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:
[ X ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[ ] 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.
856 Homer Street
Vancouver, BC V6B 2W5
Canada
(604) 684-6451
July 23, 1999
Dear Shareholder:
You are cordially invited to attend the 1999 Annual Meeting of
Shareholders of Elephant & Castle Group Inc. The Annual Meeting will be held
commencing at 9:00 A.M. in the morning, on Thursday, August 23, 1999, in the
Chevalier Room of the Rosedale on Robson Suites Hotel, located at 855 Hamilton
Street, Vancouver, B.C. Canada V6B 6A2.
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. We are
looking forward to seeing our shareholders at the meeting.
Sincerely,
/s/Martin O'Dowd
----------------
Martin O'Dowd,
President/Chief Executive Officer
/s/Richard Bryant
-----------------
Richard Bryant,
Vice President/Chief Financial Officer
<PAGE>
ELEPHANT & CASTLE GROUP INC.
856 Homer Street
Vancouver, B.C. V6B 2W5 CANADA
(604)684-6451
NOTICE OF ANNUAL MEETING
August 23, 1999
The Annual Meeting of Shareholders of Elephant & Castle Group Inc. (the
"Company") will be held in the Chevalier Room of the Rosedale on Robson Suites
Hotel, located at 855 Hamilton Street, Vancouver B.C., V6B 6A2, on Thursday,
August 23, 1999 at 9:00 A.M. in the morning for the following purposes:
(i) To elect seven (7) Directors, each to serve until the next
annual meeting of shareholders of the Company; and
(ii) 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 fiscal year ended December
27, 1998 and the Auditor's Report thereon; and
(iii) To ratify the appointment of Pannell Kerr Forster Worldwide,
as the Company's auditors for the fiscal year ending December
26, 1999.
Shareholders of record at the close of business on July 12, 1999 are
entitled to notice of and to vote at the meeting and any adjournment thereof.
By order of the Board of Directors
/s/Martin O'Dowd
----------------
Martin O'Dowd,
President/Chief Executive Officer
/s/Richard Bryant
-----------------
Richard Bryant, Vice
President/Chief Financial Officer
Vancouver, B.C.
July 23, 1999
<PAGE>
ELEPHANT & CASTLE GROUP INC.
1999 PROXY STATEMENT
This proxy statement is being furnished to holders of Common Shares of
Elephant & Castle Group Inc. (the "Company") in connection with the solicitation
of proxies on behalf of management of the Company for the 1999 Annual Meeting of
Shareholders, scheduled to be held on Thursday, August 23, 1999 and at any
adjournment thereof.
If executed and returned, the proxies will be voted by the proxy
holders at the 1999 Annual Meeting of Shareholders for the election of
directors, and for the ratification of the Board's selection of independent
auditors. Martin O'Dowd, President of the Company, will act as proxy, or in the
event of his unavailability, Rick Bryant, Chief Financial Officer, will so act.
Shareholders may substitute a proxy in lieu of either of such persons.
This statement and form of proxy are intended to be first mailed to
shareholders on or after July 23, 1999. Any shareholder submitting a proxy may
revoke it at any time before it is voted at the Annual Meeting, by notifying the
Corporate Secretary at the offices thereof, 856 Homer Street, Vancouver, B.C.
(604)684-6451, in writing or in person at any time up to, and including, the
last business day preceding the Annual Meeting or any adjournment thereof or, as
to any matter is respect of which a vote shall not have already been cast
pursuant to such proxy, with the Chairman of the Meeting on the day of the
Meeting, or at any adjournment thereof.
Only holders of the Company's Common Shares outstanding as of the close
of business on July 12, 1999, 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. As of the record date, there are 3,544,709 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.
<PAGE>
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 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 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 July 12, 1999 are entitled to vote at
the Annual Meeting. Each holder is entitled to one vote per Common Share. There
is no cumulative voting.
Security Ownership of Directors, Management and Certain Beneficial Owners
As of the close of business on July 12, 1999, 3,544,709 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 the 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) 562,375 15.92%
Peter J. Barnett(3) 550,375 15.9 %
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Approximate
Percentage of
Name and Address Number of Shares Outstanding Shares(3)
---------------- ---------------- ---------------------
<S> <C> <C>
George W. Pitman(1)(2) 129,250 3.6%
William C. McEwen(1)(4) 7,100 *
Martin O'Dowd(1)(4) 23,960 *
David Wiederecht(1)(5) ---
Anthony Mariani(1)(5) ---
Colin Stacey ---
Richard H. Bryant(1) ---
Daniel DeBou(4) 33,200 *
Paul Tilbury(4) 42,000 1.2%
General Electric
Investment Private
Placement Partners II(6) 299,721 8.59%
All Directors and Executive
Officers as a Group 31.09%
</TABLE>
- -----------------------------
(1) Each person is a director. Mr. Pitman is not a nominee for reelection
to the Board.
(2) Includes shares subject to conditional options issued to the founders
of the Company.
(3) Includes 50,000 shares transferred by Mr. Peter Barnett to his
children.
(4) Includes all vested options granted to directors and executive
officers.
(5) Messrs. Wiederecht and Mariani are employed by a fund, the holdings of
which are separately stated herein.
(6) Excludes up to 4,508,000 additional Shares subject to Warrants and
Subordinated Convertible Debentures held by the Fund.
* = less than one percent.
3
<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. As required by the Company Act
of British Columbia, advance notice of the Annual Meeting was published in the
Vancouver Sun newspaper in Vancouver, British Columbia, Canada, on June 25,
1999.
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. The term of office for each elected
director will expire at the Company's next Annual Meeting of Shareholders to be
held in 2000.
The names, ages, principal occupation and country of ordinary residence
of the nominees as of April 30, 1999, and certain information about them, are
set forth below:
<TABLE>
<CAPTION>
Name Age Principal Occupation
<S> <C> <C>
Jeffrey M. Barnett(a)(b) 60 Founder and Director
(Canada)
Martin O'Dowd (a)(b) 59 President and Chief Executive
(U.S.) Officer of the Company
Colin Stacey 59 Vice President and Chief
(Canada) Operating Officer of the Company
William L. McEwen(a)(b) 74 Independent Entrepreneur, Real
(Canada) Estate and Telecommunications
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Name Age Principal Occupation
<S> <C> <C>
David Wiederecht(a) 43 Vice President, Alternative
(U.S.) Investments, GE Investment
Corporation
Anthony Mariani(b) 35 Vice President of Private Equities,
(U.S.) GE Investment Corporation
Richard H. Bryant 45 Vice President and Chief Financial
(Canada) Officer of the Company/Interim
Director
</TABLE>
- ---------------------------
(a) Audit Committee as of 1998-1999
(b) Compensation Committee as of 1998-1999
Executive Officers and Directors
Martin O'Dowd was first elected to the Board of Directors of the
Company in June of 1995, initially serving as an outside director. In August of
1997, he was elected to serve as President of Elephant & Castle International,
Inc., and on March 19, 1998, was elected President and Chief Executive Officer
of the Company. Previously, from May of 1995, until April 28, 1997, he was
President and Chief Operating Officer of Rainforest Cafe, Inc., Minneapolis, MN.
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, and prior
to that was associated with Steak & Ale Restaurants.
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 served as Chairman of the Board and
Chief Executive Officer of the Company until July of 1999. He has entered into a
Severance Agreement with the Company. See ACertain Relationships and Related
Transactions".
George W. Pitman, Vice President - Design and Development, is one of
the founders of the Company and served as a key executive and a director of the
Company since prior to the initial public offering. Mr. Pitman's employment with
the Company was not renewed
5
<PAGE>
upon expiration of his employment agreement in June, 1999. Mr. Pitman has
asserted claims for severance pay, which claims have not been resolved to date.
Colin Stacey is the Chief Operating Officer of the Company since June
of 1997. Prior to joining the Company, Mr. Stacey was President and Chief
Executive Officer of Keg's Restaurants, a North American subsidiary of Whitbread
PLC, from 1992 to June of 1997. Prior to this assignment, Mr. Stacey occupied
senior management positions within Whitbread's restaurants and leisure
businesses in the United Kingdom and Australia. Subsequent to the 1997 Annual
Meeting, Mr. Stacey was elected by the Board to serve as a director of the
Company, but took an indeterminate leave from service as a director. Mr. Stacey
has been nominated for election to the Board in 1999.
Richard Hugh Bryant is the Vice President and Chief Financial Officer
of the Company since November of 1997. Prior to joining the Company, Mr. Bryant
was Chief Financial Officer of KEG Restaurants Limited, a subsidiary of
Whitbread PLC, from August of 1993 to June of 1997. Prior thereto, he served as
financial controller of the Whitbread Beer Company, a division of Whitbread PLC,
from June of 1990 until August of 1993.
Since March of 1998, Mr. Bryant has been serving as a director of the Company.
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 was first elected a director in 1993.
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 Vice President of Private Equities for GE Investment
Corporation since 1997. 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.
6
<PAGE>
Daniel DeBou, Chartered Accountant, has been the Chief Accounting
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.
Paul Tilbury, formerly Vice President of Operations, is currently
serving as Vice President of Canadian Rainforests Restaurants, Inc., a jointly
owned subsidiary of the Company and Rainforest Cafe, Inc. Mr. Tilbury is the
nephew of Mr. Jeffrey M. Barnett.
Meetings, Attendance, Committees
The Board of Directors of the Company held eight (8) regular meetings
in 1998. The Board maintains two standing committees: the Compensation Committee
and the Audit Committee. 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,
Martin O'Dowd, William McEwen, and Anthony Mariani 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, Martin O'Dowd and David Wiederecht have heretofore served as the Audit
Committee. The Committees meet separately from, but usually on the same days as,
regularly scheduled Board meetings. 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") were 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
7
<PAGE>
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 shares
of Company Common Stock for each year of service. Certain outside Directors have
elected not to accept cash compensation and have redirected their shares
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
ACertain Relationships and Related Transactions".
Executive Compensation
Report of the Compensation Committee
The Compensation Committee (the "Committee") is currently composed of
four directors, Messrs. Anthony Mariani, Chairman, Jeffrey M. Barnett, Martin
O'Dowd and William McEwen. Messrs. Mariani and McEwen are non-employee
directors. Mr. Barnett ceased as of a recent date to be an executive employee.
See ACertain Relationships and Related Transactions". During 1998, 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
the 1993 public offering. The Committee negotiated a compensation package for
Mr. O'Dowd, the chief executive officer of the Company.
The Compensation Committee
By: Anthony Mariani, Chairman
Jeffrey M. Barnett
Martin O'Dowd
William McEwen
Compensation Committee Interlocks and Insider Participation
Anthony Mariani, an outside director, is currently serving as Chairman
of the Compensation Committee. Messrs. McEwen, Mariani and Wiederecht are
outside directors. 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 requires finding Canadian citizens
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.
8
<PAGE>
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 as of the end of the last
fiscal year for their services rendered during fiscal years 1998, 1997 and 1996.
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 1998, the
average value was each CDN $1.00 equals U.S. $0.69.
<TABLE>
<CAPTION>
Base All Other
Salary Bonuses Compensation(1)
------ ------- ---------------
<S> <C> <C> <C>
Jeffrey M. Barnett,
Chairman
12/27/1998 CDN $167,178 -0- 45,398
12/31/1997 164,373 -0- 45,398
12/31/1996 152,361 -0- 25,026
Martin O'Dowd,
Chief Executive Officer
and President
12/27/1998 CDN $247,801 72,000 -0-
12/31/1997 59,278 -0- -0-
12/31/1996 N/A
Richard Bryant,
Chief Financial Officer
12/27/1998 CDN $132,125 -0- -0-
12/31/1997 20,833 -0- -0-
12/31/1996 N/A -0- -0-
George W. Pitman
Vice President,
Design and Development
12/27/1998 CDN $102,590 -0- -0-
12/31/1997 99,750 -0- -0-
12/31/1996 99,750 -0- -0-
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
Base All Other
Salary Bonuses Compensation(1)
------ ------- ---------------
<S> <C> <C> <C>
Paul Tilbury,
Vice President
Canadian Rainforest
12/27/1998 CDN $ 86,359 -0- $4,094
12/31/1997 58,052 -0- ---
12/31/1996 58,052 -0- ---
</TABLE>
- ---------------------------
(1) The other compensation consists of life insurance premiums paid on
policies on which the families of the insured are the sole
beneficiaries. 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.
The arrangement terminated at the end of 1998.
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 aggregate compensation paid or payable directly to the Company's
directors and senior officers as a group (including the named executive
officers) by the Company for the year ended December 31, 1998 was $859,545.
These amounts include salaries, fees, commissions and bonuses; and excludes the
value of options granted in partial compensation for salary or bonus. The
Directors and senior officers as a group earned taxable benefits in 1998
aggregating less than $5,000.00, comprising solely standard medical benefits.
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 discussion of Barnett Severance
Agreement in ACertain Relationships and Related Transactions" and non-renewal of
Mr. Pitman's employment agreement in AExecutive Officers and Directors".
10
<PAGE>
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: They are the 1993 Stock Option Plan
and the 1997 Stock Compensation Plan.
Under the 1993 Stock Option 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 shares were initially set aside for grants pursuant to
the 1993 Plan. 400,000 shares were set aside pursuant to the 1997 Stock
Compensation Plan. Options granted pursuant to both Plans 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. 105,000 options
were granted to employees during 1998 pursuant to the 1997 Plan. No employee
stock options were exercised under either Plan during the most recent year.
The 1993 Stock Option Plan and the 1997 Stock Compensation 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.
No persons who are officers or directors either received any grants or
exercised any options under either Plan during fiscal 1998.
Non-Plan Options
During 1998, options for 945,000 Common Shares were granted to five key
executives, four of whom commenced employment with the Company in 1997. None
have been exercised and 20,000 of these options were canceled through December
27, 1998.
11
<PAGE>
Total Options/Weighted Average Exercise Price
Including the 925,000 remaining options granted in 1998, there were an
aggregate of 1,312,584 options outstanding at December 27, 1998, exercisable at
various prices at a weighted average exercise price of U.S.
$6.45 per share.
Certain Relationships and Related Transactions
On July 16, 1999, the Company executed a Settlement Agreement with
Jeffrey M. Barnett and two personal services corporations of Mr. Barnett with
respect to the severance of Mr. Barnett's employment with the Company.
The Settlement Agreement provides, among other things, as follows:
(1) The Management Service Agreement pursuant to which the two personal
service corporations provided the Company with the management services of Mr.
Barnett were terminated and canceled. Mr. Barnett resigned as Chairman of the
Board and all titles with the Company's subsidiaries and affiliates. Mr. Barnett
will continue as a director of the Company.
(2) The Company will pay to Mr. Barnett the sum of $335,000, with
$100,000 payable on or before August 1, 1999 and the balance of $235,000 payable
in ten equal quarter-annual installments of $23,500 commencing November 1, 1999
with the last installment due February 1, 2002. The unpaid balance outstanding
from time-to-time is convertible, at Mr. Barnett's election, into the Company's
Common Shares at a conversion price of $2.00 U.S. per share.
(3) For a period of five years, the Company will continue the life
insurance and medical benefits provided to Mr. Barnett.
(4) The Company will pay to Mr. Barnett the sum of $20,000 as
reimbursement for his legal fees in connection with the settlement.
(5) The Company grants to Mr. Barnett the right to receive for his
lifetime, at no cost to Mr. Barnett, retail merchandise and founder's dining
privileges at Company restaurants to a maximum of $3,750 per calendar year.
(6) The Company agrees that all stock options granted to Mr. Barnett
shall be deemed vested and Mr. Barnett will be entitled to purchase 215,000 of
the Company's Common Shares at an average exercise price per share of U.S.
$3.84.
12
<PAGE>
(7) Mr. Barnett acknowledges and agrees that he owes the sum of
$350,000 to the Company, which indebtedness is evidenced by a promissory note.
The Company agreed that (i) the date upon which the said sum of $350,000 is to
be paid to the Company shall be the later of June 1, 2000 and the date upon
which the Company makes the final payment of the $335,000 due to Mr. Barnett as
described in subparagraph (2) above, and (ii) Mr. Barnett may repay his
indebtedness to the Company by surrendering to the Company shares of the
Company's Common Shares currently pledged by Mr. Barnett to the Company at the
fair market value for such shares from time to time. Mr. Barnett's obligation to
the Company arose out of his acceptance of certain claims that the Company
asserted against his brother, Peter Barnett, after Peter Barnett left the employ
of the Company.
(8) Until the Company makes the final payment of the $335,000 due to
Mr. Barnett, he will have a right of first refusal to purchase, at a price and
on terms no less favorable to the purchaser than those the Company would accept
from a third party, any Canadian operating division of the Company which the
Company is prepared to sell.
(9) Mr. Barnett shall continue to have the right to stand for election
to the Company's Board of Directors upon the same terms and conditions as other
non-management persons who wish to be directors.
(10) Mr. Barnett has entered into a voting trust agreement agreeing
that the trustee will vote all of the Company's Common Shares owned by Mr.
Barnett (a) in favor of all resolutions to elect Mr. Barnett or under certain
circumstances in the event of his death, his executor, as a director of the
Company, and (b) in the discretion of the trustee in favor or against all
resolutions to elect as directors of the Company all persons designated or
nominated by the Company's Board of Directors. GE Investment Management
(AGEIM"), the general partner of GEIPPP II, the Company's primary investor, acts
as trustee with respect to such shares.
13
<PAGE>
Comparison of Five Year Cumulative Total Return
Among Elephant & Castle Group Inc.,
the S&P Restaurant Index and the NASDAQ Composite Index
<TABLE>
<CAPTION>
E & C S & P NASDAQ
<S> <C> <C> <C>
Jun-93 100 100 100
Sep-93 60 110 110
Dec-93 50 125 118
Mar-94 65 120 110
Jun-94 75 120 102
Sep-94 90 113 113
Dec-94 105 126 105
Mar-95 120 133 120
Jun-95 125 150 130
Sep-95 130 150 150
Dec-95 80 175 150
Mar-96 95 185 160
Jun-96 99 180 170
Sep-96 77 183 178
Dec-96 102 175 182
Mar-97 128 180 175
Jun-97 133 185 202
Sep-97 139 183 240
Dec-97 92 184 225
Mar-98 78 222 260
Jun-98 70 252 268
Sep-98 55 230 240
Dec-98 25 285 315
Mar-99 30 350 350
</TABLE>
14
<PAGE>
PROPOSAL TWO
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 1999, 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 alternate firm of auditors.
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
27, 1998, all such filing requirements were complied with.
15
<PAGE>
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-K
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-K may obtain a copy thereof
without charge upon written request addressed to Rick Bryant, Vice President and
Chief Financial Officer, c/o: Elephant & Castle Group Inc., 856 Homer Street,
Vancouver, British Columbia, Canada V6B 2W5.
16
<PAGE>
SHAREHOLDER PROPOSALS
There is no provision in the Company Act of British Columbia entitling
the shareholders of a company incorporated thereunder to initiate proposals for
an annual general meeting. The Company is incorporated pursuant to the Company
Act of British Columbia.
ELEPHANT & CASTLE GROUP INC.
By Order of the Board of Directors
July 23, 1999
<PAGE>
FORM OF PROXY
ELEPHANT & CASTLE GROUP INC.
August 23, 1999
This Proxy is Solicited on Behalf of the Board of Directors.
The undersigned shareholder of Elephant & Castle Group Inc. (herein the
"Company") hereby appoints Martin O'Dowd and Rick Bryant 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 August 23,
1999, and at any adjournments 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 that may properly come before the meeting.
(TO BE SIGNED ON REVERSE SIDE)
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
Colin Stacey
William L. McEwen
Martin O'Dowd
David Wiederecht
Anthony Mariani
Richard Bryant
2. 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 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.
