<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [ x ]
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 14a6(e)(2))
[ x ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Rule
14a-12
THE CASTLE GROUP, INC.
(Name of Registrant as Specified in its Charter)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11:
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which the transaction applies:
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
(6) [ ] Fee paid previously with preliminary materials
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date
of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
THE CASTLE GROUP, INC.
(letterhead)
6 March 2000
Dear Shareholder
Enclosed is a package of information about our company The Castle Group, Inc.
and the upcoming Annual Shareholders Meeting to be held on March 31, 2000. In
this package you will find a Proxy, Notice of Annual Meeting, Proxy Statement
and our Annual Report for the year ended July 31, 1999. Of particular
importance is the Proxy which we request that you sign, date and return to us
as soon as possible.
We are not happy to send you financial information that illustrates a loss for
the fiscal year ending July 31, 2000. However, we are pleased to report that
our Company continues to make substantial progress towards the establishment of
a firm financial foundation based on a solid core of managed revenues. To
achieve this end, we have focused our efforts on our critical properties and
have opened our newest managed hotel in Guam.
The return of financial growth to the PacRim nationa is also helping the
Company. While Hawaii has not yet seen the full impact of a healthier Asia,
our efforts to establish a presence in Guam and Micronesia are beginning to
pay off. Closer to the large Asian markets, Guam and Micronesia are beginning
to reflect the impact of the Asian economic recovery and Castle's properties
will share in this improvement.
Castle now has 3 properties outside of the US. Our international properties
on Guam, Chuuk and Saipan will be expanded with the Byron Avenue Hotel in
Auckland, New Zealand in 2001 when the hotel is completed. As we have said
before, the Pacific Rim holds many opportunities for us and management is very
excited about the future.
We are in the world's largest industry serving the world's most populous
region. We continue to believe in the future and look forward to an exciting
2000 and beyond.
Regards,
THE CASTLE GROUP, INC.
/s/ Rick Wall
Rick Wall
Chairman and CEO
<PAGE>
THE CASTLE GROUP, INC.
745 FORT STREET SUITE 1000
HONOLULU, HAWAII 96813
NOTICE OF THE 2000 ANNUAL MEETING OF STOCKHOLDERS
Dear Castle Group Inc. Stockholders,
Enclosed for your perusal is important information concerning the upcoming
Annual Shareholders Meeting to be held on March 31, 2000 at 1:30 p.m., HST, at
the ballroom of the Waikiki Terrace Hotel, 2045 Kalakaua Avenue, Honolulu, HI
96815. The purpose of the meeting shall be to:
1. To elect the directors of the Company for the ensuing year;
2. Approval of an amendment to the Company's Articles of Incorporation
to allow the issuance of other classes of equity;
3. To ratify the appointment of PricewaterhouseCoopers, LLP as the
Company's independent public accountants for the fiscal year ending
July 31, 2000; and
4. To act upon such other matters as may properly come before the meeting.
Stockholders who are recordholders at the close of business on February 22,
2000 are entitled to notice of and to vote at the 2000 Annual Meeting.
In this package you will find the Proxy, Notice of Annual Meeting, Proxy
Satement, and our Annual Report for the year ended July 31, 1999. Of
particular importance is the Proxy which we request you sign, date and return
to us as soon as possible. All stockholders are cordially invited to attend
the meeting. The proxy is solicited by the Company's Board of Directors. The
return of a proxy will not affect your right to vote in person if you attend
the meeting.
If you wish to attend the 1999 Annual Meeting, but your shares are held in the
name of a broker, trust, bank or other nominee, please bring a proxy from the
broker, trustee, bank or other nominee with you to confirm your beneficial
ownership of the shares.
By Order of the Board of
Directors
/s/ Motoko Takahashi
-------------------------
Motoko Takahashi
Corporate Secretary
Honolulu, Hawaii
March 6, 2000
<PAGE>
THE CASTLE GROUP, INC.
745 FORT STREET, TENTH FLOOR
HONOLULU, HAWAII 96813
PROXY STATEMENT
This Proxy Statement and the enclosed Proxy are being mailed to holders of
shares of the Company's common stock in connection with the solicitation of
proxies by the Company's board of directors for the 2000 Annual Meeting of
Shareholders to be held on Friday, March 31, 2000, and any adjournments
thereof. Proxies are solicited to give all shareholders of record at the
close of business on February 22, 2000 an opportunity to vote on matters that
come before the meeting. Shares can be voted only if the shareholder is
present in person or is represented by proxy.
Solicitation of Proxies may be made by mail, personal interview, telephone or
facsimile transmission by officers, directors and regular employees of the
Company. All costs of solicitation will be borne by the Company. This Proxy
Statement, including the Notice of Meeting, will be mailed to shareholders
beginning on March 7, 2000.
When your Proxy is returned properly signed, the shares represented will be
voted in accordance with your directions. You can specify your choices by
marking the appropriate boxes on the enclosed Proxy. If your Proxy is signed
and returned without specifying choices, the shares will be voted as
recommended by the directors. Abstentions are voted neither "for" nor
"against," but are counted in the determination of a quorum.
If you wish to give your proxy to someone other than the persons whose names
appear on the enclosed Proxy, all three names must be crossed out and the name
of another person or persons (not more than three) inserted. The person or
persons representing you must present the signed Proxy at the meeting. You
may revoke your Proxy at any time before it is voted at the meeting by
executing a later dated Proxy, by voting by ballot at the meeting, or by
filing an instrument of revocation with the Corporate Secretary at the above
address.
Your vote is important. Accordingly, you are urged to sign and return the
enclosed Proxy whether or not you plan to attend the meeting. If you do
attend, you may vote by ballot at the meeting, thereby canceling any proxy
previously given.
On July 31, 1999, there were 5,407,031 shares of common stock outstanding.
Only shareholders of record at the close of business on February 22, 2000 are
entitled to notice of and to vote at the meeting or any adjournments thereof.
Each shareholder is entitled to one vote for each share of common stock held
on the record date with respect to each matter properly brought before the
meeting.
<PAGE>
PROPOSAL NUMBER 1
ELECTION OF DIRECTORS
Nominees:
The Board of Directors has designated the following nominees for election as
directors of the Company to serve until the next annual meeting of shareholders
or until their successors are duly elected or appointed:
DIRECTORS AGE DIRECTOR SINCE
------------------- ----- ----------------
Rick Wall 56 1985
Hideo Nomura 48 1993
Ryoji Takahashi 59 1993
Noboru Sekiguchi 72 1998
John G. Tedcastle 66 1993
Motoko Takahashi 55 1995
Judhvir Parmar 64 1998
Stanley Y. Mukai 67 1998
Edward Calvo, Sr. 63 1998
Roy Tokujo 59 n/a
Roger K. Moses 58 n/a
A description of the business experience of each of the nominees is set forth
in the section entitled "Directors and Executive Officers."
The persons names in the Proxy intend to vote for the election of the nominees
listed above unless otherwise instructed on the Proxy. If you do not wish your
shares to be voted for particular nominees, please identify the exceptions in
the appropriate space provided on the Proxy. Directors will be elected by a
plurality of the votes cast. Any shares not voted (whether by abstention,
broker non-vote, or otherwise) will have no impact on the vote.
Board of Directors
The Board of Directors has the responsibility for establishing broad corporate
policies and for overseeing the overall performance of the Company. In
accordance with corporate legal principles, the Board is not involved in day-
to-day operating details. Members of the Board are kept informed of the
Company's business through discussions with the Company's officers, by
reviewing analyses and reports sent to them, and by participating in board
meetings.
The Board of Directors held two meetings during the fiscal year ending July
31, 1999. The attendance at the board meeting was 75% and 73% respectively.
<PAGE>
Compensation of Directors
The Company does not have any present arrangements regarding compensation of
directors for services as a director, or for attendance at meetings of the
Board of Directors or for participation on committees or other special
assignments. The Board of Directors may adopt resolutions providing for
reasonable compensation for participation in committees or special assignments
and reimbursement for reasonable expenses incurred in attending any meeting of
the Board of Directors. No compensation for service as a director is presently
contemplated.
There were no arrangements pursuant to which any director of the Company was
compensated during its most recent fiscal year for service provided solely as a
director, or for attendance at any meeting of the board of directors.
The Board Of Directors Recommends That The Shareholders Vote "For" Each Of The
Nominees Listed Above.
<PAGE>
PROPOSAL NUMBER 2
APPROVAL TO AN AMENDMENT TO ARTICLES OF INCORPORATION
Background
The Articles of Incorporation of the Company provide for the issuance of one
class of stock. The Board is proposing to authorize the issuance of other
classes of Corporate Equity in order to assist the Company in raising capital
which will be used to fund the expansion of the Company in the Pacific Basin
and for working capital purposes.
Subject to shareholder approval, the Board of Directors will ratify the
issuance of Preferred Stock which has been sold through private placements with
various high net worth and sophisticated individual investors. The Company
signed a lease for an upscale hotel that is being developed in Guam which
partially opened for business in October of 1999. Under the terms of the
lease, the Company is required to fund to the developers a lease deposit and
to fund the initial supplies inventory of the hotel. As of July 31, 1999, the
Company had sold $855,000 worth of Preferred Stock and the funds were used for
working capital purposes associated with the Company's startup operations for
the Guam hotel.
Preferred Stock
The Company intends to authorize the issuance of up to 50,000 shares of $100
par value redeemable preferred stock to in private placements. Dividends are
to be cumulative from the date of original issue and will be payable semi-
annually, beginning July 15, 1999 at a rate of $7.50 per annum for each share.
These shares are nonvoting and are convertible into the Company's Common Stock
at the rate of $3 per share, meaning that one share of Preferred Stock would
be convertible into 33.33 shares of Common Stock. On January 15, 2001, the
redeemable preferred stock will be redeemable at the option of the Company at
a redemption price of $100 per share plus accrued and unpaid dividends. The
Preferred Stock shall have preference over Common Stock in the event of
dissolution of the Company.
<PAGE>
Amendment to Articles of Incorporation
The Board of Directors has proposed an amendment to the Articles of
Incorporation of The Castle Group, Inc. to authorize the Board of Directors to
issue other classes of Corporate Equity. The following section is the proposed
amendment to the Articles of Incorporation:
Article IV
"The Corporation is authorized to issue Common Stock and, as approved by the
Board of Directors, other classes of equity, as follows:
The Board is authorized to issue a total of twenty million shares of
Common Stock,fully diluted, at $.02 par value, and when issued shall
all have unlimited voting rights and be entitled to participate in
the net assets of the Corporation on dissolution; and
Other classes of Corporate Equity providing that such issuance does
not impact the rights and privileges of the Common shareholders or
provide the circumstances by which the total number of issued Common
Shares shall exceed the authorized limit."
Any shares not voted (whether by abstention, broker non-vote, or otherwise)
will have no impact on the vote. Unless otherwise indicated, the persons
named in the Proxy will vote all proxies in favor of amending the Articles of
Incorporation of the Company.
The Board Of Directors Recommends That The Shareholders Vote "For" the
Approval of the Amendment to the Aricles of Incorporation of the Company.
<PAGE>
PROPOSAL NUMBER 3
RATIFICATION OF SELECTION OF AUDITORS
The Board of Directors has selected Pricewaterhouse Coopers LLP as the
auditors of the Company for the current fiscal year. Ratification of the
selection of auditors would require a majority of the votes cast thereon.
Any shares not voted (whether by abstention, broker non-vote, or otherwise)
will have no impact on the result of the vote. Unless otherwise indicated,
the persons named in the Proxy will vote all proxies in favor of ratifying
the selection of auditors.
The Company engaged PricewaterhouseCoopers, LLP (formerly Coopers & Lybrand,
L.L.P.) on September 15, 1999, to audit the Company's financial statements for
the year ending July 31, 1999.
The Board Of Directors Recommends That The Shareholders Vote "For"
Ratification Of The Selection Of Pricewaterhousecoopers LLP As The Company's
Auditors.
<PAGE>
Directors And Executive Officers
The following table sets forth certain information concerning the directors
and executive officers of the Company as of February 29, 2000. Except as
otherwise stated below, the directors will serve until the next annual meeting
of stockholders or until their successors are elected or appointed, and the
executive officers will serve until their successors are appointed by the
Board of Directors.
Name Age Position
- ----------------------- --- --------------------------------------
Rick Wall 56 Chief Executive Officer, Director and
Chairman of the Board
John G. Tedcastle 66 Vice Chairman of the Board and Director
Thomas Blankley Jr. 46 Vice President Finance
Hideo Nomura 48 Director
Ryoji Takahashi 59 Director
Motoko Takahashi 55 Secretary and Director
Michael S. Nitta 40 Chief Financial Officer
Alan R. Mattson 43 Senior Vice President, Sales & Marketing
Judhvir Parmar 64 Director
Steve Townsend 45 Sr. Vice President, Operations
Stanley Mukai 67 Director
Edward Calvo Sr. 63 Director
Noboru Sekiguchi 72 Director
RICK WALL. Mr. Wall was appointed the Company's chief executive officer and
chairman of the board upon consummation of the Castle Plan. Mr. Wall was
instrumental in the formation of Castle Group Hawaii, the negotiation and
consummation of the Castle Plan and the acquisition of KRI. He was the
president, director and founder of Castle Group Hawaii. During the past six
years, Mr. Wall has been the managing director of HBII, which owns 62% of the
Hanalei Bay Resort. Mr. Wall has been elected to the board of directors of
the Hawaii Visitors and Convention Bureau.
<PAGE>
JOHN G. TEDCASTLE. Mr. Tedcastle was appointed as a director of the Company
in November 1993. Mr. Tedcastle is experienced in the travel and hotel
industry, having been involved for several years as part owner and developer
of an eleven-property hotel chain in New Zealand. He has also been a senior
partner in a prominent law firm in Auckland, where he specialized in property,
financing and general business law. Mr. Tedcastle is also the owner/operator
of the Takapuna Golf course in Auckland, New Zealand, where he resides.
THOMAS BLANKLEY, JR. Mr. Blankley was appointed Vice President of Finance in
September 1998. Prior to joining the Company, Mr. Blankley was President of
PAHIO Vacation Resorts, Inc., Hawaii's largest timeshare sales and marketing
company. A native of New York, Mr. Blankley was a Managing Director for
Merrill Lynch in Tokyo and Drexel Burnham Lambert in London before moving to
Hawaii in 1988. Mr. Blankley is currently a resident of Hawaii.
HIDEO NOMURA. Mr. Nomura was appointed as a director of the Company in
November, 1993. Mr. Nomura is president of Nomura Holdings and of Nomura
Hitchcock Corporation, Ltd., a property related investment and consulting firm
based in Tokyo, Japan, and has held this position since 1987. Mr. Nomura is
the operational executive of the Marina del Rey Residential Development in
California, and was the manager of Mitsui & Company (N.Z.) Ltd. for five years
until 1987. Mr. Nomura is a resident of Japan.
RYOJI TAKAHASHI. Mr. Takahashi was appointed as a director of the Company
in November 1993. Mr. Takahashi, a resident of Japan, has, for over thirty
years, been a substantial principal of Nichiman Kosan, a corporation that
specializes in coordinating the installation of air conditioning and sound
control systems in commercial buildings and subcontracts with over 300
companies. He is also the major stockholder of Nikkankyo Group, which
consists of six independent companies and has over five hundred employees.
Mr. Takahashi is a graduate of Hosei University in Tokyo, Japan, where he
majored in economics and resides in Japan.
MOTOKO TAKAHASHI. Ms. Takahashi is the sister of Ryoji Takahashi and was
appointed secretary of the Company in August of 1994 and as director in March
of 1995. Ms. Takahashi had previously served as director for various Japanese
investment companies in the United States. She also holds the position as
Vice President of N.K.C. Hawaii, Inc. Ms. Takahashi was born and completed
her education in Tokyo, Japan and has resided in the United States for more
than 30 years.
MICHAEL S. NITTA. Mr. Nitta joined the Company in November 1993 following the
acquisition of KRI, Inc. Prior to joining the Company, Mr. Nitta served as
secretary and treasurer of KRI. Mr. Nitta was instrumental in the formation
of KRI Inc. and the acquisition of Hawaiian Pacific Resorts in 1987 from its
former founders. Prior to the formation of KRI, Inc. Mr. Nitta served as
secretary and treasurer of Hawaiian Pacific Resort Hotels Inc. from 1982. Born
and residing in Hawaii, he is a graduate of the University of Hawaii and holds
a Masters of Accounting Degree.
<PAGE>
ALAN R. MATTSON. Mr. Mattson has over 20 years of experience of marketing and
sales in the tourism industry. Mr. Mattson joined the Company in September of
1999 and was formerly vice president of sales and marketing for Dollar Rent a
Car, responsible for all sales and marketing efforts for Hawaii, Asia and the
Pacific. Prior to Dollar Rent a Car, Mr. Mattson was director of marketing
for Avis Car Rental, operating out of the Avis worldwide headquarters in New
York. Mr. Mattson also has seven years of sales and marketing experience with
Hilton Hotels Corporation, performing in a variety of senior level sales and
marketing positions in Hawaii and the domestic United States. Mr. Mattson
resides in Honolulu, Hawaii.
JUDHVIR PARMAR. In 1996, Mr. Parmar was appointed to the board of directors.
Mr. Parmar was formerly Senior Vice President of Investment Operations for
International Finance Corporation ("IFC"), a wholly owned subsidiary of the
World Bank. IFC was responsible for all private sector operations of the World
Bank. A specialist in project corporate finance, Mr. Parmar was with IFC for
more than twenty years and was responsible for the worldwide investment
program at IFC. In August 1993, Mr. Parmar retired from IFC to form his own
consulting company. Mr. Parmar resides in Washington, D.C.
STEVE TOWNSEND. Mr. Townsend joined the Company in July 1997 and has 23 years
of hotel and resort management experience. During his career he has held
numerous senior management positions with resort and hotel management
companies. Prior to joining the Company, Mr. Townsend was director of
operations for Interstate Hotels prior to a one-year assignment entailing
rebuilding and re-opening a hurricane damaged resort in the Virgin Islands.
Prior to Interstate, Mr. Townsend spent 8 years with Village Resorts. Mr.
Townsend is a graduate of the Hotel and Restaurant Administration School at
Florida State University. Mr. Townsend resides in Hawaii.
STANLEY MUKAI. Mr. Mukai is a graduate of the Harvard Law School and a partner
in the law firm of McCorriston Miho Miller Mukai located in Honolulu, Hawaii.
His expertise is in the area of taxation and Mr. Mukai has held various
positions such as Advisory Board Member, Hawaii Tax Institute; Trustee, Tax
Foundation of Hawaii; Co-Chairman, Tax Subcommittee, American Bar Association;
Chairman, Tax Subcommittee on U.S. District and Portfolio Investment by
Foreigners; and Chairman, Section of Taxation, Hawaii Bar Association.
NOBURU SEKIGUCHI. Mr. Sekiguchi is a graduate of Waseda University and is a
Director and controller of Nikkankyo Group, which is the parent company of
N.K.C. Hawaii. He has worked for Toyo Menka Company, one of the leading
trading companies in Japan for forty years as a financial officer. Mr.
Sekiguchi resides in Japan.
EDWARD CALVO, SR. Mr. Calvo is vice president of Calvo Enterprises, Inc., a
conglomerate of ten businesses with fifteen hundred employees. They are the
largest private employer on Guam. Mr. Calvo has served as a Senator in the
Guam legislature and is currently the Board Chairman of the Guam Waterworks
Authority. Mr. Calvo resides in Guam.
<PAGE>
ROY TOKUJO Mr. Tokujo is a new Nominee to serve on the Board of Directors.
Mr. Tokujo is a 40 year veteran of the hotel, restaurant and entertainment
business in Hawaii and is currently the president and chief executive officer
of Cove Entertainment, Inc. Mr. Tokujo is a graduate of Michigan State and
his professional experience includes terms with the Ilikai Hotel, Polynesian
Hotel, Pagoda Hotel and Floating Restaurant, Orchid Isld Hotel, Paradise Cove
Luau and Magic of Polynesia. In 1998, Mr. Tokujo created another venture,
Lahaina Myth & Magic Theatre, Inc., a $10.5 million 700-seat theatre and stage
production. Mr. Tokujo has also served as acting president and chairman of the
board of the Hawaii Visitors & Convention Bureau. He is currently a board
member of the Hawaii Tourism Authority, a State of Hawaii agency that controls
and directs a $60 million annual budget to promote tourism for Hawaii. Mr.
Tokujo resides in Hawaii.
ROGER MOSES. Mr. Moses is a new Nominee to serve on the Board of Directors.
Mr. Moses is a non-executive director of Harts Reeves Moses & Company Limited.
He is one of New Zealand's most experienced financial and investment planners
and has been involved in most facets of the investment industry. Mr. Moses is
a past chairman of the Financial Planners and Insurance Advisors Association
and is a former member of the Association's Board of Trustees. In addition he
is a Certified Financial Planner. Mr. Moses was also chairman of the IAFP
Professional Development Foundation and became a life member of the IAFP in
1995. He has also co-authored four successful books on investment and
financial planning: "Making Money Made Simple", "Making More Money", "Living
Well in Retirement" and "Getting it Together". Mr. Moses resides in Auckland,
New Zealand.
Family Relationships
Motoko Takahashi is the sister of Ryoji Takahashi. There are no other
relationships between the directors and officers of the Company.
Executive Compensation
The following table shows for the fiscal year ended July 31, 1999, the
aggregate annual remuneration of each of the three highest paid persons who
were executive officers or directors of the Company and the executive officers
and directors as a group. Mr. Townsend's compensation includes the issuance of
22,500 unregistered shares of the Company's common stock.
Name of Individual Capacities in which renumeration Aggregate
or identity of group was received Renumeration
- ----------------------- -------------------------------- -------------
Rick Wall Chairman of the Board and $120,000
Chief Executive Officer
Steve Townsend Senior Vice President $148,125
Michael Nitta Chief Financial Officer $ 90,000
Thomas Blankley, Jr. Vice President Finance $ 90,000
Employment Contracts
The Company has entered into written employment contracts with Mr. Nitta,
effective as of November 1, 1993 and Mr. Townsend effective as of July 31,
1997. Other than Mr. Nitta, Mr. Townsend, the Company has entered into no
employment contract with any director or executive officer.
<PAGE>
The above-mentioned employment agreements are for five years and provide for a
base salary, to be increased annually by a percentage no less than the increase
in the Honolulu Consumer Price Index for the preceding twelve months. Under
their respective employment agreements, the current base salary Mr. Nitta is
$120,000 per year. However, Mr. Nitta has agreed to reduce his base salary for
the current fiscal year to $90,000. The current base salary for Mr. Townsend
is $100,000. The employment agreements further provide for paid vacation; a
monthly automobile allowance; an annual performance bonus potential of up to
15% of the base salary (up to 20% for Mr. Nitta), depending upon attaining
pre-determined goal criteria; membership in a pension plan (not yet
established) that would contribute the equivalent of 10% of base salary
annually; a business development bonus (which has been waived in the past and
current fiscal years); membership in a 401(k) plan; and full medical, dental
and disability insurance. Mr. Townsend was awarded a performance bonus of
$15,000 of which $8,750 was paid during the fiscal year ended July 31, 1999
with the balance paid during the fiscal year ended July 31, 2000. Mr. Nitta
has deferred any performance bonuses for the fiscal year.
The employment agreements contain a "change-in-control" provision which gives
each of the employees under contract the right, upon the occurrence of a
"change-in-control," to terminate their employment and receive as severance pay
the total compensation remaining to be paid under the agreement as of the date
of such termination or the total compensation for three years following the
date of termination, whichever is greater. The term "change-in-control" is
defined in each agreement as the date when persons other than the shareholders
of record on the date of commencement of the term of such agreement become the
beneficial owner of 51% of the Company's voting stock.
Long Term Incentive Plans
On July 31, 1999, the Company awarded Mr. Townsend 22,500 shares of
unregistered and restricted common stock as a bonus. No other options, awards,
options or stock appreciation rights or long term incentive plan awards were
issued or granted to the Company's management during the fiscal year ending
July 31, 1999.
The Company has a 401(k) profit sharing plan generally available to all of its
employees. Under the terms of the plan, the Company is required to match 100%
of the amounts contributed by participants through payroll deductions, up to a
maximum of 1% of their compensation. Any employee with one year of service who
is at least 21 years of age is eligible to participate.
Stock Plans
The Company's stockholders have approved a 1995 Stock Option Plan for the
purposes of: (i) attracting and retaining employees, executive management and
key employees with ability and initiative; (ii) providing incentives to those
deemed material to the success of the Company; and (iii) attaining a common
interest for these individuals to coincide with the interests of the Company
and its shareholders. A total of 1,000,000 shares of common stock have been
reserved for issuance under the Plan. No stock grants were issued for the
years ended July 31, 1995 through July 31, 1999.
<PAGE>
The Company's stockholders have approved a 1995 Stock Purchase Plan for the
purposes of providing an employee benefit that will allow employees of the
Company to purchase shares of common stock at a discount of 15% of the fair
market value of the stock. A total of 500,000 shares of common stock has been
reserved for issuance under the Plan. As of July 31, 1999, the Stock Purchase
Plan had not been instituted.
Options, Warrants And Rights
In May 1994, the Company entered into a Common Stock Purchase Warrant with Van
Kasper and company for services provided. The Warrant is for 25,000 shares
exercisable on or before May 12, 1994 for a price of $1.25 per share. In May
of 1999, the warrants were exercised on a net basis, resulting in the issuance
of 12,244 shares of the Company's common stock.
In May, 1997, The Company, as part of a renegotiation of its reservation
services agreement, granted to Hawaii Reservations Center Corp. an option to
purchase 50,000 shares of the Company's common stock at a price of $2.00 per
share. The option may be exercised between May 21, 1997 and May 20, 2002.
Hawaii Reservations Center Corp. is a wholly owned corporation of Mr. Charles
McGee, a former director of the Company. As of July 31, 1999, the option had
not yet been exercised. Mr. McGee tendered his resigned as a member of the
board of directors on February 16, 1999.
In June 1998, certain individuals advanced a total of $375,000 to the Company
in the form of a Promissory Note from the Company to the individual. The Notes
specify that if the principle amounts are not returned to the individuals on or
before March 31, 1999, then the entire principle balance shall be converted
into common stock of the Company at a 50% discount of the then fair value of
the Company's common stock. The notes were paid in full in March of 1999. The
notes also provide for the issuance of a warrant to the individuals whereby the
individual has the right to acquire 1 share of the Company's common stock for
every $2.00 of funds advanced to the Company. The exercise price under the
warrant agreements is $2.00 per share and the warrants may be exercised at any
time between June 30, 1998 and June 29, 2003.
As of July 31, 1999, no warrants had been exercised by any of the holders. Mr.
Judvhir Parmar, a director of the Company, advanced $175,000 of the $375,000
received and is therefore entitled to a warrant to purchase 87,500 shares of
the Company's common stock.
In March and April of 1999, the Company issued 8,550 shares of $100 par value
redeemable preferred stock to certain individuals and one director. Dividends
are cumulative from the date of original issue and are payable semi-annually,
beginning July 15, 1999 at a rate of $7.50 per annum per share. The preferred
stock memorandum provided that upon certain tender offers to acquire
substantially all of the Company's common stock, the holders of the redeemable
preferred stock may require the shares be redeemed at a redemption price of
$100 per share plus accrued and unpaid dividends. In December 1999, the
Company, with the consent of the preferred stockholders, amended the preferred
stock memorandum to eliminate the ability of the holders to redeem the shares.
Accordingly, the preferred stock is classified in stockholders' equity with the
<PAGE>
quarterly filing on form 10-QSB for the three months ended October 31, 1999 as
opposed to the mezzanine at July 31, 1999. At July 31, 1999, accrued dividends
on these shares of $3,363 and is included in redeemable preferred stock in the
accompanying consolidated balance sheet. As a result of the amendment to the
preferred stock memorandum, dividends on the shares shall no longer be accrued
and will instead be recorded when declared by the board of directors. These
shares are also nonvoting and are convertible to the Company's common stock at
$3 per share. As of January 15, 2001, the preferred stock is redeemable at the
option of the Company at a redemption price of $100 per share plus accrued and
unpaid dividends. Mr. Judvhir Parmar purchased 1,000 shares of the preferred
stock; Mr. Thomas Blankley, Jr. purchased 500 shares and family members of Mr.
Thomas Blankley, Jr. purchased 1,250 shares.
Other than the warrants issued to the individuals who advanced funds to the
Company, the option granted to Hawaii Reservations Center Corp. and the
redeemable preferred stock, there were no outstanding options, warrants or
rights to purchase common stock held by any of the officers or directors of the
Company or its principal shareholders.
Management And Others Interests In Certain Transactions
The Hanalei Bay Resort is a 134-unit condominium located in Princeville, Kauai,
Hawaii. HBII was formed through the efforts of HBII Management Inc., owned by
Mr. Wall, with the following partners: Siam Commercial Bank; Voyage Fourteen
Ltd., owned by John G. Tedcastle; L.C.C. Management, Inc., owned by Judhvir
Parmar; Nomura Firm and Nomura Holdings, owned by Hideo Nomura and Don Nomura.
In 1988 HBII made an offer to purchase all 134 units of the Hanalei Bay Resort
and eighty-six owners accepted the offer. HBII elected to form its own
management company and entered into a management contract with Castle Group
Hawaii, which was one of the assets acquired by the Company pursuant to the
Castle Plan. Under terms of the management contract between HBII and Castle
Group Hawaii and as acquired by the Company, the Company is required to provide
full management, including sales, supervision of staff, accounting and
maintenance. Mr. Tedcastle and Mr. Hideo Nomura were elected to serve on the
board of directors of the Company following completion of the Castle Plan. Mr.
Parmar was appointed interim director in November 1995. Mr. Parmar is a
general partner of HBII and is the owner of L.C.C. Management, Inc., which is
the holder of approximately 10% of the Company's common stock (see "Share
Ownership of Certain Beneficial Owners"). Nichiman International later became
an investor in HBII and Nichiman International s owner, Mr. Ryoji Takahashi was
appointed as a director of the Company. In March of 1995, Mr. Takahashi's
sister, Ms. Motoko Takahashi, was appointed Secretary and director of the
Company. In March of 1997, Mr. Michael Nitta was appointed Assistant Vice
President of HBII Management, Inc. Until the date that HBII sold its principal
asset, the Hanalei Bay Resort, Mr. Wall received a monthly retainer from HBII.
In March of 1999, HBII sold its principal asset that consisted of 85
condominium units in the Hanalei Bay Resort. Upon the closing of the sale, the
Company received $468,000 that was applied to the $435,000 note receivable and
accrued interest due from HBII (see Note 3 to the Consolidated Financial
Statements). The funds received by HBII upon the closing of the sale were
insufficient to make full payment to the Company for its accounts receivable
balance. Under the terms of the sale, in addition to the sale proceeds to be
<PAGE>
received, the current HBII partners shall share in the future cashflows
generated by timeshare sales of the units located within the Hanalei Bay
Resort, after certain secured and preferential payments are made. HBII shall
make payments to the Company through the funds received from the future
cashflows generated by the timeshare sales of the Hanalei Bay Resort units
(see Note 2 to the Consolidated Financial Statements). Although no assurances
can be given, management is confident that the future sales will be made and
that the Company shall receive payment in full of its accounts receivable
balance from HBII. Certain members of the Board of Directors of the Company
have a direct or indirect financial interest in HBII.
Management believes that the terms of the management contract between the
Company and HBII were on terms that were no less favorable to HBII or the
Company than those that are negotiated with other owners not affiliated with
the Company.
On August 1, 1994, the Company entered into a contract with HRCC (as described
in section "Plan of Operations" Item 6, Part II, and incorporated herein by
reference), a company owned and controlled by Charles M. McGee, a former
director of the Company. It is management's belief that the contract with
HRCC are on terms which are no less favorable than those which could be
negotiated with companies not affiliated with the Company, however, in May of
1997, the Company renegotiated its contract with HRCC with regard to the fees
charged. Under the renegotiated agreement, the fees paid to HRCC shall be
based upon the monthly room revenues of the properties managed by the Company,
subject to a minimum monthly fee. Management believes, although no assurances
can be given, that the Company shall enjoy lower reservations costs under the
new agreement.
Except for the Castle Plan, the HBII Plan, the employment contracts and other
matters described in "Remuneration of Officers and Directors," the HBII
management contract, the issuance of warrants and preferred stock described in
"Options Warrants and Rights" and the HRCC contract, there were no transactions
or proposed transactions during 1998 and 1999, to which the Company or any of
its subsidiaries was or is to be a party, in which the amount involved exceeds
$50,000 and in which any director or executive officer, or any shareholder who
is known to the Company to own of record or beneficially more than 10% of the
Company's common stock, or any member of the immediate family of any of the
foregoing persons, had a direct or indirect material interest.
<PAGE>
Share Ownership Of Certain Beneficial Owners
The following table sets forth the number of shares of the Company's common
stock beneficially owned as of July 31, 1999 by: (i) each of the three highest
paid persons who were officers and directors of the Company, (ii) all officers
and directors of the Company as a Group, and (iii) each shareholder who owned
more than 10% of the Company's Common Stock, including those shares subject to
outstanding options.
Beneficially Shares %
Name and Address Owned (1) of Class (2)
- -------------------------- ------------ ------------
Rick Wall
745 Fort Street
Honolulu, HI 96813 815,000(3) 14%
John G. Tedcastle
745 Fort Street
Honolulu, HI 96813 525,000(5) 9%
Hideo Nomura
745 Fort Street
Honolulu, HI 96813 525,000 9%
L.C.C. Management Inc.
745 Fort Street
Honolulu, HI 96813 645,833(6) 11%
N.K.C. Hawaii, Inc.
745 Fort Street
Honolulu, HI 96813 900,000(7) 15%
Thomas S. Blankley, Jr.
745 Fort Street
Honolulu, Hawaii 96813 141,667(4) 2%
Michael S. Nitta
98-1722 Halakea St.
Aiea, Hawaii 96701 45,500 <1%
Steve Townsend
745 Fort Street
Honolulu, Hawaii 95813 22,500 <1%
Directors and officers as
a group (12 persons) 3,772,500 64%
(1) Except as otherwise noted, the Company believes the persons named in the
table have sole voting and investment power with respect to the shares of
the Company's common stock set forth opposite such persons names. Amounts
shown include the shares issuable pursuant to various stock options,
warrants and convertible Preferred Stock exercisable in 1999.
<PAGE>
(2) Determined on the basis of 5,929,531 shares outstanding. Amount includes
shares issuable under certain stock options, warrants and convertible
Preferred Stock exercisable as of July 31, 1999.
(3) Includes 375,000 shares held by HBII Management, Inc., which is owned and
controlled by Mr. Wall.
(4) Includes 25,000 shares issuable pursuant to warrants held by Mr. Thomas
Blankley Jr. Includes 50,000 shares issuable pursuant to warrants held by
the parents of Mr. Thomas Blankley Jr. Excludes 16,667 shares issuable
pursuant to the conversion features of Preferred Stock held by Mr. Thomas
Blankley Jr. Includes 50,000 shares issuable pursuant to the conversion
features of Preferred Stock held by the family members of Mr. Thomas
Blankley, Jr.
(5) Includes 525,000 shares held by The John Tedcastle Family Trust, of which
Mr. John Tedcastle is trustee with control over voting rights.
(6) Includes 525,000 shares held by L.C.C. Management, Inc., a corporation
owned and controlled by Ms. Janet Parmar, spouse of Mr. Judvhir Parmar, a
director of the Company. Includes 87,500 shares issuable pursuant to
warrants held by Mr. Parmar. Includes 33,333 shares issuable pursuant to
redeemable preferred stock held by Mr. Parmar.
(7) Includes 900,000 shares held by N.K.C. Hawaii, Inc. which is owned and
controlled by the family of Mr. Takahashi
Compliance With Section 16(A) Under The Securities Exchange Act Of 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), requires the Company's directors and officers, and persons who own more
than 10% of a registered class of the Company's equity securities ("Insiders"),
to file with the Commission initial reports of ownership and reports of changes
in ownership of Common Stock. Insiders are required by the Commission's
regulations to furnish the Company with copies of all Section 16(a) reports
filed by such persons.
To the Company's knowledge, based solely on its review of the copies of such
reports furnished to the Company and written representations during the year
ended July 31, 1999, all Section 16(a) filing requirements applicable to
Insiders were fulfilled.
<PAGE>
OTHER MATTERS
The Board of Directors does not know of any other matters to be presented at
the 2000 Annual Meeting other than those described in this Proxy Statement. If
any other matters are properly brought before the 2000 Annual Meeting it is
intended that the proxies will be voted in accordance with the best judgement
of the person or persons who are entitled to vote such proxies.
SUBMISSION OF SHAREHOLDER PROPOSALS
In order to be considered for inclusion in next year's proxy statement, the
Company must receive a shareholder proposal no later than August 31, 2000.
Written requests for inclusion of a proposal should be addressed to:
Corporate Secretary, The Castle Group, Inc., 745 Fort Street, Tenth Floor,
Honolulu, Hawaii 96813.
By order of the Board of Directors
/s/ Motoko Takahashi
MOTOKO TAKAHASHI
Corporate Secretary
<PAGE>
PROXY
THE CASTLE GROUP, INC.
ANNUAL MEETING OF SHAREHOLDERS
MARCH 31, 2000
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE CASTLE GROUP, INC.
The undersigned hereby appoints Rick Wall, Motoko Takahashi, and John
Tedcastle, or any one of them, proxies to represent the undersigned, with full
power of substitution, at the Annual Meeting of Shareholders of The Castle
Group, Inc. (the "Corporation") to be held on Friday, March 31, 2000, at
1:30 P.M. (HAWAII STANDARD TIME) AT WAIKIKI TERRACE HOTEL, 2045, KALAKAUA
AVENUE, HONOLULU (WAIKIKI), HAWAII 96815, and any adjournments thereof, with
all the powers and authority the undersigned would possess to vote and act if
personally present, upon matters noted below and upon such other matters as
may properly come before the meeting. The shares represented by this Proxy
shall be voted as follows:
1. To elect as directors the nominees listed below:
Rick Wall
John Tedcastle
Ryoji Takahashi
Hideo Nomura
Motoko Takahashi
Judhvir Parmar
Noboru Sekiguchi
Stanley Y. Mukai
Edward Calvo, Sr.
Roy Tokujo
Roger K. Moses
[ ] FOR all the foregoing nominees [ ] WITHHOLD AUTHORITY to vote for
all the foregoing nominees
NOTE: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE LISTED ABOVE,
DRAW A LINE THROUGH OR OTHERWISE STRIKE OUT THE NAME OF THAT NOMINEE IN THE
LIST ABOVE. UNLESS AUTHORITY TO VOTE FOR ALL THE FOREGOING NOMINEES IS
WITHHELD, THIS PROXY WILL BE DEEMED TO CONFER AUTHORITY TO VOTE FOR EVERY
NOMINEE WHOSE NAME IS NOT STRICKEN.
<PAGE>
2. To approve the Amendment to the Company's Articles of Incorporation giving
the Board of Directors the authority to issue other classes of Corporate
Equity.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
NOTE: ANY SHARES NOT VOTED (WHETHER BY ABSTENTION, BROKER NON-VOTE, OR
OTHERWISE) WILL HAVE NO IMPACT ON THE VOTE. UNLESS OTHERWISE INDICATED, THE
PERSONS NAMED IN THE PROXY WILL VOTE ALL PROXIES IN FAVOR OF AMENDING THE
ARTICLES OF INCORPORATION OF THE COMPANY.
<PAGE>
3. To ratify the selection of PriceWaterhouseCoopers, L.L.P., as independent
auditors for the Corporation for the fiscal year ending July 31, 2000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
NOTE: ANY SHARES NOT VOTED (WHETHER BY ABSTENTION, BROKER NON-VOTE, OR
OTHERWISE) WILL HAVE NO IMPACT ON THE VOTE. UNLESS OTHERWISE INDICATED, THE
PERSONS NAMED IN THE PROXY WILL VOTE ALL PROXIES IN FAVOR OF RATIFYING THE
SELECTION OF PRICEWATERHOUSECOOPERS, L.L.P. AS THE INDEPENDENT AUDITORS FOR
THE FISCAL YEAR ENDING JULY 31, 2000.
<PAGE>
This Proxy when properly executed will be voted in the manner directed herein
by the undersigned. If any other business is transacted at the meeting, this
Proxy shall be voted in accordance with the best judgment of the proxies. The
Board of Directors recommends a vote "FOR" each of the listed proposals. This
Proxy is solicited on behalf of the Board of Directors of The Castle Group,
Inc. and may be revoked prior to its exercise.
TO BE VALID, THIS PROXY MUST BE DELIVERED TO THE OFFICE OF THE CASTLE GROUP,
INC. AT 745 FORT STREET, TENTH FLOOR, HONOLULU, HAWAII 96813 BY 4:30 P.M. ON
MARCH 29, 2000. PROXIES TRANSMITTED BY FACSIMILE MAY BE SENT TO 808-521-9994.
Dated: March 7, 2000
____________________________________
Signature(s) of Shareholder(s)
____________________________________
Please Print Name(s)
____________________________________
Signature(s) of Shareholder(s)
____________________________________
Please Print Name
NOTE: Signature(s) should follow exactly the
name(s) on the stock certificate. Executor,
administrator, trustee or guardian should sign
as such. If more than one trustee, all should
sign. ALL JOINT OWNERS MUST SIGN.
<PAGE>
(Attached SEC Form 10K-SB for the year ended
July 31, 1999 as Annual Report)
<PAGE>
