EXHIBIT VIII
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Execution Copy
SUPPORT AND INDEMNIFICATION AGREEMENT
BETWEEN
GE INVESTMENT PRIVATE PLACEMENT PARTNERS II,
A DELAWARE LIMITED PARTNERSHIP
AND
REPECHAGE RESTAURANT GROUP LTD.
January 22, 2007
TABLE OF CONTENTS
ARTICLE 1 DEFINITIONS AND PRINCIPLES OF INTERPRETATION ...................... 2
1.1 Definitions ................................................... 2
1.2 Number and Gender ............................................. 6
1.3 Inclusive Terminology ......................................... 6
1.4 Interpretation not Affected by Headings, etc .................. 6
1.5 Date For Any Action ........................................... 6
1.6 Currency ...................................................... 6
1.7 Accounting Matters ............................................ 6
1.8 Statutory References .......................................... 7
1.9 Knowledge ..................................................... 7
1.10 Entire Agreement .............................................. 7
1.11 Schedules ..................................................... 7
ARTICLE 2 THE ARRANGEMENT ................................................... 7
2.1 Agreement Regarding Arrangement ............................... 7
ARTICLE 3 AGREEMENTS REGARDING TRANSFER AND VOTING .......................... 7
3.1 Agreement not to Dispose prior to Arrangement ................. 7
3.2 Voting in Respect of Arrangement .............................. 8
ARTICLE 4 REPRESENTATIONS AND WARRANTIES .................................... 8
4.1 Representations and Warranties of the Shareholder Regarding
Shareholder Matters ........................................... 8
4.2 Indemnification Rights Regarding Certain E&C Matters .......... 10
4.3 Representations and Warranties of Acquisitionco ............... 10
ARTICLE 5 COVENANTS AND ACKNOWLEDGEMENT ..................................... 11
5.1 Covenants of Shareholder regarding Arrangement ............... 11
5.2 Covenant of Shareholder Regarding Escrow Amount .............. 12
5.3 Covenants of Acquisitionco ................................... 13
5.4 Acknowledgement of Shareholder ............................... 13
ARTICLE 6 IDEMNIFICATION .................................................. 13
6.1 Indemnification by the Shareholder ........................... 13
6.2 Indemnification by the Acquisitionco.......................... 14
6.3 Indemnification Procedure: Third Party Claims ................ 14
6.4 Interest...................................................... 17
6.5 Expiry of Liability........................................... 17
6.6 Limitations on Liability...................................... 17
6.7 Indemnification Sole Remedy................................... 18
ARTICLE 7 TERM, TERMINATION AND WAIVER ..................................... 18
7.1 Term ......................................................... 18
ARTICLE 8 GENERAL PROVISIONS ............................................... 19
8.1 Fiduciary Duties ............................................. 19
8.2 Disclosure ................................................... 19
8.3 Non-Merger ................................................... 19
8.4 Assignment ................................................... 19
8.5 Subsequent Acquisitions ...................................... 19
8.6 Expenses ..................................................... 20
8.7 Damage Provisions ............................................ 20
8.8 Exercise of Rights ........................................... 20
8.9 Notices ...................................................... 20
8.10 Governing Law ................................................ 21
8.11 Time of the Essence .......................................... 21
8.12 Third Party Rights ........................................... 21
8.13 Severability ................................................. 22
8.14 Counterparts ................................................. 22
SUPPORT AND INDEMNIFICATION AGREEMENT
THIS AGREEMENT dated January 22, 2007,
BETWEEN:
GE INVESTMENT PRIVATE PLACEMENT PARTNERS II, a Delaware
limited partnership (hereinafter referred to as the
"SHAREHOLDER"),
-and-
REPECHAGE RESTAURANT GROUP LTD., a corporation incorporated
under the laws of Canada, and a wholly-owned Subsidiary of
Repechage Investments Limited (hereinafter referred to as
"ACQUISITIONCO").
RECITALS:
WHEREAS Acquisitionco and Elephant and Castle Group Inc. ("E&C") are
concurrently entering into the Arrangement Agreement (as defined below) pursuant
to which Acquisitionco is prepared, subject to the satisfaction of certain
conditions, to complete the Arrangement (as defined below) pursuant to which the
E&C Securityholders (as defined below) shall receive a payment in the amount of
U.S.$0.7982 for each one (1) E&C Common Share, on an as if converted basis, in
accordance with the terms of the Arrangement, as may be amended from time to
time in accordance with Section 7.3 of the Arrangement Agreement.
AND WHEREAS it is one of the conditions to Acquisitionco completing the
Arrangement that the Shareholder enter into this Agreement with respect to,
among other things, the voting by the Shareholder of all of its Voting
Securities (as defined below) in favour of approving the Arrangement and the
transactions contemplated by the Arrangement Agreement (including any E&C Shares
issued upon any exercise of E&C Convertible Securities (as defined below) held
or controlled by it) at any E&C Meeting (as defined below) held to approve the
Arrangement in accordance with the terms hereof.
AND WHEREAS it is an inducement and a condition to Acquisitionco entering into
the Arrangement Agreement, that the Shareholder provide limited indemnification
for certain representations, warranties and covenants in favour of Acquisitionco
under both this Agreement and the Arrangement Agreement and the Shareholder has
received a certificate from certain officers of E&C (without personal liability)
as to the truthfulness of the representations and warranties specified in
Schedule A.
AND WHEREAS Acquisitionco has represented to the Shareholder, and it is a
condition of the Shareholder's obligations hereunder, that Acquisitionco is
concurrently entering into substantially identical agreements with each of Crown
Life Insurance Company, Xxxx Xxxxxx, Xxxxx Xxxxxx and Xxxxx Xxxxxx.
AND WHEREAS the Shareholder is desirous of entering into this Agreement.
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NOW THEREFORE THIS AGREEMENT WITNESSES THAT, in consideration of the respective
covenants and agreements contained herein and other good and valuable
consideration (the receipt and sufficiency of which are hereby acknowledged),
and intending to be legally bound hereby, the Shareholder and Acquisitionco
hereby agree as follows:
ARTICLE 1
DEFINITIONS AND PRINCIPLES OF INTERPRETATION
1.1 DEFINITIONS
"ACQUISITION PROPOSAL" has the meaning given to such term in the
Arrangement Agreement;
"Act" means the BUSINESS CORPORATIONS ACT (British Columbia) as now in
effect or as same may be amended from time to time prior to the
Effective Date;
"AFFILIATE" has the meaning determined in accordance with Section 1(2)
of the Securities Act on the date of this Agreement;
"AGREEMENT" means this support and indemnification agreement dated
January 22, 2007 between Acquisitionco and the Shareholder as the same
may be amended from time to time;
"APPLICABLE INTEREST RATE" means, at any time, the rate of interest per
annum equal to the rate at which the principal office of the Royal Bank
of Canada in Vancouver, British Columbia quotes, publishes and refers
to as its "prime rate" and which is its reference rate of interest for
loans in Canadian dollars made in Canada to Canadian borrowers adjusted
automatically with each quoted, published or displayed change in such
rate, all without the necessity of any notice to a Party or any other
Person;
"ARRANGEMENT" has the meaning given to such term in the Arrangement
Agreement;
"ARRANGEMENT AGREEMENT" means the agreement entered into on the date
hereof between Repechage Investments Limited, Acquisitionco and E&C for
the purposes of effecting the Arrangement;
"BOARD OF DIRECTORS" means the board of directors of E&C;
"BUSINESS DAY" means a day which is not a Saturday, Sunday or a
statutory holiday in Toronto, Ontario or Vancouver, British Columbia;
"CONTRACT" means any loan or credit agreement, bond, debenture, note,
mortgage, indenture, guarantee, lease or other contract, commitment,
agreement, instrument, obligation, undertaking, permit, concession,
franchise, licence or legally binding arrangement or understanding;
"DAMAGES" has the meaning given to such term in Section 6.1;
"DEPOSITARY" means American Stock Transfer and Trust Company or CIBC
Mellon Trust Company or any other trust company, bank or equivalent
financial institution
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agreed to in writing by Parent and E&C and appointed to carry out any
of the duties of the Depositary hereunder;
"E&C COMMON SHARES" means the common shares in the capital of E&C;
"E&C CONVERTIBLE SECURITIES" means the E&C Preferred Shares, as well as
any options, warrants, rights, and any other securities of E&C which
are convertible into or otherwise exercisable or exchangeable for E&C
Common Shares or E&C Preferred Shares;
"E&C MEETING" means any meeting conducted, or any other action taken,
by E&C whereby it seeks a vote of E&C Securityholders or holders of E&C
Notes for the purpose of approving the Arrangement and the transactions
contemplated by the Arrangement Agreement;
"E&C NOTES" means collectively, (i) the GEIPPP Note; (ii) the credit
agreement dated December 17, 2004 between, INTER ALIA, E&C and Crown
Life Insurance Company pursuant to which Crown Life Insurance Company
has extended a $5,000,000 term loan to E&C; and (iii) the various
convertible subordinated notes issued to various holders thereof dated
December 17, 2004 in the principal aggregate amount of US$649,000
payable on December 31, 2009, with interest accruing thereon at 9 1/4%
per annum;
"E&C PREFERRED SHARES" means the Preferred Shares, series A and Class A
Preferred shares in the capital of E&C;
"E&C SECURITYHOLDERS" means the holders of all E&C Common Shares and
all E&C Convertible Securities;
"EFFECTIVE DATE" has the meaning given to it in the Arrangement
Agreement;
"ENCUMBRANCE" means any security interest in the nature of a mortgage,
lien, charge, hypothec, assignment, pledge or other encumbrance or
adverse claim of any nature whatsoever;
"ESCROW AGENT" means an escrow agent acceptable to each of the
Shareholder and Acquisitionco acting reasonably;
"ESCROW AGREEMENT" means the agreement in substantially the form
attached as Schedule C hereto to be dated the Effective Date between
the Escrow Agent, Acquisitionco and certain shareholders of E&C,
including the Shareholder;
"ESCROW AMOUNT" means the amount of U.S.$1,240,000 to be deposited by
the Shareholder with the Escrow Agent pursuant to the Escrow Agreement
on the Effective Date from the funds held by the Depositary which
represents 67.3913% of the total amount to be deposited by the
Shareholder and the other shareholders of E&C under the Escrow
Agreement;
"GAAP" means Canadian generally accepted accounting principles;
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"GEIPPP NOTE" means the restated and amended senior secured note issued
by E&C to the Shareholder dated December 17, 2004 in the principal
amount of U.S.$4,203,879 with interest accruing thereon at 14% per
annum;
"GOVERNMENTAL ENTITY" means (a) any multinational, federal, provincial,
territorial, state, regional, municipal, local or other government,
governmental or public department, central bank, court, tribunal,
arbitral body, administrative body, commission, board, bureau or
agency, domestic or foreign; (b) any subdivision, agent or agency,
commission, board, or authority of any of the foregoing; (c) any
self-regulatory authority or stock exchange; or (d) any
quasi-governmental or private body exercising any regulatory,
expropriation or taxing authority under or for the account of any of
the foregoing;
"INDEMNITEE" has the meaning given to such term in Section 6.3;
"INDEMNITEE REPRESENTATIVE" means (i) in the case of Acquisitionco, E&C
or a Purchaser Indemnified Person, Acquisitionco, and (ii) in respect
of the Shareholder or a Shareholder Indemnified Person, the
Shareholder;
"INDEMNITOR" has the meaning given to such term in Section 6.3;
"INTER-SHAREHOLDER AGREEMENT" means the Inter-Shareholder Agreement
dated as of December 17, 2004 among E&C, the Shareholder and certain
other parties;
"LAW" or "LAWS" means all laws, by-laws, statutes, rules, regulations,
principles of law and equity, orders, rulings, ordinances, judgments,
injunctions, determinations, awards, decrees or other requirements and
the terms and conditions of any grant of approval, permission,
authority or license of any Governmental Entity or self-regulatory
authority, and the term "APPLICABLE" with respect to such Laws and in a
context that refers to one or more Parties, means such laws as are
applicable to such Party or its business, undertaking, property or
securities and emanate from a person having jurisdiction over the Party
or Parties or its or their business, undertaking, property or
securities;
"MATERIAL ADVERSE EFFECT" means, when used in connection with a person,
any change, effect, event, occurrence or state of facts that is, or
would reasonably be expected to be, material and adverse to the
business, operations, results of operations or financial condition of
that person and its Subsidiaries, taken as a whole, other than any
change, effect (whether alone or in combination with other effects),
event, occurrence or state of facts resulting from:
(i) the announcement of the Arrangement or the execution of this
Agreement;
(ii) any action required to be taken by this Agreement in order
to implement the Arrangement;
(iii) changes in general economic or political conditions or
securities or banking markets in general;
(iv) generally applicable changes in applicable Law;
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(v) changes in factors affecting the restaurant business
generally or the markets in which E&C and its Subsidiaries
operate;
(vi) the commencement, occurrence or continuation of any war,
armed hostilities or acts of terrorism; or
(vii) changes in any accounting rule or regulation or GAAP or the
interpretation thereof;
"OWNED SECURITIES" means E&C Common Shares and other securities of E&C,
including E&C Convertible Securities, that are directly or indirectly
beneficially owned by the Shareholder or over which control or
direction is exercised by such Shareholder, which as at the date hereof
are more particularly set forth in Schedule B, and includes any E&C
Securities acquired after the date hereof and over which the
Shareholder has direct or indirect beneficial ownership or exercises
control or direction (for greater certainty, the term Owned Securities
does not include any securities of E&C over which the Shareholder may
have control or direction solely by virtue of the provisions of the
Inter-Shareholder Agreement);
"PARTIES" means Acquisitionco and the Shareholder, and "PARTY" means
either of them;
"PAYOUT AMOUNT" has the meaning given to such term in Section 5.4(b);
"PERSON" means any individual, partnership, limited partnership,
syndicate, sole proprietorship, company or corporation, with or without
share capital, unincorporated association, trust, trustee, executor,
administrator, or other legal personal representative, regulatory body
or agency, government or Governmental Entity, however designated or
constituted;
"PURCHASER INDEMNIFIED PERSONS" has the meaning given to such term in
Section 6.1;
"SECURITIES Act" means the SECURITIES ACT (British Columbia) and the
rules and regulations made thereunder, as now in effect and as they may
be promulgated or amended from time to time;
"SECURITIES LAWS" means the Securities Act and all other applicable
Canadian and United States securities laws, rules and regulations
thereunder;
"SHAREHOLDER INDEMNIFIED PERSONS" has the meaning given to such term in
Section 6.2;
"SUBSIDIARY" means, with respect to a specified body corporate, any
body corporate of which more than 50% of the outstanding shares
ordinarily entitled to elect a majority of the board of directors
thereof (whether or not shares of any other class or classes shall or
might be entitled to vote upon the happening of any event or
contingency) are at the time owned directly or indirectly by such
specified body corporate and shall include any body corporate,
partnership, joint venture or other entity over which such specified
body corporate exercises direction or control or which is in a like
relation to a Subsidiary;
"TAX ACT" means the INCOME TAX ACT (Canada), as amended;
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"THIRD PARTY CLAIM" means any demand, statement or notice thereof that
has been communicated to a Party by or on behalf of any Persons other
than the Parties hereto and their respective Affiliates and that, if
maintained or enforced, could result in Damages;
"TRANSFER" means, with respect to a security, the sale, transfer,
pledge, hypothecation, encumbrance, assignment or disposition of such
securities or the beneficial ownership thereof, the offer to make such
a sale, transfer or other disposition and each option, agreement,
arrangement or understanding, whether or not in writing, to effect any
of the foregoing; and
"VOTING SECURITIES" has the meaning given to it in Section 3.2.
1.2 NUMBER AND GENDER
Words importing the singular number include the plural and vice versa and words
importing gender include all genders.
1.3 INCLUSIVE TERMINOLOGY
Whenever used in this Agreement, the words "includes" and "including" and
similar terms of inclusion shall not, unless expressly modified by the words
"only" or "solely", be construed as terms of limitation, but rather shall mean
"includes but is not limited to" and "including but not limited to", so that
references to included matters shall be regarded as illustrative without being
either characterizing or exhaustive.
1.4 INTERPRETATION NOT AFFECTED BY HEADINGS, ETC.
The division of this Agreement into Articles and Sections and other parts and
the insertion of headings are for convenience of reference only and shall not
affect the construction or interpretation of this Agreement. Unless otherwise
indicated, any reference in this Agreement to an Article, Section or Schedule
refers to the specified Article or Section of or Schedule to this Agreement.
1.5 DATE FOR ANY ACTION
In the event that any date on or by which any action is required or permitted to
be taken hereunder is not a Business Day, such action shall be required or
permitted to be taken on or by the next succeeding day which is a Business Day.
1.6 CURRENCY
In the absence of a specific designation of any currency, any dollar amount
referenced herein shall be deemed to refer to lawful currency of Canada.
1.7 ACCOUNTING MATTERS
Unless otherwise stated, all accounting terms used in this Agreement shall have
the meanings attributable thereto under GAAP and all determinations of an
accounting nature required to be made shall be made in a manner consistent with
GAAP consistently applied.
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1.8 STATUTORY REFERENCES
Any reference in this Agreement to a statute includes all regulations made
thereunder, all amendments to such statute or regulations in force from time to
time, and any statute or regulation that supplements or supersedes such statute
or regulations.
1.9 KNOWLEDGE
In this Agreement, and except as specifically qualified herein, references to
"knowledge", the "knowledge of' and similar references mean the actual knowledge
of any of the officers of the applicable Party, after due inquiry, and such
officers shall make such inquiry as is reasonable under the circumstances.
1.10 ENTIRE AGREEMENT
This Agreement constitutes the entire agreement between the Parties with respect
to the subject matter hereof and cancels and supersedes all prior agreements,
understandings, negotiations and discussions, whether oral or written, between
the parties hereto with respect to the subject matter hereof. There are no
representations, warranties, terms, conditions, undertakings or collateral
agreements, expressed, implied or statutory, between the Parties other than as
expressly set forth in this Agreement.
1.11 SCHEDULES
The following Schedules are annexed to this Agreement and are incorporated by
reference into this Agreement and form a part hereof:
Schedule A - Representations and Warranties of the Shareholder
Regarding E&C
Schedule B - Owned Securities
Schedule C - Form of Escrow Agreement
Schedule D - Section 116 Withholdings
ARTICLE 2
THE ARRANGEMENT
2.1 AGREEMENT REGARDING ARRANGEMENT
Subject to the terms and conditions of the Arrangement Agreement, the
Shareholder shall reasonably co-operate with Acquisitionco to effect the
Arrangement.
ARTICLE 3
AGREEMENTS REGARDING TRANSFER AND VOTING
3.1 AGREEMENT NOT TO DISPOSE PRIOR TO ARRANGEMENT
The Shareholder unconditionally and irrevocably agrees that from and after the
date hereof until the Agreement is terminated, except as contemplated by this
Agreement, the Shareholder will not Transfer or agree to Transfer any Owned
Securities (other than an exercise, conversion or exchange of any E&C
Convertible Securities in accordance with their terms which, for greater
certainty, will be subject to this Agreement upon their conversion, exchange or
exercise into or
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for E&C Common Shares or E&C Preferred Shares) or any E&C Notes other than with
Acquisitionco's prior written consent, acting reasonably. If any Transfer is
consented to by Acquisitionco, it shall be a condition precedent to such
Transfer that the transferee agree to be bound by the terms of this Agreement to
the same extent as the transferring Shareholder is bound. The Shareholder agrees
that any E&C Common Shares and E&C Convertible Securities acquired by it, and
over which beneficial ownership and/or direction or control is directly or
indirectly exercised, shall be subject to the provisions of this Agreement.
3.2 VOTING IN RESPECT OF ARRANGEMENT
(a) Without limiting the right of the Shareholder to vote on any
other matter at any meeting of shareholders of E&C, the
Shareholder unconditionally and irrevocably agrees, subject to
the provisions hereof, that from and after the date hereof until
this Agreement is terminated, (i) at such time as E&C conducts an
E&C Meeting or otherwise seeks approval of its shareholders or
debtholders for the purpose of approving the Arrangement, the
Shareholder will vote all Owned Securities over which the
Shareholder has voting power and which are entitled to be voted
at such meeting and all E&C Notes held by the Shareholder and
which are entitled to be voted at such meeting (collectively,
"VOTING SECURITIES") in favour of approving the Arrangement and
the transactions contemplated by the Arrangement Agreement, and
(ii) the Shareholder will at any meeting of shareholders vote all
of the Shareholder's Voting Securities against, and the
Shareholder will not consent to, any Acquisition Proposal or any
action that would reasonably be expected to delay, prevent or
frustrate the Arrangement. Without limiting the foregoing but
subject to the provisions hereof, it is understood that the
obligations under clause (i) and (ii) above shall remain
applicable in respect of each meeting of shareholders of E&C duly
called for the purpose of approving the Arrangement or an
Acquisition Proposal and/or any matter that could reasonably be
expected to facilitate either one regardless of the position of
the Board of Directors as to the Arrangement or an Acquisition
Proposal at the time of such meeting.
(b) The Shareholder unconditionally and irrevocably agrees that from
and after the date hereof until the Agreement is terminated, such
Shareholder will grant any necessary proxy to Acquisitionco with
respect to any Voting Securities to vote or grant consents as
contemplated by this Section 3.2 in accordance with and subject
to the terms of this Agreement.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
4.1 REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER REGARDING SHAREHOLDER
MATTERS
The Shareholder hereby represents and warrants to and in favour of Acquistionco
as follows and acknowledges that Acquisitionco is relying upon such
representations and warranties in connection with the entering into of this
Agreement:
(a) Capacity and Authority. The Shareholder is a limited partnership
duly formed, validly existing and in good standing under the laws
of its jurisdiction of formation, and has the requisite power and
authority to enter into this Agreement
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and to carry out its obligations hereunder and the transactions
contemplated hereby. The execution, delivery and performance of
this Agreement have been duly authorized by the Shareholder, and
no other proceedings on the part of the Shareholder are necessary
to authorize the execution and delivery by it of this Agreement.
This Agreement has been duly and validly executed and delivered
by the Shareholder and, assuming the due authorization, execution
and delivery by Acquisitionco, constitutes a legal, valid and
binding obligation of the Shareholder enforceable against the
Shareholder in accordance with its terms, subject to the
qualification that such enforceability may be limited by
bankruptcy, insolvency, reorganization or other laws of general
application relating to or affecting rights of creditors and that
equitable remedies, including specific performance, are
discretionary and may not be ordered.
(b) No Violations.
(i) Neither the execution and delivery of this Agreement by the
Shareholder nor the completion of the transactions
contemplated hereby will:
(A) violate, conflict with, change the rights or
obligations of any party under, result in a breach of
any provision of, require any consent, approval or
notice under, constitute a default (or an event which,
with notice or lapse of time or both, would constitute
a default) or result in a right of termination or
acceleration under, or result in the creation of any
encumbrance upon any of the Owned Securities, or in any
such encumbrance becoming (or being capable of
becoming) enforceable against any such Owned Securities
under any of the terms, conditions or provisions of (1)
its charter or by-laws or other comparable
organizational documents; or (2) any deed of trust,
encumbrance, or other Contract to which the Shareholder
is a party or by which it or the Owned Securities are
bound, subject to compliance with the provisions of the
Inter-Shareholder Agreement; or
(B) violate any Law or any judgment, order or decree
applicable to the Shareholder or the Owned Securities.
(ii) There is no legal impediment to the execution and delivery
of this Agreement by the Shareholder and no filing or
registration with, or authorization, consent or approval of,
any Governmental Entity is required of the Shareholder in
connection with the execution and delivery of this Agreement
by the Shareholder and the completion of the transactions
contemplated hereby except any such filing as may be
required by the Shareholder under Securities Laws.
(c) Owned Securities. The Shareholder beneficially owns, directly or
indirectly, or exercises control or direction over the number of
Owned Securities set forth in Schedule B hereto and has the
exclusive right to vote and grant proxies in respect thereof as
contemplated by this Agreement subject only to the provisions of
the Inter-Shareholder Agreement. The Owned Securities are not
subject to any
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encumbrance, and until and upon the Effective Date, the
Shareholder will have good and marketable title to such Owned
Securities free and clear of all encumbrances of any nature and
any voting agreements (other than as created pursuant to this
Agreement or the Inter-Shareholder Agreement). Neither the
Shareholder nor any of its Affiliates beneficially owns or
exercises control or direction over, directly or indirectly, any
securities of E&C except as set out in Schedule B hereto. None of
the Owned Securities is the subject of any commitment,
undertaking or agreement, the terms of which would affect in any
way the ability of the Shareholder to perform its obligations
with respect to such Owned Securities as set out in this
Agreement or, once acquired by Acquisitionco, affect the ability
of Acquisitionco to vote or otherwise enjoy full rights of
ownership thereof.
(d) Proxies. Other than as contemplated by this Agreement, the
Shareholder is not obligated to grant and has not granted and
does not have outstanding any proxy in respect of any of the
Owned Securities and it has not, nor have any of its Affiliates
that own E&C Common Shares or E&C Convertible Securities entered
into any voting trust, vote pooling or other agreement with
respect to the right to vote, call meetings of shareholders or
give consents or approvals of any kind as to the Owned Securities
other than the Inter-Shareholder Agreement.
(e) Residency. The Shareholder is a limited partnership in which
93.60% of the interests are held by non-residents of Canada for
the purposes of the Tax Act.
4.2 INDEMNIFICATION RIGHTS REGARDING CERTAIN E&C MATTERS
As an inducement to Acquisitionco to enter into this Agreement and for
Acquisitionco to enter into the Arrangement Agreement, the Shareholder agrees
that the indemnification rights in Article 6 hereof shall extend to the
representations and warranties made by E&C to Acquisitionco specified in
Schedule A. The Shareholder acknowledges that Acquistitionco is relying on such
indemnification rights in entering into this Agreement and the Arrangement
Agreement.
4.3 REPRESENTATIONS AND WARRANTIES OF ACQUISITIONCO
Acquisitionco hereby represents and warrants to and in favour of the Shareholder
as follows and acknowledges that the Shareholder is relying upon such
representations and warranties in connection with the entering into of this
Agreement:
(a) Capacity and Authority. Acquisitionco is a corporation duly
incorporated, validly existing and in good standing under the
laws of its jurisdiction of incorporation, and has the requisite
corporate power and authority to enter into each of this
Agreement and the Arrangement Agreement and to carry out its
obligations hereunder and the transactions contemplated hereby.
The execution, delivery and performance of each of this Agreement
and the Arrangement Agreement have been authorized by the board
of directors of Acquisitionco, and no other proceedings on the
part of Acquisitionco are necessary to authorize the execution
and delivery by it of this Agreement and the Arrangement
Agreement. Each of this Agreement and the Arrangement Agreement
has been duly and validly
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executed and delivered by Acquisitionco and, assuming the due
authorization, execution and delivery by the Shareholder in
the case of this Agreement and E&C in the case of the
Arrangement Agreement, constitutes a legal, valid and binding
obligation of Acquisitionco enforceable against it in
accordance with its terms, subject to the qualification that
such enforceability may be limited by bankruptcy, insolvency,
reorganization or other laws of general application relating
to or affecting rights of creditors and that equitable
remedies, including specific performance, are discretionary
and may not be ordered.
(b) No Violations.
(i) Neither the execution and delivery of this Agreement or the
Arrangement Agreement by Acquisitionco nor the completion of
the transactions contemplated hereby will:
(A) violate, conflict with, change the rights or
obligations of any party under, result in a breach of
any provision of, require any consent, approval or
notice under, constitute a default (or an event which,
with notice or lapse of time or both, would constitute
a default) or result in a right of termination or
acceleration under any of the terms, conditions or
provisions of (1) its charter or by-laws or other
comparable organizational documents; or (2) any deed of
trust, encumbrance, or other Contract to which
Acquisitionco is a party or by which it or its assets
are bound; or
(B) violate any Law or any judgment, order or decree
applicable to Acquisitionco.
(ii) There is no legal impediment to the execution and delivery
of this Agreement or the Arrangement Agreement by
Acquisitionco and no filing or registration with, or
authorization, consent or approval of, any Governmental
Entity is required of Acquisitionco in connection with the
execution and delivery of this Agreement or the Arrangement
Agreement by Acquisitionco and the completion of the
transactions contemplated in this Agreement or the
Arrangement Agreement except any such filing as may be
required by Acquisitionco under Securities Laws.
ARTICLE 5
COVENANTS AND ACKNOWLEDGEMENT
5.1 COVENANTS OF SHAREHOLDER REGARDING ARRANGEMENT
In consideration of Acquisitionco entering into this Agreement and the
Arrangement Agreement, the Shareholder agrees, from and after the date hereof
until the termination of this Agreement:
(a) that the Shareholder shall not and shall not permit its
Affiliates, agents or other representatives (including any
investment banker, legal advisor or accountant retained by the
Shareholder) to:
-12-
(i) initiate, solicit, promote or encourage, directly or
indirectly, inquiries or the submission of proposals or
offers from any Person with respect to any Acquisition
Proposal or potential Acquisition Proposal;
(ii) encourage, or participate or engage in negotiations
concerning, or furnish to any Person other than to
Acquisitionco or its Affiliates, any non-public information
with respect to, or otherwise co-operate in any way with, or
participate in, or facilitate or encourage any Person to
make an Acquisition Proposal;
(iii) endorse or recommend a proposal of, or enter into any
contract or understanding with, any Person relating to an
Acquisition Proposal, or otherwise facilitate any effort or
attempt to make or implement an Acquisition Proposal; or
(b) that it shall immediately cease and cause to be terminated in
writing any existing discussions or negotiations it is having
with any Person (other than Parent or Acquisitionco) with respect
to any potential Acquisition Proposal;
(c) that it shall promptly notify Parent orally and in writing within
24 hours of any Acquisition Proposal or any amendment to an
Acquistion Proposal being received directly or indirectly by the
Shareholder. Such written notice shall include a copy of any such
written Acquisition Proposal and all amendments thereto or, in
the absence of a written Acquisition Proposal, a description of
the material terms and conditions thereof, in either case
including the identity of the Person making the Acquisition
Proposal.
(d) that it will use all reasonable efforts to co-operate with E&C
and Acquisitionco in respect of the Arrangement and provide any
information reasonably requested by E&C or Acquisitionco for any
regulatory application or filing made or approval sought for such
transaction (including as may be required under Securities Laws);
(e) not to exercise any rights of dissent which may be available to
it under applicable Law in connection with the Arrangement;
(f) to forthwith notify Acquisitionco in writing upon the acquisition
of any additional E&C Common Shares or E&C Convertible Securities
other than E&C Shares acquired on conversion, exchange or
exercise of such E&C Convertible Securities; and
(g) that it will promptly notify Acquisitionco in writing upon
becoming aware that any representation or warranty of it
contained in this Agreement becoming untrue in any material
respect or upon an obligation of the Shareholder not being
complied with in any material respect.
5.2 COVENANT OF SHAREHOLDER REGARDING ESCROW AMOUNT
The Shareholder hereby covenants and agrees that it shall direct the
Depositary to deposit upon completion of the Arrangement the Escrow Amount with
the Escrow Agent to be held
-13-
pursuant to the terms and conditions of the Escrow Agreement to be used as
support for any claim for indemnification pursuant to Article 6 of this
Agreement.
5.3 COVENANTS OF ACQUISITIONCO
Acquisitionco hereby covenants and agrees to perform its obligations
under the Arrangement Agreement and, subject to the terms and conditions
thereof, to complete the Arrangement. Acquisitionco further agrees:
(a) not to amend the Commitment Letters (as defined in the
Arrangement Agreement) without the consent of the Shareholder,
which consent will not be unreasonably withheld or delayed; and
(b) to provide a mechanism to the Shareholder in connection with
Acquisitionco's withholding obligations under Section 116 of the
Tax Act, and any analogous provisions of applicable provincial
tax law, in substantially the form of the mechanism set out in
Schedule D hereto.
5.4 ACKNOWLEDGEMENT OF SHAREHOLDER
(a) The Shareholder hereby acknowledges and agrees that E&C shall
exercise its option to prepay in whole the GEIPPP Note on the
interest payment date falling in March 2007 at 100% of the
principal amount thereof plus interest accrued to the prepayment
date.
(b) As at March 1, 2007, the total principal amount outstanding
pursuant to the GEIPPPP Note shall be U.S.$4,203,879 and the
total accrued interest thereon shall be U.S.$1,296,407.45. To the
extent that payment of the aforementioned amounts is not received
before 4 p.m. on March 1, 2007, the per diem amount for interest
only shall be U.S.$1,612.45. The aggregate of the aforementioned
sums, including without limitation, the per diem amount, if any,
is hereinafter referred to as the "PAYOUT AMOUNT".
(c) In consideration of, and upon the payment in full of the Payout
Amount, notwithstanding any provision of the Note or the
Agreement (as such term is defined in the Note), the Shareholder
hereby acknowledges and agrees that payment of the Payout Amount
shall constitute payment in full of the indebtedness and
obligations of E&C and its affiliates to the Shareholder under
the GEIPPP Note.
ARTICLE 6
INDEMNIFICATION
6.1 INDEMNIFICATION BY THE SHAREHOLDER
The Shareholder shall indemnify and hold harmless Acquisitionco, E&C
and, to the extent named or involved in any third party action or claim, their
respective employees, shareholders, directors, officers, representatives and
related persons (collectively, the "PURCHASER INDEMNIFIED PERSONS") against, and
shall pay to Acquisitionco, E&C and the
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Purchaser Indemnified Persons, on demand, the amount of, any loss, liability,
obligation, claim, damages (including incidental and consequential damages),
fines and other penalties, costs, charges or expenses (including costs of
investigation and defense and the full amount of all legal fees and other
professional fees) (collectively, "DAMAGES"), suffered by, imposed upon or
asserted against, Acquisitionco, E&C or any of the Purchaser Indemnified Persons
(but in each case without duplication of Damages resulting from the same claim
or state of facts) as a result of, in respect of, connected with, or arising out
of:
(a) any breach of any representation or warranty specified in
Schedule A made by E&C to Acquisitionco;
(b) any breach of any representation or warranty made by Shareholder
in this Agreement;
(c) any breach by the Shareholder of any covenant or obligation of
the Shareholder contained in this Agreement; or
(d) any claim by any Person for brokerage or finder's fees,
commissions or similar payments based upon any agreement or
understanding made or alleged to have been made by any such
Person with the Shareholder (or any Person acting on their
behalf) in connection with any of the transactions contemplated
by this Agreement.
6.2 INDEMNIFICATION BY THE ACQUISITIONCO.
Acquisitionco shall indemnify and hold harmless the Shareholder and, to
the extent named or involved in any third party action or claim, its employees,
shareholders, directors, officers, representatives and related persons
(collectively the "SHAREHOLDER INDEMNIFIED PERSONS") against, and shall pay to
the Shareholder and the Shareholder Indemnified Persons, on demand, the amount
of any Damages suffered by, imposed upon or asserted against the Shareholder or
any of the Shareholder Indemnified Persons as a result of, in respect of,
connected with, or arising out of:
(a) any breach of any representation or warranty made by the
Acquisitionco in this Agreement whether or not the Shareholder
relied on or had any knowledge of it;
(b) any breach by the Acquisitionco of any covenant or obligation of
Acquisitionco contained in this Agreement; or
(c) any claim by any Person for brokerage or finder's fees,
commissions or similar payments based upon any agreement or
understanding made or alleged to have been made by such Person
with Acquisitionco (or any Person acting on its behalf) in
connection with any of the transactions contemplated in this
Agreement.
6.3 INDEMNIFICATION PROCEDURE: THIRD PARTY CLAIMS.
(a) Upon receipt by Acquisitionco, the Shareholder, E&C, a Purchaser
Indemnified Person or a Shareholder Indemnified Person, as the
case may be, (an "INDEMNITEE") of notice of any proceeding
commenced in connection with a
-15-
Third Party Claim and in respect of which the Indemnitee proposes
to demand indemnification from a Party (the "INDEMNITOR"), the
Indemnitee shall give notice to that effect to the Indemnitor
with reasonable promptness. The failure to give, or delay in
giving, such notice will not relieve the Indemnitor of its
obligations except and only to the extent of any prejudice caused
to the Indemnitor by such failure or delay.
(b) The Indemnitor has the right, by notice to the Indemnitee given
not later than ten (10) days after receipt of the notice
described in Section 6.3(a), to assume control of the defence,
compromise or settlement of the Third Party Claim provided that:
(i) the Third Party Claim involves only money damages and does
not seek any injunction or other equitable relief;
(ii) if the named parties in any Third Party Claim include both
the Indemnitor and the Indemnitee and representation by the
same counsel would, in the judgment of the Indemnitee
Representative, still be appropriate notwithstanding any
actual or potential differing interests between them
(including the availability of different defences);
(iii) settlement of, or an adverse judgment with respect to, the
Third Party Claim is not, in the judgment of the Indemnitee
Representative, likely to establish a precedent, custom or
practice adverse to the continuing business interest of the
Indemnitee; and
(iv) the Indemnitor, from time to time, at the Indemnitee
Representative's request, provides reasonable assurance to
the Indemnitee of its financial capacity to defend such
Third Party Claim and to provide indemnification in respect
thereof.
(c) Upon the assumption of control by the Indemnitor:
(i) the Indemnitor shall actively and diligently proceed with
the defence, compromise or settlement of the Third Party
Claim at the Indemnitor's sole cost and expense, including
the retaining of counsel reasonably satisfactory to the
Indemnitee;
(ii) the Indemnitor shall keep the Indemnitee Representative
fully advised with respect to the defence, compromise or
settlement of the Third Party Claim (including supplying
copies of all relevant documentation promptly as it becomes
available) and shall arrange for its counsel to inform the
Indemnitee Representative on a regular basis of the status
of the Third Party Claim;
(iii) the Indemnitee may retain separate co-counsel at its sole
cost and expense, and may participate in the defence of the
Third Party Claim; and
(iv) the Indemnitor will not consent to the entry of any judgment
or entry into any settlement with respect to the Third Party
Claim unless consented to
-16-
by the Indemnitee Representative (which consent may not be
unreasonably or arbitrarily withheld or delayed).
Provided all the conditions set forth in Section 6.3(b) are satisfied
and the Indemnitor is not in breach of any of its obligations under this Section
6.3(c), the Indemnitee shall cooperate with the Indemnitor and use its best
efforts to make available to the Indemnitor all relevant information in its
possession or under its control (provided it does not cause the Indemnitee to
breach any confidentiality obligations) and shall take such other steps as are,
in the reasonable opinion of counsel for the Indemnitor, necessary to enable the
Indemnitor to conduct such defence; provided always that:
(i) no admission of fault may be made by or on behalf of
Acquisitionco, E&C or any Purchaser Indemnified Person
without the prior written consent of Acquisitionco;
(ii) no admission of fault may be made by or on behalf of the
Shareholder or any Shareholder Indemnified Person without
the prior written consent of the Shareholder; and
(iii) the Indemnitee shall not be obligated to take any measures
which, in the reasonable opinion of the Indemnitee's legal
counsel, could be prejudicial or unfavourable to the
Indemnitee.
(d) If:
(i) the Indemnitor fails to give the Indemnitee the notice
provided in Section 6.3(b);
(ii) any of the conditions in Section 6.3(b) are unsatisfied; or
(iii) the Indemnitor breaches any of its obligations under
Section 6.3(c),
the Indemnitee Representative may assume control of the defence,
compromise or settlement of the Third Party Claim in its sole discretion and
shall be entitled to retain counsel as in its sole discretion may appear
advisable, and the Indemnitor shall be liable for the reasonable cost and
expense of such counsel.
The Indemnitee shall not settle any such Third Party Claim without the
consent of the Indemnitor which consent may not be unreasonably withheld or
delayed. Any such settlement or other final determination of the Third Party
Claim will be binding upon the Indemnitor subject to the right of the Indemnitor
to dispute that indemnification is required pursuant to this Agreement. The
Indemnitor shall, at its sole cost and expense, cooperate fully with the
Indemnitee Representative and use its best efforts to make available to the
Indemnitee Representative all relevant information in its possession or under
its control and take such other steps as are, in the reasonable opinion of
counsel for the Indemnitee Representative, necessary to enable the Indemnitee
Representative to conduct its defence. The Indemnitor shall reimburse the
Indemnitee and the Indemnitee Representative promptly and periodically for the
reasonable costs of defending against the Third Party Claim (including legal
fees and expenses), and shall remain responsible for any Damages the Indemnitee
and the Indemnitee Representative may suffer
-17-
resulting from, arising out of, or relating to, the Third Party Claim to the
extent provided in this Article 6.
6.4 INTEREST.
Any amount required to be paid by an Indemnitor to an Indemnitee under
this Article 6 will bear interest at an annual rate of the Applicable Interest
Rate accruing on a daily basis from the date on which a demand for payment is
made until payment is made in full.
6.5 EXPIRY OF LIABILITY.
(a) Except as set out in Section 6.5(b), liability for breaches of
the representations, warranties and covenants of the Shareholder
and Acquisitionco contained in this Agreement (including any
liability of the Shareholder for breaches by E&C of the
representations and warranties specified in Schedule A) will
terminate upon the expiry of the period of nine (9) months
following the Effective Date, except:
(i) in the case of fraud, intentional misrepresentation or
deliberate or wilful breach on the part of the Shareholder
or Acquisitionco, as the case may be, in which case
liability will continue indefinitely; and
(ii) to the extent that, during such period, the Indemnitee has
given notice in accordance with this Agreement to the
Indemnitor of a claim in respect of any such representation,
warranty or covenant, in which case liability for such
representation, warranty or covenant will continue in full
force and effect until the final determination of such
claim.
(b) The representations and warranties contained in Section 4.1(c)
and the Shareholder's liability in connection therewith will
survive indefinitely.
6.6 LIMITATIONS ON LIABILITY.
(a) Notwithstanding the provisions of this Article 6:
(i) each of the representations and warranties made by a Party
will be deemed to have been made without the inclusion of or
reference to limitations or qualifications as to materiality
such as the word "material", the phrase "in all material
respects" or words or phrases of similar meaning and intent
for purposes of calculating the value of claims pursuant to
this Article 6, but not, for greater certainty, for the
purpose of establishing a breach giving rise to a Party's
obligation to indemnify a Party;
(ii) there will be no liability of a Shareholder under this
Agreement with respect to any breach contemplated by Section
6.1(a) unless the claims of Acquisitionco or any
Acquisitionco Indemnified Party, as the case may be, exceed,
in the aggregate, $37,000.00 but subject to the limitations
contained in Section 6.6(a)(iv);
-18-
(iii) there will be no liability of Acquisitionco under this
Agreement with respect to any breach contemplated by Section
6.2(a), Section 6.2(b) or Section 6.2(c) or the Shareholder
under this Agreement with respect to any breach contemplated
by Section 6.1(b), Section 6.1(c) or Section 6.1(d) unless
the claims of the Shareholder or any Shareholder Indemnified
Person or Acquisitionco or any Acquisitionco Indemnified
Party, as the case may be, exceed, in the aggregate,
$25,000.00;
(iv) in no event will the liability of the Shareholder in respect
of any claims of Acquisitionco, E&C or any Purchaser
Indemnified Person under this Agreement exceed, in the
aggregate, the Escrow Amount nor will the liability of the
Shareholder with respect to any breach contemplated by
Section 6.1(a) exceed 67.3913% of the amount of such claim
and payment of any amount to which Acquisitionco, E&C or any
Purchaser Indemnified Person is entitled under this
Agreement shall be satisfied out of the Escrow Amount by and
in accordance with the provisions of the Escrow Agreement;
and
(v) in no event will the liability of Acquisitionco in respect
of claims of the Shareholder or any Shareholder Indemnified
Person under this Agreement exceed, in the aggregate, the
Escrow Amount.
(b) The Damages to which the Shareholder, Acquisitionco or any other
indemnified Person is entitled pursuant to this Article 6 will be
nil if a claim in respect thereof is asserted at any time after
expiry of the applicable survival period specified in Section 6.5
of this Agreement.
6.7 INDEMNIFICATION SOLE REMEDY.
Subject to Article 8 and except as otherwise expressly provided in this
Agreement, following the Effective Date the indemnifications provided for in
this Article 6 shall constitute the sole remedy available to the Shareholder and
Acquisitionco with respect to any and all breaches or failures of
representations, warranties, covenants, agreements or obligations contained in
this Agreement.
ARTICLE 7
TERM, TERMINATION AND WAIVER
7.1 TERM
(a) This Agreement shall terminate on the earliest to occur of the
following:
(i) the date upon which Acquistionco and the Shareholder
mutually agree to terminate this Agreement; or
(ii) the date upon which the Arrangement Agreement is terminated
in accordance with its terms.
-19-
(b) If this Agreement is terminated in accordance with the foregoing
provisions of this Section 7.1, this Agreement shall forthwith
become void and of no further force or effect and no Party shall
have any further obligations hereunder. The obligations of the
Parties under Section 8.2 hereof shall survive the termination of
this Agreement, notwithstanding anything herein to the contrary.
ARTICLE 8
GENERAL PROVISIONS
8.1 FIDUCIARY DUTIES
Nothing in this Agreement limits or otherwise effects or shall in any
way be construed to limit or otherwise effect the discharge by any nominee of
the Shareholder serving on the Board of Directors of his or her fiduciary duties
and in no event shall the Shareholder have any liability hereunder in connection
therewith.
8.2 DISCLOSURE
No press release or other disclosure (public or otherwise) with respect
to the existence or details of this Agreement, the Arrangement, Acquisitionco,
the Shareholder or the business and affairs of E&C, shall be made by the
Shareholder without the prior written consent of the Parties, except to the
extent required by applicable Law. The Shareholder acknowledges and agrees that
a summary of this Agreement and the negotiations leading to its execution and
delivery must appear in the disclosure material relating to the Arrangement.
8.3 NON-MERGER
Except as otherwise expressly provided in this Agreement, the
covenants, representations and warranties contained herein shall not merge on
but shall survive the Effective Date and shall continue in full force and effect
in accordance with the provisions of this Agreement.
8.4 ASSIGNMENT
Acquisitionco may assign its rights under this Agreement to any of its
Affiliates but, notwithstanding any such assignment, shall remain liable to the
Shareholder for any default by such assignee. This Agreement shall not otherwise
be assignable by the Shareholder without the prior written consent of
Acquistionco. This Agreement shall be binding upon and shall enure to the
benefit of and be enforceable by the Parties hereto and their respective
successors, permitted assigns, heirs, executors and personal representatives, as
the case may be.
8.5 SUBSEQUENT ACQUISITIONS
The Shareholder agrees that this Agreement and his or her rights and
obligations hereunder shall attach to any E&C Common Shares and E&C Convertible
Securities that may become directly or indirectly beneficially owned by the
Shareholder or over which control or direction may be acquired by the
Shareholder.
-20-
8.6 EXPENSES
All costs and expenses incurred in connection with this Agreement and
the transactions contemplated hereby shall be paid by the Party incurring such
expenses.
8.7 DAMAGE PROVISIONS
Each Party acknowledges and agrees that in the event of any breach of
this Agreement prior to the Effective Date, Acquisitionco would be irreparably
and immediately harmed and could not be made whole by monetary damages only. It
is accordingly agreed that (i) the Shareholder hereby waives, in any action for
specific performance, the defence of adequacy of a remedy at law, and (ii)
Acquistionco shall be entitled, in addition to any other remedy to which it may
be entitled at law or in equity, to compel specific performance of this
Agreement or to an injunction or injunctions.
8.8 EXERCISE OF RIGHTS
All rights, powers and remedies provided under this Agreement or
otherwise available in respect hereof at law or in equity shall be cumulative
and not alternative, and the exercise of any right, power or remedy by any Party
shall not preclude the simultaneous or later exercise of any other such right,
power or remedy by such Party. The failure of any Party hereto to exercise any
right, power or remedy provided under this Agreement or otherwise available in
respect hereof at law or in equity, or to insist upon compliance by any other
Party hereto with its obligations hereunder, and any custom or practice of the
Parties at variance with the terms hereof, shall not constitute a waiver by such
Party of its right to exercise any such or other right, power or remedy or to
demand such compliance.
8.9 NOTICES
Any notice, consent, waiver, direction or other communication required
or permitted to be given under this Agreement shall be in writing and may be
given by delivering or sending same by facsimile transmission to the Party to
which the notice, consent, waiver, direction or communication is to be given at
such Party's address for service herein. Any notice, consent, waiver, direction
or other communication aforesaid shall, if delivered, be deemed to have been
given and received on the date on which it was delivered to the address provided
herein (if a Business Day, if not, the next succeeding Business Day) and if sent
by facsimile transmission be deemed to have been given and received at the time
of receipt unless actually received after 5:00 p.m. local time or on a date that
does not fall on a Business Day at the point of delivery in which case it shall
be deemed to have been given and received on the next Business Day.
The addresses for service shall be as follows:
(a) if to Acquisitionco:
Repechage Restaurant Group Ltd.
Xxxxx 000, 0000 Xxxxxx Xxxxxx Xxxx
Xxxxxxx, XX
Attention: Xxxxx X. Xxxxxx, President
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Facsimile: 000-000-0000
with a copy to (which shall not constitute notice):
Xxxxxx Xxxxxxx LLP
Suite 3800, P.O. Box 00
Xxxxx Xxxx Xxxxx, Xxxxx Xxxxx
Xxxxxxx, XX X0X 0X0
Attention: W. Xxxx Xxxxxxxxxx
Facsimile: 000-000-0000
(b) if to the Shareholder:
GE Investment Private Placement Partners II
c/o GE Asset Management Incorporated
0000 Xxxxxx Xx.,
Xxxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxx Xxxxxxxxxx and Xxxxxxx X. Xxxxxxx, Esq.
Facsimile: 000-000-0000
with a copy to (which shall not constitute notice):
Xxxxx Xxxxxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000-0000
Attention: Xxxxxx X. Xxxxx
Facsimile: 000-000-0000
8.10 GOVERNING LAW
This Agreement shall be governed by, and construed in accordance with, the laws
of the Province of British Columbia and the federal laws of Canada applicable
therein and the Parties hereby attorn to the non-exclusive jurisdiction of the
courts of the Province of British Columbia.
8.11 TIME OF THE ESSENCE
Time shall be of the essence of this Agreement.
8.12 THIRD PARTY RIGHTS
This Agreement shall not confer to any rights or remedies upon any person other
than the Parties hereto except that the provisions of Article 6 are intended for
the benefit of the individuals specified therein.
-22-
8.13 SEVERABILITY
If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any rule or Law or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
Party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the Parties shall negotiate in good
faith to modify this Agreement so as to effect the original intent of the
Parties as closely as possible in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the fullest extent possible.
8.14 COUNTERPARTS
This Agreement may be executed in any number of counterparts, manually or by
facsimile, each of which will be deemed to be an original and all of which taken
together will be deemed to constitute one and the same instrument.
IN WITNESS WHEREOF the Panrties have executed this Agreement on the date first
above written.
REPECHAGE RESTAURANT GROUP
LTD.
/s/ Xxxxx Xxxxxx
---------------------------------------
Name: Xxxxx Xxxxxx
Title: President
GE INVESTMENT PRIVATE
PLACEMENT PARTNERS II
BY: GE ASSET MANAGEMENT
INCORPORATED, TTS INVESTMENT
MANAGER
/S/ Xxxxx X. Xxxxxxxxxx
---------------------------------------
Name: Xxxxx X. Xxxxxxxxxx
Title: Vice President
SCHEDULE A
INDEMNIFICATION RIGHTS
REGARDING CERTAIN E&C MATTERS
The Shareholder hereby agrees that the indemnification rights in Article 6 of
this Agreement shall extend to the representations and warranties made by E&C to
Acquisitionco in each of Sections 3.1(b), (c), (e), (g), (h), (i), (j), (k), (1)
and (y) of the Arrangement Agreement and acknowledges that Acquistionco is
relying upon such indemnification rights in connection with the entering into of
this Agreement. For greater certainty capitalized terms used in such
representations and warranties that are not otherwise defined in this Agreement
shall have the meanings given to them in the Arrangement Agreement.
SCHEDULE B
OWNED SECURITIES
E&C Common Shares 3,258,860
E&C Preferred Shares 3,653,972
Warrants to Purchase E&C Common Shares 1,750,000
SCHEDULE C
FORM OF ESCROW AGREEMENT
EXECUTION COPY
ESCROW AGREEMENT
AMONG
REPECHAGE INVESTMENTS LIMITED
AND
REPECHAGE RESTAURANT GROUP LTD.
AND
GE INVESTMENT PRIVATE PLACEMENT PARTNERS II,
A DELAWARE LIMITED PARTNERSHIP
AND
CROWN LIFE INSURANCE COMPANY
AND
XXXX XXXXXX
AND
XXXXX XXXXXX
AND
XXXXX XXXXXX
AND
[ESCROW AGENT]
, 2007
TABLE OF CONTENTS
-----------------
ARTICLE 1 DEFINITIONS AND PRINCIPLES OF INTERPRETATION ........................2
1.1 Definitions..........................................................2
1.2 Number and Gender....................................................4
1.3 Inclusive Terminology................................................4
1.4 Interpretation not Affected by Headings, etc.........................4
1.5 Date For Any Action..................................................4
1.6 Currency.............................................................5
1.7 Statutory References.................................................5
1.8 Entire Agreement.....................................................5
1.9 Schedules............................................................5
ARTICLE 2 APPOINTMENT OF ESCROW AGENT .........................................5
2.1 Appointment of the Escrow Agent......................................5
2.2 Investment by Escrow Agent...........................................5
2.3 Distributions of Escrow Funds........................................6
2.4 Interest on Escrow Funds.............................................9
2.5 No Set-Off...........................................................9
2.6 No Requirement to Act................................................9
2.7 Sufficiency of Escrow Funds..........................................9
ARTICLE 3 LIABILITY OF THE ESCROW AGENT........................................9
3.1 No Implied Duties....................................................9
3.2 No Liability for Errors.............................................10
3.3 No Liability Where Reliance.........................................10
3.4 Expert Advice.......................................................10
3.5 Force Majeure.......................................................10
3.6 No Expenditure of Own Funds.........................................10
3.7 Fees and Reimbursement of the Escrow Agent..........................10
3.8 Indemnification.....................................................11
3.9 Dispute Resolution..................................................11
3.10 Removal and Resignation.............................................11
ARTICLE 4 MISCELLANEOUS ......................................................12
4.1 Representations and Warranties......................................12
4.2 Notices.............................................................12
4.3 Governing Law.......................................................15
4.4 Amendments..........................................................15
4.5 Termination.........................................................16
4.6 Waiver..............................................................16
4.7 Severability........................................................16
4.8 Time of the Essence.................................................16
4.9 Successors and Assigns..............................................16
4.10 Counterparts........................................................16
ESCROW AGREEMENT THIS AGREEMENT DATED o, 2007,
BETWEEN:
REPECHAGE INVESTMENTS LIMITED, a corporation existing under the
laws of Newfoundland and Labrador (hereinafter referred to as the
"PARENT"),
-and-
REPECHAGE RESTAURANT GROUP LTD., a corporation existing under the
laws of Canada (hereinafter referred to as "ACQUISITIONCO" ),
-and-
GE INVESTMENT PRIVATE PLACEMENT PARTNERS II, a Delaware limited
partnership (hereinafter referred to as "GEIPPP"),
-and-
CROWN LIFE INSURANCE COMPANY, an insurance company existing under
the laws of Canada (hereinafter referred to as "CROWN"),
-and-
XXXX XXXXXX, an individual residing in Vancouver, British
Columbia (hereinafter referred to as "XXXXXX"),
-and-
XXXXX XXXXXX, an individual residing in Vancouver, British
Columbia (hereinafter referred to as "Xxxxxx"),
-and-
XXXXX XXXXXX, an individual residing in Vancouver, British
Columbia (hereinafter referred to as "XXXXXX"),
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[o] (hereinafter referred to as the "ESCROW AGENT").
RECITALS:
WHEREAS Parent, Acquisitionco and Elephant and Castle Group Inc. have entered
into an arrangement agreement dated January o, 2007 pursuant to which
Acquisitionco proposes to complete the Arrangement (as defined below);
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AND WHEREAS it is a condition to the Arrangement that an escrow agreement shall
have been entered into between Parent, Acquisitionco, GEIPPP, Crown, the
Management Shareholders (as defined below) and the Escrow Agent providing for an
escrow in the aggregate amount of U.S.$1,840,000 as exclusive support for
indemnification claims for breaches of representations, warranties and covenants
contained in the Support Agreements (as defined below) (the "INDIVIDUAL
SHAREHOLDER REPRESENTATIONS") and certain representations and warranties of E&C
made to Acquisitionco as specified in Schedule A to the Support Agreements (the
"E&C REPRESENTATIONS");
AND WHEREAS the Escrow Agent is willing to act as escrow agent on the terms set
forth in this Agreement.
NOW THEREFORE THIS AGREEMENT WITNESSES THAT, in consideration of the respective
covenants and agreements contained herein and other good and valuable
consideration (the receipt and sufficiency of which are hereby acknowledged),
and intending to be legally bound hereby, each of Parent, Acquisitionco, GEIPPP,
Crown, the Management Shareholders, and the Escrow Agent agree as follows:
ARTICLE 1
DEFINITIONS AND PRINCIPLES OF INTERPRETATION
1.1 DEFINITIONS.
"ACT" means the BUSINESS CORPORATIONS ACT (British Columbia);
"AGREED AMOUNT" has the meaning given to such term in Section 2.3(b);
"AGREED INDEMNIFICATION AMOUNT" has the meaning given to such term in
Section 2.3(c);
"AGREEMENT" means this escrow agreement dated o, 2007, as the same may
be amended from time to time;
"ARRANGEMENT" has the meaning given to such term in the Arrangement
Agreement;
"ARRANGEMENT AGREEMENT" means the agreement entered into on January o,
2007 between Parent, Acquisitionco and E&C for the purposes of
effecting the Arrangement;
"BUSINESS DAY" means a day which is not a Saturday, Sunday or a
statutory holiday in Toronto, Ontario or Vancouver, British Columbia;
"CONTESTED AMOUNT" has the meaning given to such term in Section 2.3(d)
of this Agreement;
"CONTESTING SHAREHOLDER" has the meaning given to such term in Section
2.3(d) of this Agreement;
"E&C" means Elephant & Castle Group Inc.;
"E&C REPRESENTATIONS" has the meaning given to such term in the
recitals;
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"ESCROW EXPIRY DATE" means [SPECIFY DATE THAT IS NINE MONTHS FROM THE
EFFECTIVE DATE];
"ESCROW FUNDS" has the meaning given to such term in Section 2.1;
"GOVERNMENTAL ENTITY" means (a) any multinational, federal, provincial,
territorial, state, regional, municipal, local or other government,
governmental or public department, central bank, court, tribunal,
arbitral body, administrative body, commission, board, bureau or
agency, domestic or foreign; (b) any subdivision, agent or agency,
commission, board, or authority of any of the foregoing; (c) any
self-regulatory authority or stock exchange; or (d) any
quasi-governmental or private body exercising any regulatory,
expropriation or taxing authority under or for the account of any of
the foregoing;
"INDEMNIFICATION AMOUNT" has the meaning given to such term in Section
2.3(a);
"INDEMNIFICATION EVENT" means an event pursuant to which indemnifcation
is payable to a Purchaser Indemnified Person (as defined in the Support
Agreements) pursuant to the provisions of Article 6 of the Support
Agreements.;
"INDEMNIFICATION NOTICE" has the meaning given to such term in Section
2.3(a);
"INDEMNIFYING SHAREHOLDER" has the meaning given to such term in
Section 2.3(a);
"INDEMNITEES" has the meaning given to such term in Section 3.8;
"INDIVIDUAL SHAREHOLDER REPRESENTATIONS" has the meaning given to such
term in the recitals;
"INITIAL ESCROW AMOUNT" means U.S.$1,840,000, representing the
aggregate Shareholder Escrow Amount contributed by the Shareholders;
"INTEREST" has the meaning given to such term in Section 2.4;
"MANAGEMENT SHAREHOLDERS" means collectively Bryant, Sexton, and
Xxxxxx;
"PARTIES" each of Parent, Acquisitionco, GEIPPP, Crown and the
Management Shareholders and the Escrow Agent, and "PARTY" means any one
of them;
"PERMITTED INVESTMENTS" has the meaning given to such term in Section
2.2;
"PERSON" means any individual, partnership, limited partnership,
syndicate, sole proprietorship, company or corporation, with or without
share capital, unincorporated association, trust, trustee, executor,
administrator, or other legal personal representative, regulatory body
or agency, government or Governmental Entity, however designated or
constituted;
"PROPORTIONATE INTEREST" means in respect of each Shareholder, the
following:
(a) in the case of GEIPPP, 67.3913%;
(b) in the case of Crown, 16.3043%;
(c) in the case of Xxxxxx, 9.7826%;
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(d) in the case of Xxxxxx, 2.4456%; and
(e) in the case of Xxxxxx, 4.0760%;
"RESPONDING NOTICE" has the meaning given to such term in Section
3.3(c);
"RESPONSE NOTICE" has the meaning given to such term in Section 2.3(b);
"SHAREHOLDER ESCROW AMOUNT" means:
(a) in the case of GEIPPP, U.S.$1,240,000;
(b) in the case of Crown, U.S.$300,000;
(c) in the case of Xxxxxx, U.S.$180,000;
(d) in the case of Xxxxxx, U.S.$45,000; and
(e) in the case of Xxxxxx, U.S.$75,000
and in each case, as such amount may be increased pursuant to
Section 3.2 of this Agreement or reduced pursuant to the terms of
this Agreement;
"SHAREHOLDERS" means collectively, GEIPPP, Crown and the Management
Shareholders; and
"SUPPORT AGREEMENTS" means the several Support and Indemnifcation
Agreement entered into between Acquisitionco and each Shareholder, each
dated January o, 2007.
1.2 NUMBER AND GENDER.
Words importing the singular number include the plural and vice versa and words
importing gender include all genders.
1.3 INCLUSIVE TERMINOLOGY.
Whenever used in this Agreement, the words "includes" and "including" and
similar terms of inclusion shall not, unless expressly modified by the words
"only" or "solely", be construed as terms of limitation, but rather shall mean
"includes but is not limited to" and "including but not limited to", so that
references to included matters shall be regarded as illustrative without being
either characterizing or exhaustive.
1.4 INTERPRETATION NOT AFFECTED BY HEADINGS, ETC.
The division of this Agreement into Articles and Sections and other parts and
the insertion of headings are for convenience of reference only and shall not
affect the construction or interpretation of this Agreement. Unless otherwise
indicated, any reference in this Agreement to an Article, Section or Schedule
refers to the specified Article or Section of or Schedule to this Agreement.
1.5 DATE FOR ANY ACTION.
In the event that any date on or by which any action is required or permitted to
be taken hereunder is not a Business Day, such action shall be required or
permitted to be taken on or by the next succeeding day which is a Business Day.
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1.6 CURRENCY.
In the absence of a specific designation of any currency, any dollar amount
referenced herein shall be deemed to refer to lawful currency of Canada.
1.7 STATUTORY REFERENCES.
Any reference in this Agreement to a statute includes all regulations made
thereunder, all amendments to such statute or regulations in force from time to
time, and any statute or regulation that supplements or supersedes such statute
or regulations.
1.8 ENTIRE AGREEMENT.
This Agreement along with each of the Support Agreements constitutes the entire
agreement between the Parties with respect to the subject matter hereof and
cancels and supersedes all prior agreements, understandings, negotiations and
discussions, whether oral or written, between the parties hereto with respect to
the subject matter hereof. There are no representations, warranties, terms,
conditions, undertakings or collateral agreements, expressed, implied or
statutory, between the Parties other than as expressly set forth in this
Agreement.
1.9 SCHEDULES
The following Schedule is annexed to this Agreement and is incorporated by
reference into this Agreement and forms a part hereof:
Schedule A - Arbitration Provisions.
ARTICLE 2
APPOINTMENT OF ESCROW AGENT
2.1 APPOINTMENT OF THE ESCROW AGENT.
Each of Parent, Acquisitionco, GEIPPP, Crown and the Management Shareholders
appoint the Escrow Agent to serve as escrow agent, and the Escrow Agent accepts
such appointment on the terms set forth in this Agreement. The Escrow Agent
acknowledges receipt from [INSERT NAME OF DEPOSITARY] of the Initial Escrow
Amount and agrees to hold the Initial Escrow Amount and all interest, and other
distributions and payments thereon (such amounts together with the Initial
Escrow Amount, the "ESCROW FUNDS") in trust for release pursuant to the terms of
this Agreement.
2.2 INVESTMENT BY ESCROW AGENT.
The Escrow Agent shall invest the Initial Escrow Amount in a Canadian
interest-bearing account or Canadian term deposit maintained or issued by a
Canadian chartered bank chosen by the Escrow Agent (collectively, "PERMITTED
INVESTMENTS"). The Escrow Agent is authorized to sell, exchange, redeem and
otherwise transfer all or any part of the Escrow Funds and to reinvest the
proceeds of such transfers in Permitted Investments. The Escrow Agent is further
authorized and directed to sell, exchange, redeem and otherwise transfer all or
any part of the Escrow Funds, without further instructions, as may be necessary
from time to time to pay any amount required
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to be disbursed pursuant to this Agreement. The Escrow Agent will provide
Acquisitionco and each of the Shareholders, upon written request by any of them,
with a statement showing all transactions involving the Escrow Funds up to and
including the statement date. On the Escrow Expiry Date (or such later date on
which all Escrow Funds are disbursed), the Escrow Agent shall provide each of
the Parties with a final statement showing all transactions involving the Escrow
Funds and the Shareholder Escrow Amount of such Shareholder.
2.3 DISTRIBUTIONS OF ESCROW FUNDS.
(a) Upon the occurrence of an Indemnification Event, Acquisitionco
shall give written notice (an "INDEMNIFICATION NOTICE") to:
(i) in the event the Indemnifcation Event relates to an
Individual Shareholder Representation, the applicable
Shareholder (the "INDEMNIFYING SHAREHOLDER"); or
(ii) in the event the Indemnifcation Event relates to an
E&C Representation, each of the Shareholders,
in each case setting out the amount of such claim for
indemnifcation (the "INDEMNIFICATION AMOUNT") and the basis
for such claim.
(b) In the event the Indemnifcation Event relates to an Individual
Shareholder Representation:
(i) Within twenty (20) days after delivery of an
Indemnification Notice, the Indemnifying Shareholder
shall provide Acquisitionco and the Escrow Agent with
a written response (a "RESPONSE NOTICE") in which it
shall either: (i) agree that all of the
Indemnifcation Amount may be released from its
Shareholder Escrow Amount, (ii) agree that part, but
not all, of the Indemnifcation Amount (such part
being the "AGREED AMOUNT") may be released from its
Shareholder Escrow Amount, or (iii) contest that any
of the Indemnification Amount may be released from
its Shareholder Escrow Amount. If no Response Notice
is delivered within such twenty (20) day period from
the Indemnifying Shareholder, the Indemnifying
Shareholder shall be deemed to have agreed that the
Indemnifcation Amount may be released from its
Shareholder Escrow Amount.
(ii) If the Indemnifying Shareholder agrees (or is deemed
to have agreed) that all of the Indemnifcation Amount
may be released from its Shareholder Escrow Amount,
the Escrow Agent shall, within two (2) Business Days
following the earlier of the required delivery date
for the Response Notice or the delivery of the
Response Notice, disburse to Acquisitionco from such
Indemnifying Shareholder's Shareholder Escrow Amount,
an amount equal to the Indemnifcation Amount (or such
lesser amount as is then held in respect of such
Shareholder Escrow Amount). Any such payment shall be
made by wire transfer of
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immediately available funds to a bank account
designated in writing by Acquisitionco.
(iii) If the Indemnifying Shareholder agrees that an Agreed
Amount may be released from its Shareholder Escrow
Amount, the Escrow Agent shall within two (2)
Business Days following the delivery of the Response
Notice, disburse to Acquisitionco from such
Indemnifying Shareholder's Shareholder Escrow Amount
an amount equal to the Agreed Amount (or such lesser
amount as is then held in respect of such Shareholder
Escrow Amount). Any such payment shall be made by
wire transfer of immediately available funds to a
bank account designated in writing by Acquisitionco.
(c) In the event the Indemnification Event relates to an E&C
Representation:
(i) Within twenty (20) days after delivery of an
Indemnification Notice, each of the Shareholders
shall provide Acquisitionco and the Escrow Agent with
a written response (a "RESPONDING NOTICE") in which
it shall either: (i) agree that all of the
Indemnifcation Amount may be released from the Escrow
Funds, (ii) agree that part, but not all, of the
Indemnification Amount (such part being the "AGREED
INDEMNIFICATION AMOUNT") may be released from the
Escrow Funds, or (iii) contest that any of the
Indemnifcation Amount may be released from the Escrow
Funds. If no Responding Notice is delivered within
such twenty (20) day period from a Shareholder, then
such Shareholder shall be deemed to have agreed that
the Indemnifcation Amount may be released from the
Escrow Funds.
(ii) If a Shareholder agrees (or is deemed to have agreed)
that all of the Indemnifcation Amount may be released
from the Escrow Funds, the Escrow Agent shall, within
two (2) Business Days following the earlier of the
required delivery date for the Responding Notice or
the delivery of the Responding Notice disburse to
Acquisitionco from the Escrow Funds, an amount equal
to such Shareholder's Proportionate Interest of the
Indemnification Amount (or such lesser amount as is
then held in the Escrow Funds). Any such payment
shall be made by wire transfer of immediately
available funds to a bank account designated in
writing by Acquisitionco.
(iii) If the Shareholder agrees that an Agreed
Indemnification Amount may be released from the
Escrow Funds, the Escrow Agent shall within two (2)
Business Days following the delivery of the
Responding Notice, disburse to Acquisitionco from the
Escrow Funds, an amount equal to such Shareholder's
Proportionate Interest of the Agreed Indemnifcation
Amount (or such lesser amount as is then held in the
Escrow Funds). Any such payment shall be made by wire
transfer of immediately available funds to a bank
account designated in writing by Acquisitionco.
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(d) If:
(i) in the event the Indemnifcation Event relates to an
Individual Shareholder Representation, the
Indemnifying Shareholder; or
(ii) in the event the Indemnifcation Event relates to an
E&C Representation, a particular Shareholder or
Shareholders,
(each such Indemnifying Shareholder or Shareholder being
hereinafter referred to as a "CONTESTING SHAREHOLDER")
contests the release of all or part of the Indemnification
Amount (the "CONTESTED AMOUNT"), the applicable Parties shall
negotiate in good faith and use commercially reasonable
efforts to resolve any and all disputes relating thereto. If
said efforts do not result in a resolution within 30 days of
receipt by Acquisitionco or the Escrow Agent (whichever is
later) of the Response Notice or the Responding Notice, as the
case may be, from the Contesting Shareholder, the matter shall
be settled by binding arbitration in accordance with the
provisions of Schedule A hereto. For greater certainty any
deficiency between the Agreed Amount or Agreed Indemnifcation
Amount, on the one hand, and the Indemnifcation Amount, on the
other hand, shall be considered to be a Contested Amount.
(e) The Escrow Agent shall continue to hold an amount sufficient
to cover the Contested Amount (up to the applicable
Shareholder Escrow Amount or the amount then available in the
Escrow Funds, as the case may be) notwithstanding the
occurrence of the Escrow Expiry Date, until delivery of either
(i) an original of a settlement agreement executed by
Acquisitionco and each Contesting Shareholder setting forth
joint instructions to the Escrow Agent as to the
disbursements, if any, that are to be made with respect to the
Contested Amount, or (ii) a certified copy of the final award
of the arbitrator setting forth instructions to the Escrow
Agent as to the disbursements, if any, that are to be made
with respect to the Contested Amount. The Escrow Agent shall,
within two (2) Business Days of receipt, disburse amounts from
the applicable Shareholder Escrow Amount or the Escrow Funds,
as the case may be, (to the extent such amounts are then held
in the applicable Shareholder Escrow Amount or the Escrow
Funds, as the case may be) to Acquisitionco or one or more
Shareholder, as the case may be, in accordance with such
agreement or award.
(f) Subject to Section 2.3(e) of this Agreement and provided that
Acquisitionco has not previously given an Indemnifcation
Notice which has not then been resolved in accordance with
Section 2.3 of this Agreement, the escrow period shall
terminate at 5:00 p.m. (Vancouver time) on the Escrow Expiry
Date and on the first Business Day following the Escrow Expiry
Date, Acquisitionco and each Shareholder shall jointly
instruct the Escrow Agent to distribute to the Shareholders
all of the remaining Escrow Funds in accordance with the
Shareholder Escrow Amount of each Shareholder.
(g) Notwithstanding anything contained in this Section 3.3, in no
event shall the liability of a Shareholder in respect of
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(i) an Indemnifcation Event that relates to an Individual
Shareholder Representation made by such Shareholder
exceed, in the aggregate, the amount then held in
respect of such Shareholder's Shareholder Escrow
Amount; and
(ii) an Indemnifcation Event that relates to an E&C
Representation exceed, in the aggregate, the amount
then held in the Escrow Funds nor will the liability
of such Shareholder in respect of such
Indemnification Event exceed the Proportionate
Interest of such Shareholder.
2.4 INTEREST ON ESCROW FUNDS.
The Parties agree that the interest, dividends and other distributions and
payments (collectively "INTEREST") earned on the Escrow Funds shall accrue PRO
RATA to the benefit of the Persons ultimately entitled to such funds.
2.5 NO SET-OFF.
Subject to Section 3.7 and Section 3.8 of this Agreement, the Escrow Funds shall
not be subject to any set-off, counterclaim, recoupment or other rights which
the Escrow Agent may have against any of the Parties or against any other Person
for any reason whatsoever. The Escrow Funds are not the property of the Escrow
Agent and shall not be subject to any lien, attachment or other judicial process
of any creditor of the Escrow Agent.
2.6 NO REQUIREMENT TO ACT.
The Escrow Agent shall retain the right not to act and shall not be held liable
for refusing to act unless it has received clear and reasonable documentation
which complies with the terms of this Agreement. Such documentation must not
require the exercise of any discretion or independent judgment on the part of
the Escrow Agent.
2.7 SUFFICIENCY OF ESCROW FUNDS.
Acquisitionco and each of the Shareholders acknowledge and agree that the Escrow
Agent is acting as a depositary only and the Escrow Agent shall have no
obligation to ensure the sufficiency of the Initial Escrow Amount or the Escrow
Funds. The Escrow Agent shall not be liable for any loss on the investment of
the Escrow Funds made in accordance with this Agreement.
ARTICLE 3
LIABILITY OF THE ESCROW AGENT
3.1 NO IMPLIED DUTIES.
The duties and obligations of the Escrow Agent shall be determined solely by the
express provisions of this Agreement, and no implied representations,
warranties, covenants, obligations or duties shall be read into this Agreement
against the Escrow Agent, nor shall it have, or be deemed to have, any duties
under the provisions of any other agreement (including, without limitation, the
Support Agreements) between the other Parties or any other Persons.
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3.2 NO LIABILITY FOR ERRORS.
The Escrow Agent shall not be liable for any error of judgment or mistake of
fact or law, or any action taken, suffered or omitted by it in good faith in
connection with this Agreement, except to the extent caused by its own gross
negligence or wilful misconduct.
3.3 NO LIABILITY WHERE RELIANCE.
The Escrow Agent may rely upon, and shall not incur any liability for acting or
refraining from acting in good faith in reliance upon, any written instruction
(including, without limitation, wire transfer instructions), notice, request,
resolution, direction, certificate, approval or other paper or document,
believed by it in good faith to be genuine and duly authorized and presented by
the proper Person. The Escrow Agent shall have no responsibility for determining
the accuracy of any such paper or document.
3.4 EXPERT ADVICE.
The Escrow Agent may employ such counsel, auditors and other experts as may be
necessary or desirable to properly discharge its duties under this Agreement and
may pay any reasonable amounts required for such services. Any opinion or advice
of such counsel, auditors or other experts shall be full authorization and
protection with respect to any action taken, suffered or omitted by the Escrow
Agent in good faith and in accordance with the opinion or advice of such
counsel, auditors or other experts within the area of their respective
expertise. The Escrow Agent shall not be responsible for the negligent actions
or misconduct of such counsel, auditors and other experts unless the Escrow
Agent did not exercise due care in their selection.
3.5 FORCE MAJEURE.
The Escrow Agent shall not incur any liability for failing to perform any act or
fulfill any duty, obligation or responsibility hereunder by reason of any
occurrence beyond the reasonable control of the Escrow Agent (including, but not
limited to, any provision of any present or future law or regulation of a
governmental authority, any act of God or war, any epidemic or the
unavailability of any wire or communication facility).
3.6 NO EXPENDITURE OF OWN FUNDS.
Nothing in this Agreement shall require the Escrow Agent to expend its own funds
or otherwise incur financial liability in the performance of any of its duties
or in the exercise of any of its rights or powers unless indemnified or
reimbursed as provided in this Agreement.
3.7 FEES AND REIMBURSEMENT OF THE ESCROW AGENT.
Acquisitionco and the Shareholders shall pay an aggregate fee in the amount of
$o to the Escrow Agent and shall reimburse it, upon request, for all reasonable
expenses incurred by it under this Agreement. The Escrow Agent may withhold from
amounts otherwise payable by it under this Agreement, the amount of any unpaid
fees and unreimbursed expenses due to it.
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3.8 INDEMNIFICATION.
Acquisitionco and each of the Shareholders shall jointly and severally indemnify
the Escrow Agent and its directors, officers, agents and employees
(collectively, the "INDEMNITEES") for, and shall hold such Persons harmless
against, any loss, liability, claims, actions, damages or expenses incurred by
them arising out of or in connection with the entering into and carrying out of
the Escrow Agent's duties under this Agreement, including the costs of defending
themselves against any claim or liability; provided the foregoing indemnity
shall not cover matters attributable to the Indemnitees' gross negligence or
wilful misconduct. The provisions of this Section 3.8 shall survive the
termination of this Agreement and the final disbursement of the Escrow Funds or
removal of the Escrow Agent pursuant to Section 3.10 hereof.
3.9 DISPUTE RESOLUTION.
Should any dispute arise with respect to the delivery, ownership, right of
possession or disposition of the Escrow Funds, or should any claim be made upon
the Escrow Agent or the Escrow Funds by a Person other than a Party, the Escrow
Agent, upon receipt of notice of such dispute or claim, is authorized and shall
be entitled (at its sole option and election) to retain in its possession
without liability, all or any of the Escrow Funds until such dispute shall have
been settled either by the mutual written agreement of the parties involved or
by a decree or judgment of a court of competent jurisdiction or arbitrator. A
certified copy of any such settlement or decree or judgment of a court of
competent jurisdiction or arbitrator shall be delivered to the Escrow Agent by
either party forthwith upon receipt thereof. The Escrow Agent may, but shall be
under no duty whatsoever to, institute or defend any legal proceedings which
relate to the Escrow Funds and shall be fully indemnified pursuant to Section
3.8 of this Agreement for so doing.
3.10 REMOVAL AND RESIGNATION.
The Escrow Agent may at any time be removed at the joint written direction of
Acquistionco and each of the Shareholders given not less than thirty (30) days
prior to the proposed date of removal. The Escrow Agent may, at any time, resign
and be discharged of its obligations under this Agreement by giving written
notice to Acquistionco and each of the Shareholders specifying the date of its
resignation which shall be no less than sixty (60) days after the date of such
notice. Within twenty (20) days after giving the foregoing notice of removal to
the Escrow Agent or within forty (40) days of receiving the foregoing notice of
resignation from the Escrow Agent, as the case may be, Acquistionco and each of
the Shareholders shall jointly agree on and appoint a successor escrow agent,
and provide written notice of such to the resigning Escrow Agent. If a successor
escrow agent has not accepted such appointment by the end of such 30 or 60 day
period, as the case may be, the Escrow Agent may, in its sole discretion, apply
to a court of competent jurisdiction for the appointment of a successor escrow
agent or for other appropriate relief. Upon receipt of a notice identifying the
successor escrow agent, the Escrow Agent shall deliver the Escrow Funds then
held by it to the successor escrow agent and such successor shall become the
Escrow Agent for purposes of this Agreement. Upon such delivery, the resigning
Escrow Agent shall have no further duties or responsibilities of any nature or
kind whatsoever hereunder.
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ARTICLE 4
MISCELLANEOUS
4.1 REPRESENTATIONS AND WARRANTIES.
Each of the Parties represents and warrants to each of the other Parties as
follows:
(a) if such Party is an individual, he has the capacity to enter
into this Agreement and has received independent legal advice
as to the terms and conditions of this Agreement;
(b) if such Party it not an individual, it has the power and
authority to enter into and perform its obligations under this
Agreement;
(c) this Agreement has been duly authorized, executed and
delivered by such Party and constitutes a legal, valid and
binding obligation, enforceable against him or it in
accordance with its terms;
(d) the execution, delivery and performance of this Agreement do
not and will not result in a breach of, violate, or conflict
with, any other agreement to which such Person is a party; and
(e) the execution, delivery and performance of this Agreement do
not require the consent, waiver, approval, license or
authorization of, or any filing with, any governmental
authority or other Person and will not result in a breach of,
violate or conflict with, any order, law, judgment or
restriction binding on it or any of his or its properties or
assets.
4.2 NOTICES.
Any notice, consent, waiver, direction or other communication required or
permitted to be given under this Agreement shall be in writing and may be given
by delivering or sending same by facsimile transmission to the Party to which
the notice, consent, waiver, direction or communication is to be given at such
Party's address for service herein. Any notice, consent, waiver, direction or
other communication aforesaid shall, if delivered, be deemed to have been given
and received on the date on which it was delivered to the address provided
herein (if a Business Day, if not, the next succeeding Business Day) and if sent
by facsimile transmission be deemed to have been given and received at the time
of receipt unless actually received after 5:00 p.m. local time or on a date that
does not fall on a Business Day at the point of delivery in which case it shall
be deemed to have been given and received on the next Business Day.
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The addresses for service shall be as follows:
(a) if to Parent:
Repechage Investments Limited
Xxxxx 000, 0000 Xxxxxx Xxxxxx Xxxx
Xxxxxxx, XX
Attention: Xxxxx X. Xxxxxx, President
Facsimile: 000-000-0000
with a copy to (which shall not constitute notice):
Xxxxxx Xxxxxxx LLP
Suite 3800, P.O. Box 00
Xxxxx Xxxx Xxxxx, Xxxxx Xxxxx
Xxxxxxx, XX X0X 0X0
Attention: Xxxx Xxxxxxxxxx
Facsimile: 000-000-0000
(b) if to Acquisitionco:
Repechage Restaurant Group Ltd.
Xxxxx 000, 0000 Xxxxxx Xxxxxx Xxxx
Xxxxxxx, XX
Attention: Xxxxx X. Xxxxxx, President
Facsimile: 000-000-0000
with a copy to (which shall not constitute notice):
Xxxxxx Xxxxxxx LLP
Suite 3800, P.O. Box 00
Xxxxx Xxxx Xxxxx, Xxxxx Xxxxx
Xxxxxxx, XX X0X 0X0
Attention: Xxxx Xxxxxxxxxx
Facsimile: 000-000-0000
(c) if to GEIPPP:
c/o GE Asset Management Incorporated
0000 Xxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxx Xxxxxxxxxx and Xxxxxxx X. Xxxxxxx, Esq.
Facsimile: 000-000-0000
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with a copy to (which shall not constitute notice):
Xxxxx Xxxxxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000-0000
Attention: Xxxxxx X. Xxxxx
Facsimile: 000-000-0000
(d) if to Crown:
Crown Life Insurance Company
c/o Crown Capital Partners Inc.
Xxxxx 0000, 0000 Xxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxx X0X 0X0
Attention: o
Facsimile: 000-000-0000
(e) if to Xxxxxx:
Xxxx Xxxxxx
c/o Elephant & Castle Group Inc.
Xxxxx 0000, 0000 Xxxxxx Xxxxxx
Xxxxxxxxx, XX X0X 0X0
Attention: Xxxx Xxxxxx
Facsimile: 000-000-0000
with a copy to (which shall not constitute notice):
Fasken, Martineau, DuMoulin LLP
Suite 2100, 0000 Xxxxxxx Xxxxxx
Xxxx Xxxxxxxxx, XX X0X 0X0
Attention: Georald S. Ingborg
Facsimile: 000-000-0000
(f) if to Xxxxxx:
Xxxxx Xxxxxx
c/o Elephant & Castle Group Inc.
Xxxxx 0000, 0000 Xxxxxx Xxxxxx
Xxxxxxxxx, XX X0X 0X0
Attention: Xxxxx Xxxxxx
Facsimile: 000-000-0000
with a copy to (which shall not constitute notice):
-15-
Fasken, Martineau, DuMoulin LLP
Suite 2100, 0000 Xxxxxxx Xxxxxx
Xxxx Xxxxxxxxx, XX X0X 0X0
Attention: Georald S. Ingborg
Facsimile: 000-000-0000
(g) if to Xxxxxx:
Xxxxx Xxxxxx
c/o Elephant & Castle Group Inc.
Xxxxx 0000, 0000 Xxxxxx Xxxxxx
Xxxxxxxxx, XX X0X 0X0
Attention: Xxxxx Xxxxxx
Facsimile: 000-000-0000
with a copy to (which shall not constitute notice):
Fasken, Martineau, DuMoulin LLP
Suite 2100, 0000 Xxxxxxx Xxxxxx
Xxxx Xxxxxxxxx, XX X0X 0X0
Attention: Georald S. Ingborg
Facsimile: 000-000-0000
(h) if to Escrow Agent:
o
Attention: o
Facsimile: o
with a copy to (which shall not constitute notice):
o
Attention: o
Facsimile: o
4.3 GOVERNING LAW.
This Agreement shall be governed by, and construed in accordance with, the laws
of the Province of British Columbia and the federal laws of Canada applicable
therein and the Parties hereby attorn to the non-exclusive jurisdiction of the
courts of the Province of British Columbia.
4.4 AMENDMENTS.
This Agreement may only be amended, supplemented or otherwise modified by
written agreement of all of the Parties.
-16-
4.5 TERMINATION.
This Agreement shall terminate automatically at such time as the Escrow Funds
shall have been completely distributed in accordance with the terms of this
Agreement. However, there will be no termination of any indemnity or other
liability which has accrued prior to such termination.
4.6 WAIVER.
The failure or delay by a Party in enforcing or insisting upon strict
performance of any of the provisions of this Agreement shall not be considered
to be a waiver of such provision or in any way affect the validity of this
Agreement or deprive a Party of the right, at any time or from time to time, to
enforce or insist upon strict performance of that provision or any other
provision of this Agreement.
4.7 SEVERABILITY.
If any provision of this Agreement is determined by a court of competent
jurisdiction in a final ruling to be illegal, invalid or unenforceable, that
provision shall be severed from this Agreement and be ineffective to the extent
of such illegality, invalidity or unenforceability and the remaining provisions
shall continue in full force and effect, without amendment.
4.8 TIME OF THE ESSENCE.
Time shall be of the essence of this Agreement.
4.9 SUCCESSORS AND ASSIGNS.
This Agreement shall become effective when executed by the Parties and after
that time shall be binding upon and enure to the benefit of the Parties and
their respective successors and permitted assigns. Except as otherwise provided
in Section 3.10 of this Agreement, neither this Agreement nor any of the rights,
duties or obligations under this Agreement are assignable or transferable by a
Party without the prior written consent of the other Parties. Any attempt to
assign any of the rights, duties or obligations in this Agreement without such
written consent is void.
4.10 COUNTERPARTS.
This Agreement may be executed in any number of counterparts, manually or by
facsimile, each of which will be deemed to be an original and all of which taken
together will be deemed to constitute one and the same instrument.
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IN WITNESS WHEREOF the Parties have executed this Agreement on the date first
above written.
REPECHAGE INVESTMENTS LIMITED
By:
-------------------------------------
Authorized Signing Officer
REPECHAGE RESTAURANT GROUP LTD.
By:
-------------------------------------
Authorized Signing Officer
GE INVESTMENT PRIVATE PLACEMENT
PARTNERS II
By:
-------------------------------------
Authorized Signing Officer
CROWN LIFE INSURANCE COMPANY By:
By:
-------------------------------------
Authorized Signing Officer
----------------------------------------
XXXX XXXXXX
----------------------------------------
XXXXX XXXXXX
----------------------------------------
XXXXX XXXXXX
[ESCROW AGENT]
By:
-------------------------------------
Authorized Signing Officer
SCHEDULE A
ARBITRATION PROVISIONS
ARBITRATION
(a) Any dispute shall be referred to and determined by arbitration in
Vancouver, British Columbia.
(b) The arbitral tribunal (the "TRIBUNAL") shall be composed of three
arbitrators appointed as follows:
(i) each of Acquisitionco on the one hand and the
Contesting Shareholders collectively on the other shall
appoint an arbitrator, and those two arbitrators shall
appoint a third arbitrator who shall act as president
of the Tribunal;
(ii) if either Acquisitionco or the Contesting Shareholders
fails to appoint an arbitrator within twenty (20) days
of receiving notice of the appointment of an arbitrator
by the other Party, the second arbitrator shall be
appointed by the arbitrator that has been appointed;
(iii) if the two arbitrators fail to agree upon a third
arbitrator within twenty (20) days of the appointment
of the second arbitrator, the third arbitrator shall be
appointed by a court of competent jurisdiction; and
(iv) should a vacancy arise because any arbitrator dies,
resigns or becomes incapable of performing his or her
functions, the vacancy shall be filled by the method by
which that arbitrator was originally appointed. When a
vacancy is filled, the newly established Tribunal shall
exercise its discretion to determine whether any
hearings shall be repeated.
(c) As soon as practicable after the appointment of the third
arbitrator and in any event no later than twenty (20) days after
the Tribunal has been created, the Party making the claim (the
"ARBITRATION CLAIMANT") shall deliver to the other Party (the
"ARBITRATION RESPONDENT") (with copies to each arbitrator) a
statement of case, setting out particulars of its claims and
written submissions in support thereof, together with any
documents upon which it is relying.
(d) Within twenty (20) days of its receipt of the Arbitration
Claimant's statement of case, the Arbitration Respondent shall
deliver to the Arbitration Claimant (with copies to each
arbitrator) a statement of case in answer together with its
counterclaim, if any, and any documents upon which it is relying.
(e) Within twenty (20) days of its receipt of an Arbitration
Respondent's statement of case in answer, the Arbitration
Claimant may deliver to the Arbitration Respondent (with copies
to each arbitrator) a reply together with any additional
documents upon which it is relying.
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FOR DISCUSSION PURPOSES ONLY
OR DRAFT: JAN. 9, 2007
(f) As soon as practicable after its creation, the Tribunal shall
convene a meeting with the Parties and their representatives to
determine and establish the procedure to be followed in the
arbitration.
(g) The procedure shall be as agreed by the Parties or, if they fail
to agree, shall be determined by the Tribunal. However, the
following procedural matters shall, in any event, be taken as
agreed:
(i) the language of the arbitration shall be English;
(ii) at the request of any Party, the Tribunal may, in its
discretion, hold a hearing and make an award in
relation to any preliminary issue raised by that Party;
(iii) at the joint request of the Parties, the Tribunal shall
hold a hearing and make an award in relation to any
preliminary issue raised by the Parties;
(iv) the Tribunal shall hold a hearing to address the
substantive issues raised in the statements of case
unless the Parties otherwise agree in writing that
submissions will be made in written form only; and
(v) the Tribunal shall issue its final award within sixty
(60) days of the last hearing or submission of written
statements, as applicable, of the substantive issues in
dispute between the Parties.
(h) If any Party fails to comply with a procedural order made by the
Tribunal, the Tribunal shall have the right to continue with the
arbitration and to make its award notwithstanding such
non-compliance.
(i) If one arbitrator fails or refuses to participate in the
arbitration at any time after the hearings have commenced, the
remaining two arbitrators may continue the arbitration and make
an award without a vacancy being deemed to arise if, in their
discretion, they determine that the failure or refusal of the
other arbitrator to participate is without reasonable excuse.
(j) Any award or procedural decision of the Tribunal shall be made by
a majority of the members of the Tribunal. If the Tribunal is
made up of two people as a result of the failure of an arbitrator
to participate, the President of the Tribunal shall have the
deciding vote.
(k) Any award or procedural decision of the Tribunal shall be final
and binding on the Parties.
SCHEDULE D
SECTION 116 WITHHOLDINGS
If any amount is withheld by the Depositary pursuant to section 116 of the Tax
Act by reason of a holder that is not resident in Canada (a "NON-RESIDENT
HOLDER") not delivering a section 116 certificate at or before the Effective
Time, the following provisions shall apply:
(a) The amount to be withheld at the Effective Time (the "WITHHELD
AMOUNT") shall be equal to twenty-five percent (25%) of the
applicable aggregate consideration otherwise payable to the
Non-resident Holder in respect of its E&C Securities (other than
E&C Notes which are not convertible) (the "AGGREGATE
CONSIDERATION").
(b) The Withheld Amount shall be retained by the Depositary or
deposited by Acquisitionco with its solicitors, to be held in
trust and dealt with in accordance with the provisions hereof.
(c) If the Non-resident Holder delivers a section 116 certificate to
Acquisitionco, after the Effective Time and on or before the day
that is 27 days after the end of the month in which Closing
occurs (the "REMITTANCE DEADLINE"), Acquisitionco:
(i) shall, in the case of a certificate issued under
subsection 116(2) of the Tax Act, remit forthwith to
the Receiver General for Canada twenty-five percent
(25%) of the amount, if any, by which the Aggregate
Consideration otherwise payable to the Non-resident
Holder exceeds the certificate limit specified in such
certificate and a receipt evidencing such remittance
shall be promptly delivered to the Non-resident Holder;
and
(ii) shall pay forthwith to the Non-resident Holder the
balance of the Withheld Amount, together with interest
thereon (net of any withholding tax on such interest).
(d) If no section 116 certificate has been delivered to Acquisitionco
by the Non-resident Holder at or before the Remittance Deadline
in accordance with paragraph (c) above, subject to paragraph (f)
below, such amount shall be remitted by Acquisitionco to the
Receiver General for Canada in accordance with section 116 of the
Tax Act, and a receipt evidencing such remittance shall be
promptly delivered to the Non-resident Holder.
(e) No amounts withheld under section 116 of the Tax Act shall be
remitted to any Governmental entity before the day after the
Remittance Deadline.
(f) If no section 116 certificate has been delivered to Acquisitionco
by the Non-resident Holder at or before the Remittance Deadline
in accordance with paragraph (c), no amount shall be remitted to
the Receiver General for Canada if
B-2
the Non-resident holder delivers to Acquisitionco, at or before
the Remittance Deadline, a comfort letter issued by the Canada
Revenue Agency extending the time period under which
Acquisitionco is required to remit amounts without being subject
to interest and penalties.
(g) Where the Non-resident Holder has delivered a comfort letter as
described in paragraph (f), Acquisitionco shall continue to
withhold such amount until either (i) paid to the Non-resident
Holder (together with any interest earned thereon, net of
applicable withholding tax), which shall occur upon delivery of a
section 116 certificate; or (ii) remitted to the Receiver General
for Canada if notified to do so, directly or indirectly, by the
Canada Revenue Agency (provided that any interest earned thereon
shall be paid to the Non-resident Holder, net of applicable
withholding tax and, in such case, a receipt evidencing such
remittance shall be promptly delivered to the Non-resident
Holder).
(h) For the avoidance of doubt, no amount shall be withheld under
section 116 of the Tax Act if the Non-resident Holder delivers a
section 116 certificate to Acquisitionco at or before the
Effective Time (except that if such certificate is issued under
subsection 116(2) of the Tax Act with a certificate limit that is
less than the Aggregate Consideration otherwise payable to the
Non-resident Holder, then the amount to be withheld shall not
exceed twenty-five percent (25%) of the excess of the Aggregate
Consideration otherwise payable to the Non-resident Holder over
the certificate limit.
(i) The provisions hereof shall apply, MUTATIS MUTANDIS to any
analogous provisions of applicable provincial tax law.
