INVESTMENT AGREEMENT
FINAL 12-14-04
THIS INVESTMENT AGREEMENT is dated for reference December 17, 2004
| AMONG: | Elephant & Castle Group,
Inc. |
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| a company incorporated under
the laws of the Province of British Columbia, and having an address at:
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| 0000 Xxxxxx Xxxxxx |
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| 00xx Xxxxx |
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| Xxxxxxxxx, XX |
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| X0X 0X0 |
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| Facsimile No. 000-000-0000 |
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| (The “Company”); and
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| 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: |
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| 0000 Xxxxxx Xxxxxx |
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| X.X. Xxx 0000 |
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| Xxxxxxxx, XX 00000-0000 |
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| Facsimile No. 000-000-0000 |
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| Crown Life Insurance Company,
a company organized under the federal laws of Canada and having an address at: |
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| Suite 1900 - 0000 Xxxxxx Xxxxxx
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| Xxxxxx, Xxxxxxxxxxxx |
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| X0X 0X0 |
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| Facsimile No. 000-000-0000 |
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| (“CLIC”) |
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| 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”). |
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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(CDN$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: |
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| Xxxx Xxxxxx – Sixty percent (60%) of the Purchase
Price payable at each installment period. |
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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. |
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| 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. |
| 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 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. |
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| 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. |
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| 4.5 | For purposes of this Investment Agreement,
a “Change of Control” of the Company shall mean: |
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| (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.; |
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(b) |
the relocation of the Company’s Executive Offices
from British Columbia, Canada; or |
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(c) |
The sale of all, or substantially all, of the Company’s
United States based restaurants. |
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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. |
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. |
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| 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.
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| 7.3 | The certificates representing the Securities to
be purchased hereunder shall bear a restrictive legend in substantially
the following form: |
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. |
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| 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. |
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 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. |
| 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: | ||||
| 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: | ||||
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SCHEDULE A
PURCHASE SECURITIES
Purchase Shares
(i) Seven Hundred and Forty Nine Thousand Five Hundred and One (749,501) Common Shares; plus (ii) Four Hundred Ninety Nine Thousand One Hundred Seventy Five (499,175) 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 Ninety Seven Thousand Five Hundred and Twenty Four (1,497,524) 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.
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SCHEDULE B
WARRANT SECURITIES
Purchase Shares
(i) Three Hundred and Seventy Four Thousand Seven Hundred and Fifty (374,750)Common Shares; plus (ii) Two Hundred and Forty Nine Thousand Five Hundred and Eighty Seven(249,587) 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 Seven Hundred and Forty Eight Thousand Seven Hundred and Sixty Two(748,762) Common Shares.
It is the intention of the parties hereunder that based upon the current capitalization of the Company, the Warrant Securities, subject to this Schedule B, amount to five percent (5%) of the total capital stock of the Company.
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