<PAGE>
As filed with the Securities and Exchange Commission on April 27, 1999.
Registration No. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
FORM S-1
REGISTRATION STATEMENT
Under
The Securities Act of 1933
--------------
PRIVATEBANCORP, INC.
(Exact Name of Registrant as Specified in Its Charter)
--------------
6022
(Primary Standard Industrial Classification Code Number)
Delaware 36-3681151
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
Ten North Dearborn Street, Chicago, Illinois 60602, (312) 683-7100
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
--------------
Donald A. Roubitchek
Secretary/Treasurer and Chief Financial Officer
Ten North Dearborn Street, Chicago, Illinois 60602
(312) 683-7100
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies To:
Jennifer R. Evans, Esq. Craig R. Culbertson, Esq.
Vedder, Price, Kaufman & Kammholz Alexander Lourie, Esq.
222 North LaSalle Street Jenner & Block
Chicago, Illinois 60601 One IBM Plaza, 40th Floor
(312) 609-7500 Chicago, Illinois 60611
(312) 222-9350
--------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effectiveness of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the
same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier registration statement for the
same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Proposed Proposed
Maximum Maximum
Amount Aggregate Aggregate Amount of
Title of Each Class of to be Offering Price Offering Registration
Securities to be Registered Registered per Share* Price* Fee
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common stock, without par value................ 1,035,000 $18.00 $18,630,000 $5,180
- -----------------------------------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
*Estimated solely for the purpose of determining the registration fee.
--------------
The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933, or until the Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities and is not soliciting an offer to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION; DATED APRIL , 1999.
PROSPECTUS
900,000 Shares
Common Stock
-----------
This is the initial public offering of our common stock. We are offering
900,000 shares. We anticipate that the initial public offering price will be
between $16 and $18 per share. No public market currently exists for the common
stock. We have applied to list the common stock on the Nasdaq National Market
under the symbol "PVTB."
-----------
Investing in the common stock involves risks. See "Risk Factors" beginning on
page 12.
<TABLE>
<CAPTION>
Per
Share Total
------- --------
<S> <C> <C>
Public Offering Price......................................... $ $
Underwriting Discount......................................... $ $
Proceeds to PrivateBancorp, Inc............................... $ $
</TABLE>
We have granted the underwriters a 30-day option to purchase up to 135,000
additional shares of our common stock on the same terms and conditions set
forth above to cover over-allotments, if any.
The shares of common stock that are being offered are not savings accounts or
deposits or other obligations of a bank and are not insured by the Bank
Insurance Fund or the Savings Association Insurance Fund of the Federal Deposit
Insurance Corporation or any governmental agency.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
The underwriters expect to deliver the shares to purchasers on , 1999.
-----------
EVEREN Securities, Inc. Stifel, Nicolaus & Company
Incorporated
The date of this prospectus is , 1999
<PAGE>
PrivateBancorp, Inc.
[Map of greater Chicago metropolitan area depicting locations
of Company's banking facilities and main bank office.]
and
[graphic of services offered]
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Special Note Regarding Forward-Looking Statements......................... 4
Prospectus Summary........................................................ 4
Risk Factors.............................................................. 11
Use of Proceeds........................................................... 17
Dividends; No Prior Trading Market........................................ 17
Capitalization............................................................ 18
Dilution.................................................................. 19
Business.................................................................. 20
Selected Consolidated Financial Data...................................... 32
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 34
Management................................................................ 51
Certain Transactions...................................................... 59
Principal Stockholders.................................................... 60
Supervision and Regulation................................................ 61
Description of Capital Stock.............................................. 68
Shares Eligible for Future Sale........................................... 72
Underwriting.............................................................. 74
Legal Matters............................................................. 76
Experts................................................................... 76
Where You Can Get More Information........................................ 76
Index to Consolidated Financial Statements................................ F-1
</TABLE>
----------------
Our executive offices are located at The PrivateBank and Trust Company, Ten
North Dearborn Street, Chicago, Illinois 60602. Our telephone number is (312)
683-7100.
----------------
You should rely only on the information contained in this document. We have
not authorized anyone to provide you with information that is different. The
information contained in this document may have changed since the date of this
prospectus. This prospectus is not an offer to sell and it is not soliciting an
offer to buy the common stock in any state where offers or sales are not
permitted.
----------------
Until , 1999 (25 days after the date of this prospectus), all dealers
that buy, sell or trade these shares of common stock, whether or not
participating in this offering, may be required to deliver a prospectus. This
is in addition to the dealers' obligations to deliver a prospectus when acting
as underwriters and with respect to their unsold allotments or subscriptions.
3
<PAGE>
Special Note Regarding Forward-Looking Statements
We make certain forward-looking statements in this prospectus that are
based upon our current expectations and projections about current events. You
can identify these statements from our use of the words "estimate," "project,"
"believe," "intend," "anticipate," "expect" and similar expressions. These
forward-looking statements include:
. statements of our goals, intentions and expectations;
. statements regarding our business plans and growth strategies;
. statements regarding the asset quality of our loan and investment
portfolios;
. estimates of our risks and future costs and benefits; and
. statements regarding the effectiveness of our efforts to make our
operations year 2000 compliant.
These forward-looking statements are subject to significant risks,
assumptions and uncertainties, including, among other things, the following
important factors which could affect the actual outcome of future events:
. fluctuations in market rates of interest and loan and deposit pricing,
which could negatively affect our net interest margin, asset valuations
and expense expectations;
. adverse changes in the economy of the greater Chicago metropolitan area,
our primary market, which might affect our business prospects and could
cause credit-related losses and expenses;
. the extent of continuing client demand for the high level of
personalized service that is the key element of our private banking
approach;
. adverse developments in our loan and investment portfolios;
. difficulties in identifying attractive acquisition opportunities and
strategic partners that will complement our private banking approach;
. competitive factors in the banking industry, such as the trend towards
consolidation in our market;
. changes in banking legislation or the regulatory requirements of federal
and state agencies applicable to bank holding companies and banks like
ours; and
. our effectiveness and that of our suppliers of data processing equipment
and services, government agencies, and other third parties in testing
and implementing year 2000 compliant hardware, software and systems.
Because of these and other uncertainties, our actual future results may be
materially different from the results indicated by these forward-looking
statements. In addition, our past results of operations do not necessarily
indicate our future results. We discuss these uncertainties and others in the
sections of this prospectus named "Risk Factors," "Business," and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." We are not obligated to revise or update these forward-looking
statements to reflect new events or circumstances.
4
<PAGE>
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
This summary may not contain all the information that may be important to you.
You should read the entire prospectus, including the financial statements and
related notes, before making a decision to invest in the common stock. The
terms "PrivateBancorp," "company," "we" and "our" as used in this prospectus
refer to PrivateBancorp, Inc. and its subsidiary as a consolidated entity,
except where it is made clear that such term means only the parent company. The
terms "PrivateBank" and "bank" refer to our bank subsidiary, The PrivateBank
and Trust Company. Unless we indicate otherwise, all share, per share and
financial information in this prospectus: (a) gives effect to the two-for-one
stock split of our common stock which will be effective immediately prior to
the commencement of this offering; and (b) assumes no exercise of the
underwriters' option to purchase up to an additional 135,000 shares of common
stock from us.
PrivateBancorp
PrivateBancorp is a Delaware corporation headquartered in Chicago, Illinois.
We are a bank holding company with one bank subsidiary, The PrivateBank and
Trust Company, which we formed de novo in 1991. PrivateBank provides private
banking and trust services primarily to affluent professionals, entrepreneurial
individuals and their business interests. Our managing directors seek to build
strong relationships with clients by emphasizing a consistently superior level
of personalized service. We focus on the personal financial services needs of
our clients as well as the banking needs of their various business and
investment ventures. Clients are teamed with dedicated managing directors so
they are dealing directly with our decision makers. In this way, we are able to
tailor our loan products and other services to be highly responsive to the
individual situation of each client.
Since year-end 1995, we have grown our asset base at a compound annual rate
of 27.3% to $431.1 million as of March 31, 1999. During the same period, loans
have grown at a compound annual rate of 31.6% to $307.8 million, deposits at a
compound annual rate of 27.0% to $384.5 million and trust assets under
administration at a compound annual rate of 40.2% to $637.4 million.
5
<PAGE>
Our Market
We have targeted affluent individuals, professionals, owners of closely-held
businesses and commercial real estate investors because we believe that they
have significant unmet demand for personalized services. Demographic data
provided by National Decision Systems, San Diego, California, indicates that
there is significant growth potential in the affluent segment of the
population. In the metropolitan Chicago area, the number of households with
annual incomes greater than $150,000 was estimated at 190,042 in 1998, compared
to 63,861 households in 1990. This equates to a compound annual growth rate of
14.6%, versus a growth rate for the total number of households in the
metropolitan Chicago area of 0.6%. By 2003, the number of these affluent
households in the Chicagoland area is expected to increase to 358,000,
representing an annual growth rate of 13.5%, while the aggregate number of
households is expected to increase at an annual growth rate of only 0.3%.
The PrivateBank and Trust Approach
We believe that we have developed a unique approach to private banking
designed to provide our clients with unparalleled service. We emphasize
personalized client relationships and custom-tailored financial services,
complemented by the convenience of technology. The key aspects of our private
banking approach are:
. Personal Relationships. Each of our clients is matched with a dedicated
team of individuals, headed by a managing director who becomes the
client's central point of contact with PrivateBank. Through these
dedicated teams, we are able to build strong, ongoing, personal
relationships with our clients.
6
<PAGE>
. Affluent Target Client. We offer our services to those members of the
affluent segment of the population who are focused on building and
preserving wealth. Our clients include affluent professionals,
entrepreneurial individuals and their business interests.
. Customized Financial Services. We provide our clients with a wide
variety of financial services beyond traditional banking products and
are constantly working with our clients to identify their particular
needs and to develop and shape our services to meet those needs.
. Streamlined Decision-Making Process. Unlike many larger banks, we have
not instituted a lengthy chain of command. Our clients deal directly
with their dedicated managing directors, whose broad decision-making
authority allows them to respond quickly and efficiently.
. Enhanced Personal Service through Technology. While we encourage our
clients to contact us directly, we also utilize technology to complement
and enhance our service. Through PrivateBank Access, an internet banking
service, we offer clients the convenience of accessing our services from
remote locations at any time.
. Extensive Financial Network. To better compete with other financial
service providers, we rely on a network of professionals in the
financial and investment communities with whom we have developed
relationships over the years. This network allows us to deliver to our
clients a broad array of diverse, high-quality services, including
investment management, insurance and brokerage.
Strategy for Growth
Our growth strategy entails five key components:
. Developing Our Existing Relationships. An important part of our future
growth will be the continued development of our existing client
relationships. As the needs of our clients change and grow, we hope to
grow with them and continue to provide them with our unique, flexible
services.
. Increasing the Reach of Our Existing Offices. We hope to expand the
market presence of our existing offices, especially our Oak Brook,
Illinois and Wilmette, Illinois branches. We believe that there is a
growing need for private banking services in these regions which is
largely unmet, and we hope to capitalize on the experience and
reputations of our managing directors in meeting this need.
. Opening Additional Offices in the Chicago Metropolitan Area. The success
of our Oak Brook and Wilmette offices has confirmed a significant demand
by our target clients for specialized private banking services in the
Chicago metropolitan area. We will consider opening additional offices
to meet this demand as we identify favorable locations and senior
executives.
. Expanding into New Markets. We believe that the demand for our private
banking services is not unique to Chicago. As we identify Midwestern
markets that present similar opportunities for growth and development,
we intend to pursue selective geographic expansion through acquisitions
of existing institutions or by establishing new banking offices.
. Expanding into New Product Lines. We intend to identify additional
financial services not currently offered by PrivateBank in order to
increase our franchise value by diversifying our fee income,
strengthening our client relationships and broadening our product line.
We may expand our product line by acquisition. We will focus on
companies that emphasize quality service and the value of relationships
and complement our products and client base.
Our Experienced Management Team
PrivateBancorp, Inc. was founded in November 1989 by Ralph B. Mandell and
William R. Langley. Together, they had previously headed a $1.2 billion
publicly traded suburban Chicago bank holding company which they successfully
merged into First Chicago Corporation in 1987. As founders of our company, they
assembled a team of senior bankers with diverse experience and varied
backgrounds. Mr. Mandell, with 34 years in banking, has been instrumental in
the development of many of our client relationships, either personally or by
providing his assistance. As chief executive officer, he sets the direction of
our company and instills our sense of corporate culture. Mr. Langley retired
from active management in 1995, but remains on our Board of Directors.
7
<PAGE>
Our current management team consists of nine managing directors, including
Mr. Mandell, and six associate managing directors. Our managing directors are
senior financial professionals with an average of 27 years of banking and
financial experience. Together with our Board of Directors, they currently own
an aggregate of 1,054,040 shares of our common stock, which represents
approximately 30.5% of the shares currently outstanding. In addition to Mr.
Mandell, two other managing directors, Caren L. Reed and Donald A. Roubitchek
who have both been involved since 1990, also serve on our Board of Directors.
Mr. Reed, our vice chairman and chief credit officer, has spent 43 years in
banking and has extensive experience in relationship management and credit
administration. Our quality loan portfolio and credit culture was developed
under his tutelage. Mr. Roubitchek, our chief financial officer, also serves as
our chief administrative and operating officer. Mr. Roubitchek, with 27 years
of experience, has been responsible for managing our rapid growth.
Of our other three executive officers, Gary S. Collins, a managing director
since 1991, has over 24 years of experience and has been responsible for a
considerable number of client relationships through his expertise in real
estate lending. M. Gail Fitzgerald, a managing director since 1996, has 20
years of trust experience and is our senior trust officer responsible for
managing our trust area. Hugh H. McLean, a managing director since 1996, has
over 19 years of experience. He serves as head of our credit marketing group
and manages our Oak Brook office.
The Offering
<TABLE>
<S> <C>
Common stock offered by PrivateBancorp........ 900,000 shares(1)
Common stock to be outstanding after the 4,351,824 shares(2)
offering.....................................
Price to Public............................... $ per share
Use of Proceeds............................... We intend to use the net proceeds from the sale of
shares of common stock offered hereby for general
corporate purposes to support our anticipated future
growth. This may include:
. funding internal growth at the current
locations of our banking subsidiary;
. creating new offices in the Chicago
metropolitan area;
. expanding our presence into new markets
located in the Midwest; and/or
. acquiring businesses that are complementary
to ours.
Proposed Nasdaq National MarketSM............. PVTB
</TABLE>
- --------
(1) We have granted the underwriters an option, exercisable within 30 days
after the date of this prospectus, to purchase up to an additional 135,000
shares of our common stock at the initial public offering price, solely to
cover over-allotments, if any. See "Underwriting."
(2) This number does not include shares reserved for issuance pursuant to our
two stock plans. Pursuant to the terms of these plans, we are permitted,
and in some cases obligated, to issue shares of common stock in addition to
the common stock to be outstanding after this offering. If we issue these
shares, the percentage of the common stock you own may be diluted. The
following is a summary of additional shares of common stock that we have
approved for issuance:
. 673,023 shares reserved for issuance under a stock incentive plan
maintained for the benefit of eligible officers and employees. This
number includes shares to be available for future awards and shares
issuable upon exercise of currently outstanding options to purchase
426,488 shares at a weighted average exercise price of $10.37 per share
previously granted under the plan.
. 206,320 shares reserved for issuance under other outstanding options to
purchase common stock that were previously granted to directors and
officers. The weighted average exercise price of these options is $10.51
per share.
8
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
The following table summarizes certain consolidated financial information of
PrivateBancorp. You should read this table in conjunction with our consolidated
financial statements and related notes appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
Three Months
Ended
March 31, Year Ended December 31,
----------------- ---------------------------------------------
1999 1998 1998 1997 1996 1995 1994
-------- -------- -------- -------- -------- -------- --------
(dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Selected Statement of
Income Data:
Interest income:
Loans, including fees.. $ 5,636 $ 4,624 $ 19,619 $ 16,729 $ 12,152 $ 10,053 $ 6,418
Federal funds sold and
interest-bearing
deposits.............. 48 498 2,181 875 1,392 1,149 358
Securities............. 1,570 727 3,492 2,519 2,396 1,700 1,265
-------- -------- -------- -------- -------- -------- --------
Total interest
income.............. 7,254 5,849 25,292 20,123 15,940 12,902 8,041
-------- -------- -------- -------- -------- -------- --------
Interest expense:
Interest-bearing
demand deposits....... 142 121 487 377 305 276 210
Savings and money
market deposit
accounts.............. 1,800 1,629 6,651 5,880 4,613 3,484 2,139
Other time deposits.... 1,752 1,346 6,155 3,821 2,973 2,620 782
Funds borrowed......... 144 -- 19 3 143 50 62
-------- -------- -------- -------- -------- -------- --------
Total interest
expense............. 3,838 3,096 13,312 10,081 8,034 6,430 3,193
-------- -------- -------- -------- -------- -------- --------
Net interest income.. 3,416 2,753 11,980 10,042 7,906 6,472 4,848
Provision for loan
losses................. 285 91 362 603 524 930 305
-------- -------- -------- -------- -------- -------- --------
Net interest income
after provision for
loan losses......... 3,131 2,662 11,618 9,439 7,382 5,542 4,543
-------- -------- -------- -------- -------- -------- --------
Non-interest income:
Banking and trust
services.............. 442 273 1,281 1,210 911 674 414
Securities gains....... -- -- 40 -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Total non-interest
income.............. 442 273 1,321 1,210 911 674 414
-------- -------- -------- -------- -------- -------- --------
Non-interest expense:
Salaries and employee
benefits.............. 1,115 1,102 4,077 3,902 3,411 2,749 2,054
Occupancy.............. 352 334 1,379 1,274 990 946 745
Data processing........ 131 120 508 396 334 282 262
Marketing.............. 153 139 567 500 424 296 272
Amortization of
organization costs.... -- -- -- -- 23 280 280
Professional fees...... 178 94 561 448 326 284 253
Insurance.............. 41 30 134 115 82 238 342
Other expense.......... 285 181 864 627 508 434 321
-------- -------- -------- -------- -------- -------- --------
Total non-interest
expense............. 2,255 2,000 8,090 7,262 6,098 5,509 4,529
-------- -------- -------- -------- -------- -------- --------
Income before income
taxes............... 1,318 935 4,849 3,387 2,195 707 428
Income tax provision... 291 365 1,839 1,242 762 (403) 3
-------- -------- -------- -------- -------- -------- --------
Net income........... $ 1,027 $ 570 $ 3,010 $ 2,145 $ 1,433 $ 1,110 $ 425
======== ======== ======== ======== ======== ======== ========
Per Share Data:
Basic earnings......... $ 0.30 $ 0.18 $ 0.91 $ 0.69 $ 0.49 $ 0.39 $ 0.17
Diluted earnings....... 0.28 0.17 0.86 0.65 0.47 0.38 0.16
Dividends.............. 0.03 0.02 0.08 0.07 0.07 0.03 --
Book value (at end of
period)............... 8.71 7.86 8.53 7.67 6.84 6.47 6.13
Selected Financial
Condition Data
(at end of period):
Total loans............. $307,766 $223,746 $281,965 $218,495 $171,343 $126,069 $ 98,380
Total assets............ 431,055 331,924 416,308 311,872 246,734 196,917 141,826
Total deposits.......... 384,454 304,660 364,994 285,773 222,571 176,868 122,925
Funds borrowed.......... 10,000 -- 20,000 -- 3,000 700 1,000
Total stockholders'
equity................. 30,054 25,400 29,274 24,688 20,222 18,445 17,471
Trust assets under
administration......... $637,422 $524,019 $611,650 $469,646 $328,662 $212,456 $168,872
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
Three Months
Ended
March 31, Year Ended December 31,
-------------- ---------------------------------
1999 1998 1998 1997 1996 1995 1994
------ ------ ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Selected Financial Ratios
and Other Data(1):
Performance Ratios:
Net interest margin(2)..... 3.57% 3.65% 3.61% 4.01% 3.73% 3.95% 4.09%
Net interest spread(3)..... 3.02 2.96 2.98 3.31 3.03 3.16 3.42
Non-interest income to
average assets............ 0.42 0.34 0.37 0.45 0.42 0.40 0.35
Non-interest expense to
average assets............ 2.13 2.49 2.29 2.71 2.79 3.31 3.79
Net overhead ratio(4)...... 1.71 2.15 1.91 2.26 2.38 2.90 3.44
Efficiency ratio(5)........ 58.45 67.65 60.82 64.53 69.17 77.09 86.07
Return on average
assets(6)................. 0.97 0.71 0.85 .80 0.66 0.67 0.36
Return on average
equity(7)................. 13.84 9.11 11.27 9.49 7.38 6.22 2.94
Dividend payout ratio...... 8.36 10.63 8.74 10.13 12.88 8.03 --
Asset Quality Ratios:
Non-performing loans to
total loans............... 0.12 0.32 0.36 0.24 0.65 1.90 0.15
Allowance for possible loan
losses to:
total loans............... 1.20 1.40 1.21 1.40 1.43 1.55 1.04
non-performing loans...... 1,025 440 336 578 220 82 711
Net charge-offs to average
total loans............... -- -- -- -- 0.02 -- 0.01
Non-performing assets to
total assets.............. 0.08 0.21 0.24 0.17 0.45 1.22 0.10
Balance Sheet Ratios:
Loans to deposits.......... 80.1 73.4 77.3 76.5 77.0 71.3 80.0
Average interest-earning
assets to
average interest-bearing
liabilities............... 114.2 117.0 116.4 117.7 118.6 120.7 123.8
Capital Ratios:
Total equity to total
assets.................... 6.97 7.65 7.03 7.92 8.20 9.37 12.32
Total risk-based capital
ratio..................... 11.21 11.47 11.53 11.75 12.21 14.56 19.58
Tier 1 risk-based capital
ratio..................... 10.05 10.22 10.40 10.50 10.96 13.31 18.49
Leverage ratio............. 7.53 7.87 7.88 8.70 8.71 9.76 13.03
</TABLE>
- --------
(1) Certain financial ratios for interim periods have been annualized.
(2) Net interest income divided by average interest-earning assets.
(3) Yield on average interest-earning assets less rate on average interest-
bearing liabilities.
(4) Non-interest expense less non-interest income divided by average total
assets.
(5) Non-interest expense divided by the sum of net interest income plus non-
interest income.
(6) Net income divided by average total assets.
(7) Net income divided by average common equity.
10
<PAGE>
RISK FACTORS
Investing in our common stock involves risk. You should carefully consider
the risks and uncertainties described below and elsewhere in this prospectus
before deciding to invest in our common stock. If any of these risks or
uncertainties actually occur, our business could be adversely affected. In that
event, the trading price of our common stock could decline and you could lose
all or a part of your investment. Additional risks not currently known to us
(or which we currently consider immaterial) may also hurt our operations. This
prospectus also contains forward-looking statements that involve risks and
uncertainties. Our actual results could differ materially from those
anticipated in the forward-looking statements as a result of certain factors,
including those described below and elsewhere throughout the prospectus.
We depend on key personnel.
We are a relatively young organization and are relationship-driven. Our
growth and development to date have depended in large part on the efforts of
Mr. Ralph B. Mandell, our Chairman, President and Chief Executive Officer, who
was a co-founder of our company. Including Mr. Mandell, we currently have nine
managing directors at PrivateBank who are senior executives with extensive
personal and professional contacts in the financial and corporate communities.
Our managing directors have primary contact with our clients, and they are
extremely important in maintaining our personalized relationships with our
client base. They are also instrumental in increasing our market presence. The
unexpected loss of services of one or more of our key employees could have a
material adverse effect on our operations. We intend to enter into employment
contracts, including non-compete provisions, with two of our managing
directors, Mr. Mandell and Donald A. Roubitchek, our Secretary/Treasurer and
Chief Financial Officer, and we are dependent on their continued service in
these roles. We have not entered into employment agreements with any of our
other managing directors, nor have we entered into any key man life insurance
policies.
One of our executive officers, Vice Chairman Caren L. Reed, in addition to
his client responsibilities serves as our chief credit officer. Mr. Reed has
indicated that he intends to retire from active management in December 1999.
Mr. Reed has agreed to continue to serve as our chief credit officer until we
can name a successor so he can assist in the transition process. Our strong
credit quality experience to date could be adversely impacted by Mr. Reed's
retirement.
We may not be able to implement aspects of our growth strategies.
A key component of our growth strategy involves the expansion of our
business and operations, possibly through the addition of new product lines and
the acquisition or establishment of new offices. Implementing this aspect of
our growth strategy depends in part on our ability to successfully identify
acquisition opportunities and strategic partners that will complement our
private banking approach and to successfully integrate their operations with
ours. To open new offices, we must be able to correctly identify profitable or
growing markets, as well as attract the necessary relationships to make these
new facilities cost-effective. We cannot be sure that we will be able to
identify suitable opportunities for this type of expansion, or that if we do,
we will be able to successfully integrate these new operations into our
business. If we are unable to effectively implement our growth strategies, our
business may be adversely affected.
Since our business is concentrated in the Chicago metropolitan area, a downturn
in the Chicago economy may adversely affect our business.
Currently, PrivateBank's lending and deposit gathering activities are
concentrated primarily in the greater Chicago metropolitan area. Our success
depends on the general economic condition of Chicago and its surrounding areas.
Although currently the economy in these areas is favorable, we do not know
whether such conditions will continue. Adverse changes in the economy could
reduce our growth rate, impair our ability to collect loans, and generally
affect our financial condition and results of operations.
11
<PAGE>
We operate in a very competitive market.
We face substantial competition in all phases of our operations from a
variety of different competitors. PrivateBank competes for loans, deposits and
other financial services with other commercial banks, thrifts, credit unions
and brokerage houses. Some of these competitors are local, while others are
statewide, nationwide or international in scope. Many of our competitors offer
services which we do not and many have substantially greater resources, name
recognition and market presence. Some of the financial institutions and
financial services organizations with which we compete are not subject to the
same degree of regulation as is imposed on bank holding companies, and
federally insured, state-chartered banks and national banks. As a result, these
nonbank competitors have advantages over us in providing certain services. See
"Business--Competition."
Our business may be adversely affected by the highly regulated environment in
which we operate.
We are subject to extensive federal and state legislation, regulation,
examination and supervision. This regulation and supervision is primarily
intended to protect our clients and their deposits, and not our stockholders.
Recently enacted, proposed and future legislation and regulations have had,
will continue to have, or may have a material adverse effect on our business
and operations. Our success depends on our continued ability to maintain
compliance with these regulations, including those pertaining to the Community
Reinvestment Act. Some of these regulations may increase our costs and thus
place other financial institutions in stronger, more favorable competitive
positions. We cannot predict what restrictions may be imposed upon us with
future legislation. See "Supervision and Regulation."
We may be adversely affected by interest rate changes.
Our operating results are largely dependent on our net interest income. Net
interest income is the difference between the interest and fees we earn on
loans and interest-bearing investments, and the interest we pay to our clients
on their deposits and for borrowed funds. As interest rates fluctuate, our
assets and liabilities will reprice, which will cause our net interest income
to change. Interest rates fluctuate due to a variety of factors beyond our
control, including general economic and political conditions, and the policies
of various regulatory authorities.
When interest rates are rising, the interest income earned on assets we hold
may not increase as rapidly as the interest expense paid on our liabilities. As
a result, our earnings may be adversely affected when the costs of our
liabilities increase faster than the income we earn on our assets. The degree
to which earnings may be affected depends on the number and degree of any
increases in interest rates. In addition, rising interest rates may decrease
our earnings by diminishing the demand for loans and increasing the risk of
delinquencies and defaults.
We may be adversely affected by government monetary policy.
The banking industry is affected by the monetary policies of the Federal
Reserve System, which regulates the national money supply in order to mitigate
recessionary and inflationary pressures. In setting its policy, the Federal
Reserve System may utilize techniques such as the following:
. engaging in open market transactions in United States government
securities;
. setting the discount rate on member bank borrowings; and
. determining reserve requirements.
These techniques may have an adverse effect on our deposit levels, net interest
margin, loan demand or our business and operations. See "Supervision and
Regulation."
12
<PAGE>
Our allowance for loan losses may prove to be insufficient to absorb potential
losses in our loan portfolio.
Lending money is a substantial part of our business. However, every loan we
make carries a certain risk of non-payment. This risk is affected by, among
other things:
. the credit risks of a particular borrower;
. changes in economic and industry conditions;
. the duration of the loan; and
. in the case of a collateralized loan, the changes and uncertainties as
to the future value of the collateral.
We maintain an allowance for loan losses which we believe is appropriate to
provide for any potential losses in our loan portfolio. The amount of this
allowance is determined by management through a periodic review and
consideration of several factors, including:
. an ongoing review of the quality, size and diversity of our loan
portfolio;
. evaluation of non-performing loans;
. historical loan loss experience; and
. the amount and quality of collateral, including guarantees, securing the
loans.
Although we believe our loan loss allowance is adequate to absorb probable
losses in our loan portfolio, we cannot predict such losses, and there can be
no assurance that our allowance will be adequate. Excess loan losses could have
a material adverse effect on our financial condition and results of operations.
Regulatory restrictions on dividend payments from our subsidiary may affect our
ability to pay dividends to our stockholders.
We have paid dividends to our stockholders on a regular basis. Although we
intend to continue to pay dividends, our ability to do so may be affected by
many factors. While in the past we have had available cash at the holding
company level to fund dividend payments, we anticipate that in the future we
will rely on income earned by PrivateBank as the primary source for dividend
payments. PrivateBank is subject to certain restrictions on the amount of
dividends it may pay to us without regulatory approval. See "Dividends" and
"Supervision and Regulation--Bank Regulation--Dividends."
Our computer systems could experience a security breach.
As a service to our clients, we offer PrivateBank Access, our internet PC
banking product. Use of this service involves the transmission of confidential
information over public networks. We rely on commercially available encryption
and authentication technology to provide the security and authentication
necessary to effect secure transmission of confidential information. We cannot
be sure that advances in computer capabilities, new discoveries in the field of
cryptography or other developments will not result in a compromise or breach in
the technology that we use to protect our clients' transaction data. If we were
to experience such a breach or compromise, we could suffer losses and our
operations could be adversely affected.
We depend on third parties for our data processing needs; and we are in the
process of converting to a new provider for our loan and deposit processing
requirements.
We rely on outside organizations to handle virtually all of the data
processing aspects of our business. If these outside organizations experience
any type of computer or personnel failure and are unable to properly input or
process our information, our operations may be adversely affected. Situations
which might impair the ability of our outside data processors to meet our needs
include:
. computer system failure;
13
<PAGE>
. loss of the personnel to handle the requirements of all of its
customers;
. loss, misapplication or corruption of our data; and
. lack of preparation for the "year 2000 issue."
If any of these outside organizations cease doing business or are unwilling to
renew our contract, we may be adversely affected. In addition, we are currently
in the process of transferring our loan and deposit processing requirements to
a new third party provider. While we anticipate completing this transition
during the third quarter of 1999, we may experience some delays in this process
which could have an adverse impact on our operations.
We rely on the services of outside investment managers.
In our trust and asset management business, which currently is the source of
substantially all of our fee income, we do not provide investment management
services directly through our own personnel. Rather, we rely on selected
outside investment managers to provide investment advice and asset management
services to our clients. We cannot be sure that we will be able to maintain
these arrangements on favorable terms. Also, many of the investment managers
with whom we work are affiliated with our competitors in the financial services
field. We cannot be sure that our investment managers will continue to work
with us in these arrangements. The loss of any of these outside investment
managers may impact our ability to provide our clients with quality service or
certain types of portfolio management without incurring the cost of replacing
them.
Our business may be negatively impacted by the year 2000 issue.
A critical issue has emerged in the banking industry and for the economy
overall regarding how existing application software programs and operating
systems can accommodate the date value for the year 2000. The "year 2000 issue"
arose because many of these existing programs and systems use only the last two
digits in referring to a year. Therefore, these computer programs do not
properly recognize a year beginning with "20" instead of the familiar "19." If
not corrected, many computer applications and other technology-based systems
could fail or create erroneous results. The effects of this problem will vary
from system to system, and the extent of the potential impact of the year 2000
problem is not yet known. The year 2000 problem may adversely affect a bank's
operations. We could experience interruptions in PrivateBank's business and
suffer significant losses if we, or a supplier or vendor with whom PrivateBank
contracts, are unable to achieve year 2000 readiness before January 1, 2000. We
are in the process of working with our third party service providers and
software vendors to assure that both our holding company and PrivateBank are
prepared for the year 2000. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Our Information Systems and the
Year 2000."
Existing stockholders may sell their common stock and adversely affect the
market.
The market price of our common stock could drop as a result of sales of a
large number of shares of common stock after this offering. Immediately after
this offering, there will be 4,351,824 shares of our common stock outstanding
(assuming no prior exercise of outstanding options) of which it is estimated
that 2,602,998 shares will be freely tradable without restriction or further
registration under the Securities Act of 1933, including all of the 900,000
shares sold in this offering, unless held by our "affiliates", as that term is
defined in Rule 144 of the Securities Act. An additional 249,452 shares of our
common stock are held by non-affiliates and are subject to the provisions of
Rule 144. Of such shares, 176,704 may currently be sold pursuant to the manner
of sale and volume limitations of Rule 144, and will become freely tradable
under Rule 144(k) in May 1999. The remaining shares held by non-affiliates can
first be sold pursuant to the Rule 144 provisions beginning in September 1999.
Our directors and executive officers, who currently own an aggregate of
1,005,112 shares, and certain of our stockholders, who currently own an
aggregate of 472,662 shares (representing in aggregate 34.0% of the
14
<PAGE>
total number of shares that will be outstanding after the offering), have
agreed not to offer, sell or contract to sell any of their shares for a period
of 180 days after the date of this prospectus without the prior written consent
of EVEREN Securities, Inc. Upon expiration of this holding period, however,
these persons may sell their shares as permitted under Rule 144. See "Shares
Eligible for Future Sale."
Pursuant to the terms of our Stock Incentive Plan, we have awarded 21,600
shares of restricted stock to certain of our employees who are not executive
officers. Although our employees have full voting rights with regard to these
shares and may receive any dividends we declare, they may not transfer the
shares until they are fully vested. Each restricted stock award will vest in
its entirety on the fifth anniversary of the date of grant and is subject to
forfeiture until vesting. The shares vest on various dates between 2001 and
2004.
A substantial number of shares of our common stock issued pursuant to our
Stock Incentive Plan will also become available for resale in the public market
at prescribed times. In addition, we intend to register under the Securities
Act the shares of common stock reserved for issuance under our stock plans.
Our common stock has never been publicly traded, so we cannot predict the
extent to which a trading market will develop.
There has been no prior market for our common stock. The initial public
offering price for the shares was determined through negotiations between us
and the representatives of the underwriters and may not be indicative of the
market price of our common stock after this offering. The representatives of
the underwriters have advised us that they intend to make a market in our
common stock as long as the volume of trading activity in our common stock and
certain other market making conditions justify doing so. Making a market
involves maintaining bid and asked quotations for our common stock and being
available as principal to effect transactions in reasonable quantities at those
quoted prices, subject to various securities laws and other regulatory
requirements. We cannot be sure that the representatives of the underwriters
will be able to engage in market-making activities, nor can we predict the
extent to which investor interest in the Company will lead to the development
or maintenance of an active trading market for our stock. As a result, you may
not be able to resell your shares at or above the initial public offering
price.
The price of our common stock may be highly volatile.
From time to time, the stock market has experienced significant price and
volume fluctuations. These broad market fluctuations, as well as general
economic, market and political conditions may adversely affect the market price
of our common stock regardless of our performance.
Certain provisions of Delaware law and our charter and by-laws may discourage
or prevent a takeover of our company and reduce any takeover premium.
Our Restated Certificate of Incorporation, our By-laws and Delaware law all
contain provisions that could discourage potential acquisition proposals, or
delay or prevent a change in the control of the Company. Provisions in our
charter and By-laws designed to discourage or prevent a takeover include:
. staggered terms for our directors, which makes it difficult to replace
the entire board;
. the ability of the Board of Directors to issue shares of preferred
stock, which could dilute the voting power and equity interest of
holders of the common stock; and
. the requirement that holders of 66 2/3% of our outstanding common stock
must approve any change of these anti-takeover provisions.
Stockholders sometimes realize a significant premium in their stock price
when an offer is made to purchase a company. Because we have adopted these
provisions, such offers will likely be discouraged, and our stockholders may
lose the benefit of any potential premium. There are also state and federal
laws which regulate direct and indirect takeover attempts of financial
institutions.
15
<PAGE>
Our directors and officers may have significant influence on how our common
stock is voted.
Our directors and executive officers will beneficially own approximately
28.9% of the outstanding shares of our common stock at the closing of this
offering, assuming none of them purchases shares in the offering. If our
directors and executive officers vote together, they could influence the
outcome of certain corporate actions requiring stockholder approval, including
the election of directors and the approval or non-approval of significant
corporate transactions, such as the merger or sale of all or substantially all
of our assets.
You will incur immediate and substantial dilution in your shares.
Investors in this offering will experience an immediate and substantial
dilution in the book value of the common stock. If you purchase shares of our
common stock, and we sell 900,000 shares at an assumed offering price of $17.00
(the midpoint of the price range on the cover page of this prospectus), the pro
forma net tangible book value of your shares at March 31, 1999 will be $10.04.
This is $6.96 less than your purchase price.
Management will have substantial discretion over the use of the proceeds of
this offering.
We have not designated specific uses for the net proceeds of this offering.
We intend to use the net proceeds primarily for general corporate purposes. In
addition to funding anticipated internal growth, we may also use funds to
expand our business through establishment of new banking locations and entering
into strategic acquisitions and affiliations, to the extent we identify these
opportunities. Accordingly, you must rely upon the judgment of our management
who will have significant flexibility with respect to applying the net
proceeds. At present, we have no plans, agreements or understandings relating
to any specific acquisitions or alliances. Although part of our business
strategy is to pursue acquisitions and alliances that will broaden our product
offerings and add new markets, we cannot be sure that we will find strategic
acquisition opportunities at favorable prices, that we will have sufficient
capital resources to finance our acquisition strategy, or that any such
acquisitions, if consummated, will be successfully integrated with our business
operations.
16
<PAGE>
USE OF PROCEEDS
The net proceeds which we will receive from the sale of 900,000 shares of
common stock in this offering are estimated to be approximately $13,629,000
(assuming an initial public offering price of $17.00, the midpoint of the
estimated per share range, and no exercise of the over-allotment option) after
deducting underwriting discounts and the aggregate expenses payable by us. Such
expenses are currently estimated to be approximately $600,000.
We intend to use the net proceeds of this offering for general corporate
purposes to support our anticipated future growth. In addition to funding
internal growth at the current locations of our banking business, this may
include:
. establishing new offices within the Chicago metropolitan area;
. expanding our presence into new markets located in the Midwest; and
. acquiring or affiliating with companies in businesses complementary to
ours.
We have not yet identified any specific acquisition or affiliation candidates.
DIVIDENDS; NO PRIOR TRADING MARKET
Holders of our common stock are entitled to receive dividends that our Board
of Directors may declare from time to time. We may only pay dividends out of
funds which are legally available for that purpose. Because our consolidated
net income consists largely of the net income of PrivateBank, our ability to
pay dividends to our stockholders may become dependent upon our receipt of
dividends from PrivateBank. PrivateBank's ability to pay dividends is regulated
by banking statutes. See "Supervision and Regulation-- Bank Regulation--
Dividends." Our declaration of dividends is discretionary and will depend on
our earnings and financial condition, regulatory limitations, tax
considerations, and other factors. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity."
We have paid quarterly dividends on our common stock since the third quarter
of 1995. While our Board of Directors expects to continue to declare dividends
quarterly, there can be no assurance that we will continue to pay dividends at
these levels or at all. The following table sets forth the history of per share
cash dividends paid on our stock since the beginning of 1997:
<TABLE>
<S> <C>
1997
First Quarter............................. $0.016
Second Quarter............................ 0.016
Third Quarter............................. 0.019
Fourth Quarter............................ 0.019
1998
First Quarter............................. $0.019
Second Quarter............................ 0.020
Third Quarter............................. 0.020
Fourth Quarter............................ 0.020
1999
First Quarter............................. $0.025
</TABLE>
As of March 31, 1999, we had 491 stockholders of record. Prior to this
offering, there has been no established public trading market for our common
stock. We have applied for inclusion of our common stock in The Nasdaq National
Market upon completion of this offering.
17
<PAGE>
CAPITALIZATION
The following tables set forth our total capitalization and capital ratios
as of March 31, 1999, and our total capitalization as adjusted to reflect the
issuance and sale of 900,000 shares of our common stock which we are offering
in this prospectus (assuming the underwriters do not exercise the over-
allotment option) at an assumed initial public offering price of $17.00, the
midpoint of the estimated per share price range as described in "Use of
Proceeds."
<TABLE>
<CAPTION>
March 31, 1999
-----------------
As
Actual Adjusted
------- --------
(dollars in
thousands)
<S> <C> <C>
Stockholders' equity:
Preferred Stock, 1,000,000 shares authorized(1); none
designated or outstanding................................. $ -- $ --
Common stock, without par value, 12,000,000 shares
authorized(1); 3,451,824 shares, $1.00 stated value,
issued and outstanding; 4,351,824 shares outstanding as
adjusted(2)............................................... 3,452 4,352
Surplus.................................................... 22,600 35,329
Retained earnings.......................................... 5,853 5,853
Accumulated other comprehensive income, net of tax effect.. (58) (58)
Deferred compensation...................................... (843) (843)
Loan to executive officer.................................. (950) (950)
------- -------
Total stockholders' equity............................... $30,054 $43,683
======= =======
</TABLE>
- --------
(1) Gives effect to the amendment to PrivateBancorp's Restated Certificate of
Incorporation to increase the authorized shares which was approved by
stockholders on April 22, 1999.
(2) Excludes an aggregate of 632,808 shares of common stock issuable upon
exercise of outstanding options (after giving effect to option grants
through the date of this prospectus), of which 453,408 shares are subject
to currently exercisable options.
<TABLE>
<CAPTION>
March 31,
1999
---------
<S> <C>
Capital ratios (at end of period):
Total equity to total assets........................................ 6.97%
Total risk-based capital ratio...................................... 11.21
Tier 1 risk-based capital ratio..................................... 10.05
Leverage ratio...................................................... 7.53
</TABLE>
18
<PAGE>
DILUTION
As of March 31, 1999, we had an aggregate of 3,451,824 shares of common
stock outstanding, and the common stock had a net tangible book value of $8.71
per share. "Net tangible book value per share" represents our tangible net
worth, which is our total assets less our intangibles and total liabilities,
divided by the total number of shares of common stock outstanding. Net tangible
book value is equal to our reported book value. Without taking into account any
other changes in net tangible book value after March 31, 1999, other than those
resulting from application of the net proceeds we will receive from the sale of
900,000 shares offered hereby at an assumed initial public offering price of
$17.00 (after deduction of the underwriting discount and estimated offering
expenses), the net tangible book value at March 31, 1999, would have been
$10.04 per share. This represents an immediate increase of $1.33 per share to
current stockholders and an immediate dilution in book value of $6.96 per share
to new investors. The following table illustrates this per share dilution.
<TABLE>
<S> <C> <C>
Assumed initial public offering price........................ $17.00
Net tangible book value per share before the offering...... $8.71
Increase per share attributable to investors in the
offering.................................................. 1.33
-----
Net tangible book value per share after the offering......... 10.04
------
Per share book value dilution to investors in the
offering(1)................................................. $ 6.96
======
</TABLE>
- --------
(1) Does not give effect to and assumes no prior exercise of currently
outstanding options to purchase up to an aggregate of 632,808 shares of
common stock, of which 453,408 are currently exercisable. Adjusted as of
March 31, 1999, to give effect to the exercise of such options in
accordance with their terms, the estimated net tangible book value per
share before the offering would be $8.63 and after the offering would be
$9.85, and the estimated per share book value dilution to investors in the
offering would be $7.15.
The following table compares, on a pro forma basis at March 31, 1999:
. the total number of shares of common stock purchased from us;
. the total cash consideration paid;
and the average price per share paid by:
. existing stockholders; and
. new investors.
This table assumes the sale of 900,000 shares at $17.00, before the
deduction of the underwriting discount and estimated offering expenses, and
assumes no exercise of stock options outstanding as of March 31, 1999.
<TABLE>
<CAPTION>
Shares Total
Purchased Consideration Average
--------------- ---------------- Price
Percent Percent Per
Number of Total Amount of Total Share
------ -------- ------- -------- -------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Existing stockholders.................. 3,452 79.3% $26,032 63.0% $ 7.54
Investors in the offering(1)........... 900 20.7 15,300 37.0 17.00
----- ----- ------- -----
Total................................ 4,352 100.0% $41,332 100.0%
===== ===== ======= =====
</TABLE>
- --------
(1) If the over-allotment option is exercised in full, the number of shares of
common stock held by investors in the offering will increase to 1,035,000
shares, or 23.1% of the total shares of common stock outstanding after this
offering.
19
<PAGE>
BUSINESS
Overview
We organized PrivateBancorp as a Delaware corporation in 1989 to provide
highly personalized financial services primarily to affluent individuals and
their closely-held businesses. We were one of the first de novo banks started
in the Chicago area in recent years. The organizers had significant senior
level banking experience and many potential client contacts from prior banking
positions.
As the financial industry has consolidated and increased its emphasis on
quantity over quality, many financial institutions have focused on a mass
market approach using automated customer service which de-emphasizes personal
contact. We believe that the centralization of decision-making power at these
large institutions has resulted in disruption of client relationships as
frontline bank employees who have limited decision-making authority fill little
more than a processor role for their customers. At many of these large
institutions, services are provided by employees in the "home office" who
evaluate requests without the benefit of personal contact with the customer or
an overall view of the customer's relationship with the institution.
We believe that this trend has been particularly frustrating to affluent
individuals, professionals, owners of closely-held businesses and commercial
real estate investors who traditionally were accustomed to dealing directly
with senior bank executives. These customers typically seek banking
relationships managed by a decision maker who can deliver a prompt response to
their requests and custom tailor a banking solution to meet their needs. As
smaller, independent banks have been acquired by national, multi-bank holding
companies, the personal relationships that these customers maintained with the
management of such banks have eroded, and their individualized banking services
have been lost.
Through our banking subsidiary, The PrivateBank and Trust Company, we
provide our clients with traditional personal and commercial banking services,
lending programs, and trust and asset management services. Using the European
tradition of "private banking" as our model, we strive to develop a unique
relationship with each of our clients, utilizing a team of highly qualified
account executives to serve the client's individual and corporate banking
needs, and tailoring our products and services to meet such needs. Our managing
directors are strategically located in three Chicago-area offices: Downtown
Chicago, Wilmette, Illinois, and Oak Brook, Illinois. We opened our flagship
Chicago location in 1991. We expanded to our Wilmette office in north suburban
Cook County in 1994 after identifying a senior banking officer with existing
relationships and client contacts in this North Shore area. We opened the Oak
Brook facility in west suburban DuPage County in 1997 with the addition of a
managing director who has extensive relationships in that market.
Since our start in 1991, we have experienced rapid internal growth. From
year-end 1995 to March 31, 1999, our compound annual growth rate in loans was
31.6%, in assets was 27.3%, in deposits was 27.0% and in trust assets under
administration was 40.2%. At March 31, 1999, we had total loans of $307.8
million, total assets of $431.1 million, total deposits of $384.5 million,
total stockholders' equity of $30.1 million and total trust assets under
administration of $637.4 million.
Our Market
In response to the need for individualized banking services, we created The
PrivateBank and Trust Company as the first Chicago-based institution dedicated
exclusively to providing banking services to affluent individuals and
entrepreneurs. We targeted this segment of the market because we believe that
there is significant unmet demand for personalized services within this
segment, and also because we recognize its significant growth potential.
According to National Decision Systems, San Diego, California, the number of
households in the metropolitan Chicago area with annual incomes greater than
$150,000 was estimated at 190,042 in 1998, compared to 63,861 households in
1990. This equates to a compound annual growth rate of 14.6%, versus an annual
growth rate for the total number of households in the metropolitan Chicago area
of
20
<PAGE>
0.6%. By 2003, the number of these affluent households in the Chicagoland area
is expected to increase to approximately 358,000, representing an annual growth
rate of 13.5%, while the aggregate number of households is expected to increase
at an annual growth rate of 0.3%. The following graph illustrates the size and
relative growth of this market:
[Performance Graph Appears Here]
The PrivateBank and Trust Approach
We believe that we have developed a unique approach to private banking
designed to provide our clients with unparalleled service. We emphasize
personalized client relationships and custom-tailored financial services,
complemented by the convenience of technology. The key aspects of our private
banking approach are:
. Personal Relationships. Our approach begins with the development of
strong, dedicated relationships with our clients. Each client of
PrivateBank is matched with a team of individuals headed by a managing
director. This managing director becomes our client's central point of
contact with PrivateBank. Our nine managing directors, who are senior
financial professionals with an average of 27 years of banking and
financial experience, act as the financial partners of our clients,
working with them to identify and service their banking needs. By
dedicating a team of executives to each client, we are able to build
ongoing relationships which allow our managing directors to use their
increasing knowledge of the client's financial history and goals to
quickly adapt our services to the client's individual needs. Our clients
interact with the same persons at PrivateBank for all types of banking
services, enabling them to gain a sense of security and continuity of
personal service in their banking relationship. On the basis of this
trust and confidence, we seek to expand the scope of services provided
to each client, often including banking needs related to the business
affairs of our clients. Satisfied clients provide our most fertile
source of new business and new client referrals as well.
21
<PAGE>
. Affluent Target Client. We believe that the affluent segment of the
population is increasing and is diverse in terms of its overall wealth
and financial needs. PrivateBank offers its services to those members of
this segment who are focused on building and preserving wealth. Our
clients include affluent professionals, entrepreneurial individuals and
their business interests. We target service industries such as the
accounting, legal and medical professions, as well as owners of closely-
held businesses, commercial real estate investors and corporate
executives. Although we generally target individuals with high annual
incomes and net worths, we recognize the growth potential of certain
young professionals and extend our services to those individuals whose
income or net worth do not initially meet our criteria. We believe that
this segment of the market is most suited to our business and that these
individuals are most likely to develop long-term relationships with us.
. Customized Financial Services. We realize that many of our clients
require a custom solution to their financial needs. In taking a long-
term, relationship approach to our clients, we are able to differentiate
ourselves from the "one-size-fits-all" mentality of other financial
institutions. We offer our clients a wide variety of financial services
beyond the traditional banking products and are constantly working to
develop and shape our services to meet their growing needs. We take the
time to identify our clients' particular needs and tailor our services
to meet those needs on an individual customized basis, while maintaining
highly competitive rates and fees that take into account the size and
profitability of each client relationship. While we are proud of our
portfolio of products, it is our service that distinguishes us from our
competition. We encourage our clients to contact us rather than
discourage them. We use regular contact as a way to strengthen our
relationships, increase services to existing clients and earn referral
business.
. Streamlined Decision-Making Process. Unlike most larger banks, we have
not instituted a lengthy chain of command. Our clients deal directly
with their dedicated managing directors, who are given broad decision-
making authority. This allows our managing directors to respond quickly
and efficiently to our clients' needs. We are able to use a streamlined
approach because our organization has many qualified, experienced credit
officers. Officers with credit approval authority make themselves
available on short notice to help consult on or approve credits when
time is of the essence. We use an "on call" approach, rather than
structured meetings, to approve credit. As the amount of the credit and
the complexity increases, we resort to a more traditional process.
. Enhanced Personal Service through Technology. While we encourage our
clients to contact us directly, we also utilize technology to complement
and enhance our service. We created products such as PrivateBank Access,
our internet banking service, MasterMoney debit cards and Private Line
Access, our voice-response communication system, to enhance, not
replace, personal contact. This technology allows us to offer our
clients the convenience of accessing our services from remote locations
at any time of day.
We believe that our PrivateBank Access product is likely to grow in
importance. Our clients may connect to PrivateBank Access directly
through our internet website, without the need for the diskettes or
software downloads found in some competing PC banking systems.
Currently, our product:
. accesses deposit and loan information;
. allows transfers of funds among accounts;
. includes a bill payment service with a variety of options;
. allows information to be exported to financial software packages;
. includes a help desk which is staffed 92 hours per week; and
. sends e-mail messages from clients to PrivateBank personnel.
22
<PAGE>
We are working to supplement our website to enhance our service to
clients. Some features we are planning include:
. applications for our banking products;
. access to trust account information;
. current deposit rate schedules; and
. current mortgage rate schedules.
As technology changes, we intend to modify and enhance our electronic
banking products. We believe that in the future, a growing number of
our clients will desire both personal and electronic services. We
intend to work to offer dual-delivery systems satisfying the quality of
service to which PrivateBank clients are accustomed.
. Extensive Financial Network. In order to compete with other financial
service providers, we rely on a network of professionals in the
financial and investment communities with whom we have developed
strategic alliances over the years. This enables us to offer our clients
a broad array of high quality services. For example, we work with
selected investment management firms in providing services to our trust
clients. Our clients can either maintain existing investment management
relationships when they become our trust clients, or use our preferred
providers of investment management services. This choice distinguishes
our service from the rigid policies set by some of our competitors. We,
in turn, help our clients select a complete package of services best
suited to their individual needs without incurring the overhead
associated with directly employing diversified portfolio managers. We
also have a contractual fee sharing agreement with Mesirow Financial,
Inc., whose insurance unit is one of the largest independent insurance
brokerage companies in the Chicago area. Through this affiliation, we
offer a full range of personal and corporate insurance products to our
clients. To complement our existing financial products and services, we
have a contractual arrangement with Sterling Investment Services, Inc.,
a registered securities broker-dealer firm, through which we offer our
clients on-site securities brokerage services.
Strategy for Growth
Our growth strategy entails five key components:
. Developing Our Existing Relationships. An important part of our future
growth will be the continued development of our existing client
relationships. As the needs of our clients change and grow, we seek to
grow with them and continue to provide them with our custom-tailored,
flexible services. For example, we strive to follow our clients from the
purchase of their homes, through the financing of their own business, to
the development and planning of their estate, continuing the
relationship tradition with their children and grandchildren. We believe
we have a significant opportunity to further develop our existing client
relationships in each of our offices.
. Increasing the Reach of Our Existing Offices. In addition to increasing
the services provided to our existing clients, we seek to expand the
market presence of our existing offices, especially our Oak Brook and
Wilmette branches. We believe that the growing need for private banking
services in these regions is largely unmet and we have a significant
opportunity to increase our client base in these branches. We hope to
capitalize on our reputation and the reputations of our managing
directors in increasing our market presence. Our managing directors,
with their well-established personal and professional contacts in the
financial and corporate arenas, have been instrumental in developing our
business to date. We encourage our senior executives to attend and host
business receptions, charitable activities and promotional gatherings so
that we may interact with our clients in a unique and personal manner.
We also hope to grow our branch offices through referrals from our
existing clients. Referrals have been a significant source of new
business for us. We value this system of networking because it allows us
to further develop and strengthen our personal and professional
relationships with both new and existing clients.
23
<PAGE>
. Opening Additional Offices in the Chicago Metropolitan Area. Our
experience in our Oak Brook and Wilmette offices demonstrates that there
exists significant demand by our target client for specialized private
banking services in the Chicago metropolitan area. We built these
offices around senior executive officers whom we recruited for their
strong banking experience and extensive personal and professional
contacts in those areas. To increase our market penetration we will
consider opening additional offices as we identify locations and senior
executives that will maintain our standards for high-quality
personalized service.
. Expanding into New Markets. We believe the trend toward bank
consolidation and centralized decision-making that has created a demand
for our private banking services is not unique to Chicago. We believe
there is similar demand in other markets within the Midwest and we are
interested in expanding in markets that present opportunities for growth
and development similar to those in the Chicago market. We intend to
pursue selective geographic expansion through possible acquisitions of
existing institutions or by establishing new banking offices.
. Expanding into New Product Lines. We desire to be the primary source of
financial products and services for our clients. By broadening our
product line with additional financial services not currently offered by
PrivateBank, we believe we can increase our franchise value through
diversification of our fee income and strengthening of our client
relationships. To achieve this goal, we intend to consider acquisitions,
joint ventures or strategic alliances with other companies that
emphasize quality service and the value of relationships. Our targets
are businesses that complement our services and enable us to broaden our
product line to better serve our clients.
Our Services
We offer banking services to our clients at a personal level. This is not
the same as personal banking service. We define private banking as offering
banking products and services to our clients when they want it, how they want
it and where they want it. We tailor our products and services to fit our
clients instead of making our clients fit our products and services. Our
services fall into four general categories:
. Commercial Services. PrivateBank offers a full range of lending products
to businesses owned by or affiliated with our clients. We offer lines of
credit for working capital, term loans for equipment and other
investment purposes, and letters of credit to support the commitments
our clients make. PrivateBank tailors these products to meet the varied
needs of the client. Non-credit products we offer include lockbox, cash
concentration accounts, merchant credit card processing, electronic
funds transfer, other cash management products and insurance. We strive
to offer banking packages that are competitive and allow us to provide
service to our clients beyond what is expected in our industry.
. Real Estate Services. PrivateBank provides real estate loan products to
businesses and individuals. Our commercial real estate lending products
are designed for real estate investors. We provide a full range of fixed
and floating rate permanent and mini-permanent mortgages for our clients
to finance apartment buildings, office buildings, strip shopping
centers, and other income properties. We also provide some construction
lending for residential and commercial developments. Our lending
products are competitively priced with terms that are tailored to our
clients' individual needs.
Our residential mortgage products range from 30-year fixed rate
products to personal construction lending. The home mortgage market is
very competitive and we believe that our service is what separates
PrivateBank from our competition. Many mortgage lenders cannot work
with borrowers who have non-traditional income sources or non-
traditional properties, such as co-ops. Our mortgage lending staff is
trained to work with successful individuals who have complex personal
financial profiles. We have developed a proficiency for mortgages in
excess of $1.0 million per loan and will work with our clients and our
market sources to place these loans into the secondary market. Our
experience has been that residential lending is an excellent vehicle to
attract new clients.
24
<PAGE>
. Trust and Asset Management. PrivateBank's trust services include
investment management, personal trust and estate services, custodial
services, retirement accounts and brokerage and investment services. Our
investment management professionals work with our clients to define
objectives, goals and strategies for their investment portfolios.
PrivateBank assists the client with the selection of an investment
manager and works to tailor the investment program accordingly. Our
trust and estate account administrators work with our clients and their
attorneys to establish their estate plans. We work closely with our
clients and their beneficiaries to ensure that their needs are met and
to advise them on financial matters. When serving as trustee or
executor, we often structure and oversee investment portfolios. We also
provide our clients with custodial services for safekeeping of their
assets. Consistent with our private banking approach, we emphasize a
high level of personal service in our trust area, including prompt
collection and reinvestment of interest and dividend income, weekly
valuation, tracking of tax information, customized reporting and ease of
security settlement. PrivateBank also offers retirement products such as
individual retirement accounts and administrative services for
retirement vehicles such as profit sharing plans and employee stock
option plans, as well as a full line of brokerage and investment
products.
. Individual Banking Services. Our typical private banking client has
several of the following products: interest bearing checking with credit
line, money market deposit accounts, certificates of deposit, ATM/debit
card, and brokerage accounts. Some of our clients have recently selected
our PrivateBank Access Internet PC banking product. In addition to
residential mortgages, we provide clients a variety of secured and
unsecured personal loans and lines of credit. Through our affiliations
with Mesirow and Sterling, we offer insurance products and securities
brokerage services. We strive to accommodate the individual needs of
each of our clients by offering the convenience of highly personalized
services, including domestic and international wire transfers and
foreign currency exchange.
Lending Activities
We work with our clients to provide a full range of commercial, real estate
and personal lending products and services. Our loans are concentrated in six
major areas: (a) commercial real estate; (b) residential real estate; (c)
commercial; (d) personal; (e) home equity; and (f) construction. We have
adopted a loan policy that contains general lending guidelines and is subject
to review and revision by the Board of Directors. We extend credit consistent
with this comprehensive loan policy. We believe the credit quality of our loan
portfolio is excellent.
The goal of our lending program is to meet the credit needs of our diverse
client base while using sound credit principles to protect the quality of our
assets. Our business and credit strategy is relationship-driven and we strive
to provide a reliable source of credit, a variety of lending alternatives, and
sound financial advice. When extending credit, our decision is based upon our
client's ability to repay us from non-speculative sources. The quality and
integrity of the borrower is crucial in the loan approval process. We monitor
the performance of our loan portfolio through regular contacts with our
clients, continual portfolio review, careful monitoring of delinquency reports
and reliance on our loan review function.
We have retained an independent, outside resource to perform our loan review
function. Using an outside resource ensures that our loan review process
remains independent of the loan production and administration processes. Our
loan reviewer examines individual credits to critique individual problems and
the entire portfolio to comment on systemic weaknesses. The reviewer reports
directly to the audit committee of our Board of Directors on a quarterly basis.
In addition to loan review, the loan/investment committee of our Board reviews
the adequacy of the allowance for loan losses on a quarterly basis. The
committee assesses management's loan loss provisions based on loan review's
findings, delinquency trends, historical loan loss experience and current
economic trends.
Our legal lending limit, based on PrivateBank's financials, is calculated at
20% of capital plus unencumbered reserves. At March 31, 1999, our legal lending
limit was approximately $6.5 million. This is the
25
<PAGE>
maximum amount of credit that we may commit to any one individual or business
entity after aggregating all related credit. After the offering, our legal
lending limit will increase by 20% of the amount of capital we choose to deploy
at PrivateBank.
In addition to our chief credit officer, certain individuals have been
designated acting chief credit officers, credit officers, officers with lending
authority, and residential real estate lending officers. No single individual
has sole authority to approve a loan. As the size of aggregate credit exposure
increases, additional officers are required to approve the loan requests. This
serves several purposes: (a) larger credits get more scrutiny, (b) most senior
credit officers become involved in the decision-making process for the vast
majority of dollars loaned without approving a proportionate number of loan
requests, and (c) we become more consistent in administration of credit as
credit officers experience the dynamics of our overall portfolio and credit
culture. We also believe that our past credit approval practices will mitigate
the effect of the impending retirement of our chief credit officer because our
credit culture is firmly in place.
Our chief credit officer, or his designate, is involved in all credit
decisions when the aggregate credit exposure is in excess of $250,000. Our
loan/investment committee reviews all credit decisions over $1 million. Prior
approval is required for credit exposure in excess of $4 million and for all
credits related to our board members or our managing directors. Loans are
approved at the bank level by a management loan committee or by small group
presentations to credit officers. We believe that this process allows us to be
more responsive to our clients' needs by being able to approve credit without
waiting for scheduled committee meetings. We also use management committee
meetings to discuss complex credits or when we feel that a particular credit
may be informative to everyone in the loan approval process.
The following table sets forth our loan portfolio by category as of March
31, 1999:
<TABLE>
<CAPTION>
Percentage
March of total
31, 1999 loans
-------- ----------
<S> <C> <C>
Commercial real estate................................ $108,599 35.3%
Residential real estate............................... 62,208 20.2
Commercial............................................ 53,834 17.5
Personal.............................................. 45,122 14.7
Home equity........................................... 19,860 6.4
Construction.......................................... 18,143 5.9
-------- -----
Total loans......................................... $307,766 100.0%
======== =====
</TABLE>
Commercial Real Estate Loans. Our commercial real estate portfolio is
comprised primarily of loans secured by multi-family housing units located in
the Chicago metropolitan area. Other types of commercial real estate collateral
include: commercial properties owned by clients housing their manufacturing,
warehousing or service businesses, investments in small retail centers, and
investments in other business properties.
Commercial real estate loan products include mini-permanent and permanent
financing, transaction loans to purchase properties prior to permanent
financing, and lines of credit secured by commercial real estate portfolios. We
typically structure mini-permanent and permanent financing as adjustable rate
mortgages ("ARMs"). ARM structure allows our clients to lock in an interest
rate for a fixed period of time in order to avoid interest rate risk. The vast
majority of our ARM loans have initial fixed pricing for between one to five
years. Each ARM loan has language defining repricing beyond the initial fixed
pricing term. Transaction loans to purchase commercial property typically have
maturities of one year or less. Lines of credit secured by commercial real
estate portfolios are typically granted for one year with annual extensions
after a successful underwriting review. Interest rates for our lines of credit
typically are based on a floating rate formula.
Our credit analysis process for commercial real estate loans includes review
of the appraised value of the property, the ability of the property as
collateral to service debt, the significance of any outside income of the
26
<PAGE>
borrower or income from other properties owned by the borrowers, and the
strength of guarantors, if any. Our real estate appraisal policy has been
approved by our board loan/investment committee. It addresses selection of
appraisers, appraisal standards, environmental issues and specific requirements
for different types of properties.
Residential Real Estate Loans. Our residential real estate portfolio
consists primarily of first and second mortgage loans for 1-4 unit residential
properties. We do not originate long-term fixed rate loans for our own
portfolio due to interest rate risk considerations. However, we do originate
these loans for sale into the secondary market. This is a significant business
activity in our residential real estate lending unit. For our own portfolio, we
originate ARM loans typically structured with 30 year maturities and initial
rates fixed for between one to five years with annual repricing beyond the
initial term.
Our credit review process mirrors the standards set by traditional secondary
market sources. We review appraised value and debt service ratios, and we
gather data during the underwriting process in accordance with the various laws
and regulations governing residential real estate lending. Our real estate
appraisal policy sets specific standards for valuing residential property.
We require pre-approval from secondary market sources before we approve
loans to be sold into the secondary market. Our internal approval process is
less stringent for loans pre-approved by our secondary market sources. This
allows us to be responsive to the tight time commitments dictated for locking
in rates in the secondary market.
We believe that we have a competitive advantage in our ability to offer
financing for our clients who have non-traditional income sources or require
large mortgage loans. We have developed secondary market sources for mortgages,
including several able to provide financing in amounts in excess of $1.0
million per loan which is occasionally required by our clients. By offering our
own ARM loans, we can offer credit to individuals who are self-employed or have
significant income from partnerships or investments. The secondary market often
will not take the time or be unable to make exceptions for otherwise qualified
borrowers. We have experience in making loans to qualified borrowers secured by
co-ops. We believe that we are one of a limited number of financial
institutions in the Chicago area making these loans.
Commercial Loans. Our commercial loan portfolio is comprised of lines of
credit for working capital, term loans for equipment and expansion, and letters
of credit. These loans are made to businesses affiliated with our clients, or
to clients directly for business purposes. The vast majority of our commercial
loans are personally guaranteed. Unsecured loans are made to businesses when a
guarantor, as a secondary source of repayment, has a significant ability to
repay and a significant interest in the business entity.
Our lines of credit typically are limited to a percentage of the value of
the assets securing the line, and priced by a floating rate formula. Lines of
credit typically are reviewed annually and are supported by accounts
receivable, inventory and equipment. Depending on the risk profile of the
borrower, we may require periodic aging of receivables, and inventory and
equipment listings to verify the quality of the borrowing base prior to
advancing funds. Our term loans are typically also secured by the assets of our
clients' businesses. Term loans typically have maturities between one to five
years, with either floating or fixed rates of interest. Commercial borrowers
are required to provide updated personal and corporate financial statements at
least annually. Letters of credit are an important product to many of our
clients. We have the ability to issue standby or performance letters of credit,
and can service the international needs of our clients through correspondent
banks. We use the same underwriting standards for letters of credit as we do
for funded loans.
Our credit approval process for commercial loans is comprehensive. We review
the current and future cash needs of the borrower, the business strategy,
management's ability, the strength of the collateral, and the strength of the
guarantors. While our loan policy has guidelines for advances on different
types of collateral, we establish eligible asset values on a case-by-case basis
for each borrower. Our officer on the account must be able to validate his or
her position during the approval process.
27
<PAGE>
Personal Loans. Our personal loan portfolio consists of loans to secure
funds for personal investment, loans to acquire personal assets such as
automobiles and boats, and personal lines of credit. Quite often, our borrowers
prefer not to liquidate assets to secure funds for investment or personal
acquisitions. They will use these assets as collateral for personal loans, or
if their financial statements and personal reputations are sufficient, we will
grant unsecured credit.
Our clients request a combination of lines of credit, floating rate term
loans and fixed rate term loan products. Many of our clients use their personal
investment portfolios as collateral for personal loans. Personal lines of
credit are used for a variety of purposes such as the comfort of having funds
available for future uses or establishing a line of credit as overdraft
protection. We respond quickly to the needs of our clients within the limits
set by our loan policy.
Personal loans undergo the same approval process as all other types of
loans. Each client is underwritten to ensure that they have adequate collateral
coverage and/or cash flow. Annual financial statements are required of each
personal borrower.
Home Equity Loans. Our home equity loan portfolio consists of traditional
home equity lines of credit prevalent in the market today. In general, we
advance up to 80% on the value of a home, less the amount of prior liens.
However, we may vary from that percentage depending on the value of the home,
type of dwelling, and the personal financial situation of the borrower. Home
equity loans are funded either through draws requested by our client or by
special home equity credit drafts that function as bank checks. Home equity
loans are approved using the same standards as residential mortgage loans. Our
borrower's personal cash flow is compared to debt service requirements to
determine our borrower's ability to repay. Home equity loans are competitively
priced based using a floating rate formula.
Construction Loans. Our construction loan portfolio consists of single
residential properties, multi-family properties, and commercial projects. As
construction lending has greater inherent risk, we closely monitor the status
of each construction loan throughout its term. Typically, we require full
investment of the borrower's equity in construction projects prior to injecting
our funds. Generally, we do not let our borrowers recoup their equity from the
sale proceeds of finished units (if applicable) until we have recovered our
funds on the overall project. We use a title company to disburse periodic draws
from the construction line to ensure that there will be no title problems at
the end of the project.
Our construction loans are often the highest yielding loans in our portfolio
due to the inherent risks and the monitoring requirements. These loans
typically have floating rates, commitment fees and release fees. During our
credit approval process, factors unique to construction loans are considered.
These include assessment of the market for the finished product, reasonableness
of the construction budget, ability of the borrower to fund cost overruns, and
the borrower's ability to liquidate and repay the loan at the greatest point of
risk. Due to our more stringent standards for underwriting and monitoring
construction loans and the credit profile of our borrowers, we are comfortable
with the risk associated with this portfolio and are committed to construction
lending as an integral part of our lending program.
Investment Activities
The objective of our investment policy is to maximize income consistent with
liquidity, asset quality, regulatory constraints and asset/liability
objectives. The policy is reviewed at least annually by our Board of Directors.
The Board is provided monthly information recapping purchases and sales with
the resulting gains or losses, average maturity, federal taxable equivalent
yields and appreciation or depreciation by investment categories.
We invest primarily in direct obligations of the United States, obligations
guaranteed as to principal and interest by the United States, obligations of
agencies of the United States, bank-qualified obligations of state and local
political subdivisions and collateralized mortgage obligations. We also may
invest from time to time
28
<PAGE>
in corporate debt or other securities as permitted by our investment policy. In
addition, we enter into federal funds transactions with our principal
correspondent banks, and primarily act as a net seller of such funds. The sale
of federal funds are effectively short-term loans from us to other banks.
Our investment accounts also include minimal equity investments in the
Federal Home Loan Bank of Chicago ("FHLB") and Neighborhood Housing Service
("NHS"). We invest in FHLB in order to be a member, which qualifies us to use
their services, including FHLB borrowings. See "Management's Discussion and
Analysis of Financial Condition and Results of Operation--Liquidity and Capital
Resources." NHS is a not-for-profit organization which helps provide affordable
housing to low and moderate income residents in the Chicago area. The size of
our investment is proportionate to the volume of loans in certain credit
programs offered by NHS. NHS is an important vehicle in our Community
Reinvestment Act ("CRA") lending program.
We recognize that we do not have the resources or the need to employ a full-
time investment manager who has the expertise to establish a diverse investment
program. We have engaged two investment advisory firms to help us execute our
strategy. One firm is responsible for helping us select taxable investment
products to meet our investment portfolio objectives. This firm employs a team
of professionals who bring us recommendations and challenges us on a regular
basis. Our other advisor is a leading investment manager of tax-exempt
portfolios and is well-known to us through his work with our trust clients. We
believe that the expertise of these two firms allows us to be cost effective
and will produce returns above peer group levels over the long term.
Asset/Liability Management Committee
We have an asset/liability committee ("ALCO") comprised of selected senior
executives who are charged with the dual goals of optimization and
stabilization of net interest income over time while adhering to prudent
banking practices. ALCO oversees asset growth, liquidity and capital, and
directs our overall acquisition and allocation of funds. At our monthly
meetings, ALCO reviews issues including:
. data on economic conditions;
. current interest rate outlook;
. current forecast on loans and deposits;
. mix of interest rate sensitive assets and liabilities;
. bank liquidity position;
. investment portfolio purchases and sales; and
. other matters as presented.
ALCO is also responsible for monitoring compliance with our investment
policy. On a monthly basis, ALCO reports to the loan/investment committee who
reviews the portfolio of reports we prepare for our Board of Directors and all
the decisions made by ALCO affecting net interest income.
Trust and Asset Management
We offer our clients a wide variety of trust and asset management services
designed to meet their individual needs and investment goals. Many of our trust
clients have longstanding relationships with our managing directors. In
administering a trust, we work closely with our client, the beneficiaries and
the trustees' attorneys and accountants on personal and tax matters to assist
the client in accomplishing the stated objectives. As fiduciaries of a trust or
estate our responsibilities may include:
. administering the account pursuant to the applicable document;
. collecting, holding and valuing assets;
. monitoring investment portfolios;
29
<PAGE>
. paying debts, expenses and taxes;
. distributing property; and
. advising beneficiaries.
In addition to trust and estate administration, we offer:
. institutional accounts;
. guardianship administration;
. investment agency accounts;
. Section 1031 exchanges; and
. custodial accounts.
The asset mix in our trust accounts has been fairly traditional, including
significant equity and debt portfolios. Over the past three years, the average
account value of new trusts administered by PrivateBank was approximately $3.0
million. We believe that our trust business will continue to grow as we expand
our client base and our clients increasingly reach retirement age and focus on
their estate plans.
Our investment management philosophy for our trust assets under
administration is built on two principles: (a) the preservation of capital, and
(b) achievement of maximum total return consistent with each individual
client's objectives. We have chosen to outsource the investment management
aspect of our business so that we may offer our clients diversity and
flexibility of investment representation and to allow us to impartially
evaluate investment performance. This structure also allows our clients to
independently designate one or more specific advisors enabling them to maintain
existing relationships they may have within the financial community. If the
client does not have such a relationship in place, we then help them select an
investment management firm that will best service their needs. Based on the
client's investment strategy and objectives and the account attributes, one or
more investment managers will be selected from our list of approved advisors.
Our trust policy has established controls over our trust activities to
safeguard the assets of our clients against operational and administrative
risk. We have a system of internal controls that is designed to keep our
operating risk at appropriate levels. Our system of internal controls includes
policies and procedures relating to authorization, approval, documentation and
monitoring of transactions. Administrative risk is the risk of loss that may
occur as a result of breaching a fiduciary duty to a client. To manage this
risk, our trust policy has established corporate policies and procedures to
ensure that obligations to clients are discharged faithfully and in compliance
with applicable legal and regulatory requirements. These policies and
procedures provide guidance and establish standards related to the creation,
sale, and management of investment products, trade execution, and counterparty
selection.
Properties
We have three physical banking locations. The main offices of PrivateBancorp
and PrivateBank are located in the central business and financial district of
Chicago. We lease 20,923 square feet comprising the entire eighth, ninth, and
tenth floors and part of the eleventh floor of a building located at Ten North
Dearborn Street. This lease expires on or about August 31, 2006.
PrivateBank established a north suburban office in the affluent North Shore
area located at 517 Green Bay Road, Wilmette, Illinois, in October 1994.
PrivateBank leases approximately 5,300 square feet on the first floor of a
commercial building. This lease expires on June 30, 1999 and has been renewed
for an additional five-year term.
30
<PAGE>
In January 1997, we opened a second branch office of PrivateBank in rapidly
growing, west suburban DuPage County at 1603 West Sixteenth Street, Oak Brook,
Illinois. We lease approximately 4,200 square feet on the first floor of a two-
story office building. This lease expires on December 14, 2001.
We have a variety of renewal options in each of our properties and certain
rights to secure additional space.
Competition
We do business in the highly competitive financial services industry.
PrivateBank's geographic market is primarily the greater Chicago metropolitan
area. The financial services industry is comprised of commercial banks,
thrifts, credit unions, investment banks, brokerage houses, money managers, and
other providers of financial products and services. These firms compete with
PrivateBank for one or more of the following: loans, deposits, trust services,
or investment products. Some of these firms have business units that promote
themselves as "private banks." The typical private banking competitor is a unit
of a large commercial bank catering to the upper echelon of that bank's
customer base.
We view ourselves as the only private bank in the Chicago market focused
solely on offering an extended range of traditional banking and trust products
to affluent individuals and their business interests. While our products may be
similar to our competitors', we attempt to distinguish ourselves by emphasizing
consistent, superior levels of personal service. For commercial and commercial
real estate lending, we compete with a number of major Chicago-area financial
institutions and suburban banks. For trust services, we compete with the
largest Chicago-area banks and some investment managers. For private banking
services, we compete with the private banking departments of major Chicago-area
financial institutions, some suburban banks, and brokerage houses. For
residential mortgage lending, our products compete with banks, savings and
loans, mortgage brokers and numerous other financial services firms offering
mortgage loans in our market area. Several of our competitors are national or
international in scope.
Some of our competitors are not subject to the same degree of regulation as
that imposed on bank holding companies and Illinois banking organizations. In
addition, the larger banking organizations, investment banks and brokerage
houses have significantly greater resources than us. As a result, such
competitors have advantages over PrivateBank in name recognition and market
penetration.
Legal Proceedings
From time to time, we may be party to various legal proceedings arising in
the normal course of our business. Since PrivateBank acts as a depository of
funds, we may be named from time to time as a defendant in various lawsuits
(such as garnishment proceedings) involving claims to the ownership of funds in
particular accounts. We are not currently subject to any pending or threatened
material legal proceedings.
Employees
As of March 31, 1999, we had 75 full-time equivalent employees. The majority
of our employees are located at the main office in downtown Chicago.
PrivateBank pays the salaries of all of our employees with the exception of
Messrs. Mandell and Roubitchek, a portion of whose salaries are paid by the
Company.
We provide our employees with a comprehensive program of benefits, some of
which are on a contributory basis, including comprehensive medical and dental
plans, life insurance plans, and 401(k) plans. We consider our relationship
with our employees to be good.
31
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth selected consolidated financial and other
data of PrivateBancorp. The selected statements of condition and statements of
income data, insofar as they relate to the five years in the five-year period
ended December 31, 1998, have been derived from our consolidated financial
statements. The following information should be read in conjunction with our
audited Consolidated Financial Statements and the Notes thereto, included
elsewhere herein. The selected financial data for the three months ended March
31, 1999 and 1998, are derived from our unaudited interim consolidated
financial statements. Such unaudited interim financial statements include all
adjustments (consisting only of normal, recurring accruals) that we consider
necessary for a fair presentation of the financial position and the results of
operations as of the dates and for the periods indicated. Information for any
interim period is not necessarily indicative of results that may be anticipated
for the full year. You should also read the following information in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included in this prospectus.
<TABLE>
<CAPTION>
Three Months
Ended
March 31, Year Ended December 31,
------------- ---------------------------------------
1999 1998 1998 1997 1996 1995 1994
------ ------ ------- ------- ------- ------- ------
(dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Selected Statement of
Income Data:
Interest income:
Loans, including fees... $5,636 $4,624 $19,619 $16,729 $12,152 $10,053 $6,418
Federal funds sold and
interest-bearing
deposits............... 48 498 2,181 875 1,392 1,149 358
Securities.............. 1,570 727 3,492 2,519 2,396 1,700 1,265
------ ------ ------- ------- ------- ------- ------
Total interest income. 7,254 5,849 25,292 20,123 15,940 12,902 8,041
------ ------ ------- ------- ------- ------- ------
Interest expense:
Interest-bearing demand
deposits............... 142 121 487 377 305 276 210
Savings and money
market deposit
accounts............... 1,800 1,629 6,651 5,880 4,613 3,484 2,139
Other time deposits..... 1,752 1,346 6,155 3,821 2,973 2,620 782
Funds borrowed.......... 144 -- 19 3 143 50 62
------ ------ ------- ------- ------- ------- ------
Total interest
expense.............. 3,838 3,096 13,312 10,081 8,034 6,430 3,193
------ ------ ------- ------- ------- ------- ------
Net interest income... 3,416 2,753 11,980 10,042 7,906 6,472 4,848
Provision for loan
losses.................. 285 91 362 603 524 930 305
------ ------ ------- ------- ------- ------- ------
Net interest income
after provision for
loan losses.......... 3,131 2,662 11,618 9,439 7,382 5,542 4,543
------ ------ ------- ------- ------- ------- ------
Non-interest income:
Banking and trust
services............... 442 273 1,281 1,210 911 674 414
Securities gains........ -- -- 40 -- -- -- --
------ ------ ------- ------- ------- ------- ------
Total non-interest
income............... 442 273 1,321 1,210 911 674 414
------ ------ ------- ------- ------- ------- ------
Non-interest expense:
Salaries and employee
benefits............... 1,115 1,102 4,077 3,902 3,411 2,749 2,054
Occupancy............... 352 334 1,379 1,274 990 946 745
Data processing......... 131 120 508 396 334 282 262
Marketing............... 153 139 567 500 424 296 272
Amortization of
organization costs..... -- -- -- -- 23 280 280
Professional fees....... 178 94 561 448 326 284 253
Insurance............... 41 30 134 115 82 238 342
Other expense........... 285 181 864 627 508 434 321
------ ------ ------- ------- ------- ------- ------
Total non-interest
expense.............. 2,255 2,000 8,090 7,262 6,098 5,509 4,529
------ ------ ------- ------- ------- ------- ------
Income before income
taxes.................. 1,318 935 4,849 3,387 2,195 707 428
Income tax provision.. 291 365 1,839 1,242 762 (403) 3
------ ------ ------- ------- ------- ------- ------
Net income............ $1,027 $ 570 $ 3,010 $ 2,145 $ 1,433 $ 1,110 $ 425
====== ====== ======= ======= ======= ======= ======
Per Share Data:
Basic earnings.......... $ 0.30 $ 0.18 $ 0.91 $ 0.69 $ 0.49 $ 0.39 $ 0.17
Diluted earnings........ 0.28 0.17 0.86 0.65 0.47 0.38 0.16
Dividends............... 0.03 0.02 0.08 0.07 0.07 0.03 --
Book value (at end of
period)................ 8.71 7.86 8.53 7.67 6.84 6.47 6.13
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended
March 31, Year Ended December 31,
-------------------- ------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
--------- --------- -------- -------- -------- -------- --------
(dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Selected Financial
Condition Data
(at end of period):
Total loans............. $ 307,766 $ 223,746 $281,965 $218,495 $171,343 $126,069 $ 98,380
Total assets............ 431,055 331,924 416,308 311,872 246,734 196,917 141,826
Total deposits.......... 384,454 304,660 364,994 285,773 222,571 176,868 122,925
Funds borrowed.......... 10,000 -- 20,000 -- 3,000 700 1,000
Total stockholders'
equity................. 30,054 25,400 29,274 24,688 20,222 18,445 17,471
Trust assets under
administration......... $ 637,422 $ 524,019 $611,650 $469,646 $328,662 $212,456 $168,872
Selected Financial
Ratios and Other
Data(1):
Performance Ratios:
Net interest margin(2). 3.57% 3.65% 3.61% 4.01% 3.73% 3.95% 4.09%
Net interest spread(3). 3.02 2.96 2.98 3.31 3.03 3.16 3.42
Non-interest income to
average assets........ 0.42 0.34 0.37 0.45 0.42 0.40 0.35
Non-interest expense to
average assets........ 2.13 2.49 2.29 2.71 2.79 3.31 3.79
Net overhead ratio(4).. 1.71 2.15 1.91 2.26 2.38 2.90 3.44
Efficiency ratio(5).... 58.45 67.65 60.82 64.53 69.17 77.09 86.07
Return on average
assets(6)............. 0.97 0.71 0.85 .80 0.66 0.67 0.36
Return on average
equity(7)............. 13.84 9.11 11.27 9.49 7.38 6.22 2.94
Dividend payout ratio.. 8.36 10.63 8.74 10.13 12.88 8.03 --
Asset Quality Ratios:
Non-performing loans to
total loans........... 0.12 0.32 0.36 0.24 0.65 1.90 0.15
Allowance for possible
loan losses to:
total loans........... 1.20 1.40 1.21 1.40 1.43 1.55 1.04
non-performing loans.. 1,025 440 336 578 220 82 711
Net charge-offs to
average total loans... -- -- -- -- 0.02 -- 0.01
Non-performing assets
to total assets....... 0.08 0.21 0.24 0.17 0.45 1.22 0.10
Balance Sheet Ratios:
Loans to deposits...... 80.1 73.4 77.3 76.5 77.0 71.3 80.0
Average interest-
earning assets to
average interest-
bearing liabilities... 114.2 117.0 116.4 117.7 118.6 120.7 123.8
Capital Ratios:
Total equity to total
assets................ 6.97 7.65 7.03 7.92 8.20 9.37 12.32
Total risk-based
capital ratio......... 11.21 11.47 11.53 11.75 12.21 14.56 19.58
Tier 1 risk-based
capital ratio......... 10.05 10.22 10.40 10.50 10.96 13.31 18.49
Leverage ratio......... 7.53 7.87 7.88 8.70 8.71 9.76 13.03
</TABLE>
- --------
(1) Certain financial ratios for interim periods have been annualized.
(2) Net interest income divided by average interest-earning assets.
(3) Yield on average interest-earning assets less rate on average interest-
bearing liabilities.
(4) Non-interest expense less non-interest income divided by average total
assets.
(5) Non-interest expense divided by the sum of net interest income plus non-
interest income.
(6) Net income divided by average total assets.
(7) Net income divided by average common equity.
33
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion in conjunction with "Selected
Consolidated Financial Data" and our Consolidated Financial Statements and
Notes thereto, each appearing elsewhere in this prospectus. In addition to
historical information, the following "Management's Discussion and Analysis of
Financial Condition and Results of Operations" contains forward-looking
statements that involve risks and uncertainties. Our actual results could
differ significantly from those anticipated in these forward-looking statements
as a result of certain factors, including those discussed in "Risk Factors"
contained elsewhere in this prospectus.
Overview
PrivateBancorp was organized in 1989 to serve as the holding company for a
de novo bank, The PrivateBank and Trust Company which provides personal and
commercial banking services to affluent individuals, professionals and their
business interests in the Chicago metropolitan area. We opened our flagship
Chicago location in 1991, and our full-service offices in the affluent
communities of Wilmette, Illinois, a North Shore suburb of Chicago, in 1994,
and Oak Brook, Illinois, located in the rapidly growing western suburbs, in
1997. Since inception, we have experienced rapid internal growth as a result
of:
. developing new banking relationships through the lending expertise of
our senior banking officers;
. developing new clients primarily through referrals from professional
advisors and existing clients;
. expanding our products offered and cross-marketing our existing
products;
. expanding our business lines through strategic partnerships; and
. opening new branches.
Since year-end 1995, we have grown our asset base at a compound annual rate
of 27.3% to $431.1 million as of March 31, 1999. During the same period, loans
have grown at a compound annual rate of 31.6% to $307.8 million, deposits at a
compound annual rate of 27.0% to $384.5 million and trust assets under
administration at a compound annual rate of 40.2% to $637.4 million. Due to our
increased size, we expect that these growth rates will moderate over time.
The profitability of our operations depends on our net interest income,
provision for possible loan losses, non-interest income, and non-interest
expense. Net interest income is the difference between the income we receive on
our loan and investment portfolios and our cost of funds, which consists of
interest paid on deposits and borrowings. The provision for possible loan
losses reflects the cost of credit risk in our loan portfolio. Non-interest
income consists primarily of trust fee income, and to a lesser extent, net
securities gains and fees for ancillary banking services. Non-interest expense
includes salaries and employee benefits as well as occupancy, data processing,
marketing, professional fees, insurance, and other expenses.
Net interest income is dependent on the amounts and yields of interest-
earning assets as compared to the amounts and rates on interest-bearing
liabilities. Net interest income is sensitive to changes in market rates of
interest and our asset/liability management procedures in coping with such
changes. The provision for loan losses is dependent on increases in the loan
portfolio, management's assessment of the collectibility of the loan portfolio,
loss, experience as well as economic and market factors. We earn trust fees for
managing and administering investment funds for a variety of individuals,
families and fiduciary relationships. Non-interest expenses are heavily
influenced by the growth of operations. Growth in the number of client
relationships directly affects the majority of our expense categories.
Our primary financial objectives are to continue to grow our loan portfolio
while maintaining high asset quality, and to increase non-interest income while
maintaining strong expense controls. We have maintained high asset quality
while managing rapid internal growth since our inception. We believe our
history of strong credit quality is testament to our sound credit practices, as
well as evidence that our affluent target client is a better than average
credit risk, resulting in lower loan charge-offs and lower loan loss provisions
than at traditional banks. The following table demonstrates our growth in loans
and our credit quality history:
34
<PAGE>
<TABLE>
<CAPTION>
December 31,
March --------------------------------------
31, 1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
Average loans, net of
unearned discount....... $288,322 $233,987 $195,237 $140,767 $111,637
Net charge-offs to
average loans........... -- -- -- 0.02% --
Non-performing loans to
total loans............. 0.12% 0.36% 0.24% 0.65% 1.90%
</TABLE>
Our non-interest income from fees and deposit service charges are below peer
group levels. This is largely the result of the profile of our typical client.
Our clients tend to have larger deposit account balances than customers of
traditional banks. Because average balances tend to be high, we do not earn
high service charge income typical of community banks. In 1998, we entered into
an alliance with Mesirow Financial to provide insurance services to our
clients. It is expected that fees related to the sale of insurance services
will increase in 1999 and future years.
Higher account balances result in relatively low levels of transactions per
account dollar and therefore our accounts are less costly to maintain. We
believe that as we continue to grow, we will continue to experience lower
overhead costs than other banks with similar aggregate levels of loans and
deposits. We intend to continue to improve our efficiency measures by growing
net interest income and non-interest income at a faster rate than non-interest
expense, and developing new sources of non-interest income. The following table
highlights our improving efficiency measures:
<TABLE>
<CAPTION>
December 31,
March 31, ----------------------
1999 1998 1997 1996 1995
--------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Non-interest expense to average assets.... 2.13% 2.29% 2.71% 2.79% 3.31%
Net overhead ratio........................ 1.71 1.91 2.26 2.38 2.90
Efficiency ratio.......................... 58.5 60.8 64.5 69.2 77.1
</TABLE>
Results of Operations
Net income
In 1998, we earned $3.0 million as compared to $2.1 million in 1997. This
40.3% increase in earnings was primarily the result of growth in the balance
sheet, particularly in the loan portfolio. Also contributing to improved
performance were increases in the investment portfolio, a reduced provision for
loan losses, increases in trust fees, and improved operating expense levels
which grew at a slower rate than the combined income components.
Diluted earnings per share for 1998 were $0.86, as compared to $0.65 for
1997, an increase of 30.3%. The growth rate of diluted earnings per share was
lower than the growth rate in earnings due to an increase in the number of
shares outstanding between the years and the value of existing stock options.
Return on average assets for 1998 was 0.85%, as compared to 0.80% for 1997.
Return on average equity for 1998 was 11.27%, as compared to 9.49% for 1997.
In 1997, we earned $2.1 million as compared to $1.4 million in 1996. This
49.7% increase was primarily the result of growth in the loan portfolio and
other balance sheet categories. Fees from banking and trust services grew by
32.8% in 1997 over 1996, while the provision for loan losses and other expense
grew by a combined 18.8%. Diluted earnings per share for 1997 were $0.65, as
compared to $0.47 for 1996. Return on average assets for 1997 was 0.80%, as
compared to 0.66% for 1996. Return on average equity for 1997 was 9.49%, as
compared to 7.38% for 1996.
During the first quarter of 1999, we earned $1.0 million as compared to
$570,000 during the first quarter of 1998. This 80.1% increase was primarily
the result of improvements in net interest income and non-interest income which
more than offset increases in the provision for loan losses and non-interest
expenses. Tax strategies implemented in late 1998 resulted in a reduced tax
provision in the first quarter of 1999 as compared
35
<PAGE>
to the first quarter of 1998, despite higher pre-tax earnings. Diluted earnings
per share for the first quarter of 1999 was $0.28 as compared to $0.17 for the
first quarter of 1998. Annualized return on average assets and annualized
return on average equity for the first quarter of 1999 were 0.97% and 13.84%,
respectively, as compared to 0.71% and 9.11% for the first quarter of 1998,
respectively.
Net interest income and net interest margin.
In 1998, net interest income increased from 1997 by $1.9 million, or 19.3%,
to $12.0 million. During the same period, the net interest margin decreased
from 4.01% to 3.61%. Net interest income is affected by both the volume of
assets and liabilities we hold, and the corresponding rates earned and paid.
Earning assets, on average, grew by $80.3 million in 1998, while yields
dropped from 8.03% in 1997 to 7.65% in 1998. Rates earned on assets were
affected by a general reduction in interest rate levels. During 1998, the
Federal Open Market Committee lowered the target federal funds rate on three
separate occasions, by a total of 75 basis points. Similar reductions in
Treasury rates, which are used as indices for several loan products, affected
the average yield on our loan portfolio.
In 1998, average interest-bearing liabilities grew by $71.8 million, while
average rates paid on interest bearing liabilities dropped from 4.72% in 1997
to 4.67% in 1998. Due to rate compression and competitive pressures, we were
unable to reduce rates paid as quickly or as significantly as experienced on
the asset side of the balance sheet. The volume of non-interest bearing funds,
largely comprised of demand deposits and capital, also affects the net interest
margin. In 1998, the effect of non-interest bearing funds on the net interest
margin added 63 basis points to the margin. In 1997, the effect was an addition
of 70 basis points to the net interest margin.
In 1997, net interest income increased from 1996 by $2.1 million, or 27.0%,
to $10.0 million. During the same period, net interest margin increased from
3.73% to 4.01%. Average earning assets grew by $45.7 million, while yields
increased from 7.66% in 1996 to 8.03% in 1997. Yields on assets were affected
by a slight increase in interest rate levels throughout the year. In 1996,
loans comprised 68.5% of earning assets as compared to 77.7% of earning assets
in 1997. Comparatively, this had a positive effect on asset yields in 1997. In
1997, interest-bearing liabilities, on average, grew by $40.2 million while
average rates paid on interest-bearing liabilities increased from 4.63% in 1996
to 4.72% in 1997. Rates paid increased slightly in all categories in 1997. The
effect of non-interest-bearing funds on the net interest margin was 70 basis
points in both 1996 and 1997.
Net interest income increased by 24.1% from $2.8 million in the first
quarter of 1998, to $3.4 million in the first quarter of 1999. Lower interest
rate levels and an increased percentage of assets funded by interest-bearing
liabilities compressed the net interest margin from 3.65% in the first quarter
of 1998, to 3.57% in the first quarter of 1999. The increase in average assets
of more than $100 million reflects increases in both loans and investment
securities. The average balance of federal funds sold in the first quarter of
1999 was significantly less than in the first quarter of 1998. The cost of
interest-bearing liabilities in the first quarter of 1999 was 4.38%, as
compared to 4.83% in the first quarter of 1998.
36
<PAGE>
Distribution of Assets, Liabilities and Stockholders' Equity; Interest Rates
and Interest Differential
The following table sets forth the average balances, the interest earned or
paid thereon, and the effective interest rate yield or cost for each major
category of interest-earning assets, interest-bearing liabilities and
stockholders' equity for the three months ended March 31, 1999 and 1998, and
for the years ended December 31, 1998, 1997 and 1996 on a tax-equivalent
basis, assuming a 34% tax rate.
<TABLE>
<CAPTION>
Three Months Ended March 31,
-----------------------------------------------------
1999 1998 1998
-------------------------- -------------------------- ----------------------
Average Average Average Average Average
Balance Yield/ Balance Yield/ Balance
(1) Interest Cost (1) Interest Cost (1) Interest
-------- -------- ------- -------- -------- ------- -------- --------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
Federal funds sold. $ 4,167 $ 48 4.61% $ 36,775 $ 498 5.42% $ 40,230 $ 2,181
Taxable investment
securities......... 112,724 1,570 6.28 48,339 727 6.16 57,427 3,491
Loans, net of
unearned discount.. 288,322 5,636 7.88 219,133 4,624 8.55 233,987 19,620
-------- ------ -------- ------ -------- -------
Total earning
assets.......... 405,213 7,254 7.40 304,247 5,849 7.79 331,644 25,292
-------- ------ -------- ------ -------- -------
Cash and due from
banks--non-interest
bearing............ 11,664 8,784 9,989
Allowance for
possible loan
losses............. (3,470) (3,082) (3,218)
Premises and
equipment, net..... 1,569 1,885 1,781
Other assets....... 4,898 3,704 4,187
-------- -------- --------
Total assets.... $419,874 $315,538 $344,383
======== ======== ========
Liabilities and
Stockholders'
Equity
Deposits-interest
bearing:
Interest-bearing
demand accounts... $ 27,199 142 2.12% $ 21,742 121 2.26% $ 22,073 487
Savings and money
market deposits... 177,600 1,800 4.11 142,077 1,629 4.65 151,558 6,651
Time deposits..... 139,512 1,752 5.10 96,226 1,346 5.68 111,407 6,155
-------- ------ -------- ------ -------- -------
Total interest-
bearing
deposits........ 344,311 3,694 4.36 260,045 3,096 4.83 285,038 13,293
-------- ------ -------- ------ -------- -------
Funds borrowed..... 10,485 144 5.07 -- -- 373 19
Term-debt and
subordinated debt.. -- -- -- -- -- --
-------- ------ -------- ------ -------- -------
Total interest-
bearing
liabilities..... 354,796 3,838 4.38 -- 3,096 285,411 13,312
-------- ------ -------- ------ -------- -------
Non-interest
bearing deposits... 32,990 28,594 31,335
Other liabilities.. 3,487 3,620 3,246
Stockholders'
equity............. 28,601 23,279 24,391
-------- -------- --------
Total
liabilities and
stockholders'
equity.......... $419,874 $315,538 $344,383
======== ======== ========
Net interest
income/spread...... $3,416 3.02% $2,753 2.96% $11,980
====== ==== ====== ==== =======
Net interest
margin............. 3.57% 3.65%
==== ====
<CAPTION>
Year Ended December 31,
-------------------------------------------------------------
1997 1996
-------------------------- --------------------------
Average Average Average Average Average
Yield/ Balance Yield/ Balance Yield/
Cost (1) Interest Cost (1) Interest Cost
------- --------- -------- ------- --------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Assets
Federal funds sold. 5.35% $ 15,917 $ 875 5.43% $ 26,287 $ 1,393 5.22%
Taxable investment
securities......... 6.20 40,164 2,519 6.27 38,569 2,396 6.21
Loans, net of
unearned discount.. 8.40 195,237 16,729 8.60 140,767 12,151 8.51
--------- -------- --------- --------
Total earning
assets.......... 7.65 251,318 20,123 8.03 205,623 15,940 7.66
--------- -------- --------- --------
Cash and due from
banks--non-interest
bearing............ 7,642 6,183
Allowance for
possible loan
losses............. (2,791) (2,198)
Premises and
equipment, net..... 1,995 1,280
Other assets....... 2,690 2,113
--------- ---------
Total assets.... $260,854 $213,001
========= =========
Liabilities and
Stockholders'
Equity
Deposits-interest
bearing:
Interest-bearing
demand accounts... 2.21% $ 17,722 377 2.13% $ 14,523 305 2.10%
Savings and money
market deposits... 4.39 127,560 5,880 4.61 102,759 4,613 4.48
Time deposits..... 5.53 68,252 3,821 5.60 53,601 2,973 5.54
--------- -------- --------- --------
Total interest-
bearing
deposits........ 4.67 213,534 10,078 4.72 170,883 7,891 4.61
--------- -------- --------- --------
Funds borrowed..... 5.06 49 3 5.83 2,483 143 5.67
Term-debt and
subordinated debt.. -- -- -- -- -- -- --
--------- -------- --------- --------
Total interest-
bearing
liabilities..... 4.67 213,583 10,081 4.72 173,366 8,034 4.63
--------- -------- --------- --------
Non-interest
bearing deposits... 25,053 20,783
Other liabilities.. 1,645 1,073
Stockholders'
equity............. 20,573 17,779
--------- ---------
Total
liabilities and
stockholders'
equity.......... $260,854 $213,001
========= =========
Net interest
income/spread...... 2.98% $10,042 3.31% $ 7,906 3.03%
======= ======== ======= ======== =======
Net interest
margin............. 3.61% 4.01% 3.73%
======= ======= =======
</TABLE>
- ----
(1) Average balances were generally computed using daily balances.
37
<PAGE>
The following table shows the dollar amount of changes in interest income
and interest expense by major categories of interest-earning assets and
interest-bearing liabilities attributable to changes in volume or rate or both,
for the periods indicated. Volume variances are computed using the change in
volume multiplied by the previous year's rate. Rate variances are computed
using the changes in rate multiplied by the previous year's volume. The change
in interest due to both rate and volume has been allocated between the factors
in proportion to the relationship of the absolute dollar amounts of the change
in each.
<TABLE>
<CAPTION>
Three Months Ended
March 31, Year Ended December 31,
----------------------- -------------------------------------------
1998 Compared to 1997 Compared to
1999 Compared to 1998 1997 1996
----------------------- --------------------- ---------------------
Change Change Change Change Change Change
Due to Due to Total Due to Due to Total Due to Due to Total
Rate Volume Change Rate Volume Change Rate Volume Change
------- ------ ------ ------ ------ ------ ------ ------ ------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Federal funds sold...... $ (72) $ (378) $ (450) $ (11) $1,317 $1,306 $ 52 $ (570) $ (518)
Investment securities... 26 817 843 (30) 1,002 972 23 100 123
Loans, net of unearned
discount............... (2,155) 3,167 1,012 (414) 3,305 2,891 96 4,482 4,578
------- ------ ------ ----- ------ ------ ---- ------ ------
Total interest income.. (2,201) 3,606 1,405 (455) 5,624 5,169 171 4,012 4,183
------- ------ ------ ----- ------ ------ ---- ------ ------
Interest-bearing demand
accounts............... (44) 65 21 14 96 110 4 68 72
Savings and money market
deposits............... (995) 1,166 171 (292) 1,063 771 126 1,141 1,267
Time deposits........... (842) 1,248 406 (56) 2,390 2,334 27 821 848
Funds borrowed.......... -- 144 144 -- 16 16 4 (144) (140)
------- ------ ------ ----- ------ ------ ---- ------ ------
Total interest expense. (1,881) 2,623 742 (334) 3,565 3,231 161 1,886 2,047
------- ------ ------ ----- ------ ------ ---- ------ ------
Net interest income..... $ (320) $ 983 $ 663 $(121) $2,059 $1,938 $ 10 $2,126 $2,136
======= ====== ====== ===== ====== ====== ==== ====== ======
</TABLE>
Provision for loan losses.
The provision for loan losses decreased 60.0% from $603,000 in 1997 to
$362,000 in 1998. Throughout 1998, the allowance for loan losses was reassessed
to determine the appropriate level to be maintained. This analysis was
influenced by the following factors: the volume and quality of loans and
commitments in the portfolio, loss experience, and economic conditions. The
reduced provision, despite an increasing portfolio, reflects management's
assessment of the overall risk in the loan portfolio.
The provision for loan losses increased from $524,000 in 1996 to $603,000 in
1997. This 15.1% increase was less than the rate of increase of the loan
portfolio. The quality of the loan portfolio in 1997 continued to be as strong
as experienced in 1996.
The provision for loan losses in the first quarter of 1999, was $285,000 as
compared to $91,000 in the first quarter of 1998. The reason for this increase
was the sharp increase in loan balances of $25.8 million during the first three
months of 1999 as compared to $5.3 million in the first three months of 1998.
Non-interest income.
Our total non-interest income increased 9.2% from $1.2 million in 1997 to
$1.3 million in 1998. The largest component of other income is trust fees.
Trust fees increased 9.7% from $937,000 in 1997 to $1.0 million in 1998,
reflecting growth in trust assets under administration of $141.6 million, or
30.1%, to $611.6 million at year end 1998. Trust assets have more than doubled
since mid-1996. This growth is in part attributable to our success in
attracting larger blocks of business and the favorable stock market. During
1997, we earned fees of $119,000 while administering a problem account. This
account was transferred to another trust institution late in 1997. Without this
income in 1997, the increase in trust income in 1998 over 1997 would have been
$210,000, or 25.7%. In 1998, we realized gains from securities sales of
$40,000.
Our non-interest income increased 32.8% from $911,000 in 1996 to $1.2
million in 1997. During this period, trust fees increased 62.4% from $577,000
in 1996 to $937,000 in 1997. Without fees earned on the
38
<PAGE>
transferred trust account (on which we earned $59,000 in 1996), our annual
increase from 1996 to 1997 would have been 57.9%. In 1997, other income was
enhanced by consulting fees of $132,000 which were of a non-recurring nature.
Non-interest income increased by 61.9% to $442,000 in the first quarter of
1999, as compared to $273,000 in the first quarter of 1998. The major component
of non-interest income, trust fees grew to $320,000 in the first quarter of
1999, as compared to $229,000 in the first quarter of 1998. This 39.7% increase
follows similar increases in trust assets under administration.
Non-interest expense.
<TABLE>
<CAPTION>
Three Months
Ended March Year Ended December
31, 31,
------------- --------------------
1999 1998 1998 1997 1996
------ ------ ------ ------ ------
(in thousands)
<S> <C> <C> <C> <C> <C>
Salaries and employee benefits............... $1,115 $1,102 $4,077 $3,902 $3,411
Occupancy.................................... 352 334 1,379 1,274 990
Data processing.............................. 131 120 508 396 334
Marketing.................................... 153 139 567 500 424
Amortization of organization costs........... -- -- -- -- 23
Professional fees............................ 178 94 561 448 326
Insurance.................................... 41 30 134 115 82
Other expense................................ 285 181 864 627 508
------ ------ ------ ------ ------
Total non-interest expense................. $2,255 $2,000 $8,090 $7,262 $6,098
====== ====== ====== ====== ======
</TABLE>
Total non-interest expense increased 11.4% from $7.3 million in 1997, to
$8.1 million in 1998. Non-interest expense as a percentage of average assets
declined from 2.7% in 1997 to 2.3% in 1998, reflecting the increased efficiency
of our infrastructure in supporting our growth rate. Similar improvements in
efficiency have been achieved in each year of the Company's existence. Non-
interest expense increased 19.1% from $6.1 million in 1996, to $7.3 million in
1997. Non-interest expense as a percentage of average assets declined from 2.8%
in 1996 to 2.7% in 1997.
The efficiency ratio, which measures the percentage of net revenue that is
paid as non-interest expense, has improved each year from 69% in 1996, to 65%
in 1997, to 61% in 1998. This is an indication that expenses have not grown as
quickly as revenues. It also supports the statement that the Company was able
to grow into the infrastructure established in its early years.
Salaries and employee benefits increased 4.5% to $4.1 million in 1998 from
$3.9 million in 1997. Growth from 1996 to 1997 was $491,000, or 14.4%. Staff
levels have been kept under control with the number of full time equivalent
employees increasing from 59.0 at year-end 1996, to 66.5 at year-end 1997 and
70.5 at year-end 1998. Except for staffing of the Oak Brook facility at year-
end 1996, there have been no additions at the executive level for the periods
discussed. Staff additions have been necessary to support growth of the
business.
Occupancy costs related to our facilities showed increases of $105,000, or
8.2% from 1997 to 1998, and $284,000, or 28.7% from 1996 to 1997. The majority
of our increase in operating expenses in 1997 was related to the opening of our
Oak Brook office in January 1997, and a full year's rent paid in 1997 for an
additional floor of the Chicago office.
Insurance costs related to our property, liability, and bond coverages
increased by $19,000, or 16.5%, from 1997 to 1998. The increased costs are
primarily related to increases in coverage commensurate with our growth.
Deposit insurance was an insignificant expense in each of the years.
Data processing increases for 1997 and 1998 are volume-related. During the
third quarter of 1999, we will be converting the processing of our loan and
deposit applications to a different service bureau. This is the result
39
<PAGE>
of our current processor's announcement that it will be terminating operations
in 2000. We expect our data processing expense to increase in 1999 as a result
of this conversion, and remain at higher levels in the years to follow.
Professional fees which include legal, accounting and consulting services
increased by $113,000, or 25.2% from 1997 to 1998, and $122,000, or 37.4% from
1996 to 1997. Reasons for these increases include increased usage of audit and
accounting services, consulting services related to regulatory compliance, and
in 1998, increases in investment advisory services related to our investment
portfolio.
Other expenses include office supplies, postage, telephone, delivery,
training, director fees, filing fees and duplicating. The majority of increases
in these items are related to growth of the Company.
Non-interest expense increased by 12.8% to $2.3 million in the first quarter
of 1999, as compared to $2.0 million in the first quarter of 1998. This
percentage increase was well below increase percentages earned in net interest
income and non-interest income. Most notable were increases in professional
fees related to bank investment portfolio consultants, year 2000 consultants
and internal audit expenses.
Provision for income taxes.
Our consolidated income tax rate varies from statutory rates principally due
to certain interest income which is tax-exempt for federal and state purposes,
and our expenses which are disallowed for tax purposes. Increases in our income
tax provision for the three years ended December 31, 1998 are primarily related
to increases in pre-tax earnings.
Income taxes in the first quarter of 1999, included the effect of federally
non-taxable interest earned on our municipal bond portfolio and the result of a
tax-advantaged investment program initiated in February 1999.
Financial Condition
Loans.
Our loan clients include individuals, partnerships and corporations. Loan
types include commercial real estate, which is concentrated in apartment
buildings, residential real estate, commercial, personal, home equity, and
construction. Loan quality has remained high with low levels of delinquencies
and minimal charge-offs.
The following table sets forth our loan portfolio by category as of March
31, 1999, and as of December 31 for the previous five fiscal years:
<TABLE>
<CAPTION>
December 31,
March -------------------------------------------
31, 1999 1998 1997 1996 1995 1994
-------- -------- -------- -------- -------- -------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Commercial real estate..... $108,599 $ 94,392 $ 55,429 $ 39,452 $ 29,114 $22,402
Residential real estate.... 62,208 54,171 56,307 45,012 25,973 21,696
Commercial................. 53,834 46,800 33,862 28,004 22,906 18,092
Personal................... 45,122 44,094 42,077 35,339 28,150 20,466
Home equity................ 19,860 20,100 20,680 20,683 18,707 11,504
Construction............... 18,143 22,408 10,140 2,853 1,219 747
Bankers' acceptances....... -- -- -- -- -- 3,473
-------- -------- -------- -------- -------- -------
Total loans.............. $307,766 $281,965 $218,495 $171,343 $126,069 $98,380
======== ======== ======== ======== ======== =======
</TABLE>
40
<PAGE>
The following table classifies the loan portfolio, by category, at March 31,
1999, by date at which the loans mature:
<TABLE>
<CAPTION>
More than one
After year
One year From one five ----------------
or less to five years years Total Fixed Variable
-------- ------------- -------- -------- ------- --------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Commercial real estate.. $ 16,388 $ 53,400 $ 38,811 $108,599 $36,538 $ 55,673
Residential real estate. 3,142 4,639 54,427 62,208 13,476 45,590
Commercial.............. 32,233 21,236 365 53,834 4,741 16,860
Personal................ 38,018 6,191 913 45,122 1,092 6,012
Home equity............. 1,032 9,941 8,887 19,860 -- 18,828
Construction............ 11,932 5,906 305 18,143 1,993 4,218
-------- -------- -------- -------- ------- --------
Total loans........... $102,745 $101,313 $103,708 $307,766 $57,840 $147,181
======== ======== ======== ======== ======= ========
</TABLE>
Asset Quality.
The following table classifies our non-performing loans as of the dates
shown:
<TABLE>
<CAPTION>
December 31,
March 31, ----------------------------------
1999 1998 1997 1996 1995 1994
--------- ------ ---- ------ ------ ----
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Nonaccrual loans................. $-- $ -- $-- $ -- $2,298 $--
Loans past due 90 days or more... 361 1,016 527 1,116 100 144
---- ------ ---- ------ ------ ----
Total non-performing loans..... 361 1,016 527 1,116 2,398 144
---- ------ ---- ------ ------ ----
Other real estate owned.......... -- -- -- -- -- --
---- ------ ---- ------ ------ ----
Total non-performing assets.... $361 $1,016 $527 $1,116 $2,398 $144
==== ====== ==== ====== ====== ====
Total non-performing loans to
total loans..................... 0.12% 0.36% 0.24% 0.65% 1.90% 0.15%
Total non-performing assets to
total assets.................... 0.08 0.24 0.17 0.45 1.22 0.10
</TABLE>
It is our policy to discontinue the accrual of interest income on any loan
for which we have reasonable doubt as to the payment of interest or principal.
Nonaccrual loans are returned to an accrual status when the financial position
of the borrower indicates there is no longer any reasonable doubt as to the
payment of principal or interest.
Other than those loans reflected in the table above, we had no significant
loans for which the terms had been renegotiated or restructured, or for which
we had serious doubts as to the ability of the borrower to comply with
repayment terms. We did not have any Other Real Estate Owned as of any of the
dates shown.
Potential Problem Loans. In addition to those loans reflected in the table
above, we have identified some loans through our problem loan identification
system which exhibit a higher than normal credit risk. Loans in this category
include those with characteristics such as those past maturity more than 90
days, those that have recent adverse operating cash flow or balance sheet
trends, or have general risk characteristics that the managing director
believes might jeopardize the future timely collection of principal and
interest payments. The principal amount of loans in this category as of March
31, 1999 was $960,000. At March 31, 1999, there were no significant loans which
were classified by any bank regulatory agency that are not included above as
nonaccrual, past due or restructured.
Loan Concentrations. Loan concentrations are considered to exist when there
are amounts loaned to a multiple number of borrowers engaged in similar
activities which would cause them to be similarly impacted by economic or other
conditions. Other than loans made to borrowers residing in the Chicago
metropolitan area and our involvement in lending secured by real estate, we had
no concentrations of loans exceeding 10% of total loans at March 31, 1999.
41
<PAGE>
Allowance for Loan Losses.
We believe our loan loss experience to date reflects the high credit quality
of our loan portfolio. The following table shows changes in the allowance for
loan losses resulting from additions to the allowance and loan charge-offs for
each of the periods shown. All charge-offs have been of loans in the personal
loan category. There were no recoveries on loans previously charged off in any
of the periods. Charge-offs as a percentage of average total loans have been
negligible.
<TABLE>
<CAPTION>
December 31,
March 31, -------------------------------------------
1999 1998 1997 1996 1995 1994
--------- -------- -------- -------- -------- -------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Balance at beginning of
period.................. $ 3,410 $ 3,050 $ 2,450 $ 1,955 $ 1,025 $ 728
Loans charged-off:
Commercial real estate... -- -- -- -- -- --
Residential real estate.. -- -- -- -- -- --
Commercial............... -- -- -- -- -- --
Personal................. -- 2 3 29 -- 8
Home equity.............. -- -- -- -- -- --
Construction............. --
-------- -------- -------- -------- -------- -------
Total loans charged-
off................... -- 2 3 29 -- 8
-------- -------- -------- -------- -------- -------
Provision for loan
losses.................. 285 362 603 524 930 305
-------- -------- -------- -------- -------- -------
Balance at end of period. $ 3,695 $ 3,410 $ 3,050 $ 2,450 $ 1,955 $ 1,025
======== ======== ======== ======== ======== =======
Average total loans...... $288,987 $234,486 $195,605 $141,043 $111,855 $80,717
======== ======== ======== ======== ======== =======
</TABLE>
At March 31, 1999, we allocated the allowance for loan losses by specific
category as shown in the table below. We considered various qualitative and
quantitative factors about the loan portfolio which we deemed relevant.
<TABLE>
<CAPTION>
Percent of loans
in each category
Amount to total loans
------ ----------------
(dollars in thousands)
<S> <C> <C>
Commercial real estate............................ $ 928 25.1%
Residential real estate........................... 303 8.2
Commercial........................................ 833 22.5
Personal.......................................... 509 13.8
Home equity....................................... 217 5.9
Construction...................................... 185 5.0
Unallocated....................................... 720 19.5
------ -----
Total........................................... $3,695 100.0%
====== =====
</TABLE>
Control of our loan quality is continually monitored by management and is
reviewed by the loan/investment committee of the Board of Directors of
PrivateBank on a monthly basis. The amount of additions to the allowance for
loan losses which are charged to earnings through the provision for loan losses
are determined based on a variety of factors, including assessment of the
credit risk of the portfolio, delinquent loans, an evaluation of current and
prospective economic conditions in the market area, actual charge-offs during
the year and historical loss experience. We believe the allowance for loan
losses is adequate to cover potential losses in our loan portfolio.
42
<PAGE>
Investment Securities.
Investments are substantially comprised of federal funds sold and
securities. "Federal funds sold" are overnight investments in which, except
for cash reserves, all remaining funds are invested. Our securities portfolio
is primarily comprised of U.S. Treasury securities and agency obligations,
municipal bonds, collateralized mortgage obligations, and corporate
securities. In the fourth quarter of 1998, we invested in municipal bonds to
take advantage of their favorable taxable equivalent yields. Equity securities
consist of minimal investments in the FHLB and NHS.
All of our investment securities are classified as "available for sale" to
give us the flexibility to alter the composition of our portfolio, and are
carried at fair value. The table below shows the estimated fair value of
investment securities at the dates indicated, presented by category.
<TABLE>
<CAPTION>
December 31,
March 31, ------------------------
1999 1998 1997 1996
--------- -------- ------- -------
(in thousands)
<S> <C> <C> <C> <C>
Available-for-Sale
U.S. Treasury securities and U.S. Government
agency obligations......................... $ 5,058 $ 6,095 $ 6,066 $ 7,095
State and political subdivision obligations. 40,608 37,804 -- --
Collateralized mortgage obligations......... 47,536 61,414 40,308 14,171
Corporate debt securities................... 10,280 10,263 18,269 21,951
Equity securities........................... 1,654 1,315 740 1,400
-------- -------- ------- -------
Total investment securities............... $105,136 $116,891 $65,383 $44,617
======== ======== ======= =======
</TABLE>
Maturities of investment securities, by category, as of March 31, 1999, are
shown in the following table.
<TABLE>
<CAPTION>
Within From one From five to After Equity
one year to five years ten years ten years securities Total
-------- ------------- ------------ --------- ---------- --------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury securities
and U.S. Government
agency obligations..... $4,039 $1,019 $ -- $ -- $ -- $ 5,058
State and political
subdivision
obligations............ 451 2,598 2,764 34,795 -- 40,608
Collateralized mortgage
obligations............ -- -- 4,707 42,829 -- 47,536
Corporate debt
securities............. -- -- -- 10,280 -- 10,280
Equity securities....... -- -- -- -- 1,654 1,654
------ ------ ------ ------- ------ --------
Total investment
securities........... $4,490 $3,617 $7,471 $87,904 $1,654 $105,136
====== ====== ====== ======= ====== ========
</TABLE>
The weighted average yield (computed on a tax equivalent basis) for each
range of maturities of securities, by category, is shown below as of March 31,
1999:
<TABLE>
<CAPTION>
Within From one From five to After Equity
one year to five years ten years ten years securities Total
-------- ------------- ------------ --------- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury securities
and U.S. Government
agency obligations..... 6.02% 5.80% -- -- -- 5.97%
State and political
subdivisions
obligations............ 4.82 5.27 5.98% 7.09% -- 6.88
Collateralized mortgage
obligations............ -- -- 5.22 5.88 -- 5.81
Corporate debt
securities............. -- -- -- 7.05 -- 7.05
Equity securities....... -- -- -- -- 6.10% 6.10
---- ---- ---- ---- ---- ----
Total investment
securities........... 5.90% 5.42% 5.50% 6.50% 6.10% 6.36%
==== ==== ==== ==== ==== ====
</TABLE>
43
<PAGE>
Deposits.
In 1998, total deposits increased by $79.2 million, or 27.7%, to $365.0
million. Over each of the past three years, our deposits have grown at rates in
excess of 25% per year. We rely upon our clients to provide funds to support
our lending and investment activities. Our deposit mix is substantially
comprised of interest-bearing deposits. As a client service, we facilitate
quick and convenient transfers of funds to checking accounts on an as-needed
basis. This contributes to our clients keeping account balances that we believe
to be in excess of those at most other financial institutions. While these
larger, interest-bearing accounts tend to increase our cost of funds, we are
able to support our asset base with a smaller number of accounts to service, at
a lower cost per dollar of deposits, than at similar banks of similar asset
size. For the period ended March 31, 1999, the average aggregate balance per
client relationship was approximately $94,000.
The following table presents the balances of deposits by category, and each
category as a percentage of total deposits, at March 31, 1999 and at December
31, 1998, 1997 and 1996.
<TABLE>
<CAPTION>
December 31,
-----------------------------------------------------
March 31, 1999 1998 1997 1996
----------------- ----------------- ----------------- -----------------
Percent Percent Percent Percent
Balance of Total Balance of Total Balance of Total Balance of Total
-------- -------- -------- -------- -------- -------- -------- --------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Demand.................. $ 32,582 8.5% $ 39,490 10.8% $ 34,234 12.0% $ 21,177 9.5%
Savings................. 499 0.1 482 0.1 640 0.2 258 0.1
Interest-bearing demand. 27,390 7.1 26,508 7.3 26,084 9.1 17,263 7.8
Money market............ 180,372 46.9 170,231 46.6 134,985 47.3 122,589 55.1
Certificates of deposit. 143,611 37.4 128,283 35.2 89,830 31.4 61,284 27.5
-------- ----- -------- ----- -------- ----- -------- -----
Total deposits........ $384,454 100.0% $364,994 100.0% $285,773 100.0% $222,571 100.0%
======== ===== ======== ===== ======== ===== ======== =====
</TABLE>
The aggregate amounts of time deposits, in denominations of $100,000 or
more, by maturity, are shown below as of the dates indicated:
<TABLE>
<CAPTION>
December 31,
March ------------------------
31, 1999 1998 1997 1996
-------- -------- ------- -------
(in thousands)
<S> <C> <C> <C> <C>
Three months or less................... $ 89,109 $ 67,922 $37,389 $26,833
Over three through six months.......... 16,478 18,974 16,200 7,638
Over six through twelve months......... 14,348 17,664 16,100 9,353
Over twelve months..................... 1,248 904 941 400
-------- -------- ------- -------
Total................................ $121,183 $105,464 $70,630 $44,224
======== ======== ======= =======
</TABLE>
Liquidity and Capital Resources
The following table reflects various measures of our capital at March 31,
1999, and at December 31, 1998, 1997 and 1996:
<TABLE>
<CAPTION>
December 31,
March 31, -------------------
1999 1998 1997 1996
--------- ----- ----- -----
<S> <C> <C> <C> <C>
Total equity to total assets............... 6.97% 7.03% 7.92% 8.20%
Total risk-based capital ratio............. 11.21 11.53 11.75 12.21
Tier 1 risk-based capital ratio............ 10.05 10.40 10.50 10.96
Leverage ratio............................. 7.53 7.88 8.70 8.71
</TABLE>
At March 31, 1999, we exceeded the minimum levels of all regulatory capital
requirements, and PrivateBank was considered "well-capitalized" under
regulatory standards. Based on guidelines established by
44
<PAGE>
the Federal Reserve Bank, a bank holding company is required to maintain a
leverage ratio (Tier 1 capital/total assets less intangibles) of 4.0%, a ratio
of Tier 1 capital to risk-based assets of 4.0% and a ratio of total capital to
risk-based assets of 8.0%.
Since inception, we have raised over $22 million in a series of common stock
offerings to provide the necessary capital to support our growth. The proceeds
of these common stock offerings have been the principal source of funds at the
holding company level. We have regularly infused capital into our bank
subsidiary as and when needed to maintain adequate capital ratios and have
tended to retain the balance of the holding company funds on deposit in a non-
interest bearing account at PrivateBank to be available for its funding and
liquidity purposes. The following table shows the funds we have raised through
private placements of our common stock:
<TABLE>
<CAPTION>
Number of Price Per Gross Proceeds Net Proceeds
Shares Sold Share to Company to Company
Date of Offering ----------- --------- -------------- ------------
(dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C>
4Q 1989................. 80,800 $ 6.25 $ 505 $ 505
1Q 1991................. 1,334,400 6.25 8,340 8,340
3Q 1992................. 412,208 6.88 2,834 2,781
2Q 1994................. 1,023,264 7.81 7,994 7,877
2Q 1997................. 208,256 10.94 2,278 2,251
4Q 1998................. 46,000 16.00 736 736
</TABLE>
Liquidity management at PrivateBank involves planning to meet anticipated
funding needs at a reasonable cost. Liquidity management is guided by policies,
formulated and monitored by our senior management and the Bank's
asset/liability committee, which takes into account the marketability of
assets, the sources and stability of funding and the level of unfunded
commitments. PrivateBank's principal sources of funds are deposits, short-term
borrowings and capital contributions by the Company out of the proceeds of our
common stock offerings.
PrivateBank's core deposits, the most stable source of liquidity for
PrivateBank due to the nature of long-term relationships generally established
with clients, are available to provide long-term liquidity. At March 31, 1999,
61.1% of our total assets were funded by core deposits. At December 31, 1998,
62.5% of our total assets were funded by core deposits. At December 31, 1997
and 1996, 69.5% and 72.8% of total assets were funded by core deposits,
respectively.
We periodically use services of the FHLB for short-term funding needs and
other correspondent services. At March 31, 1999, we had a short-term advance of
$10.0 million outstanding at 5.00% with a maturity of April 5, 1999, and at
December 31, 1998, we had a short-term advance of $20.0 million at 5.20% which
matured on January 7, 1999. In addition, we periodically use the FHLB to supply
letters of credit as collateral to support public fund deposits. At March 31,
1999, we had FHLB letters of credit of $17.3 million outstanding. At December
31, 1998, we had no FHLB letters of credit outstanding. We pay 0.125% per annum
for FHLB letters of credit. The following table shows our maximum availability
for and usage of FHLB advances and letters of credit.
<TABLE>
<CAPTION>
Availability Usage
Date ------------ -------
(in thousands)
<S> <C> <C>
March 31, 1999.............. $52,117 $27,340
December 31, 1998........... 45,842 20,000
December 31, 1997........... 32,673 7,905
December 31, 1996........... 25,214 10,890
</TABLE>
Liquid assets refers to money market assets such as federal funds sold, as
well as available-for-sale securities. Net liquid assets represent the sum of
the liquid asset categories less the amount of assets pledged to secure public
funds. At March 31, 1999, net liquid assets were approximately $83.1 million.
At December 31, 1998, net liquid assets totaled approximately $104.5 million,
compared to approximately $76.2 million at December 31, 1997 and $55.4 million
at December 31, 1996.
45
<PAGE>
PrivateBank accepts deposits from a variety of municipal entities.
Typically, these municipal entities require that banks pledge marketable
securities to collateralize these public deposits. The State of Illinois also
accepts FHLB letters of credit as collateral. At March 31, 1999 and December
31, 1998, 1997 and 1996, PrivateBank had approximately $9.7 million, $15.0
million, $13.1 million and $11.5 million, respectively, of securities
collateralizing such public deposits. Deposits requiring pledged assets are not
considered to be core deposits, and the assets that are pledged as collateral
for these deposits are not deemed to be liquid assets.
Our Information Systems and the Year 2000
The year 2000 issue is a computer programming concern that centers on the
inability of certain computer systems to recognize the year 2000 and other year
2000-sensitive dates. Many existing computer programs and systems were
originally programmed to accept only six-digit date fields. In these systems,
the calendar year is identified by the last two digits only. This problem may
leave these programs and computers unable to distinguish between dates in the
twentieth and twenty-first centuries. For example, some computers will treat
"00" as the year 1900, rather than 2000. These computers may also be unable to
correctly identify the year 2000 as a leap year. The inability of these
computer systems to recognize dates could result in the failure of critical
applications of the generation of inaccurate results. Therefore, these systems
must be replaced or upgraded to become compliant with the year 2000 and to
avoid these errors.
Like most providers of financial services, we are particularly sensitive to
the year 2000 issue because our operations depend on computer-generated
financial information. Software, hardware and equipment both within and outside
of our direct control, and third parties with whom we electronically or
operationally interact may be adversely affected by this issue. These third
parties include our clients as well as third party vendors providing data
processing services, information systems management, computer system
maintenance and credit bureau information. In addition, under certain
circumstances, failure to address adequately the year 2000 issue could
adversely affect the viability of our suppliers and creditors and the
creditworthiness of our borrowers. If not adequately addressed, the year 2000
issue could have a significant adverse effect on our products, services and
competitive condition and ultimately our financial condition and results of
operations.
Regulatory Oversight. Regulators of financial institutions have increased
their focus on year 2000 compliance issues, have issued guidance concerning the
responsibilities of senior management and directors and are conducting periodic
examinations to ascertain the state of year 2000 compliance readiness. The
Federal Financial Institutions Examination Council ("FFIEC") has issued a
number of interagency statements on Year 2000 Project Management Awareness.
These statements require financial institutions to, among other things, examine
the year 2000 implications of their reliance on vendors and with respect to
data exchange and the potential impact of the year 2000 issue on their
customers, suppliers and borrowers. These statements also require each
federally regulated financial institution to survey its exposure, measure its
risk and prepare a plan to address the year 2000 issue. In addition, the
federal banking regulators have issued safety and soundness guidelines to be
followed by insured depository institutions to ensure resolution of any year
2000 problems. The federal banking agencies have asserted that year 2000
testing and certification is a key safety and soundness issue in conjunction
with regulatory examinations. Consequently, an institution's failure to
appropriately and timely address the year 2000 issue could result in
supervisory action, including the reduction of the institution's supervisory
ratings, which almost certainly would involve the denial of future applications
for approval of mergers or acquisitions until compliance is achieved. In
certain egregious situations, civil money penalties may be imposed.
Our Readiness. At the direction of our Board of Directors, we have
established a year 2000 readiness committee and have engaged consultants
qualified to help us address our year 2000 issues. Following the guidelines
established by the FFIEC, we have broken down our compliance efforts into six
stages: awareness, assessment, renovation, validation, implementation and
contingency planning.
. Awareness. During our awareness phase, we educated ourselves on the
issues and risks associated with the year 2000 problem. We also
identified the aspects of our operations which are year 2000 sensitive.
46
<PAGE>
. Assessment. During this stage, we were able to determine the scope of
our entire year 2000 readiness project. We reviewed our systems,
equipment, vendors, client exposure, counterparties and fiduciary risk.
As part of this stage, we established a formal liquidity risk management
plan, which included a contingency plan to aid in mitigating risks
involved with potential withdrawal of client funds before or after the
year 2000 rollover date. This plan has been approved by our Board of
Directors.
. Renovation. For most companies, this phase is time consuming and
complicated. It involves upgrading or replacing all sensitive systems
and equipment. Because we rely on third party vendors for virtually all
of our systems and for our data processing needs, our internal
renovations were minimal. However, we are still obligated to ensure that
our third party vendors are also year 2000 compliant. We have obtained
current financial information on each of our "mission critical" vendors
and have completed an assessment of their financial and operational
capabilities. Our year 2000 project manager continues to monitor the
readiness and financial status of these vendors on an at least quarterly
basis. Because we are in the process of transferring our loan and
deposit processing requirements to a new provider, we are working
closely with both our new and existing providers to monitor and ensure
their year 2000 readiness.
. Validation. We are currently in the validation, or testing, phase of our
readiness project. We are testing, either individually or in
collaboration with our third party vendors, each system and piece of
equipment for year 2000 readiness and compatibility with other systems
with which they interface. Together with our consultants, we have
developed a comprehensive plan for testing our systems. Our plan
indicates, on a system-by-system basis, the methods used to validate
each system and includes procedures for documenting test results. We
have developed this plan based on recommendations made by the FFIEC. Our
consultants and our internal auditors are working with us to insure that
process controls are maintained throughout the testing process. By March
31, 1999, this process was substantially complete. During the second
quarter of 1999, we will begin working toward conversion of our loan and
deposit systems. Validation of these systems will be accomplished during
the conversion process.
. Implementation. We have completed the testing and have implemented
necessary changes to computer hardware, network equipment and operating
systems owned by us and located in our offices. We are currently using
most of these systems in their year 2000 compliant version. However, as
we continue to evaluate and modify these systems as needed we will
maintain our year 2000 compliance. Because virtually all of our year
2000-related software modifications are handled by third-party
processing services, and because we have no control over the renovation
of software code, we will continue to monitor software application
upgrade releases from our vendors and the year 2000 implications of such
releases. We will continue to implement such changes as are necessary
based on the results of our validation efforts and our ongoing
monitoring efforts.
. Contingency. The final stage of our readiness project involves our
creation of a business continuity plan which will allow our operations
to continue in the event that we are unable to ensure that all of our
operations will be compliant, or if we experience some sort of failure
in our systems. As part of our plan, we are developing and testing
procedures to employ alternatives to our primary systems and to address
the manual processing of information in the event of system failure. We
are also working with our third party vendors to integrate our plan with
their procedures for a back-up site for our data processing services in
the event of year 2000 problems. We expect to have our business
continuity plan completed and tested by June 30, 1999.
The Costs of Our Compliance Efforts. We estimate that the entire cost of our
year 2000 readiness project will be approximately $650,000. These costs
include:
. upgrades of existing systems and equipment;
. acquisitions of new systems and equipment;
47
<PAGE>
. consultant fees and expenses; and
. allocated personnel costs.
Through March 31, 1999, we have spent approximately $400,000 toward our year
2000 readiness.
The Risks Involved in Our Efforts. Although we are working closely with our
consultants, our third party vendors and our regulators to upgrade our systems
and operations, there can be no assurance that all of our operations will be
year 2000 compliant. In the event of system failure, either internally, or on
the part of one or more of our vendors, our operations may be adversely
affected. We may experience an interruption in our business and incur
significant losses.
Asset/Liability Management Policy
As a continuing part of our financial strategy, we attempt to manage the
impact of fluctuations in market interest rates on our net interest income.
This effort entails providing a reasonable balance between interest rate risk,
credit risk, liquidity risk and maintenance of yield. Asset/liability
management policy is established by our Board of Directors and monitored by
management. Our asset/liability policy sets standards within which we are
expected to operate. These standards include guidelines for exposure to
interest rate fluctuations, liquidity, loan limits as a percentage of funding
sources, exposure to correspondent banks and brokers, and reliance on non-core
deposits. Our policy also states the reporting requirements to our Board of
Directors. Our investment policy complements our asset/liability policy by
establishing criteria by which we may purchase securities. These criteria
include approved types of securities, brokerage sources, terms of investment,
quality standards, and diversification.
The following table illustrates our estimated interest rate sensitivity and
periodic and cumulative gap positions calculated as of March 31, 1999.
<TABLE>
<CAPTION>
Time to Maturity or Repricing
---------------------------------------
0-90 91-365 1-5 Over 5
Days Days Years Years Total
-------- --------- -------- -------- --------
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
Interest-Earning Assets:
Loans...................... $163,231 $ 22,535 $107,224 $ 14,732 $307,722
Investments................ 9,717 27,096 30,736 37,682 105,231
Federal funds sold......... 7,759 -- -- -- 7,759
-------- --------- -------- -------- --------
Total interest-earning
assets.................. $180,707 $ 49,631 $137,960 $ 52,414 $420,712
======== ========= ======== ======== ========
Interest-Bearing Liabilities:
Interest-bearing demand.... $ -- -- -- 27,390 $ 27,390
Savings and money market... 138,109 42,263 -- 499 180,871
Time deposits.............. 100,815 $ 39,452 $ 3,344 -- 143,611
Funds borrowed............. 10,000 -- -- -- 10,000
-------- --------- -------- -------- --------
Total interest-bearing
liabilities............. $248,924 $ 81,715 $ 3,344 $ 27,889 $361,872
======== ========= ======== ======== ========
Cumulative:
Rate sensitive assets
(RSA)..................... $180,707 $ 230,338 $368,298 $420,712
Rate sensitive liabilities
(RSL)..................... $248,924 $ 330,639 $333,983 $361,872
GAP (GAP = RSA-RSL)...... $(68,217) $(100,301) $ 34,315 $ 58,840
RSA/RSL...................... 72.6% 69.7% 110.3% 116.3%
RSA/Total assets............. 41.9 53.4 85.4 97.6
RSL/Total assets............. 57.7 76.7 77.4 84.0
GAP/Total assets............. 15.8% 23.3% 8.0% 13.7%
GAP/RSA...................... 16.2 23.8 8.2 14.0
</TABLE>
48
<PAGE>
We measure the impact of interest rate changes on our income statement
through the use of gap analysis. The gap represents the net position of assets
and liabilities subject to repricing in specified time periods. During any
given time period, if the amount of rate sensitive liabilities exceeds the
amount of rate sensitive assets, a company would generally be considered
negatively gapped and would benefit from falling rates over that period of
time. Conversely, a positively gapped company would generally benefit from
rising rates.
We have structured the assets and liabilities of our Company to mitigate the
risk of either a rising or falling interest rate environment. We manage our gap
position at the one year horizon. Depending upon our assessment of economic
factors such as the magnitude and direction of projected interest rates over
the short- and long-term, we operate within guidelines set by our
asset/liability policy and attempt to maximize our returns within an acceptable
degree of risk. Our policy states that we shall maintain a gap position at the
one year horizon of between 0.70 and 1.30. Our position at March 31, 1999 was
0.697 and was outside of the guidelines of our policy. We intend to fine tune
our current position to continue operating within the low end set by our policy
guidelines as long as the general rate structure of the economy and our
business opportunities remain consistent. Therefore, generally speaking, a
short-term rise in interest rates would hurt earnings, while a short-term drop
in interest rates would help earnings.
Interest rate changes do not affect all categories of assets and liabilities
equally or simultaneously. There are other factors which are difficult to
measure and predict that would influence the effect of interest rate
fluctuations on our income statement. For example, a rapid drop in interest
rates might cause our loans to repay at a more rapid pace and certain mortgage-
related investments to prepay more quickly than projected. This could mitigate
some of the benefits of falling rates as are expected when negatively gapped.
Conversely, a rapid rise in rates could give us an opportunity to increase our
margins and stifle the rate of repayment on our mortgage-related loans which
would increase our returns.
The following "rate shock" table attempts to measure the effect of rising
and falling rates over a two-year horizon in a rapidly changing rate
environment.
<TABLE>
<CAPTION>
+200 Basis -200 Basis
Points Points
---------- ----------
<S> <C> <C>
Percentage change in net interest income due to an
immediate 200 basis point change in interest rates
over a two-year time horizon...................... -8.7% +10.3%
</TABLE>
This table shows that if there was an instantaneous, parallel shift in the
yield curve of +200 basis points, we would suffer a decline in net interest
income of 8.7% over a two year horizon. Conversely, a like shift of -200 basis
points would increase net interest income by 10.3% over a two year horizon. We
used a sensitivity model which simulated these interest rate changes on our
earning assets and interest-bearing liabilities. This process allows us to
explore the complex relationships among the financial instruments in various
interest rate environments.
The preceding sensitivity analysis is based on numerous assumptions
including: the nature and timing of interest rate levels including the shape of
the yield curve, prepayments on loans and securities, changes in deposit
levels, pricing decisions on loans and deposits, reinvestment/replacement of
asset and liability cash flows and others. While assumptions are developed
based upon current economic and local market conditions, we cannot make any
assurances as to the predictive nature of these assumptions including how
client preferences or competitor influences might change.
Inflation
Our consolidated financial statements and the related notes thereto,
presented elsewhere in this prospectus, have been prepared in accordance with
generally accepted accounting principles and practices within the banking
industry. Under these principles and practices, we are required to measure our
financial position in terms of historical dollars, without considering changes
in the relative purchasing power of money over time due to inflation.
49
<PAGE>
Unlike many industrial companies, virtually all of our assets and
liabilities are monetary in nature. As a result, interest rates have a more
significant impact on our performance than the general level of inflation. Over
short periods of time, interest rates may not necessarily move in the same
direction or in the same magnitude as inflation.
Recent Accounting Pronouncements
We follow generally accepted accounting principles in the preparation of our
financial statements. There have been several recent authoritative accounting
pronouncements issued by the Financial Accounting Standards Board that we have
adopted or will adopt in the future:
. Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities (SFAS No. 125) has been adopted and had
no effect on reported consolidated financial position and results of
operations.
. Reporting Comprehensive Income (SFAS No. 130) has been adopted and had
no effect on the reported consolidated financial position and results of
operations.
. Accounting for Derivatives Instruments and for Hedging Activities (SFAS
No. 133) will be effective for our fiscal quarters beginning after June
15, 1999. Currently, however, we do not own any derivative instruments.
Accordingly, this statement is not expected to affect our reported
consolidated financial position and results of operations.
50
<PAGE>
MANAGEMENT
Directors and Executive Officers
Our directors and executive officers, their ages, and their principal
position(s) with the Company are shown in the table below. All of our directors
are also directors of PrivateBank except Mr. Farrell and Mr. Gottlieb.
<TABLE>
<CAPTION>
Name Age Position(s)
---- --- -----------
<S> <C> <C>
Ralph B. Mandell(3)(4)........... 57 Chairman, President and CEO
Caren L. Reed(5)................. 64 Vice Chairman
Donald A. Roubitchek(5).......... 48 Chief Financial Officer and Director
Donald L. Beal(2)(5)............. 52 Director
Naomi T. Borwell(1)(4)........... 71 Director
William A. Castellano(1)(3)(4)... 57 Director
Robert F. Coleman(2)(3)(6)....... 54 Director
W. James Farrell(4).............. 56 Director
John E. Gorman(2)(3)(5).......... 53 Director
Alvin J. Gottlieb(4)............. 71 Director
James M. Guyette(1)(2)(3)(6)..... 54 Director
Philip M. Kayman(6).............. 57 Director
William R. Langley(2)(3)(4)...... 58 Director
Thomas F. Meagher(1)(6).......... 68 Director
Michael B. Susman(1)(5).......... 60 Director
Gary S. Collins.................. 40 Managing Director of PrivateBank
M. Gail Fitzgerald............... 55 Managing Director of PrivateBank
Hugh H. McLean................... 39 Managing Director of PrivateBank
</TABLE>
- --------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
(3) Member of the Planning Committee.
(4) Serves as a Class I director with a term expiring in 2002.
(5) Serves as a Class II director with a term expiring in 2000.
(6) Serves as a Class III director with a term expiring in 2001.
Ralph B. Mandell, a director since 1989, is a co-founder of PrivateBancorp
and PrivateBank. He has served as Chairman and Chief Executive Officer of the
Company and the Bank since 1994 and assumed the additional title of President
of both entities in March 1999. From inception until 1994, Mr. Mandell had the
title of Co-Chairman and Co-Chief Executive Officer. Prior to starting the
Company and the Bank, Mr. Mandell was the Chief Operating Officer of First
United Financial Services, Inc., a public company that traded on the Nasdaq
National Market, from 1985 to 1989, and its President from 1988 to 1989. First
United was sold to First Chicago Corporation in 1987. He also served as
President of Oak Park Trust & Savings Bank from 1985 until 1988. Prior thereto,
Mr. Mandell had served as Executive Vice President of Oak Park Trust & Savings
Bank since 1979.
Caren L. Reed, a director since 1990, is one of PrivateBank's founding
directors. He currently serves as Vice Chairman of the Company and the Bank,
and functions as Chief Credit Officer. From 1990 to March 1999, Mr. Reed also
held the title of President of PrivateBancorp and PrivateBank. Prior to joining
51
<PAGE>
PrivateBank, Mr. Reed was an Executive Vice President of Continental Bank,
Chicago with a career spanning 34 years. His responsibilities included North
American Banking, Multinational Banking-Europe, U.S. Capital Markets, and the
London Merchant Bank.
Donald A. Roubitchek has been a director since 1997. He has been the
Secretary/Treasurer and Chief Financial Officer of the Company, and Managing
Director and Chief Operating Officer of the Bank since its inception. He has 27
years' experience in the banking industry and an extensive background in
finance. Prior to joining the Bank, Mr. Roubitchek served in various capacities
with LaSalle Community Bank, and its predecessor, Lakeview Bank.
Donald L. Beal, 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. In 1994, Ashland Investment
filed for Chapter 11 relief under the federal bankruptcy laws and emerged from
bankruptcy after reorganization in April 1995.
Naomi T. Borwell has been a director since 1990. She is a private investor.
Mrs. Borwell is a former director of First Chicago Bank of Oak Park and First
United Trust Company.
William A. Castellano has been a director since 1991. From 1996 to present
he has been Chairman and founder of both Workspace, Inc. and Worknet, Inc.,
located in Oakbrook Terrace, Illinois. Workspace provides office furniture to
businesses, and Worknet provides computer networking services to businesses. He
was the founder of and served as the Chief Executive Officer to Chrysler
Systems Leasing from 1977 to 1991.
Robert F. Coleman, 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.
W. James Farrell, a director since 1990, has been an executive with Illinois
Tool Works, Inc., a manufacturer of fasteners, components, assemblies and
systems, since 1965, and became its Chairman and CEO in 1997. He is a director
of The Quaker Oats Company, Morton International, Inc. and Premark
International, Inc., each of which is traded on the New York Stock Exchange.
John E. Gorman has been a director since 1994. Since 1982, Mr. Gorman has
been a General Partner of the Jorman Group, a privately-owned organization with
diversified business holdings.
Alvin J. Gottlieb, a director since 1990, is a private investor. Since 1961,
Mr. Gottlieb has served in various capacities on the Board of Directors of
Gottlieb Memorial Hospital, located in Melrose Park, Illinois, and he currently
holds the position of Vice Chairman.
James M. Guyette has been a director since 1990. Since 1997, he has been
President and Chief Executive Officer of Rolls Royce North America, Inc. Mr.
Guyette served as Executive Vice President of UAL Corporation from 1985 to 1995
when he retired after more than 25 years of employment with that company. He is
currently a director of Rolls-Royce plc (London) and Pembroke Capital (Dublin),
and formerly a director of First United Financial Services and United Airlines
Employees Credit Union.
Philip M. Kayman, 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 also served as Interim Senior Vice President of Hyatt
Hotels Corporation from 1997 to 1998.
William R. Langley, a director since 1989, is a co-founder of the Company
and the Bank. Mr. Langley held the title of Co-Chairman of PrivateBancorp, and
was active in day-to-day management of the Company until 1995 when he retired.
Prior to the formation of the Company, Mr. Langley had served as Chief
Executive Officer of First United Financial Services, Inc., a public company
that traded on the Nasdaq National Market, from 1985 to 1989 and as Chairman
from 1988 to 1989. First United was sold to First Chicago Corporation in 1987.
Prior to that, he served as Chairman and President of Oak Park Trust and
Savings Bank, where he had been employed since 1973.
52
<PAGE>
Thomas F. Meagher has been a director since 1996. Mr. Meagher has been the
Chairman of Howell Tractor and Equipment Co., a distributor of heavy equipment
located in Elk Grove Village, Illinois, since 1980. He has had an extensive
career in the transportation industry and currently serves on the Board of
Directors of Trans World Airlines, Inc., a New York Stock Exchange company.
Michael B. Susman has been a director since 1990. He has been a partner in
the law firm of Spitzer, Addis, Susman & Krull, located in Chicago, Illinois,
since 1974.
Gary S. Collins has been a Managing Director of the Bank since 1991. As a
specialist in real estate lending, Mr. Collins has spent more than 20 years
managing diverse real estate transactions and the full range of mortgage
financing. Before joining the Bank in 1991, he held senior positions at several
Chicagoland financial institutions, including First Chicago Bank of Oak Park,
First Colonial Bancshares and Avenue Bank of Oak Park.
M. Gail Fitzgerald has been a Managing Director of the Bank since 1996. She
serves as the Bank's director of Trust and Investment Services. Ms. Fitzgerald
has over 20 years' banking experience, most of which is in the trust area. She
served as Trust Division President of Firstar Bank of Illinois from 1995 to
1996. She also served as Chairman, President, and Chief Executive Officer of
First Colonial Trust Company in Illinois from 1993 to 1995 and Senior Vice
President of First Chicago Trust Company of Illinois from 1988 to 1993.
Hugh H. McLean has been a Managing Director of the Bank since 1996. He
serves as head of credit marketing and manager of the Oak Brook office. Prior
to joining the Bank, he served as a regional manager with Firstar Bank Illinois
and its predecessor from 1990 to 1996, and as head of a commercial banking
division at American National Bank and Trust Company in Chicago, Illinois, from
1987 to 1990, where he was employed from 1980 to 1990.
Board of Directors
Our Board of Directors currently consists of 15 members divided into three
classes of directors who are elected to hold office for staggered three-year
terms as provided in our Restated Certificate of Incorporation and Amended and
Restated By-laws. Although our charter documents have fixed the size of our
Board at 16 members, there currently is one Class III director vacancy due to
the recent resignation of a director. Those persons currently serving as Class
I directors have been elected to hold office until the annual stockholders'
meeting to be held in 2002; Class II directors have been elected to hold office
until the annual stockholders' meeting to be held in 2000; and Class III
directors have been elected to hold office until the annual stockholders'
meeting to be held in 2001.
Committees of the Board of Directors
We have appointed certain members of our Board to serve on various
committees of the Board of Directors. The Board of Directors has established
three standing committees: (a) the Compensation Committee; (b) the Audit
Committee; and (c) the Planning Committee.
Compensation Committee. The Compensation Committee is responsible for
reviewing the performance of our Chief Executive Officer; reviewing and
recommending the compensation of the Company's officers, including the Chief
Executive Officer; recommending and approving stock option grants and
restricted stock awards to management; reviewing and recommending non-cash
compensation programs including stock option grants, 401(k) contributions and
annual bonuses; reviewing and recommending director compensation; and advising
the Chief Executive Officer on miscellaneous compensation issues. The members
of the Compensation Committee are Messrs. Guyette (Chairman), Castellano,
Meagher and Susman and Mrs. Borwell.
Audit Committee. The Audit Committee reports to the Board of Directors in
discharging its responsibilities relating to our accounting, reporting and
financial control practices. The Audit Committee has general
53
<PAGE>
responsibility for oversight of financial controls, as well as our accounting,
regulatory, year 2000 and audit activities, and annually reviews the
qualifications of the independent auditors. The Audit Committee is composed
entirely of outside directors. The members of the Audit Committee are Messrs.
Coleman (Chairman), Beal, Gorman, Guyette and Langley.
Planning Committee. The Planning Committee is responsible for studying
strategic issues prior to submission to the entire Board of Directors for
approval. The Planning Committee consists of Messrs. Mandell (Chairman),
Castellano, Coleman, Gorman, Guyette and Langley.
We have not designated a nominating committee. The entire Board of Directors
acts to nominate persons for election as directors.
Director Compensation
In 1992, we commenced a program of compensating those of our outside
directors who are also outside directors of PrivateBank with stock option
awards in lieu of cash retainers. Our philosophy has been to increase our
directors' equity stake in the Company and further enhance the alignment of
their interests with those of our stockholders. The director options have been
granted each year in amounts determined at the discretion of the Board. The
options are fully vested at the end of the year of grant, subject to a full
year of service. In each case, the options have been granted at an exercise
price equal to or greater than the estimated fair market value of our common
stock at the date of grant. Partial awards have been made for partial year
service. As of March 31, 1999, there were outstanding options granted to non-
employee directors pursuant to this program to purchase an aggregate of 179,920
shares of common stock at an average weighted per share exercise price of
$11.13. In March 1999, the Board granted each non-employee director of
PrivateBank an option to purchase 1,500 shares of common stock at the initial
public offering price of shares sold in this offering.
In addition to stock options, non-employee members of the Company's Board of
Directors receive fees of $200 for each board meeting attended. The directors
also receive $100 per meeting for attendance at meetings of any committees of
the Board on which they serve. Those directors who serve on the board of
PrivateBank are also entitled to the same meeting fees. During 1998, the Boards
of Directors of each of the Company and PrivateBank met monthly. Total board
and committee meeting fees paid in 1998 was $58,800.
We intend to reevaluate the structure of our director compensation program
following the offering and anticipate that we may seek stockholder approval of
a stock-based director compensation plan at our next stockholders' meeting.
Compensation Committee Interlocks and Insider Participation
Messrs. Guyette and Castellano and Ms. Borwell each serve on the
Compensation Committee of our Board of Directors. During our last fiscal year,
each of these individuals has engaged in certain transactions as clients of
PrivateBank, in the ordinary course of PrivateBank's business, including
borrowings, all of which transactions are or were on substantially the same
terms (including interest rates and collateral on loans) as those prevailing at
the time for comparable transactions with unaffiliated persons. In the opinion
of our management, none of these transactions involved more than the normal
risk of collectibility or presented any other unfavorable features. See
"Certain Transactions."
54
<PAGE>
Executive Compensation
The following table summarizes the compensation paid by the Company and the
Bank to the Chairman, President and Chief Executive Officer and the five other
most highly paid executive officers (the "Named Executive Officers") during
1998.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation Awards
---------------------------- ---------------------
Other Annual Securities All Other
Compen- Restricted Underlying Compen-
Name and Principal Salary Bonus sation(1) Stock(2) Options(3) sation
Position Year ($) ($) ($) ($) (#) ($)
------------------ ---- ------- ------- ------------ ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Ralph B. Mandell........ 1998 210,000 100,000 18,845 77,000(4) 6,400 34,723(5)
Chairman, President and
CEO
Caren L. Reed........... 1998 146,000 45,000 14,795 -- 4,800 3,200(6)
Vice Chairman
Donald A. Roubitchek.... 1998 138,000 37,000 1,776 22,000(7) 6,400 3,200(6)
Chief Financial Officer
Hugh H. McLean.......... 1998 115,000 35,000 11,756 22,000(7) 5,600 3,005(6)
Managing Director
M. Gail Fitzgerald...... 1998 112,000 40,000 3,206 22,000(7) 5,600 3,067(6)
Senior Trust Officer
and Managing Director
Gary S. Collins......... 1998 112,000 29,000 9,429 22,000(7) 5,600 2,749(6)
Managing Director
</TABLE>
- --------
(1) Represents automobile allowances, life insurance premiums and club
membership dues and fees paid by the Company.
(2) Reflects restricted stock awards under our Stock Incentive Plan. The
Company has paid regular dividends on all shares of restricted stock
outstanding. These shares of restricted stock are subject to forfeiture
until the fifth anniversary of the grant date.
(3) Options to purchase shares of common stock were granted in 1998 at an
exercise price of $17.1875 (representing 125% of fair market value at the
date of grant) and vest at the end of five years; however, these options
may vest before the fifth anniversary subject to performance-based
acceleration terms providing for complete vesting upon the third or fourth
anniversary of their grant date if the cumulative annualized growth rate of
the fair market value of the common stock (including dividends paid) equals
at least 15% as of such anniversary date.
(4) Represents award of 5,600 shares of restricted stock at a value of $13.75
per share.
(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. See "Certain
Transactions."
(6) Represents matching contributions to the Company's 401(k) plan made by the
Company for the benefit of the executive officer.
(7) Represents award of 1,600 shares of restricted stock at a value of $13.75
per share.
55
<PAGE>
The table below summarizes certain information about the options which we
granted in 1998 to each Named Executive Officer. All options were granted at
per share exercise prices equal to 125% of the fair market value per share on
the date of grant.
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Individual Grants
-----------------------------------------
Potential
Realizable Value
at Assumed
% of Total Annual Rates of
Number of Options Stock Price
Shares Granted to Exercise Appreciation for
Underlying Employees or Base Option Term ($)
Options in Fiscal Price Expiration ----------------
Name Granted Year ($/Sh) Date 5% 10%
---- ---------- ---------- -------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Ralph B. Mandell........ 6,400 11.19% 17.1875 6/24/08 $33,343 $118,249
Caren L. Reed........... 4,800 8.39% 17.1875 6/24/08 25,007 88,687
Donald A. Roubitchek.... 6,400 11.19% 17.1875 6/24/08 29,175 118,249
Gary S. Collins......... 5,600 9.79% 17.1875 6/24/08 29,175 103,468
M. Gail Fitzgerald...... 5,600 9.79% 17.1875 6/24/08 29,175 103,468
Hugh H. McLean.......... 5,600 9.79% 17.1875 6/24/08 29,175 103,468
</TABLE>
The following table summarizes for each Named Executive Officer the number
of shares of common stock subject to outstanding options and the value of such
options that were unexercised at December 31, 1998.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised In-The-
Shares Options at Money Options at December
Acquired on December 31, 1998 (#) 31, 1998 ($)(2)
Exercise Value ---------------------------- ----------------------------
Name (#) Realized ($) Exercisable/Unexercisable(1) Exercisable/Unexercisable(1)
---- ----------- ------------ ---------------------------- ----------------------------
<S> <C> <C> <C> <C>
Ralph B. Mandell........ -- -- 71,840/10,400 656,190/32,750
Caren L. Reed........... 65,600 533,500 3,840/ 8,000 37,440/26,200
Donald A. Roubitchek.... -- -- 36,736/ 8,400 333,661/16,375
Gary S. Collins......... -- -- 30,016/ 7,200 272,956/13,100
M. Gail Fitzgerald...... -- -- 8,000/13,600 53,000/53,000
Hugh H. McLean.......... -- -- 8,000/13,600 53,000/53,000
</TABLE>
- --------
(1) The numbers and amounts in the above table represent shares of common stock
subject to options granted that were unexercised as of December 31, 1998.
(2) The estimated fair market value of our common stock at December 31, 1998
was $16.00.
Stock Incentive Plan
We maintain a Stock Incentive Plan pursuant to which we may grant our
executive officers and key employees stock options and restricted stock awards.
We also have a director compensation program for our non-employee directors.
See "Management--Director Compensation." The purpose of the Stock Incentive
Plan is to enhance our ability to attract and retain officers, executives and
key employees and to align the interests of such individuals with those of our
stockholders. The Stock Incentive Plan is administered, construed and
interpreted by the Compensation Committee of the Board of Directors. The
Compensation Committee may at any time alter, amend or terminate the Stock
Incentive Plan provided that no action of the
56
<PAGE>
Board may adversely affect a participant's rights under any previously-granted
stock option or restricted stock award without the consent of the participant.
Any amendment to the Stock Incentive Plan which increases the number of shares
of Common Stock which may be awarded or changes the class of persons eligible
to receive awards must be approved by the Company's stockholders within twelve
months prior to or after the effective date of such amendment. Deductions by
the Company for compensation amounts under the Stock Incentive Plan are not
expected to be limited by Section 162(m) of the Internal Revenue Code.
Effective upon completion of this offering, the Stock Incentive Plan
provides for aggregate awards relating to up to 658,623 shares of common stock.
Of such shares, 426,488 are subject to options that are currently outstanding
and 50,119 remain available for future grant as options or restricted stock
awards.
In the event of any change to the outstanding shares of stock of the Company
by reason of stock dividend or distribution, recapitalization, merger or
consolidation, the Compensation Committee will adjust the number of shares of
stock which may be issued under the Stock Incentive Plan and will provide for
an equitable adjustment of any outstanding options or restricted stock grants.
No individual participant in the Stock Incentive Plan may receive options to
purchase more than 100,000 shares of common stock during any calendar year. As
of March 31, 1999, there were outstanding options to purchase an aggregate of
426,488 shares of common stock under the Stock Incentive Plan, at exercise
prices ranging from $6.25 to $18.00. In March 1999, we granted a total of
60,600 stock options, effective upon completion of this offering, at the
initial public offering price. These options vest 50% after two years, 75%
after three years, and are fully vested after four years. A total of 20,400
shares of restricted stock were also granted in March 1999 which will be fully
vested after five years, at which time these shares will no longer be subject
to forfeiture.
All stock options granted pursuant to the Stock Incentive Plan are evidenced
by agreements stating the number of shares covered thereby, the exercise price,
the period or periods of time within which each option will become fully or
partially exercisable, and whether an option is an "incentive stock option" as
such term is defined in Section 422 of the Internal Revenue Code of 1986, as
amended, or a non-qualified stock option. The Compensation Committee has the
authority to determine exercisability of an option and may in its discretion
accelerate the time or times for exercise. No stock option may be exercisable
after the expiration of 10 years from the date it is granted, and, in the case
of an incentive stock option granted to a 10% stockholder, the option must be
exercised within five years from the date it is granted. The price to be paid
for the shares upon the exercise of each option may not be less than the fair
market value of such shares on the date on which the option is granted, as
determined by the Compensation Committee. An incentive stock option granted to
a 10% stockholder must have an exercise price of at least 110% of the fair
market value of the stock subject to the option as of the date of grant. The
aggregate fair market value (determined as of the time the option is granted)
of stock with respect to which incentive stock options are exercisable for the
first time by an optionee during any calendar year (under all option plans of
the Company) may not exceed $100,000, provided that, to the extent that such
limitation is exceeded, any excess options shall be deemed not to be incentive
stock options.
All restricted stock awards granted pursuant to the Stock Incentive Plan are
evidenced by a written grant document in a form approved by the Compensation
Committee. The grant document specifies the period or periods of time within
which each grant of restricted stock will no longer be subject to restrictions
on sale, transfer or alienation of the stock. The grant document shall also
specify the treatment of the stock upon termination of employment before the
restrictions are lifted.
Certain Federal Income Tax Consequences
The following summary discusses certain of the federal income tax
consequences associated with (a) the grant of a stock option under our Stock
Incentive Plan, and (b) the exercise of such option. This summary is limited
and does not describe state or local income or other tax consequences.
57
<PAGE>
Non-Qualified Stock Options.
The grant of a non-qualified stock option (including any option exceeding
the limitations on incentive stock options described above) will not be a
taxable event to the optionee. Upon the exercise of a non-qualified stock
option, the optionee generally must recognize ordinary compensation income
equal to the difference between the exercise price and the fair market value of
the common stock on the date of exercise. This compensation income will be
subject to applicable withholding. At the time of exercise, the Company will
generally be entitled to a tax deduction in the amount of such compensation
income. The optionee's tax basis for the stock received pursuant to the
exercise will equal the sum of the recognized compensation income and the
exercise price.
Incentive Stock Options.
The grant of an incentive stock option will not be a taxable event to the
optionee. In addition, in contrast to the exercise of a non-qualified stock
option, the timely exercise of an incentive stock option will not cause the
optionee to recognize taxable income for regular income tax purposes (although
the employee could be subject to an alternative minimum tax liability as
described below). Also, the Company shall not be entitled to a tax deduction
for either the grant or the exercise.
Upon exercise of an incentive stock option by an optionee, the alternative
minimum taxable income of such optionee must be determined as if such incentive
stock option were a non-qualified stock option (see "Non-Qualified Stock
Options," above). Accordingly, such optionee will be required to include as
alternative minimum taxable income the excess (if any) of the value of shares
received upon exercise as of the date such shares are vested over the amount
paid for such shares. Such employee would then be required to pay the greater
of such optionee's regular or alternative minimum tax liability computed with
respect of such year.
If optionee engages in the disqualifying disposition of the stock subject to
an incentive stock option, however, the exercise of the incentive stock option
may give rise to taxable compensation income to the optionee and a tax
deduction to the Company. The optionee's sale or exchange of shares required
upon the exercise of an incentive stock option more than one year after the
transfer of the shares to such optionee and more than two years after the date
of grant of the incentive stock option will result in any difference between
the net sale proceeds and the exercise price being treated as long-term capital
gain or loss to the optionee. If such sale or exchange takes place within two
years after the date of the grant of the incentive stock option or within one
year from the date of transfer of the shares to the optionee, the sale or
exchange will generally be a "disqualifying disposition" and will have the
following results: any excess of (x) the lesser of (1) the fair market value of
the shares at the time of exercise and (2) the amount realized on the
disqualifying disposition of the shares over (y) the option exercise price of
such shares, will be ordinary income to the optionee, subject to applicable
withholding taxes, and the Company will be entitled to a tax deduction in the
amount of such income. Any further gain or loss after the date of exercise will
generally qualify as capital gain or loss and will not result in any deduction
by the Company.
Withholding Taxes.
To the extent that any amount recognized by an optionee upon exercise of an
option is subject to withholding taxes, the Company may require the optionee to
pay, in addition to the amount required to exercise the option, the appropriate
amount of withholding. To the extent compensation income is recognized by an
optionee in connection with the exercise of a non-qualified stock option, the
Company generally would be entitled to a matching compensation deduction
(assuming the requisite withholding requirements are satisfied).
Restricted Stock Grants.
Ordinarily, the grant of restricted stock under the Stock Incentive Plan
will not be a taxable event to the grantee. The grantee will incur ordinary
compensation income, however, when the restrictions on the stock are lifted, in
an amount equal to the fair market value of the stock at the time the
restrictions are lifted. Similarly,
58
<PAGE>
while the Company will not be entitled to a tax deduction for the restricted
stock at the time of grant, at the time the restrictions are lifted, the
Company will generally be entitled to a tax deduction in the amount of the
then-current fair market value of the stock. Any dividends paid on restricted
stock will be taxable income to the grantee at the time issued.
As an exception to the above paragraph, under Internal Revenue Code (S)83(b)
a grantee may elect to include in current gross income restricted stock at the
time it is granted. If the grantee makes such an election, the fair market
value of the restricted stock at the time of grant, without regard to any
restrictions, shall be includable in the grantee's gross income. If the
restricted stock is subsequently forfeited by the grantee, either by
termination of employment before restrictions are lifted or otherwise, no
deduction to the grantee's income may be made. If the granted makes an election
under (S)83(b), the Company will generally be entitled to a tax deduction at
the time of the grant for the then-current fair market value of the restricted
stock, without regard to restrictions.
CERTAIN TRANSACTIONS
Some of our executive officers and directors are, and have been during the
preceding three years, clients of PrivateBank, and some of our 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
PrivateBank. As such clients, they have had transactions in the ordinary course
of business of PrivateBank, 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 our management, none
of the transactions involved more than the normal risk of collectibility or
presented any other unfavorable features. At March 31, 1999, PrivateBank had
$12,148,755 in loans outstanding to certain directors and executive officers
and their business interests of the Company and certain executive officers of
PrivateBank.
In May 1998, Ralph B. Mandell, our Chairman, President and Chief Executive
Officer, purchased 72,720 shares of newly issued common stock at $13.75 per
share from PrivateBancorp. The purpose of the transaction was to enhance Mr.
Mandell's interest in the long-term performance of the Company and further
align his interests with those of our stockholders. At the request of the Board
of Directors of the Company, one of the underwriters, EVEREN Securities, Inc.,
provided a fairness opinion to the Company relating to the sale price
established by our Board in connection with the transaction. As part of the
transaction, we loaned Mr. Mandell approximately 95% of the purchase price on a
full recourse basis. The loan matures in five years but becomes payable prior
to the fifth year in the event Mr. Mandell sells any of the 72,720 shares or
Mr. Mandell's employment is terminated. Interest accrues at 5.69% per annum,
compounded annually (the applicable Federal rate), on the principal amount of
the loan; however, provided Mr. Mandell does not sell any of the shares
purchased and remains in our employ, 25% of the accumulated interest on the
loan will be forgiven on the loan's second anniversary, 50% of the accumulated
interest on the loan will be forgiven on its third anniversary, 75% of the
accumulated interest on the loan will be forgiven on its fourth anniversary,
and 100% of the accumulated interest on the loan will be forgiven on the loan's
fifth anniversary. Mr. Mandell pledged all of the shares of common stock
purchased in the transaction as collateral for the loan he received from us,
but he is entitled to vote, and receive dividends on, the shares.
During 1998, we incurred professional fees for services provided by Spitzer,
Addis, Susman & Krull, a law firm of which Michael B. Susman, who is one of our
directors, is a partner.
59
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth the beneficial ownership of the common stock
as of March 31, 1999, and as adjusted to give effect to the offering assuming
900,000 shares are sold in the offering (assuming no exercise of the over-
allotment option and no additional purchases of shares in the offering by the
persons shown), with respect to (a) each of our directors and Named Executive
Officers; and (b) all of our directors and Named Executive Officers as a group.
<TABLE>
<CAPTION>
Shares
Subject to
Exercisable
Options to Percentage Percentage
Shares of Purchase Total Ownership Ownership
Common Common Beneficial Before After
Stock(1) Stock(2) Ownership Offering(3) Offering(3)
--------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Directors
Ralph B. Mandell** (4).. 221,320 75,840 297,160 8.42% 6.71%
Caren L. Reed** (5)..... 9,600 7,040 16,640 * *
Donald A. Roubitchek**
(6).................... 31,920 38,736 70,656 2.02% 1.61%
Donald L. Beal (7)...... 17,464 12,720 30,184 * *
Naomi T. Borwell (8).... 164,800 12,720 177,520 5.12% 4.07%
William A. Castellano
(9).................... 132,400 12,720 145,120 4.19% 3.32%
Robert F. Coleman (10).. 26,400 12,720 39,120 1.13% *
W. James Farrell........ 10,400 6,240 16,640 * *
John E. Gorman.......... 49,000 8,400 57,400 1.66% 1.32%
Alvin J. Gottlieb....... 105,600 6,240 111,840 3.23% 2.57%
James M. Guyette........ 12,000 12,720 24,720 * *
Philip M. Kayman........ 12,800 12,720 25,520 * *
William R. Langley...... 89,600 68,240 157,840 4.48% 3.57%
Thomas F. Meagher....... 12,500 6,480 18,980 * *
Michael B. Susman....... 22,400 12,720 35,120 1.01% *
Other Named Executive
Officers
Gary S. Collins (11).... 28,180 31,616 59,796 1.72% 1.36%
M. Gail Fitzgerald (12). 13,200 8,000 21,200 * *
Hugh H. McLean (13)..... 45,528 12,000 57,528 1.66% 1.32%
Directors and executive
officers
as a group (18
persons)............... 1,005,112 357,872 1,362,984 35.78% 28.94%
</TABLE>
- --------
*Less than 1%
**Denotes person who serves as director and as an executive officer.
(1) Unless otherwise noted, represents all shares held individually, held in
individual retirement accounts or revocable trusts for the benefit of the
director or executive officer, and held jointly with spouse.
(2) Includes options which are currently exercisable or exercisable within 60
days of the date of this prospectus.
(3) Beneficial ownership percentages are calculated in accordance with SEC
Rule 13d-3 promulgated under the Securities Exchange Act of 1934.
(4) Includes 26,600 shares of restricted stock granted to Mr. Mandell under
our Stock Incentive Plan. These shares vest at various dates between 2001
and 2004, and are subject to forfeiture until such time as they vest. Also
included are 72,720 shares which have been pledged as collateral to secure
a loan from the Company to Mr. Mandell. See "Certain Transactions." Also
includes 23,600 shares held by Mr. Mandell's spouse. Mr. Mandell's
business address is c/o The PrivateBank & Trust Company, Ten North
Dearborn Street, Chicago, Illinois 60602.
60
<PAGE>
(5) Includes 9,600 shares of restricted stock granted to Mr. Reed under our
Stock Incentive Plan. These shares vest at various dates between 2001 and
2002, and are subject to forfeiture until such time as they vest.
(6) Includes 13,200 shares of restricted stock granted to Mr. Roubitchek under
our Stock Incentive Plan. These shares vest at various dates between 2001
and 2004, and are subject to forfeiture until such time as they vest. Also
includes 400 shares held by Mr. Roubitchek's children.
(7) Includes 10,364 shares held by Mr. Beal's spouse and children.
(8) Ms. Borwell's address is 1040 N. Lake Shore Drive, Chicago, Illinois
60611.
(9) Includes 14,000 shares held by Mr. Castellano's children.
(10) Includes 800 shares held by Mr. Coleman's spouse and 3,200 shares held by
the Robert F. Coleman & Associates Retirement Savings Plan of which Mr.
Coleman is a participant.
(11) Includes 10,400 shares of restricted stock granted to Mr. Collins under
our Stock Incentive Plan. These shares vest at various dates between 2001
and 2004, and are subject to forfeiture until such time as they vest. Also
includes 4,170 shares owned by Mr. Collins' spouse and children.
(12) Includes 6,800 shares of restricted stock granted to Ms. Fitzgerald under
our Stock Incentive Plan. These shares vest at various dates between 2002
and 2004, and are subject to forfeiture until such time as they vest.
(13) Includes 7,800 shares of restricted stock granted to Mr. McLean under our
Stock Incentive Plan. These shares vest at various dates between 2002 and
2004, and are subject to forfeiture until such time as they vest.
SUPERVISION AND REGULATION
General
Banking is a highly regulated industry. We have attempted to summarize
several applicable statutes and regulations, but you should understand that
these summaries are not complete, and you should refer to the statutes and
regulations for more information. Also, these statutes and regulations are
likely to change in the future, and we cannot predict what effect these
changes, if made, will have on our operations. Finally, please remember that
supervision, regulation and examination of banks and bank holding companies by
bank regulatory agencies are intended primarily for the protection of
depositors rather than stockholders of banks and bank holding companies.
Bank Holding Company Regulation
The Company is registered as a "bank holding company" with the Board of
Governors of the Federal Reserve System (the "Federal Reserve") pursuant to the
Bank Holding Company Act of 1956 (the Bank Holding Company Act of 1956 and the
regulations issued thereunder are collectively referred to as the "BHC Act"),
and we are subject to regulation, supervision and examination by, and we are
required to file reports and additional information with the Federal Reserve.
Minimum Capital Requirements. The Federal Reserve has adopted risk-based
capital requirements for assessing bank holding company capital adequacy. These
standards revise the normal definition of capital and establish minimum capital
standards in relation to assets and off-balance sheet exposures, as adjusted
for credit risks. At December 31, 1998, our consolidated assets were
approximately $416 million. Under the Federal Reserve's risk-based guidelines
applicable to the Company, capital is classified into two categories.
For bank holding companies, Tier 1, or "core", capital consists of:
. common stockholders' equity;
. perpetual preferred stock (subject to some limitations); and
61
<PAGE>
. minority interests in the common equity accounts of consolidated
subsidiaries
less:
. goodwill;
. specified intangible assets; and
. specified investments in other corporations.
Tier 2 capital consists of:
. the allowance for loan and lease losses;
. perpetual preferred stock and related surplus;
. hybrid capital instruments;
. perpetual debt securities;
. mandatory convertible debt securities;
. term subordinated debt and related surplus; and
. intermediate-term preferred stock, including related securities.
Under the Federal Reserve's capital guidelines, bank holding companies are
required to maintain a minimum ratio of qualifying total capital to risk-
weighted assets of 8%, of which at least 4% must be in the form of Tier 1
capital. The Federal Reserve also requires a minimum leverage ratio of Tier 1
capital to total assets of 3%. Bank holding companies not rated in the highest
category under the regulatory rating system are required to maintain a leverage
ratio of one percent to two percent above the stated minimum. The 3% Tier 1
capital to total assets ratio is the minimum leverage standard for bank holding
companies, and the Federal Reserve uses this minimum standard in conjunction
with the risk-based ratio in determining the overall capital adequacy of
banking organizations. In addition, the Federal Reserve continues to consider
the Tier 1 leverage ratio in evaluating proposals for expansion or new
activities.
In its capital adequacy guidelines, the Federal Reserve emphasizes that the
foregoing standards are supervisory minimums and that banking organizations
generally are expected to operate well above the minimum ratios. These
guidelines also provide that banking organizations experiencing internal growth
or making acquisitions will be expected to maintain strong capital positions
substantially above the minimum levels.
As of March 31, 1999, we had regulatory capital in excess of the Federal
Reserve's minimum requirements. Our total risk-based capital ratio at March 31,
1999 was 11.21% and our leverage ratio was 7.53%.
Acquisitions. The BHC Act requires prior Federal Reserve approval for, among
other things, the acquisition by a bank holding company of direct or indirect
ownership or control of more than 5% of the voting shares or substantially all
the assets of any bank or bank holding company, or for a merger or
consolidation of a bank holding company with another bank holding company. With
limited exceptions, the BHC Act prohibits a bank holding company from acquiring
direct or indirect ownership or control of voting shares of any company which
is not a bank or bank holding company and from engaging directly or indirectly
in any activity other than banking or managing or controlling banks or
performing services for its authorized subsidiaries. A bank holding company
may, however, engage in or acquire an interest in a company that engages in
activities which the Federal Reserve has determined, by regulation or order, to
be so closely related to banking or managing or controlling banks as to be a
proper incident thereto, such as owning and operating a savings association,
trust company, or investment or financial advisory business. Under the BHC Act
and Federal Reserve regulations, we are prohibited from engaging in tie-in
arrangements in connection with an extension of credit, lease, sale of
property, or furnishing of services. That means that, in most circumstances, we
may not condition a client's purchase of one of our services on the purchase of
another service.
62
<PAGE>
Interstate Banking and Branching Legislation. Under the Interstate Banking
and Efficiency Act, adequately capitalized and adequately managed bank holding
companies are allowed to acquire banks across state lines subject to various
limitations. In addition, under the Interstate Banking Act, banks are
permitted, under some circumstances, to merge with one another across state
lines and thereby create a main bank with branches in separate states. After
establishing branches in a state through an interstate merger transaction, a
bank may establish and acquire additional branches at any location in the state
where any bank involved in the interstate merger could have established or
acquired branches under applicable federal and state law.
Ownership Limitations. Any person, including that person's associates,
affiliates and groups acting in concert with him or her, who purchases or
subscribes for 5% or more of our common stock may be required to obtain prior
approval of the Commissioner and the Federal Reserve. Under the Illinois
Banking Act, any person who thereafter acquires more than 10% of our stock may
be required to obtain the prior approval of the Commissioner. Under the Change
in Bank Control Act, a person may be required to obtain the prior regulatory
approval of the Federal Deposit Insurance Corporation ("FDIC") and the Federal
Reserve before acquiring the power to directly or indirectly control the
management, operations or policies of the Company or PrivateBank or before
acquiring control of 25% or more of any class of the Company's or PrivateBank's
outstanding voting stock. In addition, any corporation, partnership, trust or
organized group that acquires a controlling interest in the Company or
PrivateBank may have to obtain approval of the Federal Reserve to become a bank
holding company and thereafter be subject to regulation as a bank holding
company.
Dividends. The Federal Reserve has issued a policy statement on the payment
of cash dividends by bank holding companies. In the policy statement, the
Federal Reserve expressed its view that a bank holding company experiencing
earnings weaknesses should not pay cash dividends exceeding its net income or
which could only be funded in ways that weakened the bank holding company's
financial health, such as by borrowing. Additionally, the Federal Reserve
possesses enforcement powers over bank holding companies and their non-bank
subsidiaries to prevent or remedy actions that represent unsafe or unsound
practices or violations of applicable statutes and regulations. Among these
powers is the ability to prohibit or limit the payment of dividends by banks
and bank holding companies.
Under a longstanding policy of the Federal Reserve, the Company is expected
to act as a source of financial strength to PrivateBank and to commit resources
to support PrivateBank. The Federal Reserve takes the position that in
implementing this policy, it may require the Company to provide financial
support when the Company otherwise would not consider itself able to do so.
In addition to the restrictions on dividends imposed by the Federal Reserve,
Delaware law also places limitations on our ability to pay dividends. For
example, we may not pay dividends to our stockholders if, after giving effect
to the dividend, we would not be able to pay our debts as they become due.
Because a major source of our revenue is dividends which we receive and expect
to receive from PrivateBank, our ability to pay dividends will depend on the
amount of dividends paid by PrivateBank. We cannot be sure that PrivateBank
will, in any circumstances, pay such dividends to us.
Bank Regulation
Under Illinois law, the Bank is subject to supervision and examination by
the commissioner of the Illinois Office of Banks and Real Estate (the
"Commissioner"). As an affiliate of the Bank, the Company is also subject to
examination by the Commissioner. The Bank is a member of the Federal Home Loan
Bank ("FHLB") of Chicago and may be subject to examination by the FHLB of
Chicago. In addition, the deposits of the Bank are insured by the Bank
Insurance Fund ("BIF") thereby rendering the Bank subject to the provisions of
the Federal Deposit Insurance Act ("FDIA") and, as a state nonmember bank, to
supervision and examination by the FDIC. The FDIA requires the FDIC approval of
any merger and/or consolidation by or with an insured bank, as well as the
establishment or relocation of any bank or branch office. The FDIC also
supervises compliance with the provisions of federal law and regulations which
place restrictions on loans by FDIC-insured banks to their directors, executive
officers and other controlling persons.
63
<PAGE>
Furthermore, all banks are affected by the credit policies of other monetary
authorities, including the Federal Reserve, which regulate the national supply
of bank credit. Such regulation influences overall growth of bank loans,
investments, and deposits and may also affect interest rates charged on loans
and paid on deposits. The Federal Reserve's monetary policies have had a
significant effect on the operating results of commercial banks in the past and
we expect this trend to continue in the future.
Dividends. The Illinois Banking Act provides that an Illinois bank may not
pay dividends of an amount greater than its current net profits after deducting
losses and bad debts while such bank continues to operate a banking business.
For the purpose of determining the amount of dividends that an Illinois bank
may pay, bad debts are defined as debts upon which interest is past due and
unpaid for a period of six months or more unless such debts are well-secured
and in the process of collection.
In addition to the foregoing, the ability of the Company and PrivateBank to
pay dividends may be affected by the various minimum capital requirements and
the capital and non-capital standards established under the Federal Deposit
Insurance Corporation Improvements Act of 1991 ("FDICIA"), as described below.
Federal Reserve System. PrivateBank is subject to Federal Reserve
regulations requiring depository institutions to maintain noninterest-earning
reserves against their transaction accounts (primarily NOW and regular checking
accounts). The Federal Reserve regulations generally require 3% reserves on the
first $47.8 million of transaction accounts plus 10% on the remainder. The
first $4.7 million of otherwise reservable balances (subject to adjustments by
the Federal Reserve) are exempted from the reserve requirements. PrivateBank is
in compliance with that requirement.
Standards for Safety and Soundness. The FDIA, as amended by FDICIA and the
Riegle Community Development and Regulatory Improvement Act of 1994, requires
the Federal Reserve, together with the other federal bank regulatory agencies,
to prescribe standards of safety and soundness, by regulations or guidelines,
relating generally to operations and management, asset growth, asset quality,
earnings, stock valuation, and compensation. The FDIC and the other federal
bank regulatory agencies have adopted a set of guidelines prescribing safety
and soundness standards pursuant to FDICIA. The guidelines establish general
standards relating to internal controls and information systems, internal audit
systems, loan documentation, credit underwriting, interest rate exposure, asset
growth, and compensation, fees and benefits. In general, the guidelines
require, among other things, appropriate systems and practices to identify and
manage the risks and exposures specified in the guidelines. The guidelines
prohibit excessive compensation as an unsafe and unsound practice and describe
compensation as excessive when the amounts paid are unreasonable or
disproportionate to the services performed by an executive officer, employee,
director or principal stockholder. In addition, the FDIC adopted regulations
that authorize, but do not require, the FDIC to order an institution that has
been given notice by the FDIC that it is not satisfying any of the safety and
soundness standards to submit a compliance plan. If, after being so notified,
an institution fails to submit an acceptable compliance plan or fails in any
material respect to implement an accepted compliance plan, the FDIC must issue
an order directing action to correct the deficiency and may issue an order
directing other actions of the types to which an undercapitalized association
is subject under the "prompt corrective action" provisions of FDICIA. If an
institution fails to comply with such an order, the FDIC may seek to enforce
its order in judicial proceedings and to impose civil money penalties. The FDIC
and the other federal bank regulatory agencies also proposed guidelines for
asset quality and earning standards.
Prompt Corrective Action. FDICIA requires the federal banking regulators,
including the Federal Reserve and the FDIC, to take prompt corrective action
with respect to depository institutions that fall below minimum capital
standards and prohibits any depository institution from making any capital
distribution that would cause it to be undercapitalized. Institutions that are
not adequately capitalized may be subject to a variety of supervisory actions,
including restrictions on growth, investment activities, capital distributions
and affiliate transactions, and will be required to submit a capital
restoration plan which, to be accepted by the regulators, must be guaranteed in
part by any company having control of the institution (for example, the Company
or a
64
<PAGE>
stockholder controlling the Company). In other respects, FDICIA provides for
enhanced supervisory authority, including greater authority for the appointment
of a conservator or receiver for under-capitalized institutions. The capital-
based prompt corrective action provisions of FDICIA and their implementing
regulations apply to FDIC-insured depository institutions. However, federal
banking agencies have indicated that, in regulating bank holding companies, the
agencies may take appropriate action at the holding company level based on
their assessment of the effectiveness of supervisory actions imposed upon
subsidiary insured depository institutions pursuant to the prompt corrective
action provisions of FDICIA.
As of March 31, 1999, PrivateBank had capital in excess of the requirements
for a "well-capitalized" institution.
Insurance of Deposit Accounts. Under FDICIA, as an FDIC-insured institution,
the Bank is required to pay deposit insurance premiums based on the risk it
poses to the insurance fund. The FDIC has authority to raise or lower
assessment rates on insured deposits in order to achieve designated reserve
ratios in the insurance funds and to impose special additional assessments. The
FDICIA assessment rate schedule for BIF-insured deposits provides for an
assessment range of zero to 0.27% (subject to a $2,000 minimum) of deposits
depending on capital and supervisory factors. Each depository institution is
assigned to one of three capital groups: "well capitalized," "adequately
capitalized" or "less than adequately capitalized." Within each capital group,
institutions are assigned to one of three supervisory subgroups: "healthy,"
"supervisory concern" or "substantial supervisory concern." Accordingly, there
are nine combinations of capital groups and supervisory subgroups to which
varying assessment rates would be applicable. An institution's assessment rate
depends on the capital category and supervisory category to which it is
assigned. During 1998, PrivateBank paid deposit insurance premiums in the
aggregate amount of $33,572.
Deposit insurance may be terminated by the FDIC upon a finding that an
institution has engaged in unsafe or unsound practice, is in an unsafe or
unsound condition to continue operations or has violated any applicable law,
regulation, rule, order or condition imposed by the FDIC. We do not know any
practice, condition or violation that might lead to termination of our deposit
insurance.
The Economic Growth and Regulatory Paperwork Reduction Act of 1996 provides
that beginning with semi-annual periods after December 31, 1996, BIF deposits
will also be assessed to pay interest on the bonds issued in the late 1980s by
the Financing Corporation (the "FICO Bonds") to recapitalize the now defunct
Federal Savings & Loan Insurance Corporation. For purposes of the assessments
to pay interest on the FICO Bonds, BIF deposits will be assessed at a rate of
20% of the assessment rate applicable to SAIF deposits until December 31, 1999.
After the earlier of December 31, 1999 or the date on which the last savings
association ceases to exist, full pro rata sharing of FICO assessments will
begin. It has been estimated that the rates of assessment for the payment of
interest on the FICO Bonds will be approximately 1.3 basis points for BIF-
assessable deposits and approximately 6.4 basis points for SAIF-assessable
deposits. The payment of the assessment to pay interest on the FICO Bonds
should not materially affect the Bank.
Community Reinvestment. Under the CRA, a financial institution has a
continuing and affirmative obligation to help meet the credit needs of its
entire community, including low- and moderate-income neighborhoods. The CRA
does not establish specific lending requirements or programs for financial
institutions, nor does it limit an institution's discretion to develop the
types of products and services that it believes are best suited to its
particular community. However, institutions are rated on their performance in
meeting the needs of their communities. Performance is judged in three areas:
(a) a lending test, to evaluate the institution's record of making loans in its
assessment areas; (b) an investment test, to evaluate the institution's record
of investing in community development projects, affordable housing, and
programs benefiting low or moderate income individuals and business; and (c) a
service test, to evaluate the institution's delivery of services through its
branches, ATMs and other offices. The CRA requires each federal banking agency,
in connection with its examination of a financial institution, to assess and
assign one of four ratings to the institution's record of meeting the credit
needs of its community and to take such record into account in its evaluation
of certain
65
<PAGE>
applications by the institution, including applications for charters, branches
and other deposit facilities, relocations, mergers, consolidations,
acquisitions of assets or assumptions of liabilities, and savings and loan
holding company acquisitions. The CRA also requires that all institutions make
public disclosure of their CRA ratings.
PrivateBank was assigned a "satisfactory" rating in January 1999 as a result
of its last CRA examination. This is the second highest rating a bank may
receive.
Compliance with Consumer Protection Laws. PrivateBank is subject to many
federal consumer protection statutes and regulations including the CRA, the
Truth in Lending Act, the Truth in Savings Act, the Equal Credit Opportunity
Act, the Fair Housing Act, the Real Estate Settlement Procedures Act and the
Home Disclosure Act. Among other things, these acts:
. require banks to meet the credit needs of their communities;
. require banks to disclose credit terms in meaningful and consistent
ways;
. prohibit discrimination against an applicant in any consumer or business
credit transaction;
. prohibit discrimination in housing-related lending activities;
. require banks to collect and report applicant and borrower data
regarding loans for home purchases or improvement projects;
. require lenders to provide borrowers with information regarding the
nature and cost of real estate settlements;
. prohibit certain lending practices and limit escrow account amounts with
respect to real estate transactions; and
. prescribe possible penalties for violations of the requirements of
consumer protection statutes and regulations.
From time to time we have been made aware of certain deficiencies in our
consumer compliance program. Management believes that any deficiencies have
already been or are in the process of being corrected. In the event that
consumer compliance deficiencies were to continue over time, enforcement or
administrative actions by the appropriate federal banking regulators may affect
the implementation of our growth strategies.
Enforcement Actions. Federal and state statutes and regulations provide
financial institution regulatory agencies with great flexibility to undertake
an enforcement action against an institution that fails to comply with
regulatory requirements, particularly capital requirements. Possible
enforcement actions range from the imposition of a capital plan and capital
directive to receivership, conservatorship or the termination of deposit
insurance.
Other. PrivateBank is also subject to state and federal restrictions upon:
. extensions of credit to the Company and any non-banking affiliates,
. the purchase of assets from affiliates,
. the issuance of guarantees, acceptances or letters of credit on behalf
of affiliates, and
. investments in stock or other securities issued by affiliates or
acceptance thereof as collateral for an extension of credit.
The Company and PrivateBank are subject to restrictions with respect to
engaging in the issuance, underwriting, public sale or distribution of certain
types of securities. In addition, PrivateBank must maintain reserves against
deposits and is subject to restrictions upon:
. the nature and amount of loans which it may make to a single borrower
(and, in some instances, a group of affiliated borrowers),
66
<PAGE>
. the nature and amount of securities in which it may invest,
. the amount of investment in PrivateBank premises, and
. the manner in and extent to which it may borrow money.
Pending Legislation. Because of the concerns relating to competitiveness and
the safety and soundness of the banking industry, Congress is considering a
number of wide-ranging proposals for altering the structure, regulation and
competitive relationships of the nation's financial institutions. We cannot
predict whether or in what form any of these proposals will be adopted or the
extent to which the proposals will affect our operations, if at all.
Monetary Policy and Economic Conditions
The earnings of banks and bank holding companies are sensitive to changes in
prevailing interest rates and are affected by general economic conditions and
the fiscal and monetary policies of federal regulatory agencies, including the
Federal Reserve. Through changes in the discount rate, availability of
borrowing at the "discount window," open market transactions, and imposition of
changes in the reserve requirements, the Federal Reserve exerts considerable
influence over the cost and availability of funds obtainable for lending or
investing. Monetary policies are used in varying combinations to influence
overall growth and distributions of bank loans, investments and deposits, and
such use may affect interest rates charged on loans or paid on deposits.
Monetary and fiscal policies have affected the operating results of commercial
banks in the past and are expected to do so in the future. We cannot fully
predict the nature or the extent of any effects which fiscal or monetary
policies may have on our business and earnings.
67
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The information in this prospectus gives effect to a 2-for-1 stock split and
to an amendment to the Company's Restated Certificate of Incorporation to
increase the authorized shares approved by stockholders on April 22, 1999. The
amendment will be filed with the Secretary of State of the State of Delaware
prior to the sale of the shares of common stock offered herein.
Common Stock
We are authorized to issue 12,000,000 shares of common stock, without par
value, of which 3,451,824 shares were outstanding prior to the offering. As of
March 31, 1999, 632,808 shares of common stock were reserved for issuance upon
the exercise of currently outstanding options. The outstanding shares of common
stock currently are, and the shares of common stock to be issued in the
offering will be (when issued and delivered in accordance with the terms and
conditions of the offering), fully paid and nonassessable. Each share of common
stock has the same relative rights as, and is identical in all respects with,
each other share of common stock. Each holder of record of common stock is
entitled to one vote per share on all matters voted upon by our stockholders.
Upon completion of the public offering, holders of shares of common stock will
have no preemptive, redemption or cumulative voting rights. In the event of
liquidation, the holders of shares of common stock are entitled to share
ratably in any of our assets retained after payment in full of creditors and,
if any preferred stock is then authorized, issued and outstanding, after
payment to holders of such preferred stock but only to the extent of any
liquidation preference.
Dividends. The holders of our common stock are entitled to receive and share
equally in such dividends, if any, declared by the Board of Directors out of
funds legally available therefor. We may pay dividends if, as and when declared
by our Board of Directors. The payment of dividends by the Company is subject
to limitations imposed by the Delaware General Corporation Law ("DGCL"). See
"Dividends." If we issue preferred stock, the holders thereof may have a
priority over the holders of the common stock with respect to dividends.
Voting Rights. The holders of our common stock possess voting rights in the
Company. Stockholders elect our Board of Directors and act on such other
matters as are required to be presented to them under the DGCL or our Restated
Certificate of Incorporation, or as are otherwise presented to them by the
Board of Directors. Each holder of common stock will be entitled to one vote
per share and will not have any right to cumulate votes in the election of
directors. Accordingly, holders of more than fifty percent of the outstanding
shares of common stock will be able to elect all of the Directors to be elected
each year. Although there are no present plans to do so, if we issue preferred
stock, holders of the preferred stock may also possess voting rights. Certain
matters require a two-thirds stockholder vote. See "Certain Anti-Takeover
Effects of the Company's Restated Certificate of Incorporation and Amended and
Restated By-laws and Delaware Law."
Liquidation. In the event of any liquidation, dissolution or winding up of
the Company, the holders of our common stock would be entitled to receive,
after payment or provision for payment of all of our debts and liabilities, all
of our assets available for distribution. If preferred stock is issued, the
holders thereof may have a priority over the holders of the common stock in the
event of any liquidation or dissolution.
Preemptive Rights and Redemption. Holders of our common stock will not be
entitled to preemptive rights with respect to any shares which we may issue in
the future. The common stock is not subject to mandatory redemption by us.
Preferred Stock
Our Board of Directors is authorized, pursuant to the Restated Certificate
of Incorporation, to issue 1,000,000 shares of preferred stock, without par
value, in one or more series with respect to which the Board, without
stockholder approval, may determine voting, conversion and other rights which
could adversely affect the rights of the holders of our common stock.
Currently, no shares of our authorized preferred stock are issued or
outstanding. Stockholders will not have preemptive rights to subscribe for
shares of preferred stock.
68
<PAGE>
The rights of the holders of the common stock would generally be subject to
the prior rights of the preferred stock with respect to dividends, liquidation
preferences and other matters. The dividend rights, dividend rates, conversion
rights, conversion prices, voting rights, redemption rights and terms
(including sinking fund provisions, if any), the redemption price or prices and
the liquidation preferences of any series of the authorized preferred stock and
the numbers of such shares of preferred stock in each series will be
established by the Board of Directors as such shares are to be issued. It is
not possible to state the actual effect of the preferred stock on the rights of
holders of common stock until the Board of Directors determines the rights of
the holders of a series of the preferred stock. However, such effects might
include:
. restrictions on dividends;
. dilution of the voting power to the extent that the preferred stock were
given voting rights;
. dilution of the equity interest and voting power if the preferred stock
were convertible into common stock; and
. restrictions upon any distribution of assets to the holders of common
stock upon liquidation or dissolution until the satisfaction of any
liquidation preference granted to holders of the preferred stock.
Furthermore, although we have no present intention to do so, the Board of
Directors could direct us to issue, in one or more transactions, shares of
preferred stock or additional shares of common stock or rights to purchase such
shares (subject to the limits imposed by applicable laws and the rules of any
stock exchange or automated dealer quotation system to the extent that such
rules may become applicable to, or may be observed by, us) in amounts which
could make more difficult and, therefore, less likely, a takeover, proxy
contest, change in our management or any other extraordinary corporate
transaction which might be opposed by the incumbent Board of Directors. Any
issuance of preferred stock or of common stock could have the effect of
diluting the earnings per share, book value per share and voting power of
common stock held by our stockholders.
Certain Anti-Takeover Effects of the Restated Certificate of Incorporation,
Amended and Restated
By-laws and Delaware Law
General. Certain provisions of our Restated Certificate of Incorporation,
Amended and Restated By-laws and the DGCL may have the effect of impeding the
acquisition of control of the Company by means of a tender offer, a proxy
fight, open-market purchases or otherwise in a transaction not approved by our
Board of Directors. These provisions may have the effect of discouraging a
future takeover attempt which is not approved by our Board of Directors but
which individual stockholders may deem to be in their best interests or in
which stockholders may receive a substantial premium for their shares over then
current market prices. As a result, stockholders who might desire to
participate in such a transaction may not have an opportunity to do so. Such
provisions will also render the removal of our current Board of Directors or
management more difficult.
The provisions of the Restated Certificate of Incorporation and Amended and
Restated By-laws described below are designed to reduce, or have the effect of
reducing, our vulnerability to an unsolicited proposal for the restructuring or
sale of all or substantially all of our assets or an unsolicited takeover
attempt which is unfair to our stockholders. The following description of
certain of the provisions of our Restated Certificate of Incorporation and
Amended and Restated By-laws is general, and you should read it with our
Restated Certificate of Incorporation and Amended and Restated By-laws.
Although we have not yet made any specific proposals, the Board of Directors
expressly reserves the right to introduce in the future additional measures,
including a rights plan, which might have an anti-takeover effect.
Authorized Shares. Our Restated Certificate of Incorporation authorizes the
issuance of 12,000,000 shares of common stock and 1,000,000 shares of preferred
stock. We have authorized these amounts to provide our Board of Directors with
flexibility to effect, among other things, transactions, financings,
acquisitions, stock dividends, stock splits and employee stock options.
However, these authorized shares may also be used by the Board of Directors
consistent with its fiduciary duty to deter future attempts to gain control of
the Company.
69
<PAGE>
The Board of Directors also has sole authority to determine the terms of any
one or more series of preferred stock, including voting rights, conversion
rates, and liquidation preferences. As a result of the ability to fix voting
rights for a series of preferred stock, the Board of Directors has the power to
the extent consistent with its fiduciary duty to issue a series of preferred
stock to persons friendly to management in order to attempt to block a merger
or other transaction by which a third party seeks control, and thereby assist
the incumbent Board of Directors and management to retain their respective
positions.
Classified Board of Directors; Filling of Board Vacancies and Qualifying
Shares. Our Board of Directors is divided into three classes, each of which
contains approximately one-third of the whole number of the members of the
Board of Directors. Each class serves a staggered three-year term, with
approximately one-third of the total number of Directors being elected each
year. Under the DGCL, members of a staggered board may only be removed for
cause unless the Certificate of Incorporation provides otherwise. Our Restated
Certificate of Incorporation does not provide for removal of directors without
cause. The staggered board is intended to provide for continuity of the Board
of Directors and to make it more difficult and time consuming for a stockholder
group to fully use its voting power to gain control of the Board of Directors
without the consent of the incumbent Board of Directors.
Our Amended and Restated By-laws provide that there shall be sixteen
Directors. Our Amended and Restated By-laws also provide that any vacancy
occurring on the Board of Directors, including a vacancy created by an increase
in the number of directors, will be filled by a majority vote of the directors
then in office. Directors so chosen shall hold office until their successors
are elected and qualified or until their earlier resignation or removal.
Cumulative Voting; Action by Written Consent and Stockholder Meetings. Our
Restated Certificate of Incorporation does not provide for cumulative voting
for any purpose. Our Restated Certificate of Incorporation and Amended and
Restated By-laws also provide that any action required or permitted to be taken
by the stockholders must be effected at an annual or special meeting and may
not be effected by written consent in lieu of a meeting. Our Amended and
Restated By-laws provide that special meetings of the stockholders may only be
called by the Chairman of the Board, the President or the Secretary at the
written request of a majority of the Board of Directors.
Delaware Business Combination Statute. Section 203 of the DGCL provides
that, subject to certain exceptions specified therein, an "interested
stockholder" of a Delaware corporation shall not engage in any business
combination, including mergers or consolidations or acquisitions of additional
shares of the corporation, with the corporation for a three-year period
following the time that such stockholder becomes an interested stockholder
unless (a) prior to such time, the board of directors of the corporation
approved either the business combination or the transaction which resulted in
the stockholder becoming an interested stockholder, (b) upon consummation of
the transaction which resulted in the stockholder becoming an interested
stockholder, the interested stockholder owned at least 85% of the voting stock
of the corporation outstanding at the time the transaction commenced (excluding
certain shares), or (c) at or subsequent to such time the business combination
is approved by the board of directors of the corporation and authorized at an
annual or special meeting of stockholders, by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder. Except as otherwise specified in Section 203, an interested
stockholder is defined to include any person that is (x) the owner of 15% or
more of the outstanding voting stock of the corporation, or (y) is an affiliate
or associate of the corporation and was the owner of 15% or more of the
outstanding voting stock of the corporation at any time within the three-year
period immediately prior to the date of determination, and the affiliates and
associates of any such person.
Under certain circumstances, Section 203 makes it more difficult for a
person who would be an interested stockholder to effect various business
combinations with a corporation for a three-year period. We have not elected to
be exempt from the restrictions imposed under Section 203. The provisions of
Section 203 may encourage persons interested in acquiring us to negotiate in
advance with our Board of Directors since the stockholder approval requirement
would be avoided if a majority of the directors then in office approves either
the business combination or the transaction which results in any such person
becoming an interested
70
<PAGE>
stockholder. Such provisions also may have the effect of preventing changes in
our management. It is possible that such provisions could make it more
difficult to accomplish transactions which our stockholders may otherwise deem
to be in their best interests.
Amendment of the Restated Certificate of Incorporation and By-laws. Our
Restated Certificate of Incorporation provides that the affirmative vote of the
holders of at least 66 2/3% of our outstanding voting stock, voting together as
a single class, is required to amend, repeal, or adopt any provision
inconsistent with, the provisions of our Restated Certificate of Incorporation
classifying directors, eliminating cumulative voting prohibiting stockholder
action without a meeting or specifying the vote required to amend such
provisions. Our By-laws may be amended by the stockholders or the Board of
Directors; however, the affirmative vote of the holders of at least 66 2/3% of
the outstanding voting stock, voting together as a single class, is required to
amend, repeal, or adopt any provision inconsistent with, the provisions of the
Amended and Restated By-laws describing how special meetings of the
stockholders must be called, prohibiting stockholder action without a meeting,
regarding properly bringing business before a stockholder meeting, stating the
number of and classifying directors, relating to filling director vacancies,
and specifying the vote required to amend such provisions.
Certain By-Law Provisions. Our Amended and Restated By-laws also require a
stockholder who intends to nominate a candidate for election to the Board of
Directors, or to raise new business at an annual stockholder meeting, to
provide us advance notice of at least 120 days. The notice provision requires a
stockholder who desires to raise new business at an annual stockholder meeting
to provide us certain information concerning the nature of the new business,
the stockholder and such stockholder's interest in the business matter.
Similarly, a stockholder wishing to nominate any person for election as a
director must provide us with certain information concerning the nominee and
such proposing stockholder.
The provisions described above are intended to reduce our vulnerability to
takeover attempts and certain other transactions which have not been negotiated
with and approved by our Board of Directors.
Attempts to take over corporations have become increasingly common. An
unsolicited, nonnegotiated proposal can seriously disrupt the business and
management of a corporation and cause it great expense. Accordingly, the Board
of Directors believes it is in the best interests of the Company and our
stockholders to encourage potential acquirors to negotiate directly with
management and that these provisions will encourage such negotiations and
discourage nonnegotiated takeover attempts. It is also the view of the Board of
Directors that these provisions should not discourage persons from proposing a
merger or other transaction at a price that reflects our true value and that
otherwise is in the best interest of all stockholders.
Limitation of Director Liability and Indemnification
Our Restated Certificate of Incorporation provides that no director will be
personally liable to the Company or our stockholders for monetary damages for
breach of fiduciary duty as a director; provided, however, that directors will
have liability (a) for any breach of a director's duty of loyalty to the
Company or our stockholders, (b) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (c) under
Section 174 of the DGCL, or (d) for any transaction from which the director
derived an improper personal benefit.
Our Amended and Restated By-laws provide that we will indemnify any person
made or threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he or she is or was a director,
officer, employee or agent of the Company, or is or was serving at our request
as a director, trustee, officer, employee or agent of another corporation or
other enterprise against expenses actually and reasonably incurred by such
person in connection with such action, suit or proceeding. To the extent that a
person seeking indemnification has been successful on the merits or otherwise
in defense of any action, suit, or proceeding, such person will be indemnified
for his or her expenses which were actually and reasonably incurred. Any
indemnification payment must be authorized upon a determination that the
individual seeking indemnification met the necessary standard of conduct for
71
<PAGE>
such indemnification. Such determination will be made by a majority vote of a
quorum consisting of directors not involved with the action, suit or
proceeding; a written opinion of independent legal counsel, if the described
quorum cannot be obtained or if the majority vote of the described quorum
directs; a vote of the stockholders; or a decision of the court in which the
action was brought. To qualify for indemnification, such person must have acted
in good faith and in a manner he or she reasonably believed to be in, or not
opposed to, our best interests and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her conduct was lawful.
Expenses may be paid by us as they are incurred, in advance of a final
disposition, as authorized by the Board of Directors and upon receipt of an
undertaking by the person seeking indemnification to repay the advanced amount
if it is later determined that he or she was not entitled to indemnification.
The indemnification and advancement of expenses provided by the Amended and
Restated By-laws are not to be deemed exclusive of any other rights to which
any person seeking indemnification may be entitled as a matter of law or under
our Restated Certificate of Incorporation, the Amended and Restated By-laws,
any agreement, vote of stockholders, any insurance purchased by us, or
otherwise, both as to action in his or her official capacity and as to action
in another capacity while holding such office, and will continue as to a person
who has ceased to be such director, trustee, officer, employee or agent and
shall inure to the benefit of the heirs, executors and administrators of such
person.
[We have entered into indemnification agreements with our directors and
executive officers to indemnify them against certain liabilities. Consistent
with the provisions of our Restated Certificate of Incorporation and Amended
and Restated By-laws, under the terms of the agreements, we will indemnify our
directors and executive officers to the fullest extent permitted under
applicable law against all expenses, liabilities and losses incurred in
connection with any legal proceeding brought against any of them by reason of
their status as directors, officers, employees, agents or fiduciaries of the
company. The expenses, liabilities and losses which we are obligated to pay may
include judgments, fines and amounts paid in settlement of such legal
proceedings by our directors and executive officers so long as they acted in
good faith and in a manner which they reasonably believed was in the best
interests of the company.]
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is Illinois Stock
Transfer Company, Chicago, Illinois.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, we will have 4,351,824 of common stock
issued and outstanding (4,486,824 shares if the underwriters exercise their
over-allotment option in full), assuming no exercise of any options. Of these
shares, 2,602,998 shares, including the 900,000 shares to be sold in this
offering (assuming no exercise of the over-allotment option), will be freely
tradeable in the public market without restriction or registration under the
Securities Act, unless held by our "affiliates" as that term is defined under
the Securities Act. The remaining 1,748,826 shares are subject to certain
restrictions in trading, as described below.
Restricted stock awards granted to our employees.
Pursuant to the terms of our Stock Incentive Plan, we have awarded 21,600
shares of restricted stock to certain of our employees who are not executive
officers. Although our employees have full voting rights with regard to these
shares and may receive any dividends we declare, they may not transfer the
shares until they are fully vested. Each restricted stock award will vest in
its entirety on the fifth anniversary of the date of grant. Unless earlier
forfeited, the awards will vest according to the following schedule:
<TABLE>
<CAPTION>
Year Shares Vested
---- -------------
<S> <C>
2001....................... 4,800
2002....................... 9,600
2003....................... 1,600
2004....................... 5,600
</TABLE>
72
<PAGE>
Shares held by our executive officers and directors.
Our executive officers and directors currently hold 1,005,112 shares of our
common stock, representing 23.1% of the shares that will be outstanding upon
completion of this offering. Of these shares, 74,400 shares were granted to our
officers pursuant to restricted stock awards and are subject to the same five
year vesting schedule described above. These restricted shares will vest
between the years 2001 and 2004. The remaining shares held by our officers and
directors may be sold in the public market under the provisions of Rule 144 of
the Securities Act, upon the expiration of certain holding periods specified in
Rule 144.
Lock-up Agreements. Our directors and officers and certain of our
stockholders have entered into lock-up agreements with the underwriters
pursuant to which they have agreed not to offer, sell or contract to sell any
of their shares of common stock for a period of 180 days from the date of this
prospectus without the underwriters' prior written consent. An aggregate of
1,477,774 shares of our common stock are subject to these agreements. Upon the
expiration of this 180-day period, our directors and officers and stockholders
may resell their shares, if vested, subject to the restrictions discussed
below.
Shares Subject to Rule 144.
In general, under Rule 144 as currently in effect, a person who has
beneficially owned shares for at least one year, including an affiliate, is
entitled to sell, within a three-month period, that number of shares which does
not exceed the greater of:
. one percent of the outstanding shares of our common stock (approximately
43,518 shares immediately following the offering); or
. the average weekly reported trading volume of our common stock during
the four calendar weeks preceding the sale.
Sales made under Rule 144 are also subject to certain requirements pertaining
to:
. the manner of such sales;
. notices of such sales; and
. the availability of current public information about us.
Under Rule 144(k), a person other than an affiliate may sell shares freely,
without regard to the above restrictions, if that person has held the shares
for a period of two years or more. Affiliates, such as our directors and
officers, are always subject to these manner of sale and volume restrictions,
regardless of the length of time that they have held their shares.
Currently there are 278,604 shares of our common stock held by non-
affiliates which are subject to the provisions of Rule 144. Of such shares,
29,152 are subject to the lock-up agreements discussed above, and 176,704 may
currently be sold pursuant to the manner of sale and volume limitations of Rule
144, and will become freely tradable under Rule 144(k) in May 1999. Non-
affiliates may sell the remaining shares pursuant to the Rule 144 restrictions
beginning in September 1999. All of these shares will be freely tradable by our
non-affiliates by December 2000.
Registration Rights of Certain of Our Stockholders.
Pursuant to the terms of our private placement offering materials, we have
granted certain "piggyback" registration rights to holders of 2,769,872 shares
of our common stock. These stockholders, including some of our affiliates, are
entitled to have their shares registered for sale under the Securities Act in
the event that we determine to register shares of our common stock in
connection with an underwritten public offering or otherwise. These rights are
subject to certain limitations and conditions, including:
. our ability to preclude or limit the number of shares which these
stockholders may include in the underwritten offering or registration;
73
<PAGE>
. the right of the managing underwriter, in its sole discretion, to limit
the number of shares to be underwritten; and
. the requirement that each participating stockholder bear a pro rata
portion of the underwriting discounts and commissions.
Of the shares entitled to these registration rights, all shares held by non-
affiliates are currently tradable pursuant to the terms of Rule 144(k), as
described above. Those shares held by our affiliates are subject to the manner
of sale and volume restrictions of Rule 144, as set forth above. None of the
registration rights with respect to these shares have been exercised.
Shares Reserved For Issuance Under Our Stock Plans.
Effective upon completion of this offering, we will have an aggregate of
879,343 shares reserved for issuance under two stock-based compensation
programs maintained for the benefit of our eligible employees, officers and
directors. Pursuant to these plans, there are currently outstanding options to
purchase an aggregate of 632,808 shares of common stock, of which options to
purchase 453,408 shares are currently exercisable. We intend to register under
the Securities Act the shares of common stock reserved for issuance under our
stock plans, whereupon all of these shares will be freely tradeable, subject to
compliance by affiliates with the Rule 144 volume and manner of sale
limitations.
Our Nasdaq Symbol.
We have applied to have our common stock approved for quotation and trading
on The Nasdaq National MarketSM under the symbol "PVTB."
74
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
underwriters named below, for whom EVEREN Securities, Inc. and Stifel, Nicolaus
& Company Incorporated are acting as representatives (the "Representatives"),
have severally agreed to purchase from us, and we have agreed to sell to them,
the respective number of shares of common stock set forth opposite each
underwriter's name below:
<TABLE>
<CAPTION>
Number
of
Underwriters Shares
------------ -------
<S> <C>
EVEREN Securities, Inc...........................................
Stifel, Nicolaus & Company Incorporated..........................
-------
Total........................................................ 900,000
=======
</TABLE>
The Underwriting Agreement provides that the obligations of the several
underwriters thereunder are subject to approval of certain legal matters by
their counsel and to various other conditions. The nature of the underwriters'
obligation is such that they are committed to purchase and pay for all shares
of common stock (other than those covered by the over-allotment options
discussed below) if any are purchased.
The underwriters propose to offer the shares of our common stock directly to
the public at the initial public offering price set forth on the cover page of
this prospectus, and to certain securities dealers (who may include the
underwriters) at such price, less a concession not in excess of $ per
share of common stock. The underwriters may allow, and such selected dealers
may reallow, a concession not in excess of $ per share of common stock
to certain brokers and dealers. After this offering, the price to the public,
concession, allowance and reallowance may be changed by the Representatives.
The Representatives have informed us that they do not intend to confirm sales
to any account over which they exercise discretionary authority.
We have granted the underwriters an option to purchase up to 135,000
additional shares of common stock at the same price per share as we will
receive for the 900,000 shares that the underwriters have agreed to purchase.
This option is exercisable during the 30-day period after the date of this
prospectus, solely to cover over-allotments, if any. To the extent that the
underwriters exercise this option, each of the underwriters will be committed,
subject to certain conditions, to purchase such additional shares of common
stock in approximately the same proportions as set forth in the above table. If
purchased, the underwriters will sell the additional shares on the same terms
as the 900,000 shares are being sold. If the underwriters exercise the over-
allotment in full, the total public offering price will be $ , total
underwriting discounts and commissions will be $ , and total proceeds
to us will be $ .
The offering of the common stock is made for delivery when, as and if
accepted by the underwriters and subject to prior sale and to withdrawal,
cancellation or modification of the offering without notice. The underwriters
reserve the right to reject any order for the purchase of common stock.
Subject to certain exceptions, we have agreed not to issue, and each of our
officers and directors (and certain stockholders of the Company) has agreed not
to offer, sell or otherwise dispose of any of our shares of common stock or our
other equity securities for a period of 180 days after the date of this
prospectus (other than shares sold pursuant to this prospectus) without the
prior written consent of EVEREN Securities.
We have agreed to indemnify the underwriters against certain liabilities
under the Securities Act, or to contribute to payments the underwriters may be
required to make in respect thereof.
Prior to this offering, there has been no public market for our common
stock. Consequently, we negotiated the initial public offering price with the
underwriters. Among the factors considered in such negotiations were:
. prevailing market conditions;
. an assessment of our management;
75
<PAGE>
. our results of operations in recent periods;
. the present stage of our development;
. the market capitalizations and stages of development of other companies
which we and the Representatives believe to be comparable to us; and
. estimates of our business potential.
There can be no assurance that an active trading market will develop for our
common stock or that our common stock will trade in the public market
subsequent to this offering at or above the initial public offering price. The
initial public offering price should not be considered an indication of the
actual value of our common stock. Such price is subject to change as a result
of market conditions and other factors. We cannot assure you that our common
stock can be resold at or above the initial public offering price.
In order to facilitate this offering, certain persons participating in this
offering may engage in transactions that stabilize, maintain or otherwise
affect the price of our common stock during and after the offering, such as the
following:
. the underwriters may over-allot or otherwise create a short position in
the common stock for their own account by selling more shares of common
stock than we have been sold to them;
. the underwriters may elect to cover any such short position by
purchasing shares of common stock in the open market or by exercising
the over-allotment option;
. the underwriters may stabilize or maintain the price of our common stock
by bidding for or purchasing shares of common stock in the open market;
. the underwriters may engage in passive market making transactions; and
. the underwriters may impose penalty bids, under which selling
concessions allowed to syndicate members of other broker-dealers
participating in this offering are reclaimed if shares of common stock
previously distributed in the offering are repurchased in connection
with stabilization transactions or otherwise.
The effect of these transactions may be to stabilize or maintain the market
price at a level above that which might otherwise prevail in the open market.
The imposition of a penalty bid may also affect the price of our common stock
to the extent that it discourages resales thereof. No representation is made as
to the magnitude or effect of any such stabilization or other transactions.
Such transactions may be effected on the Nasdaq National Market or otherwise
and, if commenced, may be discontinued at any time.
EVEREN Securities has provided in the past, and both Representatives may
provide in the future, investment banking services to PrivateBancorp for which
they have received and would expect to receive customary fees and commissions.
LEGAL MATTERS
Certain legal matters in connection with this offering, including the
validity of the common stock, are being passed upon for the Company by Vedder,
Price, Kaufman & Kammholz, Chicago, Illinois. Certain legal matters are being
passed upon for the underwriters by Jenner & Block, Chicago, Illinois.
76
<PAGE>
EXPERTS
The consolidated financial statements for each of the three years in the
three-year period ended December 31, 1998, included in this prospectus, have
been audited by Arthur Andersen LLP, independent certified public accountants,
as indicated in their report with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in giving said report.
WHERE YOU CAN GET MORE INFORMATION
We have filed a registration statement on Form S-1 under the Securities Act
with the SEC in connection with the common stock offered by this prospectus.
This prospectus omits certain information, exhibits and undertakings set forth
in the registration statement which we have filed with the SEC. You may inspect
and copy those materials upon payment of prescribed rates, at the Public
Reference Room of the SEC, 450 Fifth Street, N.W., Washington, D.C. 20549 and
at the regional office of the SEC at the following locations: Seven World Trade
Center, Suite 1300, New York, New York 10048 and 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. You may obtain information on the operation of
the Public Reference Room by calling the SEC at 1-800-SEC-0330. This
information is also available on the Internet at the SEC's website. The address
for the web site is: http://www.sec.gov. For further information about the
Company, reference is hereby made to the registration statement and the
exhibits thereto. Statements contained in this prospectus concerning the
provisions of any contract, agreement or other document are not necessarily
complete, and in each instance reference is made to the copy of such contract,
agreement or other document filed as an exhibit to the registration statement
for a full statement of the provisions thereof. Each such statement in this
prospectus is qualified in all respects by such reference.
77
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PRIVATEBANCORP, INC.
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Arthur Andersen LLP, Independent Public Accountants............. F-2
Consolidated Balance Sheets as of March 31, 1999 (unaudited) and December
31, 1998 and 1997........................................................ F-3
Consolidated Statements of Income for the three months ended March 31,
1999 and 1998 (unaudited) and for the years ended December 31, 1998, 1997
and 1996................................................................. F-4
Consolidated Statements of Changes in Stockholders' Equity for the three
months ended March 31, 1999 (unaudited) and for the years ended December
31, 1998, 1997 and 1996.................................................. F-5
Consolidated Statements of Cash Flows for the three months ended March 31,
1999 and 1998 (unaudited) and for the years ended December 31, 1998, 1997
and 1996................................................................. F-6
Notes to Consolidated Financial Statements................................ F-7
</TABLE>
F-1
<PAGE>
The accompanying consolidated financial statements give effect to the
changes in the capitalization of PrivateBancorp, Inc. which will take place
prior to the effective date of the initial public offering. After the events
discussed in Note 19 to PrivateBancorp, Inc.'s consolidated financial
statements are effected, we expect to be in a position to render the following
audit report:
Arthur Andersen LLP
Chicago, Illinois
January 29, 1999
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of
PrivateBancorp, Inc.:
We have audited the accompanying consolidated balance sheets of
PRIVATEBANCORP, INC. (a Delaware corporation) AND SUBSIDIARY as of December 31,
1998 and 1997, and the related consolidated statements of income, changes in
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1998. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
PrivateBancorp, Inc. and Subsidiary as of December 31, 1998 and 1997, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1998, in conformity with generally accepted
accounting principles.
F-2
<PAGE>
PRIVATEBANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
As of March 31, 1999 and December 31, 1998 and 1997
<TABLE>
<CAPTION>
March 31, December 31, December 31,
1999 1998 1997
------------ ------------ ------------
(unaudited)
ASSETS
<S> <C> <C> <C>
Cash and due from banks-noninterest
bearing............................. $ 8,220,209 $ 11,894,781 $ 9,229,704
Federal funds sold................... 7,759,124 3,619,437 16,976,417
------------ ------------ ------------
Total cash and cash equivalents.. 15,979,333 15,514,218 26,206,121
------------ ------------ ------------
Available-for-sale securities, at
fair value.......................... 105,135,775 116,890,739 65,383,252
------------ ------------ ------------
Loans................................ 307,766,039 281,964,896 218,494,547
Less: Allowance for loan losses.... (3,695,000) (3,410,000) (3,050,000)
------------ ------------ ------------
Net loans.......................... 304,071,039 278,554,896 215,444,547
------------ ------------ ------------
Bank premises and equipment, net..... 1,528,416 1,587,720 1,904,338
------------ ------------ ------------
Accrued interest receivable.......... 2,685,131 2,264,195 1,581,728
------------ ------------ ------------
Other assets......................... 1,654,854 1,496,071 1,352,145
------------ ------------ ------------
Total assets..................... $431,054,548 $416,307,839 $311,872,131
============ ============ ============
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C> <C>
Demand deposits:
Noninterest-bearing................ $ 28,178,279 $ 39,490,083 $ 34,233,722
Interest-bearing................... 31,793,923 26,508,202 26,083,741
Savings and money market deposit
accounts............................ 180,871,333 170,713,032 135,624,494
Other time deposits.................. 143,610,570 128,282,346 89,831,506
------------ ------------ ------------
Total deposits................... 384,454,105 364,993,663 285,773,463
Accrued interest payable............. 994,331 720,874 453,056
Funds borrowed....................... 10,000,000 20,000,000 --
Other liabilities.................... 5,552,114 1,319,654 957,857
------------ ------------ ------------
Total liabilities................ 401,000,550 387,034,191 287,184,376
------------ ------------ ------------
Stockholders' equity:
Preferred stock, 1,000,000 shares
authorized........................
Common stock, without par value;
12,000,000 shares authorized;
3,451,824, 3,431,424 and 3,217,184
shares issued and outstanding in
1999, 1998 and 1997, respectively. 3,451,824 3,431,424 3,217,184
Surplus............................ 22,600,302 22,273,902 19,782,477
Retained earnings.................. 5,853,156 4,912,359 2,165,310
Accumulated other comprehensive
income, net of tax effect......... (58,045) 149,471 29,117
Deferred compensation.............. (843,498) (543,767) (506,333)
------------ ------------ ------------
Stockholders' equity before loan to
executive officer................. 31,003,739 30,223,389 24,687,755
------------ ------------ ------------
Loan to executive officer.......... (949,741) (949,741) --
------------ ------------ ------------
Total stockholders' equity....... 30,053,998 29,273,648 24,687,755
------------ ------------ ------------
Total liabilities and
stockholders' equity............ $431,054,548 $416,307,839 $311,872,131
============ ============ ============
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
F-3
<PAGE>
PRIVATEBANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
For the Three Months Ended March 31, 1999 and 1998, and
for the Years Ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
Three Months Ended
March 31, Year Ended December 31,
--------------------- -----------------------------------
1999 1998 1998 1997 1996
---------- ---------- ----------- ----------- -----------
(unaudited)
<S> <C> <C> <C> <C> <C>
Interest income:
Loans, including fees. $5,635,595 $4,624,309 $19,619,603 $16,729,277 $12,151,454
Federal funds sold and
interest-bearing
deposits............. 48,268 498,263 2,181,013 874,981 1,392,465
Securities............ 1,570,161 726,566 3,491,622 2,518,675 2,396,461
---------- ---------- ----------- ----------- -----------
Total interest
income............. 7,254,024 5,849,138 25,292,238 20,122,933 15,940,380
---------- ---------- ----------- ----------- -----------
Interest expense:
Deposits:
Interest-bearing
demand............. 142,080 121,077 487,073 376,833 304,807
Savings and money
market deposit
accounts........... 1,800,196 1,628,727 6,651,280 5,879,689 4,613,396
Other time.......... 1,751,289 1,346,153 6,154,468 3,821,473 2,972,891
Funds borrowed........ 144,420 -- 19,136 2,903 143,026
---------- ---------- ----------- ----------- -----------
Interest expense.... 3,837,985 3,095,957 13,311,957 10,080,898 8,034,120
---------- ---------- ----------- ----------- -----------
Net interest income. 3,416,039 2,753,181 11,980,281 10,042,035 7,906,260
Provision for loan
losses................. 285,000 91,370 361,986 602,991 523,679
---------- ---------- ----------- ----------- -----------
Net interest income
after provision for
loan losses.......... 3,131,039 2,661,811 11,618,295 9,439,044 7,382,581
---------- ---------- ----------- ----------- -----------
Non-interest Income:
Banking and trust
services............. 441,456 273,243 1,280,585 1,210,273 910,786
Securities gains...... -- -- 39,894 -- --
---------- ---------- ----------- ----------- -----------
Total non-interest
income............. 441,456 273,243 1,320,479 1,210,273 910,786
---------- ---------- ----------- ----------- -----------
Non-interest Expense:
Salaries and employee
benefits............. 1,115,449 1,101,860 4,076,523 3,901,662 3,410,676
Occupancy............. 352,051 333,527 1,379,059 1,274,058 990,098
Data processing....... 131,039 120,490 508,181 395,665 334,211
Marketing............. 152,990 138,793 566,960 500,482 424,235
Amortization of
organizational costs. -- -- -- -- 23,295
Professional fees..... 177,796 93,843 560,715 448,441 325,663
Insurance............. 41,415 30,015 134,365 114,955 82,001
Other................. 284,040 181,668 863,539 626,412 508,292
---------- ---------- ----------- ----------- -----------
Total non-interest
expense............ 2,254,780 2,000,196 8,089,342 7,261,675 6,098,471
---------- ---------- ----------- ----------- -----------
Income before income
taxes.............. 1,317,715 934,858 4,849,432 3,387,642 2,194,896
Income tax provision.... 291,132 364,594 1,839,294 1,242,347 761,873
---------- ---------- ----------- ----------- -----------
Net income............ $1,026,583 $ 570,264 $ 3,010,138 $ 2,145,295 $ 1,433,023
---------- ---------- ----------- ----------- -----------
Basic earnings per
share.................. $ .30 $ .18 $ .91 $ .69 $ .49
========== ========== =========== =========== ===========
Diluted earnings per
share.................. $ .28 $ .17 $ .86 $ .65 $ .47
========== ========== =========== =========== ===========
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
F-4
<PAGE>
PRIVATEBANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the Three Months Ended March 31, 1999 and
for the Years Ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
Year Ended December 31,
Three Months Ended -----------------------------------------------------------------------
March 31, 1999 1998 1997 1996
----------------------- ----------------------- ----------------------- -----------------------
Compre- Compre- Compre- Compre-
hensive hensive hensive hensive
Total Income Total Income Total Income Total Income
----------- ---------- ----------- ---------- ----------- ---------- ----------- ----------
(unaudited)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Common stock:
Balance at beginning
of year.............. $ 3,431,424 $ 3,217,184 $ 2,958,272 $ 2,850,672
Issuance of stock..... 20,400 214,240 258,912 107,600
----------- ----------- ----------- -----------
Balance at end of
year................. 3,451,824 3,431,424 3,217,184 2,958,272
----------- ----------- ----------- -----------
Surplus:
Balance at beginning
of year.............. 22,273,902 19,782,477 17,301,302 16,652,652
Issuance of common
stock................ 326,400 2,283,360 2,476,534 648,650
Other................. -- 208,065 4,641 --
----------- ----------- ----------- -----------
Balance at end of
year................. 22,600,302 22,273,902 19,782,477 17,301,302
----------- ----------- ----------- -----------
Retained Earnings
(Deficit):
Balance at beginning
of year.............. 4,912,359 2,165,310 237,373 (1,011,042)
Net income............ 1,026,583 $1,026,583 3,010,138 $3,010,138 2,145,295 $2,145,295 1,433,023 $1,433,023
---------- ---------- ---------- ----------
Dividends paid--
$0.03, $0.08, $0.07
and $0.07 per share
in 1999, 1998, 1997
and 1996,
respectively......... (85,786) (263,089) (217,358) (184,608)
----------- ----------- ----------- -----------
Balance at end of
year................. 5,853,156 4,912,359 2,165,310 237,373
----------- ----------- ----------- -----------
Accumulated Other
Comprehensive Income--
Unrealized Gains
(Losses) on Securities
Available for Sale:
Balance at beginning
of year.............. 149,471 29,117 (56,847) (47,750)
Other comprehensive
income--unrealized
gains (losses) on
securities available
for sale, net of tax
provision (benefit)
of $(132,674),
$76,523, $47,698 and
$(4,685) for the
three months ended
March 31, 1999, and
in 1998, 1997, and
1996, respectively... (207,516) (207,516) 120,354 120,354 85,964 85,964 (9,097) (9,097)
----------- ---------- ----------- ---------- ----------- ---------- ----------- ----------
Comprehensive income.. $ 819,067 $3,130,492 $2,231,259 $1,423,926
========== ========== ========== ==========
Balance at end of
year................. (58,045) 149,471 29,117 (56,847)
----------- ----------- ----------- -----------
Deferred Compensation:
Balance at beginning
of year.............. (543,767) (506,333) (217,750) --
Awards granted........ (346,800) (187,000) (402,500) (277,500)
Amortization of
deferred
compensation......... 47,068 149,566 98,917 33,500
Other................. -- -- 15,000 26,250
----------- ----------- ----------- -----------
Balance at end of
year................. (843,498) (543,767) (506,333) (217,750)
----------- ----------- ----------- -----------
31,003,739 30,223,389 24,687,755 20,222,350
Loan to Executive
Officer:
Loan to
stockholder/chief
executive officer.... (949,741) (949,741) -- --
----------- ----------- ----------- -----------
Total stockholders'
equity at end of
year............... $30,053,998 $29,273,648 $24,687,755 $20,222,350
=========== =========== =========== ===========
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
F-5
<PAGE>
PRIVATEBANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 1999 and 1998 and
For the Years Ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
Year Ended December 31,
March 31, March 31, -----------------------------------------
1999 1998 1998 1997 1996
------------ ------------ ------------- ------------ ------------
(unaudited)
<S> <C> <C> <C> <C> <C>
Cash Flows From
Operating Activities:
Net income............. $ 1,026,583 $ 570,264 $ 3,010,138 $ 2,145,295 $ 1,433,023
------------ ------------ ------------- ------------ ------------
Adjustments to
reconcile net income
to net cash provided
by operating
activities:
Depreciation and
amortization........ 135,526 122,731 507,853 472,669 329,013
Amortization of
organization costs.. -- -- -- -- 23,295
Amortization of
deferred
compensation........ 47,068 31,938 149,566 98,917 33,500
Provision for loan
losses.............. 285,000 91,370 361,986 602,991 523,679
Gain on sales of
securities.......... (45,564) -- (39,894) -- --
Increase in deferred
loan fees........... -- -- 347,766 85,684 48,883
(Increase) in
deferred income
taxes............... -- -- (290,700) (440,387) (201,729)
(Increase) in accrued
interest receivable. (420,805) (167,272) (682,467) (145,916) (291,010)
Increase in accrued
interest payable.... 273,457 84,944 267,818 60,881 35,506
Decrease in other
assets.............. (28,012) (366,903) 70,251 77,449 105,579
Increase in other
liabilities......... 4,232,460 368,143 569,862 414,712 691
------------ ------------ ------------- ------------ ------------
Total adjustments.. 4,479,130 164,951 1,262,041 1,227,000 607,407
------------ ------------ ------------- ------------ ------------
Net cash provided
by operating
activities........ 5,505,713 735,215 4,272,179 3,372,295 2,040,430
------------ ------------ ------------- ------------ ------------
Cash Flows From
Investing Activities:
Proceeds from
maturities, pay
downs, and sales of
securities............ 14,917,259 32,628,772 85,390,763 11,255,315 25,658,276
Purchase of securities
available for sale.... (3,456,295) (15,400,000) (136,661,479) (31,888,325) (31,992,943)
Net loan principal
advanced.............. (25,801,143) (5,252,823) (63,820,101) (47,240,005) (45,352,131)
Bank premises and
equipment
expenditures.......... (75,075) (47,393) (191,235) (659,401) (901,638)
------------ ------------ ------------- ------------ ------------
Net cash provided
by (used in)
investing
activities........ (14,415,254) 11,928,556 (115,282,052) (68,532,416) (52,588,436)
------------ ------------ ------------- ------------ ------------
Cash Flows From
Financing Activities:
Net increase in total
deposits.............. 19,460,442 18,886,537 79,220,200 63,202,205 45,702,759
Proceeds from funds
borrowed.............. -- -- 20,000,000 -- 3,000,000
Principal reductions
of funds borrowed..... (10,000,000) -- -- (3,000,000) (700,000)
Issuance of common
stock................. (85,786) 124,200 1,360,859 2,347,946 505,000
Dividends paid......... -- (60,629) (263,089) (217,358) (184,608)
------------ ------------ ------------- ------------ ------------
Net cash provided
by financing
activities........ 9,374,656 18,950,108 100,317,970 62,332,793 48,323,151
------------ ------------ ------------- ------------ ------------
Net Increase (Decrease)
in Cash and Cash
Equivalents............ 465,115 31,613,879 (10,691,903) (2,827,328) (2,224,855)
Cash and Cash
Equivalents at
Beginning of Year...... 15,514,218 26,206,121 26,206,121 29,033,449 31,258,304
------------ ------------ ------------- ------------ ------------
Cash and Cash
Equivalents at End of
Year................... $ 15,979,333 $ 57,820,000 $ 15,514,218 $ 26,206,121 $ 29,033,449
============ ============ ============= ============ ============
Cash Paid During Year
For:
Interest............... $ 3,564,874 $ 3,011,013 $ 13,044,139 $ 10,004,288 $ 7,998,614
Income taxes........... 233,880 $ 88,676 1,826,826 1,562,726 977,432
============ ============ ============= ============ ============
Non-Cash Transactions:
Loan to executive
officer for purchase
of common stock....... $ -- $ -- $ 949,741 $ -- $ --
============ ============ ============= ============ ============
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
F-6
<PAGE>
PRIVATEBANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and 1997
1. Accounting Policies:
The consolidated financial statements of PrivateBancorp, Inc. (the
"Company") and Subsidiary have been prepared in conformity with generally
accepted accounting principles and reporting practices prescribed for the
banking industry. A description of the significant accounting policies follows:
a. Consolidation
The consolidated financial statements of the Company and Subsidiary include
the accounts of the Company and its wholly owned subsidiary, The PrivateBank
and Trust Company (the "Bank"). Significant intercompany accounts and
transactions have been eliminated in the preparation of these statements.
b. Statement of Cash Flows
For purposes of reporting cash flows, cash and cash equivalents include cash
on hand, amounts due from banks and federal funds sold. Generally, federal
funds are sold for one-day periods, but not longer than thirty days.
c. Securities
Securities for which management has the intent and ability to hold to
maturity are reported at cost, adjusted for amortization of premium and
accretion of discount. Securities available for sale are reported at fair
value, with unrealized gains and losses and applicable income taxes reported as
other comprehensive income in a separate component of stockholders' equity. At
December 31, 1998 and 1997, all securities held were classified as available
for sale.
Premium and discount on securities are included in interest income on
securities over the period from acquisition to maturity or earlier call date
using the straight-line method, the results of which are not materially
different from those obtained using the level-yield method. The specific
identification method is used to record gains and losses on security
transactions.
d. Loans
Loans are generally reported at the principal amount outstanding, net of
unearned income. Loans originated and intended for sale in the secondary market
are classified as held for sale and reported at the lower of cost or market
value.
Loan origination and commitment fees, offset by certain direct loan
origination costs, are being deferred and the net amount amortized as an
adjustment of the related loan's yield. The Company is generally amortizing
these amounts over the contractual life of the related loans.
Loans are placed on nonaccrual status when, in the opinion of management,
there are doubts as to the collectibility of interest or principal, or when
principal or interest is past due 90 days or more and the loan is not well
secured and in the process of collection. All loans classified as nonaccrual
are considered to be impaired. Any shortfall in the estimated value of an
impaired loan compared with the recorded investment of the loan is identified
as an allocated portion of the allowance for loan losses and is one of the
factors
F-7
<PAGE>
PRIVATEBANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1998 and 1997
considered by management in their overall assessment of the adequacy of the
allowance for loan losses. Interest previously accrued but not collected is
reversed and charged against interest income at the time the related loan is
placed on nonaccrual status. Interest payments received on impaired loans are
recorded as reductions of principal if principal payment is doubtful.
e. Allowance for Loan Losses
The allowance for loan losses is determined by management based on factors
such as past loan loss experience, known and inherent risks in the loan
portfolio, the estimated value of any underlying collateral, prevailing
economic conditions and other factors and estimates which are subject to change
over time. Management adjusts the allowance for loan losses by recording a
provision for loan losses in an amount sufficient to maintain the allowance at
a level commensurate with the risks in the loan portfolio. Loans are charged
off when deemed to be uncollectible by management.
f. Bank Premises and Equipment
Bank premises and equipment are stated at cost less accumulated depreciation
and amortization. For financial reporting purposes, depreciation is computed
using the straight-line method over the estimated useful lives of the assets.
g. Organization Costs
Organization costs incurred by the Company in performing activities
necessary to organize the Bank were amortized on a straight-line basis over a
five-year period beginning February 6, 1991, when the Bank commenced
operations.
h. Income Taxes
The Company accounts for income taxes under an asset and liability approach
with the objective of recognizing the amount of taxes payable or refundable for
the current year and deferred tax assets and liabilities for the future tax
consequences that have been recognized in the Company's financial statements or
tax returns. The measurement of tax assets and liabilities is based on tax
rates in enacted tax laws. Deferred tax assets are reduced, if necessary, by
the amount of such benefits that are not expected to be realized based on
available evidence.
i. Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities
In June, 1996, the Financial Accounting Standards Board (FASB) issued SFAS
No. 125 "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities." Under SFAS No. 125, after a transfer of
financial assets, an entity recognizes the financial and servicing assets it
controls and the liabilities it has incurred, derecognizes financial assets
when control has been surrendered and derecognizes liabilities when
extinguished. In December, 1996, the FASB issued SFAS No. 127 "Deferral of
Effective Date of Certain Provisions of FASB Statement No. 125" which delayed
the effectiveness of selected provisions of SFAS No. 125 from January 1, 1997
to January 1, 1998. Management adopted SFAS No. 125 upon its effectiveness on
January 1, 1997 and January 1, 1998 as appropriate. The adoption of these
statements had no effect on the Company's reported consolidated financial
position and the results of operations.
F-8
<PAGE>
PRIVATEBANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1998 and 1997
j. Earnings per Share
The Company accounts for and reports earnings per share using a dual
presentation of basic and diluted earnings per share. Basic earnings per common
share are determined by dividing earnings by the weighted average number of
common shares. Dilutive stock options are included as share equivalents using
the treasury stock method in determining diluted earnings per share.
k. Comprehensive Income
In June, 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income," which establishes standards for reporting and display of comprehensive
income and its components. The statement requires that components of
comprehensive income, as defined, be reported in a financial statement that is
displayed with the same prominence as other financial statements. Management
adopted SFAS No. 130 in 1998 upon its effectiveness, using the statement of
changes in stockholders' equity approach. The adoption of this statement had no
effect on the Company's reported consolidated financial position and the
results of operations. The 1997 and 1996 consolidated financial statements have
been restated to conform to the SFAS No. 130 principles.
l. Derivatives
In June, 1998, the FASB issued SFAS No. 133, "Accounting for Derivatives
Instruments and for Hedging Activities." It requires that all derivatives be
recognized as assets or liabilities on the balance sheet and be measured at
fair value. If certain conditions are met, a derivative may be specifically
designated as a hedging instrument. The statement is effective for fiscal
quarters beginning after June 15, 1999. As the Company and Bank do not own any
derivative instruments, this statement is expected to have no effect on the
Company's reported consolidated financial position and the results of
operations.
m. Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expense during the reporting
period. Actual results could differ from these estimates.
n. Reclassifications
Certain reclassifications have been made to prior periods' consolidated
financial statements to place them on a basis comparable with the current
period's consolidated financial statements.
o. Interim Financial Information
The accompanying financial statements as of March 31, 1999 and for the three
months ended March 31, 1999 and 1998 are unaudited and in the opinion of
management, reflect all adjustments that are necessary for a fair presentation
of the Company's financial position, results of operations and cash flows for
the periods then ended. All such adjustments are of a normal and recurring
nature.
F-9
<PAGE>
PRIVATEBANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1998 and 1997
2. Operations:
The Company was incorporated under the laws of the State of Delaware on
November 7, 1989. The Bank commenced operations on February 6, 1991, after
having received the approval of various banking regulatory authorities.
The Bank, through its downtown Chicago main office as well as two suburban
branches, provides personal and commercial banking services primarily to
affluent individuals, professionals and their business interests in the Chicago
metropolitan area. In addition to loans and deposits, the Company's services
include trust, investment and insurance products.
3. Earnings Per Share and Stock Split:
The following table contains a reconciliation of the numerators and
denominators used in the computation of basic and diluted earnings per share
for the years ended December 31, 1998, 1997 and 1996:
<TABLE>
<CAPTION>
Weighted
Income Average Shares Per Share
(Numerator) (Denominator) Amount
----------- -------------- ---------
<S> <C> <C> <C>
Year Ended December 31, 1998
Basic Earnings Per Share--Income
available to common stockholders. $3,010,138 3,313,092 $.91
====
Effect of Dilutive Stock Options.. -- 201,436
---------- ---------
Diluted Earnings Per Share--Income
available to common stockholders. $3,010,138 3,514,528 $.86
========== ========= ====
Year Ended December 31, 1997
Basic Earnings Per Share--Income
available to common stockholders. $2,145,295 3,124,464 $.69
====
Effect of Dilutive Stock Options.. -- 161,408
---------- ---------
Diluted Earnings Per Share--Income
available to common stockholders. $2,145,295 3,285,872 $.65
========== ========= ====
Year Ended December 31, 1996
Basic Earnings Per Share--Income
available to common stockholders. $1,433,023 2,939,040 $.49
====
Effect of Dilutive Stock Options.. -- 113,984
---------- ---------
Diluted Earnings Per Share--Income
available to common stockholders. $1,433,023 3,053,024 $.47
========== ========= ====
</TABLE>
On June 25, 1998, the Company's stockholders approved an eight-for-one
common stock split to be distributed in the form of a stock dividend. As a
result of this action, 1,446,473 shares were issued to stockholders of record
on June 25, 1998. Additionally, stated value was changed from $20 to $2.50 per
share, leaving the Company's common stock account unchanged. All references to
number of shares, per share amounts and stock option data in the consolidated
financial statements have been adjusted to reflect the stock split on a
retroactive basis.
F-10
<PAGE>
PRIVATEBANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1998 and 1997
4. Securities:
The amortized cost and the estimated fair value of securities as of December
31, 1998 and 1997, were as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
------------ ---------- ---------- ------------
<S> <C> <C> <C> <C>
December 31, 1998--
Available for Sale--
U.S. Treasuries......... $ 6,020,730 $ 73,333 $ -- $ 6,094,063
States and political
subdivisions........... 37,709,337 227,188 (132,097) 37,804,428
Collateralized mortgage
obligations............ 61,357,858 117,435 (61,016) 61,414,277
Corporate securities.... 10,242,935 19,565 -- 10,262,500
------------ -------- --------- ------------
Total debt securities... 115,330,860 437,521 (193,113) 115,575,268
Equity securities....... 1,315,471 -- -- 1,315,471
------------ -------- --------- ------------
$116,646,331 $437,521 $(193,113) $116,890,739
============ ======== ========= ============
December 31, 1997--
Available for Sale--
U.S. Treasury and U.S.
Government agencies.... $ 35,948,802 $ 22,365 $ (9,917) $ 35,961,250
Collateralized mortgage
obligations............ 10,501,933 4,256 (93,456) 10,412,733
Corporate securities.... 18,145,287 125,650 (1,368) 18,269,569
------------ -------- --------- ------------
Total debt securities... 64,596,022 152,271 (104,741) 64,643,552
Equity securities....... 739,700 -- -- 739,700
------------ -------- --------- ------------
$ 65,335,722 $152,271 $(104,741) $ 65,383,252
============ ======== ========= ============
</TABLE>
The amortized cost and estimated fair value of securities at December 31,
1998, by contractual maturity, are shown below. Expected maturities will differ
from contractual maturities because obligors may have the right to call or
prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Amortized Estimated
Cost Fair Value
------------ ------------
<S> <C> <C>
Due within one year............................ $ 6,196,706 $ 6,235,547
Due after one year through five years.......... 2,624,825 2,659,654
Due after five years through ten years......... 8,781,479 8,817,549
Due after ten years............................ 97,727,850 97,862,518
Equity securities.............................. 1,315,471 1,315,471
------------ ------------
$116,646,331 $116,890,739
============ ============
</TABLE>
During 1998, securities were sold for total proceeds of $13,886,279,
resulting in a net gain of $39,894. No securities were sold in 1997 or 1996.
The other comprehensive income--unrealized gain on securities available for
sale is presented on a net basis on the Consolidated Statements of Changes in
Stockholders' Equity. The following table discloses
F-11
<PAGE>
PRIVATEBANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1998 and 1997
changes in other comprehensive income for 1998 on a gross basis. As there were
no sales of securities in 1997 or 1996, the gross and net presentations for
these years are the same.
<TABLE>
<CAPTION>
1998
-----------------------------
Before tax Tax Net of Tax
amount Expense Amount
---------- ------- ----------
<S> <C> <C> <C>
Unrealized Gains on Securities Available
for Sale--
Unrealized holding gains................. $236,771 $92,032 $144,739
Less: reclassification adjustment for
gain included in net income............. 39,894 15,509 24,385
-------- ------- --------
Net unrealized gains....................... $196,877 $76,523 $120,354
======== ======= ========
</TABLE>
At December 31, 1998, securities carried at $35,319,869 were pledged to
secure public and trust deposits and for other purposes as required or
permitted by law.
Equity securities consist of Federal Home Loan Bank of Chicago capital stock
and Neighborhood Housing Services certificates. These securities do not have a
readily determinable fair value for purposes of SFAS No. 115 since their
ownership is restricted and they lack a market. Accordingly, such securities
are carried at an amount equal to cost.
In the opinion of management, there were no investments in securities at
December 31, 1998, which constituted an unusual credit risk for the Company.
5. Loans:
Amounts outstanding by selected loan categories at December 31, 1998 and
1997, were as follows:
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
Real estate--
Residential................................... $ 47,746,331 $ 54,129,790
Commercial.................................... 94,392,491 55,429,205
Construction.................................. 22,407,610 10,140,104
Commercial...................................... 46,799,787 33,862,056
Personal........................................ 64,194,340 62,756,792
Held for sale................................... 6,424,337 2,176,600
------------ ------------
$281,964,896 $218,494,547
============ ============
</TABLE>
Loans held for sale are residential real estate loans intended to be sold in
the secondary market. Under the Bank's sales program, such loans are sold at
face value. No lower-of-cost-or-market adjustments were required at December
31, 1998 or 1997.
There were no loans on which the accrual of interest has been discontinued
(impaired loans) at December 31, 1998 and 1997, respectively, as well as at any
time during 1998. The average balance of impaired loans and the related amount
of interest income recognized while such loans were impaired amounted to $2,272
and $0 in 1997.
F-12
<PAGE>
PRIVATEBANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1998 and 1997
6. Allowance for Loan Losses:
The changes in the allowance for loan losses for the three years ended
December 31, 1998 were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Beginning balance..................... $3,050,000 $2,450,000 $1,955,000
Loans charged off..................... (1,986) (2,991) (28,679)
Provision for loan losses............. 361,986 602,991 523,679
---------- ---------- ----------
Ending balance........................ $3,410,000 $3,050,000 $2,450,000
========== ========== ==========
</TABLE>
There were no impaired loans at December 31, 1998 and 1997.
7. Bank Premises and Equipment:
Bank premises and equipment at December 31, 1998 and 1997, consisted of the
following:
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Furniture, fixtures and equipment.................. $2,408,164 $2,230,145
Leasehold improvements............................. 1,344,354 1,331,138
---------- ----------
3,752,518 3,561,283
Accumulated depreciation and amortization.......... 2,164,798 1,656,945
---------- ----------
$1,587,720 $1,904,338
========== ==========
</TABLE>
Included in occupancy expense in the consolidated statements of income is
depreciation and amortization expense of $507,853, $472,669 and $329,013 for
1998, 1997 and 1996, respectively.
The Bank leases its main banking facility and branch facilities under
noncancellable operating lease agreements. The minimum annual rental
commitments under these leases, at December 31, 1998, are as follows:
<TABLE>
<S> <C>
1999.......................... $ 338,527
2000.......................... 319,907
2001.......................... 330,456
2002.......................... 244,404
2003.......................... 254,952
2004 and thereafter........... 689,022
----------
$2,177,268
==========
</TABLE>
Total rent expense included in the consolidated statements of income was
$635,761, $601,461, and $494,757 for 1998, 1997, and 1996, respectively.
F-13
<PAGE>
PRIVATEBANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1998 and 1997
8. Income Taxes:
The components of total income tax provision in the consolidated statements
of income for the years ended December 31, 1998, 1997, and 1996 are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- --------
<S> <C> <C> <C>
Income tax provision--
Current--
Federal............................. $1,758,748 $1,609,697 $963,602
State............................... 371,246 73,037 --
---------- ---------- --------
2,129,994 1,682,734 963,602
---------- ---------- --------
Deferred--
Federal............................. (255,235) (298,018) (201,729)
State............................... (35,465) (142,369) --
---------- ---------- --------
(290,700) (440,387) (201,729)
---------- ---------- --------
Total............................. $1,839,294 $1,242,347 $761,873
========== ========== ========
</TABLE>
The tax effect of fair value adjustments on securities available for sale is
recorded directly to other comprehensive income in a separate component of
stockholders' equity. The net tax provision (benefit) recorded directly to
other comprehensive income amounted to $76,523, $47,698, and $(4,685) in 1998,
1997 and 1996, respectively.
A summary reconciliation of the differences between the total income tax
provision (benefit) and the amounts computed at the statutory federal tax rate
of 34% for the years ended December 31, 1998, 1997, and 1996 is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- --------
<S> <C> <C> <C>
Income tax provision at statutory
federal income tax rate................ $1,648,806 $1,151,798 $746,265
Increase (decrease) in taxes resulting
from:
Tax exempt income..................... (67,264) -- --
State income taxes.................... 221,615 6,525 --
Other................................. 36,137 84,024 15,608
---------- ---------- --------
Total............................... $1,839,294 $1,242,347 $761,873
========== ========== ========
</TABLE>
F-14
<PAGE>
PRIVATEBANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1998 and 1997
A net deferred tax asset is included in other assets in the consolidated
balance sheet as a result of temporary differences between the carrying amounts
of assets and liabilities in the financial statements and their related tax
bases. The components of the net deferred tax asset as of December 31, 1998 and
1997 are as follows:
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Gross deferred tax assets--
Allowance for loan losses....................... $1,182,193 $1,041,960
Leasehold improvements.......................... 231,316 159,524
Amortization of restricted stock................ 109,240 51,298
Other........................................... 51,829 36,434
---------- ----------
1,574,578 1,289,216
Valuation allowance............................... -- --
---------- ----------
Gross deferred tax assets......................... 1,574,578 1,289,216
Gross deferred tax liabilities.................... (215,233) (144,048)
---------- ----------
Net deferred tax asset............................ $1,359,345 $1,145,168
========== ==========
</TABLE>
9. Funds Borrowed:
As of December 31, 1998, funds borrowed consisted of a $20 million FHLB term
note, with an interest rate of 5.20%. The term note matured on January 7, 1999.
There were no funds borrowed as of December 31, 1997.
10. Employee Benefit and Incentive Plans:
a. Savings and Profit Sharing Plan
The Bank maintains The PrivateBank and Trust Company Savings and Profit
Sharing Plan (the "Plan") pursuant to Section 401(k) of the Internal Revenue
Code, whereby eligible employees may contribute a percentage of compensation,
but not in excess of the maximum amount allowed under the Code. The Bank can
make discretionary contributions to the Plan as determined and approved by the
Bank's Board of Directors. Total discretionary contributions to the Plan
amounted to $61,462, $47,001, and $43,130 in 1998, 1997 and 1996, respectively.
b. Stock Options
Pursuant to initial stockholder stock option agreements as amended, the
Company granted to each initial stockholder an option to purchase up to the
number of shares equal to that number of shares purchased by the investor in
the initial offering at an exercise price of $6.25 per share. All 80,800 shares
reserved for issuance to these initial stockholders were issued by the Company
in January and February, 1996, upon the exercise of these option agreements.
The Company has stock options outstanding under its Stock Incentive Plan, a
director stock option program and certain compensation replacement options.
As in effect as of December 31, 1998, the Stock Incentive Plan allows up to
15% of the then number of common shares issued and outstanding, plus an
additional 136,000 shares, to be issued under the Plan either pursuant to the
exercise of stock options granted thereunder or as restricted stock awards. The
option price may not be less than the fair market value on the date of grant.
All options have a term of 10 years. Options granted
F-15
<PAGE>
PRIVATEBANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1998 and 1997
in 1998 are first exercisable five years from the date of grant or up to two
years earlier if certain conditions for total stockholder return are met.
Options granted in 1997 and prior are first exercisable beginning at least two
years following the date of grant.
Since 1992 the Company has compensated non-employee directors with annual
option grants. The option price of the director options is fair market value
on the date of grant, and the exercise period is 10 years from the date of
grant.
In 1992, the Company granted compensation replacement options to certain
officers of the Company who agreed to reduced cash compensation. The option
price is the fair market value on the date of grant. The compensation
replacement options are exercisable during a 10-year period from the date of
grant.
The following table summarizes the status of the Company's stock option
agreements and stock option program as of December 31, 1998 and 1997, and
changes during the years then ended:
<TABLE>
<CAPTION>
1998 1997
----------------------- -----------------------
Weighted Weighted
Average Average
Shares Exercise Price Shares Exercise Price
------- -------------- ------- --------------
<S> <C> <C> <C> <C>
Outstanding at beginning
of year................ 543,168 $ 7.57 523,264 $ 7.38
Granted............... 80,960 17.19 35,360 11.00
Exercised............. (81,920) 7.02 (15,456) 6.25
Forfeited............. -- --
------- ------ ------- ------
Outstanding at end of
year................... 542,208 $ 9.09 543,168 $ 7.57
======= ====== ======= ======
Options exercisable at
year-end............... 433,808 425,168
======= =======
Weighted average fair
value of options
granted during the
year................... $17.19 $11.00
</TABLE>
The range of exercise prices and weighted average remaining contractual
life for stock options outstanding as of December 31, 1998, was $6.25-$17.19
and 7 years, respectively.
The Company applies APB Opinion 25 in accounting for stock-based
compensation. Accordingly, no compensation expense has been recognized for its
stock option program. Had compensation expense for stock options been
determined based on the fair value at the grant dates for awards under the
stock option program consistent with the method of FASB Statement No. 123, the
Company's net income and earnings per share would have been reduced to the pro
forma amounts indicated below:
<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Net income--
As reported........................... $3,010,138 $2,145,295 $1,433,023
Pro forma............................. 2,869,569 1,996,145 1,282,268
========== ========== ==========
Basic earnings per share--
As reported........................... $ .91 $ .69 $ .49
Pro forma............................. .87 .64 .44
Diluted earnings per share--
As reported........................... $ .86 $ .65 $ .47
Pro forma............................. .82 .61 .42
========== ========== ==========
</TABLE>
F-16
<PAGE>
PRIVATEBANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1998 and 1997
In determining the fair value of each option grant for purposes of the above
pro forma disclosures, the Company used an option pricing model with the
following assumptions for grants in 1998 and 1997, respectively: dividend yield
of 0.6% and 0.7% for 1998 and 1997 respectively; risk-free interest rate of
6.0% for both years; and expected lives for both years of 10 years for the
Stock Incentive Plan options, 10 years for the compensation replacement options
and 10 years for the various director options.
c. Restricted Stock
In 1998 and 1997, the Company issued 13,600 and 36,800 shares, respectively,
of restricted stock under the Stock Incentive Plan. These shares had a fair
value of $13.75 and $10.94 per share, respectively, as of the grant date.
During 1997, 1,600 restricted shares were forfeited. These shares carry voting
and dividend rights. Sale of the shares is restricted prior to vesting. Subject
to continued employment, vesting occurs five years from the date of grant.
Shares issued under the plan are recorded at their fair market value on the
date of grant with a corresponding charge to deferred compensation. The
deferred compensation, a component of stockholders' equity, is being amortized
as compensation expense on a straight-line basis over the vesting period.
Included in salaries and employee benefits in the consolidated statements of
income is compensation expense for restricted shares of $149,566, $98,917, and
$33,500 for 1998, 1997, and 1996 respectively.
11. Related-Party Transactions:
An analysis of loans made to directors and executive officers of the Company
and the Bank follows:
<TABLE>
<S> <C>
Balance, December 31, 1997................................... $11,308,339
Additions.................................................. 3,226,741
Collections................................................ (3,791,197)
-----------
Balance, December 31, 1998................................... $10,743,883
===========
</TABLE>
Directors and executive officers of the Company and Bank were clients of and
had transactions with the Bank in the ordinary course of business during the
period presented above and additional transactions may be expected in the
future. In management's opinion, all outstanding loans, commitments and deposit
relationships included in such transactions were made on substantially the same
terms, including interest rates and collateral, as those prevailing at the time
for comparable transactions with others, and did not involve more than a normal
risk of collectibility or other unfavorable features.
In addition to the loans reflected above, in June, 1998, the Company made a
$949,741 loan to the chief executive officer of the Company and the Bank, the
proceeds of which were put towards the purchase of $1 million of common stock
of the Company. The loan has a five year term but is payable sooner under
certain conditions. The loan bears interest at the rate of 5.69% per annum.
Provided that the officer remains employed by the Bank, the loan agreement
calls for forgiveness of 0% up to 100% of the interest based on how many years
the loan remains outstanding. The loan is reflected in the consolidated
financial statements as a reduction in stockholders' equity.
The Company is the general partner in a partnership for investment purposes.
Through a contractual arrangement, the Bank's trust department maintains the
partnership's records and earns an administrative fee from the partnership.
During 1998, the Bank began offering insurance products to its clients
through a strategic alliance with a Chicago based financial services firm which
is a stockholder of the Company. In addition, this financial
F-17
<PAGE>
PRIVATEBANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1998 and 1997
services firm serves as an insurance agency in coordinating certain insurance
coverage for the Company and Bank. During 1998, the Bank earned commission
revenue of $5,761 for referred business and paid $131,690 in fees to this
financial services firm for insurance and related services.
During 1998 and 1997, the Bank acquired selected furniture with a total cost
of $2,655 and $71,875, respectively, through related parties.
The Bank incurred professional fees in 1998, 1997 and 1996 for services
provided by one law firm, whose partner is a director of the Company and the
Bank.
12. Credit-Related Instruments:
The Company has, through its subsidiary Bank, credit-related instruments
with off-balance-sheet risk in the normal course of business to meet the
financing needs of its clients. These financial instruments include commitments
to extend credit and standby letters of credit. These instruments involve, to
varying degrees, elements of credit risk in excess of the amount recognized in
the consolidated financial statements. Credit risk represents the accounting
loss that would be recognized at the reporting date if counterparties failed to
completely perform as contracted.
The Bank's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit and
standby letters of credit is represented by the contractual amount of those
instruments, assuming that the amounts are fully advanced and that collateral
or other security is of no value. The Bank uses the same credit policies in
making commitments and conditional obligations as it does for on-balance-sheet
instruments. At December 31, 1998 and 1997, the Bank had the following
categories of credit-related financial instruments (at contract amount):
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Commitments to extend credit..................... $97,487,444 $67,184,442
Standby letters of credit........................ 10,147,140 2,971,656
</TABLE>
Commitments to extend credit are agreements to lend to a client as long as
there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Since many of the commitments are expected to expire
without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The Bank evaluates each client's
creditworthiness on a cash-by-case basis. The amount of collateral obtained, if
deemed necessary, upon extension of credit is based on management's credit
evaluation of the counterparty. Collateral held varies but may include accounts
receivable, inventory, property, plant and equipment and income-producing
commercial properties.
Standby letters of credit are conditional commitments issued by the Bank to
guarantee the performance of a client to a third party. Those guarantees are
primarily issued to support commercial business activities of Bank clients. The
credit risk involved in issuing letters of credit is essentially the same as
that involved in extending loan facilities to clients. The Bank holds
collateral supporting those commitments for which collateral is deemed
necessary.
13. Concentrations of Credit Risk:
Loan concentrations are defined as amounts loaned to a multiple number of
borrowers engaged in similar activities, which would cause them to be similarly
impacted by economic or other conditions. The Bank grants
F-18
<PAGE>
PRIVATEBANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1998 and 1997
loans to clients located primarily in the metropolitan Chicago area. There are
no other significant concentrations of loans and commitments to make loans
other than the categories of loans disclosed in Note 5.
14. Estimated Fair Value of Financial Instruments:
The following presents the carrying value and estimated fair value of the
various classes of financial instruments, all nontrading, held by the Company,
through its subsidiary Bank, at December 31, 1998 and 1997. This information is
presented solely for compliance with SFAS No. 107 and is subject to change over
time based on a variety of factors. Because no active market exists for a
significant portion of the financial instruments presented below and the
inherent imprecision involved in the estimation process, management does not
believe the information presented reflects the amounts that would be received
if the Company's assets and liabilities were sold nor does it represent the
fair value of the Company as an entity.
Where possible, the Company has utilized quoted market prices to estimate
fair value. Since quoted market prices were not available for a significant
portion of the financial instruments, the fair values were approximated using
discounted cash flow techniques. Fair value estimates are made at a specific
point in time, based on judgments regarding future expected loss experience,
current economic conditions, risk conditions, risk characteristics of various
financial instruments and other factors. These estimates do not reflect any
premium or discount that could result from offering for sale at one time the
Company's entire holdings of a particular financial instrument. These estimates
are subjective in nature and involve uncertainties and matters of significant
judgment and, therefore, cannot be determined with precision. Changes in
assumptions could significantly affect the estimates.
<TABLE>
<CAPTION>
December 31, 1998 December 31, 1997
------------------------- -------------------------
Carrying Estimated Carrying Estimated
Value Fair Value Value Fair Value
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Assets--
Cash and cash
equivalents.......... $ 15,514,218 $ 15,514,218 $ 26,206,121 $ 26,206,121
Securities............ 116,890,739 116,890,739 65,383,252 65,383,252
Net loans............. 278,554,896 281,547,896 215,444,547 216,343,547
Accrued interest
receivable........... 2,264,195 2,264,195 1,581,728 1,581,728
Liabilities--
Deposits with no
stated maturity...... 236,711,317 236,711,317 195,941,957 195,941,957
Time deposits......... 128,282,346 128,506,346 89,831,506 89,905,506
------------ ------------ ------------ ------------
Total deposits...... 364,993,663 365,217,663 285,773,463 285,847,463
------------ ------------ ------------ ------------
Accrued interest
payable................ 720,874 720,874 453,056 453,056
Funds borrowed.......... 20,000,000 20,000,000 -- --
============ ============ ============ ============
</TABLE>
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments. These assumptions were based on
subjective estimates of market conditions and perceived risks of the financial
instruments at a certain point in time.
a. Cash and Cash Equivalents, Accrued Interest Receivable and Interest Payable
For these short-term instruments, the carrying value approximates fair value
because these instruments are short-term in nature and do not present
unanticipated credit concerns.
F-19
<PAGE>
PRIVATEBANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1998 and 1997
b. Securities
For securities held to maturity or available for sale, fair values are based
on quoted market prices or dealer quotes. If a quoted market price is not
available, fair value is estimated using quoted market prices for similar
instruments.
c. Net Loans
The fair value of performing loans is calculated by discounting scheduled
cash flows through the estimated maturity using estimated market discount rates
that reflect the credit and interest rate risk inherent in the loan. The
estimate of maturity is based on the Company's and the industry's historical
experience with repayments for each loan classification, modified, as required,
by an estimate of the effect of current economic and lending conditions.
Fair value for significant nonaccrual (impaired) loans is based on estimated
cash flows which are discounted using a rate commensurate with the risk
associated with the estimated cash flows. Assumptions regarding credit risk,
cash flows and discount rates are judgmentally determined using available
market information and specific borrower information.
d. Deposit Liabilities
The fair value of deposits with no stated maturity, such as non-interest-
bearing deposits, interest-bearing deposits, savings and money market deposit
accounts, is equal to the amount payable on demand as of year-end. The fair
value of certificates of deposit is based on the discounted value of
contractual cash flows. The discount rate is estimated using the rates
currently offered for deposits of similar remaining maturities.
e. Funds Borrowed
Rates currently available to the Company and Bank for debt with similar
terms and remaining maturities are used to estimate fair value of existing
debt.
f. Unrecognized Financial Instruments
The fair value of unrecognized financial instruments, including commitments
to extend credit, standby letters of credit and financial guarantees, is
insignificant and, therefore, not presented.
15. Regulatory Requirements:
The Bank is subject to federal and state laws, which restrict the payment of
dividends to the Company. Based on these restrictions, at January 1, 1999, the
Bank could have declared approximately $6,954,418 in dividends without
requesting approval of the applicable federal or state regulatory agency.
The Bank is required to maintain noninterest-bearing cash balances with the
Federal Reserve based on the types and amounts of deposits held. During 1998
and 1997, the average balances maintained to meet the requirement were $829,000
and $649,000, respectively.
The Company and Bank are subject to various regulatory capital requirements
as established by the applicable federal or state banking regulatory
authorities. Under capital adequacy guidelines and the regulatory framework for
prompt corrective action, the Company and Bank must meet specific capital
guidelines that
F-20
<PAGE>
PRIVATEBANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1998 and 1997
involve quantitative measures of the Bank's assets, liabilities and certain
off-balance sheet items. The quantitative measures for capital adequacy require
the Company and Bank to maintain minimum amounts and ratios of total and Tier 1
capital to risk weighted assets and of Tier 1 capital to average assets
(leverage). The Company's and Bank's capital components, classification, risk
weightings and other factors are also subject to qualitative judgments by
regulators. Failure to meet minimum capital requirements can initiate certain
actions by regulators that, if undertaken, could have a material effect on the
Company's financial statements. Management believes that as of December 31,
1998, the Company and Bank meet all minimum capital adequacy requirements to
which they are subject.
The most recent notification from the Federal Deposit Insurance Corporation
categorized the Bank as well capitalized under the regulatory framework for
prompt corrective action and management believes that no events or changes in
conditions have occurred subsequent to such notification to change the Bank's
category.
The following table presents selected capital information for the Company
(Consolidated) and Bank as of December 31, 1998 and 1997:
<TABLE>
<CAPTION>
To Be Well
Capitalized
Under Prompt
For Capital Corrective
Adequacy Action
Actual Purposes Provisions
------------- -------------- ---------------
Amount Ratio Amount Ratio Amount Ratio
------- ----- ------- ----- ------- ------
(000's) (000's) (000's)
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1998--
Total risk-based capital--
Consolidated............ $34,978 11.53% $24,274 8.00%
Bank.................... 31,473 10.41 24,188 8.00 $30,235 10.00%
Tier 1 risk-based
capital--
Consolidated............ 31,568 10.40% 12,137 4.00%
Bank.................... 28,063 9.29 12,094 4.00 18,141 6.00%
Tier 1 (leverage)
capital--
Consolidated............ 31,568 7.88% 16,018 4.00%
Bank.................... 28,063 7.27 15,456 4.00 19,320 5.00%
As of December 31, 1997--
Total risk-based capital--
Consolidated............ $28,159 11.75% $19,165 8.00%
Bank.................... 25,837 10.79 19,164 8.00 23,955 10.00%
Tier 1 risk-based
capital--
Consolidated............ 25,164 10.50% 9,582 4.00%
Bank.................... 22,843 9.54 9,582 4.00 14,373 6.00%
Tier 1 (leverage)
capital--
Consolidated............ 25,164 8.70% 11,563 4.00%
Bank.................... 22,843 8.16 11,208 4.00 14,011 5.00%
</TABLE>
16. Operating Segments:
As noted in Note 2, the Bank provides personal and commercial banking
services to affluent individuals, professionals and their business interests in
the Chicago metropolitan area. Such services include loans, deposit
instruments, investments, and trust services. For purposes of making operating
decisions and assessing performance, management treats the Company and Bank as
one operating segment.
F-21
<PAGE>
PRIVATEBANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1998 and 1997
The financial information contained in the Company's consolidated financial
statements, such as net interest income, other income, net income and total
assets, is used by management as a key input in evaluating the performance of
the Company and Bank on an aggregate basis.
17. Contingent Liabilities
Because of the nature of its activities, the Company is from time to time
involved in legal actions that arise in the normal course of business. In the
judgment of management, after consultation of legal counsel, none of the
litigation to which the Company or its subsidiary is a party will have a
material effect, either individually or in the aggregate, on the consolidated
financial position or results of operations.
18. Privatebancorp, Inc. (Parent Company Only)--Condensed Financial Statements:
PRIVATEBANCORP, INC. (PARENT COMPANY ONLY)
CONDENSED BALANCE SHEETS
As of December 31, 1998 and 1997
<TABLE>
<CAPTION>
ASSETS 1998 1997
------ ----------- -----------
<S> <C> <C>
Cash and due from banks--bank subsidiary............... $ 668,753 $ 1,766,193
Investment in bank subsidiary.......................... 28,269,290 22,871,969
Other assets........................................... 353,350 67,149
----------- -----------
Total assets....................................... $29,291,393 $24,705,311
=========== ===========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
Other liabilities...................................... $ 17,745 $ 17,556
----------- -----------
Total liabilities...................................... 17,745 17,556
Stockholders' equity................................... 29,273,648 24,687,755
----------- -----------
Total liabilities and stockholders' equity......... $29,291,393 $24,705,311
=========== ===========
</TABLE>
F-22
<PAGE>
PRIVATEBANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1998 and 1997
PRIVATEBANCORP, INC. (PARENT COMPANY ONLY)
CONDENSED STATEMENTS OF INCOME
For the Years Ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Operating income:
Interest income--other................... $ 31,523 $ -- $ --
Total.................................. 31,523 -- --
---------- ---------- ----------
Operating expense:
Amortization of deferred compensation.... 149,566 98,917 33,500
Amortization of organization costs....... -- -- 23,295
Other.................................... 225,853 67,974 23,788
---------- ---------- ----------
Total.................................. 375,419 166,891 80,583
---------- ---------- ----------
(Loss) before income taxes and equity
in undistributed net income of bank
subsidiary............................ (343,896) (166,891) (80,583)
Income tax (benefit)....................... (134,119) (56,743) (34,546)
---------- ---------- ----------
(Loss) before equity in undistributed
net income of bank subsidiary......... (209,777) (110,148) (46,037)
---------- ---------- ----------
Equity in undistributed net income of bank
subsidiary................................ 3,219,915 2,255,443 1,479,060
---------- ---------- ----------
Net income............................. $3,010,138 $2,145,295 $1,433,023
========== ========== ==========
</TABLE>
The Parent Company Only Statements of Changes in Stockholders' Equity are
the same as the Consolidated Statements of Changes in Stockholders' Equity.
F-23
<PAGE>
PRIVATEBANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1998 and 1997
PRIVATEBANCORP, INC. (PARENT COMPANY ONLY)
CONDENSED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income............................ $ 3,010,138 $ 2,145,295 $ 1,433,023
----------- ----------- -----------
Adjustments to reconcile net income to
net cash provided by operating
activities--
Equity in net income of bank
subsidiary......................... (3,219,915) (2,255,443) (1,479,060)
Amortization of organization costs.. -- -- 23,295
Amortization of deferred
compensation....................... 149,566 98,917 33,500
(Increase) decrease in other assets. (135,187) (57,731) 2,474
Increase (decrease) in other
liabilities........................ 189 49,593 (27,398)
----------- ----------- -----------
Total adjustments................. (3,205,347) (2,164,664) (1,447,189)
----------- ----------- -----------
Net cash (used in) operating
activities....................... (195,209) (19,369) (14,166)
----------- ----------- -----------
Cash flows from investing activities:
Net (increase) in capital investments
in bank subsidiary................... (2,000,000) (2,000,000) --
----------- ----------- -----------
Net cash (used in) investing
activities........................... (2,000,000) (2,000,000) --
----------- ----------- -----------
Cash flows from financing activities:
Issuance of common stock.............. 1,360,859 2,347,946 505,000
Dividends paid........................ (263,090) (217,358) (184,608)
----------- ----------- -----------
Net cash provided by financing
activities....................... 1,097,769 2,130,588 320,392
----------- ----------- -----------
Net increase (decrease) in cash and cash
equivalents............................ (1,097,440) 111,219 306,226
Cash and cash equivalents at beginning
of year................................ 1,766,193 1,654,974 1,348,748
----------- ----------- -----------
Cash and cash equivalents at end of
year................................... $ 668,753 $ 1,766,193 $ 1,654,974
=========== =========== ===========
Other cash flow disclosures:
Income tax payment (receipt).......... $ 1,826,826 $ 1,562,726 $ 977,432
=========== =========== ===========
Non-cash transactions:
Loan to executive officer for purchase
of common stock...................... $ 949,741 $ -- $ --
=========== =========== ===========
</TABLE>
F-24
<PAGE>
PRIVATEBANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Concluded)
December 31, 1998 and 1997
19. Subsequent Event:
During March and April, 1999, the Company's Board of Directors and
stockholders approved an increase in the number of authorized shares to
12,000,000 shares of common stock and 1,000,000 shares of preferred stock. The
Board also approved a change in the per share stated value of the common stock
from $2.50 to $1.00 per share, and declared a two-for-one common stock split to
be effected in the form of a stock dividend. Such change in authorized shares,
change in stated value and stock split will become effective prior to the
effectiveness of the registration statement covering the Company's initial
public offering. All references to number of shares, per share amounts and
stock option data in the consolidated financial statements have been adjusted
to reflect the stock split on a retroactive basis.
F-25
<PAGE>
[Logo of
PrivateBancorp, Inc.]
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The following table sets forth the costs and expenses, other than the
underwriting discount, payable by the Company in connection with the sale of
the common stock being registered. All amounts are estimates except the SEC
registration fee and the NASD filing fee.
<TABLE>
<CAPTION>
Amount
--------
<S> <C>
SEC registration fee............................................ $ 5,180
NASD filing fee................................................. 2,363
Nasdaq listing fee.............................................. 63,725
Printing expenses............................................... 100,000
Accounting fees and expenses.................................... 80,000
Legal fees and expenses......................................... 250,000
Blue Sky fees and expenses...................................... 2,500
Transfer agent and Registrar's fees............................. 5,000
Postage and other miscellaneous costs........................... 91,232
--------
Total....................................................... $600,000
========
</TABLE>
Item 14. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law grants each corporation
organized thereunder the powers to indemnify any individual made party or
threatened to be made party to any threatened, pending or completed action,
suit or proceeding because the individual is or was a director, officer,
employee or agent of the corporation, against actual and reasonable expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
incurred with respect to an action, suit or proceeding if the individual acted
in good faith, and the individual reasonably believed: (a) that the
individual's conduct was in the corporation's best interests; (b) that the
individual's conduct was at least not opposed to the corporation's best
interests; and (c) in the case of any criminal proceeding, that the individual
had no reasonable cause to believe the individual's conduct was unlawful.
However, there will be limited or no indemnification for directors, officers,
employees or agents adjudged to be liable to the corporation where such
individuals are parties to any action by or in the right of the corporation.
Article Ninth of the Company's Restated Certificate of Incorporation
provides as follows:
Ninth: The Corporation shall indemnify, to the full extent that it shall
have power under applicable law to do so and in a manner permitted by such
law, any person made or threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that he is or was a
director or officer of the Corporation against liabilities and expenses
reasonably incurred or paid by such person in connection with such action,
suit or proceeding. The Corporation may indemnify, to the full extent that
it shall have power under applicable law to do so and in a manner permitted
by such law, any person made or threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he is
or was an employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against liabilities and expenses reasonably incurred or paid by such person
in connection with such action, suit or proceeding. The words "liabilities"
and "expenses" shall include, without limitation: liabilities, losses,
damages, judgments, fines, penalties, amounts paid in settlement, expenses,
attorneys' fees and costs. The indemnification provided by this Article
NINTH shall not be deemed exclusive of any other rights to which any person
indemnified may be
II-1
<PAGE>
entitled under any statute, by-law, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official
capacity and as to action in another capacity while holding such office,
and shall continue as to a person who has ceased to be such director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such person.
The Corporation may purchase and maintain insurance on behalf of any
person referred to in the preceding paragraph against any liability
asserted against him and incurred by him in any such capacity, or arising
out of his status as such, whether or not the Corporation would have the
power to indemnify him against such liability under the provisions of this
Article NINTH or otherwise.
For purposes of this Article NINTH, references to "the Corporation"
shall include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its directors, officers,
and employees or agents, so that any person who is or was a director,
officer, employee or agent of such constituent corporation, or is or was
serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, shall stand in the same position under
the provisions of this Article with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation
if its separate existence had continued.
The provisions of this Article NINTH shall be deemed to be a contract
between the Corporation and each director or officer who serves in any such
capacity at any time while this Article and the relevant provisions of the
General Corporation Law of the State of Delaware or other applicable law,
if any, are in effect, and any repeal or modification of any such law or of
this Article shall not affect any rights or obligations then existing with
respect to any state of facts then or theretofore existing or any action,
suit or proceeding theretofore or thereafter brought or threatened based in
whole or in part upon any such state of facts.
For purposes of this Article, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to any employee benefit
plan; and references to "serving at the request of the Corporation" shall
include any service as a director, officer, employee or agent of the
Corporation which imposes duties on, or involves services by, such
director, officer, employee or agent with respect to an employee benefit
plan, its participants, or beneficiaries; and a person who acted in good
faith and in a manner he reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan shall be deemed
to have acted in a manner not opposed to the best interests of the
Corporation.
Article XI of the Amended and Restated By-laws of the Company provides as
follows:
Section 11.1 Third-Party Actions. The Corporation shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending, or completed action, suit, or proceeding, whether
civil, criminal, administrative, or investigative, including all appeals
(other than an action by or in the right of the Corporation) by reason of
the fact that the person is or was a director, officer, employee, or agent
of the Corporation, or is or was serving at the request of the Corporation
as a director, trustee, officer, employee, or agent of another corporation,
partnership, joint venture, trust, or other enterprise, against expenses,
including attorneys' fees, judgment, fines, and amounts paid in settlement
actually and reasonably incurred by him or her in connection with the
action, suit, or proceeding; if the person acted in good faith and in a
manner he or she reasonably believed to be in or not opposed to the best
interests of the Corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her conduct was
unlawful. The termination of any action, suit, or proceeding by judgment,
order, settlement, conviction, or on a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner that he or she reasonably believed to
be in or not opposed to the best interests of the Corporation and, with
respect to any criminal action or proceeding, had reasonable cause to
believe that his or her conduct was unlawful.
II-2
<PAGE>
Section 11.2 Derivative Actions. The Corporation shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending, or completed action or suit, including all appeals, by
or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that the person is or was a director, officer, employee,
or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, trustee, officer, employee, or agent of another
corporation, partnership, joint venture, trust, or other enterprise,
against expenses, including attorneys' fees, actually and reasonably
incurred by the person in connection with the defense or settlement of the
action or suit, if he or she acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
Corporation. However, no indemnification shall be made in respect of any
claim, issue, or matter as to which the person is adjudged to be liable for
negligence or misconduct in the performance of his or her duty to the
Corporation unless and only to the extent that the court of common pleas or
the court in which the action or suit was brought determines on application
that, despite the adjudication of liability but in view of all the
circumstances of the case, the person is fairly and reasonably entitled to
indemnity for expenses that the court of common pleas or other court shall
deem proper.
Section 11.3 Rights After Successful Defense. To the extent that a
director, trustee, officer, employee, or agent has been successful on the
merits or otherwise in defense of any action, suit, or proceeding referred
to in Section 11.1 or 11.2, above, or in defense of any claim, issue, or
matter in that action, suit, or proceeding, he or she shall be indemnified
against expenses, including attorneys' fees, actually and reasonably
incurred by him or her in connection with the action, suit, or proceeding.
Section 11.4 Other Determination of Rights. Unless ordered by a court,
any indemnification made under Section 11.1 or 11.2, above, shall be made
by the Corporation only as authorized in the specific case on a
determination that indemnification of the director, trustee, officer,
employee, or agent is proper in the circumstances because he or she has met
the applicable standard of conduct set forth in Section 11.1 or 11.2,
above. The determination shall be made (a) by a majority vote of a quorum
consisting of directors who were not and are not parties to or threatened
with the action, suit, or proceeding; (b) if the described quorum is not
obtainable or if a majority vote of a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion; (c) by the
stockholders; or (d) by the court in which the action, suit, or proceeding
was brought.
Section 11.5 Advances of Expenses. Expenses of each person seeking
indemnification under Section 11.1 or 11.2, above, may be paid by the
Corporation as they are incurred, in advance of the final disposition of
the action, suit, or proceeding, as authorized by the Board of Directors in
the specific case, on receipt of an undertaking by or on behalf of the
director, trustee, officer, employee, or agent to repay the amount if it is
ultimately determined that he or she is not entitled to be indemnified by
the Corporation.
Section 11.6 Nonexclusiveness; Heirs. The indemnification provided by
this Article shall not be deemed exclusive of, and shall be in addition to,
any other rights to which those seeking indemnification may be entitled as
a matter of law or under the Certificate of Incorporation, these By-Laws,
any agreement, vote of stockholders, any insurance purchased by the
Corporation, or otherwise, both as to action in his or her official
capacity and as to action in another capacity while holding that office,
and shall continue as to a person who has ceased to be a director, trustee,
officer, employee, or agent and shall inure to the benefit of the heirs,
executors, and administrators of that person.
The effect of the foregoing provisions of the Delaware General Corporation
Law, the Company's Restated Certificate of Incorporation and Amended and
Restated By-laws would be to permit such indemnification of officers and
directors by the Company for liabilities arising under the Securities Act of
1933.
[We have entered into indemnification agreements with our directors and
executive officers to indemnify them against certain liabilities. Consistent
with the provisions of our Restated Certificate of Incorporation and Amended
and Restated By-laws, under the terms of the agreements, we will indemnify our
directors and executive officers to the fullest extent permitted under
applicable law against all expenses, liabilities and losses incurred in
connection with any legal proceeding brought against any of them by reason of
their status as
II-3
<PAGE>
directors, officers, employees, agents or fiduciaries of the company. The
expenses, liabilities and losses which we are obligated to pay may include
judgments, fines and amounts paid in settlement of such legal proceedings by
our directors and executive officers so long as they acted in good faith and in
a manner which they reasonably believed was in the best interests of the
company.]
The Company has purchased $10 million of insurance policies which insure the
Company's directors and officers against liability which they may incur as a
result of actions taken in such capacities. In addition, the Company maintains
trust errors and omissions coverage up to a limit of $10 million.
Under its agreement with the Underwriters, the Company has agreed to
indemnify the Underwriters against certain civil liabilities under the
Securities Act.
Item 15. Recent Sales of Unregistered Securities.
Since January 1, 1996, we have sold the following unregistered securities:
In April 1996, the Company issued an aggregate of 25,200 shares of
common stock in restricted stock grants to certain key employees pursuant
to the Stock Incentive Plan. Such shares are subject to forfeiture under
certain circumstances, and will fully vest on April 24, 2001.
In April 1997, the Company issued an aggregate of 36,800 shares of
common stock in restricted stock grants to certain key employees pursuant
to the Stock Incentive Plan. Such shares are subject to forfeiture under
certain circumstances, and will fully vest on April 24, 2002.
In May 1997, the Company sold an aggregate of 208,256 shares of common
stock in a private placement offering to accredited investors and received
net proceeds of $2,251,347 from the sale.
In May 1998, the Company issued 72,720 shares of the Company's common
stock in a sale to Mr. Mandell, the Company's Chairman of the Board,
President and Chief Executive Officer, for a total purchase price of
$999,900.
In June 1998, the stockholders of the Company approved an eight-for-one
stock split to be distributed in the form of a seven-for-one stock
dividend. As a result, 2,892,946 shares of common stock were issued to
stockholders of record on June 25, 1998, in reliance on the no-sale theory.
In June 1998, the Company issued an aggregate of 13,600 shares of common
stock in restricted stock grants to certain key employees pursuant to the
Stock Incentive Plan. Such shares are subject to forfeiture under certain
circumstances, and will fully vest on June 25, 2003.
In December 1998, the Company sold 26,000 shares of common stock to a
corporation and 20,000 shares of common stock to an individual. The Company
received aggregate consideration of $736,000 in connection with these
sales.
In March 1999, the Company issued an aggregate of 20,400 shares of
common stock in restricted stock grants to certain key employees pursuant
to the Stock Incentive Plan. Such shares are subject to forfeiture under
certain circumstances, and will fully vest on March 25, 2004.
From time to time, the Company has granted options to certain employees
and directors. Since January 1, 1996, the options to purchase an aggregate
of 280,520 shares of the Company's common stock have been granted pursuant
to the Company's Stock Plans.
Except as otherwise noted, each of these sales was deemed to be exempt from
registration under the Securities Act in reliance on Section 4(2) of the
Securities Act, Regulation D, or Rule 701 of the Securities Act, as
transactions by an issuer not involving a public offering, or transactions
pursuant to compensatory benefit plans and contracts relating to compensation.
The recipients of securities in each such transaction represented their
intention to acquire the securities for investment only and not with a view to,
or for sale in connection with, any distribution thereof, and appropriate
legends were affixed to share certificates and instruments issued in such
transactions.
II-4
<PAGE>
Item 16. Exhibits and Financial Statement Schedules.
(a) The exhibits filed as a part of this Registration Statement are as
follows:
<TABLE>
<C> <S> <C>
1.1 Underwriting Agreement.*
3.1 Restated Certificate of Incorporation of PrivateBancorp,
Inc.
3.2 Form of Amendment to Restated Certificate of Incorporation
of PrivateBancorp, Inc.
3.3 Amended and Restated By-laws of PrivateBancorp, Inc.
4.1 Specimen Common Stock Certificate.*
5.1 Opinion of Vedder, Price, Kaufman & Kammholz re: legality.
10.1 Lease Agreement for banking facility located at Ten North
Dearborn, Chicago, Illinois dated January 1, 1992, as
amended, by and between General American Life Insurance
Company as successor-in-interest to LaSalle National
Trust, N.A., as successor trustee to LaSalle National
Bank, not personally but as Trustee under Trust Agreement
dated November 6, 1985 and known as Trust No. 110519 and
The PrivateBank and Trust Company.
10.2 Lease Agreement for banking facility located at 1603 West
Sixteenth Street, Oak Brook, Illinois dated October ,
1996 by and between Columbia Lisle Limited Partnership and
The PrivateBank and Trust Company.
10.3 Lease Agreement for banking facility located at 517 Green
Bay Road, Wilmette, Illinois dated as of May 2, 1994 by
and between Gunnar H. Hedlund, Doris S. Hedlund, Robert P.
Hedlund and Gerald A. Hedlund, LaSalle National Trust,
N.A., as successor trustee to LaSalle National Bank, not
personally but solely as Trustee under Trust Agreement
dated December 28, 1972 and known as Trust No. 45197 and
The PrivateBank and Trust Company.
10.4 Stock Purchase Agreement dated as of May 28, 1998 by and
among PrivateBancorp, Inc., Delaware Charter Guarantee and
Trust Co., Trustee FBO Ralph B. Mandell, IRA and The Ralph
B. Mandell Revocable Trust UTA dated June 5, 1997.
10.5 Pledge Agreement dated as of May 28, 1998 by and between
the Ralph B. Mandell Revocable Trust UTA dated June 5,
1997 and PrivateBancorp, Inc. (included as Exhibit B to
Stock Purchase Agreement dated as of May 28, 1998 by and
among PrivateBancorp, Inc., Delaware Charter Guarantee and
Trust Co., Trustee FBO Ralph B. Mandell, IRA and The Ralph
B. Mandell Revocable Trust UTA dated June 5, 1997 filed as
Exhibit 10.4 herewith).
10.6 PrivateBancorp, Inc. Amended and Restated Stock Incentive
Plan.*
10.7 Employment Agreement by and between Ralph B. Mandell and
PrivateBancorp, Inc. dated , 1999.*
10.8 Employment Agreement by and between Donald A. Roubitchek
and PrivateBancorp, Inc. dated , 1999.*
10.9 Outsourcing Agreement by and between The PrivateBank and
Trust Company and Marshall & Ilsley Corporation, acting
through its division M&I Data Services, dated as of April
9, 1999.*
21.1 Subsidiary of the Registrant.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Vedder, Price, Kaufman & Kammholz (included in
Exhibit 5.1).
24.1 Powers of Attorney (set forth on signature page).
27.1 Financial Data Schedule.
</TABLE>
- --------
*To be filed by amendment.
II-5
<PAGE>
Item 17. Undertakings.
(a) The undersigned registrant hereby undertakes to provide to the
underwriters at the closing specified in the underwriting agreement,
certificates in such denominations and registered in such names as required by
the underwriters to permit prompt delivery to each purchaser.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to Item 14 of this Registration Statement, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer
or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act of 1933 and will be governed by the final
adjudication of such issue.
(c) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-1 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the State of Illinois,
on April 27, 1999.
PrivateBancorp, Inc.
/s/ Ralph B. Mandell
By: _________________________________
Ralph B. Mandell,
Chairman, President
and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THERE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Ralph B. Mandell and Donald A.
Roubitchek, and each of them, the true and lawful attorney-in-fact and agents
of the undersigned, with full power of substitution and resubstitution, for and
in the name, place and stead of the undersigned, to sign any and all amendments
to this Registration Statement, including post-effective amendments and
amendments pursuant to Rule 462(b) of the Securities Act of 1933, and to file
the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, and hereby grants to
such attorneys-in-fact and agents, and each of them, full power and authority
to do and perform each and every act and thing requisite and necessary to be
done, as fully as to all intents and purposes as each of the undersigned might
or could do in person, hereby ratifying and confirming all that said attorneys-
in-fact and agents, or any of them, or their or his substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
/s/ Ralph B. Mandell Chairman, President, Chief April 27, 1999
____________________________________ Executive Officer and
Ralph B. Mandell Director
/s/ Caren L. Reed Vice Chairman and Director April 27, 1999
____________________________________
Caren L. Reed
/s/ Donald A. Roubitchek Chief Financial Officer and April 27, 1999
____________________________________ Director
Donald A. Roubitchek
/s/ Jeanene V. Meisser Controller April 27, 1999
____________________________________
Jeanene V. Meisser
/s/ Donald L. Beal Director April 27, 1999
____________________________________
Donald L. Beal
/s/ Naomi T. Borwell Director April 27, 1999
____________________________________
Naomi T. Borwell
</TABLE>
II-7
<PAGE>
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
/s/ William A. Castellano Director April 27, 1999
____________________________________
William A. Castellano
/s/ Robert F. Coleman Director April 27, 1999
____________________________________
Robert F. Coleman
/s/ W. James Farrell Director April 27, 1999
____________________________________
W. James Farrell
/s/ John E. Gorman Director April 27, 1999
____________________________________
John E. Gorman
/s/ Alvin J. Gottlieb Director April 27, 1999
____________________________________
Alvin J. Gottlieb
/s/ James M. Guyette Director April 27, 1999
____________________________________
James M. Guyette
/s/ Philip M. Kayman Director April 27, 1999
____________________________________
Philip M. Kayman
/s/ William R. Langley Director April 27, 1999
____________________________________
William R. Langley
/s/ Thomas F. Meagher Director April 27, 1999
____________________________________
Thomas F. Meagher
/s/ Michael B. Susman Director April 27, 1999
____________________________________
Michael B. Susman
</TABLE>
II-8
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
-------
<C> <S> <C>
1.1 Underwriting Agreement.*
3.1 Restated Certificate of Incorporation of PrivateBancorp, Inc.
3.2 Form of Amendment to Restated Certificate of Incorporation of
PrivateBancorp, Inc.
3.3 Amended and Restated By-laws of PrivateBancorp, Inc.
4.1 Specimen Common Stock Certificate.*
5.1 Opinion of Vedder, Price, Kaufman & Kammholz re: legality.
10.1 Lease Agreement for banking facility located at Ten North
Dearborn, Chicago, Illinois dated January 1, 1992, as amended,
by and between General American Life Insurance Company as
successor-in-interest to LaSalle National Trust, N.A., as
successor trustee to LaSalle National Bank, not personally but
as Trustee under Trust Agreement dated November 6, 1985 and
known as Trust No. 110519 and The PrivateBank and Trust
Company.
10.2 Lease Agreement for banking facility located at 1603 West
Sixteenth Street, Oak Brook, Illinois dated October , 1996
by and between Columbia Lisle Limited Partnership and The
PrivateBank and Trust Company.
10.3 Lease Agreement for banking facility located at 517 Green Bay
Road, Wilmette, Illinois dated as of May 2, 1994 by and
between Gunnar H. Hedlund, Doris S. Hedlund, Robert P. Hedlund
and Gerald A. Hedlund, LaSalle National Trust, N.A., as
successor trustee to LaSalle National Bank, not personally but
solely as Trustee under Trust Agreement dated December 28,
1972 and known as Trust No. 45197 and The PrivateBank and
Trust Company.
10.4 Stock Purchase Agreement dated as of May 28, 1998 by and among
PrivateBancorp, Inc., Delaware Charter Guarantee and Trust
Co., Trustee FBO Ralph B. Mandell, IRA and The Ralph B.
Mandell Revocable Trust UTA dated June 5, 1997.
10.5 Pledge Agreement dated as of May 28, 1998 by and between the
Ralph B. Mandell Revocable Trust UTA dated June 5, 1997 and
PrivateBancorp, Inc. (included as Exhibit B to Stock Purchase
Agreement dated as of May 28, 1998 by and among
PrivateBancorp, Inc., Delaware Charter Guarantee and Trust
Co., Trustee FBO Ralph B. Mandell, IRA and The Ralph B.
Mandell Revocable Trust UTA dated June 5, 1997 filed as
Exhibit 10.4 herewith).
10.6 PrivateBancorp, Inc. Amended and Restated Stock Incentive
Plan.*
10.7 Employment Agreement by and between Ralph B. Mandell and
PrivateBancorp, Inc. dated , 1999.*
10.8 Employment Agreement by and between Donald A. Roubitchek and
PrivateBancorp, Inc. dated , 1999.*
10.9 Outsourcing Agreement by and between The PrivateBank and Trust
Company and Marshall & Ilsley Corporation, acting through its
division M&I Data Services, dated as of April 9, 1999.*
21.1 Subsidiary of the Registrant.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Vedder, Price, Kaufman & Kammholz (included in
Exhibit 5.1).
24.1 Powers of Attorney (set forth on signature page).
27.1 Financial Data Schedule.
</TABLE>
- --------
* To be filed by amendment.
II-9
<PAGE>
Exhibit 3.1
-----------
RESTATED CERTIFICATE OF INCORPORATION
OF
PRIVATEBANCORP, INC.
--------------------
PRIVATEBANCORP, INC., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), DOES HEREBY CERTIFY as follows:
1. The name of the Corporation is PrivateBancorp, Inc. The Corporation
was originally incorporated under the name Private Bancorp, Inc., and the
original Certificate of Incorporation of the Corporation was filed with the
Secretary of State of the State of Delaware on November 7, 1989.
2. This Restated Certificate of Incorporation does not amend the
provisions of the Certificate of Incorporation of this Corporation. This
Restated Certificate of Incorporation, which was duly adopted in accordance with
the provisions of Section 245 of the General Corporation Law of the State of
Delaware, restates and integrates the provisions of the Certificate of
Incorporation of the Corporation.
3. The text of the Restated Certificate of Incorporation as heretofore
amended or supplemented is hereby restated to read in its entirety as follows:
FIRST: The name of the Corporation is PrivateBancorp, Inc.
-----
SECOND: The address of the Corporation's registered office in the State
------
of Delaware is 1209 Orange Street, in the City of Wilmington, 19801, County of
New Castle. The name of its registered agent at such address is The Corporation
Trust Company.
THIRD: The nature of business to be conducted or promoted and the
-----
purpose of the Corporation is to engage in any lawful act or activity for which
corporations may be organized under the General Corporation Law of the State of
Delaware.
<PAGE>
FOURTH: The total number of shares of stock which the Corporation shall
------
have authority to issue is 5,000,000, all of which shall be Common Stock,
without par value.
FIFTH: The names and mailing address of the incorporators are as
-----
follows:
Mr. William R. Langley and
Mr. Ralph B. Mandell
One First National Plaza
Suite 2648
Chicago, Illinois 60603
SIXTH: The number of directors of the Corporation shall be fixed from
-----
time to time by the By-laws of the Corporation. Election of directors need not
be by written ballot unless the By-laws so provide. Commencing with the annual
meeting of stockholders held in 1998, the directors shall be divided into three
(3) classes, as nearly equal in number as possible, with the term of office of
the first class to expire at the 1999 annual meeting of stockholders, the term
of office of the second class to expire at the 2000 annual meeting of
stockholders and the third class expiring at the 2001 annual meeting of
stockholders. At each annual meeting of stockholders following such initial
classification, directors elected by the stockholders to succeed those directors
whose term expires shall be elected for a term of office to expire at the third
succeeding annual meeting of stockholders after their election.
SEVENTH: The name and mailing address of the persons who are to serve as
-------
directors until the first annual meeting of stockholders or until their
successors are elected and qualified are as follows:
William R. Langley
Ralph B. Mandell
EIGHTH: In furtherance and not in limitation of the powers conferred by
------
statute, the Board of Directors is expressly authorized to make, alter or repeal
the By-laws of the Corporation.
NINTH: The Corporation shall indemnify, to the full extent that it
-----
shall have power under applicable law to do so and in a manner permitted by such
law, any person made or threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative, by reason of the fact that he is or was a director or officer
of the Corporation against liabilities and expenses reasonably incurred or paid
by such person in connection with such action, suit or proceeding. The
Corporation may indemnify, to the full extent that it shall have power under
applicable law to do so and in a manner permitted by such law, any person made
or threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigate, by
reason of the fact that he is or was an employee or agent of the Corporation, or
is or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against liabilities and expenses reasonably incurred or paid by
such
2
<PAGE>
person in connection with such action, suit or proceeding. The words
"liabilities" and "expenses" shall include, without limitation: liabilities,
losses, damages, judgments, fines, penalties, amounts paid in settlement,
expenses, attorneys' fees and costs. The indemnification provided by this
Article NINTH shall not be deemed exclusive of any other rights to which any
person indemnified may be entitled under any statute, by-law, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be such director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such person.
The Corporation may purchase and maintain insurance on behalf of any person
referred to in the preceding paragraph against any liability asserted against
him and incurred by him in any such capacity, or arising out of his status as
such, whether or not the Corporation would have the power to indemnify him
against such liability under the provisions of this Article NINTH or otherwise.
For purposes of this Article NINTH, references to "the Corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that
any person who is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under the provisions of this Article with respect to the resulting or
surviving corporation as he would have with respect to such constituent
corporation if its separate existence had continued.
The provisions of this Article NINTH shall be deemed to be a contract
between the Corporation and each director or officer who serves in any such
capacity at any time while this Article and the relevant provisions of the
General Corporation Law of the State of Delaware or other applicable law, if
any, are in effect, and any repeal or modification of any such law or of this
Article shall not affect any rights or obligations then existing with respect to
any state of facts then or theretofore existing or any action, suit or
proceeding theretofore or thereafter brought or threatened based in whole or in
part upon any such state of facts.
For purposes of this Article, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to any employee benefit plan; and
references to "serving at the request of the Corporation" shall include any
service as a director, officer, employee or agent of the Corporation which
imposes duties on, or involves services by, such director, officer, employee or
agent with respect to an employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner not
opposed to the best interests of the Corporation.
3
<PAGE>
TENTH: Notwithstanding any other provision of this Amended and
-----
Restated Certificate of Incorporation or the By-laws of the Corporation to the
contrary and notwithstanding that a lesser percentage may be specified by law,
the affirmative vote of the holders of at least two-thirds (2/3) of the voting
power of the outstanding shares of all classes of stock of the Corporation,
voting together as a single class, shall be required to amend or repeal, or
adopt any provision inconsistent with, Articles SIXTH, TENTH and THIRTEENTH of
this Amended and Restated Certificate of Incorporation.
ELEVENTH: Whenever a compromise or arrangement is proposed between the
--------
Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of the Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for the Corporation under the
provisions of Section 291 of Title 8 of the Delaware Code or on the application
of trustees in dissolution or of any receiver or receivers appointed for the
Corporation under the provisions of Section 279 of Title 8 of the Delaware Code
order a meeting of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of the Corporation, as the case may be, to
be summoned in such manner as the said court directs. If a majority in number
representing three-fourths in value of the creditors or class of creditors,
and/or of the stockholders or a class of stockholders of the Corporation, as the
case may be, agree to any compromise or arrangement and to any reorganization of
the Corporation as consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the Court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of the Corporation, as the case may be, and also on the
Corporation.
TWELFTH: No director of the Corporation shall be personally liable to
-------
the Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the General Corporation Law of the
State of Delaware, or (iv) for any transaction from which the director derived
an improper personal benefit.
THIRTEENTH: Except as may be otherwise required by law or this Amended
----------
and Restated Certificate of Incorporation, each holder of the Common Stock shall
have one vote in respect of each share of stock held by him or her of record on
the books of the corporation on all matters voted upon by the stockholders. No
action required to be taken at any annual or special meeting of the stockholders
of the Corporation may be taken without an annual or special meeting of the
stockholders, and the power of stockholders to consent in writing, without a
meeting, to the taking of any action is specifically denied
4
<PAGE>
IN WITNESS WHEREOF, PRIVATEBANCORP, INC. has caused this Restated
Certificate of Incorporation to be signed by Ralph B. Mandell, its Chief
Executive Officer, Chairman and President, and attested to by Donald A.
Roubitchek, its Secretary, this 25th day of March, 1999.
PRIVATEBANCORP, INC.
By: /s/ Ralph B. Mandell
-------------------------
Ralph B. Mandell
Its Chief Executive Officer, Chairman and
President
Attest: /s/ Donald A. Roubitchek
----------------------------
Donald A. Roubitchek
Its Secretary
5
<PAGE>
Exhibit 3.2
-----------
FORM OF
AMENDMENT TO
RESTATED CERTIFICATE OF INCORPORATION
-------------------------------------
Subject to a vote of the stockholders of PrivateBancorp, Inc. (the
"Corporation") in accordance with the Delaware General Corporation Law, Article
FOURTH of the Restated Certificate of Incorporation of the Corporation is to be
amended to read in its entirety as follows:
FOURTH: The total number of shares of stock which the Corporation shall
------
have authority to issue is thirteen million (13,000,000), divided into two
classes as follows: one million (1,000,000) of which shall be Preferred
Stock, without par value, and twelve million (12,000,000) of which shall be
Common Stock, without par value.
The designations, powers, preferences and rights, and the
qualifications, limitations or restrictions of the above classes of stock
are as follows:
PREFERRED STOCK
1. The Board of Directors is expressly authorized at any time, and
from time to time, to issue shares of Preferred Stock in one or more
series, and for such consideration as the Board of Directors may determine,
with such voting powers, full or limited, or without voting powers, and
with such designations, preferences and relative, participating, optional
or other special rights, and qualifications, limitations or restrictions
thereof, as shall be stated in the resolution or resolutions providing for
the issuance thereof, and as are not stated in this Certificate of
Incorporation, or any amendment thereto. All shares of any one series
shall be of equal rank and identical in all respects.
2. No dividend shall be paid or declared on any particular series of
Preferred Stock unless dividends shall be paid or declared pro rata on all
--------
shares of Preferred Stock at the time outstanding in each other series
which ranks equally as to dividends with such particular series.
3. Unless and except to the extent otherwise required by law or
provided in the resolution or resolutions of the Board of Directors
creating any series of Preferred Stock, the holders of the Preferred Stock
shall have no voting power with respect to any matter whatsoever. Subject
to the protective conditions or restrictions of any outstanding series of
Preferred Stock, any amendment to this Certificate of Incorporation which
shall increase or decrease the authorized capital stock of any class or
classes may be adopted by the affirmative vote of the holders of a majority
of the outstanding shares of voting stock of the Corporation.
<PAGE>
4. Shares of Preferred Stock redeemed, converted, exchanged,
purchased, retired or surrendered to the Corporation, or which have been
issued and reacquired in any manner, shall, upon compliance with any
applicable provisions of the Delaware General Corporation Law, have the
status of authorized and unissued shares of Preferred Stock and may be
reissued by the Board of Directors as part of the series of which they were
originally a part or may be reclassified into and reissued as part of a new
series or as part of any other series, all subject to the protective
conditions or restrictions of any outstanding series of Preferred Stock.
COMMON STOCK
1. Subject to preferential dividend rights, if any, applicable to
shares of the Preferred Stock and subject to applicable requirements, if
any, with respect to the setting aside of sums for purchase, retirement or
sinking funds for the Preferred Stock, the holders of the Common Stock
shall be entitled to receive to the extent permitted by law, such dividends
as may be declared from time to time by the Board of Directors.
2. In the event of the voluntary or involuntary liquidation,
dissolution, distribution of assets or winding up of the Corporation, after
distribution in full of the preferential amounts, if any, to be distributed
to the holders of shares of the Preferred Stock, holders of the Common
Stock shall be entitled to receive all the remaining assets of the
Corporation of whatever kind available for distribution to stockholders
ratably in proportion to the number of shares of Common Stock held by them
respectively.
3. Except as may be otherwise required by law or this Certificate of
Incorporation, each holder of the Common Stock shall have one vote in
respect of each share of stock held by him or her of record on the books of
the corporation on all matters voted upon by the stockholders."
2
<PAGE>
Exhibit 3.3
-----------
AMENDED AND RESTATED
--------------------
BY-LAWS
-------
OF
--
PRIVATEBANCORP, INC.
--------------------
ARTICLE I
---------
OFFICES OF REGISTERED AGENT
---------------------------
Section 1.1 Registered Office and Agent. The Corporation shall have
and maintain a registered office in Delaware and a registered agent having a
business office identical with such registered office.
Section 1.2 Other Offices. The Corporation may also have such other
office or offices in Delaware or elsewhere as the Board of Directors may
determine or as the business of the Corporation may require.
1
<PAGE>
ARTICLE II
----------
STOCKHOLDERS
------------
Section 2.1 Annual Meeting. An annual meeting of the stockholders shall be
held on the Fourth Thursday in April in each year at the hour of 4:00 P.M., or
in the event the annual meeting is not held on such date and at such time, then
on the date and at the time designated by the Board of Directors, for the
purpose of electing directors and for the transaction of such other business as
may come before the meeting. If the day fixed for the annual meeting shall be a
legal holiday, such meeting shall be held on the next succeeding business day.
If the directors shall not be elected at the annual meeting, or at any
adjournment thereof, the Board of Directors shall cause the election to be held
as soon thereafter as may be convenient.
Section 2.2 Special Meetings. Special meetings of the stockholders may be
called at any time by the Chairman of the Board, the President or the Secretary,
and shall be called by the Chairman of the Board, the President or the Secretary
at the request, in writing, of a majority of the Board of Directors. Such
request shall state the purpose or purposes of the proposed meeting.
Section 2.3 Place of Meeting. Meetings of stockholders, whether annual or
special, shall be held at such time and place as may be determined by the Board
of Directors and designated in the call and notice or waiver of notice of such
meeting; provided, that a waiver of notice signed by all stockholders may
designate any time or place as the time and place for the holding of such
meeting. If no designation is made, the place of meeting shall be at the
Corporation's principal place of business.
Section 2.4 Notice of Meeting. Written notice stating the place, date and
hour of the meeting and, in case of a special meeting, the purpose or purposes
for which the meeting is called, shall be given not less than ten nor more than
sixty days before the date of the meeting, or, in the case of a merger,
consolidation or sale, lease or exchange of all or substantially all of the
Corporation's property and assets, at least twenty days before the date of the
meeting, either personally or by mail, by or at the direction of the Chairman of
the Board, the President or the Secretary to each stockholder of record entitled
to vote at such meeting. If mailed, notice is given when deposited in the United
States mail, postage prepaid, directed to the stockholder at his address as it
appears on the records of the Corporation.
Section 2.5 Fixing Record Date for Determination of Stockholders. For the
purpose of determining stockholders entitled to notice of or to vote at any
meeting of stockholders, or stockholders entitled to receive payment of any
dividend, or in order to make a determination of stockholders for any other
proper purpose, the Board of Directors may fix in advance a date as the record
date for any such determination of stockholders, such date to be not more than
sixty days prior to the date of a meeting of stockholders, the date of payment
of a dividend or the date on which other action requiring determination of
stockholders is to be taken, as the case may be. In addition, the record date
for a meeting of stockholders shall not be less than ten days, or in the
2
<PAGE>
case of a merger, consolidation or sale, lease or exchange of all or
substantially all of the Corporation's property and assets, not less than twenty
days immediately preceding such meeting. When a determination of stockholders
entitled to vote at any meeting of stockholders has been made as provided in
this Section, such determination shall apply to any adjournment thereof;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
Section 2.6 List of Stockholders Entitled to Vote. The officer who has
charge of the stock ledger of the Corporation shall prepare and make, at least
ten days before every meeting of stockholders, a complete list of the
stockholders entitled to vote at the meeting, arranged in alphabetical order,
and showing the address of each stockholder and the number of shares registered
in the name of each stockholder. Such list shall be open to the examination of
any stockholder, for any purpose germane to the meeting, for a period of at
least ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present. The stock ledger shall be the only evidence as to who are the
stockholders entitled to examine the stock ledger, the list of the stockholders,
the corporate books, or to vote at any meeting of the stockholders.
Section 2.7 Quorum and Manner of Acting. Unless otherwise provided by the
Certificate of Incorporation or these By-laws, a majority of the outstanding
shares of the Corporation, entitled to vote on a matter present in person or
represented by proxy, shall constitute a quorum for consideration of such
matter, at any meeting of stockholders; provided, that if less than a majority
of the outstanding shares entitled to vote on a matter are present in person or
represented by proxy at said meeting, a majority of the shares so present in
person or represented by proxy may adjourn the meeting from time to time without
further notice other than announcement at the meeting at which the adjournment
is taken of the time and place of the adjourned meeting. At the adjourned
meeting the Corporation may transact any business which might have been
transacted at the original meeting. If the adjournment is for more than thirty
days, or if after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each stockholder of
record entitled to vote at the meeting. If a quorum is present, the affirmative
vote of the majority of the shares present in person or represented by proxy at
the meeting and entitled to vote shall be the act of the stockholders, unless
the vote of a greater number or voting by classes is required by the General
Corporation Law of the State of Delaware, the Certificate of Incorporation or
these By-laws.
Section 2.8 Voting Shares and Proxies. Each stockholder shall be entitled
to one vote for each share of capital stock held by such stockholder, except as
otherwise provided in the Certificate of Incorporation. Each stockholder
entitled to vote shall be entitled to vote in person, or may authorize another
person or persons to act for him by proxy executed in writing by such
stockholder or by his duly authorized attorney-in-fact, but no such proxy shall
be voted or acted upon after three years from its date, unless the proxy
provides for a longer period.
3
<PAGE>
Section 2.9 Inspectors. At any meeting of stockholders, the chairman of the
meeting may, or upon the request of any stockholder shall, appoint one or more
persons as inspectors for such meeting. Such inspectors shall ascertain and
report the number of shares represented at the meeting, based upon the list of
stockholders produced at the meeting in accordance with Section 2.6 hereof and
upon their determination of the validity and effect of proxies, and they shall
count all votes, report the results and do such other acts as are proper to
conduct the election and voting with impartiality and fairness to all the
stockholders. Each such report shall be in writing and signed by at least a
majority of the inspectors, the report of a majority being the report of the
inspectors, and such reports shall be prima facie evidence of the number of
shares represented at the meeting and the result of a vote of the stockholders.
Section 2.10 Voting of Shares by Certain Holders. Shares of its own stock
belonging to the Corporation, unless held by it in a fiduciary capacity, shall
not be voted, directly or indirectly, at any meeting, and shall not be counted
in determining the total number of outstanding shares at any given time. Shares
standing in the name of another corporation, domestic or foreign, may be voted
by such officer, agent or proxy as the by-laws of such corporation may
prescribe, or, in the absence of such provision, as the board of directors of
such corporation may determine. Persons holding stock in a fiduciary capacity
shall be entitled to vote the shares so held. Persons whose stock is pledged
shall be entitled to vote, unless in the transfer by the pledgor on the books of
the Corporation he expressly empowered the pledgee to vote thereon, in which
case only the pledgee, or his Proxy, may represent such stock and vote thereon.
Section 2.11 Action by Stockholders. Any action required to be taken or
which may be taken at a meeting of stockholders must be effected at a duly
called annual or special meeting of the stockholders of the Corporation, and the
power of stockholders to consent in writing, without a meeting, to the taking of
any action is specifically denied.
Section 2.12 Notice of Stockholder Business. At an annual meeting of the
stockholders, only such business shall be conducted as shall have been properly
brought before the meeting. To be properly brought before the annual meeting of
stockholders, business must be (a) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board, (b) otherwise
properly brought before the meeting by or at the direction of the Board, or (c)
otherwise properly brought before the meeting by a stockholder. For business to
be properly brought before an annual meeting of the stockholders, the
stockholder must have the legal right and authority to make the proposal for
consideration at the meeting and the stockholder must have given timely notice
thereof in writing to the Chairman of the Board, the President or the Secretary
of the Corporation. To be timely, a stockholder's written notice of intent to
make a proposal or proposals must be personally delivered to or mailed by United
States mail, certified or registered with return receipt requested, and received
by the Chairman of the Board, the President or the Secretary of the Corporation
at the principal executive offices of the Corporation not less than 120 days
prior to the meeting; provided however, that in the event that less than 130
days notice or prior public disclosure of the date of the meeting is given or
made to stockholders, notice by the stockholder to be timely must be so received
not later than the close of business on the tenth (10th) day following the day
on which notice of the day of the annual meeting was
4
<PAGE>
mailed or such public disclosure was made. A stockholder's notice to the
Chairman of the Board, the President or the Secretary shall set forth as to each
item of business the stockholder proposes to bring before the annual meeting (a)
a brief description of the business desired to be brought before the meeting,
and in the case of a nomination for election of director, such nominee's name
and qualifications, and the reasons for conducting business at the meeting, (b)
the name and the record address of the stockholder or stockholders proposing
such business, (c) the number of shares of stock of the Corporation which are
beneficially owned by such stockholder or stockholders, and (d) any material
interest of the stockholder in such business. The chairman of the meeting may
refuse to acknowledge the proposal of any stockholder not made in compliance
with this Section 2.12. Notwithstanding anything in these By-laws to the
contrary, no business shall be brought before or conducted at an annual meeting
except in accordance with the procedures set forth in this Section 2.12.
5
<PAGE>
ARTICLE III
-----------
DIRECTORS
---------
Section 3.1 General Powers. The business and affairs of the Corporation
shall be managed by its Board of Directors, except as may be otherwise provided
by statute or the Certificate of Incorporation.
Section 3.2 Number, Tenure and Qualifications. The number of directors
shall be sixteen (16). The number may be increased or decreased from time to
time by amendment of this Section except as otherwise provided for in the
Amended and Restated Certificate of Incorporation. Commencing with the annual
meeting of stockholders held in 1998, the directors shall be divided into three
(3) classes, as nearly equal in number as possible, with the term of office of
the first class to expire at the 1999 annual meeting of stockholders, the term
of office of the second class to expire at the 2000 annual meeting of
stockholders, and the third class expiring at the 2001 annual meeting of
stockholders. At each annual meeting of stockholders following such initial
classification, directors elected by the stockholders to succeed those directors
whose term expires shall be elected for a term of office to expire at the third
succeeding annual meeting of stockholders after their election. Each director
shall hold office until his successor is elected and qualified or until his
earlier resignation or removal. Directors need not be stockholders or residents
of Delaware.
Section 3.3 Regular Meetings. A regular meeting of the Board of Directors
shall be held, without other notice than this Section, immediately after and at
the same place as the annual meeting of stockholders. The Board of Directors may
provide, by resolution, the time and place, either within or without Delaware,
for the holding of additional regular meetings without other notice than such
resolution.
Section 3.4 Special Meetings. Special meetings of the Board of Directors
may be called at any time by the Chairman of the Board, the President or any two
directors. The person or persons who call a special meeting of the Board of
Directors may designate any place, either within or without Delaware, as the
place for holding such special meeting. In the absence of such a designation the
place of meeting shall be the Corporation's principal place of business.
Section 3.5 Notice of Special Meetings. Notice stating the place, date and
hour of a special meeting shall be mailed not less than five days before the
date of the meeting, or shall be sent by telegram or be delivered personally or
by telephone not less than two days before the date of the meeting, to each
director, by or at the direction of the person or persons calling the meeting.
Attendance of a director at any meeting shall constitute a waiver of notice of
such meeting except where a director attends a meeting for the express purpose
of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at nor the purpose of any meeting of the Board of
Directors need be specified in the notice or waiver of notice of such meeting.
6
<PAGE>
Section 3.6 Quorum and Manner of Acting. A majority of the number of
directors as fixed in Section 3.2 hereof shall constitute a quorum for the
transaction of business at any meeting of the Board of Directors; provided, that
if less than a majority of such number of directors are present at said meeting,
a majority of the directors present may adjourn the meeting from time to time
without further notice. The act of the majority of the directors present at a
meeting at which a quorum is present shall be the act of the Board of Directors,
unless otherwise provided in the General Corporation Law of the State of
Delaware, the Certificate of Incorporation or these By-laws.
Section 3.7 Informal Action by Directors. Any action which is required by
law or by these By-laws to be taken at a meeting of the Board of Directors, or
any other action which may be taken at a meeting of the Board of Directors or
any committee thereof, may be taken without a meeting if a consent in writing,
setting forth the action to be taken, shall be signed by all of the directors
entitled to vote with respect to the subject matter thereof, or by all the
members of such committee, as the case may be. Such consent shall have the same
force and effect as a unanimous vote of all of the directors or all of the
members of such committee, as the case may be, at a duly called meeting thereof,
and shall be filed with the minutes of proceedings of the Board or committee.
Section 3.8 Telephonic Meetings. Unless otherwise restricted by the
Certificate of Incorporation or these By-laws, members of the Board of Directors
or of any committee designated by such Board, may participate in a meeting of
such Board or committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to this
Section shall constitute presence at such meeting.
Section 3.9 Resignations. Any director may resign at any time by giving
written notice to the Board of Directors, the Chairman of the Board, the
President, or the Secretary. Such resignation shall take effect at the time
specified therein; and, unless tendered to take effect upon acceptance thereof,
the acceptance of such resignation shall not be necessary to make it effective.
Section 3.10 Vacancies.
(a) Vacancies and newly-created directorships resulting from any
increase in the authorized number of directors to be elected by all of the
stockholders having the right to vote, voting as a single class, may be filled
by a majority of the directors then in office, although less than a quorum, or
by a sole remaining director, and the directors so chosen shall hold office
until their successors are elected and qualified or until their earlier
resignation or removal.
(b) Whenever the holders of any class or classes of stock or series
thereof are entitled to elect one or more directors by the provisions of the
Certificate of Incorporation, vacancies and newly created directorships of such
class or classes or series may be filled by a majority of the directors elected
by such class or classes or series thereof then in office, or by a sole
remaining director so elected, and the directors so chosen shall hold office
until the next
7
<PAGE>
election of the class for which such directors shall have been chosen, and until
their successors shall be elected and qualified or until their earlier
resignation or removal.
Section 3.11 Removal. Any director or the entire Board of Directors may be
removed, with or without cause, by the holders of a majority of the shares then
entitled to vote at an election of directors, provided, however, that:
(a) if the Board is classified and unless otherwise provided in the
Certificate of Incorporation, the stockholders may affect such removal only for
cause; or
(b) if the Corporation has cumulative voting, and less than the entire
Board of Directors is to be removed, no director may be removed without cause if
the votes cast against his removal would be sufficient to elect him if then
cumulatively voted at an election of the entire Board of Directors, or, if there
be classes of directors, at an election of the class of directors of which he is
a part.
Whenever the holders of any class or series are entitled to elect one or
more directors by the provisions of the Certificate of Incorporation, the
provisions of this Section shall apply, in respect to the removal without cause
of a director or directors so elected, to the vote of the holders of the
outstanding shares of that class or series and not to the vote of the
outstanding shares as a whole.
Section 3.12 Interested Directors.
(a) No contract or transaction between the Corporation and one or more
of its directors or officers, or between the Corporation and any other
corporation, partnership, association, or other organization in which one or
more of its directors or officers are directors or officers, or have a financial
interest, shall be void or voidable solely for this reason, or solely because
the director or officer is present at or participates in the meeting of the
Board or committee thereof which authorizes the contract or transaction, or
solely because his or their votes are counted for such purpose, if:
(1) The material facts as to his relationship or interest and as
to the contract or transaction are disclosed or are known to the Board of
Directors or the committee, and the Board or committee in good faith
authorizes the contract or transaction by the affirmative votes of a
majority of the disinterested directors, even though the disinterested
directors be less than a quorum; or
(2) The material facts as to his relationship or interest and as
to the contract or transaction are disclosed or are known to the
stockholders entitled to vote thereon, and the contract or transaction is
specifically approved in good faith by vote of the stockholders; or
8
<PAGE>
(3) The contract or transaction is fair as to the Corporation as
of the time it is authorized, approved or ratified, by the Board of
Directors, a committee thereof, or the stockholders.
(b) Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or of a committee
which authorizes the contract or transaction.
9
<PAGE>
ARTICLE IV
----------
COMMITTEES
----------
Section 4.1 Appointment and Powers. The Board of Directors may, by
resolution passed by a majority of the whole Board, designate one or more
committees, each committee to consist of one or more of the directors of the
Corporation which, to the extent provided in said resolution or in these By-
laws, shall have and may exercise all the powers and authority of the Board of
Directors in the management of the business and affairs of the Corporation, and
may authorize the seal of the Corporation to be affixed to all papers which may
require it; but no such committee shall have the power or authority in reference
to amending the Certificate of Incorporation (except that any such committee
may, to the extent authorized in the resolution or resolutions providing for the
issuance of such shares of stock adopted by the Board of Directors, fix the
designations and any of the preferences or rights of such shares relating to
dividends, redemption, dissolution, any distribution of assets of the
Corporation or the conversion into, or the exchange of such shares for, shares
of any other class or classes or any other series of the same or any other class
or classes of stock of the Corporation or fix the number of shares of any series
of stock or authorize the increase or decrease of the shares of any series),
adopting an agreement of merger or consolidation, recommending to the
stockholders the sale, lease or exchange of all or substantially all of the
Corporation's property and assets, recommending to the stockholders a
dissolution of the Corporation or a revocation thereof, or amending the By-laws;
and, unless the resolution, Bylaws or Certificate of Incorporation expressly so
provide, no such committee shall have the power or authority to declare a
dividend, to authorize the issuance of stock, or to adopt a certificate of
ownership and merger pursuant to Section 253 of the Delaware General Corporation
Law.
Section 4.2 Absence or Disqualification of Committee Member. In the absence
or disqualification of any member of such committee, the member or members
thereof present at any meeting and not disqualified from voting, whether or not
they constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any such absent or disqualified
member.
Section 4.3 Record of Proceedings. The committees shall keep regular
minutes of their proceedings and when required by the Board of Directors shall
report the same to the Board of Directors.
10
<PAGE>
ARTICLE V
---------
OFFICERS
--------
Section 5.1 Number and Titles. The officers of the Corporation shall be a
Chairman of the Board, a President, a Treasurer and a Secretary. There shall be
such other officers and assistant officers as the Board of Directors may from
time to time deem necessary. Any two or more offices may be held by the same
person.
Section 5.2 Election, Term of Office and Qualifications. The officers shall
be elected annually by the Board of Directors at the first meeting of the Board
of Directors held after the annual meeting of stockholders. If the election of
officers is not held at such meeting, such election shall be held as soon
thereafter as may be convenient. Vacancies may be filled or new offices created
and filled at any meeting of the Board of Directors. Each officer shall be
elected to hold office until his successor shall have been elected and
qualified, or until his earlier death, resignation or removal. Election of an
officer shall not of itself create contract rights.
Section 5.3 Removal. Any officer may be removed by the Board of Directors
whenever in its judgment the best interests of the Corporation will be served
thereby, but such removal shall be without prejudice to the contract rights, if
any, of the person so removed.
Section 5.4 Resignation. Any officer may resign at any time by giving
written notice to the Board of Directors, the Chairman of the Board, the
President or the Secretary. Such resignation shall take effect at the time
specified therein; and, unless tendered to take effect upon acceptance thereof,
the acceptance of such resignation shall not be necessary to make it effective.
Section 5.5 Duties. In addition to and to the extent not inconsistent with
the provisions in these By-laws, the officers shall have such authority, be
subject to such restrictions and perform such duties in the management of the
business, property and affairs of the Corporation as may be determined from time
to time by the Board of Directors.
Section 5.6 Chairman of the Board. The Chairman of the Board shall be
elected by and from the membership of the Board of Directors. He shall be the
chief executive officer of the Corporation unless the Board of Directors
expressly designates otherwise. Subject to the control of the Board of
Directors, the Chairman of the Board shall, in general, supervise and manage the
business and affairs of the Corporation, and he shall see that the resolutions
and directions of the Board of Directors are carried into effect. Except in
those instances in which the authority to execute is expressly delegated to
another officer or agent of the Corporation, or a different mode of execution is
expressly prescribed by the Board of Directors or these By-laws, or where
otherwise required by law, the Chairman of the Board may execute for the
Corporation any contracts, deeds, mortgages, bonds or other instruments which
the Board of Directors has authorized to be executed or the execution of which
is in the ordinary course of the Corporation's business, and they may each
accomplish such execution either under or without the seal of the Corporation
and either individually, together or with the Secretary, any Assistant
Secretary, or
11
<PAGE>
any other officer thereunto authorized by the Board of Directors or these By-
laws. The Chairman of the Board shall preside at all meetings of the
stockholders and of the Board of Directors (and of any executive committee
thereof), and shall perform such other duties as from time to time shall be
prescribed by the Board of Directors. In the absence of the President or in the
event of his inability or refusal to act or while such office is vacant, the
Chairman of the Board shall assume the duties of the President. The offices of
Chairman of the Board and President may be held by the same person.
Section 5.7 President. The President shall be the chief operating officer
of the Corporation unless the Board of Directors expressly designates otherwise.
Subject to the control of the Board of Directors, the President shall, in
general, assist the Chairman in supervising and managing the business and
affairs of the Corporation and in seeing that the resolutions and directions of
the Board of Directors are carried into effect. In the absence of the Chairman
of the Board or in the event of his inability or refusal to act or while such
office is vacant, the President shall perform the duties of the Chairman of the
Board and when so acting shall have all of the powers and authority of, and
shall be subject to the restrictions upon, the Chairman of the Board. Except in
those instances in which the authority to execute is expressly delegated to
another officer or agent of the Corporation or a different mode of execution is
expressly prescribed by the Board of Directors or these By-laws or where
otherwise required by law, he may execute for the Corporation any contracts,
deeds, mortgages, bonds or other instruments which the Board of Directors has
authorized to be executed or the execution of which is in the ordinary course of
the Corporation's business, and he may accomplish such execution either under or
without the seal of the Corporation and either individually or with the
Secretary, any Assistant Secretary, or any other officer thereunto authorized by
the Board of Directors or these By-laws. In general, he shall perform such other
duties as from time to time may be prescribed by the Chairman of the Board or
the Board of Directors. The offices of Chairman of the Board and President may
be held by the same person.
Section 5.8 Vice Presidents. The Board of Directors may, but need not,
appoint one or more Vice Presidents of the Corporation. Except in those
instances in which the authority to execute is expressly delegated to another
officer or agent of the Corporation or a different mode of execution is
expressly prescribed by the Board of Directors or these By-laws or where
otherwise required by law, the Vice President (or each of them if there are more
than one) may execute for the Corporation any contracts, deeds, mortgages, bonds
or other instruments which the Board of Directors has authorized to be executed,
and he may accomplish such execution either under or without the seal of the
Corporation and either individually or with the Secretary, any Assistant
Secretary, or any other officer thereunto authorized by the Board of Directors
or these By-laws. The Vice Presidents shall perform such other duties as from
time to time may be prescribed by the Chairman of the Board, the President or
the Board of Directors.
Section 5.9 Treasurer. The Treasurer shall be the principal financial and
accounting officer of the Corporation, and shall (a) have charge and custody of,
and be responsible for, all funds and securities of the Corporation; (b) keep or
cause to be kept correct and complete books and records of account including a
record of all receipts and disbursements; (c) deposit all funds
12
<PAGE>
and securities of the Corporation in such banks, trust companies or other
depositaries as shall be selected in accordance with these By-laws; (d) from
time to time prepare or cause to be prepared and render financial statements of
the Corporation at the request of the Chairman of the Board, the President or
the Board of Directors; and (e) in general, perform all duties incident to the
office of Treasurer and such other duties as from time to time may be prescribed
by the Chairman of the Board, the President or the Board of Directors. If
required by the Board of Directors, the Treasurer shall give a bond for the
faithful discharge of his duties in such sum and with such surety or sureties as
the Board of Directors shall determine.
Section 5.10 Secretary. The Secretary shall (a) keep the minutes of the
proceedings of the stockholders and of the Board of Directors in one or more
books provided for that purpose; (b) see that all notices are duly given in
accordance with the provisions of these By-laws or as required by law; (c) be
custodian of the corporate records and of the seal of the Corporation and see
that the seal of the Corporation is affixed to all stock certificates prior to
the issue thereof and to all documents the execution of which on behalf of the
Corporation under its seal is necessary or appropriate; (d) keep or cause to be
kept a register of the name and address of each stockholder, which shall be
furnished to the Corporation by each such stockholder, and the number and class
of shares held by each stockholder; (e) have general charge of the stock
transfer books; and (f) in general, perform all duties incident to the office of
Secretary and such other duties as from time to time may be prescribed by the
Chairman of the Board, the President or the Board of Directors.
Section 5.11 Assistant Treasurers and Assistant Secretaries. In the absence
of the Treasurer or Secretary or in the event of the inability or refusal of the
Treasurer or Secretary to act, the Assistant Treasurer and the Assistant
Secretary (or in the event there is more than one of either, in the order
designated by the Board of Directors or in the absence of such designation, in
the order of their election) shall perform the duties of the Treasurer and
Secretary, respectively, and when so acting, shall have all the authority of and
be subject to all the restrictions upon such office. The Assistant Treasurers
and Assistant Secretaries shall also perform such duties as from time to time
may be prescribed by the Treasurer or the Secretary, respectively, or by the
Chairman of the Board, the President or the Board of Directors. If required by
the Board of Directors, an Assistant Treasurer shall give a bond for the
faithful discharge of his duties in such sum and with such surety or sureties as
the Board of Directors shall determine.
Section 5.12 Salaries. The salaries and additional compensation, if
any, of the officers shall be determined from time to time by the Board of
Directors; provided, that if such officers are also directors such determination
shall be made by a majority of the directors then in office.
13
<PAGE>
ARTICLE VI
----------
CERTIFICATES OF STOCK AND THEIR TRANSFER
----------------------------------------
Section 6.1 Stock Certificates. The issued shares of the Corporation shall
be represented by certificates, and no class or series of shares of the
Corporation shall be uncertificated shares. Stock certificates shall be in such
form as determined by the Board of Directors and shall be signed by, or in the
name of the Corporation by the Chairman of the Board or the President, and by
the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant
Secretary of the Corporation. Any of or all the signatures on the certificates
may be a facsimile. All certificates of stock shall bear the seal of the
Corporation, which seal may be a facsimile, engraved or printed.
Section 6.2 Transfer of Shares. The shares of the Corporation shall be
transferable. The Corporation shall have a duty to register any such transfer
(a) provided there is presented to the Corporation or its transfer agents (i)
the stock certificate endorsed by the appropriate person or persons; and (ii)
reasonable assurance that such endorsement is genuine and effective; and, (b)
provided that (i) the Corporation has no duty to inquire into adverse claims or
has discharged any such duty; (ii) any applicable law relating to the collection
of taxes has been complied with; and (iii) the transfer is in fact rightful or
is to a bona fide purchaser. Upon registration of such transfer upon the stock
transfer books of the Corporation the certificates representing the shares
transferred shall be canceled and the new record holder, upon request, shall be
entitled to a new certificate or certificates. The terms and conditions
described in the foregoing provisions of this Section shall be construed in
accordance with the provisions of the Delaware Uniform Commercial Code, except
as otherwise provided by the Delaware General Corporation Law. No new
certificate shall be issued until the former certificate or certificates for a
like number of shares shall have been surrendered and canceled, except that in
case of a lost, destroyed, wrongfully taken or mutilated certificate a new one
may be issued therefor upon such terms and indemnity to the Corporation as the
Board of Directors, the Chairman of the Board or the President may prescribe
consistent with applicable law.
14
<PAGE>
ARTICLE VII
-----------
DIVIDENDS
---------
Section 7.1 Dividends. Subject to the provisions of the General Corporation
Law of the State of Delaware and the Certificate of Incorporation, the Board of
Directors may declare and pay dividends upon the shares of its capital stock.
Dividends may be paid in cash, in property, or in shares of the Corporation's
capital stock.
15
<PAGE>
ARTICLE VII
-----------
FISCAL YEAR
-----------
Section 8.1 Fiscal Year. The fiscal year of the Corporation shall be fixed
by the Board of Directors.
16
<PAGE>
ARTICLE IX
----------
SEAL
----
Section 9.1 Seal. The corporate seal shall have inscribed thereon the name
of the Corporation and the words "Corporate Seal" and "Delaware." The seal may
be used by causing it or a facsimile thereof to be impressed or affixed or in
any manner reproduced.
17
<PAGE>
ARTICLE X
---------
WAIVER OF NOTICE
----------------
Section 10.1 Waiver of Notice. Whenever any notice is required to be given
under these By-laws, the Certificate of Incorporation or the General Corporation
Law of the State of Delaware, a waiver thereof in writing, signed by the person
or persons entitled to such notice, whether before or after the time stated
therein, shall be deemed equivalent to the giving of such notice.
18
<PAGE>
ARTICLE XI
----------
INDEMNIFICATION
---------------
Section 11.1 Third-Party Actions. The Corporation shall indemnify any
person who was or is a part or is threatened to be made a party to any
threatened, pending, or completed action, suit, or proceeding, whether civil,
criminal, administrative, or investigative, including all appeals (other than an
action by or in the right of the Corporation) by reason of the fact that the
person is or was a director, officer, employee, or agent of the Corporation, or
is or was serving at the request of the Corporation as a director, trustee,
officer, employee, or agent of another corporation, partnership, joint venture,
trust, or other enterprise, against expenses, including attorneys' fees,
judgment, fines, and amounts paid in settlement actually and reasonably incurred
by him or her in connection with the action, suit, or proceeding; if the person
acted in good faith and in a manner he or she reasonably believed to be in or
not opposed to the best interests of the Corporation and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his or her
conduct was unlawful. The termination of any action, suit, or proceeding by
judgment, order, settlement, conviction, or on a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did not
act in good faith and in a manner that he or she reasonably believed to be in or
not opposed to the best interests of the Corporation and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his or her
conduct was unlawful.
Section 11.2 Derivative Actions. The Corporation shall indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending, or completed action or suit, including all appeals, by or in the right
of the Corporation to procure a judgment in its favor by reason of the fact that
the person is or was a director, officer, employee, or agent of the Corporation,
or is or was serving at the request of the Corporation as a director, trustee,
officer, employee, or agent of another corporation, partnership, joint venture,
trust, or other enterprise, against expenses, including attorneys' fees,
actually and reasonably incurred by the person in connection with the defense or
settlement of the action or suit, if he or she acted in good faith and in a
manner he or she reasonably believed to be in or not opposed to the best
interests of the Corporation. However, no indemnification shall be made in
respect of any claim, issue, or matter as to which the person is adjudged to be
liable for negligence or misconduct in the performance of his or her duty to the
Corporation unless and only to the extent that the court of common pleas or the
court in which the action or suit was brought determines on application that,
despite the adjudication of liability but in view of all the circumstances of
the case, the person is fairly and reasonably entitled to indemnity for expenses
that the court of common pleas or other court shall deem proper.
Section 11.3 Rights After Successful Defense. To the extent that a
director, trustee, officer, employee, or agent has been successful on the merits
or otherwise in defense of any action, suit, or proceeding referred to in
Section 11.1 or 11.2, above, or in defense of any claim, issue, or matter in
that action, suit, or proceeding, he or she shall be indemnified against
expenses,
19
<PAGE>
including attorneys' fees, actually and reasonably incurred by him or her in
connection with the action, suit, or proceeding.
Section 11.4 Other Determination of Rights. Unless ordered by a court, any
indemnification made under Section 11.1 or 11.2, above, shall be made by the
Corporation only as authorized in the specific case on a determination that
indemnification of the director, trustee, officer, employee, or agent is proper
in the circumstances because he or she has met the applicable standard of
conduct set forth in Section 11.1 or 11.2, above. The determination shall be
made (a) by a majority vote of a quorum consisting of directors who were not and
are not parties to or threatened with the action, suit, or proceeding; (b) if
the described quorum is not obtainable or if a majority vote of a quorum of
disinterested directors so directs, by independent legal counsel in a written
opinion; (c) by the stockholders; or (d) by the court in which the action, suit,
or proceeding was brought.
Section 11.5 Advances of Expenses. Expenses of each person seeking
indemnification under Section 11.1 or 11.2, above, may be paid by the
Corporation as they are incurred, in advance of the final disposition of the
action, suit, or proceeding, as authorized by the Board of Directors in the
specific case, on receipt of an undertaking by or on behalf of the director,
trustee, officer, employee, or agent to repay the amount if it is ultimately
determined that he or she is not entitled to be indemnified by the Corporation.
Section 11.6 Nonexclusiveness; Heirs. The indemnification provided by this
Article shall not be deemed exclusive of, and shall be in addition to, any other
rights to which those seeking indemnification may be entitled as a matter of law
or under the Certificate of Incorporation, these By-Laws, any agreement, vote of
stockholders, any insurance purchased by the Corporation, or otherwise, both as
to action in his or her official capacity and as to action in another capacity
while holding that office, and shall continue as to a person who has ceased to
be a director, trustee, officer, employee, or agent and shall inure to the
benefit of the heirs, executors, and administrators of that person.
20
<PAGE>
ARTICLE XII
-----------
MISCELLANEOUS PROVISIONS
------------------------
Section 12.1 Contracts. The Board of Directors may authorize any officer or
agent to enter into any contract or execute and deliver any instrument in the
name of and on behalf of the Corporation, and the Chairman of the Board or the
President may so authorize any officer or agent with respect to contracts or
instruments in the usual and regular course of its business. Such authority may
be general or confined to specific instances.
Section 12.2 Loans. No loan shall be contracted on behalf of the
Corporation and no evidence of indebtedness shall be issued in its name unless
authorized by the Board of Directors. Such authority may be general or confined
to specific instances.
Section 12.3 Checks, Drafts, Etc. All checks, drafts or other orders for
the payment of money, or notes or other evidences of indebtedness issued in the
name of the Corporation shall be signed by such officer or agent as shall from
time to time be authorized by the Board of Directors.
Section 12.4 Deposits. The Board of Directors may select banks, trust
companies or other depositaries for the funds of the Corporation.
Section 12.5 Stock in Other Corporations. Shares of any other corporation
which may from time to time be held by the Corporation may be represented and
voted by the Chairman of the Board or the President, or by any proxy appointed
in writing by the Chairman of the Board or the President, or by any other person
or persons thereunto authorized by the Board of Directors, at any meeting of
stockholders of such corporation or by executing written consents with respect
to such shares where stockholder action may be taken by written consent. Shares
represented by certificates standing in the name of the Corporation may be
endorsed for sale or transfer in the name of the Corporation by the Chairman of
the Board, the President or by any other officer thereunto authorized by the
Board of Directors. Shares belonging to the Corporation need not stand in the
name of the Corporation, but may be held for the benefit of the Corporation in
the name of any nominee designated for such purpose by the Board of Directors.
Section 12.6 Miscellaneous. Use of the masculine pronoun shall be deemed to
include usage of the feminine pronoun where appropriate.
21
<PAGE>
ARTICLE XII
-----------
AMENDMENT
---------
Section 13.1 Procedure. These By-laws may be altered, amended or repealed
and new by-laws may be adopted by the Board of Directors.
Section 13.2 Amendment by Stockholders. Notwithstanding any other provision
of the Amended and Restated Certificate of Incorporation or these By-laws of the
Corporation to the contrary and notwithstanding that a lesser percentage may be
specified by law, in the event these By-laws shall be amended by vote of
stockholders, the affirmative vote of the holders of at least two-thirds (2/3)
of the voting power of the outstanding shares of all classes of stock of the
Corporation, voting together as a single class, shall be required to amend or
repeal or adopt any provision inconsistent with Sections 2.2, 2.11, 2.12, 3.2,
3.10 or 13.2 of these By-laws.
22
<PAGE>
Exhibit 5.1
-----------
Vedder Price VEDDER, PRICE, KAUFMAN & KAMMHOLZ
222 NORTH LASALLE STREET
CHICAGO, ILLINOIS 60601-1003
312-609-7500
FACSIMILE: 312-609-5005
A PARTNERSHIP INCLUDING VEDDER, PRICE, KAUFMAN & KAMMHOLZ, P.C.
WITH OFFICES IN CHICAGO AND NEW YORK CITY
April 27, 1999
PrivateBancorp, Inc.
Ten North Dearborn Street
Chicago, Illinois 60602
Ladies and Gentlemen:
Reference is hereby made to the Registration Statement on Form S-1 filed as
of the date hereof with the Securities and Exchange Commission by
PrivateBancorp, Inc., a Delaware corporation (the "Company"), in connection with
its proposed initial public offering of up to 1,035,000 shares of Common Stock,
without par value (the "Common Stock"), including up to 135,000 shares subject
to the Underwriters' over-allotment option.
We have acted as special counsel for the Company in connection with the
proposed offering. In rendering this opinion, we have reviewed the Registration
Statement, corporate records of the Company and such other documents as we, in
our professional opinion, have deemed necessary or appropriate as a basis for
the opinion set forth below. We have assumed the authenticity, accuracy and
completeness of all documents submitted to us as originals, the conformity to
authentic original documents of all documents submitted to us as certified,
conformed or photostatic copies and the genuineness of all signatures.
Based on the foregoing, it is our opinion that the 1,035,000 shares of
Common Stock that may be sold by the Company pursuant to and in accordance with
said Registration Statement (including the 135,000 shares subject to the over-
allotment opinion), if and when so sold, will be legally issued, fully paid and
non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name under the heading "Legal
Matters" in the Prospectus included therein.
Very truly yours,
/s/ Vedder, Price, Kaufman & Kammholz
<PAGE>
EXHIBIT 10.1
------------
OFFICE BUILDING LEASE AGREEMENT
-------------------------------
INDEX
-----
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
INDEX................................................................. 1
LEASE SCHEDULE........................................................ 3
1. LEASING AGREEMENT................................................ 7
2. SERVICES PROVIDED................................................ 7
3. QUIET ENJOYMENT.................................................. 9
4. RENT -- DEFINITIONS.............................................. 9
5. COMMENCEMENT DATE AND POSSESSION................................. 13
6. HOLDING OVER..................................................... 13
7. CONDITION OF PREMISES............................................ 14
8. USES PROHIBITED.................................................. 14
9. COMPLIANCE WITH THE LAW.......................................... 14
10. LEASEHOLD IMPROVEMENTS, ALTERATIONS.............................. 15
11. ABANDONMENT...................................................... 16
12. TRANSFER OF TENANT'S INTEREST.................................... 16
13. WAIVER OF CERTAIN CLAIMS......................................... 18
14. INSURANCE........................................................ 18
15. DAMAGE OR DESTRUCTION............................................ 20
16. ENTRY BY LANDLORD................................................ 20
17. DEFAULT.......................................................... 21
18. TAXES............................................................ 23
19. EMINENT DOMAIN................................................... 23
20. SUBORDINATION TO MORTGAGES AND DEEDS OF TRUST.................... 23
21. SALE BY LANDLORD................................................. 24
22. RIGHT OF LANDLORD TO PERFORM..................................... 24
23. RIGHT OF TENANT TO PERFORM....................................... 25
24. EXPENSES OF ENFORCEMENT.......................................... 25
25. ESTOPPEL CERTIFICATE............................................. 26
26. NOTICES AND DEMANDS.............................................. 26
27. SECURITY DEPOSIT................................................. 27
28. RIGHTS RESERVED TO LANDLORD...................................... 28
29. Omitted.......................................................... 29
30. MISCELLANEOUS.................................................... 29
31. MEMORANDUM FOR RECORDING......................................... 31
32. LANDLORD'S ADDITIONAL AGREEMENTS................................. 31
33. REGULATORY TAKEOVER.............................................. 31
RIDER A
RULES AND REGULATIONS................................................. 33
</TABLE>
<PAGE>
<TABLE>
<S> <C>
RIDER B
EXTENSION OPTION, RIGHT OF FIRST REFUSAL AND EXPANSION SPACE.......... 37
</TABLE>
2
<PAGE>
TEN NORTH DEARBORN
------------------
THIS instrument is a Lease dated as of January 1, 1992 by and between The
PrivateBank and Trust Company, an Illinois corporation ("Tenant") and LaSalle
National Trust, N.A., as Successor Trustee to LaSalle National Bank, not
personally, but as Trustee under Trust Agreement dated November 6, 1985 and
known as Trust No. 110519 ("Landlord") in accordance with the following terms
and conditions:
LEASE SCHEDULE
--------------
TENANT: The PrivateBank and Trust Company
(Name & Address) Ten North Dearborn Street
Chicago, Illinois 60602
BUILDING: Ten North Dearborn Street
Chicago, Illinois 60602
THE PREMISES: 11,532 rentable square feet on the
(Unit Number & Floor) 9th and 10th Floors
Suites 900 and 1000
PERMITTED USE: Banking; all activities permitted
to be conducted by banks under
Federal and State laws and
regulations; general office uses
consistent with other tenants in
the Building and in other buildings
in the area of like quality
COMMENCEMENT DATE: January 1, 1992
TERMINATION DATE: June 30, 2000
MINIMUM MONTHLY
BASE RENT: $ 7,688
3
<PAGE>
ADDITIONAL MONTHLY On April 1, 1992 and on each July
BASE RENT: 1st, October 1st, January 2nd and
April 1st of the term, Tenant shall
advise Landlord of the amount of
its deposits as of the last day of
the previous calendar month (March
31st, June 30th, September 30th and
December 31st) as reported by
Tenant to the Federal Deposit
Insurance Corporation in its
quarterly call report. If the
amount of such deposits is in
excess of the amount of
$55,000,000, for the next
succeeding three months commencing
on such April 1st, July 1st,
October 1st or January 2nd Tenant
shall pay Additional Monthly Base
Rent in the amount of $1,441.50 per
month, and for each additional
$5,000,000 in excess of
$55,000,000, Tenant shall pay
additional Additional Monthly Base
Rent in the amount of $1,441.50 per
month, i.e., if deposits are in
excess of $55,000,000 Additional
Monthly Base Rent shall be
$1,441.50 for the succeeding
quarter; if deposits shall be in
excess of $60,000,000 Additional
Base Rent shall be $2,883 per month
for the succeeding quarter; if
deposits shall be in excess of
$65,000,000 Additional Monthly Base
Rent shall be $4,324.50 per month
for the succeeding quarter; etc.
Except as limited to Maximum Term
Rent under the provisions of
Article IV B hereof, in any event
the amount of Additional Monthly
Base Rent for any quarter shall not
be less than the amount which was
payable during the next preceding
quarter.
MAXIMUM MONTHLY On January 2nd of each year,
BASE RENT: beginning January 2, 1993 the
Maximum Monthly Base Rent shall be
determined by deducting from the
amount of $1,725,000 the aggregate
amount of Minimum Monthly Base Rent
and Additional Monthly Base Rent
that has been paid pursuant to this
Lease through the next prior
December 31st, and dividing the
results so obtained by the number
of months remaining of the Term.
4
<PAGE>
MAXIMUM TERM RENT: $1,725,000
TENANT'S PROPORTIONATE
SHARE: 14.36%
BASE EXPENSES None - Tenant's proportionate share
AND TAXES: as determined in Paragraph 4
SECURITY DEPOSIT: $165,376 subject to the provisions
of Paragraph 27
RENTABLE AREA OF
THE BUILDING: 80,288 square feet
RENTABLE AREA OF
THE PREMISES: 11,532 square feet
AGENT FOR BENEFICIARIES Scribcor, Inc.
OF LANDLORD AND PLACE 30 West Monroe Street
OF PAYMENT OF RENT: Chicago, Illinois 60603
THE FOREGOING SCHEDULE IS AN INTEGRAL PART OF THIS LEASE AND
HEREINAFTER REFERRED TO AS THE LEASE SCHEDULEE THE TERMS DEFINED IN
THE LEASE SCHEDULE, WHENEVER USED IN THIS LEASE, SHALL HAVE THE SAME
MEANINGS SET FORTH IN THE LEASE SCHEDULE.
LANDLORD: TENANT:
LaSalle National Trust, N.A., as The PrivateBank and Trust Company
Successor Trustee to LaSalle Bank, 10 North Dearborn Street
not personally, but as Trustee under Chicago, Illinois 60602
Trust Agreement dated November 6,
1985 and known as its Trust No.
110519
By: Illegible By: /s/ Donald A. Roubitchek
-------------------------------- --------------------------------
Title: Title: Secretary
----------------------------- -----------------------------
Attest: /s/ Nancy A. Stack Attest: Gail Carpenter
---------------------------- ----------------------------
5
<PAGE>
1. LEASING AGREEMENT
-----------------
Landlord hereby leases to Tenant and Tenant hereby leases from Landlord the
Premises described in the Lease Schedule, which are contained in the Building,
for the term beginning on the Commencement Date and ending on the Termination
Date as set forth on the Lease Schedule, or such later date, if any, to which
the term is extended pursuant to the provisions of Rider B attached hereto and
made a part hereof (the "Term") unless sooner terminated as provided herein, to
be used for the Permitted Uses as set forth in the Lease Schedule and none
other. This Lease shall be in full force and effect from the date signed by
Landlord and Tenant.
2. SERVICES PROVIDED
-----------------
A. During the Term, so long as Tenant is not adjudged in Default
hereunder (as such term is used in paragraph 17 below except that nonpayment of
Rent shall not require Tenant to be adjudged in Default), Landlord shall
furnish:
1. Cooled and heated air in season to provide a temperature on inside
space conditions not greater than 75 degrees Fahrenheit dry bulb and 50%
relative humidity when outside conditions are 92 degrees Fahrenheit dry bulb and
75 degrees wet bulb and maintaining not less than 70 degrees Fahrenheit when
outdoor temperatures range down to minus 5 degrees Fahrenheit under normal
business operations, daily from 8:00 A.M. to 6:00 P.M. (Saturdays from 8:00 A.M.
to 1:00 P.M.) ("normal business hours"), Sundays and holidays excepted. Tenant
may request Landlord to provide cool or heated air at times or at temperatures
other than those stated. Such request shall be in writing; three (3) hours prior
notice of the intended change shall be provided Landlord and any costs
attributable to such changes in times and temperatures shall be paid by Tenant.
Said service shall be provided by equipment that is dedicated to the Premises
only, and the controls for which shall be within the Premises. If the use of
heat generating equipment installed and operated by Tenant in the Premises,
other than that included in the Tenant's plans and specifications, affects the
temperatures otherwise maintained by the air conditioning system for normal
business operations, and thereby requires, in the reasonable judgment of
Landlord, the modification of the air conditioning system (including
installation of supplementary air conditioning units in the Premises) Landlord
reserves the right to perform such modification after written notice to or by
Tenant; and the cost thereof shall be paid by Tenant, upon demand by Landlord
prior to the commencement of each such modification. Any increased expense in
maintaining the system resulting from such modification and any increased
expenses in operating the system resulting from each such modification shall be
paid by Tenant. In addition, Tenant shall, at Tenant's expense, perform all
maintenance on any supplementary air conditioning units installed in accordance
with this paragraph 2A(1) unless Landlord elects to perform part or all of such
maintenance at Tenant's expense. Tenant agrees at all times to cooperate fully
with Landlord in the operation of said system and to abide by all reasonable
regulations and requirements which Landlord may prescribe to permit the proper
functioning and protection of said air conditioning systems, and to permit entry
by Landlord, its agents or employees into the Premises to make such repairs,
alterations, replacements or improvements, which in the judgment of Landlord or
agent are desirable or necessary, until said repairs, alterations, replacements
or improvements shall have been completed.
6
<PAGE>
2. Cold water for drinking, lavatory and toilet purposes drawn
through fixtures installed by Landlord, or by Tenant with Landlord's written
consent not to be unreasonably withheld, and hot water for lavatory purposes
drawn from regular Building supply at the prevailing temperatures. Tenant shall
pay Landlord at rates paid to the City by Landlord for water furnished for any
other purpose. Tenant shall not waste water.
3. Janitor service in and about the Premises, Saturdays, Sundays and
holidays excepted. Janitor services shall be performed during night time hours
only and the cleaning shall include only the washrooms and washroom fixtures,
floors, wastebaskets and ashtrays on the Premises. Carpeted areas shall be
vacuum-cleaned only. Any special janitorial services shall be contracted through
Landlord. Window washing shall be furnished periodically at Landlord's
discretion, but at least four times yearly for exterior windows and twice yearly
for interior windows.
4. Passenger Elevator Service, by way of three operatorless automatic
elevators, shall be provided in common with Landlord and other tenants, daily
from 8:00 A.M. to 6:00 P.M., Saturdays, Sundays and holidays excepted. The
furnishing of such Passenger Elevator Service at other times shall be optional
with Landlord and shall never be deemed a continuing obligation. Landlord,
however, shall provide limited passenger service daily at all times such
Passenger Elevator Service is not furnished. "Limited Passenger Service" shall
mean at least one of the operator less automatic elevators. Operatorless
automatic elevator service shall be deemed "Passenger Elevator Service" within
the meaning of this paragraph. Freight elevator service shall be available to
Tenant at reasonable times during the hours and days set forth above by
appointment only with Landlord; provided that such freight elevator service does
not interfere with the use thereof by other tenants or Landlord whose
appointments were made prior in time. Freight elevator service at times other
than above shall be available by appointment with a reasonable charge for such
use paid by Tenant.
5. Electric wiring system in the Premises connected with the source
of alternating current. Tenant shall pay for all electrical current consumed in
the occupancy, use and maintenance of the Premises, directly to the utility
company supplying said service. Landlord represents that the electrical current
consumed relative to the Premises, including heating and cooling, is separately
metered, that said meter measured only service to the Premises, and that said
meter shall continue in operation for the term of this Lease. If Tenant
purchases replacement lamps, bulbs, ballasts and starters used in the Premises
from Landlord, Tenant agrees to pay Landlord a reasonable standard charge for
furnishing and replacing such lamps, bulbs, ballasts and starters.
B. Temporary interruptions for the necessary periods of time of any
service referred to in paragraph 2 A above, in whole or in part caused by
repairs, renewals, improvements, changes of service, alterations, accidents,
acts of God or an enemy, strikes, lockouts, labor controversies, insurrections,
picketing (whether legal or illegal), laws, orders or regulations of any
Federal, State, County or Municipal authorities, accidents or any casualties
whatsoever, inability of Landlord to obtain electricity except by reason of non-
payment of bills by Landlord, fuel, water or supplies, or by the act or default
of Tenant or any person other than Landlord, or by any other cause or causes
beyond the reasonable control of Landlord, shall not, during such period, be
deemed an eviction or disturbance of Tenant's use and possession of the Premises
or any part thereof, or render Landlord
7
<PAGE>
liable for damages by abatement of rent or otherwise or relieve Tenant from
performance of Tenant's obligations under this Lease.
C. The parties agree that compliance with any mandatory energy
conservation measures or requirements instituted by any appropriate governmental
authority shall not be considered a violation of any terms of this Lease and
shall not entitle Tenant to terminate this Lease or require abatement of rent
hereunder.
D. Landlord shall in no event be obligated to furnish any services or
utilities, other than those specified above in this paragraph 2. If Landlord
elects to furnish services or utilities requested by Tenant in addition to those
specified above (including utility services at times other than those
specified), Tenant shall pay to Landlord Landlord's charges for such services
which such charges shall not exceed 1.5 times Landlord's costs for labor,
including associated insurance and benefit costs, and utilities within ten (10)
business days after receipt of Landlord's invoices therefor. If Tenant shall
fail to make any such payment, Landlord may, upon written notice to Tenant and
in addition to Landlord's other remedies under this Lease, discontinue any or
all of the additional services. No discontinuance of any service pursuant to
this subparagraph D shall result in any liability of Landlord to Tenant, be
deemed to be a constructive eviction or a disturbance of Tenant's use of the
Premises, or relieve Tenant from the payment and performance of Tenant's
obligations under the Lease.
3. QUIET ENJOYMENT
---------------
So long as Tenant is not adjudged in Default (as such term is defined in
paragraph 17 of this Lease except that nonpayment of Rent shall not require
Tenant to be adjudged in Default) Landlord guarantees Tenant's peaceful and
quiet enjoyment of the Premises subject to the terms of this Lease.
4. RENT -- DEFINITIONS
-------------------
A. For purposes of this Lease, the following terms shall have the
following meanings:
1. "Minimum Monthly Base Rent," "Additional Monthly Base Rent,"
"Maximum Monthly Base Rent" and "Maximum Term Rent" shall have the meanings
ascribed in the Lease Schedule.
2. "Additional Monthly Rent" means amounts due to Landlord pursuant
to the provisions of paragraph 4 D, in excess of Base Expenses and Taxes
("None") as set forth in the Lease Schedule.
3. "Rent" means all amounts due Landlord from Tenant pursuant to this
Lease.
4. "Property" means the Building, the land appurtenant thereto and
all other improvements attached to or appurtenant to the Building or located on
such land, and all fixtures and personal property located on, attached or
appurtenant to or used in connection with the operation, maintenance or repair
of the Building, the said land or other improvements.
8
<PAGE>
5. "Adjustment Date" means the Commencement Date and each anniversary
date of the Commencement Date during the Term.
6. "Adjustment Year" means any calendar year during the Term. The
first Adjustment Year is the calendar year during which the Commencement Date
falls.
7. "Expenses" include costs and expenses properly paid or incurred in
connection with the management and operation of the Building, including, but not
necessarily limited to: supplies; operation, repair and maintenance of
machinery, equipment, systems and apparatus located in and used in connection
therewith; building and liability insurance; utilities (but not including any
utility charges for energy expended in connection with heating, ventilating,
cooling and lighting of areas occupied by or intended to be occupied by tenants,
excluding common areas); window cleaning; all costs of independent contractors
who are providing services related to the operation, maintenance and repair of
the Premises; wages, salaries and fringe benefits of employees engaged in the
operation, maintenance and repair of the Premises; management fees; and legal
and accounting fees related directly to the operation, repair and maintenance of
the Building. "Expenses" shall not include building management fees in excess of
four (4%) percent; wages, salaries or fringe benefits of the building manager
employed by the management company; wages, salaries or fringe benefits of any
employee, officer or executive above the rank of assistant building manager;
legal or accounting expenses not directly related to the operation, repair and
maintenance of the Building (except legal expenses in connection with a protest
of real estate taxes as hereafter provided and accounting fees in connection
with determining operating expenses of the Building); expenses resulting from
Landlord's gross negligence or the gross negligence of any of its agents,
servants, employees or independent contractors; wages of any employee not
directly related to the Premises; depreciation charges; interest and principal
on mortgages; ground rental payments; real estate brokerage and leasing
commissions; capital improvements, except amortization of that portion of the
costs of any capital improvements made to the Property or any improvement
associated therewith which reduce Expenses, but only to the extent of such
reduction; depreciation or amortization; costs of advertising, promotional fees
and open houses to attract new tenants; wages salaries and other compensations
paid directly or indirectly to clerks or attendants in news stands or other
commercial enterprises, if any, now or hereafter operated by Landlord; costs to
correct structural defects in the Building; costs of replacing structural
elements of the Building; costs of replacing elevators or elevator doors; roof
replacement; overhead and profit paid to subsidiaries or affiliates of Landlord
or entities related to Landlord or to affiliates of Landlord for services
rendered to or for the benefit of the Building to the extent such costs exceed
the amount which would have been paid on a competitive arm's length basis to an
independent third party vendor; and expenses for which Landlord is reimbursed
from insurance. If the Building is not fully leased and occupied during all or
any portion of any Adjustment Year, Landlord will make an adjustment to the
actual amount of Expenses for each such Adjustment Year to reflect the amount of
Expenses and Taxes which would have been paid or incurred by Landlord if the
Building had been fully leased and occupied. Such adjusted amount shall be
deemed to be the Amount of Expenses and Taxes for such Adjustment Year. Such
adjustment will be determined in accordance with Landlord's customary accounting
and management principles consistently applied.
9
<PAGE>
8. "Taxes" means all federal, state and local governmental taxes,
assessments, fees and charges (including transit or transit district taxes or
assessments and city lease taxes) of any kind or nature, whether general,
special, ordinary or extraordinary, which Landlord or its beneficiaries shall
pay or become obligated to pay because of or in connection with the ownership,
leasing, management, control or operation of the Property. The amount of real
estate and personal property taxes included in Taxes for any Adjustment Year
shall be the amount indicated by the tax bills due or payable in that Adjustment
Year. There shall be deducted from Taxes as determined for any Adjustment Year
the net amount of any refund of Taxes received by Landlord during such
Adjustment Year. There shall be included in Taxes for any Adjustment Year the
amount of all reasonable fees, costs and expenses (including attorneys' fees)
paid or incurred by Landlord during such Adjustment Year in seeking or obtaining
any refund or reduction of Taxes. If a special assessment payable in
installments is levied against the Property, Taxes for any Adjustment Year shall
include only the installments of such special assessment and interest thereon,
if any, payable with respect to such Adjustment Year. Taxes shall not include
any federal or state franchise, capital stock, inheritance, income or estate
taxes, except if a change occurs in the method of taxation resulting in the
substitution or addition of any taxes, assessments, fees or other charges for
any Taxes or increases in Taxes as hereinabove defined, such substituted or
additional taxes, assessments, fees, or other charges shall be included in
Taxes, including, without limitation, any tax, assessment, fee or charge imposed
upon Landlord or its beneficiaries measured in whole or in part upon the gross
rents or other income from the Property (but not including any other source of
income) or with respect to the use of sewers, water or other utilities serving
the Property, or with respect to any business conducted on the Property.
9. "Lease" means this Lease and all Exhibits and Riders hereto,
unless the context specifically otherwise indicates.
B. Payment of Rent. On the Commencement Date, Tenant shall pay the first
---------------
Minimum Monthly Base Rent installment of Rent to the agent of Landlord's
beneficiaries. Tenant shall pay, without offset, deduction or credit, to the
agent of Landlord's beneficiaries at the address set forth in the Lease Schedule
or at such other address as Landlord may designate in writing from time to time,
the installments of Minimum Monthly Base Rent and Additional Monthly Base Rent
(but not in excess of Maximum Monthly Base Rent in the aggregate) and Additional
Monthly Rent, in advance, promptly on the first day of each calendar month of
the Term. The aggregate of Minimum Monthly Base Rent and Additional Monthly Base
Rent shall not exceed the amount of the Maximum Term Rent (i.e., $1,725,000) for
the entire Term of this Lease. Tenant's covenant and obligation to pay Rent
shall be independent of any covenant or obligation of Landlord except to the
extent specifically set forth in this Lease.
C. Omitted.
D. Additional Monthly Rent for Expenses and Taxes.
----------------------------------------------
1. Tenant shall also pay, as Additional Monthly Rent, to the agent of
Landlord's beneficiaries on the first day of each and every calendar month
during each Adjustment Year, an
10
<PAGE>
amount equal to 1/12th of Tenant's Proportionate Share of the Expenses and Taxes
Landlord reasonably estimates for said Adjustment Year.
2. For purposes of calculating Additional Monthly Rent for any
Adjustment Year, Landlord may make reasonable estimates or projections
(collectively, the "Projections") of Taxes and Expenses for such Adjustment
Year. Not less than ten (10) business days prior to each Adjustment Date,
Landlord shall deliver to Tenant a written statement (the "Projection
Statement") (a) setting forth the Projections of Expenses and Taxes for the
Adjustment Year in which such Adjustment Date falls and (b) setting forth the
Additional Monthly Rent to become due beginning on such Adjustment Date;
provided, however, that the failure of Landlord to provide a Projection
Statement shall not relieve Tenant from its obligation to continue to pay
Monthly Base Rent and Additional Monthly Rent at the rates then in effect under
this Lease, and if and when Tenant receives a Projection Statement from
Landlord, Tenant shall, immediately upon receipt of such Projection Statement,
pay the full amount of any increases in Additional Monthly Rent reflected
thereby effective retroactively to the most recent preceding Adjustment Date and
pay the Additional Monthly Rent required by the Projection Statement beginning
on the first day of the following calendar month.
3. As soon as practicable, after each Adjustment Date, Landlord shall
notify Tenant in writing of the actual amount of Expenses and Taxes for such
Adjustment Year (the "Adjustment Statement"). If such actual amount exceeds the
Projections for such Adjustment Year, then Tenant shall, within thirty (30) days
after the date of the Adjustment Statement, pay to Landlord an amount equal to
the difference between the amount of the Additional Monthly Rent based on the
Projection Statement and the amount of the Additional Monthly Rent based on the
Adjustment Statement. The obligation to make such payments shall survive the
expiration or earlier termination of the Term. If for such Adjustment Year, the
amount of the Additional Monthly Rent based on the Projection Statement exceeds
the amount of the Adjusted Monthly Rent based on the Adjustment Statement, then
Landlord shall credit such excess to installments of Rent next payable after the
date of Landlord's notice until such excess has been exhausted, or if this Lease
shall expire prior to full application of such excess, Landlord shall pay to
Tenant the balance thereof not theretofore applied against Rent. No interest or
penalties shall accrue on any amounts which Landlord is obligated to credit or
pay to Tenant by reason of this paragraph. If the Commencement Date is other
than January 1st or the last day of the Term is other than December 31st, the
computation of and adjustments to Additional Monthly Base Rent provided for
herein shall be prorated for the first and last Adjustment Years.
4. Landlord agrees to keep books and records reflecting Expenses and
Taxes in accordance with a standard method of accounting consistently applied,
recognized and approved generally by public accountants and by the public
accounting firm retained by Landlord. Within ninety (90) days after receipt of
any Adjustment Statement, Projection Statement or Correction Statement, Tenant
or its authorized agent or representative or a public accounting firm selected
by it shall have the right to inspect and copy the books of the Landlord during
business hours for the purpose of verifying information in the Adjustment
Statement. Unless Tenant asserts specific error or errors by written notice to
Landlord within one hundred eighty (180) days after such receipt of the
Statement, the Statement shall be deemed to be correct. Landlord shall have the
right for a
11
<PAGE>
period of one (1) year after rendering any Adjustment Statement (or such
additional period as may be necessary in order to ascertain relevant facts) to
render a corrected statement or corrected statements of actual Expenses and
Taxes (the "Correction Statement") in which case Tenant shall within thirty (30)
days after receipt of such Correction Statement, pay the difference between the
Additional Monthly Rent as set forth in the applicable Adjustment Statement and
the Additional Monthly Rent as set forth in the Correction Statement. If Tenant
disputes any item shown on any Projection Statement, Adjustment Statement or
Correction Statement (a) Tenant shall not be relieved of its immediate
obligation to pay any amounts due or to become due pursuant to any such
Statement, but Tenant may pay said amounts under written protest and (b) if such
dispute is not resolved by agreement between Landlord and Tenant within thirty
(30) days from the date of delivery of such written protest to Landlord, such
dispute shall be submitted to arbitration by the American Arbitration
Association, and the decision of the American Arbitration Association or its
successors shall be final and conclusive upon the parties. The expenses of the
American Arbitration Association shall be paid by Landlord if its Statement is
varied by more than three and one-half percent (3.5%); otherwise, Tenant shall
pay said expenses. If another tenant in the Building disputes the accuracy of
the Adjustment or Correction Statement and the Statement is changed as indicated
above Landlord shall notify Tenant of such change and adjust with Tenant
accordingly.
5. COMMENCEMENT DATE AND POSSESSION
--------------------------------
The term of the Lease and the payment of Rent shall commence ("Commencement
Date") on January 1, 1992.
6. HOLDING OVER
------------
In the event Tenant retains possession of the Premises or any part thereof
after the termination of this Lease or any extension thereof, by lapse of time
or otherwise, Tenant shall become a tenant from month to month only upon each
and all of the terms herein provided as may be applicable to such month to month
tenancy and any such holding over shall not constitute an extension of this
Lease; provided, however, during such holding over, Tenant shall pay Rent at
200% of the rate payable for the month immediately preceding said holding over
for each month of such hold over (without reduction for any partial month). The
provisions of this paragraph do not exclude the Landlord's rights of re-entry or
any other rights hereunder or by law.
7. CONDITION OF PREMISES
---------------------
By taking possession of the Premises, Tenant shall be deemed to have agreed
that the Premises were as of the date of taking possession in good order, repair
and condition and shall have waived all claims except for latent defects. No
promise of the Landlord to alter, remodel, decorate, clean or improve the
Premises or the Building and no representation or warranty, express or implied,
respecting the condition of the Premises or the Building has been made by the
Landlord to Tenant, unless the same is contained herein or made a part hereof.
This Lease does not grant any rights to light or air over property or to a view
of or from the Building.
12
<PAGE>
8. USES PROHIBITED
---------------
Tenant shall not use, or permit the Premises or any part thereof to be
used, for any purpose or purposes other than the Permitted Use as specified in
the Lease Schedule. No use shall be made of the Premises, nor acts done, which
will increase the existing rate of insurance upon the Property or the Building,
or cause a cancellation of any insurance policy covering the Property or the
Building, or any part thereof; nor shall Tenant sell, or permit to be kept, used
or sold, in or about the Premises, any article which may be prohibited by
Landlord's insurance policies. Tenant shall not commit, or suffer to be
committed, any waste upon the Premises, or any public or private nuisance, or
any other act or thing which may disturb the quiet enjoyment of any other tenant
in the Building, nor, without limiting the generality of the foregoing, shall
Tenant allow the Premises to be used for any use which Landlord, in its sole and
absolute discretion, deems to be improper, immoral, unlawful or objectionable.
9. COMPLIANCE WITH THE LAW
-----------------------
Tenant shall not use the Premises or permit anything to be done in or about
the Premises, nor permit anything to be done in or about the Building, which
will in anyway conflict with any law, statute, ordinance or governmental rule,
regulation or requirement now in force or which may hereafter be enacted or
promulgated. Tenant shall at its sole cost and expense, promptly comply with all
laws, statutes, ordinances and governmental rules, regulations and requirements
now in force or which may hereafter be in force and with the requirements of any
insurance company, any board of fire underwriters or other similar body now or
hereafter constituted relating to or affecting the condition, use or occupancy
of the Premises, excluding structural changes not related to or affected by
Tenant's Improvements or acts. The judgment of any court of competent
jurisdiction in an action against Tenant that Tenant has violated any law,
statute, ordinance or governmental rule, regulation or requirement, shall be
conclusive of that fact as between Landlord and Tenant.
10. LEASEHOLD IMPROVEMENTS, ALTERATIONS
-----------------------------------
(a) All alterations, improvements, additions or installations in or to
the Premises, including installation of telephone, computer or internal sound or
paging systems or other similar systems, and the performance of all decorating,
painting and other similar work in the Premises proposed to be done by or at the
request of Tenant, or in or to the Premises, shall require Landlord's prior
written consent not to be unreasonably withheld or delayed. Before commencement
of any work or delivery of any materials into the Premises or the Building,
which such work requires the issuance of a permit, Tenant shall furnish to
Landlord for approval: architectural plans and specifications certified by
licensed architect or engineer, names and addresses of all contractors,
contracts, necessary permits and licenses, certificates of insurance and
instruments of indemnification and waivers of lien against any and all claims,
costs, expenses, damages and liabilities which may arise in connection with such
work, all in such form and amount as shall be satisfactory to Landlord. Whether
or not Tenant furnishes the foregoing, Tenant agrees to hold Landlord and
Landlord's beneficiaries and their respective agents and employees forever
harmless against all claims and liabilities of every kind, nature and
description which may arise out of or in any way be connected with such work.
All such work shall be done only by contractors or
13
<PAGE>
mechanics approved by Landlord (which approval shall not be unreasonably
withheld) and at such time and in such manner as Landlord may from time to time
reasonably designate. Tenant shall pay the cost of all such work and the cost of
decorating the Premises and the Building occasioned by such work. Upon
completion of such work, Tenant shall furnish Landlord with contractors'
affidavits, full and final waivers of lien, receipted bills covering all labor
and materials expended and used in connection with such work and copies of all
permits and drawings which are required to evidence proper completion of such
work. All such work shall comply with all insurance requirements and with all
laws, ordinances, rules and regulations of all governmental authorities, and
shall be done in a good and workmanlike manner and with the use of good grades
of materials. All alterations, improvements, additions and installations to or
in the Premises shall become part of the Premises at the time of installation.
(b) Tenant agrees not to suffer or permit any lien of any mechanic or
materialman to be placed or filed against the Premises, the Building or the
Property. In case any such lien shall be filed, Tenant shall satisfy, or
otherwise cause release of record of such lien within forty-five (45) days. If
Tenant shall fail to have such lien satisfied and released of record within said
forty-five (45) day period, Landlord may, on behalf of Tenant, without being
responsible for making any investigation as to the validity of such lien, pay
the same and Tenant shall promptly reimburse Landlord for the amount so paid by
Landlord.
(c) Tenant shall have the right to contest any mechanics' or materialman's
lien or claim therefor for which Tenant is responsible as provided in this Lease
provided that (i) Tenant shall give to Landlord written notice of Tenant's
intent to contest the same prior to the commencement of such contest, (ii)
Tenant shall, prior to the commencement of such contest, furnish to Landlord
such assurances, undertakings and security as Landlord, its mortgagee or title
insurer may reasonably require indemnifying Landlord and its mortgagee from and
against all loss, damage and liability on account thereof, and (iii) Tenant
shall, in good faith, promptly commence and diligently and continuously pursue
to completion such contest, and upon completion thereof shall immediately comply
with and satisfy in full any decision, judgment, order or other final resolution
and cause to be released any lien or encumbrance on the Premises or the
Building.
11. ABANDONMENT
-----------
Tenant shall not abandon the Premises at any time during the Term. If
Tenant shall abandon (whether at the end of the Term or otherwise) the Premises,
or be dispossessed by process of law, or otherwise, any personal property
belonging to Tenant and left on the Premises shall be deemed abandoned, at the
option of Landlord. If Tenant shall abandon the Premises, Tenant shall be
deemed to be in Default hereunder and in addition to the Landlord's remedies
under paragraph 17 of this Lease, the right to possession shall, at the option
of Landlord, revert to Landlord and Tenant shall lose all right to possession;
provided, however, that Tenant shall otherwise remain liable on this Lease.
Renovation approved by Landlord shall not constitute abandonment or vacation of
the Premises if business is suspended during such approved renovation.
14
<PAGE>
12. TRANSFER OF TENANT'S INTEREST
-----------------------------
(a) Except to the extent herein provided, Tenant will not sell, assign,
mortgage or transfer this Lease or any interest therein, sublet or permit the
occupancy by others of the Premises or any part thereof, or allow any transfer
thereof or any lien upon Tenant's interest by operation of law. Neither this
Lease nor any interest therein nor any estate created thereby shall pass by
operation of law or otherwise to any trustee, custodian or receiver in
bankruptcy of Tenant or any assignee for the assignment of the benefit of
creditors of Tenant. If Tenant shall desire to assign its interest in this Lease
or to sublet all or any part of the Premises and such action would not
constitute a mortgage, lien or other encumbrance on this Lease, the Premises or
Tenant's interest therein, then Tenant shall, by notice in writing, advise
Landlord of its intention from, on and after a stated date (which shall not be
less than thirty (30) days after date of Tenant's notice) to effect such
assignment or sublet, and, in such event, Landlord shall have the right, to be
exercised by giving written notice to Tenant within fifteen (15) days after
receipt of Tenant's notice, to recapture the space described in Tenant's notice
and such recapture notice shall, if given, cancel and terminate the Term of this
Lease with respect to the space therein described as of the date stated in
Tenant's notice. Tenant's notice to assign or sublet shall state the name and
address of the proposed sub-tenant, assignee, or transferee and the proposed
general terms and conditions of the proposed sublease, assignment or other
conveyance and provide a copy of the sublease agreement. In the event Landlord
approves the proposed sublease, assignment or other conveyance, Tenant shall
deliver to Landlord a true and complete copy of the proposed sublease,
assignment or other conveyance once the sublease is executed. If Tenant's notice
shall cover all of the Premises, and Landlord shall elect to give the aforesaid
recapture notice with respect thereto, the Term of this Lease shall expire and
end on the date stated in Tenant's notice as fully and completely as if that
date had been herein definitely fixed for the expiration of the Term. If,
however, the Term is cancelled pursuant to the foregoing with respect to less
than the entire Premises, the Rent then in effect shall be adjusted on the basis
of the number of square feet retained by Tenant in proportion to the original
Rentable Area of the Premises, and this Lease as so amended shall continue
thereafter in full force and effect. If Landlord upon receiving Tenant's said
notice with respect to any such space, shall not exercise its right to cancel
and terminate as aforesaid, Landlord will not unreasonably withhold its consent
to Tenant's subletting or assigning the space covered by its notice; provided,
however, such consent need not be granted if:
(i) in the sole and reasonable judgment of Landlord, the subtenant
or assignee is of a character or engaged in a business or proposes to use the
Premises in a manner which is not in keeping with the standards of Landlord for
the Building;
(ii) the subtenant or assignee is either a government (or subdivision
or agency thereof); or
(iii) a Default under this Lease had occurred or is existing.
(b) If Tenant shall sublet or assign the Premises or any part thereof, as
provided in this paragraph 12, at a rental rate (or additional consideration) in
excess of the Rent rate due and payable by Tenant under the provisions of
paragraph 4 of this Lease taking into account reasonable
15
<PAGE>
commissions, concessions and other customary costs, fifty percent (50%) of said
excess rent (or additional consideration) shall be the property of and be paid
to the agent of Landlord's beneficiaries; provided, however, that Tenant may
sell its interest in Tenant's Improvements subject to this Lease and the rights
of Landlord therein and retain any proceeds thereof so long as such proceeds
constitute a reasonable approximation of the fair market value of Tenant's
interest in Tenant's Improvements, and are separately paid from the rent and the
payment of such proceeds, if deferred in whole or in part, is not secured by any
interest in the Premises or Tenant's Improvements.
(c) The consent by Landlord to any assignment or subletting shall not be
construed as a waiver or release of Tenant from liability for the payment and
performance of all covenants and obligations to be paid and performed by Tenant
under this Lease, nor shall the collection or acceptance of rent from any
assignee, subtenant or occupant constitute a waiver or release of Tenant from
any of its obligations or liabilities under this Lease. Such consent shall not
be construed as relieving Tenant from the obligation of obtaining Landlord's
prior written consent to any subsequent assignment or subletting.
(d) If Tenant is a partnership, a withdrawal or change, whether voluntary,
involuntary or by operation of law, of partners owning a controlling interest in
Tenant shall be deemed a voluntary assignment of this Lease and subject to the
provisions of this paragraph.
(e) Notwithstanding the restrictions set forth above, Tenant may (i)
assign this Lease to any subsidiary or affiliate in which it owns or controls
more than 50% of the ownership interests in such subsidiary or affiliate; (ii)
may sublease portions of the Premises to Tenant's subsidiaries, affiliates or
related entities owned by Tenant with notice to but without the consent of
Landlord; and (iii) may sublease part of the Premises to non-owned related
entities to conduct businesses which Tenant is entitled to conduct from the
Premises under the Permitted Use provision of the Lease Schedule.
13. WAIVER OF CERTAIN CLAIMS
------------------------
Except as provided in paragraphs 3 and 23 hereof, Tenant, as a material
part of the consideration to be rendered to Landlord under this Lease, hereby
waives, to the extent permitted by law, all claims which Tenant or Tenant's
successors or assigns may have against Landlord, its beneficiaries, and their
respective agents, servants or employees for loss, theft or damage to property
and/or injuries to or death of persons in, upon or about the Premises, the
Building or the Real Estate, from any cause whatsoever other than gross
negligence of Landlord's beneficiaries, agents, servants or employees. Neither
Landlord, Landlord's beneficiaries or agents, or their respective servants or
employees shall be liable to Tenant for any damage by or from any act or
negligence of any co-tenant or other occupant of the same Building, or of any
owner or occupant of adjoining or contiguous property. Tenant agrees to pay for
all damage to the Building or the Premises, as well as all damage to tenants or
occupants thereof caused by Tenant's misuse or neglect of the Premises, its
apparatus or appurtenances or caused by any licensee, contractor, agent or
employee of Tenant.
16
<PAGE>
Particularly, but not in limitation of the foregoing paragraph, all
property belonging to Tenant or any occupant of the Premises that is in the
Building or the Premises shall be there at the risk of Tenant or other occupant
only, and Landlord, Landlord's beneficiaries or its agents or employees shall
not be liable for: damage to, theft of or misappropriation of such property; nor
for any damage to property entrusted to Landlord, its agents or employees, if
any; nor for the loss of or damage to any property by theft or otherwise, nor
for any injury or damage to persons or property resulting from fire, explosion,
falling plaster, steam, gas, electricity, snow, water or rain which may leak
from any part of the Building or from the pipes, appliances or plumbing works
therein or from the roof, street or subsurface or from any other place or
resulting from dampness; nor for interference with the light or other
incorporeal hereditaments. Tenant shall give prompt notice to Landlord in case
of fire or accidents in the Premises or in the Building or of defects in the
Property. The foregoing provisions of this paragraph shall not be construed to
excuse Landlord from Landlord's obligations under the provisions of the Lease.
14. INSURANCE
---------
(a) Tenant shall procure and maintain, at its own cost, policies of
comprehensive general public liability and property damage insurance with
contractual liability coverage for the agreements of indemnity provided for
under the Lease and a broad form general liability endorsement to afford
protection with such limits and deductibles as may be reasonably requested by
Landlord from time to time (which as of the date hereof shall by not less than
$1,000,000.00 under a combined single limit of coverage), insuring Landlord and
all beneficiaries thereof, their respective agents and employees, and Tenant
from all claims, demands or actions for injury to or death of any person or
persons and for damage to property made by, or on behalf of, any person or
persons, firm or corporation, arising from, related to or connected with the
Premises.
(b) Tenant shall carry fire and extended coverage insurance insuring
plate glass and its interest in the Tenant Improvements in the Premises and all
its personal property located on or within the Building, including without
limitation its office furniture, equipment and supplies for their full insurable
value.
(c) All insurance required hereunder shall be in companies and in form
and substance satisfactory to Landlord and any mortgagee of Landlord and shall,
if requested by Landlord, include the beneficiaries of Landlord and any
mortgagee and their respective agents and employees as named insureds. The
aforesaid insurance shall not be subject to change or cancellation except after
at least thirty (30) days prior written notice to Landlord. The original
insurance policies (or certificates thereof satisfactory to Landlord together
with certified copies of such policies), together with satisfactory evidence of
payment of the premiums thereon, shall be deposited with Landlord prior to the
commencement of the term of this Lease and, in case of renewals or replacements
thereof, not less than thirty (30) days prior to the end of the term of each
such policy.
(d) Landlord and Tenant each hereby waive all claims of any and all rights
of action against the other for loss or damage to the Premises, except as
otherwise provided in this Lease, and to office furniture, equipment and
supplies, which pursuant to this Lease are insured or are required to be insured
by a valid and collectible insurance policy to the extent of the proceeds
collected under
17
<PAGE>
such insurance policy, subject to the condition that this waiver shall be
effective only when the waiver is permitted by such insurance policy or when by
the use of good faith effort, such waiver could have been included in the
applicable insurance policy. The policies of insurance required to be maintained
by Tenant under the terms of this Lease shall contain subrogation clauses in
form and content satisfactory to Landlord.
(e) Tenant shall not conduct or permit to be conducted any activity, or
place any equipment in or about the Premises or the Building that will in any
way increase the rate of fire insurance or other insurance on the Premises or
the Building. If any increase in the rate of fire insurance or other insurance
is stated by any insurance company or by the applicable Insurance Rating Bureau,
if any, to be due to any activity or equipment of Tenant in or about the
Premises or the Building, such statement shall be conclusive evidence that the
increase in such rate is due to such activity or equipment and, as a result
thereof, Tenant shall be liable for the amount of such increase. Tenant shall
reimburse Landlord for such amount upon written demand from Landlord and any
such sum shall be considered Additional Rent payable hereunder. Tenant and
Landlord, each at its sole expense, shall comply with any and all requirements
of any insurance organization or company necessary for the maintenance of
reasonable fire and public liability insurance covering the Premises and the
Building.
15. DAMAGE OR DESTRUCTION
---------------------
In the event the Premises or the Building are damaged by fire or other
insured casualty and the insurance proceeds have been made available therefor by
the holder or holders of any mortgages or deeds of trust covering the Building,
the damage shall be repaired by and at the expense of Landlord to the extent of
such insurance proceeds available therefor, provided such repairs can, in
Landlord's reasonable judgment, be made within one hundred eighty (180) days
after the occurrence of such damage without the payment of overtime or other
premiums. Until such repairs are completed, the Rent shall be abated in
proportion to the part of the Premises which is "untenable" by Tenant in the
conduct of its business. Untenable, for purposes of this Lease, shall mean the
lack of reasonable access to the Premises or the Premises are of an inefficient
size and configuration to carry on the business of Tenant as defined in the
Lease Schedule. Landlord shall advise Tenant, in writing within forty-five (45)
days from the date of the occurrence of such damage, as to whether or not
Landlord elects to make such repairs within one hundred eighty (180) days, and
shall notify Tenant of the estimated time the repairs shall take to complete.
If such notice is not served within such forty-five (45) days, it shall be
presumed that Landlord has elected to make such repairs. If such repairs are
not completed within said one hundred eighty (180) day period (extended for
temporary interruptions as described in paragraph 2B hereof) either party may,
by written notice, terminate the Term of this Lease.
If such damage is caused by the negligence of Tenant, Rent shall not be
abated during the period of such untenability.
If such damage occurs in the last twelve (12) months of this Lease, either
of Landlord and Tenant may terminate this Lease by written notice served within
thirty (30) days following the occurrence of such damage.
18
<PAGE>
Tenant understands that Landlord will not carry insurance of any kind
on Tenant's furniture and furnishings, or on any fixture or equipment removable
by Tenant under the provisions of this Lease and that Landlord shall not be
obligated to repair any damage thereto or replace the same.
16. ENTRY BY LANDLORD
-----------------
Landlord, Landlord's beneficiaries and their respective agents and
representatives shall have the right to enter the Premises at all reasonable
times, on reasonable notice, for the purpose of examining or inspecting the
same, to supply janitorial services and any other service to be provided by
Landlord to Tenant hereunder, to show the same to prospective purchasers or
tenants of the Building, and make such alterations, repairs, improvements or
additions, whether structural or otherwise, to the Premises or to the Building
as Landlord may deem necessary or desirable. Such entry will not unreasonably
disrupt Tenant's normal business activities. Landlord may enter by means of a
master key without liability to Tenant. Landlord shall use reasonable efforts
on such entry not to unreasonably interrupt or interfere with Tenant's use and
occupancy of the Premises, but in no event shall Landlord's entry into the
Premises constitute an eviction of Tenant nor shall such entry give rise to an
abatement of Rent.
17. DEFAULT
-------
A. The occurrence of any one or more of the following matters constitutes
a default ("Default") by Tenant under this Lease:
(i) Tenant fails to pay, when due, any Rent provided for in this
Lease and such failure continues, in whole or in part for ten (10) business days
after written notice to Tenant that said Rent is past due;
(ii) Tenant fails to pay, when due, any other amounts due and payable
to Landlord from Tenant under this Lease and such failure continues for ten (10)
business days after written notice thereof to Tenant that payment is past due;
(iii) Tenant fails to observe or perform any of the covenants in this
Lease with respect to assignment and subletting as provided in paragraph 12
hereof;
(iv) The Premises are abandoned as provided in paragraph 11;
(v) Tenant fails to cure forthwith, or to commence to cure
diligently in the circumstances and without impairment of the insurance policies
then in effect, immediately after notice thereof from Landlord, any hazardous
condition that Tenant has created in violation of law or of this Lease;
(vi) There is levy or execution upon or the attachment by legal
process of the leasehold interest of Tenant, or the filing or creation of a lien
in respect of such leasehold interest; provided, however, Tenant shall have
forty-five (45) days to have any lien satisfied or released;
19
<PAGE>
(vii) Tenant is late three (3) times in any twelve (12) consecutive
month period in the payment of Rent or any other charges required to be paid
under this Lease, or fails repeatedly to keep, observe or perform any other
covenant, agreement, condition or provision of this Lease, whether or not Tenant
cures timely any such payment or other failure; or
(viii) Tenant shall, regardless of cause or reason, fail to observe or
perform any other covenant, agreement, condition or provision of this Lease, and
such failure, if correctable, shall continue for thirty (30) days after written
notice thereof to Tenant specifying such failure and requiring the same to be
corrected, or if such failure is correctable, but cannot, with due diligence, be
corrected within said thirty (30) day period and if Tenant shall, prior to the
expiration of said thirty (30) day period, commence to correct such failure and
thereafter continue diligently to correct such failure, then Landlord shall
forebear from the exercise of its rights, powers and remedies under this Lease;
provided, however, that the correction of such failure by Tenant and the
forbearance by Landlord subsequent to the expiration of such thirty (30) day
period shall not be construed to limit, restrict, delay or impair the exercise
by Landlord of its rights, powers and remedies under this Lease upon the
occurrence or existence of any Event of Default not subject to the provisions of
this subparagraph.
B. If a Default occurs, in addition to the other rights or remedies
Landlord may have at law or under this Lease, Landlord may collect from Tenant,
and Tenant agrees to pay Landlord, in addition to all other Rent due hereunder a
late charge on any Rent not paid when due pursuant to paragraph 17 A(i), equal
to one and one-half percent (1 1/2%) of such unpaid Rent for each month or
fraction thereof which elapses without payment thereof. If a Default occurs
Landlord shall have the immediate right of re-entry and may remove all persons
and property from the Premises; such property may be removed and stored in any
other place in the Building in which the Premises are situated, or in any other
place, for the account of and at the expenses and at the risk of Tenant.
Should Landlord elect to re-enter, as herein provided, or should it take
possession pursuant to legal proceedings or pursuant to any notice provided for
by law, it may either terminate this Lease or it may from time to time, without
terminating this Lease, re-let the Premises or any part thereof for such term or
terms and at such rental or rentals and upon such other terms and conditions as
Landlord in its sole discretion may deem advisable, with the right to make
alterations and repairs to the Premises. Landlord shall be under no obligation
to re-let the Premises. However, Landlord shall use reasonable efforts to re-let
same.
In the event Landlord re-lets the Premises, Landlord may elect to apply
rentals received by it (i) to the payment of any indebtedness, other than Rent,
due hereunder from Tenant to Landlord; (ii) to the payment of any cost of such
re-letting; (iii) to the payment of the cost of any alterations and repairs to
the Premises; (iv) to the payment of Rent due and unpaid hereunder; and (v) the
residue, if any, shall be held by Landlord and applied in payment of future Rent
as the same may become due and payable hereunder. Should such rentals received
from such re-letting (after application by Landlord to payments described in
foregoing clauses (i) through (v)) during any month be less than that agreed to
be paid during that month by Tenant hereunder, including all adjustments and
additions thereto, then Tenant shall pay such deficiency to Landlord. Such
deficiency shall be calculated and paid monthly on demand by Landlord.
20
<PAGE>
No such re-entry or taking possession of the Premises by Landlord
shall be construed as an election on its part to terminate this Lease unless a
written notice of such intention be given to Tenant or unless the termination
thereof be decreed by a court of competent jurisdiction. Notwithstanding any
such reletting without termination, Landlord may at any time thereafter elect to
terminate this Lease for such previous breach.
Landlord may enforce the provisions of this Lease and may enforce and
protect its rights hereunder by suit or suits in equity or at law for specific
performance of any covenant or agreement contained herein, or for the
enforcement of any other appropriate legal or equitable remedy, including
recovery of all monies due or to become due from Tenant under any of the
provisions of this Lease.
Nothing herein contained shall limit or prejudice the right of
Landlord to provide for and obtain as damages by reason of any such termination
of this Lease or of possession an amount equal to the maximum allowed by any
statute or rule of law in effect at the time when such termination takes place,
whether or not such amount be greater, equal to, or less than the amount of
damages which Landlord may elect to receive as set forth above.
18. TAXES
-----
During the term hereof, Tenant shall pay, prior to delinquency, all taxes
assessed against and levied upon fixtures, furnishings, equipment and all other
personal property of Tenant contained in the Premises. Tenant shall cause said
fixtures, furnishings, equipment and other personal property to be assessed
separate from the real property of Landlord. In the event any or all of the
Tenant's fixtures, furnishings, equipment and other personal property shall be
assessed and taxed with the Landlord's real property, Tenant shall pay to
Landlord its share of such taxes within thirty (30) days after delivery to
Tenant by Landlord of a statement in writing setting forth the amount of such
taxes applicable to Tenant's property.
19. EMINENT DOMAIN
--------------
If the Premises, or a substantial part thereof, shall be taken or condemned
(or conveyed under threat of such taking or condemnation) for any public or
quasi public use or purpose, and as a result thereof, the Premises cannot be
used for the Permitted Use as set forth in the Lease Schedule, the Term of this
Lease shall end upon, and not before, the date of the taking of possession by
the condemning authority. Current Rent shall be apportioned as of the date of
such termination. If any part of the Building, other than the Premises or not
constituting a substantial part of the Premises, shall be so taken or condemned
(or conveyed under threat of such taking or condemnation), or if the grade of
any street adjacent to the Building is changed by any competent authority and
such taking or change of grade makes it necessary or desirable to substantially
remodel or restore the Building, Landlord shall have the right to cancel this
Lease upon not less than one hundred eighty (180) days notice prior to the date
of cancellation designated in the notice. No money or other consideration shall
be payable by Landlord to Tenant for the right of cancellation.
21
<PAGE>
20. SUBORDINATION TO MORTGAGES AND DEEDS OF TRUST
---------------------------------------------
Provided that each such mortgagee shall execute and deliver to Tenant a
Non-Disturbance and Attornment Agreement in form and content satisfactory to
Landlord and Tenant, this Lease shall be subject and subordinate to any mortgage
or deed of trust (collectively referred to hereinafter as "mortgage") which may
now or hereafter encumber the Property or the Building, and to all renewals,
modifications, consolidations, replacements, and extensions thereof provided
however, that such instrument must provide in effect that: (a) in the event of
foreclosure or other action taken under the mortgage by the holder thereof, this
Lease and the rights of Tenant hereunder (including the right, if any to extend
the term thereof and for additional space) shall not be disturbed but shall
continue in full force and effect so long as Tenant shall not be in default
thereunder; (b) such holder shall permit insurance proceeds and condemnation
proceeds to be used for any restoration and repair required by this Lease; and
(c) no property owned or removable by Tenant shall be subject to any lien of the
mortgage. Tenant agrees that if the mortgagee, beneficiary or any person
claiming under the mortgagee or beneficiary shall succeed to the interest of
Landlord in this Lease, Tenant will recognize said mortgagee, beneficiary, or
person as its Landlord under the terms of this Lease, provided that said
mortgagee, beneficiary or person for the period under which beneficiary, trustee
or person shall hold Landlord's interest in the Premises shall assume all of the
obligations of Landlord hereunder. This clause shall be self-operative and no
further instrument of subordination need be required by any mortgagee; provided,
however, that any such mortgagee may elect to have this Lease and the interest
of Tenant hereunder superior to any such mortgage and evidence such election by
notice given to Tenant. If any such mortgagee so elects, this Lease and the
interest of Tenant hereunder shall be deemed to be superior to any such mortgage
whether this Lease was executed before or after such instrument; in that event,
such mortgagee shall have the same rights with respect to this Lease as if this
Lease had been executed and delivered prior to the execution and delivery of
such mortgage and had been assigned to such mortgagee. In confirmation of such
subordination or such other election of the mortgagee, however, Tenant shall, at
Landlord's request, execute promptly any certificate or instrument evidencing
such subordination or other election that Landlord may request. In the event of
the enforcement by the mortgagee, trustee or the beneficiary under any such
mortgage of the remedies provided for by law or by such mortgage, Tenant will,
upon request of any person or party succeeding to the interest of Landlord as a
result of such enforcement, automatically become the tenant of such successor in
interest without change in the terms or other provisions of this Lease.
21. SALE BY LANDLORD
----------------
Any assignment or transfer of this Lease in connection with a sale of the
Property or the Building shall operate to release Landlord from any subsequent
liability upon any of the covenants or conditions, expressed or implied, herein
contained in favor of Tenant, and in such event Tenant agrees to look solely to
the responsibility of the assignee or transferee with respect to all matters in
connection with this Lease. If any security deposit has been made by Tenant
under this Lease, Landlord may transfer such security deposit to such assignee
or transferee and thereupon Landlord shall be released from any further
obligations with respect thereto or under this Lease. This Lease shall not be
affected by any such sale, and Tenant agrees to attorn to any assignee or
transferee.
22
<PAGE>
22. RIGHT OF LANDLORD TO PERFORM
----------------------------
All covenants and agreements to be performed by Tenant under any of the
terms of this Lease shall be performed by Tenant at Tenant's sole cost and
expense and without any abatement of Rent except as herein expressly provided.
If Tenant shall fail to pay any sum of money, other than Rent, required to be
paid by it hereunder, or shall fail to perform any other act on its part to be
performed hereunder, and such failure shall continue for thirty (30) days after
written notice thereof by Landlord except as may be required by ordinance or be
necessitated by reason of health or safety, Landlord shall have the right (but
not the obligation) and without waiver or release Tenant from any obligations of
Tenant or the waiver of Landlord's other remedies hereunder or at law, to make
any such payment or perform any such other act on Tenant's part to be made or
performed as in this Lease provided. All sums so paid by Landlord and all
necessary incidental costs together with interest thereon at the lesser of the
maximum interest rate permitted by law or at the annual rate of two percent (2%)
above the corporate base rate as announced by the First National Bank of Chicago
on ninety (90) day commercial loans to its largest customers from the date of
such payment by Landlord, until the same shall be repaid by Tenant to Landlord,
shall be payable to Landlord on demand and Tenant covenants to pay any such
sums, and Landlord shall have (in addition to any other right or remedy of
Landlord) the same rights and remedies in the event of the nonpayment thereof by
Tenant as in the case of Default by Tenant in the payment of Rent.
23. RIGHT OF TENANT TO PERFORM
--------------------------
All covenants and agreements to be performed by Landlord under any of the
terms of this Lease shall be performed by Landlord at Landlord's sole cost and
expense, subject to Landlord's rights of reimbursement as elsewhere herein
provided. If Landlord shall fail to make any payment or shall fail to perform
any other act on its part to be performed hereunder, and such failure shall
continue for thirty (30) days after written notice thereof by Tenant, Tenant
shall have the right, but not the obligation, and without waiver or release of
Landlord from any obligations of Landlord or the waiver of Tenant's other
remedies hereunder or at law, to make any such payment or perform any such other
act on Landlord's part to be made or performed under this Lease. All sums so
expended by Tenant and all necessary incidental costs together with interest
thereon at the lesser of the maximum rate permitted by law or at the annual rate
of two percent (2%) above the Corporate Base Rate as announced by the First
National Bank of Chicago on ninety (90) day commercial loans shall be payable to
Tenant by Landlord on demand and Landlord agrees to pay any such sums, and
Tenant shall have (in addition to any other right or remedy of Tenant) the right
to offset the amounts so due it with interest as aforesaid against Rent next
falling due.
24. EXPENSES OF ENFORCEMENT
-----------------------
In the event of any litigation or arbitration between Tenant and Landlord
to enforce any provision of this Lease or any right of either party hereto, the
unsuccessful party to such litigation or arbitration shall pay to the successful
party all reasonably incurred costs and expenses, including reasonable
attorneys' fees, incurred therein.
23
<PAGE>
If Landlord, without fault, is made a party to any litigation instituted by
or against Tenant or otherwise becomes involved in any litigation, negotiation
or transaction by reason of this Lease, arising out an event occurring in the
premises, Tenant shall indemnify Landlord against and pay all costs and
expenses, including reasonable court costs and attorneys' fees, incurred by
Landlord in connection therewith.
25. ESTOPPEL CERTIFICATE
--------------------
Tenant or Landlord shall at any time and from time to time upon not
less than ten (10) days prior written notice from the other party execute,
acknowledge and deliver to such requesting party a statement in writing
certifying that this Lease is unmodified and in full force and effect (or if
modified, stating the nature of such modification and certifying that this
Lease, as so modified, is in full force and effect) and the dates to which the
Rent and other charges are paid and acknowledging that there are not any uncured
defaults on the part of either party or to such party's knowledge, any uncured
defaults on the part of the requesting party hereunder, or specifying such
defaults if any are claimed and certifying as to such other matters as may be
reasonably requested by the requesting party, Landlord's mortgagee or any
prospective purchaser. It is expressly understood and agreed that any such
statement may be relied upon by any prospective purchaser or encumbrancer of all
or any portion of the Property of which the Premises are a part. Either party's
failure to deliver such statement within such time shall be conclusive upon such
party that this Lease is in full force and effect, without modification except
as may be represented by the requesting party, that there are no uncured
defaults in the requesting party's performance and that not more than two (2)
months rental has been paid in advance and such other matters as may have been
requested.
26. NOTICES AND DEMANDS
-------------------
(a) All notices, demands and other communications given, made or sent by
either party hereto to the other shall be in writing and shall be deemed to have
been fully given, made or sent when made by personal service or deposited in the
United States mail, certified or registered, postage prepaid and properly
addressed as follows:
TO LANDLORD: to the address as provided for in the Lease Schedule for the
payment of Rent
TO TENANT: The PrivateBank and Trust Company
Suite 900
10 North Dearborn Street
Chicago, Illinois 60602
Attn.: Mr. Ralph B. Mandell and
Mr. William R. Langley
24
<PAGE>
with a copy to:
David H. Addis
Spitzer, Addis, Susman and Krull
100 West Monroe Street - Suite 1100
Chicago, Illinois 60603
The address to which any notice, demand or other communication is to be given,
made or sent to either party may be changed by written notice given by such
party as above provided.
27. SECURITY DEPOSIT
----------------
A. Tenant has deposited with agent the amount as set forth on the Lease
Schedule as a security deposit ("Security Deposit") for the full and faithful
payment and performance of every provision of this Lease to be paid and
performed by Tenant. If Tenant defaults with respect to any provision of this
Lease, including but not limited to the provision relating to the payment of
Rent, agent may use, apply or retain all or any part of this Security Deposit
for the payment of any Rent and any other sum in default, or for payment of any
other amount which Landlord may spend or become obligated to spend by reason of
Tenant's default or to compensate Landlord for any other loss or damage which
Landlord may suffer by reason of Tenant's default. If any portion of the
Security Deposit is to be used or applied, Tenant shall within five (5) days
after written demand therefor deposit with Landlord an amount sufficient to
restore the Security Deposit to its original amount and Tenant's failure to do
so shall be a Default of this Lease. Landlord shall not be required to keep the
Security Deposit separate from its general funds. If Tenant shall fully and
faithfully pay and perform every provision of this Lease to be paid and
performed by Tenant, the Security Deposit or any balance thereof shall be
returned to Tenant no later than sixty (60) days following the expiration of the
Term and upon Tenant's vacation of the Premises.
B. If, on December 31, 1994, the amount of Tenant's deposits as reported
by Tenant to the Federal Deposit Insurance Corporation in its quarterly call
report shall be less than the amount of $81,000,000, Tenant shall, within sixty
(60) days of receipt of written notice from Landlord to so do, deposit with
Landlord the additional amount of $50,000 as and for additional Security
Deposit.
C. If deposits on or after December 31, 1996, as reported for purposes of
Additional Monthly Base Rent, shall not be at least the amount of $100,000,000,
Landlord may, at any time thereafter, while such deposits remain below
$100,000,000, apply $50,000 of the Security Deposit to Rent and in such event
the Maximum Term Rent shall be increased to $1,775,000 and Maximum Monthly Base
Rent shall be redetermined based upon the Maximum Term Rent of $1,775,000.
D. Landlord shall pay to Tenant interest on the amount of $15,376 of the
Security Deposit, annually, on the anniversary date of the Term, in cash or as a
credit against Rent next falling due, at a rate equal to interest being paid on
its so-called Money Market Accounts (or if such accounts no longer exist at the
rate on accounts being offered most similar thereto) by the First
25
<PAGE>
National Bank of Chicago. Security Deposit in excess of the amount of $15,376
shall not bear interest.
E. In the event that Ten North Dearborn Venture is no longer owner of its
share of LaSalle National Trust, N.A., as Trustee, under Trust Agreement dated
November 6, 1985 and known as its Trust No. 110519, during the last twelve (12)
months of the Term, Tenant may apply the Security Deposit then on deposit to
Rent payable during the last year of the Term at the rate of one-twelfth
(1/12th) of the Security Deposit per month.
28. RIGHTS RESERVED TO LANDLORD
---------------------------
Landlord reserves the following rights, exercisable without notice and
without liability to Tenant for damage or injury to property, person or business
and without effecting an eviction, constructive or actual, or disturbance of
Tenant's use or possession or giving rise to any claim for set-off or abatement
of Rent:
1. to change the Building's street address or number of the
Premises;
2. to install, affix and maintain any and all signs on the exterior
and interior of the Building consistent with signs currently affixed to the
Building;
3. to designate and approve, prior to installation, all types of
window shades, blinds, drapes, awnings, window ventilators and other similar
equipment, and to control all internal lighting that may be visible from the
exterior of the Building;
4. to designate, limit, restrict and control any service in or to
the Building and its tenants, provided that such services as are designated by
Landlord are reasonably competitive as to the rates charged thereby. No vending
or dispensing machines of any kind shall be placed in or about the Premises
without the prior written consent of Landlord;
5. to retain at all times, and to use in appropriate instances, keys
to all doors within and into the Premises. No locks or bolts shall be altered,
changed or added without the prior written consent of Landlord;
6. to make structural repairs, alterations, additions or
improvements in and about the Building, or any part thereof, and for such
purposes to enter upon the Premises, and during the continuance of said work to
temporarily close doors, entryways, public spaces and corridors in the Building
and to interrupt or temporarily suspend Building services and facilities
provided appropriate alternative access is provided to Premises;
7. to have and retain a paramount title to the Premises free and
clear of any act of Tenant; or
8. to approve the weight, size and location of safes and other heavy
equipment and articles in and about the Premises and the Building, and to
require all such items and furniture
26
<PAGE>
to be moved into and out of the Building and the Premises only at such times and
in such manner as Landlord shall direct in writing. Movements of Tenant's
property into or out of the Building and within the Building are entirely at the
risk and responsibility of Tenant and Landlord reserves the right to require
permits before allowing any such property to be moved into or out of the
Building.
29. Omitted.
--------
30. MISCELLANEOUS
-------------
A. Definitions. The words "re-enter" or "re-entry" as used in this Lease
-----------
are not restricted to their technical legal meaning. The term "Landlord" as
used in this Lease means only the Landlord from time to time and upon conveying
its interest, such conveying Landlord shall be relieved from any further
obligation or liability. The term "agent" means Hiffman Shaffer Anderson Inc.
or such other person as may hereafter be designated at any time or from time to
time by Landlord's beneficiaries. Payment to agent by Tenant shall relieve
Tenant for amounts paid to agent for Rent due by Tenant.
B. Time of Essence. Time is of the essence of this Lease and each and
---------------
all of its provisions.
C. Execution of Lease. Submission of this instrument for examination or
------------------
signature by Tenant does not constitute a reservation of or offer or option for
lease, and it is not effective or binding as a lease or otherwise until
execution and delivery by both Landlord and Tenant.
D. Severability. The invalidity or unenforceability of any provision
------------
hereof shall not affect or impair any other provisions.
E. Governing Law. This Lease shall be governed by and construed pursuant
-------------
to the laws of the State of Illinois.
F. Enforcement. All rights and remedies of Landlord under this Lease or
-----------
at law, may be exercised by Landlord in its own name individually or in its name
by agent or by Landlord's beneficiaries, and all legal proceedings for the
enforcement of any such rights or remedies, including distress for rent,
forcible detainer, and any other legal or equitable proceedings, may be
commenced and prosecuted to final judgment and execution by Landlord in its own
name individually or in its name by agent or by Landlord's beneficiaries.
Tenant conclusively agrees that Landlord has the full power and authority to
execute this Lease and to make and perform the agreements herein contained, and
Tenant expressly stipulates that any rights or remedies available to Landlord
either by the provisions of this Lease or otherwise may be enforced by Landlord
in its own name individually or in its name by agent or by Landlord's
beneficiaries. Agent shall have the right to receive, apply and retain Tenant's
funds.
G. Paragraph Headings. The marginal headings and titles to the
------------------
paragraphs and subparagraphs of this Lease are for convenience only and are not
a part of this Lease and shall have no effect upon the construction or
interpretation of any part hereof.
27
<PAGE>
H. Exculpation. Each and all of the covenants, undertakings and
-----------
agreements made in this Lease (and in any Exhibit or Rider to this Lease) on the
part of the Landlord and holder of the beneficial interest under LaSalle
National Bank as above described, while in the form purporting to be the
covenants, undertakings and agreements of Landlord and said holder, are
nevertheless each and every one of them made and intended not as personal
covenants, undertakings and agreements by Landlord or said holder or for the
purpose or intention of binding the Landlord and said holder personally, but are
made and intended for the purpose of binding only the interest of the Landlord
in the trust property of said LaSalle National Bank Trust No. 110519 and that no
personal liability or responsibility is assumed by nor shall at any time be
asserted or enforceable against Landlord or said holder or agent on account of
this Lease or on account of any covenant, undertaking or agreement in this
agreement contained, all such personal liability and responsibility, if any,
being expressly waived and released. If said holder is a partnership, any such
liability of such partnership as holder of the beneficial interest in the trust
property shall be limited to the beneficial interest of the partnership assets
and no partner of said partnership shall be individually or personally liable
for any claim arising out of this Lease. A deficit capital account of any such
partner shall not be deemed an asset of said partnership. Landlord hereby
confirms that Hiffman Shaffer Anderson, Inc. is the managing agent for the
Building and has full power to manage the Building and to enter into agreements
relating to the Building and the Premises, which agreements, however, shall for
all purposes be deemed subject to the prior provisions limiting Landlord's
liability contained in paragraph 30 H, whether or not any such provisions are
contained in such agreements.
I. Non-Waiver of Defaults. No waiver of any provision of this Lease
----------------------
shall be implied by any failure of Landlord to enforce any remedy on account of
the violation of such provision even if such violation be continued or repeated
subsequently, and no express waiver shall affect any provision other than the
one specified in such waiver and in that event only for the time and in the
manner specifically stated. No receipt of monies by Landlord from Tenant after
the termination of this Lease will in any way alter the length of the Term or
Tenant's right of possession hereunder or after the giving of any notice shall
reinstate, continue or extend the Term or affect any notice given Tenant prior
to the receipt of such monies, it being agreed that after the service of notice
or the commencement of a suit or after final judgment for possession of the
Premises, Landlord may receive and collect any Rent due, and the payment of Rent
shall not waive or affect said notice, suit or judgment nor shall be deemed to
apply other than on account of the amount due, nor shall the acceptance of Rent
be deemed a waiver of any breach by Tenant of any term, covenant or condition of
this Lease, and no endorsement or statement on any check or letter accompanying
any check or payment of Rent shall be deemed an accord and satisfaction, and
Landlord may accept such check or payment without prejudice to Landlord's right
to recover the balance of such installment or payment of Rent or pursue any
other remedies available to Landlord. None of the terms, covenants or
conditions of this Lease can be waived by either Landlord or Tenant except by
appropriate written instrument. This provision shall apply equally to nonwaiver
of Defaults by Tenant.
28
<PAGE>
31. MEMORANDUM FOR RECORDING
------------------------
Concurrently herewith the parties shall execute a Memorandum of this Lease
for recording with the Recorder of Deeds of Cook County, Illinois. Tenant
agrees that upon the termination of the Term of the Lease, by reason of default
or otherwise, Tenant shall forthwith, at the request of Landlord, execute and
deliver an appropriate release for recording as shall be required by any title
insurer to obtain a waiver of any exception to title by reason of such
Memorandum.
32. LANDLORD'S ADDITIONAL AGREEMENTS
--------------------------------
Landlord agrees that while this Lease is in effect it will not permit any
part of the Building to be used for any of the following uses: off-track betting
establishment, gambling (notwithstanding that gambling activities may hereafter
be legalized), video parlor, places of public entertainment, billiard parlor, or
any other uses inconsistent with the operation of a first class commercial
office building in the area in which the Building is located.
33. REGULATORY TAKEOVER
-------------------
Notwithstanding any other provisions contained in this Lease, in the event
Tenant is closed or taken over by the banking authority of the State of
Illinois, or other bank supervisory authority, Landlord may terminate the Lease
only with the concurrence of such banking authority or other bank supervisory
authority, and any such authority shall in any event have the election either to
continue or to terminate the Lease; Provided, that in the event this Lease is
terminated, the maximum claim of Landlord for damages or indemnity for injury
resulting from the rejection or abandonment of the unexpired term of the Lease
shall in no event be in an amount exceeding the Rent reserved by the Lease,
without acceleration, for the year next succeeding the date of the surrender of
the premises to Landlord, or the date of re-entry of Landlord, whichever first
occurs, whether before or after the closing of the bank, plus an amount equal to
the unpaid Rent accrued, without acceleration up to such date.
29
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease the day
and year first above written.
LANDLORD: TENANT:
- -------- ------
LaSalle National Trust, N.A., as Successor The PrivateBank and Trust Company
Trustee to LaSalle National Bank, not
personally, but as Trustee under Trust
Agreement dated 11/6/85 and known as its
Trust No. 110519
By: Illegible By: /s/ Donald a. Roubitchek
----------------------------------- -----------------------------
Its Its Secretary
----------------------------------- -----------------------------
Attest: /s/ Nancy A. Stack Attest: /s/ Gail Carpenter
------------------------------- -------------------------
Its Assistant Secretary Its Assistant Secretary
----------------------------------- -----------------------------
30
<PAGE>
RIDER A
--------
RULES AND REGULATIONS
---------------------
RIDER ("THIS RIDER") TO THAT CERTAIN LEASE (THE "LEASE") DATED THE _______ DAY
OF __________________ 1992, BY AND BETWEEN LASALLE NATIONAL TRUST, N.A., AS
SUCCESSOR TRUSTEE TO LASALLE NATIONAL BANK, AS TRUSTEE AS AFORESAID, AS
LANDLORD, AND THE PRIVATEBANK AND TRUST COMPANY, AS TENANT.
A. Tenant agrees to observe the reservations of Landlord contained in
paragraph 28 of the Lease entitled "Rights Reserved to Landlord" and agrees, for
itself, its employees, agents, clients, customers, invitees, licensees and
guests, to comply with the following rules and regulations and all reasonable
modifications and additions thereto which Landlord may from time to time make:
1. Any sign, lettering, picture, notice or advertisement installed within
the Premises which is visible from the public corridors within the Building
shall be installed in such manner and be of such character and style as Landlord
shall approve in writing. No sign, letter, picture, notice or advertisement
shall be placed on any outside window or in a position to be visible from
outside the Building;
2. Tenant shall not use the name "10 North Dearborn" for any purpose
other than Tenant's business address;
3. Tenant shall not use the name "10 North Dearborn" for Tenant's
business address after Tenant vacates the Premises;
4. Sidewalks, entrances, passages, courts, corridors, halls, elevators
and stairways in and about the Premises shall not be obstructed nor shall
objects be placed against glass partitions, doors or windows which would be
unsightly from the corridors of the Building or from the exterior of the
Building;
5. No animals, pets, bicycles or other vehicles shall be brought or
permitted to be in the Building or the Premises;
6. Room to room canvasses to solicit business from other tenants of the
Building are prohibited;
7. Tenant shall not waste electricity, water or air conditioning and
shall cooperate fully with Landlord to assure the most effective and efficient
operation of the heating and air conditioning systems of the Building. All
controls shall be adjusted only by authorized Building personnel;
8. All corridor doors shall remain closed at all times except in entering
or leaving the Premises;
31
<PAGE>
9. No locks or similar devices shall be attached to any door except by
Landlord and Landlord shall have the right to retain a key to all such locks;
10. Tenant assumes full responsibility for protecting the Premises from
theft, robbery and pilferage. Except during Tenant's normal business hours,
Tenant shall keep all doors to the Premises locked and other means of entry to
the Premises closed and secured. Any damage resulting from Tenant's failure to
fulfill said responsibility shall be paid for by Tenant. All property belonging
to Tenant or any other person in the Premises which is in the Building or in the
Premises, shall be there at the risk of Tenant or such other person only.
Landlord, its agent and their respective officers and employees shall not be
liable for damage, theft, or misappropriation thereof. Tenant shall and hereby
does indemnify, defend and hold harmless Landlord, its agents and their
respective officers and employees, from any claims arising out of the above,
including subrogation claims by Tenant's insurance carrier;
11. Only machinery or mechanical devices of a nature directly related to
Tenant's ordinary use of the Premises shall be installed, placed or used in the
Premises and the installation and use of all such machinery and mechanical
devices is subject to the other rules contained in this Rider and the other
portions of the Lease;
12. All cleaning, repairing, janitorial, decorating, painting or other
services and work in and about the Premises shall be done only by authorized
Building personnel in accordance with a first class building located in the
downtown Chicago Loop area;
13. Safes, furniture, equipment, machines and other large or bulky
articles shall be brought to the Building and into and out of the Premises at
such times and in such manner as Landlord shall direct (including the
designation of elevators) and at Tenant's sole risk and cost. Prior to Tenant's
removal of such articles from the Building, Tenant shall obtain written
authorization from the office of the Building and shall present such
authorization to a designated employee of Landlord;
14. Tenant shall not in any manner deface or damage the Building;
15. Inflammables such as gasoline, kerosene, naphtha and benzene, or
explosives or any other articles of an intrinsically dangerous nature are not
permitted in the Building or Premises;
16. Tenant shall ascertain from Landlord the maximum amount of electrical
current which can safely be used in the Premises, taking into account the
capacity of the electric wiring of the Building and the Premises and the needs
of other tenants, and shall not use more than such safe capacity. Landlord's
consent to the installation of electrical equipment shall not relieve Tenant
from the obligation not to use more electricity than such safe capacity;
17. To the extent permitted by law, Tenant shall not permit picketing or
other union activity involving its employees in the Building, except in those
locations and subject to time and other limitations as to which Landlord may
give prior written consent;
32
<PAGE>
18. Tenant shall not enter into or upon the roof or basement of the
Building or any storage, heating, ventilation, air-conditioning, mechanical or
elevator machinery housing areas;
19. Tenant shall not distribute literature, flyers, handouts or pamphlets
of any type in any of the common areas of the Building without the prior written
consent of Landlord;
20. Except as reasonably required to accommodate Tenant's employees, and
subject to applicable legal requirements, Tenant shall not cook, otherwise
prepare or sell any food or beverages in or from the Premises;
21. Tenant shall not permit the use of any apparatus for sound production
or transmission in such manner that the sound so transmitted or produced shall
be audible or vibrations therefrom shall be detectable beyond the Premises;
22. Tenant shall keep all of its electrical and mechanical apparatus free
of vibration, noise and air waves which may be transmitted beyond the Premises;
23. Tenant shall not permit objectionable odors or vapor to emanate from
the Premises;
24. Tenant shall not place a load upon any floor of the Premises exceeding
the floor load capacity for which such floor was designed or allowed by laws to
carry;
25. No floor covering shall be affixed to any floor in the Premises by
means of glue or other adhesive, unless the installation procedure is approved
by Landlord; and
26. No vending machines of any description shall be installed, maintained
or operated in the Premises without the written consent of Landlord.
B. Any violation by Tenant of any of the rules and regulations contained above
or other sections of the Lease, or such rules and regulations as may hereafter
be adopted by Landlord pursuant to subparagraph A of Rider A of the Lease, shall
be deemed a Default under the Lease and may be restrained; but whether or not so
restrained, Tenant acknowledges and agrees that it shall be and remain liable
for all damages, loss, costs and expenses resulting from any violation by Tenant
of any of said rules and regulations. Nothing in the Lease contained shall be
construed to impose upon Landlord any duty or obligation to enforce said rules
and regulations or the terms, covenants and conditions of any other lease
against any other tenant or any other persons, and Landlord shall not be liable
to Tenant for violation of the same by any other tenant, its employees, agents,
invitees, licensees, customers, clients, family members or guests, or by any
other person.
C. The Landlord's Exculpatory Clause which is set forth in paragraph 30 H of
the Lease is incorporated herein by reference.
D. Landlord agrees that all present and future leases for other space in the
Premises shall be made subject to substantially the same rules and regulations,
and that Landlord will vigorously enforce such rules and regulations against all
occupants of the Building.
33
<PAGE>
E. This Rider is an integral part of the Lease.
Agreed, Accepted and Acknowledged:
LANDLORD: TENANT:
LaSalle National Trust, N.A., Successor The PrivateBank and Trust Company
Trustee to LaSalle National Bank, not
personally, but as Trustee under Trust
Agreement dated 11/6/85 and known as Trust
No. 110519
By: Illegible By: /s/ Donald D. Roubitchek
-------------------------------------- ------------------------------
Title: Title: Secretary
----------------------------------- ---------------------------
Attest: /s/ Nancy A. Stack Attest: Gail Carpenter
---------------------------------- --------------------------
34
<PAGE>
RIDER B
-------
EXTENSION OPTION, RIGHT OF FIRST REFUSAL AND EXPANSION SPACE
------------------------------------------------------------
RIDER (THIS "RIDER") TO THAT CERTAIN LEASE (THE "LEASE") DATED THE ______ DAY OF
___________________, 1992, BY AND BETWEEN LASALLE NATIONAL TRUST, N.A., AS
SUCCESSOR TRUSTEE TO LASALLE NATIONAL BANK, AS TRUSTEE AS AFORESAID, AS
LANDLORD, AND THE PRIVATEBANK AND TRUST COMPANY, AS TENANT
1. EXTENSION OPTION
----------------
(a) Subject to the terms and conditions herein set forth, Tenant shall have
the right and option to extend the Lease for one (1) successive extension term
of five (5) years and zero (0) months ("Extension Option") commencing on the
first day after the end of the initial Term and ending five (5) years thereafter
("Extension Term").
Tenant shall not have any right or option to extend the Term of the Lease
for any period which would extend beyond the Extension Term.
(b) Tenant shall exercise the Extension Option by written notice given to
Landlord not earlier than twelve (12) months nor later than six (6) months prior
to the expiration of the initial Term of the Lease. If the Extension Option has
not commenced, the Extension Option and any notice given pursuant to this
paragraph (b) shall forthwith terminate and be of no further force and effect
upon the first occurrence of any of the following events:
(i) this Lease shall terminate prior to the expiration of the initial
Term hereof;
(ii) an event of Default shall have occurred and is existing at the
time of the exercise by Tenant of the Extension Option or any time
subsequent to the exercise thereof by Tenant, but prior to the commencement
of the applicable Extension Term of the Lease; or
(iii) Tenant shall fail to exercise the Extension Option in the manner
herein set forth.
In the event that Tenant exercises the Extension Option in accordance with
the provisions of this subparagraph (b), the Lease shall be extended for the
applicable Extension Term upon all terms, covenants and conditions contained in
the Lease, except that (i) the word "Term" as used in the Lease shall mean such
Extension Term; (ii) Monthly Base Rent (as defined in paragraph 4 of the Lease)
shall be the Prevailing Market Rental, determined as provided in paragraph (c)
below; and (iii) the Expiration Date thereof shall be the last day of such
Extension Term as stated in paragraph (a) above.
35
<PAGE>
(c) The "Prevailing Market Rental" for the Extension Option means and shall
be an amount equal to the effective net rental rate (determined as though all
taxes and other usual and customary expenses were the obligation of Tenant)
being charged to tenants under new or renewed leases (other than renewed leases
whose rents have been predetermined by formula or otherwise) with terms
commencing on or within six (6) months prior to the commencement of the
applicable extension term for commercial space in office buildings in the
Downtown Chicago area comparable in age, quality of location, construction,
maintenance and services to the Building (without regard to the value of
Tenant's Improvements to the Premises), and shall take into account the cost to
Tenant of Improvements to the space required for Tenant's occupancy, rental
abatement and/or concessions, and shall be expressed on the basis of an absolute
effective net rental rate per square foot per annum multiplied by the Rentable
Area of the Premises and divided by twelve (12). If Tenant objects to the
Prevailing Market Rental proposed by Landlord, Tenant shall give notice of such
objection to Landlord within thirty (30) days after receipt of Landlord's
proposal. If any such dispute is not resolved between the parties within thirty
(30) days after Tenant's notice of objection, then Landlord and Tenant shall
submit the dispute to arbitration in accordance with the provisions of paragraph
4 hereof. In no event shall the Prevailing Market Rental be less than the
monthly Base Rent in effect in the month immediately preceding the Extension
Term.
2. RIGHT OF FIRST OFFER
--------------------
(a) Tenant shall also have the Right of First Offer with respect to any
space which becomes available from time to time in the Building subject to the
prior Rights of First Refusal, Expansion Options and Extensions for the
following tenants or their successors currently in the building: American
Reprographics Management, Inc. (2nd floor), Adler, Kaplan & Begy (3rd, 4th, 5th
and 6th floors), Security Pacific Business Credit, Inc. (8th floor), and DEC
Ventures, Inc. (7th floor). Landlord shall notify Tenant in writing of such
available space and the terms upon which space is being offered by Landlord to
prospective tenants. Tenant shall have ten (10) days from the date of such
notification from Landlord to accept or renew such space in writing. If Tenant
shall fail to respond within said ten (10) day period, Tenant shall be deemed to
have rejected such available space. If the Right of First Offer is exercised,
Landlord and Tenant shall execute an amendment to the Lease adding such space to
the Premises for the Term then remaining under the Lease and at the rate
specified in the Right of First Offer Notification, except that the Monthly Base
Rent shall be no less than the rate then in effect for the balance of the
Premises. The Right of First Offer shall be governed by all other terms of the
Lease.
(b) The Right of First Offer shall terminate upon the first occurrence of
any of the following events: (i) on the expiration of the Term of the Lease;
(ii) an event of Default shall have occurred and is existing at the time of
exercise of the Right of First Refusal; or (iii) the Lease is terminated prior
to the expiration of the Term hereof including extensions.
(c) If Landlord shall have offered space to Tenant, and Tenant shall have
declined the same, and if Landlord thereafter shall materially modify the terms
upon which such space is being offered by Landlord or if Landlord shall receive
an offer for such space which it desires to accept, which such offer is on terms
other than those which were offered to Tenant, Landlord shall again offer such
space to Tenant on such revised terms prior to letting such space to others, and
Tenant
36
<PAGE>
shall have ten (10) days from the date of such re-notification from Landlord to
accept or refuse such space in writing. If Tenant shall fail to respond to such
re-offer within said ten (10) day period, Tenant shall be deemed to have
rejected such re-offered space.
3. EXPANSION SPACE
---------------
(a) In addition to the space originally leased hereunder, Tenant shall have
the option to lease approximately twenty-five hundred (2,500) rentable square
feet on an "as is" basis ("Additional Space I"). Said Additional Space is
located on the eleventh floor of the Building. This option shall be exercised by
Tenant giving written notice to Landlord one hundred eighty (180) days prior to
September 1, 1994.
(b) In addition to the space originally leased hereunder and the space
indicated in 3(a) above, Tenant shall have the option to lease approximately an
additional twenty-five hundred (2,500) square feet on an "as is" basis
("Additional Space II"). Said Additional Space II shall be located on the
eleventh floor of the building. If Tenant exercises its option under 3(a) above,
Tenant agrees that the Additional Space II encompasses the balance of rentable
space on the eleventh floor. The above option under this subparagraph 3(b) shall
be exercised by Tenant giving written notice to Landlord one hundred eighty
(180) days prior to March 1, 1997.
(c) Any option and any notice given pursuant to this paragraph (3) shall
terminate and be of no further force and effect upon the first occurrence of any
of the following events:
(i) the Lease terminates prior to the expiration of the Term;
(ii) an event of Default shall have occurred and is existing at the
time of the exercise of the applicable option under (a) or (b) above; and
(iii) Tenant shall fail to exercise the option in (a) or (b) above in
the manner set forth above.
(d) In the event that Tenant exercises either option in (a) or (b) above in
accordance with the provisions of this paragraph (3) the Additional Space I or
Additional Space II shall be added to the original Term of the Lease upon all
terms, covenants and conditions contained in the Lease, except that Monthly Base
Rent (as defined in paragraph 4 of the Lease) shall be 90% of the Prevailing
Market Rental determined as provided in paragraph 1(c) in this Rider B. In no
event shall the Prevailing Market Rental be less than the Monthly Base Rent per
square foot then in effect under the Lease.
4. ARBITRATION
-----------
If Tenant shall give to Landlord notice of Tenant's objection to Landlord's
proposed Prevailing Market Rent within thirty (30) days after receipt of
Landlord's proposal and Landlord and Tenant shall fail to agree upon the
Prevailing Market Rental within thirty (30) days after receipt of Tenant's
notice of objection as provided in subparagraph l(c) hereof, then Landlord and
Tenant
37
<PAGE>
each shall, within fifteen (15) business days after the expiration of said
thirty (30) day period, give notice to the other setting forth the name and
address of an appraiser designated by the party giving notice. All appraisers
selected shall be members of the American Institute of Real Estate Appraisers,
Masters Appraisers Institute, or a similar organization of recognized national
standing. If either party shall fail to give notice of such designation within
said fifteen (15) day period, then the appraiser, if any, designated by the
other party shall make the determination alone. If two appraisers have been
designated, such appraisers shall designate a third appraiser. If the two
appraisers shall fail to agree upon the third appraiser within five (5) business
days of the designation of the last two appraisers, then either Landlord or
Tenant may apply to the American Arbitration Association or any successor
thereto having jurisdiction for the settlement of the dispute as to the
designation of the third appraiser in accordance with the Real Estate Valuation
Arbitration Rules of the American Arbitration Association. All appraisers
designated pursuant hereto shall have had at least ten (10) years continuous
experience in the business of appraising office buildings or commercial
buildings in the Downtown Chicago area. The three appraisers shall conduct such
hearings as they may deem appropriate, shall make their determination in writing
and shall give notice to Landlord and Tenant of said determination within thirty
business days of the designation of the third appraiser. In the event that the
three appraisers cannot agree upon a Prevailing Market Rental, each appraiser
shall submit in writing to Landlord and Tenant the Prevailing Market Rental as
determined by such appraiser. The Prevailing Market Rental for the purposes of
this paragraph shall be equal to the arithmetic average of the three Prevailing
Market Rentals submitted by the appraisers.
Each party shall pay its own fees and expenses, if any, in connection with
any appraiser selected by such party under this paragraph 4, and the parties
shall share equally all other expenses and fees of any arbitration including the
fee charged by the third appraiser. Until finally determined pursuant to this
paragraph 4, the Rent during the extension term shall be equal to the Prevailing
Market Rental proposed by Landlord. The Prevailing Market Rental as determined
in accordance with the provisions of this paragraph 4 shall be final and binding
upon Landlord and Tenant. The parties shall direct the appraisers to determine
the Prevailing Market Rental in accordance with the definition of such term as
set forth in subparagraph 1(c) of this Rider. If, as a result of such
determination, there shall have been an overpayment of Rent, then at Tenant's
election, Landlord shall credit the amount of such overpayment against the next
monthly payment or payments of Rent due under this Lease, or refund the amount
of such overpayment to Tenant within thirty (30) days. If, as a result of such
determination, there shall have been a deficiency in the amount paid on account
of the Prevailing Market Rent, Tenant shall pay the amount of such deficiency to
Landlord within thirty (30) days after demand.
38
<PAGE>
The Landlord's Exculpatory Clause which is set forth in paragraph 30 H of
the Lease is incorporated herein by reference.
LANDLORD: TENANT:
LaSalle National Trust, N.A., as Successor The PrivateBank and Trust Company
Trustee to LaSalle Company National Bank,
as Trustee under Trust Agreement dated
11/6/85 and known as Trust No. 110519
By: Illegible By: /s/ Donald D. Roubitchek
--------------------------------- -----------------------------
Title: Title: Secretary
------------------------------- --------------------------
Date: 04-22-92 Date: 04-06-92
------------------------------- ---------------------------
39
<PAGE>
FIRST AMENDMENT TO LEASE
------------------------
THIS FIRST AMENDMENT to Lease ("Amendment") made this 28th day of December,
1993, by and between LaSalle National Trust, N.W., successor Trustee to LaSalle
National Bank, not personally, but as Trustee under the Trust Agreement dated
November 6, 1985 and known as Trust No. 110519 (herein referred to as
("Landlord") and The Private Bank and Trust Company, an Illinois corporation,
(herein referred to as "Tenant").
WHEREAS, the Landlord and Tenant entered into a certain Lease dated January
1, 1992 (herein referred to as the "Lease") for premises commonly known as
Suites 900 and 1000, 10 N. Dearborn, Chicago, Illinois;
WHEREAS, Tenant desires to expand into and occupy Suite 1107 on the
eleventh floor in the 10 N. Dearborn Building, which is approximately 4,181
rentable square feet ("Eleventh Floor Space") for a Twenty-Seven (27) month term
commencing April 1, 1994;
AND WHEREAS, Landlord and Tenant desire to amend the Lease pursuant to the
terms, provision and agreements herein set forth.
NOW THEREFORE, in consideration of the covenants and agreements herein set
forth and other good and valuable consideration which is hereby acknowledged,
Landlord and Tenant hereby covenant and agree as follows:
1. PREMISES AND RENTABLE AREA. The rentable area of the Premises shall
--------------------------
be increased by the Eleventh Floor Space to 15,713 square feet from 11,532
square feet as of April 1, 1994 until June 30, 1996.
2. TERM. The Commencement Date for the Lease was January 1, 1992. The
----
Commencement Date for the Eleventh Floor Space is April 1, 1994. The Termination
Date for the Lease is June 30, 2000. The Termination Date for the Eleventh Floor
Space only shall be June 30, 1996.
3. RENT. The Rent under the original Lease shall remain the same except
----
as adjusted below in this Paragraph 3 and in Paragraph 4; however, beginning
April 1, 1994, the Tenant shall pay in addition to Additional Monthly Base Rent
to agents of Landlord's beneficiaries, Scribcor, Inc. (located at 30 W. Monroe
Street, Chicago, Illinois 60603) or to such other person or at such other place
as Landlord's beneficiaries may direct in writing an amount as Monthly Base Rent
for the Eleventh Floor Space as follows:
PERIOD MONTHLY BASE RENT FOR ELEVENTH FLOOR
------ ------------------------------------
April 1, 1994 to June 30, 1996 $1,846.61
<PAGE>
Monthly Base Rent shall be payable in advance on or before the first day of
each month of the term.
4. TENANT'S PROPORTIONATE SHARE, BASE EXPENSES AND TAXES. Tenant's
-----------------------------------------------------
Proportionate Share as defined on Page 2 of the Lease shall be increased to
19.57% from 14.36%. Base Expenses and Taxes pursuant to Page 2 of the Lease
shall remain at $0.00 per square foot or $0.00 per year. Tenant will pay
Expenses and Taxes in excess of $0.00 per square foot. The increase in Tenant's
Proportionate share shall be effective on April 1, 1994.
5. OCCUPANCY. Tenant may occupy the Eleventh Floor Space anytime after
---------
construction is completed in accordance with the Work Letter attached as Exhibit
A.
6. CONSTRUCTION OF TENANT IMPROVEMENTS. Landlord shall provide at no
-----------------------------------
cost to Tenant the Tenant Improvements described in the Work Letter attached to
this Lease Amendment as Exhibit A.
7. EXTENSION OPTION, EXPANSION SPACE AND RIGHT OF FIRST REFUSAL. The
------------------------------------------------------------
Extension Option, Right of First Refusal and Expansion Space contained in Rider
B of the Lease is hereby amended by adding the following:
A. EXTENSION OPTION
----------------
(a) Subject to the terms and conditions herein set forth,
Tenant shall have the right and option to extend the Lease for the
Eleventh Floor Space for one (1) successive extension term of four (4)
years and zero (0) months ("Extension Option") commencing on July 1,
1996 and ending June 30, 2000 ("Extension Term").
After June 30, 2000, the Eleventh Floor Space shall be treated as part
of the Lease for purposes of extension options.
(b) Tenant shall exercise the Extension Option by written
notice given to Landlord not later than six (6) months prior to the
Termination Date of the Lease. If the Extension Option has not
commenced, the Extension Option and any notice given pursuant to this
paragraph (b) shall forthwith terminate and be of no further force and
effect upon the first occurrence of any of the following events:
(i) this Lease shall terminate prior to June 30, 1996;
(ii) an event of Default shall have occurred and is
existing at the time of the exercise by Tenant of the Extension
Option or any time subsequent to the exercise thereof by Tenant,
but prior to the commencement of the applicable Extension Term of
the Lease; or
2
<PAGE>
(iii) Tenant shall fail to exercise the Extension Option
in the manner herein set forth.
In the event that Tenant exercises the Extension Option in
accordance with the provisions of this subparagraph (b), the Lease for
the Eleventh Floor Space shall be extended for the applicable
Extension Term upon all terms, covenants and conditions contained in
the Lease, except that (i) the word "Term" as used in the Lease shall
mean such Extension Term; (ii) Monthly Base Rent shall be as follows:
PERIOD MONTHLY BASE RENT
------ -----------------
07/01/96 to 06/30/98 $1,742.08
07/01/98 to 06/30/00 $2,438.92
and (iii) the Termination Date thereof shall be the last day of such
Extension Term as stated in paragraph (a) above.
B. EXPANSION SPACE. (a) In addition to the space originally
---------------
leased hereunder, Tenant shall have the option to lease the eighth floor of
the Building, approximately 7,328 rentable square feet. This option shall
be exercised by Tenant giving written notice to Landlord not earlier than
June 1, 1995 and not later than August 20, 1995.
(b) Any option and any notice given pursuant to this
paragraph shall terminate and be of no further force and effect upon
the first occurrence of any of the following events:
(i) the Lease (excluding the Eleventh Floor Space)
terminates prior to the expiration of the Term;
(ii) an event of Default shall have occurred and is
existing at the time of the exercise of the applicable option
under (a) above; and
(iii) Tenant shall fail to exercise the option in (a)
above in the manner set forth above.
(c) In the event that Tenant exercises the option in (a)
above in accordance with the provisions of this paragraph, the
Expansion Space shall be added to the original Term of the Lease upon
all terms, covenants and conditions contained in the Lease except that
Monthly Base Rent shall be as follows:
PERIOD MONTHLY BASE RENT FOR EIGHTH FLOOR
------ ----------------------------------
07/01/96 to 06/30/98 $3,053.33
3
<PAGE>
07/01/98 to 06/30/2000 $4,274.67
Additionally, Tenant's Proportionate Share shall increase proportionately.
8. REAL ESTATE BROKE. Tenant represents and warrants to Landlord,
-----------------
Landlord's beneficiaries and agent that Tenant has dealt directly with and only
with the following real estate brokers, Equis Corporation, 321 N. Clark Street,
Chicago, Illinois and Scribcor, Inc., 30 W. Monroe Street, Chicago, Illinois, as
brokers in connection with this Lease, and that insofar as Tenant knows, no
other broker negotiated or participated in the negotiations of this Lease or
submitted or showed the Premises or is entitled to any commission in connection
therewith. Tenant agrees to indemnify and hold Landlord and Landlord's
beneficiaries and agents harmless from and against any and all claims, demands,
damages, liabilities and expenses of any type or nature whatsoever, including
court costs and attorney fees arising by reason of the breach of the aforesaid
representation and warranty.
9. CONFIRMATION AND REPUBLICATION. As amended hereby, the Lease is
------------------------------
hereby ratified, confirmed and republished, and all of the terms, provisions and
conditions of the Lease, including all extension options and right of first
refusals, shall remain in full force and effect and shall continue to be binding
upon and inure to the benefit of the successors and assigns of each party
hereto.
10. EXCULPATION OF LANDLORD. This Amendment is executed by LaSalle
-----------------------
National Trust, N.A. successor Trustee to LaSalle National Bank, not personally
but as Trustee, in the exercise of the power and authority conferred upon and
vested in it as such Trustee, and under the express direction of the
beneficiaries of a certain Trust Agreement dated November 6, 1985 and known as
Trust Number 110519, to all provisions of which Trust Agreement this Amendment
is expressly made subject. It is expressly understood and agreed that nothing in
this Amendment contained shall be construed as creating any personal liability
upon the Trustee, beneficiaries or their agents, and in particular without
limiting the generality of the foregoing, there shall be no personal liability
to pay any indebtedness accruing hereunder to perform any covenant, agreement,
condition or obligation either expressed or implied, herein contained, or to
keep, preserve or sequester any property of said Trust, and that all personal
liability of said Trustee and said beneficiaries to the extent permitted by law,
of every sort, if any, is hereby expressly waived by security hereunder; and
that so far as the parties hereto are concerned the owner of any indebtedness or
liability accruing hereunder shall look solely to the property from time held
subject to the provisions of said Trust Agreement and any insurance proceed
thereon for the payment thereof.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed, or caused to be
executed by property parties thereunto duly authorized so to do (by its Board of
Directors, if Tenant is a corporation), as of the day and year first above
written.
LANDLORD:
--------
LaSalle National Trust, N.A., Successor Trustee to
LaSalle National Bank, not personally, but as
Trustee under Trust Agreement dated November 6,
1985 and known as Trust No. 110519.
By: /s/ Rosemary Collins
____________________________________
Attest:___________________ Title: Assistant Vice President
_________________________________
TENANT
------
THE PRIVATE BANK AND TRUST COMPANY
10 NORTH DEARBORN STREET
CHICAGO, ILLINOIS 60602
By: /s/ Donald A. Roubitchek
____________________________________
Title: Managing Director and COO
_________________________________
Attest: /s/ Ralph B. Mandell
________________________________
Title: Co-Chairman and CEO
_________________________________
5
<PAGE>
EXHIBIT A
WORK LETTER
DATE: December 28, 1993
----------------------------------
TO: Mr. Don Roubitchek
The Private Bank and Trust Company
Suite 900
10 North Dearborn Street
Chicago, IL 60602
Dear Don:
Concurrently herewith, you ("Tenant") and the undersigned ("Landlord") are
entering into a Lease Amendment of the Premises (the "Lease"). The defined terms
used herein shall have the same meanings as set forth in the Lease. This letter
agreement is the Work Letter described in the Lease. Landlord and Tenant agree
that their respective rights and obligations with respect to the construction of
the Premises are as follows:
1. TENANT'S PLANS AND SPECIFICATIONS
---------------------------------
1.01 Tenant, at Tenant's sole expense, shall cause Tenant's architects and
space planners to prepare and complete finished detailed architectural,
engineering, electrical and mechanical plans including all dimensions and
specifications for all work to be performed in order to complete the
construction of all Tenant's improvements necessary for occupancy in the
Premises ("Tenant's Plans").
1.02 Tenant's Plans have been delivered to Landlord and included as
Schedule A.
1.03 Tenant's Plans are expressly subject to Landlord's prior written
approval, which shall not be unreasonably withheld provided that the Work
required by Tenant's Plans (a) shall not delay completion of Work or the
Commencement Date of the Lease; (b) shall be practicable and consistent with
existing physical conditions in the Building; (c) shall not impair Landlord's
ability to perform any of Landlord's obligations hereunder or under the Lease or
any other lease of space in the Building; (d) shall not affect any portion of
the Building other than the Premises or be incompatible with the Building
systems; and (e) comply with all applicable building laws and ordinances. Upon
such approval, Landlord shall cause Tenant's Plans to be filed, at Landlord's
sole cost and expense, with the governmental agencies having jurisdiction
thereof, in order to obtain all governmental permits and authorizations that may
be required in connection with the Work to be done.
1.04 Without the prior written consent of Landlord, Tenant shall make no
changes to Tenant's Plans after approval thereof by Landlord.
<PAGE>
2. LANDLORD'S PLANS AND SPECIFICATIONS
-----------------------------------
2.01 Landlord, at Landlord's sole expense, shall cause Tenant's Work to be
completed not later than the Commencement Date set forth in the Lease Schedule
or such later date as Landlord and Tenant may agree to. Tenants Work shall be
those improvements approved by Tenant and Landlord which are detailed on
Schedule A. No changes to Tenant's Work may be made by Tenant unless approved by
Landlord.
2.02 Landlord may make such changes in the plans and specifications
described in Paragraph 2 hereof as Landlord may desire, excepting that any such
changes shall not materially and adversely affect Tenant's occupancy.
2.03 Tenant agrees that title to all Work performed in the Premises and
materials installed in the Premises as part of Tenant's Work shall immediately
vest in Landlord except Tenant shall retain title to all removable trade
fixtures installed in the Premises by Tenant.
3. EXTRA WORK
----------
3.01 Tenant may designate substitutions, additional work or extra materials
over and above the Tenant's Work ("Extra Work") to be performed by Landlord
provided that the Extra Work as set forth in Tenant's Plans approved by the
Landlord for such Extra Work (a) shall not delay completion of work; (b) shall
be practicable and consistent with existing physical conditions in the Building
and shall not impair the structural integrity of the Building; (c) shall not
impair Landlord's ability to perform any of Landlord's obligations hereunder or
under the Lease or any other lease of space in the Building; (d) shall not
affect any portion of the Building other than the Premises or be incompatible
with the Building systems; and (e) comply with all applicable building laws and
ordinances. In the event Tenant requests Landlord to perform Extra Work and if
Landlord accedes to such requests Landlord shall submit to Tenant a written
estimate ("Estimate") of the cost of the Work. Within five (5) days after
Landlord's submission of the Estimate, Tenant shall, in writing, either accept
or reject the Estimate. Tenant's failure either to accept or reject the Estimate
with said five (5) day period shall be deemed rejection thereof. In the event
that Tenant rejects the Estimate or the Estimate is deemed rejected, Tenant
shall within five (5) days after such rejection furnish Landlord with necessary
revisions of Tenant's Plans, as to complete construction of the Premises. If the
actual cost of the Extra Work exceeds the Estimate, Tenant agrees to pay such
excess, it being acknowledged that the Estimate is not a guaranty of the cost of
the Extra Work. Estimated cost of the Work shall include a mark up for
Landlord's fee, overhead and profit not to exceed twenty percent (20%).
3.02 In the event that Landlord performs Extra Work hereunder, Tenant shall
pay Landlord within thirty (30) days after billing of the Extra Work.
Thereafter, Tenant shall pay to Landlord as billed by Landlord all such costs
and charges for the Extra Work set forth in such billings. Such billings shall
include a progress claim that summarizes the job to date. Landlord shall have,
in connection with all such billings, all of the rights and remedies granted
under the Lease in connection
2
<PAGE>
with the enforcement of the collection of Rent owing to Landlord thereunder.
Notwithstanding the foregoing, Landlord shall have the right to require Tenant
to deliver to Landlord cash or other security in an amount and form acceptable
to Landlord to be held by Landlord in escrow to assure prompt payment for the
cost of the Extra Work. Based upon the drawings submitted to date, Landlord is
not requiring an escrow.
4. COMPLETION - PUNCH LIST
-----------------------
When Landlord is of the opinion that the Tenant's Work is substantially
complete, then Landlord shall so notify Tenant. Tenant agrees that upon such
notification, Tenant will promptly (and not later than five business days after
the date of Landlord's said notice) inspect the Premises and furnish to Landlord
a written statement that the Tenant's Work has been substantially completed as
required by the provisions of this Work Letter and the Lease, with the exception
of certain specified and enumerated items, if any (hereinafter referred to as
the "Punch List"). Tenant agrees that at the request of Landlord from time to
time thereafter, Tenant will promptly furnish to Landlord revised Punch Lists
reflecting any completion of any prior Punch List items. It is mutually agreed
that if the Punch List or any revised Punch List consists only of items, the
non-completion of which would not materially impair Tenant's occupancy of the
Premises, then, in such event, the Premises shall be deemed to be complete and
Tenant will acknowledge in writing that the Premises are complete and accept
possession of the Premises; provided, however, that such acknowledgment or
acceptance shall not relieve Landlord of its obligations to complete all such
Punch List items. Any disputes as to the nature or existence of any Punch List
items or as to the completion of Tenant's Work will be resolved by Eckenhoff
Saunders Architects, Inc. (ESA). The decision of ESA will be final and binding
upon Landlord and Tenant. The date which is the earlier of either (a) the date
on which Tenant acknowledges that the Tenant's Work in Premises is complete, or
(b) the date on which the Premises was complete pursuant to the provisions of
this Section 5 is referred to as the "Completion Date".
5. POSSESSION - EXTENSION AND MODIFICATION OF TERM
-----------------------------------------------
5.01 Tenant will take possession of the Premises on the Completion Date.
Landlord agrees to use its best efforts to have the Premises substantially ready
for occupancy on the date specified in the Lease Schedule. Notwithstanding the
foregoing, there shall be no abatement of Rent if the Tenant's Work is not
substantially complete due to any special equipment, fixtures or materials,
changes, alterations or additions requested by Tenant; any delay by Tenant in
submitting plans, supplying information or approving or authorizing plans,
specifications, estimates or other matters, or any other act or omission of
Tenant.
6. TENANT'S ENTRY PRIOR TO COMPLETION OF TENANT'S WORK
---------------------------------------------------
Landlord may permit Tenant or its contractors to enter the Premises at
Tenant's sole risk in order to perform work required by Tenant to make the
Premises ready for Tenant's occupancy. The foregoing license to enter prior to
the Completion Date, however, is conditioned upon Tenant or Tenant's contractors
not interfering with Landlord's contractors and/or with any other tenant or its
3
<PAGE>
contractors. If at any time such entry shall cause disharmony, interference or
union disputes of any nature whatsoever, or if Landlord shall, in Landlord's
sole judgment, determine that such entry, such work or the continuance thereof
shall interfere with, hamper or prevent Landlord from proceeding with work on or
in the Building or the Premises at the earliest possible date, this license may
be withdrawn by Landlord immediately upon written notice to Tenant. Such entry
shall be deemed to be under and subject to all of the terms, covenants, and
conditions of the Lease and Tenant shall comply with all of the provisions of
the Lease which are the obligations or covenants of Tenant except that the
obligation to pay Rent shall not commence until the Completion Date or as
otherwise provided for in the Lease. In the event that Tenant's contractors
incur any charges from Landlord, including but not limited to charges for use of
construction or hoisting equipment on the Building site, then and in that event,
such charges shall be deemed an obligation of Tenant and shall be collectible as
Rent pursuant to the Lease and upon default in payment thereof Landlord shall
have the same remedies as for a default in payment of Rent pursuant to the
Lease.
7. LANDLORD'S ENTRY AFTER COMPLETION
---------------------------------
At any time after the Completion Date with Tenant's prior consent, Landlord
may enter the Premises to complete unfinished details of the Work and such entry
by Landlord, its agents, servants, employees or contractors for such purpose
shall not constitute an actual or constructive eviction, in whole or in part, or
entitle Tenant to any abatement or diminution of Rent, or relieve Tenant from
any of its obligations under the Lease, or impose any liability upon Landlord or
its agent, provided, however, that this does not interfere with tenants
completions of work. Said entry shall in no way interfere with the conduct of
Tenant's business.
8. EXCULPATORY CLAUSE
------------------
The Landlord's Exculpatory Clause which is set forth in Paragraph 9 of the
Lease Amendment is incorporated herein by reference.
9. BENEFICIARY
-----------
The beneficiary of Landlord under the Lease, for the purposes this Work
Letter, shall be authorized to act on behalf of Landlord.
4
<PAGE>
LANDLORD:
--------
LaSalle National Trust, N.A., Successor Trustee to
LaSalle National Bank, not personally, but as
Trustee under Trust Agreement dated November 6,
1985 and known as Trust No. 110519.
By: /s/ Rosemary Collins
___________________________________
Attest:__________________ Title: Assistant Vice President
________________________________
TENANT
------
THE PRIVATE BANK AND TRUST COMPANY
10 NORTH DEARBORN STREET
CHICAGO, ILLINOIS 60602
By: /s/ Donald A. Roubitchek
___________________________________
Title: Managing Director and COO
________________________________
Attest: /s/ Ralph B. Mandell
_______________________________
Title: Co-Chairman and CEO
________________________________
5
<PAGE>
SCHEDULE A - TENANT'S WORK
--------------------------
1. Paint entire Eleventh Floor Space.
2. Carpet entire Eleventh Floor Space in carpet mutually agreeable to Landlord
and Tenant.
<PAGE>
SECOND AMENDMENT TO LEASE
-------------------------
THIS SECOND AMENDMENT TO LEASE ("SECOND AMENDMENT") is made as of this 1st
day of June, 1996, by and between GENERAL AMERICAN LIFE INSURANCE COMPANY, a
Missouri corporation ("LANDLORD") and THE PRIVATEBANK AND TRUST COMPANY, an
Illinois corporation (herein referred to as "TENANT").
W I T N E S S E T H:
WHEREAS, LaSalle National Bank, not personally, but as Trustee under a
Trust Agreement dated November 6, 1985 and known as Trust No. 110519 ("LASALLE
TRUST"), as landlord, and Tenant entered into a certain lease dated as of
January 1, 1992 (herein referred to as the "ORIGINAL LEASE") for the premises
commonly known as the 9th and 10th Floors, Suites 900 and 1000, in the building
located at Ten North Dearborn Street, Chicago, Illinois (the "BUILDING"); and
WHEREAS, LaSalle Trust and Tenant entered into a First Amendment to Lease
dated December 28, 1993 (the "FIRST AMENDMENT") for the premises commonly known
as Suite 1107 (the "11TH FLOOR SPACE") in the Building (the Original Lease and
the First Amendment are hereinafter collectively referred to as the "LEASE");
and
WHEREAS, Landlord is the successor in interest to the LaSalle Trust; and
WHEREAS, Landlord and Tenant desire to further amend the Lease pursuant to
the terms, provisions and agreements herein set forth.
NOW, THEREFORE, IN CONSIDERATION OF THE MUTUAL COVENANTS AND AGREEMENTS
HEREIN SET FORTH, Landlord and Tenant hereby covenant and agree as follows:
<PAGE>
1. Premises and Rentable Area. All references in the Lease to the
--------------------------
premises are deleted and the following is substituted in lieu thereof.
The premises shall consist of the 9th and 10th floors of the Building (the
"9TH FLOOR SPACE" and the "10TH FLOOR SPACE") which, together contain
11,532 rentable square feet, and the 8th floor of the Building (the "8TH
FLOOR SPACE") which contains 7,328 rentable square feet. The 8th Floor
Space, the 9th Floor Space and the 10th Floor Space are collectively
referred to as the "PREMISES."
2. Termination Date. The Termination Date of June 30, 2000 under the
----------------
Original Lease with respect to the 9th Floor Space and 10th Floor Space, and the
Termination Date of June 30, 1996 under the First Amendment with respect to the
11th Floor Space, are hereby deleted and the following is substituted in lieu
thereof.
The Termination Date of the 11th Floor Space shall be upon substantial
completion of Tenant's Work (as defined in the Work Letter attached hereto)
to the 8th Floor Space. The date of substantial completion shall be
confirmed in writing by Landlord and Tenant, but in no event shall such
date of substantial completion be later than ninety (90) days after
possession of the 8th Floor Space is delivered by Landlord to Tenant.
The Termination Date of the Lease for the 8th Floor Space, the 9th Floor
Space and the 10th Floor Space shall be the last day of the calendar month
which is ten (10) years and three (3) months after Landlord has delivered
to Tenant possession of the 8th Floor Space, such date to be confirmed in
writing by Landlord and Tenant at the same time that the parties confirm
the date of substantial completion of the Tenant's Work to the 8th Floor
Space.
3. Rent. The references in the Lease Schedule at the beginning of the
----
Original Lease and in paragraph 3 of the First Amendment to Rent, Monthly Base
Rent, Minimum Monthly Base Rent, Additional Monthly Base Rent and Maximum
Monthly Base Rent are hereby deleted and the following is substituted in lieu
thereof:
a. Tenant shall pay monthly base rent ("BASE RENT") for the 11th
Floor Space at the rate of $1,846.61 per month, until the 8th Floor Space
is substantially completed, at which time Tenant shall vacate the 11th
Floor Space.
2
<PAGE>
b. Commencing June 1, 1996 and on the first day of each and every
month thereafter, Tenant shall pay, in advance, Base Rent for the 9th Floor
Space and 10th Floor Space in the following amounts:
MONTHLY
----------
TIME PERIOD BASE RENT
----------- ----------
June 1, 1996 to May 31, 1997 $ 8,649.00
June 1, 1997 to May 31, 1998 $ 9,129.50
June 1, 1998 to May 31, 1999 $ 9,610.00
June 1, 1999 to May 31, 2000 $10,090.50
June 1, 2000 to May 31, 2001 $10,571.00
June 1, 2001 to May 31, 2002 $11,051.50
June 1, 2002 to May 31, 2003 $11,532.00
June 1, 2003 to May 31, 2004 $12,012.50
June 1, 2004 to May 31, 2005 $12,493.00
June 1, 2005 to Termination Date $12,973.50
c. Commencing on the first day of the calendar month after Tenant
has substantially completed Tenant's Work (as defined in the Work Letter
attached hereto), but in no event later than the first day of the third
(3rd) calendar month after Landlord delivers possession of the 8th Floor
Space to Tenant, and on the first of each month thereafter, Tenant shall
pay, in advance, Base Rent for the 8th Floor Space in the following
amounts:
3
<PAGE>
MONTHLY
---------
TIME PERIOD BASE RENT
----------- ---------
First day of the calendar month after substantial $5,496.00
completion of Tenant's Work, but in no event later than
the first day of the third (3rd) calendar month after
Landlord delivers possession of the 8th Floor Space to
Tenant, to May 31, 1997
June 1, 1997 to May 31, 1998 $5,801.33
June 1, 1998 to May 31, 1999 $6,106.66
June 1, 1999 to May 31, 2000 $6,412.00
June 1, 2000 to May 31, 2001 $6,717.33
June 1, 2001 to May 31, 2002 $7,022.66
June 1, 2002 to May 31, 2003 $7,328.00
June 1, 2003 to May 31, 2004 $7,633.33
June 1, 2004 to May 31, 2005 $7,938.66
June 1, 2005 to Termination Date $8,244.00
d. Tenant shall pay Additional Monthly Rent, as defined in paragraph
4(A)(2) of the Original Lease, for the Premises commencing June 1, 1996.
Nothing herein shall release or waive Tenant's obligation to pay Tenant's
Proportionate Share of Taxes and Expenses for the 9th Floor Space and the
10th Floor Space due prior to June 1, 1996.
4. Tenant's Proportionate Share. Before substantial completion of the
----------------------------
8th Floor Space, all references to Tenant's Proportionate Share in the Original
Lease and in the First Amendment shall remain as therein provided. After
substantial completion of Tenant's Work to the 8th Floor Space, Tenant's
Proportionate Share shall be twenty-three and forty-nine one hundredths percent
(23.49%).
5. Agent for Landlord and Place of Payment of Rent. All references in
-----------------------------------------------
the Lease to payment of Rent or Additional Rent to Scribcor, Inc. are hereby
deleted and the following is substituted in lieu thereof:
4
<PAGE>
Frain, Camins & Swartchild, Inc.
300 West Washington Street
Suite 900
Chicago, Illinois 60606
6. Construction of Tenant Improvements and Early Occupancy. Tenant shall
-------------------------------------------------------
accept possession of the 8th Floor Space in its As Is-Where Is condition and
shall, at Tenant's sole cost and expense, cause Tenant's Work, as defined in the
Work Letter attached hereto, to be completed. Tenant shall have the right to
occupy the 8th Floor Space as soon as the interior portion construction is
completed. Payment of Base Rent for the 8th Floor Space shall commence when the
Tenant's Work is substantially completed, but in no event shall the date of
commencement for payment of Base Rent be later than the first day of the third
(3rd) calendar month after Landlord has delivered possession of the 8th Floor
Space to Tenant.
7. Landlord Contribution to Tenant Work. Within ten (10) days after
------------------------------------
Tenant provides to Landlord paid receipts and contractor's waivers of lien with
respect to the Tenant Work on the 8th Floor Space, Landlord shall reimburse
Tenant for the amount of such receipts, but not more than Seventy-Three Thousand
Two Hundred Eighty and No/100 Dollars ($73,280.00).
8. Rent Definitions. Paragraph 4(A)(7) of the Original Lease is amended
----------------
by adding the following additional provision:
Landlord's customary accounting and management principles shall mean that
if less than 95% of the Building is occupied, then the amount of Expenses
shall be increased to an amount equal to what normally would have occurred
had occupancy been 95%. Landlord will not knowingly collect from all
tenants in the Building more than 95% of the actual costs incurred to
operate the Building and in no event shall Tenant be liable for more than
its grossed up proportionate share of Expenses.
Landlord further agrees that with respect to any item of the Expenses which
is reasonably anticipated to cost more than $7,500 per annum, Landlord
will, upon request from Tenant, obtain bids from three (3) vendors of such
service who are
5
<PAGE>
satisfactory to Landlord, in Landlord's sole discretion, and Landlord shall
select the lowest bid from those vendors.
9. Contesting Taxes. Paragraph 4(A)(8) of the Original Lease is amended
----------------
by adding the following additional provisions:
Landlord agrees that it will contest Taxes on a regular basis using such
tax advisors or attorneys as Landlord shall select in Landlord's sole
discretion. Upon written request from Tenant, Landlord will provide Tenant
with a photocopy of the most recent bill for Taxes and the most recent
notice of any assessment for Taxes.
10. Additional Monthly Rent for Expenses and Taxes. Paragraph 4(D)(1) of
----------------------------------------------
the Original Lease is amended by adding the following additional provision:
So long as Tenant's net worth, as disclosed by Tenant's financial
statement, is equal to or greater than its net worth as disclosed by
Tenant's financial statement dated December 31, 1995, Tenant shall not be
required to deposit one-twelfth (1/12th) of Tenant's Proportionate Share of
Taxes, but shall pay Tenant's Proportionate Share of Taxes within seven (7)
business days after receipt of an invoice therefrom from Landlord, but not
earlier than fifteen (15) days prior to the date that Taxes are due to the
taxing authorities.
11. Limitations on Billing for Expenses. Paragraph 4(D)(3) of the
-----------------------------------
Original Lease is amended by adding the following additional provision:
If Landlord does not submit to Tenant the Adjustment Statement for an
Adjustment Year within one (1) year after the end of an Adjustment Year,
then Landlord's right to require Tenant to pay Additional Monthly Rent for
the Adjustment Year shall be deemed waived.
12. Tenants Right to Audit Expenses and Taxes. Paragraph 4(D)(4) of the
-----------------------------------------
Original Lease is amended by deleting, in the fourth line thereof, the words:
"Ninety (90)" and substituting in lieu thereof "Sixty (60)" and by deleting in
the thirteenth line thereof the words "One Hundred Eighty (180)" and
substituting in lieu thereof "Ninety (90)".
6
<PAGE>
13. Condition of Premises. Paragraph 7 of the Original Lease is amended
---------------------
by adding the following additional provision:
Landlord represents that Landlord has received no written notice that the
Building contains any toxic or hazardous substances or that any of the
construction materials used in the Building contain any toxic or hazardous
substances except as may be disclosed by the Phase I Environmental Report
dated November 22, 1995, as prepared by Boelter Environmental Consultants.
In the event Landlord is required to remove any hazardous waste from the
Building, such removal shall be at Landlord's sole cost and expense.
Landlord further represents and warrants that it has not received any
written notice that the Building is not in compliance with all applicable
statutes, ordinances, rules and regulations and Landlord shall be
responsible for compliance if notices of violations are received in the
future, except with respect to those violations which are the result of
Tenant's sole conduct. Compliance with applicable statutes, ordinances,
rules and regulations shall include, but not be limited to obligations of
Landlord under the Americans with Disabilities Act.
14. Leasehold Improvements, Alterations. Paragraph 10 of the Original
-----------------------------------
Lease is amended by adding the following additional provisions:
(d) In the event any alterations, improvements, additions or
installations do not affect the mechanical or electrical systems of the
Building, and do not involve any structural changes, such as new walls or
the ceiling, and the aggregate costs of such alterations, improvements,
additions and installations does not exceed $50,000 ("Minor Changes"), then
Landlord agrees that Landlord consent required under subparagraph 10(a)
above shall not be required, provided Tenant provides notice to Landlord of
the Minor Changes.
(e) Tenant shall have the right to install an internal stairway
between the 9th Floor Space and the 8th Floor Space and between any other
floors of the Building if Tenant occupies both floors in their entirety
(the "Stairway") provided (i) the plans and specifications for any such
Stairway is approved by Landlord as provided in this Paragraph 10 and (ii)
not less than fifteen (15) days prior to the Termination Date Tenant
removes each such Stairway and restores the floor where removed.
7
<PAGE>
15. Transfer of Tenant's Interest. Paragraph 12(a) of the Original Lease
-----------------------------
is amended in the sixteenth (16th) line thereof by deleting the last four words
in such line and substituting in lieu thereof the following:
"in such event and prior to June 1, 2001, Landlord"
16. Right of Tenant to Perform. Paragraph 23 of the Original Lease is
--------------------------
amended in the seventh (7th) line thereof by deleting the words "thirty (30)
days" and substituting in lieu thereof:
"five (5) consecutive business days"
Said Paragraph 23 is further amended by inserting, in the twelfth (12th)
line after the word "Lease", the following provisions:
If such failure on Landlord's part continues for a period of ninety (90)
days, then Tenant may, upon thirty (30) days' written notice, during which
Landlord may cure such failure, terminate this Lease, provided that if
Landlord cures such failure within said thirty (30) days, Tenant shall not
have the right to terminate this Lease pursuant to this paragraph, and
further provided that Tenant gives such notice of failure within six (6)
months after the date of Landlord's failure. Failure to give such notice
within six (6) months of Landlord's having first failed to take such action
shall only be deemed to be a waiver of Tenant's right to terminate the
Lease pursuant to this paragraph, but Tenant shall retain all other rights
and remedies herein contained by reason of Landlord's failure.
17. Notices. Paragraph 26 of the Original Lease is deleted in its
-------
entirety and the following is substituted in lieu thereof:
All notices, demands and other communications given, made or sent by
either party hereto shall be in writing and shall be deemed to have been
fully given, made or sent when made by personal service or deposited in the
United States mail, certified or registered, postage prepaid and properly
addressed as follows:
To Landlord: General American Life Insurance Company
700 Market Street
St. Louis, Missouri 63166
Attention: Conning Asset Management - Mortgage
Loan and Real Estate
8
<PAGE>
With a Copy to: Frain Camins & Swartchild, Inc.
300 West Washington Street - Suite 900
Chicago, Illinois 60606
To Tenant: The PrivateBank and Trust Company
10 North Dearborn Street - Suite 100
Chicago, Illinois 60602
Attention: Donald A. Roubitchek
With a Copy to: Spitzer, Addis, Susman & Krull
100 West Monroe Street - Suite 1500
Chicago, Illinois 60603
Attention: David H. Addis, Esq.
18. Security Deposit. Paragraph 27 of the Original Lease is deleted in
----------------
its entirety and the following is substituted in lieu thereof:
a. Tenant has heretofore deposited with Landlord's predecessor the
sum of $165,376.00 as and for a security deposit ("SECURITY DEPOSIT").
Landlord represents to Tenant that Landlord did not receive payment of
Tenant's Security Deposit when Landlord acquired title to the Building.
Tenant agrees that Landlord has no obligation to Tenant with respect to the
Security Deposit but nothing herein shall be deemed to waive, release or
otherwise impair Tenant's right to recover the Security Deposit from
Landlord's predecessor and Tenant shall be the only party hereto with the
right to recover the Security Deposit from the Landlord under the Original
Lease.
b. Landlord agrees that so long as Tenant's net worth, as reported by
Tenant to the Federal Deposit Insurance Corporation, or any other
appropriate governmental agency to whom Tenant reports net worth ("FDIC"),
is more than $5 million, no Security Deposit shall be required. In the
event Tenant's net worth, as reported by Tenant to the FDIC shall be less
than $5 Million, then Tenant shall deliver to Landlord a Security Deposit
in the amount of $9,000.00 for each $1 Million or a portion thereof that
Tenant's net worth is below $5 Million. For example, if Tenant's net worth
as reported to the FDIC is between $4 Million and $5 Million, then the
amount of the Security Deposit shall be $9,000.00. If Tenant's' net worth
reported to the FDIC is between $3 Million and $4 Million, then the
Security Deposit shall be $18,000.00.
c. The Security Deposit, if any, shall be held by Landlord in a non-
interest bearing account as security for the full and faithful performance
of every provision of this Lease to be performed by Tenant. If Tenant
defaults with respect
9
<PAGE>
to any provision of this Lease, including but not limited to the provisions
relating to payment of Base Rent or Tenant's Proportionate Share, Landlord
may use, apply or retain all or any part of the Security Deposit for
payment of any Base Rent or Tenant's Proportionate Share or any other sum
in default or for payment of any other amount which Landlord may spend or
become obligated to spend by reason of Tenant's default or to compensate
Landlord for any other loss or damage which Landlord may suffer by reason
of Tenant's default. If any portion of any security deposit is so used or
applied, Tenant shall, within five (5) five days after written demand
therefore, deposit with Landlord an amount sufficient to restore the
Security Deposit to the amount required to be deposited under the
provisions of this Lease. Tenant's failure to restore the Security Deposit
shall be a material breach of this Lease. Except as may be required by law,
Landlord shall not be required to keep any Security Deposit in a segregated
fund or separate from general funds.
d. If Tenant shall fully and faithfully perform every provision of
this Lease to be performed by it, the Security Deposit, or any balance
thereof, shall be returned to Tenant (or at Landlord's option to the last
assignee of Tenant's interest hereunder) within thirty (30) days after the
Termination Date, provided Tenant has vacated the premises. In the event
Landlord sells its interest in the Building, Landlord may deliver the
Security Deposit to the purchaser of Landlord's interest in the Building
and thereupon Landlord shall be discharged from any further liability with
respect to the Security Deposit and Tenant agrees to look solely to the
purchaser of Landlord's interest in the Building for the return of the
Security Deposit provided the new owner acknowledges receipt of the
Security Deposit and agrees to be bound by the provisions hereof. Tenant
further agrees not to look to any mortgagee, as mortgagee, mortgagee in
possession or successor in title to the Building, for the Security Deposit
unless such Security Deposit has actually been received by said mortgagee
as security for Tenant's performance of the provisions of this Lease.
Nothing herein shall be construed to limit the amount of damages
recoverable by Landlord because of Tenant's default or limit Landlord's
remedies to the Security Deposit.
19. Rights Reserved to Landlord. Paragraph 28(1) of the Original Lease is
---------------------------
deleted in its entirety and the following substituted in lieu thereof:
1. To change the Building's street address or number of the Premises;
provided Landlord will not name the Building with the name of a company,
firm or other entity without Tenant's consent; provided further that
Landlord reserves the right to name the Building using Landlord's name;
10
<PAGE>
20. Miscellaneous. Paragraph 30 of the Original Lease is amended by
-------------
adding the following additional provision:
J. Landlord's Liability. Notwithstanding anything in this Lease to the
--------------------
contrary, the covenants, undertakings and agreements herein made on the
part of Landlord are made and intended not as personal covenants,
undertakings and agreements for the purpose of binding either Landlord or
any successor owner or the officers, directors, shareholders or partners
thereof or the agents or employees of any of them personally, or the assets
of either Landlord or any successor owner or the officers, directors,
shareholders or partners thereof or the agents or employees of any of them,
but solely for the purpose of binding Landlord's and such successor owner's
interest in the Building. No personal liability is assumed by, nor shall at
any time be asserted or enforceable against, Landlord or any successor
owner or their respective successors or assigns or the officers, directors,
shareholders or partners thereof or the agents or employees of any of them
on account of this Lease, by reason of any covenant, undertaking or
agreement of Landlord in this Lease contained except with respect to any
Security Deposit actually received by or credited to Landlord from Tenant.
It is expressly understood that the liability of Landlord, or any successor
owner is intended to refer only to the Building of which the leased
premises are a part and to no other property or asset of Landlord, any
successor owner, or the officers, directors, shareholders or partners
thereof or the agents or employees of any of them.
21. Lease Renewal Option. Paragraphs 1(a) and 1(b) of Rider B to the
--------------------
Original Lease are deleted in their entirety and the following is substituted in
lieu thereof:
a. First Option to Extend. Subject to the terms and conditions
----------------------
herein set forth, Tenant shall have the right to extend the Lease for an
additional term of five (5) years ("FIRST EXTENSION OPTION"). So long as
Tenant is not in default under this Lease in any respect, either on the day
of exercise of the First Extension Option or on the day of commencement of
the First Extension Term (as hereinafter defined), then Tenant shall have
the right, upon giving written notice to Landlord on or before June 1,
2005, to extend the term of this lease for a period of five (5) years (the
"FIRST EXTENDED TERM"). If Tenant does not give such written notice on or
before June 1, 2005, then Tenant shall be deemed to have waived its right
to the First Extension Option. The First Extended Term shall commence on
the Termination Date and shall terminate on the last day of the calendar
month which is five (5) years after the Termination Date. Rent during the
First Extended Term shall be 95% of the Prevailing Market Rent as
determined in accordance with subparagraph (c) below or Paragraph 4 below.
11
<PAGE>
b. Second Option to Extend. In the event Tenant has exercised
-----------------------
Tenant's First Extension Option, Tenant shall have the right to extend the
Lease for an additional term of five (5) years ("SECOND EXTENSION OPTION").
So long as Tenant is not in default under this Lease in any respect either
on the day of exercise of the Second Extension Option or on the
Commencement of the Second Extended Term (as hereinafter defined), then
Tenant shall have the right to extend the Lease for an additional term of
five (5) years (the "SECOND EXTENDED TERM") by giving written notice to
Landlord on or before June 1, 2010. If Tenant has the right to give notice
for the Second Extension Option and does not give such notice on or before
June 1, 2010, then Tenant shall be deemed to have waived its right to the
Second Extension Option. The Second Extended Term shall commence on the
last day of the First Extended Term and shall terminate on the last day of
the calendar month which is ten (10) years after the Termination Date. Rent
during the Second Extended Term shall be 95% of Prevailing Market Rent as
determined pursuant to subparagraph (c) hereof or Paragraph 4 below.
c. The First Extended Term and Second Extended Term are hereinafter
referred to collectively as the "EXTENDED TERM". All of the terms and
provisions of this Lease shall be applicable during the Extended Term,
including but not limited to Tenant's obligation to pay its Prorata Share
of Expenses and Taxes.
22. Right of First Offer. Paragraph 2(a) of Rider B to the Original Lease
--------------------
is hereby deleted in its entirety and the following is substituted in lieu
thereof:
Landlord agrees that if at any time during the term of the Lease or the
Extended Term, any space in the Building which is currently under Lease
becomes available for lease, subject to presently existing tenant's present
rights of first refusal, present rights for extension or present expansion
options, Landlord shall notify Tenant in writing of such available space
and the terms upon which such available space is being offered by Landlord
to prospective tenants. Tenant shall, within fifteen (15) business days
from the date of such notification from Landlord, notify Landlord whether
Tenant is willing to accept such available space upon the terms which
Landlord has offered except that the termination date on such offered space
shall be the same, as the Termination Date under the Lease, including the
Extended Term. If Tenant shall fail to respond to Landlord within said ten
(10) day period or if Tenant shall advise Landlord that it does not wish to
lease such offered space, Landlord shall have the right to lease such
offered space upon such terms and conditions as Landlord shall determine in
Landlord's sole discretion, even though such terms and conditions may be
different than that offered to Tenant, without reoffering such offered
space to Tenant, except that if the base rent shall be ten percent (10%)
less than the base rent offered to Tenant, then Landlord will reoffer the
space to Tenant. Landlord agrees that between the date hereof and December
31, 1998, Landlord will not lease the
12
<PAGE>
6th floor of the Building for a term which expires after December 31, 2001
and any such lease of the 6th floor of the Building prior to December 31,
1998, shall not contain any option to extend after December 31, 2001.
Landlord further agrees not to lease the 6th floor of the Building for a
term longer than five (5) years with an option to extend or renew.
Landlord further agrees that if Tenant leases any space on floors 3, 6 or 7
of the Building pursuant to the provisions of this paragraph, Landlord will
reimburse Tenant for improvements made by Tenant to such space in an amount
not to exceed Five Dollars ($5.00) per square foot.
23. Modification of Right of First Offer. Paragraph 2(b) of Rider B to
------------------------------------
the Original Lease is amended by deleting clause (i) and substituting in lieu
thereof the following:
(i) Upon the expiration of the Term or the Extended Term of the
Lease,
24. Expansion Space. Paragraph 3 of the Rider B to the Original Lease is
---------------
deleted in its entirety.
25. First Amendment. The First Amendment shall remain in full force and
---------------
effect until such time as the Tenant Work on the 8th Floor Space is
substantially completed, at which time Tenant shall vacate the 11th Floor Space
and all of the provisions of the First Amendment shall no longer be in effect.
26. Signage. Tenant shall have the right to install one (1) prominent
-------
exterior sign on one side of the entrance to the Building (signage for all other
tenants in the Building to be on the other side of the entrance to the Building)
and one (1) sign in each elevator of the Building, the design, size and
placement of which signs shall be subject to the Landlord's written approval,
which approval shall not be unreasonably withheld. So long as Tenant remains the
largest tenant in the Building, no other tenant shall have the right to install
a sign which is larger than Tenant's sign at the entrance to the Building.
13
<PAGE>
27. Agents. Tenant represents and warrants to Landlord that the only real
------
estate broker which represented Tenant in connection with this Second Amendment
is Equis Corporation. Landlord agrees to pay to Equis Corporation a commission
in the amount of Ninety Nine Thousand and Seven Hundred Thirty and NO/100
Dollars ($99,730.00). Any other or additional broker's fees or commissions for
any real estate broker or consultant acting on behalf of Tenant shall be paid by
Tenant.
IN WITNESS WHEREOF, Landlord and Tenant, by their duly authorized
representatives, have executed this Second Amendment to Lease this day and year
first above written.
GENERAL AMERICAN LIFE THE PRIVATEBANK AND TRUST
INSURANCE COMPANY, A MISSOURI COMPANY, AN ILLINOIS BANKING
CORPORATION CORPORATION
BY: /s/ William L. Frields BY: /s/ Donald A. Roubitchek
-------------------------- --------------------------
ITS: Vice President ITS: Managing Director and COO
------------------------- --------------------------
ATTEST: ATTEST:
BY: /s/ Sandra F. Schmidt BY: /s/ Gail Carpenter
-------------------------- --------------------------
ITS: Assistant Secretary ITS: Assistant Secretary
------------------------- -------------------------
14
<PAGE>
EXHIBIT A
---------
WORK LETTER
-----------
TO: Mr. Don Roubitchek
The Private Bank and Trust Company
10 North Dearborn Street - Suite 900
Chicago, Illinois 60602
Dear Don:
Concurrently herewith, you ("Tenant") and the undersigned ("Landlord") are
entering into a Second Amendment to Lease (the "Second Amendment") which
relates, in part, to Tenant making improvements to the 8th Floor space of the
Building (the "Premises"). The defined terms used herein shall have the same
meanings as set forth in the Second Amendment and this letter agreement is the
Work Letter described therein. Landlord and Tenant agree that their respective
rights and obligations with respect to the construction of the 8th Floor Space
are as follows:
1. TENANT'S PLANS AND SPECIFICATIONS
---------------------------------
1.01 Tenant, at Tenant's sole expense, shall cause Tenant's architects and
space planners ("Tenant's Architect") to prepare and complete finished detailed
architectural, engineering, electrical and mechanical plans including all
dimensions and specifications for all work to be performed in order to complete
the construction of all improvements which Tenant desires for occupancy in the
8th Floor Space ("Tenant's Plans").
1.02 Tenant's Plans will be delivered to Landlord as soon as possible.
Failure of Tenant to deliver Tenant's Plans to Landlord will not relieve Tenant
from the obligation to vacate the 11th Floor Space or to commence paying Base
Rent for the 8th Floor Space within the time limits stated in the Lease.
<PAGE>
1.03 Tenant's Plans are expressly subject to Landlord's prior written
approval, which shall not be withheld provided that the construction required by
Tenant's Plans ("Tenant's Work") (a) shall be practicable and consistent with
existing physical conditions in the Building; (b) shall not impair Landlord's
ability to perform any of Landlord's obligations hereunder or under the Lease or
any other lease of space in the Building; (c) shall not affect any portion of
the Building other than the Premises or be incompatible with the Building
systems; and (d) shall comply with all applicable building laws and ordinances.
Upon such approval, Tenant will cause Tenant's Plans to be filed, with the
governmental agencies having jurisdiction thereof, in order to obtain all
governmental permits and authorizations that may be required in connection with
the Tenant's Work. Landlord agrees to review Tenant's Plans within five (5)
business days after receipt of a complete copy thereof and to respond, as
appropriate, within said time.
1.04 Without the prior written consent of Landlord, Tenant shall make no
material changes to Tenant's Plans after approval thereof by Landlord.
2. COMPLETING TENANT'S WORK
------------------------
2.01 As soon as practicable after Tenant's Plans have been approved and
Tenant has obtained all required governmental permits and authorizations, Tenant
shall, in accordance with the requirements of Paragraph 10 of the Original Lease
(as those words are defined in the Second Amendment) proceed to do all of the
construction, alterations, improvements, additions and installations to the 8th
Floor Space as provided in Tenant's Plans.
2.02 Tenant agrees that title to all structural and permanent
installations, such as electrical wiring and fixtures, HVAC equipment, duct
work, plumbing pipe and fixtures, insulation, walls, doors, and similar items
which are part of Tenant's Work performed in the Premises and to all
2
<PAGE>
materials installed in the Premises as part of Tenant's Work shall immediately
vest in Landlord. Tenant shall retain title to all removable trade fixtures
installed in the Premises by Tenant.
3. SUBSTANTIAL COMPLETION
----------------------
When Tenant is of the opinion that the Tenant's Work is substantially
complete, then Tenant shall so notify Landlord and the parties shall sign an
appropriate letter confirming the Date of Substantial Completion, the date for
the commencement of Base Rent for the 8th Floor Space, and the date which will
constitute the Termination Date under the Lease. Any disputes as to whether
there has been substantial completion shall be resolved by Tenant's Architect.
The decision of Tenant's Architect will be final and binding upon Landlord and
Tenant. The date which is the earlier of either (a) the date on which Tenant
acknowledges that the Tenant's Work in the Premises is substantially complete,
or (b) the date on which Tenant commences business operations from the 8th Floor
Space is referred to as the "Date of Substantial Completion," but in no event
shall the Date of Substantial Completion be later than ninety (90) days after
Landlord has delivered possession of the 8th Floor Space to Tenant.
4. TENANT'S ENTRY TO 8TH FLOOR SPACE
---------------------------------
Landlord shall deliver possession of the 8th Floor Space to Tenant as soon
as the current tenant has vacated the same. Landlord hereby permits Tenant or
its contractors to enter the 8th Floor Space at Tenant's sole risk in order to
perform Tenant's Work as required by Tenant and to make the 8th Floor Space
ready for Tenant's occupancy. Such entry shall be deemed to be under and subject
to all of the terms, covenants, and conditions of the Lease and Tenant shall
comply with all of the provisions of the Lease, including but not limited to
paragraph 10 of the Original Lease, except that Tenant's obligation to pay Basic
Rent shall not commence until the first day of the calendar
3
<PAGE>
month after the Date of Substantial Completion but in no event later than ninety
(90) days after Landlord has delivered possession of the 8th Floor Space to
Tenant or as otherwise provided for in the Lease. Any charges by Landlord for
special services in excess of services provided by Landlord in the ordinary
course of Landlord's operation of the Building, including but not limited to
charges for use of construction or hoisting or elevator equipment on the
Building, shall be made to Tenant's Contractor and shall be deemed an obligation
of such Contractor and the failure of such Contractor to pay shall not be a
default in payment of Rent pursuant to the Lease.
5. EXCULPATORY CLAUSE
------------------
The Landlord's Exculpatory Clause which is set forth in Paragraph 14 of the
Second Amendment is incorporated herein by reference.
LANDLORD:
GENERAL AMERICAN LIFE INSURANCE COMPANY
BY: /s/ William L. Frields
-----------------------------
TITLE: Vice President
-------------------------
TENANT:
THE PRIVATEBANK AND TRUST COMPANY
10 NORTH DEARBORN STREET
CHICAGO, ILLINOIS 60602
BY: /s/ Donald A. Roubitchek
-----------------------------
TITLE: Managing Director and COO
--------------------------
4
<PAGE>
THIRD AMENDMENT TO LEASE
This Third Amendment to Lease ("Third Amendment") is made as of this 30th
day of April, 1997 by and between General American Life Insurance Company, a
Missouri corporation ("Landlord"), and The PrivateBank and Trust Company, an
Illinois corporation ("Tenant").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, LaSalle National Bank, not personally, but as Trustee under a
Trust Agreement dated November 6, 1985 and known as Trust No. 110519 ("LaSalle
Trust"), as landlord, and Tenant entered into a certain lease dated as of
January 1, 1992 (hereinafter referred to as the "Original Lease") for the
premises commonly known as the 9th and 10th Floors, Suites 900 and 1000, in the
building located at Ten North Dearborn Street, Chicago, Illinois (the
"Building"); and
WHEREAS, LaSalle Trust and Tenant entered into a First Amendment to Lease
dated December 28, 1993 (the "First Amendment") for the premises commonly known
as Suite 1107 (the "11th Floor Space") in the Building; and
WHEREAS, Landlord and Tenant entered into a Second Amendment to Lease dated
as of the first day of June, 1996 whereby the lease on the 11th Floor Space was
terminated and the 8th Floor Space was leased to Tenant (the Original Lease, the
First Amendment and the Second Amendment are hereinafter collectively referred
to as the "Lease"); and
WHEREAS, Landlord is the successor in interest to the LaSalle Trust; and
WHEREAS, Landlord and Tenant desire to further amend the Lease pursuant to
the terms, provisions and agreements herein set forth.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein set forth, Landlord and Tenant hereby covenant and agree as follows:
<PAGE>
1. Prior Terms Incorporated. All capitalized terms used in this Third
------------------------
Amendment shall have the same meaning as defined in the Original Lease, the
First Amendment and the Second Amendment as if set forth herein in full.
2. Premises. The Premises, as defined in the Lease, shall include 2,237
--------
square feet on the 11th floor of the Building (hereinafter referred to as the
"New 11th Floor Space"). The final and exact configuration of the New 11th Floor
Space is shown on the floor plan attached hereto and made a part hereof as
Exhibit A. Tenant hereby accepts the New 11th Floor Space in its as is
condition. All construction, alterations, improvements, additions and
installations to the New 11th Floor Space shall be made in accordance with
paragraph 10 of the Original Lease, as modified by the Work Letter attached to
this Third Amendment.
3. Commencement Date for Occupancy and Rent. The date for occupancy of
----------------------------------------
the New 11th Floor Space shall be upon execution of this Third Amendment. The
commencement date for the payment of Base Rent and Additional Rent shall be July
1, 1998. Upon execution of this Third Amendment, the New 11th Floor Space shall
be included in the term Premises.
4. Termination Date. The Termination Date with respect to the New 11th
----------------
Floor Space shall be the same as the Termination Date of the Lease, which date
Landlord and Tenant agree is August 31, 2006.
5. Rent. Tenant shall pay Base Rent or Additional Monthly Rent for the
----
New 11th Floor Space as follows:
2
<PAGE>
(a) Base Rent.
---------
<TABLE>
<CAPTION>
Time Period Monthly Base Rent
----------- -----------------
<S> <C>
Date hereof to June 30, 1998 $ 0.00
July 1, 1998 to June 30, 1999 $1,584.54
July 1, 1999 to June 30, 2000 $1,677.75
July 1, 2000 to June 30, 2001 $1,770.96
July 1, 2001 to June 30, 2002 $1,864.17
July 1, 2002 to June 30, 2003 $1,957.38
July 1, 2003 to June 30, 2004 $2,050.58
July 1, 2004 to June 30, 2005 $2,143.79
July 1, 2005 to June 30, 2006 $2,237.00
July 1, 2006 to August 31, 2006 $2,330.21
</TABLE>
(b) Additional Monthly Rent. Commencing July 1, 1998, Tenant's
-----------------------
Proportionate Share shall be twenty-six and twenty-seven one hundredths
percent (26.27%). Prior to July 1, 1998, Tenant's Proportional Share shall
remain twenty-three and forty-nine one hundredths percent (23.49%).
6. Option To Terminate. In the event Tenant shall, at any time prior to
-------------------
the Termination Date, further amend the Lease to include, in addition to the 8th
Floor Space, the 9th Floor Space and the event Tenant shall, at the 10th Floor
Space, an additional full floor of the Building, then Tenant, at Tenant's option
by any time prior to the written notice to Landlord at the same time as the
execution of an amendment to the Lease adding Termination an additional full
floor, shall have the right to terminate inclusion of the New 11th Floor Space
under the Lease and, Tenant shall vacate the New 11th Floor Space within one (1)
business day after Tenant accepts or is required to accept occupancy of the
additional full floor.
3
<PAGE>
7. Agents. Tenant represents and warrants to Landlord that the only real
------
estate broker which represented Tenant in connection with this Third Amendment
is EQUIS Corporation. and warrants to Landlord agrees to pay to EQUIS
Corporation a commission in the amount of Fourteen Thousand that the only real
estate Three Hundred Sixty-Two Dollars ($14,362) and to be responsible for any
fees or commissions due broker Frain Camins & Swartchild, Inc. Any other or
additional brokers' fees or commissions for any real estate broker or consultant
acting on behalf of Tenant shall be paid by Tenant.
8. Continuation of Lease. Except as hereby amended, all of the terms and
---------------------
provisions of the Lease shall remain in full force and effect.
END OF PAGE
4
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant, by their duly authorized
representatives, have executed this Third Amendment to Lease as of the day and
year first above written.
GENERAL AMERICAN LIFE
INSURANCE COMPANY, A MISSOURI
CORPORATION
BY: /s/ William L. Frields
--------------------------
ITS: Vice President
-------------------------
ATTEST:
BY: /s/ Steven P. Traynor
--------------------------
ITS: Assistant Secretary
-------------------------
THE PRIVATEBANK AND TRUST
COMPANY, AN ILLINOIS BANKING
CORPORATION
BY: /s/ Donald A. Roubitchek
--------------------------
ITS: Managing Director and COO
-------------------------
ATTEST:
BY: /s/ Sherilyn Alexander
--------------------------
ITS: Assistant Secretary
-------------------------
5
<PAGE>
EXHIBIT A
---------
TO THIRD AMENDMENT TO LEASE
---------------------------
WORK LETTER
-----------
TO: Don Roubitchek
The PrivateBank and Trust Company
10 North Dearborn Street - Suite 900
Chicago, Illinois 60602
Dear Don:
Concurrently herewith you ("Tenant") and the undersigned ("Landlord") are
entering into a Third Amendment To Lease (the "Third Amendment") which relates,
in part, to Tenant making improvements to 2,237 feet on the 11th floor of the
Building. All capitalized terms used in this Work Letter shall have the same
meanings as set forth in the Lease. This letter agreement is the Work Letter
described in paragraph 2 of the Third Amendment. Landlord and Tenant agree that
their respective obligations for improvements to the New 11th Floor Space are as
follows:
1. Tenant's Plans and Specifications.
---------------------------------
1.1 Tenant, at Tenant's sole expense, shall cause Tenant's architects
and space planners ("Tenant's Architect") to prepare architectural, engineering,
electrical and mechanical plans, including all dimensions and specifications, in
such detail as Tenant, in Tenant's reasonable business judgment, considers
sufficient for Tenant to commence and complete all the construction of all
improvements which Tenant desires for occupancy of the New 11th Floor Space
("Tenant's Plans").
1.2 Tenant's Plans will be delivered to Landlord as soon as possible.
Failure of Tenant to deliver Tenant's Plans to Landlord will not extend the date
for the commencement of paying Base Rent and Additional Rent.
<PAGE>
1.3 Tenant's Plans, if any, are expressly subject to Landlord's prior
written approval, which approval shall not be withheld, provided, that the work
provided by Tenant's Plans ("Tenant's Work"): (a) shall be practical and
consistent with existing physical conditions in the Building; (b) shall not
impair Landlord's ability to perform any of Landlord's obligations hereunder or
under the Lease or any other lease of space in the Building; (c) shall not
affect any portion of the Building other than the Premises or be incompatible
with the Building systems; and (d) shall comply with all applicable building
laws and ordinances. Upon such approval, Tenant will cause Tenant's Plans to be
filed with the governmental agencies having jurisdiction thereof in order to
obtain all governmental permits and authorizations that may be required in
connection with Tenant's Work. Landlord agrees to review Tenant's Plans within
five (5) business days after receipt of the complete copy thereof and to respond
as appropriate within said time.
1.4 Without the prior written consent of Landlord, Tenant shall make
no material changes to Tenant's Plans after approval thereof by Landlord.
2. Completing Tenant's Work.
------------------------
2.1 As soon as practicable after Tenant's Plans have been approved
and Tenant has obtained all required governmental permits and authorizations,
Tenant shall, in accordance with the requirements of paragraph 10 of the
Original Lease, proceed to do all of the construction, alterations,
improvements, additions and installations to the New 11th Floor Space as
provided in Tenant's Plans and proceed to do all Other Space Work as defined in
paragraph 5.1 below.
2.2 Tenant agrees that title to all structural and permanent
installations, such as electrical wiring and fixtures, HVAC equipment, duct
work, plumbing pipe and fixtures, insulation, walls, doors and similar items
that are part of Tenant's Work performed in the Premises and that to
2
<PAGE>
all materials installed in the Premises as part of Tenant's Work shall
immediately vest in Landlord. Tenant shall retain title to all removable trade
fixtures installed in the Premises by Tenant.
3. Intentionally Deleted.
---------------------
4. Tenant's Entry to New 11th Floor Space.
--------------------------------------
4.1 Landlord shall deliver possession of the New 11th Floor Space
upon execution of the Third Amendment. Landlord hereby permits Tenant or its
contractors to enter the New 11th Floor Space at Tenant's sole risk in order to
perform Tenant's Work as required by Tenant and to make the New 11th Floor Space
ready for Tenant's occupancy. Such entry shall be deemed to be under and
subject to all of the terms, covenants and conditions of the Lease and Tenant
shall comply with all of the provisions of the Lease, including but not limited
to paragraph 10 of the Original Lease, except that Tenant's obligation for Base
Rent and Additional Rent shall be as set forth in the Third Amendment. Any
charges by Landlord for special services in excess of services provided by
Landlord in the ordinary course of Landlord's operation of the Building,
including but not limited to charges for use of construction or hoisting or
elevator equipment on the Building, shall be made to Tenant's Contractor and
shall be deemed an obligation of such Contractor and the failure of such
contractor to pay shall not be a default in payment of Rent pursuant to the
Lease.
5. Reimbursement to Tenant.
-----------------------
5.1 Landlord agrees, within thirty (30) days after receipt of all
documentation required below, to pay Tenant the sum of Thirty-One Thousand Three
Hundred Eighteen Dollars ($31,318) provided, that on or before July 1, 1998,
Tenant delivers to Landlord with respect to any of Tenant's Work and with
respect to any repairs, renovations, replacements or improvements made by Tenant
after the date hereof to the 8th Floor Space, the 9th Floor Space or the 10th
Floor Space
3
<PAGE>
("Other Space Work") and for which a mechanic's lien can be filed under Illinois
law, a properly completed Tenant's statement (i.e. a statement similar to what
is commonly referred to as an Owner's Statement) showing that the Tenant's Work
or the Other Space Work is completed and in place and that Tenant's Work or the
Other Space Work has been paid for in full, and further, provided, that with
respect to all repairs or improvements for which a mechanic's lien may not be
filed under Illinois law, Tenant delivers to Landlord a paid invoice.
6. Exculpatory Clause.
------------------
6.1 The Landlord's exculpatory clause in paragraph 20(J) of the
Second Amendment is incorporated herein by reference.
LANDLORD:
GENERAL AMERICAN LIFE
INSURANCE COMPANY
BY: /s/ William L. Frields
----------------------------
TITLE: Vice President
-------------------------
TENANT:
THE PRIVATEBANK AND TRUST
COMPANY OF CHICAGO
BY: /s/ Donald A. Roubitchek
----------------------------
TITLE: Managing Director and COO
-------------------------
4
<PAGE>
FOURTH AMENDMENT TO LEASE
-------------------------
This Fourth Amendment to Lease ("Fourth Amendment") is made as of this 16th
day of December, 1997 by and between General American Life Insurance Company, a
Missouri corporation ("Landlord"), and The PrivateBank and Trust Company, an
Illinois corporation ("Tenant").
W I T N E S S E T H:
-------------------
WHEREAS, LaSalle National Bank, not personally, but as Trustee under a
Trust Agreement dated November 6, 1985 and known as Trust No. 110519 ("LaSalle
Trust"), as landlord, and Tenant entered into a certain lease dated January 1,
1992 (the "Original Lease"), as amended by a First Amendment dated December 28,
1993 (the "First Amendment") and a Second Amendment dated June 1, 1996 (the
"Second Amendment") with respect to various portions in the building located at
10 North Dearborn Street, Chicago, Illinois (the "Building"); and
WHEREAS, Landlord is the Successor in Interest to LaSalle Trust; and
WHEREAS, Landlord and Tenant entered into a Third Amendment to Lease dated
April 30, 1997 (the "Third Amendment") (the Original Lease, the First Amendment,
the Second Amendment and the Third Amendment are hereinafter collectively
referred to as the "Lease"); and
WHEREAS, the Third Amendment was with respect to 2,237 square feet on the
11th Floor of the Building and therein referred to as the "New 11th Floor
Space"; and
WHEREAS, Landlord and Tenant desire to further amend the Lease pursuant to
the terms, provisions and agreements hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein set forth, Landlord and Tenant hereby covenant and agree as follows:
<PAGE>
1. Terms of Lease. Each capitalized word or words and the definition or
--------------
definitions used in the Lease shall have the same meaning in this Fourth
Amendment unless such capitalized word or capitalized word or words are
otherwise specifically defined in this Fourth Amendment. Except as otherwise
herein and the definition or provided, each and every term, provision and
condition of the Lease shall remain in full force and definitions used effect.
In the event of any conflict between the Lease and this Fourth Amendment, this
Fourth Amendment shall control.
2. Premises. The New 11th Floor Space shall be reduced by 174 square
--------
feet (the "Vacated Space") so that the New 11th Floor Space shall consist of
2,063 square feet, as shown on Floor Space shall be the floor plan attached
hereto and made a part hereof as Exhibit A. Tenant shall vacate the Vacated
reduced by 174 square feet Space on or before December 14, 1997.
3. Rent. Upon Tenant vacating the Vacated Space, paragraph 5 of the
----
Third Amendment is deleted and the following is substituted in lieu thereof:
(a) Base Rent.
---------
<TABLE>
<CAPTION>
Time Period Monthly Base Rent
----------- -----------------
<S> <C>
Date of the Third Amendment to June 30, 1998 $ 0.00
July 1, 1998 to June 30, 1999 $1,461.29
July 1, 1999 to June 30, 2000 $1,547.25
July 1, 2000 to June 30, 2001 $1,633.20
July 1, 2001 to June 30, 2002 $1,719.16
July 1, 2002 to June 30, 2003 $1,805.12
July 1, 2003 to June 30, 2004 $1,891.08
July 1, 2004 to June 30, 2005 $1,977.04
July 1, 2005 to June 30, 2006 $2,063.00
July 1, 2006 to August 31, 2006 $2,148.95
</TABLE>
(b) Additional Monthly Rent. Commencing with Tenant vacating the
-----------------------
Vacated Space, Tenant's Share shall be twenty-six and six one hundredths
percent (26.06%). Prior
2
<PAGE>
to July 1, 1998, Tenant's Proportional Share shall remain twenty-three and
forty-nine one hundredths percent (23.49%).
4. Work Letter. Paragraph 5.1 of Exhibit A to the Third Amendment is
-----------
amended by deleting the amount of Thirty One Thousand Three Hundred Eighteen
Dollars ($31,318) and substituting in lieu thereof the number Thirty Thousand
Four Hundred Forty-Eight Dollars ($30,448). In the event Landlord has disbursed
to Tenant more than Thirty Thousand Four Hundred Forty-Eight by Dollars
($30,448), Tenant agrees to reimburse Landlord for any overpayment within ten
(10) days after Landlord and Tenant have signed this Fourth Amendment.
5. Continuation of Lease. Except as hereby amended, all of the terms and
---------------------
provisions of the Lease shall remain in full force and effect.
IN WITNESS WHEREOF, Landlord and Tenant, by their duly authorized
representatives, have executed this Fourth Amendment to Lease as of the day and
year first above written.
GENERAL AMERICAN LIFE THE PRIVATEBANK AND TRUST
INSURANCE COMPANY, A MISSOURI COMPANY, AN ILLINOIS BANKING
CORPORATION CORPORATION
BY: Illegible BY: /s/ Donald A. Roubitchek
---------------------------- ----------------------------
ITS: ITS: Managing Director and COO
---------------------------- ----------------------------
ATTEST: ATTEST:
BY: Illegible BY: /s/ Gail Carpenter
---------------------------- ----------------------------
ITS: ITS: Assistant Secretary
---------------------------- ----------------------------
3
<PAGE>
EXHIBIT "A"
[EXISTING CONDITION PLAN APPEARS HERE]
<PAGE>
EXHIBIT 10.2
------------
THE PRIVATE BANK AND TRUST COMPANY
LEASE OF PREMISES AT
1603 W. SIXTEENTH STREET, OAK BROOK, ILLINOIS
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PARAGRAPH PAGE NO.
- --------- --------
<S> <C>
Schedule.............................................................. 1
1. Lease of Premises................................................ 3
2. Term............................................................. 3
3. Base Rent........................................................ 3
4. Additional Charges............................................... 3
5. Use of Leased Premises........................................... 7
6. Condition of Leased Premises..................................... 7
7. Services......................................................... 7
8. Repairs.......................................................... 9
9. Alterations...................................................... 9
10. Covenant Against Liens........................................... 10
11. Insurance........................................................ 11
12. Fire or Casualty................................................. 12
13. Waiver of Claims - Indemnification............................... 13
14. Nonwaiver........................................................ 14
15. Condemnation..................................................... 14
16. Assignment and Subletting........................................ 14
17. Surrender of Possession.......................................... 17
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
18. Holding over....................................................... 17
19. Estoppel Certificate/Environmental Disclosures..................... 17
20. Mortgage or Ground Lease by Landlord............................... 18
21. Certain Rights Reserved by Landlord................................ 20
22. Intentionally Deleted.............................................. 21
23. Landlord's Remedies................................................ 21
24. Covenant of Quiet Enjoyment........................................ 24
25. Intentionally Deleted.............................................. 25
26. Other Agreements of Tenant......................................... 25
27. Real Estate Broker................................................. 25
28. Miscellaneous...................................................... 25
29. Notices............................................................ 28
30. Limitation on Landlord's Liability................................. 29
31. Renewal Option..................................................... 29
32. Right of First Offer............................................... 30
33. Zoning............................................................. 31
</TABLE>
EXHIBITS
Exhibit A Legal Description of the Land
Exhibit B Outline of the Leased Premises
Exhibit C Tenant Improvement Work Letter
Exhibit D Janitorial Services
Exhibit E Tenant Occupancy Timetable
Exhibit F Exclusive Parking
Exhibit G Commencement Date Agreement
Exhibit H Tenant's Current Business
ii
<PAGE>
LEASE
-----
THIS LEASE is made this ____ day of October, 1996 between COLUMBIA LISLE
LIMITED PARTNERSHIP, an Illinois limited partnership, hereinafter referred to as
"LANDLORD", and THE PRIVATE BANK AND TRUST COMPANY, an Illinois banking
association, hereinafter referred to as "TENANT". The term "BUILDING" as used
herein refers to the building located at 1603 W. Sixteenth Street, Oak Brook,
Illinois. The land on which the Building is located (a legal description of
which is attached as Exhibit A) is hereinafter referred to as the "LAND". The
Building and the Land are hereinafter collectively called the "PROPERTY." The
following Schedule is an integral part of this Lease.
SCHEDULE
--------
1. Description of Leased Premises: A portion of the Building, consisting
of approximately 4,200 rentable square feet, more or less.
2. Tenant's Type of Business: Financial services.
3. Base Rent:
<TABLE>
<CAPTION>
ANNUAL BASE RENT
PER TOTAL MONTHLY
R.S.F. ANNUAL RENT INSTALLMENT
------ ----------- -----------
<S> <C> <C>
$23.00 $96,600.00 $8,050.00
</TABLE>
4. Term: Five (5) years, commencing December 15, 1996 (hereinafter
referred to as the "COMMENCEMENT DATE") and ending December 14, 2001 unless
otherwise terminated or extended as provided in this Lease (hereinafter referred
to as the "TERMINATION DATE"); provided, however, that if the Commencement Date
is other than the first day of a month, then the Termination Date shall be the
five (5) year anniversary of the last day of the month in which the Commencement
Date occurs, unless otherwise terminated or extended as provided in this Lease.
5. Tenant's Share: 26.6% (the ratio of the number of square feet of net
rentable area in the Leased Premises, to the number of square feet of net
rentable area in the Building).
6. Broker: CB Commercial (Gary Fazzio).
7. Addresses for Notices:
If to Landlord: Columbia Lisle Limited Partnership
1603 W. 16th Street
Oak Brook, IL 60521
ATTN: Gerald J. Kostelny
<PAGE>
with copy to: Robin Rash, Esq.
Rash & Associates, P.C.
1603 W. 16th Street
Oak Brook, Illinois 60521
If to Tenant: The Private Bank and Trust Company
1603 W. 16th Street
Oak Brook, Illinois 60521
Attention: Hugh McLean
with copy to: Martin J. Lillig, Esq.
Lillig & Thorsness, Ltd.
1900 Spring Road, Suite 200
Oak Brook, Illinois 60521-1495
8. Managing Agent: InSite Real Estate Development, L.L.C.
This Lease is subject to the terms and conditions of all Exhibits attached
hereto, which Exhibits are hereby made a part of this Lease.
LANDLORD: TENANT:
- -------- ------
COLUMBIA LISLE LIMITED PARTNERSHIP, THE PRIVATE BANK AND TRUST COMPANY,
an Illinois limited partnership an Illinois banking association
By: Columbia Holdings, Ltd., an
Illinois corporation, its general By: /s/ Hugh H. McLean
partner --------------------------------
Its: Managing Director
------------------------------
/s/ Robin Eden Rash
-------------------------------
By: Robin Eden Rash, Vice President
2
<PAGE>
TERMS AND CONDITIONS
--------------------
1. LEASE OF PREMISES.
-----------------
Landlord hereby leases to Tenant, and Tenant hereby leases from Landlord,
the premises (hereinafter referred to as the "LEASED PREMISES") described in the
Schedule to this Lease (hereinafter referred to as the "SCHEDULE") and shown on
the Outline of the Leased Premises attached as Exhibit B, subject to the
covenants, terms, provisions and conditions of this Lease, together with the
exclusive right to use those parking spaces indicated on the attached Exhibit F,
and together with the non-exclusive right to use, in common with others, all
parking spaces, drive aisles, entryways and other parking improvements within
the Property which are not designated for the exclusive use of Landlord or
others.
2. TERM.
----
The term of this Lease (hereinafter referred to as the "TERM") shall be as
set forth in the Schedule.
3. BASE RENT.
---------
All payments due under this Lease from Tenant shall be made to Landlord at
1603 W. 16th Street, Oak Brook, IL 60521, or to such other persons or at such
other place as Landlord may from time to time designate in writing, in coin,
currency or check which, at the time of payment, is legal tender for private or
public debts in the United States of America. Tenant agrees to pay the
applicable annual Base Rent set forth in the Schedule, payable in equal monthly
installments in the applicable amounts set forth in the Schedule, in advance, on
or before the first day of each and every month during the Term, without demand
or billing and without any set-off or deduction whatsoever. If either the Term
or the obligation to pay Base Rent commences other than on the first day of a
month or ends other than on the last day of a month, the Base Rent for such
month shall be prorated on a per diem basis.
4. ADDITIONAL CHARGES.
------------------
In addition to paying the Base Rent specified in Paragraph 3 hereof, Tenant
shall pay as "ADDITIONAL CHARGES" the amounts determined pursuant to Paragraphs
B and C of this Paragraph 4. Additional Charges shall be payable in the same
manner, time and place as Base Rent and without demand or billing and without
any set-off or deduction whatsoever, except as expressly provided for in this
Paragraph 4. Without limitation on other obligations of Tenant which shall
survive the expiration of the Term, the obligations of Tenant to pay the
Additional Charges provided for in this Paragraph 4 shall survive the expiration
of the Term.
A. DEFINITIONS. As used in this Paragraph 4, the following terms
-----------
shall have the following meanings:
3
<PAGE>
(i) "LEASE YEAR" shall mean each calendar year in which any
part of the Term falls, including the calendar years in which the
Commencement Date and Termination Date occur.
(ii) "BASE YEAR" shall mean 1997.
(iii) "OPERATING EXPENSES" shall mean all expenses, costs and
disbursements of every kind and nature (determined for each calendar year
on an accrual basis) paid or incurred by Landlord in connection with the
ownership, management, operation, repair and replacement of the Property,
except the following:
(a) Taxes (as such term is hereinafter defined);
(b) Costs of initial improvements to, or Alterations
(as such term is hereinafter defined) of, any tenant's premises;
(c) Principal or interest payments on loans secured by
mortgages or trust deeds on the Property, if any;
(d) Costs of capital improvements (other than repairs
and replacements of parts of the Building or personal property used in
connection with the Building), except that Operating Expenses shall
include (i) the cost during the Term, as reasonably amortized by
Landlord with interest on the unamortized amount at the Interest Rate,
of any capital improvement which is intended to reduce any component
cost included within Operating Expenses and (ii) the cost of any
capital improvements which are intended to keep the Property in
compliance with all governmental rules and regulations applicable from
time to time thereto, which are enacted after the Effective Date or
which are imposed because of the specific use to which Tenant puts the
Leased Premises;
(e) Depreciation or amortization of any improvements,
except as specifically set forth in this Lease;
(f) Costs of repairs, alterations or replacements
caused by casualty losses to the extent customarily insured against by
owners of office buildings of similar size, age and construction in
the Oak Brook, Illinois area;
(g) Costs of repairs, alterations or replacements
caused by the exercise of the rights of eminent domain to the extent
Landlord receives net condemnation proceeds therefor;
(h) Costs and expenses incurred in connection with
leasing space in the Building, such as legal fees for the preparation
of leases, tenant allowances, space planner fees, real estate brokers'
leasing commissions and advertising and
4
<PAGE>
promotional expenses, expenses of any leasing office incurred with
regard to leasing the Building, or portions thereof;
(i) Court costs and legal fees incurred with regard to
enforcing the obligations of tenants under other leases; or,
(j) Management fees.
(iv) "TAXES" shall mean (a) real estate taxes and assessments,
both general and special, assessed or imposed with respect to the Land or
the Building, (b) ad valorem taxes assessed or imposed upon personal
property owned by Landlord or Managing Agent and used in the operation of
the Land or the Building, (c) taxes based upon leases or the receipt of
rent which either supplement, are in addition to or are in lieu of any item
described in (a) or (b) above, and (d) fees and expenses incurred by
Landlord to obtain a reduction of or a limit on the increase in any of the
items (a) through (c) above, regardless of whether or not any such
reduction or limitation is obtained; provided, however, that except as
provided above, Taxes shall not include penalties or late fees, any
inheritance, estate, succession, transfer, gift, franchise, general net
income or capital stock tax imposed upon Landlord. In determining the
amount of Taxes for any year, the amount of special assessments to be
included shall be limited to the amount of the installment (plus any
interest payable thereon) of such special assessment required to be paid
during such year had Landlord elected to have such special assessment paid
over the maximum period of time permitted by law. Except as provided in the
preceding sentence, all references to Taxes "for" a particular year shall
be deemed to refer to Taxes levied or assessed with respect to such year
without regard to when such Taxes are paid or payable. The amount of any
refund of Taxes received by Landlord shall be credited against Taxes for
the year in which such refund is received but only to the extent such
refund relates to Taxes levied or assessed for a year within the Term.
(v) "TENANT'S SHARE" shall mean the percentage set forth in
the Schedule as Tenant's Share; provided, however, if less than one hundred
percent (100%) of the Building's rentable area shall have been occupied by
tenants at any time during any Lease Year, then at Landlord's election
Operating Expenses for such Lease Year shall be the amount which Landlord
in good faith determines is the amount Operating Expenses would have been
for such Lease Year had occupancy been one hundred percent (100%)
throughout such Lease Year.
B. EXPENSE ADJUSTMENT. During each Lease Year commencing with the
------------------
Lease Year 1998, Tenant shall pay, as Additional Charges, an amount (hereinafter
referred to as the "EXPENSE ADJUSTMENT AMOUNT") equal to Tenant's Share of the
excess of Operating Expenses for each such Lease Year over Operating Expenses
for the Base Year; except that Tenant shall be required to pay only a pro rata
amount of the Expense Adjustment Amount for the Lease Year in which the last
days of the Term occur, pro rated on a per them basis. The Expense Adjustment
Amount with respect to each Lease Year shall be paid in monthly installments in
advance on the first day of each and every calendar month during such Lease
Year, commencing on the January 1, 1998, in an amount estimated from time to
time by Landlord and communicated by written notice to
5
<PAGE>
Tenant. Landlord shall cause to be kept books and records showing Operating
Expenses in accordance with an appropriate system of accounts and accounting
practices consistently maintained. As soon as practicable following the end of
the Base Year, Landlord will deliver to Tenant a statement showing Operating
Expenses for the Base Year. As soon as practicable following the close of the
1998 and each subsequent Lease Year, Landlord shall deliver to Tenant a
statement setting forth (a) the actual Expense Adjustment Amount for such Lease
Year; (b) the total of the estimated monthly installments of the Expense
Adjustment Amount paid to Landlord for such Lease Year; (c) the actual Expense
Adjustment Amount for the Base Year; and (d) the amount of any excess or
deficiency with respect to such Lease Year, Tenant shall pay any deficiency to
Landlord as shown by such statement within thirty (30) days after receipt of
such statement. If the total of the estimated monthly installments paid by
Tenant during any Lease Year exceeds the actual Expense Adjustment Amount due
from Tenant for such Lease Year, at Landlord's option such excess shall be
either credited against payments next due hereunder or refunded by Landlord,
provided Tenant is not then in default hereunder.
C. TAX ADJUSTMENT. During each Lease Year commencing with the Lease
--------------
Year 1998, Tenant shall pay, as Additional Charges, an amount (hereinafter
referred to as the "TAX ADJUSTMENT AMOUNT") equal to Tenant's Share of the
excess of Taxes for each such Lease Year over the amount of Taxes for the Base
Year; except that Tenant shall be required to pay only a pro rata amount of the
Tax Adjustment Amount for the Lease Year in which the last days of the Term
occur, pro rated on a per diem basis. The Tax Adjustment Amount with respect to
each Lease Year shall be paid in monthly installments in advance on the first
day of each and every calendar month during such Lease Year, commencing January
1, 1998, in an amount estimated from time to time by Landlord and communicated
by written notice to Tenant. As soon as practicable following the close of the
1998 and subsequent Lease Years, and receipt of actual tax bills, Landlord shall
deliver to Tenant a statement setting forth (a) the actual Tax Adjustment Amount
for such Lease Year; (b) the total of the estimated monthly installments of the
Tax Adjustment Amount paid to Landlord for such Lease Year; and (c) the amount
of any excess or deficiency with respect to such Lease Year. Tenant shall pay
any deficiency to Landlord as shown by such statement within thirty (30) days
after receipt of such statement. If the total of the estimated monthly
installments paid by Tenant during any Lease Year exceeds the actual Tax
Adjustment Amount due from Tenant for such Lease Year, at Landlord's option such
excess shall be either credited against payments next due hereunder or refunded
by Landlord, provided Tenant is not then in default hereunder.
D. DELAY IN COMPUTING ADDITIONAL CHARGES. Delay in computing any
-------------------------------------
item of Additional Charges shall neither be deemed a default by Landlord or a
waiver of the right to collect the item of Additional Charges in question.
Notwithstanding anything seemingly to the contrary in this Lease, Tenant shall
make monthly payments on account of each item of Additional Charges, the amount
of which is to be estimated by Landlord, based on Landlord's most recent
estimate thereof until Landlord notifies Tenant of a revision to such Estimate.
E. REVIEW OF BOOKS AND RECORDS. Tenant shall have the right, during
---------------------------
Landlord's normal business hours, within ninety (90) days following the
furnishing by Landlord of such statement and upon reasonable prior notice to
Landlord, to inspect Landlord's books and records showing Operating Expenses;
provided, however, that the foregoing shall not relieve Tenant
6
<PAGE>
of paying any deficiency shown by Landlord's statement within thirty (30) days
after receipt of such statement. Unless Tenant shall, by notice to Landlord
writing such ninety (90) day period, take exception to any item in such
statement, the statement shall be conclusively binding and shall not be
contestable by Tenant.
5. USE OF LEASED PREMISES.
----------------------
Tenant shall use and occupy the Leased Premises as an office for the type
of business set forth in the Schedule and for no other purpose, without the
prior written consent of Landlord, not unreasonably withheld.
6. CONDITION OF LEASED PREMISES.
----------------------------
Landlord represents and warrants that the HVAC and mechanical components of
the Building are in good working order. Except as herein provided, the Leased
Premises is on an "as-is" basis, and no promise of Landlord to alter, remodel or
improve the Leased Premises or the Property and no representation by Landlord or
its agents respecting the condition of the Leased Premises or the Property have
been made to Tenant or relied upon by Tenant other than as may be contained in
the Tenant Improvement Work Letter attached to this Lease.
7. SERVICES.
--------
A. LIST OF SERVICES. Landlord shall provide the following services:
----------------
1. Heating and air conditioning to the extent necessary for
normal comfort in the Leased Premises, from Monday through Friday, during
the period from 8:00 a.m. to 6:00 p.m. and on Saturday during the period
from 8:00 a.m. to 1:00 p.m. Upon Tenant's request, Landlord shall make
heating and air conditioning available to Tenant at all other times. Tenant
will pay for all heating and air conditioning requested and furnished prior
to or following such hours at Landlord's actual cost incurred in providing
such extra service.
2. Water from the regular Building outlets for drinking,
lavatory and toilet purposes.
3. Janitorial services as specified in Exhibit C attached
hereto and identified as "JANITORIAL SERVICES". Tenant may, by written
notice to Landlord, elect to perform some or all of the janitorial
services, and in such case, the cost thereof shall be deducted from
Tenant's Additional Charges.
4. Electricity for lighting, convenience outlets and other
incidental uses.
5. Regular mowing of grass, trimming, weed removal, and general
landscape maintenance as reasonably necessary; and,
7
<PAGE>
6. Removal of snow and ice from the driveways and sidewalks.
B. INTERRUPTION OF SERVICES. Tenant agrees that Landlord shall not
------------------------
be liable in damages, by abatement of Base Rent or otherwise, for failure to
furnish or delay in furnishing any service or for any diminution in the quality
or quantity thereof, when such failure or delay or diminution is occasioned, in
whole or in part, by governmental rule, regulation or guideline (whether or not
having the force of law), repairs, renewals, or improvements, by any strike,
lockout or other labor trouble, by inability to secure electricity, gas, water
or other fuel at the Building after reasonable effort so to do, by any accident
or casualty whatsoever, by act or default of Tenant or other parties, or by any
other cause beyond Landlord's reasonable control; and such failures or delays or
diminution shall never be deemed to constitute an eviction or disturbance of
Tenant's use and possession of the Leased Premises or relieve Tenant from paying
Base Rent or performing any of its obligations under this Lease except that if
the Leased Premises are rendered untenantable, inaccessible or impossible to
occupy, due to interruption of such services from a cause within Landlord's
control, for in excess of five (5) consecutive business days, thereafter Base
Rent and Additional Charges shall abate for the portion of the Leased Premises
effected thereby for the period of such untenantability, inaccessibility or
impossibility of occupancy. Landlord agrees to use reasonable efforts to cause
the restoration of services in the event of any failure, delay or diminution
described in this paragraph.
C. CHARGES FOR SERVICES. Landlord shall have no obligation to
--------------------
furnish services to Tenant other than those specified in Paragraph 7(A) above.
Should Landlord provide additional services to Tenant, Tenant shall pay
separately for such additional services (including, but not limited to, heating
and air conditioning provided during hours other than those set forth in
Paragraph 7(A)), at Landlord's actual cost. Charges for any service for which
Tenant is required to pay shall be due and payable within thirty (30) days after
they are billed. If Tenant fails to make payment for any such services,
Landlord, in addition to all other rights and remedies available to Landlord
under this Lease or at law or in equity, may, with notice to Tenant, discontinue
any or all of such services and such discontinuance shall not be deemed to
constitute an eviction or disturbance of Tenant's use and possession of the
Leased Premises or relieve Tenant from paying Base Rent or performing any of its
other obligations under this Lease.
D. ENERGY CONSERVATION. Notwithstanding anything to the contrary in
-------------------
this Paragraph 7 or elsewhere in this Lease, Landlord shall have the right to
institute such policies, programs and measures as may be necessary or desirable,
in Landlord's discretion, for the conservation and preservation of energy or
energy related services, or as may be required to comply with any applicable
codes, rules and regulations, whether mandatory or voluntary.
8. REPAIRS.
-------
Tenant shall, at Tenant's own expense, keep the Leased Premises in good
order, repair and condition at all times during the Term, and Tenant shall
promptly and adequately repair all damage to the Leased Premises and replace or
repair all damaged or broken fixtures and appurtenances under the supervision
and subject to the approval of Landlord within any reasonable period of time
specified by Landlord. In addition, Tenant shall, at Tenant's expense, make all
repairs, installations
8
<PAGE>
and additions to the Leased Premises as may be required by any law, ordinance,
regulation or ruling of any governmental authority having jurisdiction over the
Leased Premises, which is enacted after the Commencement Date or is specific to
the use to which Tenant puts the Leased Premises. If Tenant does not do so,
Landlord may, but need not, make any repairs, replacements, installations, and
additions which Tenant is obligated to make and Tenant shall pay Landlord the
cost thereof, forthwith upon being billed for same. Landlord may also make
repairs, installations and additions to or in the Leased Premises as Landlord
shall desire or deem necessary, or as Landlord may be required to do by
governmental authority or court order or decree. No such entry or repairs by
Landlord shall be deemed or construed to be a disturbance of Tenant's quiet or
peaceable possession of the Leased Premises or of any rights of Tenant under
this Lease. Landlord may, but shall not be required to, enter the Leased
Premises at all reasonable times to make such repairs, installations,
alterations, improvements and additions to the Leased Premises or to the
Building or to any equipment located in the Building as Landlord shall desire or
deem necessary.
9. ALTERATIONS.
-----------
A. Tenant shall not make any alterations, improvements or additions
to the Leased Premises (collectively "ALTERATIONS") which may affect the
structure of the Building or the Building's heating, ventilation, air
conditioning, mechanical, electrical, plumbing or life safety systems (the
"BUILDING SYSTEMS"). Any other Alterations shall be subject to the prior
written consent of Landlord. The term "Alterations" does not include those
improvements described in the Tenant Improvement Work Letter attached to this
Lease as Exhibit C, which improvements are governed by the terms of Exhibit C.
B. If Landlord consents (which consent shall not be unreasonably
withheld or delayed) to any Alterations, it may impose such conditions with
respect thereto as Landlord deems appropriate, including, without limitation,
requiring Tenant to furnish Landlord with (i) insurance against liabilities
which may arise out of the Alterations and (ii) copies of plans and
specifications and all permits necessary for the Alterations. Any Alterations
shall be done at Tenant's expense by employees of or contractors hired by
Landlord, except to the extent Landlord gives its prior written consent to
Tenant's hiring its own contractors. In all events, Tenant shall use Landlord's
contractors for Alterations to and Alterations affecting any Building Systems.
Tenant shall promptly pay to Landlord or Tenant's contractors, as the case may
be, when due, the cost of all such Alterations. Upon completion of the
Alterations, Tenant shall deliver to Landlord, if payment is made by Tenant
directly to contractors, evidence of payment, all contractors' and
subcontractors' affidavits, full and final waivers of all liens for labor,
services or materials and such other supplemental documentation as Landlord may
reasonably require, all in form and substance satisfactory to Landlord. Tenant
shall defend and hold Landlord and the Property harmless from, and shall pay,
all liabilities, claims, judgments, costs, damages, liens and expenses related
to the Alterations. All repairs and Alterations done by Tenant or its
contractors pursuant to Paragraphs 8 or 9 shall be done in a first-class
workmanlike manner using only good grades of materials and shall comply with all
insurance requirements and all applicable laws, ordinances, rules, regulations
and orders of all courts and other tribunals, governmental and quasi-
governmental departments and agencies.
9
<PAGE>
C. All Alterations and any other improvements to the Leased
Premises, pursuant to Exhibit C or otherwise, whether temporary or permanent in
character, made or paid for by Landlord or Tenant, shall without compensation to
Tenant become Landlord's property at the termination of this Lease by lapse of
time or otherwise and shall, unless Landlord requests their removal (in which
case Tenant shall remove the same in the same manner and time as is provided in
Paragraph 17 with respect to Tenant's property) be relinquished to Landlord in
good condition, order and repair, ordinary wear and tear excepted. At such time
as Tenant requests Landlord's consent to make Alterations to the Leased
Premises, Tenant may also request Landlord's consent to leave such Alterations
at the termination of this Lease, by lapse of time or otherwise. Landlord's
consent or refusal to consent shall be given at the same time as (but shall be
an independent determination from) Landlord's consent to the making of such
Alterations. Such Alterations to which Landlord has given its consent to leave
pursuant to this Paragraph 9.B, and which are in good working order and
condition at the end of the Lease (hereinafter called "APPROVED ALTERATIONS")
may be left by the Tenant at the termination of this Lease. Landlord may also
grant, at the time Tenant requests consent to make Alterations, the right to
remove such Alterations to the Leased Premises which were paid for by Tenant if
(i) such removal in Landlord's reasonable judgment shall not damage the Leased
Premises or the Building; (ii) Tenant shall pay the cost of any damage caused in
the removal; and (iii) Tenant indemnifies and holds Landlord harmless from and
against any loss, cost or damage arising from the removal.
10. COVENANT AGAINST LIENS.
----------------------
Tenant has no authority or power to cause or permit any lien or
encumbrance of any kind whatsoever, whether created by act of Tenant, operation
of law or otherwise, to attach to or be placed upon Landlord's title or interest
in the Land, Building or Leased Premises, and any and all liens and encumbrances
created by Tenant shall attach to Tenant's interest only. Tenant covenants and
agrees not to suffer or permit any lien of mechanics or materialmen or others to
be placed against the Land, Building or the Leased Premises or Tenant's interest
in the Leased Premises, with respect to work or services performed or claimed to
have been performed for or materials furnished or claimed to have been furnished
to Tenant or the Leased Premises, and, in case of any such lien attaching or
claim thereof being asserted, Tenant covenants and agrees no later than ten (10)
days from the filing thereof or such claim being asserted (i) to cause it to be
released and removed of record or (ii) to provide Landlord with endorsements
(satisfactory to Landlord and Landlord's mortgagee) to Landlord and Landlord's
mortgagee's title insurance policies insuring against the existence of or
attempted enforcement of such lien or (iii) to provide Landlord with a bond from
a company satisfactory to Landlord and in form, substance and amount
satisfactory to Landlord, insuring against loss arising from the existence or
attempted enforcement of such lien. In the event that such lien is not released,
removed, insured or bonded over within said ten (10) day period Landlord, at its
sole option, may take all action necessary to release and remove such lien
(without any duty to investigate the validity thereof) and Tenant shall promptly
upon notice, either before or after such release and removal, pay or reimburse
Landlord for all sums, costs and expenses (including reasonable attorneys' fees)
incurred by Landlord in connection with such lien, together with interest
thereon at the Interest Rate.
10
<PAGE>
11. INSURANCE.
---------
A. WAIVER OF SUBROGATION. Landlord and Tenant each hereby waive any
---------------------
and every claim for recovery from the other of any and all loss or damage to the
Land or the Building or Leased Premises or to the contents thereof, whether such
loss or damage is due to the negligence of Landlord or Tenant or its respective
agent or employees, to the extent that the amount of such loss or damage is
recovered under its policies of insurance; provided, however, that the foregoing
waiver shall not be operative in any case where the effect thereof is to
invalidate any insurance coverage of the waiving party or increase the cost of
such insurance coverage; provided further, however, that Landlord and Tenant
each agree to give written notice of the terms of this mutual waiver to each
insurance company which has issued, or in the future may issue, policies of
physical damage to it, and to have said insurance policies properly endorsed, if
necessary, to prevent the invalidation of said insurance coverage by reason of
said waiver.
B. TENANT'S INSURANCE. Tenant shall purchase and maintain insurance
------------------
during the entire Term for the benefit of Tenant and Landlord, its beneficiaries
and managing agent (as their interests may appear) with terms, coverages and in
companies satisfactory to Landlord, and with such increases in limits as
Landlord may from time to time request. Tenant shall initially maintain the
following coverages in the following amounts:
(i) Comprehensive General Liability Insurance covering claims
of bodily injury, personal injury and property damage arising out of
Tenant's operations, assumed liabilities or use of the Leased Premises, for
limits of liability not less than $3,000,000 combined single limit for
bodily injury liability, personal injury liability, and property damage
liability.
(ii) Physical Damage Insurance covering all office equipment,
merchandise and all other items of Tenant's property in the Leased
Premises. Such insurance shall be written on "all risks" of physical loss
or damage basis, for the full replacement cost value of the covered items
and in amounts that meet any coinsurance clauses of the policies of
insurance.
Tenant shall, prior to the commencement of the Term, furnish to Landlord
certificates evidencing the coverages required by this Paragraph, which
certificates shall state that such insurance coverage may not be changed or
canceled without at least thirty (30) days prior written notice to Landlord and
shall name as additional insureds (i) Landlord and partners in Landlord, (ii)
the owner or owners of the Land and Building, if such are other than Landlord
and Tenant is given notice of such fact, (iii) the beneficiary or beneficiaries
of Landlord, if Landlord is a land trust, (iv) Managing Agent, (v) the holder of
each mortgage encumbering the Property of which Landlord shall have notified
Tenant, and (vi) such other persons as Landlord may from time to time designate.
C. LANDLORD'S INSURANCE. Landlord shall, during the entire term,
--------------------
keep in effect liability insurance in amounts carried by prudent owners first
class office buildings in Oak Brook, Illinois, "all risks" physical damage
insurance for the full replacement cost of the Building.
11
<PAGE>
Upon request, Landlord shall furnish Tenant with certificate evidencing the
coverage required by this paragraph.
D. AVOID ACTION INCREASING RATES. Tenant shall comply with all
-----------------------------
applicable laws and ordinances, all orders and decrees of court, all
requirements of other governmental authorities, and requirements and
recommendations of insurance rating agencies with respect to the Leased
Premises, and shall not, directly or indirectly, make any use of the Leased
Premises which may thereby be prohibited or be dangerous to person or property,
which may jeopardize any insurance coverage, increase the cost of insurance or
require additional insurance coverage. If Tenant fails to comply with the
provisions of this subparagraph D, Landlord, in addition to any other rights or
remedies available to Landlord, shall have the option to terminate this Lease
and may require Tenant to make immediate payment of any increase in Landlord's
insurance costs.
12. FIRE OR CASUALTY.
----------------
A. Paragraph 8 hereof notwithstanding, if the Leased Premises or the
Building (including machinery or equipment used in its operation) shall be
damaged by fire or other casualty and if such damage does not, in the judgment
of Landlord, render all or a substantial portion of the Leased Premises
untenantable, then Landlord shall, subject to the limitations set forth below,
repair or restore such damage with reasonable promptness, subject to reasonable
delays for insurance adjustments and delays caused by matters beyond Landlord's
reasonable control not to exceed 180 days. If any such damage renders all or a
substantial portion of the Leased Premises or Building untenantable, Landlord
shall have the right to terminate this Lease as of the date of such damage (with
appropriate prorations of Base Rent and Additional Charges being made for
Tenant's possession after the date of such damage of any tenantable portions of
the Leased Premises) upon giving written notice to Tenant at any time within
ninety (90) days after the date of such damage. Landlord shall have no liability
to Tenant, and Tenant shall not be entitled to terminate this Lease by virtue of
any delays in completion of repairs and restoration as long as the Leased
Premises are restored within 180 days of the fire or other casualty. However,
Base Rent and Additional Charges shall abate as to those portions of the Leased
Premises as are, from time to time, untenantable, as a result of such damage
until Landlord shall have completed the repairs and restorations required of
Landlord hereunder.
B. Landlord's duty to repair the Leased Premises is limited to
repairing the Leased Premises to the condition that they were provided by
Landlord at the beginning of the Term pursuant to the Tenant Improvement Work
Letter attached hereto as Exhibit C, reasonable wear and tear excepted. Tenant
shall repair all Alterations at the sole cost and expense of Tenant. If Tenant
desires any repairs or restoration in excess of those specified above, and if
Landlord consents thereto, such repair or restoration shall be done at Tenant's
sole cost and expense in accordance with the provisions of Paragraph 8 hereof.
Tenant acknowledges that Landlord shall be entitled to the full proceeds of any
insurance coverage for damage to those items or decorations provided by Landlord
either directly or through an allowance to Tenant, which Landlord is obligated
to repair. In the event the Leased Premises are not repaired or reconstructed,
all proceeds of insurance shall be payable to Landlord.
12
<PAGE>
13. WAIVER OF CLAIMS - INDEMNIFICATION.
----------------------------------
Landlord and the partners in Landlord, and their respective officers,
agents, servants and employees shall not be liable for any damage either to
person or property or for damage resulting from the loss of use of property
sustained by Tenant or by other persons due to the Land or the Building or any
part thereof or any appurtenances thereto becoming out of repair, or due to the
happening of any accident or event in or about the Land or the Building,
including the Leased Premises, or due to any act or neglect of any tenant or
occupant of the Land or the Building or of any other person. This provision
shall apply particularly, but not exclusively, to damage caused by gas,
electricity, snow, frost, steam, sewage, sewer gas or odors, fire, water or by
the bursting or leaking of pipes, faucets, sprinklers, plumbing fixtures and
windows, or by noise, smoke or odors, and shall apply without distinction as to
the person whose act or neglect was responsible for the damage and whether the
damage was due to any of the causes specifically enumerated above or to some
other cause of an entirely different kind. Tenant further agrees that all
personal property upon Property shall be at the risk of Tenant only, and that
Landlord shall not be liable for any loss or damage thereto or theft thereof.
Without limitation of any other provisions thereof, Tenant agrees to defend,
protect, indemnify and save harmless Landlord from and against all liability to
third parties (including but not limited to the officers, agents, contractors,
and business associates of Tenant) arising out of Tenant's use and occupancy of
the Leased Premises or acts or omissions of Tenant (whether or not such acts or
omissions constitute a violation of applicable law or of this Lease) and its
servants, agents, employees, contractors, suppliers workers and invitees.
Notwithstanding anything herein to the contrary, Landlord agrees to hold
harmless and indemnify Tenant, its employees, agents and invitees from and
against all liability for injuries to persons or damage to property arising from
occurrences in or about the premises or building caused in whole or in part by
the act, omission, or negligence of Landlord, its agents, employees or invitees.
14. NONWAIVER.
---------
No waiver of any provision of this Lease shall be implied by any failure of
Landlord to enforce any remedy on account of the violation of such provision,
even if such violation be continued or repeated subsequently, and no express
waiver shall affect any provision other than the one specified in such waiver
and that one only for the time and in the manner specifically stated. No receipt
of monies by Landlord from Tenant after the termination of this Lease shall in
any way alter the length of the Term or of Tenant's right of possession
hereunder or after the giving of any notice shall reinstate, continue or extend
the Term hereof or create a new tenancy or affect any notice given Tenant prior
to the receipt of such monies, it being agreed that after the service of notice
or the commencement of a suit for possession of the Leased Premises or after
final judgment for possession of the Leased Premises Landlord may receive and
collect any Base Rent due, and the payment of said Base Rent shall not waive,
affect or nullify said notice, suit or judgment. Acceptance by Landlord of less
than the entire amount then due and owing by Tenant shall not constitute a
waiver by Landlord of its rights to further collection.
13
<PAGE>
15. CONDEMNATION.
------------
If the Land or the Building or any portion thereof shall be taken or
condemned or purchased under the threat of condemnation by any competent
authority for any public or quasi-public use or purpose, or if the configuration
of any street, alley, bridge or other improvement or structure adjacent to the
Building is changed by any competent authority, Landlord shall have the option,
exercisable at its sole discretion, to cancel this Lease upon the earlier of 90
days after notice or the date upon which the condemning authority shall take
possession of the part so taken, condemned or purchased. No money or other
consideration shall be payable by Landlord to Tenant for the right of
cancellation and, whether or not Landlord exercises such cancellation right,
Tenant shall have no right to share in the condemnation award or in any judgment
for damages caused by such taking or change in configuration, it being agreed by
Tenant that each such award is the sole property of Landlord and that Tenant has
no interest therein. Base Rent and Additional Charges shall be prorated as of
the date of such cancellation or termination. Nothing herein shall prohibit
Tenant from making a separate claim against the condemning authority for loss or
damage to Tenant's furniture, equipment and other personal property as well as
any moving or relocation expenses, provided such claim does not reduce the
amount of Landlord's claim hereunder.
16. ASSIGNMENT AND SUBLETTING.
-------------------------
A. Tenant shall not, without the prior written consent of Landlord,
(i) assign, convey or mortgage this Lease or any interest hereunder; (ii) permit
or suffer to exist any assignment of this Lease, or any lien upon Tenant's
interest, voluntarily or by operation of law; (iii) sublet the Leased Premises
or any part thereof; or (iv) permit the use of the Leased Premises by any
parties other than Tenant and its employees. Any such action on the part of
Tenant shall be void and of no effect. Landlord's consent to any assignment,
subletting or transfer or Landlord's election to accept any assignee, subtenant
or transferee as the tenant hereunder and to collect rent from such assignee,
subtenant or transferee shall not release Tenant or any subsequent tenant from
primary liability to perform each covenant or obligation to be performed by
Tenant under this Lease. Landlord's consent to any assignment, subletting or
transfer shall not constitute a waiver of Landlord's right to withhold its
consent to any future assignment, subletting, or transfer. Tenant shall furnish
to Landlord, simultaneously with Tenant's request for consent to assign or
sublet, the following: (1) a true and correct copy of the proposed sublease or
assignment, signed by Tenant and the by the assignee, sublessee or transferee,
(2) description of the portion of the Leased Premises to be occupied, including
the number of square feet of net rentable area within that portion, (3) nature
of the proposed assignee, sublessee or transferee's business, and (4) current
credit reports and financial statements of the proposed assignee, sublessee or
transferee.
Notwithstanding the foregoing, Landlord agrees not to unreasonably withhold
or delay its consent to an assignment of the Lease or a sublet of the Leased
Premises. Tenant agrees that even though in any of the following circumstances
(i) through (ix) the potential assignee, sublessee or transferee may have a good
credit rating, Landlord's failure to consent shall be deemed reasonable if, in
Landlord's reasonable opinion, among other things: (i) Tenant is in default
under this lease; (ii) the proposed sublease or assignment would result in the
violation of any applicable law, ordinance or governmental regulation; (iii) the
nature of the business of an assignee, sublessee or
14
<PAGE>
transferee (a) is inconsistent with provisions of any other tenant leases
hereafter entered into by Landlord prohibiting Landlord from leasing space in
the Building for certain uses, (b) may have a material adverse impact upon the
first-class, high-grade manner, in which the Building is operated or with the
high reputation of the building or (c) is inconsistent with the provisions of
Paragraph 5 above; (iv) the character of the assignee, sublessee or transferee
may have a material adverse impact upon the first-class, high reputation of the
Building; (v) the sublessee, assignee or transferee is not sufficiently
financially responsible to perform its obligations under the proposed sublease
or assignment; (vi) the assignee, sublessee or transferee is: (a) a governmental
entity; (b) a high traffic tenant; or (c) intends to use the Leased Premises for
a doctor's office or other medical facility; (vii) Tenant has failed to furnish
Landlord (a) concurrently with Tenants request to Landlord for Landlord's
approval, with each of those items (1) through (4) specified in Paragraph 16.A
above, and (b) with such further information regarding the proposed sublessee,
assignee as Landlord may require, within a reasonable time of Landlord's
request; or (viii) Tenant has failed to furnish Landlord, no later than thirty
(30) days prior to the commencement date of the sublease or assignment a true
and correct copy of the sublease or assignment (which shall be in a form
reasonably satisfactory to Landlord), executed by Tenant and the sublessee,
assignee or transferee.
B. In addition to withholding its consent as set forth above,
Landlord shall have the right to terminate this Lease as to that portion of the
Leased Premises which Tenant seeks to sublet or as to which Tenant seeks to
assign its rights under this Lease, whether by Tenant requesting Landlord's
consent thereto or otherwise. Landlord may exercise such right to terminate by
giving written notice to Tenant at any time prior to Landlord's written consent
to such assignment or sublease. In the event that Landlord exercises such right
to terminate, Landlord shall be entitled to recover possession of, and Tenant
shall surrender, such portion of the Leased Premises on the later of (i) the
proposed date for possession by such assignee or subtenant, or (ii) ninety (90)
days after the date of Landlord's notice of termination to Tenant. In the event
Landlord terminates this Lease as to a part of the Leased Premises only, then
Tenant's Base Rent and Tenant's Share shall be equitably reduced on a per square
foot basis and Tenant shall (x) upon demand by Landlord pay to Landlord the
reasonable cost to physically divide and separate the parts of the Leased
Premises, including cost of demising walls, separate entryways, and separation
of all Building systems serving the Leased Premises, (y) upon demand pay to
Landlord a percentage of the amount payable under clause (x) above to reimburse
Landlord for all overhead, general conditions, fees and other costs and expenses
arising from Landlord's involvement in such work, and (z) execute and deliver to
Landlord such amendments to this Lease as Landlord may reasonably require to
(aa) evidence the partial termination of this Lease, and (bb) adjust Base Rent
and other sums payable for the remainder of the Leased Premises.
C. In the event that Landlord consents to any assignment or sublease
of any portion of the Leased Premises, as a condition of Landlord's consent,
Tenant shall pay to Landlord fifty percent (50%) of all receipts derived by
Tenant from such assignment or sublease. For purposes of this Paragraph 16.C,
"RECEIPTS" shall mean the excess of all amounts received or to be received by
Tenant from any assignee or sublessee of Tenant over the Base Rent and
Additional Charges payable to Landlord hereunder for the applicable periods
after deduction for marketing expense and cost of subtenant improvements, all
computed on a per rentable square foot basis and based upon generally accepted
accounting principles consistently applied. Tenant shall furnish
15
<PAGE>
Landlord with a sworn statement, certified by an independent certified public
accountant, setting forth in detail the computation of receipts, and Landlord,
or its representatives, shall have access to the books, records and papers of
Tenant in relation thereto, and the right to make copies thereof. Any monies or
other consideration in excess of the Base Rent due from Tenant hereunder
realized by or, for the benefit of Tenant by reason of such assignment or
sublease shall be deemed an item of such receipts. If a part of the
consideration for such assignment shall be payable other than in cash, the
payment to Landlord shall be payable in accordance with the foregoing cash and
the cash equivalent of all non-cash considerations in such form as is
satisfactory to Landlord. Tenant's receipts shall be paid to Landlord promptly
upon Tenant's receipt from time to time of periodic payments from such assignee
or subtenant or at such other time as Tenant shall realize receipts from such
assignment or sublease. Tenant agrees that all advertising by Tenant or on
Tenant's behalf with respect to the assignment of this lease or subletting of
any part of the Leased Premises must be approved in writing by Landlord prior to
publication.
D. Tenant shall pay to Landlord upon demand by Landlord,
notwithstanding that Landlord may have withheld its consent to any transfer
contemplated by this Paragraph 16, an amount sufficient to reimburse Landlord
for all costs and expenses incurred by it, including but not limited to
reasonable attorney's fees, in determining whether to grant or withhold any
consent contemplated by this Paragraph or otherwise in connection with any
assignment, subletting or other transfer of Tenant's interest in this Lease, or
any attempt to do any of the foregoing.
E. Landlord's consent shall not be withheld in the case of an
assignment or subletting to an entity controlling, controlled by, or under the
common control of the Tenant.
17. SURRENDER OF POSSESSION.
-----------------------
Upon the expiration of the Term or upon the termination of Tenant's right
of possession, whether by lapse of time or at the option of Landlord as herein
provided, Tenant shall forthwith surrender the Leased Premises to Landlord in
good order, repair and condition, ordinary wear excepted. Prior to the
expiration or termination of the Term or of Tenant's right of possession of the
Leased Premises, Tenant shall remove its office furniture, trade fixtures,
office equipment, telephone and computer systems (and all wiring related
thereto) and all other items of Tenant's property (including, without
limitation, any Alterations made or installed after the Commencement Date other
than the Approved Alterations) from the Leased Premises and shall surrender the
Leased Premises to Landlord in broom-clean condition. Extraordinary
improvements include, but shall not be limited to, raised floors or safes.
Tenant shall pay to Landlord upon demand the cost of repairing any damage to the
Leased Premises and to the Building caused by any such removal. If Tenant shall
fail or refuse to remove any such property from the Leased Premises, Tenant
shall be conclusively presumed to have abandoned the same, and title thereto
shall thereupon pass to Landlord without any cost to Landlord, whether by set-
off, credit, allowance or otherwise, and Landlord may at its option accept the
title to such property or at Tenant's expense may (i) remove the same or any
part in any manner that Landlord shall choose, repairing any damage to the
Leased Premises caused by such removal, and (ii) store, destroy or otherwise
dispose of the same without incurring liability to Tenant or any other person.
In the event Landlord incurs any storage or other costs by reason of
16
<PAGE>
Tenant's failure to remove any property which Tenant is obligated to remove
under this Section, Tenant upon demand shall pay to Landlord the amount of costs
so incurred.
18. HOLDING OVER.
------------
In addition to performing all of Tenant's other obligations set forth in
this Lease, Tenant shall pay to Landlord an amount equal to one hundred fifty
percent (150%) of the monthly installment of Base Rent and one hundred fifty
percent (150%) of the monthly installment of Additional Charges payable by
Tenant during the last month of the Term on the first day of each month or
portion thereof for which Tenant shall retain possession of the Leased Premises
or any part thereof after the expiration or termination of the Term or of
Tenant's right of possession, whether by lapse of time or otherwise, and also
shall pay all costs incurred and damages sustained by Landlord, whether direct
or consequential, on account of such holding over. The provisions of this
Paragraph 18 shall not be deemed to limit or constitute a waiver of any other
rights or remedies of Landlord provided herein or at law.
19. ESTOPPEL CERTIFICATE/ENVIRONMENTAL DISCLOSURES.
----------------------------------------------
Tenant agrees that from time to time upon not less than ten (10) business
days prior request of Landlord, Tenant or Tenant's duly authorized
representative having knowledge of the facts, will execute and deliver to
Landlord an Estoppel certificate:
A. (i) certifying that this Lease is unmodified and in full force
and effect or, if there have been modifications, an itemized description of such
modifications and that the Lease as modified is in full force and effect; (ii)
the dates to which Base Rent, Additional Charges and other charges have been
paid; (iii) that Landlord is not in default under any provision of this Lease,
or, if in default, the nature thereof in detail; and (iv) such further matters
regarding this Lease as Landlord may request; and
B. providing Landlord with all relevant information regarding
Tenant's operations in the Leased Premises (including, without limitation,
whether or not such operations involve the generation, transportation, storage,
treatment or disposal of waste, hazardous waste, hazardous substances or
petroleum) (collectively, the "ENVIRONMENTAL DISCLOSURES") and otherwise fully
cooperate with Landlord in the event that Landlord is or may be required to
prepare an Environmental Disclosure Document pursuant to the provisions of the
Illinois Responsible Property Transfer Act of 1988 or any other governmental
rules or regulations issued pursuant thereto or in connection therewith. All
Environmental Disclosures shall be provided by Tenant in form and substance
reasonably satisfactory to Landlord and shall be accompanied by Tenant's written
certification that such information is true and correct to the best of Tenant's
knowledge and belief.
Tenant acknowledges and agrees that it is intended that any such statements
and certificates may be relied upon by any mortgagees or prospective mortgagees
of the Land or Building, or any prospective or subsequent purchaser or
transferee of all or a part of Landlord's interest in the Land or the Building
or this Lease or any prospective transferee of all or any part of the interests
in Landlord or in any partner in Landlord. Tenant's failure to execute and
deliver any statement or
17
<PAGE>
certificate contemplated by this Paragraph 19 within ten (10) business days
after request by Landlord shall be a default under this Lease.
20. MORTGAGE OR GROUND LEASE BY LANDLORD.
------------------------------------
A. Landlord has previously and may hereafter encumber the Land and
the Building and any portion thereof, or any interest therein with mortgages,
may sell and lease back the Land, or any part of the Land, and may encumber the
leasehold estate under such a sale and leaseback arrangement with one or more
mortgages. (Any such mortgage is herein called a "MORTGAGE" and the holder of
any such mortgage is herein called a "MORTGAGEE". Any such lease of the land is
herein called a "GROUND LEASE" and the lessor under any such lease is herein
called a "GROUND LESSOR"). This Lease and the rights of Tenant hereunder shall
be and are hereby expressly made subject to and subordinate at all times to each
Mortgage and to any Ground Lease (it being agreed by Tenant that in the case of
a Ground Lease Tenant's right to possession shall be as a subtenant) now or
hereafter existing, and to all amendments, modifications, renewals, extensions,
consolidations and replacements of each of the foregoing, and to all advances
made or hereafter to be made upon the security thereof. The subordination
expressed in the preceding sentence shall be automatic and shall require no
further action by Landlord or Tenant for its effectiveness. However, Tenant
agrees to execute and deliver to Landlord such further instruments consenting to
or confirming the subordination of this Lease to any Mortgage referred to and to
any Ground Lease and containing such other provisions which may be requested in
writing by Landlord within 10 days after Tenant's receipt of such written
request. As a condition to Tenant's obligations under this Lease, Landlord
shall, within thirty (30) days after execution of this Lease, cause all existing
mortgagees and ground and underlying lessors to execute and deliver to Tenant an
agreement, in commercially reasonable form, specifying that so long as Tenant is
not in default under this Lease, the rights of Tenant to the possession and
enjoyment of the Leased Premises will not be disturbed in the event of a
foreclosure or other proceedings under the mortgage or ground lease.
B. If any Mortgage is foreclosed, or Landlord's interest under this
Lease is conveyed or transferred in lieu of foreclosure, or if any Ground Lease
is terminated:
(i) No person or entity which as the result of any of the
foregoing has succeeded to the interest of Landlord in this Lease (any such
person or entity being hereafter called a "SUCCESSOR") shall be liable for
any default by Landlord or any other matter which occurred prior to the
date such Successor succeeded to Landlord's interest in this Lease nor
shall such Successor be bound by or subject to any offsets or defenses
which Tenant may have against Landlord or any other predecessor in interest
to such Successor;
(ii) Upon request of any Successor, Tenant will attorn, as Tenant
under this Lease subject to the provisions of this subparagraph 20.B. and
subparagraph 20.D. below, to such Successor and will execute and deliver
such instruments as may be necessary or appropriate to evidence such
attornment within 10 days after receipt of a written request to do so; and
18
<PAGE>
(iii) No Successor shall be bound to recognize any prepayment by
more than 30 days of Base Rent or Additional Charges.
C. Notwithstanding anything to the contrary contained herein, any
Mortgagee or Ground Lessor may subordinate, in whole or in part, its Mortgage or
Ground Lease (as the case may be) to this Lease by sending Tenant notice in
writing subordinating such Mortgage or Ground Lease to this Lease, and Tenant
agrees to execute and deliver to such Mortgagee or Ground Lessor such further
instruments consenting to or confirming the subordination of such Mortgage or
Ground Lease to this Lease and containing such other provisions which may be
requested in writing by such Mortgagee or Ground Lessor within 10 days after
notice to Tenant of such request; provided that such Mortgagee or Ground Lessor
agrees that in the event of a foreclosure of the mortgage or termination of the
Ground Lease, Tenant may remain in possession pursuant to this Lease so long as
Tenant continues to perform its obligations hereunder.
D. Whether or not any Mortgage is foreclosed or any Ground Lease is
terminated, or any Successor succeeds to any interest of Landlord under this
Lease, no Mortgagee or Ground Lessor or Successor shall have any liability to
Tenant for any security deposit paid to Landlord by Tenant hereunder, unless
such security deposit has actually been received by such Mortgagee or Ground
Lessor or Successor.
E. Should any prospective Mortgagee or Ground Lessor require a
modification or modifications of this Lease, which modification or modifications
will not cause an increased cost or expense to Tenant or in any other way
materially and adversely change the rights and obligations of Tenant hereunder,
then and in such event, Tenant agrees that this Lease may be so modified and
agrees to execute whatever documents are required therefor and deliver the same
to Landlord within 10 days following the request therefor. Should any
prospective Mortgagee or Ground Lessor require execution of a short form of
lease for recording (containing, among other customary provisions, the names of
the parties, a description of the Leased Premises and the term of this Lease),
Tenant agrees to execute such short form of Lease and deliver the same to
Landlord within 10 days following the request therefor.
F. If Tenant fails within 10 days after written demand therefor to
execute and deliver any instruments as may be necessary or proper to effectuate
any of the covenants of Tenant set forth above in this Paragraph and in
Paragraph 19 above captioned "ESTOPPEL CERTIFICATES", Tenant hereby makes,
constitutes and irrevocably appoints Landlord or, if Landlord ever is a land
trust, any of the beneficiaries of Landlord as Tenant's attorney in fact (such
power of attorney being coupled with an interest) to execute and deliver any
such instruments for and in the name of Tenant.
G. Tenant agrees that the provisions of this paragraph shall remain
in full force and effect, notwithstanding that any Mortgagee or Ground Lessor
may directly or indirectly own or have an interest in Landlord, or in the Land
or the Building in addition to its interest as Mortgagee or Ground Lessor.
H. Provided that Landlord shall have provided Tenant with the name
and proper mailing address of and Mortgagee or Ground Lessor (which Landlord may
change from time to
19
<PAGE>
time), Tenant agrees that in the event of any act or omission by Landlord
hereunder which could give Tenant the right to terminate this Lease or to claim
a partial or total eviction, Tenant shall not exercise any such right until it
has notified in writing the Mortgagee or Ground Lessor and such party shall have
failed to commence the curing of such act or omission within thirty (30) days
after such notice and to diligently pursue the cure thereof until completed.
21. CERTAIN RIGHTS RESERVED BY LANDLORD.
-----------------------------------
Landlord shall have the following rights, each of which Landlord may
exercise without notice to Tenant and without liability to Tenant for damage or
injury to property, person or business on account of the exercise thereof, and
the exercise of any such rights shall not be deemed to constitute an eviction or
disturbance of Tenant's use or possession of the Leased Premises nor shall such
exercise give rise to any claim for set-off or abatement of rent or any other
claim:
A. Except as expressly provided in this Lease, to install, affix and
maintain any and all signs on the exterior and on the interior of the Building
and elsewhere on the Property, except as provided in 26B hereof.
B. To decorate and also to make repairs, alterations, additions, or
improvements, whether structural or otherwise, in and about the Property, or any
part thereof and for such purposes to enter upon the Leased Premises, and during
the continuance of any of said work, to temporarily close doors, entryways and
corridors in the Building and to interrupt or temporarily suspend services or
use of facilities, all without affecting any of Tenant's obligations hereunder,
so long as the Leased Premises are reasonably accessible and usable.
C. To furnish door keys or other entry devices for the entry door(s)
in the Leased Premises at the commencement of the Term and to retain at all
times, and to use in appropriate instances, keys to all doors within and into
the Leased Premises.
D. To approve the weight, size and location of safes, vaults,
computers, word processing equipment and other heavy equipment and articles in
and about the Leased Premises and the Building so as not to exceed the legal
live load per square foot designated by the structural engineers for the
Building, and to require all such items and furniture and similar items to be
moved into or out of the Building and Leased Premises only at such times and in
such manner as Landlord shall direct in writing.
E. To show the Leased Premises to prospective tenants at reasonable
times and, if vacated or abandoned, to show the Leased Premises at any time and
to prepare the Leased Premises for reoccupancy.
F. To erect, use and maintain pipes, ducts, wiring and conduits, and
appurtenances thereto, in and through the Leased Premises at reasonable
locations.
G. To enter the Leased Premises at any reasonable time to inspect
the Leased Premises.
20
<PAGE>
22. INTENTIONALLY DELETED.
---------------------
23. LANDLORD'S REMEDIES.
-------------------
A. If (i) Tenant defaults in the payment of Base Rent, Additional
Charges, or any installment of the foregoing, or in the payment of any other sum
required to be paid by Tenant either under this Lease, or under the terms of any
other agreement between Landlord and Tenant (the foregoing defaults being
collectively called "PAYMENT DEFAULTS"), and such Payment Default is not cured
within five (5) days following written notice that such payment is due, (ii)
Tenant defaults in the observance or performance of any of the other covenants
or conditions in this Lease which Tenant is required to observe and perform and
such default is not cured within thirty (30) days after written notice to
Tenant; provided, however, if the default by its nature cannot be cured within
thirty (30) days, but Tenant has commenced to cure within the thirty (30) day
period, and diligently pursues the cure, Tenant shall have up to ninety (90)
days to complete the cure, (or if such default involves a hazardous condition
and is not cured by Tenant immediately upon written notice to Tenant), or (iii)
the interest of Tenant in this Lease shall be levied on under execution or other
legal process, or (iv) Tenant becomes the subject of commencement of an
involuntary case under the federal bankruptcy law as now or hereafter
constituted, or there is filed a petition against Tenant seeking reorganization,
arrangement, adjustment or composition of or in respect of Tenant under the
federal bankruptcy law as now or hereafter constituted, or under any other
applicable federal or state bankruptcy, insolvency, reorganization or other
similar law, or seeking the appointment of a receiver, liquidator or assignee,
custodian, trustee, sequestrator (or similar official) of Tenant or any
substantial part of its property, or seeking the winding-up or liquidation of
its affairs and such involuntary case or petition is not dismissed within 60
days after the filing thereof, or (v) Tenant commences a voluntary case or
institutes proceedings to be adjudicated a bankrupt or insolvent, or consents to
the institution of bankruptcy or insolvency proceedings against it, under the
Federal bankruptcy laws as now or hereafter constituted, or any other applicable
Federal or state bankruptcy or insolvency or other similar law, or consents to
the appointment of or taking possession by a receiver or liquidator or assignee,
trustee, custodian, sequestrator (or other similar official) of Tenant or of any
substantial part of its property, or makes any assignment for the benefit of
creditors or admits in writing its inability to pay its debts generally as they
become due, or (vi) Tenant, its stockholders or Board of Directors or any
committee thereof takes any action contemplating, in preparation for or in
furtherance of any of the occurrences, steps or proceedings in items (iv) or (v)
above, or (vii) any representation or warranty made by Tenant is not accurate
and correct, then Landlord may treat the occurrence of any one or more of the
foregoing events as a breach of this Lease, and any other lease in the Building
to which Tenant is a party and thereupon at its option may, with or without
notice or demand of any kind to Tenant or any other person, have any one or more
of the following described remedies in addition to all other rights and remedies
provided at law or in equity or elsewhere herein:
(a) Landlord may terminate this Lease by giving to Tenant
written notice of Landlord's election to do so, in which event the
Term and all right, title and interest of Tenant hereunder shall end
on the date stated in such notice;
21
<PAGE>
(b) Landlord may terminate the right of Tenant to possession
of the Leased Premises without terminating this Lease, by giving
written notice to Tenant that Tenant's right of possession shall end
on the date stated in such notice, whereupon the right of Tenant to
possession of the Leased Premises or any part thereof shall cease on
the date stated in such notice; and
(c) Landlord may enforce the provisions of this Lease and
may enforce and protect the rights of Landlord hereunder by a suit or
suits in equity or at law for the specific performance of any covenant
or agreement contained herein, and for the enforcement of any other
appropriate legal or equitable remedy, including without limitation
(aa) injunctive relief, (bb) recovery of all moneys due or to become
due from Tenant under any of the provisions of this Lease, and (cc)
any other damages incurred by Landlord by reason of Tenant's default
under this Lease.
B. If Landlord exercises any of the remedies provided for in
subparagraphs (a) or (b) above, Tenant shall surrender possession of and vacate
the Leased Premises and immediately deliver possession thereof to Landlord, and
Landlord may re-enter and take complete and peaceful possession of the Leased
Premises.
C. If Landlord terminates the right of Tenant to possession of the
Leased Premises without terminating this Lease, such termination of possession
shall not release Tenant, in whole or in part, from Tenant's obligation to pay
the Base Rent hereunder for the full Term, and the present value of the
aggregate amount of the Base Rent and Additional Charges (at the then current
rates therefor) for the period from the date stated in the notice terminating
possession to the Termination Date (such present value to be computed on the
basis of a per annum discount rate equal to 7%) shall, at the option of
Landlord, be immediately due and payable by Tenant to Landlord, together with
any other moneys due hereunder, and Landlord shall have the right to immediate
recovery of all such amounts. In the alternative, Landlord shall have the right
from time to time, to recover from Tenant, and Tenant shall remain liable for,
all Base Rent and Additional Charges not theretofore accelerated and paid
pursuant to the foregoing sentence and any other sums thereafter accruing as
they become due under this Lease during the period from the date of such notice
of termination of possession to the Termination Date. In any such case,
Landlord may (but shall be under no obligation to, except as may be required by
law) relet the Leased Premises or any part thereof for the account of Tenant for
such rent, for such time (which may be for a term extending beyond the Term of
this Lease) and upon such terms as Landlord in Landlord's sole discretion shall
determine, and Landlord shall not be required to accept any tenant offered by
Tenant or to observe any instructions given by Tenant relative to such
reletting. Also, in any such case, Landlord may change the locks or other entry
devices of the Leased Premises and make repairs, alterations and additions in or
to the Leased Premises and redecorate the same to the extent deemed by Landlord
necessary or desirable, and Tenant shall upon written demand pay the cost
thereof together with Landlord's expenses of reletting, including, without
limitation, brokerage commissions payable to Landlord or Landlord's Agent or to
others. Landlord may collect the rents from any such reletting and apply the
same first to the payment of the expenses of re-entry, redecoration, repair and
alterations and the expenses of reletting and second to the payment of Base Rent
and Additional Charges payable by Tenant hereunder, and any excess or residue
shall operate only as an offsetting
22
<PAGE>
credit against the amount of Base Rent and Additional Charges due and owing or
paid as a result of acceleration or as the same thereafter becomes due and
payable hereunder, but the use of such offsetting credit to reduce the amount of
Base Rent and Additional Charges due Landlord, if any, shall not be deemed to
give Tenant any right, title or interest in or to such excess or residue and any
such excess or residue shall belong to Landlord solely; and in no event shall
Tenant be entitled to a credit on its indebtedness to Landlord in excess of
either the aggregate sum (including Base Rent and Additional Charges) due and
owing or paid as a result of acceleration or which would have been paid by
Tenant for the period for which the credit to Tenant is being determined, had no
default occurred, as applicable. No such re-entry, repossession, repairs,
alterations, additions or reletting shall be construed as an eviction or ouster
of Tenant or as an election on Landlord's part to terminate this Lease, unless a
written notice of such intention is given to Tenant, nor shall the foregoing
operate to release Tenant in whole or in part from any of Tenant's obligations
hereunder, and Landlord may, at any time and from time to time, sue and recover
judgment for any deficiencies from time to time remaining after the application
from time to time of the proceeds of any such reletting.
D. In the event of the termination of this Lease by Landlord as
provided for by subparagraph (A) above, Landlord shall be entitled to recover
from Tenant all damages and other sums which Landlord is entitled to recover
under any provision of this Lease or at law or equity, including, but not
limited to, all the fixed dollar amounts of Base Rent and Additional Charges
accrued and unpaid for the period up to and including such termination date, as
well as all other additional sums payable by Tenant, or for which Tenant is
liable or in respect of which Tenant has agreed to indemnify Landlord under any
of the provisions of this Lease, which may be then owing and unpaid, and all
costs and expenses, including without limitation court costs and reasonable
attorney's fees incurred by Landlord in the enforcement of its rights and
remedies hereunder and, in addition, any damages provable by Landlord as a
matter of law including, without limitation, an amount equal to the excess of
the Base Rent provided to be paid for the remainder of the Term over the fair
market rental value of the Leased Premises (determined at the date of
termination of this Lease) after deduction of all anticipated expenses of
reletting. In the alternative, Landlord shall have the right, from time to
time, to recover from Tenant, and Tenant shall remain liable for, all Base Rent,
Additional Charges and other amounts due and owing under this Lease not
theretofore accelerated and paid pursuant to the provisions of this Lease plus
(x) damages equal to all other sums which would have accrued under the Lease
after the date of termination had it not been terminated, such damages to be due
and payable as such sums would have become due, less (y) such amounts as
----
Landlord may receive from reletting after first paying all costs of such
reletting, including, without limitation, brokerage commissions and the costs of
repairs, alterations, additions and redecorations, and the expenses of re-entry,
and the net amounts of rent collected remaining after such expenses shall
operate only as an off-setting credit against the amount due hereunder with any
excess or residue belonging to Landlord solely. Should the fair market rental
value of the Leased Premises after deduction of all anticipated expenses of
reletting exceed the Base Rent provided to be paid by Tenant for the remainder
of the Term, Landlord shall not be obligated to pay to Tenant any part of such
excess or to credit any part of such excess against any other sums or damages
for which Tenant may be liable to Landlord.
23
<PAGE>
E. In the event that Tenant shall file for protection under the
Bankruptcy Code now or hereafter in effect, or a trustee in bankruptcy shall be
appointed for Tenant, Landlord and Tenant agree, to the extent permitted by law,
to request that the debtor-in-possession or trustee-in-bankruptcy, if one shall
have been appointed, either assume or reject this Lease within 60 days after
such appointment.
24. COVENANT OF QUIET ENJOYMENT.
---------------------------
Landlord covenants that Tenant, on paying the Base Rent, charges for
services and other payments herein reserved and on keeping, observing and
performing all the other terms, covenants, conditions, provisions and agreements
herein contained on the part of Tenant to be kept, observed and performed, all
of which obligations of Tenant are independent of Landlord's obligations
hereunder, shall, during the Term, peaceably and quietly have, hold and enjoy
the Leased Premises subject to the terms, covenants, conditions, provisions and
agreements hereof free from hindrance by Landlord or any person claiming by,
through or under Landlord.
25. INTENTIONALLY DELETED.
---------------------
26. OTHER AGREEMENTS OF TENANT.
--------------------------
A. Upon request of Landlord from time to time, Tenant agrees to
furnish Landlord with copies of current financial statements of Tenant,
certified by Tenant's accountant and an authorized representative of Tenant.
B. Tenant shall furnish locks and keys to premises and make same
available to Landlord for access to premises as provided herein.
Notwithstanding the provisions for Landlord's access to the Leased Premises,
Tenant relieves and releases Landlord of all responsibility arising out of
theft, robbery, pilferage and personal assault. Upon the expiration of the term
or Tenants right to possession, Tenant shall return all keys to Landlord and
shall disclose to Landlord the combination of any safes, cabinets or vaults left
in the Leased Premises.
27. REAL ESTATE BROKER.
------------------
Tenant represents that Tenant has dealt with (and only with) the broker
named in the Schedule as broker in connection with this Lease, and that insofar
as Tenant knows, no other broker negotiated this Lease or is entitled to any
commission in connection therewith. Tenant agrees to indemnify, defend and hold
Landlord and its partners, employees, agents, and officers harmless from and
against all claims made by any broker or finder other than the broker named in
the Schedule for a commission or fee in connection with this Lease, provided
that Landlord has not in fact retained such broker or finder.
24
<PAGE>
28. MISCELLANEOUS.
-------------
A. RIGHTS CUMULATIVE. All rights and remedies of Landlord under
-----------------
this Lease shall be cumulative and none shall exclude any other rights and
remedies allowed by law.
B. LATE PAYMENTS.
-------------
(i) All payments becoming due under this Lease and remaining
unpaid within five (5) days of when due shall bear interest from the due
date until paid at a rate per annum (the "INTEREST RATE") equal to the
prime rate of interest, announced from time to time by The First National
Bank of Chicago or any successor, plus four percent (4%), such rate to
change when and as such prime rate changes (but in no event at a rate which
is more than the highest rate which is at the time lawful in the State of
Illinois).
(ii) Tenant recognizes that late payment of Base Rent or any
other sum due hereunder will result in administrative expenses to Landlord,
the extent of which additional expenses are extremely difficult and
economically impractical to ascertain. Tenant therefore agrees that when
Base Rent or any other sum is due and payable from Tenant to Landlord
pursuant to the terms of this Lease, and such amount remains unpaid 5 days
after such amount is due, the amount of such unpaid Base Rent or other sum
shall be increased by a late charge to be paid to Landlord by Tenant equal
to the greater of (a) $100.00 or (b) 5% of the unpaid Base Rent or other
sum.
The provisions of this Paragraph shall in no way relieve Tenant of the
obligation to pay Base Rent or other payments on or before the date on which
they are due, nor shall the collection by Landlord of any amount under either
subparagraph hereof impair (a) the ability of Landlord to collect the amount
charged under the other subparagraph hereof or (b) Landlord's Remedies set forth
in Paragraph 23 of this Lease.
C. TERMS. The necessary grammatical changes required to make the
-----
provisions hereof apply either to corporations or partnerships or individuals,
men or women, and singular or plural, as the case may require, shall in all
cases be assumed as though in each case fully expressed.
D. BINDING EFFECT. Each of the provisions of this Lease shall
--------------
extend to and shall, as the case may require, bind or inure to the benefit not
only of Landlord and of Tenant, but also of their respective successors and
assigns, provided this clause shall not permit any assignment by Tenant contrary
to the provisions of this Lease.
E. LEASE CONTAINS ALL TERMS. All of the obligations of Landlord are
------------------------
contained herein and in the Schedule attached hereto and the Exhibits attached
hereto, and no modification, waiver or amendment of this Lease or of any of its
conditions or provisions shall be binding upon Landlord unless in writing signed
by Landlord or by a duly authorized agent of Landlord empowered by a written
authority signed by Landlord. In executing and delivering this Lease, Tenant
has not relied on any representation (including, but not limited to, any
representation whatsoever as to the amount of any item comprising Additional
Charges or the amount of the
25
<PAGE>
Additional Charges in the aggregate or that Landlord is furnishing the same
services to other tenants, at all, on the same level or on the same basis),
warranty or any statement of Landlord which is not set forth herein, in the Work
Letter or in one or more of the Exhibits attached hereto.
F. DELIVERY FOR EXAMINATION. Submission of the Lease for
------------------------
examination shall not bind Landlord in any manner, and no Lease or obligations
of Landlord shall arise until this instrument is signed by both Landlord and
Tenant and delivery is made to each.
G. NO AIR RIGHTS. No rights to any view or to light or air over any
-------------
property, whether belonging to Landlord or any other person, are granted to
Tenant by this Lease.
H. RECORDING. Landlord and Tenant agree to execute and record a
---------
Memorandum of this Lease.
I. CAPTIONS. The captions of paragraphs and subparagraphs are for
--------
convenience only and shall not be deemed to limit, construe, affect or alter the
meaning of such paragraphs or subparagraphs.
J. ONLY LANDLORD/TENANT RELATIONSHIP. Nothing contained in this
---------------------------------
Lease shall be deemed or construed by the parties hereto or by any third party
to create the relationship of principal and agent, partnership, joint venturer
or any association between Landlord and Tenant, it being expressly understood
and agreed that neither the method of computation of Base Rent nor any act of
the parties hereto shall be deemed to create any relationship between Landlord
and Tenant other than the relationship of landlord and tenant.
K. APPLICATION OF PAYMENTS. Landlord shall have the right to apply
-----------------------
payments received from Tenant pursuant to this Lease (regardless of Tenant's
designation of such payments) to satisfy any obligations of Tenant hereunder, in
such order and amounts as Landlord in its sole discretion may elect.
L. GOVERNING LAW. Interpretation of this Lease shall be governed by
-------------
the internal laws of the State of Illinois.
M. PARTIAL INVALIDITY. If any term, provision or condition
------------------
contained in this Lease shall, to any extent, be invalid or unenforceable, the
remainder of this Lease (or the application of such term, provision or condition
to persons or circumstances other than those in respect of which it is invalid
or unenforceable) shall not be affected thereby, and each and every other term,
provision and condition of this Lease shall be valid and enforceable to the
fullest extent permitted by law; provided, however, that if any provision of
this Lease relating to payment of Base Rent or Additional Charges is invalid or
unenforceable, Landlord shall have the right to terminate this Lease.
N. INTEREST. If, from any circumstances whatsoever, fulfillment of
--------
any provision hereof at the time performance of such provision shall be due,
shall involve exceeding the highest lawful rate of interest permissible under
applicable law, then the obligation to be fulfilled
26
<PAGE>
shall be reduced to the highest lawful rate of interest permissible under the
applicable laws; and, if for any reason whatsoever, Landlord shall ever receive
as interest an amount which would be deemed unlawful under such applicable law,
at Landlord's option such excess shall be either credited against payments next
due hereunder or refunded by Landlord, provided Tenant is not then in default
hereunder.
O. AUTHORIZED SIGNATORY. If Tenant is a corporation or partnership,
--------------------
each signatory of Tenant personally represents and warrants that he is a duly
authorized signatory for and on behalf of the Tenant, and agrees that if the
representation and warranty contained in this paragraph is false, each signatory
shall be personally liable under this Lease.
P. FINANCIAL INFORMATION. Tenant represents and warrants that all
---------------------
financial information heretofore and hereafter delivered to Landlord is true and
correct and that no material misstatements or omissions exist therein.
Q. COUNTERPARTS. This Lease may be executed in counterparts and
------------
each copy of this Lease to which is attached counterpart signature pages
containing the signatures of each of the parties hereto shall be deemed for all
purposes to be an executed original of this Lease.
R. SECURITY SYSTEM. Notwithstanding anything in this Lease to the
---------------
contrary, Tenant shall have the right, at its sole expense, to design, install
and maintain a security system within the Leased Premises.
S. PARKING. Landlord agrees to designate six (6) parking spaces for
-------
the exclusive use of Tenant, its employees and invitees. Except for spaces
designated by Landlord for the exclusive use of Landlord or others, as shown on
the attached Exhibit F, all other parking spaces within the Property shall be
available to Tenant on a non-exclusive, first come, first served basis.
T. EXTERIOR SIGNAGE. Tenant may, at its sole expense, design,
----------------
install and maintain exterior illuminated building signage, subject to
Landlord's review and approval of the design of the signage. The location of
such signage shall be in the northeast corner of the facade facing Route 83. No
other building signage shall be placed on the facade of the Building facing
Route 83.
U. PREVAILING PARTY. In the event that either party defaults in the
----------------
performance of its obligations hereunder (defaulting party), the defaulting
party shall be liable for all costs and expenses, including reasonable attorneys
fees, incurred or paid by the other party in enforcing the terms of this Lease.
V. LANDSCAPING. Landlord agrees during the term of this Lease to
-----------
prune and maintain the existing landscaping facing Route 83 so as to increase
the building's visibility thereto, and except for an initial pruning to be
completed by Landlord prior to the Commencement Date, the cost of which shall be
included in computing Operating Expenses.
27
<PAGE>
29. NOTICES.
-------
All notices to be given under this Lease shall be in writing and delivered
personally or deposited in the United States mail, certified or registered mail
with return receipt requested, postage prepaid, addressed as set forth in the
Schedule or to such other person or such other address designated by notice sent
by the party hereto who wished to receive notice.
All notices shall be deemed effectively given
(i) when delivered, if delivered personally;
(ii) three days after such notice has been deposited in the
United States mail, if mailed certified or registered mail, return receipt
requested; and
(iii) when received by the party for which notice is intended,
if given in any other manner.
30. LIMITATION ON LANDLORD'S LIABILITY.
----------------------------------
It is expressly understood and agreed by Tenant that none of Landlord's
covenants, undertakings or agreements are made or intended as personal
covenants, undertakings or agreements by Landlord or the partners in Landlord,
and any liability of Landlord or the partners in Landlord for damages or breach
or nonperformance by Landlord or otherwise arising under or in connection with
this Lease or the relationship of Landlord and Tenant hereunder, shall be
collectible only out of Landlord's interest in the Property (or if Landlord is
the beneficiary of a land trust, Landlord's right, title and interest in such
land trust), in each case as the same may then be encumbered, and no personal
liability is assumed by, nor at any time may be asserted against, Landlord or
the partners in Landlord or any of its or their officers, agents, employees,
legal representatives, successors or assigns, all such liability, if any, being
expressly waived and released by Tenant. Tenant further expressly understands
and agrees that Landlord's agent executes this Lease, not in its own right but
solely as Landlord's agent and that nothing in this Lease shall be construed as
creating any liability whatsoever against such Landlord's agent, its
shareholders, directors, officers or employees and in particular, without
limiting the generality of the foregoing, there shall be no liability to pay any
indebtedness or sum accruing hereunder, or to perform any covenant or agreement
whether express or implied herein contained, it being agreed that Landlord shall
have sole responsibility therefor.
31. RENEWAL OPTION.
--------------
A. Provided that no default is existing under this Lease at the time
the Renewal Option (as hereinafter defined) is exercised, or at the commencement
of the Renewal Period (as hereinafter defined), and subject to the right of
Tenant to nullify the exercise of the Renewal Option as hereinafter provided,
Tenant shall have the right (the "RENEWAL OPTION") to extend the Term for one
(1) five year period (the "RENEWAL PERIOD") commencing on the expiration of the
Term.
28
<PAGE>
B. Tenant's right to exercise the Renewal Option shall be
conditioned upon Landlord's receipt, concurrently with Tenant's exercise of the
Renewal Option, of current financial statements of Tenant, certified by an
authorized representative of Tenant.
C. The Renewal Option shall be exercised, if at all, by written
notice to Landlord given not earlier than eighteen (18) months nor later than
twelve (12) months prior to the expiration of the Term. In the event Tenant
fails strictly to comply with the procedure for exercise of the Renewal Option,
Tenant shall have no further right to extend the Term.
D. Landlord's and Tenant's rights and obligations for the Renewal
Period shall be upon the same terms and conditions as are contained in this
Lease, except as hereinafter provided:
(i) The annual Base Rent (described below) during the Renewal
Period shall be at the rate per annum per square foot of rentable area in
the Leased Premises, equal to the Market Rental Rate (as hereinafter
defined) per annum, but in no event shall the Base Rent for any year in the
applicable Renewal Period be less than the Base Rent in effect for the last
year of the Term. The Market Rental Rate shall be the rate for the leasing
of comparable space in the Oak Brook area for a term equal to the Renewal
Period and commencing at approximately the commencement date of the Renewal
Period taking into account rent abatement, tenant construction allowance,
and other concessions given to other tenants of similar space for similar
lease terms.
(ii) At any time in the period during which the Tenant may
exercise the Renewal Option, the Tenant may request Landlord's good faith
determination of the Base Rent for the Renewal Period. Landlord shall
provide Tenant with such determination within thirty (30) days after such
request. The Landlord's good faith determination of the Base Rent for the
Renewal Period shall be binding upon Tenant and Landlord in the event that
Tenant thereafter exercises the Renewal Option as herein provided.
(iii) Landlord shall have no obligation to make improvements,
decorations, repairs, alterations, or additions to the Leased Premises as a
condition to Tenant's obligation to pay Base Rent or Additional Charges for
the Renewal Period.
E. Except as specified herein, Tenant shall have no further right to
extend the Term.
F. Notwithstanding anything herein to the contrary, in the event of
any assignment, sublet or transfer by Tenant of this Lease or any interest under
it, or in the event Tenant vacates the Leased Premises, Tenant shall have no
rights under this Paragraph 31.
32. RIGHT OF FIRST OFFER.
--------------------
A. Provided that no default exists under this Lease, Tenant shall
have the right (the "RIGHT OF FIRST OFFER") during the Term to acquire the
Property from Landlord, upon the terms and conditions set forth in this
Paragraph 32.
29
<PAGE>
B. Prior to Landlord's listing the Property for sale or offering the
Property to any other party (other than an affiliate of Landlord), Landlord
shall give Tenant notice of the availability of the Property. Tenant. In the
event that Tenant desires to exercise the Right of First Offer, Tenant shall
give written notice to Landlord no later than five (5) days after receipt of
Landlord's notice. If Tenant does not so notify Landlord, in writing of its
election with respect to the Right of First Offer by said date, Tenant shall
conclusively be deemed to have elected not to exercise the Right of First Offer.
In the event that Tenant timely exercises the Right of First Offer, then
commencing upon the date of Tenant's exercise notice, the parties shall
negotiate, in good faith, to reach mutually acceptable terms for the sale by
Landlord and acquisition by Tenant of the Property, and to execute a contract
evidencing those terms.
C. If the parties are unable to reach agreement and enter into a
contract within thirty (30) days, then Tenant's rights with respect to the Right
of First Offer shall be terminated, and Landlord may list or offer the Property
for sale to others.
D. Notwithstanding anything herein to the contrary, in the event of
any assignment, sublet or transfer by Tenant of this Lease, or if Tenant has
vacated the Leased Premises, Tenant shall have no rights under this Paragraph
32.
33. ZONING.
------
A. The parties acknowledge that the current zoning classification of
the Property is B-1, which does not expressly permit operation of a bank. The
City of Oak Brook has issued a building permit for Tenant's use of the Leased
Premises as set forth in Tenant's letter to Landlord, dated August 26, 1996,
Tenant's letter to Thomas Hawk, Director of Code Enforcement, Village of Oak
Brook, dated September 19, 1996 and Landlord's letter to Rich Arling, Building
Inspector, Village of Oak Brook dated August 28, 1996, which letters are
attached as Exhibit H ("TENANT'S CURRENT BUSINESS").
B. If at any time during the Term, the City of Oak Brook or other
municipality determines that Tenant may not lawfully conduct its business on the
Property, due to the zoning classification of the Property, and provided that
Tenant has not materially altered its operations to be different from Tenant's
Current Business, then:
(i) the parties agree to work together, in good faith, to cause
the Property to be rezoned to B-2 or any other classification which does
expressly permit operation of Tenant's Current Business;
(ii) if Landlord is unable to obtain the rezoning within one
hundred twenty (120) days following the date of notification of the non-
conforming use, then either party may, in its sole discretion, at any time
within thirty (30) days following the end of the one hundred twenty (120)
day period, terminate this Lease, effective immediately, by giving written
notice to the other party;
30
<PAGE>
(iii) upon such termination, Landlord shall pay to Tenant an
amount equal to the unamortized value of the Work (as defined in the Tenant
Improvement Work Letter attached as Exhibit C), amortized over the initial
Term of the Lease, and all rights and obligations of both parties shall
cease, as of the date of such termination, as if such Term had naturally
expired;
(iv) notwithstanding anything in this Lease to the contrary,
Base Rent and Additional Charges shall abate during such time and to such
extent as Tenant is unable to use the Leased Premises for Tenant's Current
Business; and,
(v) Landlord's obligations hereunder shall not in any way be
limited by the provisions of Paragraph 30 of this Lease.
END OF TERMS AND CONDITIONS
31
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION OF THE LAND
-----------------------------
Lot 1 in Town and Country Resubdivision, being a Resubdivision of Lot 1 and 2 in
Block 1 in Town Development Company's Elmhurst Countryside Unit Number Three,
being a Subdivision in the South East 1/4 of Section 22, Township 39 North,
Range 11, East of the Third Principal Meridian, according to the Plat of Said
Resubdivision recorded September 8, 1988 as Document R88-101855, in DuPage
County, Illinois.
<PAGE>
EXHIBIT B
OUTLINE OF THE LEASED PREMISES
------------------------------
<PAGE>
EXHIBIT C
TENANT IMPROVEMENT WORK LETTER
------------------------------
1. DEFINITIONS. Terms which are defined in the Lease shall have the same
-----------
meanings when used in the Work Letter. In addition, the following terms shall
have the following meanings:
"ARCHITECTURAL CONSTRUCTION DOCUMENTS" means the final plans and
specifications to complete the Work in the Leased Premises, including but not
limited to details of the following: partitions, doors, electrical and telephone
outlets, ceiling, lighting, millwork, finishes and carpeting.
"CONSTRUCTION DOCUMENTS" means the final plans and specifications for all
the work to be performed to complete the Leased Premises, including but not
limited to Architectural Construction Documents, Structural Plans and Systems
Plans.
"DAY" or "DAYS" means Monday through Friday except for state or federal
government holidays.
"EXTRA WORK" means all work pursuant to this Work Letter which results from
a change by Tenant in the Construction Documents.
"REVISED PLANS" means all plans and specifications necessary or desirable
to construct and complete any item of Extra Work.
"STRUCTURAL PLANS" means the final plans and specifications for all work to
be performed in the Leased Premises which affect floor load, floor penetrations
and similar structural matters.
"SYSTEM PLANS" means the final plans and specifications for all work to be
performed to complete the mechanical, electrical, life safety and plumbing
systems in the Leased Premises, including but not limited to sprinklers,
heating, ventilating, air conditioning, electrical and plumbing.
"TENANT'S ARCHITECT" means the architect licensed by the State of Illinois
retained by Tenant and approved by Landlord, to prepare the Architectural
Construction Documents.
"TENANT'S ENGINEER" means the engineer retained by Tenant and designated by
Landlord to prepare the System Plans.
"TENANT'S STRUCTURAL ENGINEER" means the engineer retained by Tenant and
designated by Landlord to prepare, review and approve the Structural Plans.
"WORK" means the improvements to the Leased Premises described in the
Construction Documents.
<PAGE>
2. PLANS AND SPECIFICATIONS. (i) Tenant has retained Tenant's Architect,
------------------------
Tenant's Engineer and Tenant's Structural Engineer to prepare the Architectural
Construction Documents, Systems Plans and Structural Plans, respectively, all at
Tenant's sole cost and expense. All Construction Documents are subject to the
review and approval of Landlord, in its reasonable discretion.
(ii) Tenant shall deliver three (3) complete copies of the
Construction Documents to Landlord. Landlord shall have ten (10) business days
from its receipt of the Construction Documents, in which to review and approve
or disapprove the Construction Documents, and in the event of disapproval
Landlord shall specify the reasons for such disapproval. Tenant may cause the
Construction Documents to be modified and resubmitted to Landlord for Landlord's
further review and approval, and Landlord shall have five (5) business days from
its receipt of the revised Construction Documents in which to review and approve
or disapprove same.
(iii) Upon Landlord's request, Tenant shall, at Tenant's expense,
cause Tenant's Architct to deliver a set of "as-built" Construction Documents to
Landlord within sixty (60) days after the Commencement Date of the Lease. The
"AS-BUILT" Construction Documents shall consist of reproducible copies of the
final Construction Documents marked to accurately show all changes from the
Construction Documents made in the actual construction of the Leased Premises.
3. BIDDING; PERMITS. Upon Landlord's approval of the Construction
----------------
Documents, Tenant shall solicit bids for completion of the Work to one or more
general contractors, including Landlord's designated general contractor, on a
guaranteed cost basis. Tenant may select any of the bidders to perform the
Work, provided, however, that Landlord shall have the right to disapprove any
bidder if Landlord has reasonable grounds to believe that such contractor is
disreputable or may be unable to complete the Work in a good and workmanlike
manner in accordance with the Construction Documents. Notwithstanding the
foregoing, if Tenant selects a general contractor other than Landlord's
designated general contractor, Landlord's designated general contractor shall
have the right to match the bid of the general contractor selected by Tenant,
and to perform the Work.
Concurrently with Landlord's approval of the Construction Documents,
Landlord shall thereafter make application to the appropriate regulatory
authorities for the required permits and approvals. Any delay in receiving
permits or approvals shall not be considered a Landlord Delay. Any delay in
receiving permits or approvals resulting from the condition of the Construction
Documents shall be considered a Tenant Delay.
If Landlord's general contractor is selected to complete the Work, Landlord
agrees to finish and construct in the Leased Premises the Work, in accordance
with the Construction Documents. Upon substantial completion of the Work,
Landlord and Tenant shall inspect the Leased Premises and prepare a Punch List
of any defects or uncompleted items necessary to be corrected. The Leased
Premises shall not be deemed incomplete or not ready for occupancy if only
insubstantial details of construction, decoration or mechanical adjustments
remain to be done. Issuance of the certificate of occupancy shall be final and
conclusive as to whether the Leased Premises are completed and ready for
occupancy.
<PAGE>
4. COMMENCEMENT DATE AGREEMENT. Prior to Tenant taking occupancy of the
---------------------------
Leased Premises, Tenant must execute the Commencement Date Agreement in the form
attached hereto as Exhibit G.
5. EXTRA WORK.
----------
A. In the event Tenant desires to make revisions to the Work, Tenant
must request the revisions in writing. All revisions require the prior approval
of Landlord. Tenant shall cause to be prepared and delivered to Landlord, for
Landlord's review and approval, Revised Plans for the Extra Work. After
reviewing the Revised Plans, Landlord shall notify Tenant of Landlord's approval
or disapproval thereof, and in the event of disapproval Landlord shall specify
the reasons for such disapproval. Tenant may cause the Revised Plans to be
modified and resubmitted to Landlord for Landlord's further review and approval
within seven (7) days after Landlord notifies Tenant of its disapproval. In the
event Tenant does not submit modified plans within such seven (7) day period,
Tenant shall conclusively be deemed to have withdrawn its request for the Extra
Work.
B. If Landlord notifies Tenant that it approves the Revised Plans
for the Extra Work (or that it approves the modified Revised Plans, as the case
may be), and if Landlord's general contractor is performing the Work, then
concurrently with such approval Landlord shall deliver to Tenant (i) an estimate
of the cost to perform the Extra Work, and, (ii) a statement setting forth
whether in Landlord's judgment, the performance of the Extra Work will cause a
Tenant Delay (as hereinafter defined), and Landlord's estimate of the length of
the Tenant Delay (the items in subparagraphs (i) and (ii) are together referred
to as "LANDLORD'S EXTRA WORK SUBMISSIONS." Tenant shall have three (3) days to
give Landlord written notice of acceptance or rejection of Landlord's Extra Work
Submissions. If Tenant or Tenant's Architect gives notice of Tenant's approval,
such notice shall be accompanied by an Extra Work deposit equal to 50% of the
amount estimated by Landlord to perform the Extra Work ("EXTRA WORK DEPOSIT").
In the event Tenant or Tenant's Architect either (x) rejects Landlord's Extra
Work Submissions, (y) fails to give notice within the three (3) day period, or
(z) accepts Landlord's Extra Work Submissions but fails to pay the Extra Work
Deposit, then Tenant shall conclusively be deemed to have withdrawn the request
for Extra Work.
C. Notwithstanding subparagraphs A and B above, Tenant may within
the three (3) day period after receipt of Landlord's Extra Work Submissions,
give notice to Landlord that Tenant elects to cause the Revised Plans to be
modified to reduce the cost of the Extra Work, or reduce the Tenant Delay
resulting from performance of the Extra Work. In such event Tenant shall cause
modifications to be made to the Revised Plans and thereafter shall submit the
modified Revised Plans to Landlord for approval. In the event Tenant or
Tenant's Architect gives Landlord notice of its election to modify the Revised
Plans, the period commencing three (3) days after receipt of Landlord's Extra
Work Submissions and ending on the date the Landlord receives Tenant's or
Tenant's Architect notice of acceptance of the modified Landlord's Extra Work
Submissions (or the date Tenant withdraws, or is deemed to have withdrawn the
request for Extra Work, in accordance with subparagraph A and B above) shall be
a period of Tenant Delay.
<PAGE>
6. CONSTRUCTION COSTS. Landlord agrees to pay ("LANDLORD'S
------------------
CONTRIBUTION"): (a) the entire cost to design and construct an additional fire
door for the Leased Premises; and (b) an amount, not to exceed $10,000.00,
towards exterior improvements at Tenant's primary entrance to the Leased
Premises. Tenant agrees to pay ("TENANT'S CONTRIBUTION") all costs of the Work
in excess of Landlord's Contribution. Payments of Tenant's Contribution shall
be made within ten (10) days after Tenant's receipt of periodic draw requests.
7. TENANT DELAY. In the event the Leased Premises shall not be completed
------------
and ready for occupancy on the Commencement Date, this Lease shall nevertheless
continue in full force and effect, but Base Rent and Additional Charges shall
abate until the Leased Premises are ready for occupancy, and Landlord shall have
no other liability whatsoever on account thereof; provided, however, there shall
be no abatement of Base Rent and Additional Charges if the Leased Premises are
not ready for occupancy because of Tenant Delays.
The number of days of delay arising, directly or indirectly out of or on
account of any of the following events shall constitute the number of days of
"TENANT DELAYS" under the Lease and if the Leased Premises are not ready for
occupancy on account thereof, neither Base Rent nor Additional Charges shall
abate for such number of days:
(a) Tenant's failure to deliver the Construction Documents on or
before the date set forth in the Tenant Occupancy Timetable;
(b) Any delay resulting from Tenants revision of the Construction
Documents;
(c) Any delay resulting from Tenant request that Extra Work be
performed;
(d) Any delay resulting from the performance of any work by Tenant or
any person, firm, or corporation employed by Tenant;
(e) Any delay resulting from failure to obtain or complete the
installation of telephone or other equipment, fixtures, furniture, finishes or
materials selected by Tenant;
(f) Any other default or delay by Tenant or its agents hereunder or
under the Lease.
8. OCCUPANCY PRIOR TO COMMENCEMENT DATE. Landlord shall permit Tenant,
------------------------------------
and Tenant's agents and contractors who have been approved by Landlord, to enter
the Leased Premises prior to the Commencement Date, in order that Tenant may do
such work as may be required by Tenant to make the Leased Premises ready for
Tenant's use and occupancy, provided that Tenant shall fully perform and comply
with each of the following covenants, conditions and requirements:
(i) If Landlord permits such entry prior to the Commencement Date,
then such permission is conditioned upon Tenant and Tenant's agents,
contractors, workmen, mechanics, suppliers and invitees, working in harmony and
not interfering with Landlord and Landlord's agents,
<PAGE>
contractors, suppliers, workmen, and mechanics in the Leased Premises; and if at
any time such entry shall in the judgment of Landlord cause or threaten to cause
disharmony or interference, Landlord shall have the right to withdraw such
permission upon twenty-four (24) hours written notice;
(ii) Tenant agrees that any such entry into the Leased Premises shall
be deemed to be under all of the terms, covenants, conditions, and provisions of
the Lease except as to the covenant to pay Base Rent and Additional Charges, and
further agrees that in connection therewith Landlord shall not be liable in any
way for any injury, loss, or damage which may occur to any of Tenant's work and
installations made in said Leased Premises or to property placed therein prior
to the Commencement Date and thereafter, the same being at Tenant's sole risk.
In addition, Tenant shall require all entities performing work on behalf of
Tenant to provide protection for existing improvements to an extent that is
satisfactory to Landlord and shall allow Landlord access to the Leased Premises,
for inspection purposes, at all times during the period when Tenant is
undertaking construction activities thereon. In the event any entity performing
work on behalf of Tenant causes any damage to the property of Landlord or
others, Tenant shall cause such damage to be repaired at Tenant's expense and if
Tenant fails to cause such damage to be repaired promptly upon Landlord's demand
therefor, Landlord may in addition to any other rights or remedies available to
Landlord under this Lease or at law or equity cause such damage to be repaired,
in which event Tenant shall promptly upon Landlord's demand pay to Landlord the
cost of such repairs;
(iii) All contractors and subcontractors shall use only those service
corridors, entrances and elevators designated by Landlord for ingress and egress
of personnel and the delivery, and removal of equipment and material through or
across any common areas shall only be permitted with the written approval of
Landlord and during hours determined by Landlord. Landlord shall have the right
to order Tenant or any contractor or subcontractor who violates the above
requirements to cease work, vacate the building and to remove its equipment, and
its employees from the Building;
(iv) Tenant agrees that all services and work performed on the Leased
Premises by, on behalf of, or for the account of Tenant, including installation
of telephones, materials and personal property delivered to the Leased Premises
shall be done in a first-class workman-like manner using only good grades of
material;
(v) Tenant agrees to protect, indemnify, defend and hold Landlord
and its agents, partners, and employees harmless from and against any and all
losses, damages, liabilities, claims, liens, costs, and expenses, including
reasonable attorney's fees of whatever nature including those to the person and
property of Tenant, its employees, agents, invitees, licensees and others
arising out of or in connection with the activities of Tenant, Tenant's
Architect or Tenant's contractors in or about the Leased Premises or the
Building, and the cost of any repairs to the Leased Premises or the Building
necessitated by activities of Tenant, Tenant's Architect or Tenant's
contractors;
(vi) In the event any of the Work must be performed after normal
working hours (including Tenant's move into the Leased Premises which must be
done on a weekend or after 5:00 p.m. Monday through Friday) Landlord shall
require that a Building engineer be present and
<PAGE>
Tenant shall reimburse Landlord for the Building engineer's salary and benefits
at the rates currently paid by Landlord; and
(vii) Tenant shall secure, pay for, and maintain during the
continuance of its work within the Leased Premises, insurance, which shall be
endorsed in all policies to include Landlord and its contractor and their
respective employees and agents as additional insured parties, and which shall
provide sixty (60) days prior written notice of any alteration or termination of
coverage, in such amounts and insuring such risks as Landlord may require.
Tenant shall not permit Tenant's contractors to commence any work until all
required insurance has been obtained by Tenant and certificates evidencing such
coverage have been delivered to Landlord.
9. TERMINATION DATE. Under no circumstances shall the occurrence of any
----------------
of the events described in paragraphs 7 or 8 above be deemed to accelerate or
defer the Termination Date.
10. LEASE. This Tenant Construction Work Letter is expressly made a part
-----
of the Lease and is subject to each and every term and condition thereof,
including without limitation, the limitations of liability set forth in
paragraph 30 thereof.
11. MONETARY DEFAULT. The failure by Tenant to pay any monies due
----------------
Landlord pursuant to this Work Letter within the time period herein stated shall
be a default under the terms of the Lease for which Landlord shall be entitled
to exercise all remedies to Landlord for non-payment of Base Rent. All late
payments shall bear interest pursuant to the Lease.
12. ORIGINAL LEASED PREMISES. This Work Letter shall not apply to any
------------------------
additional space added to the original Leased Premises at anytime or from time
to time, whether by any options under the Lease or otherwise, or to any portion
of the original Leased Premises or any additions thereto in the event of a
renewal or extension of the initial term of the Lease, whether by options under
the Lease or otherwise, unless expressly so provided in the Lease or any
amendment or supplement thereto.
13. LANDLORD'S APPROVAL. Landlord's approval of Space Plans or
-------------------
Construction Drawings shall not imply that the items approved are in compliance
with applicable laws, ordinances or codes, and Landlord shall have no liability
to Tenant or any other party by reason of the existence and exercise of such
approval rights.
<PAGE>
EXHIBIT D
JANITORIAL SERVICES
-------------------
I. Office
A. Daily (Monday through Friday)
1. Vacuum all rugs and carpeted areas
2. Damp mop all stone, ceramic tile and terrazzo areas
3. Sweep all other uncarpeted areas
4. Dust all top surfaces
5. Clean all water fountains and water coolers
6. Empty and clean all waste receptacles
B. Periodic
1. Remove fingermarks from all surfaces near light switches, door
jambs, etc. - weekly
2. Sweep floors in private and public stairwells weekly
3. Dust all vertical surfaces - monthly
4. Dust exterior lighting fixtures - quarterly
5. Clean all interior window metal surfaces of perimeter walls -
quarterly
6. Wash telephones - monthly
7. Clean and buff all resilient flooring as required
II. Lavatories
A. Daily (Monday through Friday)
1. Wash all floors
2. Wash and polish all mirrors and bright work
3. Wash and disinfect all toilet seats, basins, bowls and urinals
4. Refill towel dispensers, soap dispensers, tissue holders, material
furnished by Landlord
5. Empty paper tower receptacles
B. Periodic
1. Clean and wash all partitions - weekly
2. Clean and wash all tile walls - monthly
3. High dusting including lights and grills - monthly
4. Machine scrub all floors at least monthly
<PAGE>
III. Windows: Wash all windows, interior and exterior, a minimum number of
three (3) times per year.
Tenants may request additional services other than those described above, at
Tenant's expense.
<PAGE>
EXHIBIT E
TENANT OCCUPANCY TIMETABLE
--------------------------
TENANT: THE PRIVATE BANK AND TRUST COMPANY
PROJECT: 1603 W. 16TH STREET, OAK BROOK, ILLINOIS
DATE: OCTOBER 2, 1996
<TABLE>
<CAPTION>
CRITICAL PATH EVENTS RESPONSIBILITY TIME REQUIRED DATE SCHEDULED ACTUAL DATE
- -------------------- --------------- ------------- --------------- ------------
<S> <C> <C> <C>
. Tenant delivers all Construction Tenant n/a 10/4/96 ____________
Documents to Landlord
. Landlord approves Construction Landlord 10 business days 10/14/96 ____________
Documents
. Landlord obtains building permit Landlord n/a 10/15/96 ____________
. Guaranteed cost delivered to Tenant Landlord 10 days after Landlord 10/14/96 ____________
approval
. Substantial completion of the Work Landlord 8 weeks after permit 12/15/96 ____________
. Inspection of Lease Premises; Landlord/Tenant n/a 12/15/96 ____________
execution of Commencement Date
Agreement and punch list
. Occupancy of Leased Premises Tenant n/a 12/15/96 ____________
</TABLE>
<PAGE>
EXHIBIT F
EXCLUSIVE PARKING
-----------------
<PAGE>
EXHIBIT G
COMMENCEMENT DATE AGREEMENT
---------------------------
DATE: ________________________________________
LANDLORD: COLUMBIA LISLE LIMITED PARTNERSHIP
TENANT: THE PRIVATE BANK AND TRUST COMPANY
BUILDING: 1603 W. 16TH STREET, OAK BROOK, ILLINOIS
RE: LEASE DATED OCTOBER ___, 1996 (THE "LEASE")
1. Tenant agrees that the Work in the Leased Premises has been
substantially completed in accordance with the requirements of the Lease. The
date of "Substantial Completion" as defined in the Lease, is _______________,
19___, except the "punch list items" which are listed on Schedule 1 attached
hereto.
2. Landlord and Tenant agree that _____ days of Tenant Delay (as defined
in Paragraph 7 of the Tenant Improvement Work Letter) have occurred.
3. We hereby confirm that the Commencement Date, as defined in the Lease,
is _______________, 19___.
4. We hereby confirm that the Termination Date, as set forth in the
Lease, is _______________, 19___.
5. Terms which are defined in the Lease shall have the same meanings when
used in this Agreement.
LANDLORD: TENANT:
- --------- -------
COLUMBIA LISLE LIMITED PARTNERSHIP, THE PRIVATE BANK AND TRUST COMPANY,
an Illinois limited partnership an Illinois banking association
By: Columbia Holdings, Ltd., an By: _____________________________
Illinois corporation, its general
partner
Its: _____________________________
By: __________________________________
Gerald J. Kostelny, President
<PAGE>
EXHIBIT H
TENANT'S CURRENT BUSINESS
-------------------------
<PAGE>
EXHIBIT 10.3
------------
LEASE
-----
THIS LEASE, made and entered into as of the 2nd day of May, 1994, by and
among GUNNAR H. HEDLUND, DORIS S. HEDLUND, RONALD P. HEDLUND and GERALD A.
HEDLUND (collectively the "Beneficiaries"), LASALLE NATIONAL TRUST, N.A. , as
successor trustee to LaSalle National Bank, not personally but solely as Trustee
(the "Trustee") under Trust Agreement dated December 28, 1972 and known as Trust
No. 45197 (the "Trust") (the Trustee and Beneficiaries, jointly and severally,
the "Landlord") , and THE PRIVATEBANK AND TRUST COMPANY, an Illinois banking
corporation ("Tenant").
ARTICLE I
---------
LEASED PREMISES
---------------
In consideration of the mutual covenants herein contained and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Landlord hereby leases to Tenant, and Tenant accepts from
Landlord, the following (collectively, the "Leased Premises"): (a) the entire
first floor, containing approximately 4,000 square feet of rentable floor area
and the entire basement, containing approximately 1,300 square feet of rentable
floor area, located in the two story masonry building (the "Building") situated
on the land commonly known as 517 Green Bay Road, Wilmette, Illinois and legally
described on Exhibit "A" attached hereto (the "Land"), and (b) the non-exclusive
use of the side drive and rear apron adjacent to the Building, as set forth on
the site plan attached hereto as Exhibit "B", to have and to hold the Leased
Premises unto Tenant for a term of years commencing on the Commencement Date (as
hereinafter defined in Article II) and ending on the Expiration Date (as
hereinafter defined in Article II) referred to hereinafter as the "Term" of this
Lease, unless sooner terminated pursuant to the terms hereof, subject to the
terms and conditions hereinafter set forth. The Land and all of the improvements
located thereon (including without limitation the Building) are sometimes
hereinafter referred to as the "Property".
ARTICLE II
----------
COMMENCEMENT DATE; LEASE YEAR; CONDITIONS PRECEDENT
---------------------------------------------------
(a) The "Commencement Date" of the Term of this Lease shall be the date on
which Landlord surrenders possession of the Leased Premises to Tenant in good
order and repair and in broom-clean condition, in accordance with this Article
II, and the "Expiration Date" shall be the last day of the month next preceding
the fifth (5th) anniversary of the Commencement Date unless this Lease is sooner
terminated in accordance with the provisions hereof or unless the Term is
extended pursuant to Article XX hereof, provided, however, if the Commencement
Date is other than the first day of a calendar month, the Expiration Date shall
be the last day of the month in which the fifth (5th) anniversary of the
Commencement Date occurs. Within ten (10) days after the Commencement Date,
Landlord and Tenant shall execute a letter setting forth the Commencement Date.
<PAGE>
(b) A "Lease Year" shall mean each twelve-month period during the Term,
with the first Lease Year commencing on the Commencement Date and expiring on
the day prior to the first (lst) anniversary of the Commencement Date; provided,
however, if the Commencement Date is other than the first day of a month, the
first Lease Year shall commence on the first day of the calendar month next
succeeding the Commencement Date, and shall end on the last day of the month in
which the first anniversary of the Commencement Date occurs, and each subsequent
Lease Year shall be the twelve month period following expiration of the
immediately preceding Lease Year.
(c) This Lease and all obligations of Tenant hereunder shall be
conditioned upon Tenant receiving, within thirty (30) days of the date hereof,
final approval of the Village of Wilmette Appearance Review Commission for
Tenant's proposed revisions and alterations to the front (east) elevation of the
Building. Upon obtaining the foregoing approval, Tenant shall notify Landlord
that such approval has been obtained. In the event that Tenant fails to obtain
the approval set forth above within such thirty (30) day period, Tenant may
terminate this Lease upon written notice delivered to Landlord within five (5)
days of the expiration of such thirty (30) day period, in which event neither
Landlord nor Tenant shall have any obligation or liability to the other with
respect to this Lease or any of the terms or conditions hereof.
(d) Landlord agrees to surrender possession of the Leased Premises to
Tenant in good order and repair and in broom-clean condition within eight (8)
weeks after the date hereof.
ARTICLE III
-----------
BASIC RENT
----------
(a) Tenant covenants to pay to Landlord at its office at 515 Green Bay
Road, Wilmette, Illinois 60091, or at such other place as Landlord may from time
to time designate in writing, as basic rent for the use of the Leased Premises,
the amounts provided in this Article III ("Basic Rent").
(b) During the first Lease Year during the Term of this Lease, Tenant
shall pay annual Basic Rent of Eighty-Seven Thousand Five Hundred and No/100
Dollars ($87,500.00) in equal monthly installments.
(c) Basic Rent for each Lease Year during the Term (including the Renewal
Terms if applicable) following the first Lease Year shall be subject to
adjustment as of the first day of such Lease Year by multiplying the "Net Basic
Rent" (as hereinafter defined) by the cumulative percentage increase, if any, in
the "CPI" (as hereinafter defined) between the CPI in effect on the last date as
of which the CPI is published prior to the Commencement Date and the CPI in
effect on the last date as of which the CPI is published prior to the
commencement of the Lease Year in question, and adding the product thereof to
the annual Basic Rent in effect for the first Lease Year. If, as of the
commencement of the Lease Year in question the applicable CPI has not yet been
published, the Basic Rent adjustment shall be made as soon as practicable after
publication thereof and a retroactive payment of such adjustment for all
previous months of such Lease Year shall be made to Landlord within ten (10)
days after the date of determination. It is the intention of the parties that
the CPI adjustment required above will be carried through during each of the
Renewal
2
<PAGE>
Terms, if applicable, as though the Renewal Terms, if exercised, had been part
of the original Term of this Lease. That is, the Basic Rent payable in the
seventh Lease Year, for example, and assuming exercise of the first Renewal
Option, will be the same as the Basic Rent would have been had the original Term
been a ten year term, and, similarly, the rental paid in the thirteenth Lease
Year, for example, and assuming exercise of the second Renewal Term, would be
the same as the rental would have been in the thirteenth Lease Year had the Term
of this Lease been originally a fifteen year term. In no event shall Basic Rent
for each Lease Year be less than $87,500.00.
As used above, the term "Net Basic Rent" shall mean $87,500.00 less 60% of
"Real Estate Taxes" (as defined in Article IV) that become due and payable with
respect to the Property during the "Base Year" (as defined in Article IV),
excluding payments with respect to delinquent taxes.
As used in this Lease, "CPI" shall mean the Consumer Price Index for
Chicago, Illinois, All Urban Consumer, All Items, as published by the Bureau of
Labor Statistics of the United States Department of Labor (1982-84 = 100). If,
at the time required for the determination of Basic Rent, the CPI is no longer
published or issued, the parties shall use such other index as is then generally
recognized and accepted for similar determinations of purchasing power. If the
parties are unable to agree on the selection of such other index which would
most accurately carry out the intent hereof, or if there is a dispute with
respect to the computation of Basic Rent for any Lease Year, then the issue with
respect thereto shall be submitted to the American Arbitration Association in
the City of Chicago for determination in accordance with its procedures at such
time, and such determination shall be binding upon both parties.
(d) All Basic Rent payments hereunder are payable in advance and shall be
paid on or before the first day of the calendar month for which such installment
of Basic Rent is owed.
(e) Notwithstanding the foregoing, (i) if the Commencement Date occurs on
a date other than the first day of a calendar month, then Basic Rent for such
first partial month shall be determined pro rata based upon the number of days
following (and including) the Commencement Date falling within such calendar
month and shall be paid together with the Basic Rent payable on the first day of
the first full calendar month of the Term, and (ii) if the Expiration Date
occurs on a date other than the last day of a calendar month, then Basic Rent
for such final partial month shall be determined pro rata based upon the number
of days preceding (and including) the Expiration Date falling within such
calendar month.
ARTICLE IV
----------
ADDITIONAL RENT
---------------
(a) Tenant agrees to pay to Landlord as additional rent ("Additional
Rent") (Basic Rent and Additional Rent, together hereinafter referred to as
"Rent") an amount equal to sixty percent (60%) of any increase in "Real Estate
Taxes" (as hereinafter defined) coming due and being payable during any Lease
Year over such taxes due and payable during the base year of 1994 (the "Base
Year"), excluding payments with respect to delinquent taxes.
3
<PAGE>
(b) "Real Estate Taxes" means all general real estate taxes levied against
the Property, specifically excluding any penalties or interest thereon, and
excluding income, franchise, transfer, inheritance or capital stock taxes.
In the event that any reductions in Real Estate Taxes are obtained and, as
a result of such reduction, Landlord receives a refund of Real Estate Taxes
previously paid, Tenant shall receive its pro rata share of such refund in the
form of a complete reduction of its Basic Rent and Additional Rent beginning in
the month following the month in which such refund is actually received by
Landlord and continuing until the amount of the refund has been recovered by
Tenant.
(c) Additional Rent shall be paid to Landlord throughout the Term not less
than ten (10) days prior to the time the bill relating to the second installment
of such Real Estate Taxes is due, (that is, ten (10) days prior to the last day
on which such Real Estate Taxes may be paid without penalty or interest)
provided that Landlord has furnished Tenant with a copy of such Real Estate Tax
bill not less than fifteen (15) days prior to the time such Real Estate Tax bill
is due. Landlord shall furnish Tenant with copies of all Real Estate Tax bills
promptly upon receipt by Landlord of such bills, and shall furnish Tenant with
proof satisfactory to Tenant that all Real Estate Taxes have been paid within
ten (10) days of the date such Real Estate Taxes are paid. Upon the expiration
of the Term, Tenant shall have no further obligation to pay any Real Estate
Taxes with respect to the Property which become due and payable after the
Expiration Date (as the same may have been extended pursuant to Article XX).
ARTICLE V
---------
USE
---
The Leased Premises may be used and occupied by Tenant for general banking
and office uses ("Tenant's Use").
ARTICLE VI
----------
BUILD OUT
---------
(a) Landlord agrees, at its sole cost and expense, to blacktop all
driveway and parking areas on the Land and to restripe all such parking areas
(the "Landlord's Work"), in a good and workmanlike manner, with first-class
materials, not later than sixty (60) days after the Commencement Date. All of
Landlord's Work shall be performed in accordance with all requirements of the
village of Wilmette. In the event that Landlord is unable, after using good
faith efforts, to obtain all necessary permits from the Village of Wilmette for
the Landlord's Work within thirty (30) days of the date hereof, Landlord and
Tenant shall each have the right to terminate this Lease prior to the date of
receipt of such permits unless Tenant waives in writing such failure to obtain
such permits within ten (10) days after Landlord provides Tenant with written
notice of such inability. In the event that on or prior to a date which is not
later than sixty (60) days after the Commencement Date Landlord has not yet
completed the Landlord's Work, Basic Rent shall be abated until completion
thereof; provided, however, the foregoing shall be subject to delays resulting
4
<PAGE>
from studies, casualty occurrences, acts of God, and similar matters beyond the
reasonable control of Landlord.
(b) Tenant agrees that it shall, either prior to the Commencement Date or
during the first Lease Year, do extensive interior and exterior improvements to
the Leased Premises, all at Tenant's expense (the "Initial Work"). Landlord will
pay to Tenant Fourteen Thousand and No/100 Dollars ($14,000.00) on the
Commencement Date as a construction allowance relative to Tenant's replacement
of HVAC units and gutters and downspouts on the front of the Building. The
Initial Work shall include interior design items such as interior partitioning,
lighting and wall coverings, and will also include substantial alterations to
Building systems such as HVAC, electrical and plumbing and to the exterior
appearance of the Building. In connection with the foregoing, Tenant may remove
existing non-structuring partitions, windows, lighting fixtures, draperies,
window coverings, dropped ceilings and the like if necessary in order to
complete the Initial Work.
ARTICLE VII
-----------
NON-DISTURBANCE AGREEMENT
-------------------------
Prior to the Commencement Date, and as a condition precedent to Tenant's
obligations hereunder, Landlord shall furnish Tenant a non-disturbance and
attornment agreement acceptable to Tenant from all holders of any mortgage or
deed of trust encumbering the Leased Premises on the Commencement Date,
providing that in the event of a foreclosure, Tenant's possession of the Leased
Premises shall not be disturbed under this Lease during the Term and any renewal
term so long as Tenant is not in default hereunder. Any reasonable legal costs
incurred by the holder of any such mortgage or deed of trust in preparing such
agreement shall be paid, as between Landlord and Tenant, by Tenant.
ARTICLE VII
-----------
CARE OF THE LEASED PREMISES; SURRENDER; SECURITY DEPOSIT
--------------------------------------------------------
(a) Tenant shall keep the Leased Premises reasonably clean and free from
rubbish and dirt at all times.
(b) At the expiration of the Term of this Lease, Tenant shall surrender
the Leased Premises in their then condition, reasonable wear and tear and damage
or loss by fire, casualty or eminent domain excepted, and shall surrender all
keys for the Leased Premises to Landlord at the place then fixed for the payment
of Basic Rent. All alterations, whether temporary or permanent, made by Tenant
in or on the Leased Premises (excluding only Tenant's furniture, equipment and
furnishings) will become Landlord's property and shall remain on the Leased
Premises at the expiration of this Lease without compensation to Tenant.
5
<PAGE>
(c) Tenant agrees to deposit with Landlord, concurrently with the
execution and delivery hereof, a security deposit (the "Security Deposit") in
the amount of $7,292.00, as security for the full and faithful performance by
Tenant of each and every term, provision, covenant, and condition of this Lease.
The Security Deposit shall be held by Landlord in a non- interest -bearing
account which shall at all times be maintained at The PrivateBank and Trust
Company and which shall not be commingled with Landlord's general funds. If
Tenant commits an Event of Default, Landlord may use the Security Deposit for
the payment of any monies due under this Lease or for any other sum which
Landlord may expend or be required to expend by reason of Tenant's Event of
Default. If any of the Security Deposit shall be so used by Landlord, then
Tenant shall promptly, in each such instance, upon the written demand therefor
by Landlord, pay to Landlord such additional sum as may be necessary to restore
the Security Deposit to the original amount. Within thirty (30) days after the
expiration of the Term, the Security Deposit, or the balance thereof, shall be
returned to Tenant.
ARTICLE IX
----------
MAINTENANCE AND REPAIRS
-----------------------
(a) Except for damage by fire, casualty or eminent domain covered by
Articles XVI and XVII hereof, Landlord shall, at its sole cost and expense, keep
the structural components of the Building and the Leased Premises, including but
not limited to, the foundations, exterior and load bearing walls, exterior
curtain walls, subflooring, pipes and conduits and roof, and the mechanical,
plumbing systems (other than portions thereof altered or added as part of
Tenant's Initial Work), in good repair, shall be responsible for and perform any
needed extraordinary repairs (being any repairs other than ordinary maintenance)
to parking areas, driveways and sidewalks; provided, however, that Landlord
shall not be required to make any such repairs which become necessary by reason
of the willful misconduct or gross negligence of Tenant, its agents, servants or
employees. Tenant shall maintain and keep in good order, condition and repair
(ordinary wear and tear and damage by fire, casualty or eminent domain excepted)
the interior, non-structural elements of the Premises and those Building systems
and equipment (including HVAC, plumbing, electrical and windows) to the extent
installed or reconditioned by Tenant, and shall also be responsible for ordinary
maintenance of the grounds adjoining the Building (such as snow and debris
removal), unless the need for repair or maintenance was caused by the willful
misconduct or negligence of Landlord, its agents, servants or employees. Each of
Tenant and Landlord shall cause those portions of the Leased Premises which each
is obligated to repair and maintain at all times to conform and comply with all
applicable governmental laws, rules, regulations and codes affecting the Leased
Premises. In the event alterations or additions to the Leased Premises are
hereafter required by reason of any change in applicable law (such as, by way of
example, additional life safety systems), Landlord shall, at its expense, cause
the same to be made or installed, and Tenant shall pay to Landlord as additional
rent hereunder on a monthly basis for the remainder of the Term (as it may be
extended) an amount equal to the amount necessary to amortize the cost of such
alterations or additions on a straight line basis over a ten (10) year period
without interest. Notwithstanding the foregoing or any other provision of this
Lease, Tenant shall not be responsible for any damage caused by the removal of
any equipment or machinery which was located in, or affixed to, the Leased
Premises before the
6
<PAGE>
Commencement Date, if such removal is the result of the termination of any
equipment lease or results from any other similar cause or matter not within the
direct control of Tenant.
(b) If either party refuses or neglects to make any repair (required to be
made by such party hereunder) within ten (10) days after written notice by the
other party (or immediately in the event of emergency), such notifying party may
make such repairs. If Landlord makes repairs required to be made by Tenant,
Tenant will pay to Landlord, on demand, as Additional Rent, the cost thereof
with interest (at a rate equal to the "Prime Rate" as announced from time to
time by First National Bank of Chicago or its successor [the "Interest Rate"])
from the date of the commencement of said repairs until paid. If Landlord fails
to make any repair required to be made by Landlord hereunder, Tenant may, at
Tenant's election, (i) make such repairs and deduct the cost thereof (together
with interest thereon at the Interest Rate) from the next installment(s) of
Basic Rent and Additional Rent due hereunder, (ii) make such repairs and bring
an action against Landlord for all damages of Tenant resulting from Landlord's
failure to make such repairs, including but not limited to the cost of such
repairs (together with interest thereon at the Interest Rate), (iii) terminate
this Lease, or (iv) seek any remedy available at law or in equity. If Landlord
fails to make any repair required to be made by Landlord hereunder and such
failure renders the Leased Premises untenantable, then in addition to all other
remedies set forth in this Lease, Rent shall abate from the date the Leased
Premises are so rendered untenantable until such time as they are tenantable.
ARTICLE X
---------
ALTERATIONS AND SIGNS; LIENS; FIXTURES
--------------------------------------
(a) Tenant shall not make (i) any interior alterations in or to the Leased
Premises in excess of $10,000 in any one instance (including the Initial Work),
(ii) any decorative or aesthetic alterations to the exterior of the Building, or
(iii) any contract for any of the foregoing, without first procuring Landlord's
written consent, which consent shall not be unreasonably withheld or delayed.
Tenant shall have the right, without obtaining the consent of Landlord, to
install such signs upon the Leased Premises and Property as Tenant shall deem
necessary or desirable, which signs shall remain Tenant's property and shall be
removed by Tenant upon the expiration of the Term. Landlord shall have the right
to install one or more signs on the Property relating to other occupants of the
Property, provided, however, that such other signs (x) are approved by Tenant in
writing prior to the installation thereof (which approval shall not be
unreasonably withheld or delayed), (y) do not visually interfere with any signs
installed by Tenant, and (z) do not detract from the overall appearance of the
Property. Landlord shall maintain such other signs in good condition and repair
at its own expense.
(b) Tenant agrees that it will not do any act or thing to create any
mechanic's lien or claim for lien against the Building or the Land or any part
thereof, and agrees to indemnify and hold Landlord harmless from and against any
and all such liens or claims of such liens and all damages, costs, expenses, and
reasonable attorneys fees in connection therewith. If any lien shall attach to
the Leased Premises by any person claiming under Tenant, Tenant shall, upon
Landlord's request, promptly pay such lien; provided, however, that Tenant need
not pay such lien upon Landlord's request in the event that Tenant shall (i)
contest such lien diligently and in good faith, (ii) shall
7
<PAGE>
promptly pay any final judgment entered in connection therewith, and (iii) shall
post with Landlord, or for Landlord's benefit, a bond, letter of credit or other
form of security satisfactory to Landlord, in an amount equal to one hundred
fifty percent (150%) of the claimed amount of the lien, in order to secure the
payment by Tenant of any final judgment entered in connection therewith.
(c) All alterations, additions, improvements and fixtures, other than
Tenant's furniture, equipment and furnishings which may be made or installed by
either Landlord or Tenant upon the Leased Premises shall become the property of
Landlord upon the expiration of the Term and shall remain upon and be
surrendered with the Leased Premises as a part thereof, without disturbance,
molestation or injury at the termination of the Term of this Lease, whether by
the lapse of time or otherwise, all without compensation or credit to Tenant;
provided, however, that if prior to said termination, or within fifteen (15)
days thereafter, Landlord so directs by written notice to Tenant, Tenant shall
promptly remove the additions, improvements, fixtures and installations which
were placed in the Leased Premises by Tenant and which are designated in said
notice, and repair any damage occasioned by such removals, and in default
thereof, Landlord may effect said removals and repairs and Tenant will pay to
Landlord, on demand, as Additional Rent hereunder, the reasonable cost thereof.
All furniture, equipment and furnishings of Tenant that are attached to or
located at the Leased Premises may be removed at the expiration of the tenancy
hereby created provided any damage caused to the Leased Premises by such removal
is repaired by Tenant. All such property not so removed by Tenant prior to the
expiration of the tenancy shall become the property of Landlord.
ARTICLE XI
----------
INSURANCE
---------
(a) Landlord shall procure and maintain with responsible insurance
companies having a rating by A.M. Best & Co. of A+ or better, insurance against
damage to the Leased Premises and Building by fire and other risks now or
hereafter embraced in extended coverage, and insurance against such other
hazards as may be agreed upon by Landlord and Tenant, all in amounts not less
than the full replacement cost of the Leased Premises. On or before the
Commencement Date, and annually during the Term, Landlord shall deliver to
Tenant certificates of insurance evidencing that the above coverages are in
effect.
(b) Tenant agrees to procure and maintain with responsible insurance
companies having a rating by A.M. Best & Co. of A+ or better:
(i) Public liability insurance, insuring Landlord (as an additional
insured) and Tenant, as their interests may appear, against all claims,
demands, or actions made by or instituted on behalf of any person, firm or
corporation, arising from, or alleged to have arisen from, related to, or
connected with the conduct and operation of Tenant's business at the Leased
Premises, including liability on all walks, parking, driveway and exterior
areas at the Land to which Tenant and its employees, agents and customers
have access, with a combined single limit of not less than $5,000,000.00
for injury to or death to one or more
8
<PAGE>
persons in any one accident, and a limit of not less than $1,000,000.00 for
damage to property;
(ii) Improvements and Betterments coverage on all improvements
constituting a permanent part of the Building; and
(iii) Insurance covering all of Tenant's fixtures, furniture,
furnishings, floor coverings, equipment and other personal property in the
Leased Premises to the extent of at least eighty percent (80%) of their
replacement cost.
(c) Each of said policies of insurance shall be in form and substance
reasonably satisfactory to the parties, and shall provide (i) that it is primary
coverage, (ii) that it will not be subject to cancellation, termination or
change except upon not less than thirty (30) days prior written notice to Tenant
or Landlord, as the case may be, and (iii) that the insurer waives subrogation
rights against Landlord and Tenant. Duly executed certificates of the policies
of insurance, together with satisfactory evidence of the payment of the premium
therefor, shall be deposited with Tenant or Landlord, as the case may be, on or
before the Commencement Date, and evidence of the renewal or replacement of such
policies shall be delivered to Tenant or Landlord, as the case may be, not less
than thirty (30) days prior to the expiration of the term of such policies. If
either party fails to comply with its insurance requirements, the other may
obtain such insurance and keep the same in effect, and the noncomplying party
shall pay to the other on demand, the cost of the premiums therefor, together
with interest thereon at the Interest Rate.
ARTICLE XII
-----------
INDEMNIFICATION, RISK OF LOSS, DAMAGE
-------------------------------------
(a) Tenant agrees to indemnify and hold Landlord, its agents and employees
harmless from and against any and all claims, liabilities, losses, damages,
costs and expenses, including reasonable attorneys' fees, arising (i) from the
conduct or management of the business conducted by Tenant in the Leased
Premises, or (ii) from any breach or default on the part of Tenant in the
performance of any covenant or agreement on the part of Tenant to be performed
pursuant to the terms of this Lease, or (iii) from any willful misconduct or
negligent act or omission of Tenant, its agents, contractors, servants,
employees, sublessees, concessionaires or licensees in or about the Leased
Premises. In case any action or proceeding is brought against Landlord by reason
of any such claim, Tenant, upon notice from Landlord, covenants to diligently
defend such action or proceeding, and to retain legal counsel reasonably
satisfactory to Landlord in connection therewith.
(b) Landlord agrees to indemnify and hold Tenant, its agents and employees
harmless from and against any and all claims, liabilities, losses, damages,
costs and expenses, including reasonable attorneys, fees, arising (i) from any
breach or default on the part of Landlord in the performance of any covenant or
agreement on the part of Landlord to be performed pursuant to the terms of this
Lease or from the failure of any representation made herein by Landlord to be
true, or (ii) from any willful misconduct or negligent act or omission of
Landlord, its agents, contractors, servants, or employees. In case any action or
proceeding is brought against Tenant by reason of any
9
<PAGE>
such claim, Landlord, upon notice from Tenant, covenants to diligently defend
such action or proceeding and to retain legal counsel reasonably satisfactory to
Tenant in connection therewith.
ARTICLE XII
-----------
ASSIGNMENT AND SUBLETTING
-------------------------
(a) Tenant shall not sell, assign, mortgage, pledge or in any manner
transfer this Lease, or any interest of Tenant herein, or agree to do so, or
permit or suffer any transfer of or lien upon this Lease or any interest of
Tenant therein by operation of law, or sublet the Leased Premises or any part
thereof, or permit the use or occupancy of the Leased Premises or any part
thereof by anyone other than Tenant, without the prior express written consent
of Landlord, which consent shall not be unreasonably withheld or delayed. Tenant
shall be entitled to retain one hundred percent (100%) of the profits, if any,
of any subleasing or assignment. Tenant agrees not to sublease more than fifty
percent (50%) of the Leased Premises to third parties without Landlord's prior
written consent, which consent may be withheld in Landlord's sole discretion.
Consent by Landlord to an assignment of this Lease or to the subletting of any
portion of the Leased Premises shall not be a waiver of Landlord's rights under
this Article XIII as to any subsequent assignment or subletting. Notwithstanding
the foregoing, Tenant may, without the consent of Landlord, assign this Lease,
or sublet all or a portion of the Leased Premises, to any affiliate, parent,
subsidiary or successor to Tenant by merger, consolidation or reorganization.
(b) In the event Landlord transfers its ownership interest in the Leased
Premises, or in the event of enforcement by any mortgagee under any mortgage on
the Leased Premises, Tenant shall automatically become the tenant of any such
successor in interest without change in the terms of this Lease. In such event,
Tenant agrees to attorn to, and look only to, any such successor in interest for
the prospective performance of Landlord's obligations under this Lease;
provided, however, that Landlord shall remain liable to Tenant for all
obligations and liabilities of Landlord accruing hereunder prior to the date of
such transfer.
ARTICLE XIV
-----------
ACCESS TO PREMISES
------------------
Tenant shall have unrestricted access to the Land, Building and Leased
Premises, and unrestricted use of the Leased Premises, 24 hours a day, 7 days a
week, throughout the Term. Landlord reserves the right to enter upon the Leased
Premises at all reasonable hours, upon not less than three (3) days prior
written notice to Tenant, for the purpose of (i) inspecting the same, (ii)
making repairs, additions or alterations to the Building, or (iii) exhibiting
the Leased Premises to prospective tenants, purchasers or others and to display
during the last one hundred eighty (180) days of the Term hereof "For Rent" or
similar signs on windows or doors in the Leased Premises; provided, however,
that such entry shall not interfere with the conduct of Tenant's business
operations. The exercise by Landlord of any of its rights under this Article
shall not be deemed an eviction or disturbance of Tenant's use and possession of
the Leased Premises.
10
<PAGE>
ARTICLE XV
----------
UTILITIES
---------
Tenant shall pay for all utility services used in the Leased Premises. The
Leased Premises shall be separately metered at Landlord's expense.
ARTICLE XVI
-----------
EMINENT DOMAIN
--------------
(a) If all or substantially all of the Leased Premises or the Building are
taken by the exercise of the power of eminent domain, this Lease and the Term
hereof shall terminate as of the date possession is taken by the condemning
authority, and Landlord shall refund any rent paid in advance on a per diem
thirty-day month basis from the date possession is so taken to the first day of
the next calendar month.
(b) If part of the Leased Premises or the Building is taken by the
exercise of the power of eminent domain and this Lease and the Term hereof are
not terminated pursuant to subsection (a) above, Landlord, at its expense and
within thirty (30) days after the payment or deposit of the compensation
relating to such taking, shall commence to reconstruct the Leased Premises not
affected by the taking, and with reasonable diligence proceed with such
reconstruction. During the reconstruction and thereafter, Rent and the
respective installments thereof shall be reduced in the proportion that the area
of the portion of the Leased Premises so taken bears to the entire area of the
Leased Premises.
(c) Tenant shall have the right to separately pursue a condemnation award
in respect of the loss, if any, to leasehold improvements paid for by Tenant.
(d) For purposes hereof, "substantially all" of the Building or Leased
Premises shall be taken, if, in Tenant's reasonable judgment, the Leased
Premises are no longer suitable for Tenant's Use as previously conducted at the
Leased Premises.
ARTICLE XVII
------------
UNTENANTABILITY
---------------
(a) In the event the Leased Premises or the Building shall be destroyed,
or so damaged by fire, explosion, windstorm, or other casualty or by war or
civil disorder as to be unsuitable for Tenant's Use as previously conducted at
the Premises, in Tenant's reasonable judgment, Landlord shall restore the Leased
Premises within a reasonable time after such destruction or damage to their
condition existing prior to such casualty; provided, if such restoration cannot
be, or is not, completed within ninety (90) days after the date of such
casualty, Tenant may terminate this Lease and the Term hereof as of the date of
the destruction or damage, or on the date it becomes apparent that the
11
<PAGE>
restoration cannot be timely completed, in either case by giving Landlord
written notice. Rent shall abate on a per diem thirty-day month basis during the
period of restoration.
(b) In the event the Leased Premises or the Building shall be damaged as
aforesaid but are not thereby rendered unsuitable for Tenant's Use as previously
conducted at the Premises, Landlord shall restore the Leased Premises with
reasonable dispatch, and while such damage is being repaired, Tenant shall be
entitled to an equitable abatement of the Rent as reasonably determined by
Tenant and Landlord. Landlord shall not be liable or responsible for any delays
in rebuilding or repairing due to labor controversies, riots, acts of God,
national emergency, acts of a public enemy, governmental laws or regulations,
inability to procure materials or labor, or both, or any other cause beyond its
control, other than causes related to the cost of labor and/or materials.
ARTICLE XVIII
-------------
REMEDIES
--------
(a) Landlord may terminate this Lease and the Term hereof or terminate
Lessee's right to possess the Leased Premises: (i) upon the failure of Tenant to
pay an installment of rent (whether Basic Rent or Additional Rent), or to make
any other payment provided to be made hereunder, in either event for ten (10)
days after written notice of such failure has been given to Tenant, or (ii) upon
the happening of any one or more of the following events (any such failure or
event described in this section (a) , an "Event of Default"):
(A) The making by Tenant of an assignment for the benefit of its
creditors;
(B) The operation or supervision of the business conducted in the
Leased Premises by a creditors' committee;
(C) The institution of proceedings in a court of competent
jurisdiction for the reorganization, liquidation or involuntary dissolution
of Tenant, or for its adjudication as a bankrupt or insolvent, or for the
appointment of a receiver of the property of Tenant, if said proceedings
are not dismissed and any receiver, trustee or liquidator appointed therein
discharged within ninety (90) days after the institution of said
proceedings; or
(D) The failure of Tenant to timely perform or discharge any of its
duties, obligations or covenants under this Lease other than covenants or
obligations for the payment of money, which failure remains uncured for a
period of thirty (30) days after written notice thereof from Landlord to
Tenant; provided, however, that such thirty (30) day period shall be
extended as necessary if Tenant is diligently pursuing the cure of such
default and if such default cannot, by its nature, be cured within said
thirty day period.
(b) Upon the termination of this Lease or Tenant's right to possession by
reason of an Event of Default, Landlord may re-enter the Leased Premises with or
without process of law using such force as may be necessary, and remove all
persons, fixtures and chattels therefrom.
12
<PAGE>
(c) Notwithstanding the termination of this Lease by Landlord upon the
occurrence of an Event of Default, Landlord shall be entitled to recover
immediately as liquidated damages, and as Landlord's sole and exclusive remedy,
an amount equal to the discounted present value (at the Interest Rate) of Basic
Rent payable for the balance of the Term less the fair rental value of the
Leased Premises for the said balance of the Term.
(d) Upon and after entry into possession without termination of this
Lease, Landlord shall use its best efforts to mitigate its damages and to relet
the Leased Premises or any part thereof for the account of Tenant for a
commercially reasonable rent (and in such regard shall in good faith consider
any proposed tenant offered by Tenant), for a commercially reasonable time and
upon commercially reasonable terms; provided, however, the liability of Tenant
for the Rent provided for hereinabove shall not be extinguished for the balance
of the Term remaining after said termination of Lessee's right to possession,
but any amounts receivable by Landlord pursuant to any reletting shall be
credited against any amounts of Rent due Landlord from Tenant for the balance of
said Term.
(e) In the event of any breach by Tenant of any of the provisions of this
Lease, Landlord may, following expiration of any applicable notice and cure
period, cure such breach for the account and at the expense of Tenant. If
Landlord at any time after an Event of Default is compelled to pay, or elects to
pay, as a result of such Event of Default any sum of money or do any act which
will require the payment of any sum of money, or incurs any expense including
reasonable attorneys' fees in instituting or prosecuting any action or
proceedings to enforce Landlord's rights hereunder, the sum or sums so paid by
Landlord, with interest thereon from the date of payment thereof at the Interest
Rate shall be deemed to be Additional Rent hereunder and shall be due from
Tenant to Landlord on the first day of the month following the payment of such
respective sums or expenses by Landlord.
(f) Tenant will, at the expiration or termination of this Lease, yield up
possession to Landlord, and failing so to do, at Landlord's option will pay to
Landlord as liquidated damages for each day possession is withheld, an amount
equal to 150% of the amount of the daily Basic Rent then payable, computed based
on a thirty-day month. Neither the payment by Tenant, nor the acceptance by
Landlord, of any rent or other payments after expiration or earlier termination
of this Lease shall constitute a renewal or extension of this Lease, or a new or
periodic tenancy by Tenant, it being understood and agreed that Tenant shall not
thereby acquire any holdover rights or obligations with respect to the Property.
(g) Subject to the provisions of Section (b) of Article IX of this Lease,
in the event of any breach by Landlord of any of the provisions of this Lease,
Tenant may, following expiration of any applicable notice and cure period, elect
one or more of the following remedies: (i) to cure such breach at the expense of
Landlord, (ii) to terminate this Lease, or (iii) to seek any remedy available at
law or equity. If Tenant, at any time, by reason of such breach, is compelled to
pay, or elects to pay, any sum of money or do any act which will require the
payment of any sum of money or incurs any expense including reasonable
attorneys, fees in instituting or prosecuting any action or proceedings to
enforce Tenant's rights hereunder, the sum or sums so paid by Tenant, shall, at
Tenant's election, either be immediately due and payable to Tenant with interest
thereon at the
13
<PAGE>
Interest Rate or be credited (with interest thereon until such credit is fully
applied) against all subsequent payments due Landlord from Tenant under this
Lease, if any.
ARTICLE XIX
-----------
RIGHT OF FIRST REFUSAL
----------------------
In the event that at any time during the Term Landlord decides to either
sell all or any portion of the Property to a third party, or lease all or any
portion of the Property not included within the Leased Premises to a third
party, Landlord shall provide Tenant with written notice of its said intention
prior to offering such purchase or lease opportunity to any third party.
Thereafter, for a period of thirty (30) days from and after Tenant's receipt of
such notice, Landlord and Tenant shall negotiate in good faith for the purchase
or lease of the Property (or such portion thereof) , as the case may be. In the
event Landlord and Tenant are unable to agree on terms of such a purchase or
lease within said thirty (30) day period, Landlord shall thereafter for a period
of nine (9) months have a right to sell or lease the Property (or such portion
thereof), as the case may be, to a third party at a price and on terms no less
favorable to Landlord than those offered by Tenant. If Landlord does not sell or
lease the Property (or such portion thereof) as above set forth within said nine
(9) month period, the same shall once again be offered to Tenant for first
negotiation (in the manner set forth above) before proceeding with a sale or
lease of the Property (or any portion thereof) to any third party. The failure
of Tenant and Landlord to agree on the terms of a purchase or lease of any
portion of the Property in any instance shall not effect Tenant's rights
hereunder with respect to a subsequent purchase or lease opportunity relating to
any other portion of the Property.
ARTICLE XX
----------
RENEWAL OPTIONS
---------------
Provided that Tenant is not then in default hereunder beyond any applicable
notice and cure periods, Tenant shall have two options (individually, a "Renewal
Option", and together, the "Renewal Options"), in its sole discretion, to renew
the Term of this Lease for all the premises then covered by this Lease for two
additional periods of five years each (individually, a "Renewal Term", and
together, the "Renewal Terms"), commencing on the day following the then
applicable Expiration Date and terminating on the fifth (in the case of the
first Renewal Term) or tenth (in the case of the Second Renewal Term)
anniversary of the original Expiration Date, by giving written notice to
Landlord of Tenant's exercise of such Renewal Option not less than ninety (90)
days prior to the commencement of the Renewal Term with respect thereto. In the
event that the Tenant exercises a Renewal Option, the amount of monthly Basic
Rent during the first Lease Year of such Renewal Term shall be equal to the
monthly Basic Rent for the prior Lease Year (subject to adjustments as provided
in Article III, subsection (c) above), the Expiration Date shall be extended to
the end of such Renewal Term, and the Term shall include such Renewal Term. In
the event Tenant fails to exercise the first Renewal Option, the second Renewal
Option shall be terminated. Except as otherwise set forth in this Article XX,
all of the terms and conditions of this Lease shall apply to the Renewal Terms.
14
<PAGE>
ARTICLE XXI
-----------
NOTICES
-------
Any notice, demand or request which may be permitted, required or desired
to be given in connection herewith shall be given in writing and directed to
Landlord and Tenant as follows, or as otherwise directed in writing by such
party:
To Landlord: at the address set forth in Article III hereof.
With a copy to: Kent A. Heitzinger, Esq.
560 Green Bay Road
Suite 100
Winnetka, IL 60093
To Tenant: at the address of the Leased Premises unless requested
otherwise by Tenant.
With a copy to: Philip M. Kayman, Esq.
Neal Gerber & Eisenberg
Two North LaSalle Street
Chicago, IL 60602
Notices shall be either (a) personally delivered (including delivery by
Federal Express or other courier service) to the offices set forth above, in
which case they shall be deemed delivered on the date of delivery to said
addresses; or (b) sent by certified or registered mail, return receipt
requested, in which case they shall be deemed delivered to such addresses as
shown on the receipt unless delivery is refused or delayed by addressee in which
event they shall be deemed delivered on the date of deposit in the U.S. Mail.
ARTICLE XXII
------------
MUTUAL WAIVER OF SUBROGATION RIGHTS
-----------------------------------
Whenever any loss, cost, damage or expense resulting from fire, explosion
or any other casualty or occurrence is incurred by either of the parties to this
Lease in connection with the Leased Premises, and such party is then covered in
whole or in part by insurance with respect to such loss, cost, damage or
expense, then the party so insured hereby releases and waives any claim of
recovery from the other party from any liability it may have on account of
thereof. Notwithstanding the foregoing, any release or waiver shall not be
operative, in any case where the effect of such release or waiver is to
invalidate insurance coverage or invalidate the right of the insured to recover
thereunder or increase the cost thereof (provided that in the case of increased
costs, the insured shall promptly provide written notice of such increase to the
other party and such other party shall have the right, within ten (10) days
following such written notice, to pay such increased cost, thereby keeping such
release or waiver in full force and effect).
15
<PAGE>
ARTICLE XXIII
-------------
BROKERAGE
---------
Landlord shall pay a commission in connection with this Lease only to Mary
Tam/Tighe Realty and Doris Hedlund (the "Brokers"). Tenant and Landlord each
represent and warrant the other that, except for the Brokers, it has had no
dealings with any broker or agent in connection with this Lease, and covenants
to pay, hold harmless and indemnify the other from and against any and all cost,
expense or liability for any compensation, commissions or charges claimed by any
broker or other agent (other than the Brokers) with respect to this Lease or the
negotiation thereof, with whom such indemnifying party may have dealt.
ARTICLE XXIV
------------
SUCCESSORS AND ASSIGNS
----------------------
The terms, covenants and conditions hereof shall be binding upon and inure
to the benefit of the parties hereto and their respective successors-in-interest
and assigns.
ARTICLE XXV
-----------
PARKING
-------
Landlord hereby agrees and covenants with Tenant that throughout the Term,
all parking spaces located in the 50 feet parking area to the rear of the
Building as shown on Exhibit B hereto (the "Parking Spaces") will be available
adjacent to the Building on a daily basis for the exclusive use of Tenant, its
agents, employees, customers and invitees, which Parking Spaces, at Tenant's
request, shall be marked at Landlord's sole cost and expense in a manner
reasonably acceptable to Tenant to notify third-parties of such right to
exclusive use. There shall be no additional charge hereunder to Tenant for the
use of the Parking Spaces.
ARTICLE XXVI
------------
ENVIRONMENTAL REPRESENTATIONS
-----------------------------
Landlord represents and warrants to Tenant that, to Landlord's actual
knowledge, no "Hazardous Material" (as hereinafter defined) is, or has ever
been, placed, held, present, generated, treated, located or disposed of on,
under or at the Property (including without limitation in connection with the
construction of the Building) or any part thereof, and the Land has never been
used as a dump site or storage site for any Hazardous Material (whether on a
permanent or temporary basis). For the purposes of this Lease, "Hazardous
Material" means and includes any hazardous, toxic or dangerous waste, substance
or material defined as such in (or for purposes of) the Comprehensive
Environmental Response, Compensation and Liability Act, any so-called
"Superfund" or "Superlien" law, or any other federal, state or local statute,
law, ordinance, code, rule, regulation, order, decree or other requirement of
any governmental authority regulating,
16
<PAGE>
relating to, or imposing liability or standards of conduct concerning, any
hazardous, toxic or dangerous waste, substance or material, including without
limitation petroleum and asbestos. In addition to any other indemnification
under this Lease, Landlord agrees to indemnify and hold Tenant, its officers,
directors, shareholders, agents and employees, harmless from and against any and
all claims, damages, liabilities, losses, costs and expenses (including without
limitation reasonable attorneys' fees) arising out of the presence or former
presence of any Hazardous Material at, on or under the Property, except such as
arises during the Term. Nothing herein shall obligate Landlord for any
consequential damages, such as moving expenses or increased rent or loss of
business, resulting from the foregoing.
ARTICLE XXVII
-------------
GENERAL
-------
(a) This written Lease, including all exhibits attached hereto and
documents to be delivered pursuant hereto, shall constitute the entire agreement
and understanding of the parties, and there are no other prior or
contemporaneous written or oral agreements, undertakings, promises, warranties,
or covenants not contained herein. Upon execution of this Lease, that certain
Letter of Intent dated March 11, 1994 by and between Hedlund and Tenant shall be
of no further force and effect.
(b) This Lease may be amended only by a written memorandum subsequently
executed by both of the parties hereto.
(c) No waiver of any default of either party hereunder shall be implied
from the payment or acceptance of Rent or any other monies thereafter or from
any omission by the other party to take any action on account of default if such
default persists or is repeated, and no express waiver shall affect any default
other than the default specified in the express waiver and that only for the
time and to the extent therein stated. One or more waivers of any covenant, term
or condition of this Lease by either party shall not be construed as a waiver of
a subsequent breach of the same covenant, term or condition. The consent or
approval by Landlord or Tenant to or of any act by the other party requiring
such party's consent or approval shall not be deemed to waive or render
unnecessary such party's consent or approval to or of any subsequent similar act
by the other party.
(d) Time is of the essence of this Lease. In the computation of any period
of time provided for in this Lease or by law, any date falling on a Saturday,
Sunday or legal holiday shall be deemed to refer to the next day which is not a
Saturday, Sunday, or legal holiday.
(e) In the event that any provision of this Lease shall be unenforceable
in whole or in part, such provision shall be limited to the extent necessary to
render the same valid, or shall be excised from this Lease, as circumstances
require, and this Lease shall be construed as if said provision had been
incorporated herein as so limited, or as if said provision has not been included
herein, as the case may be.
17
<PAGE>
(f) Headings of Articles are for convenience of reference only and shall
not be construed as a part of this Lease.
(g) This Lease shall be governed in all respects by the internal laws of
the State of Illinois.
(h) This Lease may be executed in any number of identical counterparts,
any or all of which may contain the signatures of only one of the parties, and
all of which shall be construed together as but a single instrument.
(i) In the event of institution of legal proceedings in connection with
this Lease, the party prevailing therein shall be entitled to recover the costs
and expenses incurred in connection therewith, including, without limitation,
reasonable attorneys fees.
(j) Nothing contained in this Lease shall be deemed or construed by the
parties hereto or by any third party to create the relationship of principal and
agent, or of partners or coventurers, or of any other association between
Landlord and Tenant, it being expressly understood and agreed that neither the
method of computation of rent nor any other provisions contained in this Lease
nor any acts of the parties hereto shall be deemed to create any relationship
between Landlord and Tenant hereunder other than the relationship of landlord
and tenant.
(k) Landlord represents and warrants to Tenant that fee simple title to
the Property is vested in the Trust and that the sole beneficiaries of the Trust
are Gunnar H. Hedlund, Doris S. Hedlund, Ronald P. Hedlund and Gerald A.
Hedlund. Any fee charged by the Trustee allocable solely to the execution of
this Lease (as opposed to annual fees or unpaid fees relating to other documents
executed by the Trustee) shall either be paid by Tenant or be paid by Landlord
and reimbursed by Tenant.
(l) Wherever any provision of this Lease provides for the consent of
Landlord or Tenant, such consent shall not be unreasonably withheld or delayed
unless such provision expressly grants such party the right to grant or withhold
consent in its sole discretion.
(m) Concurrently with the execution hereof, a memorandum of this Lease
shall be executed by Landlord and Tenant in the form attached hereto as Exhibit
"C", setting forth the Term, the Renewal Terms, all rights of first refusal
granted Tenant hereunder, and such other matters as Tenant may request, and such
memorandum shall be recorded, at Tenant's expense, in the office of the recorder
of deeds located in Cook County, Illinois (the "Recorder's Office"). Within ten
(10) days after the Commencement Date, Tenant and Landlord shall execute and
record in the Recorder's Office a supplemental memorandum of this Lease setting
forth the Commencement Date and the Expiration Date.
(n) Landlord represents and warrants that it has full right, power and
authority to make this Lease, and, provided that there is no uncured Event of
Default under this Lease, that Tenant or any permitted assignee or subtenant of
Tenant shall and may peaceably and quietly have, hold and enjoy the Leased
Premises during the Term.
18
<PAGE>
(o) Each party shall, from time to time at the other party's request,
deliver to the other party within fifteen (15) days after the other party's
request, a statement in writing certifying: (i) that this Lease is unmodified
and in full force and effect (or if there have been modifications that the same
is in full force and effect as modified and identifying the modifications); (ii)
the dates to which the Rent and other charges have been paid; (iii) that to the
knowledge of such party, the other party is not in default under any provision
of this Lease; and (iv) no payments other than as currently due have been made.
(p) This Lease is executed by LaSalle National Trust, N.A., as successor
Trustee to LaSalle National Bank, not personally but solely as Trustee under
Trust No. 45197 as aforesaid, in the exercise of the power and authority
conferred upon and vested in said Trustee as such, and it is expressly
understood and agreed that nothing in said Lease contained shall be construed as
creating any liability on said Trustee personally to pay any indebtedness
accruing thereunder, or to perform any covenants, either expressed or implied in
the said Lease (all such liability, if any, herein being expressly waived by
said Tenant and by every person now or hereafter claiming any right or security
thereunder) and that so far as said Trustee is concerned, the owner of any
indebtedness or right accruing under said Lease shall look solely to the assets
of the Trust, the Building and the Land for the payment or enforcement thereof,
it being understood that said Trustee merely holds legal title to the Land and
has no control over the management thereof or the income therefrom, and has no
knowledge respecting rentals, leases or other factual matters with respect to
said premises, except as represented to it by the beneficiary or beneficiaries
of said trust. Trustee does not warrant, indemnify or defend title and is not
responsible for any environmental damage.
19
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of the
day and year first above written.
LANDLORD: /s/ Gunnar H. Hedlund
____________________________________________
Gunnar H. Hedlund
/s/ Doris S. Hedlund
____________________________________________
Doris S. Hedlund
/s/ Ronald P. Hedlund
____________________________________________
Ronald P. Hedlund
/s/ Gerald A. Hedlund
____________________________________________
Gerald A. Hedlund
LASALLE NATIONAL TRUST, N.A., as successor trustee
to LaSalle National Bank, not personally but
solely as Trustee under Trust Agreement dated
December 28, 1972 and known as Trust No. 45197
By: /s/ Rosemary Collins
_________________________________________
Its: Assistant Vice President
_____________________________
TENANT: THE PRIVATEBANK AND TRUST COMPANY
By: /s/ Dennis C. Mullen
_________________________________________
Its: Managing Director
20
<PAGE>
EXHIBIT A
---------
LEGAL DESCRIPTION OF THE LAND
-----------------------------
Lot 20 and the Northerly 10 foot front and rear of Lot 19 all in Block 9 in
Dingee and others Resubdivision of Blocks 3, 6, 9 and 10 and the South one-half
( 1/2) of Block 8 in Wilmette, Cook County, Illinois.
<PAGE>
EXHIBIT B
---------
[PROPOSED PARKING PLAN APPEARS HERE]
<PAGE>
MEMORANDUM OF LEASE
-------------------
THIS MEMORANDUM OF LEASE is made and entered into as the 2nd day of May,
1994 by and between LASALLE NATIONAL TRUST, N.A., as successor Trustee to
LaSalle National Bank, not personally but solely as Trustee under Trust
Agreement dated December 28, 1972 and known as Trust No. 45197 ("Landlord") and
THE PRIVATEBANK AND TRUST COMPANY, an Illinois banking corporation ("Tenant").
W I T N E S S E T H:
-------------------
WHEREAS, Landlord, together with its beneficiaries, are, concurrently
herewith, executing and delivering a certain Lease, of even date herewith (the
"Lease") relating to certain premises, more particularly described below. The
parties hereto now wish to enter into this Memorandum of Lease for the purpose
of memorializing the Lease and providing public notice thereof.
NOW, THEREFORE, it is hereby agreed, by and between the parties hereto, as
follows:
1. THE LEASE. The parties hereto, together with the beneficiaries of Landlord,
---------
have, pursuant to the Lease, and do hereby, lease and demise to Tenant, and its
successors in interest and assigns, a portion of those certain premises, legally
described on Exhibit A attached hereto (the "Land") consisting of the following:
(a) the entire first floor, containing approximately 4,000 square feet of
rentable floor area, and the entire basement, containing approximately 1,300
square feet of rentable floor area, contained in the two story masonry building
(the "Building") situated on the Land and commonly known as 517 Green Bay Road,
Wilmette, Illinois, and (b) the non-exclusive use of the side drive and rear
apron adjacent to the Building.
2. TERM. The term of the Lease shall commence on the "Commencement Date" (as
----
defined in the Lease), which date shall in no event be later than eight (8)
weeks after the date hereof, and shall terminate on the last day of the month
next preceding the fifth (5th) anniversary of the Commencement Date unless the
Lease is sooner terminated in accordance with the provisions thereof or unless
the Term is extended as hereinafter provided; provided, however, if the
Commencement Date is other than the first day of a calendar month, the
Expiration Date shall be the last day of the month in which the fifth (5th)
anniversary of the Commencement Date occurs.
Tenant has the right, at its option, subject to the conditions and
provisions set forth in the Lease, to extend the Term of the Lease for two (2)
renewal terms of five (5) years each.
3. RENT. Tenant is required to pay Basic Rent, Additional Rent and certain
----
increases in Rent, all as provided in the Lease.
<PAGE>
4. OTHER TERMS AND PROVISIONS. Other terms and provisions applicable to the
--------------------------
use, occupancy and enjoyment of the Leased Premises are set forth in the Lease.
This Memorandum of Lease is intended only to provide public notice of the
existence of the Lease and certain of its provisions. This Memorandum of Lease
is qualified in all respects by reference to the Lease and is not intended to
amend, modify, limit, restrict or expand any of the terms or provisions of the
Lease, the parties hereto agreeing that in all respects the terms and provisions
of the Lease shall govern. In the event of any conflict between the provisions
of this Memorandum of Lease and the provisions of the Lease, the provisions of
the Lease shall in all respects prevail.
5. TRUSTEE EXCULPATION. This Memorandum of Lease is executed by LaSalle
-------------------
National Trust, N.A. as successor Trustee to LaSalle National Bank, not
personally but solely as Trustee under Trust No. 45197 as aforesaid, in the
exercise of the power and authority conferred upon and vested in said Trustee as
such, and it is expressly understood and agreed that nothing in this Memorandum
of Lease or in the Lease contained shall be construed as creating any liability
on said Trustee personally to pay any indebtedness accruing hereunder or
thereunder, or to perform any covenants, either expressed or implied, in the
said Lease or herein contained (all such liability, if any, herein being
expressly waived by the Tenant and by every person now or hereafter claiming any
right or security thereunder or hereunder) and insofar as said Trustee is
concerned, the owner of any indebtedness or right accruing under the Lease or
hereunder shall look solely to the assets of the trust, the Building and the
Land f or the payment or enforcement thereof, it being understood that the said
Trustee merely holds legal title to the Land and has no control over management
thereof or the income therefrom and has no knowledge respecting rentals, leases
or other f actual matters with respect to said premises, except as represented
to it by the beneficiary or beneficiaries of said trust. Trustee does not
warrant, indemnify or defend title and is not responsible for any environmental
damage.
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have executed this Memorandum of
Lease as of the day and year first above written.
LASALLE NATIONAL TRUST, N.A., as successor
trustee to LaSalle National Bank, not
personally but solely as Trustee under Trust
Agreement dated December 28, 1972 and known
as Trust No. 45197
By: /s/ Rosemary Collins
-----------------------------------------
Its: Assistant Vice President
ATTEST:
By: /s/ Nancy A. Stack
---------------------------
Assistant Secretary
THE PRIVATEBANK AND TRUST COMPANY
By: /s/ Dennis C. Mullen
-----------------------------------------
Its: Managing Director
ATTEST:
By: /s/ Donald A. Roubitchek
---------------------------
Secretary
<PAGE>
STATE OF ILLINOIS )
) ss
COUNTY OF COOK )
The undersigned, Kathleen E. Bye, a Notary Public in and for the County and
State aforesaid, does hereby certify, that on this date there appeared before me
Rosemary Collins and Nancy A. Stack, personally known to be me to the Assistant
Vice President and Assistant Secretary of LaSalle National Trust, N.A. and,
having first been duly sworn, did confirm and acknowledge to me that each had
signed and executed the above and foregoing Memorandum of Lease in their
respective capacities as the President and __Secretary, for the uses and
purposes therein set forth, and as their free and voluntary act and the free and
voluntary act of said corporation.
GIVEN under my hand and official seal this 5th day of May, 1994.
/s/ Kathleen E. Bye
---------------------------------------
Notary Public
My Commission expires:
10-23-95
---------------------------------------
STATE OF ILLINOIS )
) ss
COUNTY OF COOK )
The undersigned, Leslie Owens, a Notary Public in and for the County
and State aforesaid, does hereby certify, that on this date there appeared
before me Donald A. Roubitchek and Dennis C. Mullen, personally known to be me
to the Managing Director and Secretary of The PrivateBank Trust Company and,
having first been duly sworn, did confirm and acknowledge to me that each had
signed and executed the above and foregoing Memorandum of Lease in their
respective capacities as Managing Director and Secretary, for the uses and
purposes therein set forth, and as their free and voluntary act and the free and
voluntary act of said corporation.
GIVEN under my hand and official seal this 2nd day of May, 1994.
/s/ Leslie Owens
---------------------------------------
Notary Public
My Commission expires:
05-04-97
---------------------------------------
<PAGE>
EXHIBIT A
---------
LEGAL DESCRIPTION
Lot 20 and the Northerly 10 foot front and rear of Lot 19 all in Block 9 in
Dingee and others Resubdivision of Blocks 3, 6, 9 and 10 and the South one-half
( 1/2) of Block 8 in Wilmette, Cook County, Illinois.
<PAGE>
[Letterhead]
The PrivateBank and Trust Company
Donald A. Roubitchek
Managing Director and
Chief Operating Officer
(312) 683-7126
March 22, 1999
The Hedlund Family
c/o Ronald P. Hedlund
515 Green Bay Road
Wilmette, IL 60091
Dear Mr. Hedlund:
Pursuant to Article XX of the lease agreement dated May 2, 1994, between the
Hedlund family (and LaSalle National Trust #45197) and The PrivateBank and Trust
Company, the Bank hereby exercises its First Renewal Option to extend the term
of the lease for an additional five years. Based on the information contained in
a letter dated August 1, 1994, written to me by Doris Hedlund, the lease
commencement dated was July 1, 1994. Therefore, the current lease term expires
June 30, 1999, and the lease is hereby extended to June 30, 2004.
Per the terms of our agreement, we will send a copy of this letter to your
attorney, Mr. Kent A. Heitzinger. We will not send anything to LaSalle National
Trust.
We look forward to another five years of an excellent working relationship.
Sincerely,
Donald A. Roubitchek
cc: Mr. Kent A. Heitzinger
Mr. Dennis C. Mullen
Mr. Mark L. Kosiek
<PAGE>
Exhibit 10.4
------------
STOCK PURCHASE AGREEMENT
This Agreement ("Agreement") is made as of May 28, 1998 by and among
PrivateBancorp, Inc., a Delaware corporation (the "Seller"), FBO Ralph B.
Mandell IRA, Delaware Charter Guarantee and Trust Co., Trustee, account number
044-56840-1-2 (the "Account"), and The Ralph B. Mandell Revocable Trust UTA
dated 6/5/97 (the "Purchaser").
WHEREAS, Seller desires to sell, and the Account and Purchaser together
desire to purchase, four thousand five hundred forty-five (4,545) shares of the
Common Stock of PrivateBancorp, Inc., a Delaware corporation (the "Company");
NOW THEREFORE, the parties hereto agree as follows:
Section 1. Purchase.
--------
1.1 Pursuant to the terms and conditions of this Agreement, Seller
hereby agrees to sell to the Account and the Purchaser, and the Account and the
Purchaser hereby agrees to purchase from Seller, four thousand five hundred
forty-five (4,545) shares (the "Shares") of Common Stock, without par value, of
the Company.
1.2 The purchase price for the Shares to be paid by the Purchaser
to the Seller at the Closing, as provided in Section 1.3 hereof, shall be
$220.00 per Share for a total purchase price of $999,900.00 (the "Purchase
Price").
1.3 The Purchase Price shall be paid by delivery to Seller at
Closing of (a) cash in the amount of $50,160.00 from the Account, and (b) a
Secured Promissory Note (the "Note") from the Purchaser in the form of Exhibit A
attached hereto, in the amount of $949,740.00, with interest accruing at 5.69
percent, compounded annually, payable in the manner set forth in the Note.
Section 2. Closing.
-------
2.1 The Closing shall take place, subject to the conditions set
forth in Section 2.2 hereof at 5:00 P.M. on May 28, 1998, at the offices of the
Company. The date and time of Closing are herein referred to as the "Closing
Date".
2.2 The obligation of the Seller to sell the Shares, and the
obligation of the Account and Purchaser to purchase the Shares, is subject to
the conditions set forth below being complied with to the satisfaction of, or
waived by, the Seller, the Account or the Purchaser, as the case may be, on or
before the Closing Date.
2.2.1 Delivery of Stock Certificates. The Seller shall issue
------------------------------
and deliver, from the corporate treasury or otherwise, to the Account one
or more stock certificates evidencing two hundred twenty-eight (228)
Shares, duly registered to the Account. In the same manner,
1
<PAGE>
the Seller shall deliver to Purchaser one or more stock certificates
evidencing four thousand three hundred seventeen (4,317) Shares, duly
registered to Purchaser.
2.2.2 Delivery of Purchase Price. The Seller shall have
--------------------------
received cash from the Account and the executed Note from the Purchaser,
together representing the entire Purchase Price.
2.2.3 Delivery of Pledge Agreement. The Pledge Agreement, a
----------------------------
form of which is attached hereto as Exhibit B, has been fully executed and
delivered to Seller.
2.2.4 Seller's Representations and Warranties. The
---------------------------------------
representations and warranties of Seller contained in this Agreement shall
be true and correct as of the Closing Date.
2.2.5 Purchaser's and Account's Representations and
---------------------------------------------
Warranties. The representations and warranties of Purchaser and of the
----------
Account contained in this Agreement shall be true and correct as of the
Closing Date.
Section 3. Seller's Representations and Warranties. Seller represents and
---------------------------------------
warrants to the Purchaser and the Account that:
3.1 Organization, Etc. It is a corporation duly incorporated,
------------------
validly existing and in good standing under the laws of Delaware and has all
requisite corporate power and authority to enter into and perform its
obligations under this Agreement.
3.2 Authorization. This Agreement has been duly authorized,
-------------
executed and delivered by the Seller.
3.3 No Violation. The execution, delivery or performance by the
------------
Seller of this Agreement does not contravene any law, regulation, order or
judgment applicable to or binding on the Seller or any provision of the charter
or by-laws of the Seller, and will not result in a breach of, or constitute a
default under, or contravene any provisions of, any agreement to which the
Seller is a party or by which he is bound.
3.4 No Consents or Approvals. Neither the execution, delivery or
------------------------
performance by the Seller of this Agreement requires the consent or approval of,
the giving of notice to, the registration with, the recording or filing of any
documents with, or the taking of any other action in respect of, any Federal,
state or local governmental commission, authority, agency or body.
2
<PAGE>
Section 4. Purchaser's and Account's Representation and Warranties.
-------------------------------------------------------
Purchaser and the Account represent and warrant to the Seller that:
4.1 No Violation. The execution, delivery or performance of this
------------
Agreement by the Purchaser or by the Account does not contravene any law,
regulation, order or judgment applicable to or binding on the Purchaser or the
Account and will not result in a breach of, or constitute a default under, or
contravene any provision of, any agreement to which the Purchaser or the Account
is a party or by which it is bound.
4.2 No Consents or Approvals. Neither the execution, delivery or
------------------------
performance of this Agreement by the Purchaser nor by the Account requires the
consent or approval of, the giving of notice to, the registration with, the
recording or filing of any documents with, or the taking of any other action in
respect of, any Federal, state or local governmental commission, authority,
agency or body.
4.3 Securities Laws. The Purchaser and the Account acknowledge and
---------------
agree that the Shares have not been registered under the Securities Act of 1933,
as amended (the "Securities Act"), and applicable state securities laws, and
that the transfer of the Shares may be effected only pursuant to an effective
registration under the Securities Act and applicable state securities laws or an
exemption therefor. The Purchaser and the Account are acquiring the Shares for
their own accounts for the purpose of investment only and not with a present
intention to transfer, hypothecate, resell or otherwise distribute such Shares
within the meaning of the Securities Act and applicable state securities laws.
Section 5. Further Assurances.
------------------
5.1 By Seller. Seller will do, execute, acknowledge and deliver, or
---------
shall cause to be done, executed, acknowledged and delivered all such further
acts, conveyances and assurances the Purchaser or the Account may reasonably
require for accomplishment of the purposes of this Agreement.
5.2 By Purchaser. The Purchaser and the Account will do, execute,
------------
acknowledge and deliver, or shall cause to be done, executed, acknowledged and
delivered, all such further acts, conveyances and assurances as Seller may
reasonably require for accomplishment of the purposes of this Agreement.
Section 6. Miscellaneous.
-------------
6.1 Counterparts. This Agreement may be executed by the parties
------------
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute but
one and the same instrument.
3
<PAGE>
6.2 Amendment. Neither this Agreement nor any of the terms hereof
---------
may be terminated, amended, supplemented, waived or modified orally, but only by
an instrument in writing which purports to terminate, amend, supplement, waive
or modify this Agreement or any of the terms hereof and is signed by the party
against which the enforcement of the termination, amendment, supplement, waiver
or modification is sought.
6.3 Successors and Assigns. The terms of this Agreement shall be
----------------------
binding on, and inure to the benefit of, the parties hereto and their respective
successors and assigns.
6.4 Governing Law. This Agreement, including all matters of
-------------
construction, validity and performance, shall in all respects be governed by,
and construed in accordance with, the laws of the State of Illinois.
6.5 Notices. Except as otherwise provided in this Agreement, all
-------
notices hereunder shall be in writing and shall be given by mail, personal
delivery, overnight courier, telecopy or any other customary means of written
communication at the addresses set forth on the signature pages hereof, or at
such other addresses as may be specified by written notice to the parties
hereto, and shall become effective when received by the addressees.
6.6 Severability of Provisions. Any provision of this Agreement
--------------------------
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
6.7 Headings. The headings used herein are for convenience of
--------
reference only and shall not define or limit any of the terms or provisions
hereof.
6.8 Entire Agreement. This Agreement embodies the entire agreement
----------------
and understanding between the parties hereto and supersedes all prior agreements
and understandings between the parties hereto relating to the subject matter
hereof.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered by their respective officers thereunto duly authorized as
of the date and year first above written.
SELLER PURCHASER
PrivateBancorp, Inc., The Ralph B. Mandell Revocable Trust
a Delaware corporation UTA dated 6/5/97
By:________________________ By:__________________________________
Its:_______________________ Its:_________________________________
By:________________________ ADDRESS:
Its:_______________________ The Ralph B. Mandell Revocable Trust
UTA dated 6/5/97
c/o Ralph B. Mandell
ADDRESS: PrivateBancorp, Inc.
Ten North Dearborn, Suite 900
PrivateBancorp, Inc. Chicago, IL 60602
Attn: Donald A. Roubitchek,
Chief Financial Officer
Ten North Dearborn, Suite 900 ACCOUNT
Chicago, IL 60602
FBO Ralph B. Mandell IRA, account
number 044-56840-1-2
By: Delaware Charter Guarantee and
Trust Co., Trustee
By:__________________________________
Its:_________________________________
ADDRESS:
FBO Ralph B. Mandell IRA, Delaware
Charter Guarantee and Trust Co.,
Trustee, account number 044-56840-1-2
c/o Ralph B. Mandell
PrivateBancorp, Inc.
Ten North Dearborn, Suite 900
Chicago, IL 60602
<PAGE>
EXHIBIT A
Amount: $949,740
Date: May 28, 1998
Due: May 28, 2003
SECURED PROMISSORY NOTE
For value received, The Ralph B. Mandell Revocable Trust UTA dated 6/5/97
(the "Borrower") promises to pay to the order of PrivateBancorp, Inc. (the
"Company") the principal amount of Nine Hundred Forty-Nine Thousand Seven
Hundred Forty Dollars ($949,740) with interest of 5.69 percent per annum,
compounded annually (the "Interest"), on the principal amount of this Secured
Promissory Note (the "Note") from time to time outstanding, payable on May 28,
2003 or the earlier of (a) the sale of any of the four thousand five hundred
forty-five (4,545) shares of Common Stock of PrivateBancorp, Inc. pledged by the
Borrower under the Pledge Agreement dated this date by and between the Borrower
and the Company (the "Pledge Agreement"), or (b) the termination of Ralph B.
Mandell's employment with the Company. The Interest shall be forgiven by the
Company in the following percentages at the following times: (a) the first 25%
of the accumulated interest on this Note on May 28, 2000; (b) the second 25% of
the accumulated interest on this Note on May 28, 2001; (c) the third 25% of the
accumulated interest on this Note on May 28, 2002; and (d) the balance of the
accumulated interest on this Note on May 28, 2003. For the purposes hereof,
accumulated interest assumes the total interest accrued given that the Note is
not prepaid before May 28, 2003. Unless otherwise specified, all terms not
defined herein shall have the meanings given to them in the Stock Purchase
Agreement dated this date by and among the Seller, the Account and the Borrower.
This Note is secured by, issued pursuant to, and entitled to the benefits
of, the Pledge Agreement, to which agreement reference should be made for a more
complete statement of the terms and conditions under which the loan evidenced
hereby is made, as to the nature and extent of the security ("Collateral") for
this Note, the rights of the Company, and any holder of this Note with respect
to the Collateral and the acceleration of the maturity of this Note.
The Company, and any subsequent holder of this Note, by acceptance of this
Note agrees that the Borrower has and shall have personal liability and
obligation with respect to payment of this Note or other Indebtedness (as
defined in the Pledge Agreement).
The rights of the holders hereof shall be governed by Illinois law.
<PAGE>
This Note may be prepaid at any time without penalty. All payments on this
Note shall first be applied to accrued and unpaid interest and then to
principal.
THE RALPH B. MANDELL REVOCABLE TRUST
UTA DATED 6/5/97
By:__________________________________
Its:_________________________________
<PAGE>
EXHIBIT B
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT is entered into as of this 28th day of May, 1998 by
and between The Ralph B. Mandell Revocable Trust UTA dated 6/5/97 ("Pledgor")
and PrivateBancorp, Inc., a Delaware corporation (the "Company").
NOW, THEREFORE, in consideration of the terms and conditions mentioned
herein, the parties hereto agree to as follows:
1. GRANT OF SECURITY INTEREST IN SHARES. As security for the repayment
of the Secured Promissory Note dated May 28, 1998 in the amount of $949,740 (the
"Note") of Pledgor to the Company, and any and all costs and expenses, including
reasonable attorneys fees incurred to collect the Note and interest
(collectively, the "Indebtedness"), Pledgor hereby grants to the Company a lien
on and security interest in, and acknowledges and agrees that the Company has
and shall continue to have a continuing lien on and security interest in, all
right, title and interest of Pledgor to the following: (a) four thousand five
hundred forty-five (4,545) shares of stock in the Company, owned by Pledgor,
which are being delivered to the Company with executed stock power attached,
receipt for which is hereby acknowledged, and all substitutions and additions to
such shares (herein, the "Pledged Securities"), (b) all dividends, distributions
and sums distributable to or payable from, upon or in respect of the Pledged
Securities, (c) all other rights and privileges incident to the Pledged
Securities, and (d) all proceeds of the foregoing (all of the foregoing being
hereinafter referred to collectively as the "Collateral"). Said Pledged
Securities will be returned to Pledgor in their entirety upon full payment of
the Note.
2. COVENANTS, AGREEMENTS, REPRESENTATIONS AND WARRANTIES. Pledgor hereby
covenants and agrees with, and represents and warrants to, the Company that:
a. The certificates for all shares of the Pledged Securities shall
be delivered by Pledgor to the Company duly endorsed in blank for transfer or
accompanied by an appropriate assignment or an appropriate undated stock power
or powers, sufficient to transfer title thereto. The Company may at any time
after the occurrence of an Event of Default cause to be transferred into its
name or into the name of its nominee any and all of the Pledged Securities. The
Company shall at times have the right to exchange certificates representing the
Pledged Securities for certificates of smaller or larger denomination.
b. Pledgor is and shall be the sole and lawful legal, record and
beneficial owner of the Collateral. Pledgor shall not, without the Company's
prior written consent, sell, assign, or otherwise dispose of the Collateral or
any interest therein. The Collateral, and every part thereof, is and shall be
free and clear of all security interests, liens, rights, claims, attachments,
levies and encumbrances of every kind, nature and description and whether
voluntary or involuntary, except for the security interest of the Company
hereunder. Pledgor shall warrant and defend the Collateral
<PAGE>
against any claims and demands of all persons at any time claiming the same or
any interest in the Collateral adverse to the Company.
3. VOTING RIGHTS AND DIVIDENDS. Unless and until an Event of Default
hereunder has occurred and thereafter until notified by the Company pursuant to
Section 4(b) hereof:
a. Pledgor shall be entitled to exercise all voting and/or
consensual powers pertaining to the Collateral, or any part thereof, for all
purposes not inconsistent with the terms of the Agreement.
b. Pledgor, as owner of the Pledged Securities, shall be entitled to
all dividends and distributions, provided no Event of Default has occurred and
is continuing.
4. DEFAULTS AND REMEDIES.
a. The failure to pay the principal and interest under the Note when
due under the terms of the Note, including the sale of any of the four thousand
five hundred forty-five (4,545) shares of Common Stock of PrivateBancorp, Inc.
pledged by Pledgor pursuant to this Agreement, or the termination of Ralph B.
Mandell's employment with the Company; or the breach of any representation,
warranty or other covenant of Pledgor hereunder shall constitute an Event of
Default.
b. Upon the occurrence of any Event of Default, all outstanding
principal and accrued but unpaid interest under the Note, other than any
interest forgiven pursuant to the Note, shall immediately become due and
payable.
c. Upon the occurrence of any Event of Default, all rights of
Pledgor to exercise the voting and/or consensual powers which he is entitled to
exercise pursuant to Section 3(a) hereof shall, at the option of the Company
cease and thereupon become vested in the Company which, in addition to all other
rights provided herein or by law, shall then be entitled solely and exclusively
to exercise all voting and other consensual powers pertaining to the Collateral
and to exercise any and all rights of conversion, exchange or subscription and
any other rights, privileges or options pertaining thereto as if the Company
were absolute owner thereof.
d. Upon the occurrence of any Event of Default, the Company shall
have, in addition to all other rights provided herein or by law, the rights and
remedies of a secured party under the UCC, and further, the Company may, without
demand and without advertisement, notice, hearing or process of law to the
extent permitted by law, all of which Pledgor waives to the extent permitted by
law, at any time or times, sell and deliver any or all of the Collateral held by
or for it at public or private sale, at the Company's offices or elsewhere, for
cash, upon credit or otherwise, at such prices and upon such terms as the
Company deem advisable, in its sole discretion. In the exercise of any such
remedies, the Company may sell the Collateral as a unit even though the sales
price thereof may be in excess of the amount remaining unpaid on the Note. The
Company is authorized at any sale or
3
<PAGE>
other disposition of the Collateral, if it deems it advisable so to do, to
restrict the prospective bidders or purchasers to persons who will represent and
agree that they are purchasing for their own accord for investment, and not with
a view to the distribution or resale of any of the Collateral. Pledgor shall pay
the Company all costs and expenses incurred by the Company, including reasonable
attorneys' fees and court costs, in obtaining, liquidating or enforcing payment
of Collateral or the Note or in the prosecution or defense of any action or
proceeding by or against the Company, such concerning any matter arising out of
or connected with this Agreement or the Collateral or the Notes including,
without limitation, any of the foregoing arising in, arising under or related to
a case under the United States Bankruptcy Code (or any successor statute).
e. The proceeds of the Collateral at any time received by the
Company during the existence of any Event of Default shall, when received by the
Company in cash or its equivalent, be applied by the Company in reduction of, or
as collateral security for, the Note. Any surplus remaining after the full
payment and satisfaction of the Note shall be returned to Pledgor.
5. MISCELLANEOUS.
a. Entire Agreement. This Agreement, and the documents referred to
herein constitute the entire agreement among the parties pertaining to the
subject matter hereof, and supersede all prior and contemporaneous agreements,
understandings, negotiations, and discussions, whether oral or written.
b. Governing Law. This Agreement shall be construed and interpreted
according to the laws of the State of Illinois.
c. Further Assurances. Pledgor agrees to execute and deliver to the
Company such further agreements, assignments, instruments and documents and to
do all such other things as the Company may deem necessary or appropriate to
assure the Company its lien and security interest hereunder, including such
assignments, stock powers, financing statements, instruments and documents as
the Company may from time to time require in order to comply with the Uniform
Commercial Code as enacted in the State of Illinois and any successor statute(s)
thereto (the "UCC").
d. Notices. Any notices given in connection with this Agreement
shall be in writing and either personally delivered or mailed to the last known
address of the recipient using certified mail, return receipt requested. Until
further notice, notice by mail shall be addressed as follows:
If to Pledgor: Ralph B. Mandell
c/o PrivateBancorp, Inc.
Ten North Dearborn, Suite 900
Chicago, IL 60602
4
<PAGE>
If to the Company: PrivateBancorp, Inc.
Ten North Dearborn, Suite 900
Chicago, IL 60602
Attn: Donald A. Roubitchek,
Chief Financial Officer
e. Headings. The headings in this Agreement are inserted for
convenience of reference only and shall not constitute part hereof.
f. Severability. If any provision herein is held invalid or
unenforceable, the remainder of this Agreement shall not be affected thereby.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day, month and year first written.
THE RALPH B. MANDELL REVOCABLE TRUST PRIVATEBANCORP, INC.
UTA DATED 6/5/97
By:_________________________________ By:__________________________
Title:______________________________ Title:_______________________
By:__________________________
Title:_______________________
5
<PAGE>
Exhibit 21.1
------------
SUBSIDIARY OF THE REGISTRANT
Name State of Incorporation
---- ----------------------
The PrivateBank and Trust Company Illinois
<PAGE>
Exhibit 23.1
------------
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
report dated January 29, 1999 (and to all references to our Firm) included in or
made a part of this registration statement.
/s/ Arthur Andersen LLP
Chicago, Illinois
April 27, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 11,894,781
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 3,619,437
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 116,890,739
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 281,964,896
<ALLOWANCE> (3,410,000)
<TOTAL-ASSETS> 416,307,839
<DEPOSITS> 364,993,663
<SHORT-TERM> 20,000,000
<LIABILITIES-OTHER> 2,040,528
<LONG-TERM> 0
0
0
<COMMON> 3,431,424
<OTHER-SE> 25,842,224
<TOTAL-LIABILITIES-AND-EQUITY> 416,307,839
<INTEREST-LOAN> 19,619,603
<INTEREST-INVEST> 5,672,635
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 25,292,238
<INTEREST-DEPOSIT> 13,292,821
<INTEREST-EXPENSE> 13,311,957
<INTEREST-INCOME-NET> 11,980,281
<LOAN-LOSSES> 361,986
<SECURITIES-GAINS> 39,894
<EXPENSE-OTHER> 8,089,342
<INCOME-PRETAX> 4,849,432
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,010,138
<EPS-PRIMARY> 0.91
<EPS-DILUTED> 0.86
<YIELD-ACTUAL> .765
<LOANS-NON> 0
<LOANS-PAST> 361,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 960,000
<ALLOWANCE-OPEN> 3,050,000
<CHARGE-OFFS> 1,986
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 3,410,000
<ALLOWANCE-DOMESTIC> 2,690,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 720,000
</TABLE>
