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:
[_] Preliminary Proxy Statement [_] Soliciting Material Under Rule
[_] Confidential, For Use of the 14a-12
Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
PRIVATEBANCORP, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(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.
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to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
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previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
1) Amount previously paid:
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[PRIVATE BANCORP, INC. LOGO]
March 11, 2005
Dear Stockholders:
You are cordially invited to attend the 2005 Annual Meeting of
Stockholders of PrivateBancorp, Inc., which will be held at The Standard Club,
320 South Plymouth Court, Chicago, Illinois 60604, on Thursday, April 28, 2005,
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), The
PrivateBank Mortgage Company and Lodestar Investment Counsel, I thank you for
your continued support.
Sincerely,
/s/ Ralph B. Mandell
Ralph B. Mandell
Chairman of the Board,
President and Chief Executive Officer
PRIVATEBANCORP, INC.
TEN NORTH DEARBORN STREET
CHICAGO, ILLINOIS 60602
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 28, 2005
NOTICE IS HEREBY GIVEN that the 2005 Annual Meeting of Stockholders of
PrivateBancorp, Inc. will be held at The Standard Club, 320 South Plymouth
Court, Chicago, Illinois 60604, on Thursday, April 28, 2005, 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 I directors to hold office for a
three-year term;
2. To consider a proposal to amend the PrivateBancorp, Inc.
Incentive Compensation Plan to increase the number of shares
authorized for issuance under the Plan; and
3. 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 7, 2005 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, 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,
/s/ Dennis L. Klaeser
Dennis L. Klaeser
Secretary
March 11, 2005
PLEASE COMPLETE, SIGN AND RETURN THE ENCLOSED FORM OF PROXY
IN THE ENVELOPE PROVIDED.
PRIVATEBANCORP, INC.
TEN NORTH DEARBORN STREET
CHICAGO, ILLINOIS 60602
PROXY STATEMENT
FOR THE 2005 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD THURSDAY, APRIL 28, 2005
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 2005 Annual Meeting of Stockholders of
the Company and at any adjournment of such meeting. The meeting is scheduled to
be held on April 28, 2005, at 3:00 p.m. local time, at The Standard Club, 320
South Plymouth Court, Chicago, Illinois 60604. The Company anticipates first
mailing this proxy statement, together with its 2004 Annual Report on Form 10-K,
including audited consolidated financial statements for the fiscal year ended
December 31, 2004, and a proxy card to record holders of common stock of the
Company on or about March 11, 2005.
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 Investorcom, Inc. to assist in the
solicitation of proxies for a fee of $4,000 plus 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.
VOTING SECURITIES AND STOCKHOLDERS ENTITLED TO VOTE
The Board of Directors has fixed the close of business on March 7,
2005, 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
20,351,202 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 constitute 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 Incentive
Compensation Plan 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. Approval of the amendment requires the
affirmative vote of a majority of the shares of common stock of the Company
present in person or represented by proxy and entitled to vote at the meeting.
Accordingly, proxies marked "ABSTAIN" as to this proposal will have the effect
of a vote cast "AGAINST" the amendment and broker non-votes will not be taken
into account as entitled to vote and therefore have no effect with respect to
approval of the amendment.
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.
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 currently consists of 17 members,
divided into three classes, who are elected to hold office for staggered
three-year terms as provided in the Company's Amended and Restated By-laws.
There are six persons currently serving as Class I Directors whose term will
expire at the 2005 Annual Meeting. The term of the five persons currently
serving as Class II Directors expires at the annual stockholder meeting to be
held in 2006. The term of the six Class III Directors expires at the annual
stockholder meeting to be held in 2007. Of the 17 current members of the Board,
11 directors have been determined by the Board to be "independent" within the
meaning of the NASDAQ rules.
On April 22, 2004, upon the recommendation of the Nominating and
Corporate Governance Committee, John B. Williams was appointed to the Board as a
Class II director filling the vacancy created
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by the resignation of John E. Gorman that occurred on April 16, 2004. On July
22, 2004, upon the recommendation of the Nominating and Corporate Governance
Committee, the size of the Board was increased to 17 persons and Patrick F. Daly
was appointed to the Board as a Class I director to fill the vacancy created by
the increase in the size of the Board.
One director currently serving as a Class I Director, William R.
Langley, announced in February 2005, his plans to retire from the Board
effective on April 28, 2005, the date of the 2005 Annual Meeting, and therefore
will not stand for re-election. Upon the recommendation of the Nominating and
Corporate Governance Committee, Mr. Langley will be named director emeritus. The
Board does not currently plan to fill the vacancy left by Mr. Langley's
retirement; accordingly, the size of the Board will be reduced to 16 from 17.
The five persons named below, all of whom are currently serving as
directors and, other than Mr. Mandell, are "independent", have been nominated by
the Board upon the recommendation of the Nominating and Corporate Governance
Committee for election as Class I Directors to serve for a term to end at the
annual meeting of stockholders in the year 2008, or until their successors are
elected and qualified. 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 be voted for a greater
number of persons than the number of nominees for director named. 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 director
nominees and the persons continuing to serve on the Board of Directors of the
Company are set forth below.
NOMINEES FOR CLASS I DIRECTORS TO SERVE UNTIL 2008
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RALPH B. MANDELL (64), a director since 1989, is a co-founder of
PrivateBancorp and The PrivateBank (Chicago). 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 of the Company 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. Mr. Mandell also served as president of Oak
Park Trust & Savings Bank, a subsidiary of First United, from 1985 until 1988.
Prior thereto, he had served as executive vice president of Oak Park Trust &
Savings Bank since 1979.
WILLIAM A. CASTELLANO (63), has been a director since 1991. From 1996
to present he has been Chairman and founder of Worknet, Inc. located in
Naperville, Illinois. Worknet provides computer network hosting, engineering and
support services to businesses. From 1995 to 2001 he was the founder and
Chairman of Workspace marketing office furniture to companies in the Chicago
area. Also he was the founder and CEO of Chrysler Systems Leasing from 1977 to
1991.
PATRICK F. DALY (56) has been a director since July 2004. He is the
founder and chief executive officer of The Daly Group LLC, a Chicago-based group
of companies focused on real estate development, brokerage and construction
management services.
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CHERYL MAYBERRY MCKISSACK (49), a director since December 2003, is the
founder, president and chief executive officer of NIA Enterprises, LLC, a
Chicago-based database, systems integration and marketing services firm. Prior
to founding NIA Enterprises in 2000, she served as worldwide senior vice
president and general manager of Open Port Technology from 1997 to 2000. Ms.
McKissack currently serves on the board of directors of Deluxe Corporation
(NYSE: DLX), a company that designs, manufactures and distributes printed
checks. She is also the former chair and a current board member of the
Information Technology Resource Center, a non-profit organization providing
technology planning, training and support to other non-profit organizations, and
a board member of LINK Unlimited, a non-profit organization that provides
academic, social and career opportunities for inner-city youth located in
Chicago.
EDWARD W. RABIN, JR. (57), a director since December 2003, is president
of Hyatt Hotels Corporation. Between 1989 and 2003, Mr. Rabin served as
executive vice president for Hyatt Hotels Corporation, and added the title of
chief operating officer on January 1, 2000. Prior to his appointment in 1985 as
senior vice president- operations for Hyatt, in which capacity he was
responsible for the management of Hyatt's commercial hotels in the U.S., Mr.
Rabin held various Hyatt Hotels Corporation vice president positions. Mr. Rabin
is a director of SMG Corporation, one of the largest owners and operators of
stadiums, arenas and convention centers.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE ELECTION OF
EACH OF THESE NOMINEES FOR CLASS I DIRECTORS.
CLASS II DIRECTORS SERVING UNTIL 2006
- -------------------------------------
DONALD L. BEAL (58), 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, Inc.
WILLIAM A. GOLDSTEIN (65), is the chief executive officer of Lodestar
Investment Counsel, LLC, an investment advisory firm acquired by the Company in
2002, and has over 40 years of experience in the investment industry. Mr.
Goldstein was appointed to the Board of Directors of The PrivateBank (Chicago)
in January 2003 and to the Board of Directors of PrivateBancorp in April 2003.
Mr. Goldstein is also 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.
RICHARD C. JENSEN (59), 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 (66), has been a director since 1990. He has been a
partner in the law firm of Spitzer, Addis & Susman or its predecessors, located
in Chicago, Illinois, since 1974. Since 1987, Mr. Susman has served as president
and director of Henry R. Ferris & Company, Genealogical Researchers.
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JOHN B. WILLIAMS (53), has been a director since April 2004, and serves
as managing director and chief executive officer of The PrivateBank in
Wisconsin. Mr. Williams was president of U.S. Bank Wisconsin from 2000 through
2003. For the previous 30 years, Mr. Williams held various positions with U.S.
Bank and its predecessors Firstar and First Wisconsin. Mr. Williams also serves
on the board of directors of United Way of Greater Milwaukee, Boys and Girls
Clubs of Greater Milwaukee and YMCA of Metropolitan Milwaukee, Medical College
of Wisconsin, Southeastern Wisconsin Professional Baseball Park District, United
Performing Arts Foundation and Wisconsin Tax Payers Alliance.
CLASS III DIRECTORS SERVING UNTIL 2007
- --------------------------------------
ROBERT F. COLEMAN (60), 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 (59), 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, the
parent company of United Air Lines, Inc., from 1985 to 1995 when he retired
after more than 25 years of employment with that company. He is currently a
director of Priceline.com, an Internet-based transactional service offering
travel and personal finance products and services (NASDAQ: PCLN), Rolls-Royce
plc (London) and Pembroke Capital (Dublin), a financial services and asset
management company serving the aviation industry, and was formerly a director of
First United Financial Services and United Airlines Employees Credit Union.
PHILIP M. KAYMAN (63), 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. He concentrates his practice on real estate law.
THOMAS F. MEAGHER (74), has been a director since 1996. Mr. Meagher has
been the chairman and chief executive officer 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 Estate Committee of Trans World Airlines, Inc. and the
Director of Festival Airline. He serves as Chairman and CEO of Professional Golf
Cars of Florida and on the Board of the Edward Lowe Foundation and The American
REIT.
WILLIAM J. PODL (60), 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., located in
Batavia, Illinois, in 1976, and is currently chairman and chief executive
officer of that company. Mr. Podl also serves as president of Martec Research,
Ltd., an affiliate of Doran Scales, Inc.
WILLIAM R. RYBAK (54), has been a director since December 2003. Mr.
Rybak retired from VanKampen Investments, Inc. in 2000, where he served as
executive vice president and chief financial officer since 1986. Mr. Rybak was
previously a partner with the accounting firm of KPMG LLP (formerly Peat,
Marwick, Mitchell & Co.) since 1982, and is a certified public accountant. Mr.
Rybak is currently a member of the board of directors of Howe Barnes
Investments, Inc., an investment services firm located in Chicago, and the
Calamos Mutual Funds. Mr. Rybak previously served as a director of Alliance
Bancorp, Inc. and its predecessor, Hinsdale Financial Corp., from 1986 until
2001.
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DIRECTOR INDEPENDENCE
Based upon the recommendations of the Nominating and Corporate
Governance Committee, the Board of Directors have determined that Messrs. Beal,
Coleman, Daly, Guyette, Kayman, Meagher, Podl, Rabin, Rybak and Ms. McKissack
are "independent" directors, in accordance with the NASDAQ listing standards.
DIRECTOR NOMINATION PROCEDURES
The Board of Directors has delegated responsibility to the Nominating
and Corporate Governance Committee to identify and select director nominees who
are in a position to exercise independent judgment, provide effective oversight
of management and serve the best interests of stockholders. The Nominating and
Corporate Governance Committee, comprised entirely of independent directors,
recommends to the full Board for approval the proposed slate of director
nominees for election at the annual meeting of stockholders.
In selecting director nominees, the Nominating and Corporate Governance
Committee will consider, among other factors, the existing composition of the
Board and the committee's evaluation of the mix of Board members appropriate for
the perceived needs of the Company. The Nominating and Corporate Governance
Committee seeks a range of experience, knowledge and judgment and a diversity of
perspectives on the Board to enhance the Board effectiveness. The Nominating and
Corporate Governance Committee also believes continuity in leadership and board
tenure maximizes the Board's ability to exercise meaningful board oversight.
Because qualified incumbent directors are generally uniquely positioned to
provide stockholders the benefit of continuity of leadership and seasoned
judgment gained through experience as a director of the Company, the Nominating
and Corporate Governance Committee will generally consider as potential
candidates those incumbent directors interested in standing for re-election who
the committee believes have satisfied director performance expectations,
including regular attendance at, preparation for and meaningful participation in
Board and committee meetings.
Under its policies, the Nominating and Corporate Governance Committee
also considers the following in selecting the proposed nominee slate:
o at all times, at least a majority of directors must be
"independent" in the opinion of the Board as determined in
accordance with NASDAQ standards;
o at all times at least three members of the Board must satisfy
the heightened standards of independence for Audit Committee
members; and
o at all times the Board should have at least one member who
satisfies the criteria to be designated by the Board as an
"audit committee financial expert."
Policies approved by the Board recognize the following characteristics
and skills as minimum qualifications for any potential director candidate:
o highest personal and professional ethics and integrity;
commitment to the Company's values;
o ability and willingness to devote sufficient time and
attention to fulfilling Board duties and responsibilities;
o relevant business, professional or managerial skills and
experience; mature wisdom;
o communication, leadership and team building skills;
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o comprehension of the Company's business plans and strategies;
financial sophistication;
o ability to assist in the formulation of business strategies
and to monitor and guide expectations;
o ability and willingness to exercise independent judgment and
express tough opinions;
o collegial personality; nonconfrontational and constructive,
but able to challenge, ask questions and assess responses;
o good health and mental alertness; and
o alignment of personal interests with long-term interests of
stockholders.
STOCKHOLDER DIRECTOR NOMINEE RECOMMENDATIONS. It is generally the
policy of the Nominating and Corporate Governance Committee to consider
stockholder recommendations of proposed director nominees if such
recommendations are serious and timely received. To be timely, recommendations
must be received in writing at the principal executive offices of the Company,
addressed to the Nominating and Corporate Governance Committee, at least 120
days prior to the anniversary date of mailing of the Company's proxy statement
for the prior year's annual meeting. In addition, any stockholder director
nominee recommendation must include the following information:
o the proposed nominee's name and qualifications and the reason
for such recommendation;
o the name and record address of the stockholder(s) proposing
such nominee;
o the number of shares of stock of the Company which are
beneficially owned by such stockholder(s); and
o a description of any financial or other relationship between
the stockholder(s) and such nominee or between the nominee and
the Company or any of its subsidiaries.
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 and
Corporate Governance Committee; (3) the Audit Committee; (4) the Executive and
Planning Committee; and (5) the Information Technology Committee. Each of the
Compensation Committee, Nominating and Corporate Governance Committee and Audit
Committee are comprised entirely of "independent" directors in accordance with
the NASDAQ rules.
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 and other awards under the Company's Incentive Compensation Plan to
management; reviewing and recommending compensation programs including stock
option grants, 401(k) contributions and annual bonuses; reviewing and
recommending director compensation; advising the Chief Executive Officer on
miscellaneous compensation issues; and advising management regarding management
succession planning issues. The Compensation Committee also advises and assists
management in formulating policies regarding compensation and submits its
Compensation Committee Report on Executive Compensation included elsewhere in
this proxy statement. The current members of
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the Compensation Committee are Messrs. Guyette (Chairman), Daly, Meagher, Rabin
and Ms. McKissack.
NOMINATING AND CORPORATE GOVERNANCE COMMITTEE. The Nominating and
Corporate Governance Committee is responsible for proposing to the Board a slate
of nominees for election as directors by stockholders at each annual meeting.
The Nominating and Corporate Governance Committee is also responsible for taking
a leadership role in shaping the Company's corporate governance practices. In
carrying out its duties, the Nominating and Corporate Governance 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; consider the effectiveness of corporate
governance practices and policies followed by the Company and the Board; and
conduct, at least annually, a performance assessment of the Board.
The Board of Directors has adopted a charter for the Nominating and
Corporate Governance Committee, which is posted under the Investor Relations
portion of the Company's website at www.pvtb.com. The current members of the
Nominating and Corporate Governance Committee are Messrs. Guyette (Chairman),
Daly, Meagher, Rabin and Ms. McKissack.
AUDIT COMMITTEE. The Audit Committee is responsible for supervising the
Company's accounting, reporting and financial control practices. Generally, the
Audit Committee reviews 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. In
addition to being "independent" directors within the meaning of the NASDAQ
listing standards, as currently in effect, all members of the Audit Committee
satisfy the heightened independence standards under the SEC rules, as currently
in effect. The Board of Directors has determined that Mr. Rybak is an "audit
committee financial expert" as that term is defined in SEC rules. The current
members of the Audit Committee are Messrs. Coleman (Chairman), Beal, Guyette,
Langley, Podl and Rybak. A copy of the current charter of the Audit Committee is
attached to this proxy statement as Appendix B.
EXECUTIVE AND PLANNING COMMITTEE. The Executive and Planning Committee
is responsible for studying strategic issues prior to submission to the entire
Board of Directors for approval. The Executive and Planning Committee currently
consists of Messrs. Mandell (Chairman), Castellano, Coleman, 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 of outside directors who are not officers of the Company. The current
members of the Information Technology Committee are Messrs. Podl (Chairman),
Castellano, Coleman, Kayman, Langley, Susman and Ms. McKissack.
BOARD MEETINGS
During 2004, the Board of Directors met 14 times. In addition, the
Compensation Committee met eight times, the Nominating and Corporate Governance
Committee met six times, the Audit Committee
8
met 19 times and the Information Technology Committee met four times. The
Executive and Planning Committee did not hold any meetings in 2004. 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 2004.
The Board of Directors met in "executive session" in June and December
2004. The Board of Directors will meet in regularly scheduled "executive
sessions" at least twice annually, at its June or July meeting and again at its
December meeting. The Board's policy is that the chairman of the Nominating and
Corporate Governance Committee, or in his absence the chairman of the Audit
Committee, presides at executive sessions of the Board.
BOARD OF DIRECTORS COMPENSATION
During 2004, the director compensation payable to non-employee members
of the Company's Board of Directors was comprised of a cash retainer of $10,000
and options to purchase 3,000 shares of the Company's common stock at a price of
$26.89 per share granted under the Company's Incentive Compensation Plan.
Options are granted each year in amounts determined at the discretion of the
Board. The options become fully vested at the end of the year of grant, subject
to a full year of service. Non-employee members of the Company's Board of
Directors are eligible to participate in the Company's Deferred Compensation
Plan, which has been implemented as part of the Incentive Compensation Plan.
This program allows the directors to defer receipt of amounts payable to them
and to elect to receive deferred payment in the form of cash or stock.
Non-employee Board members also receive fees of $300 for each Board
meeting attended, and $200 for each Board committee meeting attended. Each
committee Chairman receives an additional $3,000 retainer, except the Audit
Committee Chairman, who receives $6,000.
Each of the Directors of the Company is also a director of The
PrivateBank (Chicago). Non-employee directors do not receive any additional
compensation for serving on the bank's board of directors other than fees paid
for attendance at the bank's board meetings and board committee meetings. The
amount of these fees is the same as the fees paid for attendance at the
Company's Board and Board committee meetings. Total fees payable to the
Company's non-employee directors for service in 2004 were $325,200, which
includes fees paid for attendance at board and board committee meetings of The
PrivateBank (Chicago).
STOCKHOLDER COMMUNICATIONS WITH DIRECTORS
Generally, stockholders who have questions or concerns regarding the
Company should contact the Company's Investor Relations department at (312)
683-7100 or visit the Investor Relations page on the Company's website at
www.pvtb.com. However, any stockholder who wishes to communicate directly with
the Board of Directors, or one or more individual directors, may direct
correspondence in writing to the Board, any committee of the Board or any named
directors, c/o the Secretary of the Company at PrivateBancorp, Inc., Ten North
Dearborn, Chicago, Illinois 60602. The Company's policy is to forward written
communications received from stockholders to the appropriate directors.
Policies adopted by the Board of Directors encourage directors to
attend the Company's annual meeting of stockholders each year. All of the 16
directors then serving attended the Company's 2004 annual meeting.
9
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS,
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the beneficial ownership of the
Company's common stock as of March 7, 2005, 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.
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**.................... 984,544(2) 39,000(3) 32,625 1,056,169 5.17%
Donald L. Beal........................ 102,092(4) -- 3,000 105,092 *
William A. Castellano................. 50,161(5) -- 6,000 56,161 *
Robert F. Coleman..................... 113,881(6) -- 52,440 166,321 *
Patrick F. Daly....................... 28,950 3,000 31,950 *
William A. Goldstein.................. 446,337 -- 6,000 452,337 2.22%
James M. Guyette...................... 78,760 -- 30,480 109,240 *
Richard C. Jensen**................... 84,169(7) 21,600(3) 27,000 132,769 *
Philip M. Kayman...................... 80,200 -- 45,960 126,160 *
William R. Langley.................... 463,184 -- 3,000 466,184 2.28%
Cheryl Mayberry McKissack............. 4,000 -- 3,000 7,000 *
Thomas F. Meagher..................... 83,560 -- 15,000 98,560 *
William J. Podl....................... 114,668 -- 6,000 120,668 *
Edward W. Rabin, Jr................... 19,200 -- 3,000 22,200 *
William R. Rybak...................... 7,630 -- 3,000 10,630 *
Michael B. Susman..................... 93,990 -- 16,050 110,040 *
John B. Williams...................... 4,000 9,000(8) -- 13,000 *
--------- ------- ------- --------- ------
Total Directors (17) persons....... 2,759,326 69,600 255,555 3,084,481 14.93%
NON-DIRECTOR NAMED EXECUTIVE OFFICERS
Gary S. Collins....................... 256,665(9) 20,000(3) -- 276,665 1.36%
Dennis L. Klaeser..................... 20,229 13,000(10) -- 33,229 *
Hugh H. McLean........................ 316,552 20,000(3) -- 336,552 1.65%
Total Directors and Executive
Officers (23) persons........... 3,399,634 177,600 264,555 3,841,789 18.59%
========= ======= ======= ========= ======
<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, as amended.
(2) Includes 69,000 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 2005 and 2009, and are subject to
forfeiture until such time as they vest.
(4) Includes 26,592 shares held by Mr. Beal's spouse and children.
(5) Includes 10,950 shares held by Mr. Castellano's children and 20,100
shares held by WMC Investment Ltd. Partnership.
(6) Includes 2,470 shares held by Mr. Coleman's spouse and 8,641 shares
held by the Robert F. Coleman & Associates Retirement Savings Plan of
which Mr. Coleman is trustee.
(7) Includes 44,168 shares held in trusts under which Mr. Jensen and his
spouse are trustees.
(8) Shares vest in 2009, and are subject to forfeiture until such time as
they vest.
(9) Includes 8,724 shares held by Mr. Collins' spouse and children.
(10) Shares vest in 2008 and in 2009, and are subject to forfeiture until
such time as they vest.
</FN>
10
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, 2004.
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............. 2004 410,000 740,000 23,099 188,230 14,000 6,150(5)
Chairman, President and CEO 2003 390,000 670,000 26,169 241,220 14,000 6,000(5)
2002 310,000 585,000 19,194 -- -- 60,040(5)
Dennis Klaeser(6)............ 2004 205,000 270,000 7,072 80,670 5,000 3,588(7)
Secretary/Treasurer and CFO 2003 146,250 230,000 5,391 172,300 9,000 --
Richard C. Jensen............ 2004 190,000 160,000 10,358 53,780 4,000 6,150(7)
Managing Director 2003 182,000 135,000 10,332 68,920 4,000 6,000(7)
2002 170,000 130,000 9,672 -- -- 6,000(7)
Hugh H. McLean............... 2004 200,000 270,000 14,028 80,670 5,000 6,150(7)
Managing Director 2003 190,000 245,000 13,994 86,150 4,500 6,000(7)
2002 175,000 230,000 11,850 -- -- 6,000(7)
Gary S. Collins.............. 2004 200,000 270,000 18,126 80,670 5,000 6,150(7)
Managing Director 2003 190,000 245,000 18,092 86,150 4,500 6,000(7)
2002 175,000 230,000 15,925 -- -- 6,000(7)
<FN>
- ------------------------------------
(1) Bonuses reflect amounts earned in 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. 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 the dollar value of restricted stock awards under the
Company's Stock Incentive Plan (2001) and Incentive Compensation Plan
(2003) based upon the closing price of the Company's common stock of
$26.89 and $17.23 on the date of grants in 2004 and 2003, respectively.
The Company has paid regular dividends on all shares of restricted
stock outstanding. These shares of restricted stock vest on, and are
subject to forfeiture in the event the officer's employment terminates
before, the fifth anniversary of the grant date and become immediately
vested in the event of a change in control. The number and value of the
aggregate restricted stock holdings of each of the above named persons
as of December 31, 2004, based on the closing price of $32.23 for the
Company's common stock on that date, were as follows: Mr. Mandell -
39,000 shares, $1,256,970; Mr. Klaeser - 13,000 shares, $418,990; Mr.
McLean - 20,000 shares, $644,600; Mr. Collins - 20,000 shares,
$644,600; and Mr. Jensen - 21,600 shares, $696,168.
(4) Vesting on stock options is accelerated in the event of a change in
control. No options were granted to the persons identified in this
table in 2002. Options to purchase shares of common stock granted in
2003 have an exercise price of $17.23 and vest ratably over a four year
period. Options to purchase shares of common stock granted in 2004 have
an exercise price of $26.89 and vest ratably over a four year period.
(5) Represents (a) matching contributions to the Company's 401(k) Plan, and
(b) dollar value-benefit of accrued imputed interest (assuming full
forgiveness of cumulative accrued interest) relating to a loan from the
Company in connection with Mr. Mandell's 1998 stock purchase
transaction. This loan was repaid in full by Mr. Mandell on December
30, 2002.
(6) Dennis Klaeser joined the Company in April 2003. Mr. Klaeser's salary
for 2003 reflects his compensation for this partial year of service.
(7) Represents matching contributions to the Company's 401(k) plan made by
the Company for the benefit of the executive officer.
</FN>
11
OPTION GRANTS IN LAST FISCAL YEAR
The table below summarizes certain information about the options to
purchase the Company's common stock, which were granted in 2004 by the Company
for each Named Executive Officer. All options were granted with a per share
exercise price equal to the fair market value of the Company's common stock on
the grant date and vest over a four-year period, subject to acceleration in the
event of a change of control.
OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED
NUMBER OF OPTIONS ANNUAL RATES OF STOCK
SHARES GRANTED TO EXERCISE PRICE APPRECIATION
UNDERLYING EMPLOYEES OR BASE FOR OPTION TERM
OPTIONS IN FISCAL PRICE EXPIRATION ----------------------
NAME GRANTED(#) YEAR ($/SH) DATE 5%($) 10%($)
- --------------------------- ----------- ---------- -------- ---------- -------- --------
Ralph B. Mandell........... 14,000 4.55% $26.89 04/22/14 $236,754 $599,980
Dennis L. Klaeser.......... 5,000 1.63 26.89 04/22/14 84,555 214,279
Richard C. Jensen.......... 4,000 1.30 26.89 04/22/14 67,644 171,423
Hugh H. McLean............. 5,000 1.63 26.89 04/22/14 84,555 214,279
Gary S. Collins............ 5,000 1.63 26.89 04/22/14 84,555 214,279
AGGREGATED OPTION EXERCISES AND YEAR-END VALUES
The following table summarizes for each Named Executive Officer the
number of shares of common stock subject to outstanding options and the value of
such options that were unexercised at December 31, 2004.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES DECEMBER 31, 2004 (#) DECEMBER 31, 2004($)(2)
ACQUIRED ON VALUE ---------------------- ------------------------
EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($) UNEXERCISABLE(1) UNEXERCISABLE(1)
- ------------------------- ----------- -------- ---------------------- -------------------------
Ralph B. Mandell......... 123,600 $2,706,364 32,625 / 46,875 $908,394 / $628,928
Dennis L. Klaeser........ -- -- -- / 23,000 -- / 296,700
Richard C. Jensen........ -- -- 27,000 / 15,000 753,585 / 223,925
Hugh H. McLean........... 48,600 1,169,772 -- / 17,000 -- / 244,265
Gary S. Collins.......... 48,600 1,156,498 19,700 / 17,000 523,147 / 244,265
<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, 2004.
(2) Based upon the closing price of the Company's common stock on December
31, 2004 of $32.23 per share.
</FN>
12
EMPLOYMENT AGREEMENTS
RALPH B. MANDELL. The Company has entered into an employment agreement
with Ralph B. Mandell, the Company's Chairman, President and Chief Executive
Officer, which was automatically renewed for an additional two years on July 1,
2003. The agreement, which has a term of two years, expires on June 30, 2005.
The term of the agreement is automatically renewed for successive two-year
terms, unless either party gives 90-days' advance notice of an intention to
terminate the agreement. The agreement provides for an annual base salary, which
is subject to review from time to time, and may be increased when and to the
extent the Board, in its discretion, determines. The Board increased Mr.
Mandell's salary to $410,000 in 2004 and to $425,000 for 2005. 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 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
(as defined in the agreement) 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. 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. If a change in control of the Company had occurred and
Mr. Mandell was terminated effective January 1, 2005, based on his 2004
compensation he would have been entitled to a lump-sum payment of approximately
$3.6 million under the agreement. This amount does not include gross up
payments, if any, that the Company may be obligated to pay to Mr. Mandell to
cover any excise taxes payable by him.
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.
OTHER NAMED EXECUTIVE OFFICERS. The Company has also entered into
employment agreements with (1) Richard C. Jensen, one of the Company's
directors, and the chairman, chief executive officer and a managing director of
The PrivateBank (St. Louis), (2) Dennis L. Klaeser, the Company's Chief
Financial Officer, (3) Hugh H. McLean, a managing director and vice chairman of
The PrivateBank (Chicago), and (4) Gary S. Collins, a managing director and vice
chairman of The PrivateBank (Chicago) (collectively referred to as the
"Executives"). The Company had previously entered into a three-year agreement
with Mr. Jensen, which expired on June 30, 2003.
Each of these agreements became effective on October 1, 2003, and has a
term of one year. The agreements are automatically renewed for an additional
year, unless either party gives 90-days' advance notice of an intention to
terminate the agreement. In the event of a change in control (as defined in the
13
agreement), the agreements are automatically extended to a date two years from
the date of the change in control. Except as discussed below, the terms and
provisions of the Executives' agreements are substantially similar to those of
the employment agreement with Mr. Mandell.
Mr. Jensen's annual base salary for 2004 was $190,000, and is $198,000
for 2005; Mr. Klaeser's annual base salary for 2004 was $205,000, and is
$215,000 for 2005; and each of Messrs. McLean's and Collins' annual base salary
for 2004 was $200,000, and is $215,000 for 2005. Each executive's base salary is
subject to periodic review from time to time, and may be increased when and to
the extent the Board, in its discretion, determines.
If the Executive chooses to resign with good reason, or the Company
chooses to terminate his employment without cause, he is entitled to receive
severance in the amount equal to 100% of his then current annual base salary,
plus the average of the sum of any bonuses he earned 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;
In the event the Executive is terminated after a change of control (as
defined in the agreement) of the Company, he will be entitled to unpaid benefits
accrued during the term of his employment, a pro rata bonus for the year of
termination based on the prior year's bonus amount, if any, and a lump-sum
payment equal to two times the sum of: (a) his annual base salary; plus (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. The agreement
also entitles the Executive 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. If a change in control of the Company had occurred and
the Executive was terminated effective January 1, 2005, based on 2004
compensation, the Executives would have been entitled to lump-sum payments as
follows: Mr. Jensen, $740,800; Mr. Klaeser, $987,926; Mr. McLean, $982,300; and
Mr. Collins, $982,300. This amount does not include gross up payments, if any,
that the Company may be obligated to pay to the Executive to cover any excise
taxes payable by him. The Executive will also be entitled to outplacement
counseling services for a reasonable period of time following such termination
as agreed between the Executive and the Company; and
Each agreement also contains certain non-solicitation provisions, which
prohibit the Executive from soliciting, either for his own account or for the
benefit of any entity located within a 50-mile radius of the Company or any of
its subsidiaries, any of the Company's or its subsidiaries' clients or
employees. These non-solicitation provisions remain in effect for a period of
one year after the termination of his employment.
WILLIAM A. GOLDSTEIN. In December 2002, The PrivateBank (Chicago)
acquired a controlling interest in Lodestar Investment Counsel, LLC
("Lodestar"). William Goldstein, the chief executive officer of Lodestar and a
director 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. In connection
with the transaction, Mr. Goldstein entered into an employment agreement with
Lodestar. The agreement, which has a term of five years, expires on December 30,
2007. Under the provisions of the agreement, Mr. Goldstein is entitled to an
annual base salary of $100,000 subject to adjustment by the Board of Managers of
Lodestar. Mr. Goldstein is eligible to receive an annual bonus equal to at least
35% of the revenues attributable to his designated accounts and is entitled to
participate in benefit plans and other fringe benefits available to Lodestar's
and the Company's executives.
14
Under the agreement, Mr. Goldstein's employment may be terminated by
Lodestar at any time for "cause," as defined in the agreement, in which case, or
if he resigns from Lodestar 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. Goldstein chooses to resign with good reason, or
Lodestar chooses to terminate his employment without cause, he is also entitled
to receive severance in the amount equal to his then current annual base salary
for a period of 18 months after termination, plus a bonus for the year of
termination equal to the prior year's bonus amount, if any.
The agreement also contains certain non-solicitation provisions, which
prohibit Mr. Goldstein from soliciting, either for his own account or for the
benefit of any entity located within a 25-mile radius of any place of business
of Lodestar, any clients or employees of Lodestar or engage in any business
which is similar to or in competition with Lodestar, for up to 18 months
following his termination. Mr. Goldstein is also prohibited from accepting any
business from any clients of Lodestar for up to two years following his
termination.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
OVERVIEW
During 2004, the Compensation Committee of the Board of Directors (the
"Compensation Committee"), consisted of Mr. Guyette, who serves as Committee
Chairman, Ms. McKissack and Messrs. Meagher, Rabin and Daly (effective July 22,
2004). Former director, John E. Gorman, served on the Committee through his
resignation from the Board of Directors on April 26, 2004. The Compensation
Committee met eight times in 2004. At all times during 2004, each member met the
standards of "independence" under the NASDAQ listing standards.
PURPOSE
The primary purpose of the Committee is to discharge the Board's
responsibilities relating to compensation of the Company's chief executive
officer and other members of senior management. In furtherance of that role, the
Committee has directed the preparation of this report and has approved its
content and its submission to the stockholders. The Compensation Committee also
provides guidance to the Board and its Nominating and Corporate Governance
Committee when requested on director compensation.
DUTIES, RESPONSIBILITIES AND AUTHORITY
In furtherance of its purposes, the Compensation Committee's duties,
responsibilities and authority include:
o Review and approval of the compensation, including salary
levels and bonuses, of the chief executive officer and other
senior executives;
o Administration of the Company's equity incentive plans and the
grant of awards under these plans;
o Annual performance appraisals of the chief executive officer
and other senior executives and other executive performance
matters;
15
o Consideration of additional executive compensation and
employee benefit programs, including incentive-based
compensation programs, non-cash compensation programs,
retirement and savings plans, and of any material changes to
existing programs;
o Monitoring the overall effectiveness of the Company's
executive compensation programs and salary structures and
making recommendations regarding the Company's overall
compensation philosophy;
o Review and consideration for recommendation for Board approval
of Board and Board committee compensation and benefits;
o Review and consideration of severance programs, employment
agreements and change-in-control agreements;
o Review of business expense reimbursements of the chief
executive officer; and
o Other duties or responsibilities as may be expressly delegated
to the Compensation Committee by the Board.
In carrying out its responsibilities, the Compensation Committee may
consult with and receive input from the chief executive officer, other senior
management, consultants and advisors, as the Committee deems advisable or
appropriate.
EXECUTIVE COMPENSATION POLICIES
Under the direction of the Committee, the Company's compensation
policies are designed to align the interests of its executives and senior
management with those of its 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 uses third-party consultants and compensation surveys to
help construct and maintain a competitive compensation program. Consultants are
chosen based on experience in compensation matters and experience in the
financial services industry. As it has in prior years, the Committee again
engaged Frederic W. Cook & Co. as its compensation consultant during 2004. Among
other things, the Committee worked during the year with the consultant on a
review of the Company's compensation philosophy and its tie to the Company's
strategy and of the identification of the peer group for comparative
compensation analysis.
As a result of this review, the Committee reaffirmed its
"pay-for-performance" philosophy which provides compensation aimed at the 50th
percentile of the selected peer group of comparable strategic and regional peer
bank holding companies for target performance and at the 75th percentile or
better for outstanding performance. The Committee concluded that the
"pay-for-performance" approach had resulted in reasonable market-competitive
levels of compensation, which were very effective in driving the Company's
outstanding performance.
PERFORMANCE CRITERIA
The Committee uses a combination of base salary, cash incentive
compensation and equity-based incentive compensation as its total compensation
package. Annual corporate and individual performance goals are set each year in
conjunction with the Board's approval of the annual profit plan. The annual
profit plan establishes the performance benchmark for both earnings and asset
growth.
16
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 wealth management
assets under management. Subjective criteria include strategy, leadership,
ethics, effectiveness, 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. As noted above, base salary levels historically have been
targeted to be generally at the mid-points of comparable peer companies, as the
Company's "pay-for-performance" philosophy dictates that a significant portion
of total compensation should be at risk. The Committee recognizes that it is
difficult to make exact comparisons to peer group, since specific talents and
responsibilities of each senior executive make his or her position unique. In
general, actions with respect to base salaries are driven first by individual
performance, and second by competitive trends of the industry and in the
Company's peer group. In December, the Committee approved annual base salaries
for the executive officers for the following year of approximately 5.2% above
2004 levels, reflecting the strong performance of the Company's senior
leadership and general marketplace trends.
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. Consistent with the "at risk" compensation
philosophy, these target percentages may be slightly above peer companies.
Bonuses paid are at, above or below the target percentage depending upon the
degree to which individual and corporate goals are met.
During the year, the Committee monitors the Company's and executives'
performance against the performance objectives as part of its review of the
quarterly bonus accrual. In December of each year, the Committee approves annual
cash incentive compensation amounts, based on performance reviews and the
achievement of projected corporate and individual performance levels. Bonuses
awarded are payable in January of the following year. The level of bonuses for
the executive officers for 2004 reflect the Company's strong financial
performance and individual achievements. Also, goals and target cash incentive
compensation percentages are set for the following year in conjunction with the
Board's approval of the annual profit plan.
EQUITY-BASED INCENTIVE COMPENSATION
All senior executives are participants in the Company's Incentive
Compensation Plan adopted and approved by stockholders in 2003. At its
discretion, the Committee approves grants of stock-based awards under the plan.
The Committee considers recommendations from the chief executive officer
regarding awards for the other senior executives. These awards are based on past
performance and the
17
expectation that each executive officer's future performance will positively
impact stockholder value. The Committee believes that using equity-based
incentive compensation best aligns the interests of management with those of the
Company's stockholders. During 2004, the Committee made awards to executive
officers under the Incentive Compensation Plan in the form of stock options and
restricted stock awards. The options were granted at market value, vest over
four years and expire ten years from the date of grant. The restricted stock
awards vest five years from the date of grant.
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 each year in conjunction with the Board's approval
of the annual profit plan. The Committee considered the effect of significant
corporate developments and initiatives in evaluating overall corporate
performance in 2004, including successful implementation of a number of the
Company's strategic objectives such as the acquisition of Corley Financial, the
establishment of the Gold Coast office and the addition of the new Milwaukee
location. Factors which influenced the Committee's evaluation of performance for
2004 included, among other achievements, significant growth in earnings per
share in 2004, return on average equity of 15%, growth in assets, loans and
wealth management assets under management and asset quality, as well as
significant appreciation during the year in the market price of the Company's
common stock. For 2004, Mr. Mandell received base salary of $410,000, and a
year-end cash bonus of $740,000, which was paid in January 2005. The bonus
amount was determined and paid in accordance with the terms of the Company's
cash incentive program under the Incentive Compensation Plan. Mr. Mandell was
also awarded long-term compensation in the form of options to purchase 14,000
shares of common stock at $26.89 per share, the market price at the time of
grant, that vest over four years and 7,000 shares of restricted stock with
five-year cliff vesting. In December, the Committee increased Mr. Mandell's base
salary to $425,000 for 2005, a 3.7% increase and in line with the salary
increases for the other senior executive officers.
POLICY REGARDING 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, such
as the Company's Incentive Compensation Plan. Generally, the Committee intends
to structure incentive compensation paid to such officers as performance-based
compensation under Section 162(m). However, the Committee or the Board may pay
or provide compensation that is subject to the deduction limitations under Code
Section 162(m).
The report is submitted by the Compensation Committee.
James M. Guyette (Chairman)
Patrick F. Daly
Thomas F. Meagher
Cheryl Mayberry McKissack
Edward W. Rabin, Jr.
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, (the "Acts")
18
except to the extent that the Company specifically incorporates this information
by reference, and shall not otherwise be deemed filed under such Acts.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Daly, Guyette, Meagher, Rabin and Ms. McKissack 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, the Company's 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. Mr.
Mandell serves on the Board of Managers of Lodestar, which oversees compensation
decisions, and Mr. Goldstein, a director of the Company, is the chief executive
officer of Lodestar.
19
PERFORMANCE GRAPH
The graph below compares the cumulative total stockholder return on the
common stock of the Company for the period beginning December 31, 1999 and
ending December 31, 2004, 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 December 31,
1999, and the reinvestment of all dividends.
[GRAPHIC OMITTED]
12/31/99 12/31/00 12/31/01 12/31/02 12/31/03 12/31/04
-------- -------- -------- -------- -------- --------
PrivateBancorp, Inc........................ $100.00 $ 68.79 $149.02 $288.74 $520.58 $743.96
CRSP Index for Nasdaq Bank Stocks.......... 100.00 113.66 124.60 126.81 140.46 155.62
Russell 2000 Index ........................ 100.00 95.68 96.66 75.80 110.19 129.47
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
2004 all required filings were
20
timely filed by each of its directors and executive officers, except: (1) a Form
3 each filed by Messrs. Williams and Daly reporting their initial holdings
(which were reported on May 24, 2004 and August 27, 2004, respectively); (2) a
Form 4 filed by Mr. Collins reporting open market purchases on January 23,
January 26 and January 29, 2004 (which were reported on March 3, 2004); (3) a
Form 4 filed by Mr. Coleman reporting an open market purchase on March 5, 2004
(which was reported on March 17, 2004); (4) a Form 4 each filed by Messrs.
Kayman, Susman and Guyette reporting the allocation of deferred compensation on
December 31, 2003 (which were reported on March 31, 2004); (5) a Form 4 filed by
Mr. Rabin reporting open market purchases on February 6, 2004, September 20,
2004 and November 1, 2004 (which were reported on April 1, 2004, November 2,
2004 and November 18, 2004); (6) a Form 4 filed by Mr. Susman reporting open
market purchases on various dates from February 8, 2002 through April 27, 2004
(which were reported on April 29, 2004); (7) a Form 4 filed by each director who
served during 2004, except Messrs. Daly and Williams, reporting an option grant
on April 22, 2004 (which were reported on May 4, 2004); (8) a Form 4 each filed
by Messrs. Mandell, Klaeser, Jensen, Collins, McLean and Ruckstaetter and Ms.
Kathleen Jackson (a former executive officer) reporting an option grant and an
acquisition of restricted stock on April 22, 2004 (which were reported on May 5,
2004); (9) a Form 4 filed by Mr. Meagher reporting an open market purchase on
April 28, 2004 (which was reported on May 6, 2004); (10) a Form 4 filed by Mr.
Williams reporting open market purchases on May 17, 2004, September 2, 2004 and
November 4, 2004 (which were reported May 24, 2004, September 8, 2004 and
November 12, 2004, respectively); (11) a Form 4 filed by Mr. Brady reporting an
option grant on June 15, 2004 (which was reported on June 23, 2004); and (12) a
Form 4 each filed by Messrs. Kayman, Rabin, Susman, Ruckstaetter and Guyette
reporting the allocation of deferred compensation on September 30, 2004 (which
were reported on October 5, 2004).
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, 2004, the Company had $20.0 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.
During 2004, The PrivateBank (Chicago) acquired phone and video
conferencing equipment and related services with a total cost of $9,750 through
Worknet, Inc., an information technology company. William Castellano, who is one
of the Company's directors, is an affiliate of that company.
Mr. Mandell's daughter-in-law is employed by The PrivateBank (Chicago)
as a Managing Director. In 2004, she was paid an aggregate salary and bonus of
$145,000, granted options to purchase 1,600 shares of the Company's common stock
at an exercise price of $26.89 per share and awarded 800 shares of restricted
stock. Mr. Goldstein's son-in-law is employed as a Managing Director of
Lodestar. He received an aggregate salary and bonus of $209,240 in 2004.
During 2004, The PrivateBank (Chicago) paid $80,535 to Neal, Gerber &
Eisenberg LLP for loan related legal services. Phillip Kayman is a partner at
Neal, Gerber & Eisenberg LLP and is also a director of the Company.
21
PROPOSAL 2. APPROVAL OF AN AMENDMENT TO THE COMPANY'S INCENTIVE
COMPENSATION PLAN
At the Annual Meeting, there will be submitted a proposal to approve an
amendment to the Company's Incentive Compensation Plan (the "Plan"). On February
26, 2005, the Board of Directors adopted the amendment, subject to stockholder
approval, based upon a recommendation of the Compensation Committee of the Board
of Directors (the "Committee") and management, to increase the number of shares
of common stock authorized to be issued under the Plan by 1,000,000 shares, of
which up to 333,000 shares may be issued pursuant to awards of restricted stock
and restricted stock units, to eliminate those provisions of the Plan that would
have permitted below market option grants, and to extend, to February 25, 2015,
the time period during which incentive stock options may be granted. The Plan
was originally approved by stockholders at the Company's 2003 Annual Meeting of
Stockholders.
Approval of the amendment to the Plan requires the affirmative vote of
a majority of the shares of common stock of the Company present in person or
represented by proxy and entitled to vote at the meeting.
The following description of the Plan sets forth the material terms of
the Plan, as proposed to be amended. However, it does not purport to be complete
and is qualified in its entirety by reference to the terms 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. As of February
1, 2005, there were only 73,830 shares remaining to be awarded under the Plan.
As a result, the Board of Directors believes that it is appropriate to increase
the number of shares that may be reserved for issuance under the Plan by
1,000,000 shares. After giving effect to the 1,000,000 share increase, the
aggregate number of shares subject to outstanding awards, together with shares
available for issuance will be 2,519,415, or 12.4% of the Company's outstanding
shares as of the March 7, 2005 record date.
These shares will enable the Company to continue to be competitive in
attracting key employees to manage planned additional bank and branch locations.
The additional shares will also be important in promoting the retention of key
employees, while aligning their interests closely with those of stockholders.
Accordingly, management believes the ability to award equity incentives is an
important component of continuing the Company's growth.
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 currently provides that the total number of shares of common
stock that may be issued pursuant to awards under the Plan may not exceed
985,080 shares. Approval by stockholders of the proposed amendment to the Plan
will increase this maximum number of shares to 1,985,080 shares. Of this amount,
the number of shares that would be available for new awards would be 1,073,830
shares. A total of 911,250 shares have already been issued upon the exercise or
vesting of prior awards under the Plan.
22
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.
Of the shares authorized for issuance under the Plan, the amendment
provides that up to 333,000 of those shares may be issued with respect to awards
of restricted stock and restricted stock units. In addition, as required by Code
Section 162(m), the Plan includes a limit of 400,000 shares of common stock as
the maximum number of shares that 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 the Plan
or certain predecessor plans 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.
23
AWARDS
The following types of awards may be granted under the Plan:
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. As amended, the Plan permits up to 665,080 of the
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. The exercise price per
share for all 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 upon achievement of performance criteria determined by the
Committee or under the Company's bonus
24
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.
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 Board's approval of the
amendments on February 26, 2005.
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
25
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.
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.
26
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 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.
27
PLAN BENEFITS
The following table provides certain information with respect to all
awards that have been made under the Plan (and certain predecessor plans) to
specific individuals and groups of individuals, specifying the amounts granted
to Named Executive Officers individually, all current directors who are not
executive officers as a group, all director nominees individually, all current
executive officers as a group and all employees, including current officers who
are not executive officers, as a group. The type and amount of any future awards
under the Plan, if the Plan is approved by the Company's stockholders, are not
currently determinable by the Committee.
PLAN BENEFITS
-------------
STOCK RESTRICTED
NAME AND POSITION OPTIONS(1) SHARES(1)
- ----------------------------------------------------------------------------- ---------- ----------
Ralph B. Mandell............................................................. 344,220 118,800
Chairman, President, Chief Executive Officer and Director Nominee
Dennis L. Klaeser............................................................ 23,000 13,000
Secretary, Treasurer and Chief Financial Officer
Richard C. Jensen............................................................ 42,000 21,600
Managing Director
Hugh H. McLean............................................................... 113,600 43,400
Managing Director
Gary S. Collins.............................................................. 160,448 51,200
Managing Director
All Current Executive Officers as a Group.................................... 774,168 286,000
William A. Castellano........................................................ 71,160 --
Director Nominee
Patrick F. Daly.............................................................. 3,000 --
Director Nominee
Cheryl Mayberry McKissack.................................................... 3,000 --
Director Nominee
Edward W. Rabin, Jr.......................................................... 3,000 --
Director Nominee
All Current Non-Executive Directors as a Group (13 persons).................. 753,120 --
Non-Executive Officer Employees as a Group................................... 2,225,514 392,300
<FN>
- ------------------------------------
(1) Include all awards to each specified individual or group of individuals
outstanding under the Plan as of March 7, 2005.
</FN>
THE BOARD OF DIRECTORS RECOMMENDS STOCKHOLDERS VOTE "FOR" APPROVAL OF
THE AMENDMENT TO THE COMPANY'S INCENTIVE COMPENSATION PLAN.
28
EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth information as of December 31, 2004
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.
NUMBER OF SECURITIES
NUMBER OF REMAINING AVAILABLE
SECURITIES TO BE FOR FUTURE ISSUANCE
ISSUED UPON WEIGHTED-AVERAGE UNDER EQUITY
EXERCISE OF EXERCISE PRICE OF COMPENSATION PLANS
OUTSTANDING OUTSTANDING (EXCLUDING
OPTIONS, WARRANTS OPTIONS, WARRANTS SECURITIES REFLECTED
AND RIGHTS AND RIGHTS IN COLUMN (A))
PLAN CATEGORY (A) (B) (C)
- ------------------------------------ ----------------- ----------------- --------------------
Equity compensation plans approved
by security holders.............. 1,445,585 $12.65 78,830
Equity compensation plans not
approved by security holders..... -- -- --
--------- ------ ------
Total............................... 1,445,585 $12.65 78,830
========= ====== ======
INDEPENDENT PUBLIC ACCOUNTANTS
The Company's independent public accountants for the fiscal year ended
December 31, 2004 were Ernst & Young LLP. The Company's Audit Committee has
selected Ernst & Young as the Company's independent public accountants for the
fiscal year ending December 31, 2005, subject to the Committee's review and
approval of the proposed engagement terms and 2005 audit plan. 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.
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.
PRINCIPAL ACCOUNTING FIRM FEES
The following table sets forth the aggregate fees billed to the Company
for professional services provided by Ernst & Young for the fiscal years ended
December 31, 2003 and 2004, respectively:
2003 2004
-------- --------
Audit Fees................. $244,000 $295,000
Audit Related Fees......... -- 24,000
Tax Fees................... -- --
All Other Fees............. -- --
-------- --------
Total................... $244,000 $319,000
======== ========
29
PRE-APPROVAL PROCEDURES
The full Audit Committee considers any proposed engagement of the
independent public accountants to render audit or permissible non-audit services
for pre-approval. The Audit Committee has not adopted pre-approval policies and
procedures delegating this responsibility to particular committee members,
although it may in the future.
All of the services provided by the independent public accountants in
2003 and 2004 were pre-approved by the Audit Committee.
AUDIT COMMITTEE REPORT
The Audit Committee of the Company's Board of Directors is currently
comprised of six outside directors, all of whom are "independent" within the
meaning of the NASDAQ rules and satisfy the heightened independence standards
under the SEC rules. The Committee operates under a written charter adopted by
it. The Board appoints the Audit Committee and its chairman, with the Committee
to consist of no fewer than three directors. The Board has designated Mr. Rybak
as the "audit committee financial expert." 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 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 2004, 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, 2004. 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 auditor independence rules, the Audit Committee considered at a
meeting held on March 3, 2005, 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 and
based on the roles and responsibilities described in its charter, 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, 2004,
for filing with the SEC. A copy of the Audit Committee's current charter is
included as Appendix B to this proxy statement.
30
This report is submitted on behalf of the current members of the Audit
Committee:
Robert F. Coleman (Chair)
Donald L. Beal
James M. Guyette
William R. Langley
William J. Podl
William R. Rybak
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, (the "Acts") 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 2006 Annual Meeting of Stockholders, a stockholder's proposal
must be received prior to November 11, 2005, by the Secretary of the Company at
the Company's executive offices at Ten North Dearborn, Chicago, 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.
31
NOTICE OF BUSINESS TO BE CONDUCTED AT AN
ANNUAL MEETING OF STOCKHOLDERS
Pursuant to the Company's Amended and Restated 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 Amended and Restated 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 2006 annual meeting is held on April
27, 2006, the date contemplated under the existing Amended and Restated By-laws,
the deadline for advance notice by a stockholder would be December 27, 2005. In
the event the Company publicly announces or discloses that the date of the 2006
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 Company that 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 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.
32
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
/s/ Dennis L. Klaeser
Dennis L. Klaeser
Secretary
33
APPENDIX A
PRIVATEBANCORP, INC. INCENTIVE COMPENSATION PLAN
(AS AMENDED FEBRUARY 26, 2005)
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
A-1
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
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.
A-2
(i) "Corporation" means PrivateBancorp, Inc., a Delaware
corporation.
(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
Stock 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).
A-3
(bb) "Stock Appreciation Right" has the meaning specified in
Section 6(c).
(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 recuse 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
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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 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 1,960,000 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 1,960,000
shares.
A-5
(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 400,000 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 653,000.
(iv) 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 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 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
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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 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
A-7
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 than 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 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
A-8
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
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
A-9
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,
spin-off, 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
(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 Awards 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
A-10
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 stockholders of the Corporation
received at the 2003 Annual Meeting of Stockholders. The effective date
of the Plan, as amended, is February 26, 2005, subject to approval by
the stockholders at the 2005 Annual Meeting of Stockholders. 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 February 26, 2015.
A-11
APPENDIX B
PRIVATEBANCORP, INC.
AUDIT COMMITTEE CHARTER
PURPOSE:
The Audit Committee is appointed by the Board to oversee the accounting and
financial reporting processes of the Company and the audits of the Company's
financial statements. 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 independent members.
The members of the Audit Committee shall meet the independence and experience
requirements of The NASDAQ Stock Market, Inc. Marketplace Rules, Section
10A(m)(3) of the Securities Exchange Act of 1934 (the "Exchange Act") and the
rules and regulations of the Commission. All members of the Audit Committee
shall be able to read and understand fundamental financial statements. No member
of the Audit Committee shall have participated in the preparation of the
financial statements of the Company in the past three years. 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 and Corporate Governance 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 and have such other direct and independent interaction with
such persons from time to time, as the members of the Audit Committee deem
appropriate. 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
B-1
by the Audit Committee or be entered into pursuant to 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
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1. Review and discuss with management and the independent auditor
(i) the annual audited financial statements, including
disclosures to be made in management's discussion and analysis
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 with management and the independent auditor
any major issues as to the adequacy of the Company's internal
controls, any special steps adopted in light of material
control deficiencies and the adequacy of disclosures about
changes in internal control over financial reporting.
4. Review and discuss with management (including the senior
internal audit executive) and the independent auditor, the
Company's internal controls report and the independent
auditor's attestation of the report prior to the filing of the
Company's Form 10-K.
5. 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-2
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.
c. Other material written communications between the
independent auditor and management, such as any
management letter or schedule of unadjusted
differences.
6. Review and approve 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 and risk of fraud.
7. 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.
8. Discuss with management, the independent auditors and outside
counsel, as appropriate, 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.
9. 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.
10. 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.
11. Ensure that a public announcement of the Company's receipt of
an audit opinion that contains a going concern qualification
is made promptly.
OVERSIGHT OF THE COMPANY'S RELATIONSHIP WITH THE INDEPENDENT AUDITOR
- --------------------------------------------------------------------
1. Review and evaluate the performance of the independent auditor
and the lead partner of the independent auditor team. Retain
the independent auditor annually.
2. 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
3. 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.
4. 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.
5. 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.
6. Discuss with the independent auditor material issues on which
the national office of the independent auditor was consulted
by the Company's audit team and matters of audit quality and
consistency.
7. 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
- --------------------------------------------------
1. Review the appointment, performance, compensation and
replacement of the senior internal auditing executive, or
independent internal auditor.
2. Review the significant reports to management prepared by the
internal auditing department and management's responses.
3. Review at least quarterly the adequacy of the Company's
internal controls.
4. Discuss any difficulties encountered in the course of the
internal audit, including any restrictions on the scope of
work or access to required information.
5. 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
- -------------------------------------
1. Obtain from the independent auditor assurance that Section
10A(b) of the Exchange Act has not been implicated.
2. 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.
3. 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 (the whistle-blower
program). All such procedures will at all times comply with
all provisions of law, regulations or Company policy that
prohibit discipline
B-4
of or discrimination against employees who report what they
reasonably believe to be violations of any law, rule or
regulation applicable to the Company.
4. 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.
5. Discuss with legal counsel implications of legal matters that
may have a material impact on the financial statements or the
Company's compliance policies.
6. Review procedures adopted by management to assure that all
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
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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 I nominees for director, and "FOR"
approval of the amendment to 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
--------------------------------, 2005
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 Annual 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 2005 Annual Meeting. |_|
- --------------------------------------------------------------------------------
<page>
- --------------------------------------------------------------------------------
REVOCABLE PROXY -- PRIVATEBANCORP, INC.
Annual Meeting of Stockholders, April 28, 2005
- --------------------------------------------------------------------------------
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 Standard Club, 320 South Plymouth Court, Chicago, Illinois on
April 28, 2005, 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 I directors of the Company's
Board of Directors to serve until the annual meeting of
stockholders in 2008.
01 William A. Castellano 04 Cheryl Mayberry McKissack
02 Patrick F. Daly 05 Edward W. Rabin, Jr.
03 Ralph B. Mandell
FOR WITHHOLD 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. To consider a proposal to amend the PrivateBancorp, Inc.
Incentive Compensation Plan to increase the number of shares
authorized for issuance under the 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 the amendment to the PrivateBancorp, Inc. Incentive Compensation Plan.
IMPORTANT: The prompt return of proxies will save the Company the expense of
further requests 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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- --------------------------------------------------------------------------------