SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement [_] Soliciting Material Under Rule
[_] Confidential, For Use of the 14a-12
Commission Only (as permitted
by Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
PRIVATEBANCORP, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
________________________________________________________________________________
2) Aggregate number of securities to which transaction applies:
________________________________________________________________________________
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
________________________________________________________________________________
4) Proposed maximum aggregate value of transaction:
________________________________________________________________________________
5) Total fee paid:
________________________________________________________________________________
[_] 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:
________________________________________________________________________________
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PRELIMINARY PROXY MATERIALS
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[PRIVATE BANCORP, INC. LOGO]
March __, 2003
Dear Stockholders:
You are cordially invited to attend the 2003 Annual Meeting of
Stockholders of PrivateBancorp, Inc. which will be held at The Union League
Club, 65 West Jackson Boulevard, Chicago, Illinois 60604, on Thursday, April 24,
2003, at 3:00 p.m. local time.
The attached Notice of Annual Meeting of Stockholders and Proxy
Statement describe the formal business to be conducted at the meeting. Directors
and officers of PrivateBancorp, Inc. as well as representatives of Ernst & Young
LLP will be present at the meeting to respond to any questions that our
stockholders may have regarding the business to be transacted.
The Board of Directors of PrivateBancorp, Inc. has determined that the
specific proposals to be considered at the meeting are in the best interests of
the Company and its stockholders. For the reasons set forth in the Proxy
Statement, the Board unanimously recommends a vote "FOR" each of these matters.
YOUR VOTE IS IMPORTANT. PLEASE SIGN AND RETURN THE ENCLOSED PROXY CARD
PROMPTLY IN THE POSTAGE-PAID ENVELOPE. YOUR COOPERATION IS APPRECIATED SINCE A
MAJORITY OF THE COMMON STOCK MUST BE REPRESENTED, EITHER IN PERSON OR BY PROXY,
TO CONSTITUTE A QUORUM FOR THE CONDUCT OF BUSINESS.
On behalf of the Board of Directors and all the employees of the
Company, The PrivateBank and Trust Company, The PrivateBank (St. Louis) and
Lodestar Investment Counsel, I thank you for your continued support.
Sincerely,
Ralph B. Mandell
Chairman of the Board,
President and Chief Executive Officer
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PRELIMINARY PROXY MATERIALS
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PRIVATEBANCORP, INC.
TEN NORTH DEARBORN STREET
CHICAGO, ILLINOIS 60602
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 24, 2003
NOTICE IS HEREBY GIVEN that the 2003 Annual Meeting of Stockholders of
PrivateBancorp, Inc. will be held at The Union League Club, 65 West Jackson
Blvd., Chicago, Illinois 60604, on Thursday, April 24, 2003, at 3:00 p.m. local
time.
The meeting is for the purpose of considering and voting upon the
following matters:
1. Election of five Class II directors to hold office for a
three-year term;
2. Amendment of the Company's Amended and Restated Certificate of
Incorporation increasing the number of authorized shares of
common stock from 12,000,000 to 24,000,000;
3. Amendment of the Company's Amended and Restated By-laws to
provide the Board of Directors the authority to determine the
size of the Board;
4. Approval of the PrivateBancorp, Inc. Incentive Compensation
Plan; and
5. Such other business as may properly come before the meeting,
including whether or not to adjourn the meeting, and any
adjournment of the meeting.
The Board of Directors has fixed March 13, 2003 as the record date for
determining stockholders entitled to notice of, and to vote at, the meeting and
at any adjournments thereof. Only record holders of the common stock of the
Company as of the close of business on the record date will be entitled to vote
at the meeting. In the event there are not sufficient shares represented for a
quorum or sufficient votes to approve any one or more of the foregoing proposals
at the time of the meeting, the meeting may be adjourned in order to permit
further solicitation of proxies by the Company. A list of stockholders entitled
to vote at the meeting will be available for inspection at the Company's offices
located at The PrivateBank and Trust Company, Ten North Dearborn Street,
Chicago, Illinois 60602, for a period of ten days prior to the meeting and will
also be available at the meeting.
By order of the Board of Directors,
Lisa M. O'Neill
Assistant Secretary
March __, 2003
PLEASE COMPLETE, SIGN AND RETURN THE ENCLOSED FORM OF PROXY
IN THE ENVELOPE PROVIDED.
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PRELIMINARY PROXY STATEMENT
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PRIVATEBANCORP, INC.
Ten North Dearborn Street
Chicago, Illinois 60602
PROXY STATEMENT
FOR THE 2003 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD THURSDAY, APRIL 24, 2003
SOLICITATION AND VOTING OF PROXIES
These proxy materials are furnished in connection with the solicitation
by the Board of Directors of PrivateBancorp, Inc. ("the Company"), a Delaware
corporation, of proxies to be used at the 2003 Annual Meeting of Stockholders of
the Company and at any adjournment of such meeting. The meeting is scheduled to
be held on April 24, 2003, at 3:00 p.m. local time, at The Union League Club, 65
West Jackson Blvd., Chicago, Illinois 60604. The Company's 2002 Annual Report on
Form 10-K, including audited consolidated financial statements for the fiscal
year ended December 31, 2002, this proxy statement and a proxy card are first
being mailed to record holders of common stock of the Company on or about March
___, 2003.
Stockholders are requested to vote by completing the enclosed proxy
card and returning it signed and dated in the enclosed postage-paid envelope.
Stockholders are urged to indicate their vote in the spaces provided on the
proxy card. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE VOTED IN
ACCORDANCE WITH THE DIRECTIONS GIVEN BY THE STOCKHOLDERS ON THE PROXY CARD. WHEN
NO INSTRUCTIONS ARE INDICATED, SIGNED PROXY CARDS WILL BE VOTED FOR EACH OF THE
PROPOSALS.
Other than the matters listed in the attached Notice of Annual Meeting
of Stockholders, the Board of Directors knows of no additional matters that will
be presented for consideration at the meeting. Execution of a proxy, however,
confers on the designated proxy holders discretionary authority to vote the
shares in accordance with their best judgment on such other business, if any,
that may properly come before the meeting and at any adjournments of the
meeting, including whether or not to adjourn the meeting.
A proxy may be revoked at any time prior to its exercise by: (1) filing
a written notice of revocation with the Secretary of the Company; (2) delivering
to the Company a duly executed proxy bearing a later date; or (3) attending the
meeting and voting in person. However, if you are a stockholder whose shares are
not registered in your own name, you will need appropriate documentation from
your record holder to vote personally at the meeting.
COST OF PROXY SOLICITATION
The cost of solicitation of proxies on behalf of management will be
borne by the Company. In addition to the solicitation of proxies by mail,
proxies may be solicited personally or by telephone by directors, officers and
other employees of the Company, The PrivateBank (Chicago) and The PrivateBank
(St. Louis). The Company has retained Morrow & Co., Inc. to assist in the
solicitation of proxies. The Company anticipates that the cost of Morrow & Co.,
Inc.'s services will be approximately $________ plus reasonable out-of-pocket
expenses. The Company will also request persons, firms and corporations holding
shares in their names, or in the name of their nominees, which are beneficially
owned by others, to send proxy materials to and obtain proxies from such
beneficial owners, and will reimburse such holders for their reasonable expenses
in doing so.
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VOTING SECURITIES AND STOCKHOLDERS ENTITLED TO VOTE
The Board of Directors has fixed the close of business on March 13,
2003, as the record date for determining stockholders entitled to notice of, and
to vote at, the meeting. On the record date, the Company had outstanding
__________ shares of common stock. Each outstanding share of common stock
entitles the holder to one vote. The Company's Amended and Restated By-laws
state that a majority of the outstanding shares of the Company entitled to vote
on a matter, present in person or represented by proxy, shall constitute a
quorum for the consideration of such matters at any meeting of stockholders.
Abstentions and broker non-votes are counted as shares present for the purpose
of determining whether the shares represented at the meeting constitute a
quorum. In the event that there are not sufficient votes to constitue a
quorum, the meeting may be adjourned in order to permit the further
solicitation of proxies. Proxies received from stockholders in proper form will
be voted at the meeting and, if specified, as directed by the stockholder.
As to the election of directors, the proxy card being provided by the
Board of Directors enables a stockholder of record to vote "FOR" election of
nominees proposed by the Board, or to "WITHHOLD" authority to vote "FOR" one or
more of the nominees being proposed. Directors are elected by a plurality of
votes cast, without regard to either (1) broker non-votes, or (2) proxies as to
which authority to vote for one or more of the nominees being proposed is
withheld.
As to the approval of the proposed amendment to the Company's Amended
and Restated Certificate of Incorporation under Proposal 2, the proxy card being
provided by the Board of Directors enables a stockholder to check the
appropriate box on the proxy card to: (1) vote "FOR" the amendment; (2) vote
"AGAINST" the amendment; or (3) "ABSTAIN" from voting on the amendment. Under
Delaware law, the amendment must be approved by a majority of the outstanding
shares of common stock entitled to vote on the proposal. Accordingly, proxies
marked "ABSTAIN" as to this proposal and broker non-votes will have the same
effect as votes cast "AGAINST" the amendment.
As to the approval of the proposed amendment to the Company's Amended
and Restated By-laws under Proposal 3, the proxy card being provided by the
Board of Directors enables a stockholder to check the appropriate box on the
proxy card to: (1) vote "FOR" the amendment; (2) vote "AGAINST" the amendment;
or (3) "ABSTAIN" from voting on the amendment. Under the Company's Amended and
Restated By-laws, the amendment must be approved by at least two-thirds of the
Company's outstanding common stock, entitled to vote on the proposal.
Accordingly, proxies marked "ABSTAIN" as to this proposal and broker non-votes
will have the same effect as votes cast "AGAINST" the amendment.
As to the approval of the PrivateBancorp, Inc. Incentive Compensation
Plan being proposed for stockholder action in Proposal 4, the proxy card being
provided by the Board of Directors enables a stockholder to check the
appropriate box on the proxy card to: (1) vote "FOR" the amendment; (2) vote
"AGAINST" the amendment; or (3) "ABSTAIN" from voting on the amendment. An
affirmative vote of the holders of a majority of the shares of common stock of
the Company present at the meeting, in person or by proxy, and entitled to vote,
is required to constitute stockholder approval of this proposal. Shares as to
which "ABSTAIN" on the proxy card has been selected with respect to Proposal 4
will be counted as present and entitled to vote and will have the effect of a
vote against the proposal. In contrast, shares underlying broker non-votes will
not be counted as entitled to vote and therefore will have the effect of a vote
against Proposal 4.
With respect to all other matters that may properly come before the
meeting, unless otherwise required by law, such matters may be approved by the
affirmative vote of the holders of a majority of the shares of common stock of
the Company present at the meeting, in person or by proxy, and entitled to vote,
including proxies marked "ABSTAIN" as to that matter.
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Your vote is important. Because many stockholders may not be able to
personally attend the meeting, it is necessary that a large number be
represented by proxy. Prompt return of your proxy card in the postage-paid
envelope provided will be appreciated.
PROPOSAL 1. ELECTION OF DIRECTORS
The Company's Board of Directors consists of 15 members, divided into
three classes, who are elected to hold office for staggered three-year terms as
provided in the Company's By-laws. Four persons currently serving as Class II
Directors have been nominated for election at this Annual Meeting of
Stockholders to serve for a three-year term to end at the annual meeting of
stockholders to be held in 2006. One current Class II Director, Caren L. Reed,
has decided not to stand for reelection. The term of those persons currently
serving as Class III Directors expires at the annual stockholder meeting to be
held in 2004. The term of Class I Directors expires at the annual stockholder
meeting to be held in 2005.
The five persons named below have been nominated for election or
reelection, as the case may be, as Class II Directors to serve for a term to end
at the annual meeting of stockholders in the year 2006 or until their successors
are elected and qualified. William A. Goldstein, the nominee for the meeting who
was not previously a director of the Company, has been nominated in accordance
with the Company's agreement relating to the acquisition in December 2002 of a
controlling interest in Lodestar Investment Counsel. All of the nominees have
indicated a willingness to serve and the Board of Directors has no reason to
believe that any of the nominees will not be available for election. However, if
any nominee is not available for election, proxies may be voted for the
election of such other person selected by the Board of Directors. Proxies
cannot, however, be voted for a greater number of persons than five. To be
elected as a director, each nominee must receive the affirmative vote of a
plurality of the shares present in person or represented by proxy and entitled
to vote at the meeting. Stockholders of the Company have no cumulative voting
rights with respect to the election of directors.
The names, ages and certain background information of the persons
serving on the Board of Directors of the Company, and the Director
Nominees are set forth below.
NOMINEES FOR CLASS II DIRECTORS SERVING UNTIL 2006
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DONALD L. BEAL (56), a director since 1991, has been the owner of
Kar-Don, Inc. d/b/a Arrow Lumber Company, located in Chicago, Illinois, since
1980. Prior to that, Mr. Beal served as Vice President of Hyde Park Bank & Trust
with responsibilities including commercial lending and personal banking. Mr.
Beal is also the sole owner of Ashland Investment.
WILLIAM A. GOLDSTEIN (63), is the Chief Executive Officer of Lodestar
Investment Counsel, LLC, an investment advisory firm recently acquired by the
Company, and has over 39 years of experience in the investment industry. Mr.
Goldstein was appointed to the Board of Directors of The PrivateBank (Chicago)
in January 2003 following completion of the acquisition and is also considered
an executive officer of the Company. Prior to founding Lodestar in 1989, he was
a Principal in the founding of Burton J. Vincent, Chesley & Co. where he served
as Executive Vice President and Director. In 1983 the firm was acquired by
Prescott, Ball & Turben (a subsidiary of Kemper Corporation). There Mr.
Goldstein was Chairman and Director of Prescott Asset Management and President
of Selected Special Shares, a publicly traded mutual fund.
JOHN E. GORMAN (57), has been a director since 1994. Since 1982, Mr.
Gorman has been a General Partner of the Jorman Group, a privately-owned
organization with diversified business holdings.
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RICHARD C. JENSEN (57), has been a director since January 2000. Mr.
Jensen has been a Managing Director of The PrivateBank (Chicago) since November
1999. He became Chairman, Chief Executive Officer and a Managing Director of The
PrivateBank (St. Louis) upon its receipt of its banking charter in June, 2000.
From May 1998 until joining us, Mr. Jensen served as Chairman and Chief
Executive Officer of Missouri Holdings, Inc. From March to May 1998, he served
as President and Chief Executive Officer of Royal Banks of Missouri. For the
previous 18 years, Mr. Jensen served in various executive positions with Nations
Bank and its predecessor, Boatmen's Bank, in St. Louis.
MICHAEL B. SUSMAN (64), has been a director since 1990. He has been a
partner in the law firm of Spitzer, Addis, Susman & Enders, located in Chicago,
Illinois, for the past 30 years. He has served as President, since 1957, and
Director, since 1987, of Henry R. Ferris & Company Genealogical Researchers.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE ELECTION OF
EACH OF THE NOMINEES FOR CLASS II DIRECTOR NAMED ABOVE.
CLASS I DIRECTORS SERVING UNTIL 2005
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RALPH B. MANDELL (62), a director since 1989, is a co-founder of
PrivateBancorp Inc. and The PrivateBank (Chicago). A Director of The PrivateBank
(Chicago) and The PrivateBank (St. Louis), he has served as Chairman and Chief
Executive Officer of PrivateBancorp and The PrivateBank (Chicago) since 1994 and
assumed the additional title of President of both entities in March 1999. From
inception until 1994, Mr. Mandell had the title of Co-Chairman. Prior to
starting The PrivateBank (Chicago) and PrivateBancorp, Mr. Mandell was the Chief
Operating Officer of First United Financial Services, Inc., from 1985 to 1989,
and served as its President from 1988 to 1989. First United, a company that was
traded on the Nasdaq National Market, was sold to First Chicago Corporation in
1987. He also served as President of Oak Park Trust & Savings Bank from 1985
until 1988. Prior thereto, Mr. Mandell had served as Executive Vice President of
Oak Park Trust & Savings Bank since 1979.
NAOMI T. BORWELL (75), has been a director since 1990. She is a private
investor. Mrs. Borwell is a former director of First Chicago Bank of Oak Park
and First United Trust Company.
WILLIAM A. CASTELLANO (61), has been a director since 1991. He has been
Chairman and founder of Worknet, Inc., located in Oakbrook Terrace, Illinois
since 1996. Worknet is an information technology firm that provides computer
networking services to businesses. He was the founder of and served as the Chief
Executive Officer to Chrysler Systems Leasing from 1977 to 1991.
ALVIN J. GOTTLIEB (75), a director since 1990, is a private investor.
Since 1961, Mr. Gottlieb has served in various capacities on the board of
directors of Gottlieb Memorial Hospital, located in Melrose Park, Illinois, and
he currently holds the position of Vice Chairman.
WILLIAM R. LANGLEY (62), a director since 1989, is a co-founder of the
Company and The PrivateBank (Chicago). Mr. Langley held the title of Co-Chairman
of the Company, and was active in day-to-day management of the Company until
1995 when he retired. Prior to the formation of the Company, Mr. Langley had
served as Chief Executive Officer of First United Financial Services, Inc. from
1985 to 1987 and as Chairman from 1987 to 1989. First United, a company that was
traded on the Nasdaq National Market, was sold to First Chicago Corporation in
1987. Prior to that, he served as Chairman and President of Oak Park Trust &
Savings Bank, where he had been employed since 1965.
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CLASS III DIRECTORS SERVING UNTIL 2004
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ROBERT F. COLEMAN (58), a director since 1990, is a principal of Robert
F. Coleman & Associates, a law firm located in Chicago, Illinois. He
concentrates his practice on business and professional litigation.
JAMES M. GUYETTE (57), has been a director since 1990. Since 1997, he
has been President and Chief Executive Officer of Rolls Royce North America,
Inc. Mr. Guyette served as Executive Vice President of UAL Corporation from 1985
to 1995 when he retired after more than 25 years of employment with that
company. He is currently a director of Rolls-Royce plc (London) and Pembroke
Capital (Dublin), and formerly a director of First United Financial Services and
United Airlines Employees Credit Union.
PHILIP M. KAYMAN (61), a director since 1990, has been a senior partner
with the law firm of Neal, Gerber & Eisenberg in Chicago, Illinois since the
firm's founding in 1986.
THOMAS F. MEAGHER (72), has been a director since 1996. Mr. Meagher has
been the Chairman of Howell Tractor and Equipment Co., a distributor of heavy
equipment located in Elk Grove Village, Illinois, since 1980. He has had an
extensive career in the transportation industry and currently serves on the
Board of Directors of Trans World Airlines, Inc., and its Estate Committee.
WILLIAM J. PODL (58), has been a director since August 1999. Mr. Podl
was an organizer of Towne Square Financial Corporation, which was purchased by
the Company in August 1999. Mr. Podl founded Doran Scales, Inc. in 1976, and is
currently Chairman and Chief Executive Officer of that company.
RETIRING DIRECTOR
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CAREN L. REED (68), a director since 1990, was a founding director of
The PrivateBank (Chicago). From 1990 to March 1999, Mr. Reed also held the title
of President of the Company and The PrivateBank (Chicago). From March 1999
through his retirement in December 1999, Mr. Reed was Vice-Chairman of The
PrivateBank and Trust Company. Prior to joining the bank, Mr. Reed was an
Executive Vice President of Continental Bank, Chicago, with a career spanning 34
years. Mr. Reed's term will end at the Annual Meeting of Stockholders on April
24, 2003.
PROPOSAL 2. APPROVAL OF AN AMENDMENT TO THE COMPANY'S
CERTIFICATE OF INCORPORATION INCREASING THE
NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
At a meeting of the Board of Directors held on March 1, 2003, the Board
of Directors unanimously approved and are recommending to the Company's
stockholders for approval an amendment to the Company's Amended and Restated
Certificate of Incorporation that would increase the number of authorized shares
of common stock from the 12,000,000 shares presently authorized to 24,000,000
shares.
As approved by the Board, subject to stockholder approval at the
Meeting, the first paragraph of Article FOURTH of PrivateBancorp, Inc.'s Amended
and Restated Certificate of Incorporation would be amended to read as follows:
"The total number of shares of stock which the Corporation shall have
authority to issue is twenty-five million (25,000,000) divided into two
classes as follows: one million (1,000,000) of
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which shall be Preferred Stock, without par value, and twenty-four
million (24,000,000) of which shall be Common Stock, without par
value."
PURPOSE OF AMENDMENT
The Amended and Restated Certificate of Incorporation currently
authorizes the issuance of up to 12,000,000 shares of common stock and 1,000,000
shares of preferred stock. As of the record date, the Company had ________
shares of common stock outstanding and 12,540 shares of common stock reserved
for issuance to current or former directors, officers and employees under
compensation and benefit plans. Subject to stockholder approval of the plan at
the meeting, an additional 480,000 shares will be reserved for issuance under
the Incentive Compensation Plan, leaving only _______ shares of common stock
authorized, unissued and unreserved and available for other corporate purposes.
While the Company does not have any current plans, commitments or agreements to
issue or reserve additional shares of common stock in excess of the current
amount of authorized shares of common stock, the Board of Directors considers
the proposed increase in the number of authorized shares desirable because it
would give the Board the necessary flexibility to issue common stock in
connection with future stock dividends and splits, potential acquisitions,
financings, employee benefits and for other general corporate purposes. Without
an increase in the number of authorized shares of common stock, the number of
available shares for issuance may be insufficient to undertake one or more of
these transactions when desirable.
The Company has recently issued 2,568,068 shares of common stock in
connection with a 3-for-2 stock split effected in the form of a dividend in
January 2003. Prior to the stock dividend, the Company issued approximately
200,000 shares of common stock in connection with the acquisition of Lodestar
Investment Counsel in December 2002. The Company's growth strategy includes the
pursuit of further acquisitions of asset management firms and other fee-income
businesses. The Company may also pursue selective acquisitions to expand its
banking franchise to other geographic markets. The Board of Directors believes
it is desirable to have the flexibility to use common stock or a combination of
cash and stock as consideration in potential acquisitions. The Company may also
desire to issue common stock from time to time to raise additional capital
necessary to support future growth of the Company.
Approving an increase in the number of authorized shares at this time
would avoid the additional expense and delay incidental to obtaining stockholder
approval to increase the number of authorized shares at the time of any planned
transaction of the type described above, unless stockholder approval is
otherwise required for a particular issuance by applicable law. The proposed
Amendment to the Amended and Restated Certificate of Incorporation would
increase the authorized, unissued and unreserved common stock remaining
available for issuance from _______ to _______ shares.
Authorized, unissued and unreserved common stock may be issued from
time to time for any proper purpose without further action of the stockholders,
except as required by the Amended and Restated Certificate of Incorporation,
applicable law or the listing requirements of the Nasdaq National Market, on
which the common stock is listed. Delaware law requires that an amendment to the
Amended and Restated Certificate of Incorporation be approved by a majority of
the outstanding shares of common stock.
Each share of common stock authorized for issuance has the same rights
and is identical in all respects with each other share of common stock. Newly
authorized shares of common stock will not affect the rights, such as voting and
liquidation rights, of the shares of common stock currently outstanding.
Stockholders will not have preemptive rights to purchase any subsequently issued
shares of common stock.
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The ability of the Board of Directors to issue additional shares of
common stock without additional stockholder approval may be deemed to have an
anti-takeover effect, since unissued and unreserved shares of common stock could
be issued by the Board of Directors in circumstances that may have the effect of
deterring takeover bids. The Board of Directors does not intend to issue any
additional shares of common stock except on terms which it deems to be in the
best interests of the Company and its stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF AN
AMENDMENT TO THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION INCREASING
THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK.
PROPOSAL 3. APPROVAL OF AMENDMENT TO
THE AMENDED AND RESTATED BY-LAWS
On March 1, 2003, subject to stockholder approval, the Company's Board
of Directors approved an amendment to Section 3.2 of the Company's Amended and
Restated By-laws. The proposed amendment will provide the Board discretion to
change the number of directors from time to time as it may deem appropriate and
in the best interests of stockholders. The Board believes this flexibility is
important to ensure that the Company maintains effective corporate governance as
the Company grows.
As approved by the Board, subject to stockholder approval at the Annual
Meeting, Section 3.2 of the Company's Amended and Restated By-laws would be
amended to read in its entirety as follows (changes underlined):
"Section 3.2. Number, Tenure and Qualifications. The number of
directors shall be fifteen (15); PROVIDED, HOWEVER, that the number may
be increased or decreased from time to time BY A RESOLUTION DULY
ADOPTED BY THE BOARD OF DIRECTORS.
Commencing with the annual meeting of stockholders held in
1998, the directors shall be divided into three (3) classes, as nearly
equal in number as possible, with the term of office of the first class
to expire at the 1999 annual meeting of stockholders, the term of
office of the second class to expire at the 2000 annual meeting of
stockholders, and the third class expiring at the 2001 annual meeting
of stockholders. At each annual meeting of stockholders following such
initial classification, directors elected by the stockholders to
succeed those directors whose term expires shall be elected for a term
of office to expire at the third succeeding annual meeting of
stockholders after their election. Each director shall hold office
until his successor is elected and qualified or until his earlier
resignation or removal. Directors need not be stockholders or residents
of Delaware."
PURPOSE OF AMENDMENT
There are currently 15 members of the Board of Directors. The Board
believes the proposed amendment to Section 3.2 is advisable to allow the Board
the flexibility to increase or decrease the number of directors if it
determines, to maximize Board effectiveness. It is anticipated that as the
Company grows, the Board may determine it advisable at various times to add
Board members with unique talents or experience to enhance the Board's oversight
of Company affairs or to satisfy stock exchange listing requirements that may
change from time to time. In addition, the Board believes it is advisable to
have the ability to appoint individuals to the Board in connection with
potential acquisitions. Board representation may be negotiated with sellers of a
company to facilitate integration of the acquired business or when it is
believed that a prior owner or manager will be a valuable addition to the Board
to
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assist in Board oversight of the newly acquired business. The Board would
also have the flexibility to reduce the size of the Board, if deemed desirable,
to maximize Board effectiveness.
At the present time, the Board has no intent to increase or decrease
the number of directors. Any increase or decrease in the number of directors
will be made in a manner so as to maintain as equal a number of directors in
each class as possible. The Board may want to increase its size in the future to
recruit an audit committee financial expert to comply with new laws, or in
connection with potential acquisitions or strategic planning. The proposed
Amendment will not give the Board the ability to further amend Section 3.2 of
the Amended and Restated By-Laws or remove any director elected by the
stockholders without cause. The Board will continue to have the authority to
appoint persons to fill any vacancies on the Board, to serve the remainder of
the term.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF AN
AMENDMENT TO THE COMPANY'S AMENDED AND RESTATED BY-LAWS.
8
<page>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, DIRECTORS AND EXECUTIVE
OFFICERS
The following table sets forth the beneficial ownership of the common
stock as of February 26, 2003, with respect to (1) each Director, nominee for
director and named executive officer of the Company; and (2) all Directors and
executive officers of the Company as a group. Other than Mr. Mandell, the
Company does not know of any stockholder who holds in excess of 5% of any class
of the Company's voting securities.
<table>
<caption>
<s>
AMOUNT OF
COMMON TOTAL
SHARES CURRENTLY AMOUNT OF TOTAL
BENEFICIALLY RESTRICTED EXERCISABLE BENEFICIAL PERCENTAGE
OWNED STOCK OPTIONS OWNERSHIP(1) OWNERSHIP(1)
------------ ---------- ----------- ------------ ------------
DIRECTORS
Ralph B. Mandell**...................... 459,710(2) 24,900(3) 68,925 553,535 7.09%
Donald L. Beal.......................... 23,946(4) -- 26,100 50,046 *
Naomi T. Borwell........................ 281,280 -- -- 281,280 3.64
William A. Castellano................... 268,680(5) -- -- 268,680 3.47
Robert F. Coleman....................... 46,200(6) -- 28,980 75,180 *
John E. Gorman.......................... 87,360 -- 12,240 99,600 1.29
Alvin J. Gottlieb....................... 170,760 -- -- 170,760 2.21
James M. Guyette........................ 38,340 -- 12,240 50,580 *
Richard C. Jensen**..................... 28,085(7) 7,800(8) 7,500 43,385 *
Philip M. Kayman........................ 34,560 -- 23,200 57,780 *
William R. Langley...................... 204,960 -- 45,300 250,260 3.22
Thomas F. Meagher....................... 47,580 -- 3,240 50,820 *
William J. Podl......................... 56,334 -- -- 56,334 *
Caren L. Reed........................... 5,775 -- 21,000 26,775 *
Michael B. Susman....................... 42,570 -- 15,615 58,185 *
--------- ------ ------- --------- -----
Total Directors (15) persons 1,796,140 32,700 264,360 2,093,200 26.17%
========= ====== ======= ========= =====
DIRECTOR NOMINEE
William Goldstein....................... 223,169 -- -- 223,169 2.89
NON-DIRECTOR NAMED EXECUTIVE OFFICERS
Gary L. Svec............................ 12,981 12,000(9) 24,981 *
Gary S. Collins......................... 78,886(10) 12,000(3) 37,800 128,686 1.62
Hugh H. McLean.......................... 98,076 12,900(11) 42,600 153,576 1.97
Total Directors and Executive Officers
(21) persons 2,221,536 75,600 352,135 2,649,271 32.76%
<fn>
- ------------------
* Less than 1%
** Denotes person who serves as a director and who is also a named executive
officer.
(1) Beneficial ownership is determined in accordance with SEC Rule 13d-3
promulgated under the Securities Exchange Act of 1934.
(2) Includes 34,500 shares held by Mr. Mandell's spouse. Mr. Mandell's
business address is c/o The PrivateBank and Trust Company, Ten North
Dearborn, Chicago, Illinois 60602.
(3) Shares vest at various dates between 2003 and 2006, and are subject to
forfeiture until such time as they vest.
(4) Includes 13,296 shares held by Mr. Beal's spouse and children.
(5) Includes 21,000 shares held by Mr. Castellano's children and 15,000
shares held by WMC Investment Ltd. Partnership.
(6) Includes 1,200 shares held by Mr. Coleman's spouse and 4,800 shares held
by the Robert F. Coleman & Associates Retirement Savings Plan of which
Mr. Coleman is a participant.
(7) Includes 8,585 shares held by Mr. Jensen's spouse.
(8) Shares vest at various dates between 2005 and 2006, and are subject to
forfeiture until such time as they vest.
(9) Shares vest at various dates between 2005 and 2006, and are subject to
forfeiture until such time as they vest. Mr. Svec has announced his
plans to leave the Company in March 2003, and these shares will be
forfeited upon termination of his employment.
(10) Includes 6,630 shares held by Mr. Collins' spouse.
(11) Shares vest at various dates between 2003 and 2006, and are subject to
forfeiture until such time as they vest.
</fn>
</table>
9
<page>
BOARD COMMITTEES
Members of the Company's Board of Directors have been appointed to
serve on various committees of the Board. The Board of Directors currently has
five standing committees: (1) the Compensation Committee; (2) the Nominating
Committee; (3) the Audit Committee; (4) the Planning Committee; and (5) the
Information Technology Committee.
Compensation Committee. The Compensation Committee is responsible for
reviewing the performance of the Chief Executive Officer; reviewing and
recommending the compensation of the Company's officers, including the Chief
Executive Officer; recommending and approving stock option grants and restricted
stock awards to management; reviewing and recommending compensation programs
including stock option grants, 401(k) contributions and annual bonuses;
reviewing and recommending director compensation; and advising the Chief
Executive Officer on miscellaneous compensation issues. The Compensation
Committee also advises and assists management in formulating policies regarding
compensation. The members of the Compensation Committee are Messrs. Guyette
(Chairman), Castellano, Meagher and Susman and Mrs. Borwell.
Nominating Committee. The Nominating Committee, newly formed in 2003,
is responsible for proposing to the Board a slate of nominees for election as
directors by stockholders at each annual meeting. The Nominating Committee and
the Board of Directors will consider nominees recommended by stockholders if the
procedures set forth under "Notice of Business to be conducted at an Annual
Meeting of Stockholders" are met. In carrying out its duties, the Nominating
Committee has also been delegated the responsibility to determine criteria for
the selection and qualification of the Board members; recommend for Board
approval persons to fill vacancies on the Board which occur between annual
meetings; evaluate, at least annually, each Board member's "independence" and
make recommendations, at least annually regarding each Board member's
"independence" status consistent with then applicable legal requirements; make
recommendations regarding director orientation and continuing education; and
consider the effectiveness of corporate governance principles and procedures
followed by the Company and the Board. The members of the Compensation Committee
are Messrs. Guyette (Chairman), Castellano, Meagher and Susman and Mrs. Borwell.
Audit Committee. The Audit Committee is responsible for supervising the
Company's accounting, reporting and financial control practices. The Audit
Committee charter that outlines the responsibilities and processes of the Audit
Committee as amended in 2003 is attached as Appendix B. Generally, the Audit
Committee is responsible for the quality and integrity of the Company's
financial information and reporting functions, the adequacy and effectiveness of
the Company's system of internal accounting and financial controls, and the
independent audit process, and annually reviews the qualifications of the
independent public accountants. The independent public accountants are
responsible for auditing the Company's financial statements and expressing an
opinion as to their conformity with generally accepted accounting principles.
All members of the Audit Committee are "independent" directors within the
meaning of Rule 4200(a)(15) of the National Association of Securities Dealers'
listing standards as currently in effect. The members of the Audit Committee are
Messrs. Coleman (Chairman), Beal, Gorman, Guyette, Langley, Podl and Reed.
Planning Committee. The Planning Committee is responsible for studying
strategic issues prior to submission to the entire Board of Directors for
approval. The Planning Committee consists of Messrs. Mandell (Chairman),
Castellano, Coleman, Gorman, Guyette, Kayman and Langley.
Information Technology Committee. The Information Technology Committee
reports to the Audit Committee regarding its responsibilities related to the
Company's information technology infrastructure. The Information Technology
Committee has oversight responsibility related to the quality and integrity of
the Company's information technology functions. This Committee is composed
entirely
10
<page>
of outside directors who are not officers of the Company. The members
of the Information Technology Committee are Messrs. Podl (Chairman), Castellano,
Coleman, Kayman, Langley, and Susman.
During 2002, the Board of Directors met monthly. In addition, the
Compensation Committee met four times, the Audit Committee met 15 times and the
Information Technology Committee met seven times. The Planning Committee did not
hold any meetings in 2002. During 2002, the duties of the Nominating Committee
were combined with the Compensation Committee. Each of the directors of the
Company attended at least 75% of the total number of meetings held of the Board
and Board committees on which such director served during fiscal year 2002, with
the exception of Messrs. Gorman, Guyette and Gottlieb.
BOARD OF DIRECTORS' COMPENSATION
In 1992, the Company commenced a program of compensating the outside
directors of the Company who are also outside directors of The PrivateBank
(Chicago) and The PrivateBank (St. Louis) with stock option awards in lieu of
cash retainers. The Company's philosophy has been to increase the directors'
equity stake in the Company to enhance the alignment of their interests with
those of the stockholders. The director options have been granted each year in
amounts determined at the discretion of the Board. The options are fully vested
at the end of the year of grant, subject to a full year of service. In each
case, the options have been granted at an exercise price equal to or greater
than the estimated fair market value of the Company's common stock at the date
of grant. Partial awards have been made for partial year service. As of December
31, 2002, there were outstanding options granted to non-employee directors
pursuant to this program to purchase an aggregate of 192,285 shares of common
stock at an average weighted per share exercise price of $9.45.
During 2002, due to the unavailability of shares remaining under the
Company's stockholder approved stock option plan, non-employee directors of the
Company were paid cash retainers of $15,000 in lieu of stock options.
In addition to the retainers, non-employee members of the Company's
Board of Directors receive fees of $300 for each Board meeting attended. The
directors also receive $200 per meeting for attendance at meetings of any
committees of the Board on which they serve. Total Board and Board committee
meeting fees paid in 2002 were $122,100, which includes fees paid to Board and
Board committee members of The PrivateBank (Chicago).
11
<page>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table summarizes the compensation paid by the Company and
its subsidiaries to the Chairman, President and Chief Executive Officer and the
four other most highly paid executive officers (the "Named Executive Officers")
who served as such at December 31, 2002. All share and per share data has been
adjusted to reflect the 3-for-2 stock dividend effective January 17, 2003.
<table>
<caption>
<s>
SUMMARY COMPENSATION TABLE
-----------------------------------------------------------------------------------
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
------------------------------------- -------------------------
OTHER ANNUAL SECURITIES ALL OTHER
NAME AND SALARY BONUS COMPENSATION RESTRICTED UNDERLYING COMPENSATION
PRINCIPAL POSITION YEAR ($) ($)(1) ($)(2) STOCK($)(3) OPTIONS(#)(4) ($)
------------------ ---- --- ------ ------------ ----------- ------------- ------------
Ralph B. Mandell(5)........... 2002 310,000 585,000 19,194 --(9) -- 60,040(7)
Chairman, President and CEO 2001 290,000 300,000 19,122 42,375(6) 9,750 57,440(7)
2000 265,000 150,000 19,103 37,125(8) 9,000 57,440(7)
Gary L. Svec.................. 2002 200,000 435,000 6,120 --(9) -- 6,000(11)
Secretary/Treasurer and CFO 2001 180,000 150,000 6,018 70,950(10) 6,000 1,200(11)
2000 150,000 108,000 2,330 48,563(12) 9,750 --
Richard C. Jensen............. 2002 170,000 130,000 9,672 --(9) -- 6,000(11)
Managing Director 2001 160,000 60,000 9,636 24,013(13) 6,000 3,400(11)
2000 150,000 50,000 9,402 43,313(14) 9,000 250(11)
Hugh H. McLean................ 2002 175,000 230,000 11,850 --(9) -- 6,000(11)
Managing Director 2001 155,000 105,000 11,778 28,250(15) 6,000 3,400(11)
2000 138,000 50,000 11,275 24,750(16) 5,400 3,400(11)
Gary S. Collins(5)............ 2002 175,000 230,000 15,925 --(9) -- 6,000(11)
Managing Director 2001 155,000 105,000 16,253 28,250(15) 6,000 3,400(11)
2000 128,000 62,000 10,375 24,750(16) 5,400 3,400(11)
<fn>
- ------------------
(1) Bonuses for 2002, 2001 and 2000 were determined in December of the
respective years and paid in the following January. In addition, during
2002, one-time cash bonuses were paid to Mr. Mandell - $40,000; Mr. Svec
- $35,000; Mr. Jensen - $30,000; Mr. McLean - $30,000 and Mr. Collins -
$30,000.
(2) Represents automobile allowances, life insurance premiums and club
membership dues and fees paid by the Company.
(3) Reflects restricted stock awards under the Company's Stock Incentive
Plan. The Company has paid regular dividends on all shares of restricted
stock outstanding. These shares of restricted stock are subject to
forfeiture until the fifth anniversary of the grant date. The number and
value of the aggregate restricted stock holdings of each of the above
named persons as of December 31, 2002, based on the dividend adjusted
closing price of $25.24 for the Company's common stock on that date,
were as follows: Mr. Mandell -- 24,900 shares, $628,476; Mr. Svec --
12,000 shares, $302,880; Mr. McLean -- 12,900 shares, $325,596; Mr.
Collins -- 12,000 shares, $302,880; and Mr. Jensen -- 7,800 shares,
$196,872.
(4) Options to purchase shares of common stock granted in 2001 have an
exercise price of $9.417 and vest over a four year period and options
granted in 2000 have an exercise price of $8.25 and vest over a four
year period. No options were granted to the persons identified in this
table in 2002.
(5) On April 24, 2002, restricted shares that were granted in 1997 vested
and created taxable compensation in the amount of $224,000, $89,600 and
$89,600 to Ralph Mandell, Gary Collins and Hugh McLean, respectively.
(6) Represents an award of 4,500 shares of restricted stock at a value of
$9.417 per share.
(7) Represents (a) matching contributions to the Company's 401(k) Plan, and
(b) dollar value-benefit of accrued imputed interest (assuming full
forgiveness of cumulative accrued interest) relating to a loan from the
Company in connection with Mr. Mandell's 1998 stock purchase
transaction. See "Transactions with Related Persons." This loan was
repaid in full by Mr. Mandell on December 30, 2002.
(8) Represents an award of 4,500 shares of restricted stock at a value of
$8.25 per share.
(9) During 2002 no restricted share grants were made to the persons
identified in this table.
(10) Represents awards of 3,000 restricted shares on February 22, 2001 and
3,750 restricted shares on December 13, 2001, respectively. The
February and December 2001 restricted stock grants were made at $9.417
and $11.39 per share, respectively.
(11) Represents matching contributions to the Company's 401(k) plan made by
the Company for the benefit of the executive officer.
(12) Represents an award of 5,250 shares of restricted stock at a value of
$9.25 per share.
12
<page>
(13) Represents an award of 2,550 shares of restricted stock at a value of
$9.417 per share.
(14) Represents an award of 5,250 shares of restricted stock at a value of
$8.25 per share.
(15) Represents an award of 3,000 shares of restricted stock at a value of
$9.417 per share.
(16) Represents an award of 3,000 shares of restricted stock at a value of
$8.25 per share.
</fn>
</table>
OPTION GRANTS IN LAST FISCAL YEAR
There were no option grants by the Company in 2002. During 2002 a
special cash bonus was paid to executives of the Company in lieu of stock
options, as the stock option plan did not have sufficient shares to grant
options.
AGGREGATED OPTION EXERCISES AND YEAR-END VALUES
The following table summarizes for each Named Executive Officer the
number of shares of common stock subject to outstanding options and the value of
such options that were unexercised at December 31, 2002, as adjusted to reflect
the Company's 3-for-2 stock dividend effective January 17, 2003.
<table>
<caption>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
<s> <c> <c> <c> <c> <c>
VALUE OF
NUMBER OF UNEXERCISED
SECURITIES UNDERLYING IN-THE-MONEY
SHARES UNEXERCISED OPTIONS AT
ACQUIRED ON VALUE OPTIONS AT DECEMBER 31,
NAME EXERCISE (#) REALIZED ($) DECEMBER 31, 2002 (#) 2002($)(2)
---- ------------ ------------ --------------------- ----------------
EXERCISABLE/ EXERCISABLE/
UNEXERCISABLE(1) UNEXERCISABLE(1)
--------------------- ----------------
Ralph B. Mandell............... 57,360 611,840 77,250/16,500 1,436,165/260,523
Gary L. Svec................... 4,875 67,230 --/10,875 --/173,704
Richard C. Jensen.............. -- -- 4,500/10,500 76,455/171,395
Gary S. Collins................ 5,280 87,384 34,800/10,200 605,827/160,673
Hugh H. McLean................. -- -- 39,600/10,200 676,979/160,673
<fn>
- ------------------
(1) The numbers and amounts in the above table represent shares of common
stock subject to options granted by the Company that were unexercised as
of December 31, 2002.
(2) The estimated fair market value of the Company's common stock at
December 31, 2002 was $25.24 per share, as adjusted to reflect the
Company's 3-for-2 stock dividend effective January 17, 2003.
</fn>
</table>
EMPLOYMENT AGREEMENTS
The Company has entered into an employment agreement with Ralph B.
Mandell, the Company's Chairman, President and Chief Executive Officer. The
agreement, which has a term of two years, expires on June 30, 2003, and is
subject to renewal for a successive two-year term. Under the provisions of the
agreement, Mr. Mandell is entitled to an initial annual base salary of $310,000.
Mr. Mandell may receive a discretionary bonus to the extent determined by the
Board of Directors and is entitled to participate in benefit plans and other
fringe benefits available to the Company's managing directors.
Under the agreement, Mr. Mandell's employment may be terminated by the
Company at any time for "cause," as defined in the agreement, in which case, or
if he resigns from the Company without "good reason," the agreement immediately
terminates, and he would be entitled only to unpaid benefits accrued during the
term of his employment. If Mr. Mandell chooses to resign with good reason, or
the Company chooses to terminate his employment without cause, he is also
entitled to receive severance in the amount equal to 150% of his then current
base annual salary, plus the average of the sum of the bonuses he earned
13
<page>
during the previous three years, in addition to a pro rata bonus for the year of
termination based on the prior year's bonus amount, if any. The agreement also
provides for death benefits equal to six months of his then current annual base
salary.
In the event that Mr. Mandell is terminated after a change in control
of the Company, he will be entitled to a lump sum payment equal to three times
the sum of (1) his annual base salary; (2) the greater of (a) his bonus amount,
if any, for the prior year or (b) his average bonus, if any, for the three
preceding years; and (3) the sum of the contributions that would have been made
by the Company to him during the year under benefit plans and the annual value
of any other executive perquisites. Based on Mr. Mandell's compensation through
2002, in the event of a change of control and his subsequent termination, he
would be entitled to a lump-sum payment of approximately $5.1 million under the
agreement. The agreement also entitles Mr. Mandell to receive gross up payments
to cover any federal excise taxes payable by him in the event the change in
control benefits are deemed to constitute "excess parachute payments" under
Section 280G of the Internal Revenue Code. A change in control is defined under
the agreement as an occurrence of any one of the following events as determined
by the Board:
o if any person, as such term is used in Sections 13(d) and 14(d) of
the Securities Exchange Act, becomes the beneficial owner of 10%
or more of the total voting power of the Company's then
outstanding voting capital stock; provided, however, that if that
person becomes a beneficial owner of 10% or more of the Company's
voting capital stock as a result of an acquisition of stock
directly from the Company, or a decrease in the number of
outstanding shares due to a repurchase of shares by the Company,
it shall not be considered a change in control;
o if during any period of two consecutive years, those individuals
who at the beginning of the period constitute the Board of
Directors cease to make up a majority of the Board;
o the consummation of a reorganization, merger or consolidation of
the Company, or the sale of all or substantially all of its
assets; provided, that so long as more than 50% of the voting
stock of the successor entity is held by stockholders who had been
beneficial owners of the Company's stock immediately before the
transaction, and at least a majority of the board of the successor
entity is made up of members of the Company's Board, the merger or
sale shall not be considered a change in control; and
o the approval by the Company's stockholders of a plan of
complete liquidation or dissolution.
The agreement also contains non-solicitation provisions, which prohibit
Mr. Mandell from soliciting, either for his own account or for the benefit of
any entity located within a 25 mile radius of the Company or any of its
subsidiaries, any of its clients or employees. These non-solicitation provisions
remain in effect for a period of two years after the termination of his
employment.
The Company has also entered into an employment agreement with Richard
C. Jensen, one of our directors, and the chairman, chief executive officer and a
managing director of The PrivateBank (St. Louis). The agreement, which has a
term of three years, expires on June 30, 2003, subject to renewal for a
successive term. The terms and provisions of Mr. Jensen's agreement are
substantially similar to those of the employment agreement with Mr. Mandell
summarized above, with the following exceptions:
o Mr. Jensen's annual base salary is $170,000;
o In the event of Mr. Jensen's discharge without cause or his
resignation with good reason, as defined in the agreement, Mr.
Jensen is entitled to (a) continue to receive his then current
base salary for a period of 12 months, plus a pro rata bonus for
the year of termination based
14
<page>
on the prior year's bonus amount, if any; and (b) outplacement
counseling services for a period of up to one year, or until
Mr. Jensen is employed elsewhere or self-employed; and
o In the event Mr. Jensen is terminated after a change of control of
the Company, he will be entitled to a lump-sum payment equal to
two times the sum of: (a) his annual base salary; (b) the greater
of (i) his bonus amount, if any, for the prior year or (ii) his
average bonus, if any, for the three preceding years; and (c) the
sum of contributions that would have been made by the Company to
him during the year under benefit plans and the annual value of
any other executive perquisites.
15
<page>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
INTRODUCTION
The Compensation Committee ("Committee") is comprised entirely of
non-management directors. Among the Committee's duties are the responsibility
for reviewing chief executive officer compensation and business expenses and
making recommendation for approval to the full Board and review and approval of
the compensation and benefit programs for other senior executives. The Committee
also advises and assists management in formulating policies regarding overall
compensation.
OBJECTIVES
Under the direction of the Committee, the Company's compensation
policies are designed to align the interests of the executives with those of the
stockholders. The goal of the policies is to improve profitability and long-term
stockholder value by rewarding the executives based on criteria set for
individual and corporate performance. The compensation program and policies are
also designed to aid in the attraction, motivation and retention of key
personnel.
The Committee has from time to time used third-party consultants and
compensation surveys to help construct and maintain a competitive compensation
program. Consultants are chosen based on their experience in compensation
matters and their experience in the financial services industry. The Committee
uses consultants for assistance in comparing salary levels and the Company's
compensation programs to those of selected peer group companies.
PERFORMANCE CRITERIA
The Committee uses a combination of base salary, cash incentive
compensation and equity-based compensation as its total compensation package.
Corporate and individual performance goals are set for each year when the annual
profit plan is approved. The annual profit plan establishes the performance
benchmark for both earnings and asset growth.
The chief executive officer's performance goals are set by the
Committee and are based upon a combination of objective and subjective
performance criteria. Objective criteria include the achievement of net income
and earnings per share targets and growth in assets, loans and trust assets
under administration. Subjective criteria include leadership, competence,
planning and execution of strategic initiatives.
The performance goals of the other senior executives are set by the
chief executive officer. These goals are based upon both corporate and personal
performance. Corporate goals are based upon achievement of the same earnings and
growth targets as for the chief executive officer. Individual performance goals
are based upon a combination of personal objectives and subjective performance
criteria.
BASE SALARY
In considering annual base salary increases, the Committee in
conjunction with the chief executive officer, reviews the performance of each of
its senior executives individually. The Committee periodically compares base
salary data with information obtained from third party consultants and
compensation surveys. Base salary levels historically have been targeted
generally at the mid-points of comparable executive compensation at peer
companies identified by the Committee, as the Committee feels that a significant
portion of total compensation should be at risk. The Committee recognizes that
it is difficult to make exact comparisons for every position since specific
talents and responsibilities of each
16
<page>
senior executive make his position unique. In general, competitive trends of the
industry and in the Company's peer group are followed. In December of each year,
the Committee approves annual base salaries for the executive officers for the
following year.
CASH INCENTIVE COMPENSATION
Cash incentive compensation is based on both corporate goal achievement
and individual performance. When performance goals are set, the Committee
assigns a percentage of the salary of the chief executive officer as his target
annual cash incentive compensation award. The chief executive officer recommends
target percentages for each of the other senior executives which are reviewed
and approved by the Committee. These target percentages may be slightly above
those set by peer companies as identified by third party consultants and
compensation surveys. Bonuses paid will be at, above or below the target
percentage depending upon the degree to which individual and corporate goals are
met, consistent with the Committee's "at risk" compensation philosophy.
In December of each year, the Committee approves annual cash incentive
compensation awards, based on performance reviews and the achievement of
projected corporate and individual performance levels. Bonuses awarded are
payable in January of the following year. Also in December of each year, goals
and target cash incentive compensation percentages are set for the following
year.
EQUITY-BASED COMPENSATION
All senior executives are participants in the Company's Stock Incentive
Plan and will be eligible to participate in the new Incentive Compensation Plan,
subject to stockholder approval. At its discretion, the Committee reviews and
recommends for full Board approval the grant to the chief executive officer and
other senior executives of stock-based awards under the plans. The Committee
considers recommendations from the chief executive officer regarding awards for
the other senior executives to the Committee for approval. These awards are
based on past performance and the expectation that each executive officer's
future performance will positively impact stockholder value. The Committee
believes that by using equity-based compensation for its executive officers in
addition to base salary and cash incentive compensation awards, the interests of
management are best aligned with the interests of the Company's stockholders. No
awards were granted to executives in 2002 because there were no shares remaining
available for grant under the plan previously approved by stockholders.
To date, the Committee has made awards under the terms of the Stock
Incentive Plan in the form of stock options, restricted stock, or a combination
of both. In 1992, certain executive officers were granted non-qualified stock
options as replacement for a portion of compensation forfeited in that year.
Since then, all stock options granted to executive officers under the Stock
Incentive Plan have been in the form of incentive stock options, and except in
1998, have been granted at the then current market price of the Company's common
stock with a ten year life and four year vesting schedule. In 1998, the
Committee granted incentive stock options as "premium priced options" at 125% of
market value with five year cliff vesting. Vesting of these options may be
accelerated if total return exceeds certain hurdles over a certain period of
time. Restricted stock awards have generally been granted with five year cliff
vesting.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
The Committee reviews the performance of Mr. Ralph B. Mandell, the
Company's chief executive officer, by evaluating the achievement of corporate
and personal objectives set at the beginning of the year. The Committee
considered the effect of significant corporate developments and initiatives in
evaluating overall corporate performance in 2002. Factors which influenced the
Committee's evaluation of performance for 2002 included, among other
achievements, significant growth in earnings per share in
17
<page>
2002, return on average equity in excess of 15%, growth in assets, loans and
trust assets under administration, successful completion of the acquisition of
Lodestar Investment Counsel, as well as significant appreciation during the year
in the market price of the Company's common stock. For 2002, Mr. Mandell
received base salary of $310,000, a cash bonus of $40,000 paid in October 2002
in lieu of stock options, and a year-end cash bonus of $545,000 paid in
January, 2003. Based on the Committee's recommendation, the Board increased Mr.
Mandell's base salary to $390,000 for 2003.
Under the terms of a 1998 stock purchase agreement, Mr. Mandell
borrowed $949,740 from the Company to purchase Company stock. The agreement
provided that interest on the note would be forgiven over the five-year term
provided Mr. Mandell continued to be employed. As in prior years, in evaluating
the chief executive's compensation for 2002, the Committee considered the amount
of imputed income relating to forgiveness of interest, which was $54,040 for
2002. Mr. Mandell repaid the entire $949,740 to the Company on December 30,
2002, and no longer maintains this type of loan arrangement with the Company.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
Section 162(m) of the Internal Revenue Code limits the tax
deductibility of executive compensation for officers of public companies.
Section 162(m) generally disallows the ordinary business expense deduction for
compensation in excess of $1,000,000 paid to a company's chief executive officer
and each of the next four most highly compensated executive officers. However,
certain performance-based compensation is excluded from the Section 162(m)
limits if paid pursuant to plans approved by stockholders of the Company.
Due to the exceptional performance of the Company during 2002, the
chief executive officer received compensation, including the value of previously
granted restricted stock which vested during the year, in excess of $1,000,000,
and approximately $181,506 of his 2002 compensation is not deductible for tax
purposes by the Company. In March 2003 the Compensation Committee adopted
certain changes to the structure of the Company's cash incentive compensation
program which will be administered as part of the newly adopted Incentive
Compensation Plan. As a result, subject to stockholder approval of the Plan at
the annual meeting, the Committee expects that a significant portion of the
Company's executive compensation will qualify for treatment as performance-based
compensation under Section 162(m) and does not currently anticipate that the
Company will exceed the Section 162(m) limit in the future. However, it is
possible that the Committee or the Board may again determine that it is
appropriate to compensate executives above the limit in circumstances of
outstanding corporate and executive achievement.
The report is submitted by the Compensation Committee.
James M. Guyette (Chairman)
Naomi T. Borwell
William A. Castellano
Thomas F. Meagher
Michael B. Susman
The foregoing Compensation Committee Report shall not be deemed
incorporated by reference by any general statement incorporating by reference
this proxy statement into any filing under the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as amended, except to the
extent that the Company specifically incorporates this information by reference,
and shall not otherwise be deemed filed under such Acts.
18
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Guyette, Castellano, Meagher and Susman and Mrs. Borwell each
serve on the Compensation Committee of the Board of Directors of the Company.
Each of these individuals has engaged in certain transactions as clients of the
banks, in the ordinary course of the banks' business, including borrowings,
during the last year, all of which transactions are or were on substantially the
same terms (including interest rates and collateral on loans) as those
prevailing at the time for comparable transactions with unaffiliated persons. In
the opinion of management, none of these transactions involved more than the
normal risk of collectability or presented any other unfavorable features. In
addition, Mr. Ralph B. Mandell, our Chairman, President and Chief Executive
Officer, serves on the Compensation committee of The PrivateBank (St. Louis),
which is responsible for determining the compensation of the senior officers of
that bank. Mr. Richard C. Jensen, Chairman, Chief Executive Officer and a
Managing Director of The PrivateBank (St. Louis), is a director of the Company.
PERFORMANCE GRAPH
The graph below compares the cumulative total stockholder return on the
common stock of the Company for the period beginning June 30, 1999 and ending
December 31, 2002, with the cumulative total return on the Russell 2000 Index
and a peer group index, the CRSP Index for Nasdaq Bank Stocks, over the same
period, assuming the investment of $100 in the Company's common stock, the
Russell 2000 Index and the CRSP Index for Nasdaq Bank Stocks on June 30, 1999,
and the reinvestment of all dividends.
[GRAPHIC OMITTED]
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06/30/99 12/31/99 12/31/00 12/31/01 12/31/02
- ---------------------- -------- -------- -------- -------- --------
PrivateBancorp, Inc. $100.00 $ 63.81 $ 43.89 $ 95.07 $184.22
CRSP Index for
Nasdaq Bank Stocks 100.00 93.44 106.80 116.43 118.49
Russell 2000 Index 100.00 110.18 105.42 106.50 83.52
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16 of the Securities Exchange Act of 1934 requires the
Company's directors and certain executive officers and certain other beneficial
owners of the Company's common stock to periodically file notices of changes in
beneficial ownership of common stock with the Securities and Exchange Commission
and the Nasdaq National Market. To the best of the Company's knowledge, based
solely on copies of such reports received by it, the Company believes that for
2002 all required filings were timely filed by each of its directors and
executive officers, except that the Form 3 and one Form 4 report for Ms.
Kathleen Jackson were filed late.
TRANSACTIONS WITH RELATED PERSONS
Some of the Company's executive officers and directors are, and have
been during the preceding year, clients of the banks, and some of the Company's
executive officers and directors are direct or indirect owners of 10% or more of
the stock of corporations which are, or have been in the past, clients of the
banks. As such clients, they have had transactions in the ordinary course of
business of the banks, including borrowings, all of which transactions are or
were on substantially the same terms (including interest rates and collateral on
loans) as those prevailing at the time for comparable transactions with
nonaffiliated persons. In the opinion of management, none of the transactions
involved more than the normal risk of collectability or presented any other
unfavorable features. At December 31, 2002, the Company had $13.9 million in
loans outstanding to certain directors and executive officers and their business
interests of the Company and to certain executive officers of the banks.
In May 1998, Ralph B. Mandell, the Company's Chairman, President and
Chief Executive Officer, purchased 72,720 shares of common stock at $13.75 per
share from the Company. The purpose of the transaction was to enhance Mr.
Mandell's interest in the long-term performance of the Company and further align
his interests with those of the Company's stockholders. As part of the
transaction, the Company loaned Mr. Mandell approximately 95% of the purchase
price on a full recourse basis. Mr. Mandell pledged all of the shares of common
stock purchased in the transaction as collateral for the loan he received from
the Company, but remained entitled to vote, and receive dividends on, the
shares. On December 30, 2002, Mr. Mandell repaid this loan in full. Interest
accrued on the loan was forgiven so long as he remains employed by the Company.
Interest in the amount of $54,040 was forgiven during the year.
During 2002, the PrivateBank (Chicago) acquired phone equipment and
related services with a total cost of $176,244 through an information technology
company, Worknet, Inc. William Castellano, who is one of our directors, is an
affiliate of that company.
In December 2002, The PrivateBank (Chicago) acquired a controlling
interest in Lodestar Investment Counsel. William Goldstein, a nominee for Class
II Director and who is serving as an executive officer of the Company, was
president and a shareholder of Lodestar before the acquisition. Mr. Goldstein
and his family trust have a majority interest in the corporation that continues
to hold a 20% interest in Lodestar. This corporation received a cash payment of
approximately $2.1 million in connection with the transaction. In addition, Mr.
Goldstein's family trust received $596,695 as part of the cash
20
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consideration portion of the transaction. Mr. Goldstein also received 223,169
shares of common stock of the Company in consideration for his interest in
Lodestar and entered into an employment agreement to remain the chief executive
officer of Lodestar subsequent to the closing of the transaction. The employment
agreement, which has a five year term, expires on December 30, 2007. Under the
terms of the employment agreement, Mr. Goldstein is entitled to an annual base
salary of $100,000 and will be eligible to participate in Lodestar's employee
bonus pool. Mr. Goldstein also is entitled to participate in equity-based
compensation plans or programs of the Company as well as other fringe benefits
provided by the Company, The PrivateBank (Chicago) or Lodestar. The employment
agreement also provides for certain severance arrangements and obligates Mr.
Goldstein to certain non-compete provisions.
During 2002, the Company incurred professional fees for services
provided by the law firm of Spitzer, Addis, Susman & Krull in the amount of
approximately $309,378. Michael B. Susman, who is one of the Company's
directors, is a partner of that firm.
PROPOSAL 4. APPROVAL OF INCENTIVE COMPENSATION PLAN
On March 1, 2003, subject to stockholder approval, the Board of
Directors approved the PrivateBancorp, Inc. Incentive Compensation Plan, based
on recommendation of the plan by the Compensation Committee (the "Committee").
The following description of the plan sets forth the material and
summary terms of the plan. It does not purport to be complete and is qualified
in its entirety by reference to the provisions of the plan, a copy of which is
attached to this proxy statement as Appendix A.
PURPOSE
The plan is intended to provide the Company with the ability to provide
stock and cash-based incentives and equity interests in the Company to employees
and directors of the Company and its subsidiaries (i) to provide such employees
and directors a stake in the growth of the Company, and (ii) to encourage them
to continue in the service of the Company and its subsidiaries.
PARTICIPANTS
All current and former employees and directors of the Company and its
subsidiaries will be eligible to participate in the plan at the discretion of
the Committee.
SHARES AVAILABLE FOR ISSUANCE
The plan provides that the total number of shares of common stock which
may be issued pursuant to awards under the plan may not exceed 480,000 shares,
which represents approximately ____% of the Company's outstanding shares of
common stock as of the record date, plus such number of shares of common stock
that have already been authorized and which may become available for issuance
under the Company's Amended and Restated Stock Incentive Plan. As of December
31, 2002, only 12,540 shares remained available for awards under such plan. No
further grants will be made under the Amended and Restated Stock Incentive Plan.
The shares of common stock subject to awards under the plan will be
reserved for issuance out of the Company's total authorized shares. A
participant in the plan is permitted to receive multiple grants of awards. The
terms and provisions of a type of award with respect to any recipient need not
be the same with respect to any other recipient of such award.
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Of the shares authorized for issuance under the plan, up to 160,000 may
be issued with respect to awards of restricted stock and restricted stock units
and up to 160,000 may be issued pursuant to stock options under which the
exercise price was less than the fair market value (but not less than 50% of the
fair market value) of a share of common stock on the date the award was granted.
In addition, as required by Code Section 162(m), the plan includes a limit of
200,000 shares of common stock as the maximum number of shares which may be
subject to awards made to any one individual.
The source of shares of common stock issued with respect to awards may
be authorized but unissued shares or treasury shares, or a combination thereof.
In the event there is a change in the capital structure of the Company as a
result of any stock dividend or split, recapitalization, merger, consolidation
or spin-off or other similar corporate change, the number of shares of common
stock available for issuance, the number of shares of common stock available for
issuance or covered by any outstanding award and the price per share, and the
various limitations described above, will be proportionately adjusted.
To the extent shares of common stock subject to an award under this
plan or the Amended and Restated Stock Incentive Plan are not issued by reason
of forfeiture, termination, surrender, cancellation or expiration, delivery of
previously-acquired shares with respect to the exercise thereof, withholding of
shares or delivery of shares in satisfaction of tax obligations or settlement in
cash in lieu of shares, or to the extent shares of common stock are purchased by
the Company with the proceeds received upon exercise of options or cash received
or the cash value of the Company's tax deduction, with respect to options, then
such shares shall become available for issuance under this plan.
ADMINISTRATION
The Board of Directors of the Company has delegated the administration
of the plan to the Committee. The Committee will make determinations with
respect to the participation of employees and directors in the plan and, except
as otherwise required by law or the plan, the grant terms of awards, including
vesting schedules, price, length of relevant performance, restriction period,
option period, dividend rights, rights to dividend equivalents, post-retirement
and termination rights, payment alternatives, and such other terms and
conditions as the Committee deems appropriate.
The Committee may designate other persons to (1) designate officers and
employees of the Company or any of its subsidiaries to be recipients of an award
under the plan, (2) determine the amount, terms, conditions, and form of any
such awards and (3) take any other actions which the Committee is authorized to
take under the plan, other than its authority with regard to awards granted to
employees who are executive officers or directors of the Company. The Committee
also may not authorize an officer to designate himself or herself as a recipient
of any award.
The disposition of an award in the event of the retirement, disability,
death or other termination of a participant's employment shall be as determined
by the Committee as set forth in the award agreement. In the event there is a
change of control (as defined in the plan) of the Company (1) all options and
SARs outstanding will become immediately exercisable and will remain exercisable
for their entire term, (2) all restrictions imposed on restricted shares will
lapse, and (3) unless otherwise specified in a participant's award agreement,
all performance goals applicable to any awards will be attained at the maximum
payment level.
AWARDS
The following types of awards may be granted under the plan:
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<page>
Stock Options. Stock Options may be granted in the form of incentive
stock options that comply with Section 422 of the Internal Revenue Code or
nonqualified stock options. The plan permits the 480,000 shares available under
the plan to be awarded in the form of incentive stock options if the Committee
so determines. The exercise period for any stock option will be determined by
the Committee at the time of grant. For up to 160,000 shares of common stock
issued pursuant to nonqualified stock options, the exercise price may be no less
than 50% of the fair market value of a share of common stock on the date the
award was granted. The exercise price per share for all other shares of common
stock issued pursuant to stock options under the plan may not be less than 100%
of the fair market value of a share of common stock on the grant date. Each
stock option may be exercised in whole, at any time, or in part, from time to
time, after the grant becomes exercisable.
Stock Appreciation Rights. The Committee may grant SARs independently
of any stock option or in tandem with all or any part of a stock option granted
under the plan. Upon exercise, an SAR entitles a participant to receive the
excess of the fair market value of a share of common stock on the date the SAR
is exercised over the fair market value of a share of common stock on the date
the SAR is granted. Upon exercise of an SAR granted in conjunction with a stock
option, the option SAR will be surrendered.
Restricted Shares. Restricted shares are shares of common stock that
may not be sold or otherwise disposed of during a restricted period determined
by the Committee. The Committee may provide for the lapse of such restrictions
in installments. Restricted shares may be voted by the recipient. To the extent
permitted by the Committee, dividends on the restricted shares may be payable to
the recipient in cash or in additional restricted shares. A recipient of a grant
of restricted shares will generally earn unrestricted ownership on those shares
only if the individual is continuously employed by the Company or a subsidiary
during the entire restricted period.
Performance Shares. Performance shares are grants of shares of common
stock that are earned by achievement of performance goals established by the
Committee. During the applicable performance period for an award, the shares may
be voted by the recipient and the recipient may be entitled to receive dividends
on those shares, at the discretion of the Committee. If the applicable
performance criteria are met, at the end of the applicable performance period,
the shares are earned and become unrestricted. The Committee may provide that a
certain percentage (which may be greater than 100%) of the number of shares
originally awarded may be earned based upon the attainment of the performance
goals.
Restricted and Performance Share Units. Restricted and performance
share units are fixed or variable shares or dollars denominated units subject to
the conditions of vesting, and time of payment, and/or in the case of
performance share units, performance standards established determined by the
Committee, which are valued at the Committee's discretion in whole or in part by
reference to, or otherwise based on, the fair market value of the Company's
common stock. Share units may be paid in common stock, cash or a combination of
both. The Committee, in its discretion, may permit a participant to defer
receipt of any such share units beyond the expiration of any applicable
restriction or performance period. A participant who receives a stock unit may
be given rights to dividend equivalents on those share units, payable in cash,
stock, or additional share units, and subject to any other conditions the
Committee may impose.
Awards under Deferred Compensation or Similar Plans. Participants may
receive the right to receive common stock or a fixed or variable share
denominated unit granted under the plan or any deferred compensation or similar
plan established from time to time by the Company.
Cash Awards. Participants in the plan may receive an award in cash that
may be earned based on achievement of performance criteria determined by the
Committee or under the Company's bonus arrangements. As required by Code Section
162(m), the plan includes a limit of $2 million as the maximum amount which may
be earned under a cash award with respect to any year.
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Other Incentive Awards. The Committee may grant other types of awards
of common stock or awards based in whole or in part by reference to common stock
("Other Incentive Awards"). These awards include, without limitation, restricted
share units, performance share units, unrestricted stock grants, dividend or
dividend equivalent rights or awards related to the establishment or acquisition
by the Company or any subsidiary of a new or start-up business or facility. The
Committee will determine the time of granting, the size and all other conditions
of other incentive awards, including any restrictions, deferral period or
performance requirements. The recipient will have the right to receive currently
or on a deferred basis, interest or dividends, or interest or dividend
equivalents.
Except to the extent permitted by specific terms of any nonqualified
stock options, no award will be assignable or transferable except by will, the
laws of descent and distribution, or, in the Committee's discretion.
Any payments from participants in connection with awards under the
plan may be paid (1) in cash, (2) in shares of already owned common stock, (3)
through a simultaneous exercise of an award and sale of the shares acquired
through a pre-approved brokerage arrangement, (4) in any combination of cash and
shares, or (5) by such other methods as the Committee may deem appropriate.
AMENDMENTS AND TERMINATION
The Board of Directors may at any time amend, suspend or terminate the
plan, to the extent permitted by law. No termination, amendment or modification
of the plan will adversely affect in any material way any awards previously
granted under the plan without the written consent of any affected participant.
There is no set termination date for the plan, although no incentive stock
options may be granted more than 10 years after the effective date of the plan.
FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is a summary of certain federal income tax
consequences to participants who may receive grants of awards under the plan.
This discussion does not purport to be complete, and does not cover, among other
things, state and local tax treatment.
Nonqualified Stock Options. For federal income tax purposes, no income
is recognized by a participant upon the grant of a nonqualified stock option.
Upon exercise, the participant will realize ordinary income in an amount equal
to the excess of the fair market value of a share of common stock on the date of
exercise over the exercise price. A subsequent sale or exchange of such shares
will result in gain or loss measured by the difference between (a) the exercise
price, increased by any compensation reported upon the participant's exercise of
the option and (b) the amount realized on such sale or exchange. Any gain or
loss will be capital in nature if the shares were held as a capital asset and
will be long-term if such shares were held for more than one year.
The Company is entitled to a deduction for compensation paid to a
participant at the same time and in the same amount as the participant realizes
compensation upon exercise of the option.
Incentive Stock Options. No taxable income is realized by the
participant upon exercise of an incentive stock option granted under the plan,
and if no disqualifying disposition of those shares is made by such participant
within two years after the date of grant or within one year after the transfer
of those shares to the participant, then (a) upon the sale of the shares, any
amount realized in excess of the exercise price will be taxed as a long-term
capital gain and any loss sustained will be taxed as a long-term capital loss,
and (b) no deduction will be allowed to the Company for Federal income tax
purposes. Upon exercise of an incentive stock option, the participant may be
subject to alternative minimum tax on certain items of tax preference.
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If the shares of common stock acquired upon the exercise of an
incentive stock option are disposed of prior to the expiration of the
two-years-from-grant/one-year-from-transfer holding period, generally (a) the
participant will realize ordinary income in the year of disposition in an amount
equal to the excess (if any) of the fair market value of the shares at exercise
(or, if less, the amount realized upon disposition of the shares) over the
exercise price of, and (b) the Company will be entitled to deduct such amount.
Any additional gain or loss realized will be taxed as short-term or long-term
capital gain or loss, as the case may be, and may not be deducted by the
Company.
If an incentive stock option is exercised at a time when it no longer
qualifies as an incentive stock option, the option will be treated as a
nonqualified stock option.
Stock Appreciation Rights. No taxable income is recognized by a
participant upon the grant of an SAR under the plan. Upon the exercise of an
SAR, however, the participant will realize ordinary income in an amount equal to
the cash received upon exercise, plus the fair market value on the date of
exercise of any shares of common stock received upon exercise. Shares of common
stock received upon the exercise of an SAR will, upon subsequent sale, be
eligible for capital gain treatment, with the capital gain holding period
commencing on the date of exercise of the SAR.
The Company is entitled to a deduction for compensation paid to a
participant at the same time and in the same amount as the participant realizes
compensation upon exercise of the SAR.
Restricted and Performance Shares. A recipient of restricted shares or
performance shares generally will be subject to tax at ordinary income rates on
the fair market value of the common stock at the time the restricted shares or
performance shares are no longer subject to forfeiture. However, a recipient who
so elects under Section 83(b) of the Code within 30 days of the date of the
grant will have ordinary taxable income on the date of the grant equal to the
fair market value of the restricted shares or performance shares as if the
restricted shares were unrestricted or the performance shares were earned and
could be sold immediately. If the shares subject to such election are forfeited,
the recipient will not be entitled to any deduction, refund or loss for tax
purposes with respect to the forfeited shares. Upon sale of the restricted
shares or performance shares after the forfeiture period has expired, the
holding period to determine whether the recipient has long-term or short-term
capital gain or loss begins when the restriction period expires. However, if the
recipient timely elects to be taxed as of the date of the grant, the holding
period commences on the date of the grant and the tax basis will be equal to the
fair market value of the shares on the date of the grant as if the shares were
then unrestricted and could be sold immediately. The Company is entitled to a
deduction for compensation paid to a participant in the amount of ordinary
income recognized by the participant.
Share Units. A recipient of share units will generally be subject to
tax at ordinary income rates on the fair market value of any common stock issued
pursuant to such an award, and the Company will generally be entitled to a
deduction equal to the amount of the ordinary income realized by the recipient.
The fair market value of any common stock received will generally be included in
income (and a corresponding deduction will generally be available to the
Company) at the time of receipt. The capital gain or loss holding period for any
common stock distributed under an award will begin when the recipient recognizes
ordinary income in respect of that distribution.
Cash Awards. A participant will recognize ordinary income upon receipt
of cash pursuant to a cash award and the Company will generally be entitled to a
deduction equal to the amount of the ordinary income realized by the recipient.
Other Incentive Awards. The federal income tax consequences of Other
Incentive Awards will depend on how the awards are structured. Generally, the
Company will be entitled to a deduction with respect to other incentive awards
only to the extent that the recipient realizes compensation income in
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connection with such awards. It is anticipated that Other Incentive Awards will
usually result in compensation income to the recipient in some amount. However,
some forms of Other Incentive Awards may not result in any compensation income
to the recipient or any income tax deduction for the Company.
PERFORMANCE GOALS AND MAXIMUM AWARDS
Section 162(m) of the Code disallows federal income tax deductions for
certain compensation in excess of $1,000,000 per year paid to each of the
Company's Chief Executive Officer and its other four most highly compensated
executive officers (collectively, the "Covered Employees"), and the Company
deductions referred to above may be limited by Code Section 162(m). Under
Section 162(m), compensation that qualifies as "other performance-based
compensation" is not subject to the $1,000,000 limit. In addition to the annual
limitations on awards described above, another condition necessary to qualify
certain incentive awards as "other performance-based compensation" is that the
material terms of the performance goals under which the award is made must be
disclosed to, and approved by, the stockholders of the Company before the
incentive compensation is paid.
For those types of awards under the plan requiring performance criteria
to meet the definition of "other performance-based compensation" the Committee
will, from time to time, establish performance criteria with respect to an
award. These performance criteria may be measured for achievement or
satisfaction during the period the Committee permits the participant to satisfy
or achieve the performance criteria and may be in absolute terms or measured
against, or in relationship to, other companies comparably, similarly or
otherwise situated and may be based on, or adjusted for, other objective goals,
events, or occurrences established by the Committee for a performance period,
including earnings, revenue growth, growth in earnings per share, expenses,
stock price, market share, charge-offs, loan loss reserves, reductions in
nonperforming assets, return on assets, return on equity, asset growth, deposit
growth, asset quality levels, growth in the fair market value of the Company's
common stock or assets, investment, regulatory compliance, satisfactory internal
or external audits, improvements in financial ratings, achievement of balance
sheet or income statement objectives. Performance criteria may include or
exclude extraordinary charges, losses from discontinued operations, restatements
and accounting changes and other unplanned special charges such as restructuring
expenses, acquisitions, acquisition expenses, including expenses related to
goodwill and impairment of assets, stock offerings and strategic loan loss
provisions. The performance criteria related to an award must be established by
the Committee prior to the completion of 25% of the performance period or such
earlier date as may be required by Section 162(m) of the Code.
At the end of each performance period for an award, the Committee will
determine the extent to which the performance criteria established for the
performance period have been achieved and determine the pay out of the
performance award. The Committee may, in its sole discretion, reduce or
eliminate the payout of any award to the extent permitted under the plan and
applicable law.
No determination has yet been made as to the amount or terms of any
future awards under the plan if the plan is approved by the Company's
stockholders. Thus, the benefits or amounts to be received by or allocated to:
(1) the Named Executive Officers; (2) the current executive officer group; (3)
the current non-executive director group; or (4) the non-executive employee
group, are not determinable.
THE BOARD OF DIRECTORS RECOMMENDS STOCKHOLDERS VOTE "FOR" APPROVAL OF
THE INCENTIVE COMPENSATION PLAN.
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EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth information as of December 31, 2002
regarding shares of the Company's common stock to be issued upon exercise and
the weighted-average exercise price of all outstanding options, warrants and
rights granted under the Company's equity compensation plans as well as the
number of shares available for issuance under such plans. No equity compensation
plans have been adopted without the approval of the Company's stockholders.
<table>
<caption>
<s>
NUMBER OF SECURITIES
REMAINING FOR FUTURE
NUMBER OF SECURITIES ISSUANCE UNDER EQUITY
TO BE ISSUED UPON WEIGHTED-AVERAGE COMPENSATION PLANS
EXERCISE OF EXERCISE PRICE OF (EXCLUDING SECURITIES
OUTSTANDING OPTIONS, OUTSTANDING OPTIONS REFLECTED IN COLUMN
WARRANTS AND RIGHTS WARRANTS AND RIGHTS (A) AND (B))
PLAN CATEGORY (A) (B) (C)
------------- ------------------- ------------------- ---------------------
Equity compensation plans
approved by security
holders................. 818,798 $8.7315 12,540
Equity compensation plans
not approved by
security holders........ -- -- --
------- ------- ------
Total................ 818,798 $8.7315 12,540
</table>
INDEPENDENT PUBLIC ACCOUNTANTS
The Company's independent public accountants for the fiscal year ended
December 31, 2002 were Ernst & Young LLP. The Company's Audit Committee has
selected Ernst & Young as the Company's independent public accountants for the
fiscal year ended December 31, 2003. Under its charter, the Audit Committee is
solely responsible for reviewing the qualifications of the Company's independent
public accountants, and selecting the independent public accountants for the
current fiscal year. A copy of the Audit Committee charter as currently in
effect is attached to this proxy statement as Appendix B.
Management has invited representatives of Ernst & Young to be present
at the meeting, and expects that they will attend. If present, these
representatives will have the opportunity to make a statement if they desire to
do so, and will be available to respond to appropriate questions from
stockholders.
CHANGE IN ACCOUNTANTS
On May 23, 2002, the Audit Committee of the Board of Directors of the
Company approved a change in the Company's auditors. The Board of Directors
ratified the Audit Committee's engagement of Ernst & Young to serve as the
Company's independent public accountants and replacement of Arthur Andersen LLP
as the Company's independent public accountants, effective immediately. Andersen
had been the Company's independent public accountants since 1991.
Andersen's reports on the consolidated financial statements of the
Company and its subsidiaries for the two most recent fiscal years ended December
31, 2001 did not contain any adverse opinion or
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disclaimer of opinion, nor were they qualified or modified as to uncertainty,
audit scope or accounting principles.
During the Company's two fiscal years ended December 31, 2001 and the
subsequent interim period through May 23, 2002, there were no disagreements
between the Company and Andersen on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to Andersen's satisfaction, would have caused
them to make reference to the subject matter of the disagreement in connection
with their reports on the Company's consolidated financial statements for such
years; and there were no reportable events as described in Item 304(a)(1)(v) of
Regulation S-K.
The Company requested that Andersen furnish to a letter addressed to
the SEC stating its agreement with the statements set forth above. A copy of
such letter, dated May 24, 2002, was filed as Exhibit 16 to the Company's
Current Report on Form 8-K dated May 24, 2002.
During the Company's two fiscal years ended December 31, 2001 and the
subsequent interim period through May 23, 2002, the Company did not consult with
Ernst & Young with respect to the application of accounting principles to a
specified transaction, either completed or proposed, or the type of audit
opinion that might be rendered on the Company's consolidated financial
statements, or any other matters or reportable events as set forth in Items
304(a)(2)(i) and (ii) of Regulation S-K.
AUDIT FEES
Ernst & Young has billed the Company $132,500, in the aggregate, for
professional services rendered by them for the audit of the Company's annual
financial statements for the fiscal year ended December 31, 2002, and the
reviews of the interim financial statements included in the Company's Quarterly
Reports on Form 10-Q, filed with the SEC for the second and third quarters of
the fiscal year ended December 31, 2002. Andersen performed the review of the
first quarter 2002 interim financial statements included in the Company's
quarterly report on Form 10-Q for the quarter ended March 31, 2002, and was paid
$64,840 for the review services that were performed together with the completion
of the 2001 audit work performed in 2002.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
Neither Ernst & Young nor Andersen performed any professional services
for the Company of the nature described in Regulation S-X Rule 2-01(c)(4)(ii)
during the fiscal year ended December 31, 2002.
ALL OTHER FEES
Neither Ernst & Young nor Andersen performed services other than those
described above under "Audit Fees" during the fiscal year ended December 31,
2002.
AUDIT COMMITTEE REPORT
The Audit Committee of the Company's Board of Directors is currently
comprised of seven outside directors and operates under a written charter
adopted by the Committee. The Board appoints the Audit Committee and its
chairman, with the Committee to consist of no fewer than three directors. The
Committee assists the Board, through review and recommendation, in its oversight
responsibility related to the quality and integrity of the Company's financial
information and reporting functions, the adequacy
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and effectiveness of the Company's system of internal accounting and financial
controls, and the independent audit process.
The responsibility for the quality and integrity of the Company's
financial statements and the completeness and accuracy of its internal controls
and financial reporting process rests with the Company's management. The
Company's independent public accountants for 2002, Ernst & Young, are
responsible for performing an audit and expressing an opinion as to whether the
Company's financial statements are fairly presented, in all material respects,
in conformity with generally accepted accounting principles.
The Audit Committee reviewed and discussed with management and Ernst &
Young the audited financial statements of the Company for the year ended
December 31, 2002. The Audit Committee also reviewed and discussed with Ernst &
Young the matters required to be discussed by Statement on Auditing Standards
No. 61, as amended ("Communication with Audit Committees"), as currently in
effect.
Ernst & Young also provided to the Committee the written disclosures
and the letter required by Independence Standards Board Standard No. 1
("Independence Discussions with Audit Committees"), as currently in effect. The
disclosures described the relationships and fee arrangements between the firm
and the Company. Consistent with Independence Standards Board Standard No. 1 and
the SEC's "Revision of the Commission's Auditor Independence Requirements,"
which became effective February 5, 2001, the Audit Committee considered at a
meeting held on February 24, 2003, whether these relationships and arrangements
are compatible with maintaining Ernst & Young's independence, and has discussed
with representatives of Ernst & Young that firm's independence from the Company.
Based on the above-mentioned reviews and discussions with management
and Ernst & Young, the Audit Committee, exercising its business judgment,
recommended to the Board of Directors that the Company's audited financial
statements be included in its Annual Report on Form 10-K for the year ended
December 31, 2002, for filing with the SEC.
This report is submitted on behalf of the members of the Audit
Committee:
Robert F. Coleman (Chair)
Donald L. Beal
John E. Gorman
James M. Guyette
William R. Langley
William J. Podl
Caren L. Reed
The foregoing Audit Committee Report shall not be deemed incorporated
by reference by any general statement incorporating by reference this proxy
statement into any filing under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, except to the extent that the
Company specifically incorporates this information by reference, and shall not
otherwise be deemed filed under such Acts.
STOCKHOLDER PROPOSALS
To be considered for inclusion in the Company's proxy and form of proxy
relating to the 2004 Annual Meeting of Stockholders, a stockholder's proposal
must be received prior to November __, 2003, by the Secretary of the Company at
the Company's executive offices at Ten North Dearborn, Chicago,
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Illinois 60602. Any such proposal will be subject to Rule 14a-8 under the
Securities Exchange Act of 1934.
HOUSEHOLDING
The SEC has adopted amendments to the proxy rules permitting companies
and intermediaries to satisfy delivery requirements for proxy statements with
respect to two or more stockholders sharing the same address by delivering a
single proxy statement to those stockholders. This method of delivery, often
referred to as "householding," should reduce the amount of duplicate information
that stockholders receive and lower printing and mailing costs for companies. We
are not householding materials for our stockholders in connection with the
Annual Meeting, however, we have been informed that certain intermediaries will
household proxy materials.
If a broker or other nominee holds your shares, this means that:
o Only one annual report and proxy statement will be delivered to
multiple stockholders sharing an address unless you notify ADP at
(888) 603-5847 or Householding Department, 51 Mercedes Way,
Edgewood, NY 11717, to inform them of your request. Be sure to
include your name, the name of your brokerage firm and your
account number.
o You can contact us by calling (312) 683-7100 or by writing to
PrivateBancorp, Inc., Ten North Dearborn, Chicago, IL 60602,
Attention: Corporate Secretary, to request a separate copy of the
annual report and proxy statement for the Annual Meeting and for
future meetings or you can contact your broker to make the same
request.
o You can request delivery of a single copy of annual reports or
proxy statements from your broker if you share the same address as
another stockholder.
NOTICE OF BUSINESS TO BE CONDUCTED AT AN
ANNUAL MEETING OF STOCKHOLDERS
Pursuant to the Company's By-laws, the only business that may be
conducted at an annual meeting of stockholders is business brought by or at the
direction of the Board of Directors and proper matters submitted in advance by a
stockholder. The By-laws of the Company set forth the advance notice procedures
for a stockholder to properly bring business before an annual meeting. To be
timely, a stockholder must give the required information to the Secretary of the
Company not less than 120 days prior to the annual meeting date. If the 2004
annual meeting is held on April 24, 2004, the date contemplated under the
existing By-laws, the deadline for advance notice by a stockholder would be
December 26, 2003. In the event the Company publicly announces or discloses that
the date of the 2004 Annual Meeting of Stockholders is to be held on any other
date, notice by the stockholder will be timely if received not later than 120
days prior to the meeting date; provided however, that in the event that less
than 130 days notice or prior public disclosure of the meeting date is given or
made, notice by the stockholder will be timely if received by the close of
business on the tenth (10th) day following the date on which the Company's
notice to stockholders of the annual meeting date was mailed or such public
disclosure was made.
The advance notice by a stockholder must include the name and address
of the stockholder proposing the business, a brief description of the proposed
business, the number of shares of stock of the Corporation which the stockholder
beneficially owns and any material interest of the stockholder in such business.
In the case of nomination to the Board of Directors, certain information
regarding the nominee
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must be provided. These requirements apply to any matter that a stockholder
wishes to raise at an annual meeting, including any matters raised outside of
the procedures of Rule 14a-8 under the Securities Exchange Act. Nothing in this
paragraph shall be deemed to require the Company to include in its proxy
statement or the proxy relating to an annual meeting any stockholder proposal
which does not meet all of the requirements for inclusion established by the
Securities and Exchange Commission in effect at the time such proposal is
received.
OTHER MATTERS WHICH MAY PROPERLY COME BEFORE THE MEETING
The Board of Directors knows of no other matter which will be presented
for consideration at the meeting other than as stated in the Notice of Annual
Meeting of Stockholders. If, however, other matters are properly brought before
the meeting, it is the intention of the persons named in the accompanying proxy
to vote the shares represented thereby on such matters in accordance with their
best judgment.
Whether or not you intend to be present at the meeting, you are urged
to return your proxy card promptly. If you are a record holder and are present
at the meeting and wish to vote your shares in person, your proxy may be revoked
by voting at the meeting. However, if you are a stockholder whose shares are not
registered in your own name, you will need additional documentation from your
record holder to vote personally at the meeting.
BY ORDER OF THE BOARD OF DIRECTORS
----------------------------------
Lisa M. O'Neill
Assistant Secretary
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APPENDIX A
PRIVATEBANCORP, INC. INCENTIVE COMPENSATION PLAN
1. Purpose; Effect on Predecessor Plans. The purpose of the
PrivateBancorp, Inc. Incentive Compensation Plan is to benefit
the Corporation and its Subsidiaries, including the Bank, by
enabling the Corporation to offer certain present and future
officers, employees, and directors of the Corporation and its
Subsidiaries stock and cash-based incentives and other equity
interests in the Corporation, thereby providing them a stake
in the growth of the Corporation and encouraging them to
continue in the service of the Corporation and its
Subsidiaries.
2. Definitions.
(a) "Award" includes, without limitation, Stock Options
(including Incentive Stock Options), Stock
Appreciation Rights, Performance Share or Unit
awards, Dividend or Equivalent Rights, Stock Awards,
Restricted Share or Unit awards, Cash Awards or other
awards ("Other Incentive Awards") that are valued in
whole or in part by reference to, or are otherwise
based on, the Corporation's Common Stock or other
factors, all on a stand alone, combination or tandem
basis, as described in or granted under this Plan.
(b) "Award Agreement" means a writing provided by the
Corporation to each Participant setting forth the
terms and conditions of each Award made under this
Plan.
(c) "Board" means the Board of Directors of the
Corporation.
(d) "Cash Award" has the meaning specified in
Section 6(i).
(e) "Change of Control" shall be deemed to have occurred
upon the happening of any of the following events:
(i) Any "person" (as such term is used in
Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended), other
than (A) a trustee or other fiduciary
holding securities under an employee benefit
plan of the Corporation or any of its
subsidiaries, or (B) a corporation owned
directly or indirectly by the stockholders
of the Corporation in substantially the same
proportions as their ownership of stock of
the Corporation, is or becomes the
"beneficial owner" (as defined in Rule 13d-3
under said Act), directly or indirectly, of
securities of the Corporation representing
20% or more of the total voting power of the
then outstanding shares of capital stock of
the Corporation entitled to vote generally
in the election of directors (the "Voting
Stock"), provided, however, that the
following shall not constitute a change in
control: (1) such person becomes a
beneficial owner of 20% or more of the
Voting Stock as the result of an acquisition
of such Voting Stock directly from the
Corporation, or (2) such person becomes a
beneficial owner of 20% or more of the
Voting Stock as a result of the decrease in
the number of outstanding shares of Voting
Stock caused by the repurchase of shares by
the Corporation; provided, further, that in
the event a person described in clause (1)
or (2) shall thereafter increase (other than
in
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circumstances described in clause (1) or
(2)) beneficial ownership of stock
representing more than 1% of the Voting
Stock, such person shall be deemed to become
a beneficial owner of 20% or more of the
Voting Stock for purposes of this paragraph
(A), provided such person continues to
beneficially own 20% or more of the Voting
Stock after such subsequent increase in
beneficial ownership, or
(ii) Individuals who, as of the Effective Date
hereof, constitute the Board (the "Incumbent
Board") cease for any reason to constitute
at least a majority of the Board, provided
that any individual becoming a director,
whose election or nomination for election by
the Corporation's stockholders was approved
by a vote of at least two-thirds (2/3) of
the directors then comprising the Incumbent
Board shall be considered as through such
individual were a member of the Incumbent
Board, but excluding for this purpose, any
individual whose initial assumption of
office is in connection with an actual or
threatened election contest relating to the
election of the directors of the Corporation
(as such terms are used in Rule 14a-11
promulgated under the Exchange Act); or
(iii) Consummation of a reorganization, merger or
consolidation or the sale or other
disposition of all or substantially all of
the assets of the Corporation (a "Business
Combination"), in each case, unless (1) all
or substantially all of the individuals and
entities who were the beneficial owners,
respectively, of the Voting Stock
immediately prior to such Business
Combination beneficially own, directly or
indirectly, more than 50% of the total
voting power represented by the voting
securities entitled to vote generally in the
election of directors of the corporation
resulting from the Business Combination
(including, without limitation, a
corporation which as a result of the
Business Combination owns the Corporation or
all or substantially all of the
Corporation's assets either directly or
through one or more subsidiaries) in
substantially the same proportions as their
ownership immediately prior to the Business
Combination of the Voting Stock of the
Corporation, and (2) at least a majority of
the members of the board of directors of the
corporation resulting from the Business
Combination were members of the Incumbent
Board at the time of the execution of the
initial agreement, or action of the
Incumbent Board, providing for such Business
Combination; or
(iv) Approval by the stockholders of the
Corporation of a plan of complete
liquidation or dissolution of the
Corporation.
(f) "Code" means the Internal Revenue Code of 1986, as
amended from time to time.
(g) "Committee" means the Compensation Committee of the
Board or such other committee of the Board as may be
designated by the Board from time to time to
administer this Plan.
(h) "Common Stock" means the Common Stock, no par value,
of the Corporation.
(i) "Corporation" means PrivateBancorp, Inc., a Delaware
corporation.
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(j) "Director" means a director of the Corporation or a
Subsidiary.
(k) "Dividend or Equivalent Rights" has the meaning
specified in Section 6(f).
(l) "Effective Date" has the meaning specified in Section
15.
(m) "Employee" means an employee of the Corporation or a
Subsidiary.
(n) "Exchange Act" means the Securities Exchange Act of
1934, as amended.
(o) "Fair Market Value" means the average of the highest
and the lowest quoted selling prices on the NASDAQ
National Market on the relevant valuation date or, if
there were no sales on the valuation date, on the
next preceding date on which such selling prices were
recorded; provided, however, that the Committee may
modify the definition of Fair Market Value with
respect to any particular Award.
(p) "Incentive Stock Option" has the meaning specified in
Section 6(b).
(q) "Other Incentive Award" has the meaning specified in
Section 2(a).
(r) "Participant" means an Employee or Director who has
been granted an Award under the Plan, including the
Predecessor Plan.
(s) "Performance Share" has the meaning specified in
Section 6(d).
(t) "Performance Unit" has the meaning specified in
Section 6(e).
(u) "Plan" means this PrivateBancorp, Inc. Incentive
Compensation Plan, which includes the Predecessor
Plan.
(v) "Plan Year" means a twelve-month period beginning
with January 1 of each year.
(w) "Predecessor Plan" means the Corporation's Amended
and Restated Stock Incentive Plan.
(x) "Previously-Acquired Shares" means shares of Common
Stock acquired by the Participant or any beneficiary
of Participant other than pursuant to an Award under
this Plan or the Predecessor Plan, or if so acquired,
such shares of Common Shares have been held for a
period of not less than six months or such shorter
period as the Committee may permit.
(y) "Restriction Period" means a period of time beginning
as of the date upon which an Award subject to
restrictions or forfeiture provisions is made
pursuant to this Plan and ending as of the date upon
which the Common Stock subject to such Award is no
longer restricted or subject to forfeiture
provisions.
(z) "Restricted Share" has the meaning specified in
Section 6(d).
(aa) "Restricted Unit" has the meaning specified in
Section 6(e).
(bb) "Stock Appreciation Right" has the meaning specified
in Section 6(c).
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(cc) "Stock Award" has the meaning specified in
Section 6(g).
(dd) "Stock Option" has the meaning specified in
Section 6(a).
(ee) "Subsidiary" means any corporation or other entity,
whether domestic or foreign, in which the Corporation
has or obtains, directly or indirectly, a proprietary
interest of at least 50% by reason of stock ownership
or otherwise.
3. Eligibility. Any Employee or Director, or former Employee or
Director, selected by the Committee is eligible to receive an
Award.
4. Plan Administration.
(a) Except as otherwise determined by the Board, the Plan
shall be administered by the Committee. The Committee
shall make determinations with respect to the
participation of Employees and Directors in the Plan
and, except as otherwise required by law or this
Plan, the terms of Awards, including vesting
schedules, price, length of relevant performance,
Restriction Period, option period, dividend rights,
post-retirement and termination rights, payment
alternatives such as cash, stock, contingent awards
or other means of payment consistent with the
purposes of this Plan, and such other terms and
conditions as the Committee deems appropriate.
(b) The Committee, by majority action thereof (whether
taken during a meeting or by written consent), shall
have authority to interpret and construe the
provisions of the Plan and the Award Agreements, to
decide all questions of fact arising in its
application and to make all other determinations
pursuant to any Plan provision or Award Agreement
which shall be final and binding on all persons. To
the extent deemed necessary or advisable for purposes
of Section 16 of the Exchange Act or Section 162(m)
of the Code, a member or members of the Committee may
refuse himself or themselves from any action, in
which case action taken by the majority of the
remaining members shall constitute action by the
Committee. No member of the Committee shall be liable
for any action or determination made in good faith,
and the members of the Committee shall be entitled to
indemnification and reimbursement in the manner
provided in the Corporation's Certificate of
Incorporation, By-Laws, by agreement or otherwise as
may be amended from time to time.
(c) To the extent permitted under the corporate law of
the Corporation's jurisdiction of incorporation, the
Committee may, by a resolution adopted by the
Committee, authorize one or more officers of the
Corporation to do one or more of the following: (i)
designate officers and employees of the Corporation
or any of its Subsidiaries to be recipients of an
Award under this Plan, (ii) determine the amount,
terms, conditions, and form of any such Awards and
(iii) take such other actions which the Committee is
authorized to take under this Plan; provided,
however, that the resolution so authorizing such
officer or officers shall specify the total number of
shares of Common Stock or cash payable under such
Awards which such officer or officers may so award;
provided, further, however, that the Committee may
not delegate to any person the authority to grant
Awards to, or take other action with respect to,
Participants who at the time of such Awards or action
are subject to Section 16 of the Exchange Act or are
"covered employees" as defined in Section 162(m) of
the Code. Further, the Committee may not
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authorize an officer to designate himself or herself
as a recipient of any such Awards. To the extent
deemed necessary or advisable for purposes of Section
16 of the Exchange Act or otherwise, the Board may
act as the Committee hereunder.
5. Stock Subject to the Provisions of the Plan.
(a) The stock subject to the provisions of this Plan may
be shares of authorized but unissued Common Stock,
treasury shares held by the Corporation or any
Subsidiary, or shares acquired by the Corporation
through open market purchases or otherwise. Subject
to adjustment in accordance with the provisions of
Section 11, the total number of shares of Common
Stock which may be issued under the Plan or with
respect to which Awards may be granted shall not
exceed 480,000 shares, plus the number of shares
heretofore authorized and available (or which become
available) for issuance under the Predecessor Plan
which are not issued after the Effective Date. To the
extent that shares of Common Stock subject to an
outstanding Award or an award under the Predecessor
Plan are not issued by reason of the forfeiture,
termination, surrender, cancellation or expiration
while unexercised of such award, by reason of the
tendering or withholding of shares by either actual
delivery or by attestation) to pay all or a portion
of the purchase price or to satisfy all or a portion
of the tax withholding obligations relating to an
award, by reason of being settled in cash in lieu of
Common Stock or settled in a manner such that some or
all of the shares covered by the Award are not issued
to a Participant, or being exchanged for a grant
under this Plan that does not involve Common Stock,
and to the extent shares are purchased by the
Corporation with the proceeds received upon the
exercise of Stock Options granted under this Plan or
the Predecessor Plan (which proceeds include cash
payments received by the Corporation as well as the
value of the Corporation's tax deduction on
non-qualified Stock Options and early dispositions of
Incentive Stock Options), then such shares shall
immediately again be available for issuance under
this Plan.
(b) The Committee may from time to time adopt and observe
such procedures concerning the counting of shares
against the Plan maximum as it may deem appropriate.
(c) Shares of Common Stock issued in connection with
awards that are assumed, converted or substituted
pursuant to a merger, acquisition or similar
transaction entered into by the Corporation or any of
its Subsidiaries shall not reduce the number of
shares of Common Stock available under this Plan.
(d) To the extent provided by the Committee, any Award
may be settled in cash rather than Stock.
(e) Subject to Section 11, the following limitations
shall apply to Awards under the Plan:
(i) The maximum number of shares of Common Stock
that may be issued under this Plan as Stock
Options intended to be Incentive Stock
Options shall be 480,000 shares.
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(ii) The maximum number of shares of Common Stock
that may be covered by Awards granted under
this Plan to any single Participant shall be
200,000 shares during any one Plan Year. If
an Award is granted in tandem with a Stock
Appreciation Right, such that the exercise
of the Award right or Stock Appreciation
Right with respect to a share of Common
Stock cancels the tandem Stock Appreciation
Right or Award right, respectively, with
respect to such share, the tandem Award
right and Stock Appreciation Right with
respect to each share of Common Stock shall
be counted as covering but one share of
Common Stock for purposes of applying the
limitations of this paragraph (ii).
(iii) The maximum number of shares of Common Stock
that may be issued under this Plan as
Restricted Shares or Restricted Share Units
shall be 160,000.
(iv) The exercise price for up to 160,000 shares
of Common Stock issued pursuant to
non-qualified Stock Options granted under
this Plan may be below the Fair Market Value
of a share of Common Stock on the grant
date, but in no event shall the exercise
price be less than 50% of the Fair Market
Value of a share of Common Stock on the date
such Award was granted.
(v) The maximum dollar amount for a Cash Award
that may be earned under the Plan with
respect to any Plan Year shall be $2
million. Any amount earned with respect to a
Cash Award with respect to which performance
is measured over a period greater than one
Plan Year shall be deemed to be earned
ratably over the number of full and partial
Plan Years in the period.
6. Awards under this Plan. As the Board or Committee may
determine, the following types of Awards may be granted under
this Plan on a stand alone, combination or tandem basis:
(a) Stock Option. A right to buy a specified number of
shares of Common Stock at a fixed exercise price
during a specified time, all as the Committee may
determine; provided that except as contemplated by
and subject to the limitation set forth in, Section
5(e)(iv) above, the exercise price of any Stock
Option shall not be less than 100% of the Fair Market
Value of the Common Stock on the date of grant of
such Award.
(b) Incentive Stock Option. An Award in the form of a
Stock Option which shall comply with the requirements
of Section 422 of the Code or any successor Section
of the Code as it may be amended from time to time.
(c) Stock Appreciation Right. A right to receive the
excess of the Fair Market Value of a share of Common
Stock on the date the Stock Appreciation Right is
exercised over the Fair Market Value of a share of
Common Stock on the date the Stock Appreciation Right
was granted.
(d) Restricted and Performance Shares. A transfer of
Common Stock to a Participant, subject to such
restrictions on transfer or other incidents of
ownership, and/or in the case of Performance Shares
subject to performance
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standards established pursuant to Section 7 below,
for such periods of time as the Committee may
determine.
(e) Restricted and Performance Share Unit. A fixed or
variable share or dollar denominated unit subject to
such conditions of vesting, and time of payment,
and/or in the case of Performance Share Units,
performance standards established pursuant to Section
7 below, as the Committee may determine, which are
valued at the Committee's discretion in whole or in
part by reference to, or otherwise based on, the Fair
Market Value of Common Stock and which may be paid in
Common Stock, cash or a combination of both. The
Committee, in its discretion, may permit a
Participant to defer receipt of such Restricted Share
or Performance Share Units beyond the expiration of
any applicable Restriction Period attainment of
performance standards.
(f) Dividend or Equivalent Right. A right to receive
dividends or their equivalent in value in Common
Stock, cash or in a combination of both with respect
to any new or previously existing Award.
(g) Stock Award. An unrestricted transfer of ownership of
Common Stock.
(h) Awards under Deferred Compensation or Similar Plans.
The right to receive Common Stock or a fixed or
variable share denominated unit granted under this
Plan or any deferred compensation or similar plan
established from time to time by the Corporation.
(i) Cash Award. An award denominated in cash that may be
earned pursuant to the achievement of Performance
Criteria set forth in Section 7 during a performance
cycle period equal to one Plan Year or such other
period of time as determined by the Committee or that
may be earned under the Corporation's annual bonus,
multi-year bonus or other incentive or bonus plans.
(j) Other Incentive Awards. Other Incentive Awards which
are related to or serve a similar function to those
Awards set forth in this Section 6, including, but
not limited to, Other Incentive Awards related to the
establishment or acquisition by the Corporation or
any Subsidiary of a new or start-up business or
facility.
7. Performance-Based Awards. The Committee may from time to time,
establish Performance Criteria with respect to an Award. The
Performance Criteria or standards for an Award shall be
determined by the Committee in writing, shall be measured for
achievement or satisfaction during the period in which the
Committee permitted such Participant to satisfy or achieve
such Performance Criteria and may be absolute in their terms
or measured against or in relationship to other companies
comparably, similarly or otherwise situated and may be based
on or adjusted for any other objective goals, events, or
occurrences established by the Committee, provided that such
criteria or standards relate to one or more of the following:
earnings, revenue growth, growth in earnings per share,
revenues, expenses, stock price, market share, charge-offs,
loan loss reserves, reductions in non-performing assets,
return on assets, return on equity, asset growth, deposit
growth, loan growth, asset quality levels, growth in the Fair
Market Value of the Common Stock or assets, investment,
regulatory compliance, satisfactory internal or external
audits, improvement of financial ratings, achievement of
balance sheet or income statement objectives. Performance
Criteria may include or exclude extraordinary charges, losses
from discontinued operations, restatements and accounting
changes and
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other unplanned special charges such as restructuring
expenses, acquisitions, acquisition expenses, including
expenses related to goodwill and other intangible assets,
stock offerings and strategic loan loss provisions. Such
Performance Criteria may be particular to a line of business,
Subsidiary or other unit or may be based on the performance of
the Corporation generally.
8. Award Agreements. Each Award under the Plan shall be evidenced
by an Award Agreement. Delivery of an Award Agreement to each
Participant shall constitute an agreement, subject to Section
9 hereof, between the Corporation and the Participant as to
the terms and conditions of the Award.
9. Other Terms and Conditions.
(a) No Assignment; Limited Transferability of Stock
Options. Except as provided below, no Award granted
under the Plan may be sold, transferred, pledged,
assigned, or otherwise alienated or hypothecated,
otherwise then by will or by the laws of descent and
distribution. Notwithstanding the foregoing, the
Committee may, in its discretion, authorize all or a
portion of the Stock Options (other than Incentive
Stock Options) granted to a Participant to be on
terms which permit transfer by such Participant to:
(i) the spouse, children or grandchildren of the
Participant ("Immediate Family Members");
(ii) a trust or trusts for the exclusive benefit
of such Immediate Family Members, or;
(iii) a partnership in which such Immediate Family
Members are the only partners, provided
that:
(A) there may be no consideration for
any such transfer;
(B) the Award Agreement pursuant to
which such Stock Options are
granted expressly provides for
transferability in a manner
consistent with this Section 9(a);
and
(C) subsequent transfers of transferred
Stock Options shall be prohibited
except those in accordance with
this Section 9(a).
Following transfer, any such options shall continue to be subject to
the same terms and conditions as were applicable immediately prior to transfer,
provided that for purposes of this Section 9(a) hereof the term "Participant"
shall be deemed to refer to the transferee. The provisions of the Stock Option
relating to the period of exercisability and expiration of the Stock Option
shall continue to be applied with respect to the original Participant, and the
Stock Options shall be exercisable or received by the transferee only to the
extent, and for the periods, set forth in said Stock Option.
(b) Beneficiary Designation. Each Participant under the
Plan may name, from time to time, any beneficiary or
beneficiaries (who may be named contingently or
successively) to whom any benefit under the Plan is
to be paid in case of his death before he receives
any or all of such benefit. Each designation will
revoke all prior designations by the same
Participant, shall be in a form prescribed by the
Committee, and will be effective only when filed by
the Participant in writing
A-8
with the Committee during his lifetime. In the
absence of any such designation, benefits remaining
unpaid at the Participant's death shall be paid to
his estate.
(c) Termination of Employment. The disposition of the
grant of each Award in the event of the retirement,
disability, death or other termination of a
Participant's employment shall be as determined by
the Committee and set forth in the Award Agreement.
Unless expressly provided otherwise by the Committee,
references to the "Plan" set forth in any agreement
representing an award granted under the Predecessor
Plan prior to the Effective Date shall refer to the
terms of such Predecessor Plan as in effect
immediately prior to the Effective Date.
(d) Rights as a Shareholder. A Participant shall have no
rights as a stockholder with respect to shares
covered by an Award until the date the Participant or
his nominee, guardian or legal representative is the
holder of record; provided, however, that
Participants holding Restricted Shares may exercise
full voting rights with respect to those shares
during the Restriction Period.
(e) Dividends and Dividend Equivalents. Rights to
dividends and Dividend Equivalents may be extended to
and made a part of any Award, subject to such terms,
conditions and restrictions as the Committee may
establish. The Committee may also establish rules and
procedures for the crediting of Dividend Equivalents
for Awards.
(f) Payments by Participants. The Committee may determine
that Awards for which a payment is due from a
Participant may be payable: (i) in cash by personal
check, bank draft or money order payable to the order
of the Corporation, by money transfers or direct
account debits; (ii) through the delivery or deemed
delivery based on attestation to the ownership of
previously acquired shares of Common Stock with a
Fair Market Value equal to the total payment due from
the Participant; (iii) through a simultaneous
exercise of the Participant's Award and sale of the
shares thereby acquired pursuant to a brokerage
arrangement approved in advance by the Committee to
assure its conformity with the terms and conditions
of the Plan; (iv) by a combination of the methods
described in (i), (ii) and (iii) above; or (v) by
such other methods as the Committee may deem
appropriate.
(g) Withholding. Except as otherwise provided by the
Committee in the Award Agreement or otherwise (i) the
deduction of withholding and any other taxes required
by law will be made from all amounts paid in cash,
and (ii) in the case of the exercise of Stock Options
or payments of Awards in shares of Common Stock, the
Participant shall be required to pay the amount of
any taxes required to be withheld in cash prior to
receipt of such stock, or alternatively, to elect to
have a number of shares the Fair Market Value of
which equals the amount required be withheld deducted
from the shares to be received upon such exercise or
payment or deliver such number of Previously-Acquired
Shares of Common Stock.
(h) Deferral. The receipt of payment of cash or delivery
of shares of Common Stock that would otherwise be due
to a Participant upon the exercise of any Stock
Option or under any other Award may be deferred
pursuant to an applicable deferral plan established
by the Corporation or a Subsidiary. The Committee
A-9
shall establish rules and procedures relating to any
such deferrals and the payment of any tax withholding
with respect thereto.
(i) Other Restrictions. The Committee shall impose such
other restrictions on any Awards granted pursuant to
the Plan as it may deem advisable, including, without
limitation, restrictions under applicable Federal or
state securities laws, post-vesting or exercise
holding periods, or requirements to comply with
restrictive covenants, and may legend the
certificates issued in connection with an Award to
give appropriate notice of any such restrictions.
10. Amendments, Modification and Termination. The Board may at any
time and from time to time, alter, amend, suspend or terminate
the Plan in whole or in part, subject to any requirement of
shareholder approval imposed by applicable law, rule or
regulation. No termination, amendment, or modification of the
Plan shall adversely affect in any material way any Award
previously granted under the Plan, without the written consent
of the Participant holding such Award.
11. Adjustment. The aggregate number of shares of Common Stock as
to which Awards may be granted to Participants, the number of
shares of Common Stock set forth in the limitations in Section
5(e), the number of shares of Common Stock covered by each
outstanding Award, and the price per share of Common Stock in
each such Award, shall all be proportionately adjusted for any
increase or decrease in the number of issued shares of Common
Stock resulting from a subdivision or consolidation of shares
or other capital adjustment, or the payment of a stock
dividend or other increase or decrease in such shares,
effected without receipt of consideration by the Corporation,
or other change in corporate or capital structure; provided,
however, that any fractional shares resulting from any such
adjustment shall be eliminated. The Committee may also make
the foregoing changes and any other changes, including changes
in the classes of securities available, to the extent it is
deemed necessary or desirable to preserve the intended
benefits of the Plan for the Corporation and the Participants
in the event of any other reorganization, recapitalization,
merger, consolidation, spinoff, extraordinary dividend or
other distribution or similar transaction.
12. Rights as Employees, Directors or Consultants. No person shall
have any claim or right to be granted an Award, and the grant
of an Award shall not be construed as giving a Participant the
right to be retained in the employ of or as a Director of or
as a consultant to the Corporation or a Subsidiary. Further,
the Corporation and each Subsidiary expressly reserve the
right at any time to dismiss a Participant free from any
liability, or any claim under the Plan, except as provided
herein or in any Award Agreement issued hereunder.
13. Change of Control. Notwithstanding anything contained in this
Plan or any Award Agreement to the contrary, in the event of a
Change of Control, the following shall occur with respect to
any and all Awards outstanding as of such Change of Control:
(a) Any and all Stock Options and Stock Appreciation
Rights granted hereunder shall become immediately
exercisable, and shall remain exercisable throughout
their entire term;
(b) Any restrictions imposed on Restricted Shares shall
lapse; and
A-10
(c) Unless otherwise specified in a Participant's Award
Agreement at time of grant, the maximum payout
opportunities attainable under all outstanding Awards
of Performance Units, Performance Shares and Other
Incentive Awards shall be deemed to have been fully
earned for the entire performance period(s) as of the
effective date of the Change of Control. The vesting
of all such Award shall be accelerated as of the
effective date of the Change of Control, and in full
settlement of such Awards, there shall be paid out in
cash, or in the sole discretion of the Committee,
shares of Common Stock with a Fair Market Value equal
to the amount of such cash, to Participants within
thirty (30) days following the effective date of the
Change of Control the maximum of payout opportunities
associated with such outstanding Awards.
14. Governing Law. To the extent that federal laws do not
otherwise control, the Plan and all Award Agreements hereunder
shall be construed in accordance with and governed by the law
of the State of Delaware, provided, however, that in the event
the Corporation's state of incorporation shall be changed,
then the law of the new state of incorporation shall govern.
15. Effective Date and Term. The effective date of this Plan is
March 1, 2003 (the "Effective Date"), the date the Plan was
adopted by the Board, subject to ratification by the
shareholders of the Corporation. The Plan shall remain in
effect until terminated by the Board, provided, however, that
no Incentive Stock Option shall be granted under this Plan on
or after the tenth anniversary of the Effective Date.
A-11
APPENDIX B
PRIVATEBANCORP, INC. AUDIT COMMITTEE CHARTER
PURPOSE:
The Audit Committee is appointed by the Board to assist the Board in monitoring
(1) the integrity of the financial statements of the Company, (2) the
independent auditor's qualifications and independence, (3) the performance of
the Company's internal audit function and independent auditors, and (4) the
compliance by the Company with legal and regulatory requirements.
The Audit Committee shall annually prepare the report to shareholders relating
to the performance of the Audit Committee's duties required to be included in
the Company's annual proxy statement by the rules of the Securities and Exchange
Commission (the "Commission").
COMMITTEE MEMBERSHIP:
The Audit Committee shall consist of no fewer than three members. The members of
the Audit Committee shall meet the independence and experience requirements of
Nasdaq, Section 10A(m)(3) of the Securities Exchange Act of 1934 (the "Exchange
Act") and the rules and regulations of the Commission. To the extent required by
Nasdaq, at least one member of the Audit Committee shall be a "financial expert"
as defined by the Commission. Audit Committee members shall not simultaneously
serve on the Audit Committees of more than two other public companies. In
accordance with the rules and regulations of the Commission and Nasdaq, members
of the Audit Committee (including their immediate family members, as defined in
such rules) may not (i) accept any consulting, advisory or other compensatory
fees from the Company, except in his or her capacity as a member of the Board or
any other committee of the Board or (ii) be an affiliate of the Company.
The members of the Audit Committee shall be appointed by the Board on the
recommendation of the Nominating Committee. Audit Committee members may be
replaced by the Board.
MEETINGS:
The Audit Committee shall meet as often as it determines, but not less
frequently than quarterly. The Audit Committee shall meet periodically with
management, the internal auditors and the independent auditor in separate
executive sessions. The Audit Committee may request any officer or employee of
the Company or the Company's outside counsel or independent auditor to attend a
meeting of the Committee or to meet with any members of, or consultants to, the
Committee.
COMMITTEE AUTHORITY AND RESPONSIBILITY:
The Audit Committee shall have the sole authority to appoint or replace the
independent auditor and shall be directly responsible for the compensation and
oversight of the work of the independent auditor (including resolution of
disagreements between management and the independent auditor regarding financial
reporting). The independent auditor shall report directly to the Audit
Committee.
The Audit Committee shall pre-approve the fees and terms of all engagements for
audit, review or attest services and any permitted non-audit services to be
performed for the Company by its independent auditor, subject to the de minimis
exceptions for non-audit services described in Section 10A(i)(B) of the Exchange
Act which are approved by the Audit Committee prior to the completion of the
audit. The engagement must either be approved in advance by the Audit Committee
or be entered into pursuant to
B-1
pre-approval policies and procedures established by the Audit Committee, which
policies and procedures must be detailed as to the particular service.
The Audit Committee may form a subcommittee consisting of one or more members
when appropriate, with authority to grant pre-approvals of audit and permitted
non-audit services, and the decisions of such subcommittee shall be presented to
the full Audit Committee at its next scheduled meeting.
The Audit Committee shall have the authority, to the extent it deems necessary
or appropriate, to engage and determine funding for independent legal,
accounting or other advisors without first seeking Board approval. The Company
shall provide for appropriate funding, as determined by the Audit Committee, for
payment of compensation to the independent auditor for the purpose of rendering
or issuing an audit report to any advisors employed by the Audit Committee.
The Audit Committee shall make regular reports to the Board. The Audit Committee
shall review and reassess the adequacy of this Charter annually in light of any
changes in regulatory requirements or authoritative guidance and recommend any
proposed changes to the Board for approval. The Audit Committee shall annually
assess the qualifications of each member of the Audit Committee and the
effectiveness of the Audit Committee and present a report thereon to the Board.
The Audit Committee, to the extent it deems necessary or appropriate, shall:
FINANCIAL STATEMENT AND DISCLOSURE MATTERS
- ------------------------------------------
1. Review and discuss with management and the independent auditor
(i) the annual audited financial statements, including
disclosures to be made in the Company's Form 10-K, and
recommend to the Board whether the audited financial
statements should be included in the Company's Form 10-K; and
(ii) the quarterly unaudited financial statements, including
disclosures to be made in the Company's Form 10-Q, prior to
its filing, including the results of the independent auditor's
review of the quarterly unaudited financial statements.
2. The reviews discussed above should include discussions with
management, the independent internal auditor and the
independent auditor regarding:
(a) Significant and unusual transactions.
(b) Significant financial reporting issues and judgments
made in connection with the preparation of the
Company's financial statements, including any
significant changes in the Company's selection or
application of accounting principles.
(c) Any major issues as to the adequacy of the Company's
internal controls.
(d) Any special steps adopted in light of material
control deficiencies.
3. Review and discuss, at least quarterly, reports from the
independent auditors as required by the Commission on:
(a) All critical accounting policies and practices to be
used.
(b) All alternative treatments of financial information
within generally accepted accounting principles that
have been discussed with management, ramifications of
the use of such alternative disclosures and
treatments, and the treatment preferred by the
independent auditor.
B-2
(c) Other material written communications between the
independent auditor and management, such as any
management letter or schedule of unadjusted
differences.
4. Discuss with management the Company's earnings press releases
prior to their issuance, including the use of "pro forma" or
"adjusted" non-GAAP information, as well as financial
information and earnings guidance provided to analysts and
rating agencies. Such discussion may generally discuss the
types of information to be disclosed and the types of
presentations to be made.
5. Discuss with management and the independent auditor the effect
of regulatory and accounting initiatives as well as
off-balance sheet structures on the Company's financial
statements.
6. Discuss with management the Company's major financial risk
exposures and the steps management has taken to monitor and
control such exposures, including the Company's risk
assessment and risk management policies.
7. Discuss with the independent auditor the matters required to
be communicated (i) in accordance with Statement on Auditing
Standards No. 61 relating to the conduct of the audit,
including any difficulties encountered in the course of audit
work, any restrictions on the scope of activities or access to
requested information, and any significant disagreements with
management and (ii) under Section 10A of the Exchange Act,
pertaining to information, if any, detected during the course
of the audit indicating that an illegal act has or may have
occurred.
8. Review disclosures made to the Audit Committee by the
Company's CEO and CFO during their certification process for
the Form 10-K and Form 10-Q about any significant deficiencies
in the design or operation of disclosure controls and
procedures and internal controls or material weaknesses
therein and any fraud involving management or other employees
who have a significant role in the Company's internal
controls.
OVERSIGHT OF THE COMPANY'S RELATIONSHIP WITH THE INDEPENDENT AUDITOR
- --------------------------------------------------------------------
9. Review and evaluate the performance of the independent auditor
and the lead partner of the independent auditor team.
10. Obtain and review a report from the independent auditor at
least annually regarding (i) the independent auditor's
internal quality-control procedures, (ii) any material issues
raised by the most recent internal quality-control review, or
peer review, of the independent auditor, or by any inquiry or
investigation by governmental or professional authorities
within the preceding five years respecting one or more
independent audits carried out by the independent auditor,
(iii) any steps taken to deal with any such issues, and (iv)
all relationships between the independent auditor and the
Company. After reviewing this report, evaluate the
qualifications, performance and independence of the
independent auditor, including considering whether the
auditor's quality controls are adequate and the provision of
permitted non-audit services is compatible with maintaining
the auditor's independence, and taking into account the
opinions of management and internal auditors. The Audit
Committee shall present its conclusions with respect to the
independent auditor to the Board.
B-3
11. Periodically review and discuss with the independent auditor
and members of the independent auditor team all significant
relationships they have or have had with the Company that
could impair auditor independence and the scope of any
non-audit services being performed for the Company by the
independent auditor.
12. Ensure the rotation of the lead and concurring audit partners
every five years and any audit partners (as defined by the
Commission) every seven years as required by law. Consider
whether, in order to assure continuing auditor independence,
it is appropriate to adopt a policy of rotating the
independent auditing firm on a regular basis.
13. Establish policies for the Company's hiring of employees or
former employees of the independent auditor who participated
in any capacity in the audit of the Company in compliance with
all relevant rules and regulations.
14. Discuss with the national office of the independent auditor
issues on which they were consulted by the Company's audit
team and matters of audit quality and consistency.
15. Meet with the independent auditor prior to the audit to
discuss the planning and staffing of the audit.
OVERSIGHT OF THE COMPANY'S INTERNAL AUDIT FUNCTION
- --------------------------------------------------
16. Review the appointment, performance, compensation and
replacement of the senior internal auditing executive, or
independent internal auditor.
17. Review the significant reports to management prepared by the
internal auditing department and management's responses.
18. Review at least quarterly the adequacy of the Company's
internal controls.
19. Discuss any difficulties encountered in the course of the
internal audit, including any restrictions on the scope of
work or access to required information.
20. Discuss with the independent auditor and management the
internal audit department responsibilities, budget and
staffing and any recommended changes in the planned scope of
the internal audit.
COMPLIANCE OVERSIGHT RESPONSIBILITIES
- -------------------------------------
21. Obtain reports from management, the Company's independent
internal auditor and/or senior internal auditing executives
and the independent auditor, as deemed appropriate, that the
Company and its subsidiary or affiliated entities are in
conformity with applicable legal requirements and the
Company's code of conduct. Review reports and disclosures of
insider and affiliated party transactions. Advise the Board
with respect to the Company's policies and procedures
regarding compliance with applicable laws and regulations and
with the Company's code of conduct.
22. Establish procedures for (i) the receipt, retention and
treatment of complaints received by the Company regarding
accounting, internal accounting controls or auditing matters,
and (ii) the confidential and anonymous submission by
employees of concerns regarding accounting, internal
accounting controls or auditing matters. All such procedures
will at all times comply with all provisions of law,
regulations or Company policy that prohibit
B-4
discipline of or discrimination against employees who report
what they reasonably believe to be violations of any law, rule
or regulation applicable to the Company.
23. Discuss with management and the independent auditor any
correspondence with regulators or governmental agencies and
any published reports which raise material issues regarding
the Company's financial statements or accounting policies.
24. Discuss with legal counsel implications of legal matters that
may have a material impact on the financial statements or the
Company's compliance policies.
25. Review procedures adopted by management to assure that any
related party transactions and potential conflicts of interest
of any director or executive officer of the Company will be
brought to the attention of the Audit Committee in advance.
Review and approve or disapprove, in advance, any such related
party transactions or potential conflicts of interest.
LIMITATION OF AUDIT COMMITTEE'S ROLE:
While the Audit Committee has the responsibilities and powers set forth in this
Charter, it is not the duty of the Audit Committee to plan or conduct audits or
to determine that the Company's financial statements and disclosures are
complete and accurate and are in accordance with generally accepted accounting
principles and applicable rules and regulations. These are the responsibilities
of management and the independent auditor.
B-5
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[LOGO OF PRIVATEBANCORP INC.]
Ten North Dearborn Street
Chicago, Illinois 60602
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Please complete, date, sign and mail the
detached proxy card in the enclosed postage-prepaid
envelope.
DETACH PROXY CARD HERE
- --------------------------------------------------------------------------------
This proxy when properly executed will be voted in the manner directed
herein by the undersigned stockholder(s). If no direction is made, this proxy
will be voted "FOR ALL" of the five (5) Class II nominees for director, "FOR"
approval of the amendment to the Amended and Restated Certificate of
Incorporation, "FOR" approval of the amendment to the Amended and Restated
By-laws and "FOR" approval of the PrivateBancorp, Inc. Incentive Compensation
Plan.
If any other business is presented at the Annual Meeting, including
whether or not to adjourn the meeting, this proxy will be voted, to the extent
legally permissible, by those named in this proxy in their best judgment. At the
present time, the Board of Directors knows of no other business to be presented
at the Annual Meeting.
Signature
----------------------------------
Signature
----------------------------------
Date
--------------------------------, 2003
Please sign exactly as name (or names) appears above. When shares are
held by joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by authorized officer. If a
partnership, please sign in partnership name by authorized person.
[LOGO OF PRIVATEBANCORP INC.]
If you personally plan to attend the Meeting of Stockholders please check the
box below and list the names of attendees on the reverse side.
Return this stub in the enclosed envelope with your completed proxy card.
I/We do plan to attend the 2003 meeting. |_|
- --------------------------------------------------------------------------------
<page>
- --------------------------------------------------------------------------------
REVOCABLE PROXY -- PRIVATEBANCORP, INC.
ANNUAL MEETING OF STOCKHOLDERS, APRIL 24, 2003
- --------------------------------------------------------------------------------
The undersigned stockholder(s) of PrivateBancorp, Inc., a Delaware corporation
(the "Company"), does (do) hereby constitute and appoint Gary S. Collins and/or
Hugh H. McClean, and each of them, the true and lawful attorney of the
undersigned with full power of substitution, to appear and act as the proxy or
proxies of the undersigned at the Annual Meeting of Stockholders of the Company
to be held at The Union League Club, 65 West Jackson Blvd., Chicago, Illinois on
April 24, 2003, at 3:00 p.m. and at any adjournment thereof, and to vote all the
shares of PrivateBancorp, Inc. standing in the name of the undersigned, or which
the undersigned may be entitled to vote, as fully as the undersigned might or
could do if personally present, as set forth below. PLEASE MARK VOTE IN THE
APPROPRIATE BOX IN THE FOLLOWING MANNER USING DARK INK ONLY.
1. The election of five (5) Class II directors of the Company's
Board of Directors to serve until the annual meeting of
stockholders in 2006.
Donald L. Beal; William A. Goldstein; John E. Gorman;
Richard C. Jensen; Michael B. Susman
FOR WITHOLD FOR ALL
ALL FOR ALL EXCEPT
|_| |_| |_|
INSTRUCTION: To withhold your vote for any individual nominee,
insert that nominee's name on the line provided below.
--------------------------------------------------------------
2. The amendment to the Amended and Restated Certificate of
Incorporation.
|_| FOR |_| AGAINST |_| ABSTAIN
3. The amendment to the Amended and Restated By-laws.
|_| FOR |_| AGAINST |_| ABSTAIN
4. The approval of the PrivateBancorp, Inc. Incentive
Compensation Plan.
|_| FOR |_| AGAINST |_| ABSTAIN
The Board of Directors of the Company has determined that the matters to be
considered at the Annual Meeting are in the best interests of the Company and
its stockholders. For the reasons set forth in the Proxy Statement, the Board
unanimously recommends that you vote FOR each of its nominees for director and
FOR each of the other matters to be considered.
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE COMPANY THE EXPENSE OF
FURTHER REQUEST FOR PROXIES TO ENSURE A QUORUM AT THE MEETING. A SELF-ADDRESSED,
POSTAGE-PREPAID ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE.
PLEASE LIST
NAMES OF PERSONS ATTENDING
- --------------------------------------------------------------------------------
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