-----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, Bf12AoqTxClZDzN0+wluKlM0Im/zWRC77omjAkvgeM/NRDxgX8+btgWNjT17L6i+ Jk2pT7ZQNpETcE+QdrrJyw== 0000950130-02-002775.txt : 20020419 0000950130-02-002775.hdr.sgml : 20020419 ACCESSION NUMBER: 0000950130-02-002775 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 20020419 GROUP MEMBERS: GE INVESTMENT PRIVATE PLACEMENT PARTNERS II LTD PARTNERSHIP GROUP MEMBERS: GENERAL ELECTRIC CO FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: G E ASSET MANAGEMENT INC CENTRAL INDEX KEY: 0000936839 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 061238874 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 3003 SUMMER STREET STREET 2: P O BOX 7900 CITY: STAMFORD STATE: CT ZIP: 06904-7900 BUSINESS PHONE: 2033262300 FORMER COMPANY: FORMER CONFORMED NAME: G E INVESTMENT MANAGEMENT INC DATE OF NAME CHANGE: 19950203 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: 1934 Act SEC FILE NUMBER: 005-49768 FILM NUMBER: 02615835 BUSINESS ADDRESS: STREET 1: 856 HOMER ST STREET 2: 701 WEST GEORGIA ST CITY: VANCOUVER B C CANADA STATE: A1 ZIP: 00000 BUSINESS PHONE: 6046846451 MAIL ADDRESS: STREET 1: 701 W GEORGIA STREET STREET 2: SUITE 303 SC 13D/A 1 dsc13da.txt SCHEDULE 13D (AMENDMENT NO. 7) ---------------------------------- OMB APPROVAL ---------------------------------- 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. 7)* 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) 326-2300 - -------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notes and Communications) December 12, 2001 ------------------------------------------------------ (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 18 SCHEDULE 13D - ------------------------------- ------------------------------ CUSIP No. 266199-10-4 ----------- Page 2 of 18 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 13,851,016 OWNED BY EACH ------------------------------------------------------------------ REPORTING 9 SOLE DISPOSITIVE POWER PERSON None WITH ------------------------------------------------------------------ 10 SHARED DISPOSITIVE POWER 13,851,016 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 13,851,016 - -------------------------------------------------------------------------------- 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) 87.8% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* PN - -------------------------------------------------------------------------------- Page 2 of 18 - -------------------------- --------------------------------------- CUSIP No. 266199-10-4 ----------- Page 3 of 18 Pages - -------------------------- --------------------------------------- - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSONS: GE Asset 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 --------------------------------------------------------------- BENEFICIALLY 8 SHARED VOTING POWER OWNED BY 13,851,016 EACH REPORTING --------------------------------------------------------------- PERSON 9 SOLE DISPOSITIVE POWER WITH None --------------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 13,851,016 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 13,851,016 - -------------------------------------------------------------------------------- 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) 87.8% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* CO - -------------------------------------------------------------------------------- Page 3 of 18 - -------------------------- --------------------------------------- CUSIP No. 266199-10-4 ----------- Page 4 of 18 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) None NUMBER OF SHARES --------------------------------------------------------------- BENEFICIALLY 8 SHARED VOTING POWER OWNED BY None EACH REPORTING PERSON --------------------------------------------------------------- WITH 9 SOLE DISPOSITIVE POWER Disclaimed (See 11 below) --------------------------------------------------------------- 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 18 Item 1. Security and Issuer. - ------ ------------------- Item I of the Schedule 13D (as defined below) is hereby deleted in its entirety and the following is inserted in lieu thereof: "This Amendment No. 7 amends and supplements 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, 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, Amendment No. 5 thereto filed on February 23, 1999 and Amendment No.6 thereto filed on April 19, 2001 (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, the Agreement (as defined below), the 2001 Agreement (as defined below) or in the Note, Stock Purchase and Warrant Agreement dated as of January 1, 1999, as applicable. The Reporting Persons have entered into a Joint Filing Agreement, dated April 12, 2002 attached hereto as Schedule I." Item 2. Identity and Background. - ------ ----------------------- Paragraph 2 of Item 2 of the Schedule 13D is hereby deleted in its entirety and the following paragraph is inserted in lieu thereof: "The address of the principal offices of the Partnership and GEAM is 3003 Summer Street, Stamford, Connecticut 06905. The address of the principal offices of General Electric Company is 3135 Easton Turnpike, Fairfield CT 06431." Paragraph 5 of Item 2 of Schedule 13D is hereby deleted in its entirety and the following paragraph is inserted in lieu thereof: "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, director of GE, is a citizen of Italy, Claudio X. Gonzalez, director of GE, is a citizen of Mexico, Andrea Jung, director of GE, is a citizen of Canada and Yoshiaki Fujimori, officer of GE, is a citizen of Japan." Item 3. Source and Amount of Funds and Other Consideration. - ------ -------------------------------------------------- The last sentence of Paragraph 7 of Item 3 of the Schedule 13D is hereby deleted in its entirety and the following sentence is inserted in lieu thereof: Page 5 of 18 "A copy of the Settlement Agreement was attached as Exhibit I to the Amendment No. 6 to the Schedule 13D filed by the Reporting Persons in October 1999." Paragraph 9 of Item 3 of the Schedule 13D is hereby deleted in its entirety and the following paragraph is inserted in lieu thereof: "In December, 1999, the Partnership, the Issuer and its U.S. Subsidiaries (as defined therein) entered into a Security Agreement dated as of October 6, 1999 (the "U.S. Security Agreement") and the Partnership, the Issuer and its Canadian Subsidiary (as defined therein) entered into a Security Agreement dated as of October 6, 1999 (the "Canadian Security Agreement" and, collectively with the U.S. Security Agreement, the "Security Agreements"), 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 U.S. Security Agreement was attached as Exhibit II to Amendment No. 6 to the Schedule 13D filed by the Reporting Persons on April 19, 2001. A copy of the Canadian Security Agreement is attached hereto as Exhibit III." Item 3 of the Schedule 13D is hereby further amended by inserting the following new paragraphs immediately at the end thereof: "On December 12, 2001, the Issuer and the Partnership entered into an Amended and Restated Note, Stock Purchase and Warrant Agreement (the "2001 Agreement") which amended and restated the Agreement. A copy of the 2001 Agreement is attached hereto as Exhibit I. Pursuant to the 2001 Agreement, (i) the Notes and 1999 Notes were amended and restated and the Restated and Amended Senior Secured Convertible Notes in the principal amount of $5,000,000, dated December 12, 2001 and maturing on September 1, 2005 (the "Senior Notes") and Restated and Amended Junior Secured Convertible Notes in the principal amount of $5,000,000, dated December 12, 2001 and maturing on September 1, 2005 (the "Junior Notes" and, collectively with the Senior Notes, the "2001 Notes") were issued to the Partnership and (ii) the Partnership received from the Issuer 2,600,000 shares of Common Stock. In consideration for the foregoing, the Partnership has waived the payment by the Issuer of all accrued and unpaid interest on the Notes and 1999 Notes through June 30, 2001, in the aggregate amount equal to $620,000. The Partnership has the right to convert the 2001 Notes at any time prior to September 1, 2005, at the option of the Partnership, into shares of Common Stock of the Issuer at a conversion price equal to $1.00 prior to September 1, 2002, $1.25 from September 1, 2002 through September 1, 2003, $1.50 from September 1, 2002 through September 1, 2004 and $1.75 from September 1, 2004 through September 1, 2005. The Senior Notes are subject to mandatory prepayment by the Issuer as follows: (i) an initial installment of $125,000 on December 12, 2001; (ii) three quarterly payments, beginning February 28, 2002, each in the amount of $125,000; (iii) four quarterly payments, beginning November 30, 2002, each in the amount of $150,000; (iv) four quarterly payments, beginning November 30, 2003, each in the amount of $175,000; (v) four quarterly payments, beginning November 30, 2004, each in the amount of $200,000; and (vi) one final installment on September 1, 2005, in the amount of $2,400,000. Since December 12, 2001, the Issuer made two payments of principal of the Senior Notes in the aggregate amount of $250,000, thereby reducing the aggregate principal amount of the Senior Notes to $4,750,000. Any future payments by the Issuer will reduce the principal amount of the Senior Notes and will proportionately reduce the Page 6 of 18 number of shares of Common Stock the Partnership is entitled to receive upon conversion of the Senior Notes. Subject to compliance by the Issuer with certain EBITDA targets set forth in the 2001 Agreement, the Junior Notes will be converted by the Partnership into the shares of Common Stock as follows: (i) on September 1, 2002, the Junior Notes in the aggregate principal amount of $1,250,000 will be converted into the shares of Common Stock at a price equal to $1 per share; (ii) on September 1, 2003, the Junior Notes in the aggregate principal amount of $1,250,000 will be converted into the shares of Common Stock at a price equal to $1.25 per share; (iii) on September 1, 2004, the Junior Notes in the aggregate principal amount of $1,250,000 will be converted into the shares of Common Stock at a price equal to $1.50 per share; and (iv) on September 1, 2005, the Junior Notes in the aggregate principal amount of $1,250,000 will be converted into the shares of Common Stock at a price equal to $1.75 per share. Any Junior Notes not previously converted will be converted into the shares of Common Stock on September 1, 2005, at a price equal to $1.75 per share. In connection with the transactions described above, the Partnership and the Issuer amended the Security Agreements to secure the aggregate principal amount of the 2001 Notes. Copies of the amendments to the Security Agreements are attached hereto as Exhibits II and IV." Item 4. Purpose of Transaction. ------ ---------------------- Item 4(a) of Schedule 13D is hereby amended by deleting paragraphs 10 and 11 thereof and by inserting new paragraphs 10 and 11 in lieu thereof to read in their entirety as follows: "In December 2001, the Partnership received from the Issuer, in exchange for the Notes and 1999 Notes, the 2001 Notes in the aggregate principal amount of $10,000,000, convertible into shares of Common Stock of the Issuer at a price per share equal to $1.00. The Partnership also received 2,600,000 shares of Common Stock. So long as the Partnership shall be the beneficial owner, in the aggregate, of at least 25% of the 2001 Notes, Common Stock acquired pursuant to the Agreement and the 2001 Agreement or any Common Stock issued upon the conversion of the 2001 Notes or the exercise of the Warrants, the Issuer (a) will nominate and recommend as candidates for election to the Board of Directors of the Issuer at least two (2) persons 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 Page 7 of 18 the Issuer and its 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 and as often as such General Partner may reasonably request." Item 5. Interest in Securities of the Issuer. - ------ ------------------------------------ Item 5(a) of the Schedule 13D is hereby deleted in its entirety and the following is inserted in lieu thereof: "(a) The Partnership and GEAM beneficially own 13,851,016 shares of Common Stock, representing 87.8% 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 2001 Notes, which are convertible, as the date hereof, into 9,750,000 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." Item 7. Material to Be Filed as Exhibits. - ------ -------------------------------- Item 7 of Schedule 13D is hereby deleted in its entirety and the following is inserted thereof: "Exhibit I Amended and Restated Note, Stock Purchase and Warrant Agreement, dated December 12, 2001, between the Issuer and the Partnership. Exhibit II Amendment No. 1, dated December 12, 2001, to the Security Agreement (US), dated October 6, 1999, among the Issuer, Elephant & Castle, Inc., Alamo Grill, Inc., Elephant and Castle of Pennsylvania, Inc., E&C Pub, Inc., Massachusetts Elephant & Castle Group, Inc. and Elephant & Castle International, Inc. Exhibit III Security Agreement (Canada), dated October 6,1999, among the Issuer, Elephant and Castle Canada Inc. and the Partnership. Exhibit IV Amendment No. 1, dated December 12, 2001, to the Security Agreement (Canada), dated October 6,1999, among the Issuer, Elephant and Castle Canada Inc. and the Partnership. The Note, Stock Purchase and 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. Amendment No. 3, dated October 17, 1997, to the Note, Stock Purchase and Warrant Agreement, dated November 30, 1995 (as amended) was attached as Exhibit I to the Page 8 of 18 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 and 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. Voting Trust Agreement made effective as of July 16, 1999, among Jeffrey M. Barnett, Jephco Holdings, Barnesco Holdings Ltd., the Partnership and GEAM was attached as Exhibit I to the Amendment No. 6 to the Schedule 13D filed by the Reporting Persons on April 19, 2001 and is incorporated by reference herein. Security Agreement dated as of October 6, 1999, among the Partnership, the Issuer and certain subsidiaries of the Issuer signatories thereto was attached as Exhibit II to the Amendment No. 6 to the Schedule 13D filed by the Reporting Persons on April 19, 2001 and is incorporated by reference herein." 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 9 of 18 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. Dated: April 15, 2002 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 10 of 18 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 15, 2002 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 11 of 18 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, Stamford, Connecticut 06905. The names and principal occupations of the Officers of GE Asset Management Incorporated ("GEAM") are as follows: NAME PRESENT PRINCIPAL OCCUPATION - ---- ---------------------------- 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 12 of 18 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 13 of 18 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: NAME PRESENT PRINCIPAL OCCUPATION - ---- ---------------------------- 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 14 of 18 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.R. Immelt General Electric Company Chairman of Board and Chief 3135 Easton Turnpike Executive Officer, Fairfield, CT 06431 General Electric Company P.D. Ameen General Electric Company Vice President and Comptroller 3135 Easton Turnpike Fairfield, CT 06431 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 J.P. Campbell General Electric Company Vice President - GE Appliances Appliance Park Louisville, KY 40225 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 and 3135 Easton Turnpike Executive Officer, General Fairfield, CT 06431 Electric Company; Chairman, General Electric Capital Services, Inc. S.C. Donnelly General Electric Company Senior Vice President - P. O. Box 8 Corporate Research Schenectady, NY 12301 and Development M.J. Espe General Electric Company Senior Vice President - Nela Park GE Lighting Cleveland, OH 44112 Y. Fujimori General Electric Company Senior Vice President- 3135 Easton Turnpike General Counsel and Secretary Fairfield, CT 06431 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 15 of 18 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 Vice Chairman of the Board and 3135 Easton Turnpike Executive Officer Fairfield, CT 06431 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 W.A. Woodburn General Electric Company Senior Vice President- 41 Woodford Avenue GE Specialty Chemicals Plainville, CT 06062 R. C. Wright National Broadcasting Vice Chairman of the Board and Company, Inc. Executive Officer, General 30 Rockefeller Plaza Electric Company; New York, NY 10112 President and Chief Executive Officer, National Broadcasting Company, Inc. Citizenship ----------- Y. Fujimori Japan All Others U.S.A
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
Page 16 of 18 S.S. Cathcart 222 Wisconsin Avenue Retired Chairman, Suite 103 Illinois Tool Works Lake Forest, IL 60045 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, Ogilvy & New York, NY 10019-7316 Mather Worldwide K.G. Langone Invemed Associates, Inc. Chairman, President and Chief 375 Park Avenue Executive Officer, New York, NY 10152 Invemed Associates, Inc. S.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
Page 17 of 18 151 West 34th Street Board of Directors, New York, NY 10001 Federated Department Stores 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 G.L. Rogers General Electric Company Vice Chairman of the Board 3135 Easton Turnpike and Executive Officer, General Fairfield, CT 06431 Electric Company 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 R.C. Wright National Broadcasting Vice Chairman of the Board and Company, Inc. Executive Officer, General 30 Rockefeller Plaza Electric Company; President New York, NY 10112 and Chief Executive Officer, National Broadcasting Company, Inc. Citizenship ----------- P. Fresco Italy C. X. Gonzalez Mexico A. Jung Canada All Others U.S.A.
Page 18 of 18 EX-99.I 3 dex99i.txt AMENDED & RESTATED NOTE,STOCK PURCH & WARRANT AGMT Exhibit I _________________________________________________________________________ ELEPHANT & CASTLE GROUP INC Restated and Amended Senior Secured 6% Convertible Notes Restated and Amended Junior Secured 6% Convertible Notes ____________________ AMENDED AND RESTATED NOTE, STOCK PURCHASE AND WARRANT AGREEMENT ____________________ Dated December 12, 2001 _________________________________________________________________________ TABLE OF CONTENTS (Not Part of Agreement)
Page ---- 1. Amendment and Restatement of the Original Agreement ............................. 2 1A. Authorization of Issue of Notes .............................................. 2 2. Consideration ................................................................... 3 2A. The Notes .................................................................... 3 2B. Shares of Common Stock ....................................................... 3 2C. Security Interest ............................................................ 3 3. Conditions of Closing. .......................................................... 4 4. Prepayments ..................................................................... 5 4A. Optional Prepayment in Whole or in Part ...................................... 5 4B. Mandatory Prepayment ......................................................... 5 4C. Mandatory Purchase at Holders' Option upon Certain Events .................... 5 4D. Intentionally Omitted. ....................................................... 6 4E. Notice of Prepayment ......................................................... 6 4F. Partial Prepayments .......................................................... 6 4G. Purchase of Junior Notes ..................................................... 6 5. Certain Covenants ............................................................... 6 5A. Financial Statements and Other Reports ....................................... 6 5B. Certain Additional Information ............................................... 8 5C. Restricted Payments .......................................................... 9 5D. Board Nominee ................................................................ 9 5E. Ratio of Earnings Before Interest, Taxes, Depreciation and Amortization to Interest Payable ............................................. 9 5F. Intentionally Omitted ........................................................ 9 5G. Indebtedness ................................................................. 10 5H. Sale of Assets ............................................................... 10 5I. Merger, Consolidation, Sale, Lease, Transfer or other Disposition of Assets ....................................................................... 10 5J. Restricted Investments ....................................................... 10 5K. Notice ....................................................................... 11 5L. Inspection of Property ....................................................... 11 5M. Corporate Existence, Licenses and Permits; Maintenance of Properties ......... 11 5N. Taxes ........................................................................ 12 5O. Insurance .................................................................... 12 5P. Books and Accounts ........................................................... 12 5Q. Notice of Events Involving Securities ........................................ 12 5R. No "Prohibited Transactions" and Employee Benefits ........................... 13
i 5S. Restricted Liens ......................................................... 13 5T. Compliance with Environmental Laws ....................................... 14 5U. Earnings ................................................................. 14 5V. Transactions with Affiliates or Officers ................................. 14 5W. Intentionally Omitted. ................................................... 15 5X. No Deductions or Withholdings ............................................ 15 5Y. Sale of Stock of Subsidiaries ............................................ 15 5Z. Restrictions on Issuance of Equity ....................................... 15 6. Events of Default and Remedies ............................................. 15 7. Representations, Covenants and Warranties .................................. 18 7A. Organization, Standing and Qualification of Company and Subsidiaries ............................................................. 18 7B. Corporate Authority ...................................................... 18 7C. Financial Statements ..................................................... 19 7D. Actions Pending .......................................................... 19 7E. Outstanding Debt; No Default ............................................. 20 7F. Title, Liens ............................................................. 20 7G. Taxes .................................................................... 20 7H. Burdensome and Conflicting Agreements and Charter Provisions ............. 20 7I. Leases ................................................................... 21 7J. Possession of Patents, etc ............................................... 21 7K. Offering of Notes ........................................................ 21 7L. Broker's or Finder's Commissions ......................................... 22 7M. Application of Proceeds .................................................. 22 7N. Governmental Consent ..................................................... 22 7O. Holding Company Status ................................................... 23 7P. Investment Company Status ................................................ 23 7Q. ERISA .................................................................... 23 7R. Disclosure ............................................................... 23 7S. Capital Stock ............................................................ 24 7T. Environmental Compliance ................................................. 24 7U. Transaction with Affiliates .............................................. 25 7V. Discontinuance of Operations ............................................. 26 7W. Licenses, Permits, etc ................................................... 26 7X. Compliance with Laws ..................................................... 26 7Y. Relationship with General Electric Company ............................... 26 7Z. Waived Interest .......................................................... 26 8. Representations and Covenants of the Buyer ................................. 26 9. Conversion; Conversion Price; Adjustments Relative to Conversion ........... 27 9A. Conversion Privilege; Mandatory Conversion; Conversion Price; Procedures. .............................................................. 27 9B. No Fractional Shares; No Adjustments for Dividends. ...................... 28 9C. Delivery of Stock Certificates and Cash in Lieu of Fractional Shares ..... 28
ii 9D. Adjustment of Conversion Price Upon Issuance of Common Stock ............. 28 9E. Liquidating Dividends; Purchase Rights ................................... 33 9F. Subdivision or Combination of Stock ...................................... 33 9G. Changes in Common Stock .................................................. 34 9H. Notice of Adjustment ..................................................... 34 9I. Certain Events ........................................................... 34 9J. Prohibition of Certain Actions ........................................... 35 9K. Stock to be Reserved ..................................................... 35 9L. Registration and Listing of Common Stock ................................. 35 9M. Issue Tax ................................................................ 36 9N. Closing of Books ......................................................... 36 9O. No Rights or Liabilities as Shareholders ................................. 36 9P. Right to Purchase ........................................................ 36 10. Intentionally Omitted. ..................................................... 37 11. Restrictions on Transfer; Registration Rights .............................. 37 11A. Applicability of Restrictions ............................................ 37 11B. Restrictive Legends ...................................................... 37 11C. Notice of Proposed Transfer; Opinions of Counsel; Certain Restrictions ............................................................. 37 11D. Registration of Restricted Securities on Request ......................... 39 11E. Piggy-Back Registration .................................................. 39 11F. Registration Expenses .................................................... 40 11G. Registration Procedures .................................................. 40 11H. Termination of Restrictions .............................................. 42 11I. Indemnification .......................................................... 43 11J. Availability of Information .............................................. 44 11K. Duration of Obligations .................................................. 44 12. Definitions ................................................................ 44 13. Miscellaneous .............................................................. 49 13A. Note Payments ............................................................ 49 13B. Expenses ................................................................. 50 13C. Consent to Amendments .................................................... 50 13D. Notices to Subsequent Holder ............................................. 51 13E. Form, Registration, Transfer and Exchange of Notes; Lost Notes ........... 51 13F. Persons Deemed Owners .................................................... 51 13G. Survival of Representations, Warranties and Indemnities .................. 51 13H. Successors and Assigns ................................................... 52 13I. Notices .................................................................. 52 13J. Accounting Terms ......................................................... 52 13K. Satisfaction Requirement ................................................. 52 13L. Governing Law ............................................................ 52 13M. Headings; Table of Contents .............................................. 52 13N. Counterparts ............................................................. 52
iii 13O. Non Exclusivity of Remedies and Specific Performance .................... 52 13P. Non Business Days ....................................................... 53
Exhibit A -- Form of Senior Secured Convertible Note Exhibit B -- Form of Junior Secured Convertible Note Exhibit 3A -- Form of Opinions of Fasken, Martineau, DuMoulin as to Canadian law matters, D. David Cohen, Esq. as to United States law matters and Bull, Housser & Tupper as to certain Canadian law matters Exhibit 7A1 -- Certain Subsidiaries Exhibit 7A2 -- Certificate of Incorporation and By-laws Exhibit 7J -- Patents, Etc. Exhibit 7S1 -- Certain Reserved Shares and Agreements Regarding Issuance of Shares Exhibit 7S2 -- Certain Owners of Securities Exhibit 7V -- Discontinued Locations Exhibit 7Y -- Relationship with General Electric Company iv ELEPHANT & CASTLE GROUP INC. AMENDED AND RESTATED NOTE, STOCK PURCHASE AND WARRANT AGREEMENT This Amended and Restated Note, Stock Purchase and Warrant Agreement (the "Agreement") is entered into as of December 12, 2001, between Elephant & Castle Group Inc., a corporation incorporated in the Province of British Columbia, Canada (herein called the "Company") and GE Investment Private Placement Partners II, a Limited Partnership, a Delaware limited partnership (herein called the "Buyer"). WHEREAS, the Company and the Buyer have entered in that certain Note, Stock Purchase and Warrant Agreement dated November 30, 1995 (as amended prior to the date hereof, the "Original Agreement") pursuant to which the Company sold and issued, and the Buyer acquired and received, 111,111 shares of Common Stock, convertible subordinated debentures due November 30, 2005, in the aggregate principal amount of $9,000,000 (the "Original Notes") and Warrants; WHEREAS, the Company issued to the Buyer pursuant to a Note and Warrant Agreement dated as of January 1, 1999, convertible subordinated debentures due December 31, 2003, in the aggregate principal amount, as of the date hereof, of $1,000,000 (the "1999 Notes"); WHEREAS, the Company granted to the Buyer security interest in substantially all of its assets and assets of its Subsidiaries pursuant to the Security Agreement dated as of October 6, 1999 among the Company, its U.S. Subsidiaries (as defined herein), and the Buyer (the "U.S. Security Agreement") and pursuant to the Security Agreement dated as of October 6, 1999 among the Company, its Canadian Subsidiary (as defined herein), and the Buyer (the "Canadian Security Agreement", and together with the U.S. Security Agreement, the "Security Agreement") as security for performance of its obligations under the Original Notes and the Original Agreement; WHEREAS, the Company desires and the Buyer agrees to amend the terms of the Original Notes and 1999 Notes by the issuance of Amended and Restated Senior Secured Convertible Notes and Amended and Restated Junior Secured Convertible Notes on terms and conditions herein set forth; WHEREAS, the parties hereto intend that this Agreement amend and restate the Original Agreement and constitute a continuation of the parties' obligations under the Original Agreement and does not constitute a novation; NOW, THEREFORE, in consideration of the mutual promises, representations, warranties, covenants and conditions set forth in this Agreement, and for other good and valuable consideration, the receipt and sufficiency whereof is hereby acknowledged, the parties hereby agree as follows: 2. Amendment and Restatement of the Original Agreement. The parties --------------------------------------------------- hereto who constitute the parties necessary to amend the Original Agreement hereby agree that, effective upon the date hereof, the Original Agreement is hereby amended and restated in its entirety by this Agreement. The parties hereby acknowledge and agree that the rights and obligations of the parties pursuant to this Agreement shall constitute continuation of the rights and obligations set forth in the Original Agreement and that entering by the parties into this Agreement and issuance by the Company of the Amended and Restated Senior Secured Convertible Notes ("Senior Notes") and Amended and Restated Junior Secured Convertible Notes ("Junior Notes") hereunder in exchange for the Original Notes and 1999 Notes shall constitute continuation of the obligations of the parties under the Original Notes and 1999 Notes on the terms provided in the Senior Notes and Junior Notes, and shall not constitute a novation. 2.1 Authorization of Issue of Notes. (a) The Company will authorize the issue of its Senior Notes in the aggregate principal amount of $5,000,000, to be dated the date of issue, to mature on the Maturity Date, to bear interest on the unpaid balance thereof from the date thereof until the Maturity Date or until the entire principal thereof shall have become due and payable at the rate of 6% per annum, payable in cash quarterly in arrears on each of September 1, December 1, March 1 and June 1, beginning March 1, 2002 with one final interest payment on September 1, 2005, and to be substantially in the form of Exhibit A hereto attached. The Company will authorize the issue of its Junior Notes in the aggregate principal amount of $5,000,000, to be dated the date of the issue, to mature on the Maturity Date, to bear interest on the unpaid balance thereof until the Maturity Date or until the entire principal thereof shall have become due and payable at the rate of 6% per annum, payable in arrears, upon each Conversion Date; provided, however, that on the first Conversion Date, the -------- ------- Company shall, in addition to the payment of any interest accrued on the Junior Notes through such date, make a one time payment to the Buyer, in cash, in the amount equal to $135,616.43. The Company shall have the option to pay up to 50% of the interest due and payable on the Junior Notes on each Conversion Date, in Common Shares, such shares to be valued at the average closing price for a share of Common Stock on NASD Bulletin Board or on NASDAQ National Market System or on an exchange, if any, on which the Common Stock is listed during the fifty (50) trading-day period following the date hereof, such value not to exceed, in any case, $1 per share. The term "Senior Note" or "Senior Notes" as used herein shall include each Senior Note delivered pursuant to any provision of this Agreement and each Senior Note delivered in substitution or exchange for any such Note, in any case which is at the time outstanding. The term "Junior Note" or "Junior Notes" as used herein shall include each Junior Note delivered pursuant to any provision of this Agreement and each Junior Note delivered in substitution of exchange for any such Junior Note, in any case which is at the time outstanding. "Senior Notes" and "Junior Notes" are herein referred to, collectively, as "Notes." All interest on the Notes shall be computed on the basis of the actual number of days elapsed and a year of 365 or 366 days, as applicable. To the extent permitted by applicable law, interest shall be due and payable on any overdue installment of principal or interest of any Note at a rate equal to the Defined Rate per annum from the date such payment was due until paid, payable on demand. 2 3. Consideration. The Company hereby agrees, subject to the terms ------------- and conditions herein set forth, to amend and restate the Original Notes and 1999 Notes and to issue to the Buyer shares of Common Stock in consideration of the following: (a) surrender by the Buyer of the Original Notes in the aggregate principal amount of $9,000,000; (b) surrender by the Buyer of the 1999 Notes in the aggregate principal amount of $1,000,000; (c) waiver by the Buyer of all accrued and unpaid interest on the Original Notes and the 1999 Notes through June 30, 2001, in the aggregate amount equal $620,000; and (d) acceptance by the Buyer of the amount equal to $210,616.80 in full payment and satisfaction of accrued and unpaid interest on the Original Notes and 1999 Notes from July 1 through, but not including the Closing Date, and the Buyer hereby agrees to waive such accrued and unpaid interest and to accept the Notes and the shares of Common Stock, all as further specified herein. 3.1 The Notes. The Company hereby agrees to amend and restate the terms of the Original Notes and 1999 Notes and, subject to the terms and conditions herein set forth, the Buyer agrees to receive from the Company on such amended and restated terms, $10,000,000 principal amount of Notes at 100% of such principal amount as follows: at 11:00 a.m. New York time on December 12, 2001, or at such other time and on such other date as the Buyer and the Company may agree (the "Closing Date"), the Company will deliver to the Buyer at the offices of Dewey Ballantine LLP, 1301 Avenue of the Americas, New York, New York 10019, or at such other location as the Buyer and the Company may agree (the "Closing"), one or more Notes, as the Buyer may request, registered in the Buyer's name, evidencing $10,000,000 principal amount to be acquired by the Buyer, against delivery of the consideration thereof as set forth in paragraph 2 hereof. 3.2 Shares of Common Stock. The Company hereby agrees to issue and deliver to the Buyer at the Closing and, subject to the terms and conditions set forth herein, the Buyer agrees to receive from the Company, 2,600,000 shares of Common Stock (the "Purchased Shares"). 3.3 Security Interest. The Company hereby acknowledges and agrees that the security interest granted by the Company to the Buyer pursuant to the Security Agreement shall continue in full force and effect and shall secure: payment of the indebtedness evidenced by the Notes, and performance and discharge of each and every obligation, covenant and condition on the Company's part to be performed under the Notes, including any and all modifications, extensions, renewals or accords and satisfactions thereof; 3 performance and discharge of each and every obligation, covenant and condition on the Company's part to be performed under this Agreement; and all reasonable costs and expenses incurred by the Buyer in collecting the indebtedness evidenced by the Notes or otherwise enforcing its rights under this Agreement or the Notes, including without limitation, reasonable attorneys' fees. 4. Conditions of Closing. The Buyer's obligation to acquire the --------------------- Notes and the Purchased Shares on the Closing Date is subject to the satisfaction, on or before the Closing Date, of the following conditions: Opinion of Counsel. On the Closing Date the Buyer shall have received (x) from - ------------------ Fasken, Martineau, DuMoulin, who are acting as Canadian counsel to the Company in connection with this transaction, a favorable opinion as to Canadian law matters, (y) from D. David Cohen, Esq., who is acting as United States counsel to the Company in connection with this transaction, a favorable opinion as to United States law matters and (z) from Bull, Housser & Tupper, who are acting as Canadian counsel to the Buyer in connection with this transaction, a favorable opinion as to certain Canadian law matters; each such opinion dated the Closing Date, satisfactory to the Buyer and substantially in the form set forth in Exhibit 3B hereto. Representations and Warranties; No Default. The representations and warranties - ------------------------------------------ contained in paragraph 7 hereof shall be true on and as of the Closing Date with the same effect as though made on and as of the Closing Date, and the Company shall have delivered to the Buyer an Officer's Certificate, dated the Closing Date to such effect. Transactions Permitted by Applicable Laws. The acquisition of and delivery of - ----------------------------------------- consideration for the Notes to be acquired by the Buyer and the issuance by the Company of the Notes and the Purchased Shares on the Closing Date on the terms and conditions herein provided (including the use of the proceeds of the Notes by the Company) shall not violate any applicable law or governmental regulation (including without limitation Regulations G, T and X of the Board of Governors of the Federal Reserve System, the Securities Act (British Columbia) and the Company Act (British Columbia)) and shall not subject the Buyer to any tax, penalty, liability or other onerous condition under or pursuant to any applicable law or governmental regulation relating to the extension of credit, and the Buyer shall have received such certificates or other evidence as the Buyer may request to establish compliance with this condition. Compliance With Outstanding Debt Issues. On or prior to the Closing Date, the - --------------------------------------- Company shall have delivered to the Buyer such evidence as the Buyer or the Buyer's special counsel may request showing that the execution, delivery and performance by the Company of this Agreement, the Notes, and the Purchased Shares will not conflict with, or result in a breach of the terms, conditions or provisions of, or constitute a default under, or result in the creation of any Lien upon any of the properties or assets of the Company or any Subsidiary pursuant to, or otherwise violate, any instrument evidencing any indebtedness of the Company or any of its Subsidiaries or any agreement relating thereto. Proceedings. On or prior to the Closing Date, all corporate and other - ----------- proceedings taken or to be taken in connection with the transactions contemplated hereby and all documents incident thereto shall be satisfactory in form and substance to the Buyer and the Buyer's special counsel, and the Buyer and the Buyer's special counsel shall have received all 4 such counterpart originals or certified or other copies of such documents as the Buyer or they may reasonably request. Delivery of Notes and Purchased Shares. On the Closing Date, the Company shall - -------------------------------------- have delivered the Notes pursuant to paragraph 2A hereof and the Purchased Shares pursuant to paragraph 2B hereof. Payment in Satisfaction of Prior Obligations. On the Closing Date, the Company - -------------------------------------------- shall have delivered to the Buyer (i) payment in the amount equal to $210,616.80 in full payment and satisfaction of accrued and unpaid interest on the Original Notes and 1999 Notes from July 1 through, but not including the Closing Date. Security Agreement. On or prior to the Closing Date, the Security Agreement and - ------------------ other documents related thereto shall have been amended to provide that the security interest granted therein, shall continue in full force and effect and shall secure the full payment and performance by the Company of its obligations, covenants and conditions under the Notes and of all obligations, covenants and conditions to be performed by the Company under this Agreement and the Security Agreement. On or prior to the Closing Date, the Company shall have delivered to the Buyer the Additional Closing Documents. 5. Prepayments. The Notes shall be subject to optional and mandatory ----------- prepayments or repurchase as specified in paragraphs 4A, 4B and 4C hereof. 5.1 Optional Prepayment in Whole or in Part. Any Note to be issued hereunder shall be subject to prepayment in whole, or from time to time in part, in increments of $500,000 principal amount of such Notes then outstanding, at the option of the Company, on any interest payment date. The prepayment price for any Note being prepaid under this paragraph 4A shall be: (i) 100% of the principal amount thereof; plus (ii) interest accrued to the prepayment date. 5.2 Mandatory Prepayment. The Company will prepay the Senior Notes outstanding as follows: (i) the initial installment on the Closing Date, in the amount of $125,000; (ii) three quarterly payments, beginning February 28, 2002, each in the amount of $125,000; (iii) four quarterly payments, beginning November 30, 2002, each in the amount of $150,000; (iv) four quarterly payments, beginning November 30, 2003, each in the amount of $175,000; (v) four quarterly payments, beginning November 30, 2004, each in the amount of $200,000; and (vi) one final installment on September 1, 2005, in the amount of $2,400,000. 5.3 Mandatory Purchase at Holders' Option upon Certain Events. The Notes shall be subject to prepayment, at any time in whole or in part, by the Company and the Company shall immediately prepay such Notes, in whole or in part, at the option of the holder, upon the occurrence of a Change in Control Event and thereafter for a period ending 90 days subsequent to receipt by the holders of Notes of notice from the Company to the effect that a Change in Control Event has occurred upon at least ten days written notice to the Company by such holder specifying (i) the principal amount of Notes to be prepaid, (ii) the prepayment date and (iii) the prepayment price for such Notes, which shall be (A) the principal amount of any such Notes, (B) a premium equal to that amount which is sufficient to provide a return equal to the Defined Rate per 5 annum on such principal amount of Notes, taking into account any interest or dividends paid on such Notes to and including the date of prepayment, compounded quarterly, from the date of issuance of such Notes to the date of such prepayment and (C) interest and dividends, if any, accrued thereon to the date of payment. 5.4 Intentionally Omitted. 5.5 Notice of Prepayment. The Company shall give each holder of Notes written notice of each prepayment pursuant to paragraph 4A hereof not less than 45 days or pursuant to paragraph 4B hereof not less than 10 days prior to any prepayment date, specifying such prepayment date, the principal amount of the Notes (and, if not all Notes are then held by the Buyer, of the Notes held by each holder) to be prepaid on such date, the paragraph pursuant to which such prepayment is to be made and the date the right to convert such Notes or portions thereof to be prepaid shall terminate pursuant to paragraph 9 hereof. Notice of prepayment having been given as aforesaid, the principal amount of the Notes specified in such notice, together with interest thereon to the date of prepayment shall become due and payable on the prepayment date specified, except to the extent that any Note which (or a portion of which) is to be so prepaid shall have been surrendered to the Company for conversion prior to such prepayment date in accordance with paragraph 9 hereof. 5.6 Partial Prepayments. Upon prepayment of less than all of the Notes pursuant to paragraphs 4A or 4B, the principal amount so prepaid shall be allocated to all Notes at the time outstanding in proportion to the outstanding principal amounts thereof. Upon any partial prepayment of any Note, such Note shall, at the option of the holder thereof, be either (a) surrendered to the Company in exchange for a new Note in a principal amount equal to the principal amount remaining unpaid on the Note surrendered, and otherwise having the same terms and provisions as the Note surrendered, or (b) made available to the Company at the principal office of the original holder of such Note for notation thereon of the portion of the principal so prepaid, except that, so long as the Buyer shall hold any Note, the Company agrees that the Buyer may make notation of any portion of the principal so prepaid on such Note on its records. 5.7 Purchase of Junior Notes. The Company covenants that it will not, and will not permit any Subsidiary to, directly or indirectly, purchase or otherwise acquire any Junior Note except (a) by making a payment or prepayment in accordance with the provisions of the Junior Notes and of this Agreement, (b) by purchasing any Junior Note as required by paragraph 4C hereof or (c) by accepting any Junior Note surrendered for conversion in accordance with paragraph 9 hereof. Any Junior Note acquired by the Company or any Subsidiary shall be canceled and shall not thereafter be deemed outstanding for any purpose hereunder. 6. Certain Covenants. ----------------- 6.1 Financial Statements and Other Reports. So long as any Notes shall remain outstanding, the Company will deliver to the Buyer, in duplicate: 6 As soon as available and in any event within 45 days after the end of each of the first three quarters of each fiscal year of the Company, (i) a consolidated balance sheet of the Company and its consolidated Subsidiaries (included in the Company's Quarterly Report on Form 10-Q filed by the Company with the Commission for the relevant fiscal quarter), and the related consolidated statements of income and changes in financial position for such quarter and for the portion of the fiscal year ended at the end of such quarter, and (ii) the Quarterly Report to Shareholders for such quarter or another report containing summarized information for such quarter and for the portion of the fiscal year ended at the end of such quarter, setting forth in each case in comparative form the figures for the corresponding quarter and the corresponding portion of the previous fiscal year; At any time when the Company does not file a Quarterly Report on Form 10-Q with the Commission, as soon as available, and in any event within 45 days after the end of each of the first three quarters in each fiscal year of the Company, unaudited consolidated statements of income, shareholders' equity and cash flows of the Company and its consolidated Subsidiaries for such quarterly period and for the period from the beginning of the current fiscal year to the end of such quarterly period, and an unaudited consolidated balance sheet of the Company and its consolidated Subsidiaries as at the end of such quarterly period, in each case setting forth in comparative form consolidated figures for the corresponding periods in the preceding fiscal year, all in reasonable detail, prepared by the Company in accordance with generally accepted accounting principles consistently followed throughout the periods involved, subject to normal year-end adjustments, and certified by the principal financial officer of the Company and accompanied by a written discussion of operations in summary form with respect to such quarterly period; As soon as available and in any event within 90 days after the end of each fiscal year of the Company, a consolidated balance sheet of the Company and its consolidated Subsidiaries (included in the Company's Annual Report to Shareholders and Annual Report on Form 10-K filed by the Company with the Commission for the relevant fiscal year), and the related consolidated statements of income, changes in stockholders' equity and cash flows for such fiscal year, setting forth in each case in comparative form the corresponding figures for the preceding fiscal year, all reported on without material exception or qualification, by Pannell Kerr Forster Worldwide or other independent public accountants of nationally recognized standing; At any time when the Company does not file an Annual Report on Form 10-K with the Commission, as soon as practicable and in any event within 90 days after the end of each fiscal year of the Company, consolidated statements of income, stockholders' equity and cash flows of the Company and its consolidated Subsidiaries for such year, and a consolidated balance sheet of the Company and its consolidated Subsidiaries as at the end of such fiscal year, setting forth in each case in comparative form corresponding consolidated figures from the preceding fiscal year, prepared in accordance with generally accepted accounting principles consistently followed throughout the periods involved, and certified by Pannell Kerr Forster Worldwide or other independent public accountants of recognized national standing, whose certificate shall be satisfactory in scope and substance to the Buyer and who shall have authorized the Company to deliver such financial statements and certification thereof to the Buyer, and accompanied by a written discussion of operations in summary form with respect to such fiscal year; 7 Promptly upon transmission thereof, copies of all such financial statements, proxy statements, notices and reports as the Company shall send to its stockholders and of all registration statements and regular or periodic reports, including without limitation Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q and any current Reports on Form 8-K, in definitive form which it files or which it is or may be required to file with the Commission; and With reasonable promptness, to the Buyer, such other financial data the Buyer may reasonably request; provided, however, that (i) neither the Company nor any -------- ------- Subsidiary shall be required to disclose any such information if such disclosure is prohibited by law, and (ii) any information provided pursuant to this paragraph 5A(f) which is designated in writing as proprietary or confidential at the time of receipt thereof, if such information is not otherwise in the public domain, shall not be disclosed by the Buyer to any other Person except (1) to its independent accountants and legal counsel, (2) pursuant to statutory and regulatory requirements, (3) pursuant to any mandatory court order, subpoena or other legal process, (4) to any other holder, or (5) in connection with the exercise of any remedy under this Agreement. The Buyer is hereby authorized to deliver a copy of any financial statement delivered to any holder pursuant to subparagraphs (a) through (e) of this paragraph 5A to any regulatory body having jurisdiction over any holder which requests such information. Any holder is further authorized, from and after the date hereof, to request information from and to have access to, the Company's independent public accountants, and the Company will direct such accountants to make available to any holder such information as any holder may reasonably request. 6.2 Certain Additional Information. So long as the Buyer shall hold any Note, the Company will deliver to the Buyer, in duplicate: Together with each delivery of financial statements required by Paragraphs 5A(a), (b), (c) and (d), as applicable above, the Company will deliver to the Buyer an Officer's Certificate stating that during the period covered by the most recent statement of income delivered to the Buyer no Event of Default or Default has occurred, or, if such has occurred, specifying the nature and status thereof, the period of existence thereof and what action the Company has taken or proposes to take with respect thereto. The financial statements required to be delivered by clause 5A(d) above shall also be accompanied by a written statement of the independent public accountants who certify such financial statements to the effect that, in the course of the examination upon which their certification was based, they have obtained no knowledge of any Event of Default or Default insofar as any such Event of Default or Default relates to any financial matters, or, if they have obtained knowledge of any such failure, specifying the nature and period of existence thereof. Forthwith upon the Chairman of the Board or any officer of the Company obtaining knowledge of an Event of Default or Default, the Company will deliver to the Buyer an Officer's Certificate specifying the nature thereof, the period of existence thereof and what action the Company proposes to take with respect thereto. 8 6.3 Restricted Payments. So long as any Note shall remain outstanding, the Company will not, and will not permit any Subsidiary to, (a) declare or pay any dividends on, or make any other distribution or payment on account of, or redeem, retire, purchase or otherwise acquire, directly or indirectly (except through payment of the Notes), any shares of any class of stock of the Company, whether now or hereafter outstanding, or make any other distribution in respect thereof, either directly or indirectly, whether in cash, property or in obligations of the Company, except for distribution of shares of the same class or of a different class of stock pro rata to all holders of shares of a class of stock under circumstances giving the Buyer rights pursuant to paragraph 9 hereof, or (b) make any payments of principal of, or retire, redeem, purchase or otherwise acquire, any indebtedness other than the Notes (such declarations, payments, purchases, redemptions, retirements, acquisitions or distributions being herein called "Restricted Payments"). 6.4 Board Nominee. So long as the Buyer shall be the beneficial owner, in the aggregate, of at least 25% of the Notes, Common Stock acquired pursuant to the Original Agreement and this Agreement or any Common Stock issued upon the conversion of the Notes or the exercise of the Warrants, the Company (a) will nominate and recommend as candidates for election to the Board of Directors of the Company at least two (2) Persons designated by the general partner of the Buyer and (b) will not increase the size of the Board of Directors of the Company without the consent of the general partner of the Buyer. If at any time any such designated Person(s) is not a member of the Board of Directors of the Company, (i) the Company will notify such designated Person(s), concurrently with notice given to members of the Board of Directors of the Company, of all meetings of the Board of Directors, and, as soon as available, will provide to such designated Person(s) all reports, financial statements or other information distributed to the Board or Directors of the Company, (ii) the Company will permit such designated Person(s) to attend all such meetings of the Board of Directors as an observer and to participate as an elected member with all rights of an elected member, voting excepted and (iii) the Company will permit the general partner of the Buyer, or any Person(s) designated by such general partner in writing to be a Person(s) acting on its behalf, at the Company's expense, to visit and inspect any of the properties of the Company and its Subsidiaries and to discuss the affairs, finances and accounts of the Company and its Subsidiaries with the principal officers and the auditors of the Company, all at such reasonable times during business hours and as often as such general partner may reasonably request. 6.5 Ratio of Earnings Before Interest, Taxes, Depreciation and Amortization to Interest Payable. So long as any Note shall remain outstanding, the Company will not permit, as at the end of the most recent fiscal quarter of the Company, the ratio of (i) Earnings Before Interest, Taxes, Depreciation and Amortization (calculated in U.S. Dollars) to (ii) interest due and payable on all Indebtedness (calculated in U.S. Dollars), in each case for the immediately preceding twelve-month period or longer period, as the case may be, to be less than 2:1. 6.6 Intentionally Omitted. 9 6.7 Indebtedness. So long as any Note shall remain outstanding, the Company will not, without the prior written consent of the Buyer, and will not permit any of its Subsidiaries directly or indirectly to create, incur, assume, guaranty, or otherwise become or remain directly or indirectly liable in respect to any Indebtedness if the aggregate principal amount of all Indebtedness of the Company and its Subsidiaries outstanding at such time (other than the Notes) exceeds the aggregate principal amount of the Notes converted pursuant to paragraph 9 hereof or prepaid by the Company in accordance with the provisions of this Agreement; provided, however, that if on any Conversion Date the Company -------- ------- shall have failed to satisfy the EBITDA requirements set forth in paragraph 9A(b) for such date, the Company shall not, and will not permit any Subsidiary directly or indirectly to create, incur, assume, guaranty, or otherwise become liable in respect to any Indebtedness unless and until the Company shall meet the EBITDA requirements for the next Conversion Date. So long as any Note shall remain outstanding, the Company will not, without the prior written consent of the Buyer, and will not permit any of its Subsidiaries directly or indirectly to create, incur, assume, guaranty, or otherwise become or remain directly or indirectly liable in respect to any Indebtedness if the aggregate principal amount of all Indebtedness of the Company and its Subsidiaries outstanding at such time (other than the Notes) exceeds $5,000,000. 6.8 Sale of Assets. So long as any Note shall remain outstanding, the Company will not, and will not permit any Subsidiary to, sell, lease, assign, transfer or otherwise dispose of any of its fixed assets, whether now owned or hereafter acquired, or any of its other property, other than in the ordinary course of its business, without the prior written consent of the Buyer. 6.9 Merger, Consolidation, Sale, Lease, Transfer or other Disposition of Assets. So long as any Note shall remain outstanding, the Company will not, without the prior written consent of the Buyer: permit any of its Subsidiaries to sell, lease, transfer or otherwise dispose of all or substantially all of its assets to another Person other than in the ordinary course of business, or make any material change in the methods by which it conducts its business, or to consolidate with or merge with or into any other corporation, or to permit another corporation to merge with or into it, except that any Subsidiary may sell, lease, transfer or otherwise dispose of all or any part of its assets to the Company or any wholly-owned Subsidiary or consolidate with or merge with or into any wholly-owned Subsidiary or, with or into the Company; or sell, lease, transfer or otherwise dispose of all or substantially all of its assets or consolidate with or merge with or into any Person or permit any Person to merge with or into it. 6.10 Restricted Investments. So long as any Note shall remain outstanding, the Company will not, and will not permit any Subsidiary to, make or authorize any Restricted Investment. For the purposes of this paragraph the term "Restricted Investment" shall mean (x) any investment, made in cash or otherwise, by the Company or any Subsidiary (i) in any Person, whether by acquisition of stock, indebtedness or other obligation or security, by a loan, advance or capital contribution, or 10 otherwise, or (ii) in any property, (y) any loan for a purpose other than as described in clause (x) of this paragraph or (z) any advance, except the following: investments in and advances to wholly-owned Subsidiaries or companies which simultaneously become wholly-owned Subsidiaries; investments in property to be used in the business of the Company or any wholly-owned Subsidiary; investments in direct obligations of, or obligations the principal and interest of which are guaranteed by, the United States of America or any agency thereof maturing in three years or less from the date of acquisition; investments in certificates of deposit or banker's acceptances issued by any commercial bank located in the United States, Canada, Western Europe or Japan which is owned by a bank holding company the commercial paper of which is rated A2 or P2, respectively, by Standard & Poor's Corporation or Moody's Investors Service, or higher, and which has capital, surplus and undivided profits aggregating at least $100,000,000; investments in commercial paper maturing within 270 days or less from the date of acquisition rated in one of the two highest grades by Standard & Poor's Corporation or Moody's Investors Service or by another rating agency of nationally recognized standing; investments in money market funds; investments held by the Company or any Subsidiary on the date hereof; or investments, loans and advances made in the ordinary course of business not in excess at any one time of 1% of total assets of the Company and its Subsidiaries on a consolidated basis. 6.11 Notice. So long as any Note shall remain outstanding, the Company will notify each holder of a Note or Notes (a) forthwith upon the Chairman of the Board or any officer of the Company obtaining knowledge of any Default or Event of Default hereunder, (b) immediately upon receipt by the Company of any notice of, or knowledge by the Chairman of the Board or any officer of the Company of, any event of default under any Current Indebtedness or Funded Indebtedness, (c) immediately upon the public announcement of any transaction, including without limitation any merger, combination or consolidation, in which the Company will not be the surviving corporation, or a sale of all or substantially all of the Company's assets and (d) of the Chairman of the Board or any officer of the Company obtaining knowledge of, and upon the occurrence of, any Change of Control Event. 6.12 Inspection of Property. So long as any Note shall remain outstanding, the Company will permit any Person designated in writing by the holders of a majority in aggregate principal amount of Notes outstanding to be a Person acting on their behalf to visit and inspect any of the properties of the Company and its Subsidiaries and to discuss the affairs, finances and accounts of any of such corporations with the principal officers of the Company and such Subsidiaries, all at such reasonable times and as often as such holders may reasonably request. 6.13 Corporate Existence, Licenses and Permits; Maintenance of Properties. So long as any Note shall remain outstanding, the Company will at all times do or cause to be done all things necessary to maintain, preserve and renew its existence as a corporation organized under the laws of province of British Columbia, Canada, 11 preserve and keep in force and effect, and cause each of its Subsidiaries to preserve and keep in force and effect, all licenses and permits necessary and material to the conduct of the business of the Company and its consolidated Subsidiaries, taken as a whole, and to maintain and keep, and cause each of its Subsidiaries to maintain and keep, its and their respective properties in good repair, working order and condition (except for normal wear and tear), and from time to time to make all needful and proper repairs, renewals and replacements, including without limitation all trade name and trademark registration renewals, so that any business material to the Company carried on in connection therewith may be properly and advantageously conducted at all times. 6.14 Taxes. So long as any Note shall remain outstanding, the Company will duly pay and discharge, and cause each of its Subsidiaries duly to pay and discharge, all taxes, assessments and governmental charges upon or against the Company or its Subsidiaries or their respective properties, in each case before the same become delinquent and before penalties accrue thereon, unless and to the extent that the same are being contested in good faith and by appropriate proceedings and the Company and its Subsidiaries shall have set aside on their books adequate reserves with respect thereto. 6.15 Insurance. So long as any Note shall remain outstanding, the Company will apply for and continue in force, or cause to be applied for and continued in force, adequate insurance covering the respective risks of the Company and its Subsidiaries of such types and in such amounts and with such deductibles as are customary for other corporations engaged in similar lines of business and with good and responsible insurance companies. 6.16 Books and Accounts. So long as any Note shall remain outstanding, the Company will, and will cause each Subsidiary to, maintain proper books of record and account in which full, true and correct entries shall be made of its transactions and set aside on its books from its earnings for each fiscal year all such proper reserves as in each case shall be required in accordance with generally accepted accounting principles. 6.17 Notice of Events Involving Securities. The Company will give each holder of a Note or Notes, each holder of any Warrants and each holder of any Common Stock issued upon conversion of any Note or Notes or exercise of any Warrant or Warrants which had been held by such holder at the time of conversion thereof, unless the Company shall have previously given such holder notice of such filing pursuant to another provision of this Agreement, (a) within ten days thereafter, notice of the filing by the Company with the Commission or with any national securities exchange either an application to register any securities of the Company pursuant to Section 12 of the Exchange Act, or a registration statement under Section 5 of the Securities Act, relating to any securities of the Company, (b) as promptly as practicable after any acquisition by it or by any Subsidiary of any of the Company's equity securities in excess in one transaction of 1% of the number of such securities then outstanding and, in any event, in connection with the materials delivered pursuant to paragraph 5A(b) hereof, as at the close of each fiscal year, notice of all acquisitions by it or by any Subsidiary of any of the Company's equity securities, specifying the class and number of such equity securities so 12 acquired, and (c) promptly upon notice thereof, notice of the filing of any Schedule 13D or 13G with respect to securities of the Company pursuant to the Exchange Act (with copies of any such Schedule to accompany or follow such notice as soon as practicable). The Company agrees to use its best efforts to give each holder notice immediately upon the occurrence of any event that would cause such holder, assuming such holder holds the number of shares of Common Stock issuable upon conversion of all the Notes then held by such holder, to be required to file any Schedule or Form with respect to securities of the Company pursuant to the Exchange Act. 6.18 No "Prohibited Transactions" and Employee Benefits. Neither the Company nor any Subsidiary nor any ERISA Affiliate will establish, maintain, contribute to, or incur an obligation to contribute to any plan (including a Multiemployer Plan) subject to Title IV of ERISA or Section 412 of Internal Revenue Code of 1986, as amended. Neither the Company nor any Subsidiary shall incur any liability with respect to retiree medical or death benefits. All employee benefit plans and arrangements (regardless of whether such plan or arrangements are covered by ERISA) maintained by or contributed to by the Company, any Subsidiary or any ERISA Affiliate shall be maintained in compliance with all applicable law, including any reporting requirements. With respect to any plan maintained by or contributed by the Company or any Subsidiary, neither the Company nor any Subsidiary will fail to make any contribution due under the terms of such plan or required by law. Neither the Company nor any Subsidiary, nor any other person including any fiduciary will engage in any transaction prohibited by Section 406 of ERISA or Section 4975 of the Internal Revenue Code of 1986, as amended, which could subject the Company, any Subsidiary or any entity that the Company or any Subsidiary has an obligation to indemnify to any tax or penalty imposed under Section 4975 of the Internal Revenue Code of 1986, as amended, or Section 502 of ERISA. So long as any Note shall remain outstanding, the Company will not, and will not permit any Subsidiary to, enter into any transaction or take any action which will result in any transaction contemplated by the Agreement becoming a transaction prohibited by Section 406 of ERISA or Section 4975 of the Internal Revenue Code of 1986, as amended. 6.19 Restricted Liens. So long as any Note shall remain outstanding, the Company will not, and will not permit any Subsidiary to, create or permit to exist any mortgage, pledge, title retention lien, or other Lien, encumbrance or security interest with respect to any assets now or hereafter acquired, except (i) for current taxes not delinquent or taxes being contested in good faith and by appropriate proceedings, (ii) Liens arising in the ordinary course of business for sums not due or sums being contested in good faith and by appropriate proceedings and not involving any deposits or advances or borrowed money or the deferred purchase price of property or services, (iii) those granted by any Subsidiary to secure indebtedness of such Subsidiary to the Company or to any other Subsidiary, and (iv) lien on asset located on new properties hereinafter purchased, leased or otherwise acquired by the Company or any Subsidiary in the amount not to exceed the aggregate principal amount of the Notes converted pursuant to paragraph 9 hereof or prepaid by the Company in accordance with the provisions of this Agreement; provided, however, that if on -------- ------- any Conversion Date the Company shall have failed to satisfy the 13 EBITDA requirements set forth in paragraph 9A(b) for such date, the Company shall not, and will not permit any Subsidiary to, create any Lien on any assets thereof unless and until the Company shall meet the EBITDA requirements for the next Conversion Date. 6.20 Compliance with Environmental Laws. So long as any Note shall remain outstanding, the Company will not, and will not permit any Subsidiary to, except in compliance with applicable Environmental Laws, or in the event of any noncompliance with applicable Environmental Laws, only to the extent which such noncompliance would not have a material adverse effect on the business, operations or financial condition of the Company, individually, or of the Company and its Subsidiaries, taken as a whole, (a) use any of the property of the Company or any Subsidiary or any portion thereof for the handling, processing, storage or disposal of Hazardous Substances, (b) cause or permit to be located on any of the property any underground tank or other underground storage receptacle for Hazardous Substances, (c) generate any Hazardous Substances on any of the property, (d) conduct any activity on the property or use any property in any manner so as to cause a release (i.e., releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, disposing or dumping) or threatened release of Hazardous Substances on, upon or into the property or (e) otherwise conduct any activity on the property or use any property in any manner that would violate any Environmental Law or bring such property in violation of any Environmental Law. 6.21 Earnings. The Company will attain a minimum of $1,800,000 in Earnings Before Interest, Taxes, Depreciation and Amortization for each twelve (12) month period ending on June 30 of each year through and including June 30, 2005. 6.22 Transactions with Affiliates or Officers. So long as any Note shall remain outstanding, the Company will not, and will not permit any Subsidiary to, (a) enter into any transaction, including, without limitation, the purchase, sale or exchange of property or the rendering of any services, with any Affiliate (other than the Company or a Subsidiary of the Company), or any officer or director thereof, or enter into, assume or suffer to exist any employment or consulting contract with any Affiliate (other than the Company or a Subsidiary of the Company), or any officer or director thereof, except any transaction or contract which is in the ordinary course of the Company's business and which is upon fair and reasonable terms no less favorable to the Company than it would obtain in a comparable arm's length transaction with a Person not an Affiliate, (b) make any advance or loan to any Affiliate (other than the Company or Subsidiary of the Company), or any director or officer thereof or of the Company or to any trust of which any of the foregoing is a beneficiary, (c) pay any fees or expenses to, or reimburse or assume any obligation for the reimbursement of any expenses incurred by, any Affiliate (other than the Company or a Subsidiary of the Company) or any officer or director thereof or (d) except as set forth in Exhibit 7S1, issue any of its capital stock of any class or issue or grant, or agree to issue or grant, any options, warrants, or similar rights to acquire or receive any of the authorized but unissued shares of capital stock of any class or any securities convertible into shares of its Capital Stock of any class; provided that nothing contained -------- in this paragraph 5V shall be deemed to prohibit (i) the Company or any of its Subsidiaries from providing reasonable compensation and related fringe 14 benefits (except as set forth in paragraph 5R) and indemnification rights to any of its respective officers, directors, consultants and employees; or (ii) the payment of reasonable fees and reasonable out-of-pocket expenses to counsel and directors who are not employees of the Company or any of its Subsidiaries. 6.23 Intentionally Omitted. 6.24 No Deductions or Withholdings. All sums payable by the Company to the Buyer hereunder whether of principal or interest or otherwise shall be paid in full without any deduction on account of any present or future income or other taxes, levies, imposts, duties, charges or withholdings of any nature. In the event of the Company being compelled by law to make any such deduction or withholding from any payment to the Buyer, the Company will pay to the Buyer by way of additional interest such additional amounts as may be necessary to ensure that the aggregate of the net amounts received by the Buyer after such deduction shall equal the amount which would have been receivable in the absence of any such deduction. 6.25 Sale of Stock of Subsidiaries. The Company will not sell, transfer, pledge, assign, convey or otherwise dispose of, and will not permit any Subsidiary to issue, any capital stock, option, warrant, or any security convertible into capital stock of any of its Subsidiaries in any of its Subsidiaries, except as permitted by paragraph 5I hereof. 6.26 Restrictions on Issuance of Equity. So long as any Note shall remain outstanding, the Company will not, without the prior written consent of the Buyer, authorize, issue or sell any shares of stock of any class or series of the Company, or any rights to purchase any shares of stock of any class or series of the Company. 7. Events of Default and Remedies. If any of the following events ------------------------------ shall occur and be continuing for any reason whatsoever (and whether such occurrence shall be voluntary or involuntary or come about or be affected by operation of law or otherwise): (i) the Company shall default in the payment of any principal of any Note when the same shall become due, either by the terms thereof or otherwise as herein provided; or (ii) the Company shall default in the payment of any interest on any Note and such default shall have continued for five consecutive days; or (iii) the Company shall default in the making of any required purchase of any Note as provided in paragraph 4C hereof; (iv) the Company or any Subsidiary shall default in any payment of principal of or interest on any other obligation for borrowed money (or any obligation or obligations under a conditional sale or other title retention agreement or any obligation or obligations issued or assumed as full or partial payment for property whether or not secured by a purchase 15 money mortgage or any obligation under notes payable or drafts accepted representing extensions of credit) beyond any period of grace provided with respect thereto or shall default in the performance of any other agreement, term or condition contained in any agreement under which any such obligation is created (or if any other default under any such agreement shall occur and be continuing) if the effect of such default is to cause, or permit the holder or holders of such obligation or obligations (or a trustee on behalf of such holder or holders) to cause, such obligation or obligations to become due prior to its or their stated maturity and such default continues for more than ten (10) business days; or (v) a final judgment, decree or order for the payment of money in excess of $50,000 shall be rendered against the Company or any Subsidiary, and the same shall not be discharged or execution thereon stayed pending appeal within 60 days after entry thereof, or, in the event of such a stay, such judgment shall not be discharged, or again stayed pending further appeal, within 60 days after such stay shall expire; or (vi) any representation or warranty made by the Company herein or in any writing furnished in connection with the issuance and sale of the Notes and the purchase thereof by the Buyer shall be false in any material respect on the date as of which made; or (vii) the Company shall default in the performance or observance of any agreement, covenant, term or condition contained in (x) paragraphs 5B and 5H hereof, (y) paragraphs 5E and 5G if such default shall occur and be continuing for any two consecutive three month periods ending on March 31, June 30, September 30 or December 31, without regard to any notice from any holder of Notes, and (z) paragraph 5Z, without regard to any notice from any holder of Notes; or (viii) the Company shall default in the performance or observance of any other agreement, covenant, term or condition contained herein (other than as provided in clause (i), (ii), (iii) or (vii) of this paragraph 6, for which the respective grace period, if any, described in such clause shall apply), including without limitation the furnishing in writing of any representation or warranty required to be furnished after each Closing Date pursuant to this Agreement, and such default shall not have been remedied within 30 days after written notice thereof shall have been received by the Company from any holder of Notes; or (ix) if the Company or any Subsidiary shall (a) apply for or consent to the appointment of a receiver, trustee, liquidator or custodian or the like of itself or of its property, (b) admit in writing its inability to pay its debts generally as they become due, (c) make a general assignment for the benefit of creditors, (d) commence a voluntary or assignment case under the Federal bankruptcy laws of the United States of America or the 16 laws of Canada or file a voluntary petition or answer seeking reorganization, an arrangement with creditors or an order for relief or seeking to take advantage of any insolvency law or file an answer admitting the material allegations of a petition filed against it in any bankruptcy, reorganization or insolvency proceeding, or corporate action shall be taken by it for the purpose of effecting any of the foregoing; or (x) if without the application, approval or consent of the Company or any Subsidiary, a proceeding shall be instituted in any court of competent jurisdiction, under any law relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking in respect of the Company or any Subsidiary an order for relief or an adjudication in bankruptcy, reorganization, dissolution, winding up, liquidation, a composition or arrangement with creditors, a readjustment of debts, the appointment of a trustee, receiver, liquidator or custodian or the like of the Company or such Subsidiary or of all or any substantial part of its assets, or other like relief in respect thereof under any bankruptcy or insolvency law, and, if such proceeding is being contested by the Company or such Subsidiary in good faith, the same shall (a) result in the entry of an order for relief or any such adjudication or appointment or (b) continue undismissed, or pending and unstayed, for any period of thirty (30) consecutive days. then, upon the happening of any event described in clauses (ix) and (x) in this paragraph 6 (with respect to the Company), the Notes shall be and become immediately due and payable without any notice of any kind at the principal amount thereof together with accrued interest thereon, or, during the continuance of any event referred to in this paragraph 6 other than such clauses (ix) and (x) (with respect to the Company), any holder or holders of 66-2/3% in aggregate principal amount of the Notes then outstanding may, at their option and in addition to any right, power or remedy permitted by law or equity or herein granted, by notice in writing to the Company, declare all of the Notes to be, and such Notes shall thereupon be and become, forthwith due and payable at the principal amount thereof, together with interest accrued thereon and a premium equal to that amount which is sufficient to provide a return equal to the Defined Rate, per annum on the principal amount thereof, taking into account any interest on such Notes paid to and including the date of final payment thereof, compounded quarterly, from the date of issuance to the date of such payment. The above provision with respect to any acceleration of the Notes is subject to the condition that if for any reason after the principal of the Notes shall have so become due and payable, the Company shall demonstrate to the satisfaction of the holders in their sole judgment that it is able to pay all matured installments of interest upon the Notes and to make any required payments which shall have become due other than by reason of such acceleration (with interest upon such payments and, to the extent that payment of such interest is enforceable under applicable law, on overdue installments of interest) and all defaults under this Agreement, other than nonpayment of the principal of or interest on the Notes which have become due by such acceleration, 17 shall have been remedied or waived by holders representing at least the percentage in aggregate principal amount of Notes requesting such acceleration, then and in such instance such default may be waived and its consequences rescinded and annulled by the holders representing at least the percentage in aggregate principal amount of Notes requesting such acceleration by written notice to the Company, which waiver shall be binding upon all holders. It is expressly understood and agreed that the decision so to waive any default and so to rescind and annul any consequences is within the sole judgment and control of the holders of the Notes, and such holders shall be under no obligation so to do. 8. Representations, Covenants and Warranties. The Company ----------------------------------------- represents, covenants and warrants as follows: 8.1 Organization, Standing and Qualification of Company and Subsidiaries. The Company is a corporation duly organized and existing in good standing under the laws of the Province of British Columbia, Canada, each Subsidiary is duly organized and existing in good standing under the laws of the jurisdiction in which it is formed or incorporated, as the case may be, and the Company has and each Subsidiary has the power to own its respective property and to carry on its respective business as now being conducted. The Company is and each Subsidiary is duly qualified and in good standing as a foreign or extra provincial corporation or other legal entity to do business in every jurisdiction where the character of the properties owned or leased by it or the nature of any business transacted by it makes such qualification necessary and where such nonqualification or lack of good standing would have a material adverse effect on the business of the Company and its consolidated Subsidiaries taken as a whole. The Company has no Subsidiary other than those set forth in Exhibit 7A and except as set forth on such Exhibit 7A, such Subsidiaries are wholly owned. Attached hereto as Exhibit 7A2 are complete and correct copies of its Certificate of Incorporation, Memorandum and Articles, as amended and in full force and effect on the date hereof. 8.2 Corporate Authority. (a) The execution and delivery by the Company of all transactions and obligations contemplated hereby are within its corporate authority. This Agreement, the Notes and the Purchased Shares constitute the legal, valid and binding obligations of the Company enforceable in accordance with its terms, except to the extent that enforcement may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws affecting creditor's rights generally and the application of general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law), and with respect to the indemnification provisions contained herein, by applicable securities laws or principles of public policy. The execution, delivery and performance of this Agreement and the issuance of the Notes, the Purchased Shares and the shares of Common Stock issuable upon conversion of the Notes have been duly authorized by all necessary corporate proceedings on the part of the Company. This Agreement and the Notes have been duly executed and delivered. The Purchased Shares delivered to the Buyer on the date hereof have been validly issued and are fully paid and nonassessable and not subject to any preemptive rights. The shares of Common Stock issuable upon conversion of the Notes have been duly authorized and 18 duly reserved for issuance, are subject to no preemptive rights, and when and if issued, will be validly issued, fully paid and nonassessable. 8.3 Financial Statements. The Company has furnished the Buyer with (i) the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission for the fiscal year ended December 31, 2000, (ii) the Company's Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission for the three months ended September 24, 2000, April 1, 2001, July 1, 2001 and September 30, 2001, respectively and (iii) audited consolidated balance sheet of the Company and its consolidated Subsidiaries as at December 31, 2000 and the related consolidated statements of income, shareholders' equity and cash flows of the Company and its consolidated Subsidiaries audited for the fiscal year ended December 31, 2000, all certified by Pannell Kerr Forster Worldwide, and unaudited consolidated balance sheet of the Company and its consolidated Subsidiaries as at September 30, 2001 and the related consolidated statements of income, shareholders' equity and cash flows of the Company and its consolidated Subsidiaries for the quarterly period ended September 30, 2001 including in each case the related schedules and notes and the management report for each month thereafter through November, 2001. All such financial statements (including any related schedules and/or notes) have been prepared in accordance with generally accepted accounting principles as in effect in Canada consistently applied, except to the extent set forth in the notes to such financial statements, throughout the periods involved and to the extent required by such principles show all liabilities, direct and contingent, of the Company and its consolidated Subsidiaries. The balance sheets and the related schedules and notes fairly present on a consolidated basis the financial condition of the Company and its consolidated Subsidiaries as at the respective dates thereof; and the net income and shareholders' equity statements and the related schedules and notes fairly present on a consolidated basis the results of the operations of the Company and its consolidated Subsidiaries for the respective periods indicated. There have been no material adverse changes in the condition, financial or other, of the Company and its Subsidiaries, on a consolidated basis, since December 31, 2001. 8.4 Actions Pending. There is no action, suit, investigation or proceeding pending or, to the knowledge of the Company, threatened against the Company or any of its Subsidiaries before any court, arbitrator or administrative or governmental body that materially and adversely affects, or as to which there is a reasonable possibility of an adverse decision that would materially and adversely affect, either individually or collectively, the business or condition of the Company and its consolidated Subsidiaries taken as a whole. Neither the Company nor any Subsidiary is in violation of any judgment, order, writ, injunction, decree, rule or regulation of any court or governmental department, commission, board, bureau, agency or instrumentality, the violation of which might, either individually or collectively, materially and adversely affect the business, property, assets or financial position of the Company and its consolidated Subsidiaries taken as a whole. 19 8.5 Outstanding Debt; No Default. Neither the Company nor any of its Subsidiaries has outstanding any Current Indebtedness or Funded Indebtedness except as set forth in the audited consolidated balance sheet of the Company and its consolidated Subsidiaries as at December 31, 2001. The Company has no outstanding indebtedness other than the Notes. There exists no event of default by the Company or any Subsidiary under the provisions of any instrument evidencing such Current Indebtedness or Funded Indebtedness and there exists no event of default by the Company or any Subsidiary, or any default by the Company or any Subsidiary the effect of which would have a material adverse effect on the Company and its Subsidiaries taken as a whole, under the provisions of any other Indebtedness of the Company or of any Subsidiary or of any agreement relating thereto that is or could be material to the Company or such Subsidiary. 8.6 Title, Liens. The Company has, and each of its Subsidiaries has, good and marketable title to its respective properties and assets reflected in the audited consolidated balance sheet of the Company and its consolidated Subsidiaries as at December 31, 2001 (other than properties and assets disposed of in the ordinary course of business). 8.7 Taxes. The Company has, and each of its Subsidiaries has, filed all Federal, Provincial, State, local and other income tax returns that, to the knowledge of the Company, are required to be filed in either the United States of America or Canada, and each has paid all taxes as shown on said returns and on all assessments received by it to the extent that such taxes have become due, including, without limitation, all goods and services tax and corporation capital tax. United States Federal income tax returns of the Company have been examined and reported on by the taxing authorities or closed by applicable statutes and satisfied for all fiscal years prior to and including the fiscal year ended December 31, 2000. The Company and each Subsidiary carrying on business in Canada has been assessed by Revenue Canada as to its income tax liability for all fiscal years to and including the fiscal year ended December 31, 2000. The Company and each Subsidiary carrying on business in Canada has remitted when due all amounts collected or owing by it on account of social service tax or other provincial sales taxes, goods and services tax and all workers compensation assessments. 8.8 Burdensome and Conflicting Agreements and Charter Provisions. Neither the Company nor any Subsidiary is a party to any contract or agreement or subject to any charter or other corporate restriction which materially and adversely affects its business as currently conducted, properties or assets or financial condition. Neither the execution nor delivery of this Agreement, the Notes, the Purchased Shares by the Company, nor the offering, issuance and sale of the Notes by the Company, nor fulfillment of nor compliance with the terms and provisions of this Agreement, the Notes or the Purchased Shares by the Company, nor the issuance by the Company of shares of Common Stock upon conversion of the Notes as provided in paragraph 9 hereof, will conflict with, or result in a breach of the terms, conditions or provisions of, or constitute a default under, or result in any violation of, or result in the creation of any Lien upon any of the properties or assets of the Company or any Subsidiary pursuant to, or require any consent, approval or other action by any court or administrative or governmental body or 20 any other Person pursuant to, the charter or by-laws of the Company or any Subsidiary, any award of any arbitrator or any agreement (including any agreement with shareholders), instrument, order, judgment, decree, statute, law, rule or regulation to which the Company or any Subsidiary is subject, except for such approval as may be required in connection with fulfillment of, or compliance with, the provisions of paragraph 9 or 11 hereof. Neither the Company nor any Subsidiary is a party to, or otherwise subject to any provision contained in, any instrument evidencing Indebtedness of the Company or such Subsidiary, any agreement relating thereto or any other contract or agreement (including its charter) which, except to the extent complied with by the Company or consented to in connection with the execution of this Agreement and the issuance of the Notes, restricts or otherwise limits the incurring of the Indebtedness evidenced by the Notes. 8.9 Leases. The Company and each of its Subsidiaries enjoys peaceful and undisturbed possession of all leases necessary in any material respect for the operation of its respective properties and assets, none of which contains any unusual or burdensome provisions which materially or adversely affects or impairs the operation of such properties or assets. All such leases are valid and subsisting and are in full force and effect and no material defaults have been committed thereunder. 8.10 Possession of Patents, etc. The Company and each Subsidiary own or has the exclusive right to the use, free and clear of any liens or other encumbrances, all the U.S. and foreign patents, trademarks, trade names, service marks, copyrights, licenses and other intellectual property rights (the "Intellectual Property Rights") that are currently used by them or are necessary in any material respect for the ownership, maintenance or operation of their respective businesses, properties or assets, and neither the Company nor any Subsidiary is in violation of any thereof or of intellectual property rights of any third parties in any material respect or has received notice from or has knowledge of any material claim by any Person that it is now infringing any of the foregoing. Exhibit 7J sets forth a true and complete list of all the Intellectual Property Rights. Neither the Company nor any Subsidiary (i) knows of any conflict which would prevent the use of any material mark in any area of the United States (other than Oregon and Hawaii) or Canada or (ii) has acquiesced in the use by a third party of any Intellectual Property Rights. The Company and its Subsidiaries have taken all necessary actions to protect material intellectual property. 8.11 Offering of Notes. Neither the Company nor any other agent acting on the Company's behalf has, directly or indirectly, offered the Notes or any similar security of the Company for sale to, or solicited any offers to buy the Notes or any similar security of the Company from, or otherwise approached or negotiated with respect thereto with more than 10 Persons including the Buyer (all of which Persons are institutional investors), and neither the Company nor any agent acting on its behalf has taken or will take any action which would subject the issuance or sale of the Notes to the provisions of Section 5 of the Securities Act, or to the registration or qualification requirements of any securities or Blue Sky law of any applicable jurisdiction. The Company has not authorized or employed any agent, broker or dealer in connection with the offering or sale of the Notes or any similar security of the Company. 21 The Company is a reporting issuer not in default under the Securities Act of the Province of British Columbia. Subject to the issuance and filing of a press release and material change report concerning this Agreement and the filing of a Form 20 under the Securities Act (British Columbia) following the Closing of the issuance of the Notes or the Shares, the issuance of the Notes and the Shares will not result in any contravention of any applicable securities legislation or the regulations thereunder in British Columbia. The issuance of the Notes and the Shares is exempt from the registration and prospectus requirements of the Securities Act of the Province of British Columbia and no prospectus will be required and no other document must be filed, proceeding taken or approval obtained in British Columbia to permit the offering, sale and delivery of the Notes and the Shares to the Buyer. 8.12 Broker's or Finder's Commissions. No broker's or finder's advisory or placement fee or commission will be payable with respect to the issuance of the Notes or the transactions contemplated hereby, and the Company will indemnify the Buyer and hold the Buyer harmless from any claim, demand, liability or action for broker's or finder's or advisory or placement fees or commissions alleged to have been incurred in connection with the issuance of the Notes or such transactions. In addition, and not in limitation of the foregoing, the Company will reimburse the Buyer for any legal or other expenses incurred by the Buyer in connection with defending against any such claim, damage, liability or action brought for broker's or finder's or advisory or placement fees or commissions. 8.13 Application of Proceeds. Neither the Company nor any Subsidiary owns any "margin security" within the meaning of Regulation G (12 CFR Part 207) of the Board of Governors of the Federal Reserve System (herein called a "margin security"). Neither the Company nor any agent acting on its behalf has taken or will take any action which might cause this Agreement or the Notes to violate Regulation G, Regulation T, Regulation X or any other regulation of the Board of Governors of the Federal Reserve System or to violate the Exchange Act, in each case as in effect now or as the same hereafter may be in effect. 8.14 Governmental Consent. Neither the nature of the Company or of any Subsidiary, nor any of their respective businesses or properties, nor any relationship between the Company or any Subsidiary and any other Person, nor any circumstance in connection with the offer, issue, sale or delivery of the Notes is such as to require any consent, approval or authorization of, or any notice to, or filing, registration or qualification with, any court or administrative or governmental body in connection with the execution and delivery of this Agreement or the offer, issue, sale or delivery of the Notes, or (except as may be required in connection with fulfillment of, or compliance with, the provisions of paragraph 9 or paragraph 11 hereof and except as provided in paragraph 7K) fulfillment of, or compliance with, the terms and provisions of this Agreement or of the Notes, or is such as to require or give rise to any limitation on the Buyer's ownership of any equity securities of the Company. 22 8.15 Holding Company Status. Neither the Company nor any Subsidiary is a "holding company," or a Subsidiary or affiliate of a "holding company," or a "subsidiary company" of a "holding company," or a "public utility," within the meaning of the Public Utility Holding Company Act of 1935, as amended, or a "public utility" within the meaning of the Federal Power Act, as amended. 8.16 Investment Company Status. Neither the Company nor any Subsidiary is an "investment company" or a company "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940, as amended, or an "investment adviser" within the meaning of the Investment Advisers Act of 1940, as amended. 8.17 ERISA. Neither the Company nor any Subsidiary nor any ERISA Affiliate maintains, contributes or has any liability (contingent or otherwise) with respect to a plan (including a Multiemployer Plan) subject to Title IV of ERISA or Section 412 of the Internal Revenue Code of 1986, as amended. All employee benefit plans and arrangements (regardless of whether such plans or arrangements are covered by ERISA) maintained by or contributed to by the Company, any Subsidiary or any ERISA Affiliate are in compliance with all applicable law, including any reporting requirements. Neither the Company nor any Subsidiary has any liability (contingent or otherwise) with respect to retiree medical or death benefits. Neither the Company, nor any Subsidiary nor any other person, including any fiduciary, has engaged in any transaction prohibited by Section 4975 of the Internal Revenue Code of 1986, as amended, or Section 406 of ERISA which could subject the Company, any Subsidiary or any entity that the Company or any Subsidiary has an obligation to indemnify to any tax or penalty imposed under Section 4975 of the Internal Revenue Code of 1986, as amended, or Section 502 of ERISA. The transactions contemplated by this Agreement will not involve any transaction prohibited by Section 406 of ERISA or in Section 4975 of the Internal Revenue Code of 1986, as amended. The representation by the Company in the next preceding sentence is made in reliance upon and subject to the accuracy of the Buyer's representation in paragraph 8 as to the source of the consideration to be used by the Buyer to acquire the Notes. 8.18 Disclosure. Neither this Agreement nor any other document, certificate or statement furnished to the Buyer by or on behalf of the Company in connection herewith contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein and therein, in the light of the circumstances under which made, not misleading. There is no fact peculiar to the Company or its Subsidiaries and known to the Company which materially adversely affects or in the future may (so far as the Company can now foresee) materially adversely affect the business, property or assets, or financial condition of the Company and its Subsidiaries, taken as a whole, which has not been set forth in this Agreement or in the other documents described herein and furnished to the Buyer by or on behalf of the Company prior to the date hereof in connection with the transactions contemplated hereby. 23 8.19 Capital Stock. As of the date hereof, the Company has authorized a total of 20,000,000 shares of its capital stock of all classes, all such authorized shares are Common Stock. Immediately prior to the Closing Date, 2,594,599 shares of Common Stock are issued and outstanding, and the Company holds no shares of its capital stock in its treasury. Since the date of the last audited financial statements delivered to the Buyer the Company has not issued any shares of capital stock. All of such outstanding shares have been validly issued and are fully paid and nonassessable. The Company has reserved such number of shares of Common Stock for issuance pursuant to such instruments or agreements as are set forth in Exhibit 7S1 hereto. Except as otherwise stated in this paragraph or set forth in Exhibit 7S1 hereto and except for shares reserved for issuance in connection with this Agreement, the Company has not granted or issued, or agreed to grant or issue, any options, warrants or similar rights to acquire or receive any of the authorized but unissued shares of its capital stock of any class or any securities convertible into shares of its capital stock of any class. As of the date hereof, no Person holds of record or beneficially owns 5% or more of the outstanding shares of any class of the capital stock of the Company except as set forth in Exhibit 7S2 hereto. Except as described above, the Company has not taken any action after the date of the last audited financial statements delivered to the Buyer and prior to the date hereof which, had the provisions of paragraph 9 been in effect on and after such date and to and including the date hereof, would have required an adjustment in the Conversion Price pursuant to paragraph 9. 8.20 Environmental Compliance. (a) Neither the Company nor any Subsidiary is in violation, or alleged to be in violation, of any judgment, decree, order, law, license, rule or regulation pertaining to environmental matters, including without limitation, those arising under the Resource Conservation and Recovery Act ("RCRA"), the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended ("CERCLA"), the Superfund Amendments and Reauthorization Act of 1986 ("SARA"), the Federal Clean Water Act, the Federal Clean Air Act, the Toxic Substances Control Act, the Waste Management Act (British Columbia), Contaminated Sites Regulation (British Columbia), Special Waste Regulation (British Columbia), Canadian Environmental Protection Act, Transportation of Dangerous Goods Act (Canada), Fisheries Act (Canada), Environment Management Act (British Columbia) and Occupational Health and Safety Regulation (British Columbia) or any federal, provincial, state or local statute, regulation, ordinance, order or decree relating to health, safety or the environment (hereinafter "Environmental Laws"), which violation would have a material adverse effect on the business, assets or financial condition of the Company, individually, or the Company and its Subsidiaries, taken as a whole. Neither the Company nor any Subsidiary has received written notice from any third party including, without limitation, any federal, provincial, state or local governmental authority, (i) that the Company or any Subsidiary has been identified by the United States Environmental Protection Agency ("EPA") as a potentially responsible party under CERCLA with respect to a site listed on the National Priorities List, 40 C.F.R. Part 300 Appendix B (1986) or a responsible person with respect to a contaminated site under the Contaminated Sites Regulation (British Columbia); (ii) that any hazardous waste, as defined by 42 U.S.C. (S) 6903(5), any hazardous substances as defined by 42 U.S.C. (S) 24 9601(14), any pollutant or contaminant as defined by 42 U.S.C. (S) 9601(33) or the Contaminated Sites Regulation (British Columbia) and any toxic substances, oil or hazardous materials or other chemicals or substances regulated by any Environmental Laws ("Hazardous Substances") which any one of them has generated, transported or disposed of has been released at any site at which a federal, provincial, state or local agency has conducted or has ordered that either the Company or any Subsidiary conduct a remedial investigation, removal or other response action pursuant to any Environmental Law or have named the Company or any Subsidiary as a Potentially Responsible Party or a responsible person or are seeking contribution from the Company or any Subsidiary; or (iii) that it is or shall be a named party to any claim, action, cause of action, cost recovery action, complaint, or legal or administrative proceeding (in each case, contingent or otherwise) arising out of any third party's incurrence of costs, expenses, losses or damages of any kind whatsoever in connection with the release of Hazardous Substances. To the actual knowledge of the Company, to the extent such activity would have a material adverse effect on the business, assets or financial condition of the Company, individually, or of the Company and its Subsidiaries, taken as a whole: (i) no portion of the property of the Company or any Subsidiary has been used for the handling, processing, storage or disposal of Hazardous Substances except in accordance with applicable Environmental Laws; and no underground tank or other underground storage receptacle for Hazardous Substances is located on any portion of the property; (ii) in the course of any activities conducted by the Company, its Subsidiaries or operators of their properties, no Hazardous Substances have been generated or are being used on the property except in accordance with applicable Environmental Laws; (iii) there have been no releases (i.e., any past or present releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, disposing or dumping) or threatened releases of Hazardous Substances on, upon, into or from the property of the Company or any Subsidiary, which releases would have a material adverse effect on the value of any of the property or adjacent properties or the environment; and (iv) in addition, any Hazardous Wastes as defined by 42 U.S.C. (S) 6903(5) or Special Wastes as defined pursuant to the Special Waste Regulation (British Columbia), if any, that have been generated on any of the property have been transported offsite only by carriers having an identification number issued by the EPA, treated or disposed of only by treatment or disposal facilities maintaining valid permits as required under applicable Environmental Laws, which transporters and facilities have been and are, to the best of the Company's knowledge, operating in material compliance with such permits and applicable Environmental Laws. 8.21 Transaction with Affiliates. During the five year period immediately preceding the date hereof, neither the Company nor any Subsidiary has entered into, or caused, suffered or permitted to exist or occur any arrangement or contract with any of its Affiliates unless such arrangement or contract (i) was fair and equitable to the Company or such Subsidiary, and (ii) has been specifically approved by the Company's or such Subsidiary's Board of Directors (or equivalent governing body), as the case may be, as an arrangement or a contract of the kind which would be entered into by a prudent Person in the position of the Company or such Subsidiary with a Person which is not one of its Affiliates. 25 8.22 Discontinuance of Operations. Neither the Company nor any Subsidiary has canceled or discontinued operations of any Elephant & Castle Restaurant & Pub location except as set forth in Exhibit 7V hereto. With respect to such canceled or discontinued operations, if any, except as disclosed on Exhibit 7V hereto, there exist no claims, liabilities, losses, damages or injuries against the Company or any Subsidiary, pending or reasonably believed by the Company or any such Subsidiary to be threatened, arising out of or in connection with such canceled or discontinued operations of an Elephant & Castle Restaurant & Pub location. 8.23 Licenses, Permits, etc. The Company and each Subsidiary has all material licenses, permits and operating authorities, including, without limitation, those pertaining to serving alcoholic beverages or gaming or gambling, as is requisite for carrying on its business or businesses in the manner in which it has heretofore been carried on, all such licenses, permits and operating authorities are in good standing, and there exists no default by the Company or any Subsidiary under the terms of any such licenses, permits and operating authorities; 8.24 Compliance with Laws. The Company and each of its Subsidiaries presently carry on, and, the Company will in the future carry on and will cause each of the Subsidiaries to carry on, their respective operations in compliance with all applicable laws, including, without limitation, all applicable statutes, regulations or bylaws relating to health and safety and employment standards and the payment of workers compensation assessments. 8.25 Relationship with General Electric Company. Except as disclosed on Exhibit 7Y, neither the Company nor any Subsidiary has any equity, creditor, debtor or similar relationship (including without limitation any investment in, or any debtor, revolving credit, leasing or creditor relationship, but excluding any vendor or vendee relationship) with General Electric Company or any subsidiary thereof. 8.26 Waived Interest. The Company hereby confirms and represents to the Buyer that the aggregate amount of accrued and unpaid interest on the Original Notes and the 1999 Notes through June 30, 2001 equals $620,000. 9. Representations and Covenants of the Buyer. The Buyer ------------------------------------------ represents, and in making the sale of Notes contemplated hereby to the Buyer it is specifically understood and agreed, that the Buyer is acquiring such Notes for its own account for the purpose of investment and not with a present view to or for sale in connection with any distribution thereof, provided that the -------- disposition of the Buyer's property shall at all times be and remain within the Buyer's control. The Buyer further represents that the Buyer is familiar with Release No. 5226 issued by the Commission under the Securities Act, that the Buyer has consulted with its counsel in regard thereto, and that the Buyer is fully familiar with the position of the Commission with respect to the resale of any Note to the public. The Buyer further represents that no part of the consideration being used by the Buyer to acquire the Notes hereunder constitutes assets of an employee benefit plan (as defined in Section 3(3) of ERISA). 26 10. Conversion; Conversion Price; Adjustments Relative to ----------------------------------------------------- Conversion - ---------- 10.1 Conversion Privilege; Mandatory Conversion; Conversion Price; Procedures. Subject to the conditions set forth in paragraph 9 hereof, the holder of any Note may, at such holder's option, at any time and from time to time prior to and including the Maturity Date, or, with respect to any principal amount of Notes for which the Company has given notice of prepayment in accordance with paragraph 4 hereof, prior to the date of such prepayment, except as otherwise specifically provided in this Agreement, convert all or any part of the unpaid principal thereof into shares of Common Stock (the "Conversion Shares") at a price (the "Conversion Price") equal to $1.00 prior to September 1, 2002, $1.25 from September 1, 2002 until but not including September 1, 2003, $1.50 from September 1, 2003 until but not including September 1, 2004 and $1.75 from September 1, 2004 until September 1, 2005. The Conversion Shares and the Conversion Price are subject to certain adjustments as set forth in paragraph 9 hereof, and the terms "Conversion Shares" and "Conversion Price" as used herein shall as of any time be deemed to include all such adjustments to be given effect as of such time in accordance with the terms hereof. Subject to the conditions set forth in paragraph 9 hereof, the Junior Notes shall be converted into the shares of Common Stock of the Company on each date set forth below (each, a "Conversion Date") as follows: (i) on September 1, 2002, the Junior Notes in the aggregate principal amount of $1,250,000 shall be converted into the shares of Common Stock at a price equal to $1 per share, for an aggregate of 1,250,000 shares; (ii) on September 1, 2003, the Junior Notes in the aggregate principal amount of $1,250,000 shall be converted into the shares of Common Stock at a price equal to $1.25 per share, for an aggregate of 1,000,000 shares; (iii) on September 1, 2004, the Junior Notes in the aggregate principal amount of $1,250,000 shall be converted into the shares of Common Stock at a price equal to $1.50 per share, for an aggregate of 833,333 shares; and (iv) on September 1, 2005, the Junior Notes in the aggregate principal amount of $1,250,000 shall be converted into the shares of Common Stock at a price equal to $1.75 per share, for an aggregate of 714,286 shares; provided, however, that - -------- ------- conversion of the Junior Notes into the shares of Common Stock as provided in this paragraph 9A(b) shall be subject to satisfaction by the Company, as of each Conversion Date, of the following requirements: (1) EBITDA of the Company for the fiscal period ending June 30, 2002, shall equal or exceed $3,000,000; (2) EBITDA of the Company for the fiscal period ending June 30, 2003, shall equal or exceed $3,750,000; (3) EBITDA of the Company for the fiscal period ending June 30, 2004, shall equal or exceed $4,500,000; and (4) EBITDA of the Company for the fiscal period ending June 30, 2005, shall equal or exceed $5,000,000. If on any Conversion Date (the "Scheduled Conversion Date") the Company shall have satisfied the EBITDA requirements set forth above for such Scheduled Conversion Date by at least 80%, 66 2/3% of the aggregate principal amount of the Junior Notes scheduled to be converted into shares of Common Stock on such Scheduled Conversion Date shall be so converted. If the Company shall have satisfied (i) the EBITDA requirements set forth above for the Scheduled Conversion Date by at least 66 2/3% and (ii) the EBITDA requirements set forth above for the next Conversion Date in full, the aggregate principal amount of the Junior Notes scheduled to be converted into 27 shares of Common Stock on such Scheduled Conversion Date and on the subsequent Conversion Date shall be converted in full at a price per share set forth above for the Scheduled Conversion Date and the next Conversion Date, respectively. Any aggregate principal amount of the Junior Notes not converted pursuant to the provisions of this paragraph 9A(b) shall be converted, at the option of the Buyer, on September 1, 2005 at a price equal to $1.75 per share. Subject to the provisions of paragraph 9 hereof, any Note may be converted in full or in part by the holder thereof by surrender of the Note, with a written statement specifying the principal amount thereof to be converted, to the Company at its principal office. Upon any partial conversion of any Note, the Company at its expense shall forthwith issue and deliver to the holder thereof a new Note or Notes in principal amount equal to the unpaid and unconverted principal amount of such surrendered Note. Each conversion shall be deemed to have been effected immediately prior to the close of business on the date on which such Note was received by the Company. 10.2 No Fractional Shares; No Adjustments for Dividends.No fractional shares shall be issued upon conversion of any Note and no payment or adjustment shall be made upon conversion of any Note for cash dividends with respect to Common Stock issued thereupon. The Company shall forthwith upon conversion of all or any portion of any Note pay all interest accrued on the principal amount converted to the date of such conversion. 10.3 Delivery of Stock Certificates and Cash in Lieu of Fractional Shares. As promptly as practicable after the conversion of any Note in full or in part, the Company, at its expense, shall issue and deliver to the holder of such Note, or as such holder (upon payment of any applicable transfer taxes by such holder) may, subject to the provisions of paragraph 11, direct, a certificate or certificates for the number of full shares of Common Stock deliverable upon such conversion, bearing, if required by the terms hereof, the restrictive legend set forth in paragraph 11B hereof, plus, in lieu of any fractional shares or other fractional pieces to which such holder would otherwise be entitled, cash equal to such fraction multiplied by the market value of one full share of Common Stock as of the close of business on the date of such conversion on the principal securities exchange, NASDAQ National Market System or NASDAQ over-the-counter market on which Common Stock is at the time traded, or, if not so traded, multiplied by the market value of one full share of Common Stock as reasonably determined by (or pursuant to a formula or procedure reasonably adopted by) the Board of Directors of the Company. 10.4 Adjustment of Conversion Price Upon Issuance of Common Stock. If and whenever after the date hereof the Company shall issue or sell any shares of its Common Stock (except with respect to the issuance of the Additional Consideration Shares and the shares of Common Stock issuable upon conversion of the Notes or upon the exercise of the Warrants) for a consideration per share less than the Conversion Price in effect immediately prior to the time of such issue or sale or the Market Price at the time of such issue or sale, then, forthwith upon such issue or sale, the Conversion Price with respect to the conversion of any Note subsequent to such event shall be reduced (but not increased, except as otherwise specifically provided in paragraph 9D(3) to the lower of the prices (calculated to the nearest cent) determined as follows: 28 by dividing (1) an amount equal to the sum of (A) the aggregate number of shares of Common Stock outstanding immediately prior to such issue or sale multiplied by the then existing Conversion Price, and (B) the consideration, if any, received by the Company upon such issue or sale, by (ii) the aggregate number of shares of Common Stock of all classes outstanding immediately after such issue or sale; and by multiplying the Conversion Price in effect immediately prior to the time of such issue or sale by a fraction, the numerator of which shall be the sum of (i) the aggregate number of shares of Common Stock outstanding immediately prior to such issue or sale multiplied by the Market Price immediately prior to such issue or sale plus (ii) the consideration received by the Company upon such issue or sale, and the denominator of which shall be the product of (iii) the aggregate number of shares of Common Stock of all classes outstanding immediately after such issue or sale, multiplied by (iv) the Market Price immediately prior to such issue or sale. No adjustment of the Conversion Price, however, shall be made in an amount less than 1% of the Conversion Price, but any such lesser adjustment shall be carried forward and shall be made at the time of and together with the next subsequent adjustment. For the purposes of this paragraph 9D, the following paragraphs 9D(1) through 9D(9) shall also be applicable: 9D(1) Issuance of Rights or Options - In case at any time ----------------------------- after the date hereof the Company shall in any manner grant (whether directly or by assumption in a merger or otherwise, except in the circumstances described in paragraph 9E below) any rights to subscribe for or to purchase, or any options for the purchase of, Common Stock or any stock or securities convertible into or exchangeable for Common Stock (such convertible or exchangeable stock or securities being herein called "Convertible Securities"), whether or not such ---------------------- rights or options or the right to convert or exchange any such Convertible Securities are immediately exercisable, and the price per share for which Common Stock is issuable upon the exercise of such rights or options or upon conversion or exchange of such Convertible Securities (determined by dividing (i) the total amount, if any, received or receivable by the Company as consideration for the granting of such rights or options, plus the minimum aggregate amount of additional consideration, if any, payable to the Company upon the exercise of such rights or options, plus, in the case of such rights or options which relate to Convertible Securities, the minimum aggregate amount of additional consideration, if any, payable upon the issue or sale of such Convertible Securities and upon the conversion or exchange thereof, by (ii) the total maximum number of shares of Common Stock issuable upon the exercise of such rights or options or upon the conversion or exchange of all such Convertible Securities issuable upon the exercise of such rights or options) shall be less than the Conversion Price in effect immediately prior to the time of the granting of such rights or options (or less than the Market Price, determined as of the date of granting such rights or options, as the case may be), then the total maximum number of shares of Common Stock issuable upon the exercise of such rights or options or upon conversion or exchange of all such Convertible Securities issuable upon the exercise of such rights or options shall (as of the date of granting of such rights or options) be deemed to be outstanding and to have been issued for such price per share. Except as provided in paragraph 9D(3), no further 29 adjustment of the Conversion Price shall be made upon the actual issue of such Common Stock or of such Convertible Securities upon exercise of such rights or options or upon the actual issue of such Common Stock upon conversion or exchange of such Convertible Securities. 9D(2) Issuance of Convertible Securities - In case at any time ---------------------------------- after the date hereof the Company shall in any manner issue (whether directly or by assumption in a merger or otherwise) or sell any Convertible Securities, whether or not the rights to exchange or convert thereunder are immediately exercisable, and the price per share for which Common Stock is issuable upon such conversion or exchange (determined by dividing (i) the total amount received or receivable by the Company as consideration for the issue or sale of such Convertible Securities, plus the minimum aggregate amount of additional consideration, if any, payable to the Company upon the conversion or exchange thereof, by (ii) the total maximum number of shares of Common Stock issuable upon the conversion or exchange of all such Convertible Securities) shall be less than the Conversion price in effect immediately prior to the time of such issue or sale (or less than the Market Price, determined as of the date of such issue or sale of such Convertible Securities, as the case may be), then the total maximum number of shares of Common Stock issuable upon conversion or exchange of all such Convertible Securities shall (as of the date of the issue or sale of such Convertible Securities) be deemed to be outstanding and to have been issued for such price per share; provided, however, that (a) except as -------- ------- otherwise provided in paragraph 9D(3), no further adjustment of the Conversion Price shall be made upon the actual issue of such Common Stock upon conversion or exchange of such Convertible Securities, and (b) if any such issue or sale of such Convertible Securities is made upon exercise of any rights to subscribe for or to purchase or any option to purchase any such Convertible Securities for which adjustments of the Conversion Price have been or are to be made pursuant to other provisions of this paragraph 9D, no further adjustment of the Conversion Price shall be made by reason of such issue or sale. 9D(3) Change in Option Price or Conversion Rate - Upon the ----------------------------------------- happening of any of the following events, namely, if the purchase price provided for in any right or option referred to in paragraph 9D(1), the additional consideration, if any, payable upon the conversion or exchange of any Convertible Securities referred to in paragraph 9D(1) or 9D(2), or the rate at which any Convertible Securities referred to in paragraph 9D(1) or 9D(2) are convertible into or exchangeable for Common Stock shall change (other than under or by reason of provisions designed to protect against dilution), the Conversion Price then in effect hereunder shall forthwith be readjusted (increased or decreased, as the case may be) to the Conversion Price which would have been in effect at such time had such rights, options or Convertible Securities still outstanding provided for such changed purchase price, additional consideration or conversion rate, as the case may be, at the time initially granted, issued or sold. On the expiration of any such option or right referred to in paragraph 9D(1) or the termination of any such right to convert or exchange any such Convertible Securities referred to in paragraph 9D(1) or 9D(2), the Conversion Price then in effect hereunder shall forthwith be readjusted (increased or decreased, as the case may be) to the Conversion Price which would have been in effect at the time of such expiration or termination had such right, option or Convertible Securities, to the extent 30 outstanding immediately prior to such expiration or termination, never been granted, issued or sold, and the Common Stock issuable thereunder shall no longer be deemed to be outstanding. If the purchase price provided for in any such right or option referred to in paragraph 9D(1) or the rate at which any Convertible Securities referred to in paragraph 9D(1) or 9D(2) are convertible into or exchangeable for Common Stock shall be reduced at any time under or by reason of provisions with respect thereto designed to protect against dilution, then in case of the delivery of shares of Common Stock upon the exercise of any such right or option or upon conversion or exchange of any such Convertible Securities, the Conversion Price then in effect hereunder shall, if not already adjusted, forthwith be adjusted to such amount as would have obtained had such right, option or Convertible Securities never been issued as to such shares of Common Stock and had adjustments been made upon the issuance of the shares of Common Stock delivered as aforesaid, but only if as a result of such adjustment the Conversion Price then in effect hereunder is thereby reduced. 9D(4) Stock Dividends - In case at any time the Company shall --------------- declare a dividend or make any other distribution upon any class or series of stock of the Company payable in shares of Common Stock or Convertible Securities, any shares of Common Stock or Convertible Securities, as the case may be, issuable in payment of such dividend or distribution shall be deemed to have been issued or sold without consideration. 9D(5) Consideration for Stock - In case at any time any shares ----------------------- of Common Stock or Convertible Securities or any rights or options to purchase any such Common Stock or Convertible Securities shall be issued or sold for cash, the consideration received therefor shall be deemed to be the amount received by the Company therefor, without deduction therefrom of any expenses incurred or any underwriting commissions or concessions paid or allowed by the Company in connection therewith. In case at any time any shares of Common Stock of any class or Convertible Securities or any rights or options to purchase any such shares of Common Stock or Convertible Securities shall be issued or sold for a consideration other than cash, the amount of the consideration other than cash received by the Company shall be deemed to be the fair value of such consideration as determined reasonably and in good faith by the Board of Directors of the Company, without deduction of any expenses incurred or any underwriting commissions or concessions paid or allowed by the Company in connection therewith. In case at any time any shares of Common Stock of any class or Convertible Securities or any rights or options to purchase such shares of Common Stock or Convertible Securities shall be issued in connection with any merger or consolidation in which the Company is the surviving corporation, the amount of consideration received therefor shall be deemed to be the fair value as determined reasonably and in good faith by the Board of Directors of the Company of such portion of the assets and business of the nonsurviving corporation as such Board may determine to be attributable to such shares of Common Stock, Convertible Securities, rights or options, as the case may be. In case at any time any rights or options to purchase any shares of Common Stock or Convertible Securities shall be issued in connection with the issue and sale of other securities of the Company, together comprising one integral transaction in which no consideration is allocated to such rights or options by the parties thereto, such rights or options shall be deemed to have been issued for an amount of consideration equal to the 31 fair value thereof as determined reasonably and in good faith by the Board of Directors of the Company. 9D(6) Record Date - In case the Company shall take a record of ----------- the holders of its Common Stock for the purpose of entitling them (i) to receive a dividend or other distribution payable in shares of Common Stock or in Convertible Securities, or (ii) to subscribe for or purchase shares of Common Stock or Convertible Securities, then such record date shall be deemed to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold as a result of the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be, unless such dividend or other distribution or right to subscribe when exercised is to be measured by the Market Price in effect on the date such dividend or other distribution or right to subscribe is exercised, in which case such date shall be deemed to be the date of the issue or sale of the shares of Common Stock deemed to have been so issued or sold. 9D(7) Treasury Shares - The number of shares of Common Stock --------------- outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the disposition of any such shares shall be considered an issue or sale of Common Stock for the purposes of this paragraph 9D. 9D(8) Definition of Market Price - "Market Price" shall mean, -------------------------- for any day, the average of the final sale prices of the Common Stock on all exchanges on which the Common Stock may at the time be listed or the final bid prices on the NASDAQ National Market System or NASDAQ over-the-counter market, in each such case, unless otherwise provided herein, averaged over a period of fifteen consecutive trading days ending 2 days prior to the day as of which "Market Price" is being determined; provided, however, that in connection with a firm underwriting of a public offering of Common Stock, Market Price shall mean the initial public offering price in such underwritten offering. If at any time the Common Stock is not listed on any such exchange or quoted in any such domestic over-the-counter market, the "Market Price" shall be deemed to be the fair market value thereof as determined by an investment banking firm mutually acceptable to the Company and the holders of a majority in aggregate principal amount of the Notes then outstanding. 9D(9) Determination of Market Price under Certain ------------------------------------------- Circumstances - Anything herein to the contrary notwithstanding, in case at any - ------------- time after the date hereof the Company shall issue any shares of Common Stock or Convertible Securities, or any rights or options to purchase any such Common Stock or Convertible Securities, in connection with the acquisition by the Company of the stock or assets of any other corporation or the merger of any other corporation into the Company under circumstances where on the date of the issuance of such shares of Common Stock or Convertible Securities or such rights or options the consideration received for such Common Stock or deemed to have been received for the Common Stock into which such Convertible Securities or such rights or options are convertible is less than the Market Price of the Common Stock but on the date the number of shares of Common Stock or Convertible Securities (or in the case of Convertible Securities other than stock, the 32 aggregate principal amount of Convertible Securities) or the number of such rights or options was determined (as set forth in a binding agreement between the Company and the other party to the transaction) the consideration received for such Common Stock or deemed to have been received for the Common Stock into which such Convertible Securities or such rights or options are convertible would not have been less than the Market Price thereof, such shares of Common Stock shall not be deemed to have been issued for less than the Market Price of the Common Stock. 10.5 Liquidating Dividends; Purchase Rights. (a) In case at any time after the date hereof the Company shall declare a dividend upon the shares of Common Stock of any class payable otherwise than in shares of Common Stock or Convertible Securities, otherwise than out of consolidated earnings or consolidated earned surplus (determined in accordance with generally accepted accounting principles, including the making of appropriate deductions for minority interests, if any, in subsidiaries), and otherwise than in the securities to which the provisions of clause (b) below apply, and provided that -------- such dividend shall not otherwise result in an adjustment of the Conversion Price pursuant to any other provision hereof, the Company shall pay over to each holder of Notes, upon conversion thereof on or after the dividend payment date, the securities and other property (including cash) which such holder would have received (together with all distributions thereon) if such holder had converted the Notes held by it on the record date fixed in connection with such dividend, and the Company shall take whatever steps are necessary or appropriate to keep in reserve at all times such securities and other property as shall be required to fulfill its obligations hereunder in respect of the shares issuable upon the exercise or conversion of all the Notes. For the purposes of the foregoing, a dividend other than in cash shall be considered payable out of consolidated earnings or consolidated retained earnings only to the extent that such earnings or retained earnings are charged an amount equal to the fair value of such dividend as determined by the Board of Directors of the Company. If at any time or from time to time on or after the date hereof the Company shall grant, issue or sell any options or rights (other than Convertible Securities) to purchase stock, warrants, securities or other property pro rata to the holders of Common --- ---- Stock of all classes ("Purchase Rights"), then if it shall be entitled to an --------------- adjustment pursuant to paragraph 9D above and in lieu of such adjustment, each holder of Notes shall be entitled, at such holder's option, to acquire (whether or not such holder's Notes shall have been converted), upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which such holder could have acquired if such holder had held the number of shares of Common Stock issuable upon conversion of such Notes, immediately prior to the time or times at which the Company granted, issued or sold such Purchase Rights. 10.6 Subdivision or Combination of Stock. In case the Company shall at any time subdivide its outstanding shares of Common Stock into a greater number of shares, the Conversion Price in effect immediately prior to such subdivision shall be proportionately reduced, and conversely, in case the outstanding shares of Common Stock of the Company shall be combined into a smaller number of shares, the Conversion Price in effect immediately prior to such combination shall be proportionately increased. 33 10.7 Changes in Common Stock. If any capital reorganization or reclassification of the capital stock of the Company, or consolidation or merger of the Company with another corporation, or sale, transfer or other disposition of all or substantially all of its properties to another corporation, shall be effected, then, as a condition of such reorganization, reclassification, consolidation, merger, sale, transfer or other disposition, lawful and adequate provision shall be made whereby each holder of Notes shall thereafter have the right to purchase and receive upon the basis and upon the terms and conditions herein specified and in lieu of the shares of the Common Stock of the Company immediately theretofore issuable upon conversion of the Notes, such shares of stock, securities or properties, if any, as may be issuable or payable with respect to or in exchange for a number of outstanding shares of such Common Stock equal to the number of shares of such Common Stock immediately theretofore issuable upon conversion of the Notes had such reorganization, reclassification, consolidation, merger, sale, transfer or other disposition not taken place, and in any such case appropriate provisions shall be made with respect to the rights and interests of each holder of Notes to the end that the provisions hereof (including without limitation provisions for adjustment of the Conversion Price) shall thereafter be applicable, as nearly equivalent as may be practicable in relation to any shares of stock, securities or properties thereafter deliverable upon the exercise thereof. The Company shall not effect any such consolidation, merger, sale, transfer or other disposition, unless prior to or simultaneously with the consummation thereof the successor corporation (if other than the Company) resulting from such consolidation or merger or the corporation purchasing or otherwise acquiring such properties shall assume, by written instrument executed and mailed or delivered to the holders of Notes at the last address of such holders appearing on the books of the Company, the obligation to deliver to such holders such shares of stock, securities or properties as, in accordance with the foregoing provisions, such holders may be entitled to acquire. The above provisions of this subparagraph shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers, sales, transfers, or other dispositions. 10.8 Notice of Adjustment. Upon any adjustment of the Conversion Price, then and in each such case the Company shall promptly obtain the opinion of a firm of independent certified public accountants (which may be the regular auditors of the Company) of recognized national standing selected by the Company's Board of Directors, which opinion shall state the Conversion Price resulting from such adjustment and the increase or decrease, if any, in the number of shares of Common Stock issuable upon conversion of the Note or Notes held by each holder of Notes, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. The Company shall promptly mail a copy of such accountants' opinion to each holder of Notes. 10.9 Certain Events. If any event occurs as to which in the opinion of the Board of Directors of the Company the other provisions of paragraph 9 hereof are not strictly applicable or if strictly applicable would not fairly protect the conversion rights of the holders of the Notes in accordance with the essential intent and principles of such provisions, then such Board of Directors shall appoint a firm of independent certified public accountants (which may be the regular auditors of the Company) of recognized 34 national standing, which shall give their opinion upon the adjustment, if any, on a basis consistent with such essential intent and principles, necessary to preserve, without dilution, the rights of the holders of the Notes. Upon receipt of such opinion by the Board of Directors, the Company shall forthwith make the adjustments described therein; provided, however, that no such adjustment -------- ------- pursuant to this paragraph 9I shall have the effect of increasing the Conversion Price as otherwise determined pursuant to paragraph 9 hereof except in the event of a combination of shares of the type contemplated in paragraph 9F and then in no event to an amount larger than the conversion price as adjusted pursuant to paragraph 9F. 10.10 Prohibition of Certain Actions. The Company will not (i) authorize or issue, or agree to authorize or issue, any shares of its capital stock of any class preferred as to dividends or as to the distribution of assets upon voluntary or involuntary liquidation, dissolution or winding-up of the Company unless the rights of the holders thereof shall be limited to a fixed sum or percentage of par value in respect of participation in dividends and in the distribution of such assets or (ii) take any action which would result in any adjustment of the Conversion Price if the total number of shares of Common Stock issuable after such action upon conversion of all of the Notes would exceed the total number of shares of Common Stock then authorized by the Company's Certificate of Incorporation. 10.11 Stock to be Reserved. The Company will at all times reserve and keep available out of its authorized Common Stock, solely for the purpose of issue upon the conversion of Notes as herein provided, such number of shares of Common Stock as shall then be issuable upon the conversion of all outstanding Notes, and the Company will maintain at all times all other rights and privileges sufficient to enable it to fulfill all its obligations hereunder. The Company covenants that all shares of Common Stock which shall be so issuable shall, upon issuance, be duly authorized, validly issued, fully paid and nonassessable, free from preemptive or similar rights on the part of the holders of any shares of capital stock or securities of the Company, and free from all Liens and charges with respect to the issue thereof; and without limiting the generality of the foregoing, the Company covenants that it will from time to time take all such action as may be required to assure that the par value, if any, per share of the Common Stock is at all times equal to or less than the then effective Conversion Price. The Company will take all such action as may be necessary to assure that such shares of Common Stock may be so issued without violation by the Company of any applicable law or regulation, or of any requirements of any domestic securities exchange upon which the Common Stock may be listed. Without limiting the foregoing, the Company will take all such action as may be necessary to assure that, upon conversion of any of the Notes, an amount equal to the lesser of (a) the par value of each share of Common Stock outstanding immediately prior to such conversion, or (b) the Conversion Price, shall be credited to the Company's stated capital account for each share of Common Stock issued upon such conversion, and that the balance of the principal amount of each Note converted shall be credited to the Company's capital surplus account. 10.12 Registration and Listing of Common Stock. If any shares of Common Stock required to be reserved for purposes of conversions of Notes hereunder 35 require registration with or approval of any governmental authority under any Federal or state law (other than the Securities Act) before such shares may be issued upon conversion, the Company will, at its expense and as expeditiously as possible, use its best efforts to cause such shares to be duly registered or approved, as the case may be. Shares of Common Stock issuable upon conversion of the Notes shall be registered by the Company under the Securities Act or similar statute then in effect if required by paragraph 11 and subject to the conditions stated in such paragraph. If and so long as the Common Stock is listed on any national securities exchange, the Company will, at its expense, obtain promptly and maintain the approval for listing on each such exchange upon official notice of issuance, of shares of Common Stock issuable upon conversion of the then outstanding Notes and maintain the listing of such shares after their issuance; and the Company will also list on such national securities exchange, will register under the Exchange Act and will maintain such listing of, any other securities that at any time are issuable upon conversion of the Notes, if and at the time that any securities of the same class shall be listed on such national securities exchange by the Company or shall require registration under the Exchange Act. 10.13 Issue Tax. The issuance of certificates for shares of Common Stock upon conversion of Notes shall be made without charge to the holders of the Notes converted for any issuance tax in respect thereto. 10.14 Closing of Books. The Company will at no time close its transfer books against the transfer of any Note or of any shares of Common Stock issued or issuable upon the conversion of any Note in any manner which interferes with the timely conversion of such Note. 10.15 No Rights or Liabilities as Shareholders. No Note shall entitle any holder thereof to any of the rights of a shareholder of the Company. No provision of this Agreement or of any Note, in the absence of the actual conversion of such Note or any part thereof by the holder thereof into Common Stock issuable upon such conversion, shall give rise to any liability on the part of such holder as a shareholder of the Company, whether such liability shall be asserted by the Company or by creditors of the Company. 10.16 Right to Purchase. (a) Any provision of this Agreement to the contrary notwithstanding, except in connection with the issuance of (i) any Common Stock or (ii) Purchase Rights described in paragraph 9E(b) hereof, the Company shall give written notice to the holders of the Notes and the holders of the Common Stock into which any Notes have been therefore converted no less than 30 days prior to the issuance of any equity securities of the Company or any rights or options for the purchase of any equity securities or any convertible securities convertible into equity securities of the Company, and each such holder shall, for a period of 20 days following receipt of such written notice, have the right to purchase from the Company, at the price any such securities or rights or options or convertible securities are being offered to any other purchaser, that number of such securities or rights or options or convertible securities as will enable such holder to hold that number of shares (or rights or options or convertible securities) of such class of securities as is equal to the percentage of shares represented 36 by the sum of (x) the shares of Common Stock into which the Notes are by their terms then convertible and (y) the shares of Common Stock then held by such holder. The rights to purchase described in paragraph 9P(a) hereof may, at the option of the holder thereof and without the consent of the Company, be assigned to any partner of GE Investment Private Placement Partners I, Limited Partnership by the giving of written notice of such assignment to the Company, and the Company shall thereafter treat such assignee as a holder described in paragraph 9P(a) hereof. 11. Intentionally Omitted. --------------------- 12. Restrictions on Transfer; Registration Rights. --------------------------------------------- 12.1 Applicability of Restrictions. Notwithstanding any provisions to the contrary contained in this Agreement, any Restricted Securities or the Company's Memorandum or Articles, the provisions of this paragraph 11 shall apply to: (a) the transfer of any Note (b) Warrant and (c) the transfer of any Restricted Security (each such transfer being herein called a "Restricted ---------- Action"). The holder of any Note, Warrant or Restricted Security, by its - ------ acceptance thereof, agrees that, unless otherwise permitted hereunder, it will not take any Restricted Action prior to the delivery to the Company of the opinion or opinions of counsel referred to in, and to the effect described in, clause (a) of paragraph 11C (or the penultimate sentence of the last paragraph of paragraph 11C), or until registration under the Securities Act of the Restricted Securities involved in, or issuable upon conversion of the Notes involved in, such Restricted Action has become effective. 12.2 Restrictive Legends. Each Note, Warrant and certificate for Restricted Securities (unless at the time of issuance such Restricted Securities are registered under the Securities Act), and each Note, Warrant and certificate issued upon the transfer or exchange of any such Note or certificate for Restricted Securities (except as otherwise permitted by this paragraph 11), shall bear a legend in substantially the following form: The securities represented by this certificate have not been registered under the Securities Act of 1933, as amended, and neither the securities nor any interest therein may be sold, transferred, pledged or otherwise disposed of in the absence of such registration or an exemption under such Act and the rules and regulations thereunder. The transfer of such securities is subject to the restrictions set forth in paragraph 11 of that certain Amended and Restated Note, Stock Purchase and Warrant Agreement, dated December 12, 2001 between Elephant & Castle Group Inc. and GE Investment Private Placement Partners II, a Limited Partnership, copies of which are available for inspection at the offices of Elephant & Castle Group Inc., and such securities may be transferred only in compliance with the terms and conditions of said paragraph 11 of said Amended and Restated Note, Stock Purchase and Warrant Agreement. 12.3 Notice of Proposed Transfer; Opinions of Counsel; Certain Restrictions. Each holder of any Notes, Warrants or of any Restricted Securities, by its acceptance thereof, agrees that, except as otherwise expressly provided below in this paragraph 11C, prior to the taking of any Restricted Action, such holder will give written 37 notice to the Company of such holder's intention to take such Restricted Action and to comply in all other respects with this paragraph 11C. Each such notice (i) shall describe the manner and circumstances of the proposed Restricted Action in sufficient detail to enable counsel to render the opinions referred to below and (ii) shall designate counsel for the holder giving such notice (who may be house counsel for such holder). The holder giving such notice will submit a copy thereof to the counsel designated in such notice, and the Company will promptly submit a copy thereof to its counsel (who may be house counsel for the Company), and the following provisions shall apply: If in the opinion of each such counsel the proposed Restricted Action may be effected without registration under the Securities Act or any applicable state securities or Blue Sky laws of any Note or Restricted Securities involved in, or issuable upon conversion of any Notes involved in, such Restricted Action, then the Company will promptly notify the holder thereof and such holder shall thereupon be entitled to effect such Restricted Action in accordance with the terms of the notice delivered by such holder to the Company, and the Company will promptly effect any transfer of any Notes or Restricted Securities involved in such Restricted Action and either deliver new Notes in accordance with paragraph 13E, or certificates for Restricted Securities bearing (or not bearing, if in the opinion of each such counsel such legend is no longer required to insure compliance with the Securities Act) the legend set forth in paragraph 11B, or both, as the case may be. If for any reason counsel for the Company (after having been furnished with the information required to be furnished by clause (i) of this paragraph 11C) shall fail to deliver an opinion to the Company (with a copy to such holder), or the Company shall fail to notify such holder thereof as aforesaid, within 15 days after counsel for such holder shall have delivered its opinion to such holder (with a copy to the Company), then for all purposes hereof the opinion of counsel for the Company shall be deemed to be the same as the opinion of counsel for such holder. If in the opinion of either or both of such counsel (such opinion or opinions to state the basis of the legal conclusions reached therein) the proposed Restricted Action may not legally be effected without registration under the Securities Act or any applicable state securities or Blue Sky laws of any Note or Restricted Securities involved in, or issuable upon conversion of any Notes involved in, such Restricted Action, the Company shall promptly so notify the holder thereof and thereafter such holder shall not be entitled to effect such Restricted Action until receipt of a further notice from the Company under clause (a) of this paragraph 11C. Notwithstanding the foregoing, each holder shall be permitted to transfer any Note or Notes or any Restricted Security or Restricted Securities attributable to Notes in one or more transactions to a limited number of institutional investors similar in nature to the Buyer or "accredited investors" as defined in Rule 501 under the Securities Act; provided, however, that (x) -------- ------- each such investor shall represent in writing that it is acquiring such Note or Restricted Security for investment and not with a view to the distribution thereof (subject, however, to any requirement of law that the disposition thereof shall at all times be within the control of such transferee), (y) each such investor shall agree in writing to be bound by all the restrictions on transfer of such Note or Restricted Security contained in paragraph 11 hereof and (z) such holder shall deliver to the Company an opinion of counsel (who shall be satisfactory to the Company) stating that such transfer may be effected without registration under the Securities Act or any 38 applicable state securities or Blue Sky laws. The Company will pay the reasonable fees and disbursements of counsel (other than house counsel) for any holder of Notes or Restricted Securities and of counsel for the Company in connection with all opinions rendered by them pursuant to this paragraph 11C, and will reimburse any such holder for all other out-of-pocket expenses (other than Registration Expenses) incurred by such holder in complying with this paragraph 11C. 12.4 Registration of Restricted Securities on Request. Upon the written request of the holders of no less than 50% of the outstanding Restricted Securities, which request (a) shall describe the Restricted Action proposed to be effected by such holder and the intended method of disposition by such holder of the Restricted Securities involved in such proposed Restricted Action, and (b) shall request that the Company effect the registration of all or part of such holder's Restricted Securities under the Securities Act, the Company will promptly give written notice of such requested registration to all holders of outstanding Notes or Restricted Securities and thereupon will use its best efforts to effect the registration under the Securities Act of (i) the Restricted Securities which the Company has been so requested to register, for disposition in accordance with the intended method of disposition stated in such request, and (ii) all other Restricted Securities the holders of which shall have, within 30 days after the receipt of such written notice from the Company, made written request (stating the intended method of disposition of such securities by such holders) to the Company for registration thereof, all to the extent required to permit the disposition (in accordance with the intended method thereof as aforesaid) by all such holders of the Restricted Securities so to be registered; provided, however, that the Company shall not be obligated to -------- ------- effect any such registration pursuant to this paragraph 11D (a) at any time prior to the second anniversary of the date of this Agreement (b) at any time prior to the first anniversary of the effective date of a registration statement filed with the Commission pursuant to a written notice of requested registration pursuant to this paragraph 11D, or (c) at any time subsequent to the third such registration made pursuant to this paragraph 11D which shall have become effective with respect to all Restricted Securities requested to be included therein and not have been interfered with by any order or requirement of the Commission or any other governmental agency or any court. The holders requesting any registration pursuant to this paragraph shall select the underwriter or underwriters to be used in connection with any public offering of securities registered pursuant to this paragraph; provided, however, that so long as the -------- ------- Buyer shall hold any Restricted Securities, the Buyer shall have the right, in its sole discretion, to approve or disapprove of any underwriter in which General Electric Company has a direct or indirect interest of 5% or more. 12.5 Piggy-Back Registration. If the Company at any time proposes to register any of its equity securities (other than securities issued with respect to any acquisition or any employee stock option, stock purchase, or similar plan or any other securities to be registered pursuant to a special purpose registration) under the Securities Act on Form S-1, Form S-2, Form S-3 or any other form of general application for sale of securities to the public in an underwritten offering upon which may be registered securities similar to the Restricted Securities, it will each such time at least 60 days prior to the anticipated filing date of such proposed registration statement give written notice to 39 all holders of all outstanding Notes or Restricted Securities of its intention so to do and, upon the written request of any such holder made within 30 days after the receipt of any such notice (which request shall specify the Restricted Securities intended to be disposed of by such holder and state the intended method of disposition thereof), the Company will use its best efforts to effect the registration under the Securities Act of Restricted Securities which the Company has been so requested to register, to the extent requisite to permit the disposition (in accordance with the intended methods thereof as aforesaid) by such holders of the Restricted Securities to be so registered, subject to the discretion of the managing underwriter to limit or exclude any of such equity securities from the offering if it determines that the inclusion thereof would adversely affect the marketing of the securities to be sold by the Company therein; provided, however, that if any of such equity securities are to be -------- ------- included in such underwriting for the account of any person other than the Buyer, the number of such equity securities to be included by any such person shall be reduced first; provided, further, however, that if any Restricted -------- ------- ------- Securities are to be distributed pursuant to this paragraph through a firm of underwriters to the public and the Buyer shall be participating in such offering the Buyer shall have the right, in its sole discretion, to approve or disapprove of any underwriter in which General Electric Company has a direct or indirect interest of 5% or more. No registration effected pursuant to this paragraph 11E shall relieve the Company from its obligation to effect any registration upon request pursuant to paragraph 11D hereof. 12.6 Registration Expenses. The Registration Expenses in connection with any registration in which Restricted Securities or Notes shall be included pursuant to paragraph 11D, 11E or 11F shall be borne by the Company. 12.7 Registration Procedures. If and whenever the Company is required to effect the registration of any Restricted Securities under the Securities Act as provided in this Agreement, the Company will promptly: (i) prepare and (in any event within 90 days after the end of the period within which requests for registration may be given to the Company) file with the Commission a registration statement with respect to such Restricted Securities and use its best efforts to cause such registration statement to become effective; (ii) prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective and to comply with the provisions of the Securities Act with respect to the disposition of all such Restricted Securities and other securities covered by such registration statement until such time as all of such Restricted Securities and other securities have been disposed of in accordance with the intended methods of disposition by the seller or sellers thereof set forth in such registration statement, but in no event for a period of more than 270 days after such registration statement becomes effective; 40 (iii) furnish to each seller of such Restricted Securities such number of copies of such registration statement and of each such amendment and supplement thereto (in each case including all exhibits), such number of copies of the prospectus included in such registration statement (including each preliminary prospectus), in conformity with the requirements of the Securities Act, and such other documents, as such seller may reasonably request in order to facilitate the disposition of the Restricted Securities owned by such seller; (iv) use its best efforts to register or qualify such Restricted Securities covered by such registration statement under such other applicable securities or Blue Sky laws of such jurisdictions within the United States of America (including territories and commonwealths thereof) as each seller shall reasonably request, except that the Company shall not for any such purpose be required to qualify generally to do business as a foreign corporation in any jurisdiction wherein it is not so qualified, to subject itself to taxation in any such jurisdiction, or to consent to general service of process in any jurisdiction; (v) notify each seller of any such Restricted Securities covered by such registration statement, at any time when a prospectus relating thereto is required to be delivered under the Securities Act within the period mentioned in subdivision (ii) of this paragraph 11H, of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances under which they were made (and upon receipt of such notice and until a supplemented or amended prospectus as set forth below is available, each such seller shall not offer or sell any securities covered by such registration statement and shall return all copies of such prospectus to the Company if requested to do so by it), and at the request of any such seller prepare and furnish to such seller a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of such Restricted Securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances under which they were made; and (vi) furnish to each holder for which Restricted Securities are registered or are to be registered at the time of the disposition of such Restricted Securities by such holder, a signed copy of an opinion of counsel (which counsel shall be reasonably acceptable to, and which opinion shall be reasonably satisfactory in form and substance to, such holder) to the effect that: (a) a registration statement covering such Restricted Securities has been filed with the Commission under the 41 Securities Act and has been made effective by order of the Commission, (b) said registration statement and the prospectus contained therein comply as to form in all material respects with the requirements of the Securities Act, and (after due inquiry) such counsel has no reason to believe that either said registration statement or such prospectus contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein (in the case of such prospectus, in light of the circumstances under which they were made) not misleading, (c) after due inquiry said counsel knows of no legal or governmental proceedings required to be described in said registration statement or prospectus which are not described as required, or of any contracts or documents of a character required to be described in said registration statement or prospectus or to be filed as an exhibit to said registration statement or to be incorporated by reference therein which is not described and filed as required, (d) no stop order has been issued by the Commission suspending the effectiveness of such registration statement and, to the best of such counsel's knowledge, no proceedings for the issuance of such a stop order are pending or threatened, and (e) the applicable provisions of the securities or Blue Sky laws of each state in which the Company shall be required, pursuant to clause (iv) of this paragraph 11G, to register or qualify such Notes or Restricted Securities, have been complied with, assuming the accuracy and completeness of the information furnished to such counsel with respect to each filing relating to such laws; it being understood that such opinion may contain such qualifications and assumptions as are customary in the rendering of similar opinions, and that such counsel may rely, as to all factual matters treated therein, on certificates of the Company (copies of which shall be delivered to such holder). The Company may require each seller of any Restricted Securities as to which any registration is being effected to furnish the Company such information regarding such seller and the distribution of such Restricted Securities as the Company may from time to time request in writing and as shall be required by law to effect such registration. 12.8 Termination of Restrictions. All restrictions imposed by paragraph 11 hereof upon the transferability of Notes or Restricted Securities shall cease and terminate as to any particular Notes or Restricted Securities, (a) when such securities shall have been effectively registered under the Securities Act and disposed of in accordance with the registration statement covering such securities, or (b) when, in the opinion of counsel for the holder thereof and counsel for the Company, such restrictions are no longer required in order to insure compliance with the Securities Act. Whenever such restrictions shall terminate as to any Notes or Restricted Securities, the holder thereof shall be entitled to receive from the Company without expense a new certificate or certificates representing such securities not bearing the legend set forth in paragraph 11B hereof. 42 12.9 Indemnification. (a) In the event of any registration of any Restricted Securities under the Securities Act pursuant to this Agreement, the Company will indemnify and hold harmless the seller of such securities and its directors and officers and each underwriter of such securities and each other person, if any, who controls such seller or underwriter within the meaning the Securities Act, against any losses, claims, damages or liabilities, joint or several, to which such seller, director or officer or underwriter or controlling person may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) arise out of or are based upon (i) any untrue statement or alleged untrue statement of any material fact contained in any registration statement under which such securities were registered under the Securities Act, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereto, or (ii) any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; and the Company will reimburse such seller, each such director and officer, each such underwriter and each such controlling person for any legal or any other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability, action or proceeding; provided, however, that the Company shall not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement, any such preliminary prospectus, final prospectus, amendment or supplement in reliance upon and in conformity with written information furnished to the Company through an instrument duly executed by such seller, officer or director, underwriter or controlling person specifically for use in the preparation thereof. Such indemnity shall remain in full force and effect irrespective of any investigation by any person indemnified above. The Company may require, as a condition to including any Restricted Securities in any registration statement filed pursuant to paragraph 11 hereof, that the Company shall have received an undertaking satisfactory to it from the prospective seller and underwriter of such securities to indemnify and hold harmless (in the same manner and to the same extent as set forth in subdivision (a) of this paragraph 11J, but only to an amount, with respect to such prospective seller, not in excess of the gross proceeds realized by such seller from the sale of Restricted Securities registered pursuant to such registration statement) the Company, each director of the Company, each officer of the Company who shall sign such registration statement and any person who controls the Company within the meaning of the Securities Act, with respect to any statement in or omission from such registration statement, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereto, if such statement or omission was made in reliance upon and in conformity with written information furnished to the Company through an instrument duly executed by such seller or underwriter, specifically for use in the preparation of such registration statement, preliminary prospectus, final prospectus, amendment or supplement. Promptly after receipt by an indemnified party of notice of the commencement of any action involving a claim referred to in the preceding paragraphs of this paragraph 11J, such indemnified party shall, if a claim in respect thereof is to be made against an indemnifying party, give written notice to the latter of the commencement of such action; 43 provided, however, that the failure of any indemnified party to give notice as - -------- ------- provided herein shall not relieve the indemnifying party of its obligations under the preceding paragraphs of this paragraph 11J, except to the extent that the indemnifying party is actually prejudiced by such failure to give notice. In case any such action is brought against an indemnified party, the indemnifying party shall be entitled to participate in and to assume the defense thereof, jointly with any other indemnifying party similarly notified to the extent that it may wish, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party for any legal or other expense subsequently incurred by the latter in connection with the defense thereof. No indemnifying party, in the defense of any such claim or litigation, shall, except with the consent of each indemnified party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation. 12.10 Availability of Information. The Company will comply with the reporting requirements of Sections 13 and 15(d) of the Exchange Act applicable to it and shall use its best efforts to comply with all other public information reporting requirements of the Commission (including reporting requirements which serve as a condition to utilization of Rule 144 promulgated by the Commission under the Securities Act) applicable to it from time to time in effect and relating to the availability of an exemption from the Securities Act for the sale of any Notes or Restricted Securities. The Company will also cooperate with each holder of any Notes or Restricted Securities in supplying such information and documentation as may be necessary for such holder to complete and file any information reporting forms presently or hereafter required by the Commission as a condition to the availability of an exemption from the Securities Act for the sale of any Notes or Restricted Securities. 12.11 Duration of Obligations. The obligations of the Company under paragraph 11 hereof, and the obligations under paragraph 11I hereof of the Company and any seller of Restricted Securities becoming obligated thereunder, shall continue for so long as any Notes or Restricted Securities shall be outstanding, except as otherwise provided in paragraph 11 hereof. 13. Definitions. For the purpose of the Agreements, the following ----------- terms shall have the following respective meanings: "1999 Notes" shall have the meaning set forth in recitals. ---------- "Additional Closing Documents" shall mean those documents that ---------------------------- have not heretofore been delivered pursuant to the Security Agreement, and shall include the required powers of attorney, the required application for transfer of Shares, certified copies of the share registers of the Subsidiaries, noted to reflect the pledge of shares to GEIPPPII, the resolutions of the board of directors of each Subsidiary consenting to the transfer of shares, the resolution of the board of directors of the Canadian Subsidiary consenting to the transfer of shares to GEIPPPII, the stock certificate of Canadian 44 Rainforest Restaurants Inc. and the stock certificate of Alamo Grill Inc. (all such terms set forth above as defined in the Security Agreement). "Affiliate" shall mean, with respect to any Person, any person --------- that, directly or indirectly, controls, is controlled by or is under common control with such Person. For the purposes of this definition, "control" (including, with correlative meanings, the terms "controlled by" and "under common control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or by contract or otherwise. "CAN $" shall mean Canadian dollars. ----- "Canadian Security Agreement" shall have the meaning set forth in --------------------------- recitals. "Canadian Subsidiary" shall mean the Elephant and Castle Canada ------------------- Inc., a corporation incorporated in the Province of Ontario, Canada. "Change in Control Event" shall be deemed to have occurred upon, ----------------------- (i) the acquisition by any "person" (as that term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended) of beneficial ownership, direct or indirect, of securities of the Company representing more than 50% of the combined voting power of the Company's then outstanding securities or (ii) the acquisition of the Company, or all or substantially all of its assets, by, or the combination of the Company or all or substantially all of its assets, with, another "person" (as defined above), unless the acquiring or surviving "person" shall be a corporation more than 50% of the combined voting power of which corporation's then outstanding securities, after such acquisition or combination, are owned, immediately after such acquisition or combination, by the owners of the voting securities of the Company outstanding immediately prior to such acquisition or combination. "Commission" shall mean the Securities and Exchange Commission or ---------- any other governmental authority at the time administering the Securities Act or the Exchange Act. "Common Stock" shall mean and include the Company's presently ------------ authorized Common Shares, without par value, as constituted on the date hereof, and, when used in paragraph 9 or 11 hereof, shall also mean and include any capital stock of any class of the Company hereafter authorized which shall not be either (i) limited to a fixed sum or percentage of par value in respect of the rights of the holders thereof to receive dividends and to participate in the distribution of assets upon the voluntary or involuntary liquidation, dissolution or winding-up of the Company, or (ii) redeemable at any time by the Company, or both; provided, however, that the shares issuable upon conversion of -------- ------- the Notes shall include only shares of capital stock of the Company designated as Common Shares on the date hereof or, in case of any reclassification of the outstanding shares thereof, the stock, securities or assets provided for in paragraph 9G, 45 which are not limited to any such fixed sum or percentage of par value and are not so redeemable by the Company. "Conversion Price" shall have the meaning set forth in paragraph ---------------- 9A hereof. "Conversion Shares" shall have the meaning set forth in paragraph ----------------- 9A hereof. "Convertible Securities" shall have the meaning set forth in ---------------------- paragraph 9D(1) hereof. "Current Indebtedness" shall mean, as of any date, with respect -------------------- to any Person, all liabilities for borrowed money and all liabilities secured by any Lien existing on property owned by such Person whether or not such liabilities have been assumed and all liabilities, contingent or otherwise, as guarantor or otherwise, with respect to borrowed money or otherwise, which, in any case, are payable on demand or within one year from the date of determination, except any such liabilities which are renewable or extendible at the option of the debtor to a date more than one year from the date of determination. "Defined Rate" shall mean 4% plus the prime or base rate as ------------ determined by the Wall Street Journal, or successor thereto, from time to time; provided, however, that if the foregoing is in excess of the maximum interest rate permitted by applicable law, then the term "Defined Rate" shall mean the maximum interest rate permitted by applicable law. "Dollar" or "U.S. $" or "U.S. Dollars" or "$" shall mean United ------ ------ ------------ - States Dollars. "Earnings Before Interest, Taxes, Depreciation and Amortization -------------------------------------------------------------- or ("EBITDA")" shall mean, for any fiscal period of the Company and its - ------------- consolidated Subsidiaries, the sum of the following: (i) net income (or loss) before provision for income taxes, (ii) depreciation and amortization (including amounts attributable to good will, costs of issuance of debt outstanding, expenses of organization, non-competition agreements, patents and trademarks, and discounts related to subordinated debt) and (iii) interest expense. "Environmental Laws" shall have the meaning set forth in ------------------ paragraph 7S hereof. "ERISA" shall mean the Employee Retirement Income Security Act of ----- 1974, as amended from time to time. "ERISA Affiliate" shall mean any entity required to be aggregated --------------- with the Company or any Subsidiary under Sections 414(b), (c), (m) or (o) of the Internal Revenue Code of 1986, as amended. 46 "Event of Default" shall mean any of the events specified in ---------------- paragraph 6, provided that there has been satisfied any requirement in connection with such event for the giving of notice, or the lapse of time, or the happening of any further condition, event or act, and "Default" shall mean any of such events, whether or not any such requirement has been satisfied. "Exchange Act" shall mean the Securities Exchange Act of 1934, as ------------ amended, or any similar or successor Federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. "Funded Indebtedness" shall mean, as of any date, with respect to ------------------- any Person, without duplication: its liabilities for borrowed money, other than Current Indebtedness; liabilities secured by any Lien existing on property owned by such Person (whether or not such liabilities have been assumed), other than Current Indebtedness; obligations other than Current Indebtedness of such Person, contingently or otherwise, as obligor, guarantor or otherwise, under any lease of real or personal property or comparable arrangement with respect to use or title which are required by generally accepted accounting principles to be capitalized; obligations other than Current Indebtedness of such Person, contingently or otherwise, as guarantor or otherwise, under any arrangement with respect to liabilities for borrowed money which, if the Company were the obligor, would represent Funded Indebtedness or which are required by generally accepted accounting principles to be capitalized; and any other obligations (other than deferred taxes) which are required by generally accepted accounting principles to be shown as liabilities on its balance sheet and which are payable or remain unpaid more than one year from the date of determination thereof. "Hazardous Substances" shall have the meaning set forth in -------------------- paragraph 7S hereof. "Indebtedness" shall mean the sum of Current Indebtedness and ------------ Funded Indebtedness. "Junior Notes" shall have the meaning set forth in paragraph 1A ------------ hereof. "Lien" shall mean any interest in property securing an obligation ---- owed to, or a claim by, a Person other than the owner of the property, whether such interest is based on the common law, statute or contract, and including but not limited to the security interest lien arising from a mortgage, encumbrance, pledge, conditional sale or trust receipt or a lease, consignment or bailment for security purposes. The term "Lien" shall include reservations, exceptions, encroachments, easements, rights-of-way, covenants, conditions, restrictions, leases and other title exceptions and encumbrances affecting property, except any such usual or normal reservations, exceptions, encroachments, easements, rights-of-way, covenants, conditions, restrictions, leases or other title exceptions or encumbrances affecting property that are not disruptive to the use of such property in the ordinary course of business. For the purposes of this Agreement, the Company or a Subsidiary shall be deemed to be the owner of any property which it 47 has acquired or holds subject to a conditional sale agreement, financing lease or other arrangement pursuant to which title to the property has been retained by or vested in some other Person for security purposes. "Market Price" shall have the meaning set forth in paragraph ------------ 9D(8) hereof. "Maturity Date" shall mean September 1, 2005. ------------- "Multiemployer Plan" means a plan which is a Multiemployer Plan ------------------ as defined in Section 4001(a)(3) of ERISA. "Officer's Certificate" shall mean a certificate signed in the --------------------- name of the Company by its Chairman of the Board, its President, one of its Vice Presidents or its Treasurer. "Original Agreement" shall have the meaning set forth in ------------------ recitals. "Original Notes" shall have the meaning set forth in recitals. -------------- "Person" shall mean and include an individual, a corporation, an ------ association, a partnership, a trust or estate, a government or any department or agency thereof. "Purchased Shares" shall have the meaning set forth in paragraph ---------------- 2B hereof. "Registration Expenses" shall mean all expenses incident to the --------------------- Company's performance of or compliance with paragraph 11 hereof, including without limitation all registration and filing fees, all fees and expenses of complying with securities or Blue Sky laws (except to the extent that such fees and expenses are required by applicable law to be paid by the selling shareholders), all printing expenses, the fees and disbursements of counsel for the Company and of independent public accountants, the reasonable fees and disbursements of one counsel per registration retained by all holders of Restricted Securities being registered (such counsel to be satisfactory to the holders of a majority of the Share Equivalents of the Restricted Securities being registered) and the expenses of any special audits required by or incident to such performance and compliance (but excluding underwriting discounts and commissions and transfer taxes, if any). "Restricted Action" shall have the meaning set forth in paragraph ----------------- 11A hereof. "Restricted Payments" shall have the meaning set forth in ------------------- paragraph 5B hereof. "Restricted Securities" shall mean at any time (a) the Common --------------------- Stock previously issued or, unless the context otherwise requires, issuable upon conversion of the Notes, (b) any Common Stock issued subsequent to the conversion of any of the 48 Notes as a dividend or other distribution with respect to, or in exchange for or in replacement of, the Common Stock issued upon such conversion, (c) the Purchased Shares and (d) any Common Stock issued, or, unless the context otherwise requires, issuable as interest on the Notes; provided, however, that -------- ------- immediately after and throughout the period during which the restrictions on the transferability of such Common Stock shall have ceased and terminated in accordance with paragraph 11 hereof, the same shall cease to be Restricted Securities. Where the context so requires, "holders of Restricted Securities" shall include holders of Notes convertible into Restricted Securities. "Securities Act" shall mean the Securities Act of 1933, as -------------- amended, and any similar or successor Federal statute, and the rules and regulations of the Commission thereunder, all as the same may be in effect at the time. "Security Agreement" shall have the meaning set forth in the ------------------ recitals. "Senior Notes" shall have the meaning set forth in paragraph 1A. ------------ "Shares" shall mean the shares of Common Stock issued pursuant to ------ this Agreement, including without limitation such shares issued upon conversion of the Notes or exercise of the Warrants. "Share Equivalents" of any Restricted Securities or the Notes ----------------- shall mean the number of shares of Common Stock included among such Restricted Securities or upon conversion of the Notes. "Subsidiary" shall mean a corporation of which the Company owns, ---------- directly or indirectly, more than 50% of the shares of stock entitled to vote in the election of directors (excluding shares so entitled to vote only upon a failure to pay dividends or other contingencies). "U.S. Security Agreement" shall have the meaning set forth in the ----------------------- recitals. "U.S. Subsidiaries" shall mean the Subsidiaries of the Company ----------------- incorporated in any state of the United States of America. "Warrants" shall mean Warrants to acquire shares of Common Stock -------- at the Company issued pursuant to the Original Agreement. 14. Miscellaneous. ------------- 14.1 Note Payments. The Company agrees that, so long as the Buyer shall hold any Note, it will make payments of principal thereof and interest and premium, if any, thereon, which comply with the terms of this Agreement, by wire transfer of immediately available funds for credit to its account at State Street Bank and Trust Company, Boston, MA, ABA: 021 000 028, Acct: 2564-7819, Ref: 8X32 - GEIPPPII, or such other account in the United States of America as the Buyer may designate in writing, notwithstanding any contrary provision herein or in any Note with respect to the 49 place of payment. The Company agrees to afford the benefits of this paragraph to any institutional investor of recognized standing which is the direct or indirect transferee of any Note acquired by the Buyer hereunder. 14.2 Expenses. The Company shall pay at the Closing the -------- reasonable fees and expenses of the Buyer, including the reasonable legal fees and expenses of Dewey Ballantine LLP, as the special counsel to the Buyer, and Bull, Housser & Tupper, as the special Canadian counsel to the Buyer, incurred in connection with preparation of this Agreement and the other agreements contemplated hereby and the closing of the transactions contemplated hereby; provided, however, that the Company shall not be required to reimburse such fees - -------- ------- and expenses which in the aggregate exceed $25,000. The Company shall pay the reasonable costs and expenses of the Buyer, including reasonable legal fees and expenses, incurred by the Buyer in enforcing any of its rights under this Agreement or the Notes, including, without limitation, costs and expenses incurred in any bankruptcy case. 14.3 Consent to Amendments. This Agreement may be amended, and the Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, if the Company shall obtain the written consent to such amendment, action or omission to act given by the holder or holders of at least 66-2/3% of the aggregate principal amount of the Notes at the time outstanding, except that, without the written consent of the holder or holders of all the Notes at the time outstanding, no amendment to this Agreement shall change the maturity of any Note, or change the principal of, or the rate or time of payment of interest or any premium payable with respect to, any Note, or affect the time or amount of any required prepayments or repurchases, or adversely affect the conversion rights, or modify the subordination provisions in a manner adverse to the holders of Notes, or reduce the proportion of the principal amount of the Notes required with respect to any consent, except that the provisions of paragraph 11 hereof may not be amended without the consent of (i) holders of at least 66-2/3% of the shares of Common Stock constituting Restricted Securities at the time issued or issuable upon conversion of all Notes then outstanding (which aggregate number of shares shall at all times include the number of shares which would be issuable if all then outstanding Notes were being converted at the Conversion Price then in effect, with such shares being deemed to be held, respectively, by the holders of such unconverted Notes) and (ii) holders of at least 66-2/3% of the Warrants at the time outstanding. Any consideration given to any holder to obtain his consent shall be given pro rata to all such holders of a Note or Notes whether or not they give consent. Each holder of any Note at the time or thereafter outstanding (or of shares of Common Stock entitled to any rights hereunder) shall be bound by any consent authorized by this paragraph, whether or not such Note shall have been marked to indicate such consent, but any Note issued thereafter may bear a notation referring to any such consent. No course of dealing between the Company and the holder of any Note nor any delay in exercising any rights hereunder or under any Note shall operate as a waiver of any rights of any holder of such Note, as applicable. As used herein and in the Notes, the term "this Agreement" and references thereto shall mean this Agreement as it may from time to time be amended or supplemented. 50 14.4 Notices to Subsequent Holder. If any Note shall have been transferred to another holder pursuant to paragraph 13E and such holder shall have designated in writing the address to which communications with respect to such Note as applicable shall be mailed, all notices, certificates, requests, statements and other documents required or permitted to be delivered to the Buyer by any provision hereof shall also be delivered to each such holder. 14.5 Form, Registration, Transfer and Exchange of Notes; Lost Notes. The Notes are issuable only as registered Notes without coupons in the denominations of $100,000 and integral multiples thereof and in multiples of $5,000 in excess of $100,000 for any Note. The Company shall keep at its principal office a register in which the Company shall provide for the registration of Notes and of transfers of Notes. Upon surrender of any Note for registration of transfer in compliance with the terms of this Agreement at the office of the Company, the Company shall, at its expense (other than for transfer taxes, if any), execute and deliver one or more new Notes of like tenor and of a like aggregate principal amount registered in the name of the designated transferee or transferees. At the option of the holder of any Note, such Note may be exchanged for other Notes of like tenor and of any authorized denominations, of a like aggregate principal amount, upon surrender of the Note to be exchanged at the office of the Company. Whenever any Notes are so surrendered for exchange, the Company or such transfer agent shall, at the Company's expense (other than for transfer taxes, if any), execute and deliver the Notes which the holder of Notes making the exchange is entitled to receive. Every Note presented or surrendered for registration of transfer or exchange shall be duly endorsed, or be accompanied by a written instrument of transfer duly executed, by the holder of such Note or his attorney duly authorized in writing. Any Note or Notes issued in exchange for any Note or upon transfer thereof shall carry the rights to unpaid interest and interest to accrue which were carried by the Note so exchanged or transferred, so that neither gain nor loss of interest to accrue shall result from any such transfer or exchange. Upon receipt of written notice or other evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of any Note and, in the case of any such loss, theft, or destruction, upon receipt of the Buyer's unsecured indemnity agreement, or, in the case of any other holder of a Note or Notes or Warrant or Warrants, other indemnity reasonably satisfactory to the Company, or in the case of any such mutilation upon surrender and cancellation of such Note or Warrant, the Company will make and deliver a new Note or Warrant, of like tenor, in lieu of the lost, stolen, destroyed or mutilated Note or Warrant. 14.6 Persons Deemed Owners. Prior to due presentment for registration of transfer, the Company may treat the Person in whose name any Note or Warrant is registered as the owner and holder of such Note or Warrant for the purpose of receiving payment of principal of and interest and premium (if any) in the case of on such Note and for all other purposes whatsoever in the case of such Note or Warrant, whether or not such Note shall be overdue, and the Company shall not be affected by notice to the contrary. 14.7 Survival of Representations, Warranties and Indemnities. All representations, warranties and indemnities contained herein or made in writing by the 51 Company in connection herewith shall survive the execution and delivery of this Agreement, the Common Stock issued under or pursuant to this Agreement and the Notes, regardless of any investigation made by the Buyer or on the Buyer's behalf. 14.8 Successors and Assigns. All covenants and agreements in this Agreement contained by or on behalf of either of the parties hereto shall bind and inure to the benefit of the respective successors and assigns of the parties hereto whether so expressed or not. 14.9 Notices. All notices and other communications required or permitted hereunder shall be in writing and shall be (i) mailed by registered or certified mail, postage prepaid, (ii) delivered by reliable overnight courier service, or (iii) otherwise delivered by hand or by messenger, addressed (A) if to the Buyer, to GE Asset Management Incorporated, 3003 Summer Street, Stamford, Connecticut 06904, Attention: Michael M. Pastore, or at such other address as the holder shall have furnished to the Company in writing, or (B) if to the Company, to Elephant & Castle Group Inc., 1190 Hornby Street, Vancouver, B.C. Canada V6Z 2K5, Attention: Chief Financial Officer, or at such other address as the Company shall have furnished to the holder in writing. All such notices and communications shall be effective upon receipt. 14.10 Accounting Terms. Unless otherwise set forth herein, all accounting terms and provisions in this Agreement shall be construed to be as determined in accordance with generally accepted accounting principles in Canada then in effect. 14.11 Satisfaction Requirement. If any agreement, certificate or other writing, or any action taken or to be taken, is by the terms of this Agreement required to be satisfactory to the Buyer, the determination of such satisfaction shall be made by the Buyer in its sole and exclusive judgment exercised in good faith. 14.12 Governing Law. This Agreement shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the laws of the State of New York. This Agreement may not be changed orally, but (subject to the provisions of paragraph 13C) only by an agreement in writing signed by the party against whom enforcement is sought. 14.13 Headings; Table of Contents. The descriptive headings of the several paragraphs of this Agreement and the table of contents are inserted for convenience only and do not constitute a part of this Agreement. 14.14 Counterparts. This Agreement may be executed simultaneously in two or more counterparts, all of which shall be deemed but one and the same instrument and each of which shall be deemed an original, and it shall not be necessary in making proof of this Agreement to produce or account for more than one such counterpart. 14.15 Non Exclusivity of Remedies and Specific Performance. The rights and remedies of any of the parties hereunder shall not be mutually exclusive, and the exercise of one or more of the provisions of this Agreement shall not preclude the exercise of any other provisions of this Agreement. Each of the parties confirms that 52 damages at law may be an inadequate remedy for breach or threat of breach of any provisions of this Agreement. The respective rights and obligations arising out of or under this Agreement shall be enforceable by specific performance, injunction, or other equitable remedy, but nothing in this Agreement is intended to limit or affect any rights at law or by statute or otherwise of any party aggrieved as against the other parties for a breach or threat of breach of any provision of this Agreement, it being the intention by this paragraph to make clear that under this Agreement the respective rights and obligations of the parties shall be enforceable in equity as well as at law or otherwise. 14.16 Non Business Days. If the date for making any payment or the last date for performance of any act or the exercising of any right, as provided in this Agreement, shall not be a business day, such payment may be made or act performed or right exercised on the next succeeding business day, with the same force and effect as if done on the nominal date provided in this Agreement, except that interest shall accrue and be payable for the period after such nominal date. 53 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized as of the day and year first above written. ELEPHANT & CASTLE GROUP INC. By:_____________________________ Name: Rick Bryant Title: President GE INVESTMENT PRIVATE PLACEMENT PARTNERS II, a LIMITED PARTNERSHIP By: GE Asset Management Incorporated Its: General Partner By:________________________ Name: Michael M. Pastore Title: Vice President 54 EX-99.II 4 dex99ii.txt AMENDMENT NO.1 TO THE SECURITY AGREEMENT (US) Exhibit II ========================================================================= AMENDMENT NO. 1 dated as of December 12, 2001 to SECURITY AGREEMENT dated as of October 6, 1999 Among ELEPHANT & CASTLE GROUP INC., its Subsidiaries signatories hereto, and GE INVESTMENT PRIVATE PLACEMENT PARTNERS II, A LIMITED PARTNERSHIP ========================================================================= AMENDMENT NO. 1 TO SECURITY AGREEMENT ------------------ dated as of December 12, 2001 THIS AMENDMENT NO. 1 dated as of December 12, 2001, (this "Amendment") to the Security Agreement (as defined below) is entered into among Elephant & Castle Group Inc. (the "Company") and its Subsidiaries signatories hereto (the "Subsidiaries") and GE Investment Private Placement Partners II, a Limited Partnership ("GEIPPPII"). W I T N E S S E T H: - - - - - - - - - - WHEREAS, the Company and GEIPPPII desire to amend and restate that certain Note, Stock Purchase and Warrant Agreement dated as of November 30, 1995 (as amended, the "Agreement"); WHEREAS, in connection with amendment and restatement of the Agreement, the Company, the Subsidiaries and GEIPPPII desire to amend that certain Security Agreement (US) dated as of October 6, 1999 (the "Security Agreement"); WHEREAS, capitalized terms unless otherwise defined herein shall have the meaning attributed thereto in the Security Agreement; WHEREAS, it is a condition to GEIPPPII's entering into the Agreement that the Company, the Subsidiaries and GEIPPPII execute this Amendment; NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company, the Subsidiaries and GEIPPPII hereby agree as follows: 1. Amendment. (a) Recitals to the Security Agreement are hereby --------- deleted in their entirety and the following recitals are inserted in lieu thereof: "WHEREAS, the Debtor and the Secured Party have decided to amend and restate that certain Note, Stock Purchase and Warrant Agreement dated November 30, 1995 (as amended and restated, 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 Restated and Amended Senior Secured Convertible Notes in the principal amount of $5,000,000 and Restated and Amended Junior Secured Convertible Notes in the principal amount of $5,000,000 (collectively, the "Notes"). Terms used herein not otherwise defined shall have the meaning ascribed thereto in the Note, Stock Purchase and Warrant Agreement. 1 WHEREAS, the Secured Party and the Debtor desire to continue the security interest in the Collateral in full force and effect as security for the repayment of the Notes." (b) Section 1.1(a) of the Security Agreement is hereby amended by deleting clauses (iii) and (v) thereof and by inserting the following new clauses (iii) and (v) in lieu thereof: "(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 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." "(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 held 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")." (c) Section 1.3 of the Security Agreement is hereby deleted in its entirety. (d) Section 2.1 of the Security Agreement are hereby amended by adding the following paragraph immediately at the end thereof: "In consideration of the continuation of the Security Interest hereunder and continuation of the security interest granted pursuant to the 2 Canadian Documents, the Secured Party hereby waives and forgives unpaid interest on (i) the convertible subordinated debentures due June 1, 2003 in the aggregate principal amount, as of the date hereof, of $9,000,000 and (ii) the convertible subordinated debentures due December 31, 2003 in the aggregate principal amount, as of the date hereof, of $1,000,000, accrued through June 30, 2001, in the aggregate amount equal $620,000. (e) Section 2.2 of the Security Agreement is hereby deleted in its entirety and the following new Section 2.2 is hereby inserted in lieu thereof: "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, (b) all covenants of the Debtor and the Subsidiaries under this Agreement and all covenants, obligations and conditions to be performed by the Debtor and the Subsidiaries under the Note, Stock Purchase and Warrant Agreement, in each case including all renewals, extensions and modifications thereof, and (c) all reasonable costs and expenses incurred by the Secured Party in collecting the indebtedness evidenced by the Notes or otherwise enforcing its rights under this Agreement, the Note, Stock Purchase and Warrant Agreement or the Notes, including without limitation, reasonable attorneys' fees. All of such debts, indebtedness, liabilities, covenants, and duties referred to in (a), (b) and (c) of this Section 2.2 are hereinafter collectively referred to as the "Secured Obligations"." (f) Section 15.2 of the Security Agreement is hereby amended by deleting the address of the Debtor contained therein and by inserting the following address in lieu thereof: "1190 Hornby Street Vancouver, B.C. Canada V6Z 2K5." (g) Exhibit A of the Security Agreement is hereby deleted in its entirety and replaced by Exhibit A attached hereto. 3 2. Conditions Precedent. GEIPPPII's obligation to enter into this -------------------- Amendment is subject to satisfaction, on or prior to the date hereof, of the following conditions: (a) GEIPPPII and the Company shall have entered into the Agreement; and (b) The Security Agreement (Canada) among the Company, Elephant and Castle Canada Inc. and GEIPPPII dated as of October 6, 1999 and documents related thereto shall have been amended as provided in the Agreement. 3. Reconfirmation. The Company and GEIPPPII hereby reconfirm their -------------- rights and obligations under the Security Agreement as amended and restated hereby. 4. Counterparts. This Amendment may be executed in any number of ------------ counterparts, each of which shall be deemed to be an original, but all such separate counterparts shall together constitute one and the same instrument. 5. Governing Law. THIS AMENDMENT SHALL IN ALL RESPECTS BE GOVERNED ------------- BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. 4 IN WITNESS WHEREOF, the Company, the Subsidiaries and GEIPPPII have each caused this Amendment to be duly executed and delivered as of the day and year first above written. GE INVESTMENT PRIVATE PLACEMENT PARTNERS II, a LIMITED PARTNERSHIP By: GE Asset Management Incorporated, its General Partner By: ___________________________________ Name: Title: ELEPHANT & CASTLE GROUP INC. By: ___________________________________ Name: Rick Bryant Title: President and CEO ELEPHANT & CASTLE, INC. By: ___________________________________ Name: Rick Bryant Title: President ALAMO GRILL, INC. By: ___________________________________ Name: Rick Bryant Title: President and CEO ELEPHANT AND CASTLE OF PENNSYLVANIA, INC. By: ___________________________________ Name: Rick Bryant Title: President and CEO 5 E & C Pub, Inc. By: _____________________________________ Name: Rick Bryant Title: President and CEO MASSACHUSETTS ELEPHANT & CASTLE GROUP, INC. By: _____________________________________ Name: Rick Bryant Title: President and CEO ELEPHANT & CASTLE INTERNATIONAL, INC. By: _____________________________________ Name: Rick Bryant Title: President and CEO 6 Exhibit A --------- List of Subsidiaries and Description of Shares ---------------------------------------------- Elephant & Castle Inc. 100,000 shares of common stock authorized 1,000 shares of common stock issued and outstanding * Elephant & Castle of Pennsylvania Inc. 100 shares of common stock, no par value, authorized 100 shares of common stock issued and outstanding * E & C Pub Inc. 100,000 shares of common stock authorized 1,000 shares of common stock issued and outstanding * Massachusetts Elephant & Castle Group, Inc. 100 shares of common stock, no par value, authorized 100 shares of common stock issued and outstanding * Elephant & Castle International Inc. 1,000,000 shares of common stock, $.10 par value, authorized 100,000 shares of common stock issued and outstanding Alamo Grill, Inc. 1,000 shares of common stock, no par value, authorized 51 share of common stock issued and outstanding
7 EX-99.III 5 dex99iii.txt SECURITY AGREEMENT (CANADA) Exhibit III SECURITY AGREEMENT among ELEPHANT & CASTLE GROUP INC., THE ELEPHANT AND CASTLE CANADA INC., and GE INVESTMENT PRIVATE PLACEMENT PARTNERS II, A LIMITED PARTNERSHIP dated as of October 6, 1999 TABLE OF CONTENTS 1. THE PLEDGE AND SECURITY INTEREST ....................................................................... 3 2. THE SECURED OBLIGATIONS ................................................................................ 8 3. CONTINUING SECURITY INTEREST; TRANSFER OF NOTES ........................................................ 8 4. DEBTOR REMAINS LIABLE .................................................................................. 8 5. SECURITY AND PLEDGE INTERESTS ABSOLUTE ................................................................. 9 6. DELIVERY OF PLEDGED PROPERTY ........................................................................... 10 7. DIVIDENDS ON PLEDGED SHARES ............................................................................ 10 8. SUBROGATION, ETC. ...................................................................................... 10 9. REPRESENTATIONS AND WARRANTIES ......................................................................... 11 9.1 Location of Collateral, etc........................................................................ 11 9.2 Ownership, No Liens, etc........................................................................... 11 9.3 Possession and Control............................................................................. 11 9.4 Validity, etc...................................................................................... 11 9.5 Due Authorization, Execution, Approval, etc........................................................ 12 9.6 As to Pledged Shares............................................................................... 13 9.7 Compliance with Laws............................................................................... 13 10. CERTAIN COVENANTS ...................................................................................... 13 10.1 As to Equipment.................................................................................... 14 10.4 As to Collateral; Further Assurances, etc.......................................................... 16 10.5 Insurance.......................................................................................... 18 10.6 Transfers and Other Liens.......................................................................... 19 10.7 Further Assurances, etc............................................................................ 19 10.9 Additional Subsidiaries............................................................................ 20 11. SECURED PARTY .......................................................................................... 21 11.1 Secured Party Appointed Attorney-in-Fact........................................................... 21 11.2 Secured Party May Perform.......................................................................... 21 11.3 Secured Party Has No Duty.......................................................................... 22 11.4 Reasonable Care.................................................................................... 22 11.5 Default............................................................................................ 22 12. REMEDIES ............................................................................................... 23 12.1 Certain Remedies................................................................................... 23 12.2 Compliance with Restrictions....................................................................... 26 12.3 Indemnity and Expenses............................................................................. 26 12.4 Floating Charge.................................................................................... 27
13. CLOSING CONDITIONS ..................................................................................... 27 14. MISCELLANEOUS PROVISIONS ............................................................................... 28 14.1 Amendments, etc.................................................................................... 28 14.2 Addresses for Notices.............................................................................. 29 14.3 Section Captions................................................................................... 29 14.4 Severability....................................................................................... 29 14.5 Counterparts, etc.................................................................................. 29 14.6 Rights Cumulative.................................................................................. 29 14.7 Assignment......................................................................................... 29 14.8 No Waiver.......................................................................................... 29 14.9 Binding Effect..................................................................................... 30 14.10 Termination........................................................................................ 30 14.11 Number and Gender of Words......................................................................... 30 14.12 PPSA Definitions................................................................................... 30 14.13 Governing Law; Entire Agreement.................................................................... 30 14.14 Forum Selection and Consent to Jurisdiction........................................................ 30 14.15 Copy of Agreement.................................................................................. 31
Exhibit A List of Subsidiaries and Description of Shares Exhibit B List of Properties Located in Canada Exhibit C Trademark Agreement (Canada) Exhibit D Assignment and Assumption of Lease Exhibit E Landlord Consent Exhibit F Letter Agreement Exhibit G Rainforest Cafe Canada Holdings, Inc. Consent Exhibit H Consent re Transfer of shares in The Elephant and Castle Canada Inc. Exhibit I Consent re Transfer of shares in Canadian Rainforest Restaurants Inc. Schedule 9.5(a) Consents of Third Parties Schedule 9.5(i) Actions, Suits and Proceedings SECURITY AGREEMENT THIS SECURITY AGREEMENT (as the same may be amended, modified or supplemented from time to time, this "Agreement") is entered into as of the 6th day of October, 1999 by and among ELEPHANT & CASTLE GROUP INC., a corporation incorporated in the Province of British Columbia (the "Debtor") and THE ELEPHANT AND CASTLE CANADA INC. (the "Subsidiary"), 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 U.S.$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 the Subsidiary 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, the Subsidiary is a 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, the Subsidiary 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), each of the Debtor and the Subsidiary hereby: (a) grants to the Secured Party a lien and a security interest in, and mortgages, assigns, transfers, delivers, pledges, sets over and confirms to the Secured Party all of the Debtor's and the Subsidiary's right, title, interest (including all power of the Debtor and the 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), in Section 1.1(b) and in Section 1.1(c) is hereinafter collectively called the "Collateral"): 3 (i) all shares of capital stock or other equivalents of the Subsidiary, as set forth on Exhibit A hereto, and any shares of capital stock or other equity interest of the Subsidiary obtained in the future by the Debtor and the certificates representing all such shares or equity interest ("Subsidiary Shares"); (ii) all shares of capital stock or other equivalents of Canadian Rainforest Restaurants, Inc., a Canadian federal corporation ("Rain Forest") (a joint venture between the Debtor and Rainforest Cafe Canada Holdings, Inc., a federal corporation organized under the Canada Business Corporations Act ("RCCH") held by the Debtor as set forth in Exhibit A hereto, and any shares of capital stock or other equity interest of Rain Forest obtained in the future by the Debtor and the certificates representing all such shares or equity interest ("Rain Forest Shares"); (iii) all other debt or equity interests of the Debtor in the Subsidiary and in Rain Forest, 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 clauses (i) and (ii) above; (iv) all equipment now owned or hereafter acquired either by the Debtor or by the Subsidiary, in all of its forms, located in Canada on all properties owned or leased by the Debtor or the Subsidiary, a list of properties currently owned or leased by the Debtor or the Subsidiary is attached hereto as Exhibit B, 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; (v) all receivables, accounts, contracts, contract rights, chattel paper, documents, instruments and general intangibles (not otherwise specifically described herein) of the Debtor and the 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 the Subsidiary now or hereafter existing in and to all security agreements, guarantees 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, guarantees and other contracts being the "Related Contracts"); 4 (vi) all claims, awards and payments made as a result of the exercise of the right of eminent domain, condemnation or expropriation against the property or any part thereof (the "Property") subject to any of the leases now or hereafter entered into by the Debtor or the Subsidiary in Canada (the "Leases"), a list of the Leases now held by Debtor and the Subsidiary 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"); (vii) all products and proceeds of any of the foregoing including, without limitation, proceeds which constitute property of the types described in clauses (i) through (vi) above, proceeds deposited from time to time in any lock boxes of the Debtor or the 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; (viii) (A) all Canadian 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 Canadian Intellectual Property 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 the Subsidiary for any past, present or future infringement of any Copyright, and all rights (but not obligations) corresponding thereto in Canada and any foreign country. (ix) (A) all Canadian 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 the Subsidiary, in whole or in part, and all patent rights with respect thereto 5 throughout the world (all of the foregoing items in this clause (A) being collectively called a "Patent"); (B) all of the Debtor's and the 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 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 the Subsidiary for past, present or future infringement of the Patents, and all rights (but not obligations) corresponding thereto in Canada and any foreign country. (b) grants to the Secured Party a lien and security interest in, and mortgages and pledges to the Secured Party all of the Debtor's and the Subsidiary's right, title, interest (including all power of the Debtor and the 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, 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 (C); (D) all proceeds of, and rights associated with, the foregoing, including without limitation royalties, income, payments, claims, damages and proceeds of infringement suits; and (E) the right (but not obligation) to sue or bring cancellation or opposition proceedings in the name of the Debtor or the 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 Canada and any foreign country. (c) charges as and by way of a floating charge to and in favour of the Secured Party all of the Debtor's and the Subsidiary's right, title and interest in and to all of their respective presently owned or held and after acquired or held real, immovable and leasehold property, including, without limitation, the leasehold property described in Exhibit B, and all interests therein, and all easements, rights-of-way, privileges, benefits, licences, improvements and rights whether connected therewith or appurtenant thereto, including all structures, plant and other fixtures (all of which is collectively called the "Real Property"), 6 1.2 It is understood that, subject to Permitted Encumbrances (as hereinafter defined) (i) the security interest hereby granted by the Subsidiary to the Secured Party shall constitute a second priority security interest subject only to the security interest of The Toronto-Dominion Bank created pursuant to the General Security Agreement dated as of October 1, 1990, between The Elephant and Castle Canada Inc., a corporation incorporated in the Province of Ontario and a subsidiary of the Debtor and The Toronto-Dominion Bank (the "Bank Security Interest") and that (ii) the other security interests hereby granted to the Secured Party will, subject to the provisions of Section 1.3 below, constitute first priority security interests. The security interests granted by the Debtor and the Subsidiary to the Secured Party pursuant to this Agreement are hereinafter collectively referred to as the "Security Interest". The property and interests described in clauses (a)(i) through (a)(iii) and clause (a)(vi) as it relates to the property and interests described in clauses (a)(i) through (a)(iii), all of Section 1.1 hereof, are hereinafter collectively referred to as the "Pledged Property". The property and interests described in clauses (a)(iv) and clause (a)(vi) as it relates to the property and interests described in clause (a)(iv), all of Section 1.1 hereof, are hereinafter collectively referred to as the "Equipment". The term "Permitted Encumbrances" means: A. all encumbrances in respect of which filings have been made in the Personal Property Registries of British Columbia, Alberta, Saskatchewan, Manitoba or Ontario as of September 1, 1999, other than British Columbia Base Registration No. 6866578, Ontario Base Registration No. 043015 and Saskatchewan Base Registration No. 100041138; and B. purchase money security interests in Equipment used in connection with and located at the Real Property and not exceeding, together with "Permitted Encumbrances" as defined in Section 1.2 of the U.S. security agreement among the Debtor, the Secured Party and others dated of even date with this Agreement, in aggregate principal amount 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 priority agreement 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 the Subsidiary and used to operate a restaurant business to the lien of any security interest granted to any lender which provides financing to the Debtor or the Subsidiary 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 CDN$2,000,000 and such subordination shall be pursuant to a subordination agreement reasonably satisfactory in 7 form and substance to the Secured Party and in all events the Secured Party shall retain a second priority interest in such Equipment in the case of the Debtor, and, for so long as the Bank Security Interest exists, a third priority interest in the Equipment in the case of The Elephant and Castle Canada Inc. 2. THE SECURED OBLIGATIONS 2.1 In consideration of the grant of the Security Interest hereunder and the grant of the security interests granted pursuant to the U.S. 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 Subsidiary under this Agreement and all covenants of the Debtor 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 Subsidiary, 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 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 Subsidiary, 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 Subsidiary such documents (without recourse and without representation or warranty) as the Debtor shall reasonably request to evidence such termination. 4. DEBTOR REMAINS LIABLE 8 Anything herein to the contrary notwithstanding: (a) the Debtor and the Subsidiary 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 Subsidiary from any of the Debtor's or the Subsidiary's 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 the Subsidiary 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 the Subsidiary 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; (d) any reduction, limitation, impairment or termination of any Secured Obligation of the Debtor or the Subsidiary for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to (and each of the Debtor and the 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 the Subsidiary 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; 9 (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 the Subsidiary. 6. DELIVERY OF PLEDGED PROPERTY All certificates or instruments representing or evidencing any Pledged Property, including all Subsidiary Shares and all Rain Forest Shares (collectively, the "Pledged 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, and resolutions of the directors approving such transfer, 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 PLEDGED SHARES In the event that any cash dividend on any 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 the Subsidiary will exercise any rights which it may acquire by reason of any payment made hereunder, whether by way of subrogation, reimbursement or otherwise, until the prior payment, in full and in cash, of all Secured Obligations of the Debtor. Subject to the payments permitted under Section 7, any amount paid to the Debtor or the Subsidiary on account of any payment made hereunder prior to the payment in full of all Secured Obligations of the Debtor or the Subsidiary, 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 the Subsidiary, and shall 10 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 the Subsidiary jointly and severally represent and warrant unto the Secured Party as set forth in this Section 9 on the date hereof and with respect to the Pledged Property, 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 Subsidiary and located in Canada is located at the places specified in Exhibit B 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 Exhibit B. The place(s) of business and chief executive office of the Debtor and the Subsidiary and the office(s) where each of the Debtor and the Subsidiary 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 V6B 2W5. Neither the Debtor nor the Subsidiary has, within the last five years, been known by any legal name different from the one set forth on the signature page hereto, nor has the Debtor or the Subsidiary been the subject of any merger or other corporate reorganization. 9.2 Ownership, No Liens, etc The Debtor or the Subsidiary, as the case may be, own the Collateral free and clear of any Lien, except for the security interest created by this Agreement, the Bank Security Interest or any Permitted Encumbrance. 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, (b) as may relate to the Bank Security Interest, (c) with respect to which the Debtor has delivered registrable discharges executed by the secured party to the Secured Party on the date hereof or (d) relate to ineffective security. Each of the Debtor and the Subsidiary 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 in which it has rights, which the Debtor or the Subsidiary 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 Secured Party, Permitted Encumbrances, and, with respect to the Subsidiary, the Bank Security Interest. No other subsidiary of the Debtor, other than the Subsidiary and the subsidiaries listed on Exhibit A to the U.S. Security Agreement (as hereinafter defined) owns any Equipment. 9.3 Possession and Control The Debtor or the Subsidiary have exclusive possession and control of all of the Equipment. 9.4 Validity, etc 11 This Agreement creates a valid first, second or third priority security interest in the Collateral as provided in Section 1.2 and 1.3 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 any province of Canada pursuant to 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 Shares. None of the Pledged Shares is a "security with a clearing agency" as that term is defined in the PPSA (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 Subsidiary of the Security Interest granted hereby or for the pledge by the Debtor and the Subsidiary of any Collateral pursuant hereto or for the execution, delivery and performance of this Agreement by the Debtor and the Subsidiary, 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 Pledged Shares, as may be required in connection with a disposition of such Pledged 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 financing statements in the Provinces of British Columbia, Alberta, Saskatchewan, Manitoba and Ontario. (b) 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 Subsidiary or among the Debtor's or the Subsidiary's shareholders, respectively, including, without limitation, the Debtor's memorandum and articles and the articles of incorporation and bylaws of the Subsidiary. (c) 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. (d) The Subsidiary is a corporation duly amalgamated, validly existing and in good standing under the laws of the Province of Ontario, 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. 12 (e) This Agreement is a legal, valid and binding obligation of the Debtor and the Subsidiary, enforceable against the Debtor and the Subsidiary in accordance with its terms. (f) The execution, delivery and performance of this Agreement by the Debtor and the Subsidiary have been duly authorized by all necessary corporate action and do not and will not contravene the Debtor's memorandum or articles or the Subsidiary's articles of incorporation or bylaws. (g) The execution, delivery and performance of this Agreement by the Debtor and the 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. (h) 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 the Subsidiary's best knowledge, threatened against or with respect to the Debtor or the Subsidiary that are (1) reasonably likely to materially and adversely affect is obligation under this Agreement; or (2) reasonably likely to materially and adversely affect is business, property, assets , condition (financial or otherwise), results of operation, or prospects. 9.6 As to Pledged Shares In the case of any Pledged Shares pledged by the Debtor, all of such Pledged Shares are duly authorized and validly issued, fully paid, and non-assessable. With respect to the Subsidiary Shares, those shares constitute all of the issued and outstanding shares in the capital of The Elephant and Castle Canada Inc. and, with respect to the Rainforest Shares, those shares constitute one-half of the issued and outstanding common shares in the capital of Canadian Rainforest Restaurants, Inc. 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 Subsidiary taken as a whole or the value of the Collateral. 10. CERTAIN COVENANTS 13 The Debtor and the Subsidiary jointly and severally covenant and agree that, so long as any portion of the Notes shall remain unpaid or any Secured Obligations shall remain outstanding, the Debtor and the 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 Each of the Debtor and the Subsidiary hereby agrees that it shall: (a) keep all the Equipment at the places therefor specified in Exhibit B 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 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 the 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 the chief executive office of the Debtor or the 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 the Subsidiary 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 14 continuing, the Debtor and the 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 the Subsidiary thereunder directly to the Secured Party and, upon such notification and at the expense of the Debtor or the 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 the 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 the 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 the Subsidiary shall, without the consent of the Secured Party, adjust, settle or compromise the amount or payment of any Receivable, or release wholly or party any account debtor or obligor thereof, or allow any credit or discount thereon. 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 the Subsidiary of the revocation of their power and authority to perform as provided in (i) or (ii) below, 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 the Subsidiary (i) will, at is 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), 15 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 the 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 party 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 the 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 the Subsidiary, any item, howsoever received from the Secured Party, representing any payment on or other proceeds of any of the Collateral (except as otherwise specifically provided herein). The Debtor and the Subsidiary shall, immediately following the occurrence and during the continuance of a Default of the nature referred to in Section 6(ix) and (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, instruments and chattel paper currently owned or held by the Debtor or the 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 the Subsidiary 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. Each of the Debtor and the Subsidiary agrees that it will not issue any stock or other securities in addition to or in substitution for the Pledged Shares. Each of the Debtor and the 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 16 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 the 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 Pledged 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, together with resolutions of the directors of the Subsidiary and Rain Forest whose capital stock is pledged under this Security Agreement, approving the transfer of shares to the Secured Party or its nominee. 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 Pledged 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 Pledged Property or any part thereof or (B) the Secured Party, acting reasonably, shall notify the Debtor that in the Secured Party's sole judgment such action would modify or in any way adversely change the Debtors 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 17 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 Pledged 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 Pledged 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 Pledged 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 Pledged 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. (e) Additional Pledged 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 18 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 Subsidiary 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 the Subsidiary 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, the Bank Security Interest, security interests 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. Each of the Debtor and the Subsidiary agrees that, from time to time at its own expense, the Debtor and the 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 the 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 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; 19 (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 and filings with the Canadian Trademark 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 Subsidiary herein which change could reasonably be expected to have a material adverse effect on the business of the Debtor or the Subsidiary or the ability of the Debtor or the 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 the Subsidiary. With respect to the foregoing and the grant of the Security Interest hereunder, the Debtor and the Subsidiary 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 the Subsidiary where permitted by law. 10.8 Landlord Consents Each of the Debtor and the 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 transaction contemplated by this Agreement, such consents to be substantially in the form attached hereto as Exhibit E (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 interest of the nature described in Sections 1.1(a), (b) or (c) after the date hereof within three (3) business days after any such purchase or acquisition, to become a party to this Agreement in the same manner and to the same extent as the Subsidiary and thereby grant a security interest in such property or interest purchased or otherwise acquired by it and be bound by all of the provisions hereof. 20 11. SECURED PARTY 11.1 Secured Party Appointed Attorney-in-Fact Each of the Debtor and the Subsidiary 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 the Subsidiary and in the name of the Debtor or the 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, instruments of assignment or other papers necessary or advisable to effect such purpose as the Secured Party may in its sole discretion determine. Each of the Debtor and the Subsidiary 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 the Subsidiary 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 12.3. 21 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. 11.5 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 the Subsidiary 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; (b) the Debtor or the Subsidiary 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 U.S. Security Agreement (as hereinafter defined) shall have occurred and be continuing. 22 12. REMEDIES 12.1 Certain Remedies If any Event of Default shall have occurred and be continuing that has not been cured or waived 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 Personal Property Security Act in effect in the Province of British Columbia at the time ("PPSA") (whether or not the PPSA applies to the affected Collateral) and also may: (a) appoint or reappoint by instrument in writing, any person or persons, whether an officer or officers or an employee or employees of the Secured Party or not, to be a receiver or receivers (hereinafter called a "Receiver", which term when used herein shall include a receiver, a receiver and manager or a receiver-manager) of the Collateral (including any interest, income or profits therefrom) and may remove any Receiver so appointed and appoint another in his stead. Any such Receiver shall, so far as concerns responsibility for his acts, be deemed the agent of the Debtor and not the Secured Party, and the Secured Party shall not be in any way responsible for any misconduct, negligence, or non-feasance on the part of any such Receiver, his servants, agents or employees. Subject to the provisions of the instrument appointing him, any such receiver shall have power to take possession of the Collateral, to preserve the Collateral or its value, to carry on or concur in carrying on all or any part of the business of the Debtor or the Subsidiary including, without limitation, the right to sell, lease or otherwise dispose of or concur in selling, leasing or otherwise disposing of the Collateral. To facilitate the foregoing powers, any such Receiver may, to the exclusion of all others, including the Debtor and the Subsidiary, enter upon, use and occupy all premises owned or occupied by the Debtor or the Subsidiary wherein Collateral may be situate, maintain Collateral upon such premises, borrow money on a secured or unsecured basis and use Collateral directly in carrying on the Debtor's or the Subsidiary's business or as security for loans or advances to enable him to carry on the Debtor's or the Subsidiary's business or otherwise, as such Receiver shall, in his discretion, determine. Except as may be otherwise directed by the Secured Party all monies received from time to time by such Receiver in carrying out his appointment shall be received in trust for and paid over to the Secured Party. Every such Receiver may, in the discretion of the Secured Party, be vested with all or any of the rights and powers of the Secured Party; (b) either directly or through its agents or nominees, exercise any or all of the powers and rights given to a Receiver by virtue of the foregoing clause (a); (c) take possession of, collect, demand, sue on, enforce, recover and receive Collateral and give valid and binding receipts and discharges therefor and in respect thereof and exercise, sell, lease or otherwise dispose of Collateral in such manner, at such time or times and place or places, for such consideration and upon such terms and conditions as to the Secured Party may seem reasonable; and 23 (d) without limiting the generality of the foregoing, require the Debtor and the Subsidiary to, and each of the Debtor and the 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 the 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. In addition to those rights granted herein and in any other agreement now or hereafter in effect between the Debtor or the Subsidiary and the Secured Party and in addition to any other rights the Secured Party may have at law or in equity, exercise all rights and remedies of a secured party under the PPSA. Provided always, that the Secured Party shall not be liable or accountable for any failure to exercise its remedies, take possession of, collect, enforce, realize, sell, lease or otherwise dispose of Collateral or to institute any proceedings for such purposes. Each of the Debtor and the Subsidiary acknowledges that the Secured Party or any Receiver appointed by it may take possession of Collateral wherever it may be located and by any method permitted by law and the Debtor agrees upon request from the Secured Party or any such Receiver to assemble and deliver possession of Collateral at such place or places as directed by the Secured Party or any Receiver. Each of the Debtor and the Subsidiary agrees to pay all costs, charges and expenses reasonably incurred by the Secured Party or any Receiver appointed by it, whether directly or for services rendered (including reasonable solicitors and auditors costs and other legal expenses and Receiver remuneration), in operating the Debtor's or the Subsidiary's accounts, in enforcing this Security Agreement, taking custody of, preserving, repairing, processing, preparing for disposition and disposing of Collateral and in enforcing or collecting Indebtedness and all such costs, charges and expenses, together with any monies owing as a result of any borrowing by the Secured Party or any Receiver appointed by it, as permitted hereby, shall be secured hereby and shall be paid from the proceeds of realization, collection or disposition of Collateral in the following order of priority: (a) to satisfy claims of all secured or unsecured creditors ranking in priority to the Secured Party; (b) to pay all remuneration, costs and expenses of every nature and kind incurred by the Receiver in connection with the exercise of the Receiver's powers and authorities hereby conferred, excluding the Receiver's borrowings; (c) to repay to the Secured Party any sum or sums borrowed by the Receiver from the Secured Party and interest thereon if secured by the Collateral; (d) to repay to the Secured Party all the Indebtedness; 24 (e) to repay any sum or sums borrowed by the Receiver from any financial institution, corporation or other person other than the Secured Party and interest thereon if secured by the Collateral; (f) any surplus shall, subject to the rights of other creditors, be paid to the Debtor or the Subsidiary, as the case may be. The Secured Party will give the Debtor and the Subsidiary such notice, if any, of the date, time and place of any public sale or of the date after which any private disposition of collateral is to be made, as may be required by the PPSA. Each of the Debtor and the Subsidiary agrees that the Secured Party may exercise its rights and remedies hereunder immediately upon default, except as may be otherwise provided in the PPSA and the Bankruptcy and Insolvency Act, and the Debtor and the Subsidiary hereby expressly confirms that except as may be otherwise provided herein or in the PPSA, the Secured Party has not given any covenant, express or implied, and is under no obligation to allow the Debtor or the Subsidiary any period of time to remedy any default prior to the Secured Party exercising its rights and remedies hereunder. The Secured Party shall not be responsible or liable for any debts contracted by it, for damages to persons or property or for salaries or non-fulfilment of contracts during any period when the Secured Party shall manage the Collateral upon entry, as herein provided, nor shall the Secured Party be liable to account as mortgagee in possession or for anything except actual receipts or be liable for any loss on realization or for any default or omission for which a mortgagee in possession may be liable. The Secured Party shall not be bound to do, observe or perform or to see to the observance or performance by the Debtor or the Subsidiary of any obligations or covenants imposed upon the Debtor or the Subsidiary nor shall the Secured Party, in the case of securities, instruments or chattel paper, be obliged to preserve rights against other persons, nor shall the Secured Party be obliged to keep any of the Collateral identifiable. Each of the Debtor and the Subsidiary hereby waives any applicable provision of law permitted to be waived by it which imposes higher or greater obligations upon the Secured Party than aforesaid. Each of the Debtor and the Subsidiary hereby irrevocably appoints the Secured Party or the Receiver, as the case may be, with full power of substitution, to be the attorney of the Debtor or the Subsidiary for and in the name of the Debtor or the Subsidiary to sign, endorse or execute under seal or otherwise any deeds, documents, transfers, cheques, instruments, demands, assignments, assurances or consents that the Debtor or the Subsidiary is obliged to sign, endorse or execute and generally to use the name of the Debtor or the Subsidiary and to do all things as may be necessary or incidental to the exercise of all or any of the powers conferred on the Secured Party or the Receiver, as the case may be, pursuant to this Security Agreement. If any Event of Default shall have occurred and be continuing that has not been cured or waived the Secured Party may: (a) 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, 25 (b) 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, (c) 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, (d) endorse any checks, drafts, or other writings in the Debtor's or the Subsidiary's name to allow collection of the Collateral, (e) take control of any proceeds of the Collateral, (f) execute (in the name, place and stead of the Debtor or the Subsidiary) endorsements, assignments, stock powers and other instruments of conveyance or transfer with respect to all or any of the Collateral. 12.2 Compliance with Restrictions Each of the Debtor and the Subsidiary 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 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, nor shall the Secured Party be liable nor accountable to the Debtor or the Subsidiary for any discount allowed by the reason of the fact that such Collateral is sold in compliance with any such limitation or restriction. 12.3 Indemnity and Expenses (a) Each of the Debtor and the Subsidiary 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) Each of the Debtor and the Subsidiary 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 26 (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 the Subsidiary 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 Subsidiary 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. 12.4 Floating Charge For the purposes of the Land Title Act (British Columbia), the floating charge on Real Property created by this Security Agreement shall become a fixed charge on the earlier of: (a) the occurrence of an Event of Default under Section 11.5(c); and (b) the Secured Party taking any action pursuant to Section 13 to enforce and realize upon any or all of the Security Interest, and in any event upon the appointment by the Secured Party of a Receiver pursuant to Section 12.1. 13. 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 the Subsidiary in Section 9 hereof shall be true and correct on and as of the date hereof and the Debtor and the Subsidiary shall have performed all obligations and conditions herein or therein 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) Debtor and the Subsidiary shall, to the extent applicable, have executed and delivered: 27 (i) the Assignment and Assumption of Lease, substantially in the form attached hereto as Exhibit D, with respect to the Leases; and (ii) the Trademark Agreement (Canada) substantially in the form attached hereto as Exhibit C, with respect to Canadian Trademarks; (c) the Consent, substantially in the form attached hereto as Exhibit G, shall have been executed and delivered by RCCH; (d) the Consents in the forms attached as Exhibits H and I shall have been executed and delivered by the Debtor; (e) 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; (f) 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; (g) the Debtor and the Secured Party shall have entered into the Waiver and Amendment No. 6 dated as of October 6, 1999; (h) Jeffrey M. Barnett and GE Investment Management Incorporated, a Delaware Corporation, as the general partner of the Secured Party, shall have entered in the Voting Trust Agreement dated as of July 16, 1999; (i) the Debtor, Jeffrey M. Barnett and Jephco Holdings shall have entered into the Settlement Agreement dated as of July 16, 1999; and (j) the Debtor and each of its subsidiaries formed under the U.S. federal laws or laws of any state of the U.S. (the "U.S. Subsidiaries") shall have executed and delivered a security agreement (the "U.S. Security Agreement") substantially in the form of this Agreement and the other documents required by the U.S. Security Agreement (such documents together with U.S. Security Agreement, herein referred to as the "U.S. Documents") to which the Debtor and the U.S. Subsidiaries are a party. 14. MISCELLANEOUS PROVISIONS 14.1 Amendments, etc. No amendment to or waiver of any provision of this Agreement nor consent to any departure by the Debtor or the Subsidiary 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. 28 14.2 Addresses for Notices All notices and other communications provided for hereunder shall be in writing and, if to the Debtor or the Subsidiary, delivered or transmitted to it at: 856 Homer Street, Fifth Floor, Vancouver, British Columbia, V6B 2W5, Fax: 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. 14.3 Section Captions Section captions used in this Agreement are for convenience of reference only, and shall not affect the construction of this Agreement. 14.4 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. 14.5 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. 14.6 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. 14.7 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, without the prior written consent of the Debtor or any of the Subsidiary. The rights of the Debtor and any of the Subsidiary are not transferable hereunder without the written consent of the Secured Party. 14.8 No Waiver 29 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. 14.9 Binding Effect This Agreement shall be binding on the Debtor and the Subsidiary and the Debtor's and the Subsidiary's successors and assigns and shall inure to the benefit of the Secured Party, and the Secured Party's successors and assigns. 14.10 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. 14.11 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. 14.12 PPSA Definitions Unless otherwise defined herein or the context otherwise requires, terms for which meanings are provided in the PPSA are used in this Agreement, including the recitals, with such meanings. 14.13 Governing Law; Entire Agreement THIS AGREEMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE LAWS OF THE PROVINCE OF BRITISH COLUMBIA AND THE LAWS OF CANADA APPLICABLE THEREIN WITHOUT REGARD FOR CONFLICT OF LAWS PRINCIPLES. 14.14 Forum Selection and Consent to Jurisdiction EACH OF THE DEBTOR AND THE SUBSIDIARY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE IN THE CITY OF VANCOUVER. EACH OF THE DEBTOR AND THE SUBSIDIARY HEREBY CONSENTS TO THE NONEXCLUSIVE JURISDICTION IN 30 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 THE SUBSIDIARY 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, EACH OF THE DEBTOR AND THE SUBSIDIARY HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS AGREEMENT. 14.15 Copy of Agreement Each of the Debtor and the Subsidiary hereby acknowledges receipt of a copy of this Security Agreement and waives all right to receive a copy of any financing statement or financing change statement fixed or registered by the Secured Party, or any verification statement issued by any registry in connection therewith. 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: _____________________________________ Name: Title: SUBSIDIARY: The Elephant and Castle Canada Inc. By: _____________________________________ Name: Title: 31 SECURED PARTY: GE INVESTMENT PRIVATE PARTNERS II, A LIMITED PARTNERSHIP By: GE Investment Management Incorporated, its General Partner By: _____________________________________ Name: Title: 32 EX-99.IV 6 dex99iv.txt AMENDMENT NO. 1 TO THE SECURITY AGREEMENT (CANADA) Exhibit IV MODIFICATION AGREEMENT ---------------------- (First Amendment to Security Agreement (Canadian)) THIS MODIFICATION AGREEMENT is dated for reference December 12, 2001. AMONG: ELEPHANT & CASTLE GROUP INC. (the "Debtor") AND: THE ELEPHANT AND CASTLE CANADA INC. (the "Subsidiary") AND: GE INVESTMENT PRIVATE PLACEMENT PARTNERS II, A LIMITED PARTNERSHIP (the "Secured Party") WHEREAS: A. The Debtor, the Subsidiary and the Secured Party have agreed to amend and restate that certain Note, Stock Purchase and Warrant Agreement dated as of November 30, 1995 pursuant to the agreement entitled the "Amended and Restated Note, Stock Purchase and Warrant Agreement" dated for reference December 12, 2001 among the same parties (as the same may be further amended, extended, renewed, replaced, restated and in effect form time to time the "Amended and Restated Note, Stock Purchase and Warrant Agreement"); B. In connection with the Amended and Restated Note, Stock Purchase and Warrant Agreement the Debtor and the Subsidiary desire to amend that certain security agreement (the "Security Agreement") dated as of October 6, 1999 among the Debtor, the Subsidiary and the Secured Party; AND C. Capitalized terms unless otherwise defined herein shall have the meaning attributed thereto in the Security Agreement. D. It is a condition to the Secured Party entering into the Amended and Restated Note, Stock Purchase and Warrant Agreement, that the Debtor and the Subsidiary execute this Modification Agreement. NOW THEREFORE WITNESSETH that in consideration of the premises and for other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged by each of the parties hereto), the parties hereby agree as follows: 1. Amendment to the Security Agreement ----------------------------------- The Debtor and Subsidiary agree that the Security Agreement is amended by: (a) deleting the first recital and substituting the following therefor: "WHEREAS, the Debtor and the Secured Party have entered into that certain Note, Stock Purchase and Warrant Agreement dated November 30, 1995 (as amended and restated by that certain Amended and Restated Note, Stock Purchase and Warrant Agreement dated for reference December 12, 2001 and as may from time to time be further amended, extended, renewed, replaced, restated and in effect from time to time 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 the amended and restated notes (the "Notes") in the aggregate principal amount of U.S.$10,000,000. Terms used herein not otherwise defined shall have the meaning ascribed thereto in the Note, Stock Purchase and Warrant Agreement"; and (b) deleting the second recital and substituting the following therefor: "WHEREAS the Secured Party and the Debtor desire to continue the security interest in the Collateral in full force and effect as security for the repayment of the Notes and the Debtor and the Subsidiary 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)." (c) section 1.1(a) is hereby amended by deleting clauses (iv) and (vi) thereof in their entirety and substituting the following in lieu thereof: "(iv) all equipment now owned or hereafter acquired either by the Debtor or by the Subsidiary, in all of its forms, located in Canada on all properties now owned or leased by the Debtor or the Subsidiary, a list of properties currently owned or leased by the Debtor or the Subsidiary is attached hereto as Exhibit B, 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 2 and all accessions thereto, together with all parts, fittings, special tools, alterations, substitutions, replacements and accessions thereto; (vi) all claims, awards and payments made as a result of the exercise of the right of eminent domain, condemnation or expropriation against property or any part thereof (the "Property") subject to any of the leases now held by the Debtor or the Subsidiary in Canada (the "Leases"), a list of the Leases now held by the Debtor and the Subsidiary 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, the "Lease Proceeds");"; (d) section 1.1(c) is hereby deleted in its entirety and the following substituted therefor; "(c) charges as and by way of a floating charge to and in favour of the Secured Party all of the Debtor's and the subsidiary's right, title and interest in and to all of their respective presently owned or held, real, immoveable and leasehold property, including, without limitation the leasehold property described in Exhibit B, and all interests therein, and all easements, rights-of-way, privileges, benefits, licences, improvements and rights whether connected therewith or appurtenant thereto, including all structures, plant and other fixtures (all of which is collectively called the "Real Property");"; (e) Section 1.3 of the Security Agreement is hereby deleted in its entirety; (f) The following paragraph is added immediately after Section 2.1 of the Security Agreement: "In consideration of the continuation of the Security Interest hereunder and continuation of the security interest granted pursuant to the U.S. Documents (as herein defined), the Secured Party hereby waives and forgives the accrued and unpaid interest on the Notes in the aggregate amount of U.S.$620,000; (g) Section 2.2 of the Security Agreement is hereby deleted in its entirety and the following substituted therefor: "2.2 This Agreement is being executed and delivered to secure, and 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 3 Agreement and the Notes, whether for principal, interest, costs, fees, expenses or otherwise, (b) all covenants of the Debtor and of the Subsidiary under this Agreement and all covenants of the Debtor under the Note, Stock Purchase and Warrant Agreement, in each case including all renewals, extensions and modifications thereof, and (c) all reasonable costs and expenses incurred by the Secured Party in collecting the indebtedness evidenced by the Notes or otherwise enforcing its rights under this Agreement, the Note, Stock Purchase and Warrant Agreement or the Notes, including without limitation, reasonable attorneys' fees. All of such debts, indebtedness, liabilities, covenants and duties referred to in (a), (b) and (c) of this Section 2.2 are hereafter collectively referred to as the "Secured Obligations". (h) Section 14.2 is hereby amended by deleting the address of the Debtor and the Subsidiary set forth therein and by inserting the following address in lieu thereof: "1190 Hornby Street, Vancouver, British Columbia, Canada, V6Z 2K5". 2. Conditions Precedent. -------------------- The Secured Party's obligation to enter into this Modification Agreement is subject to the satisfaction, on or prior to the date hereof, of the following conditions: (a) The Secured Party, the Debtor and the Subsidiary shall have entered into the Amended and Restated Note, Stock Purchase and Warrant Agreement; and (b) The U.S. Security Agreement (as defined in the Security Agreement) among, inter alia, the Company and the Secured Party dated as of October 6, 1999 and documents related thereto shall have been amended as provided for in the Amended and Restated Note, Stock Purchase and Warrant Agreement. 3. General Provisions ------------------ (a) All covenants, clauses, agreements, provisos, stipulations, conditions, powers, matters and things whatsoever contained in the Security Agreement as amended hereby, are hereby confirmed by each of the Secured Party, the Debtor and the Subsidiary and shall continue in full force and effect, save as expressly amended hereby. (b) This Modification Agreement shall from the date hereof and without prejudice to the rights and priorities of the Secured Party as against the Debtor and the Subsidiary or any subsequent encumbrancer, be read and construed along with the Security Agreement and be treated as a part thereof and for such purposes and so far as may be necessary to effectuate these presents, the Security Agreement shall be regarded as being hereby amended and the Security Agreement as so amended together with all of the covenants, clauses, agreements, provisos, stipulations, conditions, powers, matters and things whatsoever contained in the Security Agreement shall continue in full force and effect. 4 (c) The Debtor and Subsidiary covenant and agree to keep, observe and perform each and every one of the terms, covenants and conditions on the part of the Debtor and Subsidiary to be kept, observed and performed in the Security Agreement as modified by this Modification Agreement in accordance with the terms thereof and hereof. (d) This Modification Agreement and everything herein contained shall inure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns. 4. Governing Law ------------- THIS AGREEMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY, AND CONSTRUCTED IN ACCORDANCE WITH THE LAWS OF THE PROVINCE OF BRITISH COLUMBIA AND THE LAWS OF CANADA APPLICABLE THEREIN WITHOUT REGARD FOR CONFLICT OF LAWS PRINCIPLES. 5. Counterpart and Facsimile Execution ----------------------------------- This Modification Agreement may be signed in as many counterparts as may be necessary and delivered by facsimile each of which so signed shall be deemed to be an original, and such counterparts together shall constitute one and the same Modification Agreement. 5 IN WITNESS WHEREOF this Modification Agreement has been executed this 12 day of December, 2001. DEBTOR: ELEPHANT & CASTLE GROUP INC. By: _____________________________ Name: Rick Bryant Title: President and CEO SUBSIDIARY: THE ELEPHANT AND CASTLE CANADA INC. By: _____________________________ Name: Rick Bryant Title: President and CEO SECURED PARTY: GE INVESTMENT PRIVATE PARTNERS II, A LIMITED PARTNERSHIP By: GE Asset Management Incorporated, its General Partner By: _____________________________ Name: Title: 6 -----END PRIVACY-ENHANCED MESSAGE-----