5 0189370.02
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
February 18, 1999
.............ELMER'S RESTAURANTS, INC...........
(Exact name of registrant as specified in its charter)
........Oregon...................0-14837............93-0836824...
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) 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.....
...........................Not Applicable....................
(Former name or former address, if changed since last report.)
<PAGE> Page 1 of 4
Item 1 Changes in Control of Registrant.
Not applicable.
Item 2. Acquisition or Disposition of Assets.
Not applicable.
Item 3. Bankruptcy or Receivership
Not applicable.
Item 4. Changes in Registrant's Certifying Accountant
Not applicable.
Item 5. Other Events.
Effective February 18, 1999, Elmer's Restaurants, Inc. (the
'Company'), merged with its majority shareholder CBW Inc.
('CBW'), a closely held Oregon corporation, in a transaction in
which the Company was the surviving corporation. CBW was the
operator of five restaurants in Eugene, Springfield, and Bend,
Oregon. In consideration for the issuance by the Company of
770,500 new shares of the Company's restricted stock to the CBW
shareholders and the assumption of approximately $4 million in
debt owed by CBW arising from CBW's acquisition of the
controlling block of the Company's stock on August 25, 1998 (as
previously reported in CBW's Schedule 13D filing dated September
3, 1998), the Company acquired all the stock and assets of CBW
including CBW's wholly owned subsidiary, CBW Food Company, LLC
(which by operation of merger is now the Company's wholly-owned
subsidiary). The assets include five Ashley's delis operated by
CBW and an option to purchase four Richards' delis currently
operated by Grass Valley Limited, Inc.
Each CBW shareholder, listed in Table 1 hereunder, received
144.4507 shares of the Company's restricted stock for every CBW
share owned. The shares of Company stock previously acquired by
CBW, a total of 705,000 shares, were concurrently transferred to
the Company and were canceled upon receipt thereof. In further
consideration for the issuance and to secure various
indemnification obligations of the CBW shareholders under the
merger agreement, the Company and the individual CBW shareholders
executed an escrow agreement pursuant to which 220,000 shares
were placed in escrow for a period of one year from the date of
closing of the merger transaction. The Company's primary source
of financing for the acquisition consisted of $3.08 million from
its principal lender bank, Wells Fargo Bank, N.A., the proceeds
of which were applied to pay down $2.75 million of the assumed
debt and approximately $480,000 in other outstanding debt of the
Company. The debt financing is secured by a grant of various
security interests in the Company's assets as well as the
issuance of continuing guaranties by both subsidiaries of the
Company.
<TABLE>
<CAPTION>
Table 1
<S> <C> <C>
Name of Shareholder No. of CBW No. of shares issued in
shares held merger (and current
ownership percentage)
Ken N. Boettcher 500 72,225 (5.24%)
Karen Brooks 500 72,225 (5.24%)
Thomas C. Conner 667 96,349 (6.99%)
Bruce N. Davis* 952 137,517 (9.99%)
Cordy Jensen 500 72,225 (5.24%)
____________________________
* President and Director of Elmer's Restaurants, Inc.
<PAGE> Page 2 of 4
William W. Service+ 952 137, 517 (9.99%)
Donald Woolley 667 96,349 (6.99%)
Linda E. Bolton, Trustee 500 72,225 (5.24%)
Under Restated Trust
Agreement Dated 6/8/98
</TABLE>
___________________________
+ Chief Executive Officer and Director of Elmer's Restaurants,
Inc.
Since CBW was controlled by a number of the Company's existing
directors (Messrs. Conner, Davis, Jensen, Service and Woolley),
prior to consummating the merger the Company constituted a
special committee of the Board of Directors consisting of
directors with no ownership interests in CBW. The Company engaged
the services of special counsel to advise the special committee
on this transaction. The special committee reviewed a fairness
opinion prepared by Veber Partners, a private investment bank
based in Portland, Oregon. Veber Partners analyzed the then
proposed transaction, and more particularly, the fairness, from a
financial point of view, to the Company's shareholders of the
consideration paid by the Company in connection with the merger.
Upon a thorough review of the transaction, Veber Partners was of
the opinion, in its letter dated February 17, 1999, that the
consideration paid by the Company in the merger transaction was
fair from a financial point of view to the Company's
shareholders.
Item 6. Resignations of Registrant's Directors.
Not applicable.
Item 7. Financial Statements and Exhibits Filed.
Pursuant to the requirements set forth in Item 601(b)(27)(c)(vi),
a Financial Data Schedule, which would otherwise reflect pro
forma financial information, is not being filed at this time but
will be filed upon the Company's filing of its annual report on
Form 10-K for the year ended March 31, 1999 as part of the
Company's audited consolidated financial statements. Due to the
impracticability of obtaining all the relevant exhibits in
electronic form, the Company shall file those exhibits not
included herein with its annual report on Form 10-K for the year
ended March 31, 1999.
EXHIBIT INDEX
<TABLE>
<S> <C> <C>
Exhibit Sequential
No. Description Page No.
</TABLE>
2 (i) Plan of Merger, dated February 18, 1999, between
Elmer's Restaurants, Inc. and CBW Inc.
3 (i) * Restated Articles of Incorporation of the Company
(Incorporated herein by reference from Exhibit No. 3.1 to the
Company's Annual Report on Form 10-K for the year ended March 31,
1988.)
3 (ii) * By-Laws of the Company, as amended. (Incorporated
herein by reference from Exhibit 3.2 of the Company's Annual
Report on Form 10-K for the year ended March 31, 1990.)
10 (i)(a) Merger Agreement, dated February 18, 1999, between
Elmer's Restaurants, Inc., CBW Inc., and Ken Boettcher, Karen
Brooks, Thomas C. Conner, Bruce N. Davis, Cordy Jensen, William
W. Service, Gregory W. Wendt, Donald Woolley, and Linda Bolton
(as Trustee Under a Restated Trust Agreement dated June 8, 1998),
(collectively, all the shareholders of CBW Inc.).
10 (i)(b) Registration Rights Agreement, dated February 18,
1999, between Elmer's Restaurants, Inc., and Ken Boettcher, Karen
Brooks, Thomas C. Conner, Bruce N. Davis, Cordy Jensen, William
W. Service, Gregory W. Wendt, Donald Woolley, and Linda Bolton
(as Trustee Under a Restated Trust Agreement dated June 8, 1998)
(collectively, all the shareholders of CBW Inc.).
99 (i) Fairness Opinion, dated January 13, 1999, issued by
Veber Partners to the Board of Directors of Elmer's Restaurants,
Inc.
<PAGE> Page 3 of 4
Item 8. Change in Fiscal Year
Not applicable.
Signatures
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
.....................................
Elmers Restaurants, Inc.
Date March 4, 1999 ../s/ William Service, C.E.O..............
William W. Service, Chief Executive Officer
<PAGE> Page 4 of 4
Page 3 -- PLAN OF MERGER 0189558.01
PLAN OF MERGER
PARTIES:
ELMER'S RESTAURANTS, INC., an Oregon corporation (Surviving
Corporation)
CBW INC., an Oregon corporation (Merging Corporation)
RECITALS:
A. The Boards of Directors of the Merging Corporation and
the Surviving Corporation and the Shareholders of the Merging
Corporation have adopted this plan pursuant to which the Merging
Corporation shall be merged into the Surviving Corporation
pursuant to the Oregon Business Corporation Act, and upon the
terms and conditions set forth herein.
B. A subsidiary of the Merging Corporation, CBW Food
Company L.L.C. (the 'Subsidiary'), owns 705,000 shares of the
Surviving Corporation (the 'Subsidiary Shares').
AGREEMENTS:
1. MERGER. The Merging Corporation shall be merged into the
Surviving Corporation, effective as of the filing of Articles of
Merger with the Oregon Secretary of State (Effective Time). At
the Effective Time, the separate existence of the Merging
Corporation shall cease, both the Merging Corporation and the
Surviving Corporation shall be a single corporation, which shall
be the Surviving Corporation, and the Subsidiary shall become a
subsidiary of the Surviving Corporation.
2. MANNER AND BASIS OF CONVERTING SHARES. For each of their
shares of the Merging Corporation, the shareholders of the
Merging Corporation shall each receive 144.4507 shares of the
Surviving Corporation. Upon the Effective Time, the shareholders
of the Merging Corporation shall transfer all of the shares in
the Merging Corporation to the Surviving Corporation and the
Surviving Corporation shall issue to each shareholder a stock
certificate representing the shares of the Surviving Corporation
in accordance with the preceding sentence.
3. CANCELLATION. Upon the Effective Time, all shares of stock
in the Merging Corporation shall be owned and held by the
Surviving Corporation and at that time shall be cancelled. The
Subsidiary Shares shall be outstanding upon the Effective Time,
but immediately thereafter shall be transferred by the Subsidiary
to the Surviving Corporation and thereupon cancelled.
4. TERMS AND CONDITIONS. The title to all real estate and
other property owned by the Merging Corporation shall
automatically be vested in the Surviving Corporation without
reversion or impairment. The Surviving Corporation assumes all
liabilities and obligations of the Merging Corporation as of the
Effective Time.
<PAGE> Page 1 of 2
5. CONTINUATION OF BUSINESS. After the Effective Time, the
Surviving Corporation shall continue to carry on the business
activities now being carried on by both the Merging Corporation
and the Surviving Corporation.
DATED this 18th day of February, 1999.
ELMER'S RESTAURANTS, INC.
By _/s/_William Service__________
C.E.O.
By _/s/_Juanita Nelson___________
Secretary
CBW INC.
By _/s/_Bruce Davis______________
President
By _/s/_Bruce Davis______________
Secretary
<PAGE> Page 2 of 2
23 0189532.01
MERGER AGREEMENT
This MERGER AGREEMENT (this 'Agreement') is made as of
the 18th day of February, 1999 by and between ELMER'S
RESTAURANTS, INC., an Oregon corporation (the 'Surviving
Corporation'), CBW INC., an Oregon corporation (the 'Merging
Corporation'), and each shareholder of the Merging
Corporation listed on the attached Exhibit A (individually,
a 'shareholder of the Merging Corporation' and collectively,
the 'shareholders of the Merging Corporation').
Recitals:
A. The Merging Corporation, directly or indirectly,
owns 705,000 shares of the common stock of the Surviving
Corporation representing 53.8% of the Surviving
Corporation's issued and outstanding common stock.
B. The Surviving Corporation and the Merging
Corporation desire to consummate a merger on the terms and
conditions contained in this Agreement.
Agreements:
NOW, THEREFORE, in consideration of the foregoing, and
for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties
hereby agree as follows:
1. Merger. The Merging Corporation shall be merged into
the Surviving Corporation, effective as of the filing of
Articles of Merger with the Oregon Secretary of State (the
'Effective Time'). At the Effective Time, the separate
existence of the Merging Corporation shall cease, and both
the Merging Corporation and the Surviving Corporation shall
be a single corporation, which shall be the Surviving
Corporation.
2. Manner and Basis of Converting Shares. For each share
of the Merging Corporation owned by a shareholder of the
Merging Corporation, the shareholder of the Merging
Corporation shall receive 144.4507 shares of the Surviving
Corporation. Upon the Effective Time, the shareholders of
the Merging Corporation shall transfer all of the shares in
the Merging Corporation to the Surviving Corporation, and
the Surviving Corporation shall issue to each such
shareholder a stock certificate representing shares of the
Surviving Corporation in accordance with the preceding
sentence.
3. Closing. The Surviving Corporation shall designate a
date (the 'Closing Date') that is no later than three months
following the date of this Agreement. On the Closing Date,
the following actions shall occur at the offices of the
Surviving Corporation in Portland, Oregon (or at such other
location as the parties may designate):
<PAGE> Page 1 of 12
3.1
The Merging Corporation shall deliver to the
Surviving Corporation resolutions of the Board of Directors
and shareholders of the Merging Corporation approving the
transactions contemplated by this Agreement.
3.2 The Surviving Corporation shall deliver to the Merging
Corporation resolutions of the Board of Directors of the
Surviving Corporation approving the transactions
contemplated by this Agreement.
3.3 The Surviving Corporation and the shareholders of the
Merging Corporation shall each execute and deliver a
certificate confirming to the other that their
representations and warranties contained in this Agreement
are true and correct as if made on and as of the Closing
Date.
3.4 The Surviving Corporation shall cause Articles of
Merger and a Plan of Merger substantially in the form of the
attached Exhibits B and C to be filed with the Secretary of
State for the State of Oregon.
3.5 Certificates evidencing shares of the Merging
Corporation shall be surrendered, and certificates
evidencing shares of the Surviving Corporation shall be
delivered, in accordance with Section 2 above.
3.6 The parties shall execute and deliver a Registration
Rights Agreement in the form of the attached Exhibit D.
3.7 The parties shall execute and deliver an Escrow
Agreement in the form of the attached Exhibit E (the 'Escrow
Agreement'), and the shareholders of the Merging Corporation
shall deposit in escrow certain of the shares of the
Surviving Corporation received by them pursuant to Section
3.5.
3.8 The parties shall take such other actions and execute
and deliver such other documents as may be reasonably
required in order to close the transactions contemplated by
this Agreement, including, without limitation, execution by
the shareholders of the Merging Corporation of investor
questionnaires or similar instruments relating to the fact
that the shares of the Surviving Corporation to be issued to
the shareholders of the Merging Corporation will not be
registered under applicable securities laws.
4. Actions Prior to Closing Date. During the period prior
to the Closing Date, the Merging Corporation agrees to take
the following actions:
4.1 To own and operate its assets and properties in the
ordinary course of business in accordance with past
practice;
4.2 To maintain all licenses and permits applicable to its
assets and properties in full force and effect and to comply
will all laws, rules, regulations, and ordinances applicable
to its assets and properties;
<PAGE> Page 2 of 12
4.3
To refrain from transferring, encumbering,
pledging, assigning, or otherwise disposing of its assets
and properties (or engaging in negotiations or discussions
regarding the same) or entering into additional contracts or
commitments except in the ordinary course of business in
accordance with past practice (provided that it may dispose
of items of equipment which are replaced with items of
comparable value);
4.4 To provide such financial information relating to the
performance of its assets and properties as the Surviving
Corporation may reasonably request from time to time and to
grant reasonable access to its assets and properties and the
minute book, stock ledger, and corporate books and records
of the Merging Corporation to representatives of the
Surviving Corporation from time to time;
4.5 During the period beginning on the date of this
Agreement and ending on the Closing Date, to refrain,
directly or indirectly, from entering into transactions with
the shareholders of the Merging Corporation or its
affiliates or from paying dividends or distributions to
shareholders of the Merging Corporation or increasing or
enhancing the compensation of directors, officers, or
employees of or consultants to the Merging Corporation,
except in accordance with plans previously disclosed to the
Surviving Corporation; and
4.6 To maintain a net worth of no less than $480,000 and
total indebtedness no greater than $4,300,000 and to refrain
from incurring additional indebtedness other than trade
payables incurred in the ordinary course of business. In
the event the Merging Corporation's net worth is less than
$480,000 or total indebtedness is greater than $4,300,000 on
the Closing Date, the Surviving Corporation and the Merging
Corporation agree to act reasonably and in good faith to
adjust the conversion basis set forth in Section 2 above.
5. Representations and Warranties of the Merging
Corporation. As a material inducement to the Surviving
Corporation to enter into this Agreement, each of the
shareholders of the Merging Corporation, severally but not
jointly, hereby represents and warrants to, and covenants
and agrees with, the Surviving Corporation as follows:
5.1 The Merging Corporation is a corporation duly
organized, validly existing, and in good standing under the
laws of the State of Oregon. Other than its wholly-owned
subsidiary, CBW Food Company L.L.C. (the 'Subsidiary'), the
Merging Corporation does not own, directly or indirectly,
any interest or investment (whether equity or debt) in any
corporation, partnership, business, trust, or other entity.
The Subsidiary is a limited liability company duly
organized, validly existing, and in good standing under the
laws of the State of Oregon. The Merging Corporation and
the Subsidiary have full corporate power and authority and
all governmental licenses, authorizations, consents, and
approvals required to carry on the businesses they now
conduct and to own the assets and properties they now own.
Neither the ownership of their properties nor the nature of
their businesses require the Merging Corporation or the
Subsidiary to be qualified in any jurisdiction other than
the state of their incorporation.
5.2 The authorized capital stock of the Merging Corporation
consists of 10,000 shares of common stock, of which 5,334
shares are outstanding. The outstanding shares of the
Merging Corporation (the 'CBW Shares') are duly authorized
and validly issued and are
<PAGE> Page 3 of 12
fully paid, nonassessable, and without par value. The
Merging Corporation has not authorized or issued, or
committed to issue (a) any capital stock or other securities
not set forth in this Section 5.2 or (b) any options,
warrants, or other rights to acquire or convert any
obligations into, any shares of capital stock or other
securities of the Merging Corporation.
5.3 The CBW Shares are pledged and assigned to Eagle's View
Management Company, Inc. This pledge shall terminate on the
Closing Date. On the Closing Date, the shareholders of the
Merging Corporation identified on Exhibit A shall have good
and marketable title to the CBW Shares in the amounts set
forth opposite their names, free and clear of liens, claims,
encumbrances, restrictions, options, and security interests
of any kind (collectively, 'Liens').
5.4 The Merging Corporation and each of the shareholders of
the Merging Corporation has full right, power, and
authority, without the consent or authorization of any third
party (other than those identified on Schedule 5.4), to
execute, deliver, and perform its obligations under this
Agreement, which constitutes its legal, valid and binding
obligation, enforceable in accordance with its terms, except
that (a) such enforcement may be subject to bankruptcy,
insolvency, reorganization, moratorium, or other similar
laws now or hereafter in effect relating to creditors'
rights and (b) injunctive and other forms of equitable
relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding may be
brought. Neither the Merging Corporation nor its agents or
representatives have engaged any broker or finder in
connection with the transactions contemplated by this
Agreement.
5.5 All taxes, licensing fees, and other governmental fees,
assessments, and charges pertaining to the ownership and
operation of the assets and properties of the Merging
Corporation and the Subsidiary have been paid in full. The
assets and properties of the Merging Corporation and the
Subsidiary have been owned and operated in compliance in all
material respects with all applicable laws, rules,
regulations, ordinances, and governmental authorizations and
permits. There is no action, suit, inquiry, proceeding, or
investigation by or before any court or governmental or
other regulatory or administrative agency or commission
pending or, to the best knowledge of the Merging
Corporation, threatened, against or involving or arising in
connection with the Merging Corporation or the Subsidiary or
their assets or properties, other than those that are
reasonably expected by the Merging Corporation or the
Subsidiary to be resolved without a material adverse effect
on the Merging Corporation or the Subsidiary. To the best
knowledge of the Merging Corporation, it is not aware of any
facts which would form the basis for any material claim
against it or the Subsidiary.
5.6 There are no contracts, agreements, leases, or other
commitments relating to the ownership and operation of the
assets and properties of the Merging Corporation or the
Subsidiary other than those identified on Schedule 5.6 (the
'Contracts'). Except to the extent described on
Schedule 5.6, the Contracts that will not be retained by the
Subsidiary are freely assignable to the Surviving
Corporation. The Merging Corporation has previously
provided the Surviving Corporation with true and correct
copies of the Contracts, all of which are unamended and in
full force and effect and none of which is in default by
either party. The execution, delivery, and performance by
the Merging Corporation of this Agreement does not
(a) conflict
<PAGE> Page 4 of 12
with, result in a breach of violation of, or constitute a
default under, the Contracts, (b) constitute a violation of
any judgment, order, or decree applicable to the Merging
Corporation or the Subsidiary or any of their assets or
properties, or (c) result in the creation of any Lien on any
of its assets or properties.
5.7 The Merging Corporation has not received written
notification from any governmental authority stating that
any real property owned or leased by the Merging Corporation
or the Subsidiary (the 'Real Property') or any part thereof
is (a) targeted for clean-up or remediation of Hazardous
Substances (hereinafter defined) or (b) not otherwise in
compliance with applicable Environmental Laws (hereinafter
defined). To the best knowledge of the Merging Corporation,
there are no Hazardous Substances on, in, or under the Real
Property or any part thereof which are in violation of
applicable Environmental Laws, and there are no underground
storage tanks on or under the Real Property. Neither the
Merging Corporation nor the Subsidiary has used the Property
to store or dispose of any Hazardous Substances. The
Merging Corporation and the Subsidiary, and, to the best
knowledge of the Merging Corporation, all previous owners
and operators of the Real Property, have owned and operated
the Real Property in compliance with all applicable
Environmental Laws. The term 'Hazardous Substance' means
any substance or material defined or designated as hazardous
or toxic (or by any similar term) under any Environmental
Law, including petroleum products and friable materials
containing more than one percent (1%) asbestos by weight.
The term 'Environmental Law' means any federal, state, or
local law, ordinance, rule, or regulation relating to
pollution or protection of the environment or actual or
threatened releases, discharges, or emissions, into the
environment, including the so-called Comprehensive
Environmental Response, Compensation, and Liability Act;
Resource Conservation and Recovery Act; the Superfund
Amendments and Reauthorization Act; Federal Water Pollution
Control Act; Clean Air Act; and all comparable state
statutes.
5.8 The statements of December 31, 1998 provided by the
Merging Corporation to the Surviving Corporation for the
period ending December 31, 1998 attached hereto as Schedule
5.8 (the 'Financial Statements') fairly present in all
material respects the financial position of the Merging
Corporation on the dates of the Financial Statements and the
results of its operations for the periods covered thereby
and have been prepared in accordance with generally accepted
accounting principles consistently applied. There are no
attachments, executions, assignments for the benefits of
creditors, or proceedings in bankruptcy, or under any other
debtor relief laws contemplated by or pending or, to the
best knowledge of the Merging Corporation, threatened
against the Merging Corporation or the Subsidiary. Except
as and to the extent reflected or reserved against in the
latest balance sheet for the Merging Corporation included in
the Financial Statements, and except for liabilities arising
in the ordinary course of its business since the date of
such balance sheet, the Merging Corporation does not have
any accrued or contingent liability arising out of any
transaction or state of facts existing prior to the date
hereof (or the Closing Date, as applicable) that, either
alone or in the aggregate, could reasonably be expected to
require the Merging Corporation or the Subsidiary to pay
more than $25,000. Since December 31, 1998, there has not
been any change in the financial condition or operations of
the Merging Corporation or the Subsidiary, except changes in
the ordinary course of business which, individually or in
the aggregate, have not been materially adverse.
<PAGE> Page 5 of 12
5.9
Within the times and in the manner prescribed by
law, the Merging Corporation and the Subsidiary have filed
all federal, state, and local tax returns required by law
and have paid all taxes, assessments, and penalties due and
payable. There are no present disputes about taxes of any
nature payable by the Merging Corporation or the Subsidiary
and no federal or other tax return has been audited.
5.10 The Merging Corporation and the Subsidiary have good
and marketable title to all of their respective assets free
and clear of all liens, charges, and encumbrances, claims,
easements, rights of way, covenants, conditions, or
restrictions, except for (a) those disclosed in the Merging
Corporation's balance sheet as of December 31, 1998 and (b)
possible minor matters that, in the aggregate, do not
materially detract from or interfere with the present or
intended use of any of these assets or materially detract
from or interfere with the Merging Corporation's business
operations. All real property and tangible personal
property of the Merging Corporation and the Subsidiary that
is necessary to the operation of their businesses is in good
operating condition and repair in all material respects,
ordinary wear and tear excepted. No shareholder of the
Merging Corporation; nor any officer, director, or employee
of the Merging Corporation or the Subsidiary; nor any
spouse, child, or other relative of any of these persons,
owns or has any interest, directly or indirectly, in any of
the real or personal property owned or leased to the Merging
Corporation or the Subsidiary.
5.11 Schedule 5.11 is a complete and accurate list of all
real property owned by or leased to the Merging Corporation
or the Subsidiary. The zoning of each parcel of property
described in Schedule 5.11 permits the presently existing
improvements and the continuation of the business presently
being conducted on such parcel. The Merging Corporation has
not commenced, nor received notice of the commencement of,
any proceeding that would affect the present zoning
classification of any such parcel.
5.12 The books and records of the Merging Corporation and
the Subsidiary contain a materially complete and accurate
description and specify the location of all material items
of equipment, furniture, supplies, and all other tangible
personal property owned or used by the Merging Corporation
or the Subsidiary in connection with their respective
businesses. The tangible personal property reflected in
those books and records constitutes all such tangible
personal property necessary for the conduct by the Merging
Corporation and the Subsidiary of their respective
businesses as now conducted.
5.13 Schedule 5.13 is a schedule of all trade names,
trademarks, and service marks and their registrations, owned
by the Merging Corporation or the Subsidiary or in which
either of them has any rights or licenses, together with a
brief description of each. To the best knowledge of the
Merging Corporation, there is no infringement or alleged
infringement by others of any trade name, trademark, service
mark, or copyright, and the Merging Corporation and the
Subsidiary have not infringed, and are not now infringing,
on any trade name, trademark, service mark, or copyright
belonging to any other person.
5.14 The Merging Corporation and the Subsidiary hold all
necessary licenses or other rights necessary for the
operation of their respective businesses as now conducted by
them,
<PAGE> Page 6 of 12
including, without limitation, licenses from the Oregon
State Lottery Commission and the Oregon Liquor Control
Commission, and that each such license or right is presently
valid and effective and is not in danger of revocation or
non-renewal.
5.15 No representation or warranty made or given by the
shareholders of the Merging Corporation to the Surviving
Corporation in connection with the transactions contemplated
by this Agreement contains any untrue statement of material
fact or omits to state any material fact necessary, in light
of the circumstances under which it was made, in order to
make the statements herein or therein not misleading.
6. Representations and Warranties of the Surviving
Corporation. The Surviving Corporation hereby represents
and warrants to the Merging Corporation and the shareholders
of the Merging Corporation as follows:
6.1 The Surviving Corporation has full right, power, and
authority, without the consent or authorization of any third
party (other than those identified on Schedule 6.1), to
execute, deliver, and perform its obligations under this
Agreement, which constitutes the legal, valid, and binding
obligation of the Surviving Corporation, enforceable in
accordance with its terms, except that (a) such enforcement
may be subject to bankruptcy, insolvency, reorganization,
moratorium, or other similar laws now or hereafter in effect
relating to creditors' rights and (b) injunctive and other
forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any
proceeding may be brought. The Surviving Corporation is a
corporation duly organized, validly existing, and in good
standing under the laws of the State of Oregon. Neither the
Surviving Corporation nor any of its agents or
representatives has engaged any broker or finder in
connection with the transactions contemplated by this
Agreement, other than Veber Partners, LLC, who was engaged
by the Board of Directors of the Surviving Corporation to
provide an opinion as to the fairness from a financial point
of view to the stockholders of the Surviving Corporation of
the consideration to be paid by the Surviving Corporation in
connection with the proposed transactions contemplated by
this Agreement.
6.2 The execution, delivery, and performance by the
Surviving Corporation of this Agreement does not constitute
a violation of, or constitute a default under, any
agreement, instrument, or commitment to which the Surviving
Corporation is a party or by which the Surviving Corporation
is bound.
6.3 Upon the issuance thereof, the shares to be delivered
to the shareholders of the Merging Corporation pursuant to
Section 2 above shall duly be authorized, validly issued,
and fully paid.
7. Conditions to Obligations of Surviving Corporation.
The obligations of the Surviving Corporation to consummate
the transactions contemplated by this Agreement are subject
to satisfaction of or compliance with each of the following
conditions:
<PAGE> Page 7 of 12
7.1
No suit, action, investigation, inquiry, or other
proceeding by any governmental authority or other person or
entity shall have been instituted which questions or
challenges the validity or legality of the transactions
contemplated by this Agreement.
7.2 All approvals, consents, and authorizations shown on
Schedule 6.1 shall have been obtained.
7.3 Subject to any changes that have been waived in writing
by the Surviving Corporation, (a) the representations and
warranties of the shareholders of the Merging Corporation
set forth in this Agreement shall have been and shall be
true and correct in all material respects on the Closing
Date as though made on and as of the Closing Date and
(b) neither the Merging Corporation nor its shareholders
shall have violated in any material respect any covenant or
agreement by them in this Agreement and shall have performed
in all material respects all obligations to be performed by
them under this Agreement prior to or as of the Closing
Date.
8. Conditions to Obligations of Merging Corporation. The
obligations of the Merging Corporation and its shareholders
to consummate the transactions contemplated by this
Agreement are subject to satisfaction of or compliance with
each of the following conditions:
8.1 No suit, action, investigation, inquiry, or other
proceeding by any governmental authority or other person or
entity shall have been instituted which questions or
challenges the validity or legality of the transactions
contemplated by this Agreement.
8.2 All approvals, consents, and authorizations shown on
Schedule 5.4 shall have been obtained.
8.3 Subject to any changes that have been waived in writing
by the Merging Corporation, (a) the representations and
warranties of the Surviving Corporation set forth in this
Agreement shall have been and shall be true and correct in
all material respects on the Closing Date as though made on
and as of the Closing Date and (b) the Surviving Corporation
shall not have violated in any material respect any covenant
or agreement by it in this Agreement and shall have
performed in all material respects all obligations to be
performed by it under this Agreement prior to or as of the
Closing Date.
9. Right to Termination. This Agreement may be terminated
and the proposed transactions abandoned:
9.1 At any time, by mutual consent of the parties;
9.2 At the option of the Surviving Corporation and by
notice to the Merging Corporation stating the reasons for
such action, (a) in the event the closing of the
transactions contemplated by this Agreement shall not have
occurred on the date designated in Section 3 (or any other
date that the parties may designate by mutual agreement) by
reason of the failure of any of the conditions set forth in
Section 7 or (b) at any time prior to the closing of the
<PAGE> Page 8 of 12
transactions contemplated by this Agreement, in the event of
a material breach of any of the representations, warranties
or covenants of the Merging Corporation or its shareholders;
or
9.3 At the option of the Merging Corporation and by notice
to the Surviving Corporation stating the reasons for such
action, (a) in the event the closing of the transactions
contemplated by this Agreement shall not have occurred on
the date designated in Section 3 (or any other date that the
parties may designate by mutual agreement) by reason of the
failure of any of the conditions set forth in Section 8 or
(b) at any time prior to the closing of the transactions
contemplated by this Agreement, in the event of a material
breach of any of the representations, warranties or
covenants of the Surviving Corporation set forth in this
Agreement.
9.4 Termination by a party pursuant to Section 9.2 or 9.3
shall not adversely affect such party's other available
rights and remedies. The rights and remedies of the party
terminating this Agreement pursuant to Section 9.2 or 9.3,
whether contained in this Agreement or conferred pursuant to
applicable law or in equity, shall be cumulative and
concurrent and may be pursued singly, successively, or
together, at the discretion of the holder thereof.
10. Indemnification. Each of the Surviving Corporation, on
the one hand, and the shareholders of the Merging
Corporation, on the other, shall indemnify the other and the
other's employees, agents, officers, directors, heirs,
personal representatives, administrators, successors,
permitted assigns, and affiliates from and against any and
all costs, damages, expenses, and liabilities (including
reasonable attorneys' fees) incurred or sustained in
connection with or resulting from (a) any breach of the
representations and warranties of such party in this
Agreement or (b) the nonfulfillment or breach of any
covenant made by such party in this Agreement; provided,
however, that the maximum liability of the Surviving
Corporation, on the one hand, and the shareholders of the
Merging Corporation, on the other, under this Section 10
shall not exceed $1,000,000 in the aggregate for the
Surviving Corporation, on the one hand, and the shareholders
of the Merging Corporation, on the other hand; and provided
further, that the remedies of the Surviving Corporation with
respect to any such breach or nonfulfillment by the
shareholders of the Surviving Corporation or any of them
shall be limited to, and only to, recovery of the shares of
the Surviving Corporation held in accordance with the terms
of the Escrow Agreement pursuant to the provisions thereof.
The limitations on maximum liability and on remedies
contained in the preceding sentence shall not apply in the
case of a willful and material breach of a representation or
warranty made by a shareholder of the Merging Corporation
with the intent to defraud the Surviving Corporation; in the
case of such a breach, the Surviving Corporation shall have
all rights and remedies permitted under applicable law or in
equity against, and only against, the shareholder making
such representation or warranty.
11. General Provisions:
11.1 Binding Effect. This Agreement may not be assigned by
either of the parties without the written consent of the
other party. Subject to the foregoing restrictions, this
Agreement shall be binding upon and inure to the benefit of
the parties and their respective heirs, personal
representatives, administrators, successors, and permitted
assigns.
<PAGE> Page 9 of 12
11.2
Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of
Oregon.
11.3 Entire Agreement. This Agreement, including the
schedules and exhibits hereto (which are incorporated herein
by reference), contains the entire agreement between the
Surviving Corporation and the Merging Corporation with
respect to the transactions contemplated by this Agreement
and supersedes all prior and contemporaneous agreements
between them with respect to such transactions. The parties
agree that the terms of this Agreement are confidential and
will not be disclosed, other than to each party's officers,
directors, shareholders, accountants, attorneys, and
lenders, without the consent of the other, except to the
extent required under applicable law and regulations.
11.4 Amendment. This Agreement may not be modified or
amended except by the written agreement of the party
entitled to the benefit of the provision against whom
enforcement is sought.
11.5 Severability. If any term or provision of this
Agreement shall to any extent be invalid or unenforceable,
the remainder of this Agreement shall not be affected
thereby, and each term or provision of this Agreement shall
be valid and enforceable to the fullest extent permitted by
law.
11.6 Survival. All representations and warranties herein,
and all covenants herein (the full performance of which is
not required to or at the Closing Date), shall survive the
Closing Date and be fully enforceable thereafter for a
period of one year following the Closing Date.
11.7 Notices. Notices under this Agreement shall be in
writing and shall be effective when actually delivered or
three business days after deposit in the United States
Mails, certified, return receipt requested, directed to the
other party at the address set forth below, or to such other
address and/or person as the party may indicate by written
notice to the other party:
<PAGE> Page 10 of 12
If to the Merging CBW Inc.
Corporation: 140 E. 5th Ave., #A
Eugene, OR 97401
Attn: Mike Chamberlin
If to the Surviving Elmer's Restaurants,
Corporation Inc..
11802 SE Stark St.
Portland, OR 97216
Attn: Juanita Nelson
11.8 Waiver. Failure of any party at any time to require
performance of any provision of this Agreement shall not
limit such party's right to enforce such provision, nor
shall any waiver of any breach of any provision of this
Agreement constitute a waiver of any succeeding breach of
such provision or a waiver of such provision itself.
11.9 Attorney's Fees. If a suit, action, or other
proceeding of any nature whatsoever (including any
proceeding under the U.S. Bankruptcy Code) is instituted to
enforce or interpret any provision of this Agreement or in
connection with any dispute hereunder, the prevailing party
shall be entitled to recover such amount as the court may
adjudge reasonable as attorney's fees and all other fees,
costs, and expenses of litigation at trial or any appeal or
review, in addition to all other amounts provided by law.
11.10 Remedies. In the event of a default under this
Agreement, the non-defaulting party shall have all rights
and remedies available under this Agreement, to the fullest
extent of applicable law and equitable principles, subject
to the limitations set forth in Section 10.
11.11 Counterparts. This Agreement may be executed in
any number of counterparts, all of which together shall
constitute one and the same agreement.
11.12 Further Assurances. From time to time, upon
request of either party, the other party shall execute,
acknowledge, and deliver such documents and undertake such
actions as may be reasonably requested in order to fulfill
the transactions contemplated by this Agreement.
11.13 Expenses. Each party shall bear all costs and
expenses incurred by such party in connection with this
transaction, including, without limitation, legal expenses.
11.14 Knowledge of Merging Corporation. All
representations and warranties of the shareholders of the
Merging Corporation in this Agreement that are made 'to the
best knowledge of the Merging Corporation' shall be made
only to the extent of the knowledge, after due inquiry, of
Bruce N. Davis or William W. Service.
<PAGE> Page 11 of 12
IN WITNESS WHEREOF, the parties have entered into this
Merger Agreement as of the date first set forth above.
The Merging Corporation: CBW Inc., an Oregon
corporation
By:___/s/__Bruce Davis___
Title: President
The Surviving Corporation: Elmer's Restaurants,
Inc., an Oregon
corporation
By:__/s/_William Service_
Title: C.E.O.
The Shareholders of the Merging Corporation:
__/s/__Ken N. Boettcher__
Ken N. Boettcher
__/s/__Linda E. Bolton___
Linda Bolton
__/s/__Karen K. Brooks___
Karen Brooks
__/s/__Thomas C. Connor__
Thomas C. Connor
__/s/__Bruce N. Davis____
Bruce N. Davis
__/s/__Cordy Jensen______
Cordy Jensen
__/s/__William W. Service
William W. Service
__/s/__Gregory Wendt_____
Gregory Wendt
__/s/__Donald Woolley____
Donald Woolley
Schedules Omitted
<PAGE> Page 12 of 12
4 0189544.01
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement') is
made and entered into this 18th day of February, 1999, by and
between ELMER'S RESTAURANTS, INC., an Oregon corporation (the
"Company"), and Bruce N. Davis, William W. Service, Gregory W.
Wendt, Donald W. Woolley, Thomas C. Connor, Linda Bolton, Cordy
Jensen, Ken N. Boettcher and Karen Brooks, shareholders
(collectively referred to herein as 'Holders') of CBW Inc.
('CBW').
Recitals:
A. The Company, CBW, and Holders are the parties to a
Merger Agreement, of even date herewith (the "Merger Agreement").
B. Pursuant to the Merger Agreement, the Company is
obligated to issue restricted shares ('Shares' or 'Registrable
Securities') of the Company's common stock to the Holders and
therefore desires to grant Holders certain registration rights
pursuant to this Agreement.
Agreements:
NOW, THEREFORE, in consideration of the foregoing and
the covenants of the parties contained in this Agreement, the
parties hereby agree as follows:
SECTION 1
Definitions
The following terms shall have the meanings indicated:
"Common Stock" means the Common Stock of the Company.
'Company' means the issuer and its successors and assigns.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and
regulations of the SEC thereunder, all as the same shall be in
effect from time to time.
"Initial Public Offering" means an initial public offering
of shares of Common Stock by the Company registered under the
Securities Act.
"Losses" means all losses, claims, damages or liabilities
and reasonable expenses related thereto.
<PAGE> Page 1 of 14
'Registrable Securities' shall mean each of the Shares,
until, in the case of any such Share, (i) it is effectively
registered under the Securities Act and disposed of in accordance
with the Registration Statement covering it, (ii) it is saleable
by the holder thereof pursuant to Rule 144(k), or (iii) it is
distributed to the public by the holder thereof pursuant to Rule
144; provided, however, that Registrable Shares shall not include
any Shares that are subject to a lockup agreement during the
period in which disposition of such Shares would violate the
terms of such lockup agreement.
'Registration', 'register' and like words mean compliance
with all of the laws, rules, regulations and provisions of
agreements and corporate documents pertaining to lawful and
unrestricted transfer of securities by way of a public offering
or distribution.
'Registration Statement' shall mean any Registration
Statement of the Company under the Securities Act that covers any
of the Registrable Securities pursuant to the provisions of this
Agreement, including the related Prospectus, all amendments and
supplements to such Registration Statement (including post-
effective amendments), all exhibits and all material incorporated
by reference or deemed to be incorporated by reference in such
Registration Statement.
"SEC" means the Securities and Exchange Commission, or any
other federal agency then administering the Securities Act.
"Securities Act" means the Securities Act of 1933, as
amended, or any similar federal statute, and the rules and
regulations of the SEC thereunder, all as the same shall be in
effect from time to time.
"Shares" means all shares of the Company's Common Stock,
restricted or otherwise, that will be issued to, and held by, the
Holders as a result of the merger.
'Underwritten registration' or 'underwritten offering' shall
mean a sale of securities of the Company to an underwriter for
reoffering to the public pursuant to a Registration Statement.
SECTION 2
Acknowledgment of Rights
The Company will, upon request of Holders, acknowledge in
writing the Company's obligation in respect of the rights to
which Holders shall be entitled under this Agreement, provided,
that the failure of Holders to make any such request shall not
affect the continuing obligation of the Company to Holders in
respect of such rights.
<PAGE> Page 2 of 14
SECTION 3
Piggyback Registration
3.1 If at any time the Company proposes to register any
offering of shares of its capital stock under the Securities Act,
and if such registration is to be on a form of the SEC that may
include, or is at any time amended or changed to such a form that
may include the Shares (other than a registration solely to
implement an employee benefit plan or a transaction to which Rule
145, as promulgated under the Securities Act, is applicable), the
Company will at any such time give written notice to Holders of
its intention to do so at least thirty (30) days prior to the
filing of such Registration Statement. The Company will include
in any such Registration Statement any of the Registrable
Securities held by any Holder who within 20 days after receipt of
such notice shall request inclusion. Notwithstanding any other
provision of this Section 3, if the offering of shares by the
Company is underwritten and the representative of the
underwriters participating in the sale and distribution of the
Company's securities covered by such Registration Statement
advises the Company in writing that marketing factors require a
limitation on the number of shares to be underwritten, the
representative may exclude all Registrable Securities from, or
(subject to the limitations set forth below) limit the number of
Registrable Securities to be included in, the registration and
underwriting.
3.2 If the offering of shares by the Company is
underwritten and the representative of the underwriters
participating in the sale and distribution of the Company's
securities covered by such Registration Statement agrees that a
number of (but not all) the Registrable Securities (the
"Permissible Secondary Shares") may be included in the offering
covered by the Registration Statement, the Company's notice shall
afford Holders an opportunity to elect to include in such
registration the Permissible Secondary Shares owned by it.
Holders shall have twenty (20) days after receipt of the
Company's notice to notify the Company in writing of the number
of Registrable Securities (the "Elected Shares") which Holders
elect to include in the offering and the Elected Shares shall be
included in the offering. If the aggregate number of Elected
Shares that Holders of Registrable Securities desire to include
in such filing exceeds the number of Permissible Secondary
Shares, then Holders shall be entitled to include that number of
Elected Shares that bears the same ratio to the number of
Permissible Secondary Shares as the number of Elected Shares
Holders desires to include bears to the number of Elected Shares
Holders and all such other Holders desire to include.
3.3 The inclusion in such registration of Elected Shares
shall be upon the condition that Holders sell its Elected Shares
to the underwriters at the same price and on substantially the
same terms and conditions as the Company and any other selling
shareholders.
SECTION 4
Holders Requirements
To include any Registrable Securities in any registration,
Holders shall:
<PAGE> Page 3 of 14
4.1 Cooperate with the Company in preparing each such
registration and execute all such instruments and agreements
(including, without limitation, questionnaires, powers of
attorney, indemnities, and underwriting agreements) as the
underwriter may deem reasonably necessary in favor of such
underwriter;
4.2 Promptly supply the Company with all information,
documents, representations and agreements as the underwriter may
deem reasonably necessary in connection with such registration;
4.3 Agree in writing not to sell or transfer any share of
the capital stock of the Company not included in such
registration for a period of fifteen (15) days prior to and one
hundred eighty (180) days after the effective date of such
registration without the underwriter's consent;
4.4 Not (until further notice) effect sales of Shares after
receipt of written notice from the Company to suspend sales to
permit the Company to correct or update any Registration
Statement or prospectus; and
4.5 At the end of any period during which the Company is
obligated to keep any Registration Statement current and
effective, discontinue sales of Shares pursuant to such
Registration Statement upon receipt of notice from the Company of
its intention to remove from registration Shares covered by such
Registration Statement which remain unsold and shall notify the
Company of the number of Shares registered which remain unsold
promptly after receipt of such notice from the Company.
SECTION 5
Other Registration Rights
The Company will not grant to any persons the right to
request the Company to register any equity securities of the
Company, or any securities convertible or exchangeable into or
exercisable for such securities, unless such rights of other
persons are pari passu with the rights of Holders hereunder, or
subordinate and subsequent to such rights, without the written
consent of Holders.
SECTION 6
Registration Procedures
If and whenever the Company is obligated by the provisions
of this Agreement to effect the registration of any offering of
Registrable Securities under the Securities Act, as expeditiously
as reasonably possible the Company will, or will use its best
efforts to, as the case may be:
<PAGE> Page 4 of 14
6.1 Prepare and file with the SEC a Registration Statement
with respect to such Registrable Securities and, if the Board of
Directors of the Company shall so direct, cause such Registration
Statement to become effective; provided, however, that the
Company may, in exercising reasonable discretion, discontinue any
registration of its securities which is being effected pursuant
hereto at any time prior to the effective date of the
Registration Statement relating thereto.
6.2 Prepare and file with the SEC such amendments and
supplements to such Registration Statement and the prospectus
used in connection therewith as may be necessary to keep such
Registration Statement effective until the earlier of the sale of
all shares of Common Stock covered thereby and the expiration of
a period of two hundred seventy (270) days after its effective
date, and comply with the provisions of the Securities Act with
respect to the disposition of all shares of Common Stock covered
by such Registration Statement; provided, however, that if
maintaining the effectiveness of the Registration Statement would
require the filing of a post-effective amendment including new
financial statements (other than financial statements which the
Company would be required to include in a current report on Form
10-Q under Section 13 or 15(d) of the Exchange Act), the Company
shall be obligated hereunder to use its best efforts to maintain
the effectiveness of the Registration Statement for only six (6)
months in the case of the first registration filed hereunder, and
ninety (90) days in the case of any other registration filed
hereunder. In the event that any shares of Common Stock included
in a Registration Statement subject to, or required by, this
Agreement remain unsold at the end of the period during which the
Company is obligated to use its best efforts to maintain the
effectiveness of such Registration Statement, the Company, if and
when a further amendment or supplement would be required to
comply with Section 10 of the Securities Act, may file a post-
effective amendment to the Registration Statement for the purpose
of removing such shares from registered status.
6.3 Furnish to Holders so many copies of a prospectus,
including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents, as
Holders may reasonably request.
6.4 Register or qualify the securities covered by such
Registration Statement under such other securities or blue sky
laws of such jurisdictions as Holders may reasonably request, and
do any and all other acts and things that may be reasonably
necessary or advisable to enable Holders to consummate the
disposition in such jurisdictions of such Shares; provided,
however, that the Company shall not be obligated, by reason
thereof, to qualify as a foreign corporation or file any general
consent to service of process under the laws of any such
jurisdiction or subject itself to taxation as doing business in
any such jurisdiction.
6.5 Furnish to Holders, at the time of disposition, an
opinion of counsel for the Company to the effect that a
Registration Statement covering the offering of its Shares has
been filed with the SEC under the Securities Act and has been
made effective by order of the SEC, that a prospectus complying
as to form with the requirements of the Securities Act is
available for delivery, that no stop order has been issued by the
SEC suspending the effectiveness of such Registration Statement
and that, to the best of such counsel's knowledge,
<PAGE> Page 5 of 14
no proceedings for the issuance of such a stop order are
threatened or contemplated, and that the securities included in
the offering covered by such Registration Statement have been
registered or qualified, or exempted from such registration or
qualification, under the securities or blue sky laws of each
state in which the Company has been required to register or
qualify such shares as contemplated in this Section 6. In giving
such opinion, counsel for the Company shall be entitled to rely
upon the opinion of counsel for the underwriters.
6.6 Notify Holders and its counsel promptly after the
Company shall receive notice that any Registration Statement,
supplement or amendment has become effective, any Registration
Statement is required to be amended or supplemented, or any stop
order with respect thereto has been issued.
6.7 Enter into such agreements (including an underwriting
agreement in form, scope and substance as is customary in
underwritten offerings) and take all such other actions in
connection therewith (including those reasonably requested by the
representative of the underwriters or the Holders of a majority
of the Registrable Securities subject to the Registration
Statement) in order reasonably to expedite or facilitate the
disposition of the Registrable Securities.
SECTION 7
Registration Expenses
The costs and expenses (other than underwriting discounts or
commissions, stock transfer taxes and such fees for counsel,
printing, registration and other fees as state securities
officials may require that the Holders of Registrable Securities
pay) of all registrations and qualifications under the Securities
Act contemplated by this Agreement, and of all other actions that
the Company is required to take or effect pursuant to this
Agreement, shall be paid by the Company (including, without
limitation, all registration and filing fees, printing expenses,
costs of special audits incident to or required by any such
registration, fees and disbursements of counsel for the Company
and reasonable fees and disbursements of one special counsel
acting for the Holders of Registrable Securities being included
in any registration), except that all such expenses in connection
with any amendment or supplement to the Registration Statement or
the prospectus used in connection therewith required to be filed
more than two hundred seventy (270) days after the date on which
such Registration Statement becomes effective under the
Securities Act because any Holders has not effected the
disposition of Registrable Securities covered by such
Registration Statement shall be borne pro rata by such Holders.
SECTION 8
Indemnification by Company
In the event of any registration under the Securities Act of
any offering of Registrable Securities, the Company hereby agrees
to indemnify and hold harmless Holders, its officers
<PAGE> Page 6 of 14
and directors, if any, and each other person, if any, who
controls Holders (within the meaning of 'control person' as
defined in the Securities Act) and each other person (including
each underwriter, and each other person, if any, who controls
such underwriter) who participates in the offering of such
Registrable Securities against any Losses, joint or several, to
which Holders or such controlling person or participating person
may become subject under the Securities Act or otherwise, insofar
as such Losses (or proceedings in respect thereof) arise out of
or are based upon any untrue statement or alleged untrue
statement of any material fact contained, on the effective date
thereof, in any Registration Statement under which Registrable
Securities were registered under the Securities Act, in any
preliminary prospectus or final prospectus contained therein, or
in any amendment or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make
the statements therein not misleading, and will reimburse Holders
and each such controlling person or participating person for any
legal or other expenses reasonably incurred by Holders or such
controlling person or participating person in connection with
investigating or defending any such Loss; provided, that the
Company will not be liable in any such case to the extent that
any such Loss arises out of or is based upon an untrue statement
or alleged untrue statement or omission or alleged omission made
in such Registration Statement, such preliminary or final
prospectus or such amendment or supplement in reliance upon and
in conformity with written information furnished by Holders or
such controlling or participating person, as the case may be,
specifically for use in the preparation thereof. The Company
shall also indemnify underwriters, selling brokers, dealer
managers and similar securities industry professionals
participating in the distribution, their officers, directors,
agents and employees and each person who controls such persons
(within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act) to the same extent as provided
above with respect to the indemnification of Holders.
SECTION 9
Indemnification by Holders of Registrable Securities
In the event of any registration under the Securities Act of
any offering of Registrable Securities, Holders hereby agree to
indemnify and hold harmless the Company, each other Holders of
Registrable Securities and each other person, if any, who
controls the Company within the meaning of the Securities Act and
each other person (including each underwriter, and each other
person, if any, who controls such underwriter) who participates
in the offering of such Registrable Securities against any
Losses, joint or several, to which the Company, such Holders or
controlling person or
<PAGE> Page 7 of 14
participating person may become subject under the Securities Act
or otherwise, insofar as such Losses (or proceedings in respect
thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained, on the
effective date thereof, in any Registration Statement under which
an offering of such Registrable Securities was registered under
the Securities Act, in any preliminary prospectus or final
prospectus contained therein, or in any amendment or supplement
thereto, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, and will reimburse the Company, such other Holders
and each such controlling person or participating person for any
legal or other expenses reasonably incurred by the Company, such
other Holders or such controlling person or participating person
in connection with investigating or defending any such Loss or
proceeding; provided, that Holders will be liable in any such
case to the extent, and only to the extent, that any such Loss
arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in such
Registration Statement, such preliminary or final prospectus or
such amendment or supplement in reliance upon and in conformity
with written information furnished by Holders specifically for
use in the preparation thereof. The Company shall be entitled to
receive indemnities from underwriters, selling brokers, dealer
managers and similar securities industry professionals
participating in the distribution to the same extent as provided
above with respect to information so furnished in writing by such
persons specifically for inclusion in any Registration Statement
or prospectus.
SECTION 10
Conduct of Indemnification Proceedings
If any action or proceeding (including any governmental
investigation or inquiry) shall be brought or any claim shall be
asserted against any person entitled to indemnity hereunder (an
"indemnified party"), such indemnified party shall promptly
notify the party from which such indemnity is sought (the
"indemnifying party") in writing, and the indemnifying party
shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to the indemnified party and the
payment of all fees and expenses reasonably incurred in
connection with the defense thereof. Any such fees and expenses
borne by the indemnified party (including any fees and expenses
reasonably incurred in connection with investigating or preparing
to defend such action or proceeding) shall be paid to the
indemnified party, as incurred, within fifteen (15) days of
written notice thereof to the indemnifying party (regardless of
whether it is ultimately determined that an indemnified party is
not entitled to indemnification hereunder). Any such indemnified
party shall have the right to employ separate counsel in any such
action, claim or proceeding and to participate in the defense
thereof, but the fees and expenses of such counsel shall be the
expenses of such indemnified party unless (i) the indemnifying
party has agreed to pay such fees and expenses or (ii) the
indemnifying party shall have failed to promptly assume the
defense of such action, claim or proceeding or (iii) the named
parties to any such action, claim or proceeding (including any
impleaded parties) include both such indemnified party and the
indemnifying party, and such indemnified party shall have been
advised by counsel in writing that there may be one or more legal
defenses available to it which are different from or in addition
to those available to the indemnifying party and that the
assertion of such defenses would create a conflict of interest
such that counsel employed by the indemnifying party could not
faithfully represent the indemnified party (in which case, if
such indemnified party notifies the indemnifying party in writing
that it elects to employ separate counsel at the expense of the
indemnifying party, the indemnifying party shall not have the
right to assume the defense of such action, claim or proceeding
on behalf of such indemnified party, it being understood,
however, that the indemnifying party shall not, in connection
with any one such action, claim or proceeding or separate but
substantially similar or related actions, claims or proceedings
in the same
<PAGE> Page 8 of 14
jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of
more than one separate firm of attorneys (together with
appropriate local counsel) at any time for all such indemnified
parties, unless such indemnified party shall have been advised by
counsel in writing that a conflict of interest may exist between
such indemnified party and any other of such indemnified parties
with respect to such action, claim or proceeding, in which event
the indemnifying party shall be obligated to pay the fees and
expenses of such additional counsel or counsels). The
indemnifying party shall not be liable for any settlement of any
such action or proceeding effected without its written consent.
SECTION 11
Contribution
If the indemnification provided for in this Agreement is
unavailable to an indemnified party under Section 8 or 9 hereof
(other than by reason of exceptions provided in those Sections)
in respect of any Losses, then each applicable indemnifying party
in lieu of indemnifying such indemnified party shall contribute
to the amount paid or payable by such indemnified party as a
result of such Losses, in such proportion as is appropriate to
reflect the relative fault of the indemnifying party and
indemnified parties in connection with the actions, statements or
omissions which resulted in such Losses as well as any other
relevant equitable considerations. The relative fault of such
indemnifying party and the indemnified party shall be determined
by reference to, among other things, whether any action in
question, including any untrue statement or alleged untrue
statement of a material fact or omission or alleged omission of a
material fact, has been taken or made by, or relates to
information supplied by, such indemnifying party or indemnified
party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action,
statement or omission. The amount paid or payable by a party as
a result of any Losses shall be deemed to include, subject to the
limitations set forth in Section 10, any legal or other fees or
expenses reasonably incurred by such party in connection with any
action, suit, claim, investigation or proceeding.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 11 were
determined by pro rata allocation or by any other method of
allocation which does not take into account the equitable
considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section 11, an
indemnifying party which is a selling Holders of Registrable
Securities shall not be required to contribute any amount in
excess of the amount by which the total price at which the
Registrable Securities sold by such indemnifying party and
distributed to the public were offered to the public exceeds the
amount of any damages which such indemnifying party has otherwise
been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f)
of the Securities Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
<PAGE> Page 9 of 14
SECTION 12
General Provisions
12.1 With a view to making available to each Holder where
applicable the benefit of Rule 144 promulgated under the Act
(which term as used herein includes the present Rule 144 and any
other, additional, substitute, supplemental, or analogous rule or
regulation of the SEC which may at any time permit a Holder to
sell securities to the public exempt from registration), the
Company agrees (i) if the Company's securities have been
registered under Section 12 or Section 15 of the Securities
Exchange Act of 1934, as amended, and such registration is not
then withdrawn or suspended, to file with the SEC in a timely
manner all reports and other documents required to be filed by an
issuer of securities registered under the Securities Exchange Act
of 1934, as amended, so as to maintain the availability of
Rule 144 to the Holders; (ii) at its expense, forthwith upon any
Holder's request, to deliver to any Holder a certificate, signed
by one of the Company's principal officers, stating (A) the
Company's name, address and telephone number (including area
code), (B) the Company's Internal Revenue Service identification
number, (C) the Company's Securities and Exchange Commission file
number, (D) the number of shares of Common Stock outstanding as
shown by the most recent report or statement published by the
Company, (E) whether the Company has filed the reports required
to be filed under the Securities Exchange Act of 1934, as
amended, for a period of at least 90 days prior to the date of
such certificate and in addition has filed the most recent annual
report required to be filed thereunder and (F) such other or
additional information as shall be necessary to make available to
the Holder the ability to offer and sell the maximum number of
shares under Rule 144; and (iii) when Rule 144 is being complied
with or the holding period for unaffiliated security holders
shall have expired, to deliver securities not bearing any legend
restricting transfer of such securities (to the extent then
permitted by rules or interpretations of the staff of the SEC),
as may be requested from time to time by any Holder.
<PAGE> Page 10 of 14
12.2 The Shares shall not be transferred, and the Company
shall not be required to register any transfer of the Shares on
the books of the Company, unless the Company shall have been
provided with an opinion of counsel satisfactory to it prior to
such transfer that registration under the Securities Act and
applicable state securities laws is not required in connection
with the transaction resulting in such transfer; provided,
however, that no such opinion of counsel shall be required in
order to effectuate a transfer pursuant to an effective
registration of the Shares. Each certificate issued upon any
transfer of the Shares transferred as above provided shall bear
an appropriate investment legend, except that such certificate
shall not bear such restrictive legend if the opinion of counsel
referred to above is to the further effect that such legend is
not required in order to establish compliance with the provisions
of the Securities Act or if such transfer is made in accordance
with the provisions of Rule 144 promulgated under the Securities
Act. The registration rights described in this Agreement shall
immediately terminate as to those Shares which are transferred by
the Holder except for transfers (i) to immediate family members,
which shall mean lineal descendants of the Holder, (ii) to other
Holders or their permitted transferees, or (iii) of more than
50,000 Shares to any transferee.
12.3 Except to the extent expressly provided in this
Agreement, notices under this Agreement shall be in writing and
shall be effective when actually delivered or three business days
after being deposited in the United States Mails, certified,
return receipt requested, directed to the other party at the
address set forth below, or to such other address as either party
may indicate by written notice to the other party:
If to the Company:
Elmer's Restaurants, Inc.
11802 SE Stark St.
Portland, OR 97216
Attention: Juanita Nelson
[This space intentionally left blank]
<PAGE> Page 11 of 14
If to Holders:
Bruce N. Davis
William W. Service
140 E. 5th Street, Suite A
Eugene, Oregon 97401
Cordy Jensen
27 East Fifth
Eugene, Oregon 97401
Gregory W. Wendt
2547 Lyon Street
San Francisco, California 94123
Karen Brooks
88725 Skyhigh Drive
Springfield, Oregon 97408
Linda Bolton
1754 Coburg Road, #230
Eugene Oregon 97401
Ken N. Boettcher
292 West Twelfth
Eugene, Oregon 97401
Donald W. Woolley
1275 Barber Drive
Eugene, Oregon 97405
Thomas C. Connor
4040 Sunridge
Eugene, Oregon 97405
12.4 This Agreement constitutes the entire agreement between
the parties pertaining to the subject matter hereof, supersedes
any and all prior or contemporaneous agreements or undertakings
of the parties pertaining to the subject matter hereof. Neither
this Agreement, nor any term hereof, may be amended, waived,
discharged, or terminated, except by written instrument signed by
the Company and the Holders of at least 50 percent (50%) of the
Registrable Securities and any such amendment, waiver, discharge,
or termination shall be binding on all the Holders, but in no
event shall the obligation of any Holder hereunder by materially
increased, except upon the written consent of such Holder.
12.5 If any term or provision of this Agreement or the
application thereof to any party or circumstance shall to any
extent be invalid or unenforceable, the remainder of this
Agreement and the application of such term or provision to such
parties or circumstances other than those as to which it is held
invalid or unenforceable shall not be affected thereby, and
<PAGE> Page 12 of 14
each term or provision of this Agreement shall be valid and
enforceable to the fullest extent permitted by law.
12.6 Failure of either party at any time to require
performance of any provision of this Agreement shall not limit
such party's right to enforce such provision, nor shall any
waiver of any breach of any provision of this Agreement
constitute a waiver of such provision itself. Any waiver of any
provision of this Agreement shall be effective only if set forth
in writing and signed by the party to be bound.
12.7 The headings in this Agreement are for convenience of
reference only and shall have no effect whatsoever on the
construction or interpretation of any provision of this
Agreement. All provisions of this Agreement have been negotiated
at arms length and this Agreement shall not be construed for or
against any party by reason of the authorship or alleged
authorship of any provision hereof.
12.8 This Agreement may be executed in counterparts, all of
which shall constitute one and the same agreement.
12.9 This Agreement shall be governed by and construed in
accordance with the laws of the State of Oregon.
IN WITNESS WHEREOF, the parties hereto have executed this
Registration Rights Agreement as of the day and year first above
written.
The Company: ELMER'S RESTAURANTS, INC., an
Oregon corporation
By:_/s/__Bruce N. Davis_____
Bruce N. Davis
President
Holders:
_/s/__Bruce N. Davis______________
Bruce N. Davis
_/s/_Cordy Jensen_________________
Cordy Jensen
_/s/_William W. Service___________
William W. Service
<PAGE> Page 13 of 14
_/s/_Gregory W. Wendt_____________
Gregory W. Wendt
_/s/_Karen K. Brooks______________
Karen Brooks
_/s/_Donald W. Woolley____________
Donald W. Woolley
_/s/_Thomas C. Connor_____________
Thomas C. Connor
_/s/_Linda E. Bolton______________
Linda Bolton
_/s/_Ken N. Boettcher_____________
Ken N. Boettcher
<PAGE> Page 14 of 14
[LETTERHEAD]
VEBER PARTNERS
Confidential
January 13, 1999
The Board of Directors
Elmer's Restaurants, Inc.
11802 SE Stark St.
Portland, OR 97216-0595
Gentlemen:
You have requested our opinion as to the fairness from a
financial point of view to the stockholders of Elmer's
Restaurants, Inc., ("Elmer's" or the "Company") of the
consideration to be paid by the Company in connection with the
proposed merger of Elmer's with and into CBW, Inc., ("CBW") (the
"Proposed Transaction". Upon consummation of the Proposed
Transaction, Elmer's will issue to the stockholders of CBW
825,000 shares of Elmer's common stock for 100% of the shares of
CBW common stock.
Veber Partners LLC ("Veber"), as part of its investment banking
services, is regularly engaged in the valuation of businesses and
their securities in connection with mergers and acquisitions,
strategic transactions, corporate restructurings, private
placements and valuations for corporate and other purposes.
In the past, we have provided financial advisory services to CBW
and have received fees for rendering these services. Veber may
in the future provide investment banking or other financial
advisory services to Elmer's.
In connection with our review of the Proposed Transaction, and in
arriving at our opinion, we have, among other things:
(i) reviewed the publicly available financial statements of
Elmer's for recent years and interim periods to date
and certain other relevant financial and operating data
of Elmer's made available to us from published sources;
(ii) discussed the business, financial condition and
prospects of Elmer's with certain of its officers;
(iii) reviewed historical financial statements of CBW for
recent periods with recasting adjustments made to this
data by CBW management and certain other relevant
financial and operating data of CBW made available to
us, including financial forecasts prepared by CBW
management;
(iv) discussed the business, financial condition and
prospects of CBW with certain management, including
Bruce Davis, Bill Service, and Mike Chamberlain;
<PAGE> Page 1 of 3
(v) visited certain of the CBW stores located the Eugene,
OR area.
(vi) reviewed historical share price and trading activity of
Elmer's common stock and analyzed the pro forma impact
of the Proposed Transaction on earnings per share,
consolidated capital and other financial ratios of
Elmer's;
(vii) reviewed and discussed with management of Elmer's and
CBW, the strategic benefits accruing to Elmer's from
the Proposed Transaction;
(viii) reviewed the financial information presented by CBW
management and compared such information with similar
information for certain other companies engaged in
businesses we consider comparable;
(ix) reviewed the financial terms, to the extent publicly
available, of comparable merger and acquisition
transactions;
(x) considered the value of the option held by CBW to
purchase Grass Valley Limited, Inc., (Grass Valley"),
and therefore performed a review of Grass Valley as
outlined below;
a. reviewed historical financial statements of Grass
Valley for recent periods and certain other
relevant financial and operating data of Grass
Valley made available to us, including financial
forecasts prepared by CBW management;
b. discussed the business, financial condition and
prospects of Grass Valley with certain management
including Bruce Davis, Bill Service, Richard
Buckley, and Gary Weeks;
c. reviewed the financial information presented by
CBW management on Grass Valley and compared such
information with similar information for certain
other companies engaged in businesses we consider
comparable;
d. reviewed the financial terms, to the extent
publicly available, of certain comparable merger
and acquisition transactions;
e. visited certain of the Grass Valley stores located
in the Portland, OR area.
(xi) reviewed the draft merger agreement contained in the
package dated as of December 23, 1998, among CBW and
Elmer's and the related exhibits and schedules;
(xii) discussed the tax and accounting treatment of the
Proposed Transaction with Elmer's and Elmer's public
accountants; and
(xiii) performed such other analyses and examinations
(including discounted cash flow analyses) and
considered such other information, financial studies,
analyses and investigations and financial, economic and
market data as we deemed relevant.
In rendering our opinion, we have assumed and relied upon the
accuracy and completeness of all of the information provided to
us concerning Elmer's, CBW, and Grass Valley considered in
connection with our review of the Proposed Transaction, and we
have not assumed any responsibility for
<PAGE> Page 2 of 3
independent verification of such information or any independent
valuation or appraisal of any of the assets or liabilities of
Elmer's, CBW, or Grass Valley nor have we conducted a
comprehensive physical inspection of the properties and
facilities of any of these companies. For purposes of this
Opinion, we have assumed that neither Elmer's nor CBW is a party
to any pending transactions, including material merger
discussions, other than the Proposed Transaction and those
activities undertaken in the ordinary course of conducting their
respective businesses. Our opinion is necessarily based upon
market, economic, financial and other conditions as they exist
and can be evaluated as of the date of this letter and any change
in such conditions would require a reevaluation of this opinion.
In connection with the preparation of this opinion, we have not
been authorized by the Company or its Board of Directors to
solicit, nor have we solicited, third party indications of value
for the acquisition of all or any part of CBW. We were retained
by the Board of Directors of the Company and our opinion as
expressed herein is limited to the fairness, from a financial
point of view, to the Company's stockholders, of the Proposed
Transaction and does not address the Company's underlying
business decision to proceed with the Proposed Transaction. This
letter does not constitute a recommendation to any Board of
Directors member or stockholder of the Company as to how such
Board of Directors member or stockholder should vote on the
Proposed Transaction.
We express no opinion as to the price at which the shares of
Elmer's will trade after the announcement or consummation of the
Proposed Transaction.
It is understood that this letter is for the information of the
Board of Directors of the Company and may not be summarized or
publicly referred to without our prior written consent, provided,
however, that this letter may be reproduced, discussed or
summarized in any SEC filing made by Elmer's with respect to the
transaction contemplated by the Agreement.
Our professional fees for the advisory services that have been
provided to the Board of Directors of Elmer's are not contingent
upon the opinion expressed herein, and neither Veber nor any of
its employees has a present or intended financial interest in the
Company, CBW, or Grass Valley.
Based upon and subject to the foregoing and after considering
such other matters as we deem relevant, we are of the opinion
that as of the date hereof the consideration to be paid by
Elmer's in the Proposed Transaction is fair, from a financial
point of view, to the holders of the Company's stock.
Very truly yours,
VEBER PARTNERS LLC
/s/ Gayle L. Veber
Gayle L. Veber, Managing Partner
<PAGE> Page 3 of 3
