INVESTMENT AGREEMENT
EXHIBIT
V
| FINAL 12-14-04 |
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
|
V-1
|
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.
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ARTICLE
2 - PURCHASE PRICE
| 2.1 |
The
Purchase Price for the Securities shall be an aggregate of CDN
Two Hundred
and Sixty Five Thousand(CDN$265,000) Dollars. All dollar amounts
herein
refer to Canadian dollars (“CDN”) whether or not so
stated.
|
| 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.
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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.
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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.
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V-2
| 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
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, and shall have a separate Warrant
to purchase
up to ____ Common Shares at $667 per
Share.
|
| 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 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 Xxxxxx shall
continue as a director of the
Company.
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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, or termination
of
his association with the Company.
|
| 6.2 |
In
the event of death or termination of association with the Company
by 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.
|
V-3
| 6.3 |
In
the event of the death or termination of association of any Purchaser
with
the Company, 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
or
disassociated Purchaser, by making a written election to that effect
to
the Company and on notice to GEIPPP II and
CLIC.
|
| 6.4 |
For
purposes of this Agreement, a Purchaser shall be deemed to be
disassociated with the Company when he is no longer an officer,
director,
employee, consultant, advisor, or five percent (5%) shareholder
of the
Company.
|
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 __,
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 __ day of December,
2004.
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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.
|
V-4
| 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 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 or 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.
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| 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.
|
V-5
IN
WITNESS WHEREOF
the
parties have executed this agreement as of the date first written
above.
| ELEPHANT & CASTLE GROUP INC. | ||
| |
|
|
| By: | ||
|
|
||
| PURCHASERS: | ||
_________________________ __________________________________
Witness XXXXXXX
XXXXXX
_________________________ __________________________________
Witness 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:
______________________________
By:
______________________________
V-6
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.
V-7
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.
