<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 Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / 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 28, 1999
NOTICE IS HEREBY GIVEN, that the Annual Meeting of Stockholders (the
"Meeting") 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 28, 1999 at 2:00 p.m.
The Meeting is for the purpose of considering and acting upon:
(1) The election of two directors of the Corporation;
(2) The amendment to the Certificate of Incorporation of the Corporation
to increase the authorized Common Stock; and
(3) Such other matters as may properly come before the Meeting or any
adjournments thereof.
Stockholders of record at the close of business on March 18, 1999 are
entitled to notice of and to vote at the Meeting or any adjournments thereof.
By order of the Board of Directors,
David B. Castle
Secretary
DeKalb, Illinois
March 29, 1999
IMPORTANT! TO ASSURE THAT YOUR SHARES ARE REPRESENTED AT THE 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.
<PAGE>
PROXY STATEMENT
OF
CASTLE BANCGROUP, INC.
121 WEST LINCOLN HIGHWAY
DEKALB, ILLINOIS 60115
(815) 758-7007
ANNUAL MEETING OF STOCKHOLDERS
APRIL 28, 1999
- -------------------------------------------------------------------------------
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 1999 Annual Meeting of Stockholders (the "Annual
Meeting") to be held on Wednesday, April 28, 1999 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 adjournments thereof, for the purposes set forth in
the accompanying Notice of Annual 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 and its subsidiaries, 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 the Proxy Card are first being mailed to the Corporation's
stockholders on or about March 29, 1999.
- -------------------------------------------------------------------------------
VOTING AT THE ANNUAL MEETING
- -------------------------------------------------------------------------------
The close of business on March 18, 1999 has been fixed as the record date
(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 Record Date,
the Corporation had 2,175,319 shares of Common Stock issued and outstanding.
Each proxy that is properly signed and received before the Annual Meeting
and not subsequently revoked will 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 PROPOSED 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
<PAGE>
before 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., 121 West
Lincoln Highway, DeKalb, Illinois 60115, Attention: David B. Castle,
Secretary. A 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. Abstentions and broker non-votes will have the
effect of a vote against the proposal to amend the Corporation's Certificate
of Incorporation.
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 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.
The two individuals receiving the highest number of votes cast will be
elected as directors of the Corporation. The affirmative vote of the holders of
a majority of the outstanding shares of Common Stock, whether or not present or
voting at the annual meeting, 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 approval.
- -------------------------------------------------------------------------------
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
- -------------------------------------------------------------------------------
The following table sets forth, as of the Record Date, the number of
shares of Common Stock beneficially owned by each person known by the
Corporation to be the beneficial owner of more than five percent of the
outstanding shares of Common Stock, each director nominee of the
2
<PAGE>
Corporation, each director, the "named executive officers" (as defined below)
and all director nominees, directors and executive officers of the
Corporation as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF COMMON
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) STOCK OUTSTANDING
----------------------- ------------------------ ------------------
<S> <C> <C>
PRINCIPAL STOCKHOLDERS:
John W. Castle 256,573(2) 11.63%(12)
208 Miller Avenue
DeKalb, Illinois 60115
David B. Castle 196,707(3) 9.04%
2851 Country Club Lane
DeKalb, Illinois 60115
Amy W. Castle 187,674(3) 8.63%
329 Lower Flat Creek Road
Alexander, North Carolina 28701
Harry D. Castle 187,674(3) 8.63%
4909 Orchard Ave., Apt. 105
San Diego, California 92107
John L. Castle 187,674(3) 8.63%
920 South 10th Avenue
St. Charles, Illinois 60174
James N. McInnes 146,694(2) 6.68%(12)
79 Edgebrook Drive
Sandwich, Illinois 60548
Ernest A. Basler 140,313(2)(4) 6.43%(12)
515 East 4th Street
Sandwich, Illinois 60548
Shirley M. Basler 114,825(5) 5.28%
515 East 4th Street
Sandwich, Illinois 60548
DIRECTOR NOMINEES, DIRECTORS AND NAMED
EXECUTIVE OFFICERS:(6)
Robert T. Boey 12,517(2)(7) *
Donald E. Kieso 20,251(2)(8) *
Bruce P. Bickner 31,792(2) 1.46%(12)
Peter H. Henning 16,849(2)(9) *
Kathleen L. Halloran 375(2) *
Richard C. McGinity 375(2) *
Dewey R. Yaeger 10,355(2)(10) *
Ronald L. Hovermale 2,703(2) *
Thomas D. Young 5,384(2)(11) *
All director nominees, 358,343(2) 16.13%(13)
directors and executive
officers as a group (11
persons)
</TABLE>
3
<PAGE>
- ------------------------
(1) Unless otherwise indicated, the nature of beneficial ownership for shares
shown in this column is sole voting and investment power.
(2) Includes the following shares which the beneficial owner has the right to
acquire within 60 days through exercise of stock options: J. Castle -
30,000 shares; J. McInnes - 20,000 shares; E. Basler - 8,000 shares; R.
Boey - 1,500 shares; D. Kieso - 1,500 shares; B. Bickner - 1,500 shares; P.
Henning - 1,500 shares; K. Halloran - 375 shares; R. McGinity - 375 shares;
Dewey R. Yaeger - 6,000 shares; Ronald L. Hovermale - 0 shares; Thomas D.
Young - 3,125 shares; and all director nominees, directors and executive
officers as a group - 45,925 shares.
(3) Includes 45,000 shares held in the David B. Castle 1992 Trust, 45,000
shares held in the Amy W. Castle 1992 Trust, 45,000 shares held in the
Harry D. Castle 1992 Trust and 45,000 shares held in the John L. Castle
1992 Trust (180,000 shares in the aggregate). David B. Castle, Amy W.
Castle, Harry D. Castle and John L. Castle act collectively as trustee for
each of these trusts with shared voting and investment power. The 180,000
shares held by the trusts are reported in the table above in the beneficial
ownership totals for each of David B. Castle, Amy W. Castle, Harry D.
Castle and John L. Castle.
(4) Includes 102,825 shares owned jointly with Shirley M. Basler, Mr. Basler's
wife, which are also reported as beneficially owned by Shirley M. Basler.
(5) Includes 102,825 shares owned jointly with Ernest A. Basler, Ms. Basler's
husband, which are also reported as beneficially owned by Ernest A. Basler.
(6) Information with respect to John W. Castle, Director, Chairman of the Board
and Chief Executive Officer, is included above under Principal
Stockholders.
(7) Includes 3,085 shares owned jointly with Mr. Boey's wife.
(8) Includes 3,000 shares owned by Mr. Kieso's wife.
(9) Includes 120 shares owned jointly with Mr. Henning's wife.
(10) Includes 230 shares owned by Mr. Yaeger's wife.
(11) Includes 1,000 shares owned jointly with Mr. Young's wife.
(12) Percentage is calculated on a partially diluted basis, assuming only the
exercise of stock options by such individual which are exercisable within
60 days.
(13) Percentage is calculated on a fully diluted basis, assuming the exercise of
all stock options which are exercisable within 60 days.
* Less than 1%.
- -------------------------------------------------------------------------------
PROPOSAL NO. 1 - ELECTION OF DIRECTORS
- -------------------------------------------------------------------------------
The Corporation's Board of Directors is comprised of seven directors (two
Class I directors, two Class II directors and three Class III directors). The
Corporation's Certificate of Incorporation provides that directors are elected
for terms of three years, approximately one-third of whom are elected annually.
Two directors will be elected as Class II directors at the Annual Meeting to
serve for a three-year period, or until their respective successors have been
elected and qualified. The Board of Directors has nominated for election as
directors Robert T. Boey and Donald E. Kieso.
4
<PAGE>
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 ROBERT T. BOEY AND DONALD E. KIESO AS DIRECTORS OF THE
CORPORATION.
The two individuals receiving the highest number of votes cast will be
elected as directors of the Corporation.
The following table sets forth information with respect to the director
nominees, continuing directors and executive officers of the Corporation.
<TABLE>
<CAPTION>
YEAR TERM
DIRECTOR OR AS A DIRECTOR
NAME AGE(1) OFFICER SINCE EXPIRES POSITION WITH THE CORPORATION
- ---------------------------- -------- ------------- ------------- ------------------------------------------
<S> <C> <C> <C> <C>
DIRECTOR NOMINEES
Robert T. Boey 59 1992 1999 Director
Donald E. Kieso 62 1993 1999 Director
CONTINUING DIRECTORS
Bruce P. Bickner 55 1991 2000 Director
John W. Castle 65 1984 2000 Director, Chairman of the Board and Chief
Executive Officer
Peter H. Henning 51 1988 2000 Director
Kathleen L. Halloran 46 1998 2001 Director
Richard C. McGinity 54 1997 2001 Director
OTHER EXECUTIVE OFFICERS(2)
Dewey R. Yaeger 58 1997 President and Chief Operating Officer
Ronald L. Hovermale 59 1997 Senior Vice President-Operations,
Information Systems and Human Resources
Thomas D. Young 53 1995 Senior Vice President-Marketing, Planning
and Retail Services Delivery
Micah R. Bartlett 25 1998 Vice President and Controller
</TABLE>
- ------------------------
(1) At January 1, 1999.
(2) John W. Castle, Chairman of the Board and Chief Executive Officer of the
Corporation, is listed above under Continuing Directors.
5
<PAGE>
DIRECTOR NOMINEES:
ROBERT T. BOEY is the President and co-owner of American Bare Conductor, Inc., a
manufacturer of electrical copper wire and cable products, and has held such
position since 1985. Mr. Boey is also a partner and co-owner of Sycamore
Industrial Park Associates. He also has been a director of First National Bank
in DeKalb since 1988.
DONALD E. KIESO is the KPMG Emeritus Professor of Accountancy at Northern
Illinois University and is also a CPA and a self-employed author of accounting
and business textbooks. He also has been a director of Castle Bank, N.A.
(formerly The Sandwich State Bank) since 1993.
CONTINUING DIRECTORS:
BRUCE P. BICKNER is the co-president of the Monsanto Global Seed Group, a unit
of the Monsanto Company. From 1986 to 1998, Mr. Bickner served as the Chairman
and Chief Executive Officer of DeKalb Genetics Corp. He also is a director of
Nicor Gas.
JOHN W. CASTLE is the Chairman of the Board and Chief Executive Officer of the
Corporation and has held such offices since 1984. He also has been a director
of First National Bank in DeKalb, Castle Bank, N.A. (formerly The Sandwich State
Bank) and Castle Finance Company since 1984 and a director of CasBanc Mortgage,
Inc. since 1995. Mr. Castle is also an owner, director and an officer of Castle
Communications, Inc., a commercial printer.
PETER H. HENNING is the Chairman and Chief Executive Officer of Plano Molding
Company, a manufacturer of proprietary and custom plastic injection molded
products. He also has been a director of Castle Bank, N.A. (formerly The
Sandwich State Bank) since 1988.
KATHLEEN L. HALLORAN is the Senior Vice President-Administration of Nicor Gas
and has held such position or similar positions with Nicor Gas for more than the
past five years.
RICHARD C. MCGINITY is the President of School Street Capital Group, Inc., an
investment banking firm based in Boston, Massachusetts serving privately owned
companies and their owners and has held such position for more than the past
five years.
OTHER EXECUTIVE OFFICERS:
DEWEY R. YAEGER is the President and Chief Operating Officer of the
Corporation. He is a director at The Bank of Yorkville, Castle Bank Harvard,
N.A., Castle Finance Company, First National Bank in DeKalb and Castle Bank,
N.A. (formerly The Sandwich State Bank). From 1993 to 1997 he was President and
Chief Executive Officer of Central National Bank of Mattoon, Mattoon, Illinois,
and from 1985 to 1993 he was Chairman, President and Chief Executive Officer of
First of America Bank DeKalb, N.A.
RONALD L. HOVERMALE is the Senior Vice President - Operations, Information
Systems and Human Resources of the Corporation. From 1986 to 1994 he was
Senior Vice President of Human
6
<PAGE>
Resources and Operations for Bank One, Springfield, Illinois, and from 1991
to 1994 he was Director of Human Resources of Banc One Illinois Corporation.
THOMAS D. YOUNG is the Senior Vice President - Marketing, Planning and Retail
Services Delivery of the Corporation. From 1992 to 1995 he was a mortgage
banker for Premier Home Financing, Inc.
MICAH R. BARTLETT is the Vice President and Controller of the Corporation and
also serves as Vice President and Secretary of Castle Finance Company. From
1996 to 1997, Mr. Bartlett was Vice President and Cashier of Central National
Bank of Mattoon. From 1990 to 1996, Mr. Bartlett served as Assistant Vice
President of Finance and in other capacities for First National Bank Raymond
- -------------------------------------------------------------------------------
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
- -------------------------------------------------------------------------------
The Board of Directors of the Corporation conducts its business through
meetings of the full Board and through meetings of committees of the Board.
The Board of Directors maintains an Audit, Compensation and Nominating
Committee. The Board of Directors held five meetings during 1998. No
director of the Corporation attended fewer than 75% of the total meetings of
the Board and committee meetings on which such Board member served during
this period.
The Audit Committee is comprised of Kathleen L. Halloran, Richard C.
McGinity and Donald E. Kieso. Donald E. Kieso 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
six times during 1998.
The Compensation Committee is comprised of Robert T. Boey, Bruce P. Bickner
and Peter H. Henning. Bruce P. Bickner is Chairman of the Committee. The
Compensation Committee annually reviews all aspects of the compensation for the
Chief Executive Officer and for the Chief Operating Officer of the Corporation,
including 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) and the President (Chief Operating Officer). The
Compensation Committee met six times during 1998.
The Nominating Committee is comprised of Bruce P. Bickner and Peter H.
Henning. Peter H. Henning is Chairman of the Committee. John W. Castle, as
Chairman of the Board of the Corporation, serves as an ex-officio member of the
Committee. The Nominating Committee reviews the requirements for service as a
director of the Corporation, reviews potential candidates for director, proposes
nominees for director and recommends the successor to the Chairman when a
vacancy occurs in that position. The Nominating Committee did not meet during
1998.
7
<PAGE>
- -------------------------------------------------------------------------------
EXECUTIVE COMPENSATION
- -------------------------------------------------------------------------------
The following table summarizes compensation for services to the Corporation
and the Corporation's subsidiaries for the years ended December 31, 1998, 1997
and 1996 paid to or earned by the Chief Executive Officer of the Corporation and
the three other most highly compensated executive officers of the Corporation
whose salary and bonus exceeded $100,000 for the year ended December 31, 1998.
No other executive officer's salary and bonus exceeded $100,000 for the year
ended December 31, 1998. These individuals are sometimes hereinafter referred
to as the "named executive officers."
<TABLE>
<CAPTION>
ANNUAL COMPENSATION(1) SECURITIES ALL OTHER
NAME AND ---------------------------- UNDERLYING COMPEN-
PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS (#) SATION(2)
- ------------------------------------ ------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
John W. Castle 1998 $ 223,500 $ 121,808 -- $ 35,896
Chairman of the Board and 1997 $ 223,500 $ 34,556 -- $ 31,706
Chief Executive Officer 1996 $ 223,500 $ 27,938 -- $ 38,058
Dewey R. Yaeger 1998 $ 150,000 $ 75,000 8,000 $ 10,433
President and Chief 1997(3) $ 87,077 $ 14,175 8,000 $ --
Operating Officer 1996(3) -- -- -- --
Ronald L. Hovermale 1998 $ 101,754 $ -- -- $ 24,400
Senior V. P.-Operations, 1997(4) $ 15,655 $ -- -- $ 18,400
Information Systems and 1996(4) $ -- $ -- -- $ --
Human Resources
Thomas D. Young 1998 $ 110,000 $ 29,700 1,500 $ 15,871
Senior V.P.-Marketing, 1997 $ 102,500 $ 4,100 500 $ 12,925
Planning and Retail Services 1996 $ 92,308 $ -- -- $ 11,095
Delivery
</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 1996, 1997 and 1998.
(2) For each of the named executive officers, this amount consists entirely of
contributions by the Corporation under its Profit Sharing Plan and
Supplemental Profit Sharing Plan except that for Mr. Hovermale it also
includes the purchase price for 800 shares of the Corporation's Common
Stock purchased in his behalf by the Corporation in each of 1997 and 1998.
(3) Dewey R. Yaeger joined the Corporation on April 24, 1997. The 1997
information for Mr. Yaeger only reflects the period from April 24, 1997 to
December 31, 1997.
(4) Ronald L. Hovermale joined the Corporation on October 27, 1997. The 1997
information for Mr. Hovermale only reflects the period from October 27,
1997 to December 31, 1997.
8
<PAGE>
The following table sets forth information regarding individual grants of
stock options made during 1998 to Dewey R. Yaeger and Thomas D. Young. No stock
option grants were made during 1998 to the other named executive officers.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
NUMBER OF PERCENT OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM
OPTIONS EMPLOYEES IN PRICE EXPIRATION -----------------------
NAME GRANTED (#) FISCAL YEAR PER SHARE DATE 5% 10%
- --------------------------------- ---------- ------------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Dewey R. Yaeger 8,000(1) 32.0% $ 27.00 05/01/08 $ 135,841 $ 344,248
Thomas D. Young 1,500(1) 6.0% $ 31.00 11/16/08 $ 29,244 $ 74,109
</TABLE>
- -----------------------
(1) The options become exercisable with respect to 25% of the shares covered
thereby on each of the first four anniversaries of the date of grant.
The following table sets forth information regarding the year-end values of
unexercised stock options held by the named executive officers.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY STOCK
STOCK OPTIONS AT FISCAL OPTIONS AT
YEAR END (#) FISCAL YEAR END(1)
SHARES ------------------------------- ----------------------------
ACQUIRED VALUE EXER- UNEXER-
NAME ON EXERCISE (#) REALIZED EXERCISABLE UNEXERCISABLE CISABLE CISABLE
- -------------------------- --------------- -------- ----------- ------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
John W. Castle -- -- 22,500 7,500 $ 382,500 $ 127,500
Dewey R. Yaeger -- -- 2,000 14,000 $ 18,000 $ 86,000
Ronald L. Hovermale -- -- -- -- $ -- $ --
Thomas D. Young -- -- 3,125 2,875 $ 47,625 $ 18,875
</TABLE>
- -------------------------
(1) This amount represents the difference between the market value of one share
of the Corporation's Common Stock on December 31, 1998 ($31.00) and the
option exercise price times the total number of shares subject to
exercisable or unexercisable options.
- -------------------------------------------------------------------------------
DIRECTORS' COMPENSATION
- -------------------------------------------------------------------------------
Each non-employee director of the Corporation received a quarterly
retainer of $1,800 for the first two quarters of 1998 and $1,500 for the last
two quarters of 1998. In addition, before July 1, 1998 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. After July 1, 1998, each non-employee director received a fee of
$1,000 for each Board meeting attended and a fee of $300 ($400 if committee
chairman) for each committee meeting attended. 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
9
<PAGE>
automatically granted an option to purchase 1,500 shares of Common Stock. As
a result, in 1998 Kathleen L. Halloran received 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.
- -------------------------------------------------------------------------------
REPORT OF THE COMPENSATION COMMITTEE OF THE
BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
- -------------------------------------------------------------------------------
The members of the Compensation Committee of the Corporation during the
fiscal year ended December 31, 1998 were Bruce P. Bickner (Chairman), Robert
T. Boey, and Peter H. Henning. No member of the Compensation Committee is a
former or current officer or employee of the Corporation or any of its
subsidiaries.
The Compensation Committee's goal in setting executive compensation is
to attract, retain, motivate and reward highly qualified management 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), the Profit Sharing Plan, the Supplemental Profit Sharing Plan and
the Stock Benefit Plan.
The Compensation Committee's approach to setting compensation for
executive officers is to review their compensation relative to the
Corporation's financial results, including earnings growth, 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 before each year. The Committee also considers the Corporation's and
the subsidiary's standing in the community it serves, ratings by regulatory
authorities and views of the Corporation's independent auditors.
In determining the reasonableness of each executive officer's total
compensation, the Compensation Committee reviewed studies and reports
including, among others, the Illinois Bankers Association 1997 Midwest Bank
Holding Company Executive Compensation Report produced in cooperation with
Crowe Chizek. This survey compiles total compensation data based on asset
size and geographic region including salary ranges by position. The
Committee has found this study to be useful in setting corporate and
individual bank subsidiary salary ranges. The Committee has generally used a
range of the 50th to 75th percentile in setting base salaries for subsidiary
executives depending upon experience and performance.
The base salaries and annual incentive objectives for the current year
are established before 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 1998
incentive compensation was based upon the accomplishment of both financial
and individual objectives. The financial objectives were evaluated against
holding company, subsidiary, and consolidated annual budgets.
10
<PAGE>
Mr. Castle's 1998 base salary was unchanged from his 1997 base salary.
Mr. Yaeger's 1998 base salary was increased $15,000 to $150,000. Dewey R.
Yaeger joined the Company on April 24, 1997 as a consultant at a per diem
rate based on $125,000 per annum. Mr. Yaeger was employed on June 10, 1997 as
Senior Vice President at an annual base salary of $125,000 prorated to
year-end which was subsequently increased on July 15, 1997 to an annual base
salary of $135,000. The Committee considered several factors in setting base
salaries: (i) relative base salary as compared to others; (ii) increased
responsibilities of corporate governance; (iii) continued improvement in
share value relative to prior years; (iv) favorable perception by the local
community, regulators and professional consultants; (v) efficiencies gained
during 1998 from consolidating "back office" operations; (vi) progress
developing company wide marketing strategies; (vii) improved investor
relations; (viii) improved strategic and annual planning and budgeting
processes; and (ix) consultation with other members of the Board of
Directors.
The Committee granted compensation (cash bonus) in the amount of
$121,808 to Mr. Castle, and $75,000 to Mr. Yaeger. Incentive compensation
was awarded according to the written corporate incentive compensation policy
in effect for 1998. Eligibility for incentive compensation (cash bonus) is
determined by attainment of corporate annual financial objectives and
attainment of individual non-financial objectives. Evaluation of
non-financial objectives is subjective in nature. In 1998, the bonuses paid
to Mr. Castle and Mr. Yaeger were related to the attainment of both financial
and non-financial objectives.
Submitted by the Compensation Committee of the Board of Directors:
Bruce P. Bickner, Chairman
Robert T. Boey
Peter H. Henning
- -------------------------------------------------------------------------------
COMMON STOCK PRICE PERFORMANCE GRAPH
- -------------------------------------------------------------------------------
The following graph compares on a cumulative basis the 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 U.S.
companies in the NASDAQ Market Index ("NASDAQ U.S."), and (c) the total
return of all banking organizations traded on the NASDAQ Market ("NASDAQ
Bank"). The total return information presented assumes the reinvestment of
dividends.
11
<PAGE>
[GRAPHIC]
<TABLE>
<CAPTION>
5/31/95 12/31/95 12/31/96 12/31/97 12/31/98
<S> <C> <C> <C> <C> <C>
NASDAQ U.S. 1.000 1.226 1.508 1.847 2.603
NASDAQ Bank 1.000 1.284 1.696 2.839 2.817
Castle BancGroup, Inc. 1.000 1.127 1.493 1.524 2.167
</TABLE>
- -------------------------------------------------------------------------------
PROPOSAL NO. 2 - AMENDMENT TO CERTIFICATE OF INCORPORATION
- -------------------------------------------------------------------------------
The Corporation's Board of Directors has unanimously approved an
amendment to the Corporation's Certificate of Incorporation to increase the
number of shares of Common Stock, par value $.33 1/3 per share, authorized
for issuance from 5,000,000 to 25,000,000 shares. If the amendment is
approved by stockholders, the first sentence of Article Fourth of the
Certificate of Incorporation would be changed to read as follows (with the
changed portion in italics);
"The total number of shares of all classes of stock which the
Corporation shall have the authority to issue is 25,100,000 shares, which are
divided into two classes as follows:
100,000 shares of Preferred Stock, without par value, and
25,000,000 shares of Common Stock of the par value of $.33 1/3 per share."
The Board of Directors has recently considered and discussed a possible
two-for-one split of the Corporation's outstanding Common Stock to be
effected in the form of a 100% stock dividend. The Corporation currently has
5,000,000 shares of Common Stock authorized for issuance of which 2,175,319
shares are issued and outstanding as of the Record Date. In addition, as of
the Record Date 300,000 shares were reserved for issuance under the
Corporation's Stock Benefit Plan (including upon exercise of options) and
300,000 shares were reserved for issuance under the Corporation's Dividend
Reinvestment and Stock Purchase Plan. As a result there are currently
insufficient shares available for issuance to effect a two-for-one stock
split.
If the proposed amendment to the Certificate of Incorporation is adopted
by the stockholders at the Annual Meeting, the Board of Directors expects to
revisit its consideration of a two-for-one stock split of the Corporation's
Common Stock to be effected in the form of a 100% stock dividend. Any such
decision by the Board to proceed with such a stock split will be based on
circumstances existing at such time, and there can be no guarantee that the
Board will proceed.
12
<PAGE>
Adoption of the proposed amendment would increase the number of
authorized shares of Common Stock available for future issuance to 25,000,000
shares. The additional shares of Common Stock for which authorization is
sought would, if and when issued, have the same rights and privileges as the
presently outstanding shares of Common Stock, including the right to vote
cumulatively in the election of directors.
In addition to the reason discussed above relating to a potential
two-for-one stock split, other reasons for increasing the number of
authorized shares of Common Stock include providing additional authorized
shares of Common Stock which may be issued for such corporate purposes as the
Board of Directors may determine in its discretion, including, without
limitation, future stock splits, stock dividends or other distributions,
future financings, acquisitions and incentive stock and benefit plans. The
increase in the number of shares of Common Stock authorized for issuance
would enable the Corporation, as the need may arise, to take timely advantage
of market conditions and the availability of favorable opportunities without
the delay and expense associated with the holding of a special meeting of its
stockholders. Upon adoption of the amendment, the Board of Directors would
be authorized to issue additional shares of Common Stock at such time or
times, to such persons and for such consideration as it may determine, except
as may otherwise be required by law. Holders of the Corporation's Common
Stock do not have preemptive rights to subscribe for or purchase any part of
any new or additional issue of Common Stock or securities convertible into
Common Stock. Although the Corporation anticipates that it may issue shares
of Common Stock for one or more of the foregoing purposes, the Corporation
has no existing plans, understandings or agreements for the issuance of any
additional shares of Common Stock (other than shares under its incentive
stock and benefit plans and possibly in connection with a two-for-one stock
split as discussed above).
Except as may be required by law, it is unlikely that further
authorization by vote of stockholders would be sought for any issuance of the
shares of Common Stock.
Although the decision of the Board of Directors to propose an amendment
increasing the number of shares of Common Stock authorized for issuance did
not result from any effort by any person to accumulate the Corporation's
stock or effect a change in control of the Corporation, one result of an
increase may be to help the Board discourage or render more difficult a
change in control. The additional shares could be used under certain
circumstances to dilute the voting power of, create voting impediments for or
otherwise frustrate the efforts of persons seeking to effect a takeover or
gain control of the Corporation, whether or not the change of control is
favored by a majority of unaffiliated stockholders. For example, such shares
could be privately placed with purchasers who might side with the Board in
opposing a hostile takeover bid. The issuance of any additional shares of
Common Stock could also have the effect of diluting the equity of existing
holders and the earnings per share of existing shares of stock.
The affirmative vote of the holders of a majority of the outstanding
shares of Common Stock, whether or not present or voting at the annual
meeting, is required to approve the amendment to the Certificate of
Incorporation. If the proposed amendment is adopted by the stockholders, it
will become effective upon filing with the Delaware Secretary of State a
Certificate of Amendment to the Certificate of Incorporation.
13
<PAGE>
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE
"FOR" APPROVAL OF THE AMENDMENT TO THE CERTIFICATE OF INCORPORATION TO
INCREASE THE NUMBER OF SHARES OF AUTHORIZED COMMON STOCK.
- -------------------------------------------------------------------------------
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
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.
- -------------------------------------------------------------------------------
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 1998.
- -------------------------------------------------------------------------------
INDEPENDENT PUBLIC ACCOUNTANTS
- -------------------------------------------------------------------------------
The Board of Directors has selected KPMG LLP, independent certified
public accountants, to serve as the independent auditors of the Corporation
and its subsidiaries for the fiscal year ending December 31, 1999. KPMG LLP
has served as the Corporation's independent auditors since its inception in
1984. A representative from KPMG LLP is expected to be present at the Annual
Meeting, will have the opportunity to make a statement and will be available
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 30, 1999. Any such proposal shall be
subject to the requirements of the proxy rules adopted under the Securities
Exchange Act of 1934.
14
<PAGE>
- -------------------------------------------------------------------------------
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 Directors of the Corporation.
15
<PAGE>
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF STOCKHOLDERS
CASTLE BANCGROUP, INC.
APRIL 28, 1999
Please Detach and Mail in the Envelope Provided
<TABLE>
<S> <C>
A /X/ Please mark
your votes as
in this example.
FOR all nominees WITHHOLD THE BOARD OF DIRECTORS RECOMMENDS A VOTE
listed at right AUTHORITY "FOR" ALL OF THE NOMINEES AND "FOR" THE
(except as indicated to vote for all nominees PROPOSED AMENDMENT TO THE CERTIFICATE
to the contrary below) as listed at right OF INCORPORATION.
/ / / / FOR AGAINST ABSTAIN
1. Election as Nominees: Robert T. Boey 2. Amendment to / / / / / /
directors of Donald E. Kieso Certificate of
all the nominees Incorporation to
listed at right. increase authorized
Common Stock.
INSTRUCTION: To withhold authority to vote for any
individual nominee, write that nominee's name on the 3. In their discretion, on such other matter
line provided below. that may properly come before the meeting
and any adjournments thereof.
- ---------------------------------------------------
THE SHARES REPRESENTED BY THIS PROXY WILL
BE VOTED AS DIRECTED. WHERE NO DIRECTION IS
GIVEN, THE SHARES WILL BE VOTED "FOR" THE
ELECTION OF ALL NOMINEES LISTED HEREON AND
"FOR" THE PROPOSED AMENDMENT TO THE
CERTIFICATE OF INCORPORATION.
This proxy may be revoked prior to the
exercise of the powers conferred by the
proxy.
PLEASE SIGN BELOW, DATE AND RETURN
PROMPTLY.
PLEASE CHECK BOX IF YOU PLAN TO ATTEND. / /
SIGNATURE ________________________ __________________________________________ Dated: _______, 1999
SIGNATURE IF HELD JOINTLY
IMPORTANT: PLEASE SIGN EXACTLY AS NAME APPEARS HEREON. When signing on behalf of a corporation, partnership, estate, trust or in
other representative capacity, please sign name and title. If executed by a corporation, the proxy should be signed by
a duly authorized officer. If executed by a partnership, please sign in the partnership name by an authorized person.
</TABLE>
<PAGE>
CASTLE BANCGROUP, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON APRIL 28, 1999
The undersigned hereby appoints John W. Castle and Dewey R. Yaeger,
each with the power to act without the other and with full power of
substitution, as the attorneys and Proxies of the undersigned to represent and
vote all shares of common stock of Castle BancGroup, Inc. (the "Corporation"),
standing in the name of the undersigned at the close of business on March 18,
1999, at the Annual Meeting of Stockholders of the Corporation to be held in the
community room of First National Bank in DeKalb/Sycamore on April 28, 1999 or at
any adjournments or postponements thereof, with all the powers that the
undersigned would possess if personally present on all matters coming before
said meeting, as follows:
(CONTINUED, AND TO BE SIGNED AND DATED, ON THE REVERSE SIDE)
