Exhibit I
_________________________________________________________________________
ELEPHANT & CASTLE GROUP INC
Restated and Amended Senior Secured 6% Convertible Notes
Restated and Amended Junior Secured 6% Convertible Notes
____________________
AMENDED AND RESTATED NOTE, STOCK PURCHASE AND WARRANT AGREEMENT
____________________
Dated December 12, 2001
_________________________________________________________________________
TABLE OF CONTENTS
(Not Part of Agreement)
Page
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1. Amendment and Restatement of the Original Agreement ............................. 2
1A. Authorization of Issue of Notes .............................................. 2
2. Consideration ................................................................... 3
2A. The Notes .................................................................... 3
2B. Shares of Common Stock ....................................................... 3
2C. Security Interest ............................................................ 3
3. Conditions of Closing. .......................................................... 4
4. Prepayments ..................................................................... 5
4A. Optional Prepayment in Whole or in Part ...................................... 5
4B. Mandatory Prepayment ......................................................... 5
4C. Mandatory Purchase at Holders' Option upon Certain Events .................... 5
4D. Intentionally Omitted. ....................................................... 6
4E. Notice of Prepayment ......................................................... 6
4F. Partial Prepayments .......................................................... 6
4G. Purchase of Junior Notes ..................................................... 6
5. Certain Covenants ............................................................... 6
5A. Financial Statements and Other Reports ....................................... 6
5B. Certain Additional Information ............................................... 8
5C. Restricted Payments .......................................................... 9
5D. Board Nominee ................................................................ 9
5E. Ratio of Earnings Before Interest, Taxes, Depreciation and
Amortization to Interest Payable ............................................. 9
5F. Intentionally Omitted ........................................................ 9
5G. Indebtedness ................................................................. 10
5H. Sale of Assets ............................................................... 10
5I. ▇▇▇▇▇▇, Consolidation, ▇▇▇▇, Lease, Transfer or other Disposition of
Assets ....................................................................... 10
5J. Restricted Investments ....................................................... 10
5K. Notice ....................................................................... 11
5L. Inspection of Property ....................................................... 11
5M. Corporate Existence, Licenses and Permits; Maintenance of Properties ......... 11
5N. Taxes ........................................................................ 12
5O. Insurance .................................................................... 12
5P. Books and Accounts ........................................................... 12
5Q. Notice of Events Involving Securities ........................................ 12
5R. No "Prohibited Transactions" and Employee Benefits ........................... 13
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5S. Restricted Liens ......................................................... 13
5T. Compliance with Environmental Laws ....................................... 14
5U. Earnings ................................................................. 14
5V. Transactions with Affiliates or Officers ................................. 14
5W. Intentionally Omitted. ................................................... 15
5X. No Deductions or Withholdings ............................................ 15
5Y. Sale of Stock of Subsidiaries ............................................ 15
5Z. Restrictions on Issuance of Equity ....................................... 15
6. Events of Default and Remedies ............................................. 15
7. Representations, Covenants and Warranties .................................. 18
7A. Organization, Standing and Qualification of Company and
Subsidiaries ............................................................. 18
7B. Corporate Authority ...................................................... 18
7C. Financial Statements ..................................................... 19
7D. Actions Pending .......................................................... 19
7E. Outstanding Debt; No Default ............................................. 20
7F. Title, Liens ............................................................. 20
7G. Taxes .................................................................... 20
7H. Burdensome and Conflicting Agreements and Charter Provisions ............. 20
7I. Leases ................................................................... 21
7J. Possession of Patents, etc ............................................... 21
7K. Offering of Notes ........................................................ 21
7L. Broker's or Finder's Commissions ......................................... 22
7M. Application of Proceeds .................................................. 22
7N. Governmental Consent ..................................................... 22
7O. Holding Company Status ................................................... 23
7P. Investment Company Status ................................................ 23
7Q. ERISA .................................................................... 23
7R. Disclosure ............................................................... 23
7S. Capital Stock ............................................................ 24
7T. Environmental Compliance ................................................. 24
7U. Transaction with Affiliates .............................................. 25
7V. Discontinuance of Operations ............................................. 26
7W. Licenses, Permits, etc ................................................... 26
7X. Compliance with Laws ..................................................... 26
7Y. Relationship with General Electric Company ............................... 26
7Z. Waived Interest .......................................................... 26
8. Representations and Covenants of the Buyer ................................. 26
9. Conversion; Conversion Price; Adjustments Relative to Conversion ........... 27
9A. Conversion Privilege; Mandatory Conversion; Conversion Price;
Procedures. .............................................................. 27
9B. No Fractional Shares; No Adjustments for Dividends. ...................... 28
9C. Delivery of Stock Certificates and Cash in Lieu of Fractional Shares ..... 28
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9D. Adjustment of Conversion Price Upon Issuance of Common Stock ............. 28
9E. Liquidating Dividends; Purchase Rights ................................... 33
9F. Subdivision or Combination of Stock ...................................... 33
9G. Changes in Common Stock .................................................. 34
9H. Notice of Adjustment ..................................................... 34
9I. Certain Events ........................................................... 34
9J. Prohibition of Certain Actions ........................................... 35
9K. Stock to be Reserved ..................................................... 35
9L. Registration and Listing of Common Stock ................................. 35
9M. Issue Tax ................................................................ 36
9N. Closing of Books ......................................................... 36
9O. No Rights or Liabilities as Shareholders ................................. 36
9P. Right to Purchase ........................................................ 36
10. Intentionally Omitted. ..................................................... 37
11. Restrictions on Transfer; Registration Rights .............................. 37
11A. Applicability of Restrictions ............................................ 37
11B. Restrictive Legends ...................................................... 37
11C. Notice of Proposed Transfer; Opinions of Counsel; Certain
Restrictions ............................................................. 37
11D. Registration of Restricted Securities on Request ......................... 39
11E. Piggy-Back Registration .................................................. 39
11F. Registration Expenses .................................................... 40
11G. Registration Procedures .................................................. 40
11H. Termination of Restrictions .............................................. 42
11I. Indemnification .......................................................... 43
11J. Availability of Information .............................................. 44
11K. Duration of Obligations .................................................. 44
12. Definitions ................................................................ 44
13. Miscellaneous .............................................................. 49
13A. Note Payments ............................................................ 49
13B. Expenses ................................................................. 50
13C. Consent to Amendments .................................................... 50
13D. Notices to Subsequent Holder ............................................. 51
13E. Form, Registration, Transfer and Exchange of Notes; Lost Notes ........... 51
13F. Persons Deemed Owners .................................................... 51
13G. Survival of Representations, Warranties and Indemnities .................. 51
13H. Successors and Assigns ................................................... 52
13I. Notices .................................................................. 52
13J. Accounting Terms ......................................................... 52
13K. Satisfaction Requirement ................................................. 52
13L. Governing Law ............................................................ 52
13M. Headings; Table of Contents .............................................. 52
13N. Counterparts ............................................................. 52
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13O. Non Exclusivity of Remedies and Specific Performance .................... 52
13P. Non Business Days ....................................................... 53
Exhibit A -- Form of Senior Secured Convertible Note
Exhibit B -- Form of Junior Secured Convertible Note
Exhibit 3A -- Form of Opinions of ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ as to
Canadian law matters, ▇. ▇▇▇▇▇ ▇▇▇▇▇, Esq. as to United
States law matters and Bull, Housser & ▇▇▇▇▇▇ as to certain
Canadian law matters
Exhibit 7A1 -- Certain Subsidiaries
Exhibit 7A2 -- Certificate of Incorporation and By-laws
Exhibit 7J -- Patents, Etc.
Exhibit 7S1 -- Certain Reserved Shares and Agreements Regarding Issuance of
Shares
Exhibit 7S2 -- Certain Owners of Securities
Exhibit 7V -- Discontinued Locations
Exhibit 7Y -- Relationship with General Electric Company
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ELEPHANT & CASTLE GROUP INC.
AMENDED AND RESTATED NOTE, STOCK
PURCHASE AND WARRANT AGREEMENT
This Amended and Restated Note, Stock Purchase and Warrant Agreement
(the "Agreement") is entered into as of December 12, 2001, between Elephant &
Castle Group Inc., a corporation incorporated in the Province of British
Columbia, Canada (herein called the "Company") and GE Investment Private
Placement Partners II, a Limited Partnership, a Delaware limited partnership
(herein called the "Buyer").
WHEREAS, the Company and the Buyer have entered in that certain Note,
Stock Purchase and Warrant Agreement dated November 30, 1995 (as amended prior
to the date hereof, the "Original Agreement") pursuant to which the Company sold
and issued, and the Buyer acquired and received, 111,111 shares of Common Stock,
convertible subordinated debentures due November 30, 2005, in the aggregate
principal amount of $9,000,000 (the "Original Notes") and Warrants;
WHEREAS, the Company issued to the Buyer pursuant to a Note and
Warrant Agreement dated as of January 1, 1999, convertible subordinated
debentures due December 31, 2003, in the aggregate principal amount, as of the
date hereof, of $1,000,000 (the "1999 Notes");
WHEREAS, the Company granted to the Buyer security interest in
substantially all of its assets and assets of its Subsidiaries pursuant to the
Security Agreement dated as of October 6, 1999 among the Company, its U.S.
Subsidiaries (as defined herein), and the Buyer (the "U.S. Security Agreement")
and pursuant to the Security Agreement dated as of October 6, 1999 among the
Company, its Canadian Subsidiary (as defined herein), and the Buyer (the
"Canadian Security Agreement", and together with the U.S. Security Agreement,
the "Security Agreement") as security for performance of its obligations under
the Original Notes and the Original Agreement;
WHEREAS, the Company desires and the Buyer agrees to amend the terms
of the Original Notes and 1999 Notes by the issuance of Amended and Restated
Senior Secured Convertible Notes and Amended and Restated Junior Secured
Convertible Notes on terms and conditions herein set forth;
WHEREAS, the parties hereto intend that this Agreement amend and
restate the Original Agreement and constitute a continuation of the parties'
obligations under the Original Agreement and does not constitute a novation;
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in this
Agreement, and for other good and valuable consideration, the receipt and
sufficiency whereof is hereby acknowledged, the parties hereby agree as follows:
2. Amendment and Restatement of the Original Agreement. The parties
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hereto who constitute the parties necessary to amend the Original Agreement
hereby agree that, effective upon the date hereof, the Original Agreement is
hereby amended and restated in its entirety by this Agreement. The parties
hereby acknowledge and agree that the rights and obligations of the parties
pursuant to this Agreement shall constitute continuation of the rights and
obligations set forth in the Original Agreement and that entering by the parties
into this Agreement and issuance by the Company of the Amended and Restated
Senior Secured Convertible Notes ("Senior Notes") and Amended and Restated
Junior Secured Convertible Notes ("Junior Notes") hereunder in exchange for the
Original Notes and 1999 Notes shall constitute continuation of the obligations
of the parties under the Original Notes and 1999 Notes on the terms provided in
the Senior Notes and Junior Notes, and shall not constitute a novation.
2.1 Authorization of Issue of Notes. (a) The Company will authorize
the issue of its Senior Notes in the aggregate principal amount of $5,000,000,
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 Maturity Date or
until the entire principal thereof shall have become due and payable at the rate
of 6% per annum, payable in cash quarterly in arrears on each of September 1,
December 1, March 1 and June 1, beginning March 1, 2002 with one final interest
payment on September 1, 2005, and to be substantially in the form of Exhibit A
hereto attached.
The Company will authorize the issue of its Junior Notes in the
aggregate principal amount of $5,000,000, to be dated the date of the issue, to
mature on the Maturity Date, to bear interest on the unpaid balance thereof
until the Maturity Date or until the entire principal thereof shall have become
due and payable at the rate of 6% per annum, payable in arrears, upon each
Conversion Date; provided, however, that on the first Conversion Date, the
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Company shall, in addition to the payment of any interest accrued on the Junior
Notes through such date, make a one time payment to the Buyer, in cash, in the
amount equal to $135,616.43. The Company shall have the option to pay up to 50%
of the interest due and payable on the Junior Notes on each Conversion Date, in
Common Shares, such shares to be valued at the average closing price for a share
of Common Stock on NASD Bulletin Board or on NASDAQ National Market System or on
an exchange, if any, on which the Common Stock is listed during the fifty (50)
trading-day period following the date hereof, such value not to exceed, in any
case, $1 per share. The term "Senior Note" or "Senior Notes" as used herein
shall include each Senior Note delivered pursuant to any provision of this
Agreement and each Senior Note delivered in substitution or exchange for any
such Note, in any case which is at the time outstanding. The term "Junior Note"
or "Junior Notes" as used herein shall include each Junior Note delivered
pursuant to any provision of this Agreement and each Junior Note delivered in
substitution of exchange for any such Junior Note, in any case which is at the
time outstanding. "Senior Notes" and "Junior Notes" are herein referred to,
collectively, as "Notes." 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. To the extent permitted by applicable law, interest shall be due and
payable on any overdue installment of principal or interest of any Note at a
rate equal to the Defined Rate per annum from the date such payment was due
until paid, payable on demand.
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3. Consideration. The Company hereby agrees, subject to the terms
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and conditions herein set forth, to amend and restate the Original Notes and
1999 Notes and to issue to the Buyer shares of Common Stock in consideration of
the following:
(a) surrender by the Buyer of the Original Notes in the aggregate
principal amount of $9,000,000;
(b) surrender by the Buyer of the 1999 Notes in the aggregate
principal amount of $1,000,000;
(c) waiver by the Buyer of all accrued and unpaid interest on the
Original Notes and the 1999 Notes through June 30, 2001, in the aggregate
amount equal $620,000; and
(d) acceptance by the Buyer of the amount equal to $210,616.80 in
full payment and satisfaction of accrued and unpaid interest on the
Original Notes and 1999 Notes from July 1 through, but not including the
Closing Date,
and the Buyer hereby agrees to waive such accrued and unpaid interest and to
accept the Notes and the shares of Common Stock, all as further specified
herein.
3.1 The Notes. The Company hereby agrees to amend and restate the
terms of the Original Notes and 1999 Notes and, subject to the terms and
conditions herein set forth, the Buyer agrees to receive from the Company on
such amended and restated terms, $10,000,000 principal amount of Notes at 100%
of such principal amount as follows: at 11:00 a.m. New York time on December 12,
2001, or at such other time and on such other date as the Buyer and the Company
may agree (the "Closing Date"), the Company will deliver to the Buyer at the
offices of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇, or at such other location as the Buyer and the Company may agree (the
"Closing"), one or more Notes, as the Buyer may request, registered in the
Buyer's name, evidencing $10,000,000 principal amount to be acquired by the
Buyer, against delivery of the consideration thereof as set forth in paragraph 2
hereof.
3.2 Shares of Common Stock. The Company hereby agrees to issue and
deliver to the Buyer at the Closing and, subject to the terms and conditions set
forth herein, the Buyer agrees to receive from the Company, 2,600,000 shares of
Common Stock (the "Purchased Shares").
3.3 Security Interest. The Company hereby acknowledges and agrees
that the security interest granted by the Company to the Buyer pursuant to the
Security Agreement shall continue in full force and effect and shall secure:
payment of the indebtedness evidenced by the Notes, and performance and
discharge of each and every obligation, covenant and condition on the Company's
part to be performed under the Notes, including any and all modifications,
extensions, renewals or accords and satisfactions thereof;
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performance and discharge of each and every obligation, covenant and condition
on the Company's part to be performed under this Agreement; and all reasonable
costs and expenses incurred by the Buyer in collecting the indebtedness
evidenced by the Notes or otherwise enforcing its rights under this Agreement or
the Notes, including without limitation, reasonable attorneys' fees.
4. Conditions of Closing. The Buyer's obligation to acquire the
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Notes and the Purchased Shares on the Closing Date is subject to the
satisfaction, on or before the Closing Date, of the following conditions:
Opinion of Counsel. On the Closing Date the Buyer shall have received (x) from
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▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, who are acting as Canadian counsel to the Company
in connection with this transaction, a favorable opinion as to Canadian law
matters, (y) from D. ▇▇▇▇▇ ▇▇▇▇▇, 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 and (z) from Bull, Housser & ▇▇▇▇▇▇, who are acting as
Canadian counsel to the Buyer in connection with this transaction, a favorable
opinion as to certain Canadian law matters; each such opinion dated the Closing
Date, satisfactory to the Buyer and substantially in the form set forth in
Exhibit 3B hereto.
Representations and Warranties; No Default. The representations and warranties
------------------------------------------
contained in paragraph 7 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, and the Company
shall have delivered to the Buyer an Officer's Certificate, dated the Closing
Date to such effect.
Transactions Permitted by Applicable Laws. The acquisition of and delivery of
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consideration for the Notes to be acquired by the Buyer and the issuance by the
Company of the Notes and the Purchased Shares 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 the Buyer 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 the Buyer shall have received such certificates or other evidence as the
Buyer may request to establish compliance with this condition.
Compliance With Outstanding Debt Issues. On or prior to the Closing Date, the
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Company shall have delivered to the Buyer such evidence as the Buyer or the
Buyer's special counsel may request showing that the execution, delivery and
performance by the Company of this Agreement, the Notes, and the Purchased
Shares 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.
Proceedings. On or prior to the Closing Date, all corporate and other
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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 the Buyer and the Buyer's special counsel, and the Buyer
and the Buyer's special counsel shall have received all
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such counterpart originals or certified or other copies of such documents as the
Buyer or they may reasonably request.
Delivery of Notes and Purchased Shares. On the Closing Date, the Company shall
--------------------------------------
have delivered the Notes pursuant to paragraph 2A hereof and the Purchased
Shares pursuant to paragraph 2B hereof.
Payment in Satisfaction of Prior Obligations. On the Closing Date, the Company
--------------------------------------------
shall have delivered to the Buyer (i) payment in the amount equal to $210,616.80
in full payment and satisfaction of accrued and unpaid interest on the Original
Notes and 1999 Notes from July 1 through, but not including the Closing Date.
Security Agreement. On or prior to the Closing Date, the Security Agreement and
------------------
other documents related thereto shall have been amended to provide that the
security interest granted therein, shall continue in full force and effect and
shall secure the full payment and performance by the Company of its obligations,
covenants and conditions under the Notes and of all obligations, covenants and
conditions to be performed by the Company under this Agreement and the Security
Agreement. On or prior to the Closing Date, the Company shall have delivered to
the Buyer the Additional Closing Documents.
5. Prepayments. The Notes shall be subject to optional and mandatory
-----------
prepayments or repurchase as specified in paragraphs 4A, 4B and 4C hereof.
5.1 Optional Prepayment in Whole or in Part. Any Note to be issued
hereunder shall be subject to prepayment in whole, or from time to time in part,
in increments of $500,000 principal amount of such Notes then outstanding, at
the option of the Company, on any interest payment date. The prepayment price
for any Note being prepaid under this paragraph 4A shall be: (i) 100% of the
principal amount thereof; plus (ii) interest accrued to the prepayment date.
5.2 Mandatory Prepayment. The Company will prepay the Senior Notes
outstanding as follows:
(i) the initial installment on the Closing Date, in the amount of
$125,000; (ii) three quarterly payments, beginning February 28, 2002, each in
the amount of $125,000; (iii) four quarterly payments, beginning November 30,
2002, each in the amount of $150,000; (iv) four quarterly payments, beginning
November 30, 2003, each in the amount of $175,000; (v) four quarterly payments,
beginning November 30, 2004, each in the amount of $200,000; and (vi) one final
installment on September 1, 2005, in the amount of $2,400,000.
5.3 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 90 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, (B) a premium equal to that
amount which is sufficient to provide a return equal to the Defined Rate per
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annum on such principal amount of Notes, taking into account any interest or
dividends paid on such Notes to and including the date of prepayment, compounded
quarterly, from the date of issuance of such Notes to the date of such
prepayment and (C) interest and dividends, if any, accrued thereon to the date
of payment.
5.4 Intentionally Omitted.
5.5 Notice of Prepayment. The Company shall give each holder of Notes
written notice of each prepayment pursuant to paragraph 4A hereof not less than
45 days or pursuant to paragraph 4B hereof not less than 10 days prior to any
prepayment date, specifying such prepayment date, the principal amount of the
Notes (and, if not all Notes are then held by the Buyer, of the Notes held by
each holder) to be prepaid on such date, the paragraph pursuant to which such
prepayment is to be made and the date the right to convert such Notes or
portions thereof to be prepaid shall terminate pursuant to paragraph 9 hereof.
Notice of prepayment having been given as aforesaid, the principal amount of the
Notes specified in such notice, together with interest thereon to the date of
prepayment shall become due and payable on the prepayment date specified, except
to the extent that any Note which (or a portion of which) is to be so prepaid
shall have been surrendered to the Company for conversion prior to such
prepayment date in accordance with paragraph 9 hereof.
5.6 Partial Prepayments. Upon prepayment of less than all of the
Notes pursuant to paragraphs 4A or 4B, the principal amount so prepaid shall be
allocated to all Notes at the time outstanding in proportion to the outstanding
principal amounts thereof. Upon any partial prepayment of any Note, such Note
shall, at the option of the holder thereof, be either (a) surrendered to the
Company in exchange for a new Note in a principal amount equal to the principal
amount remaining unpaid on the Note surrendered, and otherwise having the same
terms and provisions as the Note surrendered, or (b) made available to the
Company at the principal office of the original holder of such Note for notation
thereon of the portion of the principal so prepaid, except that, so long as the
Buyer shall hold any Note, the Company agrees that the Buyer may make notation
of any portion of the principal so prepaid on such Note on its records.
5.7 Purchase of Junior Notes. The Company covenants that it will not,
and will not permit any Subsidiary to, directly or indirectly, purchase or
otherwise acquire any Junior Note except (a) by making a payment or prepayment
in accordance with the provisions of the Junior Notes and of this Agreement, (b)
by purchasing any Junior Note as required by paragraph 4C hereof or (c) by
accepting any Junior Note surrendered for conversion in accordance with
paragraph 9 hereof. Any Junior Note acquired by the Company or any Subsidiary
shall be canceled and shall not thereafter be deemed outstanding for any purpose
hereunder.
6. Certain Covenants.
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6.1 Financial Statements and Other Reports. So long as any Notes
shall remain outstanding, the Company will deliver to the Buyer, in duplicate:
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As soon as available and in any event within 45 days after the end of each of
the first three quarters of each fiscal year of the Company, (i) a consolidated
balance sheet of the Company and its consolidated Subsidiaries (included in the
Company's Quarterly Report on Form 10-Q filed by the Company with the Commission
for the relevant fiscal quarter), and the related consolidated statements of
income and changes in financial position for such quarter and for the portion of
the fiscal year ended at the end of such quarter, and (ii) the Quarterly Report
to Shareholders for such quarter or another report containing summarized
information for such quarter and for the portion of the fiscal year ended at the
end of such quarter, setting forth in each case in comparative form the figures
for the corresponding quarter and the corresponding portion of the previous
fiscal year;
At any time when the Company does not file a Quarterly Report on Form 10-Q with
the Commission, as soon as available, and in any event within 45 days after the
end of each of the first three quarters in each fiscal year of the Company,
unaudited consolidated statements of income, shareholders' equity and cash flows
of the Company and its consolidated Subsidiaries for such quarterly period and
for the period from the beginning of the current fiscal year to the end of such
quarterly period, and an unaudited consolidated balance sheet of the Company and
its consolidated Subsidiaries as at the end of such quarterly period, in each
case setting forth in comparative form consolidated figures for the
corresponding periods in the preceding fiscal year, all in reasonable detail,
prepared by the Company in accordance with generally accepted accounting
principles consistently followed throughout the periods involved, subject to
normal year-end adjustments, and certified by the principal financial officer of
the Company and accompanied by a written discussion of operations in summary
form with respect to such quarterly period;
As soon as available and in any event within 90 days after the end of each
fiscal year of the Company, a consolidated balance sheet of the Company and its
consolidated Subsidiaries (included in the Company's Annual Report to
Shareholders and Annual Report on Form 10-K filed by the Company with the
Commission for the relevant fiscal year), and the related consolidated
statements of income, changes in stockholders' equity and cash flows for such
fiscal year, setting forth in each case in comparative form the corresponding
figures for the preceding fiscal year, all reported on without material
exception or qualification, by ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ Worldwide or other
independent public accountants of nationally recognized standing;
At any time when the Company does not file an Annual Report on Form 10-K with
the Commission, as soon as practicable and in any event within 90 days after the
end of each fiscal year of the Company, consolidated statements of income,
stockholders' equity and cash flows of the Company and its consolidated
Subsidiaries for such year, and a consolidated balance sheet of the Company and
its consolidated Subsidiaries as at the end of such fiscal year, setting forth
in each case in comparative form corresponding consolidated figures from the
preceding fiscal year, prepared in accordance with generally accepted accounting
principles consistently followed throughout the periods involved, and certified
by ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ Worldwide or other independent public accountants of
recognized national standing, whose certificate shall be satisfactory in scope
and substance to the Buyer and who shall have authorized the Company to deliver
such financial statements and certification thereof to the Buyer, and
accompanied by a written discussion of operations in summary form with respect
to such fiscal year;
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Promptly upon transmission thereof, copies of all such financial statements,
proxy statements, notices and reports as the Company shall send to its
stockholders and of all registration statements and regular or periodic reports,
including without limitation Annual Reports on Form 10-K and Quarterly Reports
on Form 10-Q and any current Reports on Form 8-K, in definitive form which it
files or which it is or may be required to file with the Commission; and
With reasonable promptness, to the Buyer, such other financial data the Buyer
may reasonably request; provided, however, that (i) neither the Company nor any
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Subsidiary shall be required to disclose any such information if such disclosure
is prohibited by law, and (ii) any information provided pursuant to this
paragraph 5A(f) which is designated in writing as proprietary or confidential at
the time of receipt thereof, if such information is not otherwise in the public
domain, shall not be disclosed by the Buyer to any other Person except (1) to
its independent accountants and legal counsel, (2) pursuant to statutory and
regulatory requirements, (3) pursuant to any mandatory court order, subpoena or
other legal process, (4) to any other holder, or (5) in connection with the
exercise of any remedy under this Agreement.
The Buyer is hereby authorized to deliver a copy of any financial statement
delivered to any holder pursuant to subparagraphs (a) through (e) of this
paragraph 5A to any regulatory body having jurisdiction over any holder which
requests such information. Any holder is further authorized, from and after the
date hereof, to request information from and to have access to, the Company's
independent public accountants, and the Company will direct such accountants to
make available to any holder such information as any holder may reasonably
request.
6.2 Certain Additional Information. So long as the Buyer shall hold
any Note, the Company will deliver to the Buyer, in duplicate:
Together with each delivery of financial statements required by
Paragraphs 5A(a), (b), (c) and (d), as applicable above, the Company will
deliver to the Buyer an Officer's Certificate stating that during the period
covered by the most recent statement of income delivered to the Buyer no Event
of Default or Default has occurred, or, if such has occurred, specifying the
nature and status thereof, the period of existence thereof and what action the
Company has taken or proposes to take with respect thereto. The financial
statements required to be delivered by clause 5A(d) above shall also be
accompanied by a written statement of the independent public accountants who
certify such financial statements to the effect that, in the course of the
examination upon which their certification was based, they have obtained no
knowledge of any Event of Default or Default insofar as any such Event of
Default or Default relates to any financial matters, or, if they have obtained
knowledge of any such failure, specifying the nature and period of existence
thereof.
Forthwith upon the Chairman of the Board or any officer of the Company
obtaining knowledge of an Event of Default or Default, the Company will deliver
to the Buyer an Officer's Certificate specifying the nature thereof, the period
of existence thereof and what action the Company proposes to take with respect
thereto.
8
6.3 Restricted Payments. So long as any Note shall remain
outstanding, the Company will not, and will not permit any Subsidiary to, (a)
declare or pay any dividends on, or make any other distribution or payment on
account of, or redeem, retire, purchase or otherwise acquire, directly or
indirectly (except through payment of the Notes), any shares of any class of
stock of the Company, whether now or hereafter outstanding, or make any other
distribution in respect thereof, either directly or indirectly, whether in cash,
property or in obligations of the Company, except for distribution of shares of
the same class or of a different class of stock pro rata to all holders of
shares of a class of stock under circumstances giving the Buyer rights pursuant
to paragraph 9 hereof, or (b) make any payments of principal of, or retire,
redeem, purchase or otherwise acquire, any indebtedness other than the Notes
(such declarations, payments, purchases, redemptions, retirements, acquisitions
or distributions being herein called "Restricted Payments").
6.4 Board Nominee. So long as the Buyer shall be the beneficial
owner, in the aggregate, of at least 25% of the Notes, Common Stock acquired
pursuant to the Original Agreement and this Agreement or any Common Stock issued
upon the conversion of the Notes or the exercise of the Warrants, the Company
(a) will nominate and recommend as candidates for election to the Board of
Directors of the Company at least two (2) Persons designated by the general
partner of the Buyer and (b) will not increase the size of the Board of
Directors of the Company without the consent of the general partner of the
Buyer. If at any time any such designated Person(s) is not a member of the Board
of Directors of the Company, (i) the Company will notify such designated
Person(s), concurrently with notice given to members of the Board of Directors
of the Company, of all meetings of the Board of Directors, and, as soon as
available, will provide to such designated Person(s) all reports, financial
statements or other information distributed to the Board or Directors of the
Company, (ii) the Company will permit such designated Person(s) to attend all
such meetings of the Board of Directors as an observer and to participate as an
elected member with all rights of an elected member, voting excepted and (iii)
the Company will permit the general partner of the Buyer, or any Person(s)
designated by such general partner in writing to be a Person(s) acting on its
behalf, at the Company's expense, to visit and inspect any of the properties of
the Company and its Subsidiaries and to discuss the affairs, finances and
accounts of the Company and its Subsidiaries with the principal officers and the
auditors of the Company, all at such reasonable times during business hours and
as often as such general partner may reasonably request.
6.5 Ratio of Earnings Before Interest, Taxes, Depreciation and
Amortization to Interest Payable. So long as any Note shall remain outstanding,
the Company will not permit, as at the end of the most recent fiscal quarter of
the Company, the ratio of (i) Earnings Before Interest, Taxes, Depreciation and
Amortization (calculated in U.S. Dollars) to (ii) interest due and payable on
all Indebtedness (calculated in U.S. Dollars), in each case for the immediately
preceding twelve-month period or longer period, as the case may be, to be less
than 2:1.
6.6 Intentionally Omitted.
9
6.7 Indebtedness. So long as any Note shall remain outstanding, the
Company will not, without the prior written consent of the Buyer, and will not
permit any of its Subsidiaries directly or indirectly to create, incur, assume,
guaranty, or otherwise become or remain directly or indirectly liable in respect
to any Indebtedness if the aggregate principal amount of all Indebtedness of the
Company and its Subsidiaries outstanding at such time (other than the Notes)
exceeds the aggregate principal amount of the Notes converted pursuant to
paragraph 9 hereof or prepaid by the Company in accordance with the provisions
of this Agreement; provided, however, that if on any Conversion Date the Company
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shall have failed to satisfy the EBITDA requirements set forth in paragraph
9A(b) for such date, the Company shall not, and will not permit any Subsidiary
directly or indirectly to create, incur, assume, guaranty, or otherwise become
liable in respect to any Indebtedness unless and until the Company shall meet
the EBITDA requirements for the next Conversion Date. So long as any Note shall
remain outstanding, the Company will not, without the prior written consent of
the Buyer, and will not permit any of its Subsidiaries directly or indirectly to
create, incur, assume, guaranty, or otherwise become or remain directly or
indirectly liable in respect to any Indebtedness if the aggregate principal
amount of all Indebtedness of the Company and its Subsidiaries outstanding at
such time (other than the Notes) exceeds $5,000,000.
6.8 Sale of Assets. So long as any Note shall remain outstanding, the
Company will not, and will not permit any Subsidiary to, sell, lease, assign,
transfer or otherwise dispose of any of its fixed assets, whether now owned or
hereafter acquired, or any of its other property, other than in the ordinary
course of its business, without the prior written consent of the Buyer.
6.9 Merger, Consolidation, Sale, Lease, Transfer or other Disposition
of Assets. So long as any Note shall remain outstanding, the Company will not,
without the prior written consent of the Buyer:
permit any of its Subsidiaries to sell, lease, transfer or otherwise dispose of
all or substantially all of its assets to another Person other than in the
ordinary course of business, or make any material change in the methods by which
it conducts its business, or to consolidate with or merge with or into any other
corporation, or to permit another corporation to merge with or into it, except
that any Subsidiary may sell, lease, transfer or otherwise dispose of all or any
part of its assets to the Company or any wholly-owned Subsidiary or consolidate
with or merge with or into any wholly-owned Subsidiary or, with or into the
Company; or sell, lease, transfer or otherwise dispose of all or substantially
all of its assets or consolidate with or merge with or into any Person or permit
any Person to merge with or into it.
6.10 Restricted Investments. So long as any Note shall remain
outstanding, the Company will not, and will not permit any Subsidiary to, make
or authorize any Restricted Investment. For the purposes of this paragraph the
term "Restricted Investment" shall mean (x) any investment, made in cash or
otherwise, by the Company or any Subsidiary (i) in any Person, whether by
acquisition of stock, indebtedness or other obligation or security, by a loan,
advance or capital contribution, or
10
otherwise, or (ii) in any property, (y) any loan for a purpose other than as
described in clause (x) of this paragraph or (z) any advance, except the
following:
investments in and advances to wholly-owned Subsidiaries or companies which
simultaneously become wholly-owned Subsidiaries;
investments in property to be used in the business of the Company or any
wholly-owned Subsidiary;
investments in direct obligations of, or obligations the principal and interest
of which are guaranteed by, the United States of America or any agency thereof
maturing in three years or less from the date of acquisition;
investments in certificates of deposit or banker's acceptances issued by any
commercial bank located in the United States, Canada, Western Europe or Japan
which is owned by a bank holding company the commercial paper of which is rated
A2 or P2, respectively, by Standard & Poor's Corporation or ▇▇▇▇▇'▇ Investors
Service, or higher, and which has capital, surplus and undivided profits
aggregating at least $100,000,000;
investments in commercial paper maturing within 270 days or less from the date
of acquisition rated in one of the two highest grades by Standard & Poor's
Corporation or ▇▇▇▇▇'▇ Investors Service or by another rating agency of
nationally recognized standing;
investments in money market funds;
investments held by the Company or any Subsidiary on the date hereof; or
investments, loans and advances made in the ordinary course of business not in
excess at any one time of 1% of total assets of the Company and its Subsidiaries
on a consolidated basis.
6.11 Notice. So long as any Note shall remain outstanding, the Company
will notify each holder of a Note or Notes (a) forthwith upon the Chairman of
the Board or any officer of the Company obtaining knowledge of any Default or
Event of Default hereunder, (b) immediately upon receipt by the Company of any
notice of, or knowledge by the Chairman of the Board or any officer of the
Company of, any event of default under any Current Indebtedness or Funded
Indebtedness, (c) immediately upon the public announcement of any transaction,
including without limitation any merger, combination or consolidation, in which
the Company will not be the surviving corporation, or a sale of all or
substantially all of the Company's assets and (d) of the Chairman of the Board
or any officer of the Company obtaining knowledge of, and upon the occurrence
of, any Change of Control Event.
6.12 Inspection of Property. So long as any Note shall remain
outstanding, the Company will permit any Person designated in writing by the
holders of a majority in aggregate principal amount of Notes outstanding to be a
Person acting on their behalf to visit and inspect any of the properties of the
Company and its Subsidiaries and to discuss the affairs, finances and accounts
of any of such corporations with the principal officers of the Company and such
Subsidiaries, all at such reasonable times and as often as such holders may
reasonably request.
6.13 Corporate Existence, Licenses and Permits; Maintenance of
Properties. So long as any Note shall remain outstanding, the Company will at
all times do or cause to be done all things necessary to maintain, preserve and
renew its existence as a corporation organized under the laws of province of
British Columbia, Canada,
11
preserve and keep in force and effect, and cause each of its Subsidiaries to
preserve and keep in force and effect, all licenses and permits necessary and
material to the conduct of the business of the Company and its consolidated
Subsidiaries, taken as a whole, and to maintain and keep, and cause each of its
Subsidiaries to maintain and keep, its and their respective properties in good
repair, working order and condition (except for normal wear and tear), and from
time to time to make all needful and proper repairs, renewals and replacements,
including without limitation all trade name and trademark registration renewals,
so that any business material to the Company carried on in connection therewith
may be properly and advantageously conducted at all times.
6.14 Taxes. So long as any Note shall remain outstanding, the Company
will duly pay and discharge, and cause each of its Subsidiaries duly to pay and
discharge, all taxes, assessments and governmental charges upon or against the
Company or its Subsidiaries or their respective properties, in each case before
the same become delinquent and before penalties accrue thereon, unless and to
the extent that the same are being contested in good faith and by appropriate
proceedings and the Company and its Subsidiaries shall have set aside on their
books adequate reserves with respect thereto.
6.15 Insurance. So long as any Note shall remain outstanding, the
Company will apply for and continue in force, or cause to be applied for and
continued in force, adequate insurance covering the respective risks of the
Company and its Subsidiaries of such types and in such amounts and with such
deductibles as are customary for other corporations engaged in similar lines of
business and with good and responsible insurance companies.
6.16 Books and Accounts. So long as any Note shall remain outstanding,
the Company will, and will cause each Subsidiary to, maintain proper books of
record and account in which full, true and correct entries shall be made of its
transactions and set aside on its books from its earnings for each fiscal year
all such proper reserves as in each case shall be required in accordance with
generally accepted accounting principles.
6.17 Notice of Events Involving Securities. The Company will give each
holder of a Note or Notes, each holder of any Warrants and each holder of any
Common Stock issued upon conversion of any Note or Notes or exercise of any
Warrant or Warrants which had been held by such holder at the time of conversion
thereof, unless the Company shall have previously given such holder notice of
such filing pursuant to another provision of this Agreement, (a) within ten days
thereafter, notice of the filing by the Company with the Commission or with any
national securities exchange either an application to register any securities of
the Company pursuant to Section 12 of the Exchange Act, or a registration
statement under Section 5 of the Securities Act, relating to any securities of
the Company, (b) as promptly as practicable after any acquisition by it or by
any Subsidiary of any of the Company's equity securities in excess in one
transaction of 1% of the number of such securities then outstanding and, in any
event, in connection with the materials delivered pursuant to paragraph 5A(b)
hereof, as at the close of each fiscal year, notice of all acquisitions by it or
by any Subsidiary of any of the Company's equity securities, specifying the
class and number of such equity securities so
12
acquired, and (c) promptly upon notice thereof, notice of the filing of any
Schedule 13D or 13G with respect to securities of the Company pursuant to the
Exchange Act (with copies of any such Schedule to accompany or follow such
notice as soon as practicable).
The Company agrees to use its best efforts to give each holder notice
immediately upon the occurrence of any event that would cause such holder,
assuming such holder holds the number of shares of Common Stock issuable upon
conversion of all the Notes then held by such holder, to be required to file any
Schedule or Form with respect to securities of the Company pursuant to the
Exchange Act.
6.18 No "Prohibited Transactions" and Employee Benefits. Neither the
Company nor any Subsidiary nor any ERISA Affiliate will establish, maintain,
contribute to, or incur an obligation to contribute to any plan (including a
Multiemployer Plan) subject to Title IV of ERISA or Section 412 of Internal
Revenue Code of 1986, as amended. Neither the Company nor any Subsidiary shall
incur any liability with respect to retiree medical or death benefits. All
employee benefit plans and arrangements (regardless of whether such plan or
arrangements are covered by ERISA) maintained by or contributed to by the
Company, any Subsidiary or any ERISA Affiliate shall be maintained in compliance
with all applicable law, including any reporting requirements. With respect to
any plan maintained by or contributed by the Company or any Subsidiary, neither
the Company nor any Subsidiary will fail to make any contribution due under the
terms of such plan or required by law. Neither the Company nor any Subsidiary,
nor any other person including any fiduciary will engage in any transaction
prohibited by Section 406 of ERISA or Section 4975 of the Internal Revenue Code
of 1986, as amended, which could subject the Company, any Subsidiary or any
entity that the Company or any Subsidiary has an obligation to indemnify to any
tax or penalty imposed under Section 4975 of the Internal Revenue Code of 1986,
as amended, or Section 502 of ERISA. So long as any Note shall remain
outstanding, the Company will not, and will not permit any Subsidiary to, enter
into any transaction or take any action which will result in any transaction
contemplated by the Agreement becoming a transaction prohibited by Section 406
of ERISA or Section 4975 of the Internal Revenue Code of 1986, as amended.
6.19 Restricted Liens. So long as any Note shall remain outstanding,
the Company will not, and will not permit any Subsidiary to, create or permit to
exist any mortgage, pledge, title retention lien, or other Lien, encumbrance or
security interest with respect to any assets now or hereafter acquired, except
(i) for current taxes not delinquent or taxes being contested in good faith and
by appropriate proceedings, (ii) Liens arising in the ordinary course of
business for sums not due or sums being contested in good faith and by
appropriate proceedings and not involving any deposits or advances or borrowed
money or the deferred purchase price of property or services, (iii) those
granted by any Subsidiary to secure indebtedness of such Subsidiary to the
Company or to any other Subsidiary, and (iv) lien on asset located on new
properties hereinafter purchased, leased or otherwise acquired by the Company or
any Subsidiary in the amount not to exceed the aggregate principal amount of the
Notes converted pursuant to paragraph 9 hereof or prepaid by the Company in
accordance with the provisions of this Agreement; provided, however, that if on
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any Conversion Date the Company shall have failed to satisfy the
13
EBITDA requirements set forth in paragraph 9A(b) for such date, the Company
shall not, and will not permit any Subsidiary to, create any Lien on any assets
thereof unless and until the Company shall meet the EBITDA requirements for the
next Conversion Date.
6.20 Compliance with Environmental Laws. So long as any Note shall
remain outstanding, the Company will not, and will not permit any Subsidiary to,
except in compliance with applicable Environmental Laws, or in the event of any
noncompliance with applicable Environmental Laws, only to the extent which such
noncompliance would not have a material adverse effect on the business,
operations or financial condition of the Company, individually, or of the
Company and its Subsidiaries, taken as a whole, (a) use any of the property of
the Company or any Subsidiary or any portion thereof for the handling,
processing, storage or disposal of Hazardous Substances, (b) cause or permit to
be located on any of the property any underground tank or other underground
storage receptacle for Hazardous Substances, (c) generate any Hazardous
Substances on any of the property, (d) conduct any activity on the property or
use any property in any manner so as to cause a release (i.e., releasing,
spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting,
escaping, leaching, disposing or dumping) or threatened release of Hazardous
Substances on, upon or into the property or (e) otherwise conduct any activity
on the property or use any property in any manner that would violate any
Environmental Law or bring such property in violation of any Environmental Law.
6.21 Earnings. The Company will attain a minimum of $1,800,000 in
Earnings Before Interest, Taxes, Depreciation and Amortization for each twelve
(12) month period ending on June 30 of each year through and including June 30,
2005.
6.22 Transactions with Affiliates or Officers. So long as any Note
shall remain outstanding, the Company will not, and will not permit any
Subsidiary to, (a) enter into any transaction, including, without limitation,
the purchase, sale or exchange of property or the rendering of any services,
with any Affiliate (other than the Company or a Subsidiary of the Company), or
any officer or director thereof, or enter into, assume or suffer to exist any
employment or consulting contract with any Affiliate (other than the Company or
a Subsidiary of the Company), or any officer or director thereof, except any
transaction or contract which is in the ordinary course of the Company's
business and which is upon fair and reasonable terms no less favorable to the
Company than it would obtain in a comparable arm's length transaction with a
Person not an Affiliate, (b) make any advance or loan to any Affiliate (other
than the Company or Subsidiary of the Company), or any director or officer
thereof or of the Company or to any trust of which any of the foregoing is a
beneficiary, (c) pay any fees or expenses to, or reimburse or assume any
obligation for the reimbursement of any expenses incurred by, any Affiliate
(other than the Company or a Subsidiary of the Company) or any officer or
director thereof or (d) except as set forth in Exhibit 7S1, issue any of its
capital stock of any class or issue or grant, or agree to issue or grant, any
options, warrants, or similar rights to acquire or receive any of the authorized
but unissued shares of capital stock of any class or any securities convertible
into shares of its Capital Stock of any class; provided that nothing contained
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in this paragraph 5V shall be deemed to prohibit (i) the Company or any of its
Subsidiaries from providing reasonable compensation and related fringe
14
benefits (except as set forth in paragraph 5R) and indemnification rights to any
of its respective officers, directors, consultants and employees; or (ii) the
payment of reasonable fees and reasonable out-of-pocket expenses to counsel and
directors who are not employees of the Company or any of its Subsidiaries.
6.23 Intentionally Omitted.
6.24 No Deductions or Withholdings. All sums payable by the Company to
the Buyer 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
the event of the Company being compelled by law to make any such deduction or
withholding from any payment to the Buyer, the Company will pay to the Buyer by
way of additional interest such additional amounts as may be necessary to ensure
that the aggregate of the net amounts received by the Buyer after such deduction
shall equal the amount which would have been receivable in the absence of any
such deduction.
6.25 Sale of Stock of Subsidiaries. The Company will not sell,
transfer, pledge, assign, convey or otherwise dispose of, and will not permit
any Subsidiary to issue, any capital stock, option, warrant, or any security
convertible into capital stock of any of its Subsidiaries in any of its
Subsidiaries, except as permitted by paragraph 5I hereof.
6.26 Restrictions on Issuance of Equity. So long as any Note shall
remain outstanding, the Company will not, without the prior written consent of
the Buyer, authorize, issue or sell any shares of stock of any class or series
of the Company, or any rights to purchase any shares of stock of any class or
series of the Company.
7. 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 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
15
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
the Buyer 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 agreement, covenant, term or condition
contained in (x) paragraphs 5B and 5H hereof, (y) paragraphs
5E and 5G if such default shall occur and be continuing for
any two consecutive three month periods ending on March 31,
June 30, September 30 or December 31, without regard to any
notice from any holder of Notes, and (z) paragraph 5Z, without
regard to any notice from any holder of Notes; or
(viii) 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) or (vii) of this paragraph 6, 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
(ix) 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 or
assignment case under the Federal bankruptcy laws of the
United States of America or the
16
laws of Canada 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
(x) 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 (ix) and (x) in this
paragraph 6 (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 6 other than such clauses
(ix) and (x) (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,
17
shall have been remedied or waived by holders representing at least the
percentage in aggregate principal amount of Notes requesting such 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.
8. Representations, Covenants and Warranties. The Company
-----------------------------------------
represents, covenants and warrants as follows:
8.1 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 is duly organized and existing in good standing under the laws of the
jurisdiction in which it is formed or incorporated, as the case may be, and the
Company has and each Subsidiary has the 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 or other legal entity 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. The Company has no Subsidiary other than those set forth in
Exhibit 7A and except as set forth on such Exhibit 7A, such Subsidiaries are
wholly owned. Attached hereto as Exhibit 7A2 are complete and correct copies of
its Certificate of Incorporation, Memorandum and Articles, as amended and in
full force and effect on the date hereof.
8.2 Corporate Authority. (a) The execution and delivery by the
Company of all transactions and obligations contemplated hereby are within its
corporate authority. This Agreement, the Notes and the Purchased Shares
constitute 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. The execution, delivery and performance of this Agreement and the
issuance of the Notes, the Purchased Shares and the shares of Common Stock
issuable upon conversion 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. The Purchased Shares delivered to the
Buyer on the date hereof have been validly issued and are fully paid and
nonassessable and not subject to any preemptive rights. The shares of Common
Stock issuable upon conversion of the Notes have been duly authorized and
18
duly reserved for issuance, are subject to no preemptive rights, and when and if
issued, will be validly issued, fully paid and nonassessable.
8.3 Financial Statements. The Company has furnished the Buyer
with (i) the Company's Annual Report on Form 10-K filed with the Securities and
Exchange Commission for the fiscal year ended December 31, 2000, (ii) the
Company's Quarterly Report on Form 10-Q filed with the Securities and Exchange
Commission for the three months ended September 24, 2000, April 1, 2001, July 1,
2001 and September 30, 2001, respectively and (iii) audited consolidated balance
sheet of the Company and its consolidated Subsidiaries as at December 31, 2000
and the related consolidated statements of income, shareholders' equity and cash
flows of the Company and its consolidated Subsidiaries audited for the fiscal
year ended December 31, 2000, all certified by ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ Worldwide,
and unaudited consolidated balance sheet of the Company and its consolidated
Subsidiaries as at September 30, 2001 and the related consolidated statements of
income, shareholders' equity and cash flows of the Company and its consolidated
Subsidiaries for the quarterly period ended September 30, 2001 including in each
case the related schedules and notes and the management report for each month
thereafter through November, 2001.
All such 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 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, 2001.
8.4 Actions Pending. 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.
19
8.5 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 the audited consolidated balance sheet of
the Company and its consolidated Subsidiaries as at December 31, 2001. The
Company has no outstanding indebtedness other than the Notes. 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, or any default by
the Company or any Subsidiary the effect of which would have a material adverse
effect on the Company and its Subsidiaries taken as a whole, under the
provisions of any other Indebtedness of the Company or of any Subsidiary or of
any agreement relating thereto that is or could be material to the Company or
such Subsidiary.
8.6 Title, Liens. The Company has, and each of its
Subsidiaries has, good and marketable title to its respective properties and
assets reflected in the audited consolidated balance sheet of the Company and
its consolidated Subsidiaries as at December 31, 2001 (other than properties and
assets disposed of in the ordinary course of business).
8.7 Taxes. The Company has, and each of its Subsidiaries has,
filed all Federal, Provincial, State, local and other income tax returns that,
to the knowledge of the Company, are required to be filed in either the United
States of America or Canada, and each has paid all taxes as shown on said
returns and on all assessments received by it to the extent that such taxes have
become due, including, without limitation, all goods and services tax and
corporation capital tax. United States Federal income tax returns of the Company
have been examined and reported on by the taxing authorities or closed by
applicable statutes and satisfied for all fiscal years prior to and including
the fiscal year ended December 31, 2000. The Company and each Subsidiary
carrying on business in Canada has been assessed by Revenue Canada as to its
income tax liability for all fiscal years to and including the fiscal year ended
December 31, 2000. The Company and each Subsidiary carrying on business in
Canada has remitted when due all amounts collected or owing by it on account of
social service tax or other provincial sales taxes, goods and services tax and
all workers compensation assessments.
8.8 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, the Notes, the Purchased Shares 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, the Notes or the Purchased
Shares by the Company, nor the issuance by the Company of shares of Common Stock
upon conversion of the Notes as provided in paragraph 9 hereof, 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
20
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 or 11 hereof. 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.
8.9 Leases. The Company and each of its Subsidiaries enjoys
peaceful and undisturbed possession of all leases necessary in any material
respect for the operation of its respective properties and assets, none of which
contains any unusual or burdensome provisions which materially or adversely
affects or impairs the operation of such properties or assets. All such leases
are valid and subsisting and are in full force and effect and no material
defaults have been committed thereunder.
8.10 Possession of Patents, etc. The Company and each
Subsidiary own or has the exclusive right to the use, free and clear of any
liens or other encumbrances, all the U.S. and foreign patents, trademarks, trade
names, service marks, copyrights, licenses and other intellectual property
rights (the "Intellectual Property Rights") that are currently used by them or
are necessary in any material respect for the ownership, maintenance or
operation of their respective businesses, properties or assets, and neither the
Company nor any Subsidiary is in violation of any thereof or of intellectual
property rights of any third parties in any material respect or has received
notice from or has knowledge of any material claim by any Person that it is now
infringing any of the foregoing. Exhibit 7J sets forth a true and complete list
of all the Intellectual Property Rights. Neither the Company nor any Subsidiary
(i) knows of any conflict which would prevent the use of any material mark in
any area of the United States (other than Oregon and Hawaii) or Canada or (ii)
has acquiesced in the use by a third party of any Intellectual Property Rights.
The Company and its Subsidiaries have taken all necessary actions to protect
material intellectual property.
8.11 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 the Buyer (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.
21
The Company is a reporting issuer not in default under the
Securities Act of the Province of British Columbia. Subject to the issuance and
filing of a press release and material change report concerning this Agreement
and the filing of a Form 20 under the Securities Act (British Columbia)
following the Closing of the issuance of the Notes or the Shares, the issuance
of the Notes and the Shares will not result in any contravention of any
applicable securities legislation or the regulations thereunder in British
Columbia.
The issuance of the Notes and the Shares 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 and the Shares to the Buyer.
8.12 ▇▇▇▇▇▇'s or Finder's Commissions. No broker's or finder's
advisory or placement fee or commission will be payable with respect to the
issuance of the Notes or the transactions contemplated hereby, and the Company
will indemnify the Buyer and hold the Buyer harmless from any claim, demand,
liability or action for broker's or finder's or advisory or placement fees or
commissions alleged to have been incurred in connection with the issuance of the
Notes or such transactions. In addition, and not in limitation of the foregoing,
the Company will reimburse the Buyer for any legal or other expenses incurred by
the Buyer in connection with defending against any such claim, damage, liability
or action brought for broker's or finder's or advisory or placement fees or
commissions.
8.13 Application of Proceeds. Neither the Company nor any
Subsidiary owns any "margin security" within the meaning of Regulation G (12 CFR
Part 207) of the Board of Governors of the Federal Reserve System (herein called
a "margin security"). Neither the Company nor any agent acting on its behalf has
taken or will take any action which might cause this Agreement or the Notes to
violate Regulation G, Regulation T, Regulation X or any other regulation of the
Board of Governors of the Federal Reserve System or to violate the Exchange Act,
in each case as in effect now or as the same hereafter may be in effect.
8.14 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 or paragraph 11 hereof and except as
provided in paragraph 7K) fulfillment of, or compliance with, the terms and
provisions of this Agreement or of the Notes, or is such as to require or give
rise to any limitation on the Buyer's ownership of any equity securities of the
Company.
22
8.15 Holding Company Status. Neither the Company nor any
Subsidiary is a "holding company," or a Subsidiary or affiliate of a "holding
company," or a "subsidiary company" of a "holding company," or a "public
utility," within the meaning of the Public Utility Holding Company Act of 1935,
as amended, or a "public utility" within the meaning of the Federal Power Act,
as amended.
8.16 Investment Company Status. Neither the Company nor any
Subsidiary is an "investment company" or a company "controlled" by an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended, or an "investment adviser" within the meaning of the Investment
Advisers Act of 1940, as amended.
8.17 ERISA. Neither the Company nor any Subsidiary nor any
ERISA Affiliate maintains, contributes or has any liability (contingent or
otherwise) with respect to a plan (including a Multiemployer Plan) subject to
Title IV of ERISA or Section 412 of the Internal Revenue Code of 1986, as
amended. All employee benefit plans and arrangements (regardless of whether such
plans or arrangements are covered by ERISA) maintained by or contributed to by
the Company, any Subsidiary or any ERISA Affiliate are in compliance with all
applicable law, including any reporting requirements. Neither the Company nor
any Subsidiary has any liability (contingent or otherwise) with respect to
retiree medical or death benefits. Neither the Company, nor any Subsidiary nor
any other person, including any fiduciary, has engaged in any transaction
prohibited by Section 4975 of the Internal Revenue Code of 1986, as amended, or
Section 406 of ERISA which could subject the Company, any Subsidiary or any
entity that the Company or any Subsidiary has an obligation to indemnify to any
tax or penalty imposed under Section 4975 of the Internal Revenue Code of 1986,
as amended, or Section 502 of ERISA. The transactions contemplated by this
Agreement will not involve any transaction prohibited by Section 406 of ERISA or
in Section 4975 of the Internal Revenue Code of 1986, as amended. The
representation by the Company in the next preceding sentence is made in reliance
upon and subject to the accuracy of the Buyer's representation in paragraph 8 as
to the source of the consideration to be used by the Buyer to acquire the Notes.
8.18 Disclosure. Neither this Agreement nor any other
document, certificate or statement furnished to the Buyer 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 the Buyer
by or on behalf of the Company prior to the date hereof in connection with the
transactions contemplated hereby.
23
8.19 Capital Stock. As of the date hereof, the Company has
authorized a total of 20,000,000 shares of its capital stock of all classes, all
such authorized shares are Common Stock. Immediately prior to the Closing Date,
2,594,599 shares of Common Stock are issued and outstanding, and the Company
holds no shares of its capital stock in its treasury. Since the date of the last
audited financial statements delivered to the Buyer the Company has not issued
any shares of capital stock. All of such outstanding shares have been validly
issued and are fully paid and nonassessable. The Company has reserved such
number of shares of Common Stock for issuance pursuant to such instruments or
agreements as are set forth in Exhibit 7S1 hereto.
Except as otherwise stated in this paragraph or set forth in
Exhibit 7S1 hereto and except for shares reserved for issuance in connection
with this Agreement, the Company has not granted or issued, or agreed to grant
or issue, any options, warrants or similar rights to acquire or receive any of
the authorized but unissued shares of its capital stock of any class or any
securities convertible into shares of its capital stock of any class. As of the
date hereof, no Person holds of record or beneficially owns 5% or more of the
outstanding shares of any class of the capital stock of the Company except as
set forth in Exhibit 7S2 hereto. Except as described above, the Company has not
taken any action after the date of the last audited financial statements
delivered to the Buyer and prior to the date hereof which, had the provisions of
paragraph 9 been in effect on and after such date and to and including the date
hereof, would have required an adjustment in the Conversion Price pursuant to
paragraph 9.
8.20 Environmental Compliance. (a) Neither the Company nor any
Subsidiary is in violation, or alleged to be in violation, of any judgment,
decree, order, law, license, rule or regulation pertaining to environmental
matters, including without limitation, those arising under the Resource
Conservation and Recovery Act ("RCRA"), the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended ("CERCLA"), the
Superfund Amendments and Reauthorization Act of 1986 ("▇▇▇▇"), the Federal Clean
Water Act, the Federal Clean Air Act, the Toxic Substances Control Act, the
Waste Management Act (British Columbia), Contaminated Sites Regulation (British
Columbia), Special Waste Regulation (British Columbia), Canadian Environmental
Protection Act, Transportation of Dangerous Goods Act (Canada), Fisheries Act
(Canada), Environment Management Act (British Columbia) and Occupational Health
and Safety Regulation (British Columbia) or any federal, provincial, state or
local statute, regulation, ordinance, order or decree relating to health, safety
or the environment (hereinafter "Environmental Laws"), which violation would
have a material adverse effect on the business, assets or financial condition of
the Company, individually, or the Company and its Subsidiaries, taken as a
whole. Neither the Company nor any Subsidiary has received written notice from
any third party including, without limitation, any federal, provincial, state or
local governmental authority, (i) that the Company or any Subsidiary has been
identified by the United States Environmental Protection Agency ("EPA") as a
potentially responsible party under CERCLA with respect to a site listed on the
National Priorities List, 40 C.F.R. Part 300 Appendix B (1986) or a responsible
person with respect to a contaminated site under the Contaminated Sites
Regulation (British Columbia); (ii) that any hazardous waste, as defined by 42
U.S.C. (S) 6903(5), any hazardous substances as defined by 42 U.S.C. (S)
24
9601(14), any pollutant or contaminant as defined by 42 U.S.C. (S) 9601(33) or
the Contaminated Sites Regulation (British Columbia) and any toxic substances,
oil or hazardous materials or other chemicals or substances regulated by any
Environmental Laws ("Hazardous Substances") which any one of them has generated,
transported or disposed of has been released at any site at which a federal,
provincial, state or local agency has conducted or has ordered that either the
Company or any Subsidiary conduct a remedial investigation, removal or other
response action pursuant to any Environmental Law or have named the Company or
any Subsidiary as a Potentially Responsible Party or a responsible person or are
seeking contribution from the Company or any Subsidiary; or (iii) that it is or
shall be a named party to any claim, action, cause of action, cost recovery
action, complaint, or legal or administrative proceeding (in each case,
contingent or otherwise) arising out of any third party's incurrence of costs,
expenses, losses or damages of any kind whatsoever in connection with the
release of Hazardous Substances. To the actual knowledge of the Company, to the
extent such activity would have a material adverse effect on the business,
assets or financial condition of the Company, individually, or of the Company
and its Subsidiaries, taken as a whole: (i) no portion of the property of the
Company or any Subsidiary has been used for the handling, processing, storage or
disposal of Hazardous Substances except in accordance with applicable
Environmental Laws; and no underground tank or other underground storage
receptacle for Hazardous Substances is located on any portion of the property;
(ii) in the course of any activities conducted by the Company, its Subsidiaries
or operators of their properties, no Hazardous Substances have been generated or
are being used on the property except in accordance with applicable
Environmental Laws; (iii) there have been no releases (i.e., any past or present
releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging,
injecting, escaping, disposing or dumping) or threatened releases of Hazardous
Substances on, upon, into or from the property of the Company or any Subsidiary,
which releases would have a material adverse effect on the value of any of the
property or adjacent properties or the environment; and (iv) in addition, any
Hazardous Wastes as defined by 42 U.S.C. (S) 6903(5) or Special Wastes as
defined pursuant to the Special Waste Regulation (British Columbia), if any,
that have been generated on any of the property have been transported offsite
only by carriers having an identification number issued by the EPA, treated or
disposed of only by treatment or disposal facilities maintaining valid permits
as required under applicable Environmental Laws, which transporters and
facilities have been and are, to the best of the Company's knowledge, operating
in material compliance with such permits and applicable Environmental Laws.
8.21 Transaction with Affiliates. During the five year period
immediately preceding the date hereof, neither the Company nor any Subsidiary
has entered into, or caused, suffered or permitted to exist or occur any
arrangement or contract with any of its Affiliates unless such arrangement or
contract (i) was fair and equitable to the Company or such Subsidiary, and (ii)
has been specifically approved by the Company's or such Subsidiary's Board of
Directors (or equivalent governing body), as the case may be, as an arrangement
or a contract of the kind which would be entered into by a prudent Person in the
position of the Company or such Subsidiary with a Person which is not one of its
Affiliates.
25
8.22 Discontinuance of Operations. Neither the Company nor any
Subsidiary has canceled or discontinued operations of any Elephant & Castle
Restaurant & Pub location except as set forth in Exhibit 7V hereto. With respect
to such canceled or discontinued operations, if any, except as disclosed on
Exhibit 7V hereto, there exist no claims, liabilities, losses, damages or
injuries against the Company or any Subsidiary, pending or reasonably believed
by the Company or any such Subsidiary to be threatened, arising out of or in
connection with such canceled or discontinued operations of an Elephant & Castle
Restaurant & Pub location.
8.23 Licenses, Permits, etc. The Company and each Subsidiary
has all material licenses, permits and operating authorities, including, without
limitation, those pertaining to serving alcoholic beverages or gaming or
gambling, as is requisite for carrying on its business or businesses in the
manner in which it has heretofore been carried on, all such licenses, permits
and operating authorities are in good standing, and there exists no default by
the Company or any Subsidiary under the terms of any such licenses, permits and
operating authorities;
8.24 Compliance with Laws. The Company and each of its
Subsidiaries presently carry on, and, the Company will in the future carry on
and will cause each of the Subsidiaries to carry on, their respective operations
in compliance with all applicable laws, including, without limitation, all
applicable statutes, regulations or bylaws relating to health and safety and
employment standards and the payment of workers compensation assessments.
8.25 Relationship with General Electric Company. Except as
disclosed on Exhibit 7Y, neither the Company nor any Subsidiary has any equity,
creditor, debtor or similar relationship (including without limitation any
investment in, or any debtor, revolving credit, leasing or creditor
relationship, but excluding any vendor or vendee relationship) with General
Electric Company or any subsidiary thereof.
8.26 Waived Interest. The Company hereby confirms and
represents to the Buyer that the aggregate amount of accrued and unpaid interest
on the Original Notes and the 1999 Notes through June 30, 2001 equals $620,000.
9. Representations and Covenants of the Buyer. The Buyer
------------------------------------------
represents, and in making the sale of Notes contemplated hereby to the Buyer it
is specifically understood and agreed, that the Buyer is acquiring such Notes
for its own account for the purpose of investment and not with a present view to
or for sale in connection with any distribution thereof, provided that the
--------
disposition of the Buyer's property shall at all times be and remain within the
Buyer's control. The Buyer further represents that the Buyer is familiar with
Release No. 5226 issued by the Commission under the Securities Act, that the
Buyer has consulted with its counsel in regard thereto, and that the Buyer is
fully familiar with the position of the Commission with respect to the resale of
any Note to the public. The Buyer further represents that no part of the
consideration being used by the Buyer to acquire the Notes hereunder constitutes
assets of an employee benefit plan (as defined in Section 3(3) of ERISA).
26
10. Conversion; Conversion Price; Adjustments Relative to
-----------------------------------------------------
Conversion
----------
10.1 Conversion Privilege; Mandatory Conversion; Conversion
Price; Procedures.
Subject to the conditions set forth in paragraph 9 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, or, with respect to any principal amount of
Notes for which the Company has given notice of prepayment in accordance with
paragraph 4 hereof, prior to the date of such prepayment, except as otherwise
specifically provided in this Agreement, convert all or any part of the unpaid
principal thereof into shares of Common Stock (the "Conversion Shares") at a
price (the "Conversion Price") equal to $1.00 prior to September 1, 2002, $1.25
from September 1, 2002 until but not including September 1, 2003, $1.50 from
September 1, 2003 until but not including September 1, 2004 and $1.75 from
September 1, 2004 until September 1, 2005. The Conversion Shares and the
Conversion Price are subject to certain adjustments as set forth in paragraph 9
hereof, and the terms "Conversion Shares" and "Conversion Price" as used herein
shall as of any time be deemed to include all such adjustments to be given
effect as of such time in accordance with the terms hereof. Subject to the
conditions set forth in paragraph 9 hereof, the Junior Notes shall be converted
into the shares of Common Stock of the Company on each date set forth below
(each, a "Conversion Date") as follows: (i) on September 1, 2002, the Junior
Notes in the aggregate principal amount of $1,250,000 shall be converted into
the shares of Common Stock at a price equal to $1 per share, for an aggregate of
1,250,000 shares; (ii) on September 1, 2003, the Junior Notes in the aggregate
principal amount of $1,250,000 shall be converted into the shares of Common
Stock at a price equal to $1.25 per share, for an aggregate of 1,000,000 shares;
(iii) on September 1, 2004, the Junior Notes in the aggregate principal amount
of $1,250,000 shall be converted into the shares of Common Stock at a price
equal to $1.50 per share, for an aggregate of 833,333 shares; and (iv) on
September 1, 2005, the Junior Notes in the aggregate principal amount of
$1,250,000 shall be converted into the shares of Common Stock at a price equal
to $1.75 per share, for an aggregate of 714,286 shares; provided, however, that
-------- ------- conversion of the Junior Notes into the shares of Common Stock
as provided in this paragraph 9A(b) shall be subject to satisfaction by the
Company, as of each Conversion Date, of the following requirements: (1) EBITDA
of the Company for the fiscal period ending June 30, 2002, shall equal or exceed
$3,000,000; (2) EBITDA of the Company for the fiscal period ending June 30,
2003, shall equal or exceed $3,750,000; (3) EBITDA of the Company for the fiscal
period ending June 30, 2004, shall equal or exceed $4,500,000; and (4) EBITDA of
the Company for the fiscal period ending June 30, 2005, shall equal or exceed
$5,000,000. If on any Conversion Date (the "Scheduled Conversion Date") the
Company shall have satisfied the EBITDA requirements set forth above for such
Scheduled Conversion Date by at least 80%, 66 2/3% of the aggregate principal
amount of the Junior Notes scheduled to be converted into shares of Common Stock
on such Scheduled Conversion Date shall be so converted. If the Company shall
have satisfied (i) the EBITDA requirements set forth above for the Scheduled
Conversion Date by at least 66 2/3% and (ii) the EBITDA requirements set forth
above for the next Conversion Date in full, the aggregate principal amount of
the Junior Notes scheduled to be converted into
27
shares of Common Stock on such Scheduled Conversion Date and on the subsequent
Conversion Date shall be converted in full at a price per share set forth above
for the Scheduled Conversion Date and the next Conversion Date, respectively.
Any aggregate principal amount of the Junior Notes not converted pursuant to the
provisions of this paragraph 9A(b) shall be converted, at the option of the
Buyer, on September 1, 2005 at a price equal to $1.75 per share.
Subject to the
provisions of paragraph 9 hereof, any Note may be converted 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 converted, to the Company at its
principal office. Upon any partial conversion 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 unconverted principal amount
of such surrendered Note. Each conversion 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.
10.2 No Fractional Shares; No Adjustments for ▇▇▇▇▇▇▇▇▇.▇▇
fractional shares shall be issued upon conversion of any Note and no payment or
adjustment shall be made upon conversion of any Note for cash dividends with
respect to Common Stock issued thereupon. The Company shall forthwith upon
conversion of all or any portion of any Note pay all interest accrued on the
principal amount converted to the date of such conversion.
10.3 Delivery of Stock Certificates and Cash in Lieu of
Fractional Shares. As promptly as practicable after the conversion 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 11, direct, a
certificate or certificates for the number of full shares of Common Stock
deliverable upon such conversion, bearing, if required by the terms hereof, the
restrictive legend set forth in paragraph 11B hereof, plus, in lieu of any
fractional shares or other fractional pieces to which such holder would
otherwise be entitled, cash equal to such fraction multiplied by the market
value of one full share of Common Stock as of the close of business on the date
of such conversion on the principal securities exchange, NASDAQ National Market
System or NASDAQ over-the-counter market on which Common Stock is at the time
traded, or, if not so traded, multiplied by the market value of one full share
of Common Stock as reasonably determined by (or pursuant to a formula or
procedure reasonably adopted by) the Board of Directors of the Company.
10.4 Adjustment of Conversion Price Upon Issuance of Common
Stock. If and whenever after the date hereof the Company shall issue or sell any
shares of its Common Stock (except with respect to the issuance of the
Additional Consideration Shares and the shares of Common Stock issuable upon
conversion of the Notes or upon the exercise of the Warrants) for a
consideration per share less than the Conversion Price in effect immediately
prior to the time of such issue or sale or the Market Price at the time of such
issue or sale, then, forthwith upon such issue or sale, the Conversion Price
with respect to the conversion of any Note subsequent to such event shall be
reduced (but not increased, except as otherwise specifically provided in
paragraph 9D(3) to the lower of the prices (calculated to the nearest cent)
determined as follows:
28
by dividing (1) an amount equal to the sum of (A) the aggregate number of shares
of Common Stock outstanding immediately prior to such issue or sale multiplied
by the then existing Conversion Price, and (B) the consideration, if any,
received by the Company upon such issue or sale, by (ii) the aggregate number of
shares of Common Stock of all classes outstanding immediately after such issue
or sale; and by multiplying the Conversion Price in effect immediately prior to
the time of such issue or sale by a fraction, the numerator of which shall be
the sum of (i) the aggregate number of shares of Common Stock outstanding
immediately prior to such issue or sale multiplied by the Market Price
immediately prior to such issue or sale plus (ii) the consideration received by
the Company upon such issue or sale, and the denominator of which shall be the
product of (iii) the aggregate number of shares of Common Stock of all classes
outstanding immediately after such issue or sale, multiplied by (iv) the Market
Price immediately prior to such issue or sale.
No adjustment of the Conversion Price, however, shall be made
in an amount less than 1% of the Conversion Price, but any such lesser
adjustment shall be carried forward and shall be made at the time of and
together with the next subsequent adjustment.
For the purposes of this paragraph 9D, the following
paragraphs 9D(1) through 9D(9) shall also be applicable:
9D(1) Issuance of Rights or Options - In case at any time
-----------------------------
after the date hereof the Company shall in any manner grant (whether directly or
by assumption in a merger or otherwise, except in the circumstances described in
paragraph 9E below) any rights to subscribe for or to purchase, or any options
for the purchase of, Common Stock or any stock or securities convertible into or
exchangeable for Common Stock (such convertible or exchangeable stock or
securities being herein called "Convertible Securities"), whether or not such
----------------------
rights or options or the right to convert or exchange any such Convertible
Securities are immediately exercisable, and the price per share for which Common
Stock is issuable upon the exercise of such rights or options or upon conversion
or exchange of such Convertible Securities (determined by dividing (i) the total
amount, if any, received or receivable by the Company as consideration for the
granting of such rights or options, plus the minimum aggregate amount of
additional consideration, if any, payable to the Company upon the exercise of
such rights or options, plus, in the case of such rights or options which relate
to Convertible Securities, the minimum aggregate amount of additional
consideration, if any, payable upon the issue or sale of such Convertible
Securities and upon the conversion or exchange thereof, by (ii) the total
maximum number of shares of Common Stock issuable upon the exercise of such
rights or options or upon the conversion or exchange of all such Convertible
Securities issuable upon the exercise of such rights or options) shall be less
than the Conversion Price in effect immediately prior to the time of the
granting of such rights or options (or less than the Market Price, determined as
of the date of granting such rights or options, as the case may be), then the
total maximum number of shares of Common Stock issuable upon the exercise of
such rights or options or upon conversion or exchange of all such Convertible
Securities issuable upon the exercise of such rights or options shall (as of the
date of granting of such rights or options) be deemed to be outstanding and to
have been issued for such price per share. Except as provided in paragraph
9D(3), no further
29
adjustment of the Conversion Price shall be made upon the actual issue of such
Common Stock or of such Convertible Securities upon exercise of such rights or
options or upon the actual issue of such Common Stock upon conversion or
exchange of such Convertible Securities.
9D(2) Issuance of Convertible Securities - In case at any time
----------------------------------
after the date hereof the Company shall in any manner issue (whether directly or
by assumption in a merger or otherwise) or sell any Convertible Securities,
whether or not the rights to exchange or convert thereunder are immediately
exercisable, and the price per share for which Common Stock is issuable upon
such conversion or exchange (determined by dividing (i) the total amount
received or receivable by the Company as consideration for the issue or sale of
such Convertible Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the conversion or exchange
thereof, by (ii) the total maximum number of shares of Common Stock issuable
upon the conversion or exchange of all such Convertible Securities) shall be
less than the Conversion price in effect immediately prior to the time of such
issue or sale (or less than the Market Price, determined as of the date of such
issue or sale of such Convertible Securities, as the case may be), then the
total maximum number of shares of Common Stock issuable upon conversion or
exchange of all such Convertible Securities shall (as of the date of the issue
or sale of such Convertible Securities) be deemed to be outstanding and to have
been issued for such price per share; provided, however, that (a) except as
-------- -------
otherwise provided in paragraph 9D(3), no further adjustment of the Conversion
Price shall be made upon the actual issue of such Common Stock upon conversion
or exchange of such Convertible Securities, and (b) if any such issue or sale of
such Convertible Securities is made upon exercise of any rights to subscribe for
or to purchase or any option to purchase any such Convertible Securities for
which adjustments of the Conversion Price have been or are to be made pursuant
to other provisions of this paragraph 9D, no further adjustment of the
Conversion Price shall be made by reason of such issue or sale.
9D(3) Change in Option Price or Conversion Rate - Upon the
-----------------------------------------
happening of any of the following events, namely, if the purchase price provided
for in any right or option referred to in paragraph 9D(1), the additional
consideration, if any, payable upon the conversion or exchange of any
Convertible Securities referred to in paragraph 9D(1) or 9D(2), or the rate at
which any Convertible Securities referred to in paragraph 9D(1) or 9D(2) are
convertible into or exchangeable for Common Stock shall change (other than under
or by reason of provisions designed to protect against dilution), the Conversion
Price then in effect hereunder shall forthwith be readjusted (increased or
decreased, as the case may be) to the Conversion Price which would have been in
effect at such time had such rights, options or Convertible Securities still
outstanding provided for such changed purchase price, additional consideration
or conversion rate, as the case may be, at the time initially granted, issued or
sold. On the expiration of any such option or right referred to in paragraph
9D(1) or the termination of any such right to convert or exchange any such
Convertible Securities referred to in paragraph 9D(1) or 9D(2), the Conversion
Price then in effect hereunder shall forthwith be readjusted (increased or
decreased, as the case may be) to the Conversion Price which would have been in
effect at the time of such expiration or termination had such right, option or
Convertible Securities, to the extent
30
outstanding immediately prior to such expiration or termination, never been
granted, issued or sold, and the Common Stock issuable thereunder shall no
longer be deemed to be outstanding. If the purchase price provided for in any
such right or option referred to in paragraph 9D(1) or the rate at which any
Convertible Securities referred to in paragraph 9D(1) or 9D(2) are convertible
into or exchangeable for Common Stock shall be reduced at any time under or by
reason of provisions with respect thereto designed to protect against dilution,
then in case of the delivery of shares of Common Stock upon the exercise of any
such right or option or upon conversion or exchange of any such Convertible
Securities, the Conversion Price then in effect hereunder shall, if not already
adjusted, forthwith be adjusted to such amount as would have obtained had such
right, option or Convertible Securities never been issued as to such shares of
Common Stock and had adjustments been made upon the issuance of the shares of
Common Stock delivered as aforesaid, but only if as a result of such adjustment
the Conversion Price then in effect hereunder is thereby reduced.
9D(4) Stock Dividends - In case at any time the Company shall
---------------
declare a dividend or make any other distribution upon any class or series of
stock of the Company payable in shares of Common Stock or Convertible
Securities, any shares of Common Stock or Convertible Securities, as the case
may be, issuable in payment of such dividend or distribution shall be deemed to
have been issued or sold without consideration.
9D(5) Consideration for Stock - In case at any time any shares
-----------------------
of Common Stock or Convertible Securities or any rights or options to purchase
any such Common Stock or Convertible Securities shall be issued or sold for
cash, the consideration received therefor shall be deemed to be the amount
received by the Company therefor, without deduction therefrom of any expenses
incurred or any underwriting commissions or concessions paid or allowed by the
Company in connection therewith. In case at any time any shares of Common Stock
of any class or Convertible Securities or any rights or options to purchase any
such shares of Common Stock or Convertible Securities shall be issued or sold
for a consideration other than cash, the amount of the consideration other than
cash received by the Company shall be deemed to be the fair value of such
consideration as determined reasonably and in good faith by the Board of
Directors of the Company, without deduction of any expenses incurred or any
underwriting commissions or concessions paid or allowed by the Company in
connection therewith. In case at any time any shares of Common Stock of any
class or Convertible Securities or any rights or options to purchase such shares
of Common Stock or Convertible Securities shall be issued in connection with any
merger or consolidation in which the Company is the surviving corporation, the
amount of consideration received therefor shall be deemed to be the fair value
as determined reasonably and in good faith by the Board of Directors of the
Company of such portion of the assets and business of the nonsurviving
corporation as such Board may determine to be attributable to such shares of
Common Stock, Convertible Securities, rights or options, as the case may be. In
case at any time any rights or options to purchase any shares of Common Stock or
Convertible Securities shall be issued in connection with the issue and sale of
other securities of the Company, together comprising one integral transaction in
which no consideration is allocated to such rights or options by the parties
thereto, such rights or options shall be deemed to have been issued for an
amount of consideration equal to the
31
fair value thereof as determined reasonably and in good faith by the Board of
Directors of the Company.
9D(6) Record Date - In case the Company shall take a record of
-----------
the holders of its Common Stock for the purpose of entitling them (i) to receive
a dividend or other distribution payable in shares of Common Stock or in
Convertible Securities, or (ii) to subscribe for or purchase shares of Common
Stock or Convertible Securities, then such record date shall be deemed to be the
date of the issue or sale of the shares of Common Stock deemed to have been
issued or sold as a result of the declaration of such dividend or the making of
such other distribution or the date of the granting of such right of
subscription or purchase, as the case may be, unless such dividend or other
distribution or right to subscribe when exercised is to be measured by the
Market Price in effect on the date such dividend or other distribution or right
to subscribe is exercised, in which case such date shall be deemed to be the
date of the issue or sale of the shares of Common Stock deemed to have been so
issued or sold.
9D(7) Treasury Shares - The number of shares of Common Stock
---------------
outstanding at any given time shall not include shares owned or held by or for
the account of the Company, and the disposition of any such shares shall be
considered an issue or sale of Common Stock for the purposes of this paragraph
9D.
9D(8) Definition of Market Price - "Market Price" shall mean,
--------------------------
for any day, the average of the final sale prices of the Common Stock on all
exchanges on which the Common Stock may at the time be listed or the final bid
prices on the NASDAQ National Market System or NASDAQ over-the-counter market,
in each such case, unless otherwise provided herein, averaged over a period of
fifteen consecutive trading days ending 2 days prior to the day as of which
"Market Price" is being determined; provided, however, that in connection with a
firm underwriting of a public offering of Common Stock, Market Price shall mean
the initial public offering price in such underwritten offering. If at any time
the Common Stock is not listed on any such exchange or quoted in any such
domestic over-the-counter market, the "Market Price" shall be deemed to be the
fair market value thereof as determined by an investment banking firm mutually
acceptable to the Company and the holders of a majority in aggregate principal
amount of the Notes then outstanding.
9D(9) Determination of Market Price under Certain
-------------------------------------------
Circumstances - Anything herein to the contrary notwithstanding, in case at any
-------------
time after the date hereof the Company shall issue any shares of Common Stock or
Convertible Securities, or any rights or options to purchase any such Common
Stock or Convertible Securities, in connection with the acquisition by the
Company of the stock or assets of any other corporation or the merger of any
other corporation into the Company under circumstances where on the date of the
issuance of such shares of Common Stock or Convertible Securities or such rights
or options the consideration received for such Common Stock or deemed to have
been received for the Common Stock into which such Convertible Securities or
such rights or options are convertible is less than the Market Price of the
Common Stock but on the date the number of shares of Common Stock or Convertible
Securities (or in the case of Convertible Securities other than stock, the
32
aggregate principal amount of Convertible Securities) or the number of such
rights or options was determined (as set forth in a binding agreement between
the Company and the other party to the transaction) the consideration received
for such Common Stock or deemed to have been received for the Common Stock into
which such Convertible Securities or such rights or options are convertible
would not have been less than the Market Price thereof, such shares of Common
Stock shall not be deemed to have been issued for less than the Market Price of
the Common Stock.
10.5 Liquidating Dividends; Purchase Rights. (a) In case at
any time after the date hereof the Company shall declare a dividend upon the
shares of Common Stock of any class payable otherwise than in shares of Common
Stock or Convertible Securities, otherwise than out of consolidated earnings or
consolidated earned surplus (determined in accordance with generally accepted
accounting principles, including the making of appropriate deductions for
minority interests, if any, in subsidiaries), and otherwise than in the
securities to which the provisions of clause (b) below apply, and provided that
--------
such dividend shall not otherwise result in an adjustment of the Conversion
Price pursuant to any other provision hereof, the Company shall pay over to each
holder of Notes, upon conversion thereof on or after the dividend payment date,
the securities and other property (including cash) which such holder would have
received (together with all distributions thereon) if such holder had converted
the Notes held by it on the record date fixed in connection with such dividend,
and the Company shall take whatever steps are necessary or appropriate to keep
in reserve at all times such securities and other property as shall be required
to fulfill its obligations hereunder in respect of the shares issuable upon the
exercise or conversion of all the Notes. For the purposes of the foregoing, a
dividend other than in cash shall be considered payable out of consolidated
earnings or consolidated retained earnings only to the extent that such earnings
or retained earnings are charged an amount equal to the fair value of such
dividend as determined by the Board of Directors of the Company. If at any time
or from time to time on or after the date hereof the Company shall grant, issue
or sell any options or rights (other than Convertible Securities) to purchase
stock, warrants, securities or other property pro rata to the holders of Common
--- ----
Stock of all classes ("Purchase Rights"), then if it shall be entitled to an
---------------
adjustment pursuant to paragraph 9D above and in lieu of such adjustment, each
holder of Notes shall be entitled, at such holder's option, to acquire (whether
or not such holder's Notes shall have been converted), upon the terms applicable
to such Purchase Rights, the aggregate Purchase Rights which such holder could
have acquired if such holder had held the number of shares of Common Stock
issuable upon conversion of such Notes, immediately prior to the time or times
at which the Company granted, issued or sold such Purchase Rights.
10.6 Subdivision or Combination of Stock. In case the Company
shall at any time subdivide its outstanding shares of Common Stock into a
greater number of shares, the Conversion Price in effect immediately prior to
such subdivision shall be proportionately reduced, and conversely, in case the
outstanding shares of Common Stock of the Company shall be combined into a
smaller number of shares, the Conversion Price in effect immediately prior to
such combination shall be proportionately increased.
33
10.7 Changes in Common Stock. If any capital reorganization or
reclassification of the capital stock of the Company, or consolidation or merger
of the Company with another corporation, or sale, transfer or other disposition
of all or substantially all of its properties to another corporation, shall be
effected, then, as a condition of such reorganization, reclassification,
consolidation, merger, sale, transfer or other disposition, lawful and adequate
provision shall be made whereby each holder of Notes shall thereafter have the
right to purchase and receive upon the basis and upon the terms and conditions
herein specified and in lieu of the shares of the Common Stock of the Company
immediately theretofore issuable upon conversion of the Notes, such shares of
stock, securities or properties, if any, as may be issuable or payable with
respect to or in exchange for a number of outstanding shares of such Common
Stock equal to the number of shares of such Common Stock immediately theretofore
issuable upon conversion of the Notes had such reorganization, reclassification,
consolidation, merger, sale, transfer or other disposition not taken place, and
in any such case appropriate provisions shall be made with respect to the rights
and interests of each holder of Notes to the end that the provisions hereof
(including without limitation provisions for adjustment of the Conversion Price)
shall thereafter be applicable, as nearly equivalent as may be practicable in
relation to any shares of stock, securities or properties thereafter deliverable
upon the exercise thereof. The Company shall not effect any such consolidation,
merger, sale, transfer or other disposition, unless prior to or simultaneously
with the consummation thereof the successor corporation (if other than the
Company) resulting from such consolidation or merger or the corporation
purchasing or otherwise acquiring such properties shall assume, by written
instrument executed and mailed or delivered to the holders of Notes at the last
address of such holders appearing on the books of the Company, the obligation to
deliver to such holders such shares of stock, securities or properties as, in
accordance with the foregoing provisions, such holders may be entitled to
acquire. The above provisions of this subparagraph shall similarly apply to
successive reorganizations, reclassifications, consolidations, mergers, sales,
transfers, or other dispositions.
10.8 Notice of Adjustment. Upon any adjustment of the
Conversion Price, then and in each such case the Company shall promptly obtain
the opinion of a firm of independent certified public accountants (which may be
the regular auditors of the Company) of recognized national standing selected by
the Company's Board of Directors, which opinion shall state the Conversion Price
resulting from such adjustment and the increase or decrease, if any, in the
number of shares of Common Stock issuable upon conversion of the Note or Notes
held by each holder of Notes, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based. The Company
shall promptly mail a copy of such accountants' opinion to each holder of Notes.
10.9 Certain Events. If any event occurs as to which in the
opinion of the Board of Directors of the Company the other provisions of
paragraph 9 hereof are not strictly applicable or if strictly applicable would
not fairly protect the conversion rights of the holders of the Notes in
accordance with the essential intent and principles of such provisions, then
such Board of Directors shall appoint a firm of independent certified public
accountants (which may be the regular auditors of the Company) of recognized
34
national standing, which shall give their opinion upon the adjustment, if any,
on a basis consistent with such essential intent and principles, necessary to
preserve, without dilution, the rights of the holders of the Notes. Upon receipt
of such opinion by the Board of Directors, the Company shall forthwith make the
adjustments described therein; provided, however, that no such adjustment
-------- -------
pursuant to this paragraph 9I shall have the effect of increasing the Conversion
Price as otherwise determined pursuant to paragraph 9 hereof except in the event
of a combination of shares of the type contemplated in paragraph 9F and then in
no event to an amount larger than the conversion price as adjusted pursuant to
paragraph 9F.
10.10 Prohibition of Certain Actions. The Company will not (i)
authorize or issue, or agree to authorize or issue, any shares of its capital
stock of any class preferred as to dividends or as to the distribution of assets
upon voluntary or involuntary liquidation, dissolution or winding-up of the
Company unless the rights of the holders thereof shall be limited to a fixed sum
or percentage of par value in respect of participation in dividends and in the
distribution of such assets or (ii) take any action which would result in any
adjustment of the Conversion Price if the total number of shares of Common Stock
issuable after such action upon conversion of all of the Notes would exceed the
total number of shares of Common Stock then authorized by the Company's
Certificate of Incorporation.
10.11 Stock to be Reserved. The Company will at all times
reserve and keep available out of its authorized Common Stock, solely for the
purpose of issue upon the conversion of Notes as herein provided, such number of
shares of Common Stock as shall then be issuable upon the conversion of all
outstanding Notes, and the Company will maintain at all times all other rights
and privileges sufficient to enable it to fulfill all its obligations hereunder.
The Company covenants that all shares of Common Stock which shall be so issuable
shall, upon issuance, be duly authorized, validly issued, fully paid and
nonassessable, free from preemptive or similar rights on the part of the holders
of any shares of capital stock or securities of the Company, and free from all
Liens and charges with respect to the issue thereof; and without limiting the
generality of the foregoing, the Company covenants that it will from time to
time take all such action as may be required to assure that the par value, if
any, per share of the Common Stock is at all times equal to or less than the
then effective Conversion Price. The Company will take all such action as may be
necessary to assure that such shares of Common Stock may be so issued without
violation by the Company of any applicable law or regulation, or of any
requirements of any domestic securities exchange upon which the Common Stock may
be listed. Without limiting the foregoing, the Company will take all such action
as may be necessary to assure that, upon conversion of any of the Notes, an
amount equal to the lesser of (a) the par value of each share of Common Stock
outstanding immediately prior to such conversion, or (b) the Conversion Price,
shall be credited to the Company's stated capital account for each share of
Common Stock issued upon such conversion, and that the balance of the principal
amount of each Note converted shall be credited to the Company's capital surplus
account.
10.12 Registration and Listing of Common Stock. If any shares
of Common Stock required to be reserved for purposes of conversions of Notes
hereunder
35
require registration with or approval of any governmental authority under any
Federal or state law (other than the Securities Act) before such shares may be
issued upon conversion, the Company will, at its expense and as expeditiously as
possible, use its best efforts to cause such shares to be duly registered or
approved, as the case may be. Shares of Common Stock issuable upon conversion of
the Notes shall be registered by the Company under the Securities Act or similar
statute then in effect if required by paragraph 11 and subject to the conditions
stated in such paragraph. If and so long as the Common Stock is listed on any
national securities exchange, the Company will, at its expense, obtain promptly
and maintain the approval for listing on each such exchange upon official notice
of issuance, of shares of Common Stock issuable upon conversion of the then
outstanding Notes and maintain the listing of such shares after their issuance;
and the Company will also list on such national securities exchange, will
register under the Exchange Act and will maintain such listing of, any other
securities that at any time are issuable upon conversion of the Notes, if and at
the time that any securities of the same class shall be listed on such national
securities exchange by the Company or shall require registration under the
Exchange Act.
10.13 Issue Tax. The issuance of certificates for shares of Common
Stock upon conversion of Notes shall be made without charge to the holders of
the Notes converted for any issuance tax in respect thereto.
10.14 Closing of Books. The Company will at no time close its transfer
books against the transfer of any Note or of any shares of Common Stock issued
or issuable upon the conversion of any Note in any manner which interferes with
the timely conversion of such Note.
10.15 No Rights or Liabilities as Shareholders. No Note shall entitle
any holder thereof to any of the rights of a shareholder of the Company. No
provision of this Agreement or of any Note, in the absence of the actual
conversion of such Note or any part thereof by the holder thereof into Common
Stock issuable upon such conversion, shall give rise to any liability on the
part of such holder as a shareholder of the Company, whether such liability
shall be asserted by the Company or by creditors of the Company.
10.16 Right to Purchase. (a) Any provision of this Agreement to the
contrary notwithstanding, except in connection with the issuance of (i) any
Common Stock or (ii) Purchase Rights described in paragraph 9E(b) hereof, the
Company shall give written notice to the holders of the Notes and the holders of
the Common Stock into which any Notes have been therefore converted no less than
30 days prior to the issuance of any equity securities of the Company or any
rights or options for the purchase of any equity securities or any convertible
securities convertible into equity securities of the Company, and each such
holder shall, for a period of 20 days following receipt of such written notice,
have the right to purchase from the Company, at the price any such securities or
rights or options or convertible securities are being offered to any other
purchaser, that number of such securities or rights or options or convertible
securities as will enable such holder to hold that number of shares (or rights
or options or convertible securities) of such class of securities as is equal to
the percentage of shares represented
36
by the sum of (x) the shares of Common Stock into which the Notes are by their
terms then convertible and (y) the shares of Common Stock then held by such
holder. The rights to purchase described in paragraph 9P(a) hereof may, at the
option of the holder thereof and without the consent of the Company, be assigned
to any partner of GE Investment Private Placement Partners I, Limited
Partnership by the giving of written notice of such assignment to the Company,
and the Company shall thereafter treat such assignee as a holder described in
paragraph 9P(a) hereof.
11. Intentionally Omitted.
---------------------
12. Restrictions on Transfer; Registration Rights.
---------------------------------------------
12.1 Applicability of Restrictions. Notwithstanding any provisions to
the contrary contained in this Agreement, any Restricted Securities or the
Company's Memorandum or Articles, the provisions of this paragraph 11 shall
apply to: (a) the transfer of any Note (b) Warrant and (c) the transfer of any
Restricted Security (each such transfer being herein called a "Restricted
----------
Action"). The holder of any Note, Warrant or Restricted Security, 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 11C (or the penultimate sentence of the last paragraph
of paragraph 11C), or until registration under the Securities Act of the
Restricted Securities involved in, or issuable upon conversion of the Notes
involved in, such Restricted Action has become effective.
12.2 Restrictive Legends. Each Note, Warrant and certificate for
Restricted Securities (unless at the time of issuance such Restricted Securities
are registered under the Securities Act), and each Note, Warrant and certificate
issued upon the transfer or exchange of any such Note or certificate for
Restricted Securities (except as otherwise permitted by this paragraph 11),
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 11 of that
certain Amended and Restated Note, Stock Purchase and Warrant Agreement, dated
December 12, 2001 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 11 of said Amended and Restated Note, Stock Purchase and Warrant
Agreement.
12.3 Notice of Proposed Transfer; Opinions of Counsel; Certain
Restrictions. Each holder of any Notes, Warrants or of any Restricted
Securities, by its acceptance thereof, agrees that, except as otherwise
expressly provided below in this paragraph 11C, prior to the taking of any
Restricted Action, such holder will give written
37
notice to the Company of such ▇▇▇▇▇▇'s intention to take such Restricted Action
and to comply in all other respects with this paragraph 11C. 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:
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 or Restricted Securities involved in, or
issuable upon conversion of any Notes 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 or Restricted Securities involved
in such Restricted Action and either deliver new Notes in accordance with
paragraph 13E, or certificates for Restricted Securities 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 11B, 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 11C) 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.
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
or Restricted Securities involved in, or issuable upon conversion of any Notes
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 11C.
Notwithstanding the foregoing, each holder shall be permitted to
transfer any Note or Notes or any Restricted Security or Restricted Securities
attributable to Notes in one or more transactions to a limited number of
institutional investors similar in nature to the Buyer 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 or
Restricted Security 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 or Restricted Security contained in paragraph 11 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
38
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 or Restricted Securities and of counsel for the Company in
connection with all opinions rendered by them pursuant to this paragraph 11C,
and will reimburse any such holder for all other out-of-pocket expenses (other
than Registration Expenses) incurred by such holder in complying with this
paragraph 11C.
12.4 Registration of Restricted Securities on Request. Upon the
written request of the holders of no less than 50% of the outstanding Restricted
Securities, which request (a) shall describe the Restricted Action proposed to
be effected by such holder and the intended method of disposition by such holder
of the Restricted Securities involved in such proposed Restricted Action, and
(b) shall request that the Company effect the registration of all or part of
such holder's Restricted Securities under the Securities Act, the Company will
promptly give written notice of such requested registration to all holders of
outstanding Notes or Restricted Securities and thereupon will use its best
efforts to effect the registration under the Securities Act of (i) the
Restricted Securities which the Company has been so requested to register, for
disposition in accordance with the intended method of disposition stated in such
request, and (ii) all other Restricted Securities the holders of which shall
have, within 30 days after the receipt of such written notice from the Company,
made written request (stating the intended method of disposition of such
securities by such holders) to the Company for registration thereof, all to the
extent required to permit the disposition (in accordance with the intended
method thereof as aforesaid) by all such holders of the Restricted Securities so
to be registered; provided, however, that the Company shall not be obligated to
-------- -------
effect any such registration pursuant to this paragraph 11D (a) at any time
prior to the second anniversary of the date of this Agreement (b) at any time
prior to the first anniversary of the effective date of a registration statement
filed with the Commission pursuant to a written notice of requested registration
pursuant to this paragraph 11D, or (c) at any time subsequent to the third such
registration made pursuant to this paragraph 11D which shall have become
effective with respect to all Restricted Securities requested to be included
therein and not have been interfered with by any order or requirement of the
Commission or any other governmental agency or any court. The holders requesting
any registration pursuant to this paragraph shall select the underwriter or
underwriters to be used in connection with any public offering of securities
registered pursuant to this paragraph; provided, however, that so long as the
-------- -------
Buyer shall hold any Restricted Securities, the Buyer shall have the right, in
its sole discretion, to approve or disapprove of any underwriter in which
General Electric Company has a direct or indirect interest of 5% or more.
12.5 Piggy-Back Registration. If the Company at any time proposes to
register any of its equity securities (other than securities issued with respect
to any acquisition or any employee stock option, stock purchase, or similar plan
or any other securities to be registered pursuant to a special purpose
registration) under the Securities Act on Form S-1, Form S-2, Form S-3 or any
other form of general application for sale of securities to the public in an
underwritten offering upon which may be registered securities similar to the
Restricted Securities, it will each such time at least 60 days prior to the
anticipated filing date of such proposed registration statement give written
notice to
39
all holders of all outstanding Notes or Restricted Securities of its intention
so to do and, upon the written request of any such holder made within 30 days
after the receipt of any such notice (which request shall specify the Restricted
Securities intended to be disposed of by such holder and state the intended
method of disposition thereof), the Company will use its best efforts to effect
the registration under the Securities Act of Restricted Securities which the
Company has been so requested to register, to the extent requisite to permit the
disposition (in accordance with the intended methods thereof as aforesaid) by
such holders of the Restricted Securities to be so registered, subject to the
discretion of the managing underwriter to limit or exclude any of such equity
securities from the offering if it determines that the inclusion thereof would
adversely affect the marketing of the securities to be sold by the Company
therein; provided, however, that if any of such equity securities are to be
-------- -------
included in such underwriting for the account of any person other than the
Buyer, the number of such equity securities to be included by any such person
shall be reduced first; provided, further, however, that if any Restricted
-------- ------- -------
Securities are to be distributed pursuant to this paragraph through a firm of
underwriters to the public and the Buyer shall be participating in such offering
the Buyer shall have the right, in its sole discretion, to approve or disapprove
of any underwriter in which General Electric Company has a direct or indirect
interest of 5% or more. No registration effected pursuant to this paragraph 11E
shall relieve the Company from its obligation to effect any registration upon
request pursuant to paragraph 11D hereof.
12.6 Registration Expenses. The Registration Expenses in connection
with any registration in which Restricted Securities or Notes shall be included
pursuant to paragraph 11D, 11E or 11F shall be borne by the Company.
12.7 Registration Procedures. If and whenever the Company is required
to effect the registration of any Restricted Securities under the Securities Act
as provided in this Agreement, the Company will promptly:
(i) prepare and (in any event within 90 days after the end of the
period within which requests for registration may be given to the Company) file
with the Commission a registration statement with respect to such Restricted
Securities and use its best efforts to cause such registration statement to
become effective;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the
Securities Act with respect to the disposition of all such Restricted
Securities and other securities covered by such registration statement
until such time as all of such Restricted Securities and other
securities have been disposed of in accordance with the intended
methods of disposition by the seller or sellers thereof set forth in
such registration statement, but in no event for a period of more than
270 days after such registration statement becomes effective;
40
(iii) furnish to each seller of such Restricted Securities
such number of copies of such registration statement and of each
such amendment and supplement thereto (in each case including all
exhibits), such number of copies of the prospectus included in
such registration statement (including each preliminary
prospectus), in conformity with the requirements of the
Securities Act, and such other documents, as such seller may
reasonably request in order to facilitate the disposition of the
Restricted Securities owned by such seller;
(iv) use its best efforts to register or qualify such
Restricted Securities covered by such registration statement
under such other applicable securities or Blue Sky laws of such
jurisdictions within the United States of America (including
territories and commonwealths thereof) as each seller shall
reasonably request, except that the Company shall not for any
such purpose be required to qualify generally to do business as a
foreign corporation in any jurisdiction wherein it is not so
qualified, to subject itself to taxation in any such
jurisdiction, or to consent to general service of process in any
jurisdiction;
(v) notify each seller of any such Restricted Securities
covered by such registration statement, at any time when a
prospectus relating thereto is required to be delivered under the
Securities Act within the period mentioned in subdivision (ii) of
this paragraph 11H, of the happening of any event as a result of
which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact
or omits to state any material fact required to be stated therein
or necessary to make the statements therein not misleading in
light of the circumstances under which they were made (and upon
receipt of such notice and until a supplemented or amended
prospectus as set forth below is available, each such seller
shall not offer or sell any securities covered by such
registration statement and shall return all copies of such
prospectus to the Company if requested to do so by it), and at
the request of any such seller prepare and furnish to such seller
a reasonable number of copies of a supplement to or an amendment
of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such Restricted Securities, such
prospectus shall not include an untrue statement of a material
fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not
misleading in light of the circumstances under which they were
made; and
(vi) furnish to each holder for which Restricted Securities
are registered or are to be registered at the time of the
disposition of such Restricted Securities by such holder, a
signed copy of an opinion of counsel (which counsel shall be
reasonably acceptable to, and which opinion shall be reasonably
satisfactory in form and substance to, such holder) to the effect
that: (a) a registration statement covering such Restricted
Securities has been filed with the Commission under the
41
Securities Act and has been made effective by order of the
Commission, (b) said registration statement and the prospectus
contained therein comply as to form in all material respects with
the requirements of the Securities Act, and (after due inquiry)
such counsel has no reason to believe that either said
registration statement or such prospectus contains any untrue
statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements
therein (in the case of such prospectus, in light of the
circumstances under which they were made) not misleading, (c)
after due inquiry said counsel knows of no legal or governmental
proceedings required to be described in said registration
statement or prospectus which are not described as required, or
of any contracts or documents of a character required to be
described in said registration statement or prospectus or to be
filed as an exhibit to said registration statement or to be
incorporated by reference therein which is not described and
filed as required, (d) no stop order has been issued by the
Commission suspending the effectiveness of such registration
statement and, to the best of such counsel's knowledge, no
proceedings for the issuance of such a stop order are pending or
threatened, and (e) the applicable provisions of the securities
or Blue Sky laws of each state in which the Company shall be
required, pursuant to clause (iv) of this paragraph 11G, to
register or qualify such Notes or Restricted Securities, have
been complied with, assuming the accuracy and completeness of the
information furnished to such counsel with respect to each filing
relating to such laws; it being understood that such opinion may
contain such qualifications and assumptions as are customary in
the rendering of similar opinions, and that such counsel may
rely, as to all factual matters treated therein, on certificates
of the Company (copies of which shall be delivered to such
holder).
The Company may require each seller of any Restricted Securities
as to which any registration is being effected to furnish the Company such
information regarding such seller and the distribution of such Restricted
Securities as the Company may from time to time request in writing and as shall
be required by law to effect such registration.
12.8 Termination of Restrictions. All restrictions imposed by
paragraph 11 hereof upon the transferability of Notes or Restricted Securities
shall cease and terminate as to any particular Notes or Restricted Securities,
(a) when such securities shall have been effectively registered under the
Securities Act and disposed of in accordance with the registration statement
covering such securities, or (b) when, in the opinion of counsel for the holder
thereof and counsel for the Company, such restrictions are no longer required in
order to insure compliance with the Securities Act. Whenever such restrictions
shall terminate as to any Notes or Restricted Securities, the holder thereof
shall be entitled to receive from the Company without expense a new certificate
or certificates representing such securities not bearing the legend set forth in
paragraph 11B hereof.
42
12.9 Indemnification. (a) In the event of any registration of
any Restricted Securities under the Securities Act pursuant to this Agreement,
the Company will indemnify and hold harmless the seller of such securities and
its directors and officers and each underwriter of such securities and each
other person, if any, who controls such seller or underwriter within the meaning
the Securities Act, against any losses, claims, damages or liabilities, joint or
several, to which such seller, director or officer or underwriter or controlling
person may become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions or proceedings in respect
thereof) arise out of or are based upon (i) any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such securities were registered under the Securities Act, any
preliminary prospectus or final prospectus contained therein, or any amendment
or supplement thereto, or (ii) any omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading; and the Company will reimburse such seller,
each such director and officer, each such underwriter and each such controlling
person for any legal or any other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability, action or proceeding; provided, however, that the Company shall not
be liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon any untrue statement or alleged untrue
statement or omission or alleged omission made in such registration statement,
any such preliminary prospectus, final prospectus, amendment or supplement in
reliance upon and in conformity with written information furnished to the
Company through an instrument duly executed by such seller, officer or director,
underwriter or controlling person specifically for use in the preparation
thereof. Such indemnity shall remain in full force and effect irrespective of
any investigation by any person indemnified above. The Company may require, as a
condition to including any Restricted Securities in any registration statement
filed pursuant to paragraph 11 hereof, that the Company shall have received an
undertaking satisfactory to it from the prospective seller and underwriter of
such securities to indemnify and hold harmless (in the same manner and to the
same extent as set forth in subdivision (a) of this paragraph 11J, but only to
an amount, with respect to such prospective seller, not in excess of the gross
proceeds realized by such seller from the sale of Restricted Securities
registered pursuant to such registration statement) the Company, each director
of the Company, each officer of the Company who shall sign such registration
statement and any person who controls the Company within the meaning of the
Securities Act, with respect to any statement in or omission from such
registration statement, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereto, if such statement or omission
was made in reliance upon and in conformity with written information furnished
to the Company through an instrument duly executed by such seller or
underwriter, specifically for use in the preparation of such registration
statement, preliminary prospectus, final prospectus, amendment or supplement.
Promptly after receipt by an indemnified party of notice of the commencement of
any action involving a claim referred to in the preceding paragraphs of this
paragraph 11J, such indemnified party shall, if a claim in respect thereof is to
be made against an indemnifying party, give written notice to the latter of the
commencement of such action;
43
provided, however, that the failure of any indemnified party to give notice as
-------- -------
provided herein shall not relieve the indemnifying party of its obligations
under the preceding paragraphs of this paragraph 11J, except to the extent that
the indemnifying party is actually prejudiced by such failure to give notice. In
case any such action is brought against an indemnified party, the indemnifying
party shall be entitled to participate in and to assume the defense thereof,
jointly with any other indemnifying party similarly notified to the extent that
it may wish, with counsel reasonably satisfactory to such indemnified party, and
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party for any legal or other expense subsequently
incurred by the latter in connection with the defense thereof. No indemnifying
party, in the defense of any such claim or litigation, shall, except with the
consent of each indemnified party, consent to entry of any judgment or enter
into any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such indemnified party of a release from
all liability in respect to such claim or litigation.
12.10 Availability of Information. The Company will comply with
the reporting requirements of Sections 13 and 15(d) of the Exchange Act
applicable to it and shall use its best efforts to comply with all other public
information reporting requirements of the Commission (including reporting
requirements which serve as a condition to utilization of Rule 144 promulgated
by the Commission under the Securities Act) applicable to it from time to time
in effect and relating to the availability of an exemption from the Securities
Act for the sale of any Notes or Restricted Securities. The Company will also
cooperate with each holder of any Notes or Restricted Securities in supplying
such information and documentation as may be necessary for such holder to
complete and file any information reporting forms presently or hereafter
required by the Commission as a condition to the availability of an exemption
from the Securities Act for the sale of any Notes or Restricted Securities.
12.11 Duration of Obligations. The obligations of the Company
under paragraph 11 hereof, and the obligations under paragraph 11I hereof of the
Company and any seller of Restricted Securities becoming obligated thereunder,
shall continue for so long as any Notes or Restricted Securities shall be
outstanding, except as otherwise provided in paragraph 11 hereof.
13. Definitions. For the purpose of the Agreements, the following
-----------
terms shall have the following respective meanings:
"1999 Notes" shall have the meaning set forth in recitals.
----------
"Additional Closing Documents" shall mean those documents that
----------------------------
have not heretofore been delivered pursuant to the Security Agreement, and shall
include the required powers of attorney, the required application for transfer
of Shares, certified copies of the share registers of the Subsidiaries, noted to
reflect the pledge of shares to GEIPPPII, the resolutions of the board of
directors of each Subsidiary consenting to the transfer of shares, the
resolution of the board of directors of the Canadian Subsidiary consenting to
the transfer of shares to GEIPPPII, the stock certificate of Canadian
44
Rainforest Restaurants Inc. and the stock certificate of Alamo Grill Inc. (all
such terms set forth above as defined in the Security Agreement).
"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.
"CAN $" shall mean Canadian dollars.
-----
"Canadian Security Agreement" shall have the meaning set forth in
---------------------------
recitals.
"Canadian Subsidiary" shall mean the Elephant and Castle Canada
-------------------
Inc., a corporation incorporated in the Province of Ontario, Canada.
"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 representing more
than 50% of the combined voting power of the Company's then outstanding
securities or (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.
"Commission" shall mean the Securities and Exchange Commission or
----------
any other governmental authority at the time administering the Securities Act or
the Exchange Act.
"Common Stock" shall mean and include the Company's presently
------------
authorized Common Shares, without par value, as constituted on the date hereof,
and, when used in paragraph 9 or 11 hereof, shall also mean and include any
capital stock of any class of the Company hereafter authorized which shall not
be either (i) limited to a fixed sum or percentage of par value in respect of
the rights of the holders thereof to receive dividends and to participate in the
distribution of assets upon the voluntary or involuntary liquidation,
dissolution or winding-up of the Company, or (ii) redeemable at any time by the
Company, or both; provided, however, that the shares issuable upon conversion of
-------- -------
the Notes shall include only shares of capital stock of the Company designated
as Common Shares on the date hereof or, in case of any reclassification of the
outstanding shares thereof, the stock, securities or assets provided for in
paragraph 9G,
45
which are not limited to any such fixed sum or percentage of par value and are
not so redeemable by the Company.
"Conversion Price" shall have the meaning set forth in paragraph
----------------
9A hereof.
"Conversion Shares" shall have the meaning set forth in paragraph
-----------------
9A hereof.
"Convertible Securities" shall have the meaning set forth in
----------------------
paragraph 9D(1) hereof.
"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 4% plus the prime or base rate as
------------
determined by the Wall Street Journal, or successor thereto, from time to time;
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.
"Earnings Before Interest, Taxes, Depreciation and Amortization
--------------------------------------------------------------
or ("EBITDA")" shall mean, for any fiscal period of the Company and its
-------------
consolidated Subsidiaries, the sum of the following: (i) net income (or loss)
before provision for income taxes, (ii) depreciation and amortization (including
amounts attributable to good will, costs of issuance of debt outstanding,
expenses of organization, non-competition agreements, patents and trademarks,
and discounts related to subordinated debt) and (iii) interest expense.
"Environmental Laws" shall have the meaning set forth in
------------------
paragraph 7S hereof.
"ERISA" shall mean the Employee Retirement Income Security Act of
-----
1974, as amended from time to time.
"ERISA Affiliate" shall mean any entity required to be aggregated
---------------
with the Company or any Subsidiary under Sections 414(b), (c), (m) or (o) of the
Internal Revenue Code of 1986, as amended.
46
"Event of Default" shall mean any of the events specified in
----------------
paragraph 6, 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:
its liabilities for borrowed money, other than Current Indebtedness;
liabilities secured by any Lien existing on property owned by such Person
(whether or not such liabilities have been assumed), other than Current
Indebtedness;
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;
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 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.
"Hazardous Substances" shall have the meaning set forth in
--------------------
paragraph 7S hereof.
"Indebtedness" shall mean the sum of Current Indebtedness and
------------
Funded Indebtedness.
"Junior Notes" shall have the meaning set forth in paragraph 1A
------------
hereof.
"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
47
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.
"Market Price" shall have the meaning set forth in paragraph
------------
9D(8) hereof.
"Maturity Date" shall mean September 1, 2005.
-------------
"Multiemployer Plan" means a plan which is a Multiemployer Plan
------------------
as defined in Section 4001(a)(3) of ERISA.
"Officer's Certificate" shall mean a certificate signed in the
---------------------
name of the Company by its Chairman of the Board, its President, one of its Vice
Presidents or its Treasurer.
"Original Agreement" shall have the meaning set forth in
------------------
recitals.
"Original Notes" shall have the meaning set forth in recitals.
--------------
"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.
"Purchased Shares" shall have the meaning set forth in paragraph
----------------
2B hereof.
"Registration Expenses" shall mean all expenses incident to the
---------------------
Company's performance of or compliance with paragraph 11 hereof, including
without limitation all registration and filing fees, all fees and expenses of
complying with securities or Blue Sky laws (except to the extent that such fees
and expenses are required by applicable law to be paid by the selling
shareholders), all printing expenses, the fees and disbursements of counsel for
the Company and of independent public accountants, the reasonable fees and
disbursements of one counsel per registration retained by all holders of
Restricted Securities being registered (such counsel to be satisfactory to the
holders of a majority of the Share Equivalents of the Restricted Securities
being registered) and the expenses of any special audits required by or incident
to such performance and compliance (but excluding underwriting discounts and
commissions and transfer taxes, if any).
"Restricted Action" shall have the meaning set forth in paragraph
-----------------
11A hereof.
"Restricted Payments" shall have the meaning set forth in
-------------------
paragraph 5B hereof.
"Restricted Securities" shall mean at any time (a) the Common
---------------------
Stock previously issued or, unless the context otherwise requires, issuable upon
conversion of the Notes, (b) any Common Stock issued subsequent to the
conversion of any of the
48
Notes as a dividend or other distribution with respect to, or in exchange for or
in replacement of, the Common Stock issued upon such conversion, (c) the
Purchased Shares and (d) any Common Stock issued, or, unless the context
otherwise requires, issuable as interest on the Notes; provided, however, that
-------- -------
immediately after and throughout the period during which the restrictions on the
transferability of such Common Stock shall have ceased and terminated in
accordance with paragraph 11 hereof, the same shall cease to be Restricted
Securities. Where the context so requires, "holders of Restricted Securities"
shall include holders of Notes convertible into Restricted Securities.
"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.
"Security Agreement" shall have the meaning set forth in the
------------------
recitals.
"Senior Notes" shall have the meaning set forth in paragraph 1A.
------------
"Shares" shall mean the shares of Common Stock issued pursuant to
------
this Agreement, including without limitation such shares issued upon conversion
of the Notes or exercise of the Warrants.
"Share Equivalents" of any Restricted Securities or the Notes
-----------------
shall mean the number of shares of Common Stock included among such Restricted
Securities or upon conversion of the Notes.
"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).
"U.S. Security Agreement" shall have the meaning set forth in the
-----------------------
recitals.
"U.S. Subsidiaries" shall mean the Subsidiaries of the Company
-----------------
incorporated in any state of the United States of America.
"Warrants" shall mean Warrants to acquire shares of Common Stock
--------
at the Company issued pursuant to the Original Agreement.
14. Miscellaneous.
-------------
14.1 Note Payments. The Company agrees that, so long as the Buyer
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 its 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
the Buyer may designate in writing, notwithstanding any contrary provision
herein or in any Note with respect to the
49
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 acquired by the Buyer hereunder.
14.2 Expenses. The Company shall pay at the Closing the
--------
reasonable fees and expenses of the Buyer, including the reasonable legal fees
and expenses of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ LLP, as the special counsel to the Buyer, and
Bull, Housser & ▇▇▇▇▇▇, as the special Canadian counsel to the Buyer, incurred
in connection with preparation of this Agreement and the other agreements
contemplated hereby and the closing of the transactions contemplated hereby;
provided, however, that the Company shall not be required to reimburse such fees
-------- -------
and expenses which in the aggregate exceed $25,000. The Company shall pay the
reasonable costs and expenses of the Buyer, including reasonable legal fees and
expenses, incurred by the Buyer in enforcing any of its rights under this
Agreement or the Notes, including, without limitation, costs and expenses
incurred in any bankruptcy case.
14.3 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
principal amount of the Notes required with respect to any consent, except that
the provisions of paragraph 11 hereof may not be amended without the consent of
(i) holders of at least 66-2/3% of the shares of Common Stock constituting
Restricted Securities at the time issued or issuable upon conversion of all
Notes then outstanding (which aggregate number of shares shall at all times
include the number of shares which would be issuable if all then outstanding
Notes were being converted at the Conversion Price then in effect, with such
shares being deemed to be held, respectively, by the holders of such unconverted
Notes) and (ii) holders of at least 66-2/3% of the Warrants at the time
outstanding. 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 (or
of shares of Common Stock entitled to any rights hereunder) 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.
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14.4 Notices to Subsequent Holder. If any Note shall have been
transferred to another holder pursuant to paragraph 13E 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 the
Buyer by any provision hereof shall also be delivered to each such holder.
14.5 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 thereof and in multiples of
$5,000 in excess of $100,000 for any 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 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 the Buyer's
unsecured indemnity agreement, or, in the case of any other holder of a Note or
Notes or Warrant or Warrants, other indemnity reasonably satisfactory to the
Company, or in the case of any such mutilation upon surrender and cancellation
of such Note or Warrant, the Company will make and deliver a new Note or
Warrant, of like tenor, in lieu of the lost, stolen, destroyed or mutilated Note
or Warrant.
14.6 Persons Deemed Owners. Prior to due presentment for registration
of transfer, the Company may treat the Person in whose name any Note or Warrant
is registered as the owner and holder of such Note or Warrant 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
or Warrant, whether or not such Note shall be overdue, and the Company shall not
be affected by notice to the contrary.
14.7 Survival of Representations, Warranties and Indemnities. All
representations, warranties and indemnities contained herein or made in writing
by the
51
Company in connection herewith shall survive the execution and delivery of this
Agreement, the Common Stock issued under or pursuant to this Agreement and the
Notes, regardless of any investigation made by the Buyer or on the Buyer's
behalf.
14.8 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.
14.9 Notices. All notices and other communications required or
permitted hereunder shall be in writing and shall be (i) mailed by registered or
certified mail, postage prepaid, (ii) delivered by reliable overnight courier
service, or (iii) otherwise delivered by hand or by messenger, addressed (A) if
to the Buyer, to GE Asset Management Incorporated, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, or at such other address as
the holder shall have furnished to the Company in writing, or (B) if to the
Company, to Elephant & Castle Group Inc., ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇.▇.
Canada V6Z 2K5, Attention: Chief Financial Officer, or at such other address as
the Company shall have furnished to the holder in writing. All such notices and
communications shall be effective upon receipt.
14.10 Accounting Terms. Unless otherwise set forth herein, all
accounting terms and provisions in this Agreement shall be construed to be as
determined in accordance with generally accepted accounting principles in Canada
then in effect.
14.11 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 the Buyer, the determination of such satisfaction
shall be made by the Buyer in its sole and exclusive judgment exercised in good
faith.
14.12 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 13C) only by an agreement in writing signed by the
party against whom enforcement is sought.
14.13 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.
14.14 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.
14.15 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
52
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.
14.16 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.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
ELEPHANT & CASTLE GROUP INC.
By:_____________________________
Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: President
GE INVESTMENT PRIVATE PLACEMENT
PARTNERS II,
a LIMITED PARTNERSHIP
By: GE Asset Management
Incorporated
Its: General Partner
By:________________________
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President
54