<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 26, 1999
COMMISSION FILE NO. 1-12134
CUSIP NO. 286199-20-3
ELEPHANT & CASTLE GROUP INC.
(NAME OF SMALL BUSINESS ISSUER)
PROVINCE OF BRITISH COLUMBIA NOT APPLICABLE
(State or other (IRS Employer
jurisdiction of Identification Number)
incorporation)
856 Homer Street
VANCOUVER, B.C. CANADA V6B 2W5
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number including area code: (604) 684-6451
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 13 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to filing requirements
for the past 90 days. YES X NO
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.[ ]
<PAGE>
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 BENEFICIALLY APPROXIMATE PERCENTAGE OF TOTAL
OWNED OR OVER WHICH CONTROL OR ISSUED AND OUTSTANDING COMMON SHARES
DIRECTION IS EXERCISED
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<S> <C> <C>
Jeffrey M. Barnett(1)(2) 285,187 10.8%
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Peter J. Barnett(3) 275,187 10.4%
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George W. Pitman(1) 66,125 2.5%
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William C. McEwen(1) 2,550 -Less Than-1%
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Martin O'Dowd(1) 13,480 -Less Than-1%
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David Wiederecht(1)(4) - -
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Anthony Mariani(1)(4) - -
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Colin Stacey(1) - -
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Richard Bryant(1) 3,500 -Less Than-1%
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Daniel DeBou 100 -Less Than-1%
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Paul Tilbury 4,500 -Less Than-1%
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D. Matheson(1) 750 -Less Than-1%
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General Electric Investment Private 649,860 24.6%
Placement Partners 11(5)(6)
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All Directors and Executive Officers 1,301,239 49.2%
as a Group
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</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
who had been previously elected, and Mr. Matheson were subsequently
appointed directors on November 3, 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 25,000 Common shares transferred by Mr. Peter Barnett to his
adult 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 2,183,000 additional Common shares issuable on conversion
of Warrants and Subordinated Convertible Debentures held by the Fund.
(6) Excludes 285,187 Common shares owned by Mr. Jeffrey Barnett, which are
subject to a voting trust agreement with GEIM (see note 2 above).
<PAGE>
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".
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 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.
<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 ("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.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Long Term
Annual Compensation Compensation
-------------------- ----------------------
Awards
---------------------- All Other
Name and Principal Securities Under Compensation(1)
Position Year Salary Bonus Options Granted
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Jeffrey M. Barnett, Former 1999 $ 84,569 - - $695,199(2)
Chairman(5) 1998 $167,178 - 6,250 $ 45,398
1997 $164,373 - - $ 45,398
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Rick Bryant, President and Chief 1999 $155,355 $28,000 - $ 864
Executive Officer 1998 $132,125 - 50,000 -
1997 $ 20,833(3) - -
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Martin O'Dowd, Former Chief 1999 $173,516 - - $ 28,912
Executive Officer and President(5) 1998 $247,801 $72,000 300,000 -
1997 $ 59,278(4) - - -
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George W. Pitman, Former Vice 1999 $ 54,786 - - $258,500(2)
President, Design & Development(5) 1998 $102,590 - -
1997 $ 99,750 - -
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Paul Tilbury, Vice President, 1999 $ 99,359 $16,200 - $ 4,958
Canadian Rainforest 1998 $ 86,359 - - $ 4,094
1997 $ 58,052 - $ 10,000 -
- -----------------------------------------------------------------------------------------------------------------
</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.
(2) These amounts include amounts payable in future periods and certain
non-cash benefits 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.
<PAGE>
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 and the
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. 50,000
Common shares of the Company were initially set aside for grants pursuant to the
1993 Plan, while 200,000 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. 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.
<PAGE>
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 631,292 options outstanding at December 26, 1999,
exercisable at various prices at a weighted average exercise price of U.S.
$12.96 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>
- ------------------------------------------------------------------------------------------
ELEPHANT & CASTLE GROUP INC.
- ------------------------------------------------------------------------------------------
5 YEAR PERFORMANCE
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Elephant
& S&P 500 NASDAQ
- ------------------------------------------------------------------------------------------
Month Castle Restaurants Composite
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<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------
Jun-93 100.00 100.00 100.00
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Sep-93 60.00 106.20 108.36
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Dec-93 48.33 116.83 110.35
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Mar-94 63.33 116.05 105.63
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Jun-94 73.33 115.71 100.29
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Sep-94 91.67 105.73 108.57
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Dec-94 105.21 116.46 106.82
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Mar-95 115.00 133.94 116.09
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Jun-95 125.00 152.17 132.60
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Sep-95 130.84 151.62 148.23
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Dec-95 75.00 174.67 149.46
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Mar-96 95.00 184.15 156.46
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Jun-96 98.33 179.06 168.34
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Sep-96 78.33 180.83 174.29
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Dec-96 101.67 172.57 183.39
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Mar-97 122.51 179.06 173.55
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Jun-97 128.33 187.26 204.86
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Sep-97 137.51 184.10 239.46
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Dec-97 93.33 185.30 223.08
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</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------
Mar-98 76.67 224.18 260.77
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Jun-98 68.33 253.68 269.15
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Sep-98 53.33 230.05 240.61
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Dec-98 22.51 290.39 311.49
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Mar-99 30.00 352.35 349.66
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Jun-99 20.00 318.04 362.53
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Sep-99 10.00 317.13 389.23
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Dec-99 9.60 295.42 563.82
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Mar-00 13.33 272.96 649.90
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</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.
TABLE OF INDEBTEDNESS OF DIRECTORS, EXECUTIVE OFFICERS AND SENIOR OFFICERS
UNDER SECURITIES PURCHASE PROGRAMS AND OTHERWISE
<TABLE>
<CAPTION>
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Name of Principal Involvement of Largest Amount Amount Financially Security for
Position Issuer or Outstanding ($) Outstanding as Assisted Indebtedness
Subsidiary at April 25, 2000 Securities
Purchases During
1999
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<S> <C> <C> <C> <C> <C>
Mr. Barnett Former Chairman $350,000 $350,000(1) None Company Shares
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) For the terms of indebtedness See "INTEREST OF INSIDERS IN MATERIAL
TRANSACTIONS".
<PAGE>
INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
Other than as set forth herein, 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 Executive Officer of the Company had provided management
services to the Company. Following such nonrenewal, 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
installments 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 107,500 vested options to purchase the Company's Common
shares at an average exercise price of U.S.$7.68.
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
<PAGE>
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. GEIPPP II is the
holder of 649,860 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 285,187 Common shares as indicated.
In 1999, the Company did not renew a Management Service Agreement pursuant to
which a personal service corporation owner 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
installments 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 10,000
vested options to purchase the Company's Common shares at an average exercise
price of US $10.00
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 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 security interest was
approved by the Board.
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
(Registrant) Elephant & Castle Group Inc.
By /s/ Richard Bryant
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RICHARD BRYANT, PRESIDENT, CHIEF EXECUTIVE OFFICER/DIRECTOR
Date March 23, 2000
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By /s/ Daniel Debou
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DANIEL DEBOU, CHIEF ACCOUNTING OFFICER
Date March 23, 2000
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In accordance with the Exchange Act, this report has been
additionally signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
By /s/ Jeffrey Barnett
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JEFFREY BARNETT, DIRECTOR
Date March 23, 2000
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By /s/ Martin O'Dowd
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MARTIN O'DOWD, DIRECTOR
Date March 23, 2000
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By /s/ George Pitman
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GEORGE W. PITMAN, DIRECTOR
Date March 23, 2000
----------------------------------------------------------------------
By /s/ William McEwen
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WILLIAM MCEWEN, DIRECTOR
<PAGE>
Date March 23, 2000
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By /s/ David Wiederecht
----------------------------------------------------------------------
DAVID WIEDERECHT, DIRECTOR
Date March 23, 2000
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By /s/ Anthony Mariani
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ANTHONY MARIANI, DIRECTOR
Date March 23, 2000
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By /s/ David Matheson
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DAVID MATHESON, DIRECTOR
Date March 23, 2000
----------------------------------------------------------------------
