<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant X
---
Filed by a Party other than the Registrant
---
Check the appropriate box:
Preliminary Proxy Statement
- ---
Confidential, for use of the Commission Only (as permitted by Rule
14a-6(e)(2))
- ---
X 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,
/s/ David B. Castle
- ----------------------
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 $.331/3 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 2,175,394 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 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,
<PAGE>
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 Corporation,
each director, the "named executive officers" (as defined below) and all
director nominees, directors and executive officers of the Corporation as a
group.
<PAGE>
<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, directors and 358,343(2) 16.13%(13)
executive officers as a group (11 persons)
</TABLE>
- ----------------------------
(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 -
3
<PAGE>
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 of directors and executive officers 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.
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
4
<PAGE>
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
- ---------------------------- ------- ------------- ------------- -----------------------------------------
DIRECTOR NOMINEES
<S> <C> <C> <C>
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.
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.
5
<PAGE>
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 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 of Raymond.
6
<PAGE>
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
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."
7
<PAGE>
<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 Operating 1997(3) $ 87,077 $ 14,175 8,000 $ --
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 only
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.
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> <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.
8
<PAGE>
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.
HOVERMALE AGREEMENT FOR SERVICES. The Corporation has entered into an
agreement for services with Mr. Hovermale dated as of September 26, 1997. The
original term of the agreement provided for its expiration on December 31, 1999.
The agreement was amended on March 12, 1999 to, among other things, extend the
term of the agreement to January 15, 2001. Under the terms of the agreement, as
amended, Mr. Hovermale serves as Senior V. P. - Operations, Information Systems
and Human Resources of the Corporation. A copy of the agreement is filed as an
exhibit to the Corporation's Form 10-K for the 1998 fiscal year.
- --------------------------------------------------------------------------------
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 subsidiary of the Corporation, such non-employee director
also receives fees in such capacities. 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. 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.
9
<PAGE>
- --------------------------------------------------------------------------------
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 non-financial
objectives. The financial objectives were evaluated against holding company,
subsidiary, and consolidated annual budgeted net income.
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. Mr. 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
10
<PAGE>
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. The financial objectives portion was
based on both the holding company's performance versus budgeted net income and
the consolidated performance versus budgeted net income. The base bonus amount
eligible for the financial objectives portion for Mr. Castle and Mr. Yaeger was
$67,050 and $36,000, respectively. The actual award may be higher or lower than
the base amount depending on financial performance. Parent only performance
exceeded budgeted net income, such that the actual bonus for the financial
objectives portion was $83,813 for Mr. Castle and $45,000 for Mr. Yaeger. Base
bonus amounts eligible for non-financial objectives were $44,700 and $24,000 for
Mr. Castle and Mr. Yaeger, respectively. Evaluation of non-financial objectives
is subjective in nature. The compensation committee determined that Mr. Castle
accomplished 85% of his non-financial objectives and awarded $37,995
accordingly. The compensation committee determined that Mr. Yaeger accomplished
100% of his non-financial objectives and awarded $24,000 accordingly. The
compensation committee additionally awarded Mr. Yaeger $6,000 for exceptional
performance in his position.
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 OMITTED]
<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 $.331/3 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 2,175,394 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)
