SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 1999 or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________ to
_________________
Commission file number 0-14837
ELMER'S RESTAURANTS, INC.
(Exact name of registrant as specified in its charter)
OREGON ___________ 93-
0836824
(State or other jurisdiction of (I.R.S.
Employer
incorporation or organization)
Identification No.)
11802 S.E. Stark St.
Portland, Oregon 97216 (503) 252-
1485
(Address of principal executive offices) (Zip Code)
(Registrant's telephone
number,
including area code)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, no par value
___________
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of Registrant's knowledge,
in definitive proxy or information statement incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ______
Aggregate market value of Common Stock held by nonaffiliates of
the Registrant at June 10, 1999: $____________
For purposes of this calculation, officers and directors are
considered affiliates.
Number of shares of Common Stock outstanding at June 10, 1999:
1,586,229
Documents Incorporated by Reference
Part of Form 10-K into
Document which incorporated
-------- ----------------------
Proxy Statement for 1999 Annual Meeting
of Shareholders Part III
<PAGE>
TABLE OF CONTENTS
Item of Form 10-K Page
PART I...................................................... 1
Item 1. Business................................... 1
Item 2. Properties................................ 11
Item 3. Legal Proceedings......................... 13
Item 4. Submission of Matters to a Vote
of Security Holders....................... 13
Item 4(a). Executive Officers of the Registrant...... 13
PART II.................................................... 14
Item 5. Market for the Registrant's Common Equity
and Related Stockholder Matters........... 14
Item 6. Selected Financial Data................... 16
Item 7. Management's Discussion and Analysis
of Financial Condition and Results of
Operations .............. 17
Item 8. Financial Statements and Supplementary
Data...................................... 25
Item 9. Changes in and Disagreements with
Accountants on Accounting and Financial
Disclosure................................ 26
PART III................................................... 26
Item 10. Directors and Executive Officers of the
Registrant................................ 26
Item 11. Executive Compensation.................... 26
Item 12. Security Ownership of Certain Beneficial
Owners and Management..................... 26
Item 13. Certain Relationships and Related
Transactions.............................. 26
PART IV.................................................... 12
Item 14. Exhibits, Financial Statement
Schedules, and Reports on Form 8-K....... 27
SIGNATURES.................................................. 33
<PAGE>
PART I
Item 1. Business
General
The Company, located in Portland, Oregon, is a franchisor
and operator of full-service, family oriented restaurants under
the names "Elmer's Pancake & Steak House" and "Elmer's Colonial
Pancake & Steak House" and an operator of delicatessen
restaurants under the names "Ashley's" and "Richard's Deli and
Pub." The Company is an Oregon corporation and was incorporated
in 1983. Walter Elmer opened the first Elmer's restaurant in
Portland, Oregon in 1960, and the first franchised restaurant
opened in 1966. The Company acquired the Elmer's franchising
operation in January 1984 from the Elmer family. The Company now
owns and operates 11 Elmer's restaurants and franchises 18
Elmer's restaurants in six western states. The Company reports
on a fiscal year commencing April 1 and ending March 31 of the
following year.
Business Segment
The Company primarily operates in one business segment,
viz., restaurant operations. Information as to revenue, operating
profit, identifiable assets, depreciation and amortization
expense and capital expenditures for the Company's business
segment for fiscal 1999 is contained herein by reference to the
Company's consolidated financial statements.
Company-owned Elmer's restaurants are located in the Delta
Park section of Portland, Oregon; Beaverton, Gresham, Hillsboro,
Medford, Albany and Grants Pass, Oregon; Palm Springs,
California; Boise, Idaho; and Tacoma and Lynnwood, Washington.
The Company acquired five Ashley's restaurants on February 18,
1999. Two Ashley's are located in Bend, two are in Springfield,
and one is in Eugene, Oregon. The Company acquired four
Richard's Deli and Pub restaurants on March 31, 1999. Richard's
are located in Tigard, Aloha and two in Hillsboro, Oregon.
Recent Acquisitions and Developments
Effective February 18, 1999, 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 restricted common stock on
August 25, 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
operated by Grass Valley Ltd., Inc.
<PAGE>
Each CBW shareholder received 144.4507 shares of the Company's
restricted common 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
$1.75 million of the assumed debt and approximately $1.48 million
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 two
subsidiaries of the Company. The Company also used approximately
$1,000,000 to pay down debt assumed in the transaction.
Effective March 31, 1999, Company executed a stock exchange
agreement ("GVL Acquisition") with Grass Valley Ltd., Inc.
("GVL"), a closely held Oregon corporation, in a transaction in
which the Company acquired 100% of the outstanding stock of GVL
in consideration for the payment by the Company of the sum of
$110,000 in cash and the issuance of 209,620 restricted shares of
the Company's common stock to the GVL shareholders. GVL is now a
wholly owned subsidiary of the Company.
GVL is the owner and operator of four restaurants in Hillsboro,
Aloha, and Tigard, Oregon operating under the moniker of
Richard's Deli and Pub. The first Richard's Deli and Pub was
opened in August 1994 and all the restaurants are located in
leased retail space. The Company plans to continue operations at
all four locations in a substantially similar manner. The
Company's Management believes that it can leverage the
significant synergy that exists between the Richard's Deli and
Pubs and Ashley's Deli operations while accruing potentially
significant savings arising from the consolidation of back office
functions.
Each GVL shareholder received 1048.1 restricted shares of the
Company's common stock in exchange for each GVL share owned. The
Company's primary source of financing for the cash portion of the
acquisition was from working capital.
The business combinations under the Merger and GVL Acquisition
were accounted for under the purchase method. The Merger
transaction was accounted for as a reverse acquisition as the
shareholders of CBW received the larger portion (53.8%) of the
voting interests in the combined enterprise. (See the Company's
Consolidated Financial Statements incorporated herein for more
details). Accordingly, CBW was considered the acquirer for
accounting purposes and therefore, the Company's assets and
liabilities were recorded based upon their fair market value.
Management of the Company believes the Merger and GVL Acquisition
created a company with over 20 restaurants systemwide, making it
more competitive in the particular restaurant segments
represented and allowing the crossover of product promotions,
menu items, marketing strategies and restaurant images while
generating likely opportunities for the development of
<PAGE>
several brands targeting different consumer segments. Management
anticipates that the Merger and GVL Acquisition will also allow
the Company to achieve administrative and operational
efficiencies.
To the extent permitted by operating cash flow or external
financing sources, the Company intends to focus future growth
primarily in its existing markets of higher market penetration
("Core Markets") through strategic acquisitions, new restaurant
openings or through other growth opportunities. The Company will
also continue to seek to expand through existing and new
franchisees. From time to time, the Company may close or sell
restaurants or markets when determined by management and the
Board of Directors to be in the best interests of the Company.
Elmer's Pancake & Steak House
Restaurant Format and Menu. The Company franchises or
operates a total of 29 full-service, family-oriented restaurants,
with a warm, friendly atmosphere and comfortable furnishings.
Most of the restaurants are decorated in a home style with
fireplaces in the dining rooms. They are free standing
buildings, ranging in size from 4,600 to approximately 8,000
square feet with seating capacities ranging from 120 to 220. A
portion of the dining room in most restaurants may also be used
for private group meetings by closing it off from the public
dining areas. Thirteen of the restaurants have a lounge with
seating capacity ranging from 15 to 75. The normal hours of
operation are from 6 a.m. to 10 or 11 p.m. and to 12 midnight on
weekends in some restaurants with lounges.
Each restaurant offers full service, with a host or hostess
to seat guests and handle payments, wait staff to take and serve
orders, and additional personnel to clear and reset tables.
The menu offers an extensive selection of items for
breakfast, lunch and dinner. The Elmer's breakfast menu, which
is available all day, contains a wide variety of selections with
particular emphasis on pancakes, waffles, omelets, crepes and
other popular breakfast items. Each Elmer's restaurant makes all
its batters and compotes from scratch and prepares its fruit
sauces with fresh fruits when in season. The lunch menu includes
soups made from scratch, salads, french dips, hamburgers and
sandwiches. Customers at dinner may choose among steak, seafood,
chicken, and, in most restaurants, filet mignon and prime rib.
While most menu selections are standard to all Elmer's
restaurants, restaurants in different areas include on their
menus selections that appeal to local preferences. Breakfast and
lunch selections generally range in price from $1.85 to $7.25;
dinner selections generally range in price from $5.50 to $13.50.
A special children's menu is offered in most restaurants.
Ashley's and Richard's Deli and Pub
Restaurant Format and Menu. The Company operates a total of
five Ashley's restaurants and four Richard's Delis and Pubs.
They are substantially similar in design, size and menu. Seven
of the nine units are located in retail strip mall locations, one
is in a food court in a major indoor mall, and
<PAGE>
one is a free standing building. They range in size from 1,000
to 2,200 square feet with seating capacities ranging from 15 to
30. A portion of the dining room is also used for the sale of
Oregon lottery games. The normal hours of operation are from 7
a.m. to 10 p.m. and up to 2 a.m. for some restaurants or on
weekends.
Each restaurant offers deli-style hot and cold sandwiches,
soups, salads, and desserts and has a catering department. The
restaurants are approved retailers with the Oregon lottery and
offer all lottery games. Meal selections generally range in
price from $2.95 to $5.95. The catering operation offers small
to medium size food service and event support for business
meetings, outdoor barbecues, and special events.
The above brands provide a vehicle for market penetration
and unit growth, leveraging off the concept of broad appeal,
quick-turn meals and emphasis on service. In a typical market,
Ashley's restaurants and Richard's Delis and Pubs experience
competition from either other moderately-priced, casual dining
and walk-through restaurants or economy sandwich outlets.
Ashley's and Richards' differentiate themselves from economy deli
competitors by their full table and bar service, attentive wait
staff, lottery games, entertaining atmosphere, distinctive decor
and consistently high-quality meals.
Franchise Operations
In addition to the acquisition and development of additional
Company operated restaurants, the Company encourages the
strategic development of franchised restaurants in its existing
markets as well as potentially in certain additional states. The
primary criteria considered by the Company in the selection,
review and approval of prospective franchisees are the
availability of adequate capital to open and operate the number
of restaurants franchised and prior experience in operating full-
service restaurants. Under a franchise agreement, a franchisor
grants to a franchisee the right to operate a business in a
manner developed by the franchisor. The franchisee owns the
franchised operation independently from the franchisor and, in
effect, buys the right to use the franchisor's name, format, and
operational procedures. Franchisees benefit from a common
identification, standardized products, and the business
reputation and services that a franchisor may provide, such as
group advertising, management services, product enhancements, and
group buying programs. The franchisor is able to capitalize on
its business concept without, in many cases, having to invest
substantial capital for expanded operations.
Existing Franchisees. The existing franchise agreements
grant to franchisees the right to operate an Elmer's restaurant
in one specific location for 25 years, renewable generally for an
additional 25-year period. When they entered into franchising
agreements, the existing franchisees paid initial franchise fees
of up to $25,000 plus additional fees of up to $10,000 if the
restaurant had a lounge serving alcoholic beverages. Franchisees
pay monthly franchise royalty fees ranging from one to four
percent of the gross revenues of their restaurants. All but one
restaurant must contribute up to one percent of gross revenues to
a common advertising pool. The Company may terminate a franchise
agreement for several reasons including the franchisee's
bankruptcy or insolvency, default in the payment of indebtedness
to the Company or suppliers, failure to maintain standards set
forth in
<PAGE>
the franchise agreement or operations manual, continued material
violation of any safety, health or sanitation law, ordinance or
governmental rule or regulation or cessation of business.
Prospective Franchisees. Prospective new franchisees will
pay an initial franchise fee of $35,000. Initial franchise fees
are payable in cash at the execution of the franchise agreement.
Existing franchisees opening new franchised restaurants may pay a
lower initial franchise fee than new franchisees. For new
franchisees, the monthly franchise royalty fee is expected to be
four percent of the gross revenues of the restaurant, with a
minimum monthly fee of $500.00 A monthly advertising
contribution equal to one percent of the gross revenues of the
restaurant will be assessed. It has been the practice of the
Company in recent years to permit existing franchisees to open
new franchises under the royalty rate that applied to the
existing franchises owned by that franchise. See "Services to
Franchisees" below.
A prospective franchisee who assumes operation of a
previously unsuccessful franchised restaurant may be offered a
reduced initial franchise fee, deferred payment of the franchise
fee, or other concessions. Pursuant to certain area franchise
agreements, the Company will receive reduced initial franchise
fees and monthly royalty fees from additional restaurants that
may be opened in the areas covered by those agreements. See
"Area Franchise Agreements" below. In connection with the
acquisition of the Elmer's franchising operation in 1984, the
Company also granted Dale Elmer, a former director of the
Company, and members of the Elmer family the right to operate a
total of three additional restaurants at a franchise royalty fee
of two percent; no restaurants are being operated on this basis.
The Company estimates that construction costs for the
standard free-standing building range from approximately $860,000
to $1,060,000, with actual costs dependent upon local building
requirements and construction conditions, and further based on
configuration and parking requirements.
The cost of the land may vary considerably depending upon
the quality and size of the site, surrounding population density
and other factors. The cost of leasehold improvements and
restaurant equipment, including kitchen equipment, furniture, and
trade fixtures, is estimated by the Company to range from
approximately $375,000 to $500,000. Inventory and miscellaneous
items such as paper goods, food, janitorial supplies, and other
small wares are estimated initially to cost between approximately
$68,000 and $108,000.
There is no typical elapsed time from the signing of a
franchise agreement until a restaurant is open for business,
although it normally takes 120 days from the receipt of the
building permits to construct a new restaurant facility. Most
restaurants have opened within 12 months of the date of the
signing of the franchise agreement. Franchisees bear all costs
associated with the development and construction of their
restaurants. Although the Company has established criteria to
evaluate prospective franchisees, there can be no assurance that
franchisees will have the business abilities or access to
financial resources necessary to open the restaurants or that the
franchisees will successfully develop or operate restaurants in
their franchise areas in a manner consistent with the Company's
concepts and standards.
<PAGE>
The Company has added three franchises since August 1987.
The last currently operating franchise was added in November
1994.
Area Franchise Agreements. Under previous management, the
Elmer's franchising operation granted exclusive area franchise
agreements, whereby independent entities obtained the exclusive
rights to develop Elmer's restaurants within their respective
areas. Areas covered by these agreements are Clackamas County,
Oregon; Vancouver, Washington; and Ada and Canyon Counties,
Idaho. The area franchise agreements require the area franchisee
to share with the Company the initial fees and the franchise
royalty fees for each new restaurant in the area. The Company's
share of the initial fees ranges from $2,500 to $12,500 per
restaurant. There are two restaurants covered by area franchise
agreements. Under the area franchise agreements, the Company
reserves the right to approve each new restaurant franchisee.
The area franchise agreements grant the franchisees the right to
use the Company's name in the particular area and preclude the
Company from opening Company-owned or franchised restaurants in
the areas covered by the agreements. The Company does not intend
to enter into similar agreements in the future.
Services to Franchisees. The Company makes available to its
franchisees various programs and materials. The Company provides
several manuals to assist franchisees in ongoing operations,
including a comprehensive operations manual describing kitchen
operations, floor operations, personnel management, job
descriptions, and other matters. The Company has prepared a
recipe book for franchisees and maintains a complete file of
menus from all franchised restaurants. The Company has developed
and maintains a menu cost-control program and a labor cost-
control program at each of its Company-owned restaurants and has
developed and implemented a training manual and programs for all
positions within the restaurant. The Company is in the process of
updating the operations manual.
The Company provides both formal and informal ongoing
training. At least one two-day seminar is scheduled each year.
At the seminars, franchisees attend lectures by Company personnel
and guest speakers from the industry as well as participate in
group workshops discussing such topics as cost control, promotion
and food presentation.
The Company provides each franchisee with specifications for
menu items selected by the franchisee for inclusion on restaurant
menus. The Company, however, sells no food items or like
products to franchisees, except for certain minor supplies such
as guest checks, gift certificates, and children's menus. The
Company coordinates franchisees' purchases to obtain volume
discounts. Franchisees bear all cost involved in the operation
of their restaurants.
Periodic on-site inspections and audits are conducted to
ensure compliance with Company standards and to aid in
franchisees in improving their sales and profitability.
Company-owned Restaurants
The Company owns and operates 11 Elmer's restaurants, which
it acquired or built from 1984 to 1991, five Ashley's restaurants
acquired February 18, 1999, and four Richard's Deli and Pub
restaurants acquired March 31, 1999. The Company has owned and
operated an Elmer's restaurant
<PAGE>
located in the Delta Park section of Portland, Oregon since
January 1984. In August 1986, the Company opened a restaurant in
Tacoma, Washington. In January 1987, the Company began operation
of a restaurant in Lynnwood, Washington and assumed operation of
an Elmer's restaurant in Grants Pass, Oregon that was in bank
foreclosure. In fiscal 1988, the Company acquired from former
franchisees restaurants in Gresham, Albany, and Medford, Oregon;
and Boise, Idaho. In fiscal 1989, the Company purchased the land
and buildings for the Boise and Gresham restaurants and also
purchased, from a former franchisee, an additional restaurant in
Hillsboro, Oregon. In May 1989, the Company acquired a
franchised Elmer's restaurant in Palm Springs, California. In
July 1991, the Company acquired a franchised Elmer's restaurant
in Beaverton, Oregon.
As earlier discussed, the five Ashley's restaurants were
acquired in a merger with CBW, Inc. on February 18, 1999 (as
reported on a Current Report on Form 8-K filed March 5, 1999 and
amended on June 14, 1999). One restaurant in Springfield, Oregon
was opened in 1994 and the other four were opened in 1995. The
Company does not own any of the real estate. The four Richard's
Delis and Pubs were acquired in a purchase of the outstanding
stock of Grass Valley Ltd., Inc. on March 31, 1999 (as reported
on a Current Report on Form 8-K filed April 15, 1999 and amended
on June 14, 1999). The Company does not own any of the real
estate.
The Company and its franchisees coordinate the purchase of
their food, beverages and supplies from Company-approved and
other suppliers. Management monitors the quality of the food,
beverages and supplies provided to the restaurants. The Company
believes that its continued efforts over time have achieved cost
savings, improved food quality and consistency and helped
decrease volatility of food and supply costs for the restaurants.
All essential food and beverage products are available or, upon
short notice, could be made available from alternate qualified
suppliers. Therefore, management believes that the loss of any
one supplier would not have a material adverse effect on the
Company.
Employees
As of March 31, 1999, the Company employed 390 persons on a
full-time basis, of whom 13 were corporate office personnel and
377 were hourly restaurant personnel. At that date, the Company
also employed 135 part-time restaurant personnel. Of the 13
corporate employees, 6 are in upper management positions and the
remainder are professional and administrative or office
employees. Employees of franchised Elmer's restaurants are not
included in these figures. None of the Company's employees is
covered by collective bargaining agreements. The Company
considers its employee relations to be good. Most employees,
other than management and corporate personnel, are paid on an
hourly basis. The Company believes that it provides working
conditions and wages that compare favorably with those of its
competition.
Each Company-operated restaurant employs an average of
approximately 35 hourly employees, many of whom work part-time on
various shifts. The management staff of a typical restaurant
operated by the Company consists of a general manager, one
assistant manager and a shift manager. The Company has an
incentive compensation program for store managers that
<PAGE>
provides the store managers with a quarterly bonus based upon the
achievement of certain defined goals.
Trademarks and Service Marks
The Company believes its trademarks and service marks have
significant value and are important to its business. The Company
has registered the trademarks and service marks "Elmer's Pancake
& Steak House" and "Elmer's Colonial Pancake & Steak House" and
the Elmer's logo with the U.S. Patent and Trademark Office. The
service mark "Elmer's Colonial Pancake & Steak House" has also
been registered in certain states. It is the Company's policy to
pursue registration of its marks whenever possible and to oppose
any infringement of its marks.
The Company grants to each of its Elmer's restaurant
franchisees a nonexclusive right to use the trademarks and
service marks in connection with and at each franchise location.
Advertising and Marketing
Word-of-mouth advertising, new restaurant openings, and the
on-premises sale of promotional products have historically been
the primary methods of restaurant advertising. The Company
employs an advertising consultant to assist in projecting the
Elmer's restaurant concept to the general public in the Western
states, primarily through magazines, newspapers, and radio and
television commercials. The Company maintains a common
advertising pool with its franchisees to advertise Elmer's
restaurants. After production costs for the advertising campaign
have been paid out of the common pool, the remaining money is
used for advertising in the various local areas of the franchised
restaurants. The Company-owned Elmer's restaurants and all but
one of the franchised restaurants are required to participate by
contributing one percent of monthly gross revenues. At the
present time, the Company relies principally on word-of-mouth
advertising and catering exposure for advertising of Ashley's and
Richard's.
Generally, ongoing consumer research is employed on a
limited basis to track attitudes, brand awareness and market
share of not only the Company's customers, but also of its major
competitors' customers as well. This is vital in creating a
better understanding of the Company's short and long term
marketing strategies.
Competition
The restaurant industry is highly competitive with respect
to price, concept, quality and speed of service, location,
attractiveness of facilities, customer recognition, convenience
and food quality and variety and is often affected by changes in
the tastes and eating habits of the public, including changes in
local, regional or national economic conditions affecting
consumer spending habits, demographic trends and traffic
patterns, increases in the number, type and location of competing
restaurants, local and national economic conditions affecting
spending habits, and by population and traffic patterns. The
Company competes for potential franchisees with restaurant
franchisors, company-owned restaurants, chains and others. The
Company-owned Elmer's restaurants and the franchised Elmer's
restaurants compete for customers with restaurants from national
and regional
<PAGE>
chains as well as local establishments. Some of the Company's
competitors are much larger than the Company, having at their
disposal greater capital resources that can be devoted to
advertising, product development and new restaurants and greater
abilities to withstand adverse business trends. Increased
competition, discounting and changes in marketing strategies by
one or more of these competitors could have an adverse effect on
the Company's sales and earnings in the affected markets. In
general, there is active competition for management personnel,
capital and attractive commercial real estate sites suitable for
restaurants.
The Company believes that the principal competitive factors
in its favor for attracting both restaurant franchisees and
restaurant customers are Elmer's extensive menu, quality of food,
service, and reasonable prices.
Government Regulations
The restaurant industry generally, and each Company-operated
and franchised restaurant specifically, are subject to numerous
federal, state and local government regulations, including those
relating to the preparation and sale of food and those relating
to building, zoning, health, accommodations for disabled members
of the public, sanitation, safety, fire, environmental and land
use requirements; and, in some cases, state and local licensing
of the sale of alcoholic beverages and the state licensing of
gaming. The Company and its franchisees are also subject to
federal and state laws governing their relationship with
employees, including minimum wage requirements, accommodation for
disabilities, overtime, working and safety conditions and
citizenship/residency requirements. Federal and state
environmental regulations have not had a major effect on the
Company's operations to date. The Company has no material
contracts with the United States government or any of its
agencies.
The Company is subject to a number of state laws regulating
franchise operations and sales. For the most part, those laws
impose registration and disclosure requirements on the Company in
the offer and sale of franchises but, in certain cases, also
apply substantive standards to the relationship between the
Company and the franchisees, including limitations on
noncompetition provisions and on provisions concerning the
termination or nonrenewal of a franchise. Some states require
that certain materials be registered before franchises can be
offered or sold in that state. The Company is also subject to
Federal Trade Commission regulations covering disclosure
requirements and sales of franchises.
The failure to obtain or retain food licenses or approvals
to sell franchises, or an increase in the minimum wage rate,
employee benefit costs (including costs associated with mandated
health insurance coverage) or other costs associated with
employees could adversely affect the Company and its franchisees.
A mandated increase in the minimum wage rate was implemented in
1999.
<PAGE>
Item 2. Properties
Headquarters
The Company's corporate offices are located in Portland,
Oregon and consist of an office facility of approximately 5,000
square feet. Lease payments totaled $33,636 for fiscal 1999.
The lease expires November 30, 2000.
Company-Owned Restaurants
Company-Owned Properties. The Company owns the real
property upon which the following four Company-owned restaurants
are located. All of the properties are subject to encumbrances
in favor of lending institutions.
<TABLE>
<S> <C> <C>
Approximate Area
Location Site Restaurant
- -------- ---- ----------
Tacoma, Washington 1.3 acres 6,660 sq. ft.
Lynnwood, Washington 1 acre 6,500 sq. ft.
Gresham, Oregon 1 acre 5,670 sq. ft.
Boise, Idaho 1.3 acres 5,430 sq. ft.
</TABLE>
Leased Properties. The Company leases the property upon which
the following seven Corporate-owned restaurants are located.
Each lease contains specific terms relating to calculation of
lease payment, renewal, purchase options, if any, and other
matters.
<TABLE>
<S> <C> <C> <C>
Approximate Area
----------------
Elmer's Locations Site Restaurant Expiration
- ----------------- ---- ---------- ----------
Grants Pass, Oregon 1 acre 6,350 sq. ft. December 31,
2001
Hillsboro, Oregon 1.2 acres 6,350 sq. ft January 1, 2002
Medford, Oregon 1.25 acres 6,300 sq. ft. May 31, 2003
Albany, Oregon -- 5,460 sq. ft.
February 28, 2003
Palm Springs, California 1.3 acres 5,500 sq. ft. April 30, 2007
Portland, Oregon (Delta Park) 1.2 acres 6,350 sq. ft. July 31, 2006
Beaverton, Oregon -- 5,322 sq. ft. August 31, 2006
</TABLE>
<TABLE>
<S> <C> <C>
Ashley's Locations Sq Ft. Leased Through
- ------------------
Bend, Oregon (North) 1,000 12/31/00
Bend, Oregon (South) 1,400 8/31/03
Eugene, Oregon 1,700 9/30/00
Springfield, Oregon (Gateway) 921 1/31/01
Springfield, Oregon (Thurston) 1,200 4/1/02
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Richard's Locations
- -------------------
Aloha, Oregon 1,727 11/30/99
Hillsboro, Oregon (North) 1,092 8/31/01
Hillsboro, Oregon (South) 2,510 10/21/01
Tigard, Oregon 1,743 12/31/02
</TABLE>
The Company believes that its facilities are generally in good
condition and that they are suitable for their current uses. The
Company nevertheless engages periodically in construction and
other capital improvement projects designed to expand and improve
the efficiency of its facilities.
Item 3. Legal Proceedings
Not applicable.
Item 4. Submission of Matters to a Vote of Security
Holders
Not applicable.
Item 4(a). Executive Officers of the Registrant
As of June 10, 1999, the executive officers and other key
personnel of the Company were as set forth below.
<TABLE>
<S> <C> <C>
Name Age Position
- ---- --- --------
Bruce Davis 38 President
William Service 38 Chief Executive Officer
Jerry Scott 45 Vice President, Operations
Juanita Nelson 63 Secretary and Controller
</TABLE>
The executive officers of the Company are appointed annually
for one year and hold office until their successors are
appointed.
Executive Officers:
Bruce Davis has served as President and Chairman of Board of
Directors since August 1998. For more than five years prior to
joining the Company, Mr. Davis was President of three companies
engaged in the restaurant business: Jaspers Food Management,
Inc. (1993-1999), CBW, Inc. (1995-1999), and Oregon Food
Management, Inc. (1996-present).
<PAGE>
William Service has served as Chief Executive Officer and
Director since August 1998. For more than five years prior to
joining the Company, Mr. Service was the Chief Executive Officer
of three companies engaged in the restaurant business: Jaspers
Food Management, Inc. (1993-present), CBW, Inc. (1995-1999), and
Oregon Food Management, Inc. (1996-present).
Key Personnel:
Jerry Scott has served as Vice President, Operations since
August 1998. For more than five years prior to joining the
Company, Mr. Scott 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.
Juanita Nelson has served as Controller since March 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.
PART II
Item 5. Market for the Registrant's Common Equity and
Related Stockholder Matters
The Company's Common Stock is traded on the NASDAQ SmallCap
System, under the symbol "ELMS."
The following table sets forth the high and low reported
sales prices of the Common Stock in the NASDAQ SmallCap Market
for the fiscal year quarters indicated.
<TABLE>
<S> <C> <C> <C> <C>
Years Ended March 31
----------------------------------------------
1999 1998
----------------------------------------------
High Low High Low
---- --- ---- ---
1st Quarter $45/8 $2 3/4 $21/2 $21/6
2nd Quarter 57/8 35/8 31/8 2
3rd Quarter 5 1/4 315/16 4 1/2 27/8
4th Quarter 6 41/8 6 37/8
</TABLE>
Although the Common Stock is traded on the NASDAQ SmallCap
System, there is a relatively low trading volume and, at times,
limited or sporadic quotations.
<PAGE>
The Company has not paid or declared cash dividends on its
Common Stock. The Company intends to retain any future earnings
to finance growth and does not presently intend to pay dividends
or make distributions in cash other than the payment of cash in
lieu of functional shares in connection with stock splits, if
any, to the holders of Common Stock. Any future dividends will
be determined by the Board of Directors based on the Company's
earnings, financial condition, capital requirements, debt
covenants of other relevant factors.
As of June 29, 1999, the Company had 207 shareholders of
record.
Unregistered Sales Of Stock:
Sales of unregistered Common Stock made by the Company in
the last three fiscal years are as follows:
CBW Inc. acquired 705,000 restricted shares of the Common
Stock in the Company from Anita Goldberg and Rudolph Mazurosky on
August 25, 1998. The consideration paid by CBW, Inc. for the
Shares was $4,504,950. The shareholders of CBW, Inc. that
acquired the indirect beneficial ownership of the Company's
Common Stock as part of this transaction were William W. Service,
Bruce N. Davis, Thomas C. Connor, Corydon H. Jensen, Linda E.
Bolton (as Trustee under a Restated Trust Agreement dated
6/8/98), Ken Boettcher, Karen Brooks, Gregory Wendt and Donald W.
Woolley. The issuance was made pursuant to available exemptions
from the registration provisions of the Securities Act of 1933,
as amended (specifically, Section 4(2) of the Securities Act) and
relevant Blue Sky statutes. The shares are subject to transfer
restrictions and may only be transferred subject to compliance
with applicable federal and state securities laws.
Effective February 18, 1999, 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. In consideration for the issuance by the
Company of 770,500 new shares of the Company's restricted Common
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 restricted common stock on
August 25, 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). Each CBW shareholder received 144.4507 shares
of the Company's restricted Common 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. The issuances
were made pursuant to available exemptions from the registration
provisions of the Securities Act of 1933, as amended
(specifically, Section 4(2) of the Securities Act) and relevant
Blue Sky statutes. The shares are subject to transfer
restrictions and may only be transferred subject to compliance
with applicable federal and state securities laws.
Effective March 31, 1999, the Company paid the sum of
$110,000 in cash and issued 209,620 shares of Common Stock to the
shareholders of GVL, namely Gary Weeks and Richard Buckley, as
part of the GVL Acquisition (disclosed in Item 1 under the sub-
caption "Recent
<PAGE>
Developments and Acquisitions"). The issuances were made pursuant
to available exemptions from the registration provisions of the
Securities Act of 1933, as amended (specifically, Section 4(2) of
the Securities Act) and relevant Blue Sky statutes. The shares
are subject to transfer restrictions and may only be transferred
subject to compliance with applicable federal and state
securities laws.
Item 6. Selected Financial Data
The following selected financial data relating to the Company
should be read in conjunction with the Company's consolidated
financial statements and the related notes thereto, "Management's
Discussion and Analysis of Financial Condition and Results of
Operations," other financial information included herein, and
Elmer's Restaurants, Inc. consolidated financial statements. The
selected financial data set forth below for the Company as of
March 31, 1998 and 1999 and for each of the three years in the
period ended March 31, 1999 are derived from the audited
financial statements included elsewhere herein. The selected
financial data set forth below for the Company as of and for the
period from inception to March 31, 1996 and the year ended March
31, 1997 are derived from the financial statements not included
elsewhere herein.
<TABLE>
<CAPTION>
Elmer's Restaurants, Inc. and Subsidiaries
Selected Financial Data
for the year ended March 31,
<S> <C> <C> <C>
<C>
1999 1998 1997
1996
Revenues $11,952,728 $1,591,293
$875,199 $94,852
Net income (loss) 290,512 205,270
(40,971) (213,912)
Net income (loss) per share 0.35 0.27
(.05) (0.28)
Total assets 13,046,684 259,675
263,676 267,277
Long-term notes payable,
less current portion 5,703,539 50,000
245,754 275,385
Total liabilities 8,348,029 258,962
463,539 426,169
Total shareholder's equity
(deficit) 4,698,655 713
(199,863) (213,912)
</TABLE>
On August 25, 1998, CBW, Inc. ("CBW") acquired a controlling
interest in the then outstanding stock of Elmer's. On February
18, 1999, CBW merged with and into Elmer's. These transactions
have been accounted for as a purchase of Elmer's by CBW and,
accordingly a new basis of accounting, based on fair values, was
established for the assets and liabilities of Elmer's.
Subsequent to the acquisition on August 25, 1998, the Company's
financial statements reflect the combined results of operations
and financial position of CBW and Elmer's based on the new basis
of accounting for Elmer's and the historical cost basis of CBW.
The results of operations for the year ended March 31, 1999 also
reflect a minority interest in the earnings of the Company
representing the separate 46.2% separate public ownership in
Elmer's from August 25, 1998 through February 17, 1999. The
financial position at March 31, 1999 also reflects the
acquisition of GVL on that date. Prior to August 25, 1998, the
financial statements of the Company include only the results of
operations, financial position and cash flows of CBW which began
operations on June 16, 1995.
<PAGE>
New Accounting Pronouncements
New accounting pronouncements are discussed in Note 1 of
Notes to Consolidated Financial Statements.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The following discussion should be read in conjunction with
the "Selected Historical Financial Data" and the financial
statements of the Company and the accompanying notes thereto
included elsewhere herein. Certain information discussed below
may constitute forward-looking statements within the meaning of
the federal securities laws. Although the Company believes that
the expectations reflected in such forward-looking statements are
based upon reasonable assumptions, it can give no assurance that
its expectations will be achieved. Forward-looking information
is subject to certain risks, trends and uncertainties that could
cause actual results to differ materially from projected results.
Among those risks, trends and uncertainties are the general
economic climate, costs of food and labor, consumer demand,
interest rate levels, restrictions imposed by the Company's debt
covenants, management control, availability of supplies, the
availability of financing and other risks associated with the
acquisition, development and operation of new and existing
restaurants. This list of risks of uncertainties is not
exhaustive.
Overview
On August 25, 1998, CBW, Inc. purchased 53.8% of Elmer's
Restaurants, Inc. then outstanding common stock from its then
president and chairman, Ms. Anita Goldberg, and her brother and
director, Rudolph Mazurosky. On February 18, 1999, Elmer's
Restaurants, Inc. merged with CBW, Inc.
In accordance with generally accepted accounting principles,
these transactions have been accounted for as a purchase of
Elmer's Restaurants, Inc. by CBW, Inc. and accordingly a new
basis of accounting, based on fair values, was established for
the assets and liabilities of Elmer's Restaurants, Inc. The
consolidated financial statements include the accounts of CBW,
Inc. for the years ended March 31, 1998 and 1997 (rather than the
previously reported results of Elmer's) and include the accounts
of CBW, Inc. for the year ended March 31, 1999 and of Elmer's
Restaurants, Inc. for the period August 31, 1998 through March
31, 1999 (with a minority interest in the income through February
17, 1999 representing the 46.2 % separate public ownership), as
well as the assets and liabilities of Grass Valley Ltd., Inc.,
which was acquired as of March 31, 1999.
Because of the significance of these transactions, the
Company believes that a discussion and analysis of the Company's
results of operations on a pro forma basis, which include results
of operations of Elmer's Restaurants, Inc. and Grass Valley Ltd.,
Inc. provides a more meaningful comparison than the discussion
and analysis of actual results of operations which, prior to
these
<PAGE>
transactions, only includes the results of operations of CBW,
Inc. and supplements the following highlights of historical
results.
Highlights of historical results
The Company reported net income of approximately $290,500,
or $.35 per share for the year ended March 31, 1999, on sales of
approximately $11,953,000. After taking into account the pro
forma income tax provision as if the Company had been a taxable
company for the entire year, the Company reported net income, net
of pro forma income tax provision, of approximately $264,000 or
$.32 per share for the year ended March 31, 1999 compared to
approximately $133,000 of net income, net of pro forma income tax
provision, or $.17 per share for the year ended March 31, 1998.
The increase in net income, net of pro forma income tax
provision, is primarily attributable to the earnings of Elmer's
Restaurants, Inc. of approximately $301,000 for the period from
August 31, 1998, less the minority interest in income of
approximately $136,000 representing the 46.2% separate public
ownership of Elmer's Restaurants, Inc. from August 31, 1998 to
February 17, 1999.
During the fourth quarter of the Company's fiscal year,
Elmer's Restaurants, Inc. executed an option (which it acquired
at the time it merged with CBW, Inc.) to purchase Grass Valley
Ltd., Inc. ("GVL"), the operator of four restaurants in the
Portland area under the name Richard's Deli and Pub. This
acquisition was completed on the last day of the Company's fiscal
year and is reflected in the Company's March 31, 1999 balance
sheet. There are no operating results from the GVL acquisition
reflected in the Company's actual results of operations for the
year ended March 31, 1999.
During the year ended March 31, 1999, total assets increased
$12.8 million to $13 million. This increase is due primarily to
the assets related to Elmer's Restaurants, Inc. totaling
approximately $11.5 million and the acquisition of Grass Valley
Ltd., Inc. for approximately $1.2 million. At March 31, 1999,
total shareholders' equity increased $4.7 million primarily as a
result of the fair market value of the 46.2% separate public
ownership of Elmer's Restaurants, Inc. at the date of merger
totaling approximately $2.8 million, the $1.1 million approximate
fair value of stock issued in connection with the acquisition of
Grass Valley Ltd., Inc. and a $600,000 capital contribution by
the CBW, Inc. shareholders.
Pro Forma Results of Operations
As discussed above, the Company believes that discussion and
analysis of the Company's results of operations on a pro forma
basis, which include CBW, Inc. and Grass Valley Ltd., Inc.,
provides a more meaningful comparison than the discussion and
analysis of reported actual results of operations. The following
discussion and analysis presents the Company's results of
operations for the years ended March 31, 1999, 1998 and 1997, as
if the merger of CBW, Inc. and the acquisition of Grass Valley
Ltd., Inc., had occurred at the beginning of the periods after
giving effect to pro forma adjustments, including amortization of
goodwill, depreciation, interest expense, and related income tax
effects.
<PAGE>
The pro forma information is provided for illustrative
purposes and is not necessarily indicative of the combined
results of operations that would have actually occurred for such
periods nor does it represent a forecast of results of operations
for any future periods.
The following is a summary of the Company's pro forma
results of operations:
(Dollar amounts in thousands except per share data)
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Year Ended
------------------------------------
- -----------------------------
March 31, 1999 March 31, 1998
March 31, 1997
------------------- --------------
- ----- ----------------------
Percent of
Percent of Percent of
Amount Revenues Amount
Revenues Amount Revenues
------ ---------- ------- ----
- ------ ------- ----------
Pro forma revenue $21,232 100.0% $19,763
100.0% $17,722 100.0%
Pro forma restaurant
costs and expenses 14,721 69.3 13,566
68.6 12,328 69.6
Pro forma general and
administrative expenses 4,861 22.9 4,678
23.7 4,315 24.3
Pro forma operating income 1,650 7.8 1,519
7.7 1,074 6.1
Pro forma non operating
income (expense) (508) (2.4) (618)
(3.1) (654) (3.7)
Pro forma net income 751 3.5 595
3.0 263 1.5
Pro forma earnings per share $0.47 $0.38
$0.17
Pro forma weighted average
shares outstanding 1,586,229 1,586,229
1,586,229
</TABLE>
<TABLE>
<CAPTION>
Pro Forma Revenue
(Dollar amounts in thousands except per share data)
<S> <C> <C> <C> <C> <C> <C>
Year Ended
--------------------------------------
- -----------------------------
March 31, 1999 March 31, 1998
March 31, 1997
------------------ --------------
- ----- ---------------------
Percent of
Percent of Percent of
Amount Revenues Amount
Revenues Amount Revenues
------ --------- ------ ----
- ------ ------ ----------
Restaurant operations:
Restaurant sales $18,255 86.0% $17,029
86.2% $15,955 90.0%
Lottery 2,354 11.1 2,074
10.5 1,112 6.3
------- ----- ------- -
- --- ------- ----
20,609 97.1 19,103
96.7 17,067 96.3
Franchise operations 623 2.9 660
3.3 655 3.7
------- ----- ------ -
- --- ------ ----
Total pro forma revenue $21,232 100.0% $19,763
100.0% $17,722 100.0%
======= ====== =======
====== ======= ======
</TABLE>
<PAGE>
Pro Forma Revenues. Pro forma revenues for the year ended March
31, 1999 were 7.4% greater than the comparable period in 1998,
primarily as a result of increased same store restaurant sales of
7.2% and an increase in pro forma lottery revenues of 13.5%. Pro
forma revenues for the year ended March 31, 1998 were 11.9%
greater than the comparable period in 1997 due to an increase in
restaurant sales of 7.4% and lottery revenues of 86.5%. The
Company anticipates further improvement in same store sales as it
roles out a new menu design in its second quarter and an ongoing
"outsert" menu program throughout fiscal year 2000.
Pro Forma Restaurant Costs and Expenses. As a percent of pro
forma revenues, pro forma food, beverage and supply costs were
28.8% in 1999 compared to 27.0% in 1998 and 26.0% in 1997. Pro
forma labor was 31.5% of pro forma total revenue in 1999 compared
to 31.9% in 1998 and 32.8% in 1997. Pro forma occupancy and
depreciation and amortization expenses totaled 9.0% of pro forma
revenue in 1999 compared to 9.7% in 1998 and 10.7% in 1997. The
increase in pro forma food, beverage and supply cost as a
percentage of pro forma revenue in 1999 over 1998 is principally
a result of the introduction of the new "outsert" menu items and
in-store training, promotions and development. The reduction in
pro forma labor as a percentage of pro forma revenues in 1999 is
driven by a 1% reduction in labor hours, particularly in the
later half of the year. The Company's reduction in pro forma
labor as a percentage of pro forma revenues in 1999 compared to
1998 occurred while Oregon's minimum wage rate increased 9.1% on
January 1, 1998 (from $5.50 to $6.00 an hour) and another 8.3%
increase on January 1, 1999 (from $6.00 to $6.50 per hour).
Washington's minimum wage rate increased 10.7% on January 1, 1999
from $5.15 to $5.70. The Company is aware that a further 14%
Washington state minimum wage increase (to match Oregon's at
$6.50) is scheduled for January 1, 2000. The Company is not
aware of any further state minimum wage increases scheduled in
states which the Company operates restaurants. The reduction in
pro forma occupancy and depreciation and amortization expenses as
a percentage of pro forma revenues in 1999 and in 1998 is
primarily due to the increase in pro forma revenues.
Pro Forma General and Administrative Expenses. Pro forma general
and administrative expenses were 22.9% of total pro forma revenue
in 1999 compared to 23.7% in 1998 and 24.3% in 1997. The
reduction as a percentage of pro forma revenues is the result of
increased management attention to overhead cost minimization,
particularly in the year ended March 31, 1999.
Pro Forma Non Operating Income (Expenses). This primarily
relates to pro forma net interest expenses which were 2.5% of
total pro forma revenues in 1999 compared to 3.1% in 1998 and
3.6% for 1997. The reduction in pro forma net interest expense
as a percentage of pro forma revenues is the result of scheduled
amortization principal payments and the 7.4% increase in
revenues.
Liquidity and Capital Resources
As of March 31, 1999, the Company had cash and equivalents
of approximately $604,000 representing an increase of
approximately $562,000. The increase resulted from cash provided
by operations totaling approximately $694,000, cash provided by
financing activities of
<PAGE>
approximately $3,503,000 and cash used in investing activities of
approximately $3,635,000. Cash provided by financing activities
was primarily net proceeds from borrowings of approximately
$2,948,000 and capital contributions of $600,000. Cash used in
investing activities was primarily $3,438,000 used to finance the
business acquisitions, net of cash acquired. The significant
increase in other current assets and other current liabilities is
primarily the result of the merger of CBW, Inc. and Elmer's
Restaurants, Inc. and the acquisition of Grass Valley Ltd., Inc.
The Company's primary liquidity needs arise form debt
service on indebtedness incurred in connection with the merger of
CBW, Inc., operating lease requirements and the funding of
capital expenditures. As of March 31, 1999, the Company had
outstanding indebtedness for borrowed money of $2.6 million under
a term loan facility and $2.4 million real estate loan facilities
with Wells Fargo Bank and $1.25 million under a term loan
facility with Eagle's View Management, assumed at the time of the
merger with CBW, Inc. The Wells Fargo loans have a weighted-
average maturity of 9 years, bear interest at an average of 7.9%,
require monthly payments of principal and interest, are
collateralized by substantially all of the assets owned by
Elmer's Restaurants, Inc. and impose certain financial
restrictions and covenants, the most restrictive of which,
require the Company to maintain a maximum of total liabilities,
excluding subordinated debt, to tangible net worth plus
subordinated debt of 5.5 to 1.0. The Company was in compliance
with this covenant at March 31, 1999. In addition, effective
September 30, 1999, and thereafter on a trailing four quarter
basis as of the end of each fiscal quarter, the Company will be
required to maintain a ratio of cash generation to total interest
expense plus the prior period current maturities of long-term
debt of at least 2.25 to 1.0. The Company also has available a
$250,000 line of credit with Wells Fargo Bank through September
1, 2000. The Eagle's View Management loan has a maturity of
approximately 5 years, an interest rate of 12%, requires monthly
payments of interest only, and is collateralized by a second
position on substantially all the assets owned by Elmer's
Restaurants, Inc. and does not impose financial covenants upon
the Company.
The Company's primary source of liquidity during the year
was the operation of the restaurants, franchise fees earned from
its franchisees, internal cash and borrowings as discussed above.
In the future, the Company's liquidity and capital resources
will primarily depend on the operations of Elmer's Restaurants,
Inc., CBW, Inc. and Grass Valley Ltd., Inc. which, under the
provisions of the Company's loan agreements, would permit, under
certain conditions, distributions and dividends to the Company's
shareholders and early reduction of the Eagle's View Management
indebtedness. Elmer's Restaurants, Inc., CBW, Inc. and Grass
Valley Ltd., Inc., like most restaurant businesses, are able to
operate with nominal or deficit working capital because sales are
for cash and inventory turnover is rapid. Renovation and/or
remodeling of existing restaurants is either funded directly from
available cash or, in some instances, is financed through outside
lenders. Construction or acquisition of new restaurants is
generally, although not always, financed by outside lenders.
Construction or acquisition of new restaurants is generally,
although not always, financed by outside lenders.
<PAGE>
The Company believes that it will continue to be able to
obtain adequate financing on acceptable terms for new restaurant
construction and acquisitions and that cash generated from
operations will be adequate to meet its financial needs and to
pay operating expenses for the foreseeable future, although no
assurances can be given.
Effects of Year 2000
The Company has completed its assessment of internal systems
and has concluded that its hardware and software are Year 2000
compliant. The Company has concluded that it will not be
necessary to replace its retail point of sale hardware and that,
based on information available at this time, the remaining costs
to implement the Year 2000 readiness program will not be
material.
Communication with respect to Year 2000 issues with the
Company's suppliers is ongoing. While not expected, the Company
may experience delays in receipt of product, which could
adversely affect sales and earnings. The Company cannot
currently estimate to what extent future operating results might
be adversely affected by the possible failure of these third
parties to successfully address their Year 2000 issues. However,
the Company's program includes actions designed to identify and
minimize where possible, any third party exposure. The
distribution centers that deliver products to the restaurants
maintain an adequate inventory to supply items for approximately
4 weeks. If suppliers are unable to deliver product to the
distribution centers due to Year 2000 or other plant
malfunctions, alternative suppliers are currently being
identified that could deliver product that matches the Company's
specifications.
There can be no assurance that additional costs will not be
incurred, or that the objective of the program will be achieved.
However, the Company continues to monitor activities related to
the program designed to ensure Year 2000 readiness.
Inflation
Certain of the Company's operating costs are subject to
inflationary pressures, of which the most significant are food
and labor costs. As of March 31, 1999, a significant percentage
of the Company's employees were paid wages equal to or based on
the state minimum hourly wage rates. Economic growth that would
reduce unemployment or make more jobs available in higher paying
industries could directly affect the Company's labor costs. The
Company believes that inflation has not had a material impact on
its results of operations for fiscal 1997, fiscal 1998 or fiscal
1999. Substantial increases in costs could have a significant
impact on the Company and the industry. If operating expenses
increase, management believes it can recover increased costs by
increasing prices to the extent deemed advisable considering
competition.
Seasonality
The seasonality of restaurant sales due to consumer spending
habits can be significantly affected by the timing of
advertising, competitive market conditions and weather related
events.
<PAGE>
While restaurant sales for certain quarters can be stronger, or
weaker, there is no predominant pattern.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
Special Note Regarding Forward-Looking Statements:
CERTAIN STATEMENTS IN THIS FORM 10-K UNDER "ITEM 1. BUSINESS,"
"ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS" AND ELSEWHERE IN THIS FORM
10-K CONSTITUTE "FORWARD-LOOKING STATEMENTS" WHICH WE BELIEVE ARE
WITHIN THE MEANING OF THE SECURITIES ACT OF 1933, AS AMENDED AND
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. SUCH FORWARD-
LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS,
UNCERTAINTIES, AND OTHER FACTORS WHICH MAY CAUSE THE ACTUAL
RESULTS, PERFORMANCE, OR ACHIEVEMENTS OF ELMER'S RESTAURANTS,
INC. (INDIVIDUALLY AND COLLECTIVELY WITH ITS SUBSIDIARIES, HEREIN
THE "COMPANY") TO BE MATERIALLY DIFFERENT FROM ANY FUTURE
RESULTS, PERFORMANCE, OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY
SUCH FORWARD-LOOKING STATEMENTS. SUCH FACTORS INCLUDE, AMONG
OTHERS, THE FOLLOWING: GENERAL ECONOMIC AND BUSINESS CONDITIONS;
THE IMPACT OF COMPETITIVE PRODUCTS AND PRICING; SUCCESS OF
OPERATING INITIATIVES; DEVELOPMENT AND OPERATING COSTS;
ADVERTISING AND PROMOTIONAL EFFORTS; ADVERSE PUBLICITY;
ACCEPTANCE OF NEW PRODUCT OFFERINGS; CONSUMER TRIAL AND
FREQUENCY; AVAILABILITY, LOCATIONS, AND TERMS OF SITES FOR
RESTAURANT DEVELOPMENT; CHANGES IN BUSINESS STRATEGY OR
DEVELOPMENT PLANS; QUALITY OF MANAGEMENT; AVAILABILITY, TERMS AND
DEPLOYMENT OF CAPITAL; THE RESULTS OF FINANCING EFFORTS; BUSINESS
ABILITIES AND JUDGMENT OF PERSONNEL; AVAILABILITY OF QUALIFIED
PERSONNEL; FOOD, LABOR AND EMPLOYEE BENEFIT COSTS; CHANGES IN, OR
THE FAILURE TO COMPLY WITH, GOVERNMENT REGULATIONS; IMPACT OF
YEAR 2000; CONTINUED NASDAQ LISTING; WEATHER CONDITIONS;
CONSTRUCTION SCHEDULES; AND OTHER FACTORS REFERENCED IN THIS FORM
10-K.
The Company owned no derivative financial instruments at March
31, 1999, 1998 or 1997. The Company holds no financial
instruments of any kind for trading purposes.
Certain of the Company's outstanding financial instruments
are subject to market risks, including interest rate risk. Such
financial instruments are not currently subject to foreign
currency risk or commodity price risk.
<PAGE>
The Company's major market risk exposure is potential loss
arising from changing interest rates and the impact of such
changes on its long-term debt. Of the Company's long-term debt
outstanding at March 31, 1999, $1.3 million principal amount was
accruing interest at a variable rate. A rise in prevailing
interest rates could have adverse effects on the Company's
financial condition and results of operations.
<PAGE>
Item 8. Financial Statements and Supplementary Data
The information required by this item is included on pages F-1 to
F-15 of this Report.
Elmer's Restaurants, Inc. and Subsidiaries
Consolidated Financial Statements
as of March 31, 1998 and 1999 and for the years ended March 31,
1997, 1998 and 1999
<PAGE>
Report of Independent Accountants
----------------------------------
To the Board of Directors and Shareholders
Elmer's Restaurants, Inc.
In our opinion, the accompanying consolidated balance sheets and
the related consolidated statements of operations, changes in
shareholders' equity (deficit) and of cash flows present fairly,
in all material respects, the financial position of Elmer's
Restaurants, Inc. and Subsidiaries (the Company) at March 31,
1998 and 1999, and the results of their operations and their cash
flows for each of the three years in the period ended March 31,
1999 in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion
on these financial statements based on our audits. We conducted
our audits of these statements in accordance with generally
accepted auditing standards that require that we plan and perform
the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Portland, Oregon
May 21, 1999
<PAGE>
Elmer's Restaurants, Inc. and Subsidiaries
Consolidated Balance Sheets
March 31, 1998 and 1999
<TABLE>
<S> <C> <C>
March 31,
---------------------
ASSETS 1998 1999
------- --------
Current assets:
Cash and cash equivalents $42,189 $603,572
Accounts receivable 14,736 280,979
Inventories 79,954 372,584
Prepaid expenses and other 4,860 167,177
Income taxes receivable - 107,232
------- --------
Total current assets 141,739 1,531,544
Property, buildings and
equipment, net 103,496 6,882,822
Intangible assets, net of accumulated
amortization of $48,440 - 4,503,417
Other assets 14,440 128,901
-------- -----------
Total assets $259,675 $13,046,684
======== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable, current portion $10,731 $572,399
Accounts payable 130,883 839,781
Accrued expenses 67,348 165,140
Accrued payroll and related taxes - 294,170
------- -------
Total current liabilities 208,962 1,871,490
Notes payable, net of
current portion 50,000 5,703,539
Deferred income taxes - 773,000
------- ---------
Total liabilities 258,962 8,348,029
-------- ---------
Commitments and contingencies
Shareholders' equity:
Preferred stock, no par value;
500,000 shares authorized, none issued
Common stock, no par value;
10,000,000 shares authorized,
770,500 shares and 1,586,229
shares outstanding March 31,
1998 and 1999, respectively 295,020 4,746,520
Accumulated deficit (294,307) (47,865)
--------- ----------
Total shareholders' equity 713 4,698,655
-------- ----------
Total liabilities and
shareholders' equity $259,675 $13,046,684
======== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE>
Elmer's Restaurants, Inc. and Subsidiaries
Consolidated Statements of Operations
for the years ended March 31, 1997, 1998 and 1999.
<TABLE>
<S> <C> <C> <C>
Years ended March 31,
1997 1998 1999
Revenues $875,199 $1,591,293 $11,952,728
-------- ---------- -----------
Costs and expenses:
Food, beverage and
supplies 176,324 564,115 3,406,602
Labor and related 377,263 420,427 3,735,043
Occupancy costs 130,991 138,058 741,078
Depreciation and
amortization 33,674 56,263 341,170
General and
administrative
expenses 158,910 172,312 2,683,534
-------- --------- ----------
877,162 1,351,175 10,907,427
------- --------- ----------
Income (loss)
from operations (1,963) 240,118 1,045,301
Other income (expense):
Interest income 38 48 18,545
Interest expense (23,411) (34,896) (458,804)
Gain (loss) on
disposal of assets (15,635) - 6,477
-------- -------- ---------
Income (loss)
before provision
for income taxes (40,971) 205,270 611,519
Income tax provision - - (185,000)
-------- ------- ---------
Income (loss)
before minority
interest (40,971) 205,270 426,519
Minority interest - - (136,007)
-------- ------- ---------
Net income
(loss) $(40,971) $205,270 $290,512
========= ======== ========
Net income (loss)
per share $(.05) $.27 $.35
======== ======== ========
Weighted-average number
of shares outstanding 770,500 770,500 838,583
======= ======= =======
(Unaudited Pro Forma Information)
Income (loss) before
benefit (provision)
for income taxes $(40,971) $205,270 $611,519
Benefit (provision)
for income taxes 9,000 (72,000) (211,000)
Minority interest - - (136,007)
-------- --------- ---------
Pro forma net
income (loss) $(31,971) $133,270 $264,512
========= ======== ========
Pro forma net income
(loss) per share $(.04) $.17 $.32
========= ======== ========
Weighted-average number
of shares outstanding 770,500 770,500 838,583
======== ======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE>
Elmer's Restaurants, Inc. and Subsidiaries
Consolidated Statements of Changes in Shareholders' Equity
(Deficit)
for the years ended March 31, 1997, 1998 and 1999
<TABLE>
<S> <C> <C> <C>
Retained
Earnings
Common Stock (Accumulated
--------------------- Deficit)
Shares Amount
------ ------ ------------
Balance, March 31,
1996 770,500 $55,020 $(213,912)
Net loss - - (40,971)
------- ------- ---------
Balance, March 31,
1997 770,500 55,020 (254,883)
Debt to equity
conversion - 240,000 -
Dividend distributions - - (244,694)
Net income - - 205,270
------- ------- ---------
Balance, March 31,
1998 770,500 295,020 (294,307)
Capital contributions - 600,000 -
Dividend distributions - - (44,070)
Issuance of common stock
in conjunction with
merger (Note 8) 606,109 2,803,000 -
Issuance of common stock
in conjunction with
acquisition of Grass
Valley Ltd., Inc.
(Note 8) 209,620 1,048,500 -
Net income - - 290,512
------- --------- ---------
Balance, March
31, 1999 1,586,229 $4,746,520 $(47,865)
========= ========== =========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE>
Elmer's Restaurants, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
for the years ended March 31, 1997, 1998 and 1999
<TABLE>
<S> <C> <C> <C>
Years ended March 31,
-----------------------------
1997 1998 1999
---- ---- ----
Cash flows from operating
activities:
Net income (loss) $(40,971) $205,270 $290,512
Adjustments to reconcile net
income (loss) to net cash
provided by (used in)
operating activities:
Depreciation and
amortization 33,674 56,263 341,170
Deferred income taxes - - (7,000)
Gain (loss) on disposition
of assets 15,635 - (6,477)
Minority interest in
earnings of consolidated
subsidiary - - 136,007
Changes in assets
and liabilities:
Receivables (1,714) (13,022) 122,076
Inventories (38,938) (27,835) 29,279
Prepaid expenses (4,886) 2,498 11,402
Other assets (11,245) (1,525) (41,559)
Accounts payable and
accrued expenses 23,841 23,606 (51,156)
Income taxes - - (130,119)
------- ------ ---------
Net cash provided by
(used in) operating
activities (24,604) 245,255 694,135
--------- ------- -------
Cash flows from investing activities:
Additions to property,
buildings and equipment (6,093) (13,657) (217,515)
Proceeds from sale of assets - - 20,000
Payment for business acquisition,
net of cash acquired - - (3,438,127)
------ ------- ----------
Net cash used in
investing activities (6,093) (13,657) 3,635,642)
------- ------- ----------
Cash flows from financing activities:
Proceeds from notes payable 86,144 7,271 7,092,500
Payments on notes payable (72,615) (1,214)(4,145,540)
Capital contributions - 5,760 600,000
Dividend distributions - (244,694) (44,070)
------- -------- ----------
Net cash provided by
(used in) financing
activities 13,529 (232,877) 3,502,890
------- --------- ---------
Net increase (decrease)
in cash and cash
equivalents (17,168) (1,279) 561,383
Cash and cash equivalents,
beginning of year 60,636 43,468 42,189
------- ------- -------
Cash and cash equivalents,
end of year $43,468 $42,189 $603,572
======= ======= ========
Supplemental disclosures of
cash flow information:
Conversion of debt to equity $ - $234,240 $ -
======= ======== ========
Cash paid for:
Interest $23,411 $34,896 $422,023
======= ======= ========
Taxes $ - $ - $467,619
======= ======= ========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE>
Elmer's Restaurants, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
1. The Company and Summary of Significant Accounting Policies:
The Company and Basis of Presentation
Elmer's Restaurants, Inc. and Subsidiaries (the Company), an
Oregon corporation, owns and operates eleven Elmer's Pancake &
Steak House restaurants, five Ashley's Deli restaurants, four
Richard's Deli and Pub restaurants and sells franchises that give
franchisees the right to operate under the name Elmer's Pancake &
Steak House for a specific restaurant or region. Franchises and
Company owned stores are located throughout the western United
States.
On August 25, 1998, CBW, Inc. (CBW) acquired a controlling
interest (705,000 shares representing 53.8% of the outstanding
stock) of the then outstanding common stock of Elmer's
Restaurants, Inc. (Elmer's) for $4,500,000. On February 18,
1999, CBW merged with and into Elmer's. Pursuant to the terms of
the merger, Elmer's Restaurants, Inc. and Subsidiaries was the
surviving corporation. The merger was consummated by Elmer's
issuance of 770,500 shares of Elmer's restricted common stock to
CBW shareholders in exchange for the 705,000 shares previously
acquired. In connection with the merger, Elmer's assumed
approximately $4 million in debt owed by CBW arising from CBW's
acquisition of the controlling block of stock on August 25, 1998.
These transactions have been accounted for as a purchase of
Elmer's by CBW, and accordingly a new basis of accounting, based
on fair values, was established for the assets and liabilities of
Elmer's. As a result of these transactions, the financial
statements for the years ended March 31, 1997 and 1998 include
the results of operations of CBW rather than the previously
reported results of Elmer's. Elmer's entered into a new
financing agreement whereby it borrowed funds to refinance
existing debt and debt of CBW totaling approximately $1,750,000.
Elmer's also used existing cash to reduce debt by approximately
$1,000,000. Each CBW shareholder received 144.4507 shares of
Elmer's restricted common stock for every CBW share owned.
On March 31, 1999, the Company acquired Grass Valley Ltd., Inc.
(GVL), which is the owner and operator of four delicatessen-style
restaurants operating under the name of Richard's Deli and Pub
located in Oregon (see Note 8).
The consolidated financial statements include the accounts of CBW
for the years ended March 31, 1997, 1998 and 1999, and Elmer's
from August 31, 1998 (the results of operations of Elmer's from
August 25, 1998 to August 31, 1998 is not material to the results
of operations of the Company), as well as the consolidated
balance sheet of its wholly-owned subsidiary, Grass Valley Ltd.,
Inc. at March 31, 1999. All material intercompany accounts and
transactions have been eliminated. The minority interest
included in the financial statements represents the 46.2%
separate public ownership in Elmer's from August 31, 1998 through
February 17 1999.
<PAGE>
1. The Company and Summary of Significant Accounting Policies,
Continued:
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Disclosure of Fair Value of Financial Instruments
The carrying amounts of financial instruments including cash and
cash equivalents and accounts receivable approximated fair value
as of March 31, 1998 and 1999 because of the relatively short
maturity of these instruments. The carrying value of notes
payable approximated fair value as of March 31, 1998 and 1999
based upon interest rates and terms available for the same or
similar loans.
Cash and Cash Equivalents
The Company considers all short-term, highly-liquid investments
with a maturity of three months or less when purchased to be cash
equivalents.
The Company invests its excess cash in interest bearing deposits
with major banks and in U.S. Treasury securities. These
investments generally mature within 90 days and are therefore
subject to minimal risk. Management routinely reviews these
investments in order to limit the amount of credit exposure to
any one financial institution.
Inventories
Inventories of food, beverages and restaurant supplies are stated
at the lower of first-in, first-out cost or market.
Property, Buildings and Equipment
Property, buildings and equipment are stated at cost. Cost of
property, buildings and equipment reflect purchase accounting
adjustments related to the acquisition of 53.8% of the
outstanding common stock of Elmer's by CBW on August 25, 1998 and
purchase accounting adjustments related to the merger of CBW with
and into Elmer's on February 18, 1999, whereby the remaining
46.2% of the outstanding common stock of Elmer's was deemed to
have been acquired by CBW on that date (see Note 8).
<PAGE>
1. The Company and Summary of Significant Accounting Policies,
Continued:
Property, Buildings and Equipment, Continued
Depreciation is computed using the straight-line method over the
estimated useful lives of the related assets. Lives used for
calculating depreciation and amortization rates for the principal
asset classifications are as follows: buildings - 35 years;
automobiles, furniture, fixtures and equipment - 3 to 7 years;
leasehold improvements - life of lease or applicable shorter
period. Maintenance and repairs are expensed as incurred;
renewals and improvements are capitalized. Upon disposal of
assets subject to depreciation, the related costs and accumulated
depreciation are removed and resulting gains and losses are
reflected in the consolidated statements of operations.
Intangible Assets
The cost over fair value of net tangible assets of acquired
companies (goodwill) and trademarks are amortized on a straight-
line basis over 30 years. The cost of intangible assets reflects
purchase accounting adjustments related to the acquisition of
53.8% of the outstanding common stock of Elmer's by CBW on August
25, 1998 and the merger of CBW with and into Elmer's on February
18, 1999, whereby the remaining 46.2% of the outstanding common
stock of Elmer's was deemed to have been acquired by CBW on that
date (see Note 8).
Management of the Company reviews the carrying value of
capitalized tangible and intangible assets on a regular basis to
reach a judgment concerning possible permanent impairment of
value. These reviews consider, among other factors: (1) the net
realizable value of each major classification of assets, (2) the
cash flow associated with the assets, and (3) significant changes
in the extent or manner in which major assets are used.
Management believes the carrying value of assets is less than the
estimated fair value.
Franchise Operations
Initial license fees from individual and area franchise sales are
recognized as revenue when substantially all of the terms and
conditions of the franchise agreement are met. Elmer's has sold
area franchises to several restaurant operators in various
western states. The terms of the agreements entered into with
each franchisee protect the territory for the operator and
provide standard building blueprints, recipes, formulas and
methods of food preparation. The term of the franchise is 25
years. Continuing franchise fees (based on a percentage of
sales) are recognized as income when earned.
<PAGE>
1. The Company and Summary of Significant Accounting Policies,
Continued:
Income Taxes
CBW has been treated for federal income tax purposes as an S
corporation under Subchapter S of the Internal Revenue Code of
1986, as amended, since May 22, 1997 (and was a limited liability
company from organization to that date) and has been treated as a
S corporation for state income tax purposes under comparable
state tax laws. As a result, CBW's earnings through February 17,
1999 have been taxed directly to CBW's shareholders, at their
individual federal and state income tax rates, rather than to the
Company. The earnings of Elmer's from August 25,1998 through
March 31, 1999 are taxed as a taxable corporation.
Net Income (Loss) Per Share
Basic earnings per share (EPS) is computed using the weighted-
average number of shares of common stock outstanding for the
period. Diluted EPS is computed using the weighted-average
number of shares of common stock and dilutive common stock
equivalents outstanding during the period, if any. Common
equivalent shares from stock options, if any, are excluded from
the computation when their effect is antidilutive.
All references to share and per share information have been
adjusted to give effect to the 770,500 shares of restricted
common stock issued by Elmer's in connection with the merger of
CBW on February 18, 1999 with and into Elmer's as described
above.
Impact of Recently Issued Accounting Standards
The Company adopted FASB SFAS No. 130, "Reporting Comprehensive
Income," which establishes requirements for disclosure of
comprehensive income. The objective of SFAS No. 130 is to report
a measure of all changes in equity that result from transactions
and economic events other than transactions with owners.
Comprehensive income is the total of net income and all other non-
owner changes in equity. Comprehensive income did not differ
significantly from reported net income or loss in the periods
presented.
The Company has also adopted FASB SFAS No. 131, "Disclosures
About Segments of an Enterprise and Related Information." This
statement changes the way public companies report information
about segments of their business in their annual financial
statements and requires selected segment information in quarterly
reports issued to shareholders. It also requires entity-wide
disclosures about the products and services an entity provides,
the material countries in which it holds assets and reports
revenues, and its major customers.
<PAGE>
1. The Company and Summary of Significant Accounting Policies,
Continued:
Unaudited Pro Forma Financial Information
As more fully described in Note 3, CBW has been taxed for federal
and state income tax purposes as a limited liability company or
as an S corporation from inception. The unaudited pro forma
information reflects benefits (provisions) for income taxes that
would have been recorded had CBW been a taxable corporation for
all periods presented.
2. Property, Buildings and Equipment:
<TABLE>
<S> <C> <C>
March 31,
1998 1999
Land $ - $2,246,700
Buildings - 1,862,400
Furniture, fixtures and equipment 68,610 2,226,211
Leasehold improvements 98,896 813,796
Automobiles - 12,632
------- ----------
167,506 7,161,739
Less accumulated depreciation
and amortization (64,010) (278,917)
--------- ----------
$103,496 $6,882,822
======== ==========
</TABLE>
3. Income Taxes:
CBW has been treated for federal income tax purposes as an S
corporation under Subchapter S of the Internal Revenue Code of
1986, as amended, since May 22, 1997 (and was a limited liability
company from organization to that date) and has been treated as
an S corporation for state income tax purposes under comparable
state tax laws. As a result, CBW's earnings through February 17,
1999 have been taxed directly to CBW shareholders, at their
individual federal and state income tax rates, rather than to the
Company.
The earnings of Elmer's from August 31, 1998 through February 17,
1999 are taxed as a taxable corporation. Effective with the
merger of CBW with and into Elmer's (see Note 8), on February 18,
1999 (Termination date) CBW's S corporation status will
terminate. Subsequent to the Termination date, the Company will
be subject to federal and state income taxes on its earnings.
<PAGE>
3. Income Taxes, Continued:
The income tax provision of $185,000 for the year ended March 31,
1999 relates to the results of operations of Elmer's from August
31, 1998 through February 17, 1999 and the results of operations
of the Company from February 18, 1999 through March 31, 1999.
As of March 31, 1999, the deferred tax liability of $773,000
primarily represents the difference between the book basis of
property, buildings and equipment and the related tax basis of
approximately $2,200,000.
The unaudited benefit (provision) for income taxes has been
computed in accordance with SFAS No. 109 as if the Company had
been a taxable corporation for all periods presented:
<TABLE>
<S> <C> <C> <C>
Years ended March 31,
----------------------------
1997 1998 1999
---- ---- ----
(Unaudited Pro Forma Information)
Currently payable:
Federal $ - $ - $(160,000)
State - - (34,000)
------- ------- ----------
- - (194,000)
Deferred income taxes 9,000 (72,000) (17,000)
------- -------- ---------
$9,000 $(72,000) $(211,000)
====== ========= ==========
</TABLE>
A reconciliation of the federal income tax rate to the Company's
pro forma effective income tax rate is as follows:
<TABLE>
<S> <C> <C> <C>
Years ended March 31,
----------------------------
1997 1998 1999
---- ---- ----
(Unaudited Pro Forma Information)
Income tax at statutory rate 34.0% (34.0)% (34.0)%
Federal graduated rates (15.3) 3.5 -
State income taxes, net of
federal income tax benefit 4.2 (4.4) (3.5)
Other, net (0.9) (0.2) 3.1
------ ----- -----
22.0% (35.1)% (34.4)%
======= ===== =======
<PAGE>
3. Income Taxes, Continued:
Deferred income taxes are the result of provisions in the tax
laws that either require or permit certain items of income or
expense to be reported for income tax purposes in different
periods than they are reported for financial reporting. The
unaudited pro forma temporary differences that give rise to the
change in the deferred tax assets were net operating losses
generated of $41,000 in the year ended March 31, 1997 and net
operating losses utilized of $205,000 and $57,500 for the years
ended March 31, 1998 and 1999, respectively.
The net operating losses generated (utilized) resulted in an
unaudited pro forma increase in the deferred tax asset of $9,000
for the year ended March 31, 1997 and a decrease in the deferred
tax asset of $72,000 and $17,000 for the years ended March 31,
1998 and 1999, respectively. The unaudited pro forma deferred
income tax asset arising from the net operating loss carryforward
is $17,000 and $0 at March 31, 1998 and 1999, respectively.
4. Notes Payable:
</TABLE>
<TABLE>
<S> <C> <C>
1998 1999
Notes payable to shareholders,
collateralized by stock, due
at various dates through 1999,
monthly installments total $2,698
including interest at 10.75% $10,731 $ -
Note payable to affiliate,
interest at 10.5%, due 2000 50,000 -
Note payable to financial
institution, collateralized by
substantially all assets of the
Company excluding real estate,
due September 2004, monthly
principal installments of
approximately $39,400 plus
interest at 7.70% - 2,600,000
Notes payable to financial
institutions, collateralized
by real estate, due at various
dates through February
2008, monthly installments
total approximately $22,500
including interest at rates
as follows:
Fixed rate of 8.15% - 480,000
Fixed rate of 8.18% - 1,275,006
Fixed rate of 8.25% - 605,567
Note payable to financing company,
collateralized by substantially all
assets of the Company, interest
only payments due monthly at 12%,
principal balance due February 2004 - 1,262,500
Note payable to others,
collateralized by stock
of a subsidiary, due August
2001, interest at 10% - 52,865
------- ---------
60,731 6,275,938
Less current portion 10,731 572,399
------- ---------
Net of current portion $50,000 $5,703,539
======= ==========
</TABLE>
<PAGE>
4. Notes Payable, Continued:
Certain notes payable contain restrictive covenants pertaining to
financial ratios and minimum cash flow coverage. The most
restrictive covenant requires the Company to maintain a maximum
of total liabilities, excluding subordinated debt, to tangible
net worth plus subordinated debt of 5.5 to 1.0. The Company was
in compliance with this covenant at March 31, 1999. In addition,
effective September 30, 1999 and thereafter on a trailing four-
quarter basis as of the end of each fiscal quarter, the Company
will be required to maintain a ratio of cash generation (defined
as net income before taxes, interest expense, depreciation and
amortization) to total interest expense plus the prior period
current maturities of long-term debt of at least 2.25 to 1.0.
The Company has available a $250,000 line of credit with Wells
Fargo Bank, which matures September 1, 2000, and is
collateralized by substantially all assets of the Company
excluding real estate. Interest on the unpaid balance accrues at
a rate of prime plus 1%. The prime rate at March 31, 1999 was
7.75%. There was no amount outstanding at March 31, 1999.
Future maturities of notes payable for years ending March 31 are:
2000 - $572,399; 2001 - $582,574; 2002 - $574,887; 2003 -
$574,538; 2004 - $1,845,699; and thereafter - $2,125,841.
All interest costs incurred during the years ended March 31,
1997, 1998 and 1999 have been expensed during the respective
periods.
5. Leases:
Minimum fiscal year rental commitments for the years ending
March 31 under operating leases for property, buildings and
equipment with noncancelable terms of more than one year are:
2000 - $681,785; 2001 - $646,339; 2002 - $581,981; 2003 -
$497,749; 2004 - $348,298; and thereafter - $836,118.
The leases generally provide for additional rentals based upon a
specified percentage of sales and require the Company to pay
certain other costs. Rental expense on operating leases amounted
to approximately $127,000, $135,000 and $848,000 for the years
ended March 31, 1997, 1998 and 1999.
<PAGE>
6. Related Party Transactions:
Amounts outstanding with Jaspers Food Management, Inc. (JFMI) are
approximately as follows:
<TABLE>
<S> <C> <C> <C>
Years ended March 31,
-----------------------------
1997 1998 1999
---- ---- ----
Accounts payable (receivable)
and other liabilities $110,000 $76,000 $(3,873)
Note payable 50,000 50,000 -
</TABLE>
Accounts payable and other liabilities due to affiliates are due
on demand and accrue interest at an annual rate of 10.5% based on
the outstanding balance over 28 days.
Transactions applicable to JFMI were approximately as follows:
<TABLE>
<S> <C> <C> <C>
Years ended March 31,
-----------------------------
1997 1998 1999
---- ---- ----
Interest expense $ 10,000 $ 15,000 $ 14,000
Labor and related expenses 377,000 420,000 452,000
</TABLE>
Under the terms of a management services agreement, JFMI provides
substantially all store management, accounting, human resources,
training and other administrative services related to the
operation of the five Ashley's Deli restaurants as disclosed in
labor and related expenses above.
Included in accounts receivable at March 31, 1999 is a note
receivable from a franchisee and director of the Company in the
amount of $97,857. The note is due on demand with interest at
7%.
<PAGE>
7. Restaurant and Franchise Operations, Continued:
Summary results of operations and other selected financial
information from restaurant operations and franchise operations
are presented after elimination of intercompany transactions:
<TABLE>
<S> <C> <C> <C>
Years Ended March 31,
------------------------------------
1997 1998 1999
------ ----- -----------
Revenues:
Restaurant operations $875,199 $1,591,293 $11,591,646
Franchise operations - - 809,264
Intercompany
eliminations - - (448,182)
-------- ---------- -----------
Consolidated $875,199 $1,591,293 $11,952,728
======== ========== ===========
Income (loss) from operations:
Restaurant
operations $(1,963) $240,118 $649,753
Franchise
operations - - 395,548
-------- -------- --------
Consolidated $(1,963) $240,118 $1,045,301
======== ======== ==========
Capital and intangible expenditures:
Restaurant
operations $6,093 $13,657 $191,748
Franchise
operations - - 25,767
------ ------- ---------
Consolidated $6,093 $13,657 $217,515
====== ======= ========
Depreciation and amortization:
Restaurant
operations $33,674 $56,263 $261,635
Franchise
operations - - 79,535
------- ------- --------
Consolidated $33,674 $56,263 $341,170
======= ======= ========
Assets:
Restaurant
operations $259,675 $11,571,468
Franchise
operations - 1,475,216
-------- -----------
Consolidated $259,675 $13,046,684
======== ===========
</TABLE>
The number of Company-owned stores and operating franchises at
March 31, is as follows:
<TABLE>
<S> <C> <C> <C>
1997 1998 1999
Company owned stores 5 5 20
Operating franchises - - 18
</TABLE>
<PAGE>
8. Acquisitions and Merger:
CBW Acquisition of Elmer's
On August 25, 1998, CBW acquired a controlling interest (705,000
shares representing 53.8% of the outstanding stock) in Elmer's
for $4,500,000. The total cost of the acquisition of $4,612,013,
including $112,013 of related acquisition costs, was provided by
approximately $4,000,000 of debt financing and the balance in
CBW's own cash. The purchase method of accounting has been used
to record this transaction and a new basis of accounting was
established for the assets and liabilities of Elmer's to the
extent of the change in ownership based on fair values as
follows:
<TABLE>
<S> <C>
Current assets $ 1,190,536
Property, buildings and equipment 3,790,027
Intangible assets 2,171,048
Other assets 43,587
Liabilities assumed (2,163,185)
Deferred income taxes (420,000)
-----------
$ 4,612,013
===========
</TABLE>
CBW Merger with Elmer's
On February 18, 1999, CBW merged with and into Elmer's, in a
transaction in which Elmer's was the surviving corporation. In
consideration for the issuance by Elmer's of 770,500 shares of
Elmer's restricted common stock to CBW shareholders and the
assumption of approximately $4 million in debt owed by CBW
arising from CBW's acquisition of the controlling block of
Elmer's common stock on August 25, 1998, Elmer's acquired all the
stock and assets of CBW including CBW's wholly-owned subsidiary,
CBW Food Company, LLC.
Each CBW shareholder, received 144.4507 shares of Elmer's
restricted common stock for every CBW share owned. The shares of
Elmer's stock previously acquired by CBW, a total of 705,000
shares, were concurrently transferred to Elmer's and were
canceled upon receipt thereof. In further consideration for the
issuance and to secure various indemnification obligations of CBW
shareholders under the merger agreement, Elmer's and the
individual CBW shareholders executed an escrow agreement for a
period of one year from the date of closing of the merger
transaction.
Elmer's entered into a new financing agreement in connection with
the merger whereby it borrowed funds to refinance existing debt
and debt of CBW totaling approximately $1,750,000. Elmer's also
used existing cash to reduce debt by approximately $1,000,000.
<PAGE>
8. Acquisitions and Merger, Continued:
The merger transaction has been accounted for as a purchase of
the remaining 46.2% separate public ownership of Elmer's by CBW.
A new basis of accounting was established for the assets and
liabilities of Elmer's, based on fair values, upon execution of
the merger agreement. The total estimated fair value of assets
acquired in the merger transaction is comprised of the following:
<TABLE>
<S> <C>
Estimated value of 606,109 shares
of outstanding common stock of Elmer's
(other than CBW ownership) at the date
of the merger $2,803,000
Assumed liabilities 2,123,804
Accrued expenses related to the transaction 20,000
Deferred income taxes 320,000
----------
$5,266,804
==========
</TABLE>
The purchase price has been allocated to the assets to be
acquired and obligations to be assumed, based on the estimate of
the 46.2% proportionate fair values of the assets and
liabilities, as follows:
<TABLE>
<S> <C>
Current assets $839,988
Property, buildings and equipment 3,173,264
Intangible assets 1,220,701
Other assets 32,851
---------
$5,266,804
==========
</TABLE>
<PAGE>
8. Acquisitions and Merger, Continued:
Acquisition of Grass Valley Ltd., Inc. (dba Richard's Deli and
Pub)
Effective March 31, 1999, Elmer's executed a stock exchange
agreement with Grass Valley Ltd., Inc. (GVL), a closely held
Oregon corporation, in a transaction in which Elmer's acquired
100% of the outstanding stock of GVL in consideration for the
payment by Elmer's of $110,000 in cash and the issuance of
209,620 restricted shares of Elmer's common stock to the GVL
shareholders. GVL is now a wholly-owned and operating subsidiary
of the Company.
The total cost of the merger transaction is comprised of the
following:
<TABLE>
<S> <C>
Cash $110,000
Estimated value of 209,620 shares of common
stock of Elmer's issued in connection with
merger transaction 1,048,500
Assumed liabilities 181,161
Expenses related to the transaction 44,000
----------
$1,383,661
==========
</TABLE>
The excess of the estimated fair value of the assets acquired
($1,383,661) over the historical cost ($223,553) has been
allocated to goodwill ($1,160,108), as the historical costs of
all tangible assets are assumed to be equal to their fair value.
Summary
The following table represents the unaudited pro forma results of
operations for the years ended March 31, 1998 and 1999 as if the
acquisition of 53.8% of the outstanding common stock of Elmer's,
the merger of CBW with and into Elmer's and the acquisition of
GVL had occurred at the beginning of the respective periods.
These pro forma results have been prepared for comparative
purposes only and are not necessarily indicative of what would
have occurred had the acquisitions been made at the beginning of
the respective periods or of results which may occur in the
future.
<PAGE>
8. Acquisitions and Merger, Continued:
Summary, Continued
<TABLE>
<S> <C> <C>
Year ended Year ended
March 31, March 31,
1998 1999
---------- -----------
Total revenue $19,763,000 $12,231,597
Income from operations $ 1,519,000 $ 1,649,526
Income before provision for
income taxes $ 901,000 $ 1,141,293
Net income $ 595,000 $ 751,278
Net income per share of common
stock $ .38 $ .47
Weighted average number of shares
outstanding 1,586,229 1,586,229
Number of Company owned stores 20 20
</TABLE>
9. Stock Options
The Board of Directors adopted a stock option plan (Plan),
subject to shareholder approval, which provides for the award of
incentive stock options to key employees and the award of non-
qualified stock options to employees and non-employee Directors.
Under the terms of the Plan, the option price is determined as
the fair value of the Company's common stock at the time the
option is granted. Under the Plan, 320,000 shares of common
stock are authorized for issuance. Options are exercisable upon
vesting. Options generally vest 20% annually and expire 10-15
years after the date of grant.
On February 18, 1999, the Board of Directors granted options to
acquire 169,500 shares of common stock of the Company at an
exercise price of $4.75. The following table summarizes
information about stock options outstanding as of March 31, 1999:
<TABLE>
<S> <C> <C> <C> <C> <C>
Weighted- Options
Exercisable
Average Weighted-
Weighted-
Range of Remaining Average
Average
Exercise Number Contractual Exercise Number
Exercise
Price Outstanding Life Price Exercisable
Price
- -------- ----------- ----------- --------- -----------
- ----------
$4.75 169,500 12.24 years $4.75 0
$4.75
</TABLE>
There were 150,500 shares of common stock reserved for the grant
of stock options under the 1999 Plan at March 31, 1999.
The Financial Accounting Standards Board Statement of Financial
Accounting Standards No. 123 (SFAS 123) defines a fair value
based method of accounting for employee stock options and similar
equity instruments and encourages all entities to adopt that
method of accounting for all of their employee stock compensation
plans. However, it also allows an entity to continue to measure
compensation cost for those plans using the method of accounting
prescribed by APB 25. Entities electing to continue to use the
accounting treatment in APB 25 must make pro forma disclosures of
net income and, if presented, earnings per share, as if the fair
value based method of accounting defined in SFAS 123 had been
adopted.
The total value of options granted during 1999 was computed as
approximately $576,000, which would be amortized on a pro forma
basis over the vesting period of the options. The weighted
average fair market value of the option grants during 1999 was
$4.75 per share.
The Company has adopted the disclosure-only provisions of
Statement of Financial Accounting Standards No. 123. However,
assuming compensation cost had been determined based on fair
value at the date of grant, and recognized as expense on a
straight-line basis over the vesting period of the options,
consistent with the provisions of SFAS No. 123, there would be no
compensation expense for the year ended March 31, 1999.
For purposes of the SFAS No. 123 calculation discussed above, the
fair value of each option grant was estimated as of the date of
grant using Black-Scholes option pricing methodology with the
following weighted average assumptions:
<TABLE>
<S> <C>
Risk-Free interest rate 6.0%
Expected life 8.64 years
Expected volatility 59%
Expected dividend yield 0%
</TABLE>
The effects of applying SFAS 123 in this pro forma disclosure are
not indicative of future amounts, and additional awards are
anticipated in future years.
10. Contingencies:
From time to time, the Company is involved in litigation relating
to claims arising in the normal course of its business. The
Company maintains insurance coverage against potential claims in
amounts which it believes to be adequate. Management believes
that it is not presently a party to any litigation, the outcome
of which would have a material adverse effect on the Company's
business or operations.
<PAGE>
Item 9. Changes in the Disagreements with Accountants on
Accounting and Financial Disclosure
Not applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant
Information with respect to directors of the Company is
included under the caption "Election of Directors" in the
Company's definitive proxy statement (the "1999 Proxy Statement")
for its 1999 Annual Meeting of Shareholders filed or to be filed
not later than 120 days after the end of the fiscal year covered
by this Report and is incorporated herein by reference.
Information with respect to executive officers of the Company is
included under Item 4(a) of Part I of this Report. Information
with respect to compliance with Section 16(a) of the Securities
Exchange Act is included under "Section 16(a) Beneficial
Ownership Reporting Compliance" in the 1999 Proxy Statement.
Item 11. Executive Compensation
Information with respect to executive compensation is
included under the caption "Executive Compensation" in the 1999
Proxy Statement is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners
and Management
Information with respect to security ownership of certain
beneficial owners and management is included under the caption
"Voting Securities and Principal Shareholders" and "Election of
Directors" in the 1999 Proxy Statement incorporated herein by
reference.
Item 13. Certain Relationships and Related Transactions
Information with respect to certain relationships and
related transactions with management is included under the
caption "Certain Transactions" in the 1999 Proxy Statement is
incorporates herein by reference.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 10-K
The Financial Statements listed in the accompanying index on page
F-1 are filed as part of this Report.
(a)(1) Financial Statements and Schedules Page in
this Report
-----------
Report of Independent Accountants....................... F-1
Consolidated Balance Sheets at
March 31, 1999 and 1998............................... F-2
Consolidated Statements of Income
For the years ended March 31, 1999, 1998
and 1997.............................................. F-3
Consolidated Statements of Changes in Shareholders'
Equity for the years ended March 31, 1999
1998, and 1997........................................ F-4
Consolidated Statements of Cash Flows
For the years ended March 31, 1999,
1998, and 1997........................................ F-5
Notes to Consolidated Financial Statements.............. F-6
No other schedules are included because the required
information is inapplicable or is presented in the financial
statements or related notes thereto.
(a)(2) Exhibits
--------
2(i) * Plan of Merger, dated February 18, 1999, between Elmer's
Restaurants, Inc. and CBW Inc. (Incorporated herein by reference
from Exhibit 2 of the Current Report on Form 8-K filing dated
March 4,1999.)
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).
<PAGE>
9(i) * Voting Trust Agreement dated February 18, 1999, between
Ken Boettcher, Karen Brooks, Bruce N. Davis, Cordy Jensen,
William W. Service, Gregory W. Wendt, and Linda Bolton (as
Trustee Under a Restated Trust Agreement dated June 8,
1998),(collectively, certain shareholders of Elmer's Restaurants,
Inc.), and Bruce N. Davis, William W. Service and Cordy
Jensen,(collectively, the Voting Trustees). (Incorporated herein
by reference from Exhibit 9 of the Current Report on Form 8-K
filing dated March 4,1999).
10.1 * Area Franchisee - Unit Franchisee Agreement dated July 10,
1978 by and between Elmer's Colonial Pancake & Steak House, Inc.
and Paul H. and Jacqueline M. Welch, Dale M. and Sandra Lee
Elmer. Incorporated by reference to Exhibit 10.30 of the
Company's Registration Statement on Form S-18, Registration No. 2-
98298-S (the "Form S-18 Registration").
10.2 * Lease Agreement dated June 18, 1987 by and between Dale M.
Elmer and Sandra Lee Elmer and Elmer's Pancake & Steak House,
Inc., and addenda thereto. Incorporated by reference to Exhibit
10.5 of the Company's Annual Report on Form 10-K for the fiscal
year ended March 31, 1989 (the "1989 Form 10-K") and Exhibit 10.3
of the December 31, 1991 Form 10-Q.
10.3 * Franchise Agreement between the Company and Paul H. Welch
and Jacqueline M. Welch dated March 23, 1993. Incorporated by
reference to Exhibit 10.9 of the Company's Annual Report on Form
10-K for the fiscal year ended March 31, 1993 (the "1993 Form 10-
K").
10.4 * Franchise Development Option Agreement between the Company
and Paul H. Welch and Jacqueline M. Welch dated May 3, 1993.
Incorporated by reference to Exhibit 10.10 of the 1993 Form 10-K.
10.5 * Commercial Loan Note, dated May 18, 1995, issued by the
Company to The Bank of California, N.A. and addendum thereto.
Incorporated by reference to Exhibit 10.9 of the Form 10-K for
the fiscal year ended March 31, 1995.
10.6 * Loan Agreement, dated December 21, 1995, between the
Company and Wells Fargo Bank, N.A., successor-by-merger to First
Interstate Bank of Oregon, N.A. and the First Amendment thereto,
dated as of March 18, 1997, Promissory Note dated December 21,
1995 issued by the Company to Wells Fargo Bank, N.A., successor-
by-merger to First Interstate Bank of Oregon, N.A. in connection
with the Loan Agreement, and Deeds of Trust given by the Company
to Ticor Title Insurance Company, Trustee, for benefit of Wells
Fargo Bank, N.A., successor-by-merger to First Interstate Bank of
Oregon, N.A. in connection with the Loan Agreement. Incorporated
by reference to Exhibit 10.6 of the Form 10-K for the fiscal year
ended March 31, 1997 ("1997 Form 10-K").
<PAGE>
10.7 * Credit Agreement, dated as of March 18, 1997, between the
Company and Wells Fargo Bank, N.A. and Promissory Note dated
March 18, 1997, issued by the Company to Wells Fargo Bank, N.A.
in connection with the Credit Agreement and Promissory Note dated
May 17, 1995, issued by the Company to Wells Fargo Bank, N.A.,
successor-by-merger to First Interstate Bank of Oregon, N.A.,
which is governed by the Credit Agreement. Incorporated by
reference from Exhibit 10.8 of the 1997 Form 10-K.
10.8 * Promissory Notes, dated March 31, 1997, issued by Paul H.
Welch and Jacqueline M. Welch to the Company. Incorporated by
reference from Exhibit 10.8 of the 1997 Form 10-K.
10.9 * Stock Purchase Agreement, dated as of February 13, 1997,
between the Company and Dale Elmer. Incorporated by reference
from Exhibit 10.9 of the 1997 Form 10-K.
10.10 * Letter Agreement dated March 23, 1998, between the
Company and Wells Fargo Bank, N.A., Promissory Note dated March
30, 1998, issued by the Company to Wells Fargo Bank, N.A., and
Deed of Trust and Assignment of Rents and Leases dated as of
March 23, 1998, given by the Company to Wells Fargo Bank
(Arizona), N.A., Trustee, for the benefit of Wells Fargo Bank,
N.A.
10.11 * Stock Purchase Agreement, dated as of July 9, 1998,
between Anita Goldberg and Rudolph Mazurosky and CBW Inc.
(Incorporated herein by reference from Exhibit 1 of the Schedule
13D filing dated September 3, 1998).
10.12 * Shareholder Agreement, dated as of August 21, 1998, among
Elmer's Restaurants, Inc., CBW Inc., Anita Goldberg, and Rudolph
Mazurosky. (Incorporated herein by reference from Exhibit 2 of
the Schedule 13D filing dated September 3, 1998.)
10.13 * Amended and Restated Loan Agreement, dated as of August
24, 1998, between CBW Inc. and Eagle's View Management Company,
Inc. (Incorporated herein by reference from Exhibit 3 of the
Schedule 13D filing dated September 3, 1998).
10.14 * Stock Purchase Agreement, dated as of July 9, 1998,
between CBW Inc. and Thomas Connor and Donald Woolley.
(Incorporated herein by reference from Exhibit 4 of the Schedule
13D filing dated September 3, 1998).
10.15 * Letter to Linda Bolton, dated as of August 25, 1998, from
Bruce Davis, Jensen, and William Service. (Incorporated herein by
reference from Exhibit 5 of the Schedule 13D filing dated
September 3, 1998).
10.16 * Letter to Thomas Connor and Donald Woolley, dated as of
August 25, 1998, from Jaspers Food Management, Inc. and Oregon
Food Management, Inc.
<PAGE>
(Incorporated herein by reference from Exhibit 6 of the Schedule
13D filing dated September 3, 1998).
10.17 * Owner and Voting Agreement, dated as of May 22, 1997,
among various parties, as amended by a First Amendment to Owner
and Voting Agreement, dated as of July 9, 1998. (Incorporated
herein by reference from Exhibit 7 of the Schedule 13D filing
dated September 3, 1998).
10.18 * Share Transfer Agreement, dated as of May 22, 1997, among
various parties, as amended by a First Amendment to Share
Transfer Agreement, dated as of August 25, 1998. (Incorporated
herein by reference from Exhibit 8 of the Schedule 13D filing
dated September 3, 1998).
10.19 * Agreement dated as of September 3, 1998 among CBW Inc.,
Bruce N. Davis, William W. Service, Corydon H. Jensen, Thomas C.
Connor, Donald Woolley, and Linda E. Bolton.(Incorporated herein
by reference from Exhibit 9 of the Schedule 13D filing dated
September 3, 1998).
10.20 * 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.). (Incorporated
herein by reference from Exhibit 10 (i)(a) of the Current Report
on Form 8-K filing dated March 4,1999).
10.21 * Stock Escrow 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.), William W.
Service as the representative of the Escrow Indemnitors, and
AterWynne LLP, as escrow agent..(Incorporated herein by reference
from Exhibit 10 (i)(b) of the Current Report on Form 8-K filing
dated March 4,1999).
10.22 * 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.). (Incorporated
herein by reference from Exhibit 10 (i)(c) of the Current Report
on Form 8-K filing dated March 4,1999).
10.23 Credit Agreement, dated as of February 17, 1999, between
the Company and Wells Fargo Bank, N.A., Revolving Line of Credit
Note dated February 17, 1999, Promissory Note dated February 17,
1999 and Term Note dated February 17, 1999 issued by the Company
to Wells Fargo Bank, N.A. and
<PAGE>
Deed of Trust (and Rider thereto) given by the Company to Ticor
Title Insurance Company, Trustee, for benefit of Wells Fargo
Bank, N.A
10.24 Continuing Guaranty (not to exceed the principal sum of
$5,300,000 plus interest thereon), dated as of February 17, 1999,
issued by the Company's subsidiary, Elmer's Pancake and Steak
House, Inc. to Wells Fargo Bank, N.A.
10.25 Continuing Guaranty (not to exceed the principal sum of
$5,300,000 plus interest thereon), dated as of February 17, 1999,
issued by the Company's subsidiary, CBW Food Company, LLC to
Wells Fargo Bank, N.A.
10.26 Continuing Security Agreement (Rights to Payment and
Inventory) and Rider thereto, dated as of February 17, 1999,
issued by the Company to Wells Fargo Bank, N.A.
10.27 Security Agreement (Equipment and Fixtures) and Schedule
thereto, dated as of February 17, 1999, issued by the Company to
Wells Fargo Bank, N.A.
10.28 Continuing Security Agreement (Rights to Payment and
Inventory) and Rider thereto, dated as of February 17, 1999,
issued by the Company's subsidiary, Elmer's Pancake and Steak
House, Inc. to Wells Fargo Bank, N.A.
10.29 Security Agreement (Equipment) and Rider thereto, dated as
of February 17, 1999, issued by the Company's subsidiary, Elmer's
Pancake and Steak House, Inc. to Wells Fargo Bank, N.A.
10.30 Continuing Security Agreement (Rights to Payment and
Inventory) and Rider thereto, dated as of February 17, 1999,
issued by the Company's subsidiary, CBW Food Company, LLC to
Wells Fargo Bank, N.A.
10.31 Security Agreement (Equipment) and Rider thereto, dated as
of February 17, 1999, issued by the Company's subsidiary, CBW
Food Company, LLC to Wells Fargo Bank, N.A.
10.32 Second Amendment to Loan Agreement and Security Agreement,
dated as of February 18, 1999, between the Company, CBW Inc., and
Eagle's View Management Company, Inc. (exhibits omitted).
10.33 Promissory Note, dated February 17, 1999, issued by the
Company to Wells Fargo Bank, N.A.
10.34 Rate Letter, dated February 17, 1999 issued by Wells Fargo
Bank, N.A. to the Company.
10.35 Term Note, dated February 17, 1999, issued by the Company
to Wells Fargo Bank, N.A.
10.36 Deed of Trust and Assignment of Rents and Leases, dated as
of February 17, 1999, given by the Company to Wells Fargo Bank
(Arizona), N.A., Trustee for the benefit of Wells Fargo Bank,
N.A.
10.37 Second Trust Deed, dated as of February 18, 1999, given by
the Company to Chicago Title Insurance Company, Trustee for the
benefit of Eagle's View Management Company, Inc.
10.38 Second Trust Deed, dated as of February 18, 1999, given by
the Company to Alliance Title & Escrow Corp., Trustee, for the
benefit of Eagle's View Management Company, Inc.
10.39 Second Trust Deed, dated as of February 18, 1999, given by
the Company to Fidelity National Title Company of Oregon, for the
benefit of Eagle's View Management Company, Inc.
10.40 Second Trust Deed, dated as of February 18, 1999, given by
the Company to Chicago Title Insurance Company, for the benefit
of Eagle's View Management Company, Inc.
10.41 Second Deed of Trust, dated as of February 18, 1999, given
by the Company to Chicago Title Insurance Company for the benefit
of Eagle's View Management Company, Inc.
10.42 First Amendment to Promissory Note and Acknowledgment of
Reduction of Principal, dated February 18, 1999, between the
Company, CBW, Inc., and Eagle's View Management Company, Inc.
10.43 First Modification of Commercial Deed of Trust, dated
February 17, 1999, between the Company and Wells Fargo Bank, N.A.
successor-by-merger to First Interstate Bank of Oregon, N.A.
10.44 First Modification of Deed of Trust and Assignment of
Leases, dated February 17, 1999, between the Company and Wells
Fargo Bank, N.A.
10.45 Rider to Deed of Trust, dated February 17, 1999, issued by
the Company to and for the benefit of Wells Fargo Bank, N.A.
10.46 First Modification of Commercial Deed of Trust, dated
February 17, 1999, between the Company and Wells Fargo Bank,
N.A., successor-by-merger to First Interstate Bank of Oregon,
N.A.
99(i) * Fairness Opinion, dated January 13, 1999, issued by Veber
Partners to the Board of Directors of Elmer's Restaurants, Inc.
(Incorporated herein by reference from Exhibit 99 (i) of the
Current Report on Form 8-K filing dated March 4,1999).
22.1 List of Subsidiaries.
27.1 Financial Data Schedule.
<PAGE>
* Previously filed exhibits.
+ Due to the impracticability of obtaining electronic copies of
these exhibits, hard copies of these exhibits will be furnished
by the Company upon the Securities and Exchange Commission's
request.
(b) Reports on Form 8-K. Two reports on Form 8-K were
filed by the Company during the last quarter of the fiscal year
ended March 31, 1999.
A Current Report on Form 8-K was filed on March 5, 1999
and amended June 14, 1999 reporting the merger of the Company's
then majority shareholder, CBW, Inc. with the Company, leaving
the Company as the sole surviving entity.
A Current Report on Form 8-K was filed on April 15,
1999 and amended on June 14, 1999 reporting the Company's
acquisition of the common stock and assets of Grass Valley Ltd.,
Inc. ("GVL"). GVL is now a wholly-owned subsidiary of the
Company.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities
Exchange Act of 1934, Elmer's Restaurants, Inc. has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Elmer's Restaurants, Inc.
By: __/s/ WILLIAM W. SERVICE___
William W. Service
Chief Executive Officer
Dated: June 29, 1999
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed by the following persons on
behalf of Elmer's Restaurants, Inc., in the capacities and on the
dates indicated.
<PAGE>
<TABLE>
<S> <C> <C>
SIGNATURE TITLE
DATE
- --------- -----
- ----
/s/ Bruce N. Davis Chairman of the Board &
President June 29, 1999
- -----------------------------
Bruce N. Davis
/s/ William W. Service Chief Executive Officer &
Director June 29, 1999
- ----------------------------- (Principal Executive & Financial
Officer)
William W. Service
/s/ Juanita Nelson Secretary & Controller
June 29, 1999
- ----------------------------- (Principal Accounting Officer)
Juanita Nelson
/s/ Thomas C. Connor Director
June 29, 1999
- -----------------------------
Thomas C. Connor
/s/ Paul Welch Director
June 29, 1999
- -----------------------------
Paul Welch
/s/ Corydon H. Jensen Director
June 29, 1999
- -----------------------------
Corydon H. Jensen
Richard Williams Director
June 29, 1999
- -----------------------------
Richard Williams
/s/ Donald Woolley Director
June 29, 1999
- -----------------------------
Donald Woolley
<PAGE>
</TABLE>
14 0199307.01
CREDIT AGREEMENT
THIS AGREEMENT is entered into as of February 17, 1999, by
and between ELMER'S RESTAURANTS, INC., an Oregon corporation
("Borrower"), and WELLS FARGO BANK, NATIONAL ASSOCIATION
("Bank").
RECITAL
Borrower has requested from Bank the credit accommodations
described below (each, a "Credit" and collectively, the
"Credits"), and Bank has agreed to provide the Credits to
Borrower on the terms and conditions contained herein.
NOW, THEREFORE, for valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Bank and Borrower
hereby agree as follows:
ARTICLE I
THE CREDITS
SECTION 1.1. LINE OF CREDIT.
(a) Line of Credit. Subject to the terms and conditions of
this Agreement, Bank hereby agrees to make advances to Borrower
from time to time up to and including July 1, 2000, not to exceed
at any time the aggregate principal amount of Two Hundred Fifty
Thousand Dollars ($250,000.00) ("Line of Credit"), the proceeds
of which shall be used for general corporate needs and to retire
debt assumed in connection with the merger of CBW Inc. into
Borrower. Borrower's obligation to repay advances under the Line
of Credit shall be evidenced by a promissory note substantially
in the form of Exhibit A attached hereto ("Line of Credit Note"),
all terms of which are incorporated herein by this reference.
(b) Borrowing and Repayment. Borrower may from time to
time during the term of the Line of Credit borrow, partially or
wholly repay its outstanding borrowings, and reborrow, subject to
all of the limitations, terms and conditions contained herein or
in the Line of Credit Note; provided however, that the total
outstanding borrowings under the Line of Credit shall not at any
time exceed the maximum principal amount available thereunder, as
set forth above.
SECTION 1.2. TERM LOAN A.
(a) Term Loan A. Subject to the terms and conditions of
this Agreement, Bank hereby agrees to make a loan to Borrower in
the principal amount of Two Million Six Hundred Thousand Dollars
($2,600,000.00) ("Term Loan A"), the proceeds of which shall be
used to retire debt assumed in connection with the merger of CBW
Inc. into Borrower. Borrower's obligation to repay Term Loan A
shall be evidenced by a promissory note substantially in the form
of Exhibit B attached hereto ("Term Note A"), all terms of which
are incorporated herein by this reference. Bank's commitment to
grant Term Loan A shall terminate on March 17, 1999.
(b) Interest Rate Protection. Within thirty (30) days of
the date of this Agreement, Borrower shall enter into interest
rate protection agreements satisfactory in form and substance to
Bank providing the benefit of interest rate protection on not
less than fifty percent (50%) of Term Loan A for at least three
(3) years.
(c) Repayment. The principal amount of Term Loan A shall
be repaid in accordance with the provisions of Term Note A.
(d) Prepayment. Borrower may prepay principal on Term Loan
A solely in accordance with the provisions of Term Note A.
SECTION 1.3. TERM LOAN B.
(a) Term Loan B. Subject to the terms and conditions of
this Agreement, Bank hereby agrees to make a loan to Borrower in
the principal amount of Four Hundred Eighty Thousand Dollars
($480,000.00) ("Term Loan B"), the proceeds of which shall be
used to finance the Gresham Restaurant with proceeds available to
retire debt assumed in the merger with CBW Inc. Borrower's
obligation to repay Term Loan B shall be evidenced by a
promissory note substantially in the form of Exhibit C attached
hereto ("Term Note C"), all terms of which are incorporated
herein by this reference. Bank's commitment to grant Term Loan B
shall terminate on March 17, 1999.
(b) Repayment. Principal and interest on Term Loan B shall
be repaid in accordance with the provisions of Term Note B.
(c) Prepayment. Borrower may prepay principal on Term Loan
B solely in accordance with the provisions of Term Note B.
SECTION 1.4. TERM LOAN C.
(a) Term Loan. Bank has made a loan to Borrower in the
original principal amount of Six Hundred Thirty Thousand Dollars
($630,000.00) ("Term Loan C"), on which the outstanding principal
balance as of the date hereof is $607,820.54. Borrower's
obligation to repay Term Loan C is evidenced by a promissory note
substantially in the form of Exhibit D attached hereto ("Term
Note C"), all terms of which are incorporated herein by this
reference. Any references in Term Note C to any prior loan
agreement between Bank and Borrower shall be deemed a reference
to this Agreement. Subject to the terms and conditions of this
Agreement, Bank hereby confirms that Term Loan C remains in full
force and effect.
(b) Repayment. Principal and interest on Term Loan C shall
be repaid in accordance with the provisions of Term Note C.
(c) Prepayment. Borrower may prepay principal on Term Loan
C solely in accordance with the provisions of Term Note C.
SECTION 1.5. TERM LOAN D.
(a) Term Loan D. Bank has made a loan to Borrower in the
original principal amount of One Million Three Hundred Seventy-
two Thousand Five Hundred Dollars ($1,372,500.00) ("Term Loan
D"), on which the outstanding principal balance as of the date
hereof is $1,278,640.58. Borrower's obligation to repay Term
Loan D is evidenced by a promissory note substantially in the
form of Exhibit E attached hereto ("Term Note D"), all terms of
which are incorporated herein by this reference. Any references
in Term Note D to any prior loan agreement between Bank and
Borrower shall be deemed a reference to this Agreement. Subject
to the terms and conditions of this Agreement, Bank hereby
confirms that Term Loan D remains in full force and effect.
(b) Repayment. Principal and interest on Term Loan D shall
be repaid in accordance with the provisions of Term Note D.
(c) Prepayment. Borrower may prepay principal on Term Loan
D solely in accordance with the provisions of Term Note D.
SECTION 1.6. INTEREST/FEES.
(a) Interest. The outstanding principal balances of the
Line of Credit, Term Loan A, Term Loan B, Term Loan C and Term
Loan D shall bear interest at the rates of interest set forth in
the Line of Credit Note, Term Note A, Term Note B, Term Note C
and Term Note D.
(b) Computation and Payment. Interest shall be computed on
the basis of a 360-day year, actual days elapsed for the Line of
Credit, Term Loan A, Term Loan B, and Term Loan C. Interest
shall be computed on the basis of a 365-day year, actual days
elapsed for Term Loan D. Interest shall be payable at the times
and place set forth in the Line of Credit Note, Term Note A, Term
Note B, Term Note C, and Term Note D (collectively, the "Notes").
(c) Commitment Fee. Borrower shall pay to Bank a non-
refundable commitment fee for the Line of Credit equal to
$625.00, which fee shall be due and payable in full upon
execution of this Agreement.
(d) Loan Fee. Borrower shall pay to Bank a non-refundable
loan fee for Term Loan A equal to $39,000.00 and a non-
refundable loan fee for Term Loan B equal to $7,200.00, which
fees shall be due and payable in full upon execution of this
Agreement.
(e) Unused Commitment Fee. Borrower shall pay to Bank a
fee equal to one-eighth percent (0.125%) per annum (computed on
the basis of a 360-day year, actual days elapsed) on the average
daily unused amount of the Line of Credit, which fee shall be
calculated on a quarterly basis by Bank and shall be due and
payable by Borrower in arrears on each March 31, June 30,
September 30 and December 31.
SECTION 1.7. COLLECTION OF PAYMENTS. Borrower authorizes
Bank to collect all principal, interest and fees due under each
Credit by charging Borrower's demand deposit account number 4159-
611425 with Bank, or any other demand deposit account maintained
by Borrower with Bank, for the full amount thereof. Should there
be insufficient funds in any such demand deposit account to pay
all such sums when due, the full amount of such deficiency shall
be immediately due and payable by Borrower.
SECTION 1.8. COLLATERAL.
As security for all indebtedness of Borrower to Bank subject
hereto, except Term Loan C, Borrower hereby grants to Bank
security interests of first priority in all Borrower's accounts
receivable and other rights to payment, general intangibles,
inventory, fixtures, and equipment.
As security for all indebtedness of Borrower to Bank subject
hereto, except Term Loan C, Borrower hereby grants to Bank a lien
of not less than first priority on that certain real property
located at 1555 NE Burnside Street, Gresham, Oregon.
As security for all indebtedness of Borrower to Bank under
Term Loan C, Borrower hereby grants to Bank and confirms its
grant to Bank of a lien of not less than first priority on that
certain real property located at 1385 S. Capitol Boulevard,
Boise, Idaho.
As security for all indebtedness of Borrower to Bank subject
hereto, except Term Loan C, Borrower hereby grants to Bank a lien
of not less than first priority on that certain real property
located at 3411 184th Street SW, Lynnwood, Washington and 7427 S.
Hosmer Street, Tacoma, Washington.
All of the foregoing shall be evidenced by and subject to
the terms of such security agreements, financing statements,
deeds of trust and other documents as Bank shall reasonably
require, all in form and substance satisfactory to Bank.
Borrower shall reimburse Bank immediately upon demand for all
costs and expenses incurred by Bank in connection with any of the
foregoing security, including without limitation, filing and
recording fees and costs of appraisals, audits and title
insurance.
SECTION 1.9. GUARANTIES. All indebtedness of Borrower to
Bank shall be guaranteed by Elmer's Pancake & Steak House, Inc.
and CBW Food Company L.L.C. in the principal amount of Five
Million Three Hundred Thousand Dollars ($5,300,000.00) each, as
evidenced by and subject to the terms of guaranties in form and
substance satisfactory to Bank.
All liabilities of Elmer's Pancake & Steak House, Inc. and
CBW Food Company L.L.C. under their respective guaranties shall
be secured by Elmer's Pancake & Steak House, Inc.'s and CBW Food
Company L.L.C.'s respective accounts receivable and other rights
to payment, general intangibles, inventory and equipment.
All of the foregoing shall be evidenced by and subject to
the terms of such security agreements, financing statements,
deeds of trust and other documents as Bank shall reasonably
require, all in form and substance satisfactory to Bank.
Borrower shall reimburse Bank immediately upon demand for all
costs and expenses incurred by Bank in connection with any of the
foregoing security, including without limitation, filing and
recording fees and costs of appraisals, audits and title
insurance.
SECTION 1.10. SUBORDINATION OF DEBT. All obligations of
Borrower to Eagle's View Management Company, Inc. shall be
subordinated in right of repayment to all obligations of Borrower
to Bank, as evidenced by and subject to the terms of
subordination agreements in form and substance satisfactory to
Bank.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Borrower makes the following representations and warranties
to Bank, which representations and warranties shall survive the
execution of this Agreement and shall continue in full force and
effect until the full and final payment, and satisfaction and
discharge, of all obligations of Borrower to Bank subject to this
Agreement.
SECTION 2.1. LEGAL STATUS. Borrower is a corporation,
duly organized and existing and in good standing under the laws
of the state of Oregon, and is qualified or licensed to do
business (and is in good standing as a foreign corporation, if
applicable) in all jurisdictions in which such qualification or
licensing is required or in which the failure to so qualify or to
be so licensed could have a material adverse effect on Borrower.
SECTION 2.2. AUTHORIZATION AND VALIDITY. This Agreement,
the Notes, and each other document, contract and instrument
required hereby or at any time hereafter delivered to Bank in
connection herewith (collectively, the "Loan Documents") have
been duly authorized, and upon their execution and delivery in
accordance with the provisions hereof will constitute legal,
valid and binding agreements and obligations of Borrower or the
party which executes the same, enforceable in accordance with
their respective 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 terms of equitable
relief may be subject to equitable defenses and to the discretion
of the court before which any proceeding may be brought.
SECTION 2.3. NO VIOLATION. The execution, delivery and
performance by Borrower of each of the Loan Documents do not
violate any provision of any law or regulation, or contravene any
provision of the Articles of Incorporation or By-Laws of
Borrower, or result in any breach of or default under any
contract, obligation, indenture or other instrument to which
Borrower is a party or by which Borrower may be bound.
SECTION 2.4. LITIGATION. There are no pending, or to the
best of Borrower's knowledge threatened, actions, claims,
investigations, suits or proceedings by or before any
governmental authority, arbitrator, court or administrative
agency which could have a material adverse effect on the
financial condition or operation of Borrower other than those
disclosed by Borrower to Bank in writing prior to the date
hereof.
SECTION 2.5. COMPLETION OF MERGER; CORRECTNESS OF
FINANCIAL STATEMENT. The merger of CBW, Inc. into Borrower has
been completed. The pro-forma financial statement of Borrower
dated January 1, 1999 and giving effect to such merger of CBW
Inc. into Borrower, a true copy of which has been delivered by
Borrower to Bank prior to the date hereof, (a) is complete and
correct in all material respects and presents fairly in all
material respects the financial condition of Borrower,
(b) discloses all liabilities of Borrower that are required to be
reflected or reserved against under generally accepted accounting
principles, whether liquidated or unliquidated, fixed or
contingent, and (c) has been prepared in accordance with
generally accepted accounting principles consistently applied.
Since the date of such financial statement there has been no
material adverse change in the financial condition of Borrower,
nor has Borrower mortgaged, pledged, granted a security interest
in or otherwise encumbered any of its assets or properties except
in favor of Bank or as otherwise permitted by Bank in writing.
SECTION 2.6. INCOME TAX RETURNS. Borrower has no
knowledge of any pending assessments or adjustments of its income
tax payable with respect to any year.
SECTION 2.7. NO SUBORDINATION. There is no agreement,
indenture, contract or instrument to which Borrower is a party or
by which Borrower may be bound that requires the subordination in
right of payment of any of Borrower's obligations subject to this
Agreement to any other obligation of Borrower.
SECTION 2.8. PERMITS, FRANCHISES. Borrower possesses, and
will hereafter possess, all permits, consents, approvals,
franchises and licenses required and rights to all trademarks,
trade names, patents, and fictitious names, if any, necessary to
enable it to conduct the business in which it is now engaged in
compliance with applicable law.
SECTION 2.9. ERISA. Borrower is in compliance in all
material respects with all applicable provisions of the Employee
Retirement Income Security Act of 1974, as amended or recodified
from time to time ("ERISA"); Borrower has not violated any
provision of any defined employee pension benefit plan (as
defined in ERISA) maintained or contributed to by Borrower (each,
a "Plan"); no Reportable Event as defined in ERISA has occurred
and is continuing with respect to any Plan initiated by Borrower;
Borrower has met its minimum funding requirements under ERISA
with respect to each Plan; and each Plan will be able to fulfill
its benefit obligations as they come due in accordance with the
Plan documents and under generally accepted accounting
principles.
SECTION 2.10. OTHER OBLIGATIONS. Borrower is not in
default on any obligation for borrowed money, any purchase money
obligation or any other material lease, commitment, contract,
instrument or obligation.
SECTION 2.11. ENVIRONMENTAL MATTERS. Except as disclosed
by Borrower to Bank in writing prior to the date hereof, Borrower
is in compliance in all material respects with all applicable
federal or state environmental, hazardous waste, health and
safety statutes, and any rules or regulations adopted pursuant
thereto, which govern or affect any of Borrower's operations
and/or properties, including without limitation, the
Comprehensive Environmental Response, Compensation and Liability
Act of 1980, the Superfund Amendments and Reauthorization Act of
1986, the Federal Resource Conservation and Recovery Act of 1976,
and the Federal Toxic Substances Control Act, as any of the same
may be amended, modified or supplemented from time to time. To
the best of Borrower's knowledge, none of the operations of
Borrower is the subject of any federal or state investigation
evaluating whether any remedial action involving a material
expenditure is needed to respond to a release of any toxic or
hazardous waste or substance into the environment. Borrower has
no material contingent liability in connection with any release
of any toxic or hazardous waste or substance into the
environment.
SECTION 2.12. REAL PROPERTY COLLATERAL. Except as
disclosed by Borrower to Bank in writing prior to the date
hereof, with respect to any real property collateral required
hereby:
(a) All taxes, governmental assessments, insurance
premiums, and water, sewer and municipal charges, and rents (if
any) which previously became due and owing in respect thereof
have been paid as of the date hereof.
(b) There are no construction or similar liens or claims
which have been filed for work, labor or material (and no rights
are outstanding that under law could give rise to any such lien)
which affect all or any interest in any such real property and
which are or may be prior to or equal to the lien thereon in
favor of Bank.
(c) To the best of Borrower's knowledge, none of the
improvements which were included for purpose of determining the
appraised value of any such real property lies outside of the
boundaries and/or building restriction lines thereof, and no
improvements on adjoining properties materially encroach upon any
such real property.
(d) There is no pending, or to the best of Borrower's
knowledge threatened, proceeding for the total or partial
condemnation of all or any portion of any such real property, and
all such real property is in good repair and free and clear of
any damage that would materially and adversely affect the value
thereof as security and/or the intended use thereof.
ARTICLE III
CONDITIONS
SECTION 3.1. CONDITIONS OF INITIAL EXTENSION OF CREDIT.
The obligation of Bank to grant any of the Credits is subject to
the fulfillment to Bank's satisfaction of all of the following
conditions:
(a) Approval of Bank Counsel. All legal matters incidental
to the granting of each of the Credits shall be satisfactory to
Bank's counsel.
(b) Documentation. Bank shall have received, in form and
substance satisfactory to Bank, each of the following, duly
executed:
(i) This Agreement and the Notes.
(ii) Corporate Resolution: Borrowing.
(iii) Certificates of Incumbency.
(iv) Continuing Guaranties.
(v) Corporate Resolution: Guaranty.
(vi) Limited Liability Certificate: Guaranty.
(vii) Corporate Resolution: LLC Activity
(viii) Corporate Resolution: Subordination.
(ix) Security Agreements: Rights to Payment and Inventory.
(x) Security Agreements: Equipment and Fixtures.
(xi) Security Agreement: Rights to Payment and Inventory
(Elmer's Pancake & Steak House, Inc.).
(xii) Security Agreement: Equipment (Elmer's Pancake & Steak
House, Inc.).
(xiii) Security Agreements: Rights to Payment and Inventory
(CBW Food Company L.L.C.).
(xiv) Security Agreement: Equipment (CBW Food Company
L.L.C.).
(xv) Subordination Agreement.
(xvi) UCC Financing Statements.
(xvii) Deeds of Trust, Rider and Modifications to Deeds of
Trust.
(xviii) Such other documents as Bank may require under any
other Section of this Agreement.
(c) Financial Condition. Borrower, immediately after
giving effect to its merger with CBW Inc., shall have a Tangible
Net Worth of not less than $1,250,000.00, with "Tangible Net
Worth" defined as the aggregate of total stockholders' equity
plus subordinated debt less any intangible assets. There shall
have been no material adverse change, as determined by Bank, in
the financial condition or business of Borrower or any guarantor
hereunder, nor any material decline, as determined by Bank, in
the market value of any collateral required hereunder or a
substantial or material portion of the assets of Borrower or any
such guarantor.
(d) Insurance. Borrower shall have delivered to Bank
evidence of insurance coverage on all Borrower's property, in
form, substance, amounts, covering risks and issued by companies
satisfactory to Bank, and where required by Bank, with loss
payable endorsements in favor of Bank, including without
limitation, policies of fire and extended coverage insurance
covering all real property collateral required hereby, with
replacement cost and mortgagee loss payable endorsements, and
such policies of insurance against specific hazards affecting any
such real property as may be required by governmental regulation
or Bank.
(e) Appraisals. Bank shall have obtained, at Borrower's
cost, an appraisal of all real property collateral required
hereby, and all improvements thereon, issued by an appraiser
acceptable to Bank and in form, substance and reflecting values
satisfactory to Bank, in its discretion.
(f) Title Insurance. Bank shall have received an ALTA
Policy of Title Insurance, with such endorsements as Bank may
require, issued by a company and in form and substance
satisfactory to Bank, in such amount as Bank shall require,
insuring Bank's lien on the real property collateral required
hereby to be of first priority, subject only to such exceptions
as Bank shall approve in its discretion, with all costs thereof
to be paid by Borrower.
(g) Tax Service Contract. Borrower shall have procured and
delivered to Bank, at Borrower's cost, such tax service contract
as Bank shall require for any real property collateral required
hereby, to remain in effect as long as such real property secures
any obligations of Borrower to Bank as required hereby.
SECTION 3.2. CONDITIONS OF EACH EXTENSION OF CREDIT. The
obligation of Bank to make each extension of credit requested by
Borrower hereunder shall be subject to the fulfillment to Bank's
satisfaction of each of the following conditions:
(a) Compliance. The representations and warranties
contained herein and in each of the other Loan Documents shall be
true on and as of the date of the signing of this Agreement and
on the date of each extension of credit by Bank pursuant hereto,
with the same effect as though such representations and
warranties had been made on and as of each such date, and on each
such date, no Event of Default as defined herein, and no
condition, event or act which with the giving of notice or the
passage of time or both would constitute such an Event of
Default, shall have occurred and be continuing or shall exist.
(b) Documentation. Bank shall have received all additional
documents which may be required in connection with such extension
of credit.
ARTICLE IV
AFFIRMATIVE COVENANTS
Borrower covenants that so long as Bank remains committed to
extend credit to Borrower pursuant hereto, or any liabilities
(whether direct or contingent, liquidated or unliquidated) of
Borrower to Bank under any of the Loan Documents remain
outstanding, and until payment in full of all obligations of
Borrower subject hereto, Borrower shall, unless Bank otherwise
consents in writing:
SECTION 4.1. PUNCTUAL PAYMENTS. Punctually pay all
principal, interest, fees or other liabilities due under any of
the Loan Documents at the times and place and in the manner
specified therein.
SECTION 4.2. ACCOUNTING RECORDS. Maintain adequate books
and records in accordance with generally accepted accounting
principles consistently applied, and permit any representative of
Bank, at any reasonable time and upon reasonable notice to
Borrower (except that no notice shall be required at any time an
Event of Default has occurred and is continuing), to inspect,
audit and examine such books and records, to make copies of the
same, and to inspect the properties of Borrower.
SECTION 4.3. FINANCIAL STATEMENTS. Provide to Bank all of
the following, in form and detail satisfactory to Bank:
(a) not later than 120 days after and as of the end of each
fiscal year, audited consolidated and consolidating financial
statements of Borrower, prepared by a certified public accountant
acceptable to Bank, to include balance sheet, income statement,
statement of cash flow, together with form 10-K;
(b) not later than 60 days after and as of the end of each
fiscal quarter, a consolidated and consolidating financial
statement of Borrower, prepared by Borrower, to include balance
sheet and income statement, together with form 10-Q;
(c) except, if applicable, as otherwise earlier required by
(a) or (b) above, not later than (10) days after the filing
thereof, copies of all proxy statements, financial statements,
reports, and notices sent or made available generally by Borrower
to its security holders or to any holders of its debt and all
regular, periodic and special reports, and all registration
statements filed with the Securities and Exchange Commission or
any governmental authority that may be substituted therefor, or
with any national securities exchange;
(d) contemporaneously with each annual and quarterly
financial statement of Borrower required hereby, a certificate of
the president or chief financial officer of Borrower that said
financial statements are accurate and that there exists no Event
of Default nor any condition, act or event which with the giving
of notice or the passage of time or both would constitute an
Event of Default;
(e) from time to time such other information as Bank may
reasonably request, including without limitation, copies of rent
rolls and other information with respect to any real property
collateral required hereby.
SECTION 4.4. COMPLIANCE. Preserve and maintain all
licenses, permits, governmental approvals, rights, privileges and
franchises necessary for the conduct of its business; and comply
with the provisions of all documents pursuant to which Borrower
is organized and/or which govern Borrower's continued existence
and with the requirements of all laws, rules, regulations and
orders of any governmental authority applicable to Borrower
and/or its business.
SECTION 4.5. INSURANCE. Maintain and keep in force
insurance of the types and in amounts customarily carried in
lines of business similar to that of Borrower, including but not
limited to fire, extended coverage, public liability, flood,
property damage and workers' compensation, with all such
insurance carried with companies and in amounts satisfactory to
Bank, and deliver to Bank from time to time at Bank's request
schedules setting forth all insurance then in effect.
SECTION 4.6. FACILITIES. Keep all properties useful or
necessary to Borrower's business in good repair and condition in
all material respects, and from time to time make necessary
repairs, renewals and replacements thereto so that such
properties shall be preserved and maintained in good repair and
condition in all material respects.
SECTION 4.7. TAXES AND OTHER LIABILITIES. Pay and
discharge when due any and all indebtedness, obligations,
assessments and taxes, both real or personal, including without
limitation federal and state income taxes and state and local
property taxes and assessments, except such (a) as Borrower may
in good faith contest or as to which a bona fide dispute may
arise, and (b) for which Borrower has made provision, to Bank's
reasonable satisfaction, for eventual payment thereof in the
event Borrower is obligated to make such payment.
SECTION 4.8. LITIGATION. Promptly give notice in writing
to Bank of any litigation pending or threatened against Borrower
with a claim in excess of $100,000.00.
SECTION 4.9. FINANCIAL CONDITION. Maintain Borrower's
financial condition as follows using generally accepted
accounting principles consistently applied and used consistently
with prior practices (except to the extent modified by the
definitions herein):
(a) Total Liabilities divided by Tangible Net Worth not at
any time greater than 5.5 to 1.0 at the March 31, 1999 and June
30 fiscal quarter ends, 4.5 to 1.0 at the September 30, 1999 and
December 31, 1999 fiscal quarter ends, and 4.0 to 1.0 at the
March 31, 2000 fiscal quarter end and at each fiscal quarter end
thereafter, with "Total Liabilities" defined as the aggregate of
current liabilities and non-current liabilities less subordinated
debt, and with "Tangible Net Worth" as defined in Section 3.1(c)
above.
(b) EBITDA Coverage Ratio not less than 2.25 to 1.0 on a
year to date basis as of the end of each fiscal quarter up to and
including the fiscal quarter ending September 30, 1999, and
thereafter on a trailing four-quarter basis as of the end of each
fiscal quarter, with "EBITDA" defined as net profit before tax
plus interest expense (net of capitalized interest expense),
depreciation expense and amortization expense, and with "EBITDA
Coverage Ratio" defined as EBITDA divided by the aggregate of
total interest expense plus the prior period current maturity of
long-term debt and the prior period current maturity of
subordinated debt.
SECTION 4.10. NOTICE TO BANK. Promptly (but in no event
more than five (5) days after the occurrence of each such event
or matter) give written notice to Bank in reasonable detail of:
(a) the occurrence of any Event of Default, or any condition,
event or act which with the giving of notice or the passage of
time or both would constitute an Event of Default; (b) any change
in the name or the organizational structure of Borrower; (c) the
occurrence and nature of any Reportable Event or Prohibited
Transaction, each as defined in ERISA, or any funding deficiency
with respect to any Plan; or (d) any termination or cancellation
of any insurance policy which Borrower is required to maintain,
or any uninsured or partially uninsured loss through liability or
property damage, or through fire, theft or any other cause
affecting Borrower's property in excess of an aggregate of
$100,000.00.
SECTION 4.11. YEAR 2000 COMPLIANCE. Perform all acts
reasonably necessary to ensure that (a) Borrower and any business
in which Borrower holds a substantial interest, and (b) all
customers, suppliers and vendors that are material to Borrower's
business, become Year 2000 Compliant in a timely manner. Such
acts shall include, without limitation, performing a
comprehensive review and assessment of all of Borrower's systems
and adopting a detailed plan, with itemized budget, for the
remediation, monitoring and testing of such systems. As used
herein, "Year 2000 Compliant" shall mean, in regard to any
entity, that all software, hardware, firmware, equipment, goods
or systems utilized by or material to the business operations or
financial condition of such entity, will properly perform date
sensitive functions before, during and after the year 2000.
Borrower shall, immediately upon request, provide to Bank such
certifications or other evidence of Borrower's compliance with
the terms hereof as Bank may from time to time require.
ARTICLE V
NEGATIVE COVENANTS
Borrower further covenants that so long as Bank remains
committed to extend credit to Borrower pursuant hereto, or any
liabilities (whether direct or contingent, liquidated or
unliquidated) of Borrower to Bank under any of the Loan Documents
remain outstanding, and until payment in full of all obligations
of Borrower subject hereto, Borrower will not without Bank's
prior written consent:
SECTION 5.1. USE OF FUNDS. Use any of the proceeds of any
of the Credits except for the purposes stated in Article I
hereof.
SECTION 5.2. MERGER, CONSOLIDATION, TRANSFER OF ASSETS.
Merge into or consolidate with any other entity; make any
substantial change in the nature of Borrower's business as
conducted as of the date hereof; acquire all or substantially all
of the assets of any other entity; nor sell, lease, transfer or
otherwise dispose of all or a substantial or material portion of
Borrower's assets except in the ordinary course of its business;
provided, however, that Borrower is permitted to engage in a
merger or acquire assets in connection with the Grass Valley,
Ltd., Inc./Richard's Deli & Pub business (the "GVL Acquisition"),
so long as (a) Borrower remains the surviving entity in the event
of any merger, (b) no Event of Default or any condition, event or
act which with the giving of notice or the passage of time or
both would constitute an Event of Default would result from the
consummation of the GVL Acquisition, immediately after giving
effect thereto, and (c) the assets or any stock or other
interests acquired by Borrower in any such GVL Acquisition shall
become security for all indebtedness of Borrower to Bank subject
to the terms of Section 1.8 hereunder. Bank's consent shall not
be unreasonably withheld with respect to any merger or
acquisition that would not otherwise cause an Event of Default to
occur, or that immediately following consummation thereof would
result in any circumstance which with the giving of notice or the
passage of time or both would constitute an Event of Default.
SECTION 5.3. GUARANTIES. Guarantee or become liable in
any way as surety, endorser (other than as endorser of negotiable
instruments for deposit or collection in the ordinary course of
business), accommodation endorser or otherwise for, nor pledge or
hypothecate any assets of Borrower as security for, any
liabilities or obligations of any other person or entity, except
any of the foregoing in favor of Bank.
SECTION 5.4. LOANS, ADVANCES, INVESTMENTS. Make any loans
or advances to or investments in any person or entity, except any
of the foregoing existing as of, and disclosed to Bank prior to,
the date hereof, and except in connection with the GVL
Acquisition, as described and subject to the requirements set
forth in Section 5.2 above.
SECTION 5.5. DIVIDENDS, DISTRIBUTIONS. Declare or pay any
dividend or distribution in cash or any other property other than
stock, on Borrower's stock now or hereafter outstanding, nor
redeem, retire, repurchase or otherwise acquire any shares of any
class of Borrower's stock now or hereafter outstanding.
SECTION 5.6. PLEDGE OF ASSETS. Mortgage, pledge, grant or
permit to exist a security interest in, or lien upon, all or any
portion of Borrower's assets now owned or hereafter acquired,
except any of the foregoing in favor of Bank or which is existing
as of, and disclosed to Bank in writing prior to, the date
hereof.
SECTION 5.7. OTHER INDEBTEDNESS. Create, incur, assume or
permit to exist any or liabilities resulting from borrowings,
loans or advances, whether secured or unsecured, matured or
unmatured, liquidated or unliquidated, joint or several, except
(a) the liabilities of Borrower to Bank, (b) any other
liabilities of Borrower existing as of, and disclosed to Bank
prior to, the date hereof, and (c) subordinated debt of Borrower
to Eagle's View Management Company, Inc. in a principal amount
not to exceed $1,250,000.00.
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.1. The occurrence of any of the following shall
constitute an "Event of Default" under this Agreement:
(a) Borrower shall fail to pay within five (5) days
following the date due any principal, interest, fees or other
amounts payable under any of the Loan Documents.
(b) Any financial statement or certificate furnished to
Bank in connection with, or any representation or warranty made
by Borrower or any other party under this Agreement or any other
Loan Document shall prove to be incorrect, false or misleading in
any material respect when furnished or made.
(c) Any default in the performance of or compliance with
any obligation, agreement or other provision contained herein or
in any other Loan Document (other than those referred to in
subsections (a) and (b) above or those for which a specific time
for performance or cure has already been specified), and with
respect to any such default which by its nature can be cured,
such default shall continue for a period of thirty (30) days from
the first to occur of (i) the date any officer of Borrower first
knew of such default, or (ii) the date Bank gives written notice
of such default to Borrower.
(d) Any default in the payment or performance of any
obligation, or any defined event of default, under the terms of
any contract or instrument (other than any of the Loan Documents)
pursuant to which Borrower or any guarantor hereunder has
incurred any debt or other liability to Bank, or has incurred any
debt or other liability to any other person or entity involving
an amount of at least Three Hundred Thousand Dollars
($300,000.00), if such default gives to such other person or
entity the right to demand immediate payment of such amount or
the right to accelerate the obligation in default.
(e) The filing of a notice of judgment lien against
Borrower or any guarantor hereunder; or the recording of any
abstract of judgment against Borrower or any guarantor hereunder
in any county in which Borrower or such guarantor has an interest
in real property; or the service of a notice of levy and/or of a
writ of attachment or execution, or other like process, against
the assets of Borrower or any guarantor hereunder; or the entry
of a judgment against Borrower or any guarantor hereunder;
provided however, that the foregoing shall only constitute an
Event of Default hereunder if the related judgment involves at
least Three Hundred Dollars ($300,000.00) and is not bonded or
insured against, or removed or dismissed without expenditure of
funds by Borrower except for legal proceedings within 30 days;
provided, however, that no advances under any Credit shall be
available until such bonding, insurance, removal, or dismissal
occurs.
(f) Borrower or any guarantor hereunder shall become
insolvent, or shall suffer or consent to or apply for the
appointment of a receiver, trustee, custodian or liquidator of
itself or any of its property, or shall generally fail to pay its
debts as they become due, or shall make a general assignment for
the benefit of creditors; Borrower or any guarantor hereunder
shall file a voluntary petition in bankruptcy, or seeking
reorganization, in order to effect a plan or other arrangement
with creditors or any other relief under the Bankruptcy Reform
Act, Title 11 of the United States Code, as amended or recodified
from time to time ("Bankruptcy Code"), or under any state or
federal law granting relief to debtors, whether now or hereafter
in effect; or any involuntary petition or proceeding pursuant to
the Bankruptcy Code or any other applicable state or federal law
relating to bankruptcy, reorganization or other relief for
debtors is filed or commenced against Borrower or any guarantor
hereunder and is not dismissed within 45 days (provided, however,
that no advances under any Credit shall be available until such
dismissal), or Borrower or any such guarantor shall file an
answer admitting the jurisdiction of the court and the material
allegations of any involuntary petition; or Borrower or any such
guarantor shall be adjudicated a bankrupt, or an order for relief
shall be entered against Borrower or any such guarantor by any
court of competent jurisdiction under the Bankruptcy Code or any
other applicable state or federal law relating to bankruptcy,
reorganization or other relief for debtors.
(g) The dissolution or liquidation of Borrower or any
guarantor hereunder; or Borrower or any such guarantor, or any of
its directors, stockholders or members, shall take action seeking
to effect the dissolution or liquidation of Borrower or such
guarantor.
(h) The sale, transfer, hypothecation, assignment or
encumbrance, whether voluntary, involuntary or by operation of
law, without Bank's prior written consent, of all or any part of
or interest in any real property collateral required hereby.
SECTION 6.2. REMEDIES. Upon the occurrence of any Event
of Default: (a) all indebtedness of Borrower under each of the
Loan Documents, any term thereof to the contrary notwithstanding,
shall at Bank's option and without notice become immediately due
and payable without presentment, demand, protest or notice of
dishonor, all of which are hereby expressly waived by each
Borrower; (b) the obligation, if any, of Bank to extend any
further credit under any of the Loan Documents shall immediately
cease and terminate; and (c) Bank shall have all rights, powers
and remedies available under each of the Loan Documents, or
accorded by law, including without limitation the right to resort
to any or all security for any of the Credits and to exercise any
or all of the rights of a beneficiary or secured party pursuant
to applicable law. All rights, powers and remedies of Bank may
be exercised at any time by Bank and from time to time after the
occurrence of an Event of Default, are cumulative and not
exclusive, and shall be in addition to any other rights, powers
or remedies provided by law or equity.
ARTICLE VII
MISCELLANEOUS
SECTION 7.1. NO WAIVER. No delay, failure or
discontinuance of Bank in exercising any right, power or remedy
under any of the Loan Documents shall affect or operate as a
waiver of such right, power or remedy; nor shall any single or
partial exercise of any such right, power or remedy preclude,
waive or otherwise affect any other or further exercise thereof
or the exercise of any other right, power or remedy. Any waiver,
permit, consent or approval of any kind by Bank of any breach of
or default under any of the Loan Documents must be in writing and
shall be effective only to the extent set forth in such writing.
SECTION 7.2. NOTICES. All notices, requests and demands
which any party is required or may desire to give to any other
party under any provision of this Agreement must be in writing
delivered to each party at the following address:
BORROWER: ELMER'S RESTAURANTS, INC.
P.O. Box 16595
Portland, OR 97216
BANK: WELLS FARGO BANK, NATIONAL ASSOCIATION
Portland Regional Commercial Banking Office
1300 S.W. Fifth Avenue
Portland, OR 97201
or to such other address as any party may designate by written
notice to all other parties. Each such notice, request and
demand shall be deemed given or made as follows: (a) if sent by
hand delivery, upon delivery; (b) if sent by mail, upon the
earlier of the date of receipt or three (3) days after deposit in
the U.S. mail, first class and postage prepaid; and (c) if sent
by telecopy, upon receipt.
SECTION 7.3. COSTS, EXPENSES AND ATTORNEYS' FEES.
Borrower shall pay to Bank immediately upon demand the full
amount of all payments, advances, charges, costs and expenses,
including reasonable attorneys' fees (to include outside counsel
fees and all allocated costs of Bank's in-house counsel),
expended or incurred by Bank in connection with (a) the
negotiation and preparation of this Agreement and the other Loan
Documents, Bank's continued administration hereof and thereof,
and the preparation of any amendments and waivers hereto and
thereto, (b) the enforcement of Bank's rights and/or the
collection of any amounts which become due to Bank under any of
the Loan Documents, and (c) the prosecution or defense of any
action in any way related to any of the Loan Documents, including
without limitation, any action for declaratory relief, whether
incurred at the trial or appellate level, in an arbitration
proceeding or otherwise, and including any of the foregoing
incurred in connection with any bankruptcy proceeding (including
without limitation, any adversary proceeding, contested matter or
motion brought by Bank or any other person) relating to any
Borrower or any other person or entity.
SECTION 7.4. SUCCESSORS, ASSIGNMENT. This Agreement shall
be binding upon and inure to the benefit of the heirs, executors,
administrators, legal representatives, successors and assigns of
the parties; provided however, that Borrower may not assign or
transfer its interest hereunder without Bank's prior written
consent. Bank reserves the right to sell, assign, transfer,
negotiate or grant participations in all or any part of, or any
interest in, Bank's rights and benefits under each of the Loan
Documents. In connection therewith, Bank may disclose all
documents and information which Bank now has or may hereafter
acquire relating to any of the Credits, Borrower or its business,
any guarantor hereunder or the business of such guarantor, or any
collateral required hereunder.
SECTION 7.5. ENTIRE AGREEMENT; AMENDMENT. This Agreement
and the other Loan Documents constitute the entire agreement
between Borrower and Bank with respect to the Credits and
supersede all prior negotiations, communications, discussions and
correspondence concerning the subject matter hereof. This
Agreement may be amended or modified only in writing signed by
each party hereto.
SECTION 7.6. NO THIRD PARTY BENEFICIARIES. This Agreement
is made and entered into for the sole protection and benefit of
the parties hereto and their respective permitted successors and
assigns, and no other person or entity shall be a third party
beneficiary of, or have any direct or indirect cause of action or
claim in connection with, this Agreement or any other of the Loan
Documents to which it is not a party.
SECTION 7.7. TIME. Time is of the essence of each and
every provision of this Agreement and each other of the Loan
Documents.
SECTION 7.8. SEVERABILITY OF PROVISIONS. If any provision
of this Agreement shall be prohibited by or invalid under
applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity without invalidating the
remainder of such provision or any remaining provisions of this
Agreement.
SECTION 7.9. COUNTERPARTS. This Agreement may be executed
in any number of counterparts, each of which when executed and
delivered shall be deemed to be an original, and all of which
when taken together shall constitute one and the same Agreement.
SECTION 7.10. GOVERNING LAW. This Agreement shall be
governed by and construed in accordance with the laws of the
State of Oregon.
SECTION 7.11. ARBITRATION.
(a) Arbitration. Upon the demand of any party, any Dispute
shall be resolved by binding arbitration (except as set forth in
(e) below) in accordance with the terms of this Agreement. A
"Dispute" shall mean any action, dispute, claim or controversy of
any kind, whether in contract or tort, statutory or common law,
legal or equitable, now existing or hereafter arising under or in
connection with, or in any way pertaining to, any of the Loan
Documents, or any past, present or future extensions of credit
and other activities, transactions or obligations of any kind
related directly or indirectly to any of the Loan Documents,
including without limitation, any of the foregoing arising in
connection with the exercise of any self-help, ancillary or other
remedies pursuant to any of the Loan Documents. Any party may by
summary proceedings bring an action in court to compel
arbitration of a Dispute. Any party who fails or refuses to
submit to arbitration following a lawful demand by any other
party shall bear all costs and expenses incurred by such other
party in compelling arbitration of any Dispute.
(b) Governing Rules. Arbitration proceedings shall be
administered by the American Arbitration Association ("AAA") or
such other administrator as the parties shall mutually agree upon
in accordance with the AAA Commercial Arbitration Rules. All
Disputes submitted to arbitration shall be resolved in accordance
with the Federal Arbitration Act (Title 9 of the United States
Code), notwithstanding any conflicting choice of law provision in
any of the Loan Documents. The arbitration shall be conducted at
a location in Oregon selected by the AAA or other administrator.
If there is any inconsistency between the terms hereof and any
such rules, the terms and procedures set forth herein shall
control. All statutes of limitation applicable to any Dispute
shall apply to any arbitration proceeding. All discovery
activities shall be expressly limited to matters directly
relevant to the Dispute being arbitrated. Judgment upon any
award rendered in an arbitration may be entered in any court
having jurisdiction; provided however, that nothing contained
herein shall be deemed to be a waiver by any party that is a bank
of the protections afforded to it under 12 U.S.C. 91 or any
similar applicable state law.
(c) No Waiver; Provisional Remedies, Self-Help and
Foreclosure. No provision hereof shall limit the right of any
party to exercise self-help remedies such as setoff, foreclosure
against or sale of any real or personal property collateral or
security, or to obtain provisional or ancillary remedies,
including without limitation injunctive relief, sequestration,
attachment, garnishment or the appointment of a receiver, from a
court of competent jurisdiction before, after or during the
pendency of any arbitration or other proceeding. The exercise of
any such remedy shall not waive the right of any party to compel
arbitration hereunder.
(d) Arbitrator Qualifications and Powers; Awards.
Arbitrators must be active members of the Oregon State Bar or
retired judges of the state or federal judiciary of Oregon, with
expertise in the substantive laws applicable to the subject
matter of the Dispute. Arbitrators are empowered to resolve
Disputes by summary rulings in response to motions filed prior to
the final arbitration hearing. Arbitrators (i) shall resolve all
Disputes in accordance with the substantive law of the state of
Oregon, (ii) may grant any remedy or relief that a court of the
state of Oregon could order or grant within the scope hereof and
such ancillary relief as is necessary to make effective any
award, and (iii) shall have the power to award recovery of all
costs and fees, to impose sanctions and to take such other
actions as they deem necessary to the same extent a judge could
pursuant to the Federal Rules of Civil Procedure, the Oregon
Rules of Civil Procedure or other applicable law. Any Dispute in
which the amount in controversy is $5,000,000 or less shall be
decided by a single arbitrator who shall not render an award of
greater than $5,000,000 (including damages, costs, fees and
expenses). By submission to a single arbitrator, each party
expressly waives any right or claim to recover more than
$5,000,000. Any Dispute in which the amount in controversy
exceeds $5,000,000 shall be decided by majority vote of a panel
of three arbitrators; provided however, that all three
arbitrators must actively participate in all hearings and
deliberations.
(e) Judicial Review. Notwithstanding anything herein to
the contrary, in any arbitration in which the amount in
controversy exceeds $25,000,000, the arbitrators shall be
required to make specific, written findings of fact and
conclusions of law. In such arbitrations (i) the arbitrators
shall not have the power to make any award which is not supported
by substantial evidence or which is based on legal error, (ii) an
award shall not be binding upon the parties unless the findings
of fact are supported by substantial evidence and the conclusions
of law are not erroneous under the substantive law of the state
of Oregon, and (iii) the parties shall have in addition to the
grounds referred to in the Federal Arbitration Act for vacating,
modifying or correcting an award the right to judicial review of
(A) whether the findings of fact rendered by the arbitrators are
supported by substantial evidence, and (B) whether the
conclusions of law are erroneous under the substantive law of the
state of Oregon. Judgment confirming an award in such a
proceeding may be entered only if a court determines the award is
supported by substantial evidence and not based on legal error
under the substantive law of the state of Oregon.
(f) Miscellaneous. To the maximum extent practicable, the
AAA, the arbitrators and the parties shall take all action
required to conclude any arbitration proceeding within 180 days
of the filing of the Dispute with the AAA. No arbitrator or
other party to an arbitration proceeding may disclose the
existence, content or results thereof, except for disclosures of
information by a party required in the ordinary course of its
business, by applicable law or regulation, or to the extent
necessary to exercise any judicial review rights set forth
herein. If more than one agreement for arbitration by or between
the parties potentially applies to a Dispute, the arbitration
provision most directly related to the Loan Documents or the
subject matter of the Dispute shall control. This arbitration
provision shall survive termination, amendment or expiration of
any of the Loan Documents or any relationship between the
parties.
UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE
BY BANK AFTER OCTOBER 3, 1989 CONCERNING LOANS AND OTHER CREDIT
EXTENSIONS WHICH ARE NOT FOR PERSONAL, FAMILY OR HOUSEHOLD
PURPOSES OR SECURED SOLELY BY THE BORROWER'S RESIDENCE MUST BE IN
WRITING, EXPRESS CONSIDERATION AND BE SIGNED BY BANK TO BE
ENFORCEABLE.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the day and year first written
above.
WELLS FARGO BANK,
ELMER'S RESTAURANTS, INC. NATIONAL ASSOCIATION
By: __/s/Bruce N. Davis____ By: __/s/Steve Day____________
Steve Day
Title: President Vice President
9 - SECOND AMENDMENT TO LOAN AGREEMENT AND SECURITY AGREEMENT
0199297.01
SECOND AMENDMENT TO
LOAN AGREEMENT AND SECURITY AGREEMENT
THIS SECOND AMENDMENT TO LOAN AGREEMENT AND SECURITY
AGREEMENT ("Second Amendment") is made effective February 18th,
1999, by and among CBW INC., an Oregon corporation ("Borrower"),
ELMER'S RESTAURANTS, INC., an Oregon corporation ("Elmer's"), and
EAGLE'S VIEW MANAGEMENT COMPANY, INC., an Oregon corporation
("Lender").
RECITALS:
A. Borrower and Lender are parties to that certain
Amended and Restated Loan Agreement and Security Agreement, dated
August 24, 1998 (the "Loan Agreement"), wherein Lender agreed,
subject to certain terms and conditions, to loan Borrower the
sum of $4 million (the "Loan"). Borrower intended to use the
proceeds of the loan primarily to acquire a majority of the then
outstanding shares of stock in Elmer's.
B. Pursuant to the Loan Agreement, Lender made the Loan to
Borrower on or about August 25, 1998. As part of the
consideration for such loan, Borrower provided Lender with
certain security, including pledges of Elmer's common stock (the
"Goldberg Stock") and Borrower's common stock (collectively, the
"Stock Pledges"), the personal guarantees of certain of
Borrower's shareholders (the "Guarantors"), and the Agreement to
Post Security of Gregory Wendt (the "Wendt Agreement").
C. In connection with the Loan, Borrower, as Maker and
Lender, as Holder, are parties to that certain Promissory Note,
dated August 25, 1998, in the principal amount of $4 million (the
"Note"). Borrower has proposed to pay Lender certain sums in
order to reduce the principal balance owed on the Note to $1.25
million.
D. Borrower has proposed to proceed with a merger between
Borrower and Elmer's (the "Merger"). Pursuant to Section 3.2 of
the Loan Agreement, certain conditions, as set forth therein, are
required to be satisfied by Borrower and Elmer's in connection
with the Merger, upon the satisfaction of which, Lender is
required to release and discharge the Guarantors and release its
security interest in the Stock Pledges and the Wendt Agreement.
E. Borrower, Lender, and Elmer's have agreed to complete
the Merger, reduce the principal balance owed under the Note, and
to release certain security interests and the guaranties and
substitute new security, subject to the terms and conditions
contained herein.
NOW, THEREFORE, the parties agree as follows:
1. Conditions to Substitution of Security Subsequent to Merger.
Upon the occurrence of all the following on or prior to February
24, 1999, Lender shall execute and deliver a Release of Guaranty
Agreement in favor of each of the Guarantors in the form attached
as Exhibit 1, Releases of Security Interests under Pledge
Agreements in the forms attached as Exhibits 2 and 3, a Release
of Security Interest under the Wendt Agreement in the form
attached as Exhibit 4 and a First Amendment to Promissory Note,
the form of which is attached as Exhibit 5. Lender further
agrees that upon fulfillment of all such conditions by such date,
Lender shall return the funds posted under the Wendt Agreement.
1.1 Completion of Merger. Borrower shall have completed
the Merger and provided documentation of the Merger to Lender's
reasonable satisfaction sufficient to establish that Elmer's has
assumed all obligations of Borrower.
1.2 Partial Payment of Loan Balance. Borrower shall have
paid Lender the sum of $2,750,000.00 pursuant to the terms of the
First Amendment to Promissory Note, the form of which is attached
as Exhibit 5. The principal amount of the Note shall thereby be
reduced to $1.25 million and Sections 1.3 and 2.5 of the Loan
Agreement shall be amended to reflect a maturity date of
February 25, 2004.
1.3 Real Property Lien. Elmer's shall have granted and
delivered to Lender fully and properly executed Deeds of Trust in
the form attached as Exhibit 6 (the "Deeds of Trust") against the
real properties described in the attached Exhibit 7 and all
improvements located thereon (the "Properties"). The Deeds of
Trust will create valid liens, subject only to the preprinted
exceptions contained in a standard policy of Lender's Extended
Title Insurance, the prior lien of Wells Fargo Bank in the total
amount not to exceed $7,000,000.00, and such other exceptions to
title as Lender may reasonably approve.
1.4 Other Security. Elmer's shall have granted to Lender a
perfected security interest in all items of personal property of
Elmer's listed in Exhibit 8 (the "Collateral"), subject only to
the first priority security interest of Wells Fargo Bank in the
Collateral pursuant to the terms of the Subordination Agreement
between the parties attached as Exhibit 9.
1.5 Assumption of Debt. Pursuant to the terms of the
Merger, Elmer's shall have assumed all obligations, duties and
covenants of Borrower under the Loan Agreement as amended herein.
In addition, Elmer's shall be responsible for all representations
and warranties of Borrower as if Elmer's had made such
representations and warranties in the first instance and shall be
liable for any breach thereof.
1.6 Insurance Policies. Elmer's shall have delivered to
Lender in a form reasonably satisfactory to Lender, certificates
of insurance as set forth in Section 3.2.4 of the Loan Agreement.
1.7 Financing Statements. Borrower shall have executed and
delivered to Lender UCC Financing Statements covering the
Collateral and naming Lender as the secured party, subject to the
subordination described in Section 1.4 above. Lender shall be
entitled to file such financing statements with the appropriate
governmental entity and/or recording office.
1.8 Officer's Certificate. Borrower and Elmer's shall have
executed and delivered to Lender certificates from the Corporate
Secretary of Borrower and Elmer's certifying as follows:
1.8.1 Borrower and Elmer's have full and complete
authority to enter into, execute, deliver and perform the terms
of this Second Amendment, and such execution, delivery, and
performance will not cause a default by Borrower or Elmer's under
the terms of any other document or agreement by which Borrower or
Elmer's is bound.
1.8.2 Upon execution by Borrower and Elmer's, this
Second Amendment will be a valid and legally binding obligation
of Borrower and Elmer's, enforceable against Borrower and Elmer's
in accordance with its terms subject to usual and customary
bankruptcy and equitable remedies qualifications.
1.9 Approvals. Elmer's shall have obtained the approval or
consent of, and all filings and registrations required by any
state or federal agency or other federal, state, or local
regulatory authority, which is required in connection with the
execution, delivery, and performance by Borrower and Elmer's of
this Second Amendment and the documents to be executed in
connection therewith.
1.10 Resolutions. Borrower and Elmer's shall have provided
copies of resolutions adopted by the board of directors of
Borrower and Elmer's, certified by the Secretary or Assistant
Secretary of Borrower and Elmer's, respectively, as being in full
force and effect on the Closing Date, as that term is defined
below, authorizing Borrower and Elmer's to enter into this Second
Amendment and execute all documents necessary in connection
therewith.
1.11 Certificate of Incumbency. Borrower and Elmer's shall
have delivered to Lender certificates signed by the Secretary or
Assistant Secretary of Borrower and Elmer's, respectively, and
dated as of the Closing Date, as to the incumbency of the person
or persons authorized to execute and deliver this Second
Amendment, and all other documents required hereunder on behalf
of Borrower and Elmer's.
2. Representations and Warranties. Borrower and Elmer's each
represent and warrant to Lender that:
2.1 Organization and Existence. Elmer's is an Oregon
corporation duly organized and validly existing under the laws of
the State of Oregon; has all requisite power, and has all
material governmental licenses, authorizations, consents, and
approvals necessary to own its assets and carry on its business
as now being or as proposed to be conducted; and is qualified to
do business in all other jurisdictions in which the nature of the
business conducted by it makes such qualification necessary and
where failure to do so would have a material adverse effect on
its business, financial condition, or operations.
2.2 Authority. The making and performance by Borrower and
Elmer's of this Second Amendment and all exhibits hereto have
been duly authorized by all corporate action and do not and will
not violate any provision of law, rule, regulation, or order,
including, but not limited to, any such law, rule, regulation
under the Oregon Lottery Commission or Oregon Liquor Control
Commission or any other similar state or federal agency or
entity (collectively "Laws"), or any provision of the Articles of
Incorporation or Bylaws of Borrower or Elmer's, or result in the
breach of, or constitute a default or require any consent under,
any Laws or indenture or other agreement or instrument by which
Borrower or Elmer's or any of their property may be bound or
affected, or result in, or require, the creation or imposition of
any lien except as provided herein upon or with respect to any
property of Borrower or Elmer's. Lender and Borrower acknowledge
that the terms and conditions of this Loan Agreement may be
subject to disclosure under applicable securities or other laws.
2.3 Obligations After Merger. Upon completion of the
Merger, Elmer's will assume all of Borrower's duties,
requirements, and obligations under the Loan Agreement, as
amended.
2.4 Approval. Except the approval of the Oregon Lottery
Commission which has already been obtained, no authorization or
approval or other action by, and no notice to or filing or
registration with, any governmental authority or regulatory body
is required for the due execution, delivery, and performance by
Borrower or Elmer's of this Second Amendment and all exhibits
hereto.
2.5 Taxes. Borrower and Elmer's have filed all tax returns
which are required to be filed under any applicable law on or
before the date such filing is required (taking into account any
lawful extensions with respect thereto), and have paid, or made,
provision for the payment of all taxes shown to be due pursuant
to said returns or pursuant to any assessment received by
Borrower or Elmer's, except such taxes, if any, being contested
in good faith and by proper proceedings and as to which adequate
reserves have been provided. Borrower and Elmer's have had no
tax deficiencies asserted or assessed against them within the
three-year period preceding the date of this Agreement.
2.6 Default. Borrower and Elmer's are not in default in
the payment or performance or observance of any contract,
agreement, or other instrument to which either is a party or by
which either or its properties or assets may be bound, which
individually or together with all other such defaults could have
a material adverse effect on the financial condition of Borrower
or Elmer's or materially impair the ability of Borrower or
Elmer's to pay the Note or perform or observe the respective
provisions of the other Loan Documents as amended.
2.7 Binding Agreements. Upon execution and delivery
thereof by Borrower and Elmer's, this Second Amendment and all
exhibits hereto will constitute the respective legal, valid, and
binding obligations of Borrower and Elmer's enforceable in
accordance with their respective terms subject to usual and
customary bankruptcy and equitable remedies qualifications.
2.8 Business Authorizations. Borrower and Elmer's possess
all patents, patent rights, licenses, trade marks, trade mark
rights, trade names, trade name rights and copyrights required to
conduct their business as now conducted without conflict with the
rights or privileges of others.
2.9 Compliance with Laws. The operations of Borrower and
Elmer's are in material compliance, and shall continue to be,
during the time that any sums remain owing under the Loan
Agreement, in material compliance, with all Laws, including, but
not limited to, state and federal securities laws.
3. Cross-Default. The parties agree and acknowledge that in
addition to the events of default described under Section 7 of
the Loan Agreement, it shall also be an event of default under
the Loan Agreement if Borrower or Elmer's defaults under any
obligation owed to Wells Fargo or any other individual or entity
with a security interest in or lien against any material item or
part of the Collateral or any of the Properties, and such default
is not cured within applicable cure periods.
4. Covenants. Elmer's agrees that from or after the date of
the Merger, Elmer's shall comply with all covenants contained in
Sections 6.1, 6.2, 6.3, 6.4, 6.7, 6.8, 6.9, and 6.13 of the Loan
Agreement, as amended herein, and that Borrower in said sections
shall refer to Elmer's as if Elmer's had signed the Loan
Agreement in place of Borrower in the first instance.
5. Closing. The transactions contemplated by this Second
Amendment shall be closed in escrow (the "Closing") at Fidelity
National Title Company of Oregon (the "Title Company"), in
escrow, at its offices located at 900 S.W. Fifth Avenue,
Portland, Oregon. The Closing shall occur not later than
February 24, 1999 (the "Termination Date").
5.1 Lender's Deliveries at Closing. At Closing, Lender
shall deliver to escrow the following executed originals of
Exhibits 1 through 5 to this Second Amendment.
5.2 Borrower's and Elmer's Deliveries at Closing. At
Closing, Borrower and Elmer's shall deliver the sums mentioned in
Section 1.2, the executed Deeds of Trust, the executed security
agreement and subordination agreement listed in Section 1.4,
satisfactory evidence of Elmer's assumption of Borrower's
covenants and obligations under the Loan Agreement as amended
herein, the insurance policies described in Section 1.6, the
executed financing statements listed in Section 1.7, and fully
executed originals of all other items mentioned in Sections 1.8,
1.9, 1.10, and 1.11 of this Second Amendment (to the extent not
previously delivered). Borrower and Elmer's shall also deliver
all other sums and items required under this Second Amendment.
6. Title Insurance. Within 30 days after Closing, Borrower and
Elmer's shall pay for and deliver to Lender ALTA title insurance
policies with extended coverage on each parcel of the Properties.
The title insurance policies shall insure title to the Properties
subject only to the Title Company's preprinted standard
exceptions contained in a Lender's extended coverage policy, the
first priority lien of Wells Fargo Bank, and other exceptions
which are acceptable to Lender in its reasonable discretion.
7. Default. Section 7.1(i) of the Loan Agreement is hereby
deleted in its entirety.
8. Time of Essence. Time is of the essence for each of the
party's obligations under this Second Amendment.
9. Expenses. Borrower and Elmer's agree to pay to Lender the
reasonable fees and expenses, including, but not limited to,
those of Dunn, Carney, Allen, Higgins & Tongue, counsel to
Lender, incurred in connection with this Second Amendment. Said
sum shall be paid at Closing.
10. Miscellaneous.
10.1 Entire Agreement. This Second Amendment, along with
all exhibits and attachments, comprises the entire agreement of
the parties with respect to the matters covered herein, written
or oral. All provisions of this Second Amendment may be modified
or waived only by an instrument in writing signed by all parties
hereto.
10.2 Survival. All representations, warranties, and
agreements contained on the part of Borrower and Elmer's shall
survive the making of this Second Amendment and the execution of
all documents in connection herewith, as long as any interest on
or principal of the loan remains unpaid.
10.3 Authority. Each individual executing this Second
Amendment represents and warrants that he or she is duly
authorized to duly execute and deliver this Second Amendment on
behalf of the contracting party.
10.4 Counterparts. This Second Amendment and the exhibits
thereto may be executed in one or more counterparts, all of which
taken together shall constitute one and the same First Amendment,
and any of the parties hereto may execute this First Amendment by
signing any such counterpart.
10.5 Borrower's and Elmer's Indemnity of Lender. Borrower
and Elmer's shall, jointly and severally, indemnify, defend, and
hold harmless Lender from and against any loss, liability,
damage, or expense, including reasonable attorney fees, caused by
or related to: (i) any breach of Borrower's or Elmer's
warranties or any misrepresentation by Borrower or Elmer's; (ii)
the condition of any of the Properties, including, but not
limited to, any environmental contamination in, on, under, or
about the Properties; or (iii) the operation of Borrower's or
Elmer's business, unless such liability, damage, or expense
arises from the gross negligence or intentional misconduct of
Lender. The provisions of this Section shall survive Closing.
11. Consent to Merger. Subject to the satisfaction of each of
the conditions set forth above in Section Conditions to
Substitution of Security Subsequent to Merger. Upon the
occurrence of all the following on or prior to February 24, 1999,
Lender shall execute and deliver a Release of Guaranty Agreement
in favor of each of the Guarantors in the form attached as
Exhibit 1, Releases of Security Interests under Pledge Agreements
in the forms attached as Exhibits 2 and 3, a Release of Security
Interest under the Wendt Agreement in the form attached as
Exhibit 4 and a First Amendment to Promissory Note, the form of
which is attached as Exhibit 5. Lender further agrees that upon
fulfillment of all such conditions by such date, Lender shall
return the funds posted under the Wendt Agreement., Lender hereby
consents to the Merger and the transactions contemplated thereby.
12. Security Agreement. For value, the current receipt and
reasonable equivalence of which are hereby acknowledged, and to
secure the payment and performance of the Loan as evidenced by
the Note, as amended, Elmer's hereby grants to Lender a security
interest pursuant to Article 9 of the Uniform Commercial Code, in
and to the Rights to Payment, Inventory, Collateral and Proceeds
described in Exhibit 8.
13. All Other Terms of Loan Agreement to Remain Unchanged. All
terms and conditions of the Loan Agreement not specifically
amended or deleted by this Second Amendment shall remain in full
force and effect, as if fully set forth herein. If closing has
not occurred by the Termination Date, this Second Amendment shall
terminate and be null and void.
IN WITNESS WHEREOF, the parties have executed this Second
Amendment effective the date first written above.
CBW INC., EAGLE'S VIEW MANAGEMENT
an Oregon corporation COMPANY, INC., an Oregon
corporation
By: ___/s/ Bruce N. Davis___ By: ___/s/ Donna P. Woolley__
Name: Bruce N. Davis Name: Donna P. Woolley
Title: President Title: President
Date: 2/17/99 Date: 2/18/99
ELMER'S RESTAURANTS, INC.,
an Oregon corporation
By: ___/s/ Bruce N. Davis___
Name: Bruce N. Davis
Title: President
Date: 2/17/99
Exhibit List:
Exhibit 1-Release of Guaranty Agreement
Exhibits 2 and 3-Releases of Security Interests under Pledge
Agreements
Exhibit 4-Release of Security Interest under the Wendt Agreement
Exhibit 5-First Amendment to Promissory Note
Exhibit 6-Deed of Trust form
Exhibit 7-Real Properties description
Exhibit 8-Personal Property of Elmer's
Exhibit 9-Subordination Agreement
7 0199368.01
PROMISSORY NOTE
$480,000.00 Portland, Oregon
February 17, 1999
FOR VALUE RECEIVED, the undersigned ELMER'S RESTAURANTS,
INC. ("Borrower") promises to pay to the order of WELLS FARGO
BANK, NATIONAL ASSOCIATION ("Bank") at its office at 1300 S.W.
Fifth Avenue, Portland, Oregon, or at such other place as the
holder hereof may designate, in lawful money of the United States
of America and in immediately available funds, the principal sum
of Four Hundred Eighty Thousand Dollars ($480,000.00), with
interest thereon as set forth herein.
INTEREST:
(a) Interest. Interest on the outstanding principal
balance of this Note shall accrue for the first five (5) years
from the date of this Note at the rate of ______________________
_________________________________ percent __________%) per annum
(computed on the basis of a 360-day year, actual days elapsed).
Such interest rate shall be adjusted as of the fifth anniversary
date of the date of this Note (the "Adjustment Date") to a fixed
rate equal to one and sixty five one-hundredths percent (1.65%)
above the Money Market Funds Rate in effect on the Adjustment
Date.
(b) Money Market Funds Rate. "Money Market Funds Rate"
means the rate per annum which Bank estimates and quotes to its
borrowers as the rate, adjusted for reserve requirements, federal
deposit insurance and any other amount which Bank deems
appropriate, at which funds in the amount of a loan and for a
period of time comparable to the term of such loan are available
for purchase in the money market on the date such loan is made,
with the understanding that the Money Market Funds Rate is Bank's
estimate only and that Bank is under no obligation to actually
purchase and/or match funds for any transaction. This rate is
not fixed by or related in any way to any rate that Bank quotes
or pays for deposits accepted through its branch system.
(c) Default Interest. From and after the maturity date of
this Note, or such earlier date as all principal owing hereunder
becomes due and payable by acceleration or otherwise, the
outstanding principal balance of this Note shall bear interest
until paid in full at an increased rate per annum (computed on
the basis of a 360-day year, actual days elapsed) equal to four
percent (4%) above the rate of interest from time to time
applicable to this Note.
<PAGE> Page 1 of 4
REPAYMENT AND PREPAYMENT:
(a) Repayment. Principal and interest shall be payable on
the first day of each month, commencing April 1, 1999, and
continuing up to and including February 1, 2009, with a final
installment consisting of all remaining unpaid principal and
accrued interest due and payable in full on March 1, 2009. The
initial monthly installments of principal and interest due under
this Note shall be _____________________________________________
Dollars ($_______________) each. The amount of said monthly
installments shall be adjusted as of the Adjustment Date, if
necessary, to an amount which would amortize the then outstanding
principal balance of this Note over the then remaining term of
this Note at the interest rate applicable on the Adjustment Date.
Such adjustment shall not imply any change in the maturity date
of this Note, which shall remain as specified above.
(b) Application of Payments. Each payment made on this
Note shall be credited first, to any interest then due and
second, to the outstanding principal balance hereof.
(c) Prepayment. Borrower may prepay principal on this Note
in any amount and without penalty during the fifteen (15) days
immediately prior to the Adjustment Date or the maturity date
hereof. Borrower may, at any other time, prepay principal on
this Note in the minimum amount of Fifty Thousand Dollars
($50,000.00); provided however, that if the Outstanding principal
balance of this Note is less than said amount, the minimum
prepayment amount shall be the entire outstanding principal
balance hereof. In consideration of Bank providing this
prepayment option to Borrower, or if this Note shall become due
and payable at any time other than during the fifteen (15) days
immediately prior to the Adjustment Date or the maturity date
hereof by acceleration or otherwise, Borrower shall pay to Bank
immediately upon demand a fee which is the sum of the discounted
monthly differences for each month from the month of prepayment
through the month in which the Adjustment Date or said maturity
date occurs, calculated as follows for each such month:
(i) Determine the amount of interest which would have
accrued each month on the amount prepaid had it remained
outstanding until the Adjustment Date or the maturity date
hereof, whichever is next to occur, using the Money Market Funds
Rate in effect on the date of this Note or the most recent
Adjustment Date, as applicable.
(ii) Subtract from the amount determined in (i) above
the amount of interest which would have accrued for the same
month on the amount prepaid for the remaining term until the
Adjustment Date or the maturity date hereof, whichever is next to
occur, at the Money
<PAGE> Page 2 of 4
Market Funds Rate in effect on the date of prepayment for new
loans made for such term and in a principal amount equal to the
amount prepaid.
(iii) If the result obtained in (ii) for any month is
greater than zero, discount that difference by the Money Market
Funds Rate used in (ii) above.
Each Borrower acknowledges that prepayment of such amount may
result in Bank incurring additional costs, expenses and/or
liabilities, and that it is difficult to ascertain the full
extent of such costs, expenses and/or liabilities. Each
Borrower, therefore, agrees to pay the above-described prepayment
fee and agrees that said amount represents a reasonable estimate
of the prepayment costs, expenses and/or liabilities of Bank. If
Borrower fails to pay any prepayment fee when due, the amount of
such prepayment fee shall thereafter bear interest until paid at
a rate per annum two percent (2%) above the Prime Rate in effect
from time to time (computed on the basis of a 360-day year,
actual days elapsed). The "Prime Rate" is a base rate that Bank
from time to time establishes and which serves as the basis upon
which effective rates of interest are calculated for those loans
making reference thereto. Each change in the rate of interest on
any such past due prepayment fee shall become effective on the
date each Prime Rate change is announced within Bank.
All prepayments of principal shall be applied on the most
remote principal installment or installments then unpaid.
EVENTS OF DEFAULT:
This Note is made pursuant to and is subject to the terms
and conditions of that certain Credit Agreement between Borrower
and Bank dated as of February 17, 1999, as amended from time to
time (the "Credit Agreement"). Any default in the payment or
performance of any obligation under this Note, subject to any
applicable notice or cure period set forth in the Credit
Agreement, or any defined event of default under the Credit
Agreement, shall constitute an "Event of Default" under this
Note.
MISCELLANEOUS:
(a) Remedies. Upon the sale, transfer, hypothecation,
assignment or other encumbrance, whether voluntary, involuntary
or by operation of law, of all or any interest in any real
property securing this Note, or upon the occurrence of any Event
of Default, the holder of this Note, at the holder's option, may
declare all sums of principal and interest outstanding hereunder
to be immediately due and payable without presentment, demand,
notice of nonperformance, notice of protest, protest or notice of
dishonor, all of which are expressly waived by each Borrower.
<PAGE> Page 3 of 4
Each Borrower shall pay to the holder immediately upon demand the
full amount of all payments, advances, charges, costs and
expenses, including reasonable attorneys' fees (to include
outside counsel fees and all allocated costs of the holder's in-
house counsel), expended or incurred by the holder in connection
with the enforcement of the holder's rights and/or the collection
of any amounts which become due to the holder under this Note,
and the prosecution or defense of any action in any way related
to this Note, including without limitation, any action for
declaratory relief, whether incurred at the trial or appellate
level, in an arbitration proceeding or otherwise, and including
any of the foregoing incurred in connection with any bankruptcy
proceeding (including without limitation, any adversary
proceeding, contested matter or motion brought by Bank or any
other person) relating to any Borrower or any other person or
entity.
(b) Obligations Joint and Several. Should more than one
person or entity sign this Note as a Borrower, the obligations of
each such Borrower shall be joint and several.
(c) Governing Law. This Note shall be governed by and
construed in accordance with the laws of the State of Oregon.
UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE
BY BANK AFTER OCTOBER 3. 1989 CONCERNING LOANS AND OTHER CREDIT
EXTENSIONS WHICH ARE NOT FOR PERSONAL, FAMILY OR HOUSEHOLD
PURPOSES OR SECURED SOLELY BY THE BORROWER'S RESIDENCE MUST BE IN
WRITING, EXPRESS CONSIDERATION AND BE SIGNED BY BANK TO BE
ENFORCEABLE.
IN WITNESS WHEREOF, the undersigned has executed this Note
as of the date first written above.
ELMER'S RESTAURANTS, INC.
By:__/s/Bruce N. Davis___
Title: President
<PAGE> Page 4 of 4
2 0199378.01
Portland Commercial Banking
1300 SW Fifth Avenue
PO Box 3131, MAC6101-133
Portland, OR 97208-3131
WELLS
FARGO
February 17, 1999
Elmer's Restaurants, Inc.
11802 S.E. Stark Street
Portland, OR 97216
Dear Gentlemen:
This letter is with respect to that certain credit
accommodation (the "Loan") to be granted to Elmer's Restaurants,
Inc. ("Borrower") by Wells Fargo Bank, National Association
("Bank"), as evidenced by and subject to the terms of a
promissory note substantially in the form of Exhibit A attached
hereto (the "Note"), all terms of which are incorporated herein
by this reference.
The initial rate of interest applicable to the Note shall be
fixed on the date of disbursement at one and sixty-five
hundredths percent (1.65%) above the Money Market Funds Rate in
effect on said date. Further, the initial amount of each
installment of principal and interest payable on the Note shall
be set on the date of disbursement based on a 15 year
amortization schedule.
Borrower has executed the Note with the initial rate of
interest and initial repayment schedule left blank. By signing
below, Borrower hereby authorizes Bank to complete the Note on
the date of disbursement by inserting the initial interest rate
applicable to the Note and the initial amount of each installment
of principal and interest due under the Note, all in accordance
with the terms of this letter. Borrower further agrees that
Bank's commitment to grant the Loan shall terminate on March 17,
1999.
<PAGE> Page 1 of 2
Elmer's Restaurants, Inc.
February 17, 1999
Page 2
Bank shall send Borrower a copy of the completed Note as
soon as possible after the date of disbursement.
Sincerely,
WELLS FARGO BANK,
NATIONAL ASSOCIATION
By:__/s/Steve Day____________
Steve Day
Vice President
The undersigned, the Borrower named in the foregoing letter,
hereby agrees to all provisions thereof and authorizes Bank to
complete the Note in accordance with the terms set forth therein.
Acknowledged and agreed as of February 17, 1999:
ELMER'S RESTAURANTS, INC.
By: __/s/Bruce N. Davis__
Title: President
<PAGE> Page 2 of 2
13 0199385.01
TERM NOTE
$2,600,000.00 Portland, Oregon
February 17, 1999
FOR VALUE RECEIVED, the undersigned ELMER'S RESTAURANTS,
INC. ("Borrower") promises to pay to the order of WELLS FARGO
BANK, NATIONAL ASSOCIATION ("Bank") at its office at Portland
RCBO, 1300 S.W. Fifth Avenue T-13, Portland, Oregon, or at such
other place as the holder hereof may designate, in lawful money
of the United States of America and in immediately available
funds, the principal sum of Two Million Six Hundred Thousand
Dollars ($2,600,000.00), with interest thereon as set forth
herein.
DEFINITIONS:
As used herein, the following terms shall have the meanings
set forth after each, and any other term defined in this Note
shall have the meaning set forth at the place defined:
(a) "Business Day" means any day except a Saturday, Sunday
or any other day on which commercial banks in Oregon are
authorized or required by law to close.
(b) "Fixed Rate Term" means each consecutive one (1) month
period occurring during the term of this Note, with the first
Fixed Rate Term commencing on the date this Note is disbursed;
provided, that the last Fixed Rate Term hereunder may be for such
shorter period that would cause it not to extend beyond the
scheduled maturity date hereof. If any Fixed Rate Term would end
on a day which is not a Business Day, then such Fixed Rate Term
shall be extended to the next succeeding Business Day.
(c) "LIBOR" means the rate per annum (rounded upward, if
necessary, to the nearest whole 1/8 of 1%) and determined
pursuant to the following formula:
LIBOR = Base LIBOR
------------------------------------
100% - LIBOR Reserve Percentage
(i) "Base LIBOR" means the rate per annum for United States
dollar deposits quoted by Bank as the Inter-Bank Market Offered
Rate, with the understanding that such rate is quoted by Bank for
the purpose of calculating effective rates of interest for loans
making reference thereto, on the first day of a Fixed Rate Term
for delivery of funds on said date for a period of time
approximately equal to the number of days in such Fixed Rate Term
and in an amount approximately equal to the principal amount to
which such Fixed Rate Term applies. Borrower understands and
agrees that Bank may base its quotation of the Inter-Bank Market
<PAGE> Page 1 of 7
Offered Rate upon such offers or other market indicators of the
Inter-Bank Market as Bank in its discretion deems appropriate
including, but not limited to, the rate offered for U.S. dollar
deposits on the London Inter-Bank Market.
(ii) "LIBOR Reserve Percentage" means the reserve percentage
prescribed by the Board of Governors of the Federal Reserve
System (or any successor) for "Eurocurrency Liabilities" (as
defined in Regulation D of the Federal Reserve Board, as
amended), adjusted by Bank for expected changes in such reserve
percentage during the applicable Fixed Rate Term.
(d) "Prime Rate" means at any time the rate of interest
most recently announced within Bank at its principal office as
its Prime Rate, with the understanding that the Prime Rate is one
of Bank's base rates and serves as the basis upon which effective
rates of interest are calculated for those loans making reference
thereto, and is evidenced by the recording thereof after its
announcement in such internal publication or publications as Bank
may designate.
INTEREST:
(a) Interest. The Outstanding principal balance of this
Note shall bear interest (computed on the basis of a 360-day
year, actual days elapsed) at a fixed rate per annum determined
by Bank to be equal to LIBOR in effect on the first day of the
applicable Fixed Rate Term plus the Applicable LIBOR Margin set
forth in (e) below. Bank is hereby authorized to note the
interest rate applicable to each Fixed Rate Term hereunder, and
any payments made hereon, on Bank's books and records (either
manually or by electronic entry) and/or on any schedule attached
to this Note, which notations shall be prima facie evidence of
the accuracy of the information noted.
(b) Additional LIBOR Provisions.
(i) If Bank at any time shall determine that for any reason
adequate and reasonable means do not exist for ascertaining
LIBOR, then Bank shall promptly give notice thereof to Borrower.
If such notice is given and until such notice has been withdrawn
by Bank, then (A) no new LIBOR option may be selected by
Borrower, and (B) any portion of the outstanding principal
balance hereof which bears interest determined in relation to
LIBOR, subsequent to the end of the Fixed Rate Term applicable
thereto, shall bear interest determined in relation to the Prime
Rate.
(ii) If any law, treaty, rule, regulation or determination
of a court or governmental authority or any change therein or in
the interpretation or application thereof (each, a "Change in
Law") shall make it unlawful for Bank (A) to make LIBOR options
<PAGE> Page 2 of 7
available hereunder, or (B) to maintain interest rates based on
LIBOR, then in the former event, any obligation of Bank to make
available such unlawful LIBOR options shall immediately be
canceled, and in the latter event, any such unlawful LIBOR-based
interest rates then outstanding shall be converted, at Bank's
option, so that interest on the portion of the outstanding
principal balance subject thereto is determined in relation to
the Prime Rate; provided however, that if any such Change in Law
shall permit any LIBOR-based interest rates to remain in effect
until the expiration of the Fixed Rate Term applicable thereto,
then such permitted LIBOR-based interest rates shall continue in
effect until the expiration of such Fixed Rate Term. Upon the
occurrence of any of the foregoing events, Borrower shall pay to
Bank immediately upon demand such amounts as may be necessary to
compensate Bank for any fines, fees, charges, penalties or other
costs incurred or payable by Bank as a result thereof and which
are attributable to any LIBOR options made available to Borrower
hereunder, and any reasonable allocation made by Bank among its
operations shall be conclusive and binding upon Borrower.
(iii) If any Change in Law or compliance by Bank with any
request or directive (whether or not having the force of law)
from any central bank or other governmental authority shall:
(A) subject Bank to any tax, duty or other charge with
respect to any LIBOR options, or change the basis of taxation of
payments to Bank of principal, interest, fees or any other amount
payable hereunder (except for changes in the rate of tax on the
overall net income of Bank); or
(B) impose, modify or hold applicable any reserve, special
deposit, compulsory loan or similar requirement against assets
held by, deposits or other liabilities in or for the account of,
advances or loans by, or any other acquisition of funds by any
office of Bank; or
(C) impose on Bank any other condition;
and the result of any of the foregoing is to increase the cost to
Bank of making, renewing or maintaining any LIBOR options
hereunder and/or to reduce any amount receivable by Bank in
connection therewith, then in any such case, Borrower shall pay
to Bank immediately upon demand such amounts as may be necessary
to compensate Bank for any additional costs incurred by Bank
and/or reductions in amounts received by Bank which are
attributable to such LIBOR options. In determining which costs
incurred by Bank and/or reductions in amounts received by Bank
are attributable to any LIBOR options made available to Borrower
hereunder, any reasonable allocation made by Bank among its
operations shall be conclusive and binding upon Borrower.
<PAGE> Page 3 of 7
(c) Payment of Interest. Interest accrued on this Note
shall be payable on the last day of each Fixed Rate Term.
(d) Default Interest. From and after the maturity date of
this Note, or such earlier date as all principal owing hereunder
becomes due and payable by acceleration or otherwise, the
outstanding principal balance of this Note shall bear interest
until paid in full at an increased rate per annum (computed on
the basis of a 360-day year, actual days elapsed) equal to four
percent (4%) above the rate of interest from time to time
applicable to this Note.
(e) Interest Rate Adjustments. Bank shall adjust the LIBOR
margins used to determine the rates of interest applicable to
this Note on a quarterly basis to reflect any change in
Borrower's ratio of Total Liabilities to Tangible Net Worth (as
defined in any loan agreement at any time in effect between the
Company and Bank), in accordance with the following grid:
<TABLE>
<S> <C>
Applicable
Total Liabilities to LIBOR
Tangible Net Worth Margin
- -------------------- ----------
5.0 to 1.0 or greater 2.75%
greater than 4.25 to 1.0 but
less than 5.0 to 1.0 2.5%
equal to or less than
4.25 to 1.0 2.25%
</TABLE>
Each such adjustment shall be effective on the first
Business Day of the Company's fiscal quarter following the
quarter during which Bank receives and reviews the Company's most
current fiscal quarter-end financial statements in accordance
with any requirements established by Bank for the preparation and
delivery thereof.
The initial Applicable LIBOR Margin applicable to this Note
shall be 2.75%.
REPAYMENT AND PREPAYMENT:
(a) Repayment. Principal shall be payable on the last day
of each Fixed Rate Term in installments of Thirty Nine Thousand
Three Hundred Ninety Four Dollars ($39,394.00) each, with a final
installment consisting of all remaining unpaid principal and
accrued interest due and payable in full on September 1, 2004.
(b) Application of Payments. Each payment made on this
Note shall be credited first, to any interest then due and
second, to the outstanding principal balance hereof.
<PAGE> Page 4 of 7
(c) Prepayment. Borrower may prepay principal on this Note
which bears interest determined in relation to LIBOR at any time
and in the minimum amount of One Hundred Thousand Dollars
($100,000.00); provided however, that if the outstanding
principal balance of this Note is less than said amount, the
minimum prepayment amount shall be the entire outstanding
principal balance thereof. In consideration of Bank providing
this prepayment option to Borrower, or if this Note shall become
due and payable at any time prior to the last day of the Fixed
Rate Term applicable thereto by acceleration or otherwise,
Borrower shall pay to Bank immediately upon demand a fee which is
the sum of the discounted monthly differences for each month from
the month of prepayment through the month in which such Fixed
Rate Term matures, calculated as follows for each such month:
(i) Determine the amount of interest which would have
accrued each month on the amount prepaid at the interest rate
applicable to such amount had it remained outstanding until the
last day of the Fixed Rate Term applicable thereto.
(ii) Subtract from the amount determined in (i) above the
amount of interest which would have accrued for the same month on
the amount prepaid for the remaining term of such Fixed Rate Term
at LIBOR in effect on the date of prepayment for new loans made
for such term and in a principal amount equal to the amount
prepaid.
(iii) If the result obtained in (ii) for any month is greater
than zero, discount that difference by LIBOR used in (ii) above.
Each Borrower acknowledges that prepayment of such amount may
result in Bank incurring additional costs, expenses and/or
liabilities, and that it is difficult to ascertain the full
extent of such costs, expenses and/or liabilities. Each
Borrower, therefore, agrees to pay the above-described prepayment
fee and agrees that said amount represents a reasonable estimate
of the prepayment costs, expenses and/or liabilities of Bank. If
Borrower fails to pay any prepayment fee when due, the amount of
such prepayment fee shall thereafter bear interest until paid at
a rate per annum two percent (2%) above the Prime Rate in effect
from time to time (computed on the basis of a 360-day year,
actual days elapsed).
All prepayments of principal shall be applied on the most
remote principal installment or installments then unpaid.
EVENTS OF DEFAULT:
This Note is made pursuant to and is subject to the terms and
conditions of that certain Credit Agreement between Borrower
<PAGE> Page 5 of 7
and Bank dated as of February 17, 1999, as amended from time to
time (the "Credit Agreement"). Any default in the payment or
performance of any obligation under this Note, subject to any
applicable notice or cure period set forth in the Credit
Agreement, or any defined event of default under the Credit
Agreement, shall constitute an "Event of Default" under this
Note.
MISCELLANEOUS:
(a) Remedies. Upon the sale, transfer, hypothecation,
assignment or other encumbrance, whether voluntary, involuntary
or by operation of law, of all or any interest in any real
property securing this Note, or upon the occurrence of any Event
of Default, the holder of this Note, at the holder's option, may
declare all sums of principal and interest outstanding hereunder
to be immediately due and payable without presentment, demand,
notice of nonperformance, notice of protest, protest or notice of
dishonor, all of which are expressly waived by each Borrower.
Each Borrower shall pay to the holder immediately upon demand the
full amount of all payments, advances, charges, costs and
expenses, including reasonable attorneys' fees (to include
outside counsel fees and all allocated costs of the holder's in-
house counsel), expended or incurred by the holder in connection
with the enforcement of the holder's rights and/or the collection
of any amounts which become due to the holder under this Note,
and the prosecution or defense of any action in any way related
to this Note, including without limitation, any action for
declaratory relief, whether incurred at the trial or appellate
level, in an arbitration proceeding or otherwise, and including
any of the foregoing incurred in connection with any bankruptcy
proceeding (including without limitation, any adversary
proceeding, contested matter or motion brought by Bank or any
other person) relating to any Borrower or any other person or
entity.
(b) Obligations Joint and Several. Should more than one
person or entity sign this Note as a Borrower, the obligations of
each such Borrower shall be joint and several.
(c) Governing Law. This Note shall be governed by and
construed in accordance with the laws of the State of Oregon.
UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE
BY BANK AFTER OCTOBER 3, 1989 CONCERNING LOANS AND OTHER CREDIT
EXTENSIONS WHICH ARE NOT FOR PERSONAL, FAMILY OR HOUSEHOLD
PURPOSES OR SECURED SOLELY BY THE BORROWER'S RESIDENCE MUST BE IN
WRITING, EXPRESS CONSIDERATION AND BE SIGNED BY BANK TO BE
ENFORCEABLE.
<PAGE> Page 6 of 7
IN WITNESS WHEREOF, the undersigned has executed this Note
as of the date first written above.
ELMER'S RESTAURANTS, INC.
By:__/s/Bruce N. Davis____
Title: President
<PAGE> Page 7 of 7
24 0199402.01
Recording Requested By,
And when recorded return to:
WELLS FARGO BANK,
NATIONAL ASSOCIATION
201 3rd Street, 8th Floor
San Francisco, CA 94103
Attention: Loan Documentation
Tax Account Number(s) of Subject Property:
R-10400-0330
- ----------------------------------------------------------------
DEED OF TRUST
AND ASSIGNMENT OF RENTS AND LEASES
LINE OF CREDIT INSTRUMENT
-------------------------
Maximum Principal Amount to be Advanced: $250,000.00
Final Maturity Date (exclusive of any option
to renew or extend): September 1, 2000
THIS DEED OF TRUST AND ASSIGNMENT (this "Deed of Trust") is
executed as of February 17, 1999, by ELMER'S RESTAURANTS, INC.,
an Oregon corporation ("Grantor"), to WELLS FARGO BANK (ARIZONA),
NATIONAL ASSOCIATION ("Trustee"), for the benefit of WELLS FARGO
BANK, NATIONAL ASSOCIATION ("Beneficiary").
ARTICLE I. GRANT IN TRUST
1.01 Grant. For the purposes and upon the terms and conditions
in this Deed of Trust, Grantor irrevocably grants, conveys and
assigns to Trustee, in trust for the benefit of Beneficiary, with
power of sale and right of entry and possession, Grantor's
interest in: (a) all real property located in Multnomah County,
Oregon, and described on Exhibit A attached hereto; (b) all
easements, rights-of-way and rights used in connection with or as
a means of access to any portion of said real property; (c) all
tenements, hereditaments and appurtenances thereof and thereto;
(d) all right, title and interest of Grantor, now owned or
hereafter acquired, in and to any land lying within the right-of-
way of any street, open or proposed, adjoining said real
property, and any and all sidewalks, alleys and strips and gores
of land adjacent to or used in connection with said real
property; (e) all buildings, improvements and landscaping now or
hereafter erected or located on said real property; (f) all
development rights, governmental or quasi-governmental licenses,
permits or approvals, zoning rights and other similar rights or
interests which relate to the development, use or operation of,
or that benefit or are appurtenant to, said real property; (g)
all mineral rights, oil and gas rights, air rights, water or
water rights, including without limitation, all wells, canals,
ditches and reservoirs of any nature and all rights thereto,
appurtenant to or associated with said real property, whether
decreed or undecreed, tributary or non-tributary, surface or
underground, appropriated or unappropriated, and all shares of
stock in any water, canal, ditch or reservoir company, and all
well permits, water service contracts, drainage rights and other
evidences of any such rights; and (h) all interest or estate
which Grantor now has or may hereafter acquire in said real
property and all additions and accretions thereto, and all awards
or payments made for the taking of all or any portion of said
real property by eminent domain or any proceeding or purchase in
lieu thereof, or any damage to any portion of said real property
(collectively, the "Subject Property"). The listing of specific
rights or property shall not be interpreted as a limitation of
general terms.
1.02 Address. The address of the Subject Property (if known) is
115 NE Burnside, Gresham, OR 97030.
page two is missing
whether existing as of the date hereof or at any time hereafter
entered into, together with all guarantees of and security for
any tenant's or lessee's performance thereunder, and all
amendments, extensions, renewals and modifications thereto (each,
a "Lease" and collectively, the "Leases"), together with any and
all other rents, issues and profits of the Subject Property
(collectively, "Rents"). This Assignment shall not impose upon
Beneficiary any duty to produce Rents from the Subject Property,
nor cause Beneficiary to be: (a) a "mortgagee in possession" for
any purpose; (b) responsible for performing any of the
obligations of the lessor or landlord under any Lease; or (c)
responsible for any waste committed by any person or entity at
any time in possession of the Subject Property or any part
thereof, or for any dangerous or defective condition of the
Subject Property, or for any negligence in the management,
upkeep, repair or control of the Subject Property. This is a
present and absolute assignment, not an assignment for security
only, and Beneficiary's right to Rents is not contingent upon and
may be exercised without possession of the Subject Property.
Grantor agrees to execute and deliver to Beneficiary, within five
(5) days of Beneficiary's written request, such additional
documents as Beneficiary or Trustee may reasonably request to
further evidence the assignment to Beneficiary of any and all
Leases and Rents.
3.02 Protection of Security. To protect the security of this
Assignment, Grantor agrees:
(a) At Grantor's sole cost and expense: (i) to perform each
obligation to be performed by the lessor or landlord under each
Lease and to enforce or secure the performance of each obligation
to be performed by the lessee or tenant under each Lease; (ii)
not to modify any Lease in any material respect, nor accept
surrender under or terminate the term of any Lease; (iii) not to
anticipate the Rents under any Lease; and (iv) not to waive or
release any lessee or tenant of or from any Lease obligations.
Grantor assigns to Beneficiary all of Grantor's right and power
to modify the terms of any Lease, to accept a surrender under or
terminate the term of or anticipate the Rents under any Lease,
and to waive or release any lessee or tenant of or from any Lease
obligations, and any attempt on the part of Grantor to exercise
any such rights or powers without Beneficiary's prior written
consent shall be a breach of the terms hereof.
(b) At Grantor's sole cost and expense, to defend any action in
any manner connected with any Lease or the obligations
thereunder, and to pay all costs of Beneficiary or Trustee,
including reasonable attorneys' fees, in any such action in which
Beneficiary or Trustee may appear.
(c) That, should Grantor fail to do any act required to be done
by Grantor under a Lease, then Beneficiary or Trustee, but
without obligation to do so and without notice to Grantor and
without releasing Grantor from any obligation hereunder, may make
or do the same in such manner and to such extent as Beneficiary
or Trustee deems necessary to protect the security hereof, and,
in exercising such powers, Beneficiary or Trustee may employ
attorneys and other agents, and Grantor shall pay necessary costs
and reasonable attorneys' fees incurred by Beneficiary or
Trustee, or their agents, in the exercise of the powers granted
herein. Grantor shall give prompt notice to Beneficiary of any
default by any lessee or tenant under any Lease, and of any
notice of default on the part of Grantor under any Lease received
from a lessee or tenant thereunder, together with an accurate and
complete copy thereof.
(d) To pay to Beneficiary immediately upon demand all sums
expended under the authority hereof, including reasonable
attorneys' fees, together with interest thereon at the highest
rate per annum payable under any Secured Obligation, and the
same, at Beneficiary's option, may be added to any Secured
Obligation and shall be secured hereby.
3.03 License. Beneficiary confers upon Grantor a license
("License") to collect and retain the Rents as, but not before,
they come due and payable, until the occurrence of any Default.
Upon the occurrence of any Default, the License shall be
automatically revoked, and Beneficiary or Trustee may, at
Beneficiary's option and without notice, either in person or by
agent, with or without bringing any action, or by a receiver to
be appointed by a court: (a) enter, take possession of, manage
and operate the Subject Property or any part thereof; (b) make,
cancel, enforce or modify any Lease; (c) obtain and evict
tenants, fix or modify Rents, and do any acts which Beneficiary
or Trustee deems proper to protect the security hereof; and (d)
either with or without taking possession of the Subject Property,
in its own name, sue for or otherwise collect and receive all
Rents, including those past due and unpaid, and apply the same in
accordance with the provisions of this Deed of Trust. The
entering and taking possession of the Subject Property, the
collection of Rents and the application thereof as aforesaid,
shall not cure or waive any Default, nor waive, modify or affect
any notice of
page 4 is missing
Grantor is responsible for the cost of any insurance
purchased by Beneficiary. The cost of this insurance may be
added to the loan balance. If the cost is added to the loan
balance, the interest rate on the underlying loan will apply to
this added amount. The effective date of coverage may be the
date Grantor's prior coverage lapsed or the date Grantor failed
to provide proof of coverage.
The coverage Beneficiary purchases may be considerably more
expensive than the insurance Grantor can obtain on its own and
may not satisfy any need for property damage coverage or any
mandatory liability insurance requirements imposed by applicable
law.
4.06 Tax and Insurance Impounds. At Beneficiary's option and
upon its demand, Grantor shall, until all Secured Obligations
have been paid in full, pay to Beneficiary monthly, annually or
as otherwise directed by Beneficiary an amount estimated by
Beneficiary to be equal to: (a) all taxes, assessments, levies
and charges imposed by any public or quasi-public authority or
utility company which are or may become a lien upon the Subject
Property and will become due for the tax year during which such
payment is so directed; and (b) premiums for fire, other hazard
and mortgage insurance next due. If Beneficiary determines that
amounts paid by Grantor are insufficient for the payment in full
of such taxes, assessments, levies and/or insurance premiums,
Beneficiary shall notify Grantor of the increased amount required
for the payment thereof when due, and Grantor shall pay to
Beneficiary such additional amount within thirty (30) days after
notice from Beneficiary. All amounts so paid shall not bear
interest, except to the extent and in the amount required by law.
So long as there is no Default, Beneficiary shall apply said
amounts to the payment of, or at Beneficiary's sole option
release said funds to Grantor for application to and payment of,
such taxes, assessments, levies, charges and insurance premiums.
If a Default exists, Beneficiary at its sole option may apply all
or any part of said amounts to any Secured Obligation and/or to
cure such Default, in which event Grantor shall be required to
restore all amounts so applied, as well as to cure any Default
not cured by such application. Grantor hereby grants and
transfers to Beneficiary a security interest in all amounts so
paid and hold in Beneficiary's possession, and all proceeds
thereof, to secure the payment and performance of each Secured
Obligation. Upon assignment of this Deed of Trust, Beneficiary
shall have the right to assign all amounts collected and in its
possession to its assignee, whereupon Beneficiary and Trustee
shall be released from all liability with respect thereto. The
existence of said impounds shall not limit Beneficiary's rights
under any other provision of this Deed of Trust or any other
agreement, statute or rule of law. Within ninety-five (95) days
following full repayment of all Secured Obligations (other than
as a consequence of a foreclosure or conveyance in lieu of
foreclosure of the liens and security interests securing any
Secured Obligation), or at such earlier time as Beneficiary in
its discretion may elect, the balance of all amounts collected
and in Beneficiary's possession shall be paid to Grantor, and no
other party shall have any right of claim thereto.
4.07 Damages; Insurance and Condemnation Proceeds.
(a) (i) All awards of damages and all other compensation payable
directly or indirectly by reason of a condemnation or proposed
condemnation (or transfer in lieu thereof) for public or private
use affecting the Subject Property; (ii) all other claims and
awards for damages to or decrease in value of the Subject
Property; (iii) all proceeds of any insurance policies payable by
reason of loss sustained to the Subject Property; and (iv) all
interest which may accrue on any of the foregoing, are all
absolutely and irrevocably assigned to and shall be paid to
Beneficiary. At the absolute discretion of Beneficiary, whether
or not its security is or may be impaired, but subject to
applicable law if any, and without regard to any requirement
contained in any other Section hereof, Beneficiary may apply all
or any of the proceeds it receives to its expenses in settling,
prosecuting or defending any such claim and apply the balance to
the Secured Obligations in any order, and release all or any part
of the proceeds to Grantor upon any conditions Beneficiary may
impose. Beneficiary may commence, appear in, defend or prosecute
any assigned claim or action, and may adjust, compromise, settle
and collect all claims and awards assigned to Beneficiary;
provided however, that in no event shall Beneficiary be
responsible for any failure to collect any claim or award,
regardless of the cause of the failure.
(b) At its sole option, Beneficiary may permit insurance or
condemnation proceeds held by Beneficiary to be used for repair
or restoration but may impose any conditions on such use as
Beneficiary deems necessary.
4.08 Maintenance and Preservation of Subject Property. Subject
to the provisions of any Secured Obligation, Grantor covenants:
page 6 is missing
that does or could cause all or any part of the Subject Property,
to be contaminated with any Hazardous Materials or otherwise be
in violation of any Hazardous Materials Laws, or cause the
Subject Property to be subject to any restrictions on the
ownership, occupancy, transferability or use thereof under any
Hazardous Materials Laws.
4.10 Protection of Security. Grantor shall, at Grantor's sole
expense: (a) protect, preserve and defend the Subject Property
and Grantor's title and right to possession of the Subject
Property against all adverse claims; (b) if Grantor's interest in
the Subject Property is a leasehold interest or estate, pay and
perform in a timely manner all obligations to be paid and/or
performed by the lessee or tenant under the lease or other
agreement creating such leasehold interest or estate; and (c)
protect, preserve and defend the security of this Deed of Trust
and the rights and powers of Beneficiary and Trustee under this
Deed of Trust against all adverse claims. Grantor shall give
Beneficiary and Trustee prompt notice in writing of the assertion
of any claim, the filing of any action or proceeding, or the
occurrence of any damage, condemnation offer or other action
relating to or affecting the Subject Property and, if Grantor's
interest in the Subject Property is a leasehold interest or
estate, of any notice of default or demand for performance under
the lease or other agreement pursuant to which such leasehold
interest or estate was created or exists.
4.11 Acceptance of Trust; Powers and Duties of Trustee. Trustee
accepts this trust when this Deed of Trust is executed. From
time to time, upon written request of Beneficiary and, to the
extent required by applicable law presentation of this Deed of
Trust for endorsement, and without affecting the personal
liability of any person for payment of any indebtedness or
performance of any of the Secured Obligations, Beneficiary, or
Trustee at Beneficiary's direction, may, without obligation to do
so or liability therefor and without notice: (a) reconvey all or
any part of the Subject Property from the lien of this Deed of
Trust; (b) consent to the making of any map or plat of the
Subject Property; and (c) join in any grant of easement thereon,
any declaration of covenants and restrictions, any extension
agreement or any agreement subordinating the lien or charge of
this Deed of Trust. Trustee or Beneficiary may from time to time
apply to any court of competent jurisdiction for aid and
direction in the execution of the trusts and the enforcement of
the rights and remedies available under this Deed of Trust, and
may obtain orders or decrees directing, confirming or approving
acts in the execution of said trusts and the enforcement of said
rights and remedies. Trustee has no obligation to notify any
party of any pending sale or any action or proceeding (including,
but not limited to, actions in which Grantor, Beneficiary or
Trustee shall be a party) unless held or commenced and maintained
by Trustee under this Deed of Trust. Trustee shall not be
obligated to perform any act required of it under this Deed of
Trust unless the performance of the act is requested in writing
and Trustee is reasonably indemnified against all losses, costs,
liabilities and expenses in connection therewith.
4.12 Compensation; Exculpation; Indemnification.
(a) Grantor shall pay all Trustee's fees and reimburse Trustee
for all expenses in the administration of this trust, including
reasonable attorneys' fees. Grantor shall pay Beneficiary
reasonable compensation for services rendered concerning this
Deed of Trust, including without limitation, the providing of any
statement of amounts owing under any Secured Obligation.
Beneficiary shall not directly or indirectly be liable to Grantor
or any other person as a consequence of: (i) the exercise of any
rights, remedies or powers granted to Beneficiary in this Deed of
Trust; (ii) the failure or refusal of Beneficiary to perform or
discharge any obligation or liability of Grantor under this Deed
of Trust or any Lease or other agreement related to the Subject
Property; or (iii) any loss sustained by Grantor or any third
party as a result of Beneficiary's failure to lease the Subject
Property after any Default or from any other act or omission of
Beneficiary in managing the Subject Property after any Default
unless such loss is caused by the willful misconduct or gross
negligence of Beneficiary; and no such liability shall be
asserted or enforced against Beneficiary, and all such liability
is hereby expressly waived and released by Grantor.
(b) Grantor shall indemnify Trustee and Beneficiary against, and
hold them harmless from, any and all losses, damages,
liabilities, claims, causes of action, judgments, court costs,
attorneys' fees and other legal expenses, costs of evidence of
title, costs of evidence of value, and other expenses which
either may suffer or incur: (i) by reason of this Deed of Trust;
(ii) by reason of the execution of this trust or the performance
of any act required or permitted hereunder or by law; (iii) as a
result of any failure of Grantor to perform Grantor's
obligations; or (iv) by reason of any alleged obligation or
undertaking of Beneficiary to perform or discharge any of the
representations, warranties, conditions, covenants or other
obligations contained in any
page 8 is missing
and which is not an Obligor under all of the Secured Obligations,
and (2) each person or entity included in the definition of
Grantor herein if any Obligor is not included in said definition.
(a) Representations and Warranties. Each Third Party Grantor
represents and warrants to Beneficiary that: (i) this Deed of
Trust is executed at an Obligor's request; (ii) this Deed of
Trust complies with all agreements between each Third Party
Grantor and any Obligor regarding such Third Party Grantor's
execution hereof; (iii) Beneficiary has made no representation to
any Third Party Grantor as to the creditworthiness of any
Obligor; and (iv) each Third Party Grantor has established
adequate means of obtaining from each Obligor on a continuing
basis financial and other information pertaining to such
Obligor's financial condition. Each Third Party Grantor agrees
to keep adequately informed from such means of any facts, events
or circumstances which might in any way affect such Third Party
Grantor's risks hereunder. Each Third Party Grantor further
agrees that Beneficiary shall have no obligation to disclose to
any Third Party Grantor any information or material about any
Obligor which is acquired by Beneficiary in any manner. The
liability of each Third Party Grantor hereunder shall be
reinstated and revived, and the rights of Beneficiary shall
continue if and to the extent that for any reason any amount at
any time paid on account of any Secured Obligation is rescinded
or must otherwise be restored by Beneficiary, whether as a result
of any proceedings in bankruptcy or reorganization or otherwise,
all as though such amount had not been paid. The determination
as to whether any amount so paid must be rescinded or restored
shall be made by Beneficiary in its sole discretion; provided
however, that if Beneficiary chooses to contest any such matter
at the request of any Third Party Grantor, each Third Party
Grantor agrees to indemnify and hold Beneficiary harmless from
and against all costs and expenses, including reasonable
attorneys' fees, expended or incurred by Beneficiary in
connection therewith, including without limitation, in any
litigation with respect thereto.
(b) Waivers.
(i) Each Third Party Grantor waives any right to require
Beneficiary to: (A) proceed against any Obligor or any other
person; (B) marshal assets or proceed against or exhaust any
security held from any Obligor or any other person; (C) give
notice of the terms, time and place of any public or private sale
of personal property security held from any Obligor or any other
person, or otherwise comply with any other provisions of Section
9504 of the Oregon Uniform Commercial Code; (D) take any action
or pursue any other remedy, in Beneficiary's power; or (E) make
any presentment or demand for performance, or give any notice of
nonperformance, protest, notice of protest or notice of dishonor
hereunder or in connection with any obligations or evidences of
indebtedness held by Beneficiary as security for or which
constitute in whole or in part the Secured Obligations, or in
connection with the creation of new or additional obligations.
(ii) Each Third Party Grantor waives any defense to its
obligations hereunder based upon or arising by reason of: (A) any
disability or other defense of any Obligor or any other person;
(B) the cessation or limitation from any cause whatsoever, other
than payment in full, of any Secured Obligation; (C) any lack of.
authority of any officer, director, partner, agent or any other
person acting or purporting to act on behalf of any Obligor which
is a corporation, partnership or other type of entity, or any
defect in the formation of any such Obligor; (D) the application
by any Obligor of the proceeds of any Secured Obligation for
purposes other than the purposes represented by any Obligor to,
or intended or understood by, Beneficiary or any Third Party
Grantor; (E) any act or omission by Beneficiary which directly or
indirectly results in or aids the discharge of any Obligor or any
portion of any Secured Obligation by operation of law or
otherwise, or which in any way impairs or suspends any rights or
remedies of Beneficiary against any Obligor; (F) any impairment
of the value of any interest in any security for the Secured
Obligations or any portion thereof, including without limitation,
the failure to obtain or maintain perfection or recordation of
any interest in any such security, the release of any such
security without substitution, and/or the failure to preserve the
value of, or to comply with applicable law in disposing of, any
such security; or (G) any modification of any Secured Obligation,
in any form whatsoever, including without limitation the renewal,
extension, acceleration or other change in time for payment of,
or other change in the terms of, any Secured Obligation or any
portion thereof, including increase or decrease of the rate of
interest thereon. Until all Secured Obligations shall have been
paid in full, no Third Party Grantor shall have any right of
subrogation, and each Third Party Grantor waives any right to
enforce any remedy which Beneficiary now has or may hereafter
have against any Obligor or any other person, and waives any
benefit of, or any right to participate in, any security now or
hereafter hold by Beneficiary. Each Third Party Grantor further
waives all rights and defenses it may have arising out of: (1)
any election of remedies by Beneficiary, even though that
election of remedies, such as a non-judicial foreclosure with
respect
page 10 is missing
(f) To execute or cause Trustee to execute a written notice of
such Default and of its election to cause the Subject Property to
be sold to satisfy the Secured Obligations. Trustee shall give
and record such notice as the law then requires as a condition
precedent to a trustee's sale. When the minimum period of time
required by law after such notice has elapsed, Trustee, without
notice to or demand upon Grantor, except as otherwise required by
law, shall sell the Subject Property at the time and place of
sale fixed by it in the notice of sale, at one or several sales,
either as a whole or in separate parcels and in such manner and
order, all as directed by Beneficiary in its sole discretion, at
public auction to the highest bidder for cash, in lawful money of
the United States, payable at the time of sale. Except as
required by law, neither Grantor nor any other person or entity
shall have the right to direct the order in which the Subject
Property is sold. Subject to requirements and limits imposed by
law, Trustee may postpone any sale of the Subject Property by
public announcement at such time and place of sale, and from time
to time may postpone such sale by public announcement at the time
and place fixed by the preceding postponement. Trustee shall
deliver to the purchaser at such sale a deed conveying the
Subject Property or portion thereof so sold, but without any
covenant or warranty, express or implied. The recitals in said
deed of any matters or facts shall be conclusive proof of the
truthfulness thereof. Any person, including Trustee, Grantor or
Beneficiary, may purchase at such sale.
(g) To resort to and realize upon the security hereunder and any
other security now or later held by Beneficiary concurrently or
successively and in one or several consolidated or independent
judicial actions or lawfully taken non-judicial proceedings, or
both, and to apply the proceeds received to payment of the
Secured Obligations, all in such order and manner as Beneficiary
shall determine in its sole discretion.
(h) Upon sale of the Subject Property at any judicial or non-
judicial foreclosure, Beneficiary may credit bid (as determined
by Beneficiary in its sole discretion) all or any portion of the
Secured Obligations. In determining such credit bid, Beneficiary
may, but is not obligated to, take into account all or any of the
following: (1) appraisals of the Subject Property as such
appraisals may be discounted or adjusted by Beneficiary in its
sole underwriting discretion; (ii) expenses and costs incurred by
Beneficiary with respect to the Subject Property prior to
foreclosure; (iii) expenses and costs which Beneficiary
anticipates will be incurred with respect to the Subject Property
after foreclosure, but prior to resale, including without
limitation, costs of structural reports and other due diligence,
costs to carry the Subject Property prior to resale, costs of
resale (e.g., commissions, attorneys' fees, and taxes), Hazardous
Materials clean-up and monitoring, deferred maintenance, repair,
refurbishment and retrofit, and costs of defending or settling
litigation affecting the Subject Property; (iv) declining trends
in real property values generally and with respect to properties
similar to the Subject Property; (v) anticipated discounts upon
resale of the Subject Property as a distressed or foreclosed
property; (vi) the existence of additional collateral, if any,
for the Secured Obligations; and (vii) such other factors or
matters that Beneficiary deems appropriate. Grantor acknowledges
and agrees that: (A) Beneficiary is not required to use any or
all of the foregoing factors to determine the amount of its
credit bid; (B) this Section does not impose upon Beneficiary any
additional obligations that are not imposed by law at the time
the credit bid is made; (C) the amount of Beneficiary's credit
bid need not have any relation to any loan-to-value ratios
specified in any agreement between Grantor and Beneficiary or
previously discussed by Grantor and Beneficiary; and (D)
Beneficiary's credit bid may be, at Beneficiary's sole
discretion, higher or lower than any appraised value of the
Subject Property.
5.03 Application of Foreclosure Sale Proceeds. After deducting
all costs, fees and expenses of Trustee, and of this trust,
including costs of evidence of title and attorneys' fees in
connection with a sale, all proceeds of any foreclosure sale
shall be applied first, to payment of all Secured Obligations
(including without limitation, all sums expanded by Beneficiary
under the terms hereof and not then repaid, with accrued interest
at the highest rate per annum payable under any Secured
Obligation), in such order and amounts as Beneficiary in its sole
discretion shall determine; and the remainder, if any, to the
person or persons legally entitled thereto.
5.04 Application of Other Sums. All Rents or other sums
received by Beneficiary hereunder, less all costs and expenses
incurred by Beneficiary or any receiver, including reasonable
attorneys' fees, shall be applied to payment of the Secured
Obligations in such order as Beneficiary shall determine in its
sole discretion; provided however, that Beneficiary shall have no
liability for funds not actually received by Beneficiary.
5.05 No Cure or Waiver. Neither Beneficiary's, Trustee's or any
receiver's entry upon and taking possession of the Subject
Property, nor any collection of Rents, insurance proceeds,
condemnation proceeds or damages,
page 12 is missing
and to Grantor at its address set forth at the signature lines
below, or at such other address as either party shall designate
by written notice to the other party in accordance with the
provisions hereof.
6.06 Successors; Assignment. This Deed of Trust shall be
binding upon and inure to the benefit of the heirs, executors,
administrators, legal representatives, successors and assigns of
the parties hereto; provided however, that this Section does not
waive the provisions of Section 4.14 hereof. Beneficiary
reserves the right to sell, assign, transfer, negotiate or grant
participations in all or any part of, or any interest in,
Beneficiary's rights and benefits under the Note, any and all
other Secured Obligations and this Deed of Trust. In connection
therewith, Beneficiary may disclose all documents and information
which Beneficiary now has or hereafter acquires relating to the
Subject Property, all or any of the Secured Obligations and/or
Grantor and, as applicable, any partners, joint venturers or
members of Grantor, whether furnished by any Grantor or
otherwise.
6.06 Rules of Construction. (a) When appropriate based on the
identity of the parties or other circumstances, the masculine
gender includes the feminine or neuter or both, and the singular
number includes the plural; (b) the term "Subject Property" means
all and any part of or interest in the Subject Property; (c) all
Section headings herein are for convenience of reference only,
are not a part of this Deed of Trust, and shall be disregarded in
the interpretation of any portion of this Deed of Trust; (d) if
more than one person or entity has executed this Deed of Trust as
"Grantor," the obligations of all such Grantors hereunder shall
be joint and several; and (a) all terms of Exhibit A, and each
other exhibit and/or rider attached hereto and recorded herewith,
are hereby incorporated into this Deed of Trust by this
reference.
6.07 Severability of Provisions. If any provision of this Deed
of Trust shall be held to be prohibited by or invalid under
applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity without invalidating the
remainder of such provision or any remaining provisions of this
Deed of Trust.
6.08 Recourse to Separate Property. Any married person who
executes this Deed of Trust as a Grantor and who is obligated
under any Secured Obligation agrees that any money judgment which
Beneficiary or Trustee obtains pursuant to the terms of this Deed
of Trust or any other obligation of that married person secured
by this Deed of Trust may be collected by execution upon that
person's separate property, and any community property of which
that person is a manager.
6.09 Nonresidential Use. Grantor warrants that this Deed of
Trust is not and will at all times continue not to be a
residential deed (as that term is defined in ORS 86.705 (3)).
6.10 Governing Law. This Deed of Trust shall be governed by and
construed in accordance with the laws of the State of Oregon.
6.11 Arbitration.
(a) Arbitration. Upon the demand of any party, any Dispute
shall be resolved by binding arbitration (except as set forth in
(a) below) in accordance with the terms hereof. A "Dispute"
shall mean any action, dispute, claim or controversy of any kind,
whether in contract or tort, statutory or common law, legal or
equitable, now existing or hereafter arising under or in
connection with, or in any way pertaining to, this Deed of Trust
and each other document, contract and instrument required hereby
or now or hereafter delivered to Beneficiary in connection
herewith (collectively, the "Documents"), or any past, present or
future extensions of credit and other activities, transactions or
obligations of any kind related directly or indirectly to any of
the Documents, including without limitation, any of the foregoing
arising in connection with the exercise of any self-help,
ancillary or other remedies pursuant to any of the Documents.
Any party may by summary proceedings bring an action in court to
compel arbitration of a Dispute. Any party who falls or refuses
to submit to arbitration following a lawful demand by any other
party shall bear all costs and expenses incurred by such other
party in compelling arbitration of any Dispute.
(b) Governing Rules. Arbitration proceedings shall be
administered by the American Arbitration Association ("AAA") or
such other administrator as the parties shall mutually agree upon
in accordance with the AAA Commercial Arbitration Rules. All
Disputes submitted to arbitration shall be resolved in accordance
with the
page 14 is missing
OCTOBER 3, 1989 CONCERNING LOANS AND OTHER CREDIT EXTENSIONS
WHICH ARE NOT FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR
SECURED SOLELY BY THE BORROWER'S RESIDENCE MUST BE IN WRITING,
EXPRESS CONSIDERATION AND BE SIGNED BY BANK TO BE ENFORCEABLE.
IN WITNESS WHEREOF, Grantor has executed this Deed of Trust as of
the date first set forth above.
Grantor(s) Address(es):
ELMER'S RESTAURANTS, Inc. ________________________
an Oregon corporation
By:__/s/Bruce N. Davis____
Title: President
<DULY NOTARIZED>
______________
Please Initial
EXHIBIT A
(Description of Property)
Exhibit A to Deed of Trust and Assignment of Rents and Leases
executed by ELMER'S RESTAURANTS, INC., an Oregon corporation, as
Grantor, to WELLS FARGO BANK (ARIZONA), NATIONAL ASSOCIATION, as
Trustee, for the benefit of WELLS FARGO BANK, NATIONAL
ASSOCIATION, as Beneficiary, dated as of February 17,1999.
Description of Property
PARCEL I:
A portion of Block 2, of the duly recorded plat of Bristol,
situated in the Northeast quarter of Section 10, Township 1
South, Range 3 East of the Willamette Meridian, in the City of
Gresham, County of Multnomah and State of Oregon, described as
follows:
Commencing at the Northeast corner of said Section 10; thence
South (DEGREE SIGNS OMITTED) West along the center line of Southeast 242nd
Drive a distance of 257.00 feet to the intersection with the
center line of Northeast 10th Street; thence South (DEGREE SIGNS OMITTED) West
along the center line of Northeast 1Oth Street a distance of
674.01 feet to the intersection with the center line of Southeast
Burnside Street; thence continuing South (DEGREE SIGNS OMITTED) West along
said center line a distance of 49.77 feet to the Southwesterly
line of Southeast Burnside Road; thence continuing South
(dEGREE) West along said center line a distance of 24.89 feet to
a point 20.00 feet Southwesterly (when measured at right angles)
of said Southwesterly line; thence South (DEGREES) East parallel
with said Southwesterly line a distance of 175.92 feet to the
point of beginning of the tract herein to be described; thence
South (DEGREES) West a distance of 142.81 feet to a point; thence
South (DEGREES) East a distance of 173.00 feet to a point on the
North line of Northeast 8th Street; thence North (DEGREES) East
along said North line a distance of 285.00 feet to a point 20.00
feet Southwesterly (when measured at right angles) of the
Southwesterly line of said Southeast Burnside Road; thence North
(DEGREES) West parallel with said Southwesterly line a distance
of 253.00 feet to the point of beginning.
Except that portion deeded to the City of Gresham, recorded
August 29, 1973 in Book 946 Page 231, Deed Records.
PARCEL II:
A portion of Block 2, of the duly recorded plat of Bristol,
situated in the Northeast quarter of Section 10, Township 1
South, Range 3 East of the Willamette Meridian, in the City of
Gresham, County of Multnomah and State of Oregon, described as
follows:
Commencing at the Northeast corner of said Section 10; thence
South (DEGREES) West along the center line of Southeast 242nd
Drive a distance of 257.00 feet to the intersection with the
center line of Northeast 1Oth Street; thence South (DEGREES) West
along the center line of Northeast 1Oth Street a distance of
674.01 feet to the intersection with the center line of Southeast
Burnside Road; thence continuing south (DEGREES) West along said
center line a distance of 49.77 feet to the Southwesterly line of
Southeast Burnside Road; thence continuing South (DEGREES) West
along said center line a distance of 24.89 feet to a point 20.00
feet Southwesterly (when measured at right angles) of said
Southwesterly line; thence South (DEGREES) East parallel with
said Southwesterly line a distance of 175.92 feet to the point of
beginning of the tract herein to be described; thence continuing
South (DEGREES) East parallel with the said Southwesterly line to
the North corner of a parcel of land deeded to the City of
Gresham, recorded August 29, 1973 in Book 946 Page 231, Deed
Records; thence North (DEGREES) West to a point in the North line
of Lot 15; thence East along said North line to a point on the
Southwesterly line of Southeast Burnside Road; thence
Northwesterly along said Southwesterly line to a point that is
North (DEGREES) East from the point of beginning; thence South
(DEGREES) West to the point of beginning.
12 - SECOND TRUST DEED (Tacoma, Washington) 0199296.01
When recorded return to: (For Recorder's Use Only)
Kenneth S. Antell
Dunn, Carney, Allen, Higgins & Tongue
851 S.W. Sixth Avenue, Suite 1500
Portland, OR 97204-1357
=================================================================
SECOND TRUST DEED
Date: February ____, 1999
Among: ELMER'S RESTAURANTS, INC. ("Grantor")
an Oregon corporation
11802 S.E. Stark Street
P.O. Box 16938
Portland, OR 97292-0938
and: EAGLE'S VIEW MANAGEMENT COMPANY, INC. ("Beneficiary")
an Oregon corporation
P.O. Box 10638
Eugene, OR 97440
and: CHICAGO TITLE INSURANCE COMPANY ("Trustee")
2601 S. 35th Street
Tacoma, WA 98409
Grantor, in consideration of the indebtedness recited and
the trust created in this Trust Deed, irrevocably grants and
conveys to Trustee, in trust, with power of sale, the real
property commonly known as 7427 S. Hosmer Ct., located in Tacoma,
Pierce County, Washington, which is more particularly described
in attached Exhibit A, which is incorporated herein by this
reference (the "Land");
TOGETHER with all the improvements now or hereafter erected
on the Land, and all easements, rights, appurtenances, rents
(subject however to the rights and authorities given in this
Trust Deed to Beneficiary to collect and apply such rents),
royalties, mineral, oil and gas rights and profits, water, water
rights, and water stock, and all fixtures now or hereafter
attached to the Land, all of which, including replacements and
additions thereto, shall be deemed to be and remain a part of the
property covered by this Trust Deed; and all of the foregoing,
together with the Land are referred to in this Trust Deed as the
"Property;"
TO SECURE to Beneficiary (a) the repayment of the
indebtedness evidenced by a Promissory Note dated August 25,
1998, and amended by that certain First Amendment to Promissory
Note of even date herewith (the "Note"), originally given by CBW,
Inc., an Oregon corporation which merged with and into Grantor,
with an original principal balance of $4 million and a present
principal balance of $1.25 million, with interest thereon as
provided in the Note, and with the balance of the indebtedness of
the Note, if not sooner paid, due and payable on February 25,
2004, and all renewals and/or extensions of the Note; (b) the
repayment of any and all other indebtedness owing from Grantor to
Beneficiary at any time hereafter; (c) the repayment of all other
sums, with interest thereon, advanced in accordance with the
terms of this Trust Deed to protect the security of this Trust
Deed; and (d) the performance of the covenants and agreements of
Grantor contained in this Trust Deed (the "Obligations").
GRANTOR COVENANTS that (a) Grantor is lawfully seized of the
estate conveyed by this Trust Deed and has the right to grant and
convey the Property; (b) the Property is unencumbered, except for
the first priority trust deed granted in favor of Wells Fargo
Bank (the "Prior Lienholder") to secure a loan with a principal
balance not to exceed $7,000,000.00 (the "Prior Lien") and such
other exceptions that are reasonably approved in writing by
Beneficiary (the "Permitted Exceptions"); and (c) Grantor will
warrant and defend the title to the Property against all claims
and demands, subject to the Prior Lien, the lien of this Trust
Deed, and the Permitted Exceptions.
Grantor and Beneficiary covenant and agree as follows:
1. Payment of Principal and Interest. Grantor shall promptly
pay when due the principal and interest on the indebtedness
evidenced by the Note, prepayment and other charges as provided
in the Note and this Trust Deed, and the principal of and
interest on any other advances secured by this Trust Deed.
2. Application of Payments on the Note. All payments received
by Beneficiary under the Note and Section 1 above shall be
applied by Beneficiary as set forth in the Note.
3. Taxes, Assessments and Liens. Grantor shall pay all taxes,
assessments, and other charges, fines and impositions
attributable to the Property which may attain a priority over
this Trust Deed, and leasehold payments or ground rents (if any)
by Grantor making payments, when due, directly to the payee
thereof. Grantor shall promptly furnish to Beneficiary all
notices of amounts due under this Section 3, if requested by
Beneficiary, and Grantor shall promptly furnish to Beneficiary
receipts evidencing such payments. Grantor may pay taxes and
assessments pursuant to the assessor's installment schedule.
Grantor shall promptly discharge any lien which has priority over
this Trust Deed, except the Prior Lien; provided, that Grantor
shall not be required to discharge any such lien so long as
Grantor shall agree in writing to the payment of the obligation
secured by such lien in a manner acceptable to Beneficiary, in
Beneficiary's sole and unfettered discretion, or shall in good
faith contest such lien by, or defend enforcement of such lien
in, legal proceedings that operate to prevent the enforcement of
the lien or forfeiture of the Property or any part thereof.
4. Insurance.
4.1 Requirement to Maintain Property Insurance. Grantor shall
obtain and maintain at all times "all risk" property insurance,
together with endorsements for replacement cost, inflation
adjustment, and all other endorsements as Beneficiary may from
time to time require, all in amounts not less than the full
replacement value of all improvements now existing or hereafter
erected on the Property, without reduction for co-insurance.
4.2 Requirement to Maintain Liability Insurance. Grantor shall
obtain and maintain at all times comprehensive general liability
insurance with limits, coverages, and risks insured that are
acceptable to Beneficiary, and in no event less than $2,000,000
combined single limit coverage.
4.3 Insurance Carrier; Premium Payments. The insurance carrier
or carriers providing the insurance shall be chosen by Grantor
subject to approval by Beneficiary. All premiums on insurance
policies shall be paid by Grantor making payment, when due,
directly to the insurance carrier.
4.4 Form of Policies; Proof of Loss. All insurance policies and
renewals thereof shall be in forms acceptable to Beneficiary and
shall include a standard mortgage clause in favor of and in a
form acceptable to Beneficiary. Subject to the rights of the
Prior Lienholder, Beneficiary shall have the right to hold the
policies and renewals thereof, and Grantor shall promptly furnish
to Beneficiary all renewal notices and all receipts of paid
premiums. In the event of loss, Grantor shall give prompt notice
to the insurance carrier and Beneficiary. Beneficiary may make
proof of loss if not made promptly by Grantor.
4.5 Proceeds. Unless Beneficiary and Grantor otherwise agree in
writing, insurance proceeds shall be applied to restoration of
the Property damaged, if restoration is economically feasible
based upon fixed bids for restoration from the insurance
proceeds, but if restoration is not economically feasible the
insurance proceeds shall be applied to the sums secured by this
Trust Deed, subject to the rights of the Prior Lienholder. If
the Property is abandoned by Grantor, or if Grantor fails to
respond to Beneficiary within 30 days from the date notice is
mailed by Beneficiary to Grantor indicating that the insurance
carrier offers to settle a claim for insurance benefits,
Beneficiary is authorized to collect and apply the insurance
proceeds at Beneficiary's option to restoration of the Property
or to the sums secured by this Trust Deed.
4.6 No Postponement of Payments; Right to Proceeds. Unless
Beneficiary and Grantor otherwise agree in writing, any such
application of proceeds to principal shall not extend or postpone
the due date of any payments referred to in Section 1 of this
Trust Deed or change the amount of such payments. If under
Section 15 of this Trust Deed the Property is acquired by
Beneficiary, all right, title and interest of Grantor in and to
any insurance policies and in and to the proceeds thereof
resulting from damage to the Property prior to the sale or
acquisition shall pass to Beneficiary to the extent of the sums
secured by this Trust Deed immediately prior to such sale or
acquisition.
5. Compliance with Laws. Grantor represents, warrants, and
covenants that: (a) the Property, if developed, has been
developed, and all improvements located on the Property, if any,
have been constructed and maintained, in full compliance with all
applicable laws, statutes, ordinances, regulations, and codes of
all federal, state, and local governments (collectively "Laws"),
and all covenants, conditions, easements, and restrictions
affecting the Property (collectively "Covenants"); and (b)
Grantor and its operations upon the Property currently comply,
and will hereafter comply in all material respects with all
applicable Laws and Covenants.
6. Environmental Covenants, Warranties and Compliance.
6.1 Environmental Law Definition. For purposes of this section,
"Environmental Law" means any federal, state, or local law,
statute, ordinance, or regulation pertaining to Hazardous
Substances, health, industrial hygiene, or environmental
conditions, including without limitation the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980
("CERCLA"), as amended, 42 USC 9601-9675, and the Resource
Conservation and Recovery Act of 1976 ("RCRA"), as amended, 42
USC 6901-6992.
6.2 Hazardous Substance Definition. For the purposes of this
section, "Hazardous Substance" includes, without limitation, any
material, substance, or waste that is or becomes regulated or
that is or becomes classified as hazardous, dangerous, or toxic
under any federal, state, or local statute, ordinance, rule,
regulation, or law.
6.3 No Generation or Use. Grantor will not use, generate,
manufacture, produce, store, release, discharge, or dispose of
on, under or about the Property or the Property's groundwater, or
transport to or from the Property, any Hazardous Substance and
will not permit any other person to do so, except for such
Hazardous Substances that may be used in the ordinary course of
Grantor's business and in compliance with all Environmental Laws,
including but not limited to those relating to licensure, notice,
and recordkeeping.
6.4 Compliance with Law. Grantor will keep and maintain the
Property in compliance with, and shall not cause or permit all or
any portion of the Property, including groundwater, to be in
violation of any Environmental Law.
6.5 Indemnification. Grantor shall hold Beneficiary, its
directors, officers, employees, agents, successors, and assigns,
harmless from, indemnify them for, and defend them against any
and all losses, damages, liens, costs, expenses, and liabilities
directly or indirectly arising out of or attributable to any
violation of any Environmental Law, any breach of Grantor's
warranties in this Section 6, or the use, generation,
manufacture, production, storage, release, threatened release,
discharge, disposal, or presence of a Hazardous Substance on,
under, or about the Property, including without limitation the
costs of any required repair, cleanup, containment, or
detoxification of the Property, the preparation and
implementation of any closure, remedial or other required plans,
attorney fees and costs (including but not limited to those
incurred in any proceeding and in any review or appeal), fees,
penalties, and fines.
6.6 Representations. Grantor represents and warrants to
Beneficiary that: (a) neither the Property nor Grantor is in
violation of or subject to any existing, pending, or threatened
investigation by any governmental authority under any
Environmental Law; (b) Grantor has not and is not required by any
Environmental Law to obtain any permit or license other than
those it has obtained to construct or use the improvements
located on the Property; and (c) to the best of Grantor's
knowledge, no Hazardous Substance has ever been used, generated,
manufactured, produced, stored, released, discharged, or disposed
of on, under, or about the Property in violation of any
Environmental Law.
6.7 Survival. All representations, warranties, and covenants in
this Section 6 shall survive the satisfaction of the Obligations,
the reconveyance of the Property, or the foreclosure of this
Trust Deed by any means.
7. Preservation and Maintenance of Property. Grantor shall
keep the Property in good repair and shall not commit waste or
permit impairment or deterioration of the Property, and shall
comply with the provisions of any lease if this Trust Deed is on
a leasehold.
8. Protection of Beneficiary's Security.
8.1 Appearances; Disbursements. If Grantor fails to perform the
covenants and agreements contained in this Trust Deed, or,
notwithstanding Section 3 of this Trust Deed, if any action or
proceeding is commenced which materially affects Beneficiary's
interest in the Property, including, but not limited to,
construction lien foreclosure, eminent domain, insolvency, code
enforcement, or arrangements or proceedings involving a bankrupt
or decedent, then Beneficiary at Beneficiary's option, may make
such appearances, disburse such sums and take such action as is
necessary to protect Beneficiary's interest, including, but not
limited to, disbursement of reasonable costs and attorney fees,
and entry upon the Property to make repairs.
8.2 Interest on Disbursements. Any amounts disbursed by
Beneficiary pursuant to this Section 8, with interest thereon,
shall become additional indebtedness of Grantor secured by this
Trust Deed. Unless Grantor and Beneficiary agree to other terms
of payment, such amounts shall be payable upon notice from
Beneficiary to Grantor requesting payment thereof, and shall bear
interest from the date of disbursement at the rate of 15 percent
per annum, unless payment of interest at such rate would be
contrary to applicable law, in which event such amounts shall
bear interest at the highest rate permissible under applicable
law. Nothing contained in this Section 8 shall require
Beneficiary to incur any expense or take any action under this
Trust Deed.
9. Inspection. Beneficiary may make or cause to be made
reasonable entries upon and inspections of the Property during
business hours after prior written notice.
10. Condemnation.
10.1 Assignment of Proceeds. The proceeds of any award or claim
for damages, direct or consequential, in connection with
condemnation or other taking of the Property, or part thereof, or
for conveyance in lieu of condemnation, are hereby assigned and
shall be paid to Beneficiary, subject to the rights of the holder
of the Prior Lienholder.
10.2 Total and Partial Taking. In the event of a total taking of
the Property, the proceeds shall be applied to the sums secured
by the Prior Lien and this Trust Deed, with the excess, if any,
paid to Grantor. In the event of a partial taking of the
Property, unless Grantor and Beneficiary otherwise agree in
writing, there shall be applied to the sums secured by this Trust
Deed such proportion of the proceeds as is equal to that
proportion which the amount of the sums secured by this Trust
Deed immediately prior to the date of taking bears to the fair
market value of the Property immediately prior to the date of
taking with the balance of the proceeds paid to Grantor.
10.3 Property is Abandoned; Failure to Respond. If the Property
is abandoned by Grantor, or if, after notice by Beneficiary to
Grantor that the condemnor offers to make an award or settle a
claim for damages, Grantor fails to respond to Beneficiary within
30 days after the date such notice is mailed, Beneficiary is
authorized to collect and apply the proceeds, at Beneficiary's
option, either to restoration or repair of the Property or to the
sums secured by this Trust Deed.
10.4 No Postponement of Payments. Unless Beneficiary and Grantor
otherwise agree in writing, any such application of proceeds to
principal shall not extend or postpone the due date of any
payments referred to in Section 1 of this Trust Deed or change
the amount of such payments.
11. Grantor Not Released. Extension of the time for payment or
modification of amortization of the sums secured by this Trust
Deed granted by Beneficiary to any successor in interest of
Grantor shall not operate to release, in any manner, the
liability of the original Grantor and Grantor's successors in
interest. Beneficiary shall not be required to commence
proceedings against such successor, refuse to extend time for
payment, or otherwise modify amortization of the sums secured by
this Trust Deed by reason of any demand made by the original
Grantor or Grantor's successors in interest.
12. Forbearance by Beneficiary Not a Waiver. Any forbearance by
Beneficiary in exercising any right or remedy under this Trust
Deed, or otherwise afforded by applicable law, shall not be a
waiver of or preclude the exercise of any such right or remedy.
The procurement of insurance or the payment of taxes or other
liens or charges by Beneficiary shall not be a waiver of
Beneficiary's right to accelerate the maturity of the
indebtedness secured by this Trust Deed.
13. Remedies Cumulative. All remedies provided in this Trust
Deed are distinct and cumulative to any other right or remedy
under this Trust Deed or afforded by law or equity, and may be
exercised concurrently, independently or successively.
14. Due on Sale. If all or any part of the Property or any
interest in the Property is sold, transferred, assigned,
conveyed, pledged, hypothecated, or given, either voluntarily or
involuntarily, or by operation of law, without Beneficiary's
prior written consent, or in the event of a default with respect
to the Prior Lien, or if any lien or encumbrance subordinate to
the lien of this Trust Deed is placed or allowed to remain on the
Property which adversely affects the lien of this Trust Deed,
Beneficiary may, at Beneficiary's option, declare all the sums
secured by this Trust Deed to be immediately due and payable, and
seek any and all other remedies available under this Trust Deed,
the Note or under applicable law.
15. Default and Remedies.
15.1 Events of Default. Each of the following shall constitute
an event of default under this Trust Deed:
15.1.1 Nonpayment. Failure of Grantor to pay any of the
Obligations on or before the due date and within any applicable
cure period.
15.1.2 Breach of Other Covenants. Failure of
Grantor to perform or abide by any other covenant included in the
Obligations, including without limitation those covenants in the
Note, in this Trust Deed or in any other loan document or
agreement between Grantor and Beneficiary and the failure to cure
any such nonperformance within any applicable cure period.
15.1.3 Other Default. The occurrence of any other event of
default under the Note or any of the other Obligations.
15.1.4 Prior Lien. The occurrence of any default under the
terms and conditions of the Prior Lien.
15.2 Remedies.
15.2.1 Acceleration. Upon Grantor's breach of any
covenant or agreement of Grantor in this Trust Deed, including
the covenants to pay when due any sums secured by this Trust
Deed, Beneficiary at Beneficiary's option may declare all of the
sums secured by this Trust Deed to be immediately due and payable
without further demand and may invoke the power of sale and any
other remedies permitted by applicable law.
15.2.2 Sale by Trustee. If Beneficiary invokes
the power of sale, Beneficiary shall execute or cause Trustee to
execute a written notice of the occurrence of an event of default
and of Beneficiary's election to cause the Property to be sold,
and shall cause such notice to be recorded in each county in
which the Property or some part of the Property is located.
Beneficiary or Trustee shall give notice of sale in the manner
prescribed by applicable law to Grantor and to the other persons
prescribed by applicable law. After the lapse of such time as
may be required by applicable law, Trustee, without demand on
Grantor, shall sell the Property at public auction to the highest
bidder at the time and place and under the terms designated in
the notice of sale in one or more parcels and in such order as
Trustee may determine. Trustee may postpone sale of all or any
parcel of the Property by public announcement at the time and
place of any previously scheduled sale. Beneficiary or
Beneficiary's designee may purchase the Property at any sale.
15.2.3 Trustee's Deed. Trustee shall deliver to the
purchaser Trustee's deed conveying the Property so sold without
any covenant or warranty, expressed or implied. The recitals in
the Trustee's deed shall be prima facie evidence of the truth of
the statements made therein. Trustee shall apply the proceeds of
the sale in the following order: (a) to all reasonable costs and
expenses of the sale, including, but not limited to, reasonable
Trustee and attorney fees and costs of title evidence; (b) to all
sums secured by the Prior Lien; (c) to all sums secured by this
Trust Deed; and (d) the excess (if any) to the person or persons
legally entitled thereto.
15.2.4 Other Remedies. Beneficiary may
exercise any other rights or remedies available to Beneficiary
under this Trust Deed, the Note, or any other loan document or
agreement between Grantor and Beneficiary, or otherwise allowed
under applicable law.
15.2.5 Cumulative Remedies. All remedies under this
Trust Deed are cumulative and not exclusive. Any election to
pursue one remedy shall not preclude the exercise of any other
remedy. An election by Beneficiary to cure shall not constitute a
waiver of the default or of any of the remedies provided in this
Trust Deed. No delay or omission in exercising any right or
remedy shall impair the full exercise of that or any other right
or remedy or constitute a waiver of the default.
15.2.6 Costs and Expenses. Beneficiary shall be
entitled to collect all reasonable costs and expenses incurred in
pursuing the remedies provided in this Section 15, including, but
not limited to, reasonable costs and attorney fees, as provided
below in Section 21.5.
16. Grantor's Right to Reinstate. Notwithstanding Beneficiary's
acceleration of the Obligations secured by this Trust Deed,
Grantor shall have the right to reinstate this Trust Deed if all
payments are made to Beneficiary as required under applicable
Washington law and Grantor takes such action as Beneficiary may
reasonably require to assure that the lien of this Trust Deed,
Beneficiary's interest in the Property and Grantor's obligation
to pay the sums secured by this Trust Deed shall continue
unimpaired. Upon such payment and cure by Grantor, this Trust
Deed and the Obligations secured by this Trust Deed shall remain
in full force and effect as if no acceleration had occurred.
17. Assignment of Rents; Appointment of Receiver; Beneficiary in
Possession. As additional security under this Trust Deed,
Grantor hereby assigns to Beneficiary the rents of the Property
(if any), provided that Grantor shall, prior to acceleration
under Section 15 of this Trust Deed or abandonment of the
Property, have the right to collect and retain such rents as they
become due and payable. Upon acceleration under Section 15 of
this Trust Deed or abandonment of the Property, Beneficiary, in
person, by agent or by judicially appointed receiver, shall be
entitled to enter upon, take possession of and manage the
Property and to collect the rents of the Property (if any),
including those past due. All rents collected by Beneficiary or
the receiver shall be applied first to payment of the costs of
management of the Property and collection of rents, including but
not limited to, receiver fees, premiums on receiver's bonds and
reasonable attorney fees and costs, and to the sums secured by
this Trust Deed. Beneficiary and the receiver shall be liable to
account only for those rents actually received.
18. Rights of Prior Lienholder. The rights of Beneficiary with
respect to insurance and condemnation proceeds as provided in
this Trust Deed, and all other rights granted under this Trust
Deed that have also been granted to the Prior Lienholder, shall
be subject to the rights of the Prior Lienholder. Grantor hereby
authorizes the Prior Lienholder, on satisfaction of the
indebtedness secured by the Prior Lien, to remit all remaining
insurance or condemnation proceeds and all other sums held by the
Prior Lienholder to Beneficiary to be applied in accordance with
this Trust Deed.
19. Reconveyance. Upon payment of all sums secured by this
Trust Deed, Beneficiary shall request Trustee to reconvey the
Property and shall surrender this Trust Deed and all notes
evidencing indebtedness secured by this Trust Deed to Trustee.
Trustee shall reconvey the Property without warranty and without
charge to the person or persons legally entitled thereto. Such
person or persons shall pay all costs of recordation, if any.
20. Substitute Trustee. In accordance with applicable law,
Beneficiary may from time to time remove Trustee and appoint a
successor trustee. Without conveyance of the Property, the
successor trustee shall succeed to all the title, power and
duties conferred upon Trustee in this Trust Deed and by
applicable law.
21. Miscellaneous.
21.1 Notices. Except for any notice required under applicable
law to be given in another manner, (a) any notice to Grantor
provided for in this Trust Deed shall be given by certified mail,
return receipt requested, first class postage prepaid, to
Grantor's address stated on the first page of this Trust Deed, or
to such other address that Grantor may designate by notice to
Beneficiary as provided in this Trust Deed, and (b) any notice to
Beneficiary shall be given by certified mail, return receipt
requested, first class postage prepaid, to Beneficiary's address
stated on the first page of this Trust Deed or to such other
address as Beneficiary may designate by notice to Grantor as
provided in this Trust Deed. Any notice provided for in this
Trust Deed shall be deemed to have been given to Grantor or
Beneficiary when deposited in the United States mail.
21.2 Governing Law. The provisions of this Trust Deed shall be
governed by and construed in accordance with the laws of the
state of Washington.
21.3 Grantor's Copy. Grantor shall be furnished a conformed copy
of the Note and of this Trust Deed at the time of execution or
after recordation.
21.4 Successors and Assigns Bound; Captions. The covenants and
agreements contained in this Trust Deed shall bind, and the
rights under this Trust Deed shall inure to, the respective
successors and assigns of Beneficiary and Grantor. The captions
and headings of the sections of this Trust Deed are for
convenience only and are not to be used to interpret or define
the provisions of this Trust Deed.
21.5 Attorney Fees. If Beneficiary refers any of the Obligations
to an attorney for collection or seeks legal advice following a
default; if Beneficiary is the prevailing party in any litigation
instituted in connection with any of the Obligations; or if
Beneficiary or any other person initiates any judicial or
nonjudicial action, suit, or proceeding in connection with any of
the Obligations or the Property (including but not limited to
proceedings under federal bankruptcy law, eminent domain, under
probate proceedings, or in connection with any state or federal
tax lien), and an attorney is employed by Beneficiary to
(1) appear in any such action, suit, or proceeding, or
(2) reclaim, seek relief from a judicial or statutory stay,
sequester, protect, preserve, or enforce Beneficiary's interests,
then in any such event Grantor shall pay reasonable attorney
fees, costs, and expenses incurred by Beneficiary or its attorney
in connection with the above-mentioned events or any appeals
related to such events, including but not limited to costs
incurred in searching records, the cost of title reports, and the
cost of surveyors' reports. Such amounts shall be secured by this
Trust Deed and, if not paid upon demand, shall bear interest at
the rate specified in Section 8.2.
21.6 Standard for Discretion. In the event this Trust Deed is
silent on the standard for any consent, approval, determination,
or similar discretionary action, the standard shall be sole and
unfettered discretion as opposed to any standard of good faith,
fairness, or reasonableness.
21.7 Conflicts. In the event that the terms and conditions of
this Trust Deed conflict in any way with the terms and conditions
of the Prior Lien, the terms and conditions of the Prior Lien
shall control.
21.8 Time is of the Essence. Time is of the essence with respect
to all covenants and obligations of Grantor under this Trust
Deed.
21.9 Commercial Property. Grantor covenants and warrants that
the Property are used by Grantor exclusively for business and
commercial purposes.
ORAL AGREEMENTS OR ORAL COMMITMENTS TO LEND MONEY, EXTEND
CREDIT, OR FORBEAR FROM ENTERING REPAYMENT OF A DEBT ARE NOT
ENFORCEABLE UNDER WASHINGTON LAW.
IN WITNESS WHEREOF, Grantor has executed this Trust Deed as
of the day and year first above written.
ELMER'S RESTAURANTS, INC.
an Oregon corporation
By: __/s/ Bruce N. Davis___
Name: Bruce N. Davis
Title: President
STATE OF OREGON )
) ss.
County of )
This Trust Deed was acknowledged before me on February
_____, 1999, by __________ ________________________, as
_________________________ of Elmer's Restaurants, Inc.
________________________
NOTARY PUBLIC FOR OREGON
EXHIBIT A
LEGAL DESCRIPTION OF THE PROPERTY
LOT 4 OF CITY OF TACOMA SHORT PLAT NO. 8202020154, ACCORDING TO
THE MAP THEREOF, RECORDED FEBRUARY 2, 1982, IN TACOMA, PIERCE
COUNTY, WASHINGTON.
14 - SECOND TRUST DEED (Boise, Idaho) 0199298.01
After recording, please return to: (For Recorder's Use Only)
Kenneth S. Antell
Dunn, Carney, Allen, Higgins & Tongue
851 S.W. Sixth Avenue, Suite 1500
Portland, OR 97204-1357
=================================================================
SECOND TRUST DEED
Date: February 18, 1999
Among: ELMER'S RESTAURANTS, INC.
("Grantor")
an Oregon corporation
11802 S.E. Stark Street
P.O. Box 16938
Portland, OR 97292-0938
and: EAGLE'S VIEW MANAGEMENT COMPANY, INC. ("Beneficiary")
an Oregon corporation
P.O. Box 10638
Eugene, OR 97440
and: ALLIANCE TITLE & ESCROW CORP. ("Trustee")
1412 West Idaho Street
Boise, ID 83702
Grantor, in consideration of the indebtedness recited and
the trust created in this Trust Deed, irrevocably grants and
conveys to Trustee, in trust, with power of sale, the real
property commonly known as 1385 S. Capitol Blvd., located in
Boise, Ada County, Idaho, which is more particularly described in
attached Exhibit A, which is incorporated herein by this
reference (the "Land");
TOGETHER with all the improvements now or hereafter erected
on the Land, and all easements, rights, appurtenances, rents
(subject however to the rights and authorities given in this
Trust Deed to Beneficiary to collect and apply such rents),
royalties, mineral, oil and gas rights and profits, water, water
rights, and water stock, and all fixtures now or hereafter
attached to the Land, all of which, including replacements and
additions thereto, shall be deemed to be and remain a part of the
property covered by this Trust Deed; and all of the foregoing,
together with the Land are referred to in this Trust Deed as the
"Property;"
TO SECURE to Beneficiary (a) the repayment of the
indebtedness evidenced by a Promissory Note dated August 25,
1998, and amended by that certain First Amendment to Promissory
Note of even date herewith (the "Note"), originally given by CBW,
Inc., an Oregon corporation which merged with and into Grantor,
with an original principal balance of $4 million and a present
principal balance of $1.25 million, with interest thereon as
provided in the Note, and with the balance of the indebtedness of
the Note, if not sooner paid, due and payable on February 25,
2004, and all renewals and/or extensions of the Note; (b) the
repayment of any and all other indebtedness owing from Grantor to
Beneficiary at any time hereafter; (c) the repayment of all other
sums, with interest thereon, advanced in accordance with the
terms of this Trust Deed to protect the security of this Trust
Deed; and (d) the performance of the covenants and agreements of
Grantor contained in this Trust Deed (the "Obligations").
GRANTOR COVENANTS that (a) Grantor is lawfully seized of the
estate conveyed by this Trust Deed and has the right to grant and
convey the Property; (b) the Property is unencumbered, except for
the first priority trust deed granted in favor of Wells Fargo
Bank (the "Prior Lienholder") to secure a loan with a principal
balance not to exceed $7,000,000.00 (the "Prior Lien") and such
other exceptions that are reasonably approved in writing by
Beneficiary (the "Permitted Exceptions"); and (c) Grantor will
warrant and defend the title to the Property against all claims
and demands, subject to the Prior Lien, the lien of this Trust
Deed, and the Permitted Exceptions.
Grantor and Beneficiary covenant and agree as follows:
1. Payment of Principal and Interest. Grantor shall
promptly pay when due the principal and interest on the
indebtedness evidenced by the Note, prepayment and other charges
as provided in the Note and this Trust Deed, and the principal of
and interest on any other advances secured by this Trust Deed.
2. Application of Payments on the Note. All payments
received by Beneficiary under the Note and Section 1 above shall
be applied by Beneficiary as set forth in the Note.
3. Taxes, Assessments and Liens. Grantor shall pay all
taxes, assessments, and other charges, fines and impositions
attributable to the Property which may attain a priority over
this Trust Deed, and leasehold payments or ground rents (if any)
by Grantor making payments, when due, directly to the payee
thereof. Grantor shall promptly furnish to Beneficiary all
notices of amounts due under this Section 3, if requested by
Beneficiary, and Grantor shall promptly furnish to Beneficiary
receipts evidencing such payments. Grantor may pay taxes and
assessments pursuant to the assessor's installment schedule.
Grantor shall promptly discharge any lien which has priority over
this Trust Deed, except the Prior Lien; provided, that Grantor
shall not be required to discharge any such lien so long as
Grantor shall agree in writing to the payment of the obligation
secured by such lien in a manner acceptable to Beneficiary, in
Beneficiary's sole and unfettered discretion, or shall in good
faith contest such lien by, or defend enforcement of such lien
in, legal proceedings that operate to prevent the enforcement of
the lien or forfeiture of the Property or any part thereof.
4. Insurance.
4.1 Requirement to Maintain Property Insurance.
Grantor shall obtain and maintain at all times "all risk"
property insurance, together with endorsements for replacement
cost, inflation adjustment, and all other endorsements as
Beneficiary may from time to time require, all in amounts not
less than the full replacement value of all improvements now
existing or hereafter erected on the Property, without reduction
for co-insurance.
4.2 Requirement to Maintain Liability Insurance.
Grantor shall obtain and maintain at all times comprehensive
general liability insurance with limits, coverages, and risks
insured that are acceptable to Beneficiary, and in no event less
than $2,000,000 combined single limit coverage.
4.3 Insurance Carrier; Premium Payments. The
insurance carrier or carriers providing the insurance shall be
chosen by Grantor subject to approval by Beneficiary. All
premiums on insurance policies shall be paid by Grantor making
payment, when due, directly to the insurance carrier.
4.4 Form of Policies; Proof of Loss. All insurance
policies and renewals thereof shall be in forms acceptable to
Beneficiary and shall include a standard mortgage clause in favor
of and in a form acceptable to Beneficiary. Subject to the
rights of the Prior Lienholder, Beneficiary shall have the right
to hold the policies and renewals thereof, and Grantor shall
promptly furnish to Beneficiary all renewal notices and all
receipts of paid premiums. In the event of loss, Grantor shall
give prompt notice to the insurance carrier and Beneficiary.
Beneficiary may make proof of loss if not made promptly by
Grantor.
4.5 Proceeds. Unless Beneficiary and Grantor
otherwise agree in writing, insurance proceeds shall be applied
to restoration of the Property damaged, if restoration is
economically feasible based upon fixed bids for restoration from
the insurance proceeds, but if restoration is not economically
feasible the insurance proceeds shall be applied to the sums
secured by this Trust Deed, subject to the rights of the Prior
Lienholder. If the Property is abandoned by Grantor, or if
Grantor fails to respond to Beneficiary within 30 days from the
date notice is mailed by Beneficiary to Grantor indicating that
the insurance carrier offers to settle a claim for insurance
benefits, Beneficiary is authorized to collect and apply the
insurance proceeds at Beneficiary's option to restoration of the
Property or to the sums secured by this Trust Deed.
4.6 No Postponement of Payments; Right to Proceeds.
Unless Beneficiary and Grantor otherwise agree in writing, any
such application of proceeds to principal shall not extend or
postpone the due date of any payments referred to in Section 1 of
this Trust Deed or change the amount of such payments. If under
Section 15 of this Trust Deed the Property is acquired by
Beneficiary, all right, title and interest of Grantor in and to
any insurance policies and in and to the proceeds thereof
resulting from damage to the Property prior to the sale or
acquisition shall pass to Beneficiary to the extent of the sums
secured by this Trust Deed immediately prior to such sale or
acquisition.
5. Compliance with Laws. Grantor represents, warrants, and
covenants that: (a) the Property, if developed, has been
developed, and all improvements located on the Property, if any,
have been constructed and maintained, in full compliance with all
applicable laws, statutes, ordinances, regulations, and codes of
all federal, state, and local governments (collectively "Laws"),
and all covenants, conditions, easements, and restrictions
affecting the Property (collectively "Covenants"); and (b)
Grantor and its operations upon the Property currently comply,
and will hereafter comply in all material respects with all
applicable Laws and Covenants.
6. Environmental Covenants, Warranties and Compliance.
6.1 Environmental Law Definition. For purposes of
this section, "Environmental Law" means any federal, state, or
local law, statute, ordinance, or regulation pertaining to
Hazardous Substances, health, industrial hygiene, or
environmental conditions, including without limitation the
Comprehensive Environmental Response, Compensation, and Liability
Act of 1980 ("CERCLA"), as amended, 42 USC 9601-9675, and the
Resource Conservation and Recovery Act of 1976 ("RCRA"), as
amended, 42 USC 6901-6992.
6.2 Hazardous Substance Definition. For the purposes
of this section, "Hazardous Substance" includes, without
limitation, any material, substance, or waste that is or becomes
regulated or that is or becomes classified as hazardous,
dangerous, or toxic under any federal, state, or local statute,
ordinance, rule, regulation, or law.
6.3 No Generation or Use. Grantor will not use,
generate, manufacture, produce, store, release, discharge, or
dispose of on, under or about the Property or the Property's
groundwater, or transport to or from the Property, any Hazardous
Substance and will not permit any other person to do so, except
for such Hazardous Substances that may be used in the ordinary
course of Grantor's business and in compliance with all
Environmental Laws, including but not limited to those relating
to licensure, notice, and recordkeeping.
6.4 Compliance with Law. Grantor will keep and
maintain the Property in compliance with, and shall not cause or
permit all or any portion of the Property, including groundwater,
to be in violation of any Environmental Law.
6.5 Indemnification. Grantor shall hold Beneficiary,
its directors, officers, employees, agents, successors, and
assigns, harmless from, indemnify them for, and defend them
against any and all losses, damages, liens, costs, expenses, and
liabilities directly or indirectly arising out of or attributable
to any violation of any Environmental Law, any breach of
Grantor's warranties in this Section 6, or the use, generation,
manufacture, production, storage, release, threatened release,
discharge, disposal, or presence of a Hazardous Substance on,
under, or about the Property, including without limitation the
costs of any required repair, cleanup, containment, or
detoxification of the Property, the preparation and
implementation of any closure, remedial or other required plans,
attorney fees and costs (including but not limited to those
incurred in any proceeding and in any review or appeal), fees,
penalties, and fines.
6.6 Representations. Grantor represents and warrants
to Beneficiary that: (a) neither the Property nor Grantor is in
violation of or subject to any existing, pending, or threatened
investigation by any governmental authority under any
Environmental Law; (b) Grantor has not and is not required by any
Environmental Law to obtain any permit or license other than
those it has obtained to construct or use the improvements
located on the Property; and (c) to the best of Grantor's
knowledge, no Hazardous Substance has ever been used, generated,
manufactured, produced, stored, released, discharged, or disposed
of on, under, or about the Property in violation of any
Environmental Law.
6.7 Survival. All representations, warranties, and
covenants in this Section 6 shall survive the satisfaction of the
Obligations, the reconveyance of the Property, or the foreclosure
of this Trust Deed by any means.
7. Preservation and Maintenance of Property. Grantor
shall keep the Property in good repair and shall not commit waste
or permit impairment or deterioration of the Property, and shall
comply with the provisions of any lease if this Trust Deed is on
a leasehold.
8. Protection of Beneficiary's Security.
8.1 Appearances; Disbursements. If Grantor fails to
perform the covenants and agreements contained in this Trust
Deed, or, notwithstanding Section 3 of this Trust Deed, if any
action or proceeding is commenced which materially affects
Beneficiary's interest in the Property, including, but not
limited to, construction lien foreclosure, eminent domain,
insolvency, code enforcement, or arrangements or proceedings
involving a bankrupt or decedent, then Beneficiary at
Beneficiary's option, may make such appearances, disburse such
sums and take such action as is necessary to protect
Beneficiary's interest, including, but not limited to,
disbursement of reasonable costs and attorney fees, and entry
upon the Property to make repairs.
8.2 Interest on Disbursements. Any amounts disbursed
by Beneficiary pursuant to this Section 8, with interest thereon,
shall become additional indebtedness of Grantor secured by this
Trust Deed. Unless Grantor and Beneficiary agree to other terms
of payment, such amounts shall be payable upon notice from
Beneficiary to Grantor requesting payment thereof, and shall bear
interest from the date of disbursement at the rate of 15 percent
per annum, unless payment of interest at such rate would be
contrary to applicable law, in which event such amounts shall
bear interest at the highest rate permissible under applicable
law. Nothing contained in this Section 8 shall require
Beneficiary to incur any expense or take any action under this
Trust Deed.
9. Inspection. Beneficiary may make or cause to be made
reasonable entries upon and inspections of the Property during
business hours after prior written notice.
10. Condemnation.
10.1 Assignment of Proceeds. The proceeds of any award
or claim for damages, direct or consequential, in connection with
condemnation or other taking of the Property, or part thereof, or
for conveyance in lieu of condemnation, are hereby assigned and
shall be paid to Beneficiary, subject to the rights of the holder
of the Prior Lienholder.
10.2 Total and Partial Taking. In the event of a total
taking of the Property, the proceeds shall be applied to the sums
secured by the Prior Lien and this Trust Deed, with the excess,
if any, paid to Grantor. In the event of a partial taking of the
Property, unless Grantor and Beneficiary otherwise agree in
writing, there shall be applied to the sums secured by this Trust
Deed such proportion of the proceeds as is equal to that
proportion which the amount of the sums secured by this Trust
Deed immediately prior to the date of taking bears to the fair
market value of the Property immediately prior to the date of
taking with the balance of the proceeds paid to Grantor.
10.3 Property is Abandoned; Failure to Respond. If the
Property is abandoned by Grantor, or if, after notice by
Beneficiary to Grantor that the condemnor offers to make an award
or settle a claim for damages, Grantor fails to respond to
Beneficiary within 30 days after the date such notice is mailed,
Beneficiary is authorized to collect and apply the proceeds, at
Beneficiary's option, either to restoration or repair of the
Property or to the sums secured by this Trust Deed.
10.4 No Postponement of Payments. Unless Beneficiary
and Grantor otherwise agree in writing, any such application of
proceeds to principal shall not extend or postpone the due date
of any payments referred to in Section 1 of this Trust Deed or
change the amount of such payments.
11. Grantor Not Released. Extension of the time for
payment or modification of amortization of the sums secured by
this Trust Deed granted by Beneficiary to any successor in
interest of Grantor shall not operate to release, in any manner,
the liability of the original Grantor and Grantor's successors in
interest. Beneficiary shall not be required to commence
proceedings against such successor, refuse to extend time for
payment, or otherwise modify amortization of the sums secured by
this Trust Deed by reason of any demand made by the original
Grantor or Grantor's successors in interest.
12. Forbearance by Beneficiary Not a Waiver. Any
forbearance by Beneficiary in exercising any right or remedy
under this Trust Deed, or otherwise afforded by applicable law,
shall not be a waiver of or preclude the exercise of any such
right or remedy. The procurement of insurance or the payment of
taxes or other liens or charges by Beneficiary shall not be a
waiver of Beneficiary's right to accelerate the maturity of the
indebtedness secured by this Trust Deed.
13. Remedies Cumulative. All remedies provided in this
Trust Deed are distinct and cumulative to any other right or
remedy under this Trust Deed or afforded by law or equity, and
may be exercised concurrently, independently or successively.
14. Due on Sale. If all or any part of the Property or any
interest in the Property is sold, transferred, assigned,
conveyed, pledged, hypothecated, or given, either voluntarily or
involuntarily, or by operation of law, without Beneficiary's
prior written consent, or in the event of a default with respect
to the Prior Lien, or if any lien or encumbrance subordinate to
the lien of this Trust Deed is placed or allowed to remain on the
Property which adversely affects the lien of this Trust Deed,
Beneficiary may, at Beneficiary's option, declare all the sums
secured by this Trust Deed to be immediately due and payable, and
seek any and all other remedies available under this Trust Deed,
the Note or under applicable law.
15. Default and Remedies.
15.1 Events of Default. Each of the following shall
constitute an event of default under this Trust Deed:
15.1.1 Nonpayment. Failure of Grantor to pay
any of the Obligations on or before the due date and within any
applicable cure period.
15.1.2 Breach of Other Covenants. Failure of
Grantor to perform or abide by any other covenant included in the
Obligations, including without limitation those covenants in the
Note, in this Trust Deed or in any other loan document or
agreement between Grantor and Beneficiary and the failure to cure
any such nonperformance within any applicable cure period.
15.1.3 Other Default. The occurrence of any
other event of default under the Note or any of the other
Obligations.
15.1.4 Prior Lien. The occurrence of any
default under the terms and conditions of the Prior Lien.
15.2 Remedies.
15.2.1 Acceleration. Upon Grantor's breach of
any covenant or agreement of Grantor in this Trust Deed,
including the covenants to pay when due any sums secured by this
Trust Deed, Beneficiary at Beneficiary's option may declare all
of the sums secured by this Trust Deed to be immediately due and
payable without further demand and may invoke the power of sale
and any other remedies permitted by applicable law.
15.2.2 Sale by Trustee. If Beneficiary invokes
the power of sale, Beneficiary shall execute or cause Trustee to
execute a written notice of the occurrence of an event of default
and of Beneficiary's election to cause the Property to be sold,
and shall cause such notice to be recorded in each county in
which the Property or some part of the Property is located.
Beneficiary or Trustee shall give notice of sale in the manner
prescribed by applicable law to Grantor and to the other persons
prescribed by applicable law. After the lapse of such time as
may be required by applicable law, Trustee, without demand on
Grantor, shall sell the Property at public auction to the highest
bidder at the time and place and under the terms designated in
the notice of sale in one or more parcels and in such order as
Trustee may determine. Trustee may postpone sale of all or any
parcel of the Property by public announcement at the time and
place of any previously scheduled sale. Beneficiary or
Beneficiary's designee may purchase the Property at any sale.
15.2.3 Trustee's Deed. Trustee shall deliver
to the purchaser Trustee's deed conveying the Property so sold
without any covenant or warranty, expressed or implied. The
recitals in the Trustee's deed shall be prima facie evidence of
the truth of the statements made therein. Trustee shall apply
the proceeds of the sale in the following order: (a) to all
reasonable costs and expenses of the sale, including, but not
limited to, reasonable Trustee and attorney fees and costs of
title evidence; (b) to all sums secured by the Prior Lien; (c) to
all sums secured by this Trust Deed; and (d) the excess (if any)
to the person or persons legally entitled thereto.
15.2.4 Other Remedies. Beneficiary may
exercise any other rights or remedies available to Beneficiary
under this Trust Deed, the Note, or any other loan document or
agreement between Grantor and Beneficiary, or otherwise allowed
under applicable law.
15.2.5 Cumulative Remedies. All remedies under
this Trust Deed are cumulative and not exclusive. Any election to
pursue one remedy shall not preclude the exercise of any other
remedy. An election by Beneficiary to cure shall not constitute a
waiver of the default or of any of the remedies provided in this
Trust Deed. No delay or omission in exercising any right or
remedy shall impair the full exercise of that or any other right
or remedy or constitute a waiver of the default.
15.2.6 Costs and Expenses. Beneficiary shall be
entitled to collect all reasonable costs and expenses incurred in
pursuing the remedies provided in this Section 15, including,
but not limited to, reasonable costs and attorney fees, as
provided below in Section 21.5.
16. Grantor's Right to Reinstate. Notwithstanding
Beneficiary's acceleration of the Obligations secured by this
Trust Deed, Grantor shall have the right to reinstate this Trust
Deed if all payments are made to Beneficiary as required under
applicable Idaho law and Grantor takes such action as Beneficiary
may reasonably require to assure that the lien of this Trust
Deed, Beneficiary's interest in the Property and Grantor's
obligation to pay the sums secured by this Trust Deed shall
continue unimpaired. Upon such payment and cure by Grantor, this
Trust Deed and the Obligations secured by this Trust Deed shall
remain in full force and effect as if no acceleration had
occurred.
17. Assignment of Rents; Appointment of Receiver;
Beneficiary in Possession. As additional security under this
Trust Deed, Grantor hereby assigns to Beneficiary the rents of
the Property (if any), provided that Grantor shall, prior to
acceleration under Section 15 of this Trust Deed or abandonment
of the Property, have the right to collect and retain such rents
as they become due and payable. Upon acceleration under Section
15 of this Trust Deed or abandonment of the Property,
Beneficiary, in person, by agent or by judicially appointed
receiver, shall be entitled to enter upon, take possession of and
manage the Property and to collect the rents of the Property (if
any), including those past due. All rents collected by
Beneficiary or the receiver shall be applied first to payment of
the costs of management of the Property and collection of rents,
including but not limited to, receiver fees, premiums on
receiver's bonds and reasonable attorney fees and costs, and to
the sums secured by this Trust Deed. Beneficiary and the
receiver shall be liable to account only for those rents actually
received.
18. Rights of Prior Lienholder. The rights of Beneficiary
with respect to insurance and condemnation proceeds as provided
in this Trust Deed, and all other rights granted under this Trust
Deed that have also been granted to the Prior Lienholder, shall
be subject to the rights of the Prior Lienholder. Grantor hereby
authorizes the Prior Lienholder, on satisfaction of the
indebtedness secured by the Prior Lien, to remit all remaining
insurance or condemnation proceeds and all other sums held by the
Prior Lienholder to Beneficiary to be applied in accordance with
this Trust Deed.
19. Reconveyance. Upon payment of all sums secured by this
Trust Deed, Beneficiary shall request Trustee to reconvey the
Property and shall surrender this Trust Deed and all notes
evidencing indebtedness secured by this Trust Deed to Trustee.
Trustee shall reconvey the Property without warranty and without
charge to the person or persons legally entitled thereto. Such
person or persons shall pay all costs of recordation, if any.
20. Substitute Trustee. In accordance with applicable law,
Beneficiary may from time to time remove Trustee and appoint a
successor trustee. Without conveyance of the Property, the
successor trustee shall succeed to all the title, power and
duties conferred upon Trustee in this Trust Deed and by
applicable law.
21. Miscellaneous.
21.1 Notices. Except for any notice required under
applicable law to be given in another manner, (a) any notice to
Grantor provided for in this Trust Deed shall be given by
certified mail, return receipt requested, first class postage
prepaid, to Grantor's address stated on the first page of this
Trust Deed, or to such other address that Grantor may designate
by notice to Beneficiary as provided in this Trust Deed, and
(b) any notice to Beneficiary shall be given by certified mail,
return receipt requested, first class postage prepaid, to
Beneficiary's address stated on the first page of this Trust Deed
or to such other address as Beneficiary may designate by notice
to Grantor as provided in this Trust Deed. Any notice provided
for in this Trust Deed shall be deemed to have been given to
Grantor or Beneficiary when deposited in the United States mail.
21.2 Governing Law. The provisions of this Trust Deed
shall be governed by and construed in accordance with the laws of
the state of Idaho.
21.3 Grantor's Copy. Grantor shall be furnished a
conformed copy of the Note and of this Trust Deed at the time of
execution or after recordation.
21.4 Successors and Assigns Bound; Captions. The
covenants and agreements contained in this Trust Deed shall bind,
and the rights under this Trust Deed shall inure to, the
respective successors and assigns of Beneficiary and Grantor.
The captions and headings of the sections of this Trust Deed are
for convenience only and are not to be used to interpret or
define the provisions of this Trust Deed.
21.5 Attorney Fees. If Beneficiary refers any of the
Obligations to an attorney for collection or seeks legal advice
following a default; if Beneficiary is the prevailing party in
any litigation instituted in connection with any of the
Obligations; or if Beneficiary or any other person initiates any
judicial or nonjudicial action, suit, or proceeding in connection
with any of the Obligations or the Property (including but not
limited to proceedings under federal bankruptcy law, eminent
domain, under probate proceedings, or in connection with any
state or federal tax lien), and an attorney is employed by
Beneficiary to (1) appear in any such action, suit, or
proceeding, or (2) reclaim, seek relief from a judicial or
statutory stay, sequester, protect, preserve, or enforce
Beneficiary's interests, then in any such event Grantor shall pay
reasonable attorney fees, costs, and expenses incurred by
Beneficiary or its attorney in connection with the above-
mentioned events or any appeals related to such events, including
but not limited to costs incurred in searching records, the cost
of title reports, and the cost of surveyors' reports. Such
amounts shall be secured by this Trust Deed and, if not paid upon
demand, shall bear interest at the rate specified in Section 8.2.
21.6 Standard for Discretion. In the event this Trust
Deed is silent on the standard for any consent, approval,
determination, or similar discretionary action, the standard
shall be sole and unfettered discretion as opposed to any
standard of good faith, fairness, or reasonableness.
21.7 Conflicts. In the event that the terms and
conditions of this Trust Deed conflict in any way with the terms
and conditions of the Prior Lien, the terms and conditions of the
Prior Lien shall control.
21.8 Time is of the Essence. Time is of the essence
with respect to all covenants and obligations of Grantor under
this Trust Deed.
21.9 Commercial Property. Grantor covenants and
warrants that the Property are used by Grantor exclusively for
business and commercial purposes.
IN WITNESS WHEREOF, Grantor has executed this Trust Deed as
of the day and year first above written.
ELMER'S RESTAURANTS, INC.
an Oregon corporation
By: __/s/Bruce N. Davis____
Name: Bruce N. Davis
Title: President
STATE OF OREGON )
) ss.
County of )
This Trust Deed was acknowledged before me on February
_____, 1999, by __________ ________________________, as
_________________________ of Elmer's Restaurants, Inc.
______________________________
NOTARY PUBLIC FOR OREGON
EXHIBIT A
LEGAL DESCRIPTION OF THE PROPERTY
LOT 1 IN BLOCK 1 AND LOT 1 IN BLOCK 2 OF CAPITOL PARK, ACCORDING
TO THE OFFICIAL PLAT THEREOF, FILED IN BOOK 53 OF PLATS AT PAGES
4728-4729, RECORDS OF ADA COUNTY, IDAHO.
14 - SECOND TRUST DEED (Gresham, Oregon) 0199299.01
After recording, please return to: (For Recorder's Use Only)
Kenneth S. Antell
Dunn, Carney, Allen, Higgins & Tongue
851 S.W. Sixth Avenue, Suite 1500
Portland, OR 97204-1357
Until a change is requested, all
tax statements should be mailed to:
No change
=================================================================
=
SECOND TRUST DEED
Date: February ____, 1999
Among: ELMER'S RESTAURANTS, INC. ("Grantor")
an Oregon corporation
11802 S.E. Stark Street
P.O. Box 16938
Portland, OR 97292-0938
and: EAGLE'S VIEW MANAGEMENT COMPANY, INC. ("Beneficiary")
an Oregon corporation
P.O. Box 10638
Eugene, OR 97440
and: FIDELITY NATIONAL TITLE COMPANY OF OREGON ("Trustee")
900 S.W. Fifth Avenue
Portland, OR 97204
Grantor, in consideration of the indebtedness recited and
the trust created in this Trust Deed, irrevocably grants and
conveys to Trustee, in trust, with power of sale, the real
property commonly known as 155 N.E. Burnside, located in Gresham,
Multnomah County, Oregon, which is more particularly described in
attached Exhibit A, which is incorporated herein by this
reference (the "Land");
TOGETHER with all the improvements now or hereafter erected
on the Land, and all easements, rights, appurtenances, rents
(subject however to the rights and authorities given in this
Trust Deed to Beneficiary to collect and apply such rents),
royalties, mineral, oil and gas rights and profits, water, water
rights, and water stock, and all fixtures now or hereafter
attached to the Land, all of which, including replacements and
additions thereto, shall be deemed to be and remain a part of the
property covered by this Trust Deed; and all of the foregoing,
together with the Land are referred to in this Trust Deed as the
"Property;"
TO SECURE to Beneficiary (a) the repayment of the
indebtedness evidenced by a Promissory Note dated August 25,
1998, and amended by that certain First Amendment to Promissory
Note of even date herewith (the "Note"), originally given by CBW,
Inc., an Oregon corporation which merged with and into Grantor,
with an original principal balance of $4 million and a present
principal balance of $1.25 million, with interest thereon as
provided in the Note, and with the balance of the indebtedness of
the Note, if not sooner paid, due and payable on February 25,
2004, and all renewals and/or extensions of the Note; (b) the
repayment of any and all other indebtedness owing from Grantor to
Beneficiary at any time hereafter; (c) the repayment of all other
sums, with interest thereon, advanced in accordance with the
terms of this Trust Deed to protect the security of this Trust
Deed; and (d) the performance of the covenants and agreements of
Grantor contained in this Trust Deed (the "Obligations").
GRANTOR COVENANTS that (a) Grantor is lawfully seized of the
estate conveyed by this Trust Deed and has the right to grant and
convey the Property; (b) the Property is unencumbered, except for
the first priority trust deed granted in favor of Wells Fargo
Bank (the "Prior Lienholder") to secure a loan with an original
principal balance not to exceed $7,000,000.00 (the "Prior Lien")
and such other exceptions that are reasonably approved in writing
by Beneficiary (the "Permitted Exceptions"); and (c) Grantor will
warrant and defend the title to the Property against all claims
and demands, subject to the Prior Lien, the lien of this Trust
Deed, and the Permitted Exceptions.
Grantor and Beneficiary covenant and agree as follows:
1. Payment of Principal and Interest. Grantor shall
promptly pay when due the principal and interest on the
indebtedness evidenced by the Note, prepayment and other charges
as provided in the Note and this Trust Deed, and the principal of
and interest on any other advances secured by this Trust Deed.
2. Application of Payments on the Note. All payments
received by Beneficiary under the Note and Section 1 above shall
be applied by Beneficiary as set forth in the Note.
3. Taxes, Assessments and Liens. Grantor shall pay all
taxes, assessments, and other charges, fines and impositions
attributable to the Property which may attain a priority over
this Trust Deed, and leasehold payments or ground rents (if any)
by Grantor making payments, when due, directly to the payee
thereof. Grantor shall promptly furnish to Beneficiary all
notices of amounts due under this Section 3, if requested by
Beneficiary, and Grantor shall promptly furnish to Beneficiary
receipts evidencing such payments. Grantor may pay taxes and
assessments pursuant to the assessor's installment schedule.
Grantor shall promptly discharge any lien which has priority over
this Trust Deed, except the Prior Lien; provided, that Grantor
shall not be required to discharge any such lien so long as
Grantor shall agree in writing to the payment of the obligation
secured by such lien in a manner acceptable to Beneficiary, in
Beneficiary's sole and unfettered discretion, or shall in good
faith contest such lien by, or defend enforcement of such lien
in, legal proceedings that operate to prevent the enforcement of
the lien or forfeiture of the Property or any part thereof.
4. Insurance.
4.1 Requirement to Maintain Property Insurance.
Grantor shall obtain and maintain at all times "all risk"
property insurance, together with endorsements for replacement
cost, inflation adjustment, and all other endorsements as
Beneficiary may from time to time require, all in amounts not
less than the full replacement value of all improvements now
existing or hereafter erected on the Property, without reduction
for co-insurance.
4.2 Requirement to Maintain Liability Insurance.
Grantor shall obtain and maintain at all times comprehensive
general liability insurance with limits, coverages, and risks
insured that are acceptable to Beneficiary, and in no event less
than $2,000,000 combined single limit coverage.
4.3 Insurance Carrier; Premium Payments. The
insurance carrier or carriers providing the insurance shall be
chosen by Grantor subject to approval by Beneficiary. All
premiums on insurance policies shall be paid by Grantor making
payment, when due, directly to the insurance carrier.
4.4 Form of Policies; Proof of Loss. All insurance
policies and renewals thereof shall be in forms acceptable to
Beneficiary and shall include a standard mortgage clause in favor
of and in a form acceptable to Beneficiary. Subject to the
rights of the Prior Lienholder, Beneficiary shall have the right
to hold the policies and renewals thereof, and Grantor shall
promptly furnish to Beneficiary all renewal notices and all
receipts of paid premiums. In the event of loss, Grantor shall
give prompt notice to the insurance carrier and Beneficiary.
Beneficiary may make proof of loss if not made promptly by
Grantor.
4.5 Proceeds. Unless Beneficiary and Grantor
otherwise agree in writing, insurance proceeds shall be applied
to restoration of the Property damaged, if restoration is
economically feasible based upon fixed bids for restoration from
the insurance proceeds, but if restoration is not economically
feasible the insurance proceeds shall be applied to the sums
secured by this Trust Deed, subject to the rights of the Prior
Lienholder. If the Property is abandoned by Grantor, or if
Grantor fails to respond to Beneficiary within 30 days from the
date notice is mailed by Beneficiary to Grantor indicating that
the insurance carrier offers to settle a claim for insurance
benefits, Beneficiary is authorized to collect and apply the
insurance proceeds at Beneficiary's option to restoration of the
Property or to the sums secured by this Trust Deed.
4.6 No Postponement of Payments; Right to Proceeds.
Unless Beneficiary and Grantor otherwise agree in writing, any
such application of proceeds to principal shall not extend or
postpone the due date of any payments referred to in Section 1 of
this Trust Deed or change the amount of such payments. If under
Section 15 of this Trust Deed the Property is acquired by
Beneficiary, all right, title and interest of Grantor in and to
any insurance policies and in and to the proceeds thereof
resulting from damage to the Property prior to the sale or
acquisition shall pass to Beneficiary to the extent of the sums
secured by this Trust Deed immediately prior to such sale or
acquisition.
4.7 Insurance Warning.
Unless Grantor provides Beneficiary with evidence of
the insurance coverage required by this Trust Deed, Beneficiary
may purchase insurance at Grantor's expense to protect
Beneficiary's interest. This insurance may, but need not, also
protect Grantor's interest. If the Property becomes damaged, the
coverage Beneficiary purchases may not pay any claim Grantor
makes or any claim made against Grantor. Grantor may later cancel
this coverage by providing evidence that Grantor has obtained
property coverage elsewhere.
Grantor is responsible for the cost of any insurance
purchased by Beneficiary. The cost of this insurance may be added
to Grantor's loan balance. If the cost is added to Grantor's loan
balance, the interest rate on the underlying loan will apply to
this added amount. The effective date of coverage may be the date
Grantor's prior coverage lapsed or the date Grantor failed to
provide proof of coverage.
The coverage Beneficiary purchases may be considerably
more expensive than insurance Grantor can obtain on its own and
may not satisfy any need for property damage coverage or any
mandatory liability insurance requirements imposed by applicable
law.
5. Compliance with Laws. Grantor represents, warrants, and
covenants that: (a) the Property, if developed, has been
developed, and all improvements located on the Property, if any,
have been constructed and maintained, in full compliance with all
applicable laws, statutes, ordinances, regulations, and codes of
all federal, state, and local governments (collectively "Laws"),
and all covenants, conditions, easements, and restrictions
affecting the Property (collectively "Covenants"); and (b)
Grantor and its operations upon the Property currently comply,
and will hereafter comply in all material respects with all
applicable Laws and Covenants.
6. Environmental Covenants, Warranties and Compliance.
6.1 Environmental Law Definition. For purposes of
this section, "Environmental Law" means any federal, state, or
local law, statute, ordinance, or regulation pertaining to
Hazardous Substances, health, industrial hygiene, or
environmental conditions, including without limitation the
Comprehensive Environmental Response, Compensation, and Liability
Act of 1980 ("CERCLA"), as amended, 42 USC 9601-9675, and the
Resource Conservation and Recovery Act of 1976 ("RCRA"), as
amended, 42 USC 6901-6992.
6.2 Hazardous Substance Definition. For the purposes
of this section, "Hazardous Substance" includes, without
limitation, any material, substance, or waste that is or becomes
regulated or that is or becomes classified as hazardous,
dangerous, or toxic under any federal, state, or local statute,
ordinance, rule, regulation, or law.
6.3 No Generation or Use. Grantor will not use,
generate, manufacture, produce, store, release, discharge, or
dispose of on, under or about the Property or the Property's
groundwater, or transport to or from the Property, any Hazardous
Substance and will not permit any other person to do so, except
for such Hazardous Substances that may be used in the ordinary
course of Grantor's business and in compliance with all
Environmental Laws, including but not limited to those relating
to licensure, notice, and recordkeeping.
6.4 Compliance with Law. Grantor will keep and
maintain the Property in compliance with, and shall not cause or
permit all or any portion of the Property, including groundwater,
to be in violation of any Environmental Law.
6.5 Indemnification. Grantor shall hold Beneficiary,
its directors, officers, employees, agents, successors, and
assigns, harmless from, indemnify them for, and defend them
against any and all losses, damages, liens, costs, expenses, and
liabilities directly or indirectly arising out of or attributable
to any violation of any Environmental Law, any breach of
Grantor's warranties in this Section 6, or the use, generation,
manufacture, production, storage, release, threatened release,
discharge, disposal, or presence of a Hazardous Substance on,
under, or about the Property, including without limitation the
costs of any required repair, cleanup, containment, or
detoxification of the Property, the preparation and
implementation of any closure, remedial or other required plans,
attorney fees and costs (including but not limited to those
incurred in any proceeding and in any review or appeal), fees,
penalties, and fines.
6.6 Representations. Grantor represents and warrants
to Beneficiary that: (a) neither the Property nor Grantor is in
violation of or subject to any existing, pending, or threatened
investigation by any governmental authority under any
Environmental Law; (b) Grantor has not and is not required by any
Environmental Law to obtain any permit or license other than
those it has obtained to construct or use the improvements
located on the Property; and (c) to the best of Grantor's
knowledge, no Hazardous Substance has ever been used, generated,
manufactured, produced, stored, released, discharged, or disposed
of on, under, or about the Property in violation of any
Environmental Law.
6.7 Survival. All representations, warranties, and
covenants in this Section 6 shall survive the satisfaction of the
Obligations, the reconveyance of the Property, or the foreclosure
of this Trust Deed by any means.
7. Preservation and Maintenance of Property. Grantor
shall keep the Property in good repair and shall not commit waste
or permit impairment or deterioration of the Property, and shall
comply with the provisions of any lease if this Trust Deed is on
a leasehold.
8. Protection of Beneficiary's Security.
8.1 Appearances; Disbursements. If Grantor fails to
perform the covenants and agreements contained in this Trust
Deed, or, notwithstanding Section 3 of this Trust Deed, if any
action or proceeding is commenced which materially affects
Beneficiary's interest in the Property, including, but not
limited to, construction lien foreclosure, eminent domain,
insolvency, code enforcement, or arrangements or proceedings
involving a bankrupt or decedent, then Beneficiary at
Beneficiary's option, may make such appearances, disburse such
sums and take such action as is necessary to protect
Beneficiary's interest, including, but not limited to,
disbursement of reasonable costs and attorney fees, and entry
upon the Property to make repairs.
8.2 Interest on Disbursements. Any amounts disbursed
by Beneficiary pursuant to this Section 8, with interest thereon,
shall become additional indebtedness of Grantor secured by this
Trust Deed. Unless Grantor and Beneficiary agree to other terms
of payment, such amounts shall be payable upon notice from
Beneficiary to Grantor requesting payment thereof, and shall bear
interest from the date of disbursement at the rate of 15 percent
per annum, unless payment of interest at such rate would be
contrary to applicable law, in which event such amounts shall
bear interest at the highest rate permissible under applicable
law. Nothing contained in this Section 8 shall require
Beneficiary to incur any expense or take any action under this
Trust Deed.
9. Inspection. Beneficiary may make or cause to be made
reasonable entries upon and inspections of the Property during
business hours after prior written notice.
10. Condemnation.
10.1 Assignment of Proceeds. The proceeds of any award
or claim for damages, direct or consequential, in connection with
condemnation or other taking of the Property, or part thereof, or
for conveyance in lieu of condemnation, are hereby assigned and
shall be paid to Beneficiary, subject to the rights of the holder
of the Prior Lienholder.
10.2 Total and Partial Taking. In the event of a total
taking of the Property, the proceeds shall be applied to the sums
secured by the Prior Lien and this Trust Deed, with the excess,
if any, paid to Grantor. In the event of a partial taking of the
Property, unless Grantor and Beneficiary otherwise agree in
writing, there shall be applied to the sums secured by this Trust
Deed such proportion of the proceeds as is equal to that
proportion which the amount of the sums secured by this Trust
Deed immediately prior to the date of taking bears to the fair
market value of the Property immediately prior to the date of
taking with the balance of the proceeds paid to Grantor.
10.3 Property is Abandoned; Failure to Respond. If the
Property is abandoned by Grantor, or if, after notice by
Beneficiary to Grantor that the condemnor offers to make an award
or settle a claim for damages, Grantor fails to respond to
Beneficiary within 30 days after the date such notice is mailed,
Beneficiary is authorized to collect and apply the proceeds, at
Beneficiary's option, either to restoration or repair of the
Property or to the sums secured by this Trust Deed.
10.4 No Postponement of Payments. Unless Beneficiary
and Grantor otherwise agree in writing, any such application of
proceeds to principal shall not extend or postpone the due date
of any payments referred to in Section 1 of this Trust Deed or
change the amount of such payments.
11. Grantor Not Released. Extension of the time for
payment or modification of amortization of the sums secured by
this Trust Deed granted by Beneficiary to any successor in
interest of Grantor shall not operate to release, in any manner,
the liability of the original Grantor and Grantor's successors in
interest. Beneficiary shall not be required to commence
proceedings against such successor, refuse to extend time for
payment, or otherwise modify amortization of the sums secured by
this Trust Deed by reason of any demand made by the original
Grantor or Grantor's successors in interest.
12. Forbearance by Beneficiary Not a Waiver. Any
forbearance by Beneficiary in exercising any right or remedy
under this Trust Deed, or otherwise afforded by applicable law,
shall not be a waiver of or preclude the exercise of any such
right or remedy. The procurement of insurance or the payment of
taxes or other liens or charges by Beneficiary shall not be a
waiver of Beneficiary's right to accelerate the maturity of the
indebtedness secured by this Trust Deed.
13. Remedies Cumulative. All remedies provided in this
Trust Deed are distinct and cumulative to any other right or
remedy under this Trust Deed or afforded by law or equity, and
may be exercised concurrently, independently or successively.
14. Due on Sale. If all or any part of the Property or any
interest in the Property is sold, transferred, assigned,
conveyed, pledged, hypothecated, or given, either voluntarily or
involuntarily, or by operation of law, without Beneficiary's
prior written consent, or in the event of a default with respect
to the Prior Lien, or if any lien or encumbrance subordinate to
the lien of this Trust Deed is placed or allowed to remain on the
Property which adversely affects the lien of this Trust Deed,
Beneficiary may, at Beneficiary's option, declare all the sums
secured by this Trust Deed to be immediately due and payable, and
seek any and all other remedies available under this Trust Deed,
the Note or under applicable law.
15. Default and Remedies.
15.1 Events of Default. Each of the following shall
constitute an event of default under this Trust Deed:
15.1.1 Nonpayment. Failure of Grantor to pay
any of the Obligations on or before the due date and within any
applicable cure period.
15.1.2 Breach of Other Covenants. Failure of
Grantor to perform or abide by any other covenant included in the
Obligations, including without limitation those covenants in the
Note, in this Trust Deed or in any other loan document or
agreement between Grantor and Beneficiary and the failure to cure
any such nonperformance within any applicable cure period.
15.1.3 Other Default. The occurrence of any
other event of default under the Note or any of the other
Obligations.
15.1.4 Prior Lien. The occurrence of any
default under the terms and conditions of the Prior Lien.
15.2 Remedies.
15.2.1 Acceleration. Upon Grantor's breach of
any covenant or agreement of Grantor in this Trust Deed,
including the covenants to pay when due any sums secured by this
Trust Deed, Beneficiary at Beneficiary's option may declare all
of the sums secured by this Trust Deed to be immediately due and
payable without further demand and may invoke the power of sale
and any other remedies permitted by applicable law.
15.2.2 Sale by Trustee. If Beneficiary invokes
the power of sale, Beneficiary shall execute or cause Trustee to
execute a written notice of the occurrence of an event of default
and of Beneficiary's election to cause the Property to be sold,
and shall cause such notice to be recorded in each county in
which the Property or some part of the Property is located.
Beneficiary or Trustee shall give notice of sale in the manner
prescribed by applicable law to Grantor and to the other persons
prescribed by applicable law. After the lapse of such time as
may be required by applicable law, Trustee, without demand on
Grantor, shall sell the Property at public auction to the highest
bidder at the time and place and under the terms designated in
the notice of sale in one or more parcels and in such order as
Trustee may determine. Trustee may postpone sale of all or any
parcel of the Property by public announcement at the time and
place of any previously scheduled sale. Beneficiary or
Beneficiary's designee may purchase the Property at any sale.
15.2.3 Trustee's Deed. Trustee shall deliver
to the purchaser Trustee's deed conveying the Property so sold
without any covenant or warranty, expressed or implied. The
recitals in the Trustee's deed shall be prima facie evidence of
the truth of the statements made therein. Trustee shall apply
the proceeds of the sale in the following order: (a) to all
reasonable costs and expenses of the sale, including, but not
limited to, reasonable Trustee and attorney fees and costs of
title evidence; (b) to all sums secured by the Prior Lien; (c) to
all sums secured by this Trust Deed; and (d) the excess (if any)
to the person or persons legally entitled thereto.
15.2.4 Other Remedies. Beneficiary may
exercise any other rights or remedies available to Beneficiary
under this Trust Deed, the Note, or any other loan document or
agreement between Grantor and Beneficiary, or otherwise allowed
under applicable law.
15.2.5 Cumulative Remedies. All remedies under
this Trust Deed are cumulative and not exclusive. Any election to
pursue one remedy shall not preclude the exercise of any other
remedy. An election by Beneficiary to cure shall not constitute a
waiver of the default or of any of the remedies provided in this
Trust Deed. No delay or omission in exercising any right or
remedy shall impair the full exercise of that or any other right
or remedy or constitute a waiver of the default.
15.2.6 Costs and Expenses. Beneficiary shall be
entitled to collect all reasonable costs and expenses incurred in
pursuing the remedies provided in this Section 15, including, but
not limited to, reasonable costs and attorney fees, as provided
below in Section 21.5.
16. Grantor's Right to Reinstate. Notwithstanding
Beneficiary's acceleration of the Obligations secured by this
Trust Deed, Grantor shall have the right to reinstate this Trust
Deed if all payments are made to Beneficiary as required under
applicable Oregon law and Grantor takes such action as
Beneficiary may reasonably require to assure that the lien of
this Trust Deed, Beneficiary's interest in the Property and
Grantor's obligation to pay the sums secured by this Trust Deed
shall continue unimpaired. Upon such payment and cure by
Grantor, this Trust Deed and the Obligations secured by this
Trust Deed shall remain in full force and effect as if no
acceleration had occurred.
17. Assignment of Rents; Appointment of Receiver;
Beneficiary in Possession. As additional security under this
Trust Deed, Grantor hereby assigns to Beneficiary the rents of
the Property (if any), provided that Grantor shall, prior to
acceleration under Section 15 of this Trust Deed or abandonment
of the Property, have the right to collect and retain such rents
as they become due and payable. Upon acceleration under Section
15 of this Trust Deed or abandonment of the Property,
Beneficiary, in person, by agent or by judicially appointed
receiver, shall be entitled to enter upon, take possession of and
manage the Property and to collect the rents of the Property (if
any), including those past due. All rents collected by
Beneficiary or the receiver shall be applied first to payment of
the costs of management of the Property and collection of rents,
including but not limited to, receiver fees, premiums on
receiver's bonds and reasonable attorney fees and costs, and to
the sums secured by this Trust Deed. Beneficiary and the
receiver shall be liable to account only for those rents actually
received.
18. Rights of Prior Lienholder. The rights of Beneficiary
with respect to insurance and condemnation proceeds as provided
in this Trust Deed, and all other rights granted under this Trust
Deed that have also been granted to the Prior Lienholder, shall
be subject to the rights of the Prior Lienholder. Grantor hereby
authorizes the Prior Lienholder, on satisfaction of the
indebtedness secured by the Prior Lien, to remit all remaining
insurance or condemnation proceeds and all other sums held by the
Prior Lienholder to Beneficiary to be applied in accordance with
this Trust Deed.
19. Reconveyance. Upon payment of all sums secured by this
Trust Deed, Beneficiary shall request Trustee to reconvey the
Property and shall surrender this Trust Deed and all notes
evidencing indebtedness secured by this Trust Deed to Trustee.
Trustee shall reconvey the Property without warranty and without
charge to the person or persons legally entitled thereto. Such
person or persons shall pay all costs of recordation, if any.
20. Substitute Trustee. In accordance with applicable law,
Beneficiary may from time to time remove Trustee and appoint a
successor trustee. Without conveyance of the Property, the
successor trustee shall succeed to all the title, power and
duties conferred upon Trustee in this Trust Deed and by
applicable law.
21. Miscellaneous.
21.1 Notices. Except for any notice required under
applicable law to be given in another manner, (a) any notice to
Grantor provided for in this Trust Deed shall be given by
certified mail, return receipt requested, first class postage
prepaid, to Grantor's address stated on the first page of this
Trust Deed, or to such other address that Grantor may designate
by notice to Beneficiary as provided in this Trust Deed, and
(b) any notice to Beneficiary shall be given by certified mail,
return receipt requested, first class postage prepaid, to
Beneficiary's address stated on the first page of this Trust Deed
or to such other address as Beneficiary may designate by notice
to Grantor as provided in this Trust Deed. Any notice provided
for in this Trust Deed shall be deemed to have been given to
Grantor or Beneficiary when deposited in the United States mail.
21.2 Governing Law. The provisions of this Trust Deed
shall be governed by and construed in accordance with the laws of
the state of Oregon.
21.3 Grantor's Copy. Grantor shall be furnished a
conformed copy of the Note and of this Trust Deed at the time of
execution or after recordation.
21.4 Successors and Assigns Bound; Captions. The
covenants and agreements contained in this Trust Deed shall bind,
and the rights under this Trust Deed shall inure to, the
respective successors and assigns of Beneficiary and Grantor.
The captions and headings of the sections of this Trust Deed are
for convenience only and are not to be used to interpret or
define the provisions of this Trust Deed.
21.5 Attorney Fees. If Beneficiary refers any of the
Obligations to an attorney for collection or seeks legal advice
following a default; if Beneficiary is the prevailing party in
any litigation instituted in connection with any of the
Obligations; or if Beneficiary or any other person initiates any
judicial or nonjudicial action, suit, or proceeding in connection
with any of the Obligations or the Property (including but not
limited to proceedings under federal bankruptcy law, eminent
domain, under probate proceedings, or in connection with any
state or federal tax lien), and an attorney is employed by
Beneficiary to (1) appear in any such action, suit, or
proceeding, or (2) reclaim, seek relief from a judicial or
statutory stay, sequester, protect, preserve, or enforce
Beneficiary's interests, then in any such event Grantor shall pay
reasonable attorney fees, costs, and expenses incurred by
Beneficiary or its attorney in connection with the above-
mentioned events or any appeals related to such events, including
but not limited to costs incurred in searching records, the cost
of title reports, and the cost of surveyors' reports. Such
amounts shall be secured by this Trust Deed and, if not paid upon
demand, shall bear interest at the rate specified in Section 8.2.
21.6 Standard for Discretion. In the event this Trust
Deed is silent on the standard for any consent, approval,
determination, or similar discretionary action, the standard
shall be sole and unfettered discretion as opposed to any
standard of good faith, fairness, or reasonableness.
21.7 Conflicts. In the event that the terms and
conditions of this Trust Deed conflict in any way with the terms
and conditions of the Prior Lien, the terms and conditions of the
Prior Lien shall control.
21.8 Time is of the Essence. Time is of the essence
with respect to all covenants and obligations of Grantor under
this Trust Deed.
21.9 Commercial Property. Grantor covenants and
warrants that the Property are used by Grantor exclusively for
business and commercial purposes.
21.10 ORS 93.040 Warning. THIS INSTRUMENT WILL NOT
ALLOW USE OF THE PROPERTY DESCRIBED IN THIS INSTRUMENT IN
VIOLATION OF APPLICABLE LAND USE LAWS AND REGULATIONS. BEFORE
SIGNING OR ACCEPTING THIS INSTRUMENT, THE PERSON ACQUIRING FEE
TITLE TO THE PROPERTY SHOULD CHECK WITH THE APPROPRIATE CITY OR
COUNTY PLANNING DEPARTMENT TO VERIFY APPROVED USES AND TO
DETERMINE ANY LIMITS ON LAWSUITS AGAINST FARMING OR FOREST
PRACTICES AS DEFINED IN ORS 30.930.
IN WITNESS WHEREOF, Grantor has executed this Trust Deed as
of the day and year first above written.
ELMER'S RESTAURANTS, INC.
an Oregon corporation
By: ___/s/ Bruce N. Davis___
Name: Bruce N. Davis
Title: President
STATE OF OREGON )
) ss.
County of )
This Trust Deed was acknowledged before me on February
_____, 1999, by __________ ________________________, as
_________________________ of Elmer's Restaurants, Inc.
________________________
NOTARY PUBLIC FOR OREGON
EXHIBIT A
LEGAL DESCRIPTION OF THE PROPERTY
[Description Omitted]
13 - SECOND TRUST DEED 0199300.01
When recorded return to: (For Recorder's Use Only)
Kenneth S. Antell, Esq.
Dunn, Carney, Allen, Higgins & Tongue
851 S.W. Sixth Avenue, Suite 1500
Portland, OR 97204-1357
=================================================================
=
SECOND TRUST DEED
Date: February ____, 1999
Among: ELMER'S RESTAURANTS, INC. ("Grantor")
an Oregon corporation
11802 S.E. Stark Street
P.O. Box 16938
Portland, OR 97292-0938
and: EAGLE'S VIEW MANAGEMENT COMPANY, INC. ("Beneficiary")
an Oregon corporation
P.O. Box 10638
Eugene, OR 97440
and: CHICAGO TITLE INSURANCE COMPANY ("Trustee")
3030 Hoyt Avenue
Everett, WA 98201
Grantor, in consideration of the indebtedness recited and
the trust created in this Trust Deed, irrevocably grants and
conveys to Trustee, in trust, with power of sale, the real
property commonly known as 3411 184th Street S.W., located in
Lynnwood, Snohomish County, Washington, which is more
particularly described in attached Exhibit A, which is
incorporated herein by this reference (the "Land");
TOGETHER with all the improvements now or hereafter erected
on the Land, and all easements, rights, appurtenances, rents
(subject however to the rights and authorities given in this
Trust Deed to Beneficiary to collect and apply such rents),
royalties, mineral, oil and gas rights and profits, water, water
rights, and water stock, and all fixtures now or hereafter
attached to the Land, all of which, including replacements and
additions thereto, shall be deemed to be and remain a part of the
property covered by this Trust Deed; and all of the foregoing,
together with the Land are referred to in this Trust Deed as the
"Property;"
TO SECURE to Beneficiary (a) the repayment of the
indebtedness evidenced by a Promissory Note dated August 25,
1998, and amended by that certain First Amendment to Promissory
Note of even date herewith (the "Note"), originally given by CBW,
Inc., an Oregon corporation which merged with and into Grantor,
with an original principal balance of $4 million and a present
principal balance of $1.25 million, with interest thereon as
provided in the Note, and with the balance of the indebtedness of
the Note, if not sooner paid, due and payable on February 25,
2004, and all renewals and/or extensions of the Note; (b) the
repayment of any and all other indebtedness owing from Grantor to
Beneficiary at any time hereafter; (c) the repayment of all other
sums, with interest thereon, advanced in accordance with the
terms of this Trust Deed to protect the security of this Trust
Deed; and (d) the performance of the covenants and agreements of
Grantor contained in this Trust Deed (the "Obligations").
GRANTOR COVENANTS that (a) Grantor is lawfully seized of the
estate conveyed by this Trust Deed and has the right to grant and
convey the Property; (b) the Property is unencumbered, except for
the first priority trust deed granted in favor of Wells Fargo
Bank (the "Prior Lienholder") to secure a loan with a principal
balance not to exceed $7,000,000.00 (the "Prior Lien") and such
other exceptions that are reasonably approved in writing by
Beneficiary (the "Permitted Exceptions"); and (c) Grantor will
warrant and defend the title to the Property against all claims
and demands, subject to the Prior Lien, the lien of this Trust
Deed, and the Permitted Exceptions.
Grantor and Beneficiary covenant and agree as follows:
1. Payment of Principal and Interest. Grantor shall
promptly pay when due the principal and interest on the
indebtedness evidenced by the Note, prepayment and other charges
as provided in the Note and this Trust Deed, and the principal of
and interest on any other advances secured by this Trust Deed.
2. Application of Payments on the Note. All payments
received by Beneficiary under the Note and Section 1 above shall
be applied by Beneficiary as set forth in the Note.
3. Taxes, Assessments and Liens. Grantor shall pay all
taxes, assessments, and other charges, fines and impositions
attributable to the Property which may attain a priority over
this Trust Deed, and leasehold payments or ground rents (if any)
by Grantor making payments, when due, directly to the payee
thereof. Grantor shall promptly furnish to Beneficiary all
notices of amounts due under this Section 3, if requested by
Beneficiary, and Grantor shall promptly furnish to Beneficiary
receipts evidencing such payments. Grantor may pay taxes and
assessments pursuant to the assessor's installment schedule.
Grantor shall promptly discharge any lien which has priority over
this Trust Deed, except the Prior Lien; provided, that Grantor
shall not be required to discharge any such lien so long as
Grantor shall agree in writing to the payment of the obligation
secured by such lien in a manner acceptable to Beneficiary, in
Beneficiary's sole and unfettered discretion, or shall in good
faith contest such lien by, or defend enforcement of such lien
in, legal proceedings that operate to prevent the enforcement of
the lien or forfeiture of the Property or any part thereof.
4. Insurance.
4.1 Requirement to Maintain Property Insurance.
Grantor shall obtain and maintain at all times "all risk"
property insurance, together with endorsements for replacement
cost, inflation adjustment, and all other endorsements as
Beneficiary may from time to time require, all in amounts not
less than the full replacement value of all improvements now
existing or hereafter erected on the Property, without reduction
for co-insurance.
4.2 Requirement to Maintain Liability Insurance.
Grantor shall obtain and maintain at all times comprehensive
general liability insurance with limits, coverages, and risks
insured that are acceptable to Beneficiary, and in no event less
than $2,000,000 combined single limit coverage.
4.3 Insurance Carrier; Premium Payments. The
insurance carrier or carriers providing the insurance shall be
chosen by Grantor subject to approval by Beneficiary. All
premiums on insurance policies shall be paid by Grantor making
payment, when due, directly to the insurance carrier.
4.4 Form of Policies; Proof of Loss. All insurance
policies and renewals thereof shall be in forms acceptable to
Beneficiary and shall include a standard mortgage clause in favor
of and in a form acceptable to Beneficiary. Subject to the
rights of the Prior Lienholder, Beneficiary shall have the right
to hold the policies and renewals thereof, and Grantor shall
promptly furnish to Beneficiary all renewal notices and all
receipts of paid premiums. In the event of loss, Grantor shall
give prompt notice to the insurance carrier and Beneficiary.
Beneficiary may make proof of loss if not made promptly by
Grantor.
4.5 Proceeds. Unless Beneficiary and Grantor
otherwise agree in writing, insurance proceeds shall be applied
to restoration of the Property damaged, if restoration is
economically feasible based upon fixed bids for restoration from
the insurance proceeds, but if restoration is not economically
feasible the insurance proceeds shall be applied to the sums
secured by this Trust Deed, subject to the rights of the Prior
Lienholder. If the Property is abandoned by Grantor, or if
Grantor fails to respond to Beneficiary within 30 days from the
date notice is mailed by Beneficiary to Grantor indicating that
the insurance carrier offers to settle a claim for insurance
benefits, Beneficiary is authorized to collect and apply the
insurance proceeds at Beneficiary's option to restoration of the
Property or to the sums secured by this Trust Deed.
4.6 No Postponement of Payments; Right to Proceeds.
Unless Beneficiary and Grantor otherwise agree in writing, any
such application of proceeds to principal shall not extend or
postpone the due date of any payments referred to in Section 1 of
this Trust Deed or change the amount of such payments. If under
Section 15 of this Trust Deed the Property is acquired by
Beneficiary, all right, title and interest of Grantor in and to
any insurance policies and in and to the proceeds thereof
resulting from damage to the Property prior to the sale or
acquisition shall pass to Beneficiary to the extent of the sums
secured by this Trust Deed immediately prior to such sale or
acquisition.
5. Compliance with Laws. Grantor represents, warrants, and
covenants that: (a) the Property, if developed, has been
developed, and all improvements located on the Property, if any,
have been constructed and maintained, in full compliance with all
applicable laws, statutes, ordinances, regulations, and codes of
all federal, state, and local governments (collectively "Laws"),
and all covenants, conditions, easements, and restrictions
affecting the Property (collectively "Covenants"); and (b)
Grantor and its operations upon the Property currently comply,
and will hereafter comply in all material respects with all
applicable Laws and Covenants.
6. Environmental Covenants, Warranties and Compliance.
6.1 Environmental Law Definition. For purposes of
this section, "Environmental Law" means any federal, state, or
local law, statute, ordinance, or regulation pertaining to
Hazardous Substances, health, industrial hygiene, or
environmental conditions, including without limitation the
Comprehensive Environmental Response, Compensation, and Liability
Act of 1980 ("CERCLA"), as amended, 42 USC 9601-9675, and the
Resource Conservation and Recovery Act of 1976 ("RCRA"), as
amended, 42 USC 6901-6992.
6.2 Hazardous Substance Definition. For the purposes
of this section, "Hazardous Substance" includes, without
limitation, any material, substance, or waste that is or becomes
regulated or that is or becomes classified as hazardous,
dangerous, or toxic under any federal, state, or local statute,
ordinance, rule, regulation, or law.
6.3 No Generation or Use. Grantor will not use,
generate, manufacture, produce, store, release, discharge, or
dispose of on, under or about the Property or the Property's
groundwater, or transport to or from the Property, any Hazardous
Substance and will not permit any other person to do so, except
for such Hazardous Substances that may be used in the ordinary
course of Grantor's business and in compliance with all
Environmental Laws, including but not limited to those relating
to licensure, notice, and recordkeeping.
6.4 Compliance with Law. Grantor will keep and
maintain the Property in compliance with, and shall not cause or
permit all or any portion of the Property, including groundwater,
to be in violation of any Environmental Law.
6.5 Indemnification. Grantor shall hold Beneficiary,
its directors, officers, employees, agents, successors, and
assigns, harmless from, indemnify them for, and defend them
against any and all losses, damages, liens, costs, expenses, and
liabilities directly or indirectly arising out of or attributable
to any violation of any Environmental Law, any breach of
Grantor's warranties in this Section 6, or the use, generation,
manufacture, production, storage, release, threatened release,
discharge, disposal, or presence of a Hazardous Substance on,
under, or about the Property, including without limitation the
costs of any required repair, cleanup, containment, or
detoxification of the Property, the preparation and
implementation of any closure, remedial or other required plans,
attorney fees and costs (including but not limited to those
incurred in any proceeding and in any review or appeal), fees,
penalties, and fines.
6.6 Representations. Grantor represents and warrants
to Beneficiary that: (a) neither the Property nor Grantor is in
violation of or subject to any existing, pending, or threatened
investigation by any governmental authority under any
Environmental Law; (b) Grantor has not and is not required by any
Environmental Law to obtain any permit or license other than
those it has obtained to construct or use the improvements
located on the Property; and (c) to the best of Grantor's
knowledge, no Hazardous Substance has ever been used, generated,
manufactured, produced, stored, released, discharged, or disposed
of on, under, or about the Property in violation of any
Environmental Law.
6.7 Survival. All representations, warranties, and
covenants in this Section 6 shall survive the satisfaction of the
Obligations, the reconveyance of the Property, or the foreclosure
of this Trust Deed by any means.
7. Preservation and Maintenance of Property. Grantor
shall keep the Property in good repair and shall not commit waste
or permit impairment or deterioration of the Property, and shall
comply with the provisions of any lease if this Trust Deed is on
a leasehold.
8. Protection of Beneficiary's Security.
8.1 Appearances; Disbursements. If Grantor fails to
perform the covenants and agreements contained in this Trust
Deed, or, notwithstanding Section 3 of this Trust Deed, if any
action or proceeding is commenced which materially affects
Beneficiary's interest in the Property, including, but not
limited to, construction lien foreclosure, eminent domain,
insolvency, code enforcement, or arrangements or proceedings
involving a bankrupt or decedent, then Beneficiary at
Beneficiary's option, may make such appearances, disburse such
sums and take such action as is necessary to protect
Beneficiary's interest, including, but not limited to,
disbursement of reasonable costs and attorney fees, and entry
upon the Property to make repairs.
8.2 Interest on Disbursements. Any amounts disbursed
by Beneficiary pursuant to this Section 8, with interest thereon,
shall become additional indebtedness of Grantor secured by this
Trust Deed. Unless Grantor and Beneficiary agree to other terms
of payment, such amounts shall be payable upon notice from
Beneficiary to Grantor requesting payment thereof, and shall bear
interest from the date of disbursement at the rate of 15 percent
per annum, unless payment of interest at such rate would be
contrary to applicable law, in which event such amounts shall
bear interest at the highest rate permissible under applicable
law. Nothing contained in this Section 8 shall require
Beneficiary to incur any expense or take any action under this
Trust Deed.
9. Inspection. Beneficiary may make or cause to be made
reasonable entries upon and inspections of the Property during
business hours after prior written notice.
10. Condemnation.
10.1 Assignment of Proceeds. The proceeds of any award
or claim for damages, direct or consequential, in connection with
condemnation or other taking of the Property, or part thereof, or
for conveyance in lieu of condemnation, are hereby assigned and
shall be paid to Beneficiary, subject to the rights of the holder
of the Prior Lienholder.
10.2 Total and Partial Taking. In the event of a total
taking of the Property, the proceeds shall be applied to the sums
secured by the Prior Lien and this Trust Deed, with the excess,
if any, paid to Grantor. In the event of a partial taking of the
Property, unless Grantor and Beneficiary otherwise agree in
writing, there shall be applied to the sums secured by this Trust
Deed such proportion of the proceeds as is equal to that
proportion which the amount of the sums secured by this Trust
Deed immediately prior to the date of taking bears to the fair
market value of the Property immediately prior to the date of
taking with the balance of the proceeds paid to Grantor.
10.3 Property is Abandoned; Failure to Respond. If the
Property is abandoned by Grantor, or if, after notice by
Beneficiary to Grantor that the condemnor offers to make an award
or settle a claim for damages, Grantor fails to respond to
Beneficiary within 30 days after the date such notice is mailed,
Beneficiary is authorized to collect and apply the proceeds, at
Beneficiary's option, either to restoration or repair of the
Property or to the sums secured by this Trust Deed.
10.4 No Postponement of Payments. Unless Beneficiary
and Grantor otherwise agree in writing, any such application of
proceeds to principal shall not extend or postpone the due date
of any payments referred to in Section 1 of this Trust Deed or
change the amount of such payments.
11. Grantor Not Released. Extension of the time for
payment or modification of amortization of the sums secured by
this Trust Deed granted by Beneficiary to any successor in
interest of Grantor shall not operate to release, in any manner,
the liability of the original Grantor and Grantor's successors in
interest. Beneficiary shall not be required to commence
proceedings against such successor, refuse to extend time for
payment, or otherwise modify amortization of the sums secured by
this Trust Deed by reason of any demand made by the original
Grantor or Grantor's successors in interest.
12. Forbearance by Beneficiary Not a Waiver. Any
forbearance by Beneficiary in exercising any right or remedy
under this Trust Deed, or otherwise afforded by applicable law,
shall not be a waiver of or preclude the exercise of any such
right or remedy. The procurement of insurance or the payment of
taxes or other liens or charges by Beneficiary shall not be a
waiver of Beneficiary's right to accelerate the maturity of the
indebtedness secured by this Trust Deed.
13. Remedies Cumulative. All remedies provided in this
Trust Deed are distinct and cumulative to any other right or
remedy under this Trust Deed or afforded by law or equity, and
may be exercised concurrently, independently or successively.
14. Due on Sale. If all or any part of the Property or any
interest in the Property is sold, transferred, assigned,
conveyed, pledged, hypothecated, or given, either voluntarily or
involuntarily, or by operation of law, without Beneficiary's
prior written consent, or in the event of a default with respect
to the Prior Lien, or if any lien or encumbrance subordinate to
the lien of this Trust Deed is placed or allowed to remain on the
Property which adversely affects the lien of this Trust Deed,
Beneficiary may, at Beneficiary's option, declare all the sums
secured by this Trust Deed to be immediately due and payable, and
seek any and all other remedies available under this Trust Deed,
the Note or under applicable law.
15. Default and Remedies.
15.1 Events of Default. Each of the following shall
constitute an event of default under this Trust Deed:
15.1.1 Nonpayment. Failure of Grantor to pay
any of the Obligations on or before the due date and within any
applicable cure period.
15.1.2 Breach of Other Covenants. Failure of
Grantor to perform or abide by any other covenant included in the
Obligations, including without limitation those covenants in the
Note, in this Trust Deed or in any other loan document or
agreement between Grantor and Beneficiary and the failure to cure
any such nonperformance within any applicable cure period.
15.1.3 Other Default. The occurrence of any
other event of default under the Note or any of the other
Obligations.
15.1.4 Prior Lien. The occurrence of any
default under the terms and conditions of the Prior Lien.
15.2 Remedies.
15.2.1 Acceleration. Upon Grantor's breach of
any covenant or agreement of Grantor in this Trust Deed,
including the covenants to pay when due any sums secured by this
Trust Deed, Beneficiary at Beneficiary's option may declare all
of the sums secured by this Trust Deed to be immediately due and
payable without further demand and may invoke the power of sale
and any other remedies permitted by applicable law.
15.2.2 Sale by Trustee. If Beneficiary invokes
the power of sale, Beneficiary shall execute or cause Trustee to
execute a written notice of the occurrence of an event of default
and of Beneficiary's election to cause the Property to be sold,
and shall cause such notice to be recorded in each county in
which the Property or some part of the Property is located.
Beneficiary or Trustee shall give notice of sale in the manner
prescribed by applicable law to Grantor and to the other persons
prescribed by applicable law. After the lapse of such time as
may be required by applicable law, Trustee, without demand on
Grantor, shall sell the Property at public auction to the highest
bidder at the time and place and under the terms designated in
the notice of sale in one or more parcels and in such order as
Trustee may determine. Trustee may postpone sale of all or any
parcel of the Property by public announcement at the time and
place of any previously scheduled sale. Beneficiary or
Beneficiary's designee may purchase the Property at any sale.
15.2.3 Trustee's Deed. Trustee shall deliver
to the purchaser Trustee's deed conveying the Property so sold
without any covenant or warranty, expressed or implied. The
recitals in the Trustee's deed shall be prima facie evidence of
the truth of the statements made therein. Trustee shall apply
the proceeds of the sale in the following order: (a) to all
reasonable costs and expenses of the sale, including, but not
limited to, reasonable Trustee and attorney fees and costs of
title evidence; (b) to all sums secured by the Prior Lien; (c) to
all sums secured by this Trust Deed; and (d) the excess (if any)
to the person or persons legally entitled thereto.
15.2.4 Other Remedies. Beneficiary may
exercise any other rights or remedies available to Beneficiary
under this Trust Deed, the Note, or any other loan document or
agreement between Grantor and Beneficiary, or otherwise allowed
under applicable law.
15.2.5 Cumulative Remedies. All remedies under
this Trust Deed are cumulative and not exclusive. Any election to
pursue one remedy shall not preclude the exercise of any other
remedy. An election by Beneficiary to cure shall not constitute a
waiver of the default or of any of the remedies provided in this
Trust Deed. No delay or omission in exercising any right or
remedy shall impair the full exercise of that or any other right
or remedy or constitute a waiver of the default.
15.2.6 Costs and Expenses. Beneficiary shall be
entitled to collect all reasonable costs and expenses incurred in
pursuing the remedies provided in this Section 15, including, but
not limited to, reasonable costs and attorney fees, as provided
below in Section 21.5.
16. Grantor's Right to Reinstate. Notwithstanding
Beneficiary's acceleration of the Obligations secured by this
Trust Deed, Grantor shall have the right to reinstate this Trust
Deed if all payments are made to Beneficiary as required under
applicable Washington law and Grantor takes such action as
Beneficiary may reasonably require to assure that the lien of
this Trust Deed, Beneficiary's interest in the Property and
Grantor's obligation to pay the sums secured by this Trust Deed
shall continue unimpaired. Upon such payment and cure by
Grantor, this Trust Deed and the Obligations secured by this
Trust Deed shall remain in full force and effect as if no
acceleration had occurred.
17. Assignment of Rents; Appointment of Receiver;
Beneficiary in Possession. As additional security under this
Trust Deed, Grantor hereby assigns to Beneficiary the rents of
the Property (if any), provided that Grantor shall, prior to
acceleration under Section 15 of this Trust Deed or abandonment
of the Property, have the right to collect and retain such rents
as they become due and payable. Upon acceleration under Section
15 of this Trust Deed or abandonment of the Property,
Beneficiary, in person, by agent or by judicially appointed
receiver, shall be entitled to enter upon, take possession of and
manage the Property and to collect the rents of the Property (if
any), including those past due. All rents collected by
Beneficiary or the receiver shall be applied first to payment of
the costs of management of the Property and collection of rents,
including but not limited to, receiver fees, premiums on
receiver's bonds and reasonable attorney fees and costs, and to
the sums secured by this Trust Deed. Beneficiary and the
receiver shall be liable to account only for those rents actually
received.
18. Rights of Prior Lienholder. The rights of Beneficiary
with respect to insurance and condemnation proceeds as provided
in this Trust Deed, and all other rights granted under this Trust
Deed that have also been granted to the Prior Lienholder, shall
be subject to the rights of the Prior Lienholder. Grantor hereby
authorizes the Prior Lienholder, on satisfaction of the
indebtedness secured by the Prior Lien, to remit all remaining
insurance or condemnation proceeds and all other sums held by the
Prior Lienholder to Beneficiary to be applied in accordance with
this Trust Deed.
19. Reconveyance. Upon payment of all sums secured by this
Trust Deed, Beneficiary shall request Trustee to reconvey the
Property and shall surrender this Trust Deed and all notes
evidencing indebtedness secured by this Trust Deed to Trustee.
Trustee shall reconvey the Property without warranty and without
charge to the person or persons legally entitled thereto. Such
person or persons shall pay all costs of recordation, if any.
20. Substitute Trustee. In accordance with applicable law,
Beneficiary may from time to time remove Trustee and appoint a
successor trustee. Without conveyance of the Property, the
successor trustee shall succeed to all the title, power and
duties conferred upon Trustee in this Trust Deed and by
applicable law.
21. Miscellaneous.
21.1 Notices. Except for any notice required under
applicable law to be given in another manner, (a) any notice to
Grantor provided for in this Trust Deed shall be given by
certified mail, return receipt requested, first class postage
prepaid, to Grantor's address stated on the first page of this
Trust Deed, or to such other address that Grantor may designate
by notice to Beneficiary as provided in this Trust Deed, and
(b) any notice to Beneficiary shall be given by certified mail,
return receipt requested, first class postage prepaid, to
Beneficiary's address stated on the first page of this Trust Deed
or to such other address as Beneficiary may designate by notice
to Grantor as provided in this Trust Deed. Any notice provided
for in this Trust Deed shall be deemed to have been given to
Grantor or Beneficiary when deposited in the United States mail.
21.2 Governing Law. The provisions of this Trust Deed
shall be governed by and construed in accordance with the laws of
the state of Washington.
21.3 Grantor's Copy. Grantor shall be furnished a
conformed copy of the Note and of this Trust Deed at the time of
execution or after recordation.
21.4 Successors and Assigns Bound; Captions. The
covenants and agreements contained in this Trust Deed shall bind,
and the rights under this Trust Deed shall inure to, the
respective successors and assigns of Beneficiary and Grantor.
The captions and headings of the sections of this Trust Deed are
for convenience only and are not to be used to interpret or
define the provisions of this Trust Deed.
21.5 Attorney Fees. If Beneficiary refers any of the
Obligations to an attorney for collection or seeks legal advice
following a default; if Beneficiary is the prevailing party in
any litigation instituted in connection with any of the
Obligations; or if Beneficiary or any other person initiates any
judicial or nonjudicial action, suit, or proceeding in connection
with any of the Obligations or the Property (including but not
limited to proceedings under federal bankruptcy law, eminent
domain, under probate proceedings, or in connection with any
state or federal tax lien), and an attorney is employed by
Beneficiary to (1) appear in any such action, suit, or
proceeding, or (2) reclaim, seek relief from a judicial or
statutory stay, sequester, protect, preserve, or enforce
Beneficiary's interests, then in any such event Grantor shall pay
reasonable attorney fees, costs, and expenses incurred by
Beneficiary or its attorney in connection with the above-
mentioned events or any appeals related to such events, including
but not limited to costs incurred in searching records, the cost
of title reports, and the cost of surveyors' reports. Such
amounts shall be secured by this Trust Deed and, if not paid upon
demand, shall bear interest at the rate specified in Section 8.2.
21.6 Standard for Discretion. In the event this Trust
Deed is silent on the standard for any consent, approval,
determination, or similar discretionary action, the standard
shall be sole and unfettered discretion as opposed to any
standard of good faith, fairness, or reasonableness.
21.7 Conflicts. In the event that the terms and
conditions of this Trust Deed conflict in any way with the terms
and conditions of the Prior Lien, the terms and conditions of the
Prior Lien shall control.
21.8 Time is of the Essence. Time is of the essence
with respect to all covenants and obligations of Grantor under
this Trust Deed.
21.9 Commercial Property. Grantor covenants and
warrants that the Property are used by Grantor exclusively for
business and commercial purposes.
ORAL AGREEMENTS OR ORAL COMMITMENTS TO LEND MONEY, EXTEND
CREDIT, OR FORBEAR FROM ENTERING REPAYMENT OF A DEBT ARE NOT
ENFORCEABLE UNDER WASHINGTON LAW.
IN WITNESS WHEREOF, Grantor has executed this Trust Deed as
of the day and year first above written.
ELMER'S RESTAURANTS, INC.
an Oregon corporation
By: ___/s/ Bruce N. Davis___
Name: Bruce N. Davis
Title: President
STATE OF OREGON )
) ss.
County of )
This Trust Deed was acknowledged before me on February
_____, 1999, by __________ ________________________, as
_________________________ of Elmer's Restaurants, Inc.
________________________
NOTARY PUBLIC FOR OREGON
EXHIBIT A
LEGAL DESCRIPTION OF THE PROPERTY
LOT 1, ALDERWOOD SQUARE, ACCORDING TO THE PLAT THEREOF, RECORDED
IN VOLUME 46 OF PLATS, PAGES 238 AND 239, RECORDS OF SNOHOMISH
COUNTY, WASHINGTON.
14 - SECOND TRUST DEED 0199301.01
When recorded return to: (For Recorder's Use Only)
Kenneth S. Antell, Esq.
Dunn, Carney, Allen, Higgins & Tongue
851 S.W. Sixth Avenue, Suite 1500
Portland, OR 97204-1357
=================================================================
=
SECOND TRUST DEED
Date: February ____, 1999
Among: ELMER'S RESTAURANTS, INC. ("Grantor")
an Oregon corporation
11802 S.E. Stark Street
P.O. Box 16938
Portland, OR 97292-0938
and: EAGLE'S VIEW MANAGEMENT COMPANY, INC. ("Beneficiary")
an Oregon corporation
P.O. Box 10638
Eugene, OR 97440
and: CHICAGO TITLE INSURANCE COMPANY ("Trustee")
3030 Hoyt Avenue
Everett, WA 98201
Grantor, in consideration of the indebtedness recited and
the trust created in this Trust Deed, irrevocably grants and
conveys to Trustee, in trust, with power of sale, the real
property commonly known as 3411 184th Street S.W., located in
Lynnwood, Snohomish County, Washington, which is more
particularly described in attached Exhibit A, which is
incorporated herein by this reference (the "Land");
TOGETHER with all the improvements now or hereafter erected
on the Land, and all easements, rights, appurtenances, rents
(subject however to the rights and authorities given in this
Trust Deed to Beneficiary to collect and apply such rents),
royalties, mineral, oil and gas rights and profits, water, water
rights, and water stock, and all fixtures now or hereafter
attached to the Land, all of which, including replacements and
additions thereto, shall be deemed to be and remain a part of the
property covered by this Trust Deed; and all of the foregoing,
together with the Land are referred to in this Trust Deed as the
"Property;"
TO SECURE to Beneficiary (a) the repayment of the
indebtedness evidenced by a Promissory Note dated August 25,
1998, and amended by that certain First Amendment to Promissory
Note of even date herewith (the "Note"), originally given by CBW,
Inc., an Oregon corporation which merged with and into Grantor,
with an original principal balance of $4 million and a present
principal balance of $1.25 million, with interest thereon as
provided in the Note, and with the balance of the indebtedness of
the Note, if not sooner paid, due and payable on February 25,
2004, and all renewals and/or extensions of the Note; (b) the
repayment of any and all other indebtedness owing from Grantor to
Beneficiary at any time hereafter; (c) the repayment of all other
sums, with interest thereon, advanced in accordance with the
terms of this Trust Deed to protect the security of this Trust
Deed; and (d) the performance of the covenants and agreements of
Grantor contained in this Trust Deed (the "Obligations").
GRANTOR COVENANTS that (a) Grantor is lawfully seized of the
estate conveyed by this Trust Deed and has the right to grant and
convey the Property; (b) the Property is unencumbered, except for
the first priority trust deed granted in favor of Wells Fargo
Bank (the "Prior Lienholder") to secure a loan with a principal
balance not to exceed $7,000,000.00 (the "Prior Lien") and such
other exceptions that are reasonably approved in writing by
Beneficiary (the "Permitted Exceptions"); and (c) Grantor will
warrant and defend the title to the Property against all claims
and demands, subject to the Prior Lien, the lien of this Trust
Deed, and the Permitted Exceptions.
Grantor and Beneficiary covenant and agree as follows:
1. Payment of Principal and Interest. Grantor shall
promptly pay when due the principal and interest on the
indebtedness evidenced by the Note, prepayment and other charges
as provided in the Note and this Trust Deed, and the principal of
and interest on any other advances secured by this Trust Deed.
2. Application of Payments on the Note. All payments
received by Beneficiary under the Note and Section 1 above shall
be applied by Beneficiary as set forth in the Note.
3. Taxes, Assessments and Liens. Grantor shall pay all
taxes, assessments, and other charges, fines and impositions
attributable to the Property which may attain a priority over
this Trust Deed, and leasehold payments or ground rents (if any)
by Grantor making payments, when due, directly to the payee
thereof. Grantor shall promptly furnish to Beneficiary all
notices of amounts due under this Section 3, if requested by
Beneficiary, and Grantor shall promptly furnish to Beneficiary
receipts evidencing such payments. Grantor may pay taxes and
assessments pursuant to the assessor's installment schedule.
Grantor shall promptly discharge any lien which has priority over
this Trust Deed, except the Prior Lien; provided, that Grantor
shall not be required to discharge any such lien so long as
Grantor shall agree in writing to the payment of the obligation
secured by such lien in a manner acceptable to Beneficiary, in
Beneficiary's sole and unfettered discretion, or shall in good
faith contest such lien by, or defend enforcement of such lien
in, legal proceedings that operate to prevent the enforcement of
the lien or forfeiture of the Property or any part thereof.
4. Insurance.
4.1 Requirement to Maintain Property Insurance.
Grantor shall obtain and maintain at all times "all risk"
property insurance, together with endorsements for replacement
cost, inflation adjustment, and all other endorsements as
Beneficiary may from time to time require, all in amounts not
less than the full replacement value of all improvements now
existing or hereafter erected on the Property, without reduction
for co-insurance.
4.2 Requirement to Maintain Liability Insurance.
Grantor shall obtain and maintain at all times comprehensive
general liability insurance with limits, coverages, and risks
insured that are acceptable to Beneficiary, and in no event less
than $2,000,000 combined single limit coverage.
4.3 Insurance Carrier; Premium Payments. The
insurance carrier or carriers providing the insurance shall be
chosen by Grantor subject to approval by Beneficiary. All
premiums on insurance policies shall be paid by Grantor making
payment, when due, directly to the insurance carrier.
4.4 Form of Policies; Proof of Loss. All insurance
policies and renewals thereof shall be in forms acceptable to
Beneficiary and shall include a standard mortgage clause in favor
of and in a form acceptable to Beneficiary. Subject to the
rights of the Prior Lienholder, Beneficiary shall have the right
to hold the policies and renewals thereof, and Grantor shall
promptly furnish to Beneficiary all renewal notices and all
receipts of paid premiums. In the event of loss, Grantor shall
give prompt notice to the insurance carrier and Beneficiary.
Beneficiary may make proof of loss if not made promptly by
Grantor.
4.5 Proceeds. Unless Beneficiary and Grantor
otherwise agree in writing, insurance proceeds shall be applied
to restoration of the Property damaged, if restoration is
economically feasible based upon fixed bids for restoration from
the insurance proceeds, but if restoration is not economically
feasible the insurance proceeds shall be applied to the sums
secured by this Trust Deed, subject to the rights of the Prior
Lienholder. If the Property is abandoned by Grantor, or if
Grantor fails to respond to Beneficiary within 30 days from the
date notice is mailed by Beneficiary to Grantor indicating that
the insurance carrier offers to settle a claim for insurance
benefits, Beneficiary is authorized to collect and apply the
insurance proceeds at Beneficiary's option to restoration of the
Property or to the sums secured by this Trust Deed.
4.6 No Postponement of Payments; Right to Proceeds.
Unless Beneficiary and Grantor otherwise agree in writing, any
such application of proceeds to principal shall not extend or
postpone the due date of any payments referred to in Section 1 of
this Trust Deed or change the amount of such payments. If under
Section 15 of this Trust Deed the Property is acquired by
Beneficiary, all right, title and interest of Grantor in and to
any insurance policies and in and to the proceeds thereof
resulting from damage to the Property prior to the sale or
acquisition shall pass to Beneficiary to the extent of the sums
secured by this Trust Deed immediately prior to such sale or
acquisition.
5. Compliance with Laws. Grantor represents, warrants, and
covenants that: (a) the Property, if developed, has been
developed, and all improvements located on the Property, if any,
have been constructed and maintained, in full compliance with all
applicable laws, statutes, ordinances, regulations, and codes of
all federal, state, and local governments (collectively "Laws"),
and all covenants, conditions, easements, and restrictions
affecting the Property (collectively "Covenants"); and (b)
Grantor and its operations upon the Property currently comply,
and will hereafter comply in all material respects with all
applicable Laws and Covenants.
6. Environmental Covenants, Warranties and Compliance.
6.1 Environmental Law Definition. For purposes of
this section, "Environmental Law" means any federal, state, or
local law, statute, ordinance, or regulation pertaining to
Hazardous Substances, health, industrial hygiene, or
environmental conditions, including without limitation the
Comprehensive Environmental Response, Compensation, and Liability
Act of 1980 ("CERCLA"), as amended, 42 USC 9601-9675, and the
Resource Conservation and Recovery Act of 1976 ("RCRA"), as
amended, 42 USC 6901-6992.
6.2 Hazardous Substance Definition. For the purposes
of this section, "Hazardous Substance" includes, without
limitation, any material, substance, or waste that is or becomes
regulated or that is or becomes classified as hazardous,
dangerous, or toxic under any federal, state, or local statute,
ordinance, rule, regulation, or law.
6.3 No Generation or Use. Grantor will not use,
generate, manufacture, produce, store, release, discharge, or
dispose of on, under or about the Property or the Property's
groundwater, or transport to or from the Property, any Hazardous
Substance and will not permit any other person to do so, except
for such Hazardous Substances that may be used in the ordinary
course of Grantor's business and in compliance with all
Environmental Laws, including but not limited to those relating
to licensure, notice, and recordkeeping.
6.4 Compliance with Law. Grantor will keep and
maintain the Property in compliance with, and shall not cause or
permit all or any portion of the Property, including groundwater,
to be in violation of any Environmental Law.
6.5 Indemnification. Grantor shall hold Beneficiary,
its directors, officers, employees, agents, successors, and
assigns, harmless from, indemnify them for, and defend them
against any and all losses, damages, liens, costs, expenses, and
liabilities directly or indirectly arising out of or attributable
to any violation of any Environmental Law, any breach of
Grantor's warranties in this Section 6, or the use, generation,
manufacture, production, storage, release, threatened release,
discharge, disposal, or presence of a Hazardous Substance on,
under, or about the Property, including without limitation the
costs of any required repair, cleanup, containment, or
detoxification of the Property, the preparation and
implementation of any closure, remedial or other required plans,
attorney fees and costs (including but not limited to those
incurred in any proceeding and in any review or appeal), fees,
penalties, and fines.
6.6 Representations. Grantor represents and warrants
to Beneficiary that: (a) neither the Property nor Grantor is in
violation of or subject to any existing, pending, or threatened
investigation by any governmental authority under any
Environmental Law; (b) Grantor has not and is not required by any
Environmental Law to obtain any permit or license other than
those it has obtained to construct or use the improvements
located on the Property; and (c) to the best of Grantor's
knowledge, no Hazardous Substance has ever been used, generated,
manufactured, produced, stored, released, discharged, or disposed
of on, under, or about the Property in violation of any
Environmental Law.
6.7 Survival. All representations, warranties, and
covenants in this Section 6 shall survive the satisfaction of the
Obligations, the reconveyance of the Property, or the foreclosure
of this Trust Deed by any means.
7. Preservation and Maintenance of Property. Grantor
shall keep the Property in good repair and shall not commit waste
or permit impairment or deterioration of the Property, and shall
comply with the provisions of any lease if this Trust Deed is on
a leasehold.
8. Protection of Beneficiary's Security.
8.1 Appearances; Disbursements. If Grantor fails to
perform the covenants and agreements contained in this Trust
Deed, or, notwithstanding Section 3 of this Trust Deed, if any
action or proceeding is commenced which materially affects
Beneficiary's interest in the Property, including, but not
limited to, construction lien foreclosure, eminent domain,
insolvency, code enforcement, or arrangements or proceedings
involving a bankrupt or decedent, then Beneficiary at
Beneficiary's option, may make such appearances, disburse such
sums and take such action as is necessary to protect
Beneficiary's interest, including, but not limited to,
disbursement of reasonable costs and attorney fees, and entry
upon the Property to make repairs.
8.2 Interest on Disbursements. Any amounts disbursed
by Beneficiary pursuant to this Section 8, with interest thereon,
shall become additional indebtedness of Grantor secured by this
Trust Deed. Unless Grantor and Beneficiary agree to other terms
of payment, such amounts shall be payable upon notice from
Beneficiary to Grantor requesting payment thereof, and shall bear
interest from the date of disbursement at the rate of 15 percent
per annum, unless payment of interest at such rate would be
contrary to applicable law, in which event such amounts shall
bear interest at the highest rate permissible under applicable
law. Nothing contained in this Section 8 shall require
Beneficiary to incur any expense or take any action under this
Trust Deed.
9. Inspection. Beneficiary may make or cause to be made
reasonable entries upon and inspections of the Property during
business hours after prior written notice.
10. Condemnation.
10.1 Assignment of Proceeds. The proceeds of any award
or claim for damages, direct or consequential, in connection with
condemnation or other taking of the Property, or part thereof, or
for conveyance in lieu of condemnation, are hereby assigned and
shall be paid to Beneficiary, subject to the rights of the holder
of the Prior Lienholder.
10.2 Total and Partial Taking. In the event of a total
taking of the Property, the proceeds shall be applied to the sums
secured by the Prior Lien and this Trust Deed, with the excess,
if any, paid to Grantor. In the event of a partial taking of the
Property, unless Grantor and Beneficiary otherwise agree in
writing, there shall be applied to the sums secured by this Trust
Deed such proportion of the proceeds as is equal to that
proportion which the amount of the sums secured by this Trust
Deed immediately prior to the date of taking bears to the fair
market value of the Property immediately prior to the date of
taking with the balance of the proceeds paid to Grantor.
10.3 Property is Abandoned; Failure to Respond. If the
Property is abandoned by Grantor, or if, after notice by
Beneficiary to Grantor that the condemnor offers to make an award
or settle a claim for damages, Grantor fails to respond to
Beneficiary within 30 days after the date such notice is mailed,
Beneficiary is authorized to collect and apply the proceeds, at
Beneficiary's option, either to restoration or repair of the
Property or to the sums secured by this Trust Deed.
10.4 No Postponement of Payments. Unless Beneficiary
and Grantor otherwise agree in writing, any such application of
proceeds to principal shall not extend or postpone the due date
of any payments referred to in Section 1 of this Trust Deed or
change the amount of such payments.
11. Grantor Not Released. Extension of the time for
payment or modification of amortization of the sums secured by
this Trust Deed granted by Beneficiary to any successor in
interest of Grantor shall not operate to release, in any manner,
the liability of the original Grantor and Grantor's successors in
interest. Beneficiary shall not be required to commence
proceedings against such successor, refuse to extend time for
payment, or otherwise modify amortization of the sums secured by
this Trust Deed by reason of any demand made by the original
Grantor or Grantor's successors in interest.
12. Forbearance by Beneficiary Not a Waiver. Any
forbearance by Beneficiary in exercising any right or remedy
under this Trust Deed, or otherwise afforded by applicable law,
shall not be a waiver of or preclude the exercise of any such
right or remedy. The procurement of insurance or the payment of
taxes or other liens or charges by Beneficiary shall not be a
waiver of Beneficiary's right to accelerate the maturity of the
indebtedness secured by this Trust Deed.
13. Remedies Cumulative. All remedies provided in this
Trust Deed are distinct and cumulative to any other right or
remedy under this Trust Deed or afforded by law or equity, and
may be exercised concurrently, independently or successively.
14. Due on Sale. If all or any part of the Property or any
interest in the Property is sold, transferred, assigned,
conveyed, pledged, hypothecated, or given, either voluntarily or
involuntarily, or by operation of law, without Beneficiary's
prior written consent, or in the event of a default with respect
to the Prior Lien, or if any lien or encumbrance subordinate to
the lien of this Trust Deed is placed or allowed to remain on the
Property which adversely affects the lien of this Trust Deed,
Beneficiary may, at Beneficiary's option, declare all the sums
secured by this Trust Deed to be immediately due and payable, and
seek any and all other remedies available under this Trust Deed,
the Note or under applicable law.
15. Default and Remedies.
15.1 Events of Default. Each of the following shall
constitute an event of default under this Trust Deed:
15.1.1 Nonpayment. Failure of Grantor to pay
any of the Obligations on or before the due date and within any
applicable cure period.
15.1.2 Breach of Other Covenants. Failure of
Grantor to perform or abide by any other covenant included in the
Obligations, including without limitation those covenants in the
Note, in this Trust Deed or in any other loan document or
agreement between Grantor and Beneficiary and the failure to cure
any such nonperformance within any applicable cure period.
15.1.3 Other Default. The occurrence of any
other event of default under the Note or any of the other
Obligations.
15.1.4 Prior Lien. The occurrence of any
default under the terms and conditions of the Prior Lien.
15.2 Remedies.
15.2.1 Acceleration. Upon Grantor's breach of
any covenant or agreement of Grantor in this Trust Deed,
including the covenants to pay when due any sums secured by this
Trust Deed, Beneficiary at Beneficiary's option may declare all
of the sums secured by this Trust Deed to be immediately due and
payable without further demand and may invoke the power of sale
and any other remedies permitted by applicable law.
15.2.2 Sale by Trustee. If Beneficiary invokes
the power of sale, Beneficiary shall execute or cause Trustee to
execute a written notice of the occurrence of an event of default
and of Beneficiary's election to cause the Property to be sold,
and shall cause such notice to be recorded in each county in
which the Property or some part of the Property is located.
Beneficiary or Trustee shall give notice of sale in the manner
prescribed by applicable law to Grantor and to the other persons
prescribed by applicable law. After the lapse of such time as
may be required by applicable law, Trustee, without demand on
Grantor, shall sell the Property at public auction to the highest
bidder at the time and place and under the terms designated in
the notice of sale in one or more parcels and in such order as
Trustee may determine. Trustee may postpone sale of all or any
parcel of the Property by public announcement at the time and
place of any previously scheduled sale. Beneficiary or
Beneficiary's designee may purchase the Property at any sale.
15.2.3 Trustee's Deed. Trustee shall deliver
to the purchaser Trustee's deed conveying the Property so sold
without any covenant or warranty, expressed or implied. The
recitals in the Trustee's deed shall be prima facie evidence of
the truth of the statements made therein. Trustee shall apply
the proceeds of the sale in the following order: (a) to all
reasonable costs and expenses of the sale, including, but not
limited to, reasonable Trustee and attorney fees and costs of
title evidence; (b) to all sums secured by the Prior Lien; (c) to
all sums secured by this Trust Deed; and (d) the excess (if any)
to the person or persons legally entitled thereto.
15.2.4 Other Remedies. Beneficiary may
exercise any other rights or remedies available to Beneficiary
under this Trust Deed, the Note, or any other loan document or
agreement between Grantor and Beneficiary, or otherwise allowed
under applicable law.
15.2.5 Cumulative Remedies. All remedies under
this Trust Deed are cumulative and not exclusive. Any election to
pursue one remedy shall not preclude the exercise of any other
remedy. An election by Beneficiary to cure shall not constitute a
waiver of the default or of any of the remedies provided in this
Trust Deed. No delay or omission in exercising any right or
remedy shall impair the full exercise of that or any other right
or remedy or constitute a waiver of the default.
15.2.6 Costs and Expenses. Beneficiary shall be
entitled to collect all reasonable costs and expenses incurred in
pursuing the remedies provided in this Section 15, including, but
not limited to, reasonable costs and attorney fees, as provided
below in Section 21.5.
16. Grantor's Right to Reinstate. Notwithstanding
Beneficiary's acceleration of the Obligations secured by this
Trust Deed, Grantor shall have the right to reinstate this Trust
Deed if all payments are made to Beneficiary as required under
applicable Washington law and Grantor takes such action as
Beneficiary may reasonably require to assure that the lien of
this Trust Deed, Beneficiary's interest in the Property and
Grantor's obligation to pay the sums secured by this Trust Deed
shall continue unimpaired. Upon such payment and cure by
Grantor, this Trust Deed and the Obligations secured by this
Trust Deed shall remain in full force and effect as if no
acceleration had occurred.
17. Assignment of Rents; Appointment of Receiver;
Beneficiary in Possession. As additional security under this
Trust Deed, Grantor hereby assigns to Beneficiary the rents of
the Property (if any), provided that Grantor shall, prior to
acceleration under Section 15 of this Trust Deed or abandonment
of the Property, have the right to collect and retain such rents
as they become due and payable. Upon acceleration under Section
15 of this Trust Deed or abandonment of the Property,
Beneficiary, in person, by agent or by judicially appointed
receiver, shall be entitled to enter upon, take possession of and
manage the Property and to collect the rents of the Property (if
any), including those past due. All rents collected by
Beneficiary or the receiver shall be applied first to payment of
the costs of management of the Property and collection of rents,
including but not limited to, receiver fees, premiums on
receiver's bonds and reasonable attorney fees and costs, and to
the sums secured by this Trust Deed. Beneficiary and the
receiver shall be liable to account only for those rents actually
received.
18. Rights of Prior Lienholder. The rights of Beneficiary
with respect to insurance and condemnation proceeds as provided
in this Trust Deed, and all other rights granted under this Trust
Deed that have also been granted to the Prior Lienholder, shall
be subject to the rights of the Prior Lienholder. Grantor hereby
authorizes the Prior Lienholder, on satisfaction of the
indebtedness secured by the Prior Lien, to remit all remaining
insurance or condemnation proceeds and all other sums held by the
Prior Lienholder to Beneficiary to be applied in accordance with
this Trust Deed.
19. Reconveyance. Upon payment of all sums secured by this
Trust Deed, Beneficiary shall request Trustee to reconvey the
Property and shall surrender this Trust Deed and all notes
evidencing indebtedness secured by this Trust Deed to Trustee.
Trustee shall reconvey the Property without warranty and without
charge to the person or persons legally entitled thereto. Such
person or persons shall pay all costs of recordation, if any.
20. Substitute Trustee. In accordance with applicable law,
Beneficiary may from time to time remove Trustee and appoint a
successor trustee. Without conveyance of the Property, the
successor trustee shall succeed to all the title, power and
duties conferred upon Trustee in this Trust Deed and by
applicable law.
21. Miscellaneous.
21.1 Notices. Except for any notice required under
applicable law to be given in another manner, (a) any notice to
Grantor provided for in this Trust Deed shall be given by
certified mail, return receipt requested, first class postage
prepaid, to Grantor's address stated on the first page of this
Trust Deed, or to such other address that Grantor may designate
by notice to Beneficiary as provided in this Trust Deed, and
(b) any notice to Beneficiary shall be given by certified mail,
return receipt requested, first class postage prepaid, to
Beneficiary's address stated on the first page of this Trust Deed
or to such other address as Beneficiary may designate by notice
to Grantor as provided in this Trust Deed. Any notice provided
for in this Trust Deed shall be deemed to have been given to
Grantor or Beneficiary when deposited in the United States mail.
21.2 Governing Law. The provisions of this Trust Deed
shall be governed by and construed in accordance with the laws of
the state of Washington.
21.3 Grantor's Copy. Grantor shall be furnished a
conformed copy of the Note and of this Trust Deed at the time of
execution or after recordation.
21.4 Successors and Assigns Bound; Captions. The
covenants and agreements contained in this Trust Deed shall bind,
and the rights under this Trust Deed shall inure to, the
respective successors and assigns of Beneficiary and Grantor.
The captions and headings of the sections of this Trust Deed are
for convenience only and are not to be used to interpret or
define the provisions of this Trust Deed.
21.5 Attorney Fees. If Beneficiary refers any of the
Obligations to an attorney for collection or seeks legal advice
following a default; if Beneficiary is the prevailing party in
any litigation instituted in connection with any of the
Obligations; or if Beneficiary or any other person initiates any
judicial or nonjudicial action, suit, or proceeding in connection
with any of the Obligations or the Property (including but not
limited to proceedings under federal bankruptcy law, eminent
domain, under probate proceedings, or in connection with any
state or federal tax lien), and an attorney is employed by
Beneficiary to (1) appear in any such action, suit, or
proceeding, or (2) reclaim, seek relief from a judicial or
statutory stay, sequester, protect, preserve, or enforce
Beneficiary's interests, then in any such event Grantor shall pay
reasonable attorney fees, costs, and expenses incurred by
Beneficiary or its attorney in connection with the above-
mentioned events or any appeals related to such events, including
but not limited to costs incurred in searching records, the cost
of title reports, and the cost of surveyors' reports. Such
amounts shall be secured by this Trust Deed and, if not paid upon
demand, shall bear interest at the rate specified in Section 8.2.
21.6 Standard for Discretion. In the event this Trust
Deed is silent on the standard for any consent, approval,
determination, or similar discretionary action, the standard
shall be sole and unfettered discretion as opposed to any
standard of good faith, fairness, or reasonableness.
21.7 Conflicts. In the event that the terms and
conditions of this Trust Deed conflict in any way with the terms
and conditions of the Prior Lien, the terms and conditions of the
Prior Lien shall control.
21.8 Time is of the Essence. Time is of the essence
with respect to all covenants and obligations of Grantor under
this Trust Deed.
21.9 Commercial Property. Grantor covenants and
warrants that the Property are used by Grantor exclusively for
business and commercial purposes.
ORAL AGREEMENTS OR ORAL COMMITMENTS TO LEND MONEY, EXTEND
CREDIT, OR FORBEAR FROM ENTERING REPAYMENT OF A DEBT ARE NOT
ENFORCEABLE UNDER WASHINGTON LAW.
IN WITNESS WHEREOF, Grantor has executed this Trust Deed as
of the day and year first above written.
ELMER'S RESTAURANTS, INC.
an Oregon corporation
By: ___/s/ Bruce N. Davis___
Name: Bruce N. Davis
Title: President
STATE OF OREGON )
) ss.
County of )
This Trust Deed was acknowledged before me on February
_____, 1999, by __________ ________________________, as
_________________________ of Elmer's Restaurants, Inc.
________________________
NOTARY PUBLIC FOR OREGON
EXHIBIT A
LEGAL DESCRIPTION OF THE PROPERTY
LOT 1, ALDERWOOD SQUARE, ACCORDING TO THE PLAT THEREOF, RECORDED
IN VOLUME 46 OF PLATS, PAGES 238 AND 239, RECORDS OF SNOHOMISH
COUNTY, WASHINGTON.
3 - SECOND AMENDMENT TO PROMISSORY NOTE AND
ACKNOWLEDGEMENT OF REDUCTION OF PRINCIPAL 0199302.01
FIRST AMENDMENT TO
PROMISSORY NOTE AND ACKNOWLEDGEMENT OF
REDUCTION OF PRINCIPAL
THIS FIRST AMENDMENT TO PROMISSORY NOTE AND ACKNOWLEDGEMENT
OF REDUCTION OF PRINCIPAL ("Note Amendment") is effective
February ___, 1999, by and among CBW INC., an Oregon corporation
("CBW"), EAGLE'S VIEW MANAGEMENT COMPANY, INC., an Oregon
corporation ("Eagles's View"), and ELMER'S RESTAURANTS, INC., an
Oregon corporation ("Elmer's").
RECITALS:
A. CBW and Eagle's View are parties to that certain Second
Amendment to Amended and Restated Loan Agreement and Security
Agreement of even date herewith (the "Second Amendment").
B. Pursuant to the terms of the Second Amendment, the
parties agreed, subject to the terms and conditions contained in
the Second Amendment, to execute this Note Amendment.
NOW THEREFORE, the parties agree to amend the Note and
acknowledge as follows:
AMENDMENT:
1. Acknowledgement of Reduction of Principal. In
consideration of the payment of $2,750,000.00 by Maker to Holder
as of the date of this Note Amendment, the receipt of which is
hereby acknowledged by Holder, the parties acknowledge and agree
that the principal balance of the Note is reduced to
$1,250,000.00 as of the date of this Note Amendment.
2. Interest Rate. Section 1 of the Note is hereby amended
to state as follows:
"Subject to the provisions of Section 1.3 of the Note,
Maker promises to pay interest, from and including the date of
this Note on the unpaid principal balance of this Note, at a rate
equal to twelve percent (12%) per annum, compounded annually,
from the date of this Note until November 25, 1999, and fifteen
percent (15%) per annum, compounded annually, at all times
thereafter, which shall be calculated on a 365-day year accrual
basis.
3. Maturity. Section 1.2 of the Note is hereby amended to
state as follows:
"1.2 Maturity. The entire unpaid principal balance of
the Note and all accrued but unpaid interest thereon shall be due
and payable on or before February 25, 2004, or immediately upon
demand by Holder after a default as provided below in this Note
(the "Maturity Date")."
4. Security. Section 2 of the Note is hereby amended to
state as follows:
"2. Security. This Note is secured by certain
security interests and liens in favor of Holder, second in
position to those of Wells Fargo Bank, in all assets of Elmer's
Restaurants, Inc., as described in the Second Amendment."
5. Default. Section 3 of the Note is hereby amended to
state as follows:
Time is of the essence of this Note. A default shall
occur if Maker fails to make any payment under this Note within
five (5) days after written notice of such default is provided by
Holder to Maker, or if Maker fails to perform any covenant or
obligation of Maker pursuant to the Loan Agreement between Maker
and Holder, except those obligations waived or satisfied pursuant
to the Second Amendment, after expiration of applicable notice
and cure periods. A default shall also occur if Maker shall
default under any covenant or obligation owed to Wells Fargo or
to any other individual or entity and shall fail to cure such
default within any applicable notice and cure periods if the
performance of such obligation or covenant is secured by any
asset in which Holder has a security interest or lien."
6. All Other Terms and Conditions to Remain Unchanged.
All terms and conditions of the Note not specifically amended or
deleted herein shall remain in full force and effect, as if fully
set forth herein.
7. Assumption of Liability. By executing this Note
Amendment below, Elmer's assumes all obligations of Maker under
the Note as if Elmer's had been the original Maker of the Note.
Pursuant to this Note Amendment, CBW and Elmer's shall be jointly
and severally liable for the Makers' obligations under the Note
as hereby amended.
8. Definitions. Except as provided otherwise herein, all
capitalized items in this Note Amendment shall have the same
definitions as provided in the Amended and Restated Loan
Agreement and Security Agreement, as amended by the Second
Amendment.
IN WITNESS WHEREOF, the parties hereto have executed this
Note Amendment effective the date first written above.
CBW INC., EAGLE'S VIEW MANAGEMENT
an Oregon corporation COMPANY, INC.,
an Oregon corporation
By: ___/s/ Bruce N. Davis___ By: ___/s/ Donna P. Woolley
Name: Bruce N. Davis Name: Donna P. Woolley
Title: President Title: President
Date: 2/17/99 Date: 2/18/99
ELMER'S RESTAURANTS, INC.,
an Oregon corporation
By: ___/s/ Bruce N. Davis___
Name: Bruce N. Davis
Title: President
Date: 2/17/99
3 0199303.01
Recording Requested By,
And After Recording,
Return To:
WELLS FARGO BANK,
NATIONAL ASSOCIATION
201 Third Street, 8th Floor
San Francisco, CA 94103
Attn: Team 1
- -----------------------------------------------------------------
FIRST MODIFICATION OF COMMERCIAL DEED OF TRUST
GRANTOR (Grantor): Elmer's Restaurants, Inc., an Oregon
corporation
GRANTEE (Beneficiary): Wells Fargo Bank, National Association,
Successor-By-Merger to First Interstate Bank of Oregon, N.A.
GRANTEE (Trustee): Ticor Title Insurance Company
REFERENCE NO. OF DEED OF TRUST: 9512220130
This First Modification of Commercial Deed of Trust (this
"Modification") is entered into as of February 17, 1999, by and
between ELMER'S RESTAURANTS, INC., an Oregon corporation
("Grantor"), and WELLS FARGO BANK, NATIONAL ASSOCIATION,
SUCCESSOR-BY-MERGER TO FIRST INTERSTATE BANK OF OREGON, N.A.
("Beneficiary").
RECITALS
This Modification is entered into upon the basis of the
following facts and understandings of the parties:
A. This Modification pertains to that certain Commercial
Deed of Trust dated as of December 21, 1995, executed by Grantor
to Ticor Title Insurance Company, as Trustee, in favor of
Beneficiary, and recorded on December 22, 1995, under Recording
No.9512220130, in Volume 3107, at Page 0304, of the Records of
Snohomish County, Washington ("Deed of Trust").
B. Certain changes are being made to the obligations
secured by the Deed of Trust, and additional obligations have
been or are to be incurred which are to be, secured by the Deed
of Trust, and Grantor and Beneficiary have agreed to modify the
Deed of Trust to reflect said changes and additional obligations
to be secured thereby.
NOW, THEREFORE, the parties hereto agree as follows:
1. The Deed of Trust is hereby modified to reflect as
indebtedness secured thereby and included in the definition of
Indebtedness therein, in addition to the Indebtedness described
in Sections(a) through (e) of the third paragraph thereof, and in
addition to the payment and performance of any other Indebtedness
defined therein or arising thereunder, the payment to Beneficiary
of all indebtedness and performance of all obligations evidenced
by and arising under:
(a) that certain promissory note dated as of February
17, 1999, executed by Elmer's Restaurants, Inc. and payable to
Beneficiary or its order in the principal amount of Two Million
Six Hundred Thousand Dollars ($2,600,000.00), together with
interest thereon;
(b) that certain promissory note dated as of February
17, 1999, executed by Elmer's Restaurants, Inc. and payable to
Beneficiary or its order in the principal amount of Four Hundred
Eighty Thousand Dollars ($480,000.00), together with interest
thereon;
(c) that certain promissory note dated as of February
17, 1999, executed by Elmer's Restaurants, Inc. and payable to
Beneficiary or its order in the principal amount of Two Hundred
Fifty Thousand Dollars ($250,000.00), together with interest
thereon;
and any such indebtedness or other obligations incurred under or
in connection with any credit accommodation evidenced by any of
such promissory notes, even if not specifically referenced
therein.
2. The Deed of Trust is hereby further modified to reflect
that certain changes have been made to the "Note" defined in the
Deed of Trust, as more fully described in that certain Credit
Agreement of even date herewith executed by and between Grantor
and Beneficiary.
3. The real property and the whole thereof described in
the Deed of Trust shall remain subject to the lien, charge or
encumbrance of the Deed of Trust and nothing herein contained or
done pursuant hereto shall affect or be construed to affect the
liens, charges or encumbrances of the Deed of Trust, or the
priority thereof over other liens, charges or encumbrances, or to
release or affect the liability of any party or parties who may
now or hereafter be liable under or on account of said promissory
notes and/or the Deed of Trust.
4. All terms and conditions of the Deed of Trust not
expressly modified herein remain in full force and effect,
without waiver or amendment. This Modification and the Deed of
Trust shall be read together, as one document.
IN WITNESS WHEREOF, the parties hereto have caused this
Modification to be executed as of the day and year first above
written.
BENEFICIARY: GRANTOR:
WELLS FARGO BANK,
NATIONAL ASSOCIATION,
SUCCESSOR-BY-MERGER TO FIRST ELMER'S RESTAURANTS, INC., an
INTERSTATE BANK OF OREGON, N.A. Oregon corporation
By:__/s/Steve Day_____________ By:__/s/Bruce N. Davis_______
Steve Day
Vice President Title: President
OBTAIN NOTARY ACKNOWLEDGMENTS
1 0199304.01
Recording Requested By,
And After Recording,
Return To:
WELLS FARGO BANK,
NATIONAL ASSOCIATION
201 Third Street, 8th Floor
San Francisco, CA 94103
Attn: Team 1
- -----------------------------------------------------------------
FIRST MODIFICATION OF DEED OF TRUST AND
ASSIGNMENT OF RENTS AND LEASES
This First Modification of Deed of Trust (this
"Modification") is entered into as of February 17, 1999, by and
between Elmer's Restaurants, Inc., an Oregon corporation
("Grantor"), and WELLS FARGO BANK, NATIONAL ASSOCIATION
("Beneficiary").
RECITALS
This Modification is entered into upon the basis of the
following facts and understandings of the parties:
A. This Modification pertains to that certain Deed of
Trust and Assignment of Rents and Leases dated as of March 23,
1998, executed by Grantor to Wells Fargo Bank (Arizona), National
Association, as Trustee, in favor of Beneficiary, and recorded on
March 31, 1998, as Instrument No. 98029150, of the Official
Records of Ada County, Idaho ("Deed of Trust").
B. The Deed of Trust cites an erroneous maturity date, and
Grantor and Beneficiary have agreed to modify the Deed of Trust
to accurately reflect the maturity date of the secured
obligation.
NOW, THEREFORE, the parties hereto agree as follows:
The following provisions shall be deemed added to the Deed
of Trust or to change the applicable paragraph thereof as
follows:
1. Section 2.10(a) of the Deed of Trust is hereby modified to
reflect the correct date of the Note as March 30, 1998 and the
correct maturity date of the Note as February 15, 2008.
2. Delete the word "immediately" in the first sentence of
Paragraph 4.04 and replace it with the following:
"within thirty (30) days of the filing thereof"
3. Add the following to the end of the last sentence of
Paragraph 4.04:
" except such (a) as Grantor may in good faith contest
or as to which a bona fide dispute may arise, and (b) for which
Grantor has made provision, to Bank's reasonable satisfaction,
for eventual payment thereof in the event Grantor is obligated to
make such payment. Upon the failure of Grantor to do so, or at
any time following and during the continuation of any Default,
Beneficiary at its option may pay any of them and shall be the
sole judge of the legality or validity thereof and the amount
necessary to discharge the same."
4. Add the word "reasonably" to the first sentence of Paragraph
4.05 between the words "from time to time..." and "... require"
and to the second sentence of Paragraph 4.05 between the words
"form and substance..." and "... satisfactory".
5. Delete Paragraphs 4.06 and 4.07 and replace them with the
following:
" 4.06 Tax and Insurance Impounds. Following the
occurrence of any Default, at Beneficiary's option and upon its
demand, Grantor shall, until all Secured Obligations have been
paid in full, pay to Beneficiary monthly, annually or as
otherwise directed by Beneficiary an amount estimated by
Beneficiary to be equal to: (a) all taxes, assessments, levies
and charges imposed by any public or quasi-public authority or
utility company which are or may become a lien upon the Subject
Property and will become due for the tax year during which such
payment is so directed; and (b) premiums for fire, other hazard
and mortgage insurance next due. If Beneficiary determines that
amounts paid by Grantor are insufficient for the payment in full
of such taxes, assessments, levies and/or insurance premiums,
Beneficiary shall notify Grantor of the increased amount required
for the payment thereof when due, and Grantor shall pay to
Beneficiary such additional amount within thirty (30) days after
notice from Beneficiary. All amounts so paid shall not bear
interest, except to the extent and in the amount required by law.
So long as any Default exists, Beneficiary at its sole option may
apply all or any part of said amounts to any Secured Obligation
and/or to cure such Default, in which event Grantor shall be
required to restore all amounts so applied, as well as to cure
any Default not cured by such application. Once any and all
Defaults are cured, Beneficiary shall apply said amounts to the
payment of, or at Beneficiary's sole option release said funds to
Grantor for application to and payment of, such taxes,
assessments, levies, charges and insurance premiums. Grantor
hereby grants and transfers to Beneficiary a security interest in
all amounts so paid and held in Beneficiary's possession, and all
proceeds thereof, to secure the payment and performance of each
Secured Obligation. Upon assignment of this Deed of Trust,
Beneficiary shall have the right to assign all amounts collected
and in its possession to its assignee, whereupon Beneficiary and
Trustee shall be released from all liability with respect
thereto. The existence of said impounds shall not limit
Beneficiary's rights under any other provision of this Deed of
Trust or any other agreement, statute or rule of law. Within
ninety-five (95) days following full repayment of all Secured
Obligations (other than as a consequence of a foreclosure or
conveyance in lieu of foreclosure of the liens and security
interests securing any Secured Obligation), or at such earlier
time as Beneficiary in its discretion may elect, the balance of
all amounts collected and in Beneficiary's possession shall be
paid to Grantor, and no other party shall have any right of claim
thereto.
4.07 Damages; Insurance and Condemnation Proceeds.
(a) (i) All awards of damages and all other compensation
payable directly or indirectly by reason of a condemnation or
proposed condemnation (or transfer in lieu thereof) for public or
private use affecting the Subject Property; (ii) all other claims
and awards for damages to or decrease in value of the Subject
Property; (iii) all proceeds of any insurance policies payable by
reason of loss sustained to the Subject Property; and (iv) all
interest which may accrue on any of the foregoing, are all
absolutely and irrevocably assigned to and shall be paid to
Beneficiary. If the amount of the awards or proceeds is less
than $500,000.00, and repair or restoration of the Subject
Property is economically feasible, in the reasonable judgment of
Beneficiary, the net amount of such award or proceeds shall be
applied to repair or restoration, and if repair or restoration is
not economically feasible, then, at the absolute discretion of
Beneficiary, whether or not its security is or may be impaired,
but subject to applicable law if any, and without regard to any
requirement contained in any other Section hereof, Beneficiary
may apply all or any of the proceeds it receives to its expenses
in settling, prosecuting or defending any such claim and apply
the balance to the Secured Obligations in any order, and release
all or any part of the proceeds to Grantor upon any conditions
Beneficiary may impose. Beneficiary may commence, appear in,
defend or prosecute any assigned claim or action, and may adjust,
compromise, settle and collect all claims and awards assigned to
Beneficiary; provided however, that in no event shall Beneficiary
be responsible for any failure to collect any claim or award,
regardless of the cause of the failure. Beneficiary may
commence, appear in, defend or prosecute any assigned claim or
action, and may adjust, compromise, settle and collect all claims
and awards assigned to Beneficiary; provided however, that in no
event shall Beneficiary be responsible for any failure to collect
any claim or award, regardless of the cause of the failure.
(b) If such insurance or condemnation proceeds held by
Beneficiary are to be used by Grantor for repair or restoration,
Beneficiary may impose any conditions on such use as Beneficiary
reasonably deems necessary."
6. Add the words "to the best of Grantor's knowledge," to the
first sentence of Section 4.09(a) between the words "hereof,..."
and "... the Subject Property is" and to Section 4.09(c) between
the words "or..." and "...threatened".
7. Add the word "reasonable" to the first sentence of Section
4.09(d) between the words "without limitation,..." and "...
attorneys' fees" and the words "reasonably incurred" to the first
sentence of Section 4.12(a) between the words "expenses..." and
"... in the administration of".
8. Add to the end of the first sentence of Section 4.12(b):
"(except to the extent attributable to Bank's gross
negligence or intentional misconduct)"
9. Delete the words "including, without limitation, where
applicable," from the first sentence of Section 4.14 and replace
them with the word "excluding".
10. Add the following to the end of Section 5.01(a) and to
Section 5.01(c) immediately after the word "obligation..." and
immediately preceding the words "..., or any defined event of
default":
"(after the expiration of any applicable notice or cure
periods)"
The real property and the whole thereof described in the
Deed of Trust shall remain subject to the lien, charge or
encumbrance of the Deed of Trust and nothing herein contained or
done pursuant hereto shall affect or be construed to affect the
liens, charges or encumbrances of the Deed of Trust, or the
priority thereof over other liens, charges or encumbrances, or to
release or affect the liability of any party or parties who may
now or hereafter be liable under or on account of said promissory
notes and/or the Deed of Trust.
All terms and conditions of the Deed of Trust not expressly
modified herein remain in full force and effect, without waiver
or amendment. This Modification and the Deed of Trust shall be
read together, as one document.
IN WITNESS WHEREOF, the parties hereto have caused this
Modification to be executed as of the day and year first above
written.
BENEFICIARY: GRANTOR:
WELLS FARGO BANK,
NATIONAL ASSOCIATION
ELMER'S RESTAURANTS, INC., an
Oregon corporation
By: __/s/Steve Day__________ By: __/s/Bruce N. Davis________
Steve Day
Vice President Title: President
OBTAIN NOTARY ACKNOWLEDGMENTS
5 0199305.01
RIDER TO DEED OF TRUST
This Rider is incorporated into and shall be deemed to amend
and supplement that certain Deed of Trust and Assignment of Rents
and Leases dated as of February 17, 1999, executed by the
undersigned, as Grantor, for the benefit of Wells Fargo Bank,
National Association, as Beneficiary (the "Deed of Trust").
The following provisions shall be deemed added to the Deed of
Trust or to change the applicable paragraph thereof as follows:
1. Add the following to Paragraph 2.01 of the Deed of Trust as
additional "Secured Obligations" defined in and secured by the
Deed of Trust, subject to all terms and conditions thereof:
(a) Payment to Beneficiary of all sums at any time owing
and performance of all other obligations arising under or in
connection with that certain promissory note dated as of February
17, 1999, in the original principal amount of Four Hundred Eighty
Thousand Dollars ($480,000.00), with interest as provided
therein, executed by Elmer's Restaurants, Inc. and payable to
Beneficiary or its order, and finally maturing on March 1, 2009,
together with the payment and performance of any other
indebtedness or obligations incurred in connection with the
credit accommodation evidenced by said promissory note, whether
or not specifically referenced therein.
(b) Payment to Beneficiary of all sums at any time owing and
performance of all other obligations arising under or in
connection with that certain promissory note dated as of February
17, 1999, in the original principal amount of Two Million Six
Hundred Thousand Dollars ($2,600,000.00), with interest as
provided therein, executed by Elmer's Restaurants, Inc. and
payable to Beneficiary or its order, and finally maturing on
September 1, 2004, together with the payment and performance of
any other indebtedness or obligations incurred in connection with
the credit accommodation evidenced by said promissory note,
whether or not specifically referenced therein.
(c) Payment to Beneficiary of all sums at any time owing and
performance of all other obligations arising under or in
connection with that certain promissory note dated as of December
21, 1995, in the original principal amount of One Million Three
Hundred Seventy-two Thousand Five Hundred Dollars
($1,372,500.00), with interest as provided therein, executed by
Elmer's Restaurants, Inc. and payable to Beneficiary or its
order, and finally maturing on January 1, 2006, together with the
payment and performance of any other indebtedness or obligations
incurred in connection with the credit accommodation evidenced by
said promissory note, whether or not specifically referenced
therein.
2. Delete the word "immediately" in the first sentence of
Paragraph 4.04 and replace it with the following:
"within thirty (30) days of the filing thereof"
2. Add the following to the end of the last sentence of
Paragraph 4.04:
" except such (a) as Grantor may in good faith contest
or as to which a bona fide dispute may arise, and (b) for which
Grantor has made provision, to Bank's reasonable satisfaction,
for eventual payment thereof in the event Grantor is obligated to
make such payment. Upon the failure of Grantor to do so, or at
any time following and during the continuation of any Default,
Beneficiary at its option may pay any of them and shall be the
sole judge of the legality or validity thereof and the amount
necessary to discharge the same."
3. Add the word "reasonably" to the first sentence of Paragraph
4.05 between the words "from time to time..." and "... require"
and to the second sentence of Paragraph 4.05 between the words
"form and substance..." and "... satisfactory".
4. Delete Paragraphs 4.06 and 4.07 and replace them with the
following:
" 4.06 Tax and Insurance Impounds. Following the
occurrence of any Default, at Beneficiary's option and upon its
demand, Grantor shall, until all Secured Obligations have been
paid in full, pay to Beneficiary monthly, annually or as
otherwise directed by Beneficiary an amount estimated by
Beneficiary to be equal to: (a) all taxes, assessments, levies
and charges imposed by any public or quasi-public authority or
utility company which are or may become a lien upon the Subject
Property and will become due for the tax year during which such
payment is so directed; and (b) premiums for fire, other hazard
and mortgage insurance next due. If Beneficiary determines that
amounts paid by Grantor are insufficient for the payment in full
of such taxes, assessments, levies and/or insurance premiums,
Beneficiary shall notify Grantor of the increased amount required
for the payment thereof when due, and Grantor shall pay to
Beneficiary such additional amount within thirty (30) days after
notice from Beneficiary. All amounts so paid shall not bear
interest, except to the extent and in the amount required by law.
So long as any Default exists, Beneficiary at its sole option may
apply all or any part of said amounts to any Secured Obligation
and/or to cure such Default, in which event Grantor shall be
required to restore all amounts so applied, as well as to cure
any Default not cured by such application. Once any and all
Defaults are cured, Beneficiary shall apply said amounts to the
payment of, or at Beneficiary's sole option release said funds to
Grantor for application to and payment of, such taxes,
assessments, levies, charges and insurance premiums. Grantor
hereby grants and transfers to Beneficiary a security interest in
all amounts so paid and held in Beneficiary's possession, and all
proceeds thereof, to secure the payment and performance of each
Secured Obligation. Upon assignment of this Deed of Trust,
Beneficiary shall have the right to assign all amounts collected
and in its possession to its assignee, whereupon Beneficiary and
Trustee shall be released from all liability with respect
thereto. The existence of said impounds shall not limit
Beneficiary's rights under any other provision of this Deed of
Trust or any other agreement, statute or rule of law. Within
ninety-five (95) days following full repayment of all Secured
Obligations (other than as a consequence of a foreclosure or
conveyance in lieu of foreclosure of the liens and security
interests securing any Secured Obligation), or at such earlier
time as Beneficiary in its discretion may elect, the balance of
all amounts collected and in Beneficiary's possession shall be
paid to Grantor, and no other party shall have any right of claim
thereto.
4.07 Damages; Insurance and Condemnation Proceeds.
(a) (i) All awards of damages and all other
compensation payable directly or indirectly by reason of a
condemnation or proposed condemnation (or transfer in lieu
thereof) for public or private use affecting the Subject
Property; (ii) all other claims and awards for damages to or
decrease in value of the Subject Property; (iii) all proceeds of
any insurance policies payable by reason of loss sustained to the
Subject Property; and (iv) all interest which may accrue on any
of the foregoing, are all absolutely and irrevocably assigned to
and shall be paid to Beneficiary. If the amount of the awards or
proceeds is less than $500,000.00, and repair or restoration of
the Subject Property is economically feasible, in the reasonable
judgment of Beneficiary, the net amount of such award or proceeds
shall be applied to repair or restoration, and if repair or
restoration is not economically feasible, then, at the absolute
discretion of Beneficiary, whether or not its security is or may
be impaired, but subject to applicable law if any, and without
regard to any requirement contained in any other Section hereof,
Beneficiary may apply all or any of the proceeds it receives to
its expenses in settling, prosecuting or defending any such claim
and apply the balance to the Secured Obligations in any order,
and release all or any part of the proceeds to Grantor upon any
conditions Beneficiary may impose. Beneficiary may commence,
appear in, defend or prosecute any assigned claim or action, and
may adjust, compromise, settle and collect all claims and awards
assigned to Beneficiary; provided however, that in no event shall
Beneficiary be responsible for any failure to collect any claim
or award, regardless of the cause of the failure. Beneficiary
may commence, appear in, defend or prosecute any assigned claim
or action, and may adjust, compromise, settle and collect all
claims and awards assigned to Beneficiary; provided however, that
in no event shall Beneficiary be responsible for any failure to
collect any claim or award, regardless of the cause of the
failure.
(b) If such insurance or condemnation proceeds held by
Beneficiary are to be used by Grantor for repair or restoration,
Beneficiary may impose any conditions on such use as Beneficiary
reasonably deems necessary."
5. Add the words "to the best of Grantor's knowledge," to the
first sentence of Section 4.09(a) between the words "hereof,..."
and "... the Subject Property is" and to Section 4.09(c) between
the words "or..." and "...threatened".
6. Add the word "reasonable" to the first sentence of Section
4.09(d) between the words "without limitation,..." and "...
attorneys' fees" and the words "reasonably incurred" to the first
sentence of Section 4.12(a) between the words "expenses..." and
"... in the administration of".
7. Add to the end of the first sentence of Section 4.12(b):
"(except to the extent attributable to Bank's gross
negligence or intentional misconduct)"
8. Delete the words "including, without limitation, where
applicable," from the first sentence of Section 4.14 and replace
them with the word "excluding".
9. Add the following to the end of Section 5.01(a) and to
Section 5.01(c) immediately after the word "obligation..." and
immediately preceding the words "..., or any defined event of
default":
"(after the expiration of any applicable notice or cure
periods)"
IN WITNESS WHEREOF, this Rider has been executed as of the
same date as the Deed of Trust.
ELMER'S RESTAURANTS, INC.
By: __/s/Bruce N. Davis____
Title: President
3 0199306.01
Recording Requested By,
And After Recording,
Return To:
WELLS FARGO BANK,
NATIONAL ASSOCIATION
201 Third Street, 8th Floor
San Francisco, CA 94103
Attn: Team 1
- -----------------------------------------------------------------
FIRST MODIFICATION OF COMMERCIAL DEED OF TRUST
GRANTOR (Grantor): Elmer's Restaurants, Inc., an Oregon
corporation
GRANTEE (Beneficiary): Wells Fargo Bank, National Association,
Successor-By-Merger to First Interstate Bank of Oregon, N.A.
GRANTEE (Trustee): Ticor Title Insurance Company
REFERENCE NO. OF DEED OF TRUST: 9512220255
This First Modification of Commercial Deed of Trust (this
"Modification") is entered into as of February 17, 1999, by and
between ELMER'S RESTAURANTS, INC., an Oregon corporation
("Grantor"), and WELLS FARGO BANK, NATIONAL ASSOCIATION,
SUCCESSOR-BY-MERGER TO FIRST INTERSTATE BANK OF OREGON, N.A.
("Beneficiary").
RECITALS
This Modification is entered into upon the basis of the
following facts and understandings of the parties:
A. This Modification pertains to that certain Commercial
Deed of Trust dated as of December 21, 1995, executed by Grantor
to Ticor Title Insurance Company, as Trustee, in favor of
Beneficiary, and recorded on December 22, 1995, under Recording
No. 9512220255, in Book 1183, at Page 3700, of the Records of
Pierce County, Washington ("Deed of Trust").
B. Certain changes are being made to the obligations
secured by the Deed of Trust, and additional obligations have
been or are to be incurred which are to be, secured by the Deed
of Trust, and Grantor and Beneficiary have agreed to modify the
Deed of Trust to reflect said changes and additional obligations
to be secured thereby.
NOW, THEREFORE, the parties hereto agree as follows:
1. The Deed of Trust is hereby modified to reflect as
indebtedness secured thereby and included in the definition of
Indebtedness therein, in addition to the Indebtedness described
in Sections(a) through (e) of the third paragraph thereof, and in
addition to the payment and performance of any other Indebtedness
defined therein or arising thereunder, the payment to Beneficiary
of all indebtedness and performance of all obligations evidenced
by and arising under:
(a) that certain promissory note dated as of February
17, 1999, executed by Elmer's Restaurants, Inc. and payable to
Beneficiary or its order in the principal amount of Two Million
Six Hundred Thousand Dollars ($2,600,000.00), together with
interest thereon;
(b) that certain promissory note dated as of February
17, 1999, executed by Elmer's Restaurants, Inc. and payable to
Beneficiary or its order in the principal amount of Four Hundred
Eighty Thousand Dollars ($480,000.00), together with interest
thereon;
(c) that certain promissory note dated as of February
17, 1999, executed by Elmer's Restaurants, Inc. and payable to
Beneficiary or its order in the principal amount of Two Hundred
Fifty Thousand Dollars ($250,000.00), together with interest
thereon;
and any such indebtedness or other obligations incurred under or
in connection with any credit accommodation evidenced by any of
such promissory notes, even if not specifically referenced
therein.
2. The Deed of Trust is hereby further modified to reflect
that certain changes have been made to the "Note" defined in the
Deed of Trust, as more fully described in that certain Credit
Agreement of even date herewith executed by and between Grantor
and Beneficiary.
3. The real property and the whole thereof described in
the Deed of Trust shall remain subject to the lien, charge or
encumbrance of the Deed of Trust and nothing herein contained or
done pursuant hereto shall affect or be construed to affect the
liens, charges or encumbrances of the Deed of Trust, or the
priority thereof over other liens, charges or encumbrances, or to
release or affect the liability of any party or parties who may
now or hereafter be liable under or on account of said promissory
notes and/or the Deed of Trust.
4. All terms and conditions of the Deed of Trust not
expressly modified herein remain in full force and effect,
without waiver or amendment. This Modification and the Deed of
Trust shall be read together, as one document.
IN WITNESS WHEREOF, the parties hereto have caused this
Modification to be executed as of the day and year first above
written.
BENEFICIARY: GRANTOR:
WELLS FARGO BANK,
NATIONAL ASSOCIATION,
SUCCESSOR-BY-MERGER TO FIRST ELMER'S RESTAURANTS, INC., an
INTERSTATE BANK OF OREGON, N.A. Oregon corporation
By: __/s/Steve Day_____________ By: __/s/Bruce N. Davis____
Steve Day
Vice President Title: President
OBTAIN NOTARY ACKNOWLEDGMENTS
ELMER'S RESTAURANTS, INC.
LIST OF SUBSIDIARIES
1. Elmer's Pancake & Steakhouse, Inc.
2. CBW Food Company, LLC
3. Grass Valley Ltd., Inc.
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000771214
<NAME> ELMER'S RESTAURANTS, INC.
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-01-1998
<PERIOD-END> MAR-31-1999
<CASH> 603,572
<SECURITIES> 0
<RECEIVABLES> 285,979
<ALLOWANCES> (5,000)
<INVENTORY> 372,584
<CURRENT-ASSETS> 1,531,544
<PP&E> 7,161,739
<DEPRECIATION> 278,917
<TOTAL-ASSETS> 13,046,684
<CURRENT-LIABILITIES> 1,871,490
<BONDS> 5,703,539
0
0
<COMMON> 4,746,520
<OTHER-SE> (47,865)
<TOTAL-LIABILITY-AND-EQUITY> 13,046,684
<SALES> 11,952,728
<TOTAL-REVENUES> 11,952,728
<CGS> 7,141,645
<TOTAL-COSTS> 10,907,427
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 458,804
<INCOME-PRETAX> 611,519
<INCOME-TAX> 185,000
<INCOME-CONTINUING> 290,512
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 290,512
<EPS-BASIC> 0.35
<EPS-DILUTED> 0.35
</TABLE>
