Elmer's Restaurants, Inc.
11802 SE Stark
Portland, OR 97216
-------------------------------
Information Statement Pursuant to
Section 14(f) of the
Securities and Exchange Act of 1934, as Amended,
and Rule 14f-1 Thereunder
--------------------------------
Introduction
This Information Statement is being mailed on about August 10, 1998 to the
holders of record of outstanding shares of common stock (the "Common Stock" or
the "Shares") of Elmer's Restaurants, Inc., an Oregon corporation (the
"Company"). You are receiving this Information Statement in connection with the
possible election or appointment of persons designated by CBW Inc., an Oregon
corporation ("CBW"), to a majority of the seats on the Board of Directors of the
Company (the "Company Board").
On July 9, 1998, Anita Goldberg and Rudolph Mazurosky (collectively,
"Sellers"), who own approximately 53.8% of the Shares, and CBW entered into a
Stock Purchase Agreement pursuant to which CBW will acquire all of the Shares
owned by Sellers (the "Transaction"). As a result of the Transaction, CBW will
become owner of approximately 53.8% of the outstanding Shares.
Upon completion of the Transaction, Anita Goldberg will resign as President
of the Company, Rudolph Mazurosky and Zadoc Merrill will resign from the Company
Board and five new directors selected by CBW will be appointed to the Company
Board.
The Transaction will result in a change of control of the Company. The
Transaction is subject to the approval of various regulatory authorities and the
Special Committee of the Company Board. If the Transaction is not completed, the
Company's current officers and directors will not resign and there will not be a
change in control. CBW and the Sellers expect the Transaction will close by the
end of August, 1998. This Information Statement is required by Section 14(f) on
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Rule
14f-1 thereunder.
You are urged to read this Information Statement carefully. You are not,
however, required to take any action. The information in this Information
Statement about CBW has been furnished to the Company by CBW and the Company
assumes no responsibility for the accuracy or completeness of such information.
<PAGE>
General
The consideration to be paid to Sellers for the Shares being sold to CBW is
$4,504,950. CBW's financing for its acquisition of the Shares is drawn from two
sources: (1) $600,000 from the purchase by Thomas Connor and Donald Woolley of
an equity interest in CBW and (2) $3,904,950 from a loan to CBW by Eagle's View
Management Company, Inc. ("EVM"). EVM is affiliated with Donald Woolley and
members of his family. The loan from EVM is for a total of $4,000,000, matures
in 21 months, bears interest at 12% per annum for the first 15 months of the
loan and 15% thereafter, and is secured by the assets of CBW (including the
Shares it will hold), personal guaranties by CBW's shareholders, and a pledge of
all outstanding stock in CBW. As a condition to the financing, CBW has agreed to
request that the Company Board appoint Messrs. Connor and Woolley as directors
upon completion of the Transaction.
The Shares are the only class of outstanding voting securities. Each Share
is entitled to one vote. As of May 20, 1998, there were 1,311,109 Shares
outstanding.
Right to Designate Directors; The CBW Designees
CBW has requested that Messrs. Mazurosky and Merrill resign from the
Company Board upon completion of the Transaction. CBW will also request that the
Company Board increase its size to seven members, to be comprised of two current
directors (Anita Goldberg and Paul Welch) and five members selected by the
shareholders of CBW as nominees (the "CBW Designees"). In addition, William
Service and Bruce Davis will be appointed Chief Executive Officer and President,
respectively, of the Company.
Set forth below is certain information with respect to the CBW Designees:
PRINCIPAL OCCUPATION OR EMPLOYMENT
NAME DURING LAST FIVE YEARS
- ---- ----------------------------------
Bruce Davis........................ Mr. Davis, 37, is the President of three
companies engaged in the restaurant
business: Jaspers Food Management, Inc.
(1993- present), CBW Inc. (1995-present),
and Oregon Food Management, Inc.
(1996-present).
William Service.................... Mr. Service, 37, is the Chief Executive
Officer of three companies engaged in the
restaurant business: Jaspers Food
Management, Inc. (1993-present), CBW Inc.
(1995-present), and Oregon Food Management,
Inc. (1996-present).
2
<PAGE>
PRINCIPAL OCCUPATION OR EMPLOYMENT
NAME DURING LAST FIVE YEARS
- ---- ----------------------------------
Cordy Jensen....................... Mr. Jensen, 55, is the President and owner
of numerous multi-unit restaurant and lounge
operations, including The Oregon Electric
Station Restaurant, Steelhead Brewery,
Station Masters, Inc. and McKenzie Brewery
Co. Mr. Jensen is also Secretary and
Director of Centennial Bancorp and is the
director of nine privately held companies
engaged in the restaurant and lounge
business.
Thomas Connor...................... Mr. Connor, 44, has been a real estate
investor since 1974, with investments in
several companies engaged in the hospitality
or real estate development businesses,
including Connor Enterprises, Inc., Budgeted
Inns of Oregon, Inc., Connor Industries,
Inc., Spring Holdings, Inc., and 5 C's
Properties, Inc. Mr. Connor has also served
as a director of numerous privately held
companies engaged in the hospitality or real
estate development businesses. Effective
upon consummation of the Transaction, Mr.
Connor will become a director of CBW Inc.
Donald Woolley..................... Mr. Woolley, 39, has been a real estate
investor since 1984, with investments in
numerous companies involved in the timber or
real estate development industries,
including Eagle's View Management Company,
Inc., Manzana Bros., Ltd., and Spring
Holdings, Inc. Mr. Woolley has also served
as a director of numerous privately held
companies engaged in the hospitality, timber
or real estate development industries.
Effective upon consummation of the
Transaction Mr. Woolley will become a
director of CBW, Inc.
CBW has informed the Company that each of the individuals listed above has
consented to act as a director, if so designated.
There are no material legal proceedings to which any of the CBW Designees,
or any associate of any such CBW Designee, is a party adverse to the Company or
any of its subsidiaries. None of the CBW Designees, or any associate of any such
CBW Designee, has any material interest adverse to the Company or any of its
subsidiaries.
Directors and Executive Officers of the Company
The following sets forth certain information with respect to the directors
and officers of the Company, retroactively assuming the consummation of the
Transaction, other than the CBW Designees, who are described above.
3
<PAGE>
Anita Goldberg, 69, was appointed President of the Company and elected to
the Board of Directors in June 1996 and prior to that served as Director of
Franchising for the Company since September 1984. Mrs. Goldberg will resign as
President upon the consummation of the Transaction.
Paul Welch, 70, owns and operates two Elmer's Pancake and Steak House
franchises in Vancouver, Washington, one since 1978 and one since 1994. He has
served as a director of the Company since 1983.
Juanita Nelson, 62, has served as Controller of the Company since 1985 and
as Secretary since February 1998. 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.
Jerry Scott, 44, will be appointed Vice President upon consummation of the
Transaction. Since November 1995, Mr. Scott has served as Vice President of
Operations for Jaspers Food Management, Inc. He served from November 1994 to
November 1995 as Regional Director of Operations of Macheezmo Mouse Restaurants,
Inc. and from June 1993 to September 1994 as Director of Operations of Mission
Investment Company.
Section 16(A) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires directors and executive
officers, and persons who beneficially own more than ten percent of the issued
and outstanding Shares to file reports of ownership of the Company's securities
and changes in such ownership with the Securities and Exchange Commission (the
"SEC"). Officers, directors and greater than ten percent beneficial stockholders
are required by SEC regulations to furnish the Company with copies of all
Section 16(a) forms they file. Based solely upon its review of such forms
received by it, the Company believes that each of its directors, executive
officers and greater than ten percent beneficial shareholders complied with
Section 16(a) filing requirements applicable to them during the fiscal year
ended March 31, 1998.
Security Ownership of Certain Beneficial Owners
The following table sets forth certain information concerning all
shareholders known by the Company to be beneficial owners of five percent or
more of the Common Stock as of May 20, 1998, retroactively assuming the
completion of the Transaction.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT
NAME AND ADDRESS BENEFICIAL OWNERSHIP (1) OF CLASS
- ---------------- ------------------------ --------
<S> <C> <C>
CBW Inc.
140 East Fifth Avenue, Suite A
Eugene, OR 97401................................. 705,000 53.8%
4
<PAGE>
AMOUNT AND NATURE OF PERCENT
NAME AND ADDRESS BENEFICIAL OWNERSHIP (1) OF CLASS
- ---------------- ------------------------ --------
Kalberer Hotel Supply Co.
234 NW 5th
Portland, OR 97209............................... 92,206 7.0%
Boyd Coffee Company
9730 NE Sandy Boulevard
Portland, OR 97230............................... 83,400 6.4%
Susan Patricia Mann
1980 Indian Trail
Lake Oswego, OR 97034............................ 74,000 5.6%
- --------------
(1) Unless otherwise indicated by footnote, the persons named in the table have
sole voting and investment power with respect to the shares of Common Stock
beneficially owned.
</TABLE>
Security Ownership of Management
The following table sets forth information as of May 20, 1998,
retroactively assuming the completion of the Transaction, regarding the
ownership of the Common Stock by the following persons: (a) each of Anita
Goldberg, Paul Welch, and the CBW Designees and (b) all directors and executive
officers as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
NAME BENEFICIAL OWNERSHIP (1) CLASS
- ---- ----------------------- ----------
<S> <C> <C>
Anita B. Goldberg 0 0%
Director............................
Paul Welch 0 0%
Director............................
Bruce Davis 705,400 (2) 53.8%
President and Director..............
William Service 705,400 (2) 53.8%
Chief Executive Officer
and Director........................
Cordy Jensen 705,000 (2) 53.8%
Director............................
5
<PAGE>
AMOUNT AND NATURE OF PERCENT OF
NAME BENEFICIAL OWNERSHIP (1) CLASS
- ---- ----------------------- ----------
Tom Connor 705,000 (2) 53.8%
Director............................
Donald Woolley 705,000 (2) 53.8%
Director............................
All directors and
executive officers as a
group (as of May 20,
1998, giving retroactive
effect to the completion of
the Transaction) (9 705,800 (2) 53.8%
persons)
- --------------
(1) Unless otherwise indicated by footnote, the persons named in the table have
sole voting and investment power with respect to the shares of Common Stock
beneficially owned.
(2) Includes indirect beneficial ownership of 705,000 shares of Common Stock
owned by CBW Inc. Each of these individuals intends to disclaim beneficial
ownership of shares of Common Stock owned by CBW Inc.
</TABLE>
Certain Transactions
Paul Welch, a director of the Company, operates two Elmer's restaurants in
Vancouver, Washington, one since 1978 and the other since 1994. Under a
franchise agreement with the Company, Mr. Welch pays the Company a franchise
royalty fee of two percent of gross sales for each of the restaurants. During
fiscal 1998, $78,857 was paid to the Company under this franchise agreement. Mr.
Welch is indebted to the Company in the aggregate amount of $69,880 under two
promissory notes representing unpaid franchise fees for fiscal 1997.
On June 12, 1998, the Company entered into an employment agreement with
Zadoc Merrill, a director and Marketing Director of the Company. The agreement
is for a term of two years commencing on the date that the Transaction is
completed. The agreement provides that, if Mr. Merrill is terminated as an
employee other than for cause during the term of the agreement, he will receive
two years severance pay. Mr. Merrill will resign as director in connection with
the Transaction.
Kalberer Hotel Supply Co. ("Kalberer Co.") is the supplier of substantially
all of the restaurant equipment used in the restaurants owned by the Company and
its franchisees.
6
<PAGE>
Although the Company does not require franchisees to purchase their equipment
from Kalberer Co., in the past most franchises have done so. During the last
fiscal year, a total of $148,768 was paid by the Company to Kalberer Co.
Boyd Coffee Company ("Boyd's") supplies coffee and related supplies to a
number of restaurants owned by the Company and its franchisees. During the last
fiscal year, a total of $86,608 was paid by the Company to Boyd's.
The Board of Directors, its Committees and Compensation
The Company Board met six times during the year ended March 31, 1998. The
Company Board has an Audit Committee (which currently consists of Anita
Goldberg, Paul Welch and Rudolph Mazurosky), which shall be reconstituted after
the completion of the Transaction. The Audit Committee did not meet during the
year ended March 31, 1998. There are no nominating or compensation committees of
the Company Board or committees performing similar function.
Compensation of Directors
Directors are not compensated for service on the Company Board. Directors
are reimbursed for out-of-pocket expenses incurred in attending board meetings.
Compensation of Executive Officers
Summary Compensation Table
The following table sets forth in summary form all compensation for all
services rendered in all capacities to the Company for the fiscal year ended
March 31, 1998 (retroactively assuming the completion of the Transaction) to (a)
the Chief Executive Officer and President of the Company and (b) the former
President. No other officer was paid or accrued compensation in excess of
$100,000 in fiscal 1998.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------
NAME AND FISCAL
PRINCIPAL POSITION YEAR SALARY BONUS
------------------ ---- ------ -----
<S> <C> <C> <C>
William Service
Chief Executive Officer........................ 1998 None --
Bruce Davis
President...................................... 1998 None --
Anita Goldberg
Former President............................... 1998 $120,000 $66,531
</TABLE>
7
<PAGE>
Employment Agreements
On June 12, 1998, the Company entered into an employment agreement with
Juanita Nelson, Secretary and Controller of the Company. The agreement is for a
term of two years commencing on the date that the Transaction is completed. The
agreement provides that, if Mrs. Nelson is terminated other than for cause
during the term of the agreement, she will receive two years severance pay.
Dated: August 7, 1998
ELMER'S RESTAURANTS, INC.
JUANITA NELSON
-----------------------------------------
Juanita Nelson, Secretary
8
