INVESTMENT AGREEMENT
THIS INVESTMENT AGREEMENT is dated for reference December 17, 2004
AMONG: Elephant & Castle Group, Inc.
a company incorporated under the laws of the Province of British
Columbia, and having an address at:
0000 Xxxxxx Xxxxxx
00xx Xxxxx
Xxxxxxxxx, XX
X0X 0X0
Facsimile No. 000-000-0000
(The "Company"); and
General Electric Investment Private Placement Partners II, a
limited partnership formed under the laws of the State of Delaware
("GEIPPP II") and having an address at:
0000 Xxxxxx Xxxxxx
X.X. Xxx 0000
Xxxxxxxx, XX 00000-0000
Facsimile No. 000-000-0000
Crown Life Insurance Company, a company organized under the
federal laws of Canada and having an address at:
Suite 1900 - 0000 Xxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxx
X0X 0X0
Facsimile No. 000-000-0000
("CLIC")
Xxxx Xxxxxx, Xxxxx Xxxxxx and Xxxxx Xxxxxx, each of whom is an
officer and key employee of the Company fully familiar with the
business and affairs of the Company (the "Purchasers").
WHEREAS:
1. The Company is in the business of owning and operating British
pub-style restaurants (the "Business");
2. The Purchasers are willing to make an investment in the Company;
3. GEIPPP II is the principal creditor, and single largest shareholder
of the Company;
4. CLIC has agreed to make certain loans to and investments in the
Company; and
5. It is a condition of CLIC's Investment that the Purchasers be given
an opportunity to make an investment in the Company, and the
Purchasers are willing to make an investment in the Securities of
the Company, on the terms and subject to the conditions hereof.
NOW THEREFORE, the parties hereby agree as follows:
ARTICLE 1 - SECURITIES
1.1 The Company hereby grants to the Purchasers the right to purchase,
upon and subject to the terms and conditions herein provided, certain
Common Stock and Preferred Stock of the Company (the "Securities")
in the amounts set forth on Schedule A hereto for the aggregate
consideration set forth in Article 2 of this Agreement, and the
Purchasers jointly and severally agree to purchase such Securities
in the amounts, and for the purchase price so provided hereunder.
Neither the grant made hereby nor the opportunity herein stated
shall be deemed to be an "option" in favor of the Purchasers. Except
as otherwise expressly provided herein, the Purchasers obligation to
make the investment in the Securities shall be absolute and
unconditional.
1.2 The Securities shall be, when issued, validly issued and
non-assessable, and subject only to the restrictions set forth
herein, and in such collateral agreements expressly referenced
hereinafter.
ARTICLE 2 - PURCHASE PRICE
2.1 The Purchase Price for the Securities shall be an aggregate of CDN
Two Hundred and Sixty Five Thousand (CND$265,000) Dollars. All
dollar amounts herein refer to Canadian dollars ("CDN") whether or
not so stated.
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2.2 The obligations herein stated shall otherwise be joint and several.
Notwithstanding the foregoing, in the absence of any other provision
to the contrary, the maximum liability of each of the Purchasers
shall be:
Xxxx Xxxxxx - Sixty percent (60%) of the Purchase Price
payable at each installment period.
Xxxxx Xxxxxx - Twenty five percent (25%) of the Purchase
Price payable at each installment period.
Xxxxx Xxxxxx - Fifteen Percent (15%) of the Purchase
Price payable at each installment period.
2.3 Each of the Purchasers, will receive Securities representing each
such Purchasers proportionate interest in the Securities upon
payment in full for each such installment of the Securities.
ARTICLE 3 - TERMS OF PAYMENT
3.1 The Purchase Price shall be payable in installments as follows:
$115,000 shall be paid upon execution of this Agreement, then
$150,000 shall be paid in six (6) equal quarterly annual
installments of Twenty Five Thousand ($25,000) Dollars each, which
shall be due commencing on March 31, 2005, and each three months
thereafter.
3.2 Upon the execution of this Agreement, the Purchasers shall pay to
the Company in the aggregate CDN One Hundred Fifteen Thousand (CDN
$115,000) Dollars in exchange for which the Purchasers shall receive
that amount of the Securities which bears the same ratio to the full
amount of the Securities purchasable hereunder as CDN One Hundred
Fifteen Thousand (CDN $115,000) Dollars bears to the total Purchase
Price.
3.3 The Purchasers shall have no rights in respect of the Securities,
until payment is made as to such Securities. Securities paid for
shall be fully owned. Securities subject to a future installment are
"not owned" and the Purchasers shall have no shareholder rights in
respect thereof.
ARTICLE 4 - THE WARRANT
4.1 In consideration of their purchase of the Securities identified on
Schedule A hereto, the Company shall, and does hereby grant to the
Purchasers a non-assignable conditional Warrant, in form provided by
the Company, exercisable by them or by any of them, to purchase of the
Additional
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Securities identified on Schedule B hereto at the same per Share
price set forth with respect to the Securities being purchased
hereunder and identified under Schedule A.
4.2 The total purchase price for the Schedule B Securities shall be, and
is hereby, fixed at One Hundred and Thirty Two Thousand Five Hundred
($132,500) Dollars.
4.3 The Warrant may be exercised by the Purchasers together, or as they
may otherwise agree in writing INTER SE, no sooner than thirty (30)
days after the happening of a "Qualifying Event", and no later than
ninety (90) days after any such event, each as set forth in Section
4.4 hereof.
4.4 The following shall constitute a Qualifying Event permitting
exercise of the Warrants (i) a "Change of Control" of the Company,
or (ii) January 3, 2010, whichever is earlier. Notwithstanding
anything else contained herein, the Warrant may not be exercised
solely by virtue of the happening of January 3, 2010 unless prior to
that date all the Senior Notes indebtedness due to GEIPPP II shall
have been paid in full to GEIPPP II.
4.5 For purposes of this Investment Agreement, a "Change of Control" of
the Company shall mean:
(a) the sale of fifty (50%) percent or more of the Voting
Securities of the Company otherwise than to the Purchaser's (or
any group in which he is a member) to CLIC, or any affiliate
thereof, or to any parent, subsidiary or other entity
controlled by or controlling GEIPPP II.;
(b) the relocation of the Company's Executive Offices from British
Columbia, Canada; or
(c) The sale of all, or substantially all, of the Company's United
States based restaurants.
except that with respect to (b) and (c) above, such event shall not
constitute a Change of Control if unanimously approved by the Board of
Directors, including a representative of the Purchasers, prior to
implementation.
ARTICLE 5 - TERM
5.1 Term and Termination - This Agreement shall continue in force and
effect so long as any of the Purchasers remain associated with the
Company, and for so long as any of the
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Securities purchased hereunder are held by the Purchasers or any of
them.
5.2 So long as this Agreement is in full force and effect, the
Purchasers shall be entitled to request one of them be elected as a
director of the Company. Unless the Purchasers otherwise request,
Xxxx Xxxxx shall continue as a director of the Company.
ARTICLE 6 - TERMINATION OF PURCHASE RIGHTS
6.1 Each of the Purchasers proportionate Purchase Rights and obligations
shall terminate only in the event of death of such Purchaser.
6.2 In the event of death of any individual Purchaser, the Purchaser's
right to purchase any further Shares subject to purchase by such
Purchaser hereunder shall immediately cease, and be of no further
force and effect, and neither that Person, nor that Person's estate
or personal representative shall have any further option or
obligation to make any payment with respect to any unpurchased
Securities remaining hereunder.
6.3 In the event of the death of any purchaser, the remaining Purchaser
shall have the right to purchase, in accordance with a separate
agreement to be executed by and among them, the balance of the
Securities thereafter purchasable by such deceased Purchaser, by
making a written election to that effect to the Company and on
notice to GEIPPP II and CLIC.
ARTICLE 7 - INVESTMENT INTENT
7.1 The Purchasers jointly and severally represent and agree that they
are aware that the purchase of the Securities is a high risk
investment, and they agree that they are acquiring the Securities
for the purpose of investment, and not with a view to, or for
resale, or in connection with any distribution thereof.
7.2 The Purchasers further represent and warrant that they are
intimately familiar with the financial statements and books and
records of the Company, and that they are making this investment
based upon such business information, and that neither they, nor any
of them, have been coerced or required to make the investment
provided for herein.
7.3 The certificates representing the Securities to be purchased
hereunder shall bear a restrictive legend in substantially the
following form:
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THE SECURITIES REPRESENTED BY THIS STOCK CERTIFICATE ARE
RESTRICTED AGAINST RETRANSFER. NO SALE, TRANSFER OR
HYPOTHECATION MAY BE MADE OF THE SHARES WITHOUT PRIOR
REGISTRATION THEREOF UNDER THE SECURITIES ACT OF 1933 (THE
"ACT") OR AN OPINION OF COUNSEL FOR THE ISSUER THAT
REGISTRATION UNDER THE ACT MAY BE OMITTED. THE SECURITIES
REPRESENTED BY THIS CERTIFICATE HAVE BEEN ISSUED PURSUANT TO A
CERTAIN PURCHASERS INVESTMENT AGREEMENT DATED DECEMBER __,
2004. ANY PERSON ACQUIRING THE SECURITIES REPRESENTED BY THIS
CERTIFICATE SHALL ACQUIRE NO RIGHTS WITH RESPECT THERETO
EXCEPT AS EXPRESSLY PERMITTED BY THIS AGREEMENT, AND CERTAIN
INTERSHAREHOLDER AGREEMENT DATED DECEMBER 17, 2004.
7.4 Appropriate stop transfer instructions with respect to the
Securities may also be placed with the Company's transfer agent.
7.5 The Securities being acquired hereunder may not be sold,
transferred, or otherwise disposed of, and shall not be pledged or
otherwise hypothecated by the owner, except as expressly permitted
by the Intershareholder Agreement dated as of the 17th day of
December, 2004.
ARTICLE 8 - GENERAL
8.1 Time of the Essence - Time shall be of the essence of this Agreement.
8.2 Further Acts, Things - Each of the parties to this Agreement shall
at the request of any other party, and at the expense of the
Company, execute and deliver any further documents and do all acts
and things as that party may reasonably require in order to carry
out the true intent and meaning of this Agreement.
8.3 Assignment - This Agreement shall enure to the benefit of and be
binding upon the parties hereto, their permitted assigns and their
personal representatives, administrators, heirs and successors. None
of the Purchasers may assign their purchase rights hereunder, and
any such attempted assignment, including by operation of law, shall
be void and unenforceable.
8.4 No Waiver - Failure by any party hereto to insist in any instance
upon the strict performance of any one of the covenants contained
herein shall not be construed as a waiver or relinquishment of such
covenant. No waiver by any
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party hereto of any such covenant shall be deemed to have been made
unless expressed in writing and signed by the waiving party.
8.5 Severability - The unlawfulness of invalidity or unenforceability of
any provision, including any article, section or subsection, in this
Agreement or of any covenant herein contained on the part of any
party shall not affect the validity or enforceability of any other
provision, covenant, article, section or subsection hereof or herein
contained.
8.6 Amendment - No term or provision hereof may be amended or added
except by an instrument in writing signed by all of the parties to
this Agreement.
8.7 Governing Law - This Agreement shall be governed by the laws of the
Province of British Columbia.
8.8 Consents - GEIPPP II and CLIC are parties to this Agreement solely
to reflect their consent to the Purchasers arrangements with the
Company. Neither GEIPPP II nor CLIC shall have any liability or
responsibility for the obligations of the Company.
8.9 Currency - All amounts stated herein are stated in Canadian Dollars.
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IN WITNESS WHEREOF the parties have executed this agreement as of
the date first written above.
ELEPHANT & CASTLE GROUP INC.
By: [ILLEGIBLE]
---------------------------------
PURCHASERS:
/s/ Xxxxxxx Xxxxxx
------------------------------------- -------------------------------------
Witness XXXXXXX XXXXXX
/s/ Xxxxx Xxxxxx
------------------------------------- -------------------------------------
Witness XXXXX XXXXXX
/s/ Xxxxx Xxxxxx
------------------------------------- -------------------------------------
Witness XXXXX XXXXXX
CONSENTED TO:
GENERAL ELECTRIC INVESTMENT
PRIVATE PLACEMENT PARTNERS II,
A LIMITED PARTNERSHIP
GE ASSET MANAGEMENT INCORPORATED,
ITS GENERAL PARTNER
By:
----------------------------------
CROWN LIFE INSURANCE COMPANY
By:
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By:
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SCHEDULE A
PURCHASE SECURITIES
PURCHASE SHARES
(i) Six Hundred Ninety-Nine Thousand Five Hundred and Thirty-Four
(699,534) Common Shares; plus (ii) Four Hundred Eighty Seven Thousand One
Hundred Ninety Six (487,164) Two ($2.00) Dollar unit of Preferred Stock
convertible at the rate of one (1) Share of Preferred Stock for three (3)
Shares of Common Stock yielding, if converted, a maximum of One Million Four
Hundred Sixty One Thousand Five Hundred and Eighty Eight (1,461,588) Common
Shares.
It is the intention of the parties hereunder that based upon the
current capitalization of the Company, the securities, subject to this
Schedule, amount to ten percent (10%) of the total capital stock of the
Company.
SCHEDULE B
WARRANT SECURITIES
PURCHASE SHARES
(i) Five Hundred and Sixty Six Thousand Four Hundred Thirty Four
(566,434) Common Shares; plus (ii) Two Hundred Ninety Five Thousand Seven
Hundred and Ninety Nine (295,799) Two ($2.00) Dollar unit of Preferred Stock
convertible at the rate of one (1) Share of Preferred Stock for three (3)
Shares of Common Stock yielding, if converted, a maximum of Eight Hundred
Eighty Seven Thousand Three Hundred and Ninety Seven (887,397) Common Shares;
plus (iii) Two Hundred and Thirty Three Thousand Three Hundred Thirty Three
(233,333) Common Shares at a price of $0.667 per share (notwithstanding the
purchase price specified in Section 4.2, which for greater certainty shall
apply only to the Common Shares referred to in paragraphs (i) and (ii) above).
It is the intention of the parties hereunder that based upon the
current capitalization of the Company, the securities, subject to this
Schedule, amount to five percent (5%) of the total capital stock of the
Company.
