<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:
/x/ Preliminary Proxy Statement / / Confidential, for use of the
/ / Definitive Proxy Statement Commission Only (as permitted
/ / Definitive Additional Materials by Rule 14a-6(e)(2))
/ / Soliciting Material Pursuant to Rule
14a-11(c) or Rule 14a-12
CASTLE BANCGROUP, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
CASTLE BANCGROUP, INC.
(NAME OF PERSON(S) FILING PROXY STATEMENT)
Payment of filing fee (check the appropriate box):
/x/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
/ / 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>
CASTLE BANCGROUP, INC.
NOTICE
of
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD APRIL 23, 1997
NOTICE IS HEREBY GIVEN, that the Annual Meeting of Stockholders of Castle
BancGroup, Inc., a Delaware corporation (the "Corporation"), will be held in the
community room of First National Bank in DeKalb/Sycamore, 511 West State Street,
Sycamore, Illinois 60178, on Wednesday, April 23, 1997 at 2:00 p.m., for the
following purposes:
(1) To elect nine directors to serve for terms ranging form one to three
years if Proposal No. 2 is adopted, or, in the alternative, to elect
nine directors to serve until the next annual meeting of stockholders;
(2) To consider and vote upon a proposal to amend the Certificate of
Incorporation of the Corporation to classify the Board of Directors,
as more fully described in the accompanying Proxy Statement; and
(3) To transact such other business as may properly come before the
meeting or any adjournment thereof.
Stockholders of record at the close of business on March 14, 1997 are
entitled to notice of and to vote at the meeting or any adjournment thereof.
IMPORTANT! TO ASSURE THAT YOUR SHARES ARE REPRESENTED AT THE ANNUAL
MEETING, PLEASE SIGN, DATE AND RETURN PROMPTLY THE ENCLOSED PROXY CARD IN THE
ENVELOPE PROVIDED.
NO POSTAGE IS REQUIRED IF THE PROXY IS MAILED IN THE UNITED STATES.
By Order of the Board of Directors
David B. Castle
SECRETARY
DeKalb, Illinois
March 19, 1997
<PAGE>
- --------------------------------------------------------------------------------
PROXY STATEMENT
OF
CASTLE BANCGROUP, INC.
208 WEST LOCUST STREET
DEKALB, ILLINOIS 60115
(815) 758-7007
ANNUAL MEETING OF STOCKHOLDERS
APRIL 23, 1997
- --------------------------------------------------------------------------------
GENERAL INFORMATION
- --------------------------------------------------------------------------------
This Proxy Statement and the accompanying proxy card are being furnished in
connection with the solicitation of proxies by the Board of Directors of Castle
BancGroup, Inc. (the "Corporation") from holders of the Corporation's
outstanding shares of common stock, par value $.33 1/3 per share ("Common
Stock"), for use at the 1997 Annual Meeting of Stockholders (the "Annual
Meeting") to be held on Wednesday, April 23, 1997 at 2:00 p.m. in the community
room of First National Bank in DeKalb/Sycamore, 511 West State Street, Sycamore,
Illinois 60178, or at any adjournment thereof, for the purposes set forth in the
accompanying Notice of Meeting and in this Proxy Statement.
The Corporation will bear the costs of soliciting proxies from its
stockholders. In addition to soliciting proxies by mail, directors, officers
and employees of the Corporation, without receiving additional compensation
therefor, may solicit proxies in person, by telephone or by facsimile. The
Corporation may also reimburse brokers, nominees and other fiduciaries for their
reasonable expenses in forwarding proxy solicitation materials to beneficial
owners. The accompanying Notice of Annual Meeting, this Proxy Statement and
form of proxy are first being mailed to the Corporation's stockholders on or
about March 19, 1997.
- --------------------------------------------------------------------------------
VOTING AT THE ANNUAL MEETING
- --------------------------------------------------------------------------------
The close of business on March 14, 1997, has been fixed as the record date
for the determination of stockholders of the Corporation entitled to notice of
and to vote at the Annual Meeting. As of the close of business on March 3,
1997, the Corporation had _________ shares of Common Stock issued and
outstanding.
Each proxy that is properly signed and received prior to the Annual Meeting
will, unless such proxy has been revoked, be voted in accordance with the
instructions on such proxy. If no instructions are indicated, proxies will be
voted "for" the election of all nominees named in the proxy, "for" the approval
of the amendment to the Corporation's Certificate of Incorporation and in the
discretion of the persons named in the proxy on such other matters as may
properly come before the Annual Meeting. Any stockholder has the right to
revoke a proxy at any time prior to its exercise at the Annual Meeting. A proxy
may be revoked by properly executing and submitting to the Corporation a
later-dated proxy or by mailing written notice of revocation to Castle
BancGroup, Inc., 208 West Locust Street, DeKalb, Illinois 60115, Attention:
David B. Castle, Secretary. A
<PAGE>
stockholder may also revoke a proxy by appearing at the Annual Meeting and
voting in person. Proxies are valid only for the meeting specified therein or
any adjournments of such meeting.
A quorum of stockholders is necessary to take action at the Annual Meeting.
A majority of the outstanding shares of Common Stock, represented in person or
by proxy, shall constitute a quorum for the transaction of business at the
Annual Meeting. Votes cast by proxy or in person at the Annual Meeting will be
tabulated by the inspectors of election appointed for the Annual Meeting. The
inspectors will determine whether a quorum is present and will treat abstentions
as shares that are present and entitled to vote for purposes of determining the
presence of a quorum. If a broker indicates on a proxy that it does not have
discretionary authority as to certain shares of Common Stock to vote on a
particular matter, those shares will not be considered as present and entitled
to vote with respect to that matter even though such shares will be considered
present for the purpose of determining the presence of a quorum.
Stockholders have the right to cumulative voting in the election of
directors. Under cumulative voting, each stockholder is entitled to a number of
votes equal to the number of his or her shares multiplied by the number of
directors to be elected. Each stockholder may cast all of those votes for a
single nominee or may distribute the votes among as many of the nominees as such
stockholder deems appropriate. Cumulative votes for which a proxy is given will
be divided equally among all director nominees for whom authority has been
given. NOTWITHSTANDING THE FOREGOING, THE PROXY HOLDERS RESERVE THE RIGHT,
EXERCISABLE IN THEIR SOLE DISCRETION, TO VOTE PROXIES CUMULATIVELY SO AS TO
ELECT ALL OR AS MANY AS POSSIBLE OF SUCH DIRECTOR NOMINEES DEPENDING UPON THE
CIRCUMSTANCES AT THE ANNUAL MEETING.
In voting on approval of the amendment to the Corporation's Certificate of
Incorporation and all other matters that may properly come before the Annual
Meeting, each stockholder is entitled to one vote for each share of Common Stock
held.
A plurality of the votes of the shares of Common Stock present in person or
represented by proxy at the Annual Meeting is required to elect a director. A
majority of the outstanding shares of Common Stock is required to approve the
amendment to the Certificate of Incorporation. In all other matters, the
affirmative vote of the majority of the shares of Common Stock present in person
or represented by proxy at the Annual Meeting is required. For purposes of
determining the approval of any matter submitted to the stockholders for a vote,
other than the election of directors, abstentions and broker non-votes will have
the same effect as votes against such matters.
- --------------------------------------------------------------------------------
PROPOSAL NO. 1 - ELECTION OF DIRECTORS
- --------------------------------------------------------------------------------
The Corporation's Board of Directors is currently composed of eleven (11)
directors. Two of the current directors, Louis P. Brady and Nancy D. Castle,
have indicated their desire not to stand for reelection as directors of the
Corporation. Accordingly, the Board of Directors has amended its Bylaws to
provide that the number of directors of the Corporation, effective as of the
1997 Annual Meeting of Stockholders, shall be nine (9). The Corporation's Board
of Directors has nominated the following nine persons, who are current directors
of the Corporation, for election to the Board of
2
<PAGE>
Directors of the Corporation: Larry D. Beaty, Bruce P. Bickner, Robert T. Boey,
John W. Castle, Peter H. Henning, John B. Hiatt, Donald E. Kieso, James N.
McInnes and William R. Monat.
If Proposal No. 2 to amend the Certificate of Incorporation to provide for
a classified Board of Directors is adopted at the Annual Meeting, John B. Hiatt,
James N. McInnes and William R. Monat will be elected for a one-year term
expiring in 1998; Larry D. Beaty, Robert T. Boey and Donald E. Kieso will be
elected for a two-year term expiring in 1999; and Bruce P. Bickner, John W.
Castle and Peter H. Henning will be elected for a three-year term expiring in
2000. If Proposal No. 2 is not adopted, the nine nominees will serve until the
1998 Annual Meeting of Stockholders or until their respective successors have
been elected and qualified.
All of the nominees are currently serving as directors of the Corporation.
Each of the nominees has agreed to serve as a director if elected, and the
Corporation has no reason to believe that any nominee will be unable to serve.
In the event of the refusal or inability of any nominee for director of the
Corporation to serve as director, the persons named in the accompanying form of
proxy shall vote such proxies for such other person or persons as may be
nominated as directors by the Board of Directors of the Corporation, unless the
number of directors shall have been reduced by the Board.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
THE ELECTION OF THE NINE (9) NOMINEES LISTED ABOVE.
INFORMATION FOR NOMINEES, DIRECTORS AND EXECUTIVE OFFICERS
The following information is furnished with respect to each person who has been
nominated for election as a director, each of whom is currently a director of
the Corporation, the two existing directors not standing for reelection and each
person who is an executive officer of the Corporation.
DIRECTOR OR
NAME AGE OFFICER SINCE POSITION
---- --- ------------- --------
DIRECTOR NOMINEES:
Larry D. Beaty 52 1990 Director, Executive Vice President
and Treasurer of the Corporation
Bruce P. Bickner 53 1991 Director
Robert T. Boey 57 1992 Director
John W. Castle 63 1984 Director and Chairman of the
Board of the Corporation
Peter H. Henning 49 1988 Director
John B. Hiatt 75 1990 Director
Donald E. Kieso 60 1993 Director
3
<PAGE>
James N. McInnes 71 1984 Director and President
of the Corporation
William R. Monat 72 1993 Director
DIRECTORS NOT STANDING FOR
REELECTION:
Louis P. Brady 74 1984 Director and Vice Chairman
of the Corporation
Nancy D. Castle 61 1984 Director
EXECUTIVE OFFICERS:
James V. Bowers 59 1992 President of First
National Bank in DeKalb
Lawrence M. Budnik 37 1995 President of Castle Mortgage, Inc.
David B. Castle 29 1996 Secretary of the Corporation and
Executive Vice President of
Castle Finance Company
Gerald D. Engelhart 54 1996 Interim President of Castle Finance
Company and Senior Vice President
of Sandwich State Bank
Stan J. Free 36 1993 President of The Bank of Yorkville
James H. Hall 55 1993 Chairman of The Bank of Yorkville
A. Gene Shumway 49 1996 President of Sandwich State Bank
David A. Stearns 50 1995 President of First State Bank of
Harvard
Patrick J. Wise 41 1995 Vice President - Operations
of the Corporation
Jea Nae B. Wood 33 1996 Controller of the Corporation
Thomas D. Young 51 1995 Vice President - Marketing
of the Corporation
DIRECTORS:
LARRY D. BEATY is Executive Vice President, Chief Financial Officer and
Treasurer of the Corporation. Mr. Beaty has been Treasurer since 1984 and
Executive Vice President and Chief Financial Officer since 1992. With respect
to the subsidiaries of the Corporation, he has been a director of First National
Bank in DeKalb ("FNB") since 1982, Treasurer and director of SBI Illinois, Inc.
("SBI") since 1990, director of First State Bank of Harvard ("FSB") since 1990,
director of The Bank of Yorkville ("BOY") since 1993, Assistant Secretary and
director of Castle Mortgage, Inc. ("CMI") since 1995 and director of Castle
Finance Company, Inc. ("CFC") since 1996.
BRUCE P. BICKNER is Chairman and Chief Executive Officer of DeKalb Genetics
Corp., an agricultural genetics company. Mr. Bickner has held such position
since 1988. Mr. Bickner is also a director of DeKalb Genetics Corp.
4
<PAGE>
ROBERT T. BOEY is President of American Bare Conductor, Inc., a manufacturer of
electrical copper wire and cable products. He has held such position since
1985. Mr. Boey also has been a director of FNB since 1988.
JOHN W. CASTLE is Chairman of the Board and Chief Executive Officer of the
Corporation and has held such offices since 1984. Mr. Castle has been a
director of FNB, SSB and CFC since 1984, a director of SBI and FSB since 1990, a
director of BOY since 1993 and a director of CMI since 1995. Mr. Castle is also
the owner, director and an officer of Castle Communications, Inc., a commercial
printer, and is the father of David B. Castle.
PETER H. HENNING is Chairman and Chief Executive Officer of Plano Molding Co., a
manufacturer of proprietary and custom plastic injection molded products. Mr.
Henning has been a director of SSB since 1988.
JOHN B. HIATT is retired from Hiatt Brothers, a commercial construction company.
Mr. Hiatt has been a director of FNB since 1984.
DONALD E. KIESO is the KPMG Peat Marwick Emeritus Professor of Accountancy at
Northern Illinois University. He has been a director of SSB since 1993.
JAMES N. MCINNES is President and Chief Operating Officer of the Corporation and
has held such offices since 1984 and 1992, respectively. Mr. McInnes has been
director and President of SBI since 1990, Chairman of SSB since 1992, director
of FNB since 1984, director of FSB since 1990, director of CFC since 1985,
director of BOY since 1993 and director of CMI since 1995. He is also a
director of Plano Molding Co.
WILLIAM R. MONAT is a Regency Professor Emeritus at Northern Illinois
University. Mr. Monat has been a director of FNB since 1982, Secretary and
director of CMI since 1995 and director of CFC since 1996.
DIRECTORS NOT STANDING FOR REELECTION:
LOUIS P. BRADY is a retired insurance and real estate broker. He has been Vice
Chairman of Sandwich State Bank ("SSB") since 1984.
NANCY D. CASTLE is President and Chief Executive Officer of Horizons Unlimited
Foundation, a private foundation. She is also a director and officer of Castle
Communications, Inc., a commercial printer, and is the mother of David B.
Castle.
EXECUTIVE OFFICERS:
JAMES V. BOWERS is President of FNB. He was President of FSB from 1990 to 1992.
5
<PAGE>
LAWRENCE M. BUDNIK is President of CMI. He was President of Premier Home
Financing, Inc. prior to its acquisition by the Corporation in 1995.
DAVID B. CASTLE is Secretary of the Corporation. He has been Executive Vice
President of CFC since 1995. He was Senior Vice President of CFC in 1994 and
Assistant Cashier at SSB from 1990 to 1994. He is the son of Nancy D. Castle
and John W. Castle.
GERALD D. ENGLEHART is Interim President of CFC. He has also been Senior Vice
President of SSB since 1994 and has been with SSB since 1974.
STAN J. FREE is President of BOY. During 1993 he was Vice President of FNB and
from 1987 to 1993 he was Vice President of 1st National Bank of St. Charles.
JAMES H. HALL is Chairman of BOY. He was President of BOY from 1971 to 1993.
A. GENE SHUMWAY is President of SSB. From 1994 to 1996 he was Senior Vice
President of SSB and from 1982 to 1994 he was Vice President of SSB.
DAVID A. STEARNS is President of FSB. From 1992 to 1995 he was President of
Harris Bank of Woodstock and from 1982 to 1992 was President of Belvidere
National Bank & Trust Company.
PATRICK J. WISE is Vice President - Operations of the Corporation. From 1994 to
1995 he was Vice President of Northern Trust Company and from 1989 to 1994 was
President of Suburban Information System.
JEA NAE B. WOOD is Controller of the Corporation. From 1994 to 1996 she was
General Auditor of the Corporation. From 1992 to 1994 she was Assistant Vice
President of AMCORE Financial, Inc. From 1991 to 1992 she was Internal Auditor
for Homebanc.
THOMAS D. YOUNG is Vice President - Marketing of the Corporation. From 1992 to
1995 he was a mortgage banker for Premier Home Financing, Inc. and from 1989 to
1992 was Vice President of First Nationwide Bank.
- --------------------------------------------------------------------------------
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
- --------------------------------------------------------------------------------
The Board of Directors held six meetings during 1996. The Board of
Directors has an Audit and Compensation Committee and the Board of Directors as
a whole operates as a committee to nominate directors for election. Each of the
directors attended at least 75% of the meetings of the Board of Directors.
Except for Bruce P. Bickner, who attended two of the five meetings of the
Compensation Committee, each of the directors serving on the Audit and
6
<PAGE>
Compensation Committees attended at least 75% of the meetings of the committees
on which that director served.
The Audit Committee is composed of Louis P. Brady, Nancy D. Castle, Donald
E. Kieso and William R. Monat. Mr. Brady is Chairman of the Committee. The
Audit Committee's duties include reviewing the scope of internal and external
accounting controls and audit procedures, the Corporation's accounting
principles, policies and practices and financial reporting, and the results of
internal and external audits conducted with respect to the Corporation and its
subsidiaries. The Committee also recommends to the Board of Directors the
selection of the Corporation's independent auditors. The Audit Committee met
five times during 1996.
The Compensation Committee is composed of John B. Hiatt (Chairman), Bruce
P. Bickner, Robert T. Boey, Louis P. Brady and Peter H. Henning. The
Compensation Committee annually reviews all aspects of the compensation for the
Chief Executive Officer, President and Executive Vice President of the
Corporation and reviews the appropriateness of executive compensation and
benefit programs. The Compensation Committee also recommends salary levels for
subsidiary senior management which are adopted by the subsidiary Boards of
Directors. The Committee is also responsible for recommending to the Board of
Directors, the specific individual annual goals and objectives of the Chairman
of the Board (Chief Executive Officer), the President (Chief Operating Officer),
and the Executive Vice President (Chief Financial Officer). The Compensation
Committee met five times during 1996.
- --------------------------------------------------------------------------------
DIRECTORS' COMPENSATION
- --------------------------------------------------------------------------------
Each non-employee director of the Corporation received an annual retainer
of $7,200. In addition, each non-employee director received a fee of $200 for
each Board or committee meeting attended as a member or $300 for each committee
meeting attended as chairman of the committee. If a non-employee director is
also a director of any bank subsidiary of the Corporation, such non-employee
director receives an identical annual retainer and identical fees for meetings
attended as a director of the bank subsidiary. If a non-employee director is
also a director of a non-bank subsidiary of the Corporation, such non-employee
director receives a $250 fee for meetings attended as a director of the non-bank
subsidiary. Pursuant to the Corporation's Stock Benefit Plan, when a
non-employee becomes a new director of the Corporation, such new non-employee
director is automatically granted an option to purchase 1,500 shares of Common
Stock. Directors who are employees of the Corporation or its subsidiaries do
not receive additional compensation for serving as directors of the Corporation
or any of its subsidiaries.
7
<PAGE>
- --------------------------------------------------------------------------------
PROPOSAL NO. 2 - APPROVAL OF AMENDMENT TO
CERTIFICATE OF INCORPORATION TO ESTABLISH
A CLASSIFIED BOARD OF DIRECTORS AND RELATED PROVISIONS
- --------------------------------------------------------------------------------
ESTABLISHMENT OF A CLASSIFIED BOARD
Under the Corporation's existing Certificate of Incorporation and Bylaws,
the entire board of directors is elected at each annual meeting of the
stockholders to serve until the next annual meeting or until their respective
successors are elected and qualified. If adopted, the proposed new Subpart C of
Article Sixth of the Certificate of Incorporation would divide the Board of
Directors into three classes, with each class to be as nearly equal as possible
in number and to hold office for a staggered term of three years. The following
summary of the proposed amendment is qualified in its entirety by reference to
the full text of the proposed amendment attached hereto as EXHIBIT A.
The stockholders will elect a total of nine directors at the Annual
Meeting. If this Proposal No. 2 is approved by the stockholders, the Corporation
will file an amendment to the Certificate of Incorporation with the Secretary of
State of the State of Delaware amending Article Sixth, and upon the
effectiveness of such filing the nine directors will be divided into three
classes of directors. The three directors of the first class will hold office
for a one-year term expiring at the 1998 annual meeting, the three directors of
the second class will hold office for a two-year term expiring at the 1999
annual meeting and the three directors of the third class will hold office for a
three-year term expiring at the 2000 annual meeting. For information regarding
the Board nominees and the classes in which each will serve if Proposal No. 2 is
adopted, see "Proposal No. 1--Election of Directors" and the full text of the
proposed amendment attached as EXHIBIT A to this Proxy Statement. At each
annual meeting beginning with the meeting to be held in 1998, the class whose
term expires at such annual meeting will be elected for a three-year term. The
requirement of a staggered election of directors will apply to every election
thereafter.
Under the Corporation's existing Certificate of Incorporation, holders of a
majority of the Corporation's stock can change the composition of a majority of
the directors on the Board at a single annual meeting. Such holders also have
the power to remove a majority of the directors, with or without cause, and to
elect their replacements. If proposed new Subpart C of Article Sixth of the
Certificate of Incorporation is adopted, at least two annual meetings normally
will be required to effect a change in the composition of a majority of the
Board.
The Board of Directors believes that a staggered election of directors will
promote continuity and stability in the Corporation's management and policies.
Directors will serve for longer terms and, at any given time, two-thirds of the
directors will normally have had prior experience on the Board. Although the
Corporation has not experienced any problems with continuity and stability of
management in the past, the Board believes that the establishment of
8
<PAGE>
a staggered board will enable the Corporation to continue to enjoy such
continuity and stability in the future. The Board also believes that the
existence of a staggered board will encourage a substantial stockholder to
negotiate with the existing Board before attempting to take over the Corporation
because, without the cooperation of the existing Board, it may take such a
stockholder up to two years to acquire control of the Board. The Board believes
that an arms-length negotiation of the terms of an attempt to acquire control of
the Corporation is likely to result in more favorable terms for all stockholders
than are the terms likely to be offered in a takeover that is initiated without
advance negotiations.
On the other hand, the additional time required to obtain control of a
staggered board may discourage takeover bids which a majority of the
stockholders might deem desirable. The adoption of the proposed Subpart C to
Article Sixth will also increase the time required to change the management of
the Corporation, even if a majority of the stockholders are dissatisfied with
the management and believe such a change would be beneficial.
Stockholders of the Corporation have cumulative voting rights in the
election of directors pursuant to which each stockholder may cast a number of
votes equal to the number of shares the stockholder owns multiplied by the
number of directors to be elected. Votes may be distributed among one or more
nominees. Cumulative voting provides an opportunity for persons holding less
than a majority of the stock to elect one or more directors. While directors of
the Corporation will continue to be elected by cumulative voting, the creation
of a classified Board will substantially increase the number of shares required
to elect one director. Currently, with nine directors being elected annually, a
stockholder owning 100 shares could combine all 900 votes (100 shares x 9
nominees) for one nominee. If the proposed amendment is approved, only three
directors will be elected annually so a stockholder with 100 shares will only
have the ability to accumulate 300 votes (100 shares x 3 nominees). As a
result, a classified Board of Directors will make it more difficult for minority
stockholders to gain representation on the Board.
Nonetheless, the Board of Directors believes that, on balance, the proposed
amendment to the Certificate of Incorporation is advantageous to the Corporation
and its stockholders.
VACANCIES
The Corporation's Bylaws currently provide that a majority of the directors
in office, although less than a quorum, may fill any vacancies in the Board of
Directors and such new directors would serve until the next annual meeting of
stockholders. The proposed amendment to the Corporation's Certificate of
Incorporation also provides that a majority vote of the directors then in office
may fill any vacancies on the Board. However, under the proposal, any directors
so chosen will hold office until the annual meeting of stockholders at which the
term of the class of directors to which such person is chosen expires.
Accordingly, if a Class III director, whose term expires in 2000, resigns in
1998, the majority of directors then in office could elect an individual to fill
such open directorship and such individual would serve as a Class III director
of the Corporation until the annual meeting of stockholders in the year 2000.
9
<PAGE>
REMOVAL OF DIRECTORS
As permitted by the Delaware General Corporation Law, the Corporation's
Bylaws permit any director or the entire Board of Directors to be removed by a
majority vote of the stockholders, with or without cause, subject to certain
procedural protections relating to cumulative voting. The Delaware General
Corporation Law explicitly provides, however, that if a corporation's Board of
Directors is classified, a director or the entire Board of Directors may be
removed only for cause, unless the Certificate of Incorporation provides
otherwise.
Proposed Subpart C of Article Sixth of the Certificate of Incorporation
provides that, subject to the rights, if any, of the holders of any other class
or series of preferred stock, any director or the entire Board of Directors of
the Corporation may be removed from office at any time, but only for cause and
by the affirmative vote of the holders of at least 75% of the outstanding shares
then entitled to vote in an election of directors. "Cause" is not defined in
either Subpart C or the section of the Delaware General Corporation Law which
establishes the removal standards. The circumstances under which directors may
be removed will be therefore judicially determined and are likely to be limited
to circumstances involving fraud, criminal conduct or gross abuse of office
amounting to a breach of fiduciary duty to the Corporation.
The requirement that directors be removed only for cause is intended to
prevent a substantial stockholder from circumventing the purposes of a
classified board by removing incumbent directors without cause and then
attempting to fill the vacancies with its own nominees. Such a requirement may,
however, make it more difficult to remove a director even when the only reason
for the removal is the performance of the director. The burden of having to
prove cause will make such removal more difficult than at present. In addition,
in the absence of the 75% vote requirement for removal, a majority of the
stockholders would be able to remove a director for cause. The requirement of a
75% vote will, in effect, give certain minority stockholders, including members
of the Board of Directors in their capacity as stockholders, a veto power over
removal of directors for cause even if a majority of the stockholders favor such
removal.
SUPERMAJORITY VOTING REQUIREMENT TO ALTER, AMEND OR REPEAL SUBPART C OF ARTICLE
SIXTH
Although the vote of only a majority of the outstanding shares of Common
Stock is required to adopt the proposed amendment to the Certificate of
Incorporation, following its adoption the affirmative vote of 80% of the
outstanding voting stock will be required to alter, amend or repeal, or to adopt
any provision inconsistent with, Subpart C of Article Sixth. In the absence of
such a provision, the stockholders would be able, at a later date, to eliminate
a classified board and modify the requirements for the removal of directors by
the affirmative vote of the holders of a majority of the outstanding Common
Stock. The requirement of an 80% vote will, in effect, give certain minority
stockholders, including members of the Board of Directors in their capacity as
stockholders, a veto power over any subsequent changes to such provisions, even
if a majority of the stockholders favor such changes. Members of the Board of
Directors and executive officers of the Corporation as a group currently
beneficially own % of the
--------
10
<PAGE>
Common Stock. For purposes of evaluating the likelihood of achieving an 80%
stockholder vote, it should be noted that at the 1996, 1995 and 1994 annual
meetings of the stockholders, the holders of approximately 79.5%, 84.9% and
85.5%, respectively, of the outstanding Common Stock voted their shares.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
THE ADOPTION OF PROPOSAL NO. 2, THE FULL TEXT OF WHICH IS SET FORTH IN EXHIBIT A
ATTACHED HERETO AND INCORPORATED HEREIN BY REFERENCE.
- --------------------------------------------------------------------------------
EXECUTIVE COMPENSATION
- --------------------------------------------------------------------------------
The following table summarizes compensation for services to the Corporation
and the Corporation's subsidiaries for the years ended December 31, 1996, 1995
and 1994 paid to or earned by the Chief Executive Officer of the Corporation and
the four other most highly compensated executive officers of the Corporation
whose salary and bonus exceeded $100,000 for the year ended December 31, 1996.
11
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION(1) COMPENSATION
---------------------- ------------
AWARDS
------
ALL
SECURITIES OTHER
NAME AND UNDERLYING COMPEN-
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) OPTIONS/SARS (#) SATION ($)(2)
- --------------------------- ----- ----------- ---------- ---------------- -------------
<S> <C> <C> <C> <C> <C>
JOHN W. CASTLE 1996 223,500 27,938 --- 38,058
Chairman of the Board 1995 216,000 93,124 30,000 49,709
and Chief Executive 1994 186,122 81,551 --- 27,556
Officer
JAMES N. MCINNES
President and 1996 124,200 12,420 --- 22,885
Chief Operating Officer 1995 180,000 62,086 20,000 39,629
1994 170,000 63,351 --- 24,281
LARRY D. BEATY 1966 186,300 18,630 --- 28,741
Executive Vice President, 1995 175,000 52,813 16,000 36,114
Treasurer and CFO 1994 165,000 56,589 --- 24,587
JAMES V. BOWERS 1996 146,000 33,247 --- 28,617
President of FNB 1995 141,500 49,502 8,000 28,060
1994 135,854 45,565 --- 21,833
DAVID A. STEARNS
President of FSB(3) 1996 135,000 9,450 3,500 1,391
1995 93,314 22,535 --- ---
</TABLE>
- -------------------------------
(1) None of the named executive officers received any perquisites or other
personal benefits, securities or property in an amount exceeding 10% of his
salary and bonus during the last fiscal year.
(2) Consists of contributions by the Corporation under its Profit Sharing Plan
and Supplemental Profit Sharing Plan during the last fiscal year to the
named executive officers in the following amounts:
PROFIT SHARING PLAN SUPPLEMENTAL PROFIT SHARING PLAN
------------------- --------------------------------
John W. Castle 18,030 20,028
James N. McInnes 18,416 4,469
Larry D. Beaty 18,030 10,711
James V. Bowers 21,643 6,974
David A. Stearns 1,391 ---
(3) Mr. Stearns was not employed by the Corporation during 1994.
12
<PAGE>
The following table sets forth information regarding the individual grants
of stock options made during the last completed fiscal year to David A. Stearns.
No stock option grants were made during the last completed fiscal year to the
other named executive officers.
OPTION GRANTS IN FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- ------------------------------------------------------------------------------------------
PERCENT OF
TOTAL OPTIONS
NUMBER OF SECURITIES GRANTED TO EXERCISE GRANT DATE
UNDERLYING OPTIONS EMPLOYEES IN PRICE EXPIRATION PRESENT
NAME GRANTED (#) FISCAL YEAR ($/SH) DATE VALUE($)(1)
---- ------------------- ------------- -------- ---------- -----------
<S> <C> <C> <C> <C> <C>
David A. Stearns 3,500 46.1% $18.00 3/18/06 $18,375
</TABLE>
- -----------------------------------
(1) The Corporation has elected to disclose the Grant Date Present Value for
stock options granted to the named executive officers. The Generalized
Black-Scholes pricing model was used to calculate the present value for
each option. The assumptions used in the model included an expected
volatility of 20%, a risk-free rate of return of 7.0%, an expected
dividend yield of 1.2% and an expected time of exercise which averaged
6.5 years based on the vesting period.
The following table sets forth information regarding the fiscal year-end
values of unexercised stock options held by the named executive officers.
<TABLE>
<CAPTION>
FISCAL YEAR-END STOCK OPTION VALUES
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
STOCK OPTIONS AT FISCAL IN-THE-MONEY STOCK OPTIONS
YEAR END (#)AT FISCAL YEAR END ($)(1)
--------------------------- ----------------------------
SHARES VALUE
ACQUIRED ON REALIZED
NAME EXERCISE (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------- -------- ------------ ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John W. Castle 0 0 7,500 22,500 $58,125 $174,375
James N. McInnes 0 0 5,000 15,000 38,700 116,250
Larry D. Beaty 0 0 4,000 12,000 31,000 93,000
James V. Bowers 0 0 2,000 6,000 15,500 46,500
David A. Stearns 0 0 0 3,500 0 13,125
</TABLE>
- ---------------------------------
(1) This amount represents the difference in the market value of one share of
the Corporation's Common Stock on December 31, 1996 ($21.75) and the
exercise price times the number of shares.
- --------------------------------------------------------------------------------
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
- --------------------------------------------------------------------------------
The members of the Executive Compensation Committee of the Corporation
during the fiscal year ended December 31, 1996, were John B. Hiatt (Chairman),
Bruce P. Bickner, Robert
13
<PAGE>
T. Boey, Louis P. Brady and Peter H. Henning. No member of the Executive
Compensation Committee was formerly an officer or employee of the Corporation or
any of its subsidiaries.
James N. McInnes, President of the Corporation, serves as a member of the
Board of Directors and Compensation Committee of Plano Molding Company, Plano,
Illinois. As a member of the Compensation Committee of Plano Molding Company,
Mr. McInnes is actively involved in the determination of compensation awards to
Plano Molding's management, including Peter H. Henning. Mr. Henning, who is
Chairman of the Board, President and CEO of Plano Molding Company, is a member
of the Corporation's Executive Compensation Committee. As a member of such
Committee, Mr. Henning is actively involved in the determination of compensation
awards to the members of senior management of the Corporation, including Mr.
McInnes.
- --------------------------------------------------------------------------------
REPORT OF THE COMPENSATION COMMITTEE OF THE
BOARD OF DIRECTORS ON
EXECUTIVE COMPENSATION
- --------------------------------------------------------------------------------
The Compensation Committee's goal in setting executives' compensation is to
attract, retain, motivate and reward highly qualified executive officers to
achieve the Corporation's business objectives. This executive compensation
program is integrated with the Corporation's annual and long-term business plans
in order to provide a strategic link between corporate performance and
attainment of corporate goals and executive compensation. The components of the
corporate compensation program are base salary, performance incentives (bonus),
and the Stock Benefit Plan.
The Compensation Committee annually reviews all aspects of the compensation
for the Chief Executive Officer, President and Executive Vice President and
reviews the appropriateness of executive compensation and benefit programs. The
Compensation Committee also recommends salary levels for subsidiary senior
management which are adopted by the subsidiary Boards of Directors. The
Committee is also responsible for recommending to the Board of Directors, the
specific individual annual goals and objectives of the Chairman of the Board
(Chief Executive Officer), the President (Chief Operating Officer), and the
Executive Vice President (Chief Financial Officer).
The Compensation Committee's approach in setting compensation for executive
officers is to review their compensation relative to the Corporation's financial
results, including growth in earnings, increase in share value, the rate of
return on assets and equity, and various measures of productivity and
efficiency. Additionally, the Committee reviews performance relative to
attainment of specific corporate and individual objectives that are set prior to
each year. The Committee also considers the Corporation's standing in the
communities it serves, ratings by regulatory authorities, and views of the
Corporation's independent auditors.
14
<PAGE>
In determining each executive officer's total compensation, the
Compensation Committee reviews studies primarily prepared by the Illinois
Bankers Association and Alex Sheshunoff & Co., among others. The surveys
compile total compensation data based on asset size and geographic region
including salary ranges by position. The Committee has additionally employed
the services of a nationally recognized consulting firm to review the
Corporation's total compensation programs. The Illinois Bankers and Sheshunoff
studies have been of limited use in determining appropriate compensation at the
corporate level due to their small sample size. The Committee has found these
studies to be more useful in setting individual bank subsidiary salary ranges.
The Committee has generally used a range of 50-75 percentile in setting base
salaries for subsidiary executives depending upon experience and performance.
The outside consultants have advised the Compensation Committee on salary ranges
for the Corporation's executive officers and the Committee has set these
salaries as they felt was appropriate.
The Compensation Committee has also established a peer group for each bank
and for the Corporation for purposes of establishing financial objectives and
comparison thereto. The financial objectives are return on average assets and
return on average equity. The peer groups include companies of similar size in
appropriate geographic areas. The Corporation's peer group includes 43 bank
holding companies between $350 million and $1.5 billion in size, located in 29
counties in an area generally described as from Milwaukee, Wisconsin on the west
side of Lake Michigan and around the lake to Kalamazoo, Michigan on the eastern
side of Lake Michigan.
The base salaries and annual incentive objectives for the current year are
established prior to the beginning of the fiscal year. The level of incentive
compensation is determined by the Committee after year end based upon a review
of performance against predetermined objectives. The 1996 objectives ranged
between 0.87% and 1.50% for return on average assets and between 11.0% and 19.0%
for return on average equity.
For the year 1996, the Committee increased Messrs. Castle and Beaty's base
salary by $7,500 and $11,300, respectively, compared to the year ended 1995. In
recognition of Mr. McInnes' reduction to two-thirds employment, his base salary
was reduced by $55,800 compared to the year ended 1995. Mr. McInnes is on a
phased in retirement schedule and is expected to retire from employment by
year-end 1997. The Committee considered several factors in adjusting the base
salaries: (i) relative base salary as compared to others; (ii) successful
integration of Premier Home Financing, Inc. into the company; (iii) continued
improvement in share value relative to prior years; (iv) favorable perception by
the local community, regulators and outsourced professional consultants; (v) the
progress attained in consolidating and streamlining EDP operations, accounting,
and marketing; (vi) the successful implementation of new products and services
such as a "check card" and "telebanking"; (vii) the progress attained in
consolidating and implementing a company wide human resource program; (viii)
improved investor relations; (ix) the successful incorporation and comments of
the strategic plan, principles and ethics, objectives and strategies into the
corporate culture; and (x) consultation with other members of the Board. The
Committee also granted incentive compensation (bonuses) to Messrs. Castle,
McInnes and Beaty in the amount of $27,938, $12,420, and $18,630, respectively.
The annual
15
<PAGE>
incentive program (bonus) awards are based upon the Corporation's attainment of
the preset financial objectives stated above (70% weight) and the executive
officers' attainment of individual non-financial objectives (30% weight). The
incentives are based upon a percentage of compensation and can be in a range of
zero to a maximum of 150% of eligible incentive compensation. Evaluation of
non-financial individual objectives are subjective in nature. In 1996, all
three executives were awarded 83.33% for the attainment of eligible
non-financial objectives and zero for the Corporation's failure to meet the
financial objectives.
Submitted by the Compensation Committee of the Board of Directors:
John. B. Hiatt, Chairman
Bruce P. Bickner
Robert T. Boey
Louis P. Brady
Peter H. Henning
- --------------------------------------------------------------------------------
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
- --------------------------------------------------------------------------------
As of March 3, 1997 the only persons or groups who are known to the
Corporation to be the beneficial owners of more than 5% of the Common Stock were
the following individuals (Messrs. Castle and McInnes are directors and
executive officers of the Corporation):
<TABLE>
<CAPTION>
NAME AND ADDRESS OF BENEFICIAL OWNER AMOUNT AND NATURE OF BENEFICIAL PERCENT OF
OWNERSHIP(1),(2) CLASS
<S> <C> <C>
John W. Castle ------------- ------
208 Miller
DeKalb, Illinois 60115
James N. McInnes ------------- ------
25 Edgebrook Drive
Sandwich, Illinois 60548
Ernest A. Basler ------------(3) ------
518 East Sixth Street
Sandwich, Illinois 60548
</TABLE>
- -----------------------------
(1) Except as otherwise indicated in the notes to this table, each person
named in the table has sole voting and investment power over the number
of shares of Common Stock listed opposite his name.
(2) The beneficially owned shares include the following shares which the
beneficial owner has the right to acquire within 60 days through the
exercise of stock options: Mr. Castle - 15,000 shares; Mr. McInnes -
10,000 shares; and Mr. Basler - 8,000 shares.
(3) Includes 120,000 shares held jointly by Mr. Basler with his wife.
16
<PAGE>
The following table shows the number of shares of Common Stock beneficially
owned as of March 3, 1997, for each director and each executive officer named in
the Summary Compensation Table herein, except for the two directors and named
executive officers listed above who own more than 5% of the Common Stock, and
all directors and executive officers as a group.
NUMBER OF SHARES
NAME BENEFICIALLY OWNED(1)(2) PERCENT OF CLASS
---- ------------------------ ----------------
Larry D. Beaty
----------- ------
Bruce P. Bickner
----------- ------
Robert T. Boey *
-----------
James V. Bowers (3)
----------- ------
Louis P. Brady (4)
----------- ------
Nancy D. Castle
----------- ------
Peter H. Henning (5) *
-----------
John B. Hiatt *
-----------
Donald E. Kieso *
-----------
William R. Monat *
-----------
All Directors and Executive
Officers as a Group ----------- ------
( persons)
----
- ---------------------------------
*Less than one percent (1%).
(1) Except as otherwise indicated in the notes to this table, each person
named in the table has sole voting and investment power over the number of
shares of Common Stock listed opposite his or her name.
(2) The beneficially owned shares include the following shares which the
beneficial owner has the right to acquire within 60 days through the exercise
of stock options: Mr. Beaty - 8,000 shares; Mr. Bowers - 4,000 shares; each
other individual listed - 6,000 shares; and all directors and executive
officers as a group - ______ shares.
(3) Includes 4,067 shares held jointly by Mr. Bowers and his wife.
(4) Includes 7,500 shares held jointly by Mr. Brady and his wife and 11,700
shares held jointly by Mr. Brady and Gladys Brady.
(5) Includes 120 shares held jointly by Mr. Henning and his wife.
- --------------------------------------------------------------------------------
TRANSACTIONS WITH MANAGEMENT
- --------------------------------------------------------------------------------
Several of the Corporation's directors and their affiliates, including
corporations and firms of which they are officers or in which they or members
of their families have an ownership interest, are customers of the banking
subsidiaries of the Corporation. These persons, corporations and firms have
had transactions in the ordinary course of business with the banking
17
<PAGE>
subsidiaries of the Corporation, including borrowings of material amounts,
all of which, in the opinion of management, were on substantially the same
terms, including interest rates and collateral, as those prevailing at the
time for comparable transactions with unaffiliated persons and did not
involve more than the normal risk of collectibility or present other
unfavorable features.
In 1997 FNB entered into a contract with John B. Hiatt, who is a director
of both the Corporation and FNB, to assist as Construction Manager on the
remodeling of an existing building owned by FNB, which the Corporation will
lease for offices. The contract is standard for the industry and compensates
Mr. Hiatt 31/2% of construction costs, which costs are estimated not to exceed
$500,000 and which do not include architect, engineer, landscaping, parking lot,
and signage expenses. Mr. Hiatt is very experienced in the construction
business and is retired from Hiatt Brothers, a commercial construction company.
- --------------------------------------------------------------------------------
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
- --------------------------------------------------------------------------------
Based solely upon its review of Forms 3, 4 and 5 and any amendment thereto
furnished to the Corporation pursuant to Rule 16a-3(e) of the Securities
Exchange Act of 1934, as amended, and written representations from the directors
and executive officers that no other reports were required, the Corporation is
not aware of any director, officer or beneficial holder of 10% of its Common
Stock that failed to file any such reports on a timely basis during 1996.
- --------------------------------------------------------------------------------
COMMON STOCK PRICE PERFORMANCE GRAPH
- --------------------------------------------------------------------------------
The following graph compares on a cumulative basis the monthly percentage
changes since May 6, 1995 (the date on which the Common Stock was registered
under Section 12 of the Securities Exchange Act of 1934) in (a) the total
stockholder return on the Common Stock, (b) the total return of companies in the
NASDAQ Market Index ("NASDAQ Index"), and (c) the total return of all banking
organizations traded on the NASDAQ Market ("Bank Group"). The total return
information presented assumes the reinvestment of dividends. The graph assumes
$100 was invested on May 6, 1995, in the Common Stock, the NASDAQ Index and the
Bank Group.
[Insert graph]
- --------------------------------------------------------------------------------
INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
The Board of Directors has selected KPMG Peat Marwick LLP, independent
certified public accountants, to serve as the independent auditors of the
Corporation and its subsidiaries for the fiscal year ending December 31, 1997.
KPMG Peat Marwick LLP has served as the
18
<PAGE>
Corporation's independent auditors since its inception in 1984. A
representative from KPMG Peat Marwick LLP is expected to be present at the
Annual Meeting and will have the opportunity to make a statement and to respond
to appropriate questions.
- --------------------------------------------------------------------------------
STOCKHOLDER PROPOSALS
- --------------------------------------------------------------------------------
In order to be eligible for inclusion in the Corporation's proxy materials
for next year's Annual Meeting of Stockholders, any stockholder proposal to take
action at such meeting must be received at the Corporation's main office no
later than November 19, 1997. Any such proposal shall be subject to the
requirements of the proxy rules adopted under the Securities Exchange Act of
1934.
- --------------------------------------------------------------------------------
OTHER MATTERS
- --------------------------------------------------------------------------------
The Board of Directors of the Corporation does not intend to present any
other matters for action at the Annual Meeting, and the Board has not been
informed that other persons intend to present any other matters for action at
the Annual Meeting. However, if any other matters should properly come before
the Annual Meeting, the persons named in the accompanying proxy intend to vote
thereon, pursuant to the proxy, in accordance with the recommendation of the
Board of the Corporation.
The Corporation's Annual Report to Stockholders accompanies this Proxy
Statement. The Annual Report is not to be treated as part of the proxy
solicitation material or as having been incorporated herein by reference.
By Order of the Board of Directors,
David B. Castle
SECRETARY
March 19, 1997
- --------------------------------------------------------------------------------
FORM 10-K
A COPY OF THE FORM 10-K AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
WILL BE FURNISHED WITHOUT CHARGE TO STOCKHOLDERS AS OF THE RECORD DATE UPON
WRITTEN REQUEST TO DAVID B. CASTLE, SECRETARY, CASTLE BANCGROUP, INC., 208
WEST LOCUST STREET, DEKALB, ILLINOIS 60115.
- --------------------------------------------------------------------------------
19
<PAGE>
EXHIBIT A
PROPOSAL NO. 2
BE IT RESOLVED, that Subpart C, NUMBER OF DIRECTORS, of Article Sixth of
the Certificate of Incorporation of the Corporation be amended to read in its
entirety as follows:
ARTICLE SIXTH
C. CLASSIFIED BOARD OF DIRECTORS.
SECTION 1. NUMBER, ELECTION AND TERMS OF DIRECTORS. The business and
affairs of the Corporation shall be managed by or under the direction of a
board of directors consisting of not less than five (5) nor more than
fifteen (15) persons. The exact number of directors within the minimum and
maximum limitations specified in the preceding sentence shall be fixed from
time to time by the board of directors pursuant to a resolution adopted by
a majority of the board of directors then in office. The board of
directors shall be divided into three classes, the number of directors in
each class to be fixed by the board of directors. The initial term of
office of Class I directors shall expire at the annual meeting of
stockholders to be held in 1998; the initial term of office of Class II
directors shall expire at the annual meeting of stockholders to be held in
1999; and the initial term of office of Class III directors shall expire at
the annual meeting of stockholders to be held in 2000, and in each case
until their respective successors are elected and qualified. At each
annual meeting of stockholders, directors shall be chosen to succeed those
whose terms then expire and shall be elected for a term of office expiring
at the third succeeding annual meeting of stockholders after their
election, and in each case until their respective successors are elected
and qualified.
The names of the persons who are to serve as the initial directors of
each class of directors of the Corporation until their successors are
elected and qualified or until their earlier resignation or removal are as
follows:
Name Class Designation
---- -----------------
John B. Hiatt I
James N. McInnes I
William R. Monat I
Larry D. Beaty II
Robert T. Boey II
Donald E. Kieso II
A-1
<PAGE>
Bruce P. Bickner III
John W. Castle III
Peter H. Henning III
SECTION 2. NEWLY CREATED DIRECTORSHIPS AND VACANCIES. Newly created
directorships resulting from any increase in the authorized number of
directors or any vacancies in the board of directors resulting from death,
resignation, retirement, disqualification, removal from office or other
cause shall be filled by a majority vote of the directors then in office,
although less than a quorum, or by a sole remaining director. Directors so
chosen shall hold office for a term expiring at the annual meeting of
stockholders at which the term of the class to which they have been elected
expires. No decrease in the number of directors constituting the board of
directors shall shorten the term of any incumbent director. Newly created
directorships shall be allocated among the classes of directors so that
each class of directors shall consist, as nearly as possible, of one-third
of the total number of directors.
SECTION 3. REMOVAL. Subject to the rights of the holders of any
class or series of Preferred Stock of the Corporation, any director, or the
entire board of directors, may be removed from office at any time, but only
for cause and only by the affirmative vote of the holders of at least
seventy-five percent (75%) of the outstanding shares of all classes of
stock of the Corporation generally entitled to vote in the election of
directors, considered for purposes of this Section as one class.
SECTION 4. AMENDMENT, ALTERATION OR REPEAL. In addition to any
affirmative vote that may be otherwise required, the affirmative vote of
the holders of at least eighty percent (80%) of the outstanding shares of
all classes of stock of the Corporation generally entitled to vote in the
election of directors, considered for purposes of this Section as one
class, shall be required to amend, alter or repeal in any respect, or adopt
any provision inconsistent with, this Subpart C of Article Sixth.
**********************
A-2
