SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
[ X ] Filed by the registrant
[ ] Filed by a party other than the registrant
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
ELEPHANT & CASTLE GROUP INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
<PAGE>
ELEPHANT & CASTLE GROUP INC.
Suite 303
701 West Georgia Street
Vancouver, B.C. V7Y 1E7 CANADA
(604)684-6451
May 12, 1997
Dear Shareholder:
You are cordially invited to attend the 1997 Annual Meeting of
Shareholders of Elephant & Castle Group Inc. The Annual Meeting will be held
commencing at 2:00 P.M. in the afternoon, on Monday, June 16, 1997, at the
Rosedale on Robson Suite Hotel, 838 Hamilton
at Robson, Vancouver, Canada.
The formal Notice of Annual Meeting and Proxy Statement accompanying
this letter describes the business to be acted upon at the meeting. In addition,
an informal report on the state of the Company's business and affairs will be
provided to interested persons during any recess in the formal proceedings.
It is important that your shares be represented at the meeting.
Therefore, I urge that you MARK, SIGN, DATE and RETURN PROMPTLY the enclosed
PROXY in the envelope furnished for that purpose. If you are present at the
meeting, you may, if you wish, revoke your proxy and vote in person. I am
looking forward to seeing our shareholders at the meeting.
Sincerely,
s/Jeffrey M. Barnett
--------------------
Jeffrey M. Barnett
Chairman of the Board
<PAGE>
ELEPHANT & CASTLE GROUP INC.
701 West Georgia Street
Vancouver, B.C. V7Y 1E7 CANADA
(604)684-6451
NOTICE OF ANNUAL MEETING
JUNE 16, 1997
The Annual Meeting of Shareholders of Elephant & Castle Group Inc. (the
"Company") will be held at the Rosedale on Robson Suite Hotel, 838 Hamilton at
Robson Street, Vancouver, Canada, on Monday, June 16, 1997 at 2:00 P.M. in the
afternoon for the following purposes:
(i) To elect seven (7) Directors, each to serve until
the next annual meeting of shareholders of the
Company;
(ii) To approve the 1997 Stock Compensation Plan providing for the
grant of options to purchase up to 400,000 shares of the
Company's Common Stock and the use of such shares for grants.
(iii) To ratify the appointment of Pannell Kerr Forster
Worldwide, as the Company's auditors for the fiscal
year ending December 31,1997; and
(iv) To consider such other business as may properly
come before the meeting. In accordance with local
practice in Canada, the Shareholders will be
receiving, considering and approving a report to
the Shareholders from the Board of Directors; and
receiving, considering and approving the Audited
Financial Statements of the Company for the year
ended December 31, 1996 and the Auditor's Report
thereon.
Shareholders of record at the close of business on May 2, 1997 are
entitled to notice of and to vote at the meeting and any adjournment thereof.
By order of the Board of
Directors
s/Peter J. Barnett
-------------------
Peter Barnett
Secretary of the Company
Vancouver, B.C.
May 12, 1997
<PAGE>
ELEPHANT & CASTLE GROUP INC.
1997 PROXY STATEMENT
This proxy statement is being furnished to holders of Common Shares of
Elephant & Castle Group Inc. (the "Company") in connec tion with the
solicitation of proxies on behalf of the Board of Directors. If executed and
returned, the proxies will be voted at the 1997 Annual Meeting of Shareholders
to be held on Monday, June 16, 1997 and at any adjournment thereof. This
statement and form of proxy are intended to be first mailed to shareholders on
or about May 12, 1997. Any shareholder submitting a proxy may revoke it at any
time before it is voted, by notifying the Corporate Secretary in writing or in
person.
Only holders of the Company's Common Shares outstanding as of the close
of business on May 2, 1997, the record date, will be entitled to vote at the
meeting. The Company's only class of voting securities is its Common Shares,
without par value. There are currently 2,940,547 Common Shares outstanding. Each
Common Share is entitled to one vote. The representation in person, or by proxy,
of a majority of the outstanding Common Shares is necessary to provide a quorum
at the Annual Meeting. Votes withheld from a nominee for election as a director
or votes on other matters that reflect abstentions or broker non-votes are
counted as present in determining whether the quorum requirement is satisfied,
but they have no other effect on voting for election of directors.
The expenses of this proxy solicitation, including the cost of
preparing and mailing the Proxy Statement and proxy, will be paid by the
Company. Such expenses may also include the charges and expenses of banks,
brokerage firms, and other custodians, nominees or fiduciaries for forwarding
proxies and proxy material to beneficial owners of the Company's Common Stock.
The Company expects to solicit proxies primarily by mail, but directors,
officers, employees and agents of the Company may also solicit proxies in person
or by telephone or by other electronic means.
Preliminary Information
The Corporation is a corporation organized under the laws of the
Province of British Columbia, Canada. The Company operates a chain of English
pub type restaurants located throughout Canada, and, to a lesser extent, in the
United States. The Company is in the process of refocusing its restaurant
operations by opening and expanding food and beverage operations at major hotel
chains and similar facilities. The Company has also announced its participation
in a joint venture with Rainforest Cafe, Inc. (NASDAQ: RAIN) to develop and
operate Rainforest restaurants in Canada.
Voting Securities and Principal Holders Thereof
All holders of the Company's Common Shares (herein the "Common Shares")
of record as of the close of business on May 2, 1997 are entitled to vote at the
Annual Meeting. Each holder is entitled to one vote per Common Share. There is
no cumulative voting.
<PAGE>
Security Ownership of Directors, Management and Certain Beneficial Owners
As of the close of business on March 31, 1997, 2,882,114 Common Shares
were issued and outstanding. The following table sets forth, as of such date,
information relating to the beneficial ownership of the Company's Common Shares
by each person known to the Company to be beneficial owner of more than 5% of
the Common Shares, by each director, by each of the named executive officers and
by all directors and executive officers as a group:
<TABLE>
<CAPTION>
Approximate
Percentage of
Name and Address Number of Shares Outstanding Shares(3)
---------------- ---------------- ---------------------
<S> <C> <C>
Jeffrey M. Barnett(1)(2) 550,375 18.72
Peter J. Barnett(1)(2) 550,375 18.72
George W. Pitman(1)(2) 137,250 4.67
William C. McEwen(1)(3) 6,100 *
Martin O'Dowd(1)(3) 2,960 *
David Wiederecht(1)(4) ---
Anthony Mariani(1)(4) ---
Daniel DeBou(3) 13,200 *
Paul Tilbury(3) 22,000 *
General Electric
Investment Private
Placement Partners, II(5) 237,221 8.07%
All Directors and Executive 1,282,260 43.61%
Officers as a Group
- ---------------
(1) Each person is a director.
(2) Excludes an aggregate of 100,000 shares subject to conditional options
issued to the founders of the Company prior to the public offering
pursuant to a Founders Retention Plan, no part of which are exercisable
prior to 1998.
(3) Includes options granted to directors and executive officers pursuant
to the 1993 Employee Stock Option Plan and the 1993 Director Stock
Option Plan. * = less than one percent.
(4) Messrs. Wiederecht and Mariani are employed by a fund,
the holdings of which are separately stated herein.
(5) Excludes up to 925,000 additional Shares subject to
Warrants and Subordinated Convertible Debentures held by
the Fund.
</TABLE>
<PAGE>
PROPOSAL ONE
ELECTION OF DIRECTORS
The Company's Memorandum and Articles of Association provide for the
election of the Board of Directors at each annual meeting of the Company's
Shareholders. Each person so elected shall serve until their respective
successors shall have been elected and qualified.
It is intended that votes will be cast, pursuant to authority granted
by the enclosed proxy, for the election of the nominees named below as directors
of the Company, except as otherwise specified in the proxy. Directors shall be
elected by a plurality of the votes present in person or represented by proxy at
the Annual Meeting and entitled to vote on the election of directors. In the
event any one or more of such nominees shall be unable to serve, votes will be
cast, pursuant to authority granted by the enclosed proxy, for such person or
persons as may be designated by the present Board of Directors to fill the
vacancy. The Company is not aware of any nominee who will be unable, or who
intends to decline, to serve as a director. Management intends to seek at least
one additional person to serve as a director during 1997.
No such person has agreed to serve as yet.
The names and ages of the nominees as of April 30, 1997, and certain
information about them, are set forth below:
<TABLE>
<CAPTION>
Name Age Principal Occupation
---- --- --------------------
<S> <C> <C>
Jeffrey M. Barnett(a)(b) 58 Chairman of the Board, Chief Execu-
tive Officer, Director and President
Peter J. Barnett 58 Executive Vice President, Director
and Secretary
George W. Pitman 55 Vice President/Design and Develop
ment, and Director
William L. McEwen(a)(b) 72 Independent Entrepreneur, Real Es
tate and Telecommunications
Martin O'Dowd(b) 49 Director, President, Chief Operating
Officer, Rainforest Cafe, Inc.
David Wiederecht(b) 41 Vice President, Alternative Invest-
ments, GE Investment Corporation
Anthony Mariani(a) 32 Senior Analyst, Private Equities,
GE Investment Corporation
- ---------------------------
(a) Audit Committee
(b) Compensation Committee
</TABLE>
<PAGE>
Executive Officers and Directors
Jeffrey M. Barnett co-founded the predecessor of the Company in 1977
with his twin brother, Peter J. Barnett, and their long- time business
colleague, Mr. George W. Pitman. Jeffrey M. Barnett has been Chairman of the
Board and Chief Executive Officer of the Company since its inception.
Peter J. Barnett, Executive Vice President and Secretary, is one of the
founders of the Company, and serves as a key executive and a director of the
Company since the reorganization.
George W. Pitman, Vice President - Design and Development, is one of
the founders of the Company and serves as a key executive and a director of the
Company since the reorganization.
William L. McEwen is an independent entrepreneur who is the
owner/manager of residential and commercial properties in Ottawa, Ontario, and
Vancouver, B.C. Mr. McEwen is Chairman of the Board and Chief Executive Officer
of Tasco Communications, Inc., a paging and telephone answering company. He is
Vice President of the Liberal Party of Canada and a Knight of the Order of Saint
Jean of Jerusalem. Mr. McEwen was first elected a director in 1993.
Martin O'Dowd was, until April 28, 1997, President and Chief Operating
Officer of Rainforest Cafe, Inc., Minneapolis, MN, since May 1995 and has served
as a director and Secretary since June 1995. From July 1987 to May 1995, Mr.
O'Dowd was Corporate Director of Food and Beverage Services for Holiday Inn
Worldwide, where Mr. O'Dowd was responsible for approximately $250 million in
annual food and beverage revenue and was responsible for concept development,
strategic planning, and operations for 120 company-owned units. Previously, Mr.
O'Dowd was Vice President and General Operations Manager for the New York based
Hard Rock Cafe Organization. Mr. O'Dowd began his restaurant career with 8 years
at Steak & Ale Restaurants. Mr. O'Dowd was first elected to the Board of
Directors of the Company in June of 1995.
David Wiederecht is Vice President of Alternative Investments for GE
Investment Corporation since January 1994. Prior to his current assignment, he
served GE Investments in various senior financial management assignments in
GEIC's real estate and finance organization since 1988. Prior to joining GEIC,
Mr. Wiederecht worked at various assignments within General Electric Company,
including corporate headquarters and GE's audit staff. Mr. Wiederecht was first
elected to the Board of Directors of the Company in January, 1996.
Anthony Mariani is Senior Analyst of Private Equities for GE Investment
Corporation since February 1994. Prior to his current assignment, he worked at
various assignments in GE Investments' private equities and finance
organizations since 1988. Mr. Mariani was first elected to the Board of
Directors of the Company in January, 1996.
Daniel DeBou, Chartered Accountant, has been the Chief Financial
Officer of the Company since January 1, 1993. Prior to joining the Company, Mr.
DeBou was employed from 1978 to 1992 in various financial capacities with
Woodward Stores Limited, a publicly-owned company traded on the Toronto Stock
Exchange and engaged in the operation of department and specialty stores.
<PAGE>
Paul Tilbury, Vice President of Operations, formerly Regional Manager
Central Region, has served the Company since 1983, not only managing the
Elephant and Castle at the British Pavilion at Expo '86 World Fair, but also
assisting in setting up training programs implemented at the numerous restaurant
openings. Mr. Tilbury is the nephew of Jeffrey M. Barnett and Peter J. Barnett.
Meetings, Attendance, Committees
The Board of Directors of the Company held six regular meet ings in
1996. Following its public offering, the Board created two standing committees:
the Compensation Committee and the Audit Com mittee. Each incumbent director
attended at least 75% of the aggregate of: (1) the total number of Board
meetings held during the period he was a director; and (2) the total number of
meetings held by all Committees of the Board on which he served during such
period.
It is the function of the Compensation Committee to review the
Company's remuneration policies and practices, administer certain of the
Company's incentive compensation and stock option plans, and establish the
salaries of the executive officers of the Company. Messrs. Jeffrey M. Barnett,
William McEwen, Martin O'Dowd and David Wiederecht have heretofore served as the
Compensation Committee. It is the function of the Audit Committee to review the
external audit programs of the Company and to make recommendations to the Board
of Directors of the Company concerning its appointment of independent auditors,
the conduct of the audit and related matters. Messrs. Jeffrey Barnett, William
McEwen and Anthony Mariani currently serve as the Audit Committee. The
Committees meet separately from, but on the same days as, regularly scheduled
Board meetings. During 1996, there was only one independent meeting of the
Compensation Committee. The Company does not maintain a nominating committee or
one performing a similar function.
Compensation of Directors
Directors who are not employees or officers of the Company (herein the
"Outside Directors") are currently separately compensated for their services as
follows: CDN $500.00 cash for each three months as a director, plus 1,000 shares
of Company Stock for each two years of service as an outside director. Certain
outside Directors have elected not to accept cash compensation and have
redirected their shares compensation to their employer. In addition, Mr. McEwen
was granted, upon election to the Board, immediately prior to its initial public
offering, non-qualified options to purchase 5,000 Common Shares each at a price
equal to 100% of the fair market value of the Common Shares as at the date of
the grant of such stock options. The options vest in two equal installments, on
each of the first two successive anniversaries of the date of grant, subject to
continued service, and are exercisable for a period of five years.
<PAGE>
Executive Compensation
Report of the Compensation Committee
The Compensation Committee (the "Committee") is composed of three
directors, Jeffrey Barnett, Chairman and Founder of the Com pany, and Messrs.
McEwen, O'Dowd and Wiederecht, three non-employee Directors. The Committee has
not altered or otherwise modified the compensation practices and general rates
which prevailed for executives of the Company at the time of the 1993 public
offering. It is the intention that the Committee to review from time to time
compensation rates and incentives offered by the Company against practices of
similar-sized companies in the same industry and same geographic areas in future
periods.
The Compensation Committee
By: Jeffrey M. Barnett, Chairman
William McEwen
Martin O'Dowd
David Wiederecht
<PAGE>
Compensation Committee Interlocks and Insider Participation
Jeffrey M. Barnett, Chairman of the Compensation Committee, is the
Chairman and Chief Executive Officer of the Company. Messrs. McEwen, and O'Dowd
and Wiederecht are outside directors. The Com pany intends to continue a policy
of having directors unaffiliated with management to constitute a majority of the
members of the Compensation Committee. 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 two other founders of the Company
for their services rendered during fiscal years 1996, 1995 and 1994. 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 1996, the average value was
each CDN $1.00 equals U.S. $.73.
<TABLE>
<CAPTION>
Base All Other
Salary Bonuses Compensation(1)
------ ------- ---------------
<S> <C> <C> <C>
Jeffrey M. Barnett,
Chief Executive Officer
12/31/1996 CDN $152,361 ------ 25,026
12/31/1995 135,000 ------ 25,026
12/31/1994 125,539 ------ 25,026
Peter J. Barnett,
Executive Vice President
12/31/1996 CDN $141,075 ------ 18,997
12/31/1995 125,000 ------ 18,997
12/31/1994 115,385 ------ 18,997
George W. Pitman
Vice President,
Design and Development
12/31/1996 CDN $ 99,750 ------ ------
12/31/1995 95,000 ------ ------
12/31/1994 95,000 ------ ------
(1) The other compensation consists of life insurance premiums paid on policies
on which the families of the insured are the sole beneficiaries.
</TABLE>
<PAGE>
The Company currently does not maintain and none of its executive
officers are eligible for deferred compensation, long-term incentive plan
payouts, restricted stock awards, or other similar compensatory arrangements.
The principal executives who are the principal shareholders of the Company are
intended to be incentivized by their ownership of a substantial fraction of the
Company's Shares, and by certain pre-existing long-term rights to acquire up to
an aggregate of an additional 100,000 Shares pursuant to a Founders Retention
Plan, described below. Such executives are not eligible for grants of options
pursuant to the Company's 1993 Employee Stock Option Plan.
Employment Agreements
During 1993, the Company entered into five-year employment agreements
with the personal service corporations of Messrs. Jeffrey M. Barnett, Peter J.
Barnett and George W. Pitman. The agreements provide Messrs. Jeffrey M. Barnett,
Peter J. Barnett and Mr. George P. Pitman with base salaries of CDN $135,000,
CDN $125,000 and CDN $95,000, respectively, with certain defined cost of living
increases. Messrs. Barnett and Pitman are entitled to other specified benefits
such as an automobile allowance, reimbursement of business expenses, and health,
life and disability insurance. Messrs. Barnett and Pitman are entitled to
receive their compensation through the date of termination if their employment
is terminated (i) by the Company otherwise than for good cause, (ii) by reason
of death or disability of the employee, or (iii) by the employee for any reason,
other than a voluntary termination. The Company is the beneficiary of life
insurance policies in the amount of at least CDN $1,000,000 on the lives of each
of such executives. A portion of the proceeds, if any, from such policies in the
event of the death of any executive will be applied to the payment of any sums
due to the executive pursuant to such personal service agreements.
Founders Retention Plan
Prior to the public offering, the Board of Directors and the
shareholders of the Company adopted a plan pursuant to which Jeffrey M. Barnett,
Peter J. Barnett and George W. Pitman have been granted options to purchase an
aggregate of 100,000 Common Shares of the Company (43,750 to each Mr. Barnett
and 12,500 to Mr. Pit man). The options are exercisable at U.S. $6.60 per share
as to 20% of the shares pursuant to each Option Grant as of the 5th, 6th, 7th,
8th and 9th annual anniversaries of the grant date, subject to the Optionee's
continued employment by the Company on such dates. None of the founders
retention plan options are currently exercisable.
1993 Employee Stock Option Plan
The Board of Directors and the shareholders of the Company have adopted
The Elephant & Castle 1993 Employee Stock Option Plan (the "1993 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 under this Plan. 100,000 shares
were initially set aside for grants pursuant to the 1993 Plan. Options granted
pursuant to the Stock Option Plan vest 1/3 after 18 months; 2/3 after 30 months;
and as to the balance, after 42 months. All options expire on the fifth annual
anniversary of the date of grant. 26,500 options were granted to employees
during 1996, and no employee stock options were exercised during such year. Only
6,000 shares remain available for future grants pursuant to the 1993 Plan.
<PAGE>
The 1993 Plan is 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. The 1993 Plan is 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 options upon such circumstances as it deems
appropriate. Actual vesting can be accelerated or delayed based on performance
measures established by the Compensation Committee.
1997 Employee Stock Compensation Plan
The Company proposes to adopt a 1997 Stock Compensation Plan providing
for up to 400,000 additional shares to be subject to stock options pursuant to
the 1997 Plan, and for the outright grant of limited amounts of bonus shares.
See Proposal Two below.
Certain Relationships and Related Transactions
In October of 1996, the Company acquired all of the capital stock of
Alamo Grill, Inc., a one unit restaurant corporation based in the Mall of
America, Bloomington, Minnesota from Alamo Restaurants, Inc. ("ARI"). The
Company paid 147,059 Common Shares and assumed liabilities of ARI of
approximately $536,000 for the acquisition. Martin O'Dowd, a non-employee
director of the Company was also a non-employee director and a small minority
shareholder of ARI. Mr. O'Dowd received 1,960 Common Shares (approximately 1.5%
of the total share issuance) for his interest in ARI as a consequence of the
transaction.
In 1997, the Company entered into a joint venture with Rainforest Cafe,
Inc. ("RCI"), a publicly-owned company (NASDAQ: RAIN) of which Martin O'Dowd was
the former President. The terms of the joint venture were negotiated on an arms
length basis between representatives and counsel for the Company and
representatives and counsel for RCI. Mr. O'Dowd has no special, or personal,
interest in the transaction, and was not compensated by the Company in
connection therewith.
PROPOSAL TWO
ADOPTION OF THE 1997 STOCK COMPENSATION PLAN
The Board of Directors has authorized the inclusion of the 1997 Stock
Compensation Plan (the "Plan") for submission to a vote of the shareholders of
the Company at the 1997 Annual Meeting. The Plan provides for stock options, and
certain limited outright bonus share grants to key employees of the Company.
Officers and directors are eligible for, and are expected to receive, stock
options pursuant to the Plan. Directors are not eligible for bonus share grants.
<PAGE>
Stock Options
The Plan authorizes the granting of up to five (5) year incentive stock
options to key employees of the Company and its subsidiaries. A maximum of
400,000 shares have been set aside for future option grants. No grants have been
made under the Plan to date. All grants, if made, are required to be made at
100% of fair market value for the Shares on the date of grant. Certain options
may be granted at prices in excess of fair market value on the date of grant.
Employees who are directors are eligible for options pursuant to the Plan. The
Company's Compensation Committee will administer the Plan.
Bonus Shares
Under the Plan, as proposed, the Company may also grant up to 10,000
Bonus Shares to all eligible employees during any one fiscal year, and not more
than 1,500 Bonus Shares to any one employee. Directors are not eligible for
Bonus Share grants. Bonus Shares, if granted, are given to any subject employee,
without any direct pecuniary payment to the Company. However, Bonus Shares grant
may be made subject to certain performance objectives, and must be made subject
to additional service requirements. If an employee receiving a share bonus award
leaves the employ of the Company prior to one year of additional service, such
employees forfeits all of the Shares, and if the employee leaves the Company
prior to two years of additional service, such employee forfeits a declining
fraction of the Shares. After two years, unless otherwise conditioned, the
employee owns the Bonus Shares outright.
Subject to certain exceptions, not discussed herein, in general neither
the Company nor any optionee will realize taxable income, or expense, upon the
grant of any stock option or the grant of Bonus Shares. However, upon the lapse
of forfeiture restrictions relating to any Bonus Shares, the employee will
realize income, and the Company will receive a corresponding tax deduction,
equal to the extent of the fair market value of the Bonus Shares received by the
recipient free of forfeiture restrictions. In addition, upon exercise there are
generally no tax consequences to the optionee (other than alternative minimum
tax consequences to U.S. taxpayers), but upon disposition of the shares acquired
by exercise of any such stock option, the optionee, depending on holding period,
will realize either capital gain (or loss) or ordinary income and the Company
will typically be entitled to a tax deduction to the extent the optionee
realizes ordinary income. Tax consequences differ in the United States and
Canada. The summary discussion contained herein is not intended as advice to any
participant in the Plan.
The Plan is intended to provide additional incentives to valued and
trusted employees of the Company by encouraging such employees to acquire Common
Shares, subject to options issued pursuant to the Plan, and by the limited
outright grants of Bonus Shares under appropriate circumstances.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL TWO
<PAGE>
PROPOSAL THREE
RATIFICATION OF SELECTION OF ACCOUNTANTS
The Board of Directors of the Company has selected Pannell Kerr Forster
Worldwide to serve as the independent accountants of the Company for the fiscal
year 1997, subject to ratification by the shareholders.
Pannell Kerr Forster Worldwide has advised the Company that it has no
direct or indirect financial interest in the Company or its subsidiaries nor any
other connection therewith except in the capacity of independent public
accountants.
A representative of Pannell Kerr Forster Worldwide is expected to be
present at the Annual Meeting of the Shareholders. Such representative will have
the right to make a statement if he or she desires to do so and will be
available to respond to appropriate questions.
The proposal for ratification of the selection of Pannell Kerr Forster
Worldwide requires the approval of a majority of the Common Shares present and
voting at the meeting. If the proposal should not be approved, the Board of
Directors would have to select an alternative firm of auditors.
THE BOARD RECOMMENDS A VOTE "FOR" PROPOSAL THREE
<PAGE>
COMPLIANCE WITH SECTION 16(a) REPORTING
Each director, officer and beneficial owner of ten percent (10%) or
more of a registered class of the Company's equity securities is required to
file with the Securities and Exchange Commission initial reports of ownership
and reports of changes in ownership of the Common Shares and other equity
securities of the Company by specific due dates. During the year ended December
31, 1996, all such filing requirements were complied with, except that Martin
O'Dowd a director of the Company who acquired 1,960 shares as a small minority
shareholder in an entity purchased by the Company for securities in October of
1996 inadvertently failed to file a report for such month and reported such
transaction in February of 1997.
OTHER MATTERS
The Company knows of no other matters to be submitted to the meeting.
If any other matters properly come before the meeting, it is the intention of
the persons named in the enclosed form of proxy to vote the shares they
represent as the Board of Directors may recommend.
AVAILABILITY OF REPORT ON FORM 10-KSB
The Company's Annual Report is being provided to shareholders together
with this Proxy Statement. The Annual Report is not incorporated in this Proxy
Statement by reference. Any shareholder of record and each beneficial owner of
the Company's securities not in receipt of Form 10-KSB may obtain a copy thereof
without charge upon written request addressed to Peter J. Barnett, Secretary,
Ele phant & Castle Group Inc., 303 IBM Tower, 701 West Georgia Street, P. O. Box
10240, Vancouver, British Columbia, Canada V7Y 1E7.
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS
FOR 1998 ANNUAL MEETING
Proposals of shareholders which are intended to be presented by such
shareholder at the Company's 1998 Annual Meeting must be received by the Company
no later than January 31, 1998 in order to be included in the Proxy Statement
and form of proxy relating to that meeting.
ELEPHANT & CASTLE GROUP INC.
By Order of the Board of Directors
May 12, 1997
<PAGE>
ELEPHANT & CASTLE GROUP INC.
1997 EMPLOYEE STOCK COMPENSATION PLAN
400,000 COMMON SHARES
INTRODUCTORY
1. Purpose of the Plan.
The 1997 Employee Stock Compensation Plan (the "Plan") is intended to
provide additional incentives to certain valued and trusted employees of
Elephant & Castle Group Inc. (the "Company") by providing a means for said
employees to acquire a shareholder stake in the Company through incentive
options ("Options") to purchase Common Shares ("Shares"), and limited outright
grants of such Shares ("Bonus Shares"). The purpose of the Plan is to increase
each eligible employee's proprietary interest in the business of the Company,
and provide such persons with an increased personal interest in the financial
success and progress of the Company.
2. Administration of the Plan.
The Plan shall be administered by the Compensation Committee of the
Board of Directors (the "Committee").
3. Shares Subject to the Plan.
Subject to the provisions of paragraph 18, the total number of Shares
which may be issued pursuant to the Plan shall not exceed, in the aggregate,
400,000 Common Shares. If any options granted under the Plan shall for any
reason terminate or expire or be surrendered without having been exercised in
full, or any Bonus Shares granted are forfeited, the number of Common Shares not
purchased under such options or so forfeited, shall thereafter be available for
reissuance under the Plan.
THE OPTION PROVISIONS
4. Persons Eligible for Options.
(a) All key employees of the Company including new hires,
shall be eligible to receive the grant of options under the Plan. An
employee who has been granted an option hereunder, if he is otherwise
eligible, may be granted an additional option or options if the
Committee shall so determine.
(b) Employees of subsidiaries of the Company shall also be
eligible under the Plan.
<PAGE>
5. Option Purchase Price.
Options created pursuant to the Plan shall not be issued at a price
less than the fair market value of the Shares subject thereto. For the purposes
hereof "fair market value" shall mean the mean of the highest and lowest quoted
selling price for the Shares on the date of grant of any option, as such prices
are reported on the National Association of Securities Dealers Automated
Quotation System, small cap market. If the Shares subsequently listed on any
national securities exchange, then the fair market value shall mean the closing
price for the Common Shares on such national securities exchange on the date of
grant of the option. Options granted to persons owning five (5%) percent or more
of the Company's voting securities shall be granted, as required by appropriate
tax regulations, but in no event at less than 100% of the fair market value,
determined as aforesaid.
6. Duration of Options.
The expiration date of each option and all rights thereunder shall be
determined by the Committee, but in no event shall the expiration date be more
than five (5) years from the date on which the option is granted, and shall be
subject to earlier termination as provided herein.
7. Exercise of Options.
An option shall be exercisable in installments or otherwise upon such
terms as the Committee shall, in its discretion, determine at such time as an
option is granted, but in no event may any option be exercisable prior to one
year follwoing grant, or subsequent to three (3) months following termination of
the Optionee's employment by the Company, except if by reason of death or
disability. An optionee may purchase less than the total number of shares for
which the option is exercisable.
8. Method of Exercise.
(a) To the extent that the right to purchase shares has accrued thereunder,
options may be exercised from time to time by giving written notice to
the Company stating the number of shares with respect to which the
option is being exercised, accompanied by payment in full, by cash or
by certified or cashier's cheque payable to the order of the Company,
which shall then arrange to issue a share certificate or certificates
for shares with respect to each option exercised by an optionee.
(b) Notwithstanding the foregoing, the Company shall have the right to
postpone the delivery of the shares for such period as may be required
for the Company with reasonable diligence, to comply with any
applicable legal requirements.
9. Non-Transferability of Options.
No option granted under the Plan shall be assignable or transferable by
the optionee, either voluntarily or by operation of law, otherwise than by will
or the laws of descent and distribution, and shall be exercisable during his
lifetime only by the optionee.
<PAGE>
10. Termination of Employment.
(a) If any optionee shall cease to be an employee of the Company for any
reason, other than death or permanent disability, any option granted to
such employee under the Plan shall terminate three (3) months from the
date on which employment terminated, unless such optionee has been
rehired and is an employee of the Company on such date. During such
period, the optionee may exercise any option granted, but only to the
extent such option was exercisable on the date of termination of
employment. A leave of absence approved in writing shall not be deemed
a termination of employment for the purposes of this paragraph, but no
option may be exercised during any such leave of absence, except during
the first three months thereof.
(b) For purposes hereof, termination of employment, other than by death or
permanent disability, shall mean earliest of the date of (i) the
optionee's retirement, (ii) the date an optionee receives written
notice or advice that employment has been terminated or (iii) the date
an optionee ceases to render services to the Company (absences for
temporary illness and emergencies, vacations or leaves of absence
approved in writing excepted). The fact that the optionee may receive
payment from the Company, after termination, severance accumulated
vacation pay, or otherwise services rendered prior to termination,
salary in lieu of notice, or other post-employment benefits, shall not
affect the termination date.
11. Death or Permanent Disability of Optionee.
If an optionee shall die at a time when he is employed by the Company,
or cease to be an employee by reason of permanent disability approved by the
Committee, any option granted under the Plan shall terminate: one (1) year after
the date of death or termination of employment due to permanent disability
unless, by its terms, it shall expire before such date. During the period after
the death or permanent disability of an optionee, such option, to the extent
that it was exercisable on the date of such death or permanent disability, may
be exercised by the optionee, in case of permanent disability, or, in the case
of death, by the legal heirs or personal representative of the optionee.
BONUS SHARE PROVISIONS
12. General.
The Committee may grant bonuses, payable in Common Shares, to any
eligible employee. Any such Bonus Shares shall be subject to forfeiture in the
event that the recipient leaves the employ of the Company. Bonus Shares granted
pursuant to the provisions are subtracted from the Shares available for Option
grants.
13. Eligibility for Bonus Shares.
All employees, including new hires, of the Company and its subsidiaries
eligible for option grant shall be eligible for Bonus Shares, except that no
person serving, or previously serving within the prior six (6) months, as a
director of the Company shall be eligible for the grant of Bonus Shares. 14.
Maximum Grant.
<PAGE>
No more than Ten Thousand (10,000) Bonus Shares shall be granted to all
recipients in any one fiscal year. No more than Fifteen Hundred (1500) Bonus
Shares shall be granted to any individual employee in any one fiscal year.
15. Forfeiture of Bonus Shares.
(a) The Committee may establish performance conditions pursuant to which
any Bonus Shares grants may be made conditional. Satisfaction of the
performance conditions shall be based upon objective criteria, or the
subjective determination of the Committee. Performance conditions may
be waived by the Committee.
(b) In addition, all Bonus Shares shall be subject to mandatory service
requirements, which may not be waived. In the event that a recipient of
Bonus Shares leaves the employ of the Company, for any reason
whatsoever, prior to the completion of a certain number of calendar
months of service, the Bonus Shares received, or a fraction thereof,
shall be forfeited and transferred back to the Company without any
further consideration from the Company to the recipient. The minimum
service requirements, and the percentage of shares subject to
forfeiture, shall be as follows:
<TABLE>
<CAPTION>
Service Time Percentage of Bonus Shares Forfeited
------------ ------------------------------------
<S> <C>
Less than 12 months 100%
(from the date of grant)
Less than 15 months 80%
Less than 18 months 60%
Less than 21 months 40%
Less than 24 months 20%
More than 24 months zero
</TABLE>
16. Rights as a Stockholder; Stock Certificates.
A recipient of Bonus Shares shall have rights as a stockholder with
respect to any Common Shares received by a stock certificate issued in the
recipient's name, even though all or a portion of such Shares remain subject to
a risk of forfeiture hereunder. Shares subject to forfeiture shall not be
transferable. Stock certificates representing Shares which remain subject to
forfeiture, together with a related stock power, shall be held by the Company,
and such Shares shall be canceled and returned to the Company treasury if
thereafter forfeited. Stock certificates representing Bonus Shares which are
fully vested and no longer subject to forfeiture shall be delivered to the
recipient.
GENERAL
17. Restrictions on Shares.
(a) Any Shares issued pursuant to the Plan shall bear the following
restrictive legend placed on the certificates stating in substance.
"The shares represented by this certificate have not been registered
under the Securities Act of 1933 (U.S.A.) and may not be sold, pledged
or otherwise transferred, except pursuant to an effective registration
statement under the said Act, or the opinion of counsel, reasonably
acceptable to the Company that an exemption from registration is
available."
<PAGE>
(b) Each optionee and grantee understands that the shares are restricted as
to re-transfer and shall provide to the Company at the time of grant of
Bonus Shares, or exercise of any option, an undertaking that the Shares
have been acquired for investment only and not with a view to resale or
other re-distribution.
18. Adjustment.
(a) In the event of any subdivision, consolidation or other change in the
share capital of the Company, the aggregate number of shares subject to
issuance pursuant to the Plan, and all existing unexercised options,
shall be appropriately and proportionately adjusted by the Committee.
Any such adjustment in an outstanding option shall be made without
change in the aggregate purchase price applicable to the unexercised
portion of the option, but with an appropriate adjustment in the price
per share covered by the option.
(b) In the event a majority of the outstanding shares of the Company are
tendered in acceptance of a takeover bid, re- organization,
amalgamation or consolidation of the Company with one or more
corporations as a result of which the Company is not the surviving
corporation, or upon a sale of all or substantially all of the assets
of the Company, any and all outstanding options shall accelerate and be
automatically exercisable thereunder. Thereafter, the Plan and all
unexercised options shall terminate ninety (90) days following the
completion of such takeover bid, re-organization, merger, consolidation
or sale of assets, unless provision is made in any merger,
consolidation or similar instrument for continuity of the Plan with
respect to securities of the surviving corporation.
19. Effective Date, Amendment and Termination of Plan.
(a) The Effective Date of the Plan shall be the date that the Plan is first
authorized by the shareholders of the Company.
(b) The Plan shall terminate upon ten (10) years from the Effective Date of
the Plan.
(c) The Committee may, from time to time, with respect to shares at the
time not subject to granted options, suspend or terminate the Plan or
amend or revise the terms of the Plan, subject to any requirement that
such suspension, termination, amendment or revision shall be approved
by the shareholders of the Company if such action is required by law.
(d) Nothing hereunder shall preclude the Company from establishing other
incentive stock purchase plans for employees or directors.
DATED: At the City of Vancouver,
in the Province of British Columbia,
this __ day of June, 1997.
<PAGE>
ELEPHANT & CASTLE GROUP INC.
This Proxy is Solicited on Behalf of the Board of Directors.
The undersigned shareholder of Elephant & Castle Group Inc. (herein the
"Company") hereby appoints Jeffrey M. Barnett and Daniel DeBou the proxy of the
undersigned (with power of substitution) to vote such shareholder's shares at
the Annual Meeting of the Shareholders of the Company to be held on June 16,
1997, and at any adjournment thereof, with respect to the proposals more fully
described in the Proxy Statement for the meeting in the manner specified, and on
any other business which may properly come before the meeting.
PLEASE MARK, SIGN, DATE AND RETURN
THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
<PAGE>
THE DIRECTORS RECOMMEND A VOTE FOR THE PROPOSALS SET FORTH BELOW
1. Election of Directors:
FOR all nominees listed below WITHHOLD AUTHORITY
(except as marked to the to vote for all Nominees
contrary below) listed below
[ ] [ ]
INSTRUCTION: If you have marked "FOR" above but wish to withhold authority for
any individual nominee, strike a line through the nominee's name in the list
below.
Jeffrey M. Barnett, Peter J. Barnett, George W. Pitman, William L. McEwen,
Martin O'Dowd, David Wiederecht and Anthony Mariani.
2. Adoption of the Company's 1997 Stock Compensation Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. Approval of Selection of Auditors:
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
In their discretion, the Proxies are authorized to vote upon such other business
as may properly come before the meeting.
----------------------------
Signature
----------------------------
Signature if held jointly
----------------------------
Dated
Please sign exactly as name appears on your stock certificates. 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 partnership name by authorized person.
