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ELEPHANT & CASTLE GROUP INC.
NOTICE OF EXTRAORDINARY GENERAL MEETING
OF SHAREHOLDERS
AND
MANAGEMENT INFORMATION CIRCULAR
AND
PROXY STATEMENT
FEBRUARY 9, 2000
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
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<S> <C>
NOTICE OF EXTRAORDINARY GENERAL MEETING OF SHAREHOLDERS......................1
MANAGEMENT INFORMATION CIRCULAR
AND PROXY STATEMENT.................................................2
PURPOSE OF SOLICITATION......................................................2
VOTING OF PROXIES ...........................................................2
APPOINTMENT OF PROXIES.......................................................3
REVOCATION OF PROXIES........................................................3
PRELIMINARY INFORMATION......................................................4
VOTING SECURITIES............................................................4
PARTICULARS OF SPECIAL BUSINESS TO BE ACTED UPON.............................4
Voting on Resolutions...............................................4
Background..........................................................5
Consolidation.......................................................6
SECURITY OWNERSHIP OF DIRECTORS, MANAGEMENT
AND CERTAIN BENEFICIAL OWNERS.......................................6
EXECUTIVE COMPENSATION.......................................................7
Compensation of Directors...........................................7
Report of the Compensation Committee................................8
Compensation Committee Interlocks and Insider Participation.........8
Summary Compensation Table..........................................8
Other Compensation Information.....................................10
Employment Agreements..............................................10
Employee Stock Option and Stock Compensation Plans.................10
Non-Plan Options...................................................11
Total Options/Weighted Average Exercise Price......................11
Indemnification of Directors or Officers...........................11
Performance Graph..................................................11
INDEBTEDNESS OF DIRECTORS AND EXECUTIVE OFFICERS............................11
i
<PAGE>
INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON.....................12
INTEREST OF INSIDERS IN MATERIAL TRANSACTIONS...............................12
Management Service Agreements......................................12
Security Interest in Favour of GEIPPP II...........................13
APPROVAL ...................................................................14
EXHIBIT A................................................................- 1 -
TEXT OF SPECIAL RESOLUTION......................................- 1 -
SCHEDULE A...............................................................- 1 -
</TABLE>
ii
<PAGE>
ELEPHANT & CASTLE GROUP INC.
856 HOMER STREET
VANCOUVER, BRITISH COLUMBIA, CANADA
V6B 2W5
(604) 684-6451
NOTICE OF EXTRAORDINARY GENERAL MEETING OF SHAREHOLDERS
TAKE NOTICE that an Extraordinary General Meeting (the "Meeting") of the
holders of Common shares ("Shareholders") of the Elephant & Castle Group Inc.
(the "Company") will be held at the Micheko Room on the 2nd Floor of the
Rosedale Hotel, 838 Hamilton Street, Vancouver, British Columbia on THURSDAY,
MARCH 23, 2000 at the hour of ten o'clock in the forenoon (Vancouver time)
for the following purposes:
1. To consider and, if deemed advisable, pass a special resolution in the
form attached as Exhibit A to the Management Information Circular and
Proxy Statement which accompanies this notice, such that the 20,000,000
Common shares without par value in the capital of the Company be
consolidated into 10,000,000 Common shares without par value, every two
Common shares before consolidation being consolidated into one share (the
"Consolidation");
2. To transact such other business as may properly come before the Meeting.
A Shareholder entitled to attend and vote at the Meeting is entitled to
appoint a proxyholder to attend and vote in his or her stead. If you are
unable to attend the Meeting, or any adjournment thereof in person, please
read the Notes accompanying the Form of Proxy enclosed herewith and then
complete and return the Proxy within the time set out in the Notes. The
enclosed Form of Proxy is solicited by Management but, as set out in the
Notes, you may amend it if you so desire by striking out the names listed
therein and inserting in the space provided the name of the person you wish
to represent you at the Meeting.
A copy of the documents or proposed documents to be considered, approved,
ratified, adopted, authorized, executed or given effect to will be available
for inspection by members at the registered and records office of the Company
during usual business hours up to the date of the Meeting.
DATED at Vancouver, British Columbia, this 9th day of February, 2000.
BY ORDER OF THE BOARD OF DIRECTORS
ELEPHANT & CASTLE GROUP INC.
RICHARD H. BRYANT
-------------------------
Richard H. Bryant
President and Chief Executive Officer
1
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ELEPHANT AND CASTLE GROUP INC.
EXTRAORDINARY GENERAL MEETING
OF SHAREHOLDERS
TO BE HELD ON MARCH 23, 2000
MANAGEMENT INFORMATION CIRCULAR
AND PROXY STATEMENT
PURPOSE OF SOLICITATION
This Management Information Circular and Proxy Statement is furnished in
connection with the solicitation of proxies by the Board of Directors and the
management of Elephant & Castle Group Inc. (the "Company") for use at the
extraordinary general meeting (the "Meeting") of the holders of Common shares
(the "Shareholders") of the Company, to be held at the time and place and for
the purposes set forth in the accompanying Notice of Meeting and at any
adjournment thereof.
Management is seeking Shareholder authorisation for a consolidation of the
Company's Common shares without par value. Prior to the action proposed, the
Company's Memorandum authorizes the issuance of 20,000,000 Common shares
without par value. Management proposes a reduction of the Common shares by
consolidation of the 20,000,000 Common shares into 10,000,000 Common shares.
Every two (2) Common shares before consolidation will be consolidated into
one (1) Common share after consolidation. This action, if taken, is
effectively a reverse split of the Company's common stock on a basis of one
(1) new share for each two (2) shares previously outstanding.
The information contained in this Management Information Circular and Proxy
Statement is given as at February 9, 2000, except where otherwise indicated.
THE SOLICITATION IS MADE BY THE MANAGEMENT OF THE COMPANY (the "Management").
The cost of solicitation will be borne by the Company. Although it is
expected that the solicitation of proxies will be primarily by mail, proxies
may also be solicited personally or by telephone, facsimile transmission,
electronic mail or personal interview by regular employees of the Company, at
a nominal cost.
VOTING OF PROXIES
All shares represented at the Meetings by properly executed proxies will be
voted (including the voting on any ballot), in accordance with the
instructions specified in the Form of Proxy. IN THE ABSENCE OF ANY SUCH
SPECIFICATION, THE MANAGEMENT DESIGNEES, IF NAMED IN THE FORM OF PROXY, WILL
VOTE IN FAVOUR OF THE MATTERS SET OUT THEREIN.
The Management designees named in the enclosed Form of Proxy are executive
officers of the Company and have indicated their willingness to represent as
proxy the Shareholder who appoints them.
2
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THE ENCLOSED FORM OF PROXY, WHEN PROPERLY SIGNED, CONFERS DISCRETIONARY
AUTHORITY UPON THE PERSONS NAMED THEREIN WITH RESPECT TO AMENDMENTS OR
VARIATIONS OF MATTERS IDENTIFIED IN THE NOTICE OF MEETING AND ANY OTHER
MATTERS WHICH MAY PROPERLY BE BROUGHT BEFORE THE MEETING. AS OF THE DATE
HEREOF, THE MANAGEMENT OF THE COMPANY IS NOT AWARE THAT ANY SUCH AMENDMENTS
TO, VARIATIONS OF, OR OTHER MATTERS ARE TO BE PRESENTED FOR ACTION AT THE
MEETING. HOWEVER, IF ANY OTHER MATTERS WHICH ARE NOT NOW KNOWN TO THE
MANAGEMENT SHOULD PROPERLY COME BEFORE THE MEETING, THEN THE MANAGEMENT
DESIGNEES INTEND TO VOTE IN ACCORDANCE WITH THE JUDGMENT OF THE MANAGEMENT OF
THE COMPANY.
The number of votes required for approval of any matter that will be
submitted to the Shareholders at the Meeting is not less than three-quarters
of the votes cast, unless otherwise indicated in this Management Information
Circular and Proxy Statement.
APPOINTMENT OF PROXIES
The enclosed form of Proxy names Richard Bryant or Daniel DeBou, both
executive officers of the Company, as the Management designees. HOWEVER, A
SHAREHOLDER HAS THE RIGHT TO DESIGNATE A PERSON (WHO NEED NOT BE A
SHAREHOLDER OF THE COMPANY), OTHER THAN THE MANAGEMENT DESIGNEES, TO ATTEND
AND ACT FOR THE SHAREHOLDER AT THE MEETING. Such right may be exercised by
inserting in the blank space provided in the Form of Proxy, the name of the
person to be designated and striking out therefrom the names of the
Management designees or by completing another proper form of proxy and
delivering same to either the registered office of the Company, located at
2100-1075 West Georgia Street, Vancouver, British Columbia, Canada, V6E 3G2
or to the offices of the Company's Registrar and Transfer Agent, American
Stock Transfer and Trust Company, Attention: Isaac Frelich, located at 6201,
15th Avenue, Brooklyn, New York, 11219, USA, not later than forty-eight (48)
hours (excluding Saturdays, Sundays and holidays) before the time set for the
Meeting or any adjournment thereof.
The Form of Proxy, to be valid, must be signed by the Shareholder, or by the
Shareholder's attorney duly authorized in writing, or, if the Shareholder is
a corporation, the Form of Proxy shall be executed by an officer of such
corporation or by an attorney duly authorized in writing. If the proxy is
executed by an attorney for an individual Shareholder or by an officer or
attorney of a corporate Shareholder, the instrument so empowering the officer
or attorney, as the case may be, or a notarial copy thereof, must accompany
the Form of Proxy.
REVOCATION OF PROXIES
In addition to revocation in any manner permitted by law, a proxy may be
revoked by an instrument in writing signed by the Shareholder, or by the
Shareholder's attorney duly authorized in writing or, if the Shareholder is a
corporation, the instrument in writing shall be executed by an officer of
such corporation or by an attorney duly authorized in writing, and deposited
at the registered office of the Company, located at 2100-1075 West Georgia
Street,
3
<PAGE>
Vancouver, British Columbia, Canada, V6E 3G2, at any time up to and including
the last business day preceding the day of the Meeting or any adjournment
thereof, or, as to any matter in respect of which a vote shall not already
have been cast pursuant to such proxy, with the Chairman of the Meeting on
the day of the Meeting, or at any adjournment thereof, and upon either of
such deposits the proxy is revoked.
PRELIMINARY INFORMATION
The Company is a corporation organized under the laws of the Province of
British Columbia, Canada. The Company operates a chain of casual dining
restaurants located throughout Canada and, to a lesser extent, in the United
States. The Company entered into a joint venture with Rainforest Cafe, Inc.
(NASDAQ: RAIN) to develop and operate Rainforest restaurants in Canada.
VOTING SECURITIES
All holders of the Company's Common shares outstanding as of the close of
business on February 16, 2000 (the "Record Date") who either personally
attend the Meeting or who have completed and delivered a form of proxy in the
manner and subject to the provisions described below will be entitled to vote
at the Meeting. The Company's only class of voting securities is its Common
shares, without par value. As of the date hereof, there were 5,289,209 fully
paid and non assessable Common shares issued and outstanding. Each
Shareholder is entitled to one vote per Common Share held by such
Shareholder. There is no cumulative voting.
PARTICULARS OF SPECIAL BUSINESS TO BE ACTED UPON
To the knowledge of the Directors of the Company, the only matters
to be brought before the Meeting are those matters set forth in the
accompanying Notice of Meeting. IN THE ABSENCE OF INSTRUCTIONS MADE ON A FORM
OF PROXY, IT IS THE INTENTION OF THE MANAGEMENT DESIGNEES, IF NAMED AS PROXY,
TO VOTE FOR THE APPROVAL OF ALL OF THE MATTERS REFERRED TO IN THE NOTICE. If
any other matters properly come before the Meeting, it is the intention of
the person name in the form of proxy to vote the same in accordance with
their best judgment of such matters.
VOTING ON RESOLUTIONS
Management of the Company is seeking approval by special resolution of the
matters described below under the heading "Consolidation". For the purposes
of the Meeting, "SPECIAL RESOLUTION" means a resolution passed by not less
than three-quarters of the votes cast in person or by proxy in respect of
each matter.
4
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The quorum at the Meeting shall be either two members, two proxyholders
representing two members or one member and a proxyholder representing another
member, in each case personally present at the commencement of the meeting
and holding or representing by proxy not less than one-tenth of the issued
shares of the Company entitled to be voted at such meeting.
BACKGROUND
Management is seeking shareholder authorization for consolidation of the
Company's Common shares without par value. Prior to the action proposed, the
Company's Memorandum authorizes the issuance of 20,000,000 Common shares
without par value. Management proposes a reduction of the Common shares by
consolidation of the 20,000,000 Common shares into 10,000,000 Common shares
(the "Consolidation"). Every two (2) Common shares before the Consolidation
will be consolidated into one (1) Common share after the Consolidation. This
action, if taken, is effectively a reverse split of the Company's common
stock on a basis of one (1) new share for each two (2) shares previously
outstanding.
The Company currently has 5,289,209 Common shares outstanding and has
reserved 8,305,597 additional Common shares for issuance in connection with
other transactions. If the Consolidation is approved, the number of Common
shares outstanding will be reduced to not more than 2,644,604. Fractional
shares are not being issued in connection with the Consolidation.
The Company's common stock is listed for trading on NASDAQ small cap market
(PUBSF) and on the Pacific Stock Exchange in the United States. NASDAQ rules
for maintaining a listing require a trading price in excess of One Dollar
(U.S. $1.00) per share. During substantial portions of the last quarter of
1999 and the first quarter of the current year, the Company's common stock
traded at or below $1.00 per share. The Consolidation will decrease the
number of total shares outstanding and to be issued and thereby increase the
opportunities for the Company's Common shares to retain the NASDAQ listing.
If the listing is retained, Management believes it will enhance the future
liquidity of the Company's equity securities for shareholders and the
potential for new securities issuances by the Company in the future.
There is no assurance that the action proposed, if taken, will assure the
maintenance of the NASDAQ listing. Furthermore, historically, securities
which have been reverse split tend to trade towards their prior levels after
Consolidation. If that were to occur in this instance, shareholders could be
adversely impacted, by having a diminution of the total dollar valuation of
the same proportionate interest in the Company.
Management recommends that you vote FOR the Consolidation proposal, in order
to maximize the Company's opportunities to maintain the NASDAQ listing.
5
<PAGE>
CONSOLIDATION
The proposed Consolidation requires approval of the Shareholders in the form
of a special resolution approving the Consolidation and alteration of the
Memorandum of the Company passed at the Meeting. The full text of the special
resolutions is set forth in Exhibit A to this Management Information Circular
and Proxy Statement.
The special resolution, if approved, will be sent to the registrar appointed
pursuant to section 320 of the COMPANY ACT (British Columbia), together with
a copy of the Memorandum as altered by the special resolution. The special
resolution to alter the Memorandum shall take effect on the date that a
certified copy has been accepted for filing by the registrar or on the date
specified in the resolution, whichever is later.
SECURITY OWNERSHIP OF DIRECTORS, MANAGEMENT
AND CERTAIN BENEFICIAL OWNERS
To the knowledge of the directors and executive officers of the Company the
following table sets forth, as of the date hereof, information relating to
the beneficial ownership of the Company's Common shares by each person known
to the Company to be the beneficial owner of more than 10% of the Common
shares, by each director and executive officer of the Company and all
directors and executive officers as a group:
<TABLE>
<CAPTION>
NAME NUMBER OF COMMON SHARES APPROXIMATE PERCENTAGE OF
BENEFICIALLY OWNED OR OVER TOTAL ISSUED AND
WHICH CONTROL OR DIRECTION OUTSTANDING COMMON
IS EXERCISED SHARES
<S> <C> <C>
Jeffrey M. Barnett(1)(2) 570,375 10.8%
Peter J. Barnett(3) 550,375 10.4%
George W. Pitman(1) 132,250 2.5%
William C. McEwen(1) 5,100 < 1%
Martin O'Dowd(1) 26,960 < 1%
David Wiederecht(1)(4) -- --
Anthony Mariani(1)(4) -- --
Colin Stacey(1) -- --
Richard H. Bryant(1) 7,000 < 1%
Daniel DeBou 200 < 1%
Paul Tilbury 9,000 < 1%
6
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<CAPTION>
NAME NUMBER OF COMMON SHARES APPROXIMATE PERCENTAGE OF
BENEFICIALLY OWNED OR OVER TOTAL ISSUED AND
WHICH CONTROL OR DIRECTION OUTSTANDING COMMON
IS EXERCISED SHARES
<S> <C> <C>
D. Matheson(1) 1,500 < 1%
General Electric Investment 1,299,721 24.6%
Private Placement Partners
II(5)(6)
All directors and executive 2,602,481 49.2%
officers as a group
</TABLE>
(1) With the exception of Messrs. McEwen and Matheson each person was
appointed as a director at the last Annual General Meeting. Mr. McEwen
and Mr. Matheson were subsequently appointed directors on November 3rd,
1999.
(2) These shares are subject to a voting trust agreement under which GE
Investment Management ("GEIM"), the general partner of General Electric
Investment Private Placement Partners II ("GEIPPP II") is entitled to vote
such shares to elect directors subject to certain conditions. (See
"INTEREST OF INSIDERS IN MATERIAL TRANSACTIONS").
(3) Includes 50,000 Common shares transferred by Mr. Peter Barnett to his
children.
(4) Messrs. Wiederecht and Mariani are employed by a fund, GEIM, general
partner of GEIPPP II, the holdings of which are separately stated herein.
(5) Excludes up to 4,366,000 additional Common shares issuable on conversion
of Warrants and Subordinated Convertible Debentures held by the Fund.
(6) Excludes 570,375 Common shares owned by Mr. Jeffrey Barnett, which are
subject to a voting trust agreement with GEIM (see note 2 above).
EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
Directors who are not employees or officers of the Company (herein the
"Outside Directors") were separately compensated for their services as
follows: CDN$500 cash for each three months as a director, plus 1,000 Common
shares for each two years of service as an Outside Director. Effective July
1, 1999, Outside Director compensation was increased to CDN$1,250 per quarter
plus 3,000 Common shares for each year of service. Certain Outside Directors
have elected not to accept cash compensation and have redirected their Common
Share compensation to their employer. No director, other than Mr. Jeffrey
Barnett, is indebted to the Company. As to Mr. Barnett's indebtedness to the
Company, see "INTEREST OF INSIDERS IN MATERIAL TRANSACTIONS".
7
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REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee (the "Committee") is currently composed of three
directors, Messrs. Anthony Mariani, Chairman, Jeffrey M. Barnett and Martin
O'Dowd. Mr. Mariani is a non-employee director, Mr. Barnett ceased to be an
executive employee of the Company on June 25, 1999, and Mr. O'Dowd ceased to
be an executive employee of the Company on October 25, 1999. See "INTEREST OF
INSIDERS IN MATERIAL TRANSACTIONS". During 1999, the Committee has not
altered or otherwise modified the compensation practices and general rates
which prevailed for the principal executives of the Company at the time of
its 1993 initial public offering. The Committee negotiated a compensation
package for Mr. Bryant, the President and Chief Executive Officer of the
Company.
The Compensation Committee
By: Anthony Mariani, Chairman
Jeffrey M. Barnett
Martin O'Dowd
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Anthony Mariani, an Outside Director, is currently serving as Chairman of the
Compensation Committee. Each of Messrs. J. Barnett, G. Pitman, Wm. McEwen, M.
O'Dowd, A. Mariani, D. Matheson and D. Wiederecht is an Outside Director. The
Company intends to pursue a policy of having directors unaffiliated with
management to constitute a majority of the full Board, and at least one half
of the members of the Compensation Committee and the Audit Committee. Filling
vacancies on the Board may require finding Canadian residents willing to so
serve, since the Board of any corporation organized under the laws of British
Columbia must consist of a majority of Canadian residents. There are no
interlocks among the members of the Compensation Committee.
SUMMARY COMPENSATION TABLE
The following table sets forth a summary of the compensation of the Chief
Executive Officer of the Company and the four other most highly paid
executive officers of the Company serving as such ("Named Executive
Officers") as of the end of the last fiscal year for their services rendered
during fiscal years 1999, 1998 and 1997. All figures are in Canadian dollars.
The relative value of the Canadian dollar compared to the U.S. dollar
fluctuates from time to time. During 1999, the average value was each CDN
$1.00 equals U.S. $0.67.
8
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<TABLE>
<CAPTION>
_________________________________________________________________________________________
Annual Long Term
Compensation Compensation
________________________________________
Awards
_______________
Name and Securities All Other
Principal Under Options Compen-
Position Year Salary Bonus Granted sation(1)
_________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Jeffrey M. Barnett, 1999 $ 84,569 -- -- $695,199(2)
Former 1998 $167,178 -- 125,000 $ 45,398
Chairman(5) 1997 $164,373 -- -- $ 45,398
_________________________________________________________________________________________
Rick Bryant, 1999 $155,355 $28,000 -- $ 864
President 1998 $132,125 -- 100,000 --
and Chief 1997 $ 20,833(3) -- -- --
Executive Officer
_________________________________________________________________________________________
Martin O'Dowd, 1999 $173,516 -- -- $ 28,912
Former Chief 1998 $247,801 $72,000 600,000 --
Executive 1997 $ 59,278(4) -- -- --
Officer and
President(5)
_________________________________________________________________________________________
George W. Pitman, 1999 $ 54,786 -- -- $258,500(2)
Former Vice 1998 $102,590 -- -- --
President, 1997 $ 99,750 -- -- --
Design and
Development(5)
_________________________________________________________________________________________
Paul Tilbury, 1999 $ 99,359 $16,200 -- $ 4,958
Vice President, 1998 $ 86,359 -- -- $ 4,094
Canadian 1997 $ 58,052 -- 20,000 --
Rainforest
_________________________________________________________________________________________
</TABLE>
(1) Other compensation consists of retiring allowances and benefits,
directors fees, life insurance premiums paid on policies on which the
families of the insured are the sole beneficiaries and an automobile
allowance. Also includes, in 1998 and 1997, certain travel and
entertainment perquisites deemed to be of a compensatory nature. In
addition, Mr. Jeffrey M. Barnett is the owner of an apartment in
Toronto, Canada used by the Company for various business purposes.
Through 1998, the Company paid CDN $2,500 per month for the use
thereof, no part of which has been accounted for as other compensation.
This arrangement terminated at the end of 1998.
9
<PAGE>
(2) These amounts include amounts payable under the terms of the settlement
agreements made in 1999. See "INTEREST OF INSIDERS IN MATERIAL
TRANSACTIONS - Management Service Agreement".
(3) Mr. Bryant began his employment with the Company in November of 1997.
(4) Mr. O'Dowd began his employment with the Company in June of 1997.
(5) Mr. Barnett, Mr. O'Dowd and Mr. Pitman ceased being executive officers
on June 25, 1999, October 25, 1999 and June 25, 1999, respectively.
The Company currently does not maintain, and none of the Named Executive
Officers are eligible for, deferred compensation, long-term incentive plan
payouts, restricted stock awards, or other similar compensatory arrangements.
OTHER COMPENSATION INFORMATION
The aggregate compensation paid or payable directly to the Company's
directors and executive officers as a group (including the Named Executive
Officers) by the Company for the year ended December 26, 1999 was $1,767,202.
These amounts include salaries, fees, commissions and bonuses, but exclude
the value of options granted in partial compensation for salary or bonus. The
directors and executive officers as a group earned taxable benefits in 1999
aggregating less than $6,000 comprising solely standard medical benefits and,
in one case, an automobile allowance.
EMPLOYMENT AGREEMENTS
During 1993, the Company entered into five-year employment agreements with
the personal service corporations of Messrs. Jeffrey M. Barnett, Peter
Barnett and George W. Pitman. The agreements with Messrs. Jeffrey M. Barnett
and George W. Pitman were extended through 1999. See the discussion of the
Barnett Severance Agreement and non-renewal of Mr. Pitman's employment
agreement in "INTEREST OF INSIDERS IN MATERIAL TRANSACTIONS".
EMPLOYEE STOCK OPTION AND STOCK COMPENSATION PLANS
The Board of Directors of the Company has adopted two stock plans, and the
Shareholders have ratified such plans. These plans are the 1993 Stock Option
Plan (the "1993 Plan") and the 1997 Stock Compensation Plan (the "1997
Plan"). Under the 1993 Plan, options may be granted to key salaried
management and administration employees. Messrs. Jeffrey M. Barnett, Peter J.
Barnett and George W. Pitman are not eligible for grants pursuant to the 1993
Plan. 100,000 Common shares of the Company were initially set aside for
grants pursuant to the 1993 Plan, while 400,000 Common shares of the Company
were set aside pursuant to the 1997 Plan. Options granted pursuant to both
Plans vest 1/3 after 18 months; 1/3 after 30 months; and the remaining 1/3
after 42 months. All options expire on the fifth annual anniversary of the
date of grant. No stock options were granted or exercised under either Plan
during the most recent fiscal year.
10
<PAGE>
Both the 1993 Plan and the 1997 Plan are intended to permit the Company to
retain and attract qualified individuals who contribute to the overall
success of the Company and the achievement of performance measures. Both
Plans are administered by the Compensation Committee of the Board of
Directors, whose members determine to whom options will be granted and the
terms of the options. The Committee is entitled to accelerate the vesting of
options upon such circumstances as it deems appropriate. Actual vesting can
be accelerated or delayed based on performance measures established by the
Compensation Committee.
NON-PLAN OPTIONS
During 1999, no non-plan options were granted to or exercised by executive
officers.
TOTAL OPTIONS/WEIGHTED AVERAGE EXERCISE PRICE
There were an aggregate of 1,262,584 options outstanding at December 26,
1999, exercisable at various prices at a weighted average exercise price of
U.S. $6.48 per share.
INDEMNIFICATION OF DIRECTORS OR OFFICERS
There was no indemnification payable during the 1999 financial year to
directors or officers of the Company.
PERFORMANCE GRAPH
The following graph compares the total cumulative shareholder return for $100
invested in Common shares on June 1, 1993 with the total returns of the S&P
Restaurant Index and the NASDAQ Composite Index:
<TABLE>
<CAPTION>
Monthly Total Returns (%)
Elephant & Castle
S&P 500: Restaurants Group Inc. NASDAQ
Composite
<S> <C> <C> <C>
Jun-93 100 100.00 100
Sep-93 106.1965 60.00 108.36
Dec-93 116.8257 48.33 110.3487
Mar-94 116.0468 63.33 105.6325
Jun-94 115.7066 73.33 100.2855
Sep-94 105.7304 91.67 108.5716
Dec-94 116.4611 105.21 106.8201
Mar-95 133.9424 115.00 116.1
Jun-95 152.1718 125.00 132.6
Sep-95 151.6227 130.84 148.2
Dec-95 174.67 75.00 149.5
Mar-96 184.1489 95.00 156.5
Jun-96 179.0556 98.33 168.3
Sep-96 180.828 78.33 174.3
Dec-96 172.5741 101.67 183.4
Mar-97 179.0631 122.51 173.5
Jun-97 187.2584 128.33 204.9
Sep-97 184.0997 137.51 239.5
Dec-97 185.3021 93.33 223.1
Mar-98 224.1779 76.67 260.8
Jun-98 253.6798 68.33 269.2
Sep-98 230.0482 53.33 240.6
Dec-98 290.3916 22.51 311.5
Mar-99 352.3536 30.00 349.7
Jun-99 318.0356 20.00 362.5
Sep-99 317.1273 10.00 389.2
Dec-99 295.4195 9.60 563.8
</TABLE>
INDEBTEDNESS OF DIRECTORS AND EXECUTIVE OFFICERS
Other than as set forth below, no director, executive officer, proposed
nominee for election as a director, nor any of their respective associates or
affiliates is or has been at any time since the beginning of the last
completed financial year indebted to the Company.
11
<PAGE>
TABLE OF INDEBTEDNESS OF DIRECTORS, EXECUTIVE OFFICERS AND
SENIOR OFFICERS UNDER
SECURITIES PURCHASE PROGRAMS AND OTHERWISE
<TABLE>
<CAPTION>
________________________________________________________________________________________________
Name of Involvement Largest Amount Financially Security
Principal of Issuer Amount Outstanding Assisted for
Position or Outstanding as at Securities Indebtedness
Subsidiary ($) February 9, Purchases
2000 During 1999
________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Mr. Barnett Former $350,000 $350,000(1) None Company
Chairman Shares
________________________________________________________________________________________________
</TABLE>
(1) For the terms of indebtedness See "INTEREST OF INSIDERS IN
MATERIAL TRANSACTIONS".
INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
Other than as set forth in this Management Information Circular and Proxy
Statement, no Director or officer of the Company, person who was a director
or officer of the Company at any time since the beginning of its last
completed financial year, Shareholder who holds more than 10% of the voting
rights attached to the shares of the Company or any associate, or affiliate
of any of the foregoing has any material interest in any matter to be acted
upon at the Meeting.
INTEREST OF INSIDERS IN MATERIAL TRANSACTIONS
Other than as disclosed below, no insider, proposed nominee for election as a
director, or any associate or affiliate of the foregoing, had any material
interest, direct or indirect, in any transaction or proposed transaction
since the beginning of the last completed financial year which has materially
affected or would materially affect the Company.
Other than as disclosed below, the Company is not aware of any material
transaction, involving any director or executive officer or proposed nominee
for election as a director or any Shareholder who holds more than 10% of the
voting rights attached to the Common shares of the Company or any associate
or affiliate of any of the foregoing, which has been entered into since the
commencement of the Company's last completed financial year or in any
proposed transaction which, in either case, has materially affected or will
materially affect the Company or any of its subsidiaries.
MANAGEMENT SERVICE AGREEMENTS
In 1999, the Company did not renew a Management Service Agreement pursuant to
which two personal service corporations owned by Mr. J. Barnett, former
Chairman of the Board and Chief
12
<PAGE>
Executive Officer of the Company had provided management services to the
Company. Following such non-renewal, a Settlement Agreement was executed
pursuant to which Mr. Barnett resigned as Chairman of the Board, and all
titles with the Company's subsidiaries and affiliates. Mr. Barnett continues
as a Director of the Company.
Under the Settlement Agreement, the Company pays to Mr. Barnett quarterly
instalments of CDN$23,500 against a total settlement of CDN$335,000. Mr.
Barnett also continues to receive certain life insurance and medical
benefits, and is entitled to 215,000 vested options to purchase the Company's
Common shares at an average exercise price of U.S.$3.84. If the Consolidation
is approved, the number of shares underlying such options will be halved and
the exercise prices doubled (as will be the case with all options and other
convertible securities held by other persons, including Management persons).
Mr. Barnett owes the Company CDN$350,000 payable on the later of June 1, 2000
or the Company's payment of its obligations owed to Mr. Barnett as described
above. Mr. Barnett has the option to repay his indebtedness to the Company by
surrendering the Company's Common shares at fair market value for such shares
from time to time.
Mr. Barnett has also entered into a voting trust agreement agreeing that GE
Investment Management ("GEIM"), the general partner of GEIPPP II, the
Company's primary investor, will vote all of the Company's Common shares
owned by Mr. Barnett (a) in favour of all resolutions to elect Mr. Barnett or
under certain circumstance in the event of his death, his executor, as a
director of the Company, and (b) in the discretion of the trustee in favour
or against all resolutions to elect as directors of the Company all person
designated or nominated by the Company's Board of Directors.
In 1999, the Company did not renew a Management Service Agreement pursuant to
which a personal service corporation owned by Mr. Pitman, former Vice
President, Design & Development, had provided management services to the
Company. Following such non-renewal, a Settlement Agreement was executed. Mr.
Pitman continues as a director of the Company.
Under the Settlement Agreement, the Company pays to Mr. Pitman quarterly
instalments of CDN$12,500 against a total settlement of CDN$200,000. Mr.
Pitman also continues to receive certain medical benefits, and is entitled to
20,000 vested options to purchase the Company's Common shares at an average
exercise price of US $5.00. If the Consolidation is approved, the number of
shares underlying such options will be halved and the exercise prices doubled
(as will be the case with all options and other convertible securities held
by other persons, including Management persons).
SECURITY INTEREST IN FAVOUR OF GEIPPP II
The Company has provided a security interest over all the assets of the
Company and each of its subsidiaries to secure the repayment of the
U.S.$9,000,000 of Convertible Unsecured Debentures (the "Debentures") issued
by the Company to GEIPPP II in November, 1995. In consideration for the
security interest in the assets of the Company and its subsidiaries, GEIPPP
II waived all
13
<PAGE>
existing defaults, all interest payments for a period of six months and
amended certain financial covenants to make them less onerous.
The grant of a security interest was approved by the Board of Directors of
the Company on July 16, 1999 and re-affirmed by the Board, following a review
of the Company's financial position on September 13, 1999. Messrs. Wiederecht
and Mariani, both of whom are nominees of GEIPPP II, did not participate in
either the discussion or the vote at the two meetings when this issue was
dealt with by the Board.
GEIPPP II is the holder of 1,299,721 Common shares (approximately 24.6% of
total outstanding) of the Company and, by virtue of the voting trust
agreement with Mr. Jeffrey Barnett (see above "Settlement Agreement") is
entitled to vote Mr. Jeffrey Barnett's 570,375 Common shares on any election
for directors in favour of nominees selected by the Board of Directors,
subject to an obligation to vote for Mr. Jeffrey Barnett's election or under
certain circumstances, in the event of his death, his executor.
APPROVAL
The Board of Directors of the Company have approved the contents of this
Management Proxy Circular and Statement, and have further approved the
sending of it to the Shareholders of the Company.
DATED at Vancouver, British Columbia, as of the 9th day of February, 2000.
ELEPHANT & CASTLE GROUP INC.
BY ORDER OF THE BOARD OF DIRECTORS
RICHARD H. BRYANT
--------------------------------------
RICHARD H. BRYANT
President and Chief Executive Officer
14
<PAGE>
EXHIBIT A
TEXT OF SPECIAL RESOLUTION
CONSOLIDATION OF COMMON SHARES
UPON MOTION duly made, IT IS RESOLVED AS A SPECIAL RESOLUTION THAT:
1. The 20,000,000 Common shares without par value in the capital of the
Elephant & Castle (the "Company") be consolidated into 10,000,000
Common shares without par value, every two Common shares before
Consolidation being consolidated into one share (the "Consolidation"),
and the memorandum of the Company be altered accordingly so that it
shall be in the form set out in Schedule A.
2. No fractional Common shares of the Corporation be issued in connection
with the Consolidation, and the number of Common shares to be received
by each shareholder will be rounded down to the nearest whole number of
Common shares which that shareholder would otherwise be entitled to
receive upon such Consolidation.
<PAGE>
SCHEDULE A
COMPANY ACT
MEMORANDUM
of
Elephant & Castle Group Inc.
(the "Company")
(as altered by special resolution of the Company
passed on / /)
1. The name of the Company is Elephant & Castle Group Inc.
2. The authorized capital of the Company consist of 10,000,000 Common
shares without par value.
<PAGE>
FOR THE EXTRAORDINARY GENERAL MEETING OF SHAREHOLDERS OF
ELEPHANT & CASTLE GROUP INC.
TO BE HELD ON MARCH 23, 2000
THIS PROXY IS SOLICITED BY AND ON BEHALF OF MANAGEMENT
The undersigned, being a holder of Common shares without par value ("Common
Shares") in the capital of Elephant & Castle Group Inc. (the "Company") and
hereby revoking any proxy previously given, hereby appoints RICHARD BRYANT,
or failing him, DANIEL DEBOU, or instead of either of them
____________________________ as proxyholder of the undersigned, to attend and
vote for the undersigned and otherwise act for and on behalf of and in the
name of the undersigned at the Extraordinary General Meeting (the "Meeting")
of shareholders of the Company, to be held on the 23rd day of March, 2000,
and at any adjournment or postponement thereof. The undersigned hereby
instructs the proxyholder to vote in favour or against, or withhold or
abstain from voting, as the case may be, all of the Common Shares in the
capital of the Company or such number of shares as may be noted hereon
registered in the name of the undersigned on any poll (ballot) in respect of
the following matters details of which are provided in the Management
Information Circular and Proxy Statement, as indicated on the reverse:
<PAGE>
NOTES TO PROXY
Shareholders who are unable to attend the Meeting are requested to complete
and deposit this proxy no later than 9:00 a.m. (Vancouver Time), March 21,
2000, either with the registered office of the Company, located at 2100-1075
West Georgia Street, Vancouver, British Columbia, Canada, V6E 3G2 or to the
offices of the Company's Registrar and Transfer Agent, American Stock
Transfer and Trust Company, Attention: Isaac Frelich, located at 6201, 15th
Avenue, Brooklyn, New York, 11219, USA.
The shares represented by this proxy will be voted for or against, or the
voting of such shares will be withheld or abstained from, as the case may be,
on any poll (ballot) in respect of the item set forth in the Form of Proxy as
the shareholder may have specified by marking an "X" in the place provided
for that purpose. IF NO CHOICE IS SPECIFIED, THE SHARES WILL BE VOTED ON ANY
POLL (BALLOT) AS IF THE SHAREHOLDER HAD SPECIFIED VOTING FOR (I.E. IN FAVOUR
OF) THE ITEM, AND THE SHAREHOLDER HEREBY CONFERS DISCRETIONARY AUTHORITY ON
THE PROXYHOLDER OR PROXYHOLDERS HEREBY APPOINTED TO VOTE THE SHARES
ACCORDINGLY.
Each shareholder has the right to appoint a person (which may be a company)
to attend and act on the shareholder's behalf at the Meeting other than the
persons designated in this Form of Proxy. If the shareholder does not want
to appoint the persons designated in the Form of Proxy, the shareholder
should strike out their names and insert in the blank space provided the name
of the person the shareholder wishes to act as the shareholder's proxyholder
and, if desired, an alternate proxyholder. A proxyholder or alternate
proxyholder need not be a shareholder of the Company.
In the case of any amendments or variations to the proposed resolutions, and
in the case of any other matters which may properly come before the Meeting,
the shareholder hereby confers discretionary authority on the proxyholder
hereby appointed to act and vote on the shareholder's behalf on any poll
(ballot), as the proxyholder to the proxyholder's sole discretion may see
fit, all in the same manner and to the same extent and with the same power as
the shareholder could, if the shareholder were personally present at such
meeting. No such amendments, variations, or other matters were known to
management at the time this proxy was solicited.
In addition to revocation in any manner permitted by law, a proxy may be
revoked by an instrument in writing signed by the shareholder or by the
shareholder's attorney duly authorized in writing or, if the shareholder is a
corporation, the instrument in writing should bear the corporate seal of such
corporation and shall be executed by an officer of such corporation or by an
attorney duly authorized in writing, and deposited either at the registered
office of the Company, located at 2100-1075 West Georgia Street, Vancouver,
British Columbia, V6E 3G2, at any time up to and including the last business
day preceding the day of the Meeting or any adjournment thereof, or as to any
matter in respect of which a vote shall not already have been cast pursuant
to such proxy, with the Chairman of the Meeting on the day of the Meeting, or
at any adjournment thereof, and upon either of such deposits the proxy is
revoked.
PLEASE MARK, SIGN, DATE AND RETURN THE
PROXY PROMPTLY USING THE ENCLOSED ENVELOPE.
<PAGE>
FOR AGAINST ABSTAIN 1. To authorise the consolidation of
/ / / / / / 20,000,000 Common Shares without par
value in the capital of Elephant &
Castle Group Inc. into 10,000,000 Common
Shares without par value.
THE UNDERSIGNED HEREBY AUTHORIZES THE PROXYHOLDER TO VOTE IN THE MATTER OF
SHARE CONSOLIDATION LISTED IN ITEM 1 ABOVE, UNLESS AN INSTRUCTION TO THE
CONTRARY IS INDICATED. The Notes to Proxy above are incorporated in and form
part of this form of proxy.
If this form of proxy is returned undated, the undersigned hereby authorizes
the Chairman of the Meeting or the Chairman's delegate to fill in the date
March 21, 2000.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
Name: ____________________________________________________________
Address: _________________________________________________________
No. of Common Shares: ____________________________________________
Signature of Shareholder: ________________________________________
(PROXY MAY NOT BE VALID UNLESS SIGNED)
DATED this _______ day of _____________, 2000
Note: Please sign exactly as name appears on your stock certificate. When
shares are held by joint tenants, both should sign. When signing as attorney,
executor, administrator, trustee or guardian, please give full title as such.
If a corporation, please sign in full corporate name by President or other
authorized officer. If a partnership, please sign in full partnership name by
authorized person.
