|
|
 | | | |
- close
- close
- close
- close
Midwest Banc Holdings DEF 14A 2007 Documents found in this filing:
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. __) Filed by the Registrant þ
Filed by a Party other than the Registrant o:
Check the appropriate box: o
MIDWEST BANC HOLDINGS, INC.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
Fellow Stockholders:
You are cordially invited to attend the 2007 annual meeting of
stockholders of Midwest Banc Holdings, Inc. (the
“Company”), Melrose Park, Illinois, which will be held
on May 2, 2007, at 10:00 a.m., central time, at
Dominican University Priory Campus, 7200 West
Division Street, River Forest, Illinois 60305.
The attached Notice of the annual meeting and the Proxy
Statement describe the formal business to be transacted at the
meeting. Directors and officers of the Company as well as
representatives of PricewaterhouseCoopers LLP will be present at
the meeting to respond to any questions that our stockholders
may have regarding the business to be transacted.
The board of directors of the Company has determined that the
matters to be considered at the meeting are in the best
interests of the Company and its stockholders. For the
reasons set forth in the Proxy Statement, the board unanimously
recommends that you vote FOR each of the matters to be
considered.
Please sign and return the enclosed proxy card promptly. Your
cooperation is appreciated since a majority of the common stock
must be represented, either in person or by proxy, to constitute
a quorum for the conduct of business.
On behalf of the board of directors and all of the employees of
the Company and its subsidiaries, I thank you for your continued
interest and support.
Sincerely yours,
James J. Giancola
President and Chief Executive Officer
April 2, 2007
501 West
North
Avenue l
Melrose Park, Illinois 60160
NOTICE
OF THE 2007 ANNUAL MEETING OF STOCKHOLDERS
By Order of the board of directors,
Daniel R. Kadolph
Secretary
Melrose Park, Illinois
April 2, 2007
Your Vote Is Important. Whether you own one share
or many, your prompt cooperation in voting your proxy is greatly
appreciated. Please complete, sign and return the executed
enclosed form of proxy in envelope provided.
PROXY STATEMENT
FOR THE
2007 ANNUAL MEETING OF
STOCKHOLDERS OF
MIDWEST BANC HOLDINGS,
INC.
To Be Held On Wednesday,
May 2, 2007
This proxy statement, the accompanying proxy card and the annual
report to stockholders of Midwest Banc Holdings, Inc. (the
“Company” or “Midwest”) are being mailed on
or about April 2, 2007. The board of directors of the
Company is soliciting your proxy to vote your shares at the
annual meeting of stockholders. The board is soliciting your
proxy to give all stockholders of record the opportunity to vote
on matters that will be presented at the meeting. This proxy
statement provides you with information on these matters to
assist you in voting your shares.
Midwest’s board of directors is soliciting proxies for the
meeting. You are receiving a proxy statement because you owned
shares of Midwest common stock on March 21, 2007, and that
entitles you to vote at the meeting. By use of a proxy, you can
vote whether or not you attend the meeting. This proxy statement
describes the matters on which we would like you to vote and
provides information on those matters so that you can make an
informed decision.
The notice of annual meeting, proxy statement and proxy are
being mailed to stockholders on or about April 2, 2007. If
you hold your shares in “street name,” please refer to
the information forwarded by your bank, broker or other holder
of record to see the options available to you.
A proxy is your legal designation of another person, the proxy,
to vote on your behalf. By completing and returning the enclosed
proxy card, you are giving the board the authority to vote your
shares in the manner you indicate on your proxy card.
You will receive multiple proxy cards if you hold your shares in
different ways (e.g., joint tenancy, trusts, custodial accounts)
or in multiple accounts. If your shares are held by a broker
(i.e., in “street name”), you will receive your proxy
card or other voting information from your broker, and you will
return your proxy card or cards to your broker. You should vote
on and sign each proxy card you receive.
You are qualified to receive notice of and to vote at the
meeting if you own shares of our common stock at the close of
business on our record date, March 21, 2007.
As of the record date, there were 25,141,200 shares of
common stock outstanding and entitled to vote. Each share of
common stock is entitled to one vote on each matter presented.
These terms describe how your shares are held. If your shares
are registered directly in your name with Computershare Investor
Services, LLC, our transfer agent, you are a “stockholder
of record.” If your shares are held in the name of a
brokerage, bank, trust or other nominee as a custodian, you are
a “street name” holder.
You can vote either in person at the meeting or by proxy without
attending the meeting. We urge you to vote by proxy even if you
plan to attend the meeting so that we will know as soon as
possible that enough votes will be present for us to hold the
meeting. If you attend the meeting in person, you may vote at
the meeting and your proxy will not be counted.
Stockholders who vote by proxy do so by filling out the enclosed
form of proxy, signing it, and mailing it in the enclosed
postage-paid envelope.
Please refer to the specific instructions set forth on the
enclosed proxy card.
If you hold your shares in “street name,” your
broker/bank/trustee/nominee will provide you with materials and
instructions for voting your shares.
If you are a “stockholder of record,” you may
vote your shares in person at the meeting. If you hold your
shares in “street name,” you must obtain a proxy
from your broker, banker, trustee or nominee, giving you the
right to vote the shares at the meeting.
The board recommends that you vote your shares as follows:
Proposal 1 — FOR the election of twelve
nominees for director with terms expiring at the next annual
meeting of stockholders.
Proposal 2 — FOR the ratification of the
appointment of PricewaterhouseCoopers LLP as the Company’s
independent registered public accounting firm for the fiscal
year ending December 31, 2007.
Proposal 1 — You may cast your vote in favor of
electing the nominees as directors or withhold your vote on one
or more nominees.
Proposal 2 — You may cast your vote in favor of
or against the proposal, or you may elect to abstain from voting
your shares.
If you sign and return your proxy card without indicating how
you want your shares to be voted, the board of directors will
vote your shares as follows:
Proposal 1 — FOR the election of all
nominees for directors.
Proposal 2 — FOR the ratification of the
appointment of PriceWaterhouseCoopers LLP as the Company’s
independent registered public accounting firm for the fiscal
year ending December 31, 2007.
Under our by-laws, a majority of the votes that can be cast must
be present, in person or by proxy, to hold the meeting.
If you are a holder of record (that is, your shares are
registered in your own name with our transfer agent) and you
don’t vote your shares, your shares will not be voted.
If you hold your shares in “street name,” and you
don’t give your bank, broker or other holder of record
specific voting instructions for your shares, your record holder
can vote your shares on the election of directors and the
ratification of the independent registered public accounting
firm.
If you don’t give your record holder specific voting
instructions and your record holder does not vote, the votes
will be “broker non-votes.” “Broker
non-votes” will have no effect on the vote for the
election of directors and the other proposal. “Broker
non-votes” will be counted as present for purposes of
determining whether enough votes are present to hold the annual
meeting.
Votes withheld and abstentions are deemed as “present”
at the meeting, are counted for quorum purposes, and other than
for the election of directors, will have the same effect as a
vote against the matter. Broker non-votes, if any, while counted
for general quorum purposes, are not deemed to be
“present” with respect to any matter for which a
broker does not have authority to vote.
If you vote by proxy, and if unforeseen circumstances make it
necessary for the board to substitute another person for a
nominee, we will vote your shares for that other person.
Yes. Your voting records will not be disclosed to us except:
The inspector of election, a representative of our transfer
agent, must comply with confidentiality guidelines that prohibit
disclosure of the votes to Midwest.
You may revoke your proxy by doing one of the following:
Proposal 1 requires a plurality of the votes cast to elect
a director.
Proposal 2 requires the affirmative vote of a majority of
those shares present in person or represented by proxy and
entitled to vote thereon at the meeting.
Representatives from Computershare Investor Services, LLC, our
transfer agent, will count the votes and serve as our inspectors
of election. The inspectors of election will be present at the
meeting.
We pay the costs of soliciting proxies. Upon request, we will
reimburse brokers, dealers, banks and trustees, or their
nominees, for reasonable expenses incurred by them in forwarding
proxy materials to beneficial owners of shares of our common
stock.
No. In addition to mailing these proxy materials, certain of our
directors, officers or employees may solicit proxies by
telephone, facsimile,
e-mail or
personal contact. They will not be specifically compensated for
doing so.
If you
have any further questions about voting your shares or attending
the meeting please call Daniel R. Kadolph at
(708) 865-1053.
Security
Ownership of Certain Beneficial Owners
The following table sets forth information as of March 21,
2007, the record date, for: (1) those people believed by
management to be the beneficial owners of more than 5% of our
common stock; (2) the nominees for the board of directors
of the Company; and (3) certain executive officers of the
Company. The table includes, with respect to directors, the year
in which each became a director of the Company; if elected,
their terms will expire at the next annual meeting of
stockholders. The table also sets forth the amount of our common
stock and the percent thereof beneficially owned by each person
and all directors and executive officers as a group as of the
record date. Ownership information is based upon information
furnished by the respective individuals.
Our by-laws provide that the board of directors shall consist of
three to twenty directors with the number fixed from time to
time by a resolution of the board of directors. The board of
directors has set the number of directors at twelve.
As part of its review of corporate governance issues in 2005,
the corporate governance and nominating committee recommended to
the board that all directors be elected annually by
stockholders. The board of directors unanimously approved an
amendment to our by-laws eliminating the classification of
directors. Under our amended by-laws, all directors are to be
elected at each annual meeting of stockholders and will serve a
one-year term until their successors are elected and qualified
or until their earlier resignation, removal or death.
All persons standing for election as director were unanimously
nominated by the board of directors. No person being nominated
as a director is being proposed for election pursuant to any
agreement or understanding between any such person and the
Company.
The nominees proposed for election at this meeting are set forth
below.
In the event that any of these individuals is unable to serve or
declines to serve for any reason, it is intended that the
proxies will be voted for the election of such other person as
may be designated by the board of directors. The board has no
reason to believe that any director nominee will be unable or
unwilling to serve. Unless authority to vote for the nominees
is withheld, it is intended that the shares represented by the
enclosed proxy card, if executed and returned, will be voted FOR
the election of the nominees proposed by the board of
directors.
Your board recommends that you vote “FOR” each of
the nominees listed below.
E. V. Silveri has served as chairman of the
board of the Company since 1983. Mr. Silveri was elected a
director of Midwest Bank and Trust Company (the
“Bank”) in 1972 and has been chairman of the board of
the Bank since 1975. He was also a member of the board of
directors of Midwest Bank of Hinsdale, and served as chairman of
First Midwest Data Corp from 1991 to 2002. Since 1984,
Mr. Silveri has been the president and also a director of
Go-Tane
Service Stations, Inc., a firm he co-founded in 1966.
James J. Giancola was named director and chief
executive officer of the Company and the Bank in September 2004.
Mr. Giancola was named vice chairman of the Bank in July
2006. He was president of the Bank from 2004 to 2006. In
November 2004, Mr. Giancola was named chairman, director,
president, chief executive officer of MBTC Investment Company.
In February 2005, he was named director of Midwest Financial and
Investment Services, Inc.
Prior to joining the Company, he was semi-retired and a private
investor. Mr. Giancola has over 30 years experience in
the banking industry. He served as president of Fifth Third
Bank, Indiana from 1999 to 2000. He also served as president and
chief executive officer of CNB Bancshares, Inc., a seven billion
dollar bank holding company in Evansville, Indiana from 1997 to
1999. Mr. Giancola also served as president of Gainer Bank
located in Northwest Indiana. Mr. Giancola became a
director of ACE Holding Company, LLC, a mortgage banking company
in Indianapolis, Indiana in 2006.
J. J. Fritz was named director and executive
vice president of the Company and director, president, and chief
operating officer of the Bank in July 2006. Mr. Fritz was
also named director, president, and chief executive officer of
Royal American Investment Services, Inc. in July 2006.
Mr. Fritz and other investors founded Royal American
Corporation in 1991, where he served as chairman and chief
executive officer, after he served as chief executive officer of
First Chicago Bank of Mt. Prospect. His lengthy career in the
Chicago metropolitan area also includes positions at Northern
Trust, First National Bank of Libertyville and Continental
Illinois National Bank.
Angelo DiPaolo has served as a director of the
Company since 1983. He has also served as a director of the Bank
since 1982. He has served as president of DiPaolo Company, a
heavy construction company, and DiPaolo Center, a commercial
complex in Glenview, Illinois, since 1963.
Barry I. Forrester, CFA has served as a director
of the Company since May 2005 and as a director of the Bank
since June 2005. He has been a private investor since 2004 and a
director of Eagle Savings Bank in Cincinnati, Ohio since 2006.
Previously, he had worked over 14 years as an investment
banker specializing in providing corporate finance services to
financial institutions including public offerings of equity and
debt, mergers and acquisitions, and
mutual-to-stock
conversion transactions. He served clients through positions at
William Blair & Company from 2000 through 2004, ABN
AMRO Incorporated from 1997 to 2000, and EVEREN Securities, Inc.
(including predecessors Kemper Securities and Blunt
Ellis & Loewi) from 1989 to 1997. Prior thereto he was
a financial analyst with Crowe Chizek and Company, LLP. He holds
the Chartered Financial Analyst designation and is a member of
the CFA Institute and CFA Society of Chicago.
Robert J. Genetski, PhD has served as director of
the Company since June 2005. He has also served as a director of
the Bank since 2004. He has been president of Robert
Genetski & Associates, Inc. since 1991. He also serves
as a director of DNP Select Income Fund. He has previously
taught at the University of Chicago Graduate School of Business,
New York University, and Wheaton College.
Gerald F. Hartley, CPA has served as a director of
the Company and chairman of the Audit Committee since June 2003.
Mr. Hartley was named Director of the Bank in February
2004. Mr. Hartley has over 40 years experience in
financial, accounting, and auditing responsibilities. He served
as a director of Republic Bank of Chicago and Republic Bancorp
Co. from August 2000 through May 2003. Previously, he spent
35 years in the public accounting profession, primarily
with Crowe Chizek and Company, LLP, dealing with community-based
banks and bank holding companies. Mr. Hartley served as a
member of the AICPA Committee on Bank Accounting and Auditing
and as a director of the Illinois CPA Society.
Homer J. Livingston, Jr. has served as
director of the Company since May 2005 and as director of the
Bank since June 2005. He formerly served as president and chief
executive officer of the Chicago Stock Exchange, president and
chief executive officer of LaSalle National Bank of Chicago, as
the trustee of the Southern Pacific Railroad, as a member of the
board of Evanston Northwestern Healthcare and as a director of
Peoples Energy Corp.
Joseph Rizza has served as a director of the
Company since April 1997. He was elected a director of the Bank
in 2002. Mr. Rizza was also a director of Midwest Bank of
Hinsdale from 1994 to 2001. Mr. Rizza is the owner of Joe
Rizza Enterprises which owns several automobile dealerships and
financial service companies in the Chicago metropolitan area.
Thomas A. Rosenquist was named a director of the
Company and the Bank in July of 2006. Mr. Rosenquist served
as a director of Royal American Corporation from April 1997 to
June 2006. He formerly served as a director of Gurnee National
Bank and American National Bank and Trust Company of Waukegan.
Mr. Rosenquist is owner, president, and chief executive
officer of Lake County Grading Company, a trucking and
excavating company.
Kenneth Velo has served as a director of the
Company since June 2005. He has served as a director of the Bank
since 2004. He has been a priest in the Archdiocese of Chicago
since 1973 and named Monsignor in 1996. He has been the head of
the Office of Catholic Collaboration of DePaul University
serving in the capacity of senior executive since 2001. He has
also been president of The Big Shoulders Fund since 2003.
Monsignor Velo was president of Catholic Extension, a national
organization funding more than 75 dioceses in the United States
of America. He is a member of the board of Children’s
Memorial Hospital and serves on the board of Trustees of Fenwick
College Preparatory School as well as other civic and community
efforts.
Leon Wolin has served as a director of the Company
since 1991. He was elected a director of the Bank in 1985.
Mr. Wolin was a director of Midwest Bank of Hinsdale from
1996 to 2002. Mr. Wolin has been president of Price
Associates, Inc., a real estate appraisal and consulting firm,
since 1980. Mr. Wolin has been president of Union Health
Services since 2000.
Corporate
Governance
The corporate governance and nominating committee will consider
candidates for nomination as a director recommended by directors
or stockholders. The committee will consider nominees
recommended by our stockholders if the procedures set forth
below are followed.
In evaluating candidates, the committee considers the attributes
of the candidate (including skills, experience, diversity, age,
and legal and regulatory requirements) and the needs of the
board and will review all candidates in the same manner. Our
by-laws require that a director own 3,000 shares of our
common stock and that a director must acquire these shares
within three years of being elected or appointed to the board.
The board has the authority to waive this requirement and has
waived it in the past. The by-laws also provide that commencing
at the 2008 annual meeting of stockholders, a person who is
older than age 75 will not be eligible to serve as a
director of the Company.
Under our stock and incentive plan, non-employee directors
elected or appointed to the board for the first time (other than
those non-employee directors who are elected or appointed to the
board in conjunction with an acquisition) will receive an award
of 3,000 shares of restricted stock which will vest as
follows: 1,000 shares following the director’s
election or appointment to the board and 1,000 shares on
the two succeeding annual meetings following such election or
appointment provided the individual is still serving as a
director on such anniversary.
The committee reviews and shapes governance policies and
identifies qualified individuals for nomination to the board.
Nominees may be suggested by directors, members of management,
stockholders, or, if applicable, by a third party engaged to
recommend directors.
In identifying and recommending nominees for positions on the
board of directors, the committee places primary emphasis on:
There are no other specific minimum qualifications that nominees
must meet in order for the committee to recommend them to the
full board. Each nominee will be evaluated based on his or her
individual merits.
Members of the committee will discuss and evaluate potential
candidates in detail and suggest individuals to explore in more
depth. Once a candidate is identified whom the committee desires
to seriously consider and move toward nomination, the candidate
will be invited to meet with the entire committee. If the entire
committee approves the candidate, the chairman of the committee,
or his or her designee, will enter into a discussion with the
nominee
with the objective of obtaining the nominee’s permission to
be submitted for election at the next annual meeting of
stockholders or to be appointed to the board. If the candidate
accepts the invitation, the candidate is recommended for
approval to the entire board of directors.
Stockholder Nominations. The committee
will consider nominees recommended by our stockholders. A
stockholder who wishes to recommend a nominee for the
committee’s consideration may do so by submitting the name
of the nominee in writing to the Chairman of the Corporate
Governance and Nominating Committee, Midwest Banc Holdings,
Inc., 501 West North Avenue, Melrose Park, IL 60160 prior
to January 1st of each year, for consideration at the
next annual meeting of stockholders. In submitting nominees,
persons should be aware of and apply the guiding principles for
director qualifications cited above. Persons submitting
nominations may be asked to provide additional background
information about a prospective candidate as determined by the
committee.
The board of directors conducts its business through meetings of
the board and through activities of its committees. The board of
directors meets regularly and may schedule special meetings as
needed. During fiscal year 2006, our board held six meetings
primarily related to general Company matters. Each of our
directors attended at least 75% of the total number of the
Company’s board meetings held and committee meetings on
which such directors served during fiscal year 2006.
The board encourages all board members to attend the annual
meeting of stockholders. All of the board members attended the
2006 annual meeting of stockholders.
If you wish to communicate with the board of directors or any
individual board member, you may send correspondence to James J.
Giancola, president and chief executive officer, Midwest Banc
Holdings, Inc., 501 West North Avenue, Melrose Park,
Illinois 60160. Mr. Giancola will submit your
correspondence to the board member, all of the board members or
the appropriate board committee, as applicable. Concerns
relating to accounting, internal controls, or auditing matters
are to be immediately brought to the attention of the
chairperson of the audit committee.
The board of directors (after receiving a recommendation from
the corporate governance and nominating committee) determined on
February 25, 2007 that Messrs. DiPaolo, Hartley,
Rizza, Silveri, Wolin, Livingston, Forrester, and Rosenquist and
Dr. Genetski and Monsignor Velo are “independent
directors” as such term is defined in Rule 4200(a)(15)
of the NASDAQ listing standards. A copy of our director
independence standards is available at
www.midwestbanc.com — Investor
Relations — Corporate Governance.
When making the independence determinations, both the corporate
governance and nominating committee and the board of directors
reviewed the information relating to transactions certain
directors had in the ordinary course of business with the
Company and the Bank (see Transactions with Certain Related
Parties found on page 38, for a discussion of these
transactions). After considering this information, both the
committee and the board concluded that these transactions would
not interfere with the exercise of independent judgment of these
directors in carrying out their responsibilities as directors of
the Company.
Independent directors may meet in executive session, without
management, at any time, and are regularly scheduled for such
executive sessions four times a year.
The board of directors has adopted a policy concerning the
approval of related party transactions — transactions
between the Company and its subsidiaries and our related
parties, our directors, officers or principal
stockholders, and their respective family members and businesses
they control. Except as noted below, any related party
transaction may be consummated or may continue only if:
All related party transactions where the amount involved is less
than $100,000 may be approved by our chief executive officer and
if so approved shall be presented for ratification to the
committee or a majority of the independent directors.
All loans to a related party shall be approved by the board of
directors of Midwest Bank and Trust Company as required by
Regulation O of the Board of Governors of the Federal
Reserve System and by a majority of the independent directors.
Any loan to a related party: (i) must be made in the
ordinary course of business; (ii) must be made on
substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable loans
with persons not related to the Company; and (iii) must not
involve more than the normal risk of collectibility or present
other unfavorable features.
All related party transactions approved by our chief executive
officer must be submitted for ratification by the committee or a
majority of the independent directors. All other related party
transactions (except loans approved as discussed above) shall be
submitted for approval to the committee or a majority of the
independent directors. After such approval, management must
update the committee and the full board of directors as to any
material change to those proposed transactions.
All related party transactions are to be disclosed in our
applicable filings as required by the Securities Act of 1933 and
the Securities Exchange Act of 1934, the Exchange Act, and
related rules. Furthermore, all related party transactions shall
be disclosed to the committee and to the full board of directors.
We have adopted a Code of Business Conduct and Ethics which
applies to all directors, officers, and employees of the
Company, including the chief executive officer and the chief
financial officer. There were no waivers during 2006. A copy of
the Code is available at www.midwestbanc.com —
Investor Relations — Corporate Governance. We will
post any changes to the Code, as well as waivers of the Code for
directors or executive officers, at the same location on our
website.
Section 16 of the Exchange Act requires the Company’s
directors and certain officers, and certain other owners of our
common stock, to periodically file notices of changes in
beneficial ownership of such common stock with the Securities
and Exchange Commission, the SEC. To the best of the
Company’s knowledge, during 2006 all required filings were
timely submitted.
Committees
of the Board
The audit committee is composed entirely of outside directors
who are not officers of the Company. The members of the
committee are “independent directors” as such term is
defined in Rule 4200(a)(15) of the NASDAQ listing standards
as currently in effect and the financial requirements under
applicable SEC and NASDAQ rules. The committee currently
consists of Messrs. Hartley (Chairman), Forrester, Genetski
and Wolin. The board of directors has determined that
Mr. Hartley is the audit committee’s financial expert.
A copy of the committee charter is available at our website
www.midwestbanc.com — Investor
Relations — Corporate Governance.
Generally, the committee has the responsibility for oversight of
financial controls, as well as the Company’s accounting,
regulatory and audit activities, and annually reviews the
qualifications of the Company’s independent registered
public accounting firm. The independent registered public
accounting firm is responsible for auditing and expressing an
opinion on the Company’s financial statements. During 2006,
the committee met ten times.
The corporate governance and nominating committee currently
consists of Messrs. Livingston (Chairman), Hartley,
Silveri, Rosenquist and Wolin and Monsignor Velo. Committee
members are “independent directors” as such term is
defined in Rule 4200(a)(15) of the NASDAQ listing standards
as currently in effect. A copy of the charter is available at
our website www.midwestbanc.com — Investor
Relations — Corporate Governance.
The committee has the following responsibilities:
The strategic opportunities committee consists of
Messrs. Forrester (Chairman), Fritz, Giancola, Hartley,
Livingston and Silveri. The members of the committee are the
Company’s chairman of the board, chief executive officer of
the Company and the chief operating officer of the Bank, and
independent directors as determined by the board and
constituting a majority of the committee, considering the
recommendation of the corporate governance and nominating
committee. A copy of the committee charter is available at our
website www.midwestbanc.com — Investor
Relations — Corporate Governance.
The committee assists the Company’s management and board in
identifying, evaluating and executing potential mergers,
acquisitions and other similar strategic transactions. The
committee provides direction to and coordinates with management
as to the initiation, status and disposition of transaction
opportunities. The committee has authority to provide the
Company’s management direction to enter into customary
preliminary transaction agreements such as confidentiality
agreements; engage legal, financial and other advisers in
connection with particular transactions; and make transaction
proposals on a preliminary, non-binding basis. The committee
reviews potential transactions for consistency with the
Company’s strategic plans and effects on long-term
stockholder value and, as the committee deems appropriate,
recommends potential transactions for review and approval by the
full board, which retains the exclusive authority to approve
binding, definitive transaction agreements. The committee will
annually review and assess the success and challenges of past
transactions. The committee met seven times in 2006.
The asset liability committee consists of Messrs. Genetski
(Chairman), Forrester, Fritz, Giancola, Livingston and Silveri.
The members of the committee are the Company’s chairman of
the board, chief executive officer of the Company and chief
operating officer of the Bank, and independent directors as
determined by the board and constituting a majority of the
committee, considering the recommendation of the corporate
governance and nominating committee.
The committee assists the Company’s management and board in
reviewing and making recommendations to the board of the
Company’s securities portfolio and asset liability
management strategy and policies; reviewing the Company’s
securities portfolio performance and consistency with its
strategy and policies; and reviewing and assessing the risk and
returns associated with the Company’s securities portfolio
in the context of the overall assets, liabilities and capital of
the Company. The committee met eight times in 2006.
The compensation committee consists of Messrs. Wolin
(Chairman), DiPaolo, Forrester, Livingston, Rizza and Rosenquist
and Monsignor Velo. The members of the committee are
“independent directors” as such term is defined in
Rule 4200(a)(15) of the NASDAQ listing standards as
currently in effect. A copy of the committee charter is
available at our website www.midwestbanc.com —
Investor Relations — Corporate Governance. The
committee met six times during 2006.
The fundamental responsibilities of the committee are to:
Management plays a significant role in the compensation-setting
process. The most significant aspects of management’s role
are: evaluating employee performance; suggesting business
performance targets and objectives; and recommending salary
levels, cash incentives and restricted stock awards.
Ms. Ceas, our senior vice president-human resources, and
Mr. Giancola work with Mr. Wolin in establishing the
agenda for committee meetings. Management also prepares meeting
information for each committee meeting.
Mr. Giancola and Ms. Ceas participate in committee
meetings at the committee’s request to provide: background
information regarding our strategic objectives;
Mr. Giancola’s evaluation of the performance of the
senior executive officers; and compensation recommendations as
to senior executive officers (other than himself).
Mr. Giancola does not participate in those portions of the
committee meetings where his compensation is reviewed and
approved.
The committee charter grants the committee the sole and direct
authority to hire and fire its advisors and compensation
consultants and approve their compensation. These advisors
report directly to the committee. We pay the committee’s
advisors and consultants. The committee has for several years,
used the services of a compensation consultant to identify
specific study groups of companies and to provide research
regarding compensation programs and compensation levels among
the companies in the study groups.
The committee engaged The Delves Group to serve as its
consultant for fiscal 2007. The Delves Group has provided
consulting services to the committee since 2005. The committee
has determined that The Delves Group is independent because it
has never done any work for Midwest other than advise the
committee and has no prior relationship with management. The
Delves Group reports directly to the committee but is authorized
it to communicate with Ms. Ceas to obtain information. The
Delves Group will not do any work for Midwest except as
authorized by the committee.
The information contained in this report shall not be deemed
to be “soliciting material” or to be “filed”
with the Securities and Exchange Commission, nor shall such
information be incorporated by reference into any future filing
under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, except to the extent that the
Company specifically incorporates such information by reference
in such filing.
The compensation committee consists of Messrs. Wolin
(Chairman), DiPaolo, Forrester, Livingston, Rizza and Rosenquist
and Monsignor Velo. The members of the committee are
“independent directors” as such term is defined in
Rule 4200(a)(15) of the NASDAQ listing standards as
currently in effect. A copy of the committee charter is
available at www.midwestbanc.com — Investor
Relations — Corporate Governance.
The compensation committee has reviewed the Compensation
Disclosure and Analysis contained in this proxy statement
with the management of Midwest, and based on the review and
discussions, the compensation committee has recommended to the
board of directors that the Compensation Disclosure and
Analysis be included in our annual report on
form 10-K
and its proxy statement.
This report is submitted by the compensation committee.
Leon Wolin (Chairman)
Angelo DiPaolo
Barry I. Forrester
Homer J. Livingston, Jr.
Joseph R. Rizza
Thomas Rosenquist
Kenneth J. Velo
James J. Giancola, president and chief executive officer of the
Company, and J. J. Fritz, executive vice president, serve on the
board of directors of the Company. Mr. Giancola is also the
chief executive officer of the Bank and Mr. Fritz is the
president and chief operating officer of the Bank. Each of the
directors of the Company is also a director of the Bank.
Determinations regarding compensation of the employees of
Midwest and the Bank are made by the compensation committee of
the board of directors, who are all independent directors.
Additionally, there were no compensation committee interlocks
during 2006, which generally means that no executive officer of
Midwest served as a director or member of the compensation
committee of another entity, one of whose executive officers
served as a director or member of our compensation committee.
The following table shows the compensation paid to the directors
in 2006.
Committee chairmen receive the following fees for serving as
chairmen:
Executive
Compensation
Compensation
Discussion and Analysis
Our Compensation Discussion and Analysis addresses the following
topics: the members and role of our compensation committee; our
compensation-setting process; our compensation philosophy and
policies regarding executive compensation; our
compensation-setting process; the components of our executive
compensation program; and our compensation decisions for fiscal
year 2006 and for the first quarter of fiscal year 2007.
The compensation committee consists of Messrs. Wolin
(Chairman), DiPaolo, Forrester, Livingston, Rizza and Rosenquist
and Monsignor Velo. The members of the committee are
“independent directors” as such term is defined
in Rule 4200(a)(15) of the NASDAQ listing standards
currently in effect. A copy of the committee charter is
available at our website www.midwestbanc.com —
Investor Relations — Corporate Governance.
The committee meets as often as necessary to perform its duties
and responsibilities. It held six meetings during fiscal 2006
and has held two meetings so far during fiscal 2007.
Mr. Wolin works with James J. Giancola, our chief executive
officer, and Mary Ceas, our senior vice president —
human resources, to establish the meeting agenda. The committee
typically meets with the chief executive officer, Ms. Ceas,
our chairman of the board, outside counsel and, where
appropriate, outside advisors. The committee also meets in
executive session without management.
Many of our compensation decisions relating to 2006 performance
were made in December of 2006. However, our compensation
planning process neither begins nor ends with any particular
committee meeting. Compensation decisions are designed to
promote our fundamental business objectives and strategy.
Business and succession planning, evaluation of management
performance, and consideration of the business environment are
year-round processes. Commencing in 2007, our compensation
decisions for the year relating to incentive compensation and
equity awards will be made in the first quarter of the following
year.
The committee receives and reviews materials in advance of each
meeting. These materials include information that management
believes will be helpful to the committee as well as materials
that the committee has specifically requested. Depending on the
agenda for the particular meeting, these materials may include:
We believe that the skills, abilities and commitment of our
senior executives are essential to our long-term success and
competitiveness. The primary goal of our compensation program is
to attract, retain and motivate talented individuals who can
assist us in delivering high performance to our stockholders and
customers. This philosophy is intended to align the interests of
management with those of our stockholders.
A variety of compensation elements is used to attract, retain
and motivate talented individuals who can assist us in
delivering high performance to our stockholders and customers.
These include:
The allocation of each component varies by executive and is set
to balance appropriately for each executive at-risk pay and
fixed compensation. We have developed a compensation philosophy
of providing market competitive salaries and incentive awards
that, when combined with base salaries, reward exceeding
performance objectives with above-market total compensation,
performance below objectives with below-market total
compensation, and meeting performance objectives with at-market
total compensation. We accomplish this through annual and
long-term incentive awards and provide that the awards vary
significantly with performance.
At the core of our compensation philosophy is our guiding belief
that pay should be directly linked to performance. This
philosophy has guided many compensation related decisions:
We also believe that total compensation and accountability
should generally increase with position and responsibility.
Consistent with this philosophy:
We have developed a compensation program which is comprised of
components typically offered to executives by financial
institutions similar to us. The committee recognizes that
attracting and retaining key executives is critical to our long
term success. The committee has set certain guidelines regarding
the compensation of our executive officers. Each executive
officer is reviewed annually and that officer’s
compensation is based on the committee’s assessment of that
individual’s contribution to the Company.
We believe that compensation should focus management on
achieving strong short-term (annual) performance in a manner
that supports and ensures our long-term success and
profitability. The cash incentive portion of our incentive
program is designed to encourage executives to meet annual
performance targets while the restricted stock award portion of
the incentive program encourages the achievement of objectives
on a three year performance
cycle. We believe that restricted stock awards create long-term
incentives that align the interest of management with the
long-term interests of stockholders.
We have decided that all aspects of executive compensation
should be clearly, comprehensibly and promptly disclosed in
plain English. We believe that compensation disclosures should
provide all of the information necessary to permit stockholders
to understand our compensation philosophy, our
compensation-setting process and how much our executives are
paid.
Management plays a significant role in the compensation-setting
process. The most significant aspects of management’s role
are suggesting business performance targets and objectives;
formulating individual performance objectives; evaluating
employee performance; and recommending salary levels, cash
incentives and restricted stock awards. The senior vice
president — human resources and chief executive
officer work with Mr. Wolin in establishing the agenda for
committee meetings. Management also prepares meeting information
for each committee meeting.
The chief executive officer and the senior vice
president — human resources participate in committee
meetings at the committee’s request to provide background
information regarding our strategic objectives; the chief
executive officer’s evaluation of the performance of the
senior executive officers; and compensation recommendations as
to senior executive officers (other than himself). The chief
executive officer does not participate in those portions of the
committee meetings where his compensation is reviewed and
approved.
The committee charter grants the committee the sole and direct
authority to hire and terminate its advisors and compensation
consultants and approve their compensation. These advisors
report directly to the committee. Midwest pays the
committee’s advisors and consultants.
The committee has, for a few years, used the services of a
compensation consultant to identify specific study groups of
companies and to provide research regarding compensation
programs, compensation levels and performance among the
companies in the study groups (see discussion below at
Benchmarking).
The committee engaged The Delves Group to serve as a consultant
for fiscal 2007. The Delves Group has provided consulting
services to the committee since 2005. The committee has
determined that The Delves Group is independent because it has
never done any work for Midwest other than advise the committee
and has no prior relationship with management. The Delves Group
reports directly to the committee but is authorized to
communicate with the senior vice president — human
resources to obtain information. The Delves Group will not do
any work for Midwest except as authorized by the committee.
The consultant was also engaged in 2005 to design a new,
performance-based, executive long-term incentive program. Our
main goals for redesigning this program were to improve the
relationship between long-term compensation and performance, and
the interests of stockholders. After reviewing a variety of
alternatives in conjunction with the consultant, the committee
(and the board of directors) approved a proposal to make annual
grants of performance-accelerated stock options and
performance-accelerated restricted stock to executive officers
and certain other top management employees. Under the approved
proposal, the timing of equity award vesting will be determined
by performance on two measures: earnings per share and return on
assets. The target measures and the amount of the equity awards
are set on a yearly basis by the committee.
During 2006, The Delves Group was engaged to evaluate the
effectiveness and structure of our executive compensation
programs and practices. This included a market review of
competitive compensation levels as well as a review of our
annual incentive plan. The committee directed the consultant to
design comparison groups of
companies and to provide a research report regarding
compensation levels and compensation programs at those
companies. The consultant in its report indicated:
For 2006, the committee determined that the incentive awards
would be made in the form of cash (50%) and
performance-accelerated restricted stock awards (50%), with the
vesting and target measures as described above (see discussion
below at Annual Management Incentive Compensation Program
found on page 22 and Equity Based
Compensation found on page 23).
During December of 2006, the committee met to evaluate the
performance of our senior executive officers, to determine their
cash incentive compensation and their performance-accelerated
restricted stock awards for 2006 and to set their base salaries
for the next calendar year, all of which were subsequently
approved by the board. In January of 2007, the committee
established (and the board approved) the performance objectives
for the current fiscal year for the chief executive officer of
the Company and chief operating officer of the Bank. The
committee will meet to review, modify as appropriate, and
approve (subject to further board approval) the performance
objectives recommended by the chief executive and chief
financial officers for the current fiscal year for the remaining
senior officers.
In January of 2007, the chief executive officer prepared (at the
committee’s request) a series of performance goals for 2007
for the chief executive officer and J. J. Fritz, our Bank’s
president and chief operating officer. At its meeting, the
committee reviewed and modified the performance goals for the
chief executive officer of the Company and chief operating
officer of the Bank and assigned a specific weight to each goal,
placing special emphasis on financial performance and credit
risk.
For other executive officers, the process begins with
establishing individual and corporate performance objectives
during the first quarter of each fiscal year. The committee
engages in an active dialogue with the chief executive officer
concerning strategic objectives and performance targets and
reviews the appropriateness of the financial measures used in
incentive plans and the degree of difficulty in achieving
specific performance targets. Corporate performance objectives
typically are established on the basis of two measures: earnings
per share and return on assets. The target measures and the
amount of the awards are set on a yearly basis by the committee.
We do not believe it is appropriate to establish compensation
levels primarily based on benchmarking. However, it is our
belief that information regarding pay practices at other
companies is useful in two respects. First, we recognize that
our compensation practices must be competitive in the
marketplace. Second, this marketplace information is one of the
many factors that we consider in assessing the reasonableness of
compensation.
Accordingly, the committee reviews compensation levels for our
named executive officers against compensation levels at the
companies in a study group identified by our compensation
consultant. The compensation consultant provided the committee
with information regarding compensation programs and
compensation levels at the median and 75th percentiles
among companies in this study group.
To remain consistent from year to year, the committee currently
intends to use this study group (same industry, high growth and
geographic) as part of the annual marketplace study. The
specific companies included in each group may change based on
their size, relevance or other pertinent factors.
Decisions on executive officer compensation levels are based on
the committee’s assessment of each executive’s
contribution to our success as well as median competitive market
compensation levels determined by the consultant. The review of
median competitive data includes both a
component-by-component
analysis as
well as a total compensation review for each of our executive
officers. In determining competitive compensation levels, we
reviewed survey data for similarly sized financial institutions,
as well as data from the following nine peer community banks:
Amcore Financial, PrivateBancorp, Taylor Capital Group, First
Merchants Corp., Integra Bank Corp., Old Second Bancorp, First
Financial Corp., MainSource Financial Group and Lakeland
Financial Corp. The median asset size of the peer group was
$2.5 billion, with an observed range from $1.6 to
$5.4 billion.
Together with the performance objectives, targeted total
compensation levels are established (i.e., maximum achievable
compensation) for each of our senior executive officers. In
making this determination, we are guided by the compensation
philosophy described above. We also consider historical
compensation levels, competitive pay practices at the companies
in the study group, and the relative compensation levels among
our senior executive officers. We may also consider industry
conditions, corporate performance versus a peer group of
companies and the overall effectiveness of our compensation
program in achieving desired performance levels.
As targeted total compensation levels are determined, we also
determine the portion of total compensation that will be
contingent, performance-based pay. Performance-based pay
generally includes awards made under our incentive plan for
achievement of specified performance objectives. For 2006, 50%
of the incentive compensation was paid in cash and the remainder
in the form of performance-accelerated restricted stock awards.
Under the terms of their employment agreements,
Mr. Giancola and Mr. Fritz are eligible for
performance based awards with a range from zero to 70% of their
base salaries and the other named executive officers are
eligible for performance based awards ranging from 16% to 80% of
their base salaries.
The committee reviews, on an annual basis, its performance and
the effectiveness of our compensation program in obtaining
desired results.
In the following discussion, we review the elements of executive
compensation and our 2006 and 2007 compensation decisions. In
its discussions, the committee continued to apply the
compensation principles described above in determining the
compensation of our named executive officers. In summary, the
compensation decisions made in fiscal 2006 and the first quarter
of fiscal 2007 for the named executive officers, including the
chief executive officer of the Company and chief operating
officer of the Bank, were as follows:
After considering all components of the compensation paid to the
named executive officers, the compensation committee has
determined that the compensation is reasonable and not
excessive. In making this determination, we considered many
factors, including the following:
We believe that base salaries are a key element in attracting
and retaining our management team. We, therefore, target base
salaries at the competitive median level for companies of
similar size, performance and industry. In determining
individual salaries, the committee considers — in
addition to market median data and study group data —
the scope of the executive’s responsibilities, individual
contributions, experience in the position, our financial
performance, historical compensation and the relative
compensation levels among our executive officers. Salary ranges
and individual salaries for executive officers are reviewed
annually, and adjusted from time to time to take into account
outstanding performance, promotions, and updated competitive
information. While there are no specific performance weightings
established, salary recommendations are based on performance
criteria such as:
The committee also considers the minimum base salaries set for
the chief executive officer of the Company and chief operating
officer of the Bank in their employment agreements.
Set forth below is a table showing the named executive officers
2007 base salary and the increase over 2006.
In setting these base salaries, we considered:
The committee believes that increases in future total
compensation should be more heavily weighted toward the cash and
stock incentive components rather than salary to promote a pay
for performance compensation framework.
Annual incentives are paid to motivate and reward exceptional
performance for the year. Our management incentive compensation
plan provides officers and key employees an opportunity to earn
an annual cash incentive compensation and a stock incentive
compensation for achieving specified, performance-based goals
established for the fiscal year. Awards to executive officers
are based upon the committee’s review and discussion with
our chief executive officer concerning his evaluation of each
executive’s performance during the year relative to
specific goals developed at the beginning of the year. These
goals are position specific and include a mix of individual,
corporate, and — where relevant — business
unit measures. The primary goals used in 2006 included, earnings
per share, return on assets, deposit growth, loan growth, and
credit quality. These goals are aligned with the Company’s
overall business plan for the year. These performance objectives
allow the named executive officers to earn a cash and stock
incentive compensation (50%/50% mix) up to a specified
percentage of their base salary if Midwest or their particular
business unit achieves established goals.
The incentive compensation for each of the executive officers
(except the chief executive officer of the Company and chief
operating officer of the Bank) are recommended by management,
and reviewed, revised as appropriate, and approved by the
committee and then the board of directors. In reviewing annual
incentive awards, the committee takes into account both
competitive median annual incentive values as well as the impact
of annual incentive awards on total compensation.
The annual incentives the Company awarded in 2006 to the named
executive officers are shown in column (g) of the
Summary Compensation Table found on page 26.
The targeted levels of maximum incentive compensation as a
percentage of base salary for 2006 and 2007 for the named
executive officers are specified below.
We believe that equity compensation is the most effective means
of creating a long-term link between the compensation provided
to officers and other key management personnel with gains
realized by the stockholders. We have elected to use
performance-accelerated restricted stock awards as our equity
compensation vehicle.
Prior to 2005, we made long-term incentive awards in the form of
time-vested stock options. In 2005 with the assistance of the
consultant, the committee designed a performance-based,
executive long-term incentive program. Under this program, the
committee decided to award a mix of performance-accelerated
options and performance-accelerated restricted stock. The
intention was to encourage employees to create stockholder value
through both the prospect of higher stock values anticipated
from achieving performance goals and the vesting structure which
encourages employees to achieve the performance goals as soon as
possible. This program was also intended to both ensure a closer
alignment between long-term compensation and performance, and
reduce the dilutive impact to stockholders of service vested
equity grants.
The committee developed guidelines, set forth below, in awarding
equity based compensation:
As part of its philosophy, the committee is opposed to equity
plans that contain evergreen features (automatic yearly
increases of shares covered by the plan) or permit repricing of
previously granted awards.
In 2006, the committee decided that all executive
officers — with the exception of the chief executive
officer of the Company and chief operating officer of the Bank,
whose equity grants are governed by their employment
contracts — would be awarded a target value of equity
based upon 50% of the performance incentive compensation which
would be delivered in the form of performance-accelerated
restricted stock. The committee also decided that the 2006
incentive compensation to the chief executive officer of the
Company and chief operating officer of the Bank would be awarded
in the same manner: 50% cash and 50% performance-accelerated
restricted stock. These grants cliff-vest in five years;
however, vesting can be accelerated to three years if we achieve
specific performance conditions related to return on assets and
earnings per share. The performance conditions associated with
each grant and the amount of each grant were reviewed and
selected by the committee prior to the grant date. If the
performance targets are not met, no acceleration occurs. The
amount of equity awards made to the named executives as well as
the expected value of those awards are shown in the Grants of
Plan-Based Awards Table and related discussion found on
pages 27. Dividends are paid on the unvested restricted
stock awards. In the event of a change in control, retirement,
death or disability, the restrictions automatically terminate,
and the shares fully vest. If employment terminates for any
other reason, all unvested shares are forfeited.
We place great emphasis on variable performance-based
compensation. The chart below shows the breakdown between fixed
pay and variable performance-based pay for fiscal 2006:
None of our named executive officers have any arrangements that
provide for payment of severance payments except as may be
provided in their employment or transitional employment
agreements discussed below, see Employment Agreements
found on page 30 and Transitional Employment
Agreements found on page 32. We do offer a severance
program in which all eligible employees participate that does
not discriminate in favor of the senior officers, including the
named executive officers.
When reviewing compensation matters and developing compensation
packages for executive officers, the committee takes into
consideration that the Company and certain of its subsidiaries
have entered into employment agreements with
Messrs. Giancola and Fritz and transitional employment
agreements with each of the other named executive officers and
certain other officers. For a discussion of these agreements,
see Employment Agreements found on page 30 and
Transitional Employment Agreements found on page 32.
Under our employment agreements and our transitional employment
agreements with the other named executive officers, the
executive officers are entitled to receive certain payments upon
a
change-in-control.
Our stock plan provides that upon a change in control (as
defined in the plan) all unvested stock options and restricted
stock awards shall immediately become vested. For a discussion
of post-employment termination payments, see Potential
Payments Upon Termination or
Change-in-Control
found on page 33.
The committee also considers that we have implemented a
supplemental executive retirement plan, the SERP, for the
purpose of providing retirement benefits to certain executive
officers of the Company and its subsidiaries. The annual
retirement benefit available under the SERP is calculated to
range from 20% to 35% of final salary (as defined in the SERP
agreement) at normal retirement age of 65 and is payable over
15 years. For a further discussion of the SERPs, see
Supplemental Executive Retirement Plan found on
page 32. The amounts contributed to the plan for the
benefit of the named executive officers for 2006 are set out in
column (h) of the Summary Compensation Table found
on page 26.
We offer a 401(k) salary reduction plan to almost all of our
employees under which participants may elect to make tax
deferred contributions. We contribute 1% more than the
employee’s contribution up to a maximum of 5% (e.g., if the
employee contributes 3% of his salary, we contribute an amount
equal to 4% of the employee’s salary). The amounts
contributed to the plan for the benefit of the named executive
officers for 2006 are set out in column (i) of the
Summary Compensation Table found on page 26.
Executive officers participate in other employee benefit plans
generally available to all employees on the same terms as
similarly situated employees. In addition, certain executive
officers receive certain other additional perquisites that are
described in the proxy statement in column (i) in the
Summary Compensation Table found on page 26. The
committee requested that Midwest disclose all perquisites
provided to the executives shown in the table even if the
perquisites fall below the disclosure thresholds under SEC rules.
On July 1, 2006, we completed the acquisition of Royal
American Corporation. In conjunction with that acquisition, the
compensation committee and the board of directors unanimously
approved the following:
Set forth below is a discussion of other policies that impact
our compensation decisions.
We believe that internal equity is an important factor to be
considered in establishing compensation for the officers. We
have not established a policy regarding the ratio of total
compensation of the chief executive officer to that of the other
officers, but we do review compensation levels to ensure that
appropriate equity exists. We intend to continue to review
internal compensation equity and may adopt a formal policy in
the future if we deem such a policy to be appropriate.
Midwest generally seeks to maximize the deductibility for tax
purposes of all elements of compensation. Section 162(m) of
the Internal Revenue Code generally disallows a tax deduction to
public corporations for non-qualifying compensation in excess of
$1.0 million. We review compensation plans in light of
applicable tax provisions, including Section 162(m) and
Section 409A of the Code, and may revise compensation plans
from time to time to maximize deductibility. However, we may
approve compensation that does not qualify for deductibility
when we deem it to be in the best interests of Midwest.
The committee will continue to evaluate the impact of
Section 162(m) and Section 409A and to consider
compensation policies and programs appropriate for an
organization of the Company’s size and history in an effort
to address the potential impact. The committee may determine
that it is appropriate to continue to compensate an executive
above the 162(m) limit for various reasons, including in
circumstances of outstanding corporate or executive achievement.
It is the board of directors’ policy that the compensation
committee will, to the extent permitted by governing law, have
the sole and absolute authority to make retroactive adjustments
to any cash or equity based incentive compensation paid to
executive officers and certain other officers where the payment
was predicated upon the achievement of certain financial results
that were subsequently the subject of a restatement. Where
applicable, the
Company will seek to recover any amount determined to have been
inappropriately received by the individual executive.
Midwest has adopted a policy on stock option grants and
restricted stock awards that includes the following provisions
relating to the timing of the award:
Summary
Compensation Table
The following table discloses information concerning the
compensation of the named executive officers during the year
ending December 31, 2006.
Grants of
Plan-Based Awards
The following table presents information relating to non-stock
grants of incentive plan awards, stock based incentive plan
awards and awards of options, restricted stock and similar
instruments under plans that are performance based which were
granted in 2006. The table also shows the equity based
compensation awards granted in 2006 that are not performance
based where the payout or future value is tied to the
Company’s stock price and not to other performance
criteria. We did not grant any stock options to the named
executive officers during 2006.
Outstanding
Equity Awards At Fiscal Year-End
The following table summarizes for each named executive officer
the information regarding outstanding stock and option awards at
December 31, 2006.
The following table summarizes for each named executive officer
the number of shares acquired and amounts received upon exercise
of options and vesting of restricted stock for the year ended
December 31, 2006.
The following table sets forth for each named executive officer
the specified years of credited service and the estimated
present value of accumulated benefits under our supplemental
executive retirement plan. The benefits information regarding
the supplemental executive retirement plans can be found under
the heading Supplemental Executive Retirement Plan on
page 32.
The following table summarizes for the named executive officers
the full amount of non-tax qualified deferred compensation that
we are obligated to pay to each named executive officer,
including the full amount of earnings for 2006.
Employment Agreement with James J.
Giancola. On September 28, 2004, the Company
and the Bank and entered into an employment agreement with James
J. Giancola. The employment agreement is effective through
December 31, 2009 unless otherwise terminated pursuant to
the terms of the agreement. Thereafter, the employment agreement
will automatically renew for one year periods. Mr. Giancola
will serves as chief executive officer and president of the
Company and chief executive officer of the Bank.
Under the terms of this agreement, Mr. Giancola receives a
base salary ($560,000 for 2006) which will be reviewed
annually. Any salary adjustment (whether increased or decreased)
shall be based on: (i) Mr. Giancola’s performance
since his last review; (ii) the performance and
profitability of the Company; and (iii) the Company’s
salary policy effective at the time of any such salary review
and adjustment. Mr. Giancola is also eligible to receive
performance-based annual cash incentive compensation (no greater
than 70% of his base salary)
and/or stock
awards as determined by the board.
Upon Mr. Giancola’s resignation, he shall be entitled
to receive any base salary which has been earned through the
effective date of such resignation. Mr. Giancola shall not
be entitled to receive any other compensation or benefits under
any Company benefit plans or the agreement. Mr. Giancola
will have the right to purchase health insurance at his own
expense through age 65.
During the period of Mr. Giancola’s employment, the
Company shall pay up to $60,000 for him to join the club of his
choice and will reimburse him for dues to such club not to
exceed $500 per month.
If Mr. Giancola’s employment is terminated due to his
death or disability, for cause (as defined in the agreement),
voluntarily by Mr. Giancola or through the expiration of
the employment agreement, the Company and the Bank will have no
further obligations to him.
If Mr. Giancola’s employment is terminated by the
Company without cause, he shall be entitled to receive severance
pay of up to 100% of his then base salary based upon the
following severance vesting schedule, with such payment being
due within thirty days of his termination. Mr. Giancola is
in his third year of service.
In addition, upon such termination, until Mr. Giancola
reaches age 65 or his earlier death before age 65, the
Company shall at Mr. Giancola’s expense continue on
his behalf and on behalf of his spouse and dependents medical,
dental, and hospitalization benefits provided (x) to
Mr. Giancola at any time during the
90-day
period prior to his termination or (y) to other similarly
situated executives who continue in the employ of the Company.
Our obligation with respect to the foregoing benefits shall be
limited to the extent that Mr. Giancola obtains any such
benefits pursuant to a subsequent employer’s benefit plans,
in which case we may reduce the coverage of any benefits it is
required to provide Mr. Giancola as long as the aggregate
coverages and benefits of the combined benefit plans are no less
favorable to Mr. Giancola than the coverages and benefits
required to be provided under the agreement.
Upon a
change-in-control
(generally the acquisition of 50% or more of the voting power of
the Company, a significant change in the composition of our
board, a merger where we are not the surviving entity or a sale
of most of our assets), all of Mr. Giancola’s
outstanding stock options and other incentive awards from the
Company shall become fully exercisable, all restrictions on
Mr. Giancola’s outstanding awards of restricted stock
shall lapse and we shall pay Mr. Giancola a cash lump sum
payment equal to 299% of his base amount as defined in
section 280G(b)(3) of the Internal Revenue Code of 1986, as
amended. If this payment would cause the Company to contravene
any law, regulation or policy applicable to the Company, such
payment shall be made to the extent permitted by law,
regulation, or policy, and the remainder of such payment shall
be made from time to time at the earliest time permitted by law,
regulation, or policy.
Under the terms of the agreement, Mr. Giancola has agreed
that for a two year period following the termination of his
employment, he will not recruit or hire or attempt to recruit or
hire employees of the Company or the Bank. He has also agreed
that for this period, he will not, directly or indirectly:
solicit the banking business of any current customers of the
Company or the Bank; acquire, charter, operate or enter into any
franchise or other management agreement with any financial
institution; serve as an officer, director, employee, agent or
consultant to any financial institution; establish or operate a
branch or other office of a financial institution within the
city limits of or having its main office or a branch within
fifty miles of the main office of the Bank or any of its
branches.
Employment Agreement with J. J.
Fritz. Pursuant to the Agreement and Plan of
Merger, by and between the Company and Royal American
Corporation, the Company succeeded to Royal’s employment
agreement with Mr. Fritz upon the completion of our
acquisition of Royal American. The employment agreement provides
for Mr. Fritz’s employment as the president and chief
operating officer of the Bank and as an executive vice president
of the Company. The agreement is for an initial term ending
November 1, 2010, subject to earlier termination on three
years’ notice by either party. At the end of the term,
Mr. Fritz has a one-time option to either
(a) terminate his employment and receive a lump sum payment
equal to his base salary for the last year of his employment,
plus employer-paid health insurance coverage for himself and his
wife through age 65 (or such later date as necessary for
Medicare eligibility), or (b) continue his employment on an
at-will basis unless and until a new employment agreement is
negotiated.
The employment agreement provides for an annual base salary of
at least $300,000. In addition, Mr. Fritz is entitled to
incentive compensation based on structure and performance
measures determined by the Company’s compensation committee
and board of directors, provided that the maximum incentive
compensation for which he is eligible is equal to 70% of his
base salary.
If the Company terminates Mr. Fritz’s employment prior
to November 1, 2010, other than for due cause (as defined
in the agreement), Mr. Fritz will be entitled to continue
to receive the compensation and benefits described above for a
period of three years, so long as he continues to satisfactorily
work and perform his duties. Other rights and benefits that
Mr. Fritz may have under any benefit plans or programs at
termination will be determined in accordance with the terms and
conditions of the applicable plans and programs.
If Mr. Fritz is terminated for due cause, or if he resigns
without giving the required notice, the Company will have no
obligation to make any payments to Mr. Fritz except for
salary earned through the date of termination, and any other
rights and benefits as determined in accordance with the terms
and conditions of the applicable plans and programs.
In the event of Mr. Fritz’s death or disability, his
employment will terminate as of the date the death or disability
occurs, but Mr. Fritz, or his estate or named beneficiary
in the event of his death, will be entitled to continue to
receive his base salary for a period of 90 days, along with
employer-paid health insurance coverage for himself
and/or his
wife through age 65 (or later as necessary for Medicare
eligibility). Other rights and benefits that Mr. Fritz may
have under any benefit plans or programs at termination will be
determined in accordance with the terms and conditions of the
applicable plans and programs.
If, following a
change-in-control
(generally the acquisition of 25% or more of our common stock by
any person over an 18 month period, a merger where our
stockholders do not control the surviving entity or the sale of
substantially all of our assets) Mr. Fritz is terminated
other than for due cause, death or disability, or he voluntarily
terminates for good reason (as defined in the employment
agreement), he will be entitled to receive (a) a monthly
payment equal to 1/12th of his average total annual
compensation for the last 3 years of full time employment,
payable for a period of 35 months commencing in the month
his employment is terminated, and (b) employer-paid health
insurance coverage for himself and his wife, through age 65
(or such later age as necessary for Medicare eligibility).
The employment agreement includes covenants limiting
Mr. Fritz’s ability to compete with the Company (or
its successor) following his termination, which are also
consistent with the limitations in the original employment
agreement with Royal.
The Company and certain subsidiaries of the Company have entered
into separate transitional employment agreements with certain of
the named executive officers (Messrs. Kadolph, Bernstein,
and Caravello) and certain other officers of the Company’s
subsidiaries. The agreements are designed to mitigate the impact
of
change-in-control
transactions on the performance of key officers and executives.
In the event of a
“change-in-control”
(generally, the acquisition of 50% or more of the voting power
or the sale of more than 40% of the assets of the Company or the
relevant subsidiary), the agreements require the Company, the
relevant subsidiary or any successor, as the case may be, to
continue the employment of the affected officers for either 12
or 24 months in their respective positions and at their
respective salaries (including the payment of directors’
fees, if any) with the right to participate in new or continuing
incentive, benefit and other plans.
In the event the employment of an officer is terminated by
(1) the officer for any reason during the first year
following the
change-in-control
(subject to the requirement that certain officers must wait
90 days following the change of control to exercise such
right of termination), (2) by an acquiror for any reason
other than death, disability or cause, or (3) due to
constructive discharge (e.g., a reduction in salary or benefits,
a material diminution in title, duties or responsibilities, or a
significant change in hours worked or location), the acquiror is
obligated to continue the affected officer’s salary
(including the payment of directors’ fees, if any) for 12
or 24 months after the termination of employment and the
affected officer is prohibited from competing with the Company
for 6 months or 24 months, respectively.
The Company has implemented a supplemental executive retirement
plan, the SERP, for the purpose of providing certain retirement
benefits to those executive and other corporate officers of the
Company and its subsidiaries approved by the board of directors.
The annual retirement benefit available under the SERP is
calculated to range from 20% to 35% of final salary (as defined
in the SERP agreement) at normal retirement age of 65 and is
payable over 15 years. To qualify, each participant must
continue to remain employed with the Company for at least five
years following the adoption of the plan. Benefits are payable
in various forms in the event of normal retirement, early
retirement, death, disability, and separation from service,
subject to certain conditions defined in the plan. The SERP also
provides for the payment of certain death benefits to the extent
such amounts exceed a participant’s accrued benefit under
the SERP at the time of death.
All of the Named Executive Officers participate in the SERP. In
addition, 32 other officers also participate in the SERP. For
information relating to the amounts we contributed to the SERPs
in 2006 for the named executive officers, see column (h) in
the Summary Compensation Table found on page 26.
Potential
Payments Upon Termination or
Change-in-Control
The tables below in this section reflect the amount of
compensation to each of our named executive officers in the
event of termination of such executive’s employment. The
amount of compensation payable to each named executive officer
upon voluntary termination, early retirement, involuntary
not-for-cause
termination, termination for cause, termination following a
change of control and in the event of disability or death of the
executive is shown below. The amounts shown assume that such
termination was effective as of December 31, 2006 and thus
includes amounts earned through such time and are estimates of
the amounts which would be paid out to the executives upon their
termination. The actual amounts to be paid out can only be
determined at the time of such executive’s separation from
the Company.
Regardless of the manner in which a named executive
officer’s employment terminates, he is entitled to receive
amounts earned during his term of employment. Such amounts
include:
If Mr. Giancola’s employment is terminated by the
Company without cause, he will receive severance pay of up to
100% of his base salary based upon the following vesting
schedule: 60% after 2 years service, 70% after 3 years
service, 80% after 4 years service and 100% after
5 years service. Mr. Giancola is in his third year of
service.
If Mr. Fritz’s employment is terminated by the Company
without cause prior to November 1, 2010, he will receive
his base salary and incentive compensation for a period of three
years.
In the event of retirement of a named executive, in addition to
earned non-equity incentive compensation, 401(k) contributions
and unused vacation, he will receive the following amounts.
In the event of the death or disability of a named executive, in
addition to earned non-equity incentive compensation, 401(k)
contributions and unused vacation, he will receive the following
amounts.
In the event of Mr. Fritz’s death, his estate will
continue to receive his base salary for 90 days along with
employer paid health insurance coverage for his spouse through
age 65.
Payments
Made Upon a Change of Control
We have entered into employment agreements or transitional
employment agreements with each named executive officer. If an
executive’s employment is terminated following a
change-in-control
or the executive terminates his employment in certain
circumstances defined in the agreement, in addition to earned
non-equity incentive compensation, 401(k) contributions and
unused vacation, he will receive the following amounts
The following table shows the potential payments upon
termination or change of control of Midwest for James J.
Giancola as if such events had occurred on December 31,
2006.
The following table shows the potential payments upon
termination or change of control of Midwest for Daniel R.
Kadolph as if such events had occurred on December 31, 2006.
The following table shows the potential payments upon
termination or change of control of Midwest for
J. J. Fritz as if such events had occurred on
December 31, 2006.
The following table shows the potential payments upon
termination or change of control of Midwest for Sheldon
Bernstein as if such events had occurred on December 31,
2006.
The following table shows the potential payments upon
termination or change of control of Midwest for Thomas A.
Caravello as if such events had occurred on December 31,
2006.
Some of our executive officers and directors are, and have been
during the preceding year, clients of the Bank and some our
executive officers and directors are direct or indirect owners
of 10% or more of the equity of entities which are, or have been
in the past, clients of the Bank. As such clients, they have had
transactions in the ordinary course of business of the Bank,
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. At
December 31, 2006, the Company’s directors, executive
officers, and their business interests had loans outstanding,
whose individual aggregate indebtedness to the Bank exceeded
$120,000, totaling approximately $32.5 million in the
aggregate, which represented 11.3% of total stockholders’
equity as of that date. All such loans were approved in
conformity with the guidelines established by bank regulatory
agencies. In addition, such loans were made in the ordinary
course of business, were made on substantially the same terms,
including interest rate and collateral, as those prevailing at
the time for comparable loans with persons not related to us,
and, in the opinion of management, did not involve more than the
normal risk of collectibility or present other unfavorable
features.
During 2006, the Company paid $4,000 for subscription to an
economic service provided by Dr. Robert J. Genetski.
The Company made payments totaling $79,000 in 2006 to DiPaolo
Company, a company controlled by Angelo DiPaolo, a director
of the Company, for construction services (representing less
than 1% of the consolidated revenues of the DiPaolo Company).
The Company also made payments totaling $32,000 for the purchase
of bank-owned vehicles from (and services on bank owned vehicles
performed by) Rizza Cadillac Buick Hummer and Joe Rizza Ford,
all companies controlled by Joseph Rizza, a director of the
Company (which represented less than 1% of the consolidated
gross revenues of these entities). The Company also made
payments totaling $254,00 to a security systems company managed
by the
son-in-law
of LeRoy Rosasco, a director who retired from the Board in May
of 2005, who owns 6.1% of the Company’s common stock.
On December 29, 2005, the Bank entered into a lease for a
branch office in Franklin Park, Illinois with Crossings
Commercial, LLC, an entity controlled by Angelo DiPaolo. The
lease is for fifteen years and provides for annual rental
payments of $41,106 (on a triple net basis). However, if another
tenant enters into a lease at this facility for a square foot
rental less than what the Bank is paying, the annual rental for
the Bank will be reduced to this amount.
The information contained in this report shall not be deemed
to be “soliciting material” or to be “filed”
with the SEC, nor shall such information be incorporated by
reference into any future filing under the Securities Act of
1933, as amended, or the Securities Exchange Act of 1934, as
amended, except to the extent that the Company specifically
incorporates such information by reference in such filing.
The audit committee consists of four non-employee, independent
directors. The current members of the committee are
Messrs. Hartley (Chairman), Forrester, Genetski, and Wolin,
each of whom has been determined to meet independence and
financial experience requirements under applicable SEC and
NASDAQ rules. During the year ended December 31, 2006, the
committee held ten meetings. The committee met with the
independent accountant and the internal auditor, with and
without management present. In addition, the committee met alone
in executive session.
The board of directors has determined that Mr. Hartley
qualifies as an “audit committee financial expert”
within the meaning of SEC and NASDAQ rules. All members of the
committee satisfy the NASDAQ financial literacy standards.
The committee has adopted a pre-approval policy for permitted
audit, audit-related, tax and other services to be provided to
the Company by its independent registered public accounting
firm. The committee has also adopted procedures for the
anonymous confidential submission of complaints, and concerns of
employees, regarding accounting, internal controls, or auditing
matters.
The committee has adopted a written charter that outlines the
responsibilities and processes of the committee. The charter of
the audit committee is available on our website,
www.midwestbanc.com — Investor
Relations — Corporate Governance. In accordance with
its charter, the committee has the responsibility for monitoring
the integrity of the financial reporting system. In this
capacity the committee is responsible for the oversight of
financial controls, the Company’s accounting, regulatory
and audit activities and annually reviews the qualifications of
our independent registered public accounting firm.
The committee is directly responsible for the appointment,
oversight, compensation and retention of PricewaterhouseCoopers
LLP, PwC, the independent registered public accounting firm for
the Company who was engaged in April 2005, by the audit
committee as Midwest’s independent registered public
accounting firm following the resignation of Midwest’s
former independent accountant, as described under the caption
Change of Independent Registered Public Accounting Firm
below at page 42.
Management is responsible for establishing and maintaining the
Company’s internal control over financial reporting and for
preparing financial statements in accordance with accounting
principles generally accepted in the United States of America.
The responsibility for the quality and integrity of our
financial statements and the completeness and accuracy of its
internal controls and financial reporting process rests with
management. PwC is responsible for performing an independent
audit of the Company’s annual financial statements and
expressing an opinion on (i) the conformity of the
Company’s financial statements with accounting principles
generally accepted in the United States of America,
(ii) management’s assessment of the effectiveness of
internal control over financial reporting, and (iii) the
effectiveness of internal control over financial reporting. It
is the Audit Committee’s responsibility to monitor and
oversee these processes.
In fulfilling its obligations under its written charter, the
audit committee has:
1. Reviewed and discussed Midwest’s audited financial
statements for the fiscal year ended December 31, 2006 with
management and PwC;
2. Reviewed and discussed with PwC the matters required to
be discussed by Statement on Auditing Standards No. 61, as
amended (Communication with Audit Committees);
3. Received from PwC the written disclosures and the letter
required by Independence Standards board Standard No. 1
(Independence Discussions with Audit Committees). The Audit
Committee was advised by PwC that no member of the firm has any
financial interest, either direct or indirect, in Midwest during
the time that it has served as Midwest’s independent
accountant. Consistent with Independence Standards board
Standard No. 1 and the SEC’s “Revision of the
Commission’s Auditor Independence Requirements,” which
became effective February 5, 2001, the Audit Committee
considered whether these relationships and arrangements are
compatible with maintaining PwC’s independence;
4. Discussed the reasonableness of significant financial
reporting issues in connection with the preparation of
Midwest’s financial statements, including the quality of
the accounting principles used;
5. Reviewed Midwest’s quarterly reports on SEC
Form 10-Q
prior to filing; and
6. Reviewed both the independent accountant and internal
auditor audit plans for the year.
The audit committee received periodic updates provided by
management and PwC at regularly scheduled committee meetings.
Based on the foregoing reviews and discussions, the audit
committee, exercising its business judgment, concluded that PwC
is independent and recommended to the board of directors that
Midwest’s 2006 audited consolidated financial statements be
included in Midwest’s Annual Report on
Form 10-K
for the year ended December 31, 2006. We have selected PwC
as the Company’s independent registered public accounting
firm for fiscal 2007, and the board of directors approved
submitting the selection of PwC for ratification by the
stockholders at the 2007 annual meeting.
This report is submitted by the Audit Committee.
Gerald F. Hartley (Chairman)
Barry I. Forrester
Robert Genetski
Leon Wolin
Midwest has selected PricewaterhouseCoopers LLP, PwC, as
Midwest’s independent registered public accounting firm for
the year ending December 31, 2007. The decision to retain
PwC was made by the audit committee and the decision to place
the ratification of PwC on the annual meeting agenda was
approved by the board of directors.
PwC has served as our independent registered public accounting
firm since April 19, 2005. We expect that a representative
from PwC will be present at the meeting. This representative
will be offered an opportunity to make a statement if desired
and will be available to respond to appropriate questions.
Even if the selection is ratified, the audit committee, in its
discretion, may direct the appointment of a different
independent registered public accounting firm at any time during
the year if the committee believes such a change would be in the
best interests of the Company and its stockholders.
Although approval by the stockholders is not required, the
appointment of PwC is being submitted for ratification at the
meeting as a matter of good corporate governance and with the
objective of soliciting stockholders’ opinions, which the
audit committee will consider in future deliberations.
Adoption of this proposal will require the affirmative vote of
the holders of a majority of the shares of common stock entitled
to vote and present in person or by proxy. The directors intend
to vote for this proposal.
YOUR
BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS
PROPOSAL.
INDEPENDENT
ACCOUNTANT
Under its charter, the audit committee is solely responsible for
reviewing the qualifications of and selecting our independent
accountant.
The committee engaged the firm of PricewaterhouseCoopers LLP,
PwC, to serve as Midwest’s independent registered public
accounting firm as of April 19, 2005. McGladrey &
Pullen, LLP, McGladrey, our independent registered public
accounting firm for the fiscal years ended December 31 2003
and 2004, resigned effective March 11, 2005.
During the two years ended December 31, 2004 and during the
interim period through the date of PwC’s engagement on
April 19, 2005, we did not consult with PwC regarding
either (i) the application of accounting principles to a
specified transaction, either completed or proposed, or the type
of audit opinion that might be rendered on our financial
statements and neither a written report was provided to the
Company nor oral advice was provided that PwC concluded was an
important factor considered by the Company in reaching a
decision as to the accounting, auditing or financial reporting
issue; or (ii) any matter that was either the subject of a
disagreement, as that term is defined in
paragraph 304(a)1(v) of
Regulation S-K
and the related instructions to Item 304 of
Regulation S-K
or a reportable event required to be reported under
paragraph 304(a)1(v) of
Regulation S-K.
McGladrey orally advised us just prior to the close of business
on March 11, 2005, that it had resigned as our independent
accountant. We received written confirmation of McGladrey’s
resignation on March 14, 2005.
The reports of McGladrey on the Company’s financial
statements for the years ended December 31, 2004 and 2003
did not contain an adverse opinion or disclaimer of opinion, nor
were such reports qualified or modified as to uncertainty, audit
scope or accounting principles.
During the fiscal years ended December 31, 2004 and 2003,
and through March 11, 2005, except as noted below, there
were no disagreements with McGladrey on matters of accounting
principles or practices, financial statement disclosure, or
audit scope or procedure, which disagreement, if not resolved to
the satisfaction of McGladrey, would have caused it to make
reference to the subject matter of the disagreement in its
reports on the financial statements for such fiscal years. There
were no “reportable events” as that term is described
in Item 304(a)(1)(v) of
Regulation S-K
for the fiscal years ended December 31, 2004 and 2003 and
through March 11, 2005.
We received an unqualified opinion from McGladrey on our
financial statements for the years ended December 31, 2004
and 2003. McGladrey expressed an unqualified opinion on
management’s assessment of the effectiveness of our
internal control over financial reporting and an adverse opinion
on the effectiveness of our internal control over financial
reporting as of December 31, 2004.
McGladrey advised the audit committee that during the conduct of
the 2004 audit, McGladrey encountered a disagreement with
management over whether the impairment of FNMA Series F
perpetual preferred securities we held by as
available-for-sale
securities at December 31, 2004, was other than temporary.
At December 31, 2004, shares of FNMA Series F
perpetual preferred securities had been trading at amounts less
than their amortized cost for a period of sixteen consecutive
months. Management believed that the decline in the value of
these securities was due, in large part, to the reset of the
dividend rate in the spring of 2004, which was a low point in
the interest rate cycle, followed by a subsequent increase in
interest rates. Management noted that the next dividend reset
date was scheduled for March 2006. We expected this investment
to recover its original cost as interest rates increased and had
both the intent and ability to hold the investment until such
recovery occurred.
At the urging of McGladrey, we adopted a more conservative
position and classified the impairment of these securities as
other-than-temporarily
impaired. The Company recognized a non-cash pre-tax charge of
$10.1 million in its fourth quarter statement of income for
the
other-than-temporary
impairment of its floating rate FNMA Series F perpetual
preferred securities. This loss previously had been reflected in
comprehensive income. This action resulted in the
reclassification, after tax, of $5.6 million, or
$0.31 per diluted share, from comprehensive income to the
statement of income for the fourth quarter and reduced net
income to $2.4 million, or $0.13 per diluted share,
for
the year ended December 31, 2004. The reclassification had
minimal impact on our stockholders’ equity at
December 31, 2004.
It is the practice of the Company not to retain securities that
are classified as
other-than-temporarily
impaired. Accordingly, these securities were liquidated in
February 2005 at a $1.3 million gain in excess of the
year-end carrying value. We continue to hold other floating rate
perpetual preferred securities of FNMA, which management has
concluded are not
other-than-temporarily
impaired because they are appreciated in value.
The audit committee discussed with McGladrey its disagreement
with management as to whether shares of our
available-for-sale
floating rate perpetual preferred equity securities were
“other-than-temporarily”
impaired, as defined in FASB Statement No. 115,
“Accounting for Certain Investments in Debt and Equity
Securities” and Securities and Exchange Commission Staff
Accounting Bulletin No. 59, “Accounting for
Noncurrent Marketable Equity Securities.”
The Company authorized McGladrey to respond fully to the
inquiries of PwC, the Company’s successor accountant,
concerning the subject matter of the disagreement described
herein.
The following is a summary of the fees and
out-of-pocket
expenses billed to the Company by PwC for professional services
rendered for the years ended December 31, 2006 and 2005.
The audit committee considered and discussed with PwC the
provision of non-audit services to the Company and the
compatibility of providing such services with maintaining its
independence as the Company’s accountant.
Audit Fees. Audit fees are for the
audit of our annual consolidated financial statements for the
fiscal years ended December 31, 2006 and 2005, the audit of
our internal control over financial reporting, reviews of the
interim consolidated financial statements included in the
Company’s Quarterly Reports on
Form 10-Q
and services that are normally provided in connection with
statutory and regulatory filings or engagements, as well as such
services as comfort letters, consents and assistance with and
review of documents filed with the SEC.
Audit-Related Fees. Audit-related fees
consist of fees billed for assurance and similar services that
are reasonably related to the performance of the audit or review
of the consolidated financial statements, are not reported under
“Audit Fees”, and include accounting consultations and
attest services that are not required by statute or regulation.
Tax Fees. PwC did not perform any
professional services for Midwest that would be considered
tax-related.
All Other Fees. All other fees includes
a subscription fee to PwC’s research tool.
The audit committee has adopted a policy for pre-approval of
audit and permitted non-audit services by our independent
registered public accounting firm. The audit committee will
consider annually and, if appropriate, approve the provisions of
audit services by our independent registered public accounting
firm and consider and, if appropriate, pre-approve the
provisions of certain defined audit and non-audit services.
For services that have not been pre-approved, the committee has
delegated to the Chairman of the committee the authority to
pre-approve audit-related and non-audit services, not prohibited
by law, to be performed by our independent registered public
accounting firm and associated fees up to a maximum for any one
non-audit service of $100,000, provided that the Chairman shall
report any decisions to pre-approve such audit-related or
non-audit related services and fees to the full committee at its
next regular meeting.
Any proposed engagement that does not fit with the definition of
a pre-approved service and cannot be approved by the Chairman of
the audit committee, may be presented to the committee for
consideration at its next
regular meeting or, if earlier consideration is required, to the
committee at a special meeting. The audit committee will
regularly review summary reports detailing all services being
provided to us by our independent registered public accounting
firm.
ADDITIONAL
INFORMATION
To be considered for inclusion in our proxy and form of proxy
relating to the 2008 annual meeting of stockholders, a
stockholder proposal must be received prior to December 9,
2007, by the president of the Company at the address set forth
on the first page of this Proxy Statement. Any such proposal
will be subject to
Rule 14a-8
under the Securities Exchange Act of 1934.
Under our by-laws, the only business which may be conducted at
an annual meeting of stockholders is that business brought
before the meeting by the board of directors or by any
stockholder who is entitled to vote and who has complied with
the notice procedures set forth in our by-laws. For business to
be brought before an annual meeting by a stockholder, the
stockholder must be a stockholder of record and must have given
timely notice in writing to our President. For the 2008 annual
meeting, a stockholder must give written notice to the President
of the Company by January 8, 2008; provided, however, that,
in the event less than 130 days notice or prior public
disclosure that the date of the 2008 annual meeting will be held
on a date other than May 7, 2008, notice by the stockholder
to be timely must be so delivered not later than ten days after
the earlier of the date of the notice of the meeting or public
disclosure of the date of the meeting.
A stockholder’s notice to our President must set forth as
to each matter the stockholder proposes to bring before the
annual meeting:
Our by-laws provide that nominations for election to the board
of directors may be made only by the board of directors or by
stockholder entitled to vote for the election of directors who
complies with the notice procedures set forth in the by-laws
described above.
In addition to the information described above, the
stockholder’s notice must set forth, as to each person the
stockholder proposes to nominate for election or re-election as
a director, his or her name and qualifications, including all
information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors,
or is otherwise required, in each case pursuant to
Regulation 14A under the Exchange Act (including such
person’s written consent to being named in the proxy
statement as a nominee and to serving as a director if elected).
These requirements apply to any matter that a stockholder wishes
to raise at an annual meeting, including those matters raised
other than pursuant to the procedures of
Rule 14a-8
under the Exchange Act. We are not required to include in our
proxy statement or the proxy relating to any annual meeting any
stockholder proposal which does not meet all of the requirements
for inclusion established by the Securities and Exchange
Commission in effect at the time such proposal is received.
The corporate governance and nominating committee will consider
nominees recommended by stockholders. A stockholder who wishes
to recommend a nominee for the committee’s consideration
may do so by submitting the name of the nominee in writing to
the Chairman of the corporate governance and nominating
committee,
Midwest Banc Holdings, Inc., 501 West North Avenue,
Melrose Park, IL 60160 prior to January 1st of each
year, for consideration at the next annual meeting. In
submitting nominees, persons should be aware of and apply the
guiding principles for director qualifications discussed above
under Director Nomination Procedures at page 8.
Persons submitting nominations may be asked to provide
additional background information about a prospective candidate
as determined by the committee.
The board of directors knows of no business which will be
presented for consideration at the annual meeting other than as
stated in the Notice of annual meeting of Stockholders. If,
however, other matters are properly brought before the meeting,
it is the intention of the persons named in the accompanying
proxy to vote the shares represented thereby on such matters, to
the extent legally permissible, in accordance with their best
judgment.
Whether or not you intend to be present at the meeting, you are
urged to return your proxy card promptly. If you are then
present at the meeting and wish to vote your shares in person,
your original proxy may be revoked by voting at the meeting.
By Order of the board of directors
Daniel R. Kadolph
Secretary
Melrose Park, Illinois
April 2, 2007
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN
PERSON. WHETHER YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE
REQUESTED TO SIGN, DATE AND PROMPTLY RETURN THE ACCOMPANYING
PROXY CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
Annual
Meeting Proxy Card
6PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. 6
+
Change of Address — Please print new address below.
Please sign exactly as name appears hereon. When shares are held by joint tenants, both should
sign. When signing as attorney, executor, administrator, trustee or guardian, please give full
title as such. If a corporation, please sign in corporation’s name by president or other authorized
officer. If a partnership, please sign in partnership name by authorized person.
<STOCK#>
00PK8C
6 PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. 6
Proxy — Midwest Banc Holdings, Inc.
501 West North Avenue
Melrose Park, Illinois 60160 The undersigned stockholder(s) of Midwest Banc Holdings, Inc., a Delaware corporation (the
“Company”), does (do) hereby constitute and appoint Robert Figarelli, Bruno P. Costa and Joseph
Parrillo, and each of them, the true and lawful attorney of the undersigned with full power of
substitution, to appear and act as the proxy or proxies of the undersigned at the Annual Meeting of
Stockholders of the Company to be held at Dominican University Priory Campus, 7200 W. Division
Street, River Forest, Illinois 60305, on May 2, 2007, at 10:00 a.m. central time or at any
adjournment thereof, and to vote all the shares of the Company standing in the name of the
undersigned, or which the undersigned may be entitled to vote, as fully as the undersigned might or
could do if personally present, as set forth below.
The shares represented by this proxy will be voted as specified and, in the discretion of the
proxies, on all other matters as may properly come before the Annual Meeting or any postponement or
adjournment thereof. If this proxy is properly executed but no direction is made, it will be voted
FOR all of the nominees for director and FOR the ratification of the appointment of
PricewaterhouseCoopers LLP as the Company’s independent accountant for the fiscal year ending
December 31, 2007.
YOUR VOTE IS IMPORTANT! PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
(Continued and to be signed on reverse side.)
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
C123456789
| |||||||
