Prospectus dated September 6, 1996
ELEPHANT & CASTLE GROUP INC.
PROSPECTUS
ALAMO RESTAURANTS INC.
PROXY STATEMENT
This Prospectus/Proxy Statement ("Prospectus/Proxy Statement") is
being furnished by Alamo Restaurants Inc., a Minnesota corporation ("Alamo"), to
holders of its common stock, $.01 par value, of (the "Alamo Common Stock"), in
connection with the solicitation of proxies by the Board of Directors of Alamo
for use at the Special Meeting of Shareholders of Alamo to be held at the times
and places and for the purposes set forth in the accompanying Notice of Special
Meeting or any adjournment or postponement thereof the "Alamo Special Meeting."
This Prospectus/Proxy Statement and the accompanying form of
Proxy are first being mailed to shareholders of Alamo on September 6, 1996.
At the Alamo Special Meeting, the shareholders of Alamo will
consider and vote upon a proposal to approve and adopt that certain Agreement
Relating to the Sale of all of the Capital Stock of Alamo Grill, Inc., an
Indiana corporation ("Grill"), in exchange for Capital Stock of Elephant &
Castle Group Inc., a publicly owned British Columbia corporation ("E&C" or the
"Company"). A copy of the Agreement is attached to this Prospectus/Proxy
Statement as Exhibit A and is incorporated herein by reference.
Under the terms of the Agreement, Grill will become a direct or
indirect wholly owned subsidiary of E&C pursuant to the acquisition of all of
the issued and outstanding shares of Common Stock, $.01 par value of Grill, for
a purchase price of $1,536,000 consisting of (i) the assumption of liabilities
by E&C not in excess of $536,000 in the aggregate and (ii) the delivery of
147,059 shares of Common Stock, without par value of E&C (the "E&C Common
Shares"). Alamo is to distribute the E&C Common Shares to and among its
shareholders based upon a fraction determined by dividing the number of E&C
Common Shares to be delivered pursuant to the Agreement by the number of shares
of Alamo Common Stock, $.01 par value, issued and outstanding as of the Closing
Date. Thereafter, Alamo intends to cease doing business.
<PAGE>
This Prospectus/Proxy Statement also constitutes the prospectus
of E&C with respect to a maximum of 147,059 shares of E&C Common Stock to be
issued in exchange for the Common Stock, $.01 par value, of Grill in connection
with the Acquisition.
On September 3, 1996 the reported closing sales price of a share
of E&C Common Stock on The NASDAQ National Market was $6.125. Alamo shareholders
are urged to obtain current price information for E&C Common Stock in connection
with their consideration of the Agreement and the transactions contemplated
thereby.
THE SECURITIES TO BE ISSUED PURSUANT TO THIS PROSPECTUS/PROXY
STATEMENT HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS/PROXY STATEMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus/Proxy Statement is September 6, 1996.
<PAGE>
AVAILABLE INFORMATION
Elephant & Castle Group Inc. ("E&C" or the "Company") is sub ject to
the informational requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and in accordance therewith files reports and other
information with the Securities and Exchange Commission (the "Commission")
relating to its business, financial position, results of operations and other
matters. Such reports and other information can be inspected and copied at the
Public Reference Section maintained by the Commission at Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549 and its Regional Offices located at
The Citicorp Center, 500 West Madison Street, Chicago, Illinois 60661, and 7
World Trade Center, 15th Floor, New York, New York 10048. Copies of such
material also can be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. Elephant & Castle Common Stock is listed on the Pacific Stock Exchange
("PSE") and the NASDAQ SmallCap Market. Such material can also be inspected at
the offices of PSE and NASDAQ. The offices of such exchange and NASDAQ are,
respectively: The Pacific Stock Exchange, 115 Sansome Street, Suite 1104, San
Francisco, California 94104 and the NASDAQ Stock Market, 1735 K Street, N.W.,
Washington, D.C. 20006.
The Company has filed with the Commission a registration statement on
Form S-4 (the "Registration Statement") under the Securities Act of 1933, as
amended (the "Securities Act") with respect to the Common Stock offered hereby.
This Prospectus/Proxy Statement does not contain all the information set forth
in the Registration Statement, certain parts of which are omitted in accordance
with the rules and regulations of the Commission. Reference is made to the
Registration Statement and to the exhibits relating thereto for further
information with respect to Elephant & Castle and the Common Stock offered
hereby.
No person is authorized to give any information or to make any
representation not contained in this Prospectus/Proxy Statement and, if given or
made, such information or representation should not be relied upon as having
been authorized by the Company or any other person. This Prospectus/Proxy
Statement does not constitute an offer to sell or a solicitation of an offer to
buy any securi ties in any jurisdiction to any person to whom it is not lawful
to make any such offer or solicitation in such jurisdiction. Neither the
delivery of this Prospectus/Proxy Statement nor any distribu tion of the
securities made under this Prospectus/Proxy Statement shall, under any
circumstances, create an implication that there has been no change in the
affairs of the Company since the date of this Prospectus/Proxy Statement.
However, if any material change occurs during the period that this
Prospectus/Proxy Statement is required to be delivered, this Prospectus/Proxy
Statement will be amended or supplemented accordingly. All information regarding
E&C in this Prospectus/Proxy Statement has been supplied by E&C, and all
information regarding Alamo in this Prospectus/Proxy Statement has been supplied
by Alamo.
INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents filed with the Commission by the Company
pursuant to the Exchange Act are incorporated by reference in this
Prospectus/Proxy Statement.
All documents and reports filed by the Company pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act whether before or after the date
of this Prospectus/Proxy Statement and prior to the date of the Special Meeting
<PAGE>
shall be deemed to be incorporated by reference in this Prospectus/Proxy
Statement and to be a part hereof from the dates of filing of such documents or
reports. Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus/Proxy Statement to the extent that a statement
contained herein or in any other subsequently filled document which also is or
is deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this
Prospectus/Proxy Statement.
This Prospectus/Proxy Statement incorporates documents by reference
which are not presented herein or delivered herewith. Such documents (other than
exhibits to such documents unless such exhibits are specifically incorporated by
reference) are available without charge, to any person, including any beneficial
owner, to whom this Prospectus/Proxy Statement is delivered, on written or oral
request, in the case of documents relating to Elephant & Castle Group Inc., 701
West Georgia Street, Suite 303, P.O. Box 10240, Pacific Centre, Vancouver, B.C.
V7Y 1E7 CANADA (tele phone number (604) 684-6451, Attn: Daniel DeBou, Chief
Financial Officer.
SUMMARY
The following summary is qualified in its entirety by the detailed
information appearing elsewhere in this Proxy Statement/ Prospectus.
Stockholders are urged to review the entire Prospec tus/Proxy Statement and the
Exhibits thereto. Capitalized terms used and not otherwise defined in this
summary have the meanings given to them elsewhere in this Prospectus/Proxy
Statement.
General
This Prospectus/Proxy Statement relates to the proposed acquisition by
Elephant & Castle Group Inc., a British Columbia corporation ("E&C" or the
"Company"), of all of the issued and outstanding Common Stock of Alamo Grill,
Inc., an Indiana corpora tion ("Grill") and a wholly owned subsidiary of Alamo
Restaurants Inc. ("Alamo"), a Minnesota corporation, pursuant to that certain
Agreement Relating to the Sale of All of the Capital Stock of a Subsidiary
Corporation in exchange for Capital Stock of the Acquiring Corporation dated as
of April 9, 1996 (the "Agreement"), by and among E&C, Alamo and Grill.
The Parties
E&C. E & C is a publicly owned company, the Common Stock of which is
traded on NASDAQ - Small Cap Market (PUBSF) and the Pacific Stock Exchange
("PUB"). The Company operates a chain of 14 full-service English-style dining
restaurants and pubs, 12 of which are located in Canada, one in the Bellingham,
Washington and one in Philadelphia, Pennsylvania. The Canadian restaurants are
operated under the name "The Elephant & Castle Pub & Restaurant" and are located
in major shopping malls and office complexes from Victoria, B.C. to Ottawa,
Ontario. The Bellingham restaurant is also operated under the name "The Elephant
& Castle Pub & Restaurant" and is located in a large suburban mall near the
United States/Canadian border. The Philadelphia Elephant & Castle and one
restaurant located in Winnipeg, Canada are located within Holiday Inn hotels.
In addition to the 14 traditional style Elephant & Castle restaurants,
the Company recently developed a newly-owned New York style deli restaurant
known as "Rosie's on Robson" at the Rosedale Hotel in Vancouver, British
<PAGE>
Columbia and a "University" restaurant: "Elephant on Campus" at the British
Columbia Institute of Technol ogy in Vancouver, and has licensed an E&C Express
restaurant at the Vancouver International Airport.
E&C was incorporated in British Columbia on December 14, 1992, as a
holding corporation for is theretofore existing separate restaurant
corporations, which had been owned and operated by the founders of E&C for a
number of years. E&C's executive offices are located at 701 West Georgia Street,
Suite 303-701, Vancouver B.C., Canada V7Y 1E7; its telephone number is (604)
684-6451.
Alamo and Grill. Alamo is a privately owned company, which has agreed
to sell to E&C all of the capital stock of its only operating subsidiary, Grill.
Alamo was incorporated in Minnesota on July 16, 1992. Its principal offices are
located at 1465 East 84th Place, Merrillville, Indiana (219) 769-9000. Grill is
an Indiana corporation, which maintains its restaurant and place of business at
The Mall of America, Bloomington, Minnesota. The Mall of America is the largest
shopping mall in the United States, and a tourist destination which attracts
millions of visitors annually.
Special Meeting of Alamo Shareholders
At a Special Meeting of Stockholders of Alamo, or any adjournment or
postponement thereof (the "Alamo Special Meeting", the shareholders of Alamo
will be asked to consider and vote upon a proposal to approve and adopt the
Agreement and the transactions contemplated thereby. The Alamo Special Meeting
is scheduled to be held at 9:00 a.m., local time, on Wednesday, September 25,
1996, at the offices of Robins, Kaplan, Miller & Ciresi, 2800 LaSalle Plaza, 800
LaSalle Avenue, Minneapolis, Minnesota, 55402. The Board of Directors of Alamo
(the "Alamo Board") has fixed the close of business on September 3, 1996 as the
record date (the "Alamo Record Date") for the determination of holders of Alamo
Common Stock entitled to notice of and to vote at the Alamo Special Meeting. See
"The Alamo Special Meeting."
The Alamo Board without dissent has approved the Agreement and the
transactions contemplated thereby and recommends that the Alamo Shareholders
vote "FOR" the proposal to approve and adopt the Agreement and the transactions
contemplated thereby. See "THE AGREEMENT - Recommendations of the Board of
Directors.
Required Vote
Alamo Shareholders. Pursuant to the Minnesota Business Corporation Act
("MBCA"), the affirmative vote of the holders of at least a majority of the
shares of Alamo Common Stock outstanding as of the Record Date is required to
approve and adopt the Agreement and the transactions contemplated thereby. At
the Record Date, there were 3,201,000 shares of Alamo Common Stock outstanding.
The presence, either in person or as represented by proxy, of the holders of a
majority of the shares of Alamo Common Stock out standing as of the Record Date
is necessary to constitute a quorum at the Alamo Special Meeting. As of the
Record Date, Alamo's directors and executive officers as a group held shares
represent ing approximately 25% of the votes entitled to be cast by Alamo s at
the Alamo Special Meeting. See "THE ALAMO SPECIAL MEETING Voting Rights."
Dissenting shareholders have appraisal rights under the MBCA. See "THE ALAMO
SPECIAL MEETING - Rights of Dissenting Shareholders".
Background of the Agreement
The terms of the Agreement resulted from arm's length negotiations
<PAGE>
between representatives of E&C and Alamo. There was no pre-existing business
relationship between the parties prior to the commencement of negotiations which
resulted in the Agreement. See "THE AGREEMENT- Background of Negotiations."
Recommendations of the Alamo Board of Directors
On April 2, 1996, the Alamo Board approved the Agreement and the
transactions contemplated thereby. The Alamo Board recommends that the Alamo
Shareholders vote "FOR" approval and adoption of the Agreement and the
transactions contemplated thereby.
The recommendation of the Alamo Board is based upon its belief that the
terms of the Agreement are fair and in the best interests of Alamo and the Alamo
Shareholders and that the Acquisition will result in benefits to the Alamo
Shareholders. For a discussion of the factors considered by the Alamo Board in
making its recommenda tion, see "THE AGREEMENT - Recommendations of the Board of
Directors". An appraisal of the value of Alamo's 100% interest in Grill has not
been obtained.
Conditions to the Agreement
The obligations of E&C and Alamo to consummate the Agreement are
subject to the satisfaction of a number of conditions, including the approval of
the Agreement and the transactions contemplated thereby by the holders of a
majority of the shares of Alamo Common Stock. See "THE AGREEMENT - Terms and
Conditions".
Rights to Terminate and Amendments
The Agreement may be terminated prior to the closing of the
transactions contemplated thereby under certain circumstances.
Subject to compliance with applicable law, the Agreement may be amended
by a written agreement executed by E&C, Alamo and Grill at any time prior to or,
subject to certain conditions after, its approval by the Alamo Shareholders. See
"THE AGREEMENT -Terms and Conditions."
Risk Factors
In addition to the other information contained in this Pro spectus,
shareholders of Alamo should carefully consider the following matters in
determining whether or not to approve the Agreement in exchange for E&C Common
Stock and its businesses before making any investment decision with respect to
the transac tions being considered, including that E&C incurred significant
losses during 1995 and the first quarter of 1996; that there is no assurance of
future growth of the enterprise; that E&C currently has a majority of its assets
and operations in Canada; that E&C publishes its consolidated financial
statements in Canadian dollars (CDN $), including the translation of results
from U.S. operations into Canadian currency and the exchange rate between
Canadian dollars and United States dollars varies from time to time based upon,
among other factors, economic conditions and interest rates in each country; and
that the Company has limited experience in the hotel and resort food catering
business insufficient to determine all the risks of retaining and controlling
the quality and costs of a potentially diverse set of food formats, including
the "red meat" food format of Alamo Grill, being acquired pursuant to the
Agreement.
<PAGE>
Registration of E&C Common Stock
If the Agreement is approved, subsequent to the Closing of the sale of
Grill, Alamo shareholders will receive a distribution of the E&C Common Stock
being issued in exchange for the capital stock of Grill. Information concerning
the business and securities of E&C is included herein. See "BUSINESS OF E&C";
"DESCRIPTION OF E&C SECURITIES". The E&C Common Stock is quoted on The NASDAQ
Small-Cap Market under the symbol "PUBSF" and on the Pacific Stock Exchange
("PUB"). As of the recent date, the closing bid prices for E&C Common Stock was
$7.75. Alamo Shareholders are urged to obtain current price information for E&C
Common Stock in connection with their consideration of the Agreement and the
transactions contem plated thereby.
RISK FACTORS
In addition to the other information contained in this Prospectus and
in related materials being delivered herewith, shareholders of Alamo should
carefully consider the following matters in determining whether or not to
approve the Agreement and before making any investment decision with respect to
the transac tions being considered.
Risks Relating to E&C
Losses
The Company incurred significant losses during 1995 and the first
quarter of 1996. For the year ended December 31, 1995, the Company's net loss
was CDN $1,581,955, compared to net income of CDN $213,166 for the corresponding
period in 1995. The 1995 figure includes a one-time reserve of CDN $900,000 for
closing costs and legal expenditures in connection with the closure of three
loca tions. The loss per share was CDN $0.63 (U.S. $0.46) or CDN $0.27 (U.S.
$0.20) excluding the reserve, compared to net income per Share of CDN $.09 per
Share in 1994. During the three months ended March 31, 1996, the Company's net
loss widened to CDN $381,093 from CDN $183,822 during the first quarter of 1995.
On a per-share basis, the quarterly loss in the first quarter was CDN $0.15
(U.S. $0.11), against CDN $0.07 (U.S. $0.05) in the prior period.
No Assurance of Future Growth
The Company currently operates fourteen (14) Elephant & Castle
restaurants. The Elephant & Castle chain has been developed and expanded
relatively slowly over a geographically wide and economi cally diverse area
principally in Canada during the last nineteen (19) years. The Company's ability
to grow sales at a relatively more rapid pace will depend to a substantial
extent on the Com pany's ability to build or acquire additional restaurants. The
Company's ability to open additional restaurants, in turn, will depend upon a
number of factors, including the availability of suitable locations, the hiring
and training of skilled restaurant management and personnel, and its ability to
generate funds from operations or to obtain adequate restaurant financing on
favorable terms from third parties such as hotel and resort operators. There can
be no assurance that the Company will be able to build or acquire new
restaurants at a selectively more rapid pace, or if such units are built or
acquired, that those additional restaurants can be operated profitably.
Limited Experience in Hotel and Resort Food and Beverage Operations
The Company intends to achieve growth in revenues in the immediate
future by continuing its development into new segments of the food service
<PAGE>
business, particularly at hotel and resort opera tions. Although the Company's
management is broadly experienced in restaurant development and management, the
application of its operating and administrative skills to food and beverage
services at hotels and resorts presents certain new challenges, the risks of
which cannot be fully measured at this time. The Company's initial venture into
hotel operations, with the Shilo Hotel and resort operations in Yuma, Arizona
and Pomona, California, were unsuccess ful and resulted in termination of the
leases and litigation which is continuing. On the other hand, the Company's
initial two restaurants with Holiday Inn at facilities in Winnipeg, Canada and
Philadelphia, Pennsylvania have been successfully received, but it is still too
early for the elimination of uncertainties. Similar uncertainties are presented
by the Company's recent entry into university food provisions and airport
facilities.
Significant Assets in Canada
All but two (2) of the Elephant & Castle restaurants are currently
located in Canada. Changes in economic conditions in Canada have
disproportionately adversely affected the Company in the past. In addition,
since consumer tastes change from region to region and locale to locale, there
is a risk that any new markets (whether in the United States or otherwise) may
not be as receptive to the Elephant & Castle format and menu as have existing
loca tions.
Exchange Rates
The Company publishes its consolidated financial statements in Canadian
dollars (CDN $), including the translation of results from U.S. operations into
Canadian currency. The exchange rate between Canadian dollars and United States
dollars varies from time to time based upon, among other factors, economic
conditions and interest rates in each country. Generally, so long as
substantially all of the Company's operations are located in Canada, if Canadian
dollars decline in relation to United States dollars, the Company's financial
statements, balance sheet resources, and opportunities for expansion in the
United States may be adversely affected. Although fluctuations in exchange rates
are not expected to be material to the Company's business in the future, such
fluctuations cannot be fully predicted or planned for with certainty.
New Food Formats
The Company's traditional menu at its Elephant & Castle restaurants has
emphasized popular English-style dishes with a broad range of typical North
American foods, such as burgers and pasta. As the Company undertakes additional
hotel and resort operations, it is facing business issues relating to food
formats. The Company only recently started a "deli"-concept restaurant: "Rosie's
at Rosedale on Robson". The "red meat" concept of Alamo would be a third
alternative for E&C management to promote. The Company does not yet have
sufficient experience in the hotel and resort food catering business to
determine all the risks of retaining and controlling the quality and costs of a
potentially widely diverse set of food formats.
Dependence on Founders
The Company believes that the development of its business has been, and
will continue to be, dependent on the special skills and services of the
founders. Jeffrey M. Barnett, the Chief Executive Officer, President and
Chairman of the Board of the Company, and his twin brother Peter J. Barnett and
George W. Pitman founded the Company in 1977. The loss of the services of one or
more of the founders could have a material adverse effect upon the Company's
<PAGE>
business and development. Messrs. Jeffrey M. Barnett, Peter J. Barnett and
George W. Pitman have entered into five-year employment agreements with the
Company which expire in 1998. The Company is the beneficiary of certain life
insurance policies on the lives of the founders. See "Management - Employment
Agreements".
Need for Additional Management
The Company will need additional middle level managers and
administrators in order to accomplish its planned growth, whether through the
hotel and resort operations, the addition of satellite operations and/or the
establishment of new restaurants. The specific personnel necessary for the tasks
to be undertaken have not yet been identified, nor has any formal search been
commenced to find specific individuals. Experienced restaurant and hotel food
and beverage management personnel are in great demand and there is no assurance
that the necessary personnel will be available to the Company or will be
available on the right terms and conditions.
Competition
The restaurant and food service industry is highly competitive and
fragmented. There are innumerable restaurants and other food service operations
that compete directly and indirectly with the Company. Many existing restaurant
chains have significantly greater financial resources and higher total sales
volume than does the Company. The restaurant business is often affected by
changes in consumer taste and discretionary spending priorities, local economic
conditions, demographic trends, traffic patterns in the vicinity of each
restaurant, employee availability, and the type, number and location of directly
competing restaurants.
Government Regulation
The Company's business is subject to extensive provincial, state and
local government regulation in the various jurisdictions in which its
restaurants and its licensed-outlet-type operations are located, including
regulations relating to alcoholic beverage control, public health and safety,
and fire codes. The failure to obtain or retain food and liquor licenses could
adversely affect the operation of the Company's restaurants. While the Company
has not experienced and does not anticipate any problems in obtaining required
licenses, permits or approvals, any difficulties, delays or failures in
obtaining such licenses, permits or approvals in the future could adversely
interfere with the operation of one or more restaurants in a particular area.
Control by Existing Management
Jeffrey M. Barnett, the Chairman of the Board, President and Chief
Executive Officer of the Company, Peter J. Barnett, Executive Vice President and
a director, and Jeffrey M. Barnett's brother, and George W. Pitman, a Vice
President and director of the Company, collectively own 47.5% of the outstanding
Common Shares of the Company, prior to the issuance of shares in connection with
this transaction See "Management" and "Principal Shareholders".
Risks Relating to Grill Continuing to Operate Independently
(In the event the Agreement is not approved)
The Grill is a single unit restaurant operation. As a single unit
enterprise, it has been unable, and is unlikely in the future to be able, to
attract the capital necessary for expansion.
<PAGE>
Alamo and Grill are indebted to third parties, including lenders and
trade creditors in amounts aggregating $536,000. In the absence of a transaction
such as the one under consideration with E&C, Alamo and Grill currently lack the
resources to pay such indebtedness, and may be unable to raise the necessary
capital from third party sources on terms and conditions acceptable to the
profitable continuation of the business of Grill.
The shareholders of Alamo have no assurance of the acquisition of the
Grill by any party other than E&C. The Agreement with E&C was reached after an
extended period of negotiations, and an exhaustive and unsuccessful search for a
potential purchaser.
THE SPECIAL MEETING OF ALAMO SHAREHOLDERS
This Prospectus/Proxy Statement is being provided to the Alamo
Shareholders in connection with a Special Meeting of holders of Alamo Common
Stock to consider the sale of the capital stock of Grill and the other matters
set forth herein. Although Alamo is a privately-held company, without any class
of securities registered under the Securities and Exchange Act of 1934 (the
"Exchange Act"), Alamo Common Stock is held of record by 128 persons and the
Alamo Board intends to solicit proxies from the shareholders for use at the
Alamo Special Meeting. A form of proxy is being provided to the Alamo
Shareholders with this Prospectus/Proxy Statement. Information with respect to
the execution and revocation of proxies is provided under "THE ALAMO SPECIAL
MEETING - Voting Rights."
Purpose of the Meeting
At the Alamo Special Meeting, the Alamo Shareholders will be asked to
consider and vote upon and approve a plan of reorganiza tion involving the sale
of substantially all of the assets consisting of 100% of the capital stock of
its only operating subsidiary, Grill, and such other matters as may properly be
brought before the Alamo special meeting or any postponements or adjournments
thereof.
The Alamo Board of Directors has unanimously approved the Agreement and
the transactions contemplated thereby and recommends that the Alamo Shareholders
vote "FOR" the proposal to approve and adopt the Agreement and the transactions
contemplated thereby. See "THE AGREEMENT - Recommendations of the Board of
Directors."
Distribution of Shares of E&C Common Stock
Upon approval of Alamo's shareholders of the sale of the shares of
Grill by Alamo to E&C, the total consideration to be received by Alamo at
Closing is $1,536,000 consisting of (i) the assumption of liabilities by E&C not
in excess of $536,000 in the aggregate and (ii) the delivery of 147,059 shares
of Common Stock, without par value, of E&C. Alamo will then cease doing business
and will distribute the shares of E&C stock to its shareholders based upon a
fraction determined by dividing the number of E&C common shares to be delivered
to Alamo under the Agreement [147,059 shares], by the number of shares of Alamo
Common Stock, $.01 par value, issued and outstanding as of the Closing date
[2,961,000] (3,161,000 less 200,000 shares to be relinquished by Jon P. Taffer,
see "Security Ownership of Certain Beneficial Owners and Manage ment"). Hence,
.0496 shares of E&C Common Stock will be distrib uted for each full share of
Alamo Common Stock issued and outstand ing, or 49.6 shares of E&C Common Stock
for each 1,000 shares of Alamo Common Stock owned.
<PAGE>
Approval
The approval and adoption by Alamo Shareholders of the Sale of Grill
will require the affirmative vote of the holders of a majority of the
outstanding shares of Alamo Common Stock.
As of July 1, 1996, directors and executive officers of Alamo and their
affiliates may be deemed to be the beneficial owners of approximately 25% of the
outstanding shares of Alamo Common Stock. See "Security Ownership of Certain
Beneficial Owner and Manage ment."
At the Alamo Special Meeting, in determining whether the proposal to
approve and adopt the Sale of Grill has received the requisite number of
affirmative votes, abstentions and broker non-votes will have the same effect as
a vote against either proposal. At the Alamo Special Meeting, abstentions and
broker non-votes will be counted for purposes of determining the presence or
absence of a quorum. A "broker non-vote" occurs when a nominee holding shares
for a beneficial owner does not vote on a proposal because, for such proposal,
the nominee does not have discretionary power and has not received instructions
with respect to voting of such shares.
Date, Time and Place; Record Date
The Alamo Special Meeting is scheduled to be held at 9:00 a.m., local
time, on Wednesday, September 25, 1996, in the Conference Center at the offices
of Robins Kaplan Miller & Ciresi, 2800 LaSalle Plaza, Minneapolis, Minnesota
55402. The Alamo Board has fixed the Record Date as the close of business on
September 3, 1996 for the determination of Alamo Shareholders entitled to notice
of and to vote at the Alamo Special Meeting. Only holders of record of Alamo
Common Stock at the close of business on the Alamo Record Date will be entitled
to notice of and to vote at the Alamo Special Meeting.
Voting Rights
Pursuant to the Minnesota Business Corporation Act ("MBCA"), the
affirmative vote of the holders of at least a majority of the shares of Alamo
Common Stock outstanding as of the Alamo Record Date is required to approve and
adopt the Agreement and the transactions contemplated thereby. As of the Record
Date, there were 3,201,000 shares of Alamo Common Stock outstanding held by 128
holders of record. Holders of record of Alamo Common Stock outstanding as of the
Record Date are entitled to one vote per share at the Alamo Special Meeting. The
presence, either in person or represented by proxy, of the holders of a majority
of the shares of Alamo Common Stock outstanding as of the Record Date is
necessary to constitute a quorum at the Alamo Special Meeting.
The Alamo Board is soliciting proxies so that each Alamo Shareholder on
the Record Date has the opportunity to vote on the proposal to be considered at
the Alamo Special Meeting. When a proxy card is returned properly signed and
dated, the shares represented thereby will be voted in accordance with the
instruc tions on the proxy card. If an Alamo Shareholder does not return a
signed proxy card, his or her shares will not be voted and thus will have the
effect of a vote against the Agreement and the transactions contemplated
thereby.
Proxies
All shares of Alamo Common Stock which are entitled to vote
and are represented at the Alamo Special Meeting by properly executed proxies
received prior to at the Alamo Special Meeting, and not revoked, will be voted
<PAGE>
at the Alamo special meeting in accordance with the instructions indicated on
such proxies. If no instructions are indicated, such proxies will be voted FOR
approval and adoption of the Agreement.
If any other matters are properly presented at the Alamo Special
Meeting for consideration, including, among other things, consideration of a
motion to adjourn the Alamo Special Meeting to another time and/or place
(including, without limitation, for the purpose of soliciting additional
proxies), persons named in the enclosed form of proxy in acting thereunder will
have discretion to vote on such matters in accordance with their best judgment.
Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before it is voted. Proxies may be revoked by (1)
filing with the President of Alamo at or before the taking of the vote at the
Alamo Special Meeting, a written notice of revocation bearing a later date than
the proxy, (2) duly executing a later dated proxy related to the same shares and
delivering it to the Secretary of Alamo for the taking of the vote at the Alamo
Special Meeting or (3) attending the Alamo Special Meeting and voting in person
(although attendance at the Alamo Special Meeting will not in and of itself
constitute a revocation of a proxy). Any written notice of revocation or
subsequent proxy should be sent as to be delivered to Alamo Restaurants, Inc.,
1465 East 84th Place, Merrillville, Indiana, 46410, Attention: President, or
hand delivered to the President of Alamo, at or before the taking of the vote at
the Alamo Special Meeting.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information, as of July 30,
1996, with respect to the beneficial ownership of Alamo Common Stock by (i) each
director, (ii) Alamo's Chief Executive Officer, and (iii) all directors and
executive officers of ARI as a group. To Alamo's knowledge, based upon its
review of its stock ledger, no person other than those identified below
beneficially own 5% or more of the outstanding Alamo Common Stock.
Shares of Alamo
Common Stock Percentage of Alamo
Name Beneficially Owned Common Stock Outstanding
---- ------------------ ------------------------
Jon P. Taffer 725,000(1) 22.64%
John P. Holdahl 50,000 1.56%
Martin J. O'Dowd 40,000 1.25%
All directors and
executive officers
as a group (3 persons) 815,000 25.45%
_______________________
(1) In order to facilitate approval of the Agreement, Mr. Taffer has agreed with
the Board of Alamo that, upon approval of the Agreement, he will relinquish,
without consideration, to Alamo Corporation for cancellation 200,000 shares of
Common Stock, with the effect that the shares of E&C Common Stock that otherwise
would have been receivable solely by him will be distributed pro rata to Mr.
Taffer and the other shareholders of Alamo.
<PAGE>
Rights of Dissenting Shareholders
Section 302A.471 of the MBCA entitles any holder of Alamo's Common
Stock who objects to the Agreement, in lieu of receiving the shares of E&C
Common Stock to which he or she would otherwise be entitled pursuant to the
Agreement, to dissent from the Agreement and obtain payment for the "fair value"
of his or her shares of Alamo Common Stock. Any shareholder contemplating the
exercise of these dissenters' rights should review carefully the provisions of
Sections 302A 471 and 302A.473 of the MBCA, particularly the procedural steps
required to perfect such rights. SUCH RIGHTS WILL BE LOST IF THE PROCEDURAL
REQUIREMENTS OF SECTION 3021.473 ARE NOT FULLY AND PRECISELY SATISFIED.
Set forth below (to be read in conjunction with the full text of
Section 302A.471 and 302A.473 appearing in Annex B to this Proxy Statement) is a
brief description of the procedures relating to the exercise of dissenters'
rights. The following description does not purport to be a complete statement of
the provisions of Section 302A.473 and is qualified in its entirety by reference
thereto.
Under Section 302A.473, Subd.3, a shareholder who wishes to exercise
dissenters' rights (a "Dissenter") must file with the Company (the Company's
address set forth in this Proxy Statement/ Prospectus, Attention: President)
before the vote on the Agreement, a written notice of intent to demand the fair
value of the Company's shares owned by the shareholder. IN ADDITION, THE
SHAREHOLDER MUST NOT VOTE HIS OR HER SHARES IN FAVOR OF THE AGREEMENT. A VOTE
AGAINST THE AGREEMENT WILL NOT IN ITSELF CONSTITUTE SUCH A WRITTEN NOTICE AND A
FAILURE TO VOTE WILL NOT AFFECT THE VALIDITY OF A TIMELY WRITTEN NOTICE.
HOWEVER, THE SUBMISSION OF A BLANK PROXY WILL CONSTITUTE A VOTE IN FAVOR OF THE
AGREEMENT AND A WAIVER OF DISSENTERS' RIGHTS.
If the Agreement is approved by the shareholders of Alamo, Alamo will
send to all dissenters who filed in a timely manner the necessary notice of
intent to demand the fair value of their shares and who did not vote their
shares in favor of the Agreement, a notice containing the information required
by Section 302A.473, Subd.4, including, without limitation, the address to which
a dissenter must send a demand for payment and certificates repre senting shares
in order to obtain payment for such shares and the date by which they must be
received. In order to receive the fair value of the shares under Section
302A.473, a dissenter must demand payment and deposit certificates representing
shares within 30 (thirty) days after such notice from Alamo is given. Under
Minnesota law, notice by mail is given by Alamo when deposited in the United
States mail. A SHAREHOLDER WHO FAILS TO MAKE DEMAND FOR PAYMENT AND TO DEPOSIT
CERTIFICATES AS REQUIRED BY SECTION 302.A473, SUBD.4, WILL LOSE THE RIGHT TO
RECEIVE THE FAIR VALUE OF HIS OR HER SHARES UNDER SUCH SECTION NOTWITHSTANDING
THE TIMELY FILING OF NOTICE OF INTENT TO DEMAND PAYMENT UNDER SECTION 302A.473,
SUBD.3.
After the effective date of the Agreement, or after Alamo receives a
valid demand for payment, Alamo will remit, to each dissenter who has complied
with the provisions of Section 302A.473, Subd. 3 and 4, the amount Alamo
estimates to be the fair value of the shares, with interest from five days after
the effective date of the Agreement until the date of payment, calculated at the
rate provided in Minnesota Statutes, Section 549.09 for interest judgments and
awards, which in 1996 is five (5%) percent. Such remittance will be accompanied
by certain financial statements, an estimate of fair value, a description of the
method used by Alamo to reach such estimate, a copy of Sections 302A.471 and
302A.473, a brief description of the procedure to be followed in demanding
supplemental payment and, in the case of dissenters receiving an offer to remit,
a statement of the reason for withholding remit tance.
<PAGE>
If a dissenter believes that the amount remitted or offered by Alamo is
less than the fair value of the shares, with interest, the dissenter may give
written notice to the Company of the dissenter's estimate of fair value, with
interest, with thirty (30) days after Alamo mails such remittance or offer, and
demand payment of the difference. UNLESS A DISSENTER MAKES SUCH A DEMAND WITHIN
SUCH 30- DAY PERIOD, THE DISSENTER WILL BE ENTITLED ONLY TO THE AMOUNT REMITTED
OR OFFERED BY ALAMO.
Within sixty (60) days after Alamo receives such a demand from a
dissenter, it will be required to either pay the dissenter the amount demanded
or agreed to after discussion between the dissenter and Alamo or file in court a
petition requesting that the court determine the fair value of the shares, with
interest. All dissenters who have demanded payment for their shares, but have
not reached agreement with Alamo, will be made parties to the proceed ing. The
court will then determine whether the dissenters in question have fully complied
with the provisions of Section 302A.473, and will determine the fair value of
the shares, taking into account any and all factors the court finds relevant
(includ ing, without limitation, the recommendation of any appraisers which may
have been appointed by the court), computed by any method that the court, in its
discretion, sees fit to use, whether or not used by Alamo or a dissenter. The
fair value of the shares as deter mined by the court is binding on all
shareholders, but the dissenters will not be liable to Alamo for the amount, if
any, by which the payment remitted to the dissenters' exceeds the fair value of
the shares determined by the court, with interest. The costs and expenses of the
court proceeding will be assessed against Alamo, except that the court may
assess part or all of those costs and expenses against a dissenter whose action
in demanding payment is found to be arbitrary, vexatious or not in good faith.
Under Section 302A.471, Subd.2, a shareholder of Alamo may not assert
dissenters' rights with respect to less than all of the shares of Common Stock
registered in the shareholder's name, unless the shareholder dissents with
respect to all shares beneficially owned by another person and discloses the
name and address of such other person. The beneficial owner of shares of Common
Stock may assert dissenters' rights with respect to such shares, by following
the procedures described above, if the beneficial owner submits to Alamo at the
time of or before the assertion of dissenters' rights a written consent of the
shareholder in whose name the shares are registered. The fair value of Alamo's
shares means the value of the shares immediately before the effective date of
the Agreement.
Under the terms of the Agreement, in the event that sharehold ers of
Alamo owning ten (10%) percent or more of its Common Stock assert their
dissenters' rights under Minnesota law, either Alamo or E&C may elect to
terminate the Agreement.
No Fractional Shares
Alamo does not intend to distribute fractional shares of E&C Common
Stock, and, in order to do so, will round down to the nearest whole number that
number of shares to be distributed to Alamo shareholders. By so doing,
approximately 1,900 shares will remain undistributed. Alamo intends to sell such
shares in the open market and apply the proceeds thereof to any unliquidated
liabilities.
Costs of Solicitation
The costs of solicitation of Alamo Shareholder proxies will be borne by
Alamo. Alamo will reimburse the respective brokers, fiduciaries, custodians and
other nominees for reasonable out-of-pocket expenses incurred in sending this
<PAGE>
Prospectus/Proxy Statement and other proxy materials to, and obtaining
instructions relating to such materials from, the respective beneficial owners
of Alamo Common Stock. Alamo Shareholder proxies may be solicited by directors,
executive officers or regular employees of Alamo, in person, by letter or by
telephone or telegram.
THE AGREEMENT
Background
Grill is a wholly-owned subsidiary of Alamo. Grill operates the Alamo
Grill Restaurant at The Mall of America in Bloomington, Minnesota. It has no
other significant assets or business operations.
Subsequent to the commencement of operations at The Mall of America,
Alamo formed two additional subsidiary corporations, one of which opened an
Alamo Grill Restaurant in Salt Lake City, Utah and the second which opened an
Alamo Grill Restaurant in Wichita, Kansas. Management of Alamo was executing a
business plan which contemplated a broad expansion of the Alamo Grill concept.
The restaurants in Salt Lake City and Wichita were unsuccess ful and
those subsidiaries terminated operations in 1994 and 1995, respectively.
Management subsequently determined that the site at The Mall of America was
unique in terms of a mall location and that in order for Alamo to expand
successfully, non-mall based, free-standing sites would be required. However,
Alamo lacked the capital required to expand on a free-standing basis and it
determined that in light of its unsuccessful ventures in Salt Lake City and
Wichita, it was not possible to raise new capital sufficient to expand on a
free-standing basis.
Hence, the Board of Directors concluded that, since the fundamental
expansion plan had been frustrated, Alamo should undertake an evaluation of
options which, under the circumstances, would maximize the return to Alamo
shareholders. Such evaluation resulted in the Board concluding that it was in
the best interests of the Alamo shareholders to seek a buyer for its Mall of
America location. Initially, Alamo retained a national restaurant brokerage for
the purpose of soliciting interest in the Mall of America site. Sales materials
were distributed by the broker to over 60 (sixty) national chains and
independent operators. The agreement with the broker expired by its terms
without having produced an offer for the Mall of America location satisfactory
to management.
Subsequently, management undertook its own direct efforts to find a
buyer for the Mall of America location. Martin J. O'Dowd, a director of Alamo,
is also a director of E&C and the President of a separate publicly-owned
restaurant chain not involved in this transaction: Rainforest Cafes. Mr. O'Dowd
was instrumental in introducing the Alamo concept to E&C for its analysis. Mr.
O'Dowd is not being compensated for his role, although he is a shareholder of
both Alamo and E&C. Following a substantial review and evalua tion by E&C,
negotiations commenced for the purchase of the stock of Grill from Alamo. Such
negotiations continued over a period of approximately 15 months, during which
time E&C was engaged in other expansion activities. Management of E&C and Alamo
met on several occasions in an attempt to reach an agreement, which was finally
approved by the respective Boards of Alamo (on April 2, 1996) and E&C (on May
14, 1996).
Recommendation of the Board of Directors of Alamo
Once the decision was made by the Board of Directors of Alamo that its
<PAGE>
fundamental business purpose had been frustrated, the Alamo Board determined
that it would be in the best interests of the shareholders of Alamo to attempt
to find a buyer for its one remaining asset, The Mall of America location. The
Board undertook to negotiate a transaction with a publicly-held company in order
to provide shareholders of Alamo with some degree of liquidity and potential for
capital appreciation.
The Board of Directors of Alamo concluded that the offer from E&C to
acquire the stock of Grill and to pay up to $536,000 in cash to satisfy
substantially all of the liabilities of Alamo and the Grill and to exchange
147,059 Common Shares of E&C for the capital stock of Grill represents the best
available potential opportunity for shareholders of Alamo to obtain fair value
for the business of Grill. The Board of Directors of Alamo unanimously approved
the Agreement at its meeting on April 2, 1996, with Mr. O'Dowd abstaining due to
his position as a director of both Alamo and E&C. The Board of Directors of
Alamo believes the consummation of the agreement is in the best interest of
Alamo.
Elephant & Castle's Reasons for the Agreement
E&C has advised Alamo that it is acquiring The Mall of America unit for
these principal purposes: (1) for the potentially profit able continuation of
the business and operations of the Grill located at The Mall of America; and (2)
for the use of the site as a test-market facility for potential use of a "red
meat" concept in the expansion of its hotel-based properties. E&C has further
advised Alamo that it has no intention to use the "Alamo" name at its hotel
properties, and that it has no intention of creating a chain of "Alamo" or
Alamo-type restaurants at malls or free standing locations.
Terms and Conditions
The following is a brief summary of certain provisions of the Agreement
and their effect. This summary is not intended to be a complete statement of all
material provisions of the Agreement and is qualified in its entirety by
reference to the full text of the Agreement, a copy of which is attached hereto
as Annex A hereto.
Representations and Warranties. The Agreement contains various
representations and warranties from each of E&C and Alamo relating to, among
other things, the capitalization, organization, conduct of business, material
events and contracts, the accuracy of SEC filings and financial statements and
compliance with law of, E&C, Alamo and Grill. The Agreement also contains
covenants relating to the conduct of Grill's business prior to the closing, the
agreement by Alamo not to solicit any other business combina tions, E&C's
obligations to file a Registration Statement and the delivery of the resignation
of the Grill's directors as specified by E&C, among other things.
Conditions to Closing. The conditions to closing set forth in the
Agreement include the effectiveness of the Registration Statement and receipt of
the necessary state and blue sky authorizations, approval of the majority of the
outstanding shares of Alamo Common Stock cast at the Alamo Special Meeting or
any adjournment thereof and the authorization for listing on NASDAQ and PSE of
the shares of Common Stock issuable pursuant to the terms of the Agreement.
Other conditions to the obligations to close include: the accuracy of each
party's representation's and warranties on the closing date; the performance by
each party of its obligations pursuant to the Agreement, the delivery of
officers' certificates and opinions of counsel, the absence of any proceedings
enjoining the consummation of transactions contemplated by the Agreement, the
receipt of consents and approvals, the absence of any material adverse change to
<PAGE>
the business of Alamo and Grill, taken as a whole, and the execution of a
consulting agreement between E&C and Innovative Hospitality Corporation.
Termination of the Agreement. The Agreement may be terminated any time
prior to the Effective Time, whether before or after the approval by the Alamo
shareholders, by mutual consent of the Board of Directors of E&C and Alamo or by
either party if, (i) the closing does not occur, without fault of the
terminating party, on or before June 30, 1996, (ii) any court of competent
jurisdiction in the U.S. or other governmental body shall have issued an order,
decree or ruling or taken any other action, restraining, enjoining or otherwise
prohibiting the sale of shares; or (iii) the approval of majority of the shares
of Alamo's outstanding Common Stock cast at the Special Meeting or any
adjournment thereof is not obtained. In addition, either party may terminate the
Agreement (i) if the other fails to comply with its obligations pursuant to
Articles 1 and 5 of the Agreement or(ii) if the other party has breached any of
its representations and warranties, and such breaches have not been cured with
15 days of written notice of such breach. E&C may terminate the Agreement if,
during the 30 trading days prior to Closing, E&C's Common Stock trades at an
average price of $8.50 or higher. Alamo may terminate the Agreement if, during
the 30 trading days prior to Closing, E&C's Common Stock trades at an average
price of $5.125 or less. Either Alamo or E&C may terminate the Agreement in the
event ten (10%) percent of the shareholders of Alamo elect to exercise their
dissenters rights under the MBCA.
Interests of Certain Persons; Certain Relationships and Related
Transactions
As of June 1, 1996, directors and executive officers of Alamo and their
affiliates may be deemed to be beneficial owners of approximately 25% of the
outstanding shares of Alamo Common Stock.
Jon P. Taffer, President of Alamo, is also President of Innovative
Hospitality Concepts ("IHC") which is in the business of providing management
and consulting operations to restaurant and food service businesses throughout
the United States. IHC has had a management agreement with Alamo pursuant to
which it managed the operations at The Mall of America facility through
November, 1995 when that management agreement expired and has continued
thereafter on a month-to-month, at-will arrangement by the parties thereto.
Under the terms of the Agreement, E&C required that IHC undertake to provide
certain ongoing management and administrative services to the Alamo Grill
operation at the Mall of America site following the closing of the transaction.
Under the terms of the proposed management agreement between E&C and IHC, IHC
will be compensated at the rate of $2,000 per month plus out-of-pocket expenses
for 24 months. Thereafter, IHC's fee will increase to $2,200 per month for up to
an additional 24 months. The service is terminable at any time by E&C on 60
days' notice to IHC.
In addition, as a condition to entering the Agreement, E&C required
that IHC enter a separate agreement pursuant to which IHC will provide
consulting re: menu revisions, product specifications, grand opening events,
administrative and accounting forms, landlord-tenant negotiations, and related
services in connection with the opening and expansion of the Alamo Grill concept
at hotel locations following closing of the Agreement. Under the terms of that
agreement, IHC will be compensated by payment of $10,000 per restaurant/hotel
location opening, payable one-third upon retainer, one-third upon completion of
substantive work, and one-third upon grand opening of each such restaurant/hotel
location. In addition, E&C may choose to utilize the consulting services of IHC
for man agement and employee location at any such given restaurant location. For
such optional training services, IHC may receive an additional fee of up to
$15,000 U.S. per restaurant location.
<PAGE>
Certain Federal Income Tax Consequences
The following discussion addresses the material federal income tax
consequences of the Agreement that are applicable to the holders of Alamo Common
Stock. This discussion reflects the opinion of counsel attached as an exhibit to
the Registration Statement of which this Prospectus/Proxy Statement is a part
(the "Exhibit Opinion"). The Exhibit Opinion includes an opinion to the effect
that the Agreement will constitute a "reorganization" within the meaning of
Section 368 of the Internal Revenue Code (the "Code"). The Exhibit Opinion,
which is based on certain assump tions and subject to certain limitations and
qualifications as noted in the opinion, will be delivered by Robins, Kaplan,
Miller & Ciresi, counsel for Alamo.
Alamo shareholders should be aware that the following discussion does
not deal with all federal income tax considerations that may be relevant to a
particular Alamo shareholder in light of his or her particular circumstances,
such as shareholders who are dealers in securities, or foreign persons or who
have acquired their Alamo Common Stock through stock option or in other compen
satory transactions. In addition, no foreign, state or local tax considerations
are addressed herein. Accordingly, Alamo sharehold ers are urged to consult
their own tax advisors as to specific tax consequences to them of the Agreement,
including the applicable federal, state, local and foreign tax consequences to
them.
The following discussion is based on Alamo's counsel's interpretation
of the Code, applicable Treasury regulations, judicial authority and
administrative ruling and practice, all as of the date hereof. The Internal
Revenue Service (the "IRS") is not precluded from adopting a contrary position.
In addition, there can be no assurance that future legislative, judicial or
administrative changes or interpretations will not adversely affect the accuracy
of the statements and the conclusions set forth herein. Any such changes or
interpretations could be applied retroactively and could affect the tax
consequences of the agreement to Alamo and its shareholders.
Subject to the limitations and qualifications referred to herein, and
as a result of the Agreement qualifying as a reorgani zation within the meaning
of Code Section 368, counsel for Alamo is of the opinion that:
(a) The transaction by which Alamo transfers substantially all of its
assets, being its stock in Grill to E&C in exchange for stock of E&C
which Alamo distributes to Alamo's shareholders, is a tax-free "type C"
reorganiza tion;
(b) No gain or loss will be recognized by the holders of Alamo Common Stock
upon their receipt of E&C common stock which will be distributed to
them prior to the dissolu tion of Alamo;
(c) The aggregate tax basis of the E&C Common Stock received
by the Alamo shareholders will be the same as the
aggregate tax basis of the Alamo common shares;
(d) The holding period of E&C Common Stock received by each Alamo
shareholder will include the period for which the Alamo Common Stock
was considered to be held, provided that the Alamo Common Stock is held
as a capital asset at the time of the transfer; and
(e) Alamo will not recognize gain or loss solely as a result
of the transactions contemplated by the Agreement.
<PAGE>
Alamo has not requested a ruling from the IRS in connection with the
Agreement. However, it is a condition of the respective obligations of E&C and
Alamo to consummate the Agreement that such parties received confirming tax
opinions from their respective legal counsel to the effect that for federal
income tax purposes, the Agreement will constitute a reorganization. The Exhibit
Opinion is not intended to satisfy this closing condition. These Closing
Opinions, which are collectively referred to herein as the "tax opinions"
neither bind the IRS nor preclude the IRS from adopting a contrary position. As
with the Exhibit Opinion, the tax opinions will be subject to certain
assumptions and qualifications and will be based on the truth and accuracy of
certain representa tions of E&C and Alamo, including representations in certain
certificates of the respective management of E&C and Alamo dated on or prior to
the date of this Prospectus/Proxy Statement.
A successful IRS challenge to the tax-free reorganization status would
result in an Alamo shareholder recognizing gain or loss with respect to each
share of Alamo stock surrendered equal to the difference between the
shareholder's basis in such share and the share market value of the E&C stock
ultimately received. In such event, an Alamo shareholder's aggregate basis in
the E&C Common Stock so received would equal its fair market and the
shareholder's holding period for such stock would begin the day after the
Agreement was consummated.
Even if the transaction qualifies as a reorganization, a recipient of
shares of E&C Common Stock would recognize gain to the extent such shares were
considered to be received in exchange for services or property (other than
solely Alamo Common Stock). All or a portion of such gain may be taxable as
ordinary income. Gain would also have to be recognized to the extent that an
Alamo shareholder was treated as receiving consideration other than the E&C
Common Stock in exchange for his or her Alamo Common Stock.
Federal Securities Law Consequences
All shares of E&C Common Stock received by the Alamo share holders
following the consummation of the Agreement, will be freely transferable, except
that shares of E&C Common Stock received by persons who are deemed to be
"affiliates" (as such term is defined under the Securities Act of 1933) of Alamo
prior to the Agreement may be resold by them only in transactions permitted by
the resale provisions of Rule 145 promulgated under the Securities Act (or Rule
144 in the case of such persons who become affiliates of E&C)) or as otherwise
permitted under the Securities Act. Persons who may be deemed to be affiliates
of Alamo or E&C generally include individuals or entities that control, are
controlled by, or are under common control with, such party, and may include
certain officers and directors of such party as well as the principal
shareholders of such party. The Agreement requires Alamo to use its best efforts
to cause each of its affiliates to execute a written agreement to the effect
that such person will not offer to sell or otherwise dispose of any of the
shares of E&C Common Stock issued to such person in or pursuant to the agreement
in violation of the Securities Act or the rules and the regulations promulgated
thereunder.
Closing; Effective Time
The closing of the transactions contemplated by the Agreement (the
"Closing") will take place on the first business day immedi ately following the
date on which the last of the conditions set forth in the Agreement is satisfied
or waived, or at such other time as E&C and Alamo may agree ("Closing Date").
<PAGE>
BUSINESS OF E&C
Introduction
E&C operates a chain of 14 full-service English-style dining
restaurants and pubs, 12 of which are located in Canada and one in the State of
Washington and one in Philadelphia, Pennsylvania. The Canadian restaurants are
operated under the name "The Elephant & Castle Pub & Restaurant" and are located
in major shopping malls and office complexes from Victoria, B.C. to Ottawa,
Ontario. The Philadelphia restaurant and one in Winnipeg, Canada are based
inside of Holiday Inn hotel operations. In addition, E&C currently operates a
"Rosie's" deli-style restaurant at the Rosedale-on-Robson Hotel in Vancouver,
B.C., Canada and an English style "Elephant on Campus" restaurant at the British
Columbia Institute of Technology.
The Company believes that it is in the early stages of a major
expansion/refocusing of its restaurant operations. The expansion/ refocusing
contemplates that the Company will ultimately operate a majority of its
restaurants at (i) major hotel locations; (ii) in the United States; and (iii)
with alternative menu formats, not limited to the Elephant & Castle English-pubs
concept. The acquisition of the Grill provides a prospective "red meat" format,
which E&C believes to be a potentially important ingredient in its expansion
formula.
The expansion/refocusing also includes alternative venues (sites) for
the Company's restaurant facilities. To that end, in 1995, the Company opened
its first on-campus "University" restau rant, and arranged for the licensing of
a restaurant at the new international terminal at Vancouver International
Airport.
During 1995, the Company arranged for an investment of $4,000,000
(U.S.), of which $1,000,000 has been invested as equity, and $3,000,000 by way
of Subordinated Convertible Notes, by a major United States-based pension money
manager, GEIPPP, II, with an anticipated placement of an additional $6,000,000
of such Notes in future periods. The closing of this financing significantly
enhances the Company's ability to achieve the expansion/refocusing which is, and
has been, the basis of its future plans.
During 1995, the Company also experienced financial losses. Such losses
resulted in part from the termination of two Shilo Hotel properties, in Yuma,
Arizona and Pomona, California, which properties had previously been occupied by
Elephant & Castle under arrangements which turned out to be unsuitable and
unprofitable; the close-down of a Toronto, Canada mall location which could not
be renewed on acceptable terms; and generally unfavorable business conditions
which prevailed in Canada, particularly Eastern Canada, due, in part, to the
economic uncertainty related to the political crisis concerning the separation
of Quebec. During 1995, the Company also incurred substantially increased
general and adminis trative costs relating inter alia to a decision not to build
a restaurant at a particular hotel site in San Francisco, after the investment
of significant management time, and funds.
Principal Operations
Elephant & Castle (Traditional Format). At the Elephant & Castle
restaurants, the Company seeks to distinguish itself from competitive
restaurants by its distinctive British style and Tudor decor, and by featuring a
wide variety of menu items including a large number of English-style dishes. The
Company's restaurants offer a broad menu at popular prices. The menu is
regularly updated to keep up with current trends in customers' tastes. The
<PAGE>
average check per customer, including beverage, was approximately CDN $14 during
1995. Although all of the Company's restaurants provide full liquor service,
alcoholic beverages are primarily served to complement meals. Sales of alcoholic
beverages accounted for approximately 40% of restaurant sales during 1995.
The Company's restaurants average approximately 5,500 square feet in
size, with a typical seating capacity of 225. The restaurants are open 7 days a
week for lunch, dinner and late-night dining. Due to their location at major
downtown and suburban malls and office complexes, the Elephant & Castle
restaurants cater to a consistently high traffic flow of both shoppers and
office workers. More than 34,000 customers a week are currently serviced at the
Elephant & Castle chain. Repeat clientele make up a significant portion of the
Company's restaurants' patrons.
Hotel Restaurants. During late 1993 and 1994 the Company signed
agreements with Holiday Inn for the renovation and redevel opment of restaurants
at Holiday Inn hotels in Winnipeg, Manitoba, Canada and Philadelphia,
Pennsylvania in the United States. The Winnipeg Crowne Plaza Holiday Inn
Elephant & Castle restaurant was opened on May 18, 1994, and the Philadelphia
Holiday Inn unit was opened on February 28, 1995. Both Holiday Inn restaurants
have thus far produced revenues and store-operating profits. As a result
thereof, the Company has an additional restaurant under construction at a
Holiday Inn site in San Diego, California, scheduled to open in the summer of
1996, and is considering building a substantial number of additional restaurant
units at Holiday Inns and other similar first-class hotels over the next five
years.
In the opinion of management, the three critical ingredients for the
strategy for expansion at major hotel sites are:
(1) the control of occupancy costs;
(2) the capacity to work synergistically with a hotel management
seeking to divorce itself from direct involve ment in food and
beverage operations; and
(3) Company control of the menu, kitchen and restaurant
amenities.
The Company is currently engaged in continuing discussions with Holiday
Inn and other hotel operators concerning additional locations.
In December of 1994, the Company entered into an agreement with an
international developer, the Chevalier Group of Hong Kong, to build a 200-seat,
5,000-square-foot restaurant in the develop er's $40,000,000 280 room
Rosedale-on-Robson all-suites hotel. The hotel was completed, and
Rosie's-on-Robson opened for operations in August of 1995. The Company's
arrangements with the Chevalier Group are similar to those at the Holiday Inn
locations, current and planned. The Company provides all of the hotel's room
services, off-premise catering, and branded specialty products.
The Company's restaurant at Rosedale is significantly different from
the traditional Elephant & Castle format. Manage ment operates "Rosie's" as a
New York-style deli and bar. "Rosie's" enables the Company to have a second
"branded" concept restaurant to provide to those hotel operators in locations or
with space requirements which may be unsuitable for the Elephant & Castle
traditional menu and decor.
<PAGE>
The Company's limited experience with "Rosie's" to date has been
favorable. With "Rosie's", the Company was committed to starting from fresh,
creating its own interior design and menu, under the direction of an
experienced, well-regarded staff, including an award-winning chef and design
consultants.
Previously, commencing in late 1992, the Company obtained the right to
operate all of the food and beverage services at the Shilo Hotel & Resort
complex in Yuma, Arizona. In addition, on July 1, 1993, the Company added the
food and beverage operations at a second Shilo Hotel in Pomona, California. The
style and menu at the Shilo Hotels was significantly different from that
followed at the traditional Elephant & Castle restaurants. The Company's
experience at the Shilo Hotels and with the management thereof was decisively
negative, resulting in termination and closing of those restaurants during 1995
and litigation which is continuing. See Legal Proceedings.
In its broadest terms, the Company's strategy for growth in the hotel,
food and beverage industry is as follows: Locations primarily at hotel sites
will be identified in chosen select markets. The Company has identified four
geographic pockets of potential growth for all corporate brands. The intention
is to cluster restaurants in select locations within the chosen geograph ic
regions. Key points for consideration would include a high level of occupancy at
a prospective hotel; a hotel which is part of a chain large and sophisticated
enough to join in combined marketing activities; potential unique traffic
generators; and the potential for non-seasonal activity. The addition of a "red
meat" menu format would, in the opinion of management, significantly add to the
Company's capacity to fulfill its growth objectives.
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF
ELEPHANT & CASTLE GROUP INC.
The following selected financial information of Elephant & Castle Group
Inc. for each of the years ended December 31, 1995, 1994 and 1993 has been
derived from Elephant & Castle Group Inc.'s audited financial statements
contained in its Annual Reports on Form 10-KSB for the years then ended and is
qualified in its entirety by such documents. The selected unaudited financial
information of Elephant & Castle Group Inc., as of and for the six months ended
June 30, 1996, includes all adjustments, deemed to be necessary for a fair
presentation of such information for the period then ended. The operating
results for the six months ended June 30, 1996 are not necessarily indicative of
results for the full year. This information should be read in conjunction with
Management's Discussion and Analysis of Financial Condition and Results of
Operations and the Consolidated Financial Statements.
<TABLE>
<CAPTION>
ELEPHANT & CASTLE GROUP INC.
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
(Canadian Dollars)
Six months
ended June 30 Fiscal Year Ended December 31
------------- -------------------------------------------
1996 1995 1994 1993
------------- -------------------------------------------
(Unaudited)
<S> <C> <C> <C> <C>
Sales...................................................... $ 12,642,465 $ 25,764,339 $ 25,414,275 $ 22,445,883
Net Income (Loss), before Other Item ...................... (794,042) (681,955) 213,166 163,789
Net Income (Loss), including
Other Item .............................................. (794,042) (1,581,955) 213,166 163,789
Net Income (Loss) per Share, before
Other Item .............................................. (0.30) (0.27) 0.09 0.09
Net Income (Loss) per Share, including
Other Item .............................................. (0.30) (0.63) 0.09 0.09
Total Assets .............................................. $ 14,733,158 15,888,100 10,328,981 10,005,206
Shareholders' Equity ...................................... 6,293,096 7,087,138 7,345,905 7,307,236
Average Shares Outstanding ................................ 2,628,648 2,502,759 2,440,583 1,865,000
</TABLE>
<PAGE>
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following unaudited pro forma combined financial
information give effect to the acquisition by Elephant & Castle of the capital
stock of the Grill on the basis described in the Agreement. This pro forma
information has been prepared utilizing the historical consolidated financial
statements of Elephant & Castle and the unaudited financial information relating
to Grill, provided by Alamo. This information should be read in conjunction with
the historical financial statements and notes thereto, which are incorporated
into this Prospectus/Proxy Statement. The pro forma financial data are provided
for comparative purposes only and do not purport to be indicative of the results
which would have been obtained if the acquisition had been effected during the
periods presented. The historical results of Grill are not being accounted for
as a significant subsidiary of E&C.
<TABLE>
<CAPTION>
Elephant & Castle Group Inc.
Pro Forma Combined Condensed Balance Sheets
Elephant & Castle Group Inc. and The Alamo Grill Inc.
As at December 31, 1995 and January 28, 1996
Canadian Dollars
(unaudited)
E&C Alamo Combined Adjustments Total
---------- --------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C>
ASSETS
Current
Cash and Term Deposits .......................... 5,031,758 58,583 5,090,341 -734,320 (2) 4,356,021
Accounts Receivable ............................. 540,749 208 540,957 540,957
Inventory ....................................... 501,699 26,349 528,048 528,048
Deposits and Prepaid Expenses ................... 509,543 84,373 593,916 593,916
---------- --------- ---------- ----------
6,583,749 169,513 6,753,262 6,018,942
Fixed Assets ...................................... 8,798,738 248,724 9,047,462 9,047,462
Other Assets ...................................... 505,613 820,520 1,326,133 796,350 (2,3) 2,122,483
---------- --------- ---------- ----------
15,888,100 1,238,757 17,126,857 17,188,887
---------- --------- ---------- ----------
LIABILITIES
Current
Accounts Payable ................................ 3,090,167 285,552 3,375,719 -452,936 (1,2,4) 2,922,783
Current Portion of Capital Leases ............... 71,382 2,859 74,241 74,241
Current Portion of Long Term Debt ............... 451,173 0 451,173 451,173
---------- --------- ---------- ----------
3,612,722 288,411 3,901,133 3,448,197
Obligation Under Capital Leases ................... 23,899 7,119 31,018 31,018
Long Term Debt .................................... 4,933,341 411,000 5,344,341 -411,000 (2) 4,933,341
Deferred Income Tax ............................... 231,000 0 231,000 231,000
---------- --------- ---------- ----------
8,800,962 706,530 9,507,492 8,643,556
---------- --------- ---------- ----------
<PAGE>
<CAPTION>
Elephant & Castle Group Inc.
Pro Forma Combined Condensed Balance Sheets
Elephant & Castle Group Inc. and The Alamo Grill Inc.
As at December 31, 1995 and January 28, 1996
Canadian Dollars
(unaudited)
(continued)
E&C Alamo Combined Adjustments Total
---------- --------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C>
SHAREHOLDERS' EQUITY
Capital Stock ..................................... 8,092,065 1 8,092,066 1,369,999 (1,2) 9,462,065
Retained Earnings ................................. (996,067) 532,226 -463,841 -444,033 (2,3,4) -907,874
Foreign Exchange Translation Adjustment ........... -8,860 0 -8,860 -8,860
---------- --------- ---------- ----------
7,087,138 532,227 7,619,365 8,545,331
---------- --------- ---------- ----------
15,888,100 1,238,757 17,126,857 17,188,887
---------- --------- ---------- ----------
See notes to pro forma combined condensed financial statements
</TABLE>
LEGAL OPINIONS
The validity of the securities offered hereby will be passed upon for
the Company by D. David Cohen, Esq., 500 No. Broadway, Suite 133, Jericho, NY
11753 who has acted as special counsel to the Company in connection with this
Offering. Mr. Cohen is the owner of 74,500 shares of the Company's Common Stock,
and in connection with the purchase at 59,500 shares is indebted to the Company
to the extent of $300,000 plus interest accrued thereon. Such loan is secured by
securities other than securities of the Company.
Robins, Kaplan, Miller & Ciresi, Esqs. 2800 LaSalle Plaza, Minneapolis,
MN 55402 have acted as counsel to Alamo Restaurants, Inc. and Alamo Grill, Inc.
in connection with the transactions described herein.
EXPERTS
The financial statements and schedules of the Company, incorporated by
reference in the Registration Statement of which this Prospectus is a part have
been audited by Pannell Kerr Forster, chartered accountants, for the periods
indicated in their report thereon. Such financial statements and schedules have
been incorporated in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
ADDITIONAL INFORMATION
For additional information concerning the Company, financial
statements, its operations, properties, facilities, employees, competitors,
management, executive compensation, legal proceedings, market for the Company's
Common Stock, security ownership of directors executive officers and certain
beneficial holders, this prospectus will be accompanied by the Company's Form
10-KSB for the fiscal year ended December 31, 1995, latest Form 10-Q and the
Company's proxy statement in connection with the election of directors at its
1996 Annual Meeting of Shareholders.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
Article 21.1 of the Company's Articles of Association provides, with
respect to the indemnification of directors and officers, that the Company shall
indemnify, subject to the [Company Act], any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
proceeding, whether or not brought by the Company or by a corporation or other
legal entity or enterprise and whether civil, criminal or administra tive, by
reason of the fact that such person is or was a director, manager, or officer of
the Company, against all costs, charges and expenses, including legal fees and
any amount paid to settle the action or proceeding or satisfy a judgment, if
such person acted honestly and in good faith with a view to the best interests
of the Company, if such person exercised the care, diligence and skill of a
reasonably prudent person, and, with respect to any criminal or administrative
action or proceeding, such person had reasonable grounds for believing that his
or her conduct was lawful. The provisions of Article 21.1 are deemed to be a
term of every contract of employment or office of every director, manager, and
officer of the Company.
Article 21.2 of the Company's Articles of Association provides that,
subject to the Company Act, the Company may indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or proceeding, whether or not brought by the Company or by a
corporation or other legal entity or enterprise and whether civil, criminal or
administrative, by reason of the fact that he is or was an employee or agent of
the Company or is or was serving in any other capacity on behalf of the Company
at its request including, but without limiting the generality of the foregoing,
serving at the request of the Company as a director, manager, officer, employee
or agent of another corporation, a partnership, joint venture, trust or other
enterprise, against all costs, charges and expenses, including legal fees and
any amount paid to settle the action or proceeding or satisfy a judgment, if he
acted honestly and in good faith with a view to the best interests of the
Company or other corporation or other legal entity or enterprise as aforesaid,
and, with respect to any criminal or administrative action or proceeding, if he
had reasonable grounds for believing that his conduct was lawful. The provisions
of Article 21.2 shall not be part of any contract or agreement between any
aforesaid person and the Company unless expressly made so by the terms of the
contract or agreement with the Company.
Article 21.4 provides that the Company may indemnify any person, other
than a director, in respect of any losses, damages, costs or expenses whatsoever
incurred by him while acting as an officer, employee or agent for the Company,
unless such losses, damages, costs or expenses shall arise out of failure to
comply with instructions, willful act or default or fraud by such person, and in
any of such events the Company shall only indemnify such person if the
directors, in their absolute discretion, so decide. The provisions of this
Article 21.4 shall not be part of any contract or agreement between any
aforesaid person and the Company unless expressly made so by the terms of the
contract or agreement with the Company.
Article 21.6 provides that the Company may give indemnities, on such
terms and conditions as it deems appropriate, to any director, officer,
employee, agent or other person who has undertaken or is about to undertake any
liability on behalf of the Company or any corporation controlled by it. The
provisions of Article 21.6 shall not be part of any contract or agreement
<PAGE>
between any aforesaid person and the Company unless expressly made so by the
terms of the contract or agreement with the Company.
Article 21.7 provides that, subject to the Company Act and other
applicable laws and statutes, no director, officer, employee or agent for the
time being of the Company shall be liable for the acts, receipts, neglects or
defaults of any other director, officer, employee or agent or for joining in any
receipt or act for conformity, or for any loss, damage or expense happening to
the Company through the insufficiency or deficiency of title to any property
acquired by order of the Board, or for the insufficiency or deficiency of any
security in or upon which any of the moneys of or belonging to the Company shall
be invested or for any loss or damages arising from the bankruptcy, insolvency,
or tortious act of any person, firm or corporation with whom or with which any
moneys, securities or effects shall be lodged or deposited or for any loss
occasioned by any error of judgment or oversight on his part or for any other
loss, damage or misfortune whatever which may happen in the execution of the
duties of his respective office or trust or in relation thereto unless the same
shall happen by or through his own willful act or omission, default, negligence,
breach of trust or breach of duty.
<PAGE>
Item 21. Exhibits and Financial Statements Schedules.
(a) Exhibits
Exhibit
Number Description of Exhibit
- --------------------------------------------------------------------------------
2.1 Agreement Relating to the Sale of All of the Capital Stock of
a Subsidiary Corporation in Exchange for Capital Stock of the
Acquiring Corporation dated as of April 9, 1996 by and among
Company, Alamo Restaurants, Inc. and Alamo Grill, Inc.
(included as Exhibit A to the Joint Proxy Statement and
Prospectus which forms a part of the Registration Statement
(the "Proxy Statement") +
2.2 Form of Proxy to be utilized at the meeting of Shareholders
of Alamo Restaurants, Inc. to approve the Agreement 3.1
Certificate of Incorporation and Certificate of Name Change
of Company +
3.2 Articles of Association of Company *
3.3 Certificate of Amalgamation, dated May 1, 1990, The Elephant
and Castle Canada Inc. *
4.1 Form of certificate evidencing shares of Common Stock *
4.2 Form of Underwriter's Warrant Agreement between Company and
Underwriter *
10.1 Bank Loan Agreement, dated September 13, 1990, with Toronto
Dominion Bank *
10.2 Letter Agreement dated June 26, 1991, regarding expansion of
facilities at Edmonton Eaton Centre food court relocation *
10.3 Retailer Application dated May 23, 1992, and Specimen
Agreement for Alberta Lotteries and Alberta Gaming Control *
10.4 License Agreement dated July 9, 1992, with Servomation Inc.
relating to B.C. Place Stadium *
10.5 Restaurant lease dated November 10, 1992, with Shilo
Management Corporation, relating to the Shilo Inn, Yuma,
Arizona *
10.6 Letter Agreement, with Shilo Management Corporation relating
to Shilo Hotel, Pomona, California *
10.7 Restaurant Lease Agreement with Holiday Inns of Canada, Ltd.,
relating to Holiday Inn Crowne Plaza at Winnipeg, Manitoba **
10.8 Restaurant Lease Agreement relating to Holiday Inn,
Philadelphia, Pennsylvania ***
10.9 Alamo Grill, Inc. lease agreement made as of the 30th day of
April, 1993 +
<PAGE>
Exhibit
Number Description of Exhibit
- -------------------------------------------------------------------------------
10.10 Form of Accounting Services Agreement between Innovative
Hospitality Concepts, Inc. and Elephant & Castle Group, Inc. +
10.11 Form of Consulting Services Agreement between Jon P.
Taffer, an individual Innovative Hospitality Concepts,
Inc. and Elephant & Castle, Inc. +
11.1 Statement of computation regarding per share earnings *
22.1 Subsidiaries of Company *
23.1 Consent of Pannell Kerr & Forster +
23.2 Consent of D. David Cohen, Esq. (x)
23.3 Consent and Tax Opinion of Robins, Kaplan, Miller
Ciresi (x)
24.1 Power of Attorney (included on the signature page of Part II
of this Registration Statement)
99.1 Canadian Declaration as of May 11, 1990, claiming the trade
name "The Elephant and Castle" *
99.2 Filing receipt dated February 5, 1993, for U.S. service mark
application "E&C" *
99.3 Filing receipt dated February 5, 1993, for U.S. service mark
"Elephant Mug" *
- ---------------------
* Incorporated by reference from the Exhibits filed with the Company's
Registration Statement on Form SB-2 (Registration No. 33-60612).
Modification of the numbering of the exhibits is in accordance with
Item 601 of Registration S-B
** Filed with Company's 10-K SB for the Fiscal year ended December 31,
1993.
*** Filed with Company's 10-K SB for the Fiscal year ended December 31,
1994.
+ Previously filed herewith.
(x) Filed herewith.
(b) Financial Statement Schedules
All schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions or not applicable, and therefore have
been omitted.
<PAGE>
(c) Item 4(b) Information
Not applicable.
Item 22. Undertakings.
(a) (1) The Company undertakes that prior to any public offering
of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by
any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), the issuer undertakes that such
reoffering prospectus will contain the information called for
by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in
addition to the information called for by the other items of
the applicable form; and
(2) The Company undertakes that every prospectus (i) that is
filed pursuant to paragraph (1) immediately preceding, or (ii)
that purports to meet the requirements of Section 10(a)(3) of
the Securities Act, and is used in connection with an offering
of securities subject to Rule 415, will be filed as a part of
an amendment to the registration statement and will not be
used until such amendment is effective, and that, for purposes
of determining any liability under the Securities Act, each
such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered
therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(3) Insofar as indemnification for liabilities arising under
the Securities Act may be permitted to directors, officers and
controlling persons of the Company pursuant to the foregoing
provisions, or otherwise, the Company has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities
(other than the payment of the Company of expenses incurred or
paid by a director, officer or controlling person of the
Company in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or
controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the questions
whether such indemnifi cation by it is against public policy
as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
(b) The undersigned Company hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus pursuant
to Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first and to send the
incorporated documents by first class mail or other equally prompt means. This
includes information contained in documents filed subsequent to the effective
date of the registration statement through the date of responding to the
request.
<PAGE>
(c) The undersigned Company hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the Province of British Columbia,
Canada, on the 3rd day of September, 1996.
ELEPHANT & CASTLE GROUP INC.
By: /s/Jeffrey M. Barnett
Jeffrey M. Barnett, President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Jeffrey M. Barnett and Daniel DeBou, and
each of them, with full power to act without the other, his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite or necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<PAGE>
Signature Title Date
--------- ----- ----
/s/Jeffrey M. Barnett Chairman of the Board
- --------------------- President and
Jeffrey M. Barnett Director (Principal
Executive Officer) September 3, 1996
/s/Peter J. Barnett Vice President
- ------------------ and Director September 3, 1996
Peter J. Barnett
/s/George W. Pitman Vice President
- ------------------- and Director September 3, 1996
George W. Pitman
/s/Daniel DeBou Principal Financial
- --------------- Officer and
Daniel DeBou Principal Accounting
Officer September 3, 1996
/s/William McEwen Director September 3, 1996
- -----------------
William McEwen
/s/D. David Cohen Director September 3, 1996
- -----------------
D. David Cohen
/s/Martin O'Dowd Director September 3, 1996
- ----------------
Martin O'Dowd
/s/David Wiederecht Director __________, 1996
- -------------------
David Wiederecht
/s/Anthony Mariani Director __________, 1996
- ------------------
Anthony Mariani
<PAGE>
ANNEX A
AGREEMENT RELATING TO THE SALE OF ALL
OF THE CAPITAL STOCK OF A SUBSIDIARY
CORPORATION IN EXCHANGE FOR
CAPITAL STOCK OF THE ACQUIRING CORPORATION
AGREEMENT, dated as of April 9, 1996 (the "Agreement"), by and
among ELEPHANT & CASTLE GROUP INC., a company organized and existing under the
laws of British Columbia, Canada (" Purchaser"); and ALAMO RESTAURANTS, INC., a
Minnesota corporation (the "Company"); and ALAMO GRILL, INC., an Indiana
corporation and a wholly-owned subsidiary of the Company (the "Subsidiary" or
"Grill").
RECITALS
WHEREAS, the Subsidiary is the sole operating business of the
Company;
WHEREAS, the Company is willing to sell all of the capital
stock of the Subsidiary;
WHEREAS, Purchaser desires to acquire all of the capital stock
of the Subsidiary, in exchange for the capital stock of
Purchaser and the assumption by Purchaser of certain of the
liabilities of the Company;
WHEREAS, it is contemplated that the affirmative vote of
holders of a majority of the voting stock of the Company will
be required to approve the sale of the capital stock of Grill;
and
WHEREAS, Purchaser, Subsidiary and the Company desire to make
certain representations, warranties, covenants and agreements,
each to the other, with the transactions contemplated
hereunder.
NOW, THEREFORE, in consideration of the premises and the
mutual representations, warranties, covenants, agreements and conditions
contained herein, the parties hereto agree as follows:
1. SALE AND TRANSFER
1.1 Sale and Transfer
At the Closing, as hereinafter defined, the Company shall
sell, transfer and deliver to Purchaser, and Purchaser shall purchase, accept
and pay for all of the issued and outstanding capital stock of the Subsidiary
(the "Sale"). The Company shall further transfer and deliver any and all
tangible and intangible assets held by the Company relating to the business and
operations of the Subsidiary, including recipes, accounting policies and
procedures, computer records, (including without limitation, with respect to
staff training, schedules, cash management records, engineering and technical
data) menus, plans of operations, employee lists, property rights and other such
intangible property. In exchange for the assets of the Subsidiary held by the
Company, Purchaser will assume and cause to be paid at Closing the specified
liabilities of the Company up to but not in excess of $536,000 in the aggregate
as set forth in Exhibit A.
<PAGE>
1.2 Stockholders' Meeting
The Company will take all action necessary in accordance with
applicable law and its Restated Certificate of Incorporation and By-Laws to
convene a special meeting of its stockholders (the "Special Meeting") as soon as
practicable to consider and vote upon the approval of this Agreement. The
Company, through its Board of Directors, shall recommend to its stockholders
approval of this Agreement (which recommendation shall be contained in the Proxy
Statement (as hereinafter defined)) and shall use all commercially reasonable
efforts to solicit from its stockholders proxies in favor of approval and
adoption of this Agreement. Subject to the foregoing, the transactions provided
for herein shall be subject to, and contingent upon, such stockholder approval.
1.3 Further Assurances
If, at any time after the Effective Time, Purchaser shall
advise the Company that any deeds, bills of sale, assignments, assurances or any
other actions or things are necessary or desirable to vest, perfect or confirm
of record or otherwise in Purchaser its right, title or interest in, to or under
any of the rights, properties or assets of the Subsidiary to be acquired as a
result of, or in connection with, the sale or otherwise to carry out this
Agreement, the officers and directors of the Company shall be authorized to
execute and deliver, in the name and on behalf of each of the Company and the
Subsidiary all such deeds, bills of sale, assignments and assurances, and to
take and do, in the name and on behalf of the Company all such other actions and
things as may be necessary or desirable to vest, perfect or confirm any and all
right, title and interest in, to and under such rights, properties or assets in
Purchaser, or otherwise to carry out this Agreement.
1.4 Assets/Liabilities Not Included
It is understood and agreed that this transaction related
solely to the business and assets of the Subsidiary, and does not affect, relate
to or impinge upon any specific assets, tangible or intangible, at the Company
which are unrelated to the business and assets of the Subsidiary.
2. THE PURCHASE PRICE
2.1 The shares of the capital stock of the Subsidiary shall be acquired
by Purchaser hereunder solely in exchange for Common Shares, par value $.01 per
share ("Purchaser Common Shares"). The purchase price shall be $1,536,000
payable as follows:
(a) Purchaser shall pay (or assume) the liabilities referred
to in Section 1.1 above (up to but not in excess of $536,000 in the aggregate);
and
(b) The remaining balance, after deducting the amount paid or
assumed as (a) above, $1,000,000, by delivery of 147,059 shares of the Common
Stock of Purchaser.
2.2 Company shall distribute the Purchaser Common Shares to and among
its shareholders based upon a fraction determined by dividing the number of
Purchaser Common Shares to be delivered hereunder by the number of shares of
Company Common Stock, par value $.01 (the "Company Common Stock") issued and
outstanding as of the Closing Date (except for shares of the Company Common
<PAGE>
Stock held in treasury or otherwise owned, directly or indirectly, by the
Company). The aforesaid ratio is hereinafter referred to as the "Exchange
Ratio."
2.3 The Company Common Stock shall not be affected by the distribution
of the Purchaser Common Shares to and the holders of such Company Common Stock
shall continue to have any and all rights of shareholders with respect thereto.
2.4 The Purchaser Common Shares are hereinafter sometimes called the
"Closing Consideration." In the event of any change in Purchaser Common Shares
by reason of any stock split, readjustment, stock dividend, exchange of shares,
reclassification, recapitalization or otherwise, subject to the date hereof and
prior to Closing, the Closing Consideration, and the Exchange Ratio shall be
correspondingly adjusted.
2.5 Purchaser shall not have any liability or responsibility for the
distribution of the Purchaser. Common Shares to any holder of shares of Company
Common Stock.
2.6 Fractional Shares
Notwithstanding any other provisions of this Agreement, each
holder of shares of Company Common Stock who would be entitled by the
application of the Exchange Ratio, to receive a fraction of a Purchaser Common
Share shall not be entitled to receive a fractional share, and shall receive, in
lieu thereof, scrip representing rights to acquire, without further
consideration, a fraction of one whole share/nearest to one-one hundredth (.00)
of a share. The shareholders may trade the scrip only as between themselves in
order to collect sufficient scrip for a whole share. The scrip shall have no
cash value. Scrip not exchanged for a whole share shall expire and be of no
further value as of the sixtieth (60th) day following the effective date
hereunder.
2.7 Shareholder Approval
This Agreement provides that the shareholders of the Company
shall be entitled to notice of and the right to vote upon the transaction at a
Special Meeting of such shareholders, and is subject to such approval.
3. REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to the Company as follows:
3.1 Organization
Purchaser is a corporation duly organized, validly existing
and in good standing under the laws of British Columbia.
3.2 Capitalization
The authorized capital stock of Purchaser consists of
10,000,000 shares of Purchaser Common Stock. As of the date hereof, there are
2,604,611 shares of Purchaser Common Stock issued and outstanding. As of the
date hereof, there were 220,000 shares of Purchaser Common Stock reserved for
issuance upon the exercise of outstanding options and options which may be
granted under the stock option plans of Purchaser (the "Purchaser Plans"),
595,000 shares of Purchaser Common Stock reserved for issuance upon the exercise
of certain warrants; 171,110 shares reserved for issuance without further
<PAGE>
consideration in connection with the placement of $9,000,000 of Convertible
Subordinated Notes due 2004 of Purchaser (the "Convertible Notes"), and
1,250,000 shares of Purchaser Common Stock reserved for issuance upon the
conversion of the outstanding aggregate principal amount of the Convertible
Notes. All issued and outstanding shares of Purchaser Common Stock are, and all
shares of Purchaser Common Stock to be issued at the Effective Time shall be,
when issued, duly authorized and validly issued, fully paid, nonassessable and
free of preemptive rights with respect thereto.
3.3 Authority Relative to this Agreement
Purchaser has full corporate power and authority to execute
and deliver this Agreement and to consummate the Sale and the other transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the Sale and the other transactions contemplated hereby have
been duly and validly authorized by the Board of Directors of Purchaser. No
other corporate proceedings on the part of Purchaser are necessary to authorize
this Agreement or to consummate the Sale or the other transactions contemplated
hereby. This Agreement has been duly and validly executed and delivered by
Purchaser and, assuming the due authorization and delivery hereof by the Company
and Subsidiary, constitutes a valid and binding agreement of Purchaser,
enforceable against it in accordance with the terms hereof, except to the extent
that enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting the enforcement of creditors'
rights generally or by general equitable or fiduciary principles.
3.4 No Violations, Etc.
(a) Assuming that all filings, permits, authorizations,
consents and approvals have been duly made or obtained as contemplated by this
Section 3.4, the execution and delivery of this Agreement and the consummation
by Purchaser of the Sale and the other transactions contemplated hereby will not
(i) violate any provision of the Certificate of Incorporation or By-Laws of
Purchaser, (ii) violate any statute, rule, regulation, order or decree of any
public body or authority by which Purchaser or any of its properties is bound,
or (iii) result in a violation of breach of, or constitute (with or without due
notice or lapse of time or both) a default under, any license, franchise,
permit, indenture, agreement or other instrument to which Purchaser is a party,
or by which Purchaser or any of its properties is bound, excluding from the
foregoing clauses (ii) and (iii) violations, breaches and defaults (x) which,
either individually or in the aggregate, would not materially impair or preclude
the ability of Purchaser to consummate the Sale or the other transactions
contemplated hereby or not have a material adverse effect on the business,
operations, assets, condition (financial or otherwise) or results of operations
of Purchaser taken as a whole ("Purchaser Material Adverse Effect") or (y) for
which Purchaser prior to the Sale shall have received appropriate consents or
waivers.
(b) No filing or registration with, or authorization, consent
or approval of, any governmental entity is required by Purchaser in connection
with the execution and delivery of this Agreement or the consummation by
Purchaser of the Sale and the other transactions contemplated hereby, except (i)
in connection, or in compliance, with the provisions of the Securities Act of
1933, as amended, and the rules and regulations promulgated thereunder (the
"Securities Act"), (ii) filings with, and approval of, NASDAQ and the Pacific
Stock Exchange ("PSE") in connection with the listing of common stock of
Purchase issuable to the shareholders of the Company, (iii) such consents,
approvals, orders, authorizations, registrations, declarations and filings, if
<PAGE>
any as may be required under the corporation, takeover or blue sky laws of
various states, and (iv) such other consents, orders, authorizations,
registrations, declarations and filings the failure of which to be obtained or
made, either individually or in the aggregate, would not either materially
impair or preclude the ability of Purchaser to consummate the transactions
contemplated hereby.
3.5 Registration Statement; Proxy Statement
None of the information supplied by Purchaser for inclusion or
incorporation by reference in (i) the registration statement registering under
the Securities Act the Purchaser Common Stock to be issued at the Effective Time
(such registration statement as amended by any amendments thereto being referred
to herein as the "Registration Statement") or (ii) the proxy statement to be
sent to the shareholders of the Company in connection with the Special Meeting,
including all amendments and supplements thereto (the "Proxy Statement") shall,
in the case of the Registration Statement at the time the Registration Statement
becomes effective and the Effective Time, and in the case of the Proxy
Statement, on the date the Proxy Statement is first mailed to stockholders, at
the time of the Special Meeting and at the Effective Time, contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein not
misleading. If at any time prior to the Effective Time any event with respect to
Purchaser shall occur which is required to be described in the Registration
Statement or Proxy Statement, such event shall be so described, and an amendment
or supplement shall be promptly filed with the Securities and Exchange
Commission (the "SEC") and, as required by law, disseminated to the stockholders
of the Company. The Registration Statement will (with respect to Purchaser)
comply as to form in all material respects with the applicable provisions of the
Securities Act and the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder (the "Exchange Act"), as the case
may be.
3.6 SEC Filings
Purchaser has filed with the SEC all required forms, reports
and documents required to be filed by it with the SEC since January 1, 1994
(collectively, the "Purchaser SEC Reports"), all of which complied as to form
when filed in all material respects with the applicable provisions of the
Securities Act and the Exchange Act, as the case may be. As of their respective
dates, the Purchaser SEC Reports (including all exhibits and schedules thereto
and documents incorporated by reference therein) did not contain any 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, in light of the
circumstances under which they were made, not misleading.
3.7 Financial Statements
The audited consolidated financial statements and unaudited
consolidated interim financial statements of Purchaser included or incorporated
by reference in Purchaser's forms, reports and documents filed with the SEC
since January 1, 1994, have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto), and fairly present the
consolidated financial position of Purchaser as of the dates thereof and the
consolidated results of operations and consolidated cash flows for the periods
then ended (subject, in the case of any unaudited interim financial statements,
to normal year-end adjustments and to the extent they may not include footnotes
or may be condensed or summary statements) , and such audited consolidated
<PAGE>
financial statements have been certified as such (without exception by
Purchaser's independent accountants.
3.8 Absence of Material Adverse Change
Since the date of Purchaser's 10-K for the fiscal year ended
December 31, 1995, except as set forth in the Purchaser's SEC Reports, there has
been no change, or any development involving a prospective change, in the
business, operations, assets, financial condition or results of operations of
Purchaser taken as a whole that would have a Purchaser Material Adverse Effect.
3.9 Disclosure
No representation or warranty by Purchaser and no statement or
information relating to Purchaser contained herein, or in any certificate
furnished by or on behalf of Purchaser in connection herewith, contains or will
contain any untrue statement of a material fact or omits or will omit to state a
material fact necessary in order to make the statements made herein or therein,
in light of the circumstances under which they were made, not misleading.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Purchaser that:
4.1 Organization and Qualification
(a) Each of the Company and the Subsidiary is a corporation
duly organization, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and each has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted.
(b) The Subsidiary is duly qualified as a foreign corporation
to do business, and is in good standing, in each jurisdiction where the
character of its properties owned or leased or the nature of its activities
makes such qualification necessary, except for failures to be so qualified or in
good standing which would not, individually or in the aggregate, have a material
adverse effect on the management, business, operations, assets, condition
(financial or otherwise) or prospects of the Subsidiary (a "Material Adverse
Effect").
(c) Neither the Company nor the Subsidiary is in violation of
any of the provisions of its Restated Certificate of Incorporation (or other
applicable charter document) or By-Laws. Set forth in Section 4.1 of the
Disclosure Statement previously delivered by the Company to Purchaser (the
"Disclosure Statement") are accurate and complete copies of the Restated
Certificate of Incorporation (or other applicable charter document) and By-Laws,
as currently in effect, of each of the Company and the Subsidiary.
4.2 Authority Relative to this Agreement
The Company has full corporate power and authority to execute
and deliver this Agreement and to consummate the Sale and the other transactions
contempt hereby. The execution and delivery of this Agreement and the
consummation of the Sale and the other transactions contemplated hereby have
been duly and validly authorized by the Board of Directors of the Company and no
other corporate proceedings on the part of the Company or the Subsidiary are
necessary to authorize this Agreement or to consummate the other transactions
contemplated hereby (other than, with respect to the Sale, the approval by the
<PAGE>
holders of a majority of the outstanding shares of Company Common Stock at the
Special Meeting or any adjournment thereof). This Agreement has been duly and
validly executed and delivered by the Company and, assuming the due
authorization, execution and delivery hereof by Purchaser, constitutes a valid
and binding agreement of the Company, enforceable against the Company in
accordance with its terms, except to the extent that its enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws affecting the enforcement of creditors' rights generally or by
general equitable or fiduciary principles.
The transaction will require the written consent of the Simon
Property Group, Lessor of the Mall of America location. In the absence of such
consent, Purchaser shall have no obligation hereunder.
4.3 No Violations, Etc.
No filing with, notification to and no permit, authorization,
consent or approval of, any public body is necessary for the consummation by the
Company of the Sale or the other transactions contemplated hereby. Neither the
execution and delivery of this Agreement nor the consummation of the Sale or the
other transactions contemplated hereby nor compliance by the Company with any of
the provisions hereof will (i) subject to obtaining the approval of a majority
of the outstanding shares of Company Common Stock at the Special Meeting or any
adjournment thereof, conflict with or result in any breach of any provision of
the Certificate of Incorporation (or other comparable charter documents) or
By-Laws of the Company or its Subsidiary, (ii) result in a violation or breach
of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, cancellation, acceleration,
redemption or repurchase) under, any of the terms, conditions or provisions of
any (x) note, bond, mortgage, indenture or deed of trust, or (y) license, lease
(except as set forth in Section 4.3 of the Disclosure Statement), agreement or
other instrument or obligation to which the Company or the Subsidiary is a party
or by which either of them or any of their properties or assets may be bound, or
(iii) violate any order, writ, injunction, decree, statute, rule or regulation
applicable to the Company, any of its Subsidiary or any of their properties or
assets.
4.4 Board Recommendation
The Board of Directors of the Company has, by a unanimous vote
at a meeting of such Board duly held on, or by unanimous written consent of such
Board dated April 2, 1996, approved and adopted this Agreement, the Sale and the
other transactions contemplated hereby, and recommended that the holders of such
shares approve and adopt this Agreement, the Sale and the other transactions
contemplated hereby.
4.5 Affiliates
The Company has delivered to Purchaser a letter identifying
all persons who, as of the date hereof, may be deemed to be "affiliates" of the
Company for purposes of Rule 145 under the Securities Act ("Affiliates") and the
written agreement of each such person, substantially in the form of Exhibit B
hereto.
4.6 Registration Statement; Proxy Statement
None of the information supplied in writing by the Company or
Subsidiary for inclusion or incorporation by reference in the (i) Registration
Statement or (ii) Proxy Statement shall, in the case of the Registration
<PAGE>
Statement, at the time the Registration Statement becomes effective and the
Effective Time, and in the case of the Proxy Statement, at the date the Proxy
Statement is first mailed to stockholders, at the time of the Special Meeting
and at the Effective Time, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. If at any time prior to the Effective Time any
event with respect to the Company or the Subsidiary shall occur which is
required to be described in the Registration Statement or Proxy Statement, such
event shall be so described, and an amendment or supplement shall be promptly
filed with the SEC and, as required by law, disseminated to the stockholders of
the Company. The Registration Statement will (with respect to the Company and
the Subsidiary) comply as to form in all material respects with the applicable
provisions of the Securities Act and Exchange Act, as the case may be.
4.7 Finders or Brokers
Neither the Company nor its Subsidiary has employed any
investment banker, broker, finder or intermediary in connection with the
transactions contemplated hereby who might be entitled to a fee or any
commission the receipt of which is conditioned upon consummation of the Sale.
4.8 Financial Statements
The financial statements of the Subsidiary to be included or
incorporated by reference in the Proxy Statement have been prepared, or will
have been prepared, in accordance with generally accepted accounting principles
applied on a consistent basis during the periods involved, and shall fairly
present the consolidated financial position of the Company and its Subsidiary as
of the dates thereof and the consolidated results of operations and consolidated
cash flows for the periods then ended (subject, in the case of any unaudited
interim financial statements, to normal year-end adjustments and to the extent
they may not include footnotes or may be condensed or summary statements).
4.9 Absence of Undisclosed Liabilities
The Subsidiary has no liabilities or obligations of any
nature, whether absolute, accrued, unmatured, contingent or otherwise, or any
unsatisfied judgments or any leases of personalty or realty or unusual or
extraordinary commitments, except the liabilities recorded on the balance sheet
of the Subsidiary, annexed hereto as Exhibit C hereof (the "Balance Sheet") and
the notes thereto, and except for liabilities or obligations incurred in the
ordinary course of business and consistent with past practice since the date of
the Balance Sheet, that would not individually or in the aggregate have a
Material Adverse Effect.
4.10 Absence of Changes or Events
Since January 29, 1994, except as set forth in Section 4.10 of
the Disclosure Statement:
(a) there has not been any direct or indirect redemption,
purchase or other acquisition of any shares of capital stock of the Company or
the Subsidiary, or any declaration, setting aside or payment of any dividend or
other distribution by the Company or any of its Subsidiary in respect of their
capital stock;
<PAGE>
(b) except in the ordinary course of business and consistent
with past practice, neither the Company nor the Subsidiary has incurred any
indebtedness for borrowed money, or assumed, guaranteed, endorsed or otherwise
as an accommodation become responsible for the obligations of any other
individual, firm or corporation, made any loans or advances to any other
individual, firm or corporation or entered into any commitment or transaction
material to the Company and its Subsidiary taken as a whole;
(c) there has not been any change in accounting methods,
principles or practices of the Company;
(d) except in the ordinary course of business and consistent
with past practice and in amounts that are immaterial, there has not been any
revaluation by the Company or any of its Subsidiary of any of their respective
assets, including, without limitation, writing down the value of inventory or
writing off notes or accounts receivables;
(e) there has not been any damage, destruction or loss,
whether covered by insurance or not, except for such as would not individually
or in the aggregate, have a Material Adverse Effect on the business and affairs
of the Subsidiary;
(f) there has been no material change, or any development
involving a prospective change, in the general affairs, management, business,
operations, condition (financial or otherwise) or prospects of the Subsidiary;
and
(g) there has not been any agreement by the Company or its
Subsidiary to (i) do any of the things described in the preceding clauses (a)
through (f) other than as expressly contemplated or provided for in this
Agreement or (ii) take, whether in writing or otherwise, any action which, if
taken prior to the date of this Agreement, would have made any representation or
warranty in this Article 4 untrue or incorrect in any material respect.
4.11 Capitalization of the Company
The authorized capital stock of the Company consists of
20,000,000 shares of Company Common Stock, without par value. As of the date
hereof, there are 3,146,000 shares of Company Common Stock outstanding and -0-
shares of Company Common Stock held in the Company's treasury. As of the date
hereof, 454,232 shares of Company Common Stock were reserved for issuance upon
the exercise of outstanding warrants and options.
4.12 Capital Stock of Subsidiary
The Company is directly or indirectly the record and
beneficial owner of all of the outstanding shares of capital stock of such
Subsidiary. Other than as set forth in Section 4.12 of the Disclosure Statement,
all of such shares so owned by the Company are duly authorized and validly
issued, fully paid, nonassessable and free of preemptive rights with respect
thereto and are owned by the Company free and clear of any claim, lien or
encumbrance of any kind with respect thereto. Except as disclosed in Section
4.12 of the Disclosure Statement, the Company does not directly or indirectly
own any interest in any other corporation, partnership, joint venture, business
association or entity.
<PAGE>
4.13 Litigation
There is no (i) claim, action, suit or proceeding pending or,
to the best knowledge of the Company, threatened against or relating to the
Company or its Subsidiary before any court or governmental or regulatory
authority or body or arbitration tribunal, or (ii) outstanding judgment, order,
writ, injunction or decree, or application, request or motion therefor, of any
court, governmental agency or arbitration tribunal in a proceeding to which the
Company, the Subsidiary, or any of their respective assets was or is a party
except, in the case of clauses (i) and (ii) above, such as would not,
individually or in the aggregate, either materially impair or preclude the
Company's ability to consummate the Sale or the other transactions contemplated
hereby or have a Material Adverse Effect.
4.14 Insurance
Section 4.14 of the Disclosure Statement lists all material
insurance policies in force on the date hereof covering the businesses,
properties and assets of the Subsidiary and all claims against such policies.
All such policies are currently in effect, and true and complete copies of all
such policies have been delivered to Purchaser. Except as set forth in Section
4.14 of the Disclosure Statement, the Company has not received notice of the
cancellation of any of such insurance in effect on the date of this Agreement.
4.15 Title to and Condition of Properties
Except as set forth in Section 4.15 of the Disclosure
Statement, the Subsidiary has good title to all of the personal property which
is reflected on the Subsidiary's Balance Sheet for the period ended 1/28/96 (the
"Balance Sheet"), except for such property since sold or otherwise disposed of
in the ordinary course of business and consistent with past practice. Except as
set forth in Section 4.15 of the Disclosure Statement, no such personal property
is subject to claims, liens or encumbrances, whether by mortgage, pledge, lien,
conditional sale agreement, charge or otherwise, except for those which would
not, individually or in the aggregate, either materially impair or preclude the
Company's ability to consummate the Sale and the other transactions contemplated
hereby or have a Material Adverse Effect.
Copies of UCC search for filings against Subsidiary have been
provided.
4.16 Leases
There have been delivered to Purchaser true and complete
copies of each lease requiring the payment of rentals pursuant to which real or
personal property is held under lease by the Subsidiary. A true and complete
list of all such leases is set forth in Section 4.16 of the Disclosure
Statement. All of the leases so listed are valid and subsisting and in full
force and effect with respect to the Subsidiary, as the case may be, and, to the
Company's knowledge, with respect to any other party thereto, and the leased
real property is in good and satisfactory condition.
4.17 Contracts and Commitments
Except as are listed in Section 4.17 of the Disclosure
Statement, the Company is not a party to any existing contract, obligation or
commitment of any type in any of the following categories:
<PAGE>
(a) any sales contract, including any open bid or quotation,
which is of an open-end or blanket nature or contains warrants in excess of
those consistent with industry practice, or contains unusual penalty provisions
for late performance, or was incurred other than in the ordinary course of
business and consistent with past practice;
(b) contracts for the purchase of materials, supplies or
equipment which have not been entered into in the ordinary course of business
and consistent with past practice or which provide for purchase prices
substantially greater than those presently prevailing for such materials,
supplies or equipment, or contracts for capital expenditures;
(c) contracts with distributors, manufacturers'
representatives or sales agents, except those which are terminable at the option
of the Company or its assignees on 60 days' notice or less without incurring any
liability thereby;
(d) contracts under which the Company has, except by way of
endorsement of negotiable instruments for collection in the ordinary course of
business and consistent with past practice, become absolutely or contingently or
otherwise liable for (i) the performance of any other person, firm or
corporation under a contract, or (ii) the whole or any part of the indebtedness
or liabilities of any other person, firm or corporation;
(e) powers of attorney outstanding from the Company other than
as issued in the ordinary course of business and consistent with past practice;
(f) contracts under which any amount payable by or to the
Company is dependent upon the revenues or profits of the Company;
(g) contracts with any director, officer or employee of the
Company other than in such person's capacity as a director, officer or employee
of the Company;
(h) contracts which limit or restrict where the Company or any
of its Subsidiary may conduct its or their business or the type or line of
business which the Company or any of its Subsidiary may engage in;
(i) contracts containing any material agreement with respect
to any change of control of the Company;
(j) contracts with any party for the loan of money or
availability of credit to or from the Company or any of its Subsidiary (except
credit extended by the Company or any of its Subsidiary to its or their
customers in the ordinary course of business and consistent with past practice;
or
(k) any hedging, option, derivative or other similar
transaction.
True and complete copies of all contracts, obligations and
commitments listed in Section 4.17 of the Disclosure Statement have been
delivered to Purchaser.
4.18 Labor Matters
The Subsidiary is not a party to any union contract or other
collective bargaining agreement. The Subsidiary is in compliance in all material
respects with all applicable laws respecting employment and employment
<PAGE>
practices, terms and conditions of employment and wages and hours. The
Subsidiary has not engaged in any unfair labor practice. There is no labor
strike, slowdown or stoppage pending (or, to the best knowledge of the Company,
any labor strike or stoppage threatened) against or affecting the Subsidiary. No
petition for certification has been filed and is pending before the National
Labor Relations Board with respect to any employees of the Subsidiary.
4.19 Compliance with Law
The Subsidiary has not violated, or failed to comply with, any
statute, law, ordinance, regulation, rule or order of any foreign, federal,
state or local government or any other governmental department or agency, or any
judgment, decree or order of any court, applicable to its business or
operations, except where any such violation or failure to comply would not,
individually or in the aggregate, have a Material Adverse Effect. The Company
Subsidiary has all permits, licenses and franchises from governmental agencies
required to conduct its businesses as now being conducted.
4.20 Employment and Labor Contracts
Neither the Company nor the Subsidiary is a party to any
employment, management services, consultation or other contract or agreement
with any past or present officer, director or executive employee or, to the best
of the Company's knowledge, any entity affiliated with any past or present
officer, director or executive employee other than those set forth in Section
4.20 of the Disclosure Statement, in each case true and complete copies of which
contracts have been delivered to Purchaser.
4.21 Intellectual Property Rights
The Subsidiary owns or has the right to use all Intellectual
Property Rights ("Intellectual Property Rights") necessary and appropriate for
the operation of the business of the Subsidiary as the same currently exits.
Intellectual Property Rights shall mean and include rights relating to patents,
trademarks, service marks, trade names, copyrights, mask works, inventions,
processes, trade secrets, know-how, confidentiality agreements, consulting
agreements, software and any documentation relating to the manufacture,
marketing and maintenance of products) necessary to the conduct of their
respective businesses. Except as listed in Section 4.21 of the Disclosure
Statement, to the knowledge of the Company, there have been no claims or
assertions made by others that the Subsidiary has infringed upon any
Intellectual Property Rights of others in the preceding six-year period. Except
as listed in Section 4.21 of the Disclosure Statement, the Company has no
knowledge of any infringement of Intellectual Property Rights of the Company by
others. True and complete copies of all material listed in Section 4.21 of the
Disclosure Statement have been delivered to Purchaser.
4.22 Taxes
Except as disclosed in Section 4.22 of the Disclosure
Statement, (i) the Subsidiary has prepared and timely filed or will timely file
with the appropriate governmental agencies all material franchise, income and
all other material Tax (as hereinafter defined) returns and reports (hereinafter
collectively referred to as "Tax Returns") required to be filed for any period
on or before the Effective Time, taking into account any extension of time to
file granted to or obtained on behalf of the Company and/or its Subsidiary
(copies of which for the past three fiscal years have been delivered to
Purchaser); and (ii) all material Taxes of the Subsidiary through Closing Date
<PAGE>
have been paid in full to the proper authorities or fully accrued for with
respect to all fiscal periods for which there are available financial
statements, other than such Taxes as are being contested in good faith by
appropriate proceedings and are adequately reserved for in accordance with
generally accepted accounting principles.
"Tax" or "Taxes" shall mean all federal, state, local and
foreign taxes, duties, levies, charges and assessments of any nature, including
social security payments and deductibles relating to wages, salaries and
benefits and payments to subcontractors (to the extent required under applicable
Tax law), and also including all interest, penalties and additions imposed with
respect to such amounts.
4.23 Employee Benefit Plans; ERISA
(a) Except as set forth in Section 4.23 of the Disclosure
Statement, there are no "employee pension benefit plans" as defined in Section
3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), covering employees (or former employees) employed in the United
States, maintained or contributed to by the Subsidiary or any of their ERISA
Affiliates (as hereinafter defined), or to which the Subsidiary or any of their
ERISA Affiliates contributes or is obligated to make payments thereunder or
otherwise may have any liability ("Pension Benefits Plans"). For purposes of
this Agreement, "ERISA Affiliate" shall mean any person (as defined in Section
3(9) of ERISA) that is a member of any group of persons described in Section
414(b), (c), (m) or (o) of the Code of which the Company or a Subsidiary is a
member.
(b) The Company has delivered to Purchaser true and complete
copies of all "welfare benefits plans" (as defined in Section 3(l) of ERISA)
covering employees (or former employees) of the Subsidiary.
(c) The Company and its Subsidiary, and each of the Pension
Benefit Plans and Welfare Plans, are in compliance with the applicable
provisions of ERISA and other applicable laws except where the failure to comply
would not, individually or in the aggregate, have a material adverse effect.
(d) All contributions to, and payments from, the Pension
Benefit Plans which are required to have been made in accordance with the
Pension Benefit Plans and, when applicable, Section 302 of ERISA or Section 412
of the code have been timely made.
(e) The Pension Benefit Plans intended to qualify under
Section 401 of the Code have been determined by the Internal Revenue Service
("IRS") to be so qualified and nothing has occurred with respect to the
operation of such Pension Benefit Plans which would cause the loss of such
qualification or exemption or the imposition of any material liability, penalty
or tax under ERISA or the Code.
(f) There are (i) no investigations pending, to the best
knowledge of the Company, by any governmental entity involving the Pension
Benefit Plans or Welfare Plans, (ii) no termination proceedings involving the
Pension Benefit Plans, and (iii) no pending or, to the best of the Company's
knowledge, threatened claims (other than routine claims for benefits), suits or
proceedings against any Pension Benefit or Welfare Plan, against the assets of
any of the trusts under any pension Benefit or Welfare Plan or against any
fiduciary of any Pension Benefit or Welfare Plan with respect to the operation
of such plan or asserting any rights or claims to benefits under any pension
Benefit Plan or against the assets of any trust under such plan, except for
<PAGE>
those which would not, individually or in the aggregate, give rise to any
liability which would have a Material Adverse Effect, nor, to the best of the
Company's knowledge, are there any facts which would give rise to any liability
except for those which would not, individually or in the aggregate, either
materially impair or preclude the Company's ability to consummate the Sale and
the other transactions contemplated hereby or have a Sale Material Adverse
Effect in the event of any such investigation, claim, suit or proceeding.
(g) Neither the Company nor its Subsidiary or any employee of
the foregoing, nor any trustee, administrator, other fiduciary or any other
"party in interest" or "disqualified person" with respect to the Pension Benefit
Plans or Welfare Plans, has engaged in a "prohibited transaction" (as such term
is defined in Section 4975 of the Code or Section 406 of ERISA) which would be
reasonably likely to result in a tax or penalty on the Company or any of its
Subsidiary under Section 4975 of the Code or Section 502(I) of ERISA.
(h) Neither the Pension Benefit Plans subject to Title IV of
ERISA nor any trust created thereunder has been terminated nor have there been
any "reportable events" (as defined in Section 4043 of ERISA and the regulations
thereunder) with respect to either thereof.
(i) Neither the Company nor the Subsidiary nor any ERISA
Affiliate has incurred any currently outstanding liability to the Pension
Benefit Guaranty Corporation (the "PBGC") or to a trustee appointed under
Section 4042(b) or (c) of ERISA other than for the payment of premiums, all of
which have been paid when due.
(j) Neither the Company nor the Subsidiary nor any of their
ERISA Affiliates has any liability (including any contingent liability under
Section 4204 of ERISA) with respect to any multi employer plan, within the
meaning of Section 3(37) of ERISA, covering employees (or former employees)
employed in the United States.
(k) Except as disclosed in Section 4.23of the Disclosure
Statement, with respect to each of the Pension Benefit and Welfare Plans, true,
correct and complete copies of the following documents have been delivered to
Purchaser: (i) the current plans and related trust documents, including
amendments thereto, (ii) any current summary plan descriptions, (iii) the most
recent Forms 5500, financial statements and actuarial reports, if applicable,
and (iv) the most recent IRS determination letter, if applicable.
4.24 Environmental Matters
(a) The Subsidiary and the properties and assets used in
businesses are in full compliance with all applicable Environmental Laws (as
hereinafter defined), which compliance includes, without limitation, the
possession of all licenses, permits, registrations and other governmental
authorizations (collectively, "Environmental Authorizations") required under
applicable Environmental Laws, and compliance with the terms and conditions
thereof, and there are no circumstances currently in existence which, to the
knowledge of the Company, may materially prevent or interfere with compliance in
the future.
4.25 For purposes of this Agreement:
(a) "Environment" shall mean any surface water, ground water,
or drinking water supply, land surface or subsurface strata, or ambient air, and
includes, without limitation, any indoor location.
<PAGE>
(b) "Environmental Laws" shall mean all federal, state, local
and foreign laws, codes, regulations, ordinances, requirements, directives,
orders, common law, and administrative or judicial interpretations thereof that
may be enforced by any Governmental Authority or court, relating to pollution,
the protection of human health, the protection of the Environment, or the
emission, discharge, disposal or other release or threatened release of
Hazardous Materials in or into the Environment.
4.26 Directors, Officers and Compensation of Employees
There is set forth in Section 4.26 of the Disclosure Statement
a true and complete list showing (a) the names and addresses of all directors
and officers of the Company and the Subsidiary and (b) the names of all salaried
persons whose aggregate compensation for purposes of tax reporting from the
Company and its Subsidiary in the fiscal year ended January 28, 1996, was, or in
the calendar year ending December 31, 1996 is expected (excluding product sales
commissions) to be, U.S. $60,000 or more per year, together with a statement of
the full amount expected to be paid to such person for services in all
capacities to be rendered in the calendar year ending December 31, 1995, and the
basis thereof, separately including the amounts paid or payable, or expected to
be paid or payable, under bonus or incentive arrangements, if any.
4.27 Disclosure
No representation or warranty by the Company and no statement
or information relating to the Company or the Subsidiary contained herein, or in
any certificate furnished by or on behalf of the Company or the Subsidiary to
Purchaser or Newco in connection herewith contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
necessary in order to make the statements herein or therein, in light of the
circumstances under which they were made, not misleading.
5. COVENANTS
5.1 Conduct of Business of the Company
Except as contemplated by this Agreement, during the period
from the date of this Agreement to the Effective Time, the Subsidiary will
conduct its operations according to its ordinary and usual course of business
consistent with past practice, and will use all commercially reasonable efforts
to preserve intact its business organization, to keep available the services of
its officers and employees and to maintain satisfactory relationships with
suppliers, distributors, customers and others having business relationships with
it and will take no action which would materially impair or preclude the
operation of the business of the Subsidiary. Without limiting the generality of
the foregoing, and except as otherwise expressly provided in this Agreement,
prior to the Effective Time, the Subsidiary will not without the prior written
consent of Purchaser:
(a) except in the ordinary course of business and consistent
with past practice (i) create, incur, assume, maintain or permit to exist any
long-term debt or any short-term debt for borrowed money other than under
existing loans, lines of credit or replacements thereof on terms no less
favorable than, and in amounts not exceeding, existing loans or lines of credit;
(ii) assume, guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the obligations of any other
person except in the ordinary course of business and consistent with past
practices; or (iii) make any loans, advances or capital contributions to, or
investments in, any other person;
<PAGE>
(b) (i) except pursuant to written agreements existing on the
date of execution of this Agreement, increase in any manner the compensation of
any of its directors or officers; (ii) pay or agree to pay any pension,
retirement allowance or other employee benefit not required; (iii) grant any
severance or termination pay to, or enter into any employment or severance
agreement with, any of its past or present employees; or (iv) enter into any
contract, agreement or understanding with any of its past or present directors
or officers;
(c) except in the ordinary course of business and consistent
with past practice or as otherwise expressly contemplated hereby, sell,
transfer, lease, license, pledge, mortgage, or otherwise dispose of, or
encumber, or agree to sell, transfer, lease, license, pledge, mortgage or
otherwise dispose of or encumber, any material properties, real personal or
mixed;
(d) except as otherwise expressly contemplated hereby, enter
into any other agreements, commitments or contracts, except agreements,
commitments or contracts for the purchase, sale or lease of goods or services in
the ordinary course of business and consistent with past practice and having a
term of no more than one year;
(e) authorize, recommend, propose or announce an intention to
authorize, recommend or propose, or enter into any agreement in principle or an
agreement with respect to, any plan of liquidation or dissolution, any
acquisition of a material amount of assets or securities, any disposition of a
material amount of assets or securities or any material change in its
capitalization, or any entry into a material contract or any amendment or
modification of any material contract or any release or relinquishment of any
material contract rights not in the ordinary course of business and consistent
with past practice except as expressly contemplated by this Agreement;
(f) except as previously identified to Purchaser prior to the
date hereof, authorized or commit to make any capital expenditures, except as
Purchaser shall consent to;
(g) knowingly undertake any act, or suffer to exist any
condition, causing any insurance policy naming it as a beneficiary or a loss
payee to be canceled or terminated, except in the ordinary course of business
and consistent with past practice and following written notice to Purchaser;
(h) maintain its books and records in a manner otherwise than
in the ordinary course of business and consistent with past practice;
(i) enter into any hedging, option, derivative or other
similar transaction;
(j) change any assumption underlying, or method of
calculating, any bad debt, contingency, provision or other reserve;
(k) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, contingent or otherwise), other than the
payment, discharge or satisfaction of liabilities (including accounts payable)
in the ordinary course of business and consistent with past practice, or
collect, or accelerate the collection of, any amounts owed (including accounts
receivable) other than the collection in the ordinary course of business; or
(l) agree to do any of the foregoing.
<PAGE>
5.2 No Solicitation
The Company agrees that, prior to the Effective Time, it shall
not, and shall not give authorization or permission to any of its or its
Subsidiary's directors, officers, employees, agents or representatives to, and
shall use all commercially reasonable efforts to see that such persons do not,
directly or indirectly, solicit, initiate, facilitate or encourage (including by
way of furnishing or disclosing information) any merger, consolidation, other
business combination involving the Subsidiary, or the acquisition of all or any
substantial portion of the assets or capital stock of the Subsidiary or
inquiries or proposals concerning or which may reasonably be expected to lead to
any of the foregoing, or enter into any agreement, arrangement or understanding
requiring it to abandon, terminate or fail to consummate the Sale or any other
transactions expressly contemplated by this Agreement, or contemplated to be a
material part thereof. The Company shall immediately advise the Purchaser in
writing of any inquiries or proposals relating to any such transaction.
5.3 Access to Information
From the date of this Agreement until the Effective Time, the
Company will give Purchaser and their authorized representatives full access
during normal business hours to all facilities, personnel and operations and to
all books and records of the Subsidiary, will permit Purchaser to make such
inspections as they may reasonably require and will cause its officers and those
of its Subsidiary to furnish Purchaser with such financial and operating data
and other information with respect to the businesses and properties of the
Subsidiary as Purchaser may from time to time reasonably request.
5.4 Registration Statement and Proxy Statement
(a) Purchaser shall file with the SEC as soon as is reasonably
practicable after the date hereof but in no event later than forty-five (45)
days from the date hereof, the Registration Statement in which the Company's
Proxy Statement shall be included. Purchaser and the Company shall use all
commercially reasonable efforts to have the Registration Statement declared
effective by the SEC. Purchaser shall also take any action required to be taken
under applicable state blue sky or securities laws in connection with shares of
Purchaser Common Stock to be issued as Closing Consideration. Purchaser and the
Company shall promptly furnish to each other all information, and take such
other actions, as may reasonably be requested in connection with any action by
any of them in connection with the preceding sentences of this Section 5.4(a).
5.5 Commercially Reasonable Efforts: Other Actions
(a) Subject to the terms and conditions herein provided,
Purchaser, and the Company shall use all commercially reasonable efforts to
take, or cause to be taken, all other actions and do, or cause to be done, all
other things necessary, proper or appropriate under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement.
(b) Prior to the Effective Time, the Company shall cooperate
with Purchaser in taking such actions as are reasonably appropriate or necessary
in connection with any redemption, pre-payment, modification, satisfaction or
elimination of any outstanding indebtedness of the Company or its Subsidiary
which is required to be obtained to effectuate the Sale or other transactions
contemplated hereby; provided that any such restructuring shall become effective
at the Effective Time.
<PAGE>
(c) The Company shall cause its Directors to deliver proxies
to Purchaser with respect to all shares of the Company's Common Stock owned by
such directors, which proxies shall authorize the Purchaser to vote all such
shares in favor of the Sale.
5.6 Public Announcements
Before issuing any press release or otherwise making any
public statement with respect to the Sale or any of the other transactions
contemplated hereby, Purchaser, the Company and the Subsidiary will consult
with, and obtain the consent of, each other as to its form and substance and
shall not issue any such press release or make any such public statement prior
to obtaining such consent, except as may be required by law.
5.7 Notification of Certain Matters
(a) The Company and the Subsidiary shall give prompt notice to
Purchaser of any notice of or other communication asserting a default or event
which, with notice or lapse of time or both, would become a default received by
the Company or any of its Subsidiary subsequent to the date of this Agreement
and prior to the Effective Time, under any contract material to the general
affairs, management, business, operations, assets, condition (financial or
otherwise) or prospects of the Subsidiary.
(b) Each of the Company and Purchaser give prompt notice to
the other party of (a) any notice or other communication from any third party
alleging that the consent of such third party is or may be required in
connection with the Sale or other transactions contemplated hereby, (b) any
material adverse change in their respective general affairs, management,
business, operations, assets, condition (financial or otherwise) or prospects or
the occurrence of any event which, so far as reasonably can be foreseen at the
time of its occurrence, is reasonably likely to result in any such change, or
(c) the occurrence or existence of any event which would, or could with the
passage of time or otherwise, make any representation or warranty contained
herein untrue.
5.8 Expenses
Except as set forth in Section 10.5, Purchaser, on the one
hand, and the Company, on the other hand, shall bear their respective expenses
incurred in connection with the Sale, including, without limitation, the
preparation, execution and performance of this Agreement and the transactions
contemplated hereby and all fees and expenses of investment bankers, finders,
brokers, agents of the transaction.
5.9 Affiliates
The Company shall advise Purchaser in writing of any person
who becomes an Affiliate after the date hereof and prior to the Effective Time
and shall use all commercially reasonable efforts to have each such person
deliver to Purchaser, no later than the date such person becomes an Affiliate, a
agreement substantially in the form of Exhibit B hereto.
5.10 Stock Exchange Listings
Purchaser shall use all commercially reasonable efforts to
list on NASDAQ and the PSE, upon official notice of issuance, the Purchaser
Common Stock to be issued in connection with the Sale.
<PAGE>
5.11 Company and Subsidiary Actions
The Company shall not take or omit to take, and shall not
cause or permit its Subsidiary to take or omit to take, any action which would
cause a breach of any representation or warranty of the Company and/or the
Subsidiary contained in this Agreement, such that the Closing conditions set
forth in Section 7.1 would not be satisfied.
5.12 Environmental Matters
The Company shall make all filings and use all commercially
reasonable efforts to take all actions necessary to comply with the provisions
and requirements of all Environmental Laws.
5.13 Resignation of Directors
Prior to the Effective Time, the Company shall deliver to
Purchaser at no cost the resignation of and of the directors of the Subsidiary,
as Purchaser shall specify, effective at the Effective Time.
6. CONDITIONS TO THE OBLIGATION OF PURCHASER AND THE COMPANY
The respective obligations of each party to effect the Sale shall be subject to
the fulfillment at or prior to the Closing of each of the following conditions:
6.1 Registration Statement
The Registration Statement shall have become effective in
accordance with the provisions of the Securities Act. No stop order suspending
the effectiveness of the Registration Statement shall have been issued by the
SEC and remain in effect. All necessary state securities or blue sky
authorizations shall have been received.
6.2 Stockholders Approval
The approval of a majority of the outstanding shares of
Company Common Stock cast at the Special Meeting or any adjournment thereof
shall have been obtained.
6.3 Listings
The Purchaser Shares issuable in the Sale shall have been
authorized for listing on NASDAQ and the PSE subject to official notice of
issuance.
6.4 Dissenting shareholders
The shareholders of the Company owning 10% or more of its
Common Stock shall not have asserted their dissenters' rights under the
provisions of the Minnesota Business Corporation Law.
7. CONDITIONS TO THE OBLIGATIONS OF PURCHASER AND NEWCO
The obligation of Purchaser to effect the Sale and to perform
its other obligations to be performed at or subsequent to the Closing shall be
subject to the fulfillment at or prior to the Closing of the following
additional conditions, any one or more of which may be waived by Purchaser :
<PAGE>
7.1 Representations and Warranties
The representations and warranties of the Company contained
herein shall be true and correct in all respects on the date of this Agreement
and the Closing Date as though such representations and warranties were made at
and on such date.
7.2 Performance
The Company shall have performed and complied in all material
respects with all agreements, obligations and conditions required by this
Agreement to be performed or complied with by it on or prior to the Closing Date
except for those failures to so perform or comply which individually or in the
aggregate would not either materially impair or preclude the Company's ability
to consummate the Sale and the other transactions contemplated hereby or have a
Material Adverse Effect.
7.3 Certificates
The Company shall furnish such certificates of its officers to
evidence compliance with the conditions set forth in Sections 7.1 and 7.2 as may
be reasonably requested by Purchaser .
7.4 Certain Proceedings
No writ, order, decree or injunction of a court of competent
jurisdiction or governmental entity shall have been entered against Purchaser or
the Company which, and no proceedings therefor shall have been threatened or
commenced by any governmental entity which seek to prohibit or enjoin the
consummation of the transactions contemplated hereunder.
7.5 Consents and Approvals
All necessary consents and approvals of any other governmental
authority or other third party required for the consummation of the Sale and the
other transactions contemplated hereby and any waiting period applicable to the
consummation of the Sale shall have expired or been terminated.
7.6 Material Adverse Change
There shall not have occurred since the date of the Balance
Sheet annexed hereto any material adverse change in the general affairs,
management, business, operations, assets, condition (financial or otherwise) or
prospects of the Company and its Subsidiary taken as a whole.
7.7 Opinion of Counsel
Purchaser shall have received the opinion of Robins, Kaplan,
Miller & Ciresi to the Company, substantially in the form of Exhibit D hereto.
7.8 Consulting and Services Agreement.
Purchaser shall have entered into an agreement with Innovative
Hospitality Corporation providing for the continuation of certain accounting and
administrative by IHC with respect to the opening of the Grill and further
providing for IHC's consulting services with respect to the operating of five
(5) new restaurants using the Grill concept substantially in the form of Exhibit
E hereto.
<PAGE>
7.9 Dissenting Shareholders
The shareholders of the Company owning 10% or more of its
Common Stock shall not have exercised their dissenters' rights under the
provisions of the Minnesota Business Corporation Law.
8. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY
The obligations of the Company under this Agreement to effect
the Sale shall be subject to the fulfillment on or before the Closing Date of
each of the following additional conditions, any one or more of which may be
waived by the Company:
8.1 Representations and Warranties True
The representations and warranties of Purchaser contained
herein (without regard to any materiality exceptions or provisos therein) shall
be true and correct in all material respects on the date of this Agreement and
the Closing Date as though such representations and warranties were made at and
on such date, except (i) for those untruths or inaccuracies which individually
or in the aggregate would not either materially impair or preclude the ability
of Purchaser to consummate the Sale and the other transactions contemplated
hereby or have a Purchaser Material Adverse Effect, and (ii) for changes
permitted or contemplated by this Agreement.
8.2 Performance
Purchase shall have performed and complied in all material
respects with all agreements, obligations and conditions required by this
Agreement to be performed or complied with by it on or prior to the Closing Date
except for those failures to so perform or comply which individually or in the
aggregate would not either materially impair or preclude the ability of
Purchaser to consummate the Sale and the other transactions contemplated hereby
or have a Purchaser Material Adverse Effect.
8.3 Certificates
Purchaser shall furnish such certificates of their respective
officers to evidence compliance with the conditions set forth in Sections 8.1
and 8.2 as may be reasonably requested by the Company.
8.4 Certain Proceedings
No writ, order, decree or injunction of a court of competent
jurisdiction or governmental entity shall have been entered against Purchaser or
the Company which prohibits the consummation of the Sale, and any waiting period
applicable to the consummation of the Sale shall have expired or been
terminated.
8.5 Opinion of Counsel
The Company shall have received the opinions of D. David
Cohen, Esq., counsel to Purchaser, substantially in the form of Exhibit E
hereto.
<PAGE>
9. CLOSING
9.1 Time and Place
Subject to the provisions of this Agreement, the closing of
the Sale (the "Closing") shall take place at the offices of Robins, Kaplan,
Miller & Ciresi, 2800 LaSalle Plaza, 800 LaSalle Avenue, Minneapolis, MN 55402,
as soon as practicable but in no event later than 9:30 A.M., local time, on the
first business day after the date on which each of the conditions set forth in
Articles 6, 7 and 8 have been satisfied or waived by the party parties entitled
to the benefit of such conditions; or at such other place, at such other time,
or on such other date as Purchaser and the Company may mutually agree. The date
on which the Closing actually occurs is herein referred to as the "Closing
Date." Either party may give five (5) business days' notice of Closing to the
other party.
10. TERMINATION AND ABANDONMENT
10.1 Termination
This Agreement may be terminated and the Sale may be abandoned
any time prior to the Effective Time, whether before or after approval by the
stockholders of the Company:
(a) by mutual consent of the Boards of Directors of the
Purchaser and the Company;
(b) by either Purchaser or the Company if, without fault of
such terminating party, the Sale shall not have been consummated on or before
June 30, 1996, which date may be extended by mutual consent of the parties
hereto;
(c) by either Purchaser or the Company, if any court of
competent jurisdiction in the United States or other governmental body in the
United States shall have issued an order (other than a temporary restraining
order), decree or ruling, or taken any other action restraining, enjoining or
otherwise prohibiting the Sale; or
(d) by either Purchaser or the Company, if the approval of a
majority of the outstanding shares of Company Common Stock cast at the Special
Meeting or any adjournment thereof is not obtained.
10.2 Termination by Purchaser
This Agreement may be terminated and the Sale may be
abandoned, by action of the Board of Directors of Purchaser, at any time prior
to the Effective Time, before or after the approval by the stockholders of the
Company, if (a) the Company shall have failed to comply in any material respect
with any of the covenants or agreements contained in Articles 1 and 5 of this
Agreement to be complied with or performed by the Company at or prior to such
date of termination, or (b) there exists a breach or breaches of any
representation or warranty of the Company and/or the Subsidiary contained in
this Agreement such that the Closing condition set forth in Section 7.1 would
not be satisfied; provided, however, that if such breach or breaches are capable
of being cured prior to the Effective Time, such breaches shall not have been
cured within 15 days of delivery to the Company of written notice of such breach
or breaches, or (c) if at anytime within the 30 trading days prior to Closing,
Purchaser's Common Stock trades at $8.50 or higher.
<PAGE>
10.3 Termination by the Company
This Agreement may be terminated and the Sale may be abandoned
at any time prior to the Effective Time, before or after the approval by the
stockholders of the Company, by action of the Board of Directors of the Company,
if (a) Purchaser shall have failed to comply in any material respect with any of
the covenants or agreements contained in Articles 1 and 5 of this Agreement to
be complied with or performed by Purchaser at or prior to such date of
termination, or (b) there exists a breach or breaches of any representation or
warranty of Purchaser contained in this Agreement such that the Closing
condition set forth in Section 8.1 would not be satisfied; provided, however,
that if such breach or breaches are capable of being cured prior to the
Effective Time, such breaches shall not be cured within fifteen (15) days of
delivery to Purchaser of written notice of such breach or breaches, or (c) if at
any time within the thirty (30) trading days prior to Closing, Purchasers Common
Stock trades at $5.125 or less.
10.4 Procedure for Termination
In the event of termination and abandonment of the Sale by
Purchaser or the Company pursuant to this Article 10, written notice thereof
shall forthwith be given to the other.
10.5 Effect of Termination
In the event of termination of this Agreement and abandonment
of the Sale pursuant to this Article 10, no party hereto (or any of its
directors or officers) shall have any liability or further obligation to
consummate the transactions contemplated by this Agreement, except that nothing
herein shall relieve any party from liability for damages, other than those
relating to future or projected profits, for any breach of this Agreement.
11. MISCELLANEOUS
11.1 Amendment and Modification
Subject to applicable law, this Agreement mal be amended,
modified or supplemented only by written agreement of Purchaser, the Company and
the Subsidiary at any time prior to the Effective Time with respect to any of
the terms contained herein; provided, however, that after this Agreement is
adopted by the stockholders of the Company, no such amendment or modification
shall change the amount or form of the Closing Consideration.
11.2 Waiver of Compliance; Consents
Any failure of Purchaser, on the one hand, or the Company or
Subsidiary, on the other hand, to comply with any obligation, covenant,
agreement or condition herein may be waived by the Company or Subsidiary, or
Purchaser or Newco, respectively, only by a written instrument signed by the
party granting such waiver, but such waiver or failure to insist upon strict
compliance with such obligation, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure. Whenever this Agreement requires or permits consent by or on behalf of
any party hereto, such consent shall be given in writing in a manner consistent
with the requirements for a waiver of compliance as set forth in this Section
11.2.
<PAGE>
11.3 Survivability; Investigations
The respective representations and warranties of Purchaser,
Newco and the Company contained herein or in any certificates or other documents
delivered prior to or at the Closing shall not be deemed waived or otherwise
affected by any investigation made by any party hereto and shall not survive the
Closing.
11.4 Notices
All notices and other communications hereunder shall be in
writing and shall be delivered personally, by next-day courier, or mailed by
registered or certified mail (return receipt requested) first-class postage
prepaid, or telecopied with written confirmation of receipt, to the parties at
the addresses specified below (or at such other address for a party as shall be
specified by like notice; provided that notices of a change of address shall be
effective only upon receipt thereof. Any such notice shall be effective upon
receipt, if personally delivered or telecopied, one day after delivery to a
courier for next-day delivery, or three days after mailing, if deposited in the
U.S. mail, first-class postage prepaid.
(a) If to the Company, to:
Alamo Restaurants, Inc.
1465 East 84th Place
Merrillville, IN 46410
with a copy to:
Robert T. Montague, Esq.
Robins, Kaplan, Miller & Ciresi
2800 LaSalle Plaza
800 LaSalle Avenue
Minneapolis, MN 55402-2015
Fax: (612) 339-4181
(b) If to Purchaser, or Newco, to:
Elephant & Castle Group, Inc.
P.O. Box 10240
Pacific Center
701 West Georgia Street
Suite 303-701
Vancouver, B.C. Y7Y1E7
CANADA
with a copy to:
D. David Cohen, Esq.
500 North Broadway - Suite 133
Jericho, NY 11753
Fax: (516) 933-8454
<PAGE>
11.5 Assignment
This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns (including, without limitation, any
wholly-owned Subsidiary of Purchaser incorporated under the laws of Delaware and
substituted for Newco as provided in Section 1.1), but neither this Agreement
nor any of the rights interests or obligations hereunder may be assigned by any
of the parties hereto without the prior written consent of the other parties,
nor is this Agreement intended to confer any rights or remedies hereunder upon
any other person except the parties hereto.
11.6 Arbitration
In the event of any dispute arising hereunder, the parties
hereby stipulate and agree that such dispute shall be resolved by binding
arbitration in accordance with the Rules of Commercial Arbitration of the
American Arbitration Association ("AAA") before a single arbitrator. If a claim
is made by Purchaser against Company or Subsidiary, arbitration shall be held in
Minneapolis, Minnesota. If a claim is made by Company or Subsidiary against
Purchaser, such arbitration shall be held in Vancouver, British Columbia,
Canada. Any arbitral order resulting such proceedings may be entered as a
judgment in any court of competent jurisdiction.
11.7 Counterparts
This agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
11.8 Severability
In case any one or more of the provisions contained in this
Agreement should be invalid, illegal or unenforceable in any respect against a
party hereto, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired thereby
and such invalidity, illegality or unenforceability shall only apply as to such
party in the specific jurisdiction where such judgment shall be made.
11.9 Captions
The article and section headings contained in this Agreement
are solely for the purpose of reference, are not part of the agreement of the
parties, and shall not in any way affect the meaning or interpretation of this
Agreement.
11.10 Entire Agreement
This Agreement, including the exhibits hereto and the
documents and instruments referred to herein (including the Confidentiality
Agreement and Disclosure Statement), embodies the entire agreement and
understanding of the parties hereto in respect of the subject matter contained
herein and supersedes all prior agreements and the understandings between the
parties with respect to such subject matter. There are no representations,
promises, warranties, covenants, or undertakings, other than those expressly set
forth or referred to herein and therein.
<PAGE>
IN WITNESS WHEREOF, Purchaser, and Newco and the Company and
Subsidiary each and all have caused this Agreement to be signed by their
respective duly authorized officers as of the date first above written.
ELEPHANT & CASTLE GROUP INC.
By:
Name:
Title:
ALAMO RESTAURANTS, INC.
By:
Name:
Title:
ALAMO GRILL, INC.
By:
Name:
Title:
<PAGE>
EXHIBIT A
Company liabilities to be paid by Purchaser at Closing:
Barclay Bank Up to $326,000
Other Liabilities1 Up to $210,000
= ========
Total $536,000
- --------
* Specific payees and amounts to be provided prior to Closing to allow
for checks to be prepared evidencing payment. Liabilities of the
Company not paid or expressly assumed in writing by the Purchaser in
connection with this transaction shall remain the sole responsibility
of the Company.
<PAGE>
EXHIBIT B
Affiliate Letter
The undersigned is an officer, director, key employee or controlling
person of Alamo Restaurants, Inc. ("Alamo" or the "Company").
Alamo is prepared, subject to the approval of the shareholders of the
Company, to sell all of the capital stock of Alamo Grills, Inc. ("Subsidiary")
to E&C Acquisition Corp. ("Newco") for shares of the capital stock of Elephant &
Castle Group, Inc. ("Purchaser" and "Purchaser Shares").
The undersigned will receive an indeterminate number of such Purchaser
Shares at the closing of the transactions.
In order to induce the Purchaser to enter into the transaction, the
undersigned represents, warrants and agrees with Purchaser that:
1. He, she or it ("He") will engage in no transactions in the Purchaser
Shares prior to the expiration of thirty (30) days following the public
release of financial information of Purchaser, including not less than
thirty (30) days of combined operations of Subsidiary with Purchaser.
2. He will not sell, transfer, hypothecate or otherwise dispose of any of
the Purchaser Shares otherwise than pursuant to an effective
Registration Statement relative thereto, or, in the opinion of counsel
to the Purchaser, an exemption from registration applicable to any such
transaction.
3. He will permit the certificates representing the Purchaser Shares to be
endorsed with a legend restricting transfer, as provided by paragraphs
1 and 2 hereof.
<PAGE>
ANNEX B
302A.471. Rights of dissenting shareholders
Subdivision 1. Actions creating rights. A shareholder of a corporation
may dissent from, and obtain payment for the fair value of the shareholder's
shares in the event of, any of the following corporate actions:
(a) An amendment of the articles that materially and adversely affects
the rights or preferences of the shares of the dissenting shareholder in that
it:
(1) alters or abolishes a preferential right of the shares;
(2) creates, alters, or abolishes a right in respect of the redemption
of the shares, including a provision respecting a sinking fund for the
redemption or repurchase of the shares;
(3) alters or abolishes a preemptive right of the holder of the shares
to acquire shares, securities other than shares, or rights to purchase shares or
securities other than shares;
(4) excludes or limits the right of a shareholder to vote on a matter,
or to cumulate votes, except as the right may be excluded or limited through the
authorization or issuance of securities of an existing or new class or series
with similar or different voting rights; except that an amendment to the
articles of an issuing public corporation that provides that section 302A.671
does not apply to a control share acquisition does not give rise to the right to
obtain payment under this section;
(b) A sale, lease, transfer, or other disposition of all or
substantially all of the property and assets of the corporation, but no
including a transaction permitted without shareholder approval in section
302A.661, subdivision 1, or a disposition in dissolution described in section
302A.725, subdivision 2, or a disposition pursuant to an order of a court, or a
disposition for cash on terms requiring that all or substantially all of the net
proceeds of disposition be distributed to the shareholders in accordance with
their respective interests within one year after the date of disposition;
(c) A plan of merger, whether under this chapter or under chapter 322B,
to which the corporation is a party, except as provided in subdivision 3;
(d) A plan of exchange, whether under this chapter or under chapter
322B, to which the corporation is a party as the corporation whose shares will
be acquired by the acquiring corporation, if the shares of the shareholder are
entitled to be voted on the plan; or
(e) Any other corporate action taken pursuant to a shareholder vote
with respect to which the articles, the bylaws, or a resolution approved by the
board directs that dissenting shareholders may obtain payment for their shares.
Subd. 2. Beneficial owners. (a) A shareholder shall not assert
dissenters' rights as to less than all of the shares registered in the name of
the shareholder, unless the shareholder dissents with respect to all the shares
that are beneficially owned by another person but registered in the name of the
shareholder and discloses the name and address of each beneficial owner on whose
behalf the shareholder dissents. In that event, the rights of the dissenter
shall be determined as if the shares as to which the shareholder has dissented
and the other shares were registered in the names of different shareholders.
(b) The beneficial owner of shares who is not the shareholder may
assert dissenters' rights with respect to shares held on behalf of the
beneficial owner, and shall be treated as a dissenting shareholder under the
terms of this section and section 302A.473, if the beneficial owner submits to
the corporation at the time of or before the assertion of the rights a written
consent of the shareholder.
Subd. 3. Rights not to apply. Unless the articles, the bylaws, or a
resolution approved by the board otherwise provide, the right to obtain payment
under this section does not apply to a shareholder of the surviving corporation
in a merger, if the shares of the shareholder are not entitled to be voted on
the merger.
Subd. 4. Other rights. The shareholders of a corporation who have a
right under this section to obtain payment for their shares do not have a right
at law or in equity to have a corporate action described in subdivision 1 set
aside or rescinded, except when the corporate action is fraudulent with regard
to the complaining shareholder or the corporation.
Laws 1981, c. 270, ss. 80, eff. July 1, 1981. Amended by Laws 1987, c. 203, ss.
2,3; Laws 1988, c. 692. ss. 10; Laws 1991, c. 49, ss. 16; Laws 1992, c. 517,
art. 1, ss. 15, eff. Jan. 1, 1993; Laws 1993, c.17, ss. 40: Laws 1994, c. 417,
ss. 5
Subdivision 1. Definitions. (a) For purposes of this section, the terms
defined in this subdivision have the meanings given them.
(b) "Corporation" means the issuer of the shares held by a dissenter
before the corporate action referred to in section 302A.471, subdivision 1 or
the successor by merger of that issuer.
(c) "Fair value of the shares" means the value of the shares of a
corporation immediately before the effective date of the corporate action
referred to in section 302A.471, subdivision 1.
(d) "Interest" means interest commencing five days after the effective
date of the corporate action referred to in section 302A.471, subdivision 1, up
to and including the date of payment, calculated at the rate provided in section
540.09 for interest on verdicts and judgments.
Subd. 2. Notice of action. If a corporation calls a shareholder meeting
at which any action described in section 302A.471, subdivision 1 is to be voted
upon, the notice of the meeting shall inform each shareholder of the right to
dissent and shall include a copy of section 302A.471 and this section and a
brief description of the procedure to be followed under these sections.
Subd. 3. Notice of dissent. If the proposed action must be approved by
the shareholders, a shareholder who wishes to exercise dissenters' rights must
file with the corporation before the vote on the proposed action a written
notice of intent to demand the fair value of the shares owned by the shareholder
and must not vote the shares in favor of the proposed action.
Subd. 4. Notice of procedure; deposit of shares. (a) After the proposed
action has been approved by the board and, if necessary, the shareholders, the
corporation shall send to all shareholders who have complied with subdivision 3
and to all shareholders entitled to dissent if no shareholder vote was required,
a notice that contains:
(1) The address to which a demand for payment and certificates of
certificated shares must be sent in order to obtain payment and the date by
which they must be received;
(2) Any restrictions on transfer of uncertificated shares that will
apply after the demand for payment is received;
(3) A form to be used to certify the date on which the shareholder, or
the beneficial owner on whose behalf the shareholder dissents, acquired that
shares or an interest in them and to demand payment; and
(4) A copy of section 302A.471 and this section and a brief description
of the procedures to be followed under these sections.
(b) In order to receive the fair value of the shares, a dissenting
shareholder must demand payment and deposit certificated shares or comply with
any restrictions on transfer of uncertificated shares within 30 days after the
notice required by paragraph (a) was given, but the dissenter retains all other
rights of a shareholder until the proposed action takes effect.
Subd. 5. Payment; return of shares. (a) After the corporate action
takes effect, or after the corporation receives a valid demand for payment,
whichever is later, the corporation shall remit to each dissenting shareholder
who has complied with subdivisions 3 and 4 the amount the corporation estimates
to be the fair value of the shares, plus interest, accompanied by:
(1) The corporation's closing balance sheet and statement of income for
a fiscal year ending not more than 16 months before the effective date of the
corporate action, together with the latest available interim financial
statements;
(2) An estimate by the corporation of the fair value of the shares and
a brief description of the method used to reach the estimate; and
(3) A copy of section 302A.471 and this section, and a brief
description of the procedure to be followed in demanding supplemental payment.
(b) The corporation may withhold the remittance described in paragraph
(a) from a person who was not a shareholder on the date the action dissented
from was first announced to the public or who is dissenting on behalf of a
person who was not a beneficial owner on that date. If the dissenter has
complied with subdivisions 3 and 4, the corporation shall forward to the
dissenter the materials described in paragraph (a), a statement of the reason
for withholding the remittance, and an offer to pay to the dissenter the amount
t listed in the materials if the dissenter agrees to accept that amount in full
satisfaction. The dissenter may decline the offer and demand payment under
subdivision 6. Failure to do so entitles the dissenter only to the amount
offered. If the dissenter makes demand, subdivisions 7 and 8 apply.
(c) If the corporation fails to remit payment within 60 days of the
deposit of certificates or the imposition of transfer restrictions on
uncertificated shares, it shall return all deposited certificates and cancel all
transfer restrictions. However, the corporation may again give notice under
subdivision 4 and require deposit or restrict transfer at a later time.
Subd. 6. Supplemental payment; demand. If a dissenter believes that the
amount remitted under subdivision 5 is less than the fair value of the shares
plus interest, the dissenter may give written notice to the corporation of the
dissenter's own estimate of the fair value of the shares, plus interest, within
30 days after the corporation mails the remittance under subdivision 5, and
demand payment of the difference. Otherwise, a dissenter is entitled only to the
amount remitted by the corporation.
Subd. 7. Petition; determination. If the corporation receives a demand
under subdivision 6, it shall, within 60 days after receiving the demand, either
pay to the dissenter the amount demanded or agreed to by the dissenter after
discussion with the corporation or file in court a petition requesting that the
court determine the fair value of the shares, plus interest. The petition shall
be filed in the county in which the registered office of the corporation is
located, except that a surviving foreign corporation that receives a demand
relating to the shares of a constituent domestic corporation shall file the
petition in the county in this state in which the last registered office of the
constituent corporation was located. The petition shall names as parties all
dissenters who have demanded payment under subdivision 6 and who have not
reached agreement with the corporation. The corporation shall, after filing the
petition, serve all parties with a summons and a copy of the petition under the
rules of civil procedure. Nonresidents of this state may be served by registered
or certified mail or by publication as provided by law. Except as otherwise
provided, the rules of civil procedure apply to this proceeding. The
jurisdiction of the court is plenary and exclusive. The court may appoint
appraiser, with powers and authorities the court deems proper, to receive
evidence on an recommend the amount of the fair value of the shares. The court
shall determine whether the shareholder or shareholders in question have fully
complied with the requirements of this section, and determine the fair value of
the shares, taking into account any and all factors the courts finds relevant,
computed by any method or combination of methods that the court, in its
discretion, sees fit to use, whether or not used by the corporation or by a
dissenter. The fair value of the shares as determined by the court is binding on
all shareholders, wherever located. A dissenter is entitled to judgment in cash
for the amount t by which the fair value of the shares as determined by the
court, plus interest, exceeds the about, if any, remitted under subdivision 5,
but shall not be liable to the corporation for the amount, if any, by which the
amount, if any, remitted to the dissenter under subdivision 5 exceeds the fair
value of the shares as determined by the court, plus interest.
Subd. 8. Costs; fees; expenses. (a) The court shall determine the costs
and expenses of a proceeding under subdivision 7, including the reasonable
expenses and compensation of any appraisers appointed by the court, and shall
assess those costs and expenses against the corporation, except that the court
may assess part or all of those costs and expenses against a dissenter whose
action in demanding payment under subdivision 6 is found to be arbitrary,
vexatious, or not in good faith.
(b) If the court finds that the corporation has failed to comply
substantially with this section, the court may assess all fees and expenses of
any experts or attorneys as the court deems equitable. These fees and expenses
may also be assessed against a person who has acted arbitrarily, vexatiously, or
not in good faith in bringing the proceeding, and may be awarded to a party
injured by those actions.
(c) The court may award, in its discretion, fees and expenses to any
attorney for the dissenters out of the amount awarded to the dissenters, if any.
Laws 1981, c. 270, ss. 81, eff. July 1, 1981. Amended by Laws 1987, c. 104, ss.
30 to 33; Laws 1993, c 17, ss. 41, 42.
Pannell Kerr Forster [GRAPHIC - LOGO]
PKF
worldwide
7th Floor, Marine Building,
355 Burrard St.
Vancouver, B C,
Canada, V6C 2G8
Telephone: (604) 687-1231
Facsimile: (604) 688-4675
September 6, 1996
Board of Directors
Elephant & Castle Group Inc.
We consent to the incorporation by reference in the Registration Statement on
Form S-4 related to the issuance of 147,059 shares of Elephant & Castle Group
Inc. of our report dated April 9, 1996 relating to the consolidated balance
sheets of Elephant & Castle Group Inc. as at December 31, 1995 and 1994 and the
related consolidated statements of income, shareholders' equity and cash flows
for the years ended December 31, 1995, 1994 and 1993, which report appears in
the December 31, 1995 annual report on Form 10-K-SB of Elephant & Castle Group
Inc.
Our report included a paragraph titled "Comments by Auditors for U.S. Readers on
Canada - U.S. Reporting Conflict".
/s/Pannell Kerr Forster
Chartered Accountants
Vancouver, Canada
D. DAVID COHEN
ATTORNEY AT LAW
JERICHO ATRIUM
SUITE 133
500 NO. BROADWAY
JERICHO, NEW YORK 11753
ANDREW J. BRANOWER (516) 933-1700
OF COUNSEL (516) 933-7285
FAX: (516) 933-8454
September 5, 1996
Elephant & Castle Group Inc.
701 West Georgia Street
Vancouver, BC V7Y lE7
Canada
Attn: Jeffrey Barnett
RE: Elephant & Castle Group Inc./Alamo
Our File: 98046.017
Gentlemen:
The undersigned has served as counsel to Elephant & Castle Group Inc. (the
"Company") in connection with an agreement relating to the acquisition of all of
the capital stock of Alamo Grill, Inc. ("Grill"), a wholly-owned subsidiary of
Alamo Restaurants, Inc. ("Restaurants"), and in connection with the registration
of certain shares of the Common Stock of the Company (the "Shares") under the
Securities Act of 1933 as amended ("Act").
In my opinion, subject to the completion of the transactions required by
the Agreement with Grill and Restaurants, the Shares to be issued to the
shareholders of Restaurants in exchange for capital stock of Grill, will be,
when issued, duly issued and outstanding and without liens charge or encumbrance
thereon.
This shall also serve as a consent to the use of my name in the
Registration Statement filed pursuant to the Act under the heading "Experts."
Very truly yours,
/s/ D. David Cohen
------------------
D. David Cohen
ROBINS, KAPLAN, MILLER & CIRESI
ATTORNEYS AT LAW
2800 LASALLE PLAZA
800 LASALLE AVENUE
MINNEAPOLIS, MINNESOTA 55402-2015
TELEPHONE (612) 349-8500
FACSIMILE (612) 339-4181
ATLANTA
BOSTON
CHICAGO
LOS ANGELES
MINNEAPOLIS
ORANGE COUNTY
SAINT PAUL
SAN FRANCISCO
WASHINGTON, D.C.
August 29, 1996
Alamo Restaurants, Inc.
1465 East 84th Place
Merrillville, IN 46410
Re: Our File No.: 027225-0000
Dear Gentlemen:
This opinion letter is being delivered to you in connection with the filing of a
registration statement (the "Registration Statement") on Form S-4 which includes
the Proxy Statement/Prospectus relating to the Agreement dated April 9, 1996
(the "Agreement"), by and among Alamo Restaurants, Inc., a Minnesota corporation
(the "Company"), Alamo Grill, Inc., an Indiana corporation and whollyowned
subsidiary of the Company ("Sub"), and Elephants Castle Group, Inc., a British
Columbia corporation ("E&C"), pursuant to which the Company will sell all of the
capital stock of Sub to E&C in exchange for shares of E&C common stock and the
assumption by E&C of certain liabilities.
Except as otherwise provided, capitalized terms referred to herein have the
meanings set forth in the Agreement. All section references, unless otherwise
indicated, are to the Internal Revenue Code of 1986, as amended (the "Code").
We have acted as legal counsel to the Company and Sub in connection with the
Agreement. As such, and for the purpose of rendering this opinion, we have
examined (or will examine on or prior to the Effective Time of the Agreement)
and are relying (or will rely) upon (without any independent investigation or
review thereof) the truth and accuracy, at all relevant times, of the
statements, covenants, representations and warranties contained in the following
documents:
<PAGE>
1. The Agreement (including Exhibits);
2. Representations made by the Company and Sub;
3. Representations made by E&C;
4. The Registration Statement; and
5. Such other instruments and documents related to the formation,
organization and operation of the Company and Sub or to the
consummation of the Agreement and the transactions contemplated thereby
as we have deemed necessary or appropriate.
In connection with rendering this opinion, we have assumed or
obtained representations (and are relying thereon, without any independent
investigation or review thereof) that:
1. Original documents (including signatures) are authentic,
documents submitted to us as copies conform to the original documents, and there
has been (or will be by the Effective Time of the Agreement) due execution and
delivery of all documents where due execution and delivery are prerequisites to
effectiveness thereof.
2. The Agreement will be effective under the applicable state
law.
3. The Capital Stock of the Sub owned by the Company
represents substantially all of the assets of the Company.
4. The Company transfers to its shareholders in liquidation
all shares of E&C common stock received in consideration of its sale of all of
the capital stock of Sub and thereafter ceases doing business.
5. To the extent any expenses relating to the Agreement (or
the "plan of reorganization" within the meaning of Treas. Reg. Section 1.368-1
(c) with respect to the Agreement) are funded directly or indirectly by a party
other than the incurring party, such expenses will be within the guidelines
established in Revenue Ruling 73-54, 1973-1 C.B. 187.
6. Any representation or statement made "to the best of
knowledge" or similarly qualified is correct without such qualification.
Based on our examination of the foregoing items and subject to
the assumptions, exceptions, limitations and qualifications set forth herein, we
are of the opinion that for federal income tax purposes, the transaction carried
out pursuant to the Agreement will constitute a "reorganization" as defined in
Section 368(a) of the Code.
As a result of the Agreement constituting a reorganization, we
are further of the opinion that for federal income tax purposes:
a. No gain or loss will be recognized by the holders of the Company's Common
Stock upon the receipt of E&C Common Stock solely in exchange for their
Common S~ock upon the liquidation of the Company.
b. The aggregate tax basis of the E&C Common Stock so received by the Company'
s shareholder will be the same as the aggregate tax basis of the Company' s
Common Stock surrendered in exchange therefor.
c. The holding period of the E&C common Stock so received by each of the
Company' s shareholder will include the period for which the Company's
Common Stock surrendered in exchange therefor was considered to be held,
provided that the Company Common Stock so surrendered is held as a capital
<PAGE>
asset at the Effective Time of the Agreement. d. Neither the Company nor
Sub will recognize gain or loss solely as a result of the transactions
contemplated by the Agreement.
In addition to the assumptions set forth above, this opinion
is subject to the exceptions, limitations and qualifications set forth below.
1. This opinion represents and is based upon our best judgment
regarding the application of federal income tax laws arising under the Code,
existing judicial decisions, administrative regulations and published rulings
and procedures. Our opinion is not binding upon the Internal Revenue Service or
the courts, and the Internal Revenue Service is not precluded from successfully
asserting a contrary position. Furthermore, no assurance can be given that
future legislative, judicial or administrative changes, on either a prospective
or retroactive basis, will not adversely affect the accuracy of the conclusions
stated herein. Nevertheless, we undertake no responsibility to advise you of any
new developments in the application or interpretation of the federal income tax
laws.
2. This opinion addresses only the specific tax opinions set
forth above, and does not address any other federal, state, local or foreign tax
consequences that may result from the Agreement or any other transaction
(including any transaction undertaken in connection with the Agreement). In
particular, but not by way of limitation of the previous sentence, we express no
opinion regarding the tax consequences of the Agreement (including the opinions
set forth above) as applied to specific shareholders of the Company, foreign
persons, and holders of shares acquired upon exercise of stock options or in
other compensatory transactions.
3. No opinion is expressed as to any transaction other than
the transaction contemplated by the Agreement as described therein or to any
transaction whatsoever, including the Agreement, if all the transactions
described in the Agreement are not consummated in accordance with the terms of
such Agreement and without waiver or breach of any material provision thereof or
if all of the representations, warranties, statements and assumptions upon which
we relied are not true and accurate at all relevant times. In the event any one
of the statements, representations, warranties or assumptions upon which we have
relied to issue this opinion is incorrect, our opinion might be adversely
affected and may not be relied upon.
4. This opinion is intended solely for the purpose of
inclusion as an exhibit to the Registration Statement. It may not be relied upon
for any other purpose or by any other person or entity, and may not be made
available to any other person or entity without our prior written consent.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and further consent to the use of our name wherever
appearing in the Registration Statement.
Very truly yours,
/s/ Robins, Kaplan, Miller & Ciresi
-----------------------------------
Robins, Kaplan, Miller & Ciresi
