<PAGE>
THE CASTLE GROUP, INC.
745 FORT STREET, TENTH FLOOR
HONOLULU, HAWAII 96813
PROXY STATEMENT
This Proxy Statement and the enclosed Proxy are being mailed to
holders of shares of the Company's common stock in connection with the
solicitation of proxies by the Company's board of directors for the 1999
Annual Meeting of Shareholders to be held on Friday, January 22, 1999, and
any adjournments thereof. Proxies are solicited to give all shareholders of
record at the close of business on December 22, 1998, an opportunity to vote
on matters that come before the meeting. Shares can be voted only if the
shareholder is present in person or is represented by proxy.
Solicitation of Proxies may be made by mail, personal interview,
telephone or facsimile transmission by officers, directors and regular
employees of the Company. All costs of solicitation will be borne by the
Company. This Proxy Statement, including the Notice of Meeting, will be
mailed to shareholders beginning on December 23, 1998.
When your Proxy is returned properly signed, the shares
represented will be voted in accordance with your directions. You can
specify your choices by marking the appropriate boxes on the enclosed Proxy.
If your Proxy is signed and returned without specifying choices, the shares
will be voted as recommended by the directors. Abstentions are voted
neither "for" nor "against," but are counted in the determination of a
quorum.
If you wish to give your proxy to someone other than the persons
whose names appear on the enclosed Proxy, all three names must be crossed
out and the name of another person or persons (not more than three)
inserted. The signed Proxy must be presented at the meeting by the person
or persons representing you. You may revoke your Proxy at any time before
it is voted at the meeting by executing a later dated Proxy, by voting by
ballot at the meeting, or by filing an instrument of revocation with the
Corporate Secretary at the above address.
Your vote is important. Accordingly, you are urged to sign and
return the enclosed Proxy whether or not you plan to attend the meeting. If
you do attend, you may vote by ballot at the meeting, thereby canceling any
proxy previously given.
On July 31, 1998, there were 5,311,130 shares of common stock
outstanding. Only shareholders of record at the close of business on
December 22, 1998, are entitled to notice of and to vote at the meeting or
any adjournments thereof. Each shareholder is entitled to one vote for each
share of common stock held on the record date with respect to each matter
properly brought before the meeting.
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ELECTION OF DIRECTORS
NOMINEES
The Board of Directors has designated the following nominees for
election as directors of the Company to serve until the next annual meeting
of shareholders or until their successors are duly elected or appointed:
DIRECTORS AGE DIRECTOR SINCE
-------------------- --- --------------
Rick Wall 55 1985
Charles E. McGee 63 1993
Kimo M. Keawe 49 1993
Hideo Nomura 48 1993
Ryoji Takahashi 58 1993
Noboru Sekiguchi 61 1998
John G. Tedcastle 65 1993
Motoko Takahashi 54 1995
Judhvir Parmar 63 1998
Stanley Y. Mukai 54 1998
Edward Calvo, Sr. 54 1998
A description of the business experience of each of the nominees is set
forth in the section entitled "Directors and Executive Officers."
The persons names in the Proxy intend to vote for the election of the
nominees listed above unless otherwise instructed on the Proxy. If you do
not wish your shares to be voted for particular nominees, please identify
the exceptions in the appropriate space provided on the Proxy. Directors
will be elected by a plurality of the votes cast. Any shares not voted
(whether by abstention, broker non-vote, or otherwise) will have no impact
on the vote.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" EACH
OF THE NOMINEES LISTED ABOVE.
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BOARD OF DIRECTORS
The Board of Directors has the responsibility for establishing broad
corporate policies and for overseeing the overall performance of the
Company. In accordance with corporate legal principles, the Board is not
involved in day-to-day operating details. Members of the Board are kept
informed of the Company's business through discussions with the Company's
officers, by reviewing analyses and reports sent to them, and by
participating in board meetings.
The Board of Directors held (1) meeting and two (2) telephonic meetings
during the fiscal year ending July 31, 1998. The attendance at the board
meeting was 90%, 75% and 85% respectively.
COMPENSATION OF DIRECTORS
The Company does not have any present arrangements regarding
compensation of directors for services as a director, or for attendance at
meetings of the Board of Directors or for participation on committees or
other special assignments. The Board of Directors may adopt resolutions
providing for reasonable compensation for participation in committees or
special assignments and reimbursement for reasonable expenses incurred in
attending any meeting of the Board of Directors. No compensation for
service as a director is presently contemplated.
There were no arrangements pursuant to which any director of the
Company was compensated during its most recent fiscal year for service
provided solely as a directors, or for attendance at any meeting of the
board of directors.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth the number of shares of the Company's
common stock beneficially owned as of July 31, 1998 by: (i) each of the
three highest paid persons who were officers and directors of the Company,
(ii) all officers and directors of the Company as a Group, and (iii) each
shareholder who owned more than 10% of the Company's Common Stock, including
those shares subject to outstanding options.
Beneficially Shares %
Name and Address Owned (1) of Class (2)
- --------------------------- -------------- -------------
Rick Wall
745 Fort Street
Honolulu, HI 96813 815,000 (3) 15%
Kimo M. Keawe
745 Fort Street
Honolulu, HI 96813 322,500 (4) 6%
John G. Tedcastle
745 Fort Street
Honolulu, HI 96813 525,000 (5) 10%
Hideo Nomura
745 Fort Street
Honolulu, HI 96813 525,000 10%
L.C.C. Management Inc.
745 Fort Street
Honolulu, HI 96813 525,000 (6) 10%
N.K.C. Hawaii, Inc.
745 Fort Street
Honolulu, HI 96813 900,000 (7) 17%
All directors and officers
as a group (12 persons) 4,263,500 80%
(1) Except as otherwise noted, the Company believes the persons named in the
table have sole voting and investment power with respect to the shares of
the Company's common stock set forth opposite such persons' names. Amounts
shown include the shares issuable pursuant to various stock options
exercisable in 1998.
(2) Determined on the basis of 5,361,130 shares outstanding, except that
shares issuable under certain stock options exercisable as of July 31, 1998.
(3) Includes 375,000 shares held by HBII Management, Inc., which is owned
and controlled by Mr. Wall.
(4) Includes 322,500 shares held by Keawe Resorts, Inc., which is owned and
controlled by Mr. Keawe. Includes 32,250 shares which Mr. Keawe has agreed
to return to the Company in accordance with the terms and conditions of the
Consulting Agreement between the Company and Mr. Keawe.
(5) Includes 525,000 shares held by The John Tedcastle Family Trust, of
which Mr. John Tedcastle is trustee with control over voting rights.
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(6) Includes 525,000 shares held by L.C.C. Management, Inc., a corporation
owned and controlled by Ms. Janet Parmar, spouse of Mr. Judvhir Parmar, a
director of the Company.
(7) Includes 900,000 shares held by N.K.C. Hawaii, Inc. which is owned and
controlled by the family of Mr. Takahashi.
OPTIONS, WARRANTS AND RIGHTS
In November, 1993, the Company granted an option to Kelvin Bloom to
purchase 125,000 shares of the Company's common stock at an exercise price
of $0.000008 per share. In 1995, the Company and Mr. Bloom the option
period was amended to be exercisable only between August 1, 1996 and
December 2, 1998. In July 1997, Mr. Bloom forfeited all of his rights,
title and interest in the stock option.
In May 1994, the Company entered into a Common Stock Purchase Warrant
with Van Kasper and Company for services provided. The Warrant is for
25,000 shares exercisable on or before May 12, 1999 for a price of $1.25 per
share. As of July 31, 1998, the warrant had not yet been exercised.
In August, 1994, the Company, as part of the employment agreement with
Shari Chang, agreed to give to Shari W. Chang as a bonus, 22,500 shares of
the Company's common stock. On September 30, 1995, Ms. Chang accepted
delivery of the shares under the employment agreement.
In May, 1997, The Company, as part of a renegotiation of its
reservation services agreement, granted to Hawaii Reservations Center Corp.
an option to purchase 50,000 shares of the Company's common stock at a price
of $2.00 per share. The option may be exercised between May 21, 1997 and
May 20, 2002. Hawaii Reservations Center Corp. is a wholly owned
corporation of Mr. Charles McGee, a director of the Company. As of July 31,
1998, the option had not yet been exercised.
In July 1998, certain individuals advanced a total of $375,000 to the
Company in the form of a Promissory Note from the Company to the individual.
The Notes specify that if the principle amounts are not returned to the
individuals on or before March 31, 1999, then the entire principle balance
shall be converted into common stock of the Company at a 50% discount of the
then fair value of the Company's common stock. The notes also provide for
the issuance of a warrant to the individuals whereby the individual has the
right to acquire 1 share of the Company's common stock for every $2.00 of
funds advanced to the Company. The exercise price under the warrant
agreements is $2.00 per share and the warrants may be exercised at any time
between June 30, 1998 and June 29, 2003. As of July 31, 1998, the notes and
warrant agreements had been sent out to the individuals for execution, but
have not yet been returned to the Company. Management believes, although
no assurance may be given, that the notes and the warrants shall be executed
and returned to the Company. No warrants were exercised during the fiscal
year ended July 31, 1998. Mr. Judvhir Parmar, a director of the Company,
advanced $175,000 of the $375,000 received.
Other than the warrants issued to the individuals who advanced funds to
the Company, and the option granted to Hawaii Reservations Center Corp.,
there were no outstanding options, warrants or rights to purchase common
stock held by any of the officers or directors of the Company or its
principal shareholders.
<PAGE>
DIRECTORS, EXECUTIVE OFFICERS, AND SIGNIFICANT EMPLOYEES
The following table sets forth certain information concerning the
directors and executive officers of the Company as of July 31, 1998.
Except as otherwise stated below, the directors will serve until the next
annual meeting of stockholders or until their successors are elected or
appointed, and the executive officers will serve until their successors are
appointed by the Board of Directors.
Name Age Position
- ------------------- ------ ---------------------------------------
Rick Wall 55 Chief Executive Officer, Director and
Chairman of the Board
John G. Tedcastle 65 Vice Chairman of the Board and Director
Kelvin M. Bloom 39 Chief Operating Officer, Senior Vice
President and Director
Kimo M. Keawe 49 Director
Hideo Nomura 48 Director
Charles E. McGee 63 Director
Ryoji Takahashi 58 Director
Motoko Takahashi 54 Secretary and Director
Michael S. Nitta 39 Chief Financial Officer and Vice
President, Finance
Shari W. Chang 48 Senior Vice President, Sales & Marketing
Judhvir Parmar 63 Director
Steve Townsend 44 Sr. Vice President, Operations
Stanley Mukai 54 Interim Director
Edward Calvo Sr. 54 Interim Director
Noboru Sekiguchi 61 Interim Director
RICK WALL. Mr. Wall was appointed the Company's chief executive
officer and chairman of the board upon consummation of the Castle Plan. Mr.
Wall was instrumental in the formation of Castle Group Hawaii, the
negotiation and consummation of the Castle Plan and the acquisition of KRI.
He was the president, director and founder of Castle Group Hawaii. During
the past six years, Mr. Wall has been the managing director of HBII, which
owns 62% of the Hanalei Bay Resort. Mr. Wall has been elected to the board
of directors of the Hawaii Visitors and Convention Bureau and resides in
Honolulu, Hawaii.
CHARLES E. MCGEE. Mr. McGee was appointed as director of the Company in
November, 1993. Mr. McGee has 36 years of diversified experience in
marketing, management and computer technology. From 1975 until 1992, he was
employed by First Insurance Company of Hawaii, Ltd., most recently as senior
vice president, overseeing the marketing, information systems,
administration and service departments. Mr. McGee had previously been
president of two independent data processing services companies. In
addition, he has held various senior management positions with IBM
Corporation, including division manager of the Pacific region. Mr. McGee
currently operates and controls Hawaii Reservations Center Corporation, a
company which provides reservations for hotels and resorts. Mr. McGee has
been a resident of Hawaii for over thirty years. Mr. McGee is a graduate of
LaSalle University, and has studied at Massachusetts Institute of
Technology.
<PAGE>
KIMO M. KEAWE. Mr. Keawe was appointed as senior vice president and
director of the Company in November, 1993 following the acquisition of KRI,
Inc. Mr. Keawe is also the president and chief operating officer of KRI,
the company's wholly owned subsidiary doing business as Hawaiian Pacific
Resorts. Mr. Keawe was instrumental in the formation of KRI in 1988,
purchasing Hawaiian Pacific Resorts from its original founders. He has held
numerous senior management positions throughout his hotel and resort
management career, which spans over 20 years. Mr. Keawe is on the advisory
board of the Travel Industry Management School of Hawaii Pacific University.
Mr. Keawe is a graduate of Oregon State University, and was born and raised
in the State of Hawaii.
KELVIN M. BLOOM. Mr. Bloom was appointed senior vice president and
director of the Company in November, 1993, and was appointed Chief
Operating Officer in July, 1995. Mr. Bloom was also appointed president of
Castle Hotels and Resorts, Inc., a wholly-owned subsidiary of the Company,
responsible for all facets of the Condominium Resort Management Division of
the Company. Prior to joining the Company, Mr. Bloom was the vice president
of the Hawaii Region of Village Resorts, Inc./Horizon Hospitality Group,
responsible for all Hawaiian interests and operations of that company.
During his 15 years with Village Resorts, Mr. Bloom served as general
manager, Kiahuna Plantation Resort in Poipu, Kauai; general manager for the
Lakeland Village Beach and Ski Resort in Lake Tahoe, California; and
executive assistant manager for the Whaler on Kaanapali Beach in Kaanapali,
Maui. Mr. Bloom was previously employed by Menefee Resorts in Kihei, Maui
and Sheraton Hotels in Hawaii.
HIDEO NOMURA. Mr. Nomura was appointed as a director of the Company in
November, 1993. Mr. Nomura is president of Nomura Holdings and of Nomura
Hitchcock Corporation, Ltd., a property related investment consulting firm
based in Tokyo, Japan, and has held this position since 1987. Mr. Nomura is
the operational executive of the Marina del Rey Residential Development in
California, and was the manager of Mitsui & Company (N.Z.) Ltd. for five
years until 1987. Mr. Nomura is a resident of Japan.
RYOJI TAKAHASHI. Mr. Takahashi was appointed as a director of the
Company in November, 1993. Mr. Takahashi, a resident of Japan, has, for
over thirty years, been a substantial principal of Nichiman Kosan, a
corporation which specializes in coordinating the installation of air
conditioning and sound control systems in commercial buildings and
subcontracts with over 300 companies. He is also the major stockholder of
Nikkankyo Group which consists of six independent companies and has over
five hundred employees. Mr. Takahashi is a graduate of Hosei University in
Tokyo, Japan, where he majored in economics.
MOTOKO TAKAHASHI. Ms. Takahashi is the sister of Ryoji Takahashi and
was appointed secretary of the Company in August of 1994 and as director in
March of 1995. Ms. Takahashi had previously served as director for various
Japanese investment companies in the United States. She also holds the
position as Vice President of N.K.C. Hawaii, Inc. Ms. Takahashi was born
and completed her education in Tokyo, Japan and has resided in the United
States for more than 30 years.
<PAGE>
JOHN G. TEDCASTLE. Mr. Tedcastle was appointed as a director of the
Company in November, 1993. Mr. Tedcastle is experienced in the travel and
hotel industry, having been involved for several years as part owner and
developer of an eleven property hotel chain in New Zealand. He has also
been a senior partner in a prominent law firm in Auckland, where he
specialized in property, financing and general business law. Mr. Tedcastle
is also the owner/operator of the Takapuna Golf course in Auckland, New
Zealand, where he resides.
SHARI W. CHANG. Ms. Chang joined the Company in July, 1994 as senior
vice president of sales and marketing. Prior to joining the Company, Ms.
Chang was vice president of sales for Aston Hotels and Resorts and a vice
president of Island Holiday Tours. She has also served as consultant to the
Hawaii Visitors Bureau in the past. Ms. Chang is a graduate of the
University of Hawaii, and resides in Honolulu, Hawaii.
MICHAEL S. NITTA. Mr. Nitta joined the Company in November, 1993
following the acquisition of KRI, Inc. Prior to joining the Company, Mr.
Nitta served as secretary and treasurer of KRI. Together with Mr. Keawe,
Mr. Nitta was instrumental in the formation of KRI Inc. and the acquisition
of Hawaiian Pacific Resorts in 1987 from its former founders. Prior to the
formation of KRI, Inc. Mr. Nitta served as secretary and treasurer of
Hawaiian Pacific Resort Hotels Inc. from 1982. Born and residing in Hawaii,
he is a graduate of the University of Hawaii and holds a Masters of
Accounting Degree.
JUDHVIR PARMAR. In 1996, the board of directors voted to increase the
number of directors to ten, and Mr. Parmar was subsequently elected. Mr.
Parmar was formerly Senior Vice President of Investment Operations for
International Finance Corporation ("IFC"), a wholly owned subsidiary of
the World Bank. IFC was responsible for all private sector operations of
the World Bank. A specialist in project corporate finance, Mr. Parmar was
with IFC for more than twenty years and was responsible for the worldwide
investment program at IFC. In August, 1993, Mr. Parmar retired from IFC to
form his own consulting company.
STEVE TOWNSEND. Mr. Townsend joined the Company in July, 1997 and has
23 years of hotel and resort management experience. During his career he
has held numerous senior management positions with resort and hotel
management companies. Prior to joining the Company, Mr. Townsend was
director of operations for Interstate Hotels prior to a one year assignment
entailing rebuilding and re-opening a hurricane damaged resort in the Virgin
Islands. Prior to Interstate, Mr. Townsend spent 8 years with Village
Resorts. Mr. Townsend is a graduate of the Hotel and Restaurant
Administration School at Florida State University.
STANLEY MUKAI. Mr. Mukai is a graduate of the Harvard Law School and
a partner in the law firm of McCorriston Miho Miller Mukai located in
Honolulu, Hawaii. His expertise is in the area of taxation and Mr. Mukai
has held various positions such as Advisory Board Member, Hawaii Tax
Institute; Trustee, Tax Foundation of Hawaii; Co-Chairman, Tax
Subcommittee, American Bar Association; Chairman, Tax Subcommittee on U.S.
District and Portfolio Investment by Foreigners; and Chairman, Section of
Taxation, Hawaii Bar Association.
<PAGE>
EDWARD CALVO, SR. Mr. Calvo is vice president of Calvo Enterprises,
Inc., a conglomerate of ten businesses with fifteen hundred employees.
They are the largest private employer on Guam. Mr. Calvo has served as a
Senator in the Guam legislature and is currently the Board Chairman of the
Guam Waterworks Authority.
NOBURU SEKIGUCHI. Mr. Sekiguchi is a graduate of Waseda University and
is a Director and controller of Nikkankyo Group, which is the parent company
of N.K.C. Hawaii. He has worked for Toyo Menka Company, one of the leading
trading companies in Japan for forty years as a financial officer.
FAMILY RELATIONSHIPS
Motoko Takahashi is the sister of Ryoji Takahashi. There are no other
relationships between the directors and officers of the Company.
<PAGE>
REMUNERATION OF DIRECTORS AND OFFICERS.
EXECUTIVE COMPENSATION
The following table shows for the fiscal year ended July 31, 1997, the
aggregate annual remuneration of each of the three highest paid persons who
were executive officers or directors of the Company and the executive
officers and directors as a group. The reported compensation is based on
cash compensation without consideration of a restricted stock grant to
Charles E. McGee described below under "Compensation of Directors".
Name of Individual Capacities in which renumeration Aggregate
or identity of group was received renumeration
- --------------------- -------------------------------- -------------
Rick Wall Chairman of the Board and $120,000
Chief Executive Officer
Kelvin M. Bloom Chief Operating Officer and $120,000
Senior Vice President
Shari W. Chang Senior Vice President $100,000
Sales & Marketing
Steve Townsend Senior Vice President $100,000
Operations
Officers and Directors
as a group Various $634,800(1)
(1) Includes payments made under consulting agreement between the Company
and Kimo M. Keawe
EMPLOYMENT CONTRACTS
The Company has entered into written employment contracts with Messrs.
Bloom, Keawe and Nitta, as of November 1, 1993, Ms. Chang as of August 1,
1994 and Mr. Townsend as of July 31, 1997. Other than Mr. Bloom, Mr. Keawe,
Mr. Nitta, Mr. Townsend and Ms. Chang, the Company has entered into no
employment contract with any director or executive officer.
The above-mentioned employment agreements are for a period of five
years and provide for a base salary, to be increased annually by a percentage
no less than the increase in the Honolulu Consumer Price Index for the
preceeding twelve months. Under their respective employment agreements, the
current base salary for each of Messrs. Bloom, Keawe and Nitta is $120,000
per year. However, Mr. Nitta has agreed to reduce his base salary for the
current fiscal year to $90,000. The current base salary for Ms. Chang and
Mr. Townsend under the terms of their agreements is $100,000. The employment
agreements further provide for paid vacation; a monthly automobile allowance;
an annual performance bonus potential of up to 20% of the base salary (up to
15% for Ms. Chang and Mr. Townsend), depending upon attaining pre-determined
goal criteria; membership in a pension plan (not yet established) that would
contribute the equivalent of 10% of base salary annually; a business
development bonus (which has been waived in the past and current fiscal
years); membership in a 401(k) plan; and full medical, dental and disability.
<PAGE>
The employment agreements contain a "change-in-control" provision which
gives each of the employees under contract, the right, upon the occurence of
a "change-in-control," to terminate their employment and receive as severance
pay the total compensation remaining to be paid under the agreement as of the
date of such termination or the total conpemsation for three years following
the date of termination, whichever is greater. The term "change-in-control"
is defined in each agreement as the date when persons other than the
shareholders of record on the date of commencement of the term of such
agreement become the beneficial owners of 51% of the Company's voting stock.
Mr. Keawe resigned as an officer of the Company in accordance with an
Agreement dated April 16, 1997 and the Company and Mr. Keawe have agreed to
a termination of his employment contract and its related terms and
conditions, to be effective as of April 1997. The Agreement specifies that
the Company shall pay to Mr. Keawe a fee of $10,000 per month for the seven
months ending November 1997 and $5,000 per month for the six months ending
May, 1998 for a total consulting fee of $100,000 plus health insurance
benefits. Mr. Keawe, for the consideration given, shall render consulting
and advisory services to the Company on marketing, managerial and
operational matters. The Agreement also calls for Mr. Keawe to transfer
32,250 shares of the Company's Common Stock owned by Keawe Resorts, Inc., a
company owned and controlled by Mr. Keawe, to the Company upon the
occurrence of certain events as set forth in the Agreement.
The Company and Mr. Keawe entered into a new consulting agreement
effective as of June 1, 1998 which specifies that the Company will pay to
Mr. Keawe a fee of $3,000 per month for the period beginning June 1, 1998
and ending on December 31, 1998.
LONG TERM INCENTIVE PLANS
No options (with the exception of the option discussed in the section
entitled "Options, Warrants and Rights"), stock appreciation rights or long
term incentive plan awards were issued or granted to the Company's
management during the fiscal year ending July 31, 1998.
The Company has a 401(k) profit sharing plan generally available to all
of its employees. Under the terms of the plan, the Company is required to
match 50% of the amounts contributed by participants through payroll
deductions, up to a maximum of 1% of their compensation. Any employee with
one year of service who is at least 21 years of age is eligible to
participate. Effective September 1, 1998, the Company amended the profit
sharing plan to specifies that the Company is required to match 100% of
the amounts contributed by participants through payroll deductions, up to
a maximum of 1% of their compensation.
STOCK PLANS
The Company's stockholders have approved a 1995 Stock Option Plan and
a 1995 Stock Purchase Plan for the purposes of (i) attracting and retaining
employees, executive management and key employees with ability and
initiative; (ii) providing incentives to those deemed material to the
success of the Company, and (iii) attaining a common interest for these
individuals to coincide with the interests of the Company and its
shareholders. No stock grants were issued for the years ended July 31,
1995 through July 31, 1998.
<PAGE>
INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS.
The Hanalei Bay Resort is a 134 unit condominium located in
Princeville , Kauai , Hawaii. HBII was formed through the efforts of HBII
Management Inc. owned by Mr. Wall, with the following partners: Siam
Commercial Bank; Voyage Fourteen Ltd., owned by John G. Tedcastle; L.C.C.
Management, Inc., owned by Judhvir Parmar; Nomura Firm and Nomura Holdings,
owned by Hideo Nomura and Don Nomura. In 1988 HBII made an offer to
purchase all 134 units of the Hanalei Bay Resort and eighty six owners
accepted the offer. HBII elected to form its own management company and
entered into a management contract with Castle Group Hawaii, which was one
of the assets acquired by the Company pursuant to the Castle Plan. Under
terms of the management contract between HBII and Castle Group Hawaii and as
acquired by the Company, the Company is required to provide full management,
including sales, supervision of staff, accounting and maintenance. Mr.
Tedcastle and Mr. Hideo Nomura were elected to serve on the board of directors
of the Company following completion of the Castle Plan. Mr. Parmar was
appointed interim director in November 1995. Mr. Parmar is a general
partner of HBII is married to Ms. Janet Parmar, the owner of L.C.C.
Management, Inc., which is the holder of approximately 10% of the Company's
common stock. Nichiman International later became an investor in HBII and
Nichiman International's owner, Mr. Ryoji Takahashi was appointed as a director
of the Company. In March of 1995, Mr. Takahashi's sister, Ms. Motoko
Takahashi, was appointed Secretary and director of the Company. In November
of 1995, Mr. Kelvin Bloom married the daughter of one of the limited partners
of HBII. In March of 1997, Mr. Michael Nitta was appointed Assistant Vice
President of HBII Management, Inc. Mr. Wall and Mr. Bloom received a monthly
retainer from HBII. Management believes that the terms of the management
contract between the Company and HBII are on terms which are no less
favorable to HBII or the Company than those which are negotiated with other
owners not affiliated with the Company.
Effective August 1, 1994, the Company entered into a contract with
HRCC, a company controlled by Charles E. McGee, a director of the Company.
It is management's belief that the contract with HRCC are on terms which are
not less favorable than those which could be negotiated with companies not
affiliated with The Company. However, in May of 1997, the Company
renegotiated its contract with HRCC with regard to the fees charged. Under
the renegotiated agreement, the fees paid to HRCC shall be based upon the
monthly room revenues of the properties managed by the Company, subject to a
minimum monthly fee. Management believes, although no assurances can be
given, that the Company shall enjoy lower reservations costs under the new
agreement.
Except for the Castle Plan, the HBII Plan and the purchase agreement
involving KRI, the employment contracts and other matters described in
"Remuneration of Officers and Directors," the HBII management contract, and
the HRCC contract, there were no transactions or proposed transactions
during 1996 and 1997, to which the Company or any of its subsidiaries was
or is to be a party, in which the amount involved exceeds $50,000 and in
which any director or executive officer, or any shareholder who is known to
the Company to own of record or beneficially more than 10% of the Company's
common stock, or any member of the immediate family of any of the foregoing
persons, had a direct or indirect material interest.
<PAGE>
RATIFICATION OF SELECTION OF AUDITORS
The Board of Directors has selected Pricewaterhouse Coopers LLP as the
auditors of the Company for the current fiscal year. Ratification of the
selection of auditors would require a majority of the votes cast thereon. Any
shares not voted (whether by abstention, broker non-vote, or otherwise) will
have no impact on the result of the vote. Unless otherwise indicated, the
persons named in the Proxy will vote all proxies in favor of ratifying the
selection of auditors.
Representatives of Pricewaterhouse Coopers LLP (formerly Coopers &
Lybrand L.L.P.) was engaged by the Company on September 15, 1998, to audit
the Company's financial statements for the year ending July 31, 1998.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR"
RATIFICATION OF THE SELECTION OF PRICEWATERHOUSECOOPERS LLP AS THE
COMPANY'S AUDITORS.
OTHER MATTERS
SUBMISSION OF SHAREHOLDER PROPOSALS
In order to be considered for inclusion in next year's proxy statement,
a shareholder proposal must be received by the Company no later than August
31, 1999. Written requests for inclusion of a proposal should be addressed
to: Corporate Secretary, The Castle Group, Inc., 745 Fort Street, Tenth
Floor, Honolulu, Hawaii 96813.
OTHER BUSINESS
Management knows of no other business which may be brought before the
Annual Meeting of shareholders. However, if any other matters shall
properly come before the meeting, it is the intention of the persons named
in the enclosed Proxy to vote such proxy in accordance with their best
judgment on such matters.
By order of the Board of Directors
\s\ MOTOKO TAKAHASHI
Corporate Secretary
<PAGE>
PROXY
THE CASTLE GROUP, INC.
ANNUAL MEETING OF SHAREHOLDERS
JANUARY 22, 1998
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE CASTLE GROUP, INC.
The undersigned hereby appoints Kimo Keawe, Motoko Takahashi, and John
Tedcastle, or any one of them, proxies to represent the undersigned, with
full power of substitution, at the Annual Meeting of Shareholders of The
Castle Group, Inc. (the "Corporation") to be held on JANUARY 22, 1999,
1:30 P.M. (HAWAII STANDARD TIME) AT WAIKIKI TERRACE HOTEL, 2045, KALAKAUA
AVENUE, HONOLULU (WAIKIKI), HAWAII 96815, and any adjournments thereof,
with all the powers and authority the undersigned would possess to vote
and act if personally present, upon matters noted below and upon such
other matters as may properly come before the meeting. The shares
represented by this Proxy shall be voted as follows:
1. To elect as directors the nominees listed below:
Rick Wall
Kimo M. Keawe
Charles E. McGee
John Tedcastle
Ryoji Takahashi
Hideo Nomura
Motoko Takahashi
Judhvir Parmar
Noboru Sekiguchi
Stanley Y. Mukai
Edward Calvo, Sr.
[ ] FOR all the foregoing nominees [ ] WITHHOLD AUTHORITY to vote for
all the foregoing nominees
NOTE: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE LISTED ABOVE,
DRAW A LINE THROUGH OR OTHERWISE STRIKE OUT THE NAME OF THAT NOMINEE IN THE
LIST ABOVE. UNLESS AUTHORITY TO VOTE FOR ALL THE FOREGOING NOMINEES IS
WITHHELD, THIS PROXY WILL BE DEEMED TO CONFER AUTHORITY TO VOTE FOR EVERY
NOMINEE WHOSE NAME IS NOT STRICKEN.
2. To ratify the selection of PriceWaterhouseCoopers, L.L.P., as independent
auditors for the Corporation for the fiscal year ending July 31, 1999.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
This Proxy when properly executed will be voted in the manner directed
herein by the undersigned. Unless otherwise specified, the shares of the
undersigned will be voted for Proposals 1 and 2. If any other business is
transacted at the meeting, this Proxy shall be voted in accordance with the
best judgment of the proxies. The Board of Directors recommends a vote
"FOR" each of the listed proposals. This Proxy is solicited on behalf of
the Board of Directors of The Castle Group, Inc. and may be revoked prior to
its exercise.
<PAGE>
TO BE VALID, THIS PROXY MUST BE DELIVERED TO THE OFFICE OF THE CASTLE GROUP,
INC. AT 745 FORT STREET, TENTH FLOOR, HONOLULU, HAWAII 96813 BY 4:30 P.M. ON
JANUARY 21, 1999. PROXIES TRANSMITTED BY FACSIMILE MAY BE SENT TO
808-521-9994.
Dated: _______________________, 19____
____________________________________
Signature(s) of Shareholder(s)
____________________________________
Please Print Name(s)
____________________________________
Signature(s) of Shareholder(s)
____________________________________
Please Print Name(s)
NOTE: Signature(s) should follow exactly the
name(s) on the stock certificate. Executor,
administrator, trustee or guardian should sign
as such. If more than one trustee, all should
sign. ALL JOINT OWNERS MUST SIGN.
-2-
<PAGE>
