-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, C4yn+43d0KjVLMHspwc+8rb0BcXnFdsUjZ0JP/3ES5aMSEYFeZa5wGVWfdcYoQlP Jq7vevyNhcDkYoL6rLIzUw== 0000912057-01-509570.txt : 20010421 0000912057-01-509570.hdr.sgml : 20010421 ACCESSION NUMBER: 0000912057-01-509570 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 20010419 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: ELEPHANT & CASTLE GROUP INC CENTRAL INDEX KEY: 0000899849 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 000000000 FISCAL YEAR END: 1227 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: SEC FILE NUMBER: 005-50761 FILM NUMBER: 1606762 BUSINESS ADDRESS: STREET 1: 856 HOMER ST STREET 2: 701 WEST GEORGIA ST CITY: VANCOUVER B C CANADA STATE: A1 BUSINESS PHONE: 6046846451 MAIL ADDRESS: STREET 1: 701 W GEORGIA STREET STREET 2: SUITE 303 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: GE INVESTMENT PRIVATE PLACEMENT PARTNERS II LTD PARTNERSHIP CENTRAL INDEX KEY: 0001023838 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 061429671 STATE OF INCORPORATION: DE FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 3003 SUMMER ST CITY: STAMFORD STATE: CT ZIP: 06904 BUSINESS PHONE: 2033262417 MAIL ADDRESS: STREET 1: 3003 SUMMER STREET CITY: STAMFORD STATE: CT ZIP: 06904 SC 13D/A 1 a2045022zsc13da.txt SCHEDULE 13D/A --------------------------- OMB APROVAL --------------------------- OMB Number: 3235-0145 Expires: August 31, 1999 Estimated average burden hours per response ...14.90 --------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 13D UNDER THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. 6)* ELEPHANT & CASTLE GROUP INC. - ------------------------------------------------------------------------------- (Name of Issuer) Common Stock - ------------------------------------------------------------------------------- (Title of Class of Securities) 266199-10-4 ---------------------------------------- (CUSIP Number) Michael M. Pastore, GE Asset Management Incorporated, 3003 Summer Street, Stamford, CT 06905, (203) 326-2312 - ------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notes and Communications) October 26, 1999 ---------------------------------------------------------- (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(b)(3) or (4), check the following box. /_/ NOTE: Six copies of this statement, including all exhibits should be filed with the Commission. See Rule 13d-1(a) for other parties to whom copies are to be sent. *The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). POTENTIAL PERSONS WHO ARE TO RESPOND TO THE COLLECTION OF INFORMATION CONTAINED IN THIS FORM ARE NOT REQUIRED TO RESPOND UNLESS THE FORM DISPLAYS A CURRENTLY VALID OMR CONTROL NUMBER. Page 1 of 23 Pages SCHEDULE 13D CUSIP No. 266199-10-4 Page 2 of __ Pages - --------------------------- ---------------------------- - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSONS: GE Investment Private Placement Partners II, a Limited Partnership I.R.S. Identification Nos. of above persons (entities only) 06-1429671 - -------------------------------------------------------------------------------- 2 Check the Appropriate Box if a Member of a Group (See Instructions) (a) /_/ (b) /X/ - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* OO - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) /_/ Not applicable - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION STATE OF DELAWARE - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER None NUMBER OF ------------------------------------------------------------ SHARES 8 SHARED VOTING POWER BENEFICIALLY 2,832,266 OWNED BY ------------------------------------------------------------ EACH 9 SOLE DISPOSITIVE POWER REPORTING None PERSON ------------------------------------------------------------ WITH 10 SHARED DISPOSITIVE POWER 2,832,266 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,832,266 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* /_/ Not applicable - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 59.29% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* PN - -------------------------------------------------------------------------------- Page 2 of 23 Pages CUSIP No. 266199-10-4 Page 3 of __ Pages - ---------------------------------- --------------------------- - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSONS: GE Asset Management Incorporated (formerly known as GE Investment Management Incorporated), as General Partner of GE Investment Private Placement Partners II, a Limited Partnership SS. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON 06-1238874 - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX OF A MEMBER OF A GROUP* (a) /_/ (b) /X/ - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* Not applicable - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) /_/ Not applicable - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION STATE OF DELAWARE - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER None NUMBER OF -------------------------------------------------------- SHARES 8 SHARED VOTING POWER BENEFICIALLY OWNED BY 2,832,266 EACH -------------------------------------------------------- REPORTING 9 SOLE DISPOSITIVE POWER PERSON NONE WITH -------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 2,832,266 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,832,266 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN Not applicable - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 59.29% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* CO - -------------------------------------------------------------------------------- Page 3 of 23 Pages CUSIP No. 266199-10-4 Page 4 of __ Pages - -------------------------------- -------------------------- - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSONS General Electric Company SS. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (entities only) 14-0689340 - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX OF A MEMBER OF A GROUP* (a) /_/ (b) /x/ - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* Not applicable - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION STATE OF NEW YORK - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER Disclaimed (See 11 below) NUMBER OF -------------------------------------------------------------- SHARES 8 SHARED VOTING POWER BENEFICIALLY None OWNED BY -------------------------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER REPORTING Disclaimed (See 11 below) PERSON -------------------------------------------------------------- WITH 10 SHARED DISPOSITIVE POWER None - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON Beneficial ownership of all shares disclaimed by General Electric Company - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* /_/ - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) Not applicable - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* CO - -------------------------------------------------------------------------------- Page 4 of 23 Pages ITEM 1. SECURITY AND ISSUER. This Amendment No. 6 amends and restates in its entirety the Statement on Schedule 13D filed by GE Investment Private Placement Partners II, a Limited Partnership, a Delaware limited partnership (the "Partnership"), GE Asset Management Incorporated (formerly known as GE Investment Management Incorporated), a Delaware corporation and a wholly-owned subsidiary of General Electric Company ("GEAM") and General Electric Company, a New York corporation ("GE") (collectively, the "Reporting Persons") with the Securities and Exchange Commission on November 30, 1995, as amended pursuant to Amendment No. 1 thereto filed on March 14, 1997, Amendment No. 2 thereto filed on November 6, 1997, Amendment No. 3 thereto filed on June 24, 1998, Amendment No. 4 thereto filed on December 22, 1998, and Amendment No. 5 thereto filed on February 23, 1999 (as amended, the "Schedule 13D"), relating to common stock, no par value per share (the "Common Stock") of Elephant & Castle Group Inc. (the "Issuer"), having its principal offices at Suite 1200, 1190 Hornby Street, Vancouver, BC V6Z 2K5 Canada. Capitalized terms used herein shall have the meanings given to them in the Schedule 13D and the Agreement (as defined below) or in the Note, Stock Purchase and Warrant Agreement dated as of January 1, 1999. The Reporting Persons have entered into a Joint Filing Agreement, dated April 9, 2001 attached hereto as Schedule I. ITEM 2. IDENTITY AND BACKGROUND. This statement is filed on behalf of GE Investment Private Placement Partners II, a Delaware limited partnership, GE Asset Management Incorporated (formerly known as GE Investment Management Incorporated) a Delaware corporation, and General Electric Company, a New York corporation. The address of the principal offices of the Partnership and GEAM is 3003 Summer Street, Stamford, Connecticut 06904. The address of the principal offices of General Electric Company is 3135 Easton Turnpike, Fairfield CT 06431. For information with respect to the identity and principal occupation of each (i) executive officer and director of the General Partner of the Partnership see Schedule II attached hereto; (ii) executive officer and director of GEAM see Schedule II attached hereto; (iii) executive officer and director of GE see Schedule III attached hereto. Except as set forth below, during the last five years, neither any Reporting Person nor, to the best knowledge of each Reporting Person, any person identified in Schedules II, III, IV, V or VI has (i) been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (ii) been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such a proceeding was or is subject to a judgement, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. All Reporting Persons and, to the best knowledge of each Reporting Person, all persons identified in Schedule II and III are United States citizens, except that Paolo Fresco, Page 5 of 23 Pages director of GE, is a citizen of Italy, Claudio X. Gonzalez, director of GE, is a citizen of Mexico and Andrea Jung, director of GE, is a citizen of Canada. ITEM 3. SOURCE AND AMOUNT OF FUNDS AND OTHER CONSIDERATION. On November 30, 1995, the Partnership entered into a Note, Stock Purchase and Warrant Agreement, which was amended on May 31, 1996, March 14, 1997, October 17, 1997, December 8, 1998 and January 1, 1999, respectively, (as amended, the "Agreement") which provides for the purchase by the Partnership of (i) 111,111 shares of Common Stock (the "Purchased Shares"), (ii) convertible subordinated debentures convertible into shares of Common Stock (the "Notes") in the aggregate principal amount of $9,000,000, distributed on four closing dates, as described below, (iii) warrants (the "Warrants") exercisable for 300,000 shares of Common Stock at $11.764 per share of Common Stock, and (iv) certain shares of Common Stock (the "Additional Shares") issued by the Issuer in order to induce the Partnership to purchase the Notes. The funds used by the Partnership to pay for the shares of Common Stock, Notes and Warrants were obtained from Capital Contributions made by its partners pursuant to a pre-existing capital commitment. The Agreement was attached as Exhibit I to the Schedule 13D filed by the Reporting Persons on November 30, 1995, and is incorporated herein by reference. The Notes were distributed to the Partnership in the following manner: (i) on November 30, 1995 (the "First Closing Date"), the Partnership received Notes in the principal amount of $3,000,000; (ii) on March 14, 1997 (the "Second Closing Date"), the Partnership received Notes in the principal amount of $2,000,000; (iii) on October 17, 1997 (the "Third Closing Date"), the Partnership received Notes in the Principal amount of $2,000,000; and (iv) on June 23, 1998 (the "Fourth Closing Date"), the Partnership received Notes in the principal amount of $2,000,000. The Partnership is entitled to receive the Additional Shares in the following amounts: (i) 70,555 shares of Common Stock on May 30, 1996, (ii) 55,555 shares of Common Stock on the Second Closing Date, (iii) 6,500 shares of Common Stock on March 31, 1997, (iv) 15,000 shares of Common Stock on May 30, 1997, (v) 6,500 shares of Common Stock on June 30, 1997, (vi) 15,000 shares of Common Stock on May 30, 1998 and (vii) 15,000 shares of Common Stock on May 30, 1999. On December 8, 1998, the Partnership and the Issuer agreed to enter into the Amendment No. 4 to the Agreement (the "Amendment No. 4"). Prior to entering into the Amendment No. 4, the Partnership was entitled to receive 6,500 shares of Common Stock as Additional Consideration Shares for each three month period ending September 30, December 31, March 31 and June 30 beginning September 30, 1997, during which there shall have occurred and been continuing for any portion of such period a Default (as defined in the Agreement). Pursuant to the Amendment No. 4, the Partnership became entitled to receive the Additional Consideration Shares for each three month period ending September 30, December 31, March 31 and June 30 beginning September 30, 1997 and ending March 31, 1998. Also pursuant to the Amendment No. 4, up to $2,000,000 principal amount of Notes issued on the Fourth Closing Date and up to $1,000,000 principal amount of Notes issued on the Third Closing Date, became subject to repurchase by the Issuer, at the option of the holders of such Notes, at any time and Page 6 of 23 Pages from time to time after the six month anniversary of the date of the Exchange (as defined below) upon any Public Offering by the Issuer. A copy of the Amendment No. 4 was attached as Exhibit I to the Amendment No. 4 to the Schedule 13D filed by the Reporting Persons on December 22, 1998. On December 8, 1998, the Partnership also entered into a Note Agreement with the Issuer (the "Note Agreement"), pursuant to which the Partnership acquired the exchangeable debentures of the Issuer due March 31, 2000 (the "1998 Notes") in the aggregate principal amount of $2,000,000. The Partnership had the right to exchange the 1998 Notes (the "Exchange") at any time prior to the Maturity Date, at the option of the Partnership, into convertible subordinated notes of the Issuer (the "Convertible Subordinated Notes") on mutually acceptable terms and conditions. The funds used by the Partnership to pay for the 1998 Notes were obtained from Capital Contributions made by its partners pursuant to a pre-existing capital commitment. A copy of the Note Agreement was attached as Exhibit II to the Amendment No. 4 to the Schedule 13D filed by the Reporting Persons on December 22, 1998. On February 1, 1999, the Partnership and the Issuer have entered into a Note, Stock Purchase and Warrant Agreement dated as of January 1, 1999 (the "1999 Agreement"), pursuant to which the Partnership exchanged the 1998 Notes in the aggregate principal amount of $2,000,000 for the convertible subordinated debentures of the Issuer due December 31, 2003, in the aggregate principal amount of $2,000,000 (the "1999 Notes"). The Partnership had the right to convert the 1999 Notes, at the option of the Partnership, at any time after the six month anniversary of the date of the 1999 Agreement and prior to the Maturity Date, inclusive, into shares of Common Stock of the Issuer at a per share price equal to $2.00. The Partnership also received pursuant to the 1999 Agreement, warrants (the "1999 Warrants") exercisable, at the option of the Partnership, for 1,000,000 shares of Common Stock of the Issuer at a per share price equal to $3.00. The term of the 1999 Warrants which were to expire on January 29, 2000 in accordance with their original terms was extended in January, 2000 until January, 2002. A copy of the 1999 Agreement was attached as Exhibit I to the Amendment No. 5 to the Schedule 13D filed by the Reporting Persons on February 23, 1999. In July, 1999, the Partnership and GEAM have entered into a Voting Trust Agreement with Mr. Jeffrey M. Barnett ("Barnett") and certain entities controlled by Barnett (the "Settlement Agreement"), pursuant to which the Partnership and GEAM are entitled to vote 570,375 shares of Common Stock owned by Barnett on any election for directors in favor of nominees selected by the Board of Directors, subject to an obligation to vote for Barnett's election or under certain circumstances, in the event of his death, his executor. A copy of the Settlement Agreement is attached hereto as Exhibit I. The terms of the 1999 Notes were renegotiated in October 1999 and the Partnership converted a portion of the 1999 Notes in the aggregate principal amount of $1,000,000 into the Common Stock of the Issuer at a per share price equal to $1.00. The Partnership retained the remaining portion of the 1999 Notes in the aggregate principal amount of $1,000,000. In December, 1999, the Partnership, the Issuer and certain subsidiaries of the Issuer entered into a Security Agreement dated as of October 6, 1999 (the "Security Page 7 of 23 Pages Agreement"), pursuant to which the Issuer granted to the Partnership a security interest in substantially all of the assets of the Issuer and its subsidiaries. A copy of the Security Agreement is attached hereto as Exhibit II. On March 23, 2000, the Issuer consolidated its authorized and issued capital stock on a one for two basis. In addition, certain financings entered into by the Issuer had a significant dilutive effect on the conversion prices of the Notes, 1999 Notes, Warrants and 1999 Warrants. Currently, the conversion prices of the notes and warrants owned by the Partnership are as follows: (i) a portion of the Notes in the aggregate principal amount of $6,000,000 is convertible into the shares of Common Stock at a per share price equal to $7.68; (ii) a portion of the Notes in the aggregate principal amount of $3,000,000 is convertible into the shares of Common Stock at a per share price equal to $10; (iii) the 1999 Notes in the aggregate principal amount of $1,000,000 are convertible into the shares of Common Stock at a per share price equal to $4; (iv) the Warrants may be exercised for 351,156 shares of Common Stock, at a per share price equal to $7.68; and (v) the 1999 Warrants may be exercised for 500,000 shares of Common Stock at a per share price equal to $4. ITEM 4. PURPOSE OF TRANSACTION. (a) The Reporting Persons have acquired their share of Common Stock, notes and warrants of the Issuer as an investment, in the regular course of business. The Reporting Persons intend to reexamine their investment in the Issuer from time to time and, depending on market considerations and other factors, may purchase or sell shares of Common Stock, if appropriate opportunities to do so are available, on such terms and at such time as they consider advisable. On the First Closing Date, the Issuer delivered to the Partnership convertible subordinated Notes in the aggregate principal amount of $3,000,000. On the Second Closing Date, the Partnership purchased additional convertible subordinated Notes in the aggregate principal amount of $2,000,000. On the Third Closing Date, the Partnership purchased additional convertible subordinated Notes in the aggregate principal amount of $2,000,000. On the Fourth Closing Date, the Partnership purchased additional convertible subordinated Notes in the aggregate principal amount of $2,000,000. On December 8, 1998, the Partnership purchased from the Issuer 1998 Notes in the aggregate principal amount of $2,000,000, exchangeable at any time prior to the Maturity Date, at the option of the Partnership, into convertible subordinated notes of the Issuer (the "Convertible Subordinated Notes") on such terms and other conditions as may be mutually acceptable to the Partnership and the Issuer. On February 1, 1999, the Partnership received from the Issuer, in exchange for the 1998 Notes, 1999 Notes in the aggregate principal amount of $2,000,000, convertible at the option of the Partnership, at any time after the six month anniversary of the date of the 1999 Agreement and prior to the Maturity Date, inclusive, into shares of Common Stock of the Issuer Page 8 of 23 Pages at a per share price equal to $2.00. The Partnership has also received from the Issuer 1999 Warrants exercisable at the option of the Partnership for 1,000,000 shares of Common Stock of the Issuer at a per share price equal to $3.00. In July, 1999, the Partnership and GEAM entered into the Settlement Agreement with Barnett, pursuant to which the Partnership and GEAM are entitled to vote the shares of Common Stock owned by Barnett on any election for directors in favor of nominees selected by the Board of Directors, subject to an obligation to vote for Barnett's election or under certain circumstances, in the event of his death, his executor. The Reporting Persons disclaim the beneficial ownership of all the shares subject to the Settlement Agreement. In October, 1999, the Partnership converted a portion of the 1999 Notes in the aggregate principal amount of $1,000,000 into the Common Stock of the Issuer at a per share price equal to $1.00. So long as the Partnership shall be the beneficial owner of any Note, Warrant or Common Stock the Issuer (a) will nominate and recommend as candidates for election to the Board of Directors of the Issuer up to three (3) persons who are reasonably acceptable to the then current Board of Directors of the Issuer and who are designated by the General Partner of the Partnership and (b) will not increase the size of the Board of Directors of the Issuer without the consent of the General Partner of the Partnership. If at any time any such designated Person(s) is not a member of the Board of Directors of the Issuer, (i) the Issuer will notify such designated Person(s), concurrently with notice given to members of the Board of Directors of the Issuer, 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 of Directors of the Issuer, (ii) the Issuer 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 Issuer will permit the General Partner of the Partnership, or any Person(s) designated by such General Partner in writing to be a Person(s) acting on its behalf, at the Issuer's expense, to visit and inspect any of the properties of the Issuer and it's Subsidiaries and to discuss the affairs, finances and accounts of the Issuer and its Subsidiaries with the principal officers and the auditors of the Issuer, all at such reasonable times during business hours as often as such General Partner may reasonably request. If at any time the Partnership is no longer the beneficial owner of any Note, Warrant, Purchased Shares, Additional Consideration Shares or Common Stock issued upon the conversion or exercise, as applicable, thereof, the Issuer will, upon the expiration of the term of the Directors designated by the Partnership, so nominate and recommend three (3) Persons who are reasonably acceptable to the then current Board of Directors who are designated by the holders representing 50% or more of the Notes and the Warrants held by the holders. The Partnership also has additional rights pursuant to a side letter agreement, executed by the Issuer on March 12, 1997. The side letter agreement was attached as Exhibit II to the Amendment No. 1 to the Schedule 13D filed by the Reporting Persons on March 14, 1997, and is incorporated herein by reference. Under the terms of this letter agreement, the Issuer acknowledged that the Partnership has certain concerns with the management of the Issuer and allows the Partnership to make certain management changes in the Issuer if the Issuer is in any default defined in Section 6 of the Agreement on or after September 30, 1997. Page 9 of 23 Pages Subject to the foregoing, the Reporting Persons do not have any present plans or proposals which relate to or would result in: (b) The acquisition by any person of additional securities of the Issuer, or the disposition of securities of the Issuer; (c) An extraordinary corporate transaction, such as a merger, reorganization or liquidation, involving the Issuer or any of its subsidiaries; (d) A sale or transfer of a material amount of assets of the Issuer or any of its subsidiaries; (e) Any change in the present board of directors or management of the Issuer, including any plans or proposals to change the number of directors or to fill any existing vacancies on the board, as otherwise disclosed herein; (f) Any material change in the present capitalization or dividend policy of the Issuer; (g) Any other material change in the Issuer's business or corporate structure, except as set forth in the side letter agreement dated as of March 12, 1997; (h) Changes in the Issuer's charter, bylaws or instruments corresponding thereto or other actions which may impede the acquisition of control of the Issuer by any person; (i) Causing a class of securities of the Issuer to be delisted from a national securities exchange or to cease to be authorized to be quoted in an inter-dealer quotation system of a registered national securities association; (j) A class of equity securities of the Issuer becoming eligible for termination of registration pursuant to Section 12(g)(4) of the Securities Exchange Act of 1934, as amended; or (k) Any action similar to any of those enumerated above. ITEM 5. INTEREST IN SECURITIES OF THE ISSUER. (a) The Partnership and GEAM beneficially own 2,832,266 shares of Common Stock, representing 59.29% of the shares of such class that would be outstanding upon (i) the exercise of all the outstanding Warrants and 1999 Warrants exercisable, in aggregate, for 851,156 shares of Common Stock and (ii) the conversion of all the outstanding Notes and 1999 Notes, which are convertible into 1,331,250 shares of Common Stock (calculated using the current conversion ratios). Pursuant to the Settlement Agreement, the Partnership and GEAM have the right to vote 570,375 shares of Common Stock owned by Barnett on any election for directors in favor of nominees selected by the Board of Directors, subject to an obligation to vote for Barnett's election or under certain circumstances, in the event of his death, his executor. The Reporting Persons disclaim the beneficial ownership of all the shares subject to the Settlement Agreement. Page 10 of 23 Pages (b) To the best knowledge of the Reporting Persons, no person other than the Reporting Persons has the power to vote or to direct the vote or to dispose or direct the disposition of any of the securities which they may be deemed to beneficially own. (c) No Reporting Person nor to the best knowledge of each Reporting Person, any person identified in Schedules II or III, beneficially owns any shares of Common Stock or has effected any transaction in shares of Common Stock during the preceding 60 days. (d) No other person except for the Reporting Persons are known to have the rights to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, the shares of Common Stock beneficially owned by the Reporting Persons and covered by this Statement. (e) Not applicable. ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONS WITH RESPECT TO SECURITIES OF THE ISSUER. In July, 1999, the Partnership and GEAM have entered into the Settlement Agreement, pursuant to which the Partnership and GEAM are entitled to vote 570,375 shares of Common Stock owned by Barnett on any election for directors in favor of nominees selected by the Board of Directors, subject to an obligation to vote for Barnett's election or under certain circumstances, in the event of his death, his executor. Except as set forth above, there are no contracts, arrangements, understandings or relationships (legal or otherwise) among the Partnership, GEAM, or GE or, to the best of their knowledge, any executive officer or director of any of them and any other person with respect to any securities of the Issuer, including any contract, arrangement, understanding or relationship concerning the transfer or the voting of any securities of the Issuer, finders fees, joint ventures, loan or option arrangements, puts or calls, guarantees or profits, division of profits or loss, or the giving or withholding of parcels. ITEM 7. MATERIAL TO BE FILED AS EXHIBITS. Exhibit I Voting Trust Agreement made effective as of July 16, 1999, among Jeffrey M. Barnett, Jephco Holdings, Barnesco Holdings Ltd., GE Investment Private Placement Partners II, a Limited Partnership and GE Asset Management Incorporated. Exhibit II Security Agreement dated as of October 6, 1999, among the Partnership, the Issuer and certain subsidiaries of the Issuer signatories thereto. The Note, Stock Purchase & Warrant Agreement, dated November 30, 1995, and Amendments thereof, dated May 31, 1996, and March 14, 1997, respectively, between the Issuer and the Partnership was attached as Exhibit I to the Amendment No. 1 dated March 14, 1997, to Schedule 13D filed by the Reporting Persons on March 14, 1997, and is incorporated herein by reference. Page 11 of 23 Pages Amendment No. 3 dated October 17, 1997, to the Note, Stock Purchase & Warrant Agreement, dated November 30, 1995 (as amended) was attached as Exhibit I to the Amendment No. 2 to the Schedule 13D filed by the Reporting Persons on November 6, 1997 and is incorporated herein by reference. Amendment No. 4 dated December 8, 1998, to the Note, Stock Purchase & Warrant Agreement, dated November 30, 1995 (as amended) was attached as Exhibit I to the Amendment No. 4 to the Schedule 13D filed by the Reporting Persons on December 22, 1997 and is incorporated herein by reference. Note Agreement dated December 8, 1998, between the Issuer and the Partnership was attached as Exhibit II to the Amendment No. 4 to the Schedule 13D filed by the Reporting Persons on December 22, 1997 and is incorporated herein by reference. Side Letter Agreement, dated as of March 12, 1997, between the Partnership and the Issuer was attached as Exhibit II to the Amendment No. 1 to the Schedule 13D filed by the Reporting Persons on March 14, 1997, and is incorporated herein by reference. Note, Stock Purchase and Warrant Agreement dated as of January 1, 1999, between the Issuer and the Partnership was attached as Exhibit I to the Amendment No. 5 to the Schedule 13D filed by the Reporting Persons on February 23, 1999, and is incorporated herein by reference. SCHEDULE I, II AND III. Schedules I, II and III to the Schedule 13D are hereby amended and restated in their entirety as set forth in the revised versions thereof attached hereto. Page 12 of 23 Pages SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. GE INVESTMENT PRIVATE PLACEMENT PARTNERS II, A LIMITED PARTNERSHIP By: GE Asset Management Incorporated, Its General Partner By: /s/ Michael M. Pastore ----------------------------------------- Name: Michael M. Pastore Title: Vice President Dated: April 19, 2001 Page 13 of 23 Pages SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. GENERAL ELECTRIC COMPANY By: /s/ John H. Myers -------------------------------------- Name: John H. Myers Title: Vice President Dated: April 19, 2001 Page 14 of 23 Pages SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. GE ASSET MANAGEMENT INCORPORATED By: /s/ Michael M. Pastore --------------------------------------- Name: Michael M. Pastore Title: Vice President Dated: April 19, 2001 Page 15 of 23 Pages SCHEDULE I JOINT FILING AGREEMENT The undersigned parties hereby agree that the Schedule 13D filed herewith (and any amendments thereto) relating to Common Stock of Elephant & Castle Group Inc. is being filed jointly with the Securities and Exchange Commission pursuant to Section 13-d-1(f) on behalf of each such person. Dated: April 19, 2001 GE INVESTMENT PRIVATE PLACEMENT PARTNERS II, A LIMITED PARTNERSHIP By: GE Asset Management Incorporated, Its General Partner By: /s/ Michael M. Pastore --------------------------------------- Name: Michael M. Pastore Title: Vice President GENERAL ELECTRIC COMPANY By: /s/ John H. Myers --------------------------------------- Name: John H. Myers Title: Vice President GE ASSET MANAGEMENT INCORPORATED By: /s/ Michael M. Pastore --------------------------------------- Name: Michael M. Pastore Title: Vice President Page 16 of 23 Pages SCHEDULE II GE ASSET MANAGEMENT INCORPORATED, General Partner of GE Investment Private Placement Partners II, a Limited Partnership The business address of each of the persons listed below is 3003 Summer Street, P.O. Box 7900, Stamford, Connecticut 06904. The names and principal occupations of the Officers of GE Asset Management Incorporated ("GEAM") are as follows: Officers Position(s) John H. Myers Chairman of the Board and President Eugene K. Bolton Executive Vice President - Domestic Equity Investments Michael J. Cosgrove Executive Vice President - Sales and Marketing Ralph R. Layman Executive Vice President - International Equity Investments Alan M. Lewis Executive Vice President - General Counsel and Secretary Robert A. MacDougall Executive Vice President - Fixed Income Geoffrey R. Norman Executive Vice President - Marketing Donald W. Torey Executive Vice President - Real Estate and Private Equities John J. Walker Executive Vice President - Chief Financial Officer Anthony J. Sirabella Senior Vice President - Chief Information Officer Christopher D. Brown Senior Vice President - Equity Portfolios David B. Carlson Senior Vice President - Equity Portfolios Jane E. Hackney Senior Vice President - Equity Investments Peter J. Hathaway Senior Vice President - Equity Portfolios Damian J. Maroun Senior Vice President - Equity Trading Paul C. Reinhardt Senior Vice President - Equity Portfolios Richard L. Sanderson Senior Vice President - Equity Research Christopher W. Smith Senior Vice President - Equity Investments Ralph E. Whitman Senior Vice President - Equity Portfolios Nancy A. Ward Vice President - Client Portfolio Manager - Domestic Equities Gerald L. Igou Vice President - Equity Investments Mark A. Mitchell Vice President - Equity Investments Page 17 of 23 Pages John H. Schaetzl Vice President - Equity Investments Brian Hopkinson Senior Vice President - International Equity Portfolios Daizo Motoyoshi Senior Vice President - International Equity Portfolios Michael J. Solecki Senior Vice President - International Equity Portfolios Judith A. Studer Senior Vice President - International Equity Portfolios Peter Gillespie Vice President - International Equity Portfolios T. Brent Jones Vice President - International Equity Portfolios Paul Nestro Vice President - International Equity Portfolios Makoto F. Sumino Vice President - International Equity Portfolios Robert W. Aufiero Vice President - Fixed Income Kathleen S. Brooks Vice President - Fixed Income Paul M. Colonna Vice President - Fixed Income William M. Healey Vice President - Fixed Income Craig M. Varrelman Vice President - Client Portfolio Manager - Fixed Income Michael J. Caufield Senior Vice President - Municipal Bonds Robert R. Kaelin Senior Vice President - Municipal Bonds Susan M. Courtney Vice President - Municipal Bonds Stella V. Lou Vice President - Municipal Bonds Michael A. Sullivan Vice President - Municipal Bonds James M. Mara Senior Vice President - International Private Equities Wolfe H. Bragin Vice President - Private Equities Andreas T. Hildebrand Vice President - Private Equities Patrick J. McNeela Vice President - Private Equities David W. Wiederecht Vice President - Private Equities Philip A. Riordan Senior Vice President - Real Estate B. Bradford Barrett Vice President - Real Estate Robert P. Gigliotti Vice President - Real Estate Preston R. Sargent Vice President - Real Estate Timothy M. Morris Vice President - Risk Management Sandra J. O'Keefe Vice President - Financial Planning & Analysis William F. Ruoff, III Vice President - Quality Michael J. Tansley Vice President & Controller Page 18 of 23 Pages Matthew J. Simpson Senior Vice President, Gen. Counsel - Investment Services & Asst. Secretary Paul J. Crispino Vice President - Tax Counsel Judith M. Bandler Vice President - Benefits Counsel Marc R. Bryant Vice President - Assoc. Gen. Counsel & Asst. Secretary Jeanne M. La Porta Vice President - Assoc. Gen. Counsel & Asst. Secretary Michael M. Pastore Vice President - Assoc. Gen. Counsel & Asst. Secretary Scott A. Silberstein Vice President - Assoc. Gen. Counsel & Asst. Secretary Michael J. Strone Vice President - Assoc. Gen. Counsel & Asst. Secretary Anthony H. Zacharski Vice President - Assoc. Gen. Counsel & Asst. Secretary The names and principal occupations of the Directors of GEAM are as follows: Eugene K. Bolton Executive Vice President of GEAM and Trustee of GEPT Michael J. Cosgrove Executive Vice President of GEAM and Trustee of GEPT John H. Myers Vice President of General Electric Company, Chairman of the Board and President GEAM and Trustee of GEPT Ralph R. Layman Executive Vice President of GEAM and Trustee of GEPT Alan M. Lewis Executive Vice President, General Counsel and Secretary of GEAM and Trustee of GEPT Robert A. MacDougall Executive Vice President of GEAM and Trustee of GEPT Geoffrey R. Norman Executive Vice President of GEAM and Trustee of GEPT Donald W. Torey Executive Vice President of GEAM and Trustee of GEPT John J. Walker Executive Vice President - Chief Financial Officer of GEAM and Trustee of GEPT Page 19 of 23 Pages SCHEDULE III General Electric Company Executive Officers The names and principal occupations of the Officers of General Electric Company are as follows: NAME PRESENT PRESENT - ---- BUSINESS ADDRESS PRINCIPAL OCCUPATION ---------------- -------------------- J.F. Welch, Jr. General Electric Company Chairman of the Board and 3135 Easton Turnpike Chief Executive Officer Fairfield, CT 06431 J.R. Immelt General Electric Company President 3135 Easton Turnpike General Electric Company Fairfield, CT 06431 P.D. Ameen General Electric Company Vice President and 3135 Easton Turnpike Comptroller Fairfield, CT 06431 F.S. Blake General Electric Company Senior Vice President - Corporate 3135 Easton Turnpike Fairfield, CT 06431 Business Development J.R. Bunt General Electric Company Vice President and Treasurer 3135 Easton Turnpike Fairfield, CT 06431 D.C. Calhoun General Electric Company Senior Vice President - 1 Neumann Way GE Aircraft Engines Cincinnati, OH 05215 W.J. Conaty General Electric Company Senior Vice President - 3135 Easton Turnpike Human Resources Fairfield, CT 06431 D.D. Dammerman General Electric Company Vice Chairman of the Board 3135 Easton Turnpike and Fairfield, CT 06431 Executive Officer, General Electric Company; Chairman, General Electric Capital Services, Inc. Scott C. Donnelly General Electric Company Senior Vice President - P. O. Box 8 Corporate Research Schenectady, NY 12301 and Development Matthew J. Espe General Electric Company Senior Vice President - Nela Park GE Lighting Cleveland, OH 44112 B.W. Heineman, Jr. General Electric Company Senior Vice President - 3135 Easton Turnpike General Counsel and Secretary Fairfield, CT 06431 J.M. Hogan General Electric Company Senior Vice President - P.O. Box 414 GE Medical Systems Milwaukee, WI 53201 Page 20 of 23 Pages L. R. Johnston General Electric Company Senior Vice President - Appliance Park GE Appliances Louisville, KY 40225 J. Krenicki, Jr. General Electric Company Vice President - 2901 East Lake Road GE Transportation Systems Erie, PA 16531 R.W. Nelson General Electric Company Vice President - 3135 Easton Turnpike Corporate Financial Planning Fairfield, CT 06431 and Analysis G.M. Reiner General Electric Company Senior Vice President - 3135 Easton Turnpike Chief Information Officer Fairfield, CT 06431 J. G. Rice General Electric Company Senior Vice President - 1 River Road GE Power Systems Schenectady, NY 12345 G.L. Rogers General Electric Company Senior Vice President - 1 Plastics Avenue GE Plastics Pittsfield, MA 01201 K.S. Sherin General Electric Company Senior Vice President - 3135 Easton Turnpike Finance Fairfield, CT 06431 and Chief Financial Officer L.G. Trotter General Electric Company Senior Vice President - 41 Woodford Avenue GE Industrial Systems Plainville, CT 06062 R. C. Wright National Broadcasting Vice Chairman of the Board Company, Inc. and 30 Rockefeller Plaza Executive Officer, General New York, NY 10112 Electric Company; President and Chief Executive Officer, National Broadcasting Company, Inc. The names and principal occupations of Directors of General Electric Company are as follows: PRESENT PRESENT NAME BUSINESS ADDRESS PRINCIPAL OCCUPATION - ---- ---------------- -------------------- J.I.Cash, Jr. Harvard Business School Professor of Business Morgan Hall Administration-Graduate Soldiers Field Road School of Business Boston, MA 02163 Administration, Harvard University S.S. Cathcart 222 Wisconsin Avenue Retired Chairman, Suite 103 Illinois Tool Works Lake Forest, IL 60045 Page 21 of 23 Pages D.D. Dammerman General Electric Company Vice Chairman of the Board and 3135 Easton Turnpike Executive Officer, General Fairfield, CT 06431 Electric Company; Chairman, General Electric Capital Services, Inc. P. Fresco Fiat SpA Chairman of the Board, via Nizza 250 Fiat SpA 10126 Torino, Italy A. M. Fudge Kraft Foods, Inc. Executive Vice President, 555 South Broadway Kraft Foods, Inc. Tarrytown, NY 10591 C.X. Gonzalez Kimberly-Clark de Mexico, Chairman of the Board S.A. de C.V. and Chief Executive Officer, Jose Luis Lagrange 103, Kimberly-Clark de Mexico, Tercero Piso S.A. de C.V. Colonia Los Morales Mexico, D.F. 11510, Mexico J.R. Immelt General Electric Company President 3135 Easton Turnpike General Electric Company Fairfield, CT 06431 A. Jung Avon Products, Inc. President and Chief 1345 Avenue of the Americas Executive Officer, New York, NY 10105 Avon Products, Inc. R. B. Lazarus Ogilvy & Mather Worldwide Chairman and Chief 309 West 49th Street Executive Officer New York, NY 10019-7316 K.G. Langone Invemed Associates, Inc. Chairman, President and Chief 375 Park Avenue Executive Officer, New York, NY 10152 Invemed Associates, Inc. Scott G. McNealy Sun Microsystems, Inc. Chairman, President and Chief 901 San Antonio Road Executive Officer, Palo Alto, CA 94303-4900 Sun Microsystems, Inc. G.G. Michelson Federated Department Stores Former Member of the 151 West 34th Street Board of Directors, New York, NY 10001 Federated Department Stores Page 22 of 23 Pages S. Nunn King & Spalding Partner, King & Spalding 191 Peachtree Street, N.E. Atlanta, Georgia 30303 R.S. Penske Penske Corporation Chairman of the Board 13400 Outer Drive, West and President, Penske Detroit, MI 48239-4001 Corporation F.H.T. Rhodes Cornell University President Emeritus, 3104 Snee Building Cornell University Ithaca, NY 14853 A.C. Sigler Champion International Retired Chairman of the Corporation Board and CEO 1 Champion Plaza and former Director, Stamford, CT 06921 Champion International Corporation D.A. Warner III J. P. Morgan & Co., Inc. Chairman of the Board, & Morgan Guaranty Trust Co. President, and Chief 60 Wall Street Executive Officer, New York, NY 10260 J.P. Morgan & Co. Incorporated and Morgan Guaranty Trust Company J.F. Welch, Jr. General Electric Company Chairman of the Board 3135 Easton Turnpike and Chief Executive Fairfield, CT 06431 Officer, General Electric Company R. C. Wright National Broadcasting Company, Inc. Vice Chairman of the Board and 30 Rockefeller Plaza Executive Officer, General New York, NY 10112 Electric Company; President and Chief Executive Officer, National Broadcasting Company, Inc. CITIZENSHIP ----------- P. Fresco Italy C. X. Gonzalez Mexico Andrea Jung Canada All Others U.S.A. Page 23 of 23 Pages EX-99.1 2 a2045022zex-99_1.txt EXHIBIT 99.1 Exhibit 99.1 VOTING TRUST AGREEMENT THIS AGREEMENT made effective as of the 16th day of July, 1999. BETWEEN: JEFFREY M. BARNETT, businessman, of 1067 West 46th Avenue, Vancouver, British Columbia V6M 2J9 (hereinafter referred to as "Barnett") OF THE FIRST PART AND JEPHCO HOLDINGS, having an office at 1067 West 46th Avenue, Vancouver, British Columbia V6M 2J9 (hereinafter referred to as " Jephco") OF THE SECOND PART AND BARNESCO HOLDINGS LTD., a British Columbia company having an office at 1067 West 46th Avenue, Vancouver, British Columbia V6M 2J9 (hereinafter referred to as" Barnesco") OF THE THIRD PART AND GE INVESTMENT PRIVATE PLACEMENT PARTNERS II, A LIMITED PARTNERSHIP, a Delaware limited partnership, having an office at c/o GE Investment Management Incorporated, 3003 Summer Street, Stamford, Connecticut, USA, 06904 (hereinafter referred to as "GEIPPPII") OF THE FOURTH PART AND GE INVESTMENT MANAGEMENT INCORPORATED, in its capacity as general partner of GEIPPPII, having an office at 3003 Summer Street, Stamford, Connecticut, USA, 06904 (hereinafter referred to as the "Trustee") OF THE FIFTH PART WHEREAS A. Barnett is the registered and beneficial owner of ___________ Common shares of Elephant & Castle Group Inc. ("E&C"); B. E&C and GEIPPPII have entered into the Note Agreement (as defined below) whereby GEIPPPII agreed to purchase from E&C certain convertible subordinated debentures of E&C, 111,111 Common shares of E&C, and certain warrants for the purchase of further Common shares of E&C; C. E&C is in default of certain covenants in the Note Agreement; and D. As partial consideration for the waiver by GEIPPPII of those defaults under the Note Agreement Barnett has agreed to transfer the shares of E&C registered in his name to the Trustee to be voted by the Trustee in accordance with the terms of this Agreement. PART 1.: DEFINITIONS 1.1 In this Agreement: (a) "Agreement" means this agreement and any schedule hereto, including any and all agreements to the extent they amend or supplement this Agreement; (b) "arm's length" has the same interpretation as given to it in the context of the Income Tax Act (Canada); (c) "Event of Default" means an Event of Default as defined in the Note Agreement; (d) "Note Agreement" means the Note, Stock Purchase and Warrant Agreement dated November 30, 1995 between E&C and GEIPPPII, as amended or supplemented from time to time; (e) "Security Agreement" means any security agreement by which E&C grants or has granted a security interest in any of its assets to GEIPPPIl; (f) "Settlement Agreement" means the Settlement Agreement between E&C, Jephco, Barnesco and Barnett dated as of June 25, 1999; (g) "Shares" means the approximately 562,000 Common shares in the capital of E&C (or such other number of securities into which the Shares may be changed by reason of a reorganization or recapitalization of E&C or after a consolidation, reclassification, subdivision or other change in the share capital of E&C) and which prior to the effective date of this Agreement were held by Barnett, Bamesco or Jephco together with any other shares in E&C which may, by reason of sections 2.1 or 5.1 or otherwise, become subject to the Voting Trust; 2 (h) "Voting Trust" means the obligations of the Trustee under the terms of this Agreement from time to time to vote the Shares in accordance with, the terms of this Agreement and to otherwise deal with the Shares having regard to the beneficial ownership of the Shares by Barnett, Barnesco or Jephco and their respective heirs, executors, administrators, successors and permitted assigns. PART 2.: TRANSFER OF REGISTRATION OF SHARES TO TRUSTEE 2.1 Barnett will forthwith endorse in blank, assign and deliver to the Trustee the certificate or certificates for the Shares and will do or cause to be done all things necessary, within his power, to effect registration in the Register of Members and Transfers of E&C of the Shares in the name of the Trustee. If Barnett, Barnesco or Jephco, or any corporation controlled (as that term is defined in the Company Act (British Columbia)) by either of them, acquire any additional shares in E&C during the term of this Agreement for whatever reason, including, without limitation, as a result of the conversion of the promissory note issued by E&C pursuant to the Settlement Agreement, the exercise of stock options or by purchases on the open market, such shares, if voting, will become subject to this Agreement, will be registered in the name of the Trustee and will be deemed to be included in the Shares, and Barnett and Jephco will, or will cause, the certificates for such Shares to be endorsed, assigned and delivered to the Trustee as provided above. With respect to the 100,000 Common shares of E&C which arc the subject of the "Barnett Pledge Agreement" (as defined in the Settlement Agreement), notwithstanding the other provisions of this Agreement, Barnett and GEIPPPII will use reasonable efforts to cause the pledgee of those shares to have the pledge of those shares replaced by a pledge of a trust certificate or certificates issued hereunder representing those shares and, until that is done, Barnett covenants and agrees to deliver to the Trustee, each year, a proxy to exercise the voting rights attached to those shares. Barnett also covenants and agrees not to revoke any such proxy. 2.2 The Trustee will surrender to the proper officer of E&C for cancellation all certificates for the Shares which have been endorsed for transfer and delivered to it pursuant to section 2.1, in exchange for new certificates in the name of the Trustee evidencing that the Shares have been registered in its name. 2.3 The Trustee will, on the request of any person transferring any of the Shares to it, issue one or more trust certificates in the name of that person, representing those Shares, and will maintain a register of the holders of trust certificates issued hereunder. The Trustee will determine the form of trust certificate to be used for this purpose and the execution of a trust certificate referring to this Agreement by the Trustee will be conclusive evidence of its determination of that form of certificate. No transfer, assignment, disposition or other dealing with a trust certificate will be valid for any purpose unless noted or entered on the register of the holders of trust certificates. The Trustee may require proof, to its satisfaction (acting reasonably), of the execution by the registered holder of a trust certificate of any instrument purporting to transfer, assign or otherwise deal with that trust certificate. 3 PART 3.: POWERS OF THE TRUSTEE 3.1 During the term of this Agreement, while it remains the holder of the Shares and until the Voting Trust has been terminated, the Trustee will, subject to the provisions hereinafter set forth, have the sole and exclusive right to exercise the voting rights attached to the Shares, and will be entitled in its absolute discretion to exercise the said voting rights to the same extent as would be the case if it was the absolute owner of such Shares. 3.2 Without restricting the generality of the foregoing but subject to section 4.1, the Trustee will have the power to vote the Shares at all regular and special meetings of the members of E&C and may vote for, do or assent or consent to any act or proceeding which the shareholders or members of E&C might or could vote for, or assent or consent, or vote against or withhold its consent or assent, and will have all the powers, rights and privileges of a shareholder or member of E&C as if the Trustee held the beneficial interest in the Shares. 3.3 The Trustee may vote the Shares registered in its naive by written proxy in the form permitted by the Memorandum or Articles of E&C or in such other form as may be acceptable to the chairman of any meeting of the members of E&C at which any Shares are to be voted. 3.4 The Trustee will have the power to delegate its discretionary powers by instrument in writing to another person to act as trustee hereunder, as it sees fit. PART 4.: SPECIFIC RESTRICTIONS OF POWERS OF TRUSTEE 4.1 Notwithstanding the provisions of Part 3, the Trustee will exercise the voting rights attached to the Shares in favour of any resolution to elect Barnett to the board of directors of E&C and, if the estate of Barnett holds in aggregate 10% or more of the Common shares of E&C at the relevant time (including in that calculation any shares distributed by the executor to Barnett's wife or children from Barnett's estate), in favour of any resolution to elect Barnett's executor to the board of directors of E&C. In the absence of a nomination by any other person of Barnett or his executor as a director of E&C, the Trustee will, on the written request of Barnett or his executor, make such nomination. The Trustee may otherwise exercise the voting rights attached to the Shares with respect to an; resolution to elect directors of E&C as it sees fit, in its discretion. On all other resolutions to be voted on by the shareholders of E&C the Trustee will exercise the voting rights attached to the Shares as directed in writing by the registered holder of any trust certificate with respect to any Shares represented by that certificate, and otherwise as directed in writing by Barnett. 4.2 The Trustee does not have the power or authority, as such, to sell or dispose of any Shares which are subject to this Agreement except: 4 (a) pursuant to an amalgamation or merger involving E&C, in which case shares received in exchange for Shares will be deemed to be the Shares for which they were substituted and will be held on the same terms and conditions; or (b) pursuant to a distribution to the person or persons beneficially entitled to such Shares pursuant to section 6.2. PART 5.: DIVIDENDS 5.1 Any and all dividends, whether in cash, rights, or stock, declared by E&C and accruing to the registered holder of any Share are the property of the person who transferred the Share to the Trustee, if no trust certificate has been issued, and to the registered holder of the trust certificate issued by the Trustee with respect to that Share if a trust certificate has been issued, and may be paid, issued or delivered directly to that person, or as that person directs in writing, in accordance with its beneficial entitlement thereto in full satisfaction of E&C's obligations with regard to payment of dividends; PROVIDED that if such dividends are in the form of shares, or rights offerings for shares, of E&C, such shares, if voting, will become subject to this Agreement, will be registered in the name of the Trustee and will be deemed to be included in the Shares. PART 6.: DURATION OF VOTING TRUST 6.1 The term of this Agreement will be from the date hereof until January 1, 2002, unless this Agreement is earlier terminated as provided below. 6.2 Upon the termination of this Agreement, in whole or part, as provided in sections 6.1 or 7.1, the Trustee shall execute such transfers and assignments to effectively transfer to each person who transferred a Share to the Trustee, if no trust certificate has been issued with respect to that Share, and to the registered holder of the trust certificate issued by the Trustee with respect to that Share if a trust certificate has been issued, registration of that Share in the Register of Members and Transfers of E&C and the Trustee will do and cause to be done all things required to vest in such person all of the Trustee's interest in that Share, within forty-five (45) days from the date of termination of this Agreement. PART 7.: EARLY TERMINATION OF VOTING TRUST 7.1 This Agreement may be terminated prior to the termination date in section 6.1 by Barnett by notice in writing to the Trustee and to GEIPPPII on the happening of any of the following events, such termination to be effective fifteen (15) days after receipt of that notice: (a) GEIPPPII declares that an Event of Default has occurred under the Note Agreement or the Security Agreement; 5 (b) GEIPPPII sells, assigns, transfers or otherwise disposes of not less than 90% of the Notes (as defined in the Note Agreement) in a transaction with an arm's length third party; or (c) E&C fails to pay any payment due under the Settlement Agreement within 60 days of the date such payment became due. 7.2 Barnett or the registered holder of a trust certificate may terminate the Voting Trust with respect to some or all of the Shares of which they are the beneficial owner during the term of this Agreement if he or such registered holder, as the case may be, provides evidence satisfactory to the Trustee, in its discretion, that he or such registered holder has made a bona fide sale or assignment of the beneficial interest in those Shares to an arm's length third party who is a Qualified Institutional Buyer, as that term is defined in Rule 144A of the Rules promulgated by the Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended (United States of America), or by a transaction that complies with Rule 144 of those same Rules. In that event, on the delivery to the Trustee of the trust certificate for those Shares if one has been issued, the Trustee shall execute such transfers and assignments to effectively transfer to the purchaser or assignee registration in the Register of Members and Transfers of E&C of the portion of the Shares to be released from the Voting Trust pursuant to this section, and the Trustee will do and cause to be done all things required to vest in such purchaser or assignee all of the Trustee's interest in those Shares, within forty-five (45) days from the date of receipt by the Trustee of the evidence referred to above and the relevant trust certificate, if any. PART 8.: POWER TO AMEND THE VOTING TRUST AGREEMENT 8.1 This Agreement may not be amended unless there is unanimous agreement of the parties hereto or their respective heirs, executors, administrators, successors and permitted assigns. PART 9.: COMPENSATION FOR TRUSTEE 9.1 The Trustee shall not be entitled to any remuneration by virtue of acting as trustee pursuant to this Agreement. PART 10.: INDEMNITY AND LIABILITY OF TRUSTEE 10.1 GEIPPPII will save and hold the Trustee harmless from any and all liability and expense arising solely out of the holding by the Trustee of the Shares as Trustee, save and except any such liability which arises as a result of the willful misconduct or gross negligence of the Trustee. 10.2 The parties hereto agree that the Trustee shall not be liable for any of its actions taken pursuant to this Agreement in good faith, save and except any such liability which arises as a result of the willful misconduct or gross negligence of the Trustee. 6 10.3 The Trustee is permitted to act as general partner of GEIPPPII, or in any other capacity with respect to GEIPPPII, or to enter into any business with E&C, Barnett or GEIPPPII, or corporations directly or indirectly controlled by any of them in the same manner that it could if not a Trustee, without being liable to account to the Voting Trust for any profit, remuneration or other financial benefits. PART 11.: CONCERNING THE TRUSTEE 11.1 The Trustee may at any time resign from the office of Trustee hereof on giving not less than ten (10) days' notice addressed to the other parties to this Agreement of its resignation and the appointment of a replacement trustee by it by notice in writing to the other parties hereto, which replacement trustee must be a party related to the Trustee. 11.2 Notice of all changes in the trusteeship hereunder shall be endorsed on or attached to this Agreement and shall be signed by the successor Trustee and every such notice shall be sufficient evidence to any person having dealings with the Trustee for the time being of the facts to which it relates. 11.3 The Trustee may at any time apply to the Supreme Court of British Columbia for direction on any matter relating to the Voting Trust. 11.4 Barnett, E&C, and the Company will furnish to the Trustee such evidence of compliance with any provision hereof, or evidence of any Event of Default, and in such form, as the Trustee may reasonably require by written notice to Barnett, E&C or GEIPPPII, as applicable. 11.5 In the exercise of any right or duty hereunder, the Trustee may, if it is acting in good faith, rely as to the truth of the statements and the accuracy of any opinion expressed therein, on any statutory declaration, opinion, report, certificate or other evidence famished to tire Trustee pursuant to a provision hereof or pursuant to a request of the Trustee, if the Trustee examines the same and determines that such evidence complies with the applicable requirements of this Agreement. 11.6 The Trustee may employ or retain such counsel, accountants, appraisers, or other experts or advisers as it reasonably requires for the purpose of discharging its duties hereunder and may pay reasonable remuneration for all services so performed by any of them, without taxation of costs of any counsel, and will not be responsible for any misconduct or negligence on the part of any of them who has been selected with due care by the Trustee. PART 12.: NOTICE 12.1 Any notice required to be given under this Agreement will be deemed to be well and sufficiently given by delivery or by telecopy as follows: 7 (a) to Barnett or to Jephco or Barnesco at: 1067 West 46th Avenue, Vancouver, British Columbia V6M 2J9 Telecopy Number: (604)________ with a copy to: McAlpine Gudmunseth Mickelson The Landing 250 - 375 Water Street Vancouver, British Columbia Telecopy Number: (604) 685-8434 Attention: Mr. Stein Gudmunseth Q.C. (b) to GE Investment Private Placement Partners, A Limited Partnership at: c/o GE Investment Management Incorporated 3003 Summer Street, Stamford, Connecticut, USA, 06904 Telecopy Number: Attention: Mr. with a copy to: Dewey Ballantine LLP 1301 Avenue of the Americas New York, New York, USA, 10019 Attention: Telecopy Number: (c) to the Trustee at: GE Investment Management Incorporated 3003 Summer Street Stamford, Connecticut, USA, 06904 Attention: Mr. Telecopy Number: 8 with a copy to: Dewey Ballantine LLP 1301 Avenue of the Americas New York, New York, USA, 10019 Attention: Telecopy Number: and any notice given as aforesaid will be deemed to have been given upon delivery or transmission, as applicable. Any party may from time to time by notice in writing change his address for the purpose of this section 12.1. PART 13.: EXECUTION IN COUNTERPARTS 13.1 This Agreement may be executed in several counterparts, each of which so executed will be deemed to be the original, and such counterparts will together constitute one and the same instrument. PART 14.: ENUREMENT 14.1 This Agreement will be binding upon and shall enure to the benefit of the parties hereto, and the respective heirs, executors, administrators, successors and permitted assigns. PART 15.: ENTIRE AGREEMENT 15.1 This Agreement constitutes the entire agreement between the parties with respect to the matters set forth herein and replaces and supersedes all and any prior agreements, memoranda, correspondence, communications, negotiations, representations and warranties, whether verbal or written, express or implied, statutory or otherwise between the parties hereto. PART 16.: GOVERNING LAW 16.1 This Agreement is governed by, and is to be interpreted in accordance with, the laws of British Columbia and the laws of Canada applicable in British Columbia. PART 17.: SUBMISSION TO JURISDICTION 17.1 Each of the parties irrevocably submits to the jurisdiction of the Supreme Court of British Columbia in any action brought in that Court and each party to this Agreement waives, and will not assert by way of motion; as a defense, or otherwise; in any Permitted Action, any claim that: (a) that party is not subject to the jurisdiction of the courts of British Columbia; 9 (b) the action is brought in an inconvenient form; (c) the venue of the action is improper; or (d) any subject matter of the action may not be enforced in or by the courts of British Columbia. In any suit or action brought to obtain a judgment for the recognition or enforcement of any final judgment rendered in the action, no party to this Agreement will seek any review with respect to the merits of any such action, whether or not that party appears in or defends any such action. IN WITNESS WHEREOF the parties have executed this Agreement as of the day and year first. above written. /s/ Jeffrey M. Barnett - ---------------------------------- JEFFREY M. BARNETT GE INVESTMENT PRIVATE PLACEMENT PARTNERS II, A LIMITED PARTNERSHIP, by its general partner GE INVESTMENT MANAGEMENT INCORPORATED Per: _________________________________ BARNESCO HOLDINGS LTD. Per: /s/ Jeffrey M. Barnett ---------------------------- JEPHCO HOLDINGS Per: /s/ Jeffrey M. Barnett ----------------------------- 10 (a) that party is not subject to the jurisdiction of the courts of British Columbia; (b) the action is brought in an inconvenient form; (c) the venue of the action is improper; or (d) any subject matter of the action may not be enforced in or by the courts of British Columbia. In any suit or action brought to obtain a judgment for the recognition or enforcement of any final judgment rendered in the action, no party to this Agreement will seek any review with respect to the merits of any such action, whether or not that party appears in or defends any such action. IN WITNESS WHEREOF the parties have executed this Agreement as of the day and year first above written. - --------------------------------- JEFFREY M. BARNETT GE INVESTMENT PRIVATE PLACEMENT PARTNERS II, A LIMITED PARTNERSHIP, by its general partner GE INVESTMENT MANAGEMENT INCORPORATED Per: /s/ Anthony Mariani -------------------------------------------- Anthony Mariani, Vice President BARNESCO HOLDINGS LTD. Per: _________________________ JEPHCO HOLDINGS Per: _________________________ GE INVESTMENT MANAGEMENT INCORPORATED Per: /s/ Anthony Mariani ------------------------------------ Anthony Mariani, Vice President 11 EX-99.2 3 a2045022zex-99_2.txt EXHIBIT 99.2 Exhibit 99.2 EXECUTION COPY SECURITY AGREEMENT AMONG ELEPHANT & CASTLE GROUP INC., ITS SUBSIDIARIES SIGNATORIES HERETO, AND GE INVESTMENT PRIVATE PLACEMENT PARTNERS II, A LIMITED PARTNERSHIP dated as of October 6, 1999 TABLE OF CONTENTS Page 1. The Pledge and Security Interest. 1 2. The Secured Obligations 5 3. Continuing Security Interest; Transfer of Notes. 5 4. Debtor Remains Liable 6 5. Security and Pledge Interests Absolute 6 6. Delivery of Pledged Property 7 7. Dividends on Subsidiaries Shares 7 8. Subrogation, etc 7 9. Representations and Warranties 8 10. Certain Covenants 11 11. Secured Party 18 12. Default 19 13. Remedies 20 14. Closing Conditions 24 15. Miscellaneous Provisions. 25 Exhibit A -- List of Subsidiaries and Description of Shares Exhibit B -- Leases Exhibit C -- List of Properties Located in the United States Exhibit D -- Trademark Agreement (US) Exhibit E -- Assignment and Assumption of Lease Exhibit F -- Letter Agreement Exhibit G -- Landlord Consent Schedule 9.5(a) -- Consents of Third Parties Schedule 9.5(i) -- Actions, Suits and Proceedings SECURITY AGREEMENT THIS SECURITY AGREEMENT, dated as of October 6, 1999 (as the same may be amended, modified or supplemented from time to time, this "Agreement") by and among ELEPHANT & CASTLE GROUP INC., a corporation incorporated in the Province of British Columbia (the "Debtor") and each of its Subsidiaries signatories hereto and listed on Exhibit A hereto (the "Subsidiaries"), and GE Investment Private Placement Partners II, a Limited Partnership, a Delaware limited partnership (the "Secured Party"). WITNESSETH: WHEREAS, the Debtor and the Secured Party have entered into that certain Note, Stock Purchase and Warrant Agreement dated November 30, 1995 (as amended, the "Note, Stock Purchase and Warrant Agreement") and, pursuant to the Note, Stock Purchase and Warrant Agreement, the Debtor has executed and delivered to the Secured Party convertible subordinated debentures in the aggregate principal amount of $9,000,000 (collectively, the "Notes"). Terms used herein not otherwise defined shall have the meaning ascribed thereto in the Note, Stock Purchase and Warrant Agreement. WHEREAS, the Secured Party desires to receive certain security for the repayment of the Notes and has agreed to waive and forgive interest due on the Notes by the Debtor to the Secured Party for the period commencing June 1, 1999 and ending November 30, 1999 and, in exchange therefor, the Debtor and its Subsidiaries have agreed to execute this Agreement and, pursuant hereto, to pledge the Collateral (as hereinafter defined) as security for the prompt satisfaction of the Secured Obligations (as hereinafter defined). WHEREAS, each Subsidiary signatory hereto is a direct or indirect wholly-owned subsidiary of the Debtor and will obtain benefits from the waiver of the interest due on the Notes described above. NOW, THEREFORE, in consideration of the foregoing and the premises and for other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged and confessed, and intending to be legally bound hereby, the Debtor, its Subsidiaries and the Secured Party agree as follows: 1. THE PLEDGE AND SECURITY INTEREST. 1.1 In order to secure the prompt and unconditional payment and performance of the Secured Obligations (as herein defined), the Debtor and each of its Subsidiaries hereby: (a) grants to the Secured Party a lien and a first priority security interest in, and mortgages, assigns, transfers, delivers, pledges, sets over and confirms to the Secured Party all of the Debtor's and each such Subsidiary's right, title, interest (including all power of the Debtor and each such Subsidiary, if any, to pass greater title than it has itself), remedies, powers and privileges, of every kind and character now owned or hereafter acquired, created or arising in and to the following (all of the property referred to in this Section 1.1(a) and in Section 1.1(b) is hereinafter collectively called the "Collateral"): (i) all shares of capital stock or other equivalents of the Subsidiaries of the Debtor owned by the Debtor, as set forth on Exhibit A hereto, and any shares of capital stock or other equity interest of any Subsidiary obtained in the future by the Debtor and the certificates representing all such shares or equity interest ("Subsidiaries Shares"). (ii) all other debt or equity interests of the Debtor in its Subsidiaries listed on Exhibit A hereto, presently owned or from time to time acquired by the Debtor in any manner, and all dividends, distributions, interest, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all such debt or equity interests referred to in clause (i) above; (iii) all equipment now owned or hereafter acquired either by the Debtor or by its Subsidiaries, in all of its forms, located in the United States on all properties now or hereafter owned or leased by the Debtor or any of the Subsidiaries, a list of properties currently owned or leased by the Debtor or the Subsidiaries is attached hereto as Exhibit C, including, without limitation, all machinery and other goods, furniture, fixtures, furnishings, office supplies, appliances and all other similar types of tangible personal property of whatever nature (whether or not the same constitute fixtures) and all parts thereof and all accessions thereto, together with all parts, fittings, special tools, alterations, substitutions, replacements and accessions thereto. (iv) all receivables, accounts, contracts, contract rights, chattel paper, documents, instruments and general intangibles (not otherwise specifically described herein) of the Debtor and each Subsidiary, whether or not arising out of or in connection with the sale or lease of goods or the rendering of services, and all rights of the Debtor and each Subsidiary now or hereafter existing in and to all security agreements, guaranties and other contracts securing or otherwise relating to any such receivables, contracts, contract rights, chattel paper, documents, instruments and general intangibles, (any and all such receivables, contracts, contract rights, chattel paper, documents and instruments being the "Receivables", and any and all such security agreements, guaranties and other contracts being the "Related Contracts"). (v) all claims, awards and payments made as a result of the exercise of the right of eminent domain or condemnation against the property or any part thereof (the "Property") subject to any of the leases now or hereafter entered into 2 by the Debtor or any of the Subsidiaries (the "Leases"), a list of the Leases now held by Debtor and its Subsidiaries is set forth on Exhibit B hereto, or payments received in lieu of the exercise of any such right, all rents, income or profits arising as from or in connection with any of the Leases, all compensation received as damages for injury to the Property, all proceeds from insurance on improvements to the Property, and all proceeds of any sale, assignment or subletting of any of the Leases (collectively, "Lease Proceeds"). (vi) all products and proceeds of any of the foregoing including, without limitation, proceeds which constitute property of the types described in clauses (i) through (v) above, proceeds deposited from time to time in any lock boxes of the Debtor or any Subsidiary and, to the extent not otherwise included, all payments under insurance, or any indemnity, warranty or guaranty, payable by reason of loss or damage to or otherwise with respect to any of the foregoing, and all accessions, appurtenances and additions to and substitutions for any of the foregoing and all renewals and replacements of any of the foregoing, and all accounts, receivables, account receivables, instruments, notes, chattel paper, documents (including all documents of title), books, records, contract rights and general intangibles arising in connection with any of the foregoing. (vii) (A) all U.S. and foreign copyrights, whether statutory or common law, registered or unregistered, now or hereafter in force throughout the world including, without limitation copyrights registered in the United States Copyright Office or anywhere else in the world, applications for registration thereof, whether pending or in preparation for filing (all of the foregoing items in this clause (A) being collectively called a "Copyright"), mask works, and computer software and databases; (B) all Copyright licenses; (C) all extensions or renewals of any of the items described in clauses (A) and (B); (D) all proceeds of, and rights associated with, the foregoing, including without limitation royalties, income, payments, claims, damages and proceeds of suit; and (E) the right (but not obligation) to sue in the name of the Debtor or any Subsidiary for any past, present or future infringement of any Copyright, and all rights (but not obligations) corresponding thereto in the United States and any foreign country. (viii) (A) all U.S. and foreign patents, registered designs, whether or not registered, and other trade secrets, research and development, formulae, know-how, proprietary and intellectual property rights and information, including all grants, registrations and applications relating thereto, which are presently, or in the future may be, owned, issued, acquired, or used (whether pursuant to a license or otherwise) by the Debtor or any Subsidiary, in whole or in part, and all patent rights with respect thereto throughout the world (all of the foregoing items in this clause (A) being collectively called a "Patent"); (B) all of the Debtor's and each Subsidiary's right, title, and interest in all patentable inventions, and to file applications for Patents under federal law or the law or regulation of any foreign 3 country, and to request reexamination and/or reissue of any U.S. or foreign patents, and to extend such patents and patent rights; (C) all proceeds of, and rights associated with, the foregoing, including without limitation royalties, income, payments, claims, damages and proceeds of infringement suits; and (D) the right (but not obligation) to sue or bring interference proceedings in the name of the Debtor or any Subsidiary for past, present or future infringement of the Patents, and all rights (but not obligations) corresponding thereto in the United States and any foreign country. (b) grants to the Secured Party a lien and a first priority security interest in, and mortgages and pledges to the Secured Party all of the Debtor's and each Subsidiary's right, title, interest (including all power of the Debtor and each such Subsidiary, if any, to pass greater title than it has itself), remedies, powers and privileges, of every kind and character now owned or hereafter acquired, created or arising in and to the following: (A) all trademarks, trade names, corporate names, company names, business names, fictitious business names, trade styles, service marks, certification marks, collective marks, logos, other source of business identifiers, prints and labels on which any of the foregoing have appeared or appear, designs and general intangibles of a like nature, now existing anywhere in the world or hereafter adopted or acquired, whether currently in use or not, all registrations and recordings thereof and all applications in connection therewith, whether pending or in preparation for filing (all of the foregoing items in this clause (A) being collectively called a "Trademark"); (B) all Trademark licenses; (C) all reissues, extensions or renewals of any of the items described in clauses (A) and (B); (E) all proceeds of, and rights associated with, the foregoing, including without limitation royalties, income, payments, claims, damages and proceeds of infringement suits; and (F) the right (but not obligation) to sue or bring cancellation or opposition proceedings in the name of the Debtor or any Subsidiary for any past, present or future infringement or dilution of any Trademark, Trademark registration or Trademark license, or for any injury to the goodwill associated with the use of any such Trademark or for breach or enforcement of any Trademark license or protection of any Trademark, and all rights (but not obligations) corresponding thereto in the United States and any foreign country. 1.2 It is understood that, subject to Permitted Encumbrances (as hereinafter defined) the security interest hereby granted by the Debtor and the Subsidiaries to the Secured Party with respect to Collateral described in Section 1.1 (a) and (b) hereof shall constitute a first priority security interest in such Collateral, subject, however, to the provisions of Section 1.3 below. The security interests granted by the Debtor and the Subsidiaries to the Secured Party pursuant to this Agreement are hereinafter referred to as the "Security Interest". The property and interests described in clauses (i) and (ii) and clause (v) as it relates to the property and interests described in clauses (i) and (ii), all of Section 1.1(a) hereof, are hereinafter collectively referred to as the "Pledged Property". The property and interests described in clause (iii) and clause (v) as it relates to the property and interests described in clause (iii), all of Section 1.1(a) hereof, are hereinafter collectively referred to as the "Equipment". The term "Permitted Encumbrances" shall mean any purchase money security interests in Equipment used in 4 connection with and located at the Property and not exceeding, together with any purchase money security interests permitted pursuant to Section 1.2 of the Canadian Security Agreement (as hereinafter defined), an aggregate principal amount of CDN$50,000 in any one year. 1.3 The Secured Party hereby acknowledges and agrees that, notwithstanding any provisions of this Agreement to the contrary, it shall subordinate its Security Interest (by executing a consent to such subordination if so requested) in any Equipment acquired after the date hereof which is located on any new properties (the "New Properties") hereinafter purchased, leased or otherwise acquired by the Debtor or any of the Subsidiaries and used to operate a restaurant business to the lien of any security interest granted to any institutional lender which provides financing to Debtor or any of the Subsidiaries in respect of any such Equipment on the New Properties; PROVIDED, HOWEVER, that the extent of such subordination shall be limited to an aggregate amount of $2,000,000 and such subordination shall be pursuant to a subordination agreement reasonably satisfactory in form and substance to Secured Party and in all events the Secured Party shall retain a second priority interest in such Equipment. 2. THE SECURED OBLIGATIONS. 2.1 In consideration of the grant of the Security Interest hereunder and the security interests granted pursuant to the Canadian Documents (as herein defined), the Secured Party hereby waives and forgives interest for the six (6) month period, beginning as of June 1, 1999 and ending on November 30, 1999 which would otherwise be due and payable by the Debtor to the Secured Party with respect to the Notes. 2.2 This Agreement is being executed and delivered to secure, and the Security Interests herein granted shall secure: (a) full payment and performance of all of the indebtedness and obligations owing to the Secured Party by the Debtor under the Note, Stock Purchase and Warrant Agreement and the Notes, whether for principal, interest, costs, fees, expenses or otherwise, and (b) all covenants of the Debtor and the Subsidiaries under this Agreement and all covenants of the Debtor and the Subsidiaries under the Note, Stock Purchase and Warrant Agreement, in each case including all renewals, extensions and modifications thereof. All of such debts, indebtedness, liabilities, covenants, and duties referred to in (a) and (b) of this Section 2.2 are hereinafter collectively referred to as the "Secured Obligations". 3. CONTINUING SECURITY INTEREST; TRANSFER OF NOTES. (a) This Security Agreement shall create a continuing security interest in the Collateral and shall (i) remain in full force and effect until payment in full of all Secured Obligations, or until earlier terminated in accordance with the terms hereof and (ii) be binding upon the Debtor, and the Subsidiaries, their respective successors, transferees and assigns. (b) Subject to the applicable provisions of the Note, Stock Purchase and Warrant Agreement, the Secured Party may assign or otherwise transfer (in whole or in part) any Note held by it to any other Person or entity, and such other Person or entity shall 5 thereupon become vested with all the rights and benefits in respect thereof granted to the Secured Party under this Security Agreement or otherwise, subject, however, to any contrary provisions in such assignment or transfer. (c) Upon the payment in full of all Notes and the termination of all Secured Obligations, other than in connection with the exercise of remedies under this Agreement, the Security Interest granted herein shall terminate and all rights to the Collateral shall revert to the Debtor or the Subsidiaries, as the case may be. Upon any such termination, the Secured Party will, at sole expense of the Debtor execute and deliver to the Debtor and the Subsidiaries, such documents (without recourse and without representation or warranty) as the Debtor shall reasonably request to evidence such termination. 4. DEBTOR REMAINS LIABLE. Anything herein to the contrary notwithstanding (a) the Debtor and each of the Subsidiaries shall remain liable under the contracts and agreements included in, or relating to, the Collateral to the extent set forth therein, and shall perform all of their respective duties and obligations under such contracts and agreements to the same extent as if this Security Agreement had not been executed; (b) the exercise by the Secured Party of any of its rights hereunder shall not release the Debtor or the Subsidiaries from any of the Debtor's or the Subsidiaries' duties or obligations under any of the contracts or agreements included in, or relating to, the Collateral; and (c) the Secured Party shall have no obligation or liability under any such contracts or agreements included in, or relating to, the Collateral by reason of this Security Agreement, nor shall the Secured Party be obligated to perform any of the obligations or duties of the Debtor or any of the Subsidiaries thereunder or to take any action to collect or enforce any claim for payment assigned hereunder. 5. SECURITY AND PLEDGE INTERESTS ABSOLUTE. All rights of the Secured Party and the Security Interest granted to and pledges made to the Secured Party hereunder, and all obligations of the Debtor and any of the Subsidiaries hereunder, shall be absolute and unconditional, irrespective of (a) any lack of validity or enforceability of the Note, Stock Purchase and Warrant Agreement or any Note; (b) the failure of the Secured Party to assert any claim or demand or to enforce any right or remedy against the Debtor or any other Person under the provisions of the Note, Stock Purchase and Warrant Agreement, any Note or otherwise; (c) any change in the time, manner or place of payment of, or in any other term of, all or any of the Secured Obligations or any other extension, compromise or renewal of any Secured Obligations; 6 (d) any reduction, limitation, impairment or termination of any Secured Obligation of the Debtor or any of the Subsidiaries for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to (and the Debtor and each such Subsidiary hereby waives any right to or claim of) any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality, nongenuineness, irregularity, compromise, unenforceability of, or any other event or occurrence affecting, any Secured Obligation of the Debtor or any of the Subsidiaries or otherwise; (e) any amendment to, rescission, waiver, or other modification of, or any consent to departure from, any of the terms of the Note, Stock Purchase and Warrant Agreement or any Note; (f) any addition, exchange, release, surrender or non-perfection of any collateral (including the Collateral), or any amendment to or waiver or release of or addition to or consent to departure from any guaranty, for any of the Secured Obligations; or (g) any other circumstances which might otherwise constitute a defense available to, or a legal or equitable discharge of, the Debtor or any of the Subsidiaries. 6. DELIVERY OF PLEDGED PROPERTY. All certificates or instruments representing or evidencing any Pledged Property, including all Subsidiaries Shares, shall be delivered to and held by or on behalf of the Secured Party pursuant hereto, shall be in suitable form for transfer by delivery, and shall be accompanied by all necessary instruments of transfer or assignment, duly executed in blank all in form and substance satisfactory to the Secured Party. The Secured Party shall have the right, at any time after the occurrence of an Event of Default, in its discretion and without notice to the Debtor, to transfer to or to register in the name of the Secured Party or any of its nominees any or all of the Pledged Property, subject only to revocable rights specified in Section 3(b) hereof; provided, however, that the Secured Party shall promptly give notice to the Debtor following any such transfer of the Pledged Property. In addition, the Secured Party shall have the right at any time to exchange certificates or instruments representing or evidencing the Pledged Property for certificates or instruments of smaller or larger denominations. 7. DIVIDENDS ON SUBSIDIARIES SHARES. In the event that any dividend in the ordinary course (excluding, without limitation, any distribution of the type described in clauses (i), (ii) and (iii) of Section 8 hereof) on the shares pledged pursuant to this Agreement is to be paid at a time when (x) no Default of the nature referred to in Section 6(ix) or (x) of the Note, Stock Purchase and Warrant Agreement has occurred and is continuing and (y) no Event of Default has occurred and is continuing, such dividend may be paid directly to the Debtor. If any such Default or Event of Default has occurred and is continuing, then any such dividend shall be paid directly to the Secured Party. 8. SUBROGATION, ETC. Neither the Debtor nor any of the Subsidiaries will exercise any rights which it may acquire by reason of any payment on account of any Collateral, whether by way of subrogation, reimbursement or otherwise, until the prior payment, in full and in cash, 7 of all Secured Obligations of the Debtor. Subject to the provisions of Section 7 hereof, any amount paid to the Debtor or any of the Subsidiaries on account of any Collateral prior to the payment in full of all Secured Obligations of the Debtor or any of the Subsidiaries, including without limitation (i) instruments and other property received, receivable or otherwise distributed in respect of, or in exchange for, any Pledged Property, (ii) dividends and other distributions paid or payable in cash in respect of any Pledged Property in connection with a total liquidation or dissolution of the payor of the dividends, and (iii) cash paid, payable or otherwise distributed in respect of principal of or in redemption of, or in exchange for, any Pledged Property, shall be held in trust for the benefit of the Secured Party, be segregated from the other property or funds of the Debtor or any such Subsidiary, and shall immediately be paid to the Secured Party and credited and applied against the obligations of the Debtor, whether matured or unmatured, in accordance with the terms of the Note, Stock Purchase and Warrant Agreement. 9. REPRESENTATIONS AND WARRANTIES. The Debtor and each of the Subsidiaries jointly and severally represents and warrants unto the Secured Party as set forth in this Section 9 on the date hereof and with respect to the Collateral, as at the date of each pledge and delivery hereunder: 9.1 LOCATION OF COLLATERAL, ETC. All of the Equipment currently owned by the Debtor and the Subsidiaries is located at the places specified in Exhibit C hereto. None of the Equipment has, within the four months preceding the date of this Agreement, been located at any place other than the places specified in Exhibits C hereto. The place(s) of business and chief executive office of the Debtor and the office(s) where the Debtor keeps its records concerning the Collateral, including Receivables and all originals of all chattel paper which evidence Receivables, are located at 856 Homer Street, Fifth Floor, Vancouver, BC, Canada V613 2W5. The place(s) of business and chief executive office of each Subsidiary and the office(s) where such Subsidiary keeps its records concerning the Collateral, including Receivables and all originals of all chattel paper which evidence Receivables, are listed on Exhibit A hereto. Neither the Debtor nor any Subsidiary has any trade names. Neither the Debtor nor any Subsidiary has been known by any legal name different from the one set forth on the signature page hereto, nor has the Debtor or any Subsidiary been the subject of any merger or other corporate reorganization. 9.2 OWNERSHIP, NO LIENS, ETC. The Debtor or the Subsidiaries, as the case may be, own the Collateral free and clear of any Lien, except for the security interest created by this Agreement and except as permitted by the Note, Stock Purchase and Warrant Agreement. No effective financing statement or other instrument similar in effect covering all or any part of the Collateral is on file in any recording office, except financing statements (a) as may have been filed in favor of the Secured Party relating to this Agreement, or (b) with respect to which the Debtor has delivered UCC-3 (or similar releases) executed by the secured party to the Secured Party on the date hereof. Each of the Debtor and the Subsidiaries is the legal and beneficial owner of, and has good and marketable title to (and has full right and authority to pledge and assign) the Collateral, which the Debtor has not previously sold, assigned or transferred and which is free and clear of all Liens, except the Lien granted pursuant hereto in favor of the 8 Secured Party and Permitted Encumbrances. No Subsidiary of the Debtor, other than the Subsidiaries listed on Exhibit A hereto and on Exhibit A to the Canadian Security Agreement (as hereinafter defined), owns any Equipment. 9.3 POSSESSION AND CONTROL. The Debtor or the Subsidiaries have exclusive possession and control of all of the Equipment. 9.4 VALIDITY, ETC. This Agreement creates a valid first priority security interest in the Collateral as provided in Section 1.2 hereof, securing the payment of the Secured Obligations. The Security Interest constitutes, subject to the filings described in Section 9.5(b) below, a perfected security interest in all Collateral in which a security interest may be perfected by filing, recording or registering a financing statement or analogous documents in the United States (or any political subdivision thereof) and its territories and possessions pursuant to the U.C.C. or other applicable law in such jurisdictions. The delivery of the Pledged Property to the Secured Party is effective to create a valid, perfected, first priority security interest in the Pledged Property and all proceeds thereof, securing the Secured Obligations. No filing or other action will be necessary to perfect or protect the Security Interest as it relates to the Pledged Property. All the Subsidiaries Shares are "certificated securities" as that term is defined in Section 8-102 of the U.C.C. (as hereinafter defined). 9.5 DUE AUTHORIZATION, EXECUTION, APPROVAL, ETC. (a) No consent of any other party, other than those consents listed on Schedule 9.5(a) attached hereto, and no consent, authorization, approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required either (i) for the grant by the Debtor and the Subsidiaries of the Security Interest granted hereby or for the pledge by the Debtor and the Subsidiaries of any Collateral pursuant hereto or for the execution, delivery and performance of this Agreement by the Debtor and the Subsidiaries, or (ii) for the perfection of or the exercise by the Secured Party of its rights and remedies hereunder including the exercise by the Secured Party of the voting or other rights provided for in this Agreement, or, except with respect to any Subsidiaries Shares, as may be required in connection with a disposition of such Subsidiaries Shares by laws affecting the offering and sale of securities generally, the remedies in respect of the Pledged Property pursuant to this Agreement and, except for the filing of executed UCC-1 financing statements in the following states: Minnesota, Pennsylvania, California, Massachusetts and Washington, and the following counties: Mennepin County, Minnesota, Philadelphia County, Pennsylvania, San Diego County, California, King County, Washington, Whatcom County, Washington, and Boston, Massachusetts. (b) Fully executed financing statements (including fixture filings, as applicable) or other appropriate filings, recordings or registrations containing a description of the Collateral have been delivered to the Secured Party for filing in each governmental, municipal or other office specified in Schedule 9.5(b) hereto, which are all the filings, recordings and registrations (other than filings required to be made in the United States Patent and Trademark Office and the United States Copyright Office in order to perfect 9 the Security Interest in Collateral consisting of United States Trademarks or Copyrights) that are necessary to publish notice of and protect the validity of and to establish a legal, valid and perfected security interest in favor of the Secured Party in respect of all Collateral in which the Security Interest may be perfected by filing, recording or registration in the United States (or any political subdivision thereof) and its territories and possessions, and no further or subsequent filing, refiling, recording, rerecording, registration or reregistration is necessary in any such jurisdiction, except as provided under applicable law with respect to the filing of continuation statements. (c) This Agreement and the Security Interest created hereby is in full compliance with the terms of all documents, instruments and agreements relating to the Debtor and the Subsidiaries or among the Debtor's or the Subsidiaries' shareholders, respectively, including, without limitation, the Debtor's memorandum and articles and the certificate of incorporation and bylaws of each Subsidiary. (d) The Debtor is a corporation duly incorporated, validly existing and in good standing under the laws of the Province of British Columbia, has the corporate power and authority to own its assets and to transact its business and is duly qualified under the laws of each jurisdiction in which such qualification is required. (e) Each Subsidiary of the Debtor is a corporation duly incorporated, validly existing and in good standing in the jurisdiction of its incorporation, has the corporate power and authority to own its assets and to transact its business and is duly qualified under the laws of each jurisdiction in which such qualification is required. (f) This Agreement is a legal, valid and binding obligation of the Debtor and each Subsidiary, enforceable against the Debtor and each Subsidiary in accordance with its terms. (g) The execution, delivery and performance of this Agreement by the Debtor and each Subsidiary have been duly authorized by all necessary corporate action and do not and will not contravene the Debtor's memorandum or articles and each Subsidiary's certificate of incorporation or bylaws. (h) The execution, delivery and performance of this Agreement by the Debtor and each Subsidiary do not and will not (1) require any consent which has not been obtained; (2) violate any provision of law or require filing or registration with any governmental authority; (3) result in a breach or constitute a default under or require any consent under any indenture or loan or credit agreement, any other agreement, lease or instrument to which the Debtor or any Subsidiary is a party or by which any of their property is bound; (4) result in, or require, the creation or imposition on any lien, security interest or other encumbrance upon or with respect to any of their properties now owned or hereafter acquired; or (5) cause the Debtor or any Subsidiary to be in default under any law, order, writ, judgment, injunction, decree, agreement, lease or instrument. 10 (i) Other than as set forth on Schedule 9.5(i) attached hereto, there are no actions, suits or proceedings pending or, to the Debtor's and each Subsidiary's best knowledge, threatened against or with respect to the Debtor or such Subsidiary that are (1) reasonably likely to materially and adversely affect its obligations under this Agreement; or (2) reasonably likely to materially and adversely affect its business, property, assets, condition (financial or otherwise), results of operation, or prospects. 9.6 AS TO SUBSIDIARIES SHARES. In the case of any Subsidiaries Shares pledged by the Debtor, all of such Subsidiaries Shares are duly authorized and validly issued, fully paid, and non-assessable, and constitute all of the issued and outstanding shares of capital stock of each Subsidiary of the Debtor. 9.7 COMPLIANCE WITH LAWS. The Debtor and each Subsidiary is in compliance with the requirements of all applicable laws, rules, regulations and orders of every governmental authority, the noncompliance with which might materially adversely affect the business, properties, assets, operations, condition (financial or otherwise) of the Debtor and the Subsidiaries taken as a whole or the value of the Collateral. 10. CERTAIN COVENANTS. The Debtor and each of the Subsidiaries jointly and severally covenants and agrees that, so long as any portion of the Notes shall remain unpaid or any Secured Obligations shall remain outstanding, the Debtor and each such Subsidiary will, unless the Secured Party shall otherwise consent in writing, perform the obligations set forth in this Section 10. 10.1 AS TO EQUIPMENT. The Debtor and each Subsidiary hereby agrees that it shall: (a) keep all the Equipment at the places therefor specified in Exhibit C hereto, or, upon 30 days' prior written notice to the Secured Party, at such other places in a jurisdiction where all representations and warranties set forth in Section 9 (including Section 9.4) shall be true and correct, and all action required pursuant to the first sentence of Section 10.7 shall have been taken with respect to the Equipment; (b) cause the Equipment to be maintained and preserved in the same condition, repair and working order as when new, ordinary wear and tear excepted, and in accordance with any manufacturer's manual; and forthwith, or in the case of any loss or damage to any of the Equipment, as quickly as practicable after the occurrence thereof, make or cause to be made all repairs, replacements, and other improvements in connection therewith which are necessary or desirable to such end; and promptly furnish to the Secured Party a statement respecting any loss or damage to any of the Equipment; and (c) promptly pay when due all material property and other taxes, assessments and governmental charges or levies imposed upon, and all claims (including claims for labor, materials and supplies) against, the Equipment, except to the extent the validity thereof is 11 being contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP as in effect in Canada have been set aside. 10.2 AS TO RECEIVABLES. (a) Subject to Section 10.3(b), the Debtor and each Subsidiary shall keep its place(s) of business and chief executive office and the office(s) where it keeps its records concerning the Receivables, and all originals of all chattel paper which evidenced Receivables, located at its chief executive office of the Debtor or such Subsidiary, or, upon 30 days' prior written notice to the Secured Party, at such other locations in a jurisdiction where all actions required by Section 10.7 shall have been taken with respect to the Receivables; not change its name except upon 30 days' prior written notice to the Secured Party; hold and preserve such records and chattel paper; and permit representatives of the Secured Party at any time during normal business hours to inspect and make abstracts from such records and chattel paper. (b) Until such time as the Secured Party shall notify the Debtor or any of its Subsidiaries that a Default of the nature referred to in Section 6(ix) or (x) of the Note, Stock Purchase and Warrant Agreement or an Event of Default has occurred and is continuing, the Debtor and each Subsidiary shall, in accordance with its customary business practices, continue to collect, at its own expense, all amounts due or to become due to it under the Receivables; provided, however, that the Secured Party shall have the right, at any time after notice to the Debtor or the Subsidiary from the Secured Party that a Default of the nature referred to in Section 6(ix) or (x) of the Note, Stock Purchase and Warrant Agreement or an Event of Default has occurred and is continuing, to notify the account debtors or obligors under any Receivables of the assignment of such Receivables to the Secured Party and to direct such account debtors or obligors to make payment of all amounts due or to become due to the Debtor or such Subsidiary thereunder directly to the Secured Party and, upon such notification and at the expense of the Debtor or such Subsidiary, to enforce collection of any such Receivables, and to adjust, settle or compromise the amount or payment thereof, in the same manner and to the same extent as the Debtor or such Subsidiary might have done. After delivery to the Debtor or the Subsidiary of the notice from the Secured Party referred to above: (i) all amounts and proceeds (including instruments) received by the Debtor or the Subsidiary in respect of any Receivables shall be received in trust for the benefit of the Secured Party hereunder, shall be segregated from other funds of the Debtor or such Subsidiary, and shall be forthwith paid over to the Secured Party in the same form as so received (with any necessary endorsements) to be held as cash collateral and applied as provided by Section 13; and (ii) except in the ordinary course of business, neither the Debtor, nor any Subsidiary shall, without the consent of the Secured Party, adjust, settle, or compromise the amount or payment of any Receivable, or release wholly or partly any account debtor or obligor thereof, or allow any credit or discount thereon. 12 After the occurrence and during the continuance of an Event of Default, (A) the Secured Party may in its own name or in the name of others communicate with account debtors in order to verify with them to the Secured Party `s satisfaction the existence, amount and terms of any Receivables and (B) the Secured Party shall have the right, at the Debtor's expense, to make test verifications of the Receivables in any manner and through any medium that it considers advisable, and the Debtor agrees to furnish all such assistance. 10.3 AS TO OTHER COLLATERAL. (a) Until such time as the Secured Party shall notify the Debtor or any Subsidiary of the revocation of such power and authority, which notice may be given by the Secured Party at any time if a Default of the nature referred to in Section 6(ix) or (x) of the Note, Stock Purchase and Warrant Agreement or an Event of Default has occurred and is continuing, the Debtor and each Subsidiary (i) will, at its own expense, endeavor to collect, as and when due in accordance with its customary practices, all amounts due with respect to any of the Collateral (except as otherwise specifically provided herein), including the taking of such action with respect to such collection as the Secured Party may reasonably request or, in the absence of such request, as the Debtor or such Subsidiary may deem advisable, and (ii) may grant, in the ordinary course of business, to any party obligated on any of the Collateral (except as otherwise specifically provided herein), any rebate, refund or allowance to which such party may be lawfully entitled, may accept, in connection therewith, the return of goods, the sale or lease of which shall have given rise to such Collateral (except as otherwise specifically provided herein). The Secured Party, however, may, at any time, after Default of the nature referred to in Section 6(ix) or (x) of the Note, Stock Purchase and Warrant Agreement or an Event of Default has occurred and is continuing, notify any parties obligated on any of the Collateral (except as otherwise specifically provided herein) to make payment to the Secured Party of any amounts due or to become due thereunder and enforce collection of any of the Collateral (except as otherwise specifically provided herein) by suit or otherwise and surrender, release, or exchange all or any part thereof, or compromise or extend or renew for any period (whether or not longer than the original period) any indebtedness thereunder or evidenced thereby. Upon request of the Secured Party, the Debtor or any Subsidiary will, at its own expense, notify any parties obligated on any of the Collateral (except as otherwise specifically provided herein) to make payment to the Secured Party of any amounts due or to become due thereunder. (b) The Secured Party is authorized to endorse, in the name of the Debtor or any Subsidiary, any item, howsoever received by the Secured Party, representing any payment on or other proceeds of any of the Collateral (except as otherwise specifically provided herein). The Debtor and each Subsidiary shall, immediately following the occurrence and during the continuance of a Default of the nature referred to in Section 6(ix) or (x) of the Note, Stock Purchase and Warrant Agreement or an Event of Default deliver to the Secured Party possession of all originals of all negotiable documents, 13 instruments and chattel paper currently owned or held by the Debtor or such Subsidiary (duly endorsed in blank, if requested by the Secured Party). 10.4 AS TO COLLATERAL; FURTHER ASSURANCES, ETC. (a) Except as expressly provided in the Note, Stock Purchase and Warrant Agreement, neither the Debtor nor any of the Subsidiaries will sell, assign, transfer, pledge, encumber in any manner or otherwise dispose of, or grant any option with respect to, the Collateral (except in favor of the Secured Party hereunder). The Debtor and each Subsidiary will warrant and defend the right and title herein granted unto the Secured Party in and to the Collateral pledged by it hereunder (and all right, title, and interest represented by such Collateral) against the claims and demands of all Persons whomsoever. The Debtor and each of the Subsidiaries agrees that it will not issue any stock or other securities in addition to or in substitution for the Subsidiaries Shares. The Debtor and each such Subsidiary agrees that at any time, and from time to time, at the expense of the Debtor, the Debtor and the Subsidiary will promptly execute and deliver all further instruments, and take all further action, that may be necessary or desirable, or that the Secured Party may reasonably request, in order to perfect and protect any Security Interest granted or purported to be granted by the Debtor and each such Subsidiary hereby or to enable the Secured Party to exercise and enforce its rights and remedies hereunder with respect to any Collateral pledged by it hereunder. (b) STOCK POWERS, ETC. The Debtor agrees that all Subsidiaries Shares (and all other shares of capital stock constituting Pledged Property) delivered by the Debtor pursuant to this Agreement will be accompanied by duly executed undated blank stock powers, or other equivalent instruments of transfer acceptable to the Secured Party. The Debtor will, from time to time upon the request of the Secured Party, promptly deliver to the Secured Party such stock powers, instruments, and similar documents, satisfactory in form and substance to the Secured Party, with respect to the Pledged Property as the Secured Party may reasonably request. (c) CONTINUOUS PLEDGE. Subject to Section 4, the Debtor will, at all times, keep pledged to the Secured Party pursuant hereto all Subsidiaries Shares and all other shares of capital stock constituting Pledged Property, all dividends and distributions with respect thereto, and other securities, instruments, proceeds, and rights from time to time received by or distributable to the Debtor in respect of any Pledged Property. (d) VOTING RIGHTS; DIVIDENDS, ETC. The Debtor agrees: (i) So long as no Event of Default shall have occurred, the Debtor shall be entitled to exercise any and all voting and other consensual rights pertaining to the Pledged Property or any part thereof for any purpose not inconsistent with the terms of this Agreement; provided, however, that the Debtor shall not exercise or refrain from exercising any such right if (A) such action would modify or in any way adversely change the Debtor's or the Secured Party's rights under the 14 Pledged Property or any part thereof or (B) the Secured Party shall notify the Debtor that in the Secured Party's sole judgment such action would modify or in any way adversely change the Debtor's or the Secured Party's rights under the Pledged Property or any part thereof. (ii) after any Default of the nature referred to in Section 6(ix) or (x) of the Note, Stock Purchase and Warrant Agreement or an Event of Default shall have occurred and be continuing, promptly upon receipt thereof by the Debtor and without any request therefor by the Secured Party, to deliver (properly endorsed where required hereby or requested by the Secured Party) to the Secured Party all dividends, distributions, all interest, all principal, all other cash payments, and all proceeds of the Pledged Property, all of which shall be held by the Secured Party for use in accordance with Section 13.1; and (iii) after any Event of Default shall have occurred and be continuing and the Secured Party has notified the Debtor of the Secured Party's intention to exercise its voting power under this Section 10.4: (A) the Secured Party may exercise (to the exclusion of the Debtor) the voting power and all other incidental rights of ownership with respect to any Subsidiaries Shares or other shares of capital stock constituting Pledged Property and the Debtor hereby grants the Secured Party an irrevocable proxy, exercisable under such circumstances, to vote the Subsidiaries Shares and such other Pledged Property; and (B) promptly to deliver to the Secured Party such additional proxies and other documents as may be necessary to allow the Secured Party to exercise such voting power. All dividends, distributions, interest, principal, cash payments, and proceeds which may at any time and from time to time be held by the Debtor but which Debtor is then obligated to deliver to the Secured Party, shall, until delivery to the Secured Party, be held by the Debtor separate and apart from its other property in trust for the Secured Party. The Secured Party agrees that unless an Event of Default shall have occurred and be continuing and the Secured Party shall have given the notice referred to in Section 10.4(d), the Debtor shall have the exclusive voting power with respect to any shares of capital stock (including any of the Subsidiaries Shares) constituting Pledged Property and the Secured Party shall, upon the written request of the Debtor, promptly deliver such proxies and other documents, if any, as shall be reasonably requested by the Debtor which are necessary to allow the Debtor to exercise voting power with respect to any such share of capital stock (including any of the Subsidiaries Shares) constituting Pledged Property; provided, however, that no vote shall be cast, or consent, waiver, or ratification given, or action taken by the Debtor that would impair any Pledged Property or be inconsistent with or violate any provision of this Agreement, the Notes or the Note, Stock Purchase and Warrant Agreement. 15 (e) ADDITIONAL SUBSIDIARIES SHARES. The Debtor agrees to pledge, hypothecate, assign, charge, mortgage, deliver and transfer to the Secured Party, for its benefit, shares of any additional subsidiaries, if any, formed, purchased or otherwise acquired by the Debtor after the date hereof within three (3) business days after such formation, purchase or other acquisition, and all dividends, distributions, interest, cash, instruments and other property or rights the Debtor might have with respect to such shares as provided in Sections 6 and 7 hereof. 10.5 INSURANCE. The Debtor will maintain or cause to be maintained insurance of the type, in the amounts and with such insurance companies as provided in Section 5O of the Note, Stock Purchase and Warrant Agreement. If a Default of the nature referred to in Section 6(ix) or (x) of the Note, Stock Purchase and Warrant Agreement or an Event of Default has occurred and is continuing, all proceeds of all insurance maintained by the Debtor or the Subsidiaries and covering the Collateral shall be paid to the Secured Party for application to the payment in full of all outstanding Secured Obligations. 10.6 TRANSFERS AND OTHER LIENS. Neither the Debtor nor any of the Subsidiaries shall, without the prior written consent of the Secured Party, which may be granted or denied by the Secured Party in its sole and absolute discretion: (a) sell, assign (by operation of law or otherwise) transfer, or otherwise dispose of any of the Collateral other than worn-out or obsolete Equipment; (b) create or suffer to exist any Lien or other charge or encumbrance upon or with respect to any of the Collateral or Leases to secure Indebtedness of any Person or entity, except for the Security Interest created by this Agreement, Permitted Encumbrances and security interest in the New Properties as permitted by Section 1.3, and except as permitted by the Note, Stock Purchase and Warrant Agreement; or (c) sell, assign (by operation of law or otherwise), transfer, sublet or otherwise dispose of any Lease. 10.7 FURTHER ASSURANCES, ETC. The Debtor and each of the Subsidiaries agrees that, from time to time at its own expense, the Debtor and each such Subsidiary will promptly execute and deliver all further instruments and documents including, without limitation, assignments, certificates and supplemental documents, and do all further acts or things, that may be necessary or desirable, or that the Secured Party may request, in order to more fully evidence, perfect, preserve and protect any Security Interest granted or purported to be granted hereby or to enable the Secured Party to exercise and enforce its rights and remedies hereunder with respect to any Collateral. Without limiting the generality of the foregoing, the Debtor and each such Subsidiary will: (a) mark conspicuously each chattel paper included in the Receivables and each Related Contract and each of its records pertaining to the Collateral with a legend, in 16 form and substance satisfactory to the Secured Party, indicating that such chattel paper, Related Contract or Collateral is subject to the Security Interest granted hereby; (b) if any Collateral shall be evidenced by a promissory note or other instrument, negotiable document or chattel paper, deliver and pledge to the Secured Party hereunder such promissory note, instrument, negotiable document or chattel paper duly endorsed and accompanied by duly executed instruments of transfer or assignment, all in form and substance satisfactory to the Secured Party; (c) execute and file such financing or continuation statements, or amendments thereto, and such other instruments or notices (including, without limitation, filings with the United States Patent and Trademark Office or United States Copyright Office (or any successor office or any similar office in any other country), as may be necessary or desirable, or as the Secured Party may request, in order to perfect and preserve the Security Interests and other rights granted or purported to be granted to the Secured Party hereby; (d) furnish to the Secured Party, from time to time at the Secured Party's request, statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as the Secured Party may reasonably request, all in reasonable detail; (e) furnish such other information as the Secured Party may reasonably request concerning the Collateral; (f) promptly notify the Secured Party of any change in the facts or circumstances warranted or represented by the Debtor or any of the Subsidiaries herein which change could reasonably be expected to have a material adverse effect on the business of the Debtor or such Subsidiary or the ability of the Debtor or such Subsidiary to perform its obligations under the Note, Stock Purchase and Warrant Agreement or this Agreement; and (g) promptly notify the Secured Party of any material claim, action, or proceeding commenced against the Debtor or any of the Subsidiaries. With respect to the foregoing and the grant of the Security Interest hereunder, the Debtor and each of the Subsidiaries hereby authorizes the Secured Party to file one or more financing or continuation statements, and amendments thereto, relative to all or any part of the Collateral, without the signature of the Debtor or such Subsidiary where permitted by law. A carbon, photographic or other reproduction of this Agreement or any financing statement covering the Collateral or any part thereof shall be sufficient as a financing statement where permitted by law. 10.8 LANDLORD CONSENTS. The Debtor and each Subsidiary covenants and agrees that it will use its best efforts to obtain as promptly as practicable following execution of this Agreement, all consents from third parties necessary to effect the transactions contemplated by 17 this Agreement, such consents to be substantially in the form attached hereto as Exhibit G (the "Landlord Consent"). 10.9 ADDITIONAL SUBSIDIARIES. The Debtor covenants and agrees that it will cause any subsidiary of which the Debtor owns 75% or more of the issued and outstanding voting shares and which purchases or otherwise acquires any property or interests of a nature described in Section 1.1(a) and Section 1.1(b) after the date hereof, within three (3) business days after any such purchase or acquisition, to become a party to this Agreement and thereby grant a security interest in such property or interests purchased or otherwise acquired by it and be bound by all of the provisions hereof. 11. SECURED PARTY 11.1 SECURED PARTY APPOINTED ATTORNEY-IN-FACT. The Debtor and each of the Subsidiaries hereby irrevocably appoints the Secured Party as the Debtor's and each such Subsidiary's attorney-in-fact, with full authority in the place and stead of the Debtor or such Subsidiary and in the name of the Debtor or such Subsidiary or otherwise, to take any action and to execute any instrument which the Secured Party may deem necessary or advisable to accomplish the purposes of this Agreement, including, without limitation: (a) to ask, demand, collect, sue for, recover, compromise, receive and give acquittance and receipts for moneys representing any dividend, interest payment or other distribution or payment due and to become due under or in respect of any of the Collateral; (b) to receive, endorse, and collect any drafts or other instruments, documents and chattel paper, in connection with clause (a) above; (c) to file any claims or take any action or institute any proceedings which the Secured Party may deem necessary or desirable for the collection of any of the Collateral or otherwise to enforce the rights of the Secured Party with respect to any of the Collateral; (d) to perform the affirmative obligations of the Debtor or any such Subsidiary hereunder (including all obligations of the Debtor or any such Subsidiary pursuant to Section 10.7); and (e) without limiting the generality of the foregoing, following the occurrence of an Event of Default, to assign, sell or otherwise dispose of all right, title and interest of the Debtor in and to the Trademarks listed on Schedule I to the Trademark Agreement, and including those trademarks which are added to the same subsequent hereto, and all registrations and recordings thereof, and all pending applications therefor, and to record, register and file, or accomplish any other formality with respect to the foregoing, and to execute and deliver any and all agreements, documents, statements, certificates, 18 instruments of assignment or other papers necessary or advisable to effect such purpose as the Secured Party may in its sole discretion determine. The Debtor and each of the Subsidiaries hereby acknowledges, consents and agrees that the power of attorney granted pursuant to this Section 11 is irrevocable and coupled with an interest. 11.2 SECURED PARTY MAY PERFORM. If the Debtor or any of the Subsidiaries fails to perform any agreement contained herein, the Secured Party may itself perform, or cause performance of, such agreement, and the expenses of the Secured Party incurred in connection therewith shall be payable by the Debtor pursuant to Section 13.3. 11.3 SECURED PARTY HAS NO DUTY. In addition to, and not in limitation of, Section 4, the powers conferred on the Secured Party hereunder are solely to protect its interest in the Collateral and shall not impose any duty on it to exercise any such powers. Except for reasonable care of any Collateral in its possession or control and the accounting for moneys actually received by it hereunder, the Secured Party shall have no duty as to any Collateral, or as to the taking of any necessary steps to preserve rights against prior parties or any other rights pertaining to any Collateral including, without limitation, with respect to the Pledged Property, responsibility for (a) ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relative to any Pledged Property, whether or not the Secured Party has or is deemed to have knowledge of such matters, or (b) taking any necessary steps to preserve rights against prior parties or any other rights pertaining to any Collateral. 11.4 REASONABLE CARE. The Secured Party is required to exercise reasonable care in the custody and preservation of any of the Collateral in its possession or control; provided, however, the Secured Party shall be deemed to have exercised reasonable care in the custody and preservation of any of the Collateral if the Collateral is accorded treatment substantially equal to that which the Secured Party accords its own property and if it takes such action for that purpose as the Debtor reasonably requests in writing at times other than upon the occurrence and during the continuance of any Event of Default, but failure of the Secured Party to comply with any such request at any time shall not in itself be deemed a failure to exercise reasonable care. 12. DEFAULT. As used herein, the term "Event of Default" shall mean any one of the following events: (a) any representation or warranty made by the Debtor or any of the Subsidiaries in this Agreement or in any writing furnished in connection with entering in the transactions contemplated hereby shall be false in any material respect on the date as of which made; 19 (b) the Debtor or any of the Subsidiaries shall fail to observe or perform any covenant, condition or agreement set forth in this Agreement and such failure shall continue unremedied for a period of fifteen (15) days after notice thereof from the Secured Party to the Debtor; (c) any Event of Default under the Note, Stock Purchase and Warrant Agreement shall have occurred and be continuing; or (d) any Event of Default under the Canadian Security Agreement (as hereinafter defined) shall have occurred and be continuing. 13. REMEDIES 13.1 CERTAIN REMEDIES. If any Event of Default shall have occurred and be continuing that has not been cured or waived: (a) The Secured Party may exercise in respect of the Collateral, in addition to other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party on default under the Uniform Commercial Code in effect in the State of New York at the time ("U.C.C.") (whether or not the U.C.C. applies to the affected Collateral) and also may (i) require the Debtor and each Subsidiary to, and the Debtor and each such Subsidiary hereby agrees that it will, at its expense and upon request of the Secured Party forthwith, assemble all or part of the Collateral as directed by the Secured Party and make it available to the Secured Party at a place to be designated by the Secured Party which is reasonably convenient to both parties; (ii) without notice except as specified below, sell, lease, or otherwise dispose of the Collateral or any part thereof, in its then condition or following any commercially reasonable preparation or processing, in one or more parcels at public or private sale or other proceeding, at any of the Secured Party's offices, on the premises of the Debtor, at any exchange, broker's board or elsewhere, for cash, on credit or for future delivery, and upon such other terms as the Secured Party may deem commercially reasonable and by way of one or more contracts (it being agreed that the sale of any part of the Collateral shall not exhaust the Secured Party's power of sale, but sales may be made from time to time, and at any time, until all of the Collateral has been sold or until the Secured Obligations have been paid and performed in full). The Debtor and each of the Subsidiaries agrees that, to the extent notice of sale shall be required by law, at least ten days' prior notice to the Debtor of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. The Secured Party shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. The Secured Party may adjourn any public or private sale from time to time by announcement at the time and place fixed 20 therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. In case any sale of all or any part of the Collateral is made on credit or for future delivery, the Collateral so sold may be retained by the Secured Party until the sale price is paid in full by the purchaser or purchasers thereof, but the Secured Party shall not incur any liability in case any such purchaser or purchasers shall fail to take up and pay for the Collateral so sold and, in case of any such failure, such Collateral may be sold again upon like notice. The Secured Party may bid for or purchase, free from any right of redemption, stay or appraisal on the part of the Debtor or any of the Subsidiaries (all said rights being also hereby waived and released), the Collateral or any part thereof offered for sale and may make payment on account thereof by using any claim then due and payable to it from the Debtor as a credit against the purchase price, and it may, upon compliance with the terms of sale, hold, retain and dispose of such property without further accountability to the Debtor or any of the Subsidiaries therefor. Each purchaser at any sale shall hold the property sold absolutely free from any claim or right on the part of the Debtor or any of the Subsidiaries and each of the Debtor and the Subsidiaries hereby waives all rights of redemption, stay, valuation and appraisal Debtor or any such Subsidiary now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted; and (iii) without limiting the generality of the foregoing, require the Debtor and each Subsidiary to, and the Debtor and each such Subsidiary hereby agrees that it will, at its expense and upon request of the Secured Party forthwith, assign, all right, title and interest of the Debtor or such Subsidiary in and to the Trademarks listed on Schedule I to the Trademark Agreement, and including those trademarks which are added to the same subsequent hereto, and all registrations and recordings thereof, and all pending applications therefor, and record, register and file, or accomplish any other formality with respect to the foregoing, and execute and deliver any and all agreements, documents, statements, certificates, instruments of assignment or other papers necessary or advisable to effect such purpose. (b) All cash proceeds received by the Secured Party in respect of any sale of, collection from, or other realization upon all or any part of the Collateral may, in the discretion of the Secured Party, be held by the Secured Party as collateral for, and/or then or at any time thereafter applied (after payment of any amounts payable to the Secured Party pursuant to Section 13.3) in whole or in part by the Secured Party against, all or any part of the Secured Obligations in such order as the Secured Party shall elect. Any surplus of such cash or cash proceeds held by the Secured Party and remaining after payment in full of all the Secured Obligations shall be paid over to the Debtor or to whomsoever may be lawfully entitled to receive such surplus. If the proceeds of the sale of the Collateral are insufficient to pay all the Secured Obligations, the Debtor agrees to pay upon demand any deficiency to the Secured Party. 21 (c) The Secured Party may (i) transfer all or any part of the Pledged Property into the name of the Secured Party or its nominee, with or without disclosing that such Pledged Property is subject to the lien and security interest hereunder, (ii) notify the parties obligated on any of the Collateral to make payment to the Secured Party of any amount due or to become due thereunder, (iii) enforce collection of any of the Collateral by suit or otherwise, and surrender, release or exchange all or any part thereof, or compromise or extend or renew for any period (whether or not longer than the original period) any obligations of any nature of any party with respect thereto, (iv) endorse any checks, drafts, or other writings in the Debtor's or a Subsidiary's name to allow collection of the Collateral, (v) take control of any proceeds of the Collateral, (vi) execute (in the name, place and stead of the Debtor or the Subsidiaries) endorsements, assignments, stock powers and other instruments of conveyance or transfer with respect to all or any of the Collateral. (d) The Secured Party further may: (i) foreclose or otherwise enforce the Security Interest, in whole or in part, against the Collateral by any available judicial procedure; (ii) enter upon the premises where any of the Collateral not in the possession of the Secured Party or its agent is located and take possession thereof and remove the same, with or without judicial process; (iii) at its discretion, surrender any policies of insurance on the Collateral and receive the unearned premiums, and as the agent and attorney-in-fact for the Debtor and the Subsidiaries to collect such premiums; and (iv) at its discretion, retain the Collateral in satisfaction of the Secured Obligations where the circumstances are such that the Secured Party is entitled to do so under the Code and otherwise. 13.2 COMPLIANCE WITH RESTRICTIONS. Each of the Debtor and the Subsidiaries agrees that in any sale of any of the Collateral whenever an Event of Default shall have occurred and be continuing, the Secured Party is hereby authorized to comply with any limitation or restriction in connection with such sale as it may be advised by counsel is necessary in order to avoid any violation of applicable law (including compliance with such procedures as may restrict 22 the number of prospective bidders and purchasers, require that such prospective bidders and purchasers have certain qualifications, and restrict such prospective bidders and purchasers to persons who will represent and agree that they are purchasing for their own account for investment and not with a view to the distribution or resale of such Collateral), or in order to obtain any required approval of the sale or of the purchaser by any governmental regulatory authority or official, and the Debtor and the Subsidiaries further agree that such compliance shall not result in such sale being considered or deemed not to have been made in a commercially reasonable manner, nor shall the Secured Party be liable nor accountable to the Debtor or the Subsidiaries for any discount allowed by the reason of the fact that such Collateral is sold in compliance with any such limitation or restriction. 13.3 INDEMNITY AND EXPENSES. (a) Each of the Debtor and the Subsidiaries agrees to indemnify the Secured Party from and against any and all claims, losses and liabilities arising out of or resulting from this Agreement (including, without limitation, enforcement of this Agreement), except claims, losses or liabilities resulting from the Secured Party's gross negligence or willful misconduct. (b) The Debtor and each of its Subsidiaries will, so long as an Event of Default shall not have occurred and be continuing, within 15 Business Days after demand and, if an Event of Default has occurred and is continuing, upon demand, pay to the Secured Party the amount of any and all reasonable expenses, including the costs of any insurance and payment of taxes and other charges and the reasonable fees and disbursements of its counsel and of any experts and agents, which the Secured Party may incur in connection with (i) the administration of this Agreement, (ii) the custody, preservation, use or operation of or the sale of, collection from, or other realization upon, any of the Collateral, (iii) the exercise or enforcement of any of the rights of the Secured Party hereunder, or (iv) the failure of the Debtor or any of the Subsidiaries to perform or observe any of the provisions hereof. All such expenses, costs, taxes and other charges shall be a part of the Secured Obligations and shall bear interest at the maximum rate permitted by applicable law from the date incurred until the date repaid to the Secured Party. It is agreed, however, that the risk of loss or damage to the Collateral is on the Debtor and the Subsidiaries prior to the Secured Party's exercise of any right or remedy described herein, and the Secured Party shall have no liability whatsoever for failure to obtain or maintain insurance, nor to determine whether any insurance ever in force is adequate as to amount or as to the risks insured. 23 14. CLOSING CONDITIONS. The Secured Party's obligation to enter into this Security Agreement and to waive and forbear interest as contemplated in Section 2.1 hereof is subject to the satisfaction, at or prior to the date hereof, of the following conditions: (a) the representations and warranties made by the Debtor and each of the Subsidiaries in Section 9 hereof shall be true and correct on and as of the date hereof and the Debtor and each of the Subsidiaries shall have performed all obligations and conditions herein required to be performed or observed by it on or prior to the date hereof, and the Debtor shall have delivered to the Secured Party an Officer's Certificate, dated the date hereof, to such effect; (b) the Debtor and each of the Subsidiaries shall have executed and delivered: (i) the Assignment and Assumption of Lease, substantially in the form attached hereto as Exhibit E, with respect to the Leases; and (ii) the Trademark Agreement (US), substantially in the form attached hereto as Exhibit D, with respect to United States Trademarks; (c) the Debtor shall have executed and delivered the letter agreement, substantially in the form attached hereto as Exhibit F, with respect to the Assignment and Assumption of Lease, referred to above; (d) the Secured Party shall have received such other documents, instruments, opinions or assurances, including, without limitation, corporate resolutions and good standing and incumbency certificates, as the Secured Party and its counsel may request; (e) the Debtor and the Secured Party shall have entered into the Waiver and Amendment No. 6 dated as of October 6, 1999; (f) Jeffrey M. Barnett, Jephco Holdings Ltd., a corporation incorporated in the Province of British Columbia, Barnesco Holdings Ltd., a corporation incorporated in the Province of British Columbia, the Secured Party and GE Investment Management Incorporated, a Delaware corporation, as the general partner of the Secured Party, shall have entered into the Voting Trust Agreement dated as of July 16, 1999; (g) the Debtor, Jeffrey M. Barnett and Jephco Holdings Ltd., a corporation incorporated in the Province of British Columbia, shall have entered into the Settlement Agreement dated as of June 25, 1999; and (h) the Debtor and each of its subsidiaries formed under the Canadian federal laws or laws of any province of Canada (the "Canadian Subsidiaries") shall have executed and delivered a security agreement (the "Canadian Security Agreement") substantially in the form of this Agreement and the other documents required by the Canadian Security Agreement (such documents, together with the Canadian Security 24 Agreement, herein referred to as the "Canadian Documents") to which the Debtor and the Canadian Subsidiaries are a party. 15. MISCELLANEOUS PROVISIONS. 15.1 AMENDMENTS, ETC. No amendment to or waiver of any provision of this Agreement nor consent to any departure by the Debtor or any of the Subsidiaries herefrom, shall in any event be effective unless the same shall be in writing and signed by the Secured Party, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. 15.2 ADDRESSES FOR NOTICES. All notices and other communications provided for hereunder shall be in writing and, if to the Debtor or any of the Subsidiaries, delivered or transmitted to it at 856 Homer Street, Fifth Floor, Vancouver, British Columbia, V6B 2W6, facsimile number (604) 684-8595 and if to the Secured Party, delivered or transmitted to it, at the address or facsimile number of the Secured Party specified in the Note, Stock Purchase and Warrant Agreement, or as to any party at such other address or facsimile number as shall be designated by such party in a written notice to each other party complying as to delivery with the terms of this Section. Any notice, if mailed and properly addressed with postage prepaid or if properly addressed and sent by prepaid courier service, shall be deemed given when received; any notice, if transmitted by facsimile, shall be deemed given when transmitted upon receipt of electronic confirmation of transmission. 15.3 SECTION CAPTIONS. Section captions used in this Agreement are for convenience of reference only, and shall not affect the construction of this Agreement. 15.4 SEVERABILITY. Wherever possible each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under such law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement. 15.5 COUNTERPARTS, ETC. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original and all of which shall constitute but one and the same agreement. 15.6 RIGHTS CUMULATIVE. All rights and remedies of the Secured Party hereunder are cumulative of each other and of every other right or remedy which the Secured Party may otherwise have at law or in equity or under any other contract or other writing for the enforcement of the Security Interest herein or in the collection of the Notes or the Secured Obligations, and the exercise of one or more rights or remedies shall not prejudice or impair the concurrent or subsequent exercise of other rights and remedies. 15.7 ASSIGNMENT. The rights, powers and interests held by the Secured Party hereunder, together with the Collateral, may be transferred and assigned by the Secured Party, 25 without the prior written consent of the Debtor or any of the Subsidiaries. The rights of the Debtor and any of the Subsidiaries are not transferable hereunder without the written consent of the Secured Party. 15.8 NO WAIVER. No failure on the part of the Secured Party to exercise, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof; nor shall any single or partial exercise by the Secured Party of any right, power or remedy hereunder preclude any other or further exercise thereof or the exercise of any other right, power or remedy. 15.9 BINDING EFFECT. This Agreement shall be binding on the Debtor and the Subsidiaries and the Debtor's and the Subsidiaries' successors and assigns and shall inure to the benefit of the Secured Party, and the Secured Party's successors and assigns. 15.10 TERMINATION. This Agreement and the Security Interest in the Collateral will terminate upon the earlier to occur (i) satisfaction and payment in full of all of the Secured Obligations by extinguishment thereof but not by renewal, modification or extension thereof or (ii) fifteen (15) days following the request of the Debtor received on or at any time after the third anniversary of the date of this Agreement; provided, however, that (A) the Debtor is, on the date of the termination, and has been, at all times during the twelve (12) months preceding such date, in compliance with its covenants contained in Section 5 of the Notes, Stock Purchase and Warrant Agreement, (B) on the date of the termination there exists no Default or "Event of Default" (as defined in the Note, Stock Purchase and Warrant Agreement) or Event of Default hereunder, and (C) there is no litigation in excess of $200,000 existing, pending or threatened against the Debtor or any of its Subsidiaries on the date of the termination. 15.11 AGREEMENT AS FINANCING STATEMENT. The Secured Party shall have the right at any time to execute and file this Agreement as a financing statement, but the failure of the Secured Party to do so shall not impair the validity or enforceability of this Agreement. 15.12 NUMBER AND GENDER OF WORDS. Whenever herein the singular is used, the same shall include the plural where appropriate, and the words of any gender shall include each other where appropriate. 15.13 U.C.C. DEFINITIONS. Unless otherwise defined herein or the context otherwise requires, terms for which meanings are provided in the U.C.C. are used in this Agreement, including the recitals, with such meanings. 15.14 GOVERNING LAW; ENTIRE AGREEMENT. THIS AGREEMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD FOR CONFLICT OF LAWS PRINCIPLES. 15.15 FORUM SELECTION AND CONSENT TO JURISDICTION. THE DEBTOR AND EACH OF THE SUBSIDIARIES IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE 26 IN THE CITY OF VANCOUVER. THE DEBTOR AND EACH OF THE SUBSIDIARIES HEREBY CONSENTS TO THE NONEXCLUSIVE JURISDICTION IN THE COURTS OF THE STATE OF NEW YORK AND IN THE FEDERAL COURTS IN THE SOUTHERN DISTRICT OF THE STATE OF NEW YORK AND EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH ACTION OR PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT THE DEBTOR OR ANY OF THE SUBSIDIARIES HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OF NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, THE DEBTOR AND EACH OF THE SUBSIDIARIES HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS AGREEMENT. 27 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed effective as of the day, month and year first above written. DEBTOR: ELEPHANT & CASTLE GROUP INC. By: /s/ Rick Bryant ----------------------------- Name: Rick Bryant Title: President and CEO SUBSIDIARIES: ELEPHANT & CASTLE, INC. By: /s/ Rick Bryant ----------------------------- Name: Rick Bryant Title: President and CEO ALAMO GRILL, INC. By: /s/ Rick Bryant ----------------------------- Name: Rick Bryant Title: President and CEO ELEPHANT AND CASTLE OF PENNSYLVANIA, INC. By: /s/ Rick Bryant ----------------------------- Name: Rick Bryant Title: President and CEO E & C PUB, INC. By: /s/ Rick Bryant ----------------------------- Name: Rick Bryant Title: President and CEO 28 MASSACHUSETTS ELEPHANT & CASTLE GROUP, INC. By: /s/ Rick Bryant ----------------------------- Name: Rick Bryant Title: President and CEO ELEPHANT & Castle International, Inc. By: /s/ Rick Bryant ----------------------------- Name: Rick Bryant Title: President and CEO SECURED PARTY: GE INVESTMENT PRIVATE PARTNERS II, A LIMITED PARTNERSHIP By: GE Investment Management Incorporated, its General Partner By: /s/ Michael M. Pastore ------------------------------ Name: Michael M. Pastore Title: Vice President 29 -----END PRIVACY-ENHANCED MESSAGE-----