-term portion (Note 5)............... 3,573,613 3,822,338
Deferred income taxes (Note 4)........................... 83,500 58,500
--------- ---------
Total liabilities.................................... 5,180,012 5,507,048
--------- ---------
Commitments (Notes 6 and 9)
Shareholders' equity (Note 7):
Preferred stock, no par value; 500,000 shares
authorized; none issued
Common stock, no par value; 10,000,000 shares
authorized; 1,727,445 shares in 1995 and 1,847,218
shares in 1994 issued and outstanding................ 1,866,676 1,996,031
Retained earnings...................................... 1,090,320 782,427
--------- ---------
Total shareholders' equity........................... 2,956,996 2,778,458
--------- ---------
Total liabilities and shareholders' equity........... $8,137,008 $8,285,506
========= =========
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
<PAGE>7
<TABLE>
Consolidated Statements of Cash Flows
<CAPTION>
Years ended March 31, 1995 1994 1993
- --------------------- ---------- ---------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income........................................... $ 377,771 $ 159,922 $ 98,737
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation....................................... 611,680 805,026 864,925
Amortization....................................... 111,095 110,431 114,730
Deferred income taxes.............................. 25,000 (11,500)
Gain on disposition of assets...................... (3,620) (10,216)
Changes in assets and liabilities:
Accounts receivable.............................. 5,327 (2,795) (3,801)
Inventories...................................... (36,736) 5,767 7,160
Prepaid expenses................................. 15,106 15,269 14,017
Other assets..................................... 30,017 (31,820) 21,778
Accounts payable and accrued expenses............ 26,397 (98,396) 2,154
Accrued income taxes............................. 20,575 (43,201) 43,201
--------- --------- ---------
Net cash provided by operating activities...... 1,182,612 909,987 1,151,401
Cash flows from investing activities:
Additions to property, buildings and equipment....... (632,814) (754,578) (258,997)
Proceeds from sale of assets......................... 3,620 37,431
Additions to intangible assets....................... (530) (12,140)
Net cash used in investing activities.......... (629,194) (717,677) (271,137)
--------- --------- ---------
Cash flows from financing activities:
Net change in other non-current assets............... (4,900) (1,150)
Proceeds from notes payable.......................... 517,950 663,723 134,000
Payments on notes payable............................ (916,958) (850,387) (899,212)
Repurchase of common stock........................... (199,233) (140,559) (45,947)
--------- --------- ---------
Net cash used in financing activities............. (598,241) (332,123) (812,309)
--------- --------- ---------
Net increase (decrease) in cash and
cash equivalents................................ (44,823) (139,813) 67,955
Cash and cash equivalents, beginning of year........... 1,314,090 1,453,903 1,385,948
--------- --------- ---------
Cash and cash equivalents, end of year................. $1,269,267 $1,314,090 $1,453,903
========= ========= =========
Supplemental schedule of noncash investing and
financing activities:
The Company purchased the following in exchange for
assumption of certain liabilities:
Property, buildings and equipment, net of
cash paid........................................ $ -- $ 27,578 $ --
========= ========= =========
Supplemental disclosures of cash flow information:
Cash paid for:
Interest........................................... $ 390,127 $ 350,406 $ 421,302
========= ========= =========
Income taxes ...................................... $ 134,596 $ 188,295 $ 69,567
========= ========= =========
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
<PAGE>8
<TABLE>
Consolidated Statements of Changes in Shareholders' Equity
<CAPTION>
Common Stock
------------------------ Retained
Shares Amount Earnings
--------- ---------- ----------
<S> <C> <C> <C>
Balance March 31, 1992................................ 1,981,580 $2,140,342 $ 565,963
Repurchase and retirement of common stock............. (38,182) (40,436) (5,511)
Net income............................................ 98,737
--------- ---------- ----------
Balance March 31, 1993................................ 1,943,398 2,099,906 659,189
Repurchase and retirement of common stock............. (96,180) (103,875) (36,684)
Net income............................................ 159,922
--------- ---------- ----------
Balance March 31, 1994................................ 1,847,218 1,996,031 782,427
Repurchase and retirement of common stock............. (119,773) (129,355) (69,878)
Net income............................................ 377,771
--------- ---------- ----------
Balance March 31, 1995................................ 1,727,445 $1,866,676 $1,090,320
========= ========== ==========
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
Notes to Consolidated Financial Statements
1. The Company and Summary of Significant Accounting Policies:
The Company
Elmer's Restaurants, Inc. (the Company), an Oregon
corporation, owns and operates eleven Elmer's Pancake & Steak House
restaurants and sells franchises that give franchisees the right to
operate under the name Elmer's Pancake & Steak House for a specific
restaurant or region. Franchises and Company owned stores are
located throughout the western United States.
The consolidated financial statements include the accounts of
the Company and its subsidiaries. All material intercompany
accounts and transactions have been eliminated.
Cash and Cash Equivalents
The Company considers all short-term, highly-liquid
investments with a maturity of three months or less when purchased
to be cash equivalents.
Inventories
Inventories of food, beverages and restaurant supplies are
stated at the lower of first-in, first-out cost or market.
Property, Buildings and Equipment
Property, buildings and equipment are stated at cost.
Depreciation is computed using the straight-line method over the
estimated useful lives of the related assets. Lives used for
calculating depreciation and amortization rates for the principal
asset classifications are as follows: buildings - 35 years;
automobiles, furniture, fixtures and equipment - 3-7 years;
leasehold improvements - life of lease or applicable shorter
period. Maintenance and repairs are expensed as incurred; renewals
and improvements are capitalized. Upon disposal of assets subject
to depreciation, the related costs and accumulated depreciation are
removed and resulting gains and losses are reflected in the
consolidated statements of income.
<PAGE>9
Intangible Assets
The cost over fair value of net tangible assets of acquired
companies (goodwill) is amortized on a straight-line basis over
periods not exceeding 25 years. The Company periodically reviews
goodwill to assess recoverability, and impairments would be
recognized in operating results if a permanent decline in value
were to occur.
Other intangible assets are stated at cost and amortized using
the straight-line method over the shorter of the actual life or the
period estimated to be benefited of 3-40 years.
Franchise Operations
Initial license fees from individual and area franchise sales
are recognized as revenue when substantially all of the terms and
conditions of the franchise agreement are met. The Company has
sold area franchises to several restaurant operators in various
western states. The terms of the agreements entered into with each
franchisee protect the territory for the operator and provide
standard building blueprints, recipes, formulas and methods of food
preparation. The term of the franchise is twenty-five years.
Continuing franchise fees (based on a percentage of sales) are
recognized as income when earned.
Income Taxes
The Company files consolidated income tax returns with its
subsidiaries. Deferred income taxes have been recorded for the tax
consequences in future years of differences between the tax bases
of assets and liabilities and their financial reporting amounts
based on enacted tax laws and statutory tax rates applicable to the
periods in which the differences are expected to affect taxable
income. Income tax expense is the tax payable for the year and the
change during the year in deferred tax assets and liabilities.
Investment tax credits are accounted for using the flow-through
method, whereby the credits are reflected as a reduction of federal
income tax expense in the year in which the credit is recognized
for tax purposes.
Net Income Per Share
Net income per share is computed on the basis of the weighted
average number of shares of common stock outstanding during the
respective periods. The dilutive effect of common stock
equivalents is not significant.
Concentration of Credit Risk
The Company invests its excess cash in interest bearing
deposits with major banks and in U.S. Treasury securities. These
investments generally mature within 90 days and are therefore
subject to minimal risk. Management routinely reviews these
investments in order to limit the amount of credit exposure to any
one financial institution.
2. Property, Buildings and Equipment:
<TABLE>
<CAPTION>
March 31,
------------------------
1995 1994
---------- ----------
<S> <C> <C>
Land.............................................. $ 1,258,439 $ 1,258,439
Buildings......................................... 2,377,270 2,355,370
Furniture, fixtures and equipment................. 5,899,577 5,486,409
Automobiles....................................... 57,028 55,828
Leasehold improvements............................ 1,046,522 872,884
---------- ----------
10,638,836 10,028,930
Less accumulated depreciation and
amortization.................................... (5,537,157) (4,948,385)
---------- ----------
$ 5,101,679 $ 5,080,545
========== ==========
</TABLE>
3. Intangible Assets:
Intangible assets, net of accumulated amortization of $949,815
at March 31, 1995 and $838,720 at March 31, 1994, are comprised of:
<TABLE>
<CAPTION>
March 31,
------------------------
1995 1994
---------- ----------
<S> <C> <C>
Trademark and franchise registrations and agreements........ $ 779,970 $ 829,806
Cost over fair value of net tangible assets acquired........ 417,488 452,479
Covenant not to compete..................................... 26,667 46,667
Other....................................................... 45,207 51,475
--------- ----------
$1,269,332 $1,380,427
--------- ---------
</TABLE>
4. Income Taxes:
The Company's provision for income taxes has been computed in
accordance with Statement of Financial Accounting Standards No. 109
(SFAS 109), Accounting for Income Taxes, and is comprised of the
following:
<TABLE>
<CAPTION>
Years ended March 31,
--------------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Currently payable:
Federal......................................... $127,000 $116,000 $103,000
State........................................... 36,000 26,000 20,000
------- ------- -------
163,000 142,000 123,000
Deferred income taxes - primarily
utilization of alternative minimum
tax credit carryforwards and timing
differences in reporting
depreciation and amortization................... 25,000 (11,500)
------- ------- -------
$188,000 $142,000 $111,500
======= ======= =======
</TABLE>
<PAGE>10
SFAS 109 requires the recognition of deferred tax assets and
liabilities for both the expected future tax impact of differences
between the financial statement and tax basis of assets and
liabilities, and for the expected future tax benefit to be derived
from tax loss and tax credit carryforwards. SFAS 109 additionally
requires the establishment of a valuation allowance, when
necessary, to reflect the likelihood of realization of deferred tax
assets. No valuation allowance was deemed necessary as a result of
management's evaluation of the likelihood that all of the deferred
tax assets will be realized. The Company has recorded a net
deferred tax liability of $83,500 and $58,500 at March 31, 1995 and
1994, respectively, which is comprised of the following:
March 31,
----------------------
1995 1994
---------- ----------
Excess of financial statement fixed
assets over tax basis......................... $(217,000) $(218,000)
Federal alternative minimum tax credit
carryforwards................................. 133,500 159,500
------- -------
$ (83,500) $ (58,500)
Income taxes are provided at a rate different from the expected
federal tax rate on income before income taxes for the following
reasons:
<TABLE>
<CAPTION>
Years ended March 31,
------------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Expected tax........................................... $192,000 $103,000 $ 72,000
Federal graduated rates................................ (2,000) (4,500)
Amortization not deductible for income taxes........... 12,000 12,000 12,000
Depreciation of assets with different tax
and book bases...................................... (13,000) 16,000 18,000
State taxes, net of federal tax benefits............... 24,000 17,000 14,000
Alternative minimum tax credits utilized............... (26,000)
Other.................................................. (1,000) (4,000)
------- ------- -------
$188,000 $142,000 $111,500
======= ======= =======
</TABLE>
<TABLE>
5. Notes Payable:
<CAPTION>
March 31,
-----------------------
1995 1994
---------- ----------
<S> <C> <C>
Notes payable to financial institutions,
collateralized by all assets excluding real
estate, due at various dates through June
2000, monthly principal installments total
approximately $57,000 plus interest at rates
as follows:
Prime rate plus 1% - 1.25% (prime was 9% at
March 31, 1995).................................... $2,141,854 $2,417,221
7%-10%............................................... 5,353 24,818
Notes payable to financial institutions,
collateralized by real estate, due at various
dates through October 1998, monthly
installments total $15,695 including interest
at rates as follows:
FHLB 11th district rate plus 2.75% (applicable
district rates were 4.367% and 4.187% at
March 31, 1995).................................... 1,442,193 1,472,719
Average 2 year U.S. Treasury note rate plus
1.75% and 2% (applicable treasury note rates
were 6.95% and 5.49% at March 31, 1995)............ 538,975 552,878
Notes payable to others, collateralized by
equipment and the stock of a subsidiary, due
at various dates through August 2001, interest
from 6% to 10%..................................... 41,593 201,340
--------- ---------
4,269,968 4,668,976
Less current portion................................... (696,355) (846,638)
--------- ---------
Long-term portion...................................... $3,573,613 $3,822,338
========= =========
</TABLE>
<PAGE>11
During April 1995, the Company refinanced a term loan with a
financial institution totaling $1,209,778 which was due to mature
in June 1995. Under the terms of the refinancing agreement, the
loan is to be repaid over a five year period ending in June 2000.
Notes payable totaling $9,906 to certain individuals have been
subordinated to certain debt held by a financial institution at
March 31, 1995.
Certain notes payable contain restrictive covenants pertaining
to capital expenditures, financial ratios, minimum cash flow
coverage, dividends and repurchase of Company common stock. The
most restrictive covenants require the Company to maintain a ratio
of cash generation (defined as the sum of net income, depreciation
and amortization) to current maturities of long-term debt of at
least 1.3 to 1.0 and restrict the amount of capital expenditures
which the Company may make in any one fiscal year. As of March 31,
1995, the Company was not in compliance with the covenant with a
financial institution limiting the amount of capital expenditures
relating to notes payable totaling approximately $1,663,038.
Compliance with this covenant has been waived by the financial
institution.
Future maturities of notes payable (considering the
refinancing of certain long-term debt in April 1995) for years
ending March 31 are as follows:
1996 .................................................. $ 696,355
1997 .................................................. 1,161,292
1998 .................................................. 1,103,433
1999 .................................................. 755,401
2000................................................... 220,122
Thereafter............................................. 333,365
---------
$4,269,968
=========
All interest costs incurred have been expensed.
6. Leases:
Minimum fiscal year rental commitments for the years ending
March 31 under operating leases with noncancelable terms of more
than one year, are as follows:
1996 .................................................. $ 492,518
1997 .................................................. 481,306
1998 .................................................. 434,435
1999 .................................................. 317,922
2000................................................... 317,922
Thereafter............................................. 1,718,839
---------
$3,762,942
=========
The leases generally provide for additional rentals based upon specific
percentages of sales and require the Company to pay certain other costs. Rental
expense on operating leases amounted to $625,156 (including $133,438 of
additional rentals) for the year ended March 31, 1995, $592,341 (including
$96,865 of additional rentals) for the year ended March 31, 1994, and $571,664
(including $84,650 of additional rentals) for the year ended March 31, 1993.
Total lease payments were $32,836 for the year ended March 31, 1995 and
$32,436 for the years ended March 31, 1994 and 1993 for the lease of the
corporate offices from a director of the Company.
7. Shareholders' Equity:
On November 30, 1988 the Company granted warrants to purchase 15,000
shares of Company common stock at $1.13 per share to a Company director as
consideration for services. The warrants expire June 30, 1995.
Common stock warrants to purchase 15,000 shares of Company common stock at
$1.20 per share were authorized and issued to three individuals on July 1, 1988
as consideration for services to the Company as directors. These warrants
expire June 30, 1995.
As of March 31, 1995, no warrants had been exercised.
<PAGE>12
8. Restaurant and Franchise Operations:
Summary results of operations and other selected financial information
from restaurant operations and franchise operations are presented after
elimination of intercompany transactions:
<TABLE>
<CAPTION>
Years Ended March 31,
-----------------------------------------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Revenues:
Restaurant operations........................... $14,592,232 $13,729,829 $13,417,533
Franchise operations............................ 1,297,546 1,184,817 1,174,892
Intercompany eliminations....................... (666,691) (638,163) (630,584)
---------- ---------- ----------
Consolidated $15,223,087 $14,276,483 $13,961,841
========== ========== ==========
Income from Operations:
Restaurant operations........................... $ 519,999 $ 281,144 $ 286,735
Franchise operations............................ 373,375 335,113 305,307
---------- ---------- ----------
Consolidated.................................... $ 893,374 $ 616,257 $ 592,042
========== ========== ==========
Capital and Intangible Expenditures:
Restaurant operations........................... $ 625,677 $ 733,264 $ 249,242
Franchise operations............................ 7,137 49,422 21,895
---------- ---------- ----------
Consolidated.................................... $ 632,814 $ 782,686 $ 271,137
========== ========== ==========
Depreciation and Amortization:
Restaurant operations........................... $ 648,115 $ 836,249 $ 887,732
Franchise operations............................ 74,660 79,208 91,923
---------- ---------- ----------
Consolidated.................................... $ 722,775 $ 915,457 $ 979,655
========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
March 31,
--------------------------
1995 1994
----------- -----------
<S> <C> <C>
Assets:
Restaurant operations............................ $ 7,149,621 $ 7,243,251
Franchise operations............................. 987,387 1,042,255
---------- ----------
Consolidated..................................... $ 8,137,008 $ 8,285,506
========== ==========
</TABLE>
The number of Company owned stores and operating franchises at
March 31 is as follows:
<TABLE>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Company owned stores................................... 11 11 11
Operating franchises................................... 18 16 16
</TABLE>
10. Commitments:
The Company has employment agreements with its Chief Executive
Officer and the founders of the original Elmer's Pancake & Steak
House. The agreements provide the following minimum compensation
commitments: Chief Executive Officer - $120,000 per year expiring
May 1999; Founders - $15,000 per year for life.
The Company has authorized incentive compensation for the
Company's Chief Executive Officer equal to 10 percent of the
Company's annual earnings (before income taxes and the incentive
payment) in excess of $200,000 for each fiscal year commencing with
the year ended March 31, 1989. Incentive compensation expense for
the years ended March 31, 1995, 1994 and 1993 was $40,641, $11,325
and $1,138, respectively.
EXHIBIT 22.1
SUBSIDIARIES
------------
The following list sets forth the name of each
subsidiary of the Company. The Company owns 100 percent of the
outstanding stock of each of the companies listed.
Place of
Company Incorporation
------- -------------
Elmer's Pancake & Steak House, Inc. Oregon
Annko, Inc. Oregon
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS OF ELMER'S RESTAURANTS, INC. AND SUBSIDIARIES
AS OF MARCH 31, 1995 AND 1994, AND THE RELATED CONSOLIDATED STATEMENTS
OF INCOME, CHANGES IN SHAREHOLDERS' EQUITY, AND CASH FLOWS FOR EACH OF
THE THREE YEARS IN THE PERIOD ENDED MARCH 31, 1995, AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-START> APR-01-1994
<PERIOD-END> MAR-31-1995
<CASH> 1,269,267
<SECURITIES> 0
<RECEIVABLES> 113,401
<ALLOWANCES> (5,000)
<INVENTORY> 212,037
<CURRENT-ASSETS> 1,703,391
<PP&E> 10,638,836
<DEPRECIATION> 5,537,157
<TOTAL-ASSETS> 5,101,679
<CURRENT-LIABILITIES> 1,522,899
<BONDS> 3,573,613
<COMMON> 1,866,676
0
0
<OTHER-SE> 1,090,320
<TOTAL-LIABILITY-AND-EQUITY> 8,137,008
<SALES> 14,592,232
<TOTAL-REVENUES> 15,223,087
<CGS> 8,960,282
<TOTAL-COSTS> 14,329,713
<OTHER-EXPENSES> 1,625,329
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 380,392
<INCOME-PRETAX> 565,771
<INCOME-TAX> 188,000
<INCOME-CONTINUING> 377,771
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 377,771
<EPS-PRIMARY> .21
<EPS-DILUTED> .21
</TABLE>
