STOCK ESCROW AGREEMENT
This Stock Escrow Agreement (this "Agreement") is made and
entered into as of February 18, 1999 (the "Effective Date"), by
and among ELMER'S RESTAURANTS, INC., an Oregon corporation
("Elmer's"), the parties listed on Exhibit A attached hereto
(collectively, the "Escrow Indemnitors," and each individually,
an "Escrow Indemnitor"), ▇▇▇▇▇▇▇ ▇. Service as the representative
of the Escrow Indemnitors (the "Representative"), and ▇▇▇▇ ▇▇▇▇▇,
LLP, as escrow agent (the "Escrow Agent").
RECITALS
A. The Escrow Indemnitors are shareholders of CBW Inc., an
Oregon corporation ("CBW"). CBW, Elmer's and certain other
parties have entered into a Merger Agreement dated as of
February 18, 1999, (the "Merger Agreement"), pursuant to which
CBW shall be merged with Elmer's (the "Merger"), with Elmer's to
be the surviving corporation of the Merger. In the Merger, the
outstanding shares of CBW Common Stock ("CBW Stock") will be
converted into shares of Elmer's Common Stock, ("Elmer's Common
Stock").
B. The Merger Agreement provides that an aggregate of
220,000 shares of Elmer's Common Stock issued in respect of the
conversion of outstanding CBW Stock in the Merger will be
withheld from the Escrow Indemnitors and will be placed in an
escrow established in accordance with this Agreement to secure
the indemnification obligations under Section 10 of the Merger
Agreement.
C. The parties desire to enter into this Agreement to
establish the terms and conditions under which the escrow will be
established and maintained.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. CERTAIN DEFINED TERMS.
1.1 Terms Defined in Merger Agreement. Capitalized
terms used in this Agreement and not otherwise defined herein
shall have the same meanings given to such terms in the Merger
Agreement.
1.2 Escrow. As used herein, the "Escrow" means the
escrow and the Escrow Account (as defined in Section 3.1 below)
established pursuant to this Agreement in which the Escrowed
Property (as defined in Section 1.3 below) will be held to secure
indemnification obligations of the Escrow Indemnitors in
accordance with Section 10 of the Merger Agreement.
1.3 Escrowed Property. As used herein, the "Escrowed
Property" means, collectively: (a) 220,000 shares of Elmer's
Common Stock issued in respect of the conversion of all
outstanding shares of CBW Stock in the Merger (the "Escrow
Shares") and the Stock Powers (as defined in Section 3.1 below)
executed and delivered by the Escrow Indemnitors with respect to
such Escrow Shares; and (b) all other property (not including
dividends but including Distributions and Secondary Distributions
(as defined in Section 3.2 below)) other than dividends issued or
paid with respect to any Escrow Shares that are deposited in the
Escrow Account -- pursuant to this Agreement, all of which items
shall be deemed to be "Escrowed Property" upon deposit in the
Escrow Account. The number of Escrow Shares of each Escrow
Indemnitor that will be placed in the Escrow is shown in
Exhibit A hereto and will be equal to such Escrow Indemnitor's
Pro Rata Share (as defined in Section 2.1) of the Escrowed
Property unless Elmer's shall have received written instructions
requesting a different allocation among the Escrow Indemnitors.
1.4 Termination Date. "Termination Date" means the
one-year anniversary of the Closing Date of the Merger.
2. AGREEMENT.
2.1 Obligations of Escrow Indemnitors. As a material
inducement to Elmer's to enter into the Merger Agreement and
consummate the transactions contemplated thereby, the Escrow
Indemnitors agree to be expressly subject to the terms and
conditions of this Agreement:
(a) to establish the Escrow pursuant to this
Agreement to secure the indemnification obligations
under Section 10 of the Merger Agreement and to assume
such indemnification obligations;
(b) that in the event Elmer's or any of its
employees, agents, officers, directors, permitted
assigns and affiliates (hereinafter, collectively,
"Elmer's") incurs any costs, damages, expenses, and
liabilities (including reasonable attorneys' fees)
incurred or sustained in connection with or resulting
from (i) any breach of the representations and
warranties of CBW or the Escrow Indemnitors in the
Merger Agreement or (ii) the nonfulfillment or breach
of any covenant made by CBW or the Escrow Indemnitors
in the Merger Agreement all as provided in Section 10
of the Merger Agreement (the "Claims and Liabilities"),
the Escrowed Property (or a portion thereof) shall,
subject to the provisions of the Merger Agreement and
this Agreement, be transferred to Elmer's to compensate
Elmer's for such Claims and Liabilities, with the
portion of the Escrowed Property to be so transferred
to be pro rata as to each Claim and Liability among the
Escrow Indemnitors according to each Escrow
Indemnitor's proportionate share of the Escrowed
Property set forth on Exhibit A hereto (the "Pro Rata
Share");
(c) to appoint the Representative as the
Escrow Indemnitors' representative, attorney-in-fact
and agent for purposes of this Agreement to act for and
on behalf of each Escrow Indemnitor as provided herein,
and to the taking by the Representative of any and all
actions and the making of any decisions required or
permitted to be taken or made by the Representative on
the Escrow Indemnitors' behalf under this Agreement;
and
(d) to all of the other terms and conditions
of this Agreement.
3. FORMATION OF ESCROW ACCOUNTS.
3.1 Delivery and Deposit of Escrowed Property. Upon
the execution of this Agreement by all parties hereto:
(a) Elmer's will promptly deliver to the
Escrow Agent (in lieu of delivery to the Escrow
Indemnitors and subsequent delivery to the Escrow
Agent) the Escrow Shares in the form of duly authorized
and executed stock certificates issued in the
respective names of the Escrow Indemnitors,
representing each Escrow Indemnitor's Pro Rata Share of
the Escrow Shares; and
(b) each Escrow Indemnitor will promptly
deliver to the Escrow Agent duly executed Stock Powers
and Assignments Separate From Certificate for such
Escrow Indemnitor's Escrow Shares in the form of
Exhibit B ("Stock Powers"), signed in blank by such
Escrow Indemnitor.
The Escrow Agent agrees to accept delivery of the above-mentioned
Escrowed Property, which shall be clearly designated by Elmer's
as "Escrowed Property," and to hold the same in escrow in an
escrow account (the "Escrow Account"), subject to the terms and
conditions of this Agreement.
3.2 Distributions, Conversions, Voting and Rights of
Ownership. So long as the Escrow is in effect, distributions
(other than dividends paid in respect of such shares which shall
be distributed to the Escrow Indemnitors) of any kind (including
without limitation shares of Elmer's Common Stock issued in
connection with a subdivision or split of Elmer's Common Stock)
that are paid, issued or made by Elmer's in respect of the Escrow
Shares or that are issuable by Elmer's or a third party upon the
conversion or other exchange of Elmer's Common Stock in a merger,
consolidation or other transaction affecting the Elmer's Common
Stock (the "Distributions"), or in respect of any such
Distributions ("Secondary Distributions"), will be immediately
delivered to the Escrow Agent and will be held in the Escrow on
the same terms and conditions as those applied hereunder to the
Escrow Shares and the Escrow Indemnitors will promptly sign and
deliver to the Escrow Agent new Stock Powers or other applicable
instruments of transfer for such Distributions and/or Secondary
Distributions (duly executed in blank by the Escrow Indemnitors)
to be held in the Escrow as Escrowed Property pursuant to this
Agreement. As used herein, the terms "Escrowed Property"
includes all Distributions and Secondary Distributions on
Escrowed Property and the term "Escrow Shares" includes all
Distributions and Secondary Distributions on Escrowed Property
consisting of stock or other securities. The Escrow Indemnitors
will have the right to exercise any and all rights to vote the
Escrow Shares deposited in the Escrow Account for their account
so long as such Escrow Shares are held in the Escrow and have not
been released to Elmer's as provided herein and Elmer's will take
all steps necessary to allow the exercise of such rights. While
the stock certificates representing, and Stock Powers for, Escrow
Shares remain in the Escrow Agent's possession pursuant to this
Agreement, the Escrow Indemnitors, will (subject to the
provisions of Sections 3.3 and 3.4 below) retain and be able to
exercise all other incidents of ownership of the Escrow Shares
that are not inconsistent with the terms and conditions of this
Agreement. If reasonably requested to do so by Elmer's or the
Escrow Agent, each Escrow Indemnitor shall promptly execute and
deliver to the Escrow Agent (or to Elmer's, as to Escrow Shares
that are released to Elmer's as provided herein) replacement
Stock Powers for any Escrow Shares or other shares of stock or
securities that are or become Escrowed Property. If requested by
Elmer's, due to the failure of any Escrow Indemnitor to promptly
execute and deliver replacement Stock Powers as herein provided,
the Representative, acting as attorney-in-fact for each Escrow
Indemnitor, shall promptly execute on behalf of such Escrow
Indemnitor, and deliver to the Escrow Agent, replacement Stock
Powers for any Escrow Shares or other shares of stock or
securities that are or become Escrowed Property.
3.3 No Transfer or Encumbrance. Except to the extent
expressly permitted by the provisions of this Section 3.3, no
Escrowed Property or any beneficial interest therein may be sold,
assigned, pledged, encumbered or otherwise transferred (including
without limitation by operation of law, other than a conversion
of shares in a merger or consolidation) by any Escrow Indemnitor
or be taken or reached by any legal or equitable process in
satisfaction of any debt or other liability of an Escrow
Indemnitor (other than such Escrow Indemnitor's obligations under
this Agreement) prior to the delivery and release to the Escrow
Indemnitors of the Escrowed Property by the Escrow Agent in
accordance with the provisions of Section 5 hereof. Provided,
however, an Escrow Indemnitor may transfer its share of the
Escrowed Property hereunder so long as such transfer is to
another Escrow Indemnitor or is by gift or upon death or
permanent incapacity to his guardian, conservator, executor,
administrator, trustees or beneficiaries under his will, spouse,
children, stepchildren, grandchildren, parents, siblings or legal
dependents, to a trust of which the beneficiary or beneficiaries
of the corpus and the income shall be such a person and all such
persons agree to be bound by the terms hereof or to partners of
an Escrow Indemnitor that is a partnership, provided that all of
such partners agree to be bound by the terms hereof.
3.4 Treatment of Escrowed Property. The Escrowed
Property shall be held by the Escrow Agent and shall not be
subject to any lien, attachment, trustee process or any other
judicial process of any creditor of any party hereto.
4. ADMINISTRATION OF ESCROW ACCOUNT. The Escrow Agent
shall administer the Escrow Account as follows:
4.1 Claim Notice. If Elmer's asserts a claim for
indemnification under Section 10 of the Merger Agreement on or
prior to the Termination Date, then Elmer's shall promptly give
written notice of such claim (a "Claim Notice"), including a copy
of such claim and/or process and all legal pleadings in
connection therewith, to the Representative and the Escrow Agent
in accordance with Section 12 hereof. Each Claim Notice shall
state the amount of claimed Claims and Liabilities (the "Claimed
Amount") and the basis for such claim. Elmer's shall assert any
claim for indemnification promptly following its discovery of the
facts giving rise to such claim and in no event more than
sixty (60) days from such discovery so long as such period does
not extend beyond the Termination Date of this Agreement.
4.2 Response Notice. Within thirty (30) days after
delivery of a Claim Notice to the Representative, the
Representative shall give to Elmer's, with a copy to the Escrow
Agent, a written response (the "Response Notice") in which the
Representative shall either:
(a) agree that such portions of the Escrowed
Property having a value (computed in accordance with
Section 4.4 below) equal to the full Claimed Amount may
be released from the Escrow Account and delivered to
Elmer's; or
(b) agree that a portion of the Escrowed
Property having a value (computed in accordance with
Section 4.4 below) equal to a specified part, but not
all, of the Claimed Amount (the "Agreed Amount") may be
released from the Escrow Account to Elmer's; or
(c) contest that any of the Escrowed
Property may be released from the Escrow Account to
Elmer's.
The Representative may contest the release of Escrowed
Property only based upon a good faith belief that all or such
portion of the Claimed Amount does not constitute Claims and
Liabilities (or that there is a valid defense to such claims and
liabilities), or does not constitute the actual amount of Claims
and Liabilities incurred, for which Elmer's is entitled to
indemnification under Section 10 of the Merger Agreement. If no
Response Notice is delivered by the Representative within such
thirty (30) day period, then the Representative shall be deemed
to have agreed that the full Claimed Amount may be released and
delivered from the Escrow Account to Elmer's.
4.3 Release Without Contest.
(a) If in his Response Notice the
Representative agrees (or if the Representative fails
to deliver a Response Notice within the required time
period and as such is deemed to have agreed) that the
Escrowed Property having a value (computed in
accordance with Section 4.4 below) equal to the full
Claimed Amount may be released from the Escrow Account
to Elmer's, then the Escrow Agent shall promptly
thereafter deliver to Elmer's from the Escrow Account
Escrowed Property having a value (computed in
accordance with Section 4.4 below) equal to the Claimed
Amount (or such lesser amount as is then held in the
Escrow Account).
(b) If the Representative in the Response
Notice agrees that Escrowed Property having a value
(computed in accordance with Section 4.4 below) equal
to the Agreed Amount may be released from the Escrow
Account to Elmer's in the respective amounts set forth
in the Response Notice, then the Escrow Agent shall
promptly thereafter deliver to Elmer's such Agreed
Amount or such lesser amount as is then held in the
Escrow Account, and the provisions of Section 5 shall
apply. The amounts of Escrowed Property equal to the
Agreed Amount that are to be released by the Escrow
Agent to Elmer's from the Escrow Account under this
Section shall be in such proportions of Escrow Shares
and other Escrowed Property as may be requested by the
Representative (subject to the availability of such
type(s) of Escrowed Property at such time).
4.4 Value of Escrowed Property. For purposes of
determining the amount of Escrowed Property to be delivered out
of the Escrow to Elmer's as all or part of any Claimed Amount
hereunder and determining the value of any Escrowed Property for
any other purpose hereunder (a) Escrowed Property that is cash
will be deemed to have a value equal to the amount of such cash
in U.S. Dollars; (b) shares of Elmer's Common Stock will be
deemed to have a value per share equal to the average closing
price of the shares as traded on Nasdaq during the ten (10)
trading days prior to the date of delivery of the Escrowed
Property by the Escrow Agent to Elmer's which average closing
price shall be evidenced by a certificate delivered to the Escrow
Agent by Elmer's on the date of delivery and executed by the
Chief Financial Officer of Elmer's; (c) all other Escrowed
Property shall be deemed to have a value that is equal to its
then-current market value (if such value is readily deter
minable), which market value and the basis for determination
shall be evidenced by a certificate delivered to the Escrow Agent
by Elmer's on the date of delivery and executed by the Chief
Financial Officer of Elmer's; and (d) Escrowed Property that has
no readily determinable market value will be deemed to have the
value determined by the mutual agreement of Elmer's and the
Representative, or, in the absence of such an agreement by the
decision of any arbitrator deciding the claim in question under
Section 5.
5. ARBITRATION OF CONTESTED RELEASES.
5.1 Arbitration of Disputes over Escrow Release. If
the Representative gives a Response Notice contesting the release
of Escrowed Property equal to all or any part of the Claimed
Amount set forth in the applicable Claim Notice, as provided in
Section 4.2 above (the "Contested Amount"), then such
dispute shall be settled by mandatory binding arbitration in
Portland, Oregon in accordance with the provisions of this
Section 5 and the Commercial Arbitration Rules of the American
Arbitration Association then in effect (the "AAA Rules"), unless
Elmer's and the Representative settle such dispute in a written
settlement agreement executed by Elmer's and the Representative
on behalf of and binding on each of the Escrow Indemnitors and
Elmer's. The provisions of this Section 5 shall prevail and
govern in the event of any conflict between such provisions and
the AAA Rules.
5.2 Arbitrator. Unless otherwise mutually agreed by
Elmer's and the Representative, the arbitration will be heard and
decided by a single arbitrator who shall be selected as provided
in Section 5.3.
5.3 Selection of Arbitrator. Elmer's and the
Representative will have the authority to select the arbitrator
from a list provided by the American Arbitration Association of
arbitrators who are attorneys-at-law who practice in the area of
business law or commercial litigation; provided that the
arbitrator cannot have represented either Elmer's or any of the
Escrow Indemnitors in any previous matter. If Elmer's and the
Representative cannot agree on the selection of the arbitrator
from the above list of arbitrators, then the arbitrator shall be
chosen by the American Arbitration Association. Elmer's and
Representative will provide notice to the Escrow Agent of the
identity of the arbitrator not more than fifteen (15) days after
the selection of the arbitrator.
5.4 Time for Arbitration Decision: Effect. The
arbitrator shall decide each dispute to be arbitrated pursuant
hereto within ninety (90) days after the selection of the
arbitrator. The arbitrator's decision shall relate solely to
whether Elmer's is entitled to receive the Contested Amount (or a
portion thereof) pursuant to the applicable terms of the Merger
Agreement and this Agreement. The final decision of the
arbitrator shall provide directions to the Escrow Agent as
provided in Section 5.5 and shall be furnished to Elmer's, the
Representative, and the Escrow Agent in writing and shall
constitute a conclusive determination of all issues in question,
binding upon Elmer's, the Representative, the Escrow Indemnitors
and the Escrow Agent and shall not be contested by any of them.
Upon the conclusion of any arbitration proceedings hereunder, the
arbitrator will render findings of fact and conclusions of law
and a written opinion setting forth the basis and reasons for any
decision reached and instructions (if applicable) to the Escrow
Agent as to the release of Escrowed Property and will deliver
such documents to Elmer's, the Representative and the Escrow
Agent, along with a signed copy of the award and the instructions
(if any) to the Escrow Agent. The arbitrator chosen in
accordance with these provisions will not have the power to
alter, amend or otherwise affect the terms of this Section 5 or
the provisions of this Agreement or the Merger Agreement.
Judgment upon the award rendered by the arbitrator may be entered
in any court having competent jurisdiction over the subject
matter thereof.
5.5 Actions of Escrow Agent Pending Arbitration.
After delivery of a Response Notice in which any or all of the
Claimed Amount is contested by the Representative, the Escrow
Agent shall continue to hold in the Escrow Account Escrowed
Property having a value (computed in accordance with Section 4.4
of this Agreement) sufficient to cover the Contested Amount (but
only to the extent that there is Escrowed Property remaining in
the Escrow after payment to Elmer's of all uncontested Claimed
Amounts), notwithstanding the occurrence of the Termination Date,
until: (a) delivery of a copy of a settlement agreement executed
by Elmer's and the Representative setting forth instructions to
the Escrow Agent as to the release of such Escrowed Property that
shall be made with respect to the Contested Amount; (b) delivery
of a copy of the final decision of the arbitrator setting forth
instructions to the Escrow Agent as to the release of Escrowed
Property that shall be made with respect to the Contested Amount;
or (c) receipt of a court order or judgment directing Escrow
Agent to act with respect to the distribution of any Escrowed
Property. The Escrow Agent shall thereupon release Escrowed
Property from the Escrow Account (to the extent Escrowed Property
is then held in the Escrow Account) in accordance with such
settlement agreement, arbitrator's instructions, court order or
judgment, as applicable. The Escrowed Property released by the
Escrow Agent to Elmer's from the Escrow Account shall be in such
proportions of Escrow Shares and/or other Escrowed Property, as
may be requested by the Representative (subject to the
availability of such type(s) of Escrowed Property at such time).
5.6 No Responsibility of Escrow Agent to Resolve
Dispute. If any controversy arises involving any party to this
Agreement (other than the Escrow Agent) concerning the subject
matter of this Agreement, including a Contested Amount, the
Escrow Agent will not be required to determine the controversy or
to take any action until such dispute has been resolved.
5.7 Right to Counsel. Elmer's (on behalf of itself
and any of its employees, agents, officers, directors, permitted
assigns and affiliates) and the Representative shall each have
the right to employ its or his own legal counsel to represent
such person in any disputes arising under this Agreement.
5.8 Compensation of Arbitrator. The arbitrator will
be compensated for his or her services at a rate to be determined
by the parties or by the American Arbitration Association, but
based upon reasonable hourly or daily consulting rates for the
arbitrator in the event the parties are not able to agree upon
his or her rate of compensation. Elmer's, on the one hand, and
the Escrow Indemnitors, on the other hand, will each pay 50% of
the initial compensation to be paid to the arbitrator in any such
arbitration and 50% of the costs of transcripts and other normal
and regular expenses of the arbitration proceedings
(collectively, the "Arbitration Expenses"), with the portion of
such Arbitration Expenses required to be borne by the Escrow
Indemnitors to be shared by the Escrow Indemnitors based on the
Escrow Indemnitor's respective Pro Rata Shares.
5.9 Burden of Proof. For any claim submitted to an
arbitration hereunder, the burden of proof will be as it would be
if the claim were litigated in a judicial proceeding.
5.10 Exclusive Remedy. Except to the extent provided
in Section 10 of the Merger Agreement, and except as specifically
otherwise provided in this Agreement, arbitration in accordance
with this Section 5 will be the sole and exclusive remedy of the
parties for any dispute arising over the release of Escrowed
Property from the Escrow hereunder.
6. PAYMENT OF REMAINING ESCROWED PROPERTY TO CBW
SHAREHOLDERS.
6.1 On Termination Date. On the Termination Date, the
Escrow Agent shall deliver to Elmer's and the Representative a
statement of the value (computed in accordance with Section 4.4
hereof) of the remaining balance of the Escrowed Property then
remaining in the Escrow Account, and the total amount of all
claims made pursuant to Section 4 or 5 hereof in connection with
the Escrow Account and not as of then resolved and paid (the
excess, if any, of such remaining balance in such Escrow Account
over the total amount of such claims against such Escrow Account
shall be referred to as the "Final Escrow Balance"). Elmer's and
the Representative each shall review the accuracy of the Final
Escrow Balance and notify the Escrow Agent and each other of any
asserted discrepancy or of the absence of any discrepancy within
ten (10) business days of receipt of the foregoing statement.
Upon the Escrow Agent's notification of no discrepancy by Elmer's
and the Representative within the ten (10) business day period
specified in the preceding sentence, then within twenty (20)
business days after receipt by Elmer's and the Representative of
such statement, the Escrow Agent shall deliver to each of the
Escrow Indemnitors an amount of the Escrowed Property
representing such Escrow Indemnitor's Pro Rata Share of the Final
Escrow Balance constituting Escrowed Property, free and clear of
the Escrow created by this Agreement. If either Elmer's or the
Representative notifies the Escrow Agent of a discrepancy, any
dispute with respect to such discrepancy shall be resolved by
mandatory binding arbitration as provided in Section 5. After
the last claim shall have been resolved pursuant to Sections 4
and 5 hereof and all Escrowed Property deliverable to Elmer's
upon the resolution of all such claims has been delivered to
Elmer's, the remaining balance, if any, of the Escrowed Property
shall be delivered by the Escrow Agent to each Escrow Indemnitor
pro rata, based on the Escrow Indemnitor's Pro Rata Share, free
and clear of the Escrow created by this Agreement.
6.2 Distribution of the Escrowed Property. All
distributions of Escrowed Property to the Escrow Indemnitors, to
be made by the Escrow Agent under this Section shall be made so
that each Escrow Indemnitor receives his or her Pro Rata Share of
the total amount of each type of property (principally Elmer's
Common Stock) constituting the Escrowed Property held in the
Escrow immediately before such distribution.
6.3 Delivery Methods. Delivery of Escrowed Property
by the Escrow Agent shall be by registered mail or by nationally
recognized overnight courier. The Escrow Agent shall not be
responsible for obtaining insurance in connection with such
delivery.
6.4 Power to Transfer Escrow Shares and Distributions.
The Escrow Agent is hereby granted the power to effect any
transfer of Escrowed Property permitted or required by this
Agreement in accordance with its terms.
7. FEES AND EXPENSES OF ESCROW AGENT AND REPRESENTATIVE.
7.1 Representative. Elmer's shall pay the fees of the
Escrow Agent, based on an hourly rate of $200 per hour, for the
services to be rendered by the Escrow Agent hereunder, provided,
however, that any extraordinary fees and expenses referred to in
Section 7.3 below, including, without limitation, any fees or
expenses incurred by the Escrow Agent in connection with a
dispute over the distribution of Escrowed Property will be paid
fifty percent (50%) by Elmer's and fifty percent (50%) by the
Escrow Indemnitors.
7.2 Representative. The Representative will not be
entitled to receive any compensation from Elmer's in connection
with this Agreement; however, the Escrow Indemnitors shall
indemnify and promptly reimburse the Representative for all
reasonable expenses actually incurred by the Representative in
connection with the performance of his duties hereunder
(including, but not limited to, all losses, costs and expenses
which the Representative may incur as a result of involvement in
any legal proceedings arising from the performance of his duties
hereunder) pro rata according to the Escrow Indemnitors'
respective Pro Rata Shares. Elmer's shall not have any
obligation to reimburse the Representative for any expenses
whatsoever.
7.3 Escrow Agent's Extraordinary Fees. Elmer's and
the Representative hereby acknowledge that all fees and usual
charges for services of the Escrow Agent hereunder shall be
considered compensation for ordinary services as contemplated by
this Agreement. In the event that the Escrow Agent renders any
service not provided for in this Agreement, or if the parties
hereto request a substantial modification of the terms of this
Agreement, or if any controversy arises and the Escrow Agent is
made a party to any litigation pertaining to this Agreement or
its subject matter, then the Escrow Agent shall be reasonably
compensated for such extraordinary services and reimbursed for
all reasonable costs, attorney's fees and expenses incurred by
the Escrow Agent in rendering such extraordinary services, which
costs, fees and expenses shall be borne by Elmer's and the Escrow
Indemnitors as provided in Section 7.1 above.
8. LIABILITY AND AUTHORITY OF REPRESENTATIVE;
SUCCESSORS AND ASSIGNEES.
8.1 Limits on Liability. The Representative shall
incur no liability with respect to any action taken or suffered
by him in his capacity as Representative in reliance upon any
note, direction, instruction, consent, statement or other
documents believed by him to be genuinely and duly authorized,
nor for other action or inaction except his own willful
misconduct or gross negligence. The Representative may, in all
questions arising under this Escrow Agreement, rely on the advice
of counsel, and for anything done, omitted or suffered in good
faith by the Representative based on such advice, the
Representative shall not be liable to anyone.
8.2 Successor Representatives. In the event of the
death or permanent disability of the Representative, or the
resignation of Representative as the representative of the Escrow
Indemnitors hereunder, a successor Representative shall be
elected by a majority vote of the Escrow Indemnitors, with each
such Escrow Indemnitor (or his or her successors or assigns) to
be given a weighted vote based on such Escrow Indemnitor's
Pro Rata Share. Each successor Representative shall have all of
the power, authority, rights and privileges conferred by this
Agreement upon the original Representative, and the term
"Representative" as used herein shall be deemed to include each
successor Representative. Unless and until the Escrow Agent
receives written notice from all of the Escrow Indemnitors
identifying a new representative, the Escrow Agent shall at all
times be entitled to assume that the Representative set forth in
this Agreement is the Representative hereunder. Upon receipt of
such written notice, the Escrow Agent shall be fully protected
and not be held liable for any instructions received by the new
representative of the Escrow Indemnitors.
8.3 Authority of Representative. The Representative
shall have full power and authority to represent the Escrow
Indemnitors and their successors with respect to all matters
arising under this Agreement or related to the subject matter
hereof and all actions taken by the Representative hereunder
shall be binding upon each and all of the Escrow Indemnitors and
their successors, as if expressly confirmed and ratified in
writing by each of them. Without limiting the generality of the
foregoing, the Representative shall have full power and authority
to interpret all of the terms and provisions of this Agreement,
to compromise and settle any claims asserted hereunder and to
authorize payments to be made with respect thereto, on behalf of
the Escrow Indemnitors and their successors. The Escrow
Indemnitors (with respect to the Escrowed Property, in their
capacity as Escrow Indemnitors) have consented to the appointment
of the Representative as representative of the Escrow Indemnitors
(with respect to the Escrowed Property, in their capacity as
Escrow Indemnitors) and as the attorney-in-fact and agent for and
on behalf of each Escrow Indemnitor for the purposes of taking
actions and executing agreements and documents on behalf of any
of the Escrow Indemnitors as provided in this Agreement, and,
subject to the express limitations set forth below, the taking by
the Representative of any and all actions and the making of any
decisions required or permitted to be taken by him under this
Agreement, including, but not limited to, the exercise of the
power to authorize delivery to Elmer's of Escrowed Property and
to take all actions necessary in the judgment of the
Representative for the accomplishment of the foregoing and all of
the other terms, conditions and limitations of this Agreement.
The Representative will have unlimited authority and power to act
on behalf of each Escrow Indemnitor with respect to this
Agreement and the disposition, settlement or other handling of
all claims, rights or obligations arising under this Agreement
with respect to Escrowed Property so long as all Escrow
Indemnitors are treated in the same manner (unless the Escrow
Indemnitors otherwise consent). The Escrow Indemnitors will be
bound by all actions taken by the Representative in connection
with this Agreement, and Elmer's will be entitled to rely on any
action or decision of the Representative.
9. LIMITATION OF ESCROW AGENT'S RESPONSIBILITY AND
LIABILITY.
9.1 Limitation of Responsibility. The Escrow Agent's
duties are limited to those set forth in this Agreement, and the
Escrow Agent, acting as such under this Agreement, is not charged
with knowledge of or any duties or responsibilities under any
other document or agreement, including, without limitation, the
Merger Agreement. The Escrow Agent may execute any of its powers
or responsibilities hereunder and exercise any rights hereunder
either directly or by or through its agents or attorneys.
Nothing in this Escrow Agreement will be deemed to impose upon
the Escrow Agent any duty to qualify to do business or to act as
a fiduciary or otherwise in any jurisdiction. The Escrow Agent
will not be responsible for, and will not be under a duty to
examine into or pass upon, the validity, binding effect,
execution or sufficiency of this Escrow Agreement or of any
agreement mandatory or supplemental hereto.
9.2 Limitation of Liability. The Escrow Agent will
incur no liability with respect to any action taken, not taken or
suffered by it in reliance upon any notice, direction, instruc
tion, consent, statement or other document believed by it to be
genuine and duly authorized, including, without limitation,
directions from any arbitrator selected in accordance with
Section 5.3, nor for any other action or inaction, except its own
willful misconduct or gross negligence. In all questions arising
under this Agreement, the Escrow Agent may rely on the advice of
counsel, and for anything done, omitted or suffered in good faith
by the Escrow Agent based on such advice, the Escrow Agent will
not be liable to anyone. The Escrow Agent will not be required
to take any action hereunder involving any expense unless the
payment of such expense is made or provided for in a manner
satisfactory to it. The Escrow Agent will not be liable for any
action taken or omitted to be taken by it in good faith unless a
court of competent jurisdiction determines that the Escrow
Agent's willful misconduct or gross negligence was the cause of
any loss to Elmer's, the Representative, any Escrow Indemnitor.
The Escrow Agent makes no representation or warranty with respect
to, and is not responsible for the validity of, the Escrow
Shares. The Escrow Agent is not responsible for the receipt of
any dividend or other distribution on behalf of any Escrow
Indemnitor or for the voting of or exercise of any other rights
with respect to the Escrow Shares. The Escrow Agent will have no
duty to solicit the delivery of any Escrowed Property. The
Escrow Agent will have no obligation with respect to the Escrowed
Property other than either to withhold the release of Escrowed
Property to the Escrow Indemnitors or to release Escrowed
Property to Elmer's, as the case may be, to the extent expressly
provided in this Agreement. The Escrow Agent will have no
obligations with respect to the investment of any cash that
becomes Escrowed Property except as expressly provided in
Section 3. Any dispute which may arise with respect to the
payment or ownership or right of possession of all or any part of
the Escrow or the Escrowed Property, or the duties of the Escrow
Agent hereunder, shall be settled pursuant to the provisions of
Section 5. The Escrow Agent shall be under no duty to institute
or defend any proceeding unless the subject of such proceeding is
part of its duties hereunder. In the event of any dispute
between the parties to this Escrow Agreement, or between any of
them and any other person, resulting in adverse claims or demands
being made upon any of the Escrow Property, or in the event that
Escrow Agent, in good faith, is in doubt as to what action it
should take hereunder, the Escrow Agent may, at its option, file
a suit as interpleader in a court of appropriate jurisdiction, or
refuse to comply with any claims or demands on it, or refuse to
take any other action hereunder, so long as such dispute shall
continue or such doubt shall exist. The Escrow Agent shall be
entitled to continue so to refrain from acting until (i) the
rights of all parties have been fully and finally adjudicated by
a court of appropriate jurisdiction or (ii) all differences and
doubt shall have been resolved by agreement among all of the
interested persons, and the Escrow Agent shall have been notified
thereof in writing signed by all such persons. The rights of the
Escrow Agent under this Section are cumulative of all other
rights which it may have by law or otherwise.
9.3 Indemnity. Elmer's and each of the Escrow
Indemnitors (each an "Indemnifying Party" and together the
"Indemnifying Parties"), each hereby jointly and severally
covenants and agrees to reimburse, indemnify and hold harmless
the Escrow Agent and its employees and agents from and against
any loss, damage or liability suffered, incurred by or asserted
against the Escrow Agent (including amounts paid in settlement of
any action, suit, proceeding, or claim brought or threatened to
be brought and including reasonable expenses of legal counsel)
arising out of, in connection with or based upon any act or
omission by the Escrow Agent relating in any way to this
Agreement or the Escrow Agent's services hereunder; provided,
however, that the liability of any Escrow Indemnitor shall be
limited to such Escrow Indemnitor's pro rata share of the
liability of all of the Escrow Indemnitors hereunder, based on
the number of shares of CBW stock held by such Escrow Indemnitor.
This indemnity will not apply to any such loss, damage or
liability arising from the gross negligence or willful misconduct
on the Escrow Agent's part. Anything in this Agreement to the
contrary notwithstanding, in no event will the Escrow Agent be
liable for special, indirect or consequential damage or loss of
any kind whatsoever (including but not limited to lost profits),
even if the Escrow Agent has been advised of the likelihood of
such loss or damage and regardless of the form of action.
9.4 Participation in Defense of the Escrow Agent.
Each Indemnifying Party may participate at its own expense in the
defense of any claim or action that may be asserted against the
Escrow Agent, and if the Indemnifying Parties so elect, the
Indemnifying Parties may assume the defense of such claim or
action; provided, however, that if there exists a conflict of
interest that would make it inappropriate for the same counsel to
represent both the Escrow Agent and the Indemnifying Parties, the
Escrow Agent's retention of separate counsel will be reimbursable
as provided in Section 9.3. The Escrow Agent's right to
indemnification hereunder will survive the Escrow Agent's
resignation or removal as escrow agent hereunder and will survive
the termination of this Agreement by lapse of time or otherwise.
9.5 Notice of Claims against Escrow Agent. The Escrow
Agent will notify each Indemnifying Party by letter, or by
telephone or telecopy confirmed by letter sent U.S. first class
mail, registered or certified, of any receipt by the Escrow Agent
of a written assertion of a claim against the Escrow Agent
related to this Agreement, or any action commenced against the
Escrow Agent, within ten (10) business days after the Escrow
Agent's receipt of written notice of such claim. However, the
Escrow Agent's failure to so notify each Indemnifying Party will
not operate in any manner whatsoever to relieve an Indemnifying
Party from any liability that it may have otherwise than on
account of this Section 9. In the event the Escrow Agent fails
to so notify each Indemnifying Party and an Indemnifying Party is
prejudiced thereby, then such Indemnifying Party will not have
liability to Escrow Agent under this Section 9.
10. SUCCESSOR ESCROW AGENT. In the event the Escrow
Agent becomes unavailable or unwilling to continue in its
capacity herewith, the Escrow Agent may resign at any time and be
discharged from its duties or obligations hereunder by giving a
written resignation to the parties to this Escrow Agreement,
specifying not less than thirty (30) days prior written notice of
the date when such resignation shall take effect; provided,
however, that no such resignation shall become effective until
the appointment of a successor Escrow Agent and acceptance of
such appointment by such successor Escrow Agent. Elmer's may
appoint a successor Escrow Agent without the consent of the
Representative so long as such successor is a bank with assets of
at least Fifty Million Dollars ($50,000,000) which has no direct
depository or lending relationship with Elmer's and which is
qualified to do business in the State of Oregon, and may appoint
any other successor Escrow Agent with the consent of the Repre
sentative, which shall not be unreasonably withheld. If, within
such notice period, Elmer's provides to the Escrow Agent written
instructions with respect to the appointment of a successor
Escrow Agent in accordance with this Section 10 and directions
for the transfer of any Escrowed Property then held by the Escrow
Agent to such successor, the Escrow Agent shall act in accordance
with such instructions and promptly transfer such Escrowed
Property to such designated successor. If no successor Escrow
Agent is appointed within sixty (60) days of the date specified
for the Escrow Agent's resignation to take effect, the Escrow
Agent shall have the right to apply to a court of competent
jurisdiction for such appointment at the expense of Elmer's.
Each successor Escrow Agent shall execute and deliver an
instrument accepting such appointment and shall, without further
acts, be vested in all the estates, properties, rights, powers
and duties of the Escrow Agent or any other predecessor Escrow
Agent as if originally named as Escrow Agent hereunder.
11. TERMINATION. This Agreement shall terminate upon the
earlier of (a) the Termination Date, or (b) the release by the
Escrow Agent of all of the Escrowed Property in accordance with
this Agreement. Notwithstanding any termination of this Escrow
Agreement, the provisions of Sections 7.1, 7.3 and 9.3 hereof
shall survive such termination and remain in full force and
effect.
12. NOTICES. All notices, requests, consents, and other
communications hereunder shall be in writing and shall be deemed
to have been properly given or made on the date personally
delivered or on the date mailed, by first class registered or
certified mail with postage prepaid, by private nationally
recognized courier service or by facsimile and confirmed, if
delivered, mailed, courier or facsimile to the respective parties
hereto at the following addresses:
If the Escrow Agent:
▇▇▇▇ ▇▇▇▇▇, LLP
▇▇▇ ▇.▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇.
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
If to Elmer's, to:
Elmer's Restaurants, Inc.
▇▇▇▇▇ ▇.▇. ▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
If to the Escrow Indemnitors and the Representative,
to:
▇▇▇▇▇▇▇ ▇. Service
c/o CBW Inc.
▇▇▇ ▇. ▇▇▇ ▇▇▇▇▇▇, #▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
Any party hereto may designate a different address by
providing written notice of such new address to the other parties
hereto.
13. MISCELLANEOUS.
13.1 Governing Law; Assigns. This Agreement will be
governed by and construed in accordance with the internal laws of
the State of Oregon without regard to conflict-of-law principles
and will be binding upon, and inure to the benefit of, the
parties hereto and their respective successors and permitted
assigns.
13.2 Counterparts. This Agreement may be executed in
two or more counterparts, each of which will be deemed an
original, but all of which together will constitute one and the
same instrument.
13.3 Entire Agreement; Severability. Except as
otherwise set forth in the Merger Agreement, this Agreement
constitutes the entire understanding and agreement of the parties
with respect to the subject matter of this Agreement and
supersedes all prior agreements or understandings, written or
oral, between the parties with respect to the subject matter
hereof. If any provision of this Agreement is held to be illegal
or unenforceable by a tribunal of competent jurisdiction, then
such provision shall not be voided, but shall be deemed modified
to the extent necessary to make such provision lawful and
enforceable, and the other provisions of this Agreement shall
remain in full force and effect.
13.4 Waivers. No waiver by any party hereto of any
condition or of any breach of any provision of this Agreement
will be effective unless in writing. No waiver by any party of
any such condition or breach, in any one instance, will be deemed
to be a further or continuing waiver of any such condition or
breach or a waiver of any other condition or breach of any other
provision contained herein.
13.5 Amendment. This Agreement may be amended by the
written agreement of Elmer's, the Escrow Agent and the
Representative, provided that, if the Escrow Agent does not agree
to an amendment agreed upon by Elmer's and the Representative,
the Escrow Agent will resign (which resignation shall be
effective immediately and, in any event, prior to the effective
date of the amendment) and Elmer's will appoint a successor
Escrow Agent in accordance with Section 10 hereof. No such
amendment may treat any one Escrow Indemnitor differently from
the other Escrow Indemnitors unless consented to in writing by
Escrow Indemnitors having beneficial ownership in a majority of
the outstanding Escrowed Property, including the consent of any
Escrow Indemnitor who is to be treated differently.
[Remainder of Page Left Deliberately Blank]
IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the day and year first above written.
ELMER'S: ELMER'S RESTAURANTS, INC.,
an Oregon corporation
By:__/s/_BRUCE N.
DAVIS___________________
Its:__PRESIDENT___________________________
ESCROW AGENT: ▇▇▇▇ ▇▇▇▇▇ LLP
By:___/s/_JACK W.
SCHIFFERDECKER_________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇.,
Partner
REPRESENTATIVE: __/s/_WILLIAM W. SERVICE_________________
▇▇▇▇▇▇▇ ▇. Service
ESCROW INDEMNITORS: __/s/_BRUCE N.
DAVIS_____________________
▇▇▇▇▇ ▇. ▇▇▇▇▇
__/s/_WILLIAM W.
SERVICE_________________
▇▇▇▇▇▇▇ ▇. Service
__/s/_GREGORY ▇▇▇▇▇
_________________
▇▇▇▇▇▇▇ ▇▇▇▇▇
__/s/_LINDA E.
BOLTON____________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Trustee Under
Restated Trust Agreement Dated
6/8/98
[Signatures Continued On Next Page]
__/s/_CORDY
JENSEN_______________________
▇▇▇▇▇ ▇▇▇▇▇▇
__/s/_KEN N.
BOETTCHER___________________
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
__/s/_KAREN
BROOKS_______________________
▇▇▇▇▇ ▇▇▇▇▇▇
__/s/_THOMAS C.
CONNOR___________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
__/s/_DONALD
WOOLLEY_____________________
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
[SCHEDULE OMITTED]