FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):December 8, 1998
Elephant & Castle Group Inc.
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(Exact name of registrant as specified in its charter)
British Columbia, Canada 1-12134 N/A
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(State or other Commission IRS Employer
jurisdiction File No. Identification No.
of incorporation)
856 Homer Street, Vancouver B.C. Canada V6B 2W5
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(Address of principal executive officer)
Registrant's Telephone Number, including area code: (604)684-6451
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ITEM 5. OTHER EVENTS
On December 8, 1998, the Registrant entered into a new Note Agreement
(the "Exchange Note Agreement") with GE Investment Private Placement Partners
II, a Limited Partnership ("GEIPPP"). As previously disclosed, in 1995, and
subsequently GEIPPP invested Ten Million ($10,000,000) Dollars in the securities
of the Registrant, One Million ($1,000,000) Dollars in Common Stock, and Nine
Million ($9,000,000) Dollars in Convertible Debentures (the "1995 Debentures").
Pursuant to the Exchange Note Agreement, Exhibit A hereto, the Company
authorized and issued to GEIPPP, and GEIPPP purchased and paid for Two Million
($2,000,000) Dollars of additional Notes due March 31, 2000 (the "Exchange
Notes"). The Exchange Notes are exchangeable dollar for dollar, by GEIPPP into a
planned certain new issue of convertible subordinated notes (the "New Notes")
expected to be in the aggregate amount of between $3,000,000 and $5,000,000, and
being offered by the Company to a limited number of sophisticated investors,
including GEIPPP upon exchange of the Exchange Notes.
While the terms and conditions of the New Notes have not been fixed,
and will not be fixed until actually sold and delivered, the New Notes are
expected to be convertible into Common Shares at a slight premium (10%) over the
market price for such Common Shares during the ten (10) day period immediately
prior to a closing of the transactions for the New Notes.
In parallel with the issuance of the Exchange Notes, the Registrant and
GEIPPP also amended the 1995 Agreement to provide that GEIPPP would waive any
dilution relating to the last Three Million Dollars ($3,000,000) of the
Debentures already held by GEIPPP, and, in exchange for such waiver, the Company
agreed to a mandatory repurchase of the $3,000,000 of Debentures in the event of
a future public offering of common stock, preferred stock, or securities
convertible into, exercisable for or exchangeable into common stock or preferred
stock. Exhibit B hereto.
The Registrant does not have any authorized issue of preferred stock.
The authorized capital of the Company, as recently amended, is 20,000,000 Common
Shares, without par value. See Exhibit C hereto.
Under the Amendment to the 1995 Agreement, the repurchase price, in the
event of an applicable transaction is the principal amount of the Notes, plus a
premium equal to twenty percent (20%) per amount of the Notes, taking into
account any cash interest or dividends paid on such Notes. The Notes bear
current interest increasing annually to a maximum rate of eight percent (8%) per
annum commencing in November, 1999. The premium would be 25% in certain
circumstances within the control of the Registrant and not anticipated to
materialize.
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The Registrant intends to use the proceeds of the Exchange Notes, and
the New Notes, if authorized, issued and sold, to meet general obligations of
the Company and to continue to build and develop its restaurants under the brand
names, Elephant & Castle, Alamo, and, with respect to a joint venture in Canada
only, Rainforest Cafe.
Pursuant to the requirements of the Securities Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Elephant & Castle Group Inc.
By /s/Rick Bryant
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Rick Bryant
Title Chief Financial Officer
Dated: December 22, 1998
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EXHIBIT A
ELEPHANT & CASTLE GROUP INC.
Exchangeable Debentures Due March 31, 2000
NOTE AGREEMENT
Dated December 8, 1998
<PAGE>
TABLE OF CONTENTS
(Not Part of Agreement)
1. Authorization of Issue of Notes.............................................
2. The Notes...................................................................
3. Conditions of Closing.......................................................
3A. Opinion of Company's Counsel....................................
3B. Representations and Warranties; No Default......................
3C. Purchase Permitted by Applicable Laws...........................
3D. Compliance With Outstanding Debt Issues.........................
3E. Proceedings.....................................................
3F. Delivery of Notes, Further Conditions of Closing................
4. Prepayments.................................................................
4A. Optional Prepayment in Whole or in Part.........................
4B. Mandatory Payment...............................................
4C. Mandatory Purchase at Holders' Option upon Certain Events.......
4D. Conditional Mandatory Purchase at Holders' Option...............
5. Events of Default and Remedies..............................................
6. Representations, Covenants and Warranties...................................
6A. Organization, Standing and Qualification of Company and
Subsidiaries................................................
6B. Corporate Authority.............................................
6C. Financial Statements............................................
6D. Actions Pending.................................................
6E. Outstanding Debt; No Default....................................
6F. Burdensome and Conflicting Agreements and Charter Provisions....
6G. Offering of Notes...............................................
6H. Governmental Consent............................................
6I. Disclosure......................................................
6J. No Deductions or Withholdings...................................
7. Representations and Covenants of the Purchaser..............................
8. Exchange....................................................................
8A. Exchange Privilege..............................................
8B. No Adjustments for Dividends....................................
8C. Delivery of Convertible Subordinated Notes......................
9. Restrictions on Transfer....................................................
9A. Applicability of Restrictions...................................
9B. Restrictive Legends.............................................
9C. Notice of Proposed Transfer; Opinions of Counsel;
Certain Restrictions........................................
10. Definitions.................................................................
<PAGE>
11. Miscellaneous...............................................................
11A. Note Payments...................................................
11B. Expenses........................................................
11C. Consent to Amendments...........................................
11D. Notices to Subsequent Holder....................................
11E. Form, Registration, Transfer and Exchange of Notes; Lost Notes..
11F. Persons Deemed Owners...........................................
11G. Survival of Representations, Warranties and Indemnities.........
11H. Successors and Assigns..........................................
11I. Notices.........................................................
11J. Satisfaction Requirement........................................
11K. Governing Law...................................................
11L. Headings; Table of Contents.....................................
11M. Counterparts....................................................
11N. Non Exclusivity of Remedies and Specific Performance............
11O. Non Business Days...............................................
Exhibit A -- Form of Note
Exhibit 3A -- Form of Opinions of Harper Grey Easton as to
Canadian law matters and D. David
Cohen, Esq. as to United States law matters
Exhibit 6E -- Indebtedness
<PAGE>
ELEPHANT & CASTLE GROUP INC.
Suite 500
856 Homer Street
Vancouver, B.C. V6B 2W5
Canada
December 8, 1998
GE Investment Private Placement
Partners II, a Limited Partnership
c/o GE Investment Management Incorporated
General Electric Investment Corporation
3003 Summer Street
Stamford, Connecticut 06904
Gentlemen:
The undersigned, ELEPHANT & CASTLE GROUP INC., a corporation
incorporated in the Province of British Columbia, Canada (herein called the
"Company"), hereby agrees with you as follows:
1. Authorization of Issue of Notes
The Company will authorize the issue of its exchangeable debentures
(the "Notes") in the aggregate principal amount of $2,000,000, to be dated the
date of issue, to mature on the Maturity Date, to bear interest on the unpaid
balance thereof from the date thereof until the entire principal thereof shall
have become due and payable at the rate of 8% per annum, payable in arrears on
the Maturity Date; provided, however, that to the extent permitted by applicable
law interest shall be due and payable on any overdue installment of principal or
interest at a rate equal to the Defined Rate per annum from the date such
payment was due until paid, payable on demand. All interest on the Notes shall
be computed on the basis of the actual number of days elapsed and a year of 365
or 366 days, as applicable. The term "Note" or "Notes" as used herein shall
include each Note delivered pursuant to any provision of this Agreement and each
Note delivered in substitution or exchange for any such Note, in any case which
is at the time outstanding.
2. The Notes
The Company hereby agrees to sell to you and, subject to the terms and
conditions herein set forth, you agree to purchase from the Company, $2,000,000
principal amount of Notes at 100% of such principal amount as follows:
At 11:00 a.m. New York time on December 8, 1998, or at such
other time and on such other date as you and the Company may agree (the
"Closing Date"), the Company will deliver to you at the offices of
Dewey Ballantine, 1301 Avenue of the Americas, New York, New York
10019, or at such other location as you and the Company may agree (the
"Closing), one or more Notes, as you may request, registered in your
name, evidencing $2,000,000 principal amount to be purchased by you,
against payment of the purchase price thereof by wire transfer of
immediately available funds to or upon the order of the Company.
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3. Conditions of Closing
Your obligation to purchase and pay for such Notes on the Closing Date
is subject to the satisfaction, on or before the Closing Date, of the following
conditions:
3A. Opinion of Company's Counsel
On the Closing Date you shall have received (x) from Harper Grey
Easton, who are acting as Canadian counsel to the Company in connection with
this transaction, a favorable opinion as to Canadian law matters and (y) from D.
David Cohen, Esq., who is acting as United States counsel to the Company in
connection with this transaction, a favorable opinion as to United States law
matters; each such opinion dated the Closing, satisfactory to you and
substantially in the form set forth in Exhibit 3A hereto.
3B. Representations and Warranties; No Default
The representations and warranties contained in paragraph 6 hereof
shall be true on and as of the Closing Date with the same effect as though made
on and as of the Closing Date, except to the extent of changes caused by the
transactions herein contemplated and as to certain dates; there shall exist on
the Closing Date after giving effect to the transactions described herein no
Event of Default or Default; and the Company shall have delivered to you an
Officer's Certificate, dated the Closing Date, to both such effects.
3C. Purchase Permitted by Applicable Laws
The purchase of and payment for the Notes to be purchased by you and
the issuance by the Company of the Notes on the Closing Date on the terms and
conditions herein provided (including the use of the proceeds of the Notes by
the Company) shall not violate any applicable law or governmental regulation
(including without limitation Regulations G, T and X of the Board of Governors
of the Federal Reserve System, the Securities Act (British Columbia) and the
Company Act (British Columbia)) and shall not subject you to any tax, penalty,
liability or other onerous condition under or pursuant to any applicable law or
governmental regulation relating to the extension of credit, and you shall have
received such certificates or other evidence as you may request to establish
compliance with this condition.
3D. Compliance With Outstanding Debt Issues
On or prior to the Closing Date, the Company shall have delivered to you such
evidence as you or your special counsel may reasonably request showing that the
execution, delivery and performance by the Company of this Agreement
and the
Notes will not conflict with, or result in a breach of the terms, conditions or
provisions of, or constitute a default under, or result in the creation of any
Lien upon any of the properties or assets of the Company or any Subsidiary
pursuant to, or otherwise violate, any instrument evidencing any indebtedness of
the Company or any of its Subsidiaries or any agreement relating thereto.
3E. Proceedings
On or prior to the Closing Date, all corporate and other proceedings
taken or to be taken in connection with the transactions contemplated hereby and
all documents incident thereto shall be satisfactory in form and substance to
you and your special counsel, and you and your special counsel shall have
received all such counterpart originals or certified or other copies of such
documents as you or they may reasonably request.
<PAGE>
3F. Delivery of Notes, Further Conditions of Closing
On the Closing Date, the Company shall have delivered the Notes
pursuant to paragraph 2 hereof.
4. Prepayments
The Notes shall be subject to optional prepayments and mandatory
repayments or
repurchase as specified in paragraphs 4A, 4B and 4C hereof.
4A. Optional Prepayment in Whole or in Part
Any Note to be issued hereunder shall be subject to prepayment at any
time, in whole, or from time to time in part, in increments of $500,000
principal amount of such Notes then outstanding plus accrued and unpaid interest
thereon, at the option of the Company and no notice shall be required.
4B. Mandatory Payment
On the Maturity Date, the Company will repay in whole all outstanding
principal amount of the Notes together with interest accrued thereon to the date
of repayment except to the extent that any Note (or portion thereof) shall have
been surrendered to the Company for exchange prior to such payment date in
accordance with paragraph 8 hereof.
4C. Mandatory Purchase at Holders' Option upon Certain Events
The Notes shall be subject to prepayment, at any time in whole or in
part, by the Company and the Company shall immediately prepay such Notes, in
whole or in part, at the option of the holder, upon the occurrence of a Change
in Control Event and thereafter for a period ending 30 days subsequent to
receipt by the holders of Notes of notice from the Company to the effect that a
Change in Control Event has occurred upon at least ten days written notice to
the Company by such holder specifying (i) the principal amount of Notes to be
prepaid, (ii) the prepayment date and (iii) the prepayment price for such Notes,
which shall be (A) the principal amount of any such Notes and (B) interest
accrued thereon to the date of payment.
4D. Conditional Mandatory Purchase at Holders' Option
In the event that prior to March 31, 1999, the Company has not sold
Convertible Subordinated Notes to one or more purchasers, in such amounts and on
such terms and conditions which are subject to your satisfaction in your sole
and absolute discretion, then the Notes shall be subject to prepayment in whole
or in part at any time on or after March 31, 1999 by the Company, and the
Company shall immediately prepay such Notes, in whole or in part, at the option
of the holder or holders of at least 66-2/3% of the aggregate principal amount
of the Notes at the time outstanding, within 30 days subsequent to receipt by
the Company of written notice to the Company by such holder or holders,
specifying (i) the principal amount of Notes to be prepaid, (ii) the prepayment
date (which shall not be earlier than 30 days subsequent to receipt by the
Company of such notice) and (iii) the prepayment price for such Notes, which
shall be (A) the principal amount of any such Notes and (B) interest accrued
thereon to the date of payment.
<PAGE>
5. Events of Default and Remedies
If any of the following events shall occur and be continuing for any
reason whatsoever (and whether such occurrence shall be voluntary or involuntary
or come about or be affected by operation of law or otherwise):
(i) the Company shall default in the payment of any principal of any
Note when the same shall become due, either by the terms thereof or otherwise as
herein provided; or
(ii) the Company shall default in the payment of any interest or
premium on any Note and such default shall have continued for five consecutive
days; or
(iii) the Company shall default in the making of any required
purchase of any Note as provided in paragraph 4C hereof;
(iv) the Company or any Subsidiary shall default in any payment of
principal of or interest on any other obligation for borrowed money (or any
obligation or obligations under a conditional sale or other title retention
agreement or any obligation or obligations issued or assumed as full or partial
payment for property whether or not secured by a purchase money mortgage or any
obligation under notes payable or drafts accepted representing extensions of
credit) beyond any period of grace provided with respect thereto or shall
default in the performance of any other agreement, term or condition contained
in any agreement under which any such obligation is created (or if any other
default under any such agreement shall occur and be continuing) if the effect of
such default is to cause, or permit the holder or holders of such obligation or
obligations (or a trustee on behalf of such holder or holders) to cause, such
obligation or obligations to become due prior to its or their stated maturity
and such default continues for more than ten (10) business days; or
(v) a final judgment, decree or order for the payment of money in
excess of $50,000 shall be rendered against the Company or any Subsidiary, and
the same shall not be discharged or execution thereon stayed pending appeal
within 60 days after entry thereof, or, in the event of such a stay, such
judgment shall not be discharged, or again stayed pending further appeal, within
60 days after such stay shall expire; or
(vi) any representation or warranty made by the Company herein or in
any writing furnished in connection with the issuance and sale of the Notes and
the purchase thereof by you shall be false in any material respect on the date
as of which made; or
(vii) the Company shall default in the performance or observance of
any other agreement, covenant, term or condition contained herein (other than as
provided in clause (i), (ii), (iii) of this paragraph 5, for which the
respective grace period, if any, described in such clause shall apply),
including without limitation the furnishing in writing of any representation or
warranty required to be furnished after each Closing Date pursuant to this
Agreement, and such default shall not have been remedied within 30 days after
written notice thereof shall have been received by the Company from any holder
of Notes; or
<PAGE>
(viii) if the Company or any Subsidiary shall (a) apply for or
consent to the appointment of a receiver, trustee, liquidator or custodian or
the like of itself or of its property, (b) admit in writing its inability to pay
its debts generally as they become due, (c) make a general assignment for the
benefit of creditors, (d) commence a voluntary case under the Federal bankruptcy
laws of the United States of America or file a voluntary petition or answer
seeking reorganization, an arrangement with creditors or an order for relief or
seeking to take advantage of any insolvency law or file an answer admitting the
material allegations of a petition filed against it in any bankruptcy,
reorganization or insolvency proceeding, or corporate action shall be taken by
it for the purpose of effecting any of the foregoing; or
(ix) if without the application, approval or consent of the Company
or any Subsidiary, a proceeding shall be instituted in any court of competent
jurisdiction, under any law relating to bankruptcy, insolvency, reorganization
or relief of debtors, seeking in respect of the Company or any Subsidiary an
order for relief or an adjudication in bankruptcy, reorganization, dissolution,
winding up, liquidation, a composition or arrangement with creditors, a
readjustment of debts, the appointment of a trustee, receiver, liquidator or
custodian or the like of the Company or such Subsidiary or of all or any
substantial part of its assets, or other like relief in respect thereof under
any bankruptcy or insolvency law, and, if such proceeding is being contested by
the Company or such Subsidiary in good faith, the same shall (a) result in the
entry of an order for relief or any such adjudication or appointment or (b)
continue undismissed, or pending and unstayed, for any period of thirty (30)
consecutive days;
then, upon the happening of any event described in clauses (viii) and (ix) in
this paragraph 5 (with respect to the Company), the Notes shall be and become
immediately due and payable without any notice of any kind at the principal
amount thereof together with accrued interest thereon, or, during the
continuance of any event referred to in this paragraph 5 other than such clauses
(viii) and (ix) (with respect to the Company), any holder or holders of 66-2/3%
in aggregate principal amount of the Notes then outstanding may, at their option
and in addition to any right, power or remedy permitted by law or equity or
herein granted, by notice in writing to the Company, declare all of the Notes to
be, and such Notes shall thereupon be and become, forthwith due and payable at
the principal amount thereof, together with interest accrued thereon and a
premium equal to that amount which is sufficient to provide a return equal to
the Defined Rate, per annum on the principal amount thereof, taking into account
any interest on such Notes paid to and including the date of final payment
thereof, compounded quarterly, from the date of issuance to the date of such
payment.
The above provision with respect to any acceleration of the
Notes is subject to the condition that if for any reason after the principal of
the Notes shall have so become due and payable, the Company shall demonstrate to
the satisfaction of the holders in their sole judgment that it is able to pay
all matured installments of interest upon the Notes and to make any required
payments which shall have become due other than by reason of such acceleration
(with interest upon such payments and, to the extent that payment of such
interest is enforceable under applicable law, on overdue installments of
interest) and all defaults under this Agreement, other than nonpayment of the
principal of or interest on the Notes which have become due by such
acceleration, shall have been remedied or waived by holders representing at
least the percentage in aggregate principal amount of Notes requesting such
<PAGE>
acceleration, then and in such instance such default may be waived and its
consequences rescinded and annulled by the holders representing at least the
percentage in aggregate principal amount of Notes requesting such acceleration
by written notice to the Company, which waiver shall be binding upon all
holders. It is expressly understood and agreed that the decision so to waive any
default and so to rescind and annul any consequences is within the sole judgment
and control of the holders of the Notes, and such holders shall be under no
obligation so to do.
6. Representations, Covenants and Warranties
The Company represents, covenants and warrants as follows:
6A. Organization, Standing and Qualification of Company and
Subsidiaries The Company is a corporation duly organized and existing in good
standing under the laws of the Province of British Columbia, Canada, each
Subsidiary, if any, is duly organized and existing in good standing under the
laws of the jurisdiction in which it is incorporated, and the Company has and
each Subsidiary has the corporate power to own its respective property and to
carry on its respective business as now being conducted. The Company is and each
Subsidiary is duly qualified and in good standing as a foreign or extra
provincial corporation to do business in every jurisdiction where the character
of the properties owned or leased by it or the nature of any business transacted
by it makes such qualification necessary and where such nonqualification or lack
of good standing would have a material adverse effect on the business of the
Company and its consolidated Subsidiaries taken as a whole.
6B. Corporate Authority. (a) The execution and delivery by the
Company of all transactions and obligations contemplated hereby are within its
corporate authority. This Agreement constitutes the legal, valid and binding
obligations of the Company enforceable in accordance with its terms, except to
the extent that enforcement may be limited by applicable bankruptcy, insolvency,
reorganization or other similar laws affecting creditor's rights generally and
the application of general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law), and with
respect to the indemnification provisions contained herein, by applicable
securities laws or principles of public policy.
(b) The execution, delivery and performance of this Agreement
and the issuance of the Notes have been duly authorized by all
necessary corporate proceedings on the part of the Company. This
Agreement and the Notes have been duly executed and delivered.
6C. Financial Statements The Company has furnished you with
(i) the Company's Annual Report on Form 10-KSB filed with the Securities and
Exchange Commission for the fiscal year ended December 31, 1997, and (ii) the
Company's Quarterly Report on Form 10-Q filed with the Securities and Exchange
Commission for the three months ended March 31, 1998, June 30, 1998 and
September 31, 1998, respectively (All such financial statements contained in
such reports are collectively referred to herein as the "Financial Statements").
The financials statement contained in the Company's Annual
Report on Form 10-KSB filed with the Securities and Exchange Commission for the
fiscal year ended December 31, 1997 have been certified by Pannell Kerr Forster,
including the related schedules and notes. All Financial Statements (including
any related schedules and/or notes) have been prepared in accordance with
generally accepted accounting principles as in effect in Canada consistently
applied, except to the extent set forth in the notes to such financial
<PAGE>
statements, throughout the periods involved and to the extent required by such
principles show all liabilities, direct and contingent, of the Company and its
consolidated Subsidiaries. The balance sheets and the related schedules and
notes fairly present on a consolidated basis the financial condition of the
Company and its consolidated Subsidiaries as at the respective dates thereof;
and the net income and shareholders' equity statements and the related schedules
and notes fairly present on a consolidated basis the results of the operations
of the Company and its consolidated Subsidiaries for the respective periods
indicated.
There have been no material adverse changes in the condition,
financial or other, of the Company and its Subsidiaries, on a consolidated
basis, since December 31, 1997.
6D. Actions Pending Except as disclosed in the Company's
Annual Report on Form 10-KSB for the fiscal year ended December 31, 1997 filed
with the Securities and Exchange Commission, there is no action, suit,
investigation or proceeding pending or, to the knowledge of the Company,
threatened against the Company or any of its Subsidiaries before any court,
arbitrator or administrative or governmental body that materially and adversely
affects, or as to which there is a reasonable possibility of an adverse decision
that would materially and adversely affect, either individually or collectively,
the business or condition of the Company and its consolidated Subsidiaries taken
as a whole. Neither the Company nor any Subsidiary is in violation of any
judgment, order, writ, injunction, decree, rule or regulation of any court or
governmental department, commission, board, bureau, agency or instrumentality,
the violation of which might, either individually or collectively, materially
and adversely affect the business, property, assets or financial position of the
Company and its consolidated Subsidiaries taken as a whole.
6E. Outstanding Debt; No Default Neither the Company nor any
of its Subsidiaries has outstanding any Current Indebtedness or Funded
Indebtedness except as set forth in Exhibit 6E. There exists no event of default
by the Company or any Subsidiary under the provisions of any instrument
evidencing such Current Indebtedness or Funded Indebtedness and there exists no
event of default by the Company or any Subsidiary except as set forth on Exhibit
6E.
6F. Burdensome and Conflicting Agreements and Charter
Provisions Neither the Company nor any Subsidiary is a party to any contract or
agreement or subject to any charter or other corporate restriction which
materially and adversely affects its business as currently conducted, properties
or assets or financial condition. Neither the execution nor delivery of this
Agreement or the Notes by the Company, nor the offering, issuance and sale of
the Notes by the Company, nor fulfillment of nor compliance with the terms and
provisions of this Agreement or the Notes by the Company, will conflict with, or
result in a breach of the terms, conditions or provisions of, or constitute a
default under, or result in any violation of, or result in the creation of any
Lien upon any of the properties or assets of the Company or any Subsidiary
pursuant to, or require any consent, approval or other action by any court or
administrative or governmental body or any other Person pursuant to, the charter
or by-laws of the Company or any Subsidiary, any award of any arbitrator or any
agreement (including any agreement with shareholders), instrument, order,
judgment, decree, statute, law, rule or regulation to which the Company or any
Subsidiary is subject, except for such approval as may be required in connection
with fulfillment of, or compliance with, the provisions of paragraph 9 hereof.
<PAGE>
Neither the Company nor any Subsidiary is a party to, or otherwise subject to
any provision contained in, any instrument evidencing Indebtedness of the
Company or such Subsidiary, any agreement relating thereto or any other contract
or agreement (including its charter) which, except to the extent complied with
by the Company or consented to in connection with the execution of this
Agreement and the issuance of the Notes, restricts or otherwise limits the
incurring of the Indebtedness evidenced by the Notes.
6G. Offering of Notes Neither the Company nor any other agent
acting on the Company's behalf has, directly or indirectly, offered the Notes or
any similar security of the Company for sale to, or solicited any offers to buy
the Notes or any similar security of the Company from, or otherwise approached
or negotiated with respect thereto with more than 10 Persons including yourself
(all of which Persons are institutional investors), and neither the Company nor
any agent acting on its behalf has taken or will take any action which would
subject the issuance or sale of the Notes to the provisions of Section 5 of the
Securities Act, or to the registration or qualification requirements of any
securities or Blue Sky law of any applicable jurisdiction. The Company has not
authorized or employed any agent, broker or dealer in connection with the
offering or sale of the Notes or any similar security of the Company.
The issuance of the Notes is exempt from the registration and
prospectus requirements of the Securities Act of the Province of British
Columbia and no prospectus will be required and no other document must be filed,
proceeding taken or approval obtained in British Columbia to permit the
offering, sale and delivery of the Notes to you.
6H. Governmental Consent Neither the nature of the Company or
of any Subsidiary, nor any of their respective businesses or properties, nor any
relationship between the Company or any Subsidiary and any other Person, nor any
circumstance in connection with the offer, issue, sale or delivery of the Notes
is such as to require any consent, approval or authorization of, or any notice
to, or filing, registration or qualification with, any court or administrative
or governmental body in connection with the execution and delivery of this
Agreement or the offer, issue, sale or delivery of the Notes, or (except as may
be required in connection with fulfillment of, or compliance with, the
provisions of paragraph 9 hereof and except as provided in paragraph 6G)
fulfillment of, or compliance with, the terms and provisions of this Agreement
or of the Notes.
6I. Disclosure Neither this Agreement nor any other document,
certificate or statement furnished to you by or on behalf of the Company in
connection herewith contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements contained herein
and therein, in the light of the circumstances under which made, not misleading.
There is no fact peculiar to the Company or its Subsidiaries and known to the
Company which materially adversely affects or in the future may (so far as the
Company can now foresee) materially adversely affect the business, property or
assets, or financial condition of the Company and its Subsidiaries, taken as a
whole, which has not been set forth in this Agreement or in the other documents
described herein and furnished to you by or on behalf of the Company prior to
the date hereof in connection with the transactions contemplated hereby.
6J. No Deductions or Withholdings All sums payable by the
Company to you hereunder whether of principal or interest or otherwise shall be
paid in full without any deduction on account of any present or future income or
other taxes, levies, imposts, duties, charges or withholdings of any nature. In
<PAGE>
the event of the Company being compelled by law to make any such deduction or
withholding from any payment to you, the Company will pay to you by way of
additional interest such additional amounts as may be necessary to ensure that
the aggregate of the net amounts received by you after such deduction shall
equal the amount which would have been receivable in the absence of any such
deduction.
7. Representations and Covenants of the Purchaser You
represent, and in making the sale of Notes contemplated hereby to you it is
specifically understood and agreed, that you are acquiring such Notes for your
own account for the purpose of investment and not with a view to or for sale in
connection with any distribution thereof, provided that the disposition of your
property shall at all times be and remain within your control. You further
represent that you are familiar with Release No. 5226 issued by the Commission
under the Securities Act, that you have consulted with your counsel in regard
thereto, and that you are fully familiar with the position of the Commission
with respect to the resale of any Note to the public.
8. Exchange.
8A. Exchange Privilege (a) Subject to the conditions set forth
in paragraph 8 hereof, the holder of any Note may, at such holder's
option, at any time and from time to time prior to and including the
Maturity Date, exchange all or any part of the unpaid principal
thereof into convertible subordinated notes of the Company (the
"Convertible Subordinated Notes") on such terms and other conditions
as may be mutually acceptable to such holder and the Company.
(b) Subject to the provisions of paragraph 8 hereof, any Note
may be exchanged in full or in part by the holder thereof by
surrender of the Note, with a written statement specifying the
principal amount thereof to be exchanged, to the Company at its
principal office. Upon any partial exchange of any Note, the Company
at its expense shall forthwith issue and deliver to the holder
thereof a new Note or Notes in principal amount equal to the unpaid
and unexchanged principal amount of such surrendered Note. Each
exchange shall be deemed to have been effected immediately prior to
the close of business on the date on which such Note was received by
the Company.
8B. No Adjustments for Dividends ( (a) No payment or
adjustment shall be made upon exchange of any Note for cash
dividends with respect to Convertible Subordinated Notes issued
thereupon.
(b) The Company shall forthwith upon exchange of all or any
portion of any Note pay all interest accrued on the principal amount
exchanged to the date of such exchange. 8C. Delivery of Convertible
Subordinated Notes . As promptly as practicable after the exchange
of any Note in full or in part, the Company, at its expense, shall
issue and deliver to the holder of such Note, or as such holder
(upon payment of any applicable transfer taxes by such holder) may,
subject to the provisions of paragraph 9, direct, the Convertible
Subordinated Notes deliverable upon such exchange.
<PAGE>
9. Restrictions on Transfer.
9A. Applicability of Restrictions Notwithstanding any
provisions to the contrary contained in this Agreement, any Note or the
Company's Memorandum or Articles, the provisions of this paragraph 9 shall apply
to any proposed, purported or effected transfer of any Note, except as expressly
permitted pursuant to paragraph 9C hereof (each such action being herein called
a "Restricted Action"). The holder of any Note, by its acceptance thereof,
agrees that, unless otherwise permitted hereunder, it will not take any
Restricted Action prior to the delivery to the Company of the opinion or
opinions of counsel referred to in, and to the effect described in, clause (a)
of paragraph 9C (or the penultimate sentence of the last paragraph of paragraph
9C), or until registration under the Securities Act of the Notes involved in,
such Restricted Action has become effective.
9B. Restrictive Legends Each Note and certificate issued upon
the transfer or exchange of any such Note (except as otherwise permitted by this
paragraph 9), shall bear a legend in substantially the following form:
The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and
neither the securities nor any interest therein may be sold,
transferred, pledged or otherwise disposed of in the absence
of such registration or an exemption under such Act and the
rules and regulations thereunder. The transfer of such
securities is subject to the restrictions set forth in
paragraph 9 of that certain Note Agreement, dated December 8,
1998 between Elephant & Castle Group Inc. and GE Investment
Private Placement Partners II, a Limited Partnership, copies
of which are available for inspection at the offices of
Elephant & Castle Group Inc., and such securities may be
transferred only in compliance with the terms and conditions
of said paragraph 9 of said Note Agreement.
9C. Notice of Proposed Transfer; Opinions of Counsel; Certain
Restrictions Each holder of any Notes, by its acceptance thereof, agrees that,
except as otherwise expressly provided below in this paragraph 9C, prior to the
taking of any Restricted Action, such holder will give written notice to the
Company of such holder's intention to take such Restricted Action and to comply
in all other respects with this paragraph 9C. Each such notice (i) shall
describe the manner and circumstances of the proposed Restricted Action in
sufficient detail to enable counsel to render the opinions referred to below and
(ii) shall designate counsel for the holder giving such notice (who may be house
counsel for such holder). The holder giving such notice will submit a copy
thereof to the counsel designated in such notice, and the Company will promptly
submit a copy thereof to its counsel (who may be house counsel for the Company),
and the following provisions shall apply:
(a) If in the opinion of each such counsel the proposed
Restricted Action may be effected without registration under the
Securities Act or any applicable state securities or Blue Sky laws
of any Note involved in such Restricted Action, then the Company
will promptly notify the holder thereof and such holder shall
thereupon be entitled to effect such Restricted Action in accordance
with the terms of the notice delivered by such holder to the
Company, and the Company will promptly effect any transfer of any
Notes involved in such Restricted Action and either deliver new
<PAGE>
Notes in accordance with paragraph 11E, bearing (or not bearing, if
in the opinion of each such counsel such legend is no longer
required to insure compliance with the Securities Act) the legend
set forth in paragraph 9B, or both, as the case may be. If for any
reason counsel for the Company (after having been furnished with the
information required to be furnished by clause (i) of this paragraph
9C) shall fail to deliver an opinion to the Company (with a copy to
such holder), or the Company shall fail to notify such holder
thereof as aforesaid, within 15 days after counsel for such holder
shall have delivered its opinion to such holder (with a copy to the
Company), then for all purposes hereof the opinion of counsel for
the Company shall be deemed to be the same as the opinion of counsel
for such holder.
(b) If in the opinion of either or both of such counsel (such
opinion or opinions to state the basis of the legal conclusions
reached therein) the proposed Restricted Action may not legally be
effected without registration under the Securities Act or any
applicable state securities or Blue Sky laws of any Note involved in
such Restricted Action, the Company shall promptly so notify the
holder thereof and thereafter such holder shall not be entitled to
effect such Restricted Action until receipt of a further notice from
the Company under clause (a) of this paragraph 9C.
Notwithstanding the foregoing, each holder shall be permitted to transfer any
Note or Notes attributable to Notes in one or more transactions to a limited
number of institutional investors similar in nature to yourselves or "accredited
investors" as defined in Rule 501 under the Securities Act; provided, however,
that (x) each such investor shall represent in writing that it is acquiring such
Note for investment and not with a view to the distribution thereof (subject,
however, to any requirement of law that the disposition thereof shall at all
times be within the control of such transferee), (y) each such investor shall
agree in writing to be bound by all the restrictions on transfer of such Note
contained in paragraph 9 hereof and (z) such holder shall deliver to the Company
an opinion of counsel (who shall be satisfactory to the Company) stating that
such transfer may be effected without registration under the Securities Act or
any applicable state securities or Blue Sky laws. The Company will pay the
reasonable fees and disbursements of counsel (other than house counsel) for any
holder of Notes and of counsel for the Company in connection with all opinions
rendered by them pursuant to this paragraph 9C, and will reimburse any such
holder for all other out-of-pocket expenses incurred by such holder in complying
with this paragraph 9C.
10. Definitions For the purpose of the Agreements, the
following terms shall have the following respective meanings:
"Affiliate" shall mean, with respect to any Person, any person
that, directly or indirectly, controls, is controlled by or is under common
control with such Person. For the purposes of this definition, "control"
(including, with correlative meanings, the terms "controlled by" and "under
common control with"), as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities or by contract or otherwise.
"Change in Control Event" shall be deemed to have occurred
upon, (i) the acquisition by any "person" (as that term is used in Sections
13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended) of
beneficial ownership, direct or indirect, of securities of the Company
<PAGE>
representing more than 50% of the combined voting power of the Company's then
outstanding securities, (ii) the acquisition of the Company, or all or
substantially all of its assets, by, or the combination of the Company or all or
substantially all of its assets, with, another "person" (as defined above),
unless the acquiring or surviving "person" shall be a corporation more than 50%
of the combined voting power of which corporation's then outstanding securities,
after such acquisition or combination, are owned, immediately after such
acquisition or combination, by the owners of the voting securities of the
Company outstanding immediately prior to such acquisition or combination or
(iii) for a period commencing on the Closing Date and ending on the fifth
anniversary thereof, any of two out of Jeffrey M. Barnett, Martin O'Dowd or
Richard Bryant shall cease to be actively employed by the Company or cease to
spend substantially all of his business time to the management and control of
the affairs of the Company.
"Commission" shall mean the Securities and Exchange Commission
or any other governmental authority at the time administering the Securities Act
or the Exchange Act.
"Convertible Subordinated Notes" shall have the meaning set
forth in paragraph 8A of this Agreement.
"Current Indebtedness" shall mean, as of any date, with
respect to any Person, all liabilities for borrowed money and all liabilities
secured by any Lien existing on property owned by such Person whether or not
such liabilities have been assumed and all liabilities, contingent or otherwise,
as guarantor or otherwise, with respect to borrowed money or otherwise, which,
in any case, are payable on demand or within one year from the date of
determination, except any such liabilities which are renewable or extendible at
the option of the debtor to a date more than one year from the date of
determination.
"Defined Rate" shall mean the greater of (i) 9% and (ii) the
prime or base rate as determined by the Wall Street Journal, or successor
thereto, from time to time plus 500 basis points; provided, however, that if the
foregoing is in excess of the maximum interest rate permitted by applicable law,
then the term "Defined Rate" shall mean the Maximum interest rate permitted by
applicable law.
"Dollar" or "U.S. $" or "U.S. dollars" or "$" shall mean
United States dollars.
"Event of Default" shall mean any of the events specified in
paragraph 5, provided that there has been satisfied any requirement in
connection with such event for the giving of notice, or the lapse of time, or
the happening of any further condition, event or act, and "Default" shall mean
any of such events, whether or not any such requirement has been satisfied.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, or any similar or successor Federal statute, and the rules and
regulations of the Commission thereunder, all as the same shall be in effect at
the time.
"Funded Indebtedness" shall mean, as of any date, with respect
to any Person, without duplication:
(a) its liabilities for borrowed money, other than Current
Indebtedness;
<PAGE>
(b) liabilities secured by any Lien existing on property owned
by such Person (whether or not such liabilities have been assumed),
other than Current Indebtedness;
(c) obligations other than Current Indebtedness of such
Person, contingently or otherwise, as obligor, guarantor or otherwise,
under any lease of real or personal property or comparable arrangement
with respect to use or title which are required by generally accepted
accounting principles to be capitalized;
(d) obligations other than Current Indebtedness of such
Person, contingently or otherwise, as guarantor or otherwise, under any
arrangement with respect to liabilities for borrowed money which, if
the Company were the obligor, would represent Funded Indebtedness or
which are required by generally accepted accounting principles to be
capitalized; and
(e) any other obligations (other than deferred taxes) which
are required by generally accepted accounting principles to be shown as
liabilities on its balance sheet and which are payable or remain unpaid
more than one year from the date of determination thereof.
"Indebtedness" shall mean the sum of Current Indebtedness and
Funded Indebtedness.
"Lien" shall mean any interest in property securing an
obligation owed to, or a claim by, a Person other than the owner of the
property, whether such interest is based on the common law, statute or contract,
and including but not limited to the security interest lien arising from a
mortgage, encumbrance, pledge, conditional sale or trust receipt or a lease,
consignment or bailment for security purposes. The term "Lien" shall include
reservations, exceptions, encroachments, easements, rights-of-way, covenants,
conditions, restrictions, leases and other title exceptions and encumbrances
affecting property, except any such usual or normal reservations, exceptions,
encroachments, easements, rights-of-way, covenants, conditions, restrictions,
leases or other title exceptions or encumbrances affecting property that are not
disruptive to the use of such property in the ordinary course of business. For
the purposes of this Agreement, the Company or a Subsidiary shall be deemed to
be the owner of any property which it has acquired or holds subject to a
conditional sale agreement, financing lease or other arrangement pursuant to
which title to the property has been retained by or vested in some other Person
for security purposes.
"Maturity Date" shall mean March 31, 2000.
"Person" shall mean and include an individual, a corporation,
an association, a partnership, a trust or estate, a government or any department
or agency thereof.
"Restricted Action" shall have the meaning set forth in
paragraph 9A hereof.
"Securities Act" shall mean the Securities Act of 1933, as
amended, and any similar or successor Federal statute, and the rules and
regulations of the Commission thereunder, all as the same may be in effect at
the time.
<PAGE>
"Subsidiary" shall mean a corporation of which the Company
owns, directly or indirectly, more than 50% of the shares of stock entitled to
vote in the election of directors (excluding shares so entitled to vote only
upon a failure to pay dividends or other contingencies).
11. Miscellaneous.
11A. Note Payments The Company agrees that, so long as you
shall hold any Note, it will make payments of principal thereof and interest and
premium, if any, thereon, which comply with the terms of this Agreement, by wire
transfer of immediately available funds for credit to your account at State
Street Bank and Trust Company, Boston, MA, ABA: 021 000 028, Acct: 2564-7819,
Ref: 8X32 - GEIPPPII, or such other account in the United States of America as
you may designate in writing, notwithstanding any contrary provision herein or
in any Note with respect to the place of payment. The Company agrees to afford
the benefits of this paragraph to any institutional investor of recognized
standing which is the direct or indirect transferee of any Note purchased by you
hereunder.
11B. Expenses The Company agrees, whether or not the
transactions hereby contemplated shall be consummated, to pay, and save you
harmless against liability for the payment of, all out-of-pocket expenses
arising in connection with such transactions, including all taxes (including any
intangible personal property tax, together in each case with interest and
penalties, if any, and also including any filing fees payable to any
governmental authority, and any income tax payable by you in respect of any
reimbursement for any such tax or fee) which may be payable in respect of the
execution and delivery of this Agreement or the execution, delivery or
acquisition of any Note issued under or pursuant to this Agreement or any
Preferred Stock issued under or pursuant to this Agreement or issuable upon
conversion of any such Notes, printing costs, if any, and the reasonable fees
and expenses of your special counsel in connection with this Agreement, any
subsequent modification thereof or consent thereunder (including any proposed
modification or consent, whether or not finalized) and any of the foregoing
transactions contemplated by this Agreement, the cost and fees and expenses of
any investment banks and advisers incurred in connection with transactions
related to the execution of this Agreement and the issuance of the Notes, and
the cost and expenses, including reasonable attorney's fees, incurred by you in
enforcing any of your rights hereunder, including without limitation costs and
expenses incurred in any bankruptcy case. The obligations of the Company under
this paragraph shall survive transfer by you and payment or conversion of any
Note.
11C. Consent to Amendments This Agreement may be amended, and
the Company may take any action herein prohibited, or omit to perform any act
herein required to be performed by it, if the Company shall obtain the written
consent to such amendment, action or omission to act given by the holder or
holders of at least 66-2/3% of the aggregate principal amount of the Notes at
the time outstanding, except that, without the written consent of the holder or
holders of all the Notes at the time outstanding, no amendment to this Agreement
shall change the maturity of any Note, or change the principal of, or the rate
or time of payment of interest or any premium payable with respect to, any Note,
or affect the time or amount of any required prepayments or repurchases, or
adversely affect the conversion rights, or modify the subordination provisions
in a manner adverse to the holders of Notes, or reduce the proportion of the
<PAGE>
principal amount of the Notes required with respect to any consent. Any
consideration given to any holder to obtain his consent shall be given pro rata
to all such holders of a Note or Notes whether or not they give consent. Each
holder of any Note at the time or thereafter outstanding shall be bound by any
consent authorized by this paragraph, whether or not such Note shall have been
marked to indicate such consent, but any Note issued thereafter may bear a
notation referring to any such consent. No course of dealing between the Company
and the holder of any Note nor any delay in exercising any rights hereunder or
under any Note shall operate as a waiver of any rights of any holder of such
Note, as applicable. As used herein and in the Notes, the term "this Agreement"
and references thereto shall mean this Agreement as it may from time to time be
amended or supplemented.
11D. Notices to Subsequent Holder If any Note shall have been
transferred to another holder pursuant to paragraph 11E and such holder shall
have designated in writing the address to which communications with respect to
such Note, as applicable shall be mailed, all notices, certificates, requests,
statements and other documents required or permitted to be delivered to you by
any provision hereof shall also be delivered to each such holder.
11E. Form, Registration, Transfer and Exchange of Notes; Lost
Notes The Notes are issuable only as registered Notes without coupons in the
denominations of $100,000 and integral multiples of $5,000 in excess of $100,000
for such Note. The Company shall keep at its principal office a register in
which the Company shall provide for the registration of Notes and of transfers
of Notes. Upon surrender of any Note for registration of transfer in compliance
with the terms of this Agreement at the office of the Company, the Company
shall, at its expense (other than for transfer taxes, if any), execute and
deliver one or more new Notes, as applicable of like tenor and of a like
aggregate principal amount registered in the name of the designated transferee
or transferees. At the option of the holder of any Note, such Note may be
exchanged for other Notes of like tenor and of any authorized denominations, of
a like aggregate principal amount, upon surrender of the Note to be exchanged at
the office of the Company. Whenever any Notes are so surrendered for exchange,
the Company or such transfer agent shall, at the Company's expense (other than
for transfer taxes, if any), execute and deliver the Notes which the holder of
Notes making the exchange is entitled to receive. Every Note presented or
surrendered for registration of transfer or exchange shall be duly endorsed, or
be accompanied by a written instrument of transfer duly executed, by the holder
of such Note or his attorney duly authorized in writing. Any Note or Notes
issued in exchange for any Note or upon transfer thereof shall carry the rights
to unpaid interest and interest to accrue which were carried by the Note so
exchanged or transferred, so that neither gain nor loss of interest to accrue
shall result from any such transfer or exchange. Upon receipt of written notice
or other evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of any Note and, in the case of any such loss, theft,
or destruction, upon receipt of your unsecured indemnity agreement, or, in the
case of any other holder of a Note or Notes, other indemnity reasonably
satisfactory to the Company, or in the case of any such mutilation upon
surrender and cancellation of such Note, the Company will make and deliver a new
Note, of like tenor, in lieu of the lost, stolen, destroyed or mutilated Note.
<PAGE>
11F. Persons Deemed Owners Prior to due presentment for
registration of transfer, the Company may treat the Person in whose name any
Note is registered as the owner and holder of such Note for the purpose of
receiving payment of principal of and interest and premium (if any) in the case
of on such Note and for all other purposes whatsoever in the case of such Note,
whether or not such Note shall be overdue, and the Company shall not be affected
by notice to the contrary.
11G. Survival of Representations, Warranties and Indemnities
All representations, warranties and indemnities contained herein or made in
writing by the Company in connection herewith shall survive the execution and
delivery of this Agreement, regardless of any investigation made by you or on
your behalf.
11H. Successors and Assigns All covenants and agreements in
this Agreement contained by or on behalf of either of the parties hereto shall
bind and inure to the benefit of the respective successors and assigns of the
parties hereto whether so expressed or not.
11I. Notices All notices and other communications provided for
or given or made hereunder shall be effective when sent by first class mail (or
registered mail, if required) and, if to you, at GE Investment Management
Incorporated, c/o General Electric Investment Corporation, 3003 Summer Street,
Stamford, Connecticut 06904, directed to GE Investment Private Placement
Partners II, a Limited Partnership, Attention: Michael M. Pastore, and if to the
Company, at its offices at the address set forth on page 1 hereof, or to such
other address with respect to either party as such party shall notify the other
in writing.
11J. Satisfaction Requirement If any agreement, certificate or
other writing, or any action taken or to be taken, is by the terms of this
Agreement required to be satisfactory to you, the determination of such
satisfaction shall be made by you in your sole and exclusive judgment exercised
in good faith.
11K. Governing Law This Agreement shall be construed and
enforced in accordance with, and the rights of the parties shall be governed by,
the laws of the State of New York. This Agreement may not be changed orally, but
(subject to the provisions of paragraph 11C) only by an agreement in writing
signed by the party against whom enforcement is sought.
11L. Headings; Table of Contents The descriptive headings of
the several paragraphs of this Agreement and the table of contents are inserted
for convenience only and do not constitute a part of this Agreement.
11M. Counterparts This Agreement may be executed
simultaneously in two or more counterparts, all of which shall be deemed but one
and the same instrument and each of which shall be deemed an original, and it
shall not be necessary in making proof of this Agreement to produce or account
for more than one such counterpart.
11N. Non Exclusivity of Remedies and Specific Performance The
rights and remedies of any of the parties hereunder shall not be mutually
exclusive, and the exercise of one or more of the provisions of this Agreement
shall not preclude the exercise of any other provisions of this Agreement. Each
of the parties confirms that damages at law may be an inadequate remedy for
breach or threat of breach of any provisions of this Agreement. The respective
rights and obligations arising out of or under this Agreement shall be
enforceable by specific performance, injunction, or other equitable remedy, but
nothing in this Agreement is intended to limit or affect any rights at law or by
statute or otherwise of any party aggrieved as against the other parties for a
breach or threat of breach of any provision of this Agreement, it being the
intention by this paragraph to make clear that under this Agreement the
respective rights and obligations of the parties shall be enforceable in equity
as well as at law or otherwise.
11O. Non Business Days If the date for making any payment or
the last date for performance of any act or the exercising of any right, as
provided in this Agreement, shall not be a business day, such payment may be
made or act performed or right exercised on the next succeeding business day,
with the same force and effect as if done on the nominal date provided in this
Agreement, except that interest shall accrue and be payable for the period after
such nominal date.
<PAGE>
If you are in agreement with the foregoing, please sign the
form of acceptance on the enclosed counterpart of this letter and return the
same to the undersigned, whereupon this letter shall become a binding agreement
between you and the undersigned.
Very truly yours,
ELEPHANT & CASTLE GROUP INC.
By:
Name:
Title:
The foregoing Agreement is hereby accepted as of the date first above written.
GE INVESTMENT PRIVATE PLACEMENT PARTNERS II,
a LIMITED PARTNERSHIP
By: GE Investment Management Incorporated
Its: General Partner
By:
Name:
Title:
<PAGE>
A-3
EXHIBIT A
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
NEITHER THE SECURITIES NOR ANY INTEREST THEREIN MAY BE SOLD,
TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF IN THE ABSENCE
OF SUCH REGISTRATION OR AN EXEMPTION UNDER SUCH ACT AND THE
RULES AND REGULATIONS THEREUNDER. THE TRANSFER OF SUCH
SECURITIES IS SUBJECT TO THE RESTRICTIONS SET FORTH IN
PARAGRAPH 9 OF THAT CERTAIN NOTE AGREEMENT, DATED DECEMBER 8
1998, BETWEEN ELEPHANT & CASTLE GROUP INC. AND GE INVESTMENT
PRIVATE PLACEMENT PARTNERS II, A LIMITED PARTNERSHIP, COPIES
OF WHICH ARE AVAILABLE FOR INSPECTION AT THE OFFICES OF
ELEPHANT & CASTLE GROUP INC., AND SUCH SECURITIES MAY BE
TRANSFERRED ONLY IN COMPLIANCE WITH THE TERMS AND CONDITIONS
OF SAID PARAGRAPH 9 OF SAID NOTE AGREEMENT.
Elephant & Castle Group Inc.
Exchangeable Subordinated Note
Due March 31, 2000
No.
$ [date]
FOR VALUE RECEIVED, the undersigned, Elephant & Castle Group
Inc. (herein called the "Company"), a corporation organized and existing under
the laws of the Province of British Columbia, Canada, hereby promises to pay to
GE Investment Private Placement Partners II, a Limited Partnership ("GEIPPPII")
or registered assigns, the principal sum of ______________________ Dollars on
March 31, 2000, with interest (computed on the basis of the number of days
actually elapsed and a 365-or 366-day year, as applicable) on the unpaid balance
thereof from the date of issuance hereof until March 31, 2000 or until the
entire principal hereof shall have become due and payable, at the rate of 8% per
annum, payable in arrears on March 31, 2000; provided, however, that to the
extent permitted by law interest shall be due and payable on any overdue
installment of principal or interest at a rate equal to the greater of (i) 9%
and (ii) the prime or base rate as determined by the Wall Street Journal from
time to time plus 500 basis points, but not in excess of the maximum interest
rate permitted by applicable law, per annum from the date such payment was due,
payable on demand. This Note is subject to mandatory and optional prepayment at
the times, in the amounts and subject to the conditions set forth in the
Agreement.
Payments of both principal and interest are to be made by wire
transfer for credit to the account of GEIPPPII at State Street Bank and Trust
Company, Boston, MA, ABA: 021 000 028, Acct: 2564-7819, Ref: 8X32-GEIPPPII, or
in such other manner or to such other place in the United States of America as
the holder hereof shall designate to the Company in writing, in lawful money of
the United States of America.
This Note is one of a duly authorized issue of Exchangeable
Notes due March 31, 2000 of the Company, originally issued pursuant to a Note
Agreement (the "Agreement") dated December 8, 1998, between the Company and GE
Investment Private Placement Partners II, a Limited Partnership, and is entitled
to the benefit of the Agreement, and each holder of this Note, by his acceptance
hereof, agrees to be bound by the provisions of the Agreement. As provided in
the Agreement, (i) this Note is subject to prepayment or repurchase, in whole or
in part, as specified in such Agreement, (ii) subject to and upon compliance
with the provisions of the Agreement, at the option of the holder hereof, this
Note or any portion of the principal amount hereof may at any time after the
date hereof to and including March 31, 2000, be exchanged into Convertible
Subordinated Notes of the Company as specified in the Agreement and (iii) this
Note may be transferred only upon fulfillment by the Company and the holder
hereof of conditions specified in the Agreement.
As provided and subject to the restrictions on transfer set
forth in the Agreement, upon surrender of this Note for registration of
transfer, duly endorsed, or accompanied by a written instrument of transfer duly
executed, by the registered holder hereof or his attorney duly authorized in
writing, a new Note for a like principal amount will be issued to, and
registered in the name of, the transferee. Prior to due presentment for
registration of transfer, the Company may treat the person in whose name this
Note is registered as the owner hereof for the purpose of receiving payment and
for all other purposes, and the Company shall not be affected by any notice to
the contrary.
This Note shall be governed by and enforced in accordance with
the laws of the State of New York.
The Company agrees to make payments, prepayments and
repurchases of the Notes on the dates and in the amounts specified in the
Agreement.
Should the indebtedness represented by this Note or any part
thereof be collected in any proceeding provided for in the Agreement or be
placed in the hands of attorneys for collection, the Company agrees to pay, in
addition to the principal, premium, if any, and interest due and payable hereon,
all costs of collecting this Note, including reasonable attorney's fees and
expenses.
In case an Event of Default, as defined in the Agreement,
shall occur and be continuing, this Note may be declared due and payable in the
amount, in the manner and with the effect provided in the Agreement.
Elephant & Castle Group Inc.
By:
Name:
Title:
<PAGE>
EXHIBIT B
AMENDMENT NO. 4
dated as of December 8, 1998
to
NOTE, STOCK PURCHASE AND WARRANT AGREEMENT
dated as of November 30, 1995
Between
ELEPHANT & CASTLE GROUP INC.
and
GE INVESTMENT PRIVATE PLACEMENT
PARTNERS II, A LIMITED PARTNERSHIP
<PAGE>
EXHIBIT 4
AMENDMENT NO. 4
TO
NOTE, STOCK PURCHASE AND WARRANT AGREEMENT
dated as of December 8, 1998
THIS AMENDMENT NO. 4 dated as of December 8, 1998, (this
"Amendment") to the Agreement (as defined below) is entered into between
Elephant & Castle Group Inc. (the "Company") and GE Investment Private Placement
Partners II, a Limited Partnership ("GEIPPPII").
W I T N E S S E T H:
WHEREAS, the Company and GEIPPPII have entered into that
certain Note, Stock Purchase and Warrant Agreement dated as of November 30,
1995, as amended by Amendment No.1 dated as of May 31, 1996, Amendment No. 2
dated as of March 14, 1997 and Amendment No. 3 dated as of October 17, 1997 (the
"Agreement");
WHEREAS, capitalized terms unless otherwise defined herein
shall have the meaning attributed thereto in the Agreement;
NOW, THEREFORE, in consideration of the premises and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and GEIPPPII hereby agree as follows:
1. Amendment. (a) Paragraph 2B(b)(iii)(C) is hereby amended by
inserting immediately after the words "respectively, beginning September 30,
1997" the words "and ending March 31, 1998".
(b) Paragraph 4 is hereby amended (i) by renumbering
paragraphs 4D, 4E and 4F, as paragraphs 4E, 4F and 4G, respectively, and (ii) by
inserting at the end of Paragraph 4C a new paragraph 4D which shall read in full
as follows:
"4D. Mandatory Repurchase at Holders' Option upon Equity
Financing. Up to $2,000,000 (Two Million Dollars) principal amount of Notes
issued on the Fourth Closing Date and up to $1,000,000 (One Million Dollars)
principal amount of Notes issued on the Third Closing Date shall be subject to
repurchase, at the option of the holder of such Notes, at any time and from time
to time after the six month anniversary of the date of the Exchange (as defined
below) that the Company issues to the public, common stock, preferred stock or
securities convertible into, exercisable for or exchangeable into common stock
or preferred stock (collectively, a "Public Offering"), provided, however, that
the provisions of this Paragraph 4D shall not apply to the exchangeable notes
issued by the Company pursuant to that certain Note Agreement dated as of
December 8, 1998 between the Company and GEIPPPII (the "Bridge Loan Agreement")
or the convertible subordinated notes to be exchanged therefore (the "Exchange")
pursuant to the terms of such Bridge Loan Agreement or to be issued to other
investors. This option may be exercised by the holders of such Notes for a
period ending ninety (90) days subsequent to receipt by the holders of such
Notes of written notice from the Company to the effect that such equity
financing has occurred upon at least 10 days written notice from the holders to
<PAGE>
the Company electing repurchase of the Notes specifying (i) the principal amount
of Notes issued on the Fourth Closing Date and/or the principal amount of Notes
issued on the Third Closing Date to be repurchased, (ii) the repurchase date and
(iii) the repurchase price for such Notes which shall be (A) the principal
amount of such Notes, and (B) a premium equal to that amount which is sufficient
to provide a return equal to 20% (twenty percent) per annum on such principal
amount of Notes, taking into account any cash interest or dividends paid on such
Notes, provided, however, that if the Company effects a Public Offering at any
time after the date hereof and prior to the six month anniversary of the date of
the Exchange and subsequently effects a Public Offering after the six month
anniversary of the date of the Exchange, such premium shall be equal to that
amount which is sufficient to provide a return equal to 25% (twenty-five
percent) per annum on such principal amount of Notes, in each case, from the
date of issuance of such Notes to and including the date of such repurchase,
compounded annually."
(c) Paragraph 4G is hereby amended by inserting in such
paragraph 4G immediately after the words "as required by paragraph 4C" the words
"or paragraph 4D".
(d) Paragraph 9D is hereby amended by inserting at the end of
paragraph 9D(9) a new paragraph 9D(10) which shall read in full as follows:
"9D(10) Nonapplicability of Paragraph 9D to certain shares of
Common Stock. Notwithstanding anything to the contrary contained in this
Agreement, the provisions of paragraph 9D (other than this paragraph 9D(10))
shall not apply to, and shall not adjust the Conversion Price with respect to,
any shares of Common Stock issuable upon conversion of $2,000,000 (Two Million
Dollars) principal amount of Notes issued on the Fourth Closing Date and
$1,000,000 (One Million Dollars) principal amount of Notes issued on the Third
Closing Date, in each case as such amount may be reduced by the principal amount
of such Notes repurchased pursuant to Paragraph 4D."
(e) Paragraph 12 is hereby amended by deleting the words
"Peter J. Barnett or George W. Pitman" from the definition of "Change in Control
Event" and by inserting in lieu thereof the words "Martin O'Dowd or Richard
Bryant".
2. Reconfirmation. The Company and GEIPPPII hereby reconfirm
their rights and obligations under the Agreement as amended and restated hereby.
3. Counterparts. This Amendment may be executed in any number
of counterparts, each of which shall be deemed to be an original, but all such
separate counterparts shall together constitute one and the same instrument.
4. Governing Law. THIS AMENDMENT SHALL IN ALL RESPECTS BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
<PAGE>
IN WITNESS WHEREOF, the Company and GEIPPPII have each caused
this Amendment to be duly executed and delivered as of the day and year first
above written.
GE INVESTMENT PRIVATE PLACEMENT
PARTNERS II, A LIMITED PARTNERSHIP
By: General Electric Investment Management,
its general partner
By:
Name:
Title:
ELEPHANT & CASTLE GROUP INC.
By:
Name:
Title:
<PAGE>
EXHIBIT C
FORM 19
(Section 348)
PROVINCE OF BRITISH COLUMBIA
COMPANY ACT
SPECIAL RESOLUTION
The following special resolution was passed by the undermentioned
Company on the date stated:
Name of Company: Elephant & Castle Group Inc.
Date resolution passed: November 25, 1998
Resolution:
RESOLVED, as Special Resolutions, that:
1. The authorized capital of the Company be increased by creating an
additional 10,000,000 Common Shares without par value.
2. Paragraph 2 of the Memorandum be altered to read.
3. The authorized capital of the Company consists of 20,000,000 Common
Shares without par value.
4. The Memorandum of the Company be altered so that is shall be in the
form set out in Schedule "A" attached to these resolutions.
Certified a true copy the 3rd day of December, 1998.
/s/(Isidor M. Wolfe)
--------------------
Isidor M. Wolfe
<PAGE>
SCHEDULE "A"
MEMORANDUM
(Altered)
OF
ELEPHANT & CASTLE GROUP INC.
1. The name of the Company is "Elephant & Castle Group Inc.
2. The authorized capital of the Company consists of 20,000,000 Common
shares without par value.
