As filed with the Securities and Exchange Commission on August 20, 2004.
May 5, 2006.
Registration No. 333-______
================================================================================
333-130897
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 2
to
to
FORM S-4
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
UNDER THE SECURITIES ACT OF 1933
WINTRUST FINANCIAL CORPORATION
(Exact
(Exact Name of Registrant as Specified in its Charter)
| Illinois | 6022 | 36-3873352 | ||
| (State or Other Jurisdiction of | (Primary Standard Industrial | (I.R.S. Employer | ||
| Incorporation or Organization) | Classification Code Number) | Identification Number) |
727 NORTH BANK LANE
LAKE FOREST, ILLINOISNorth Bank Lane
Lake Forest, Illinois 60045-1951
(847) 615-4096
(Address,
(Address, including zip code, and telephone number, including area code, ofRegistrant'sRegistrant’s principal executive offices)
DAVID
Lake Forest, Illinois 60045-1951
(847) 615-4096
(Address, including zip code, and telephone number, including area code, of
David A. DYKSTRA
SENIOR EXECUTIVE VICE PRESIDENT AND CHIEF OPERATING OFFICER
Dykstra
Senior Executive Vice President and Chief Operating Officer
727NORTH BANK LANE
LAKE FOREST, ILLINOISNorth Bank Lane
Lake Forest, Illinois 60045-1951
(847) 615-4096
(Name,
(Name, address, including zip code, and telephone number, including area code, of agent for service)
COPIES TO:
JOHN R. OBIALA, ESQ. BENJAMIN G. LOMBARD, ESQ.
JENNIFER DURHAM KING, ESQ. REINHART BOERNER VAN DEUREN S.C.
VEDDER, PRICE, KAUFMAN & KAMMHOLZ, P.C. 1000 NORTH WATER STREET, SUITE 2100
222 NORTH LASALLE STREET, SUITE 2600 MILWAUKEE, WISCONSIN 53202
CHICAGO, ILLINOIS 60601 (414) 298-1000
(312) 609-7500
______________________________
Senior Executive Vice President and Chief Operating Officer
727
Lake Forest, Illinois 60045-1951
(847) 615-4096
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
| Lisa J. Reategui Sidley Austin LLP One South Dearborn Street Chicago, Illinois 60603 (312) 853-7000 | Edwin S. del Hierro Barack Ferrazzano Kirschbaum Perlman & Nagelberg LLP 333 West Wacker Drive, Suite 2700 Chicago, Illinois 60606 (312) 984-3100 |
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after the Registration Statement becomes effective.
______________________________effective and after the conditions to the completion of the proposed transaction described in the proxy statement/prospectus have been satisfied or waived.
If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. [ ]o
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]o
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]
______________________________
CALCULATION OF REGISTRATION FEE
______________________________
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTIONo
The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance withSection 8(a) OF
THE SECURITIES ACT OF of the Securities Act of 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTIONas amended, or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), MAY DETERMINE.
may determine.
The information in this proxy statement/prospectus is not complete and may be changed. We may not offer or sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary proxy statement/prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any statejurisdiction where the offer or sale is not permitted.
PRELIMINARY COPY — SUBJECT TO COMPLETION, DATED AUGUST 20, 2004
[TOWN BANKSHARES LOGO] WINTRUST FINANCIAL CORPORATION
________________
MAY 4, 2006
 | Wintrust Financial Corporation |
PROXY STATEMENT OF TOWN BANKSHARES, LTD.
________________
HINSBROOK BANCSHARES, INC.
PROSPECTUS OF WINTRUST FINANCIAL CORPORATION
________________
MERGER PROPOSED - YOUR VOTE IS VERY IMPORTANT
Merger Proposal – Your Vote Is Important
DEAR TOWN BANKSHARES, LTD.HINSBROOK SHAREHOLDERS:
You are cordially invited to attend a special meeting of shareholders of Town Bankshares, Ltd.Hinsbrook Bancshares, Inc. which will be held on __________ __, 2004,May 30, 2006, at _____
p.m.4:00 p.m, local time, at _____________________.the main office of Hinsbrook Bank & Trust located at 6262 South Route 83, Willowbrook, Illinois 60527
At the meeting, you will be asked to approve a merger agreement between Town BanksharesHinsbrook and Wintrust Financial Corporation that provides for Wintrust'sWintrust’s acquisition of Town Bankshares. IfHinsbrook through the merger is completed,of Hinsbrook with and into Wintrust. You may elect to convert each share of Town
BanksharesHinsbrook common stock which you own will be converted into cash, shares of Wintrust’s common stock, or a combination of cash and shares of Wintrust common stock.All elections for cash consideration, stock consideration or the rightcombination of cash and stock consideration are subject to proration as described in this proxy statement/prospectus.Subject to possible proration, if you elect to receive all cash consideration, you will receive $41.59 per share in cash. Subject to possible proration, if you elect to receive the merger consideration in all shares of Wintrust'sWintrust common stock, plus cashyou will receive between 0.680 and 0.846 of a share of Wintrust common stock, depending on the average high and low sale price of Wintrust common stock on the Nasdaq National Market during the 10 trading day period ending on the fourth trading day prior to completion of the merger. Assuming that the price of Wintrust common stock on the Nasdaq National Market is between $49.14 and $61.14 per share, the value of the consideration paid in the amount of $58.10.
The exact number of shares of Wintrust common stock that you will receive will
depend uponin the average pricemerger for each share of WintrustHinsbrook common stock determinedwill be approximately $41.59 at the time the exchange ratio is calculated. The formula for determining the appropriate exchange ratio for each share of closing. If the average price determined at closing of Wintrust'sHinsbrook common stock is at least $41.34 per shareset forth in detail in this proxy statement/prospectus. If you elect to receive merger consideration consisting of cash and no more than $55.34 per share, you would
receive a number of shares of Wintrust common stock, equal to $71.00 divided byyou will receive cash consideration for one-half of your Hinsbrook shares and stock consideration for the average price and $58.10 in cash for each shareother half of Town Bankshares common
stock whichyour Hinsbrook shares.
The exchange ratio will not be determined until after the date of the special meeting. Therefore, at the time of the special meeting, you own andwill not know the precise value of the total per sharestock merger consideration you may receive on the date the merger is completed.We estimate that you would receive would be $129.10. If the average price of the Wintrust common stock is less than or equalmay issue up to $41.34, you will receive 1.717 shares of
common stock and $58.10 in cash for each share of Town Bankshares common stock
you own, and if the average price of the Wintrust common stock is greater than
$55.34, you will receive 1.2831,500,000 shares of Wintrust common stock and $58.10 in
cash for each share of Town Bankshares common stock you own. Subject to certain
conditions, Wintrust may terminateHinsbrook shareholders as contemplated by the merger agreement if the average price of
its common stock is greater than $58.34, and Town Bankshares may terminate the
merger agreement if the average price of Wintrust's common stock is less than
$38.34.
Wintrust'sagreement.
Wintrust’s common stock is traded on the Nasdaq National Market under the symbol "WTFC."“WTFC.” The closing price of Wintrust common stock on ______________
__, 2004,May 3, 2006, was $______.$51.05.
The merger cannot be completed unless the holders of at least a majority of the voting power of the outstanding shares of Town BanksharesHinsbrook common stock vote in favor of the merger agreement. YOUR BOARD OF DIRECTORS HAS
UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND RECOMMENDS THAT YOU APPROVE IT.Your board of directors has unanimously approved the merger agreement and recommends that you vote “FOR” the approval of the merger agreement at the special meeting. Your board of directors also unanimously recommends that you vote “FOR” the approval to adjourn the special meeting to permit further solicitation in the event that an insufficient number of shares are present in person or by proxy to approve the merger agreement and the transactions it contemplates and “FOR” the authorization of the proxies named in the proxy card to vote on such other matters as may properly come before the special meeting or any adjournment or postponement thereof.
Additional information regarding the transaction, the merger agreement, Town BanksharesHinsbrook and Wintrust is set forth in the attached proxy statement/prospectus. This document also serves as the prospectus for up to 583,0001,500,000 shares of Wintrust common stock that may be issued by Wintrust in connection with the merger.We urge you to read this entire document carefully, including "Risk Factors"“Risk Factors” beginning on page 15.
17.
Sincerely,
William J. Hickmann
Chairman
Robert K. Buhrke
President and Chief Executive Officer
Hinsbrook Bancshares, Inc.
President and Chief Executive Officer
Hinsbrook Bancshares, Inc.
Neither the Securities and Exchange Commission nor any state securities regulatory body has approved or disapproved of the Boardsecurities to be issued under this proxy statement/prospectus or determined if this proxy statement/prospectus is accurate or adequate. Any representation to the contrary is a criminal offense.
The securities to be issued in connection with the merger are not savings or deposit accounts or other obligations of Directors
Town Bankshares, Ltd.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
REGULATORY BODY HAS APPROVED OR DISAPPROVED OF THE SECURITIESany bank or nonbank subsidiary of any of the parties, and they are not insured by the Federal Deposit Insurance Corporation, the Bank Insurance Fund or any other governmental agency.
This proxy statement/prospectus is dated ___, 2006, and is first being mailed to Hinsbrook shareholders on or about ___, 2006.
REFERENCES TO BE ISSUED UNDER
THIS PROXY STATEMENT/PROSPECTUS OR DETERMINED IF THIS PROXY STATEMENT/PROSPECTUS
IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
THE SECURITIES TO BE ISSUED IN CONNECTION WITH THE MERGER ARE NOT SAVINGS OR
DEPOSIT ACCOUNTS OR OTHER OBLIGATIONS OF ANY BANK OR NONBANK SUBSIDIARY OF ANY
OF THE PARTIES, AND THEY ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE BANK INSURANCE FUND OR ANY OTHER GOVERNMENTAL AGENCY.
THIS PROXY STATEMENT/PROSPECTUS IS DATED ___________ __, 2004, AND IS FIRST
BEING MAILED TO TOWN BANKSHARES SHAREHOLDERS ON OR ABOUT ___________ __, 2004.
AVAILABLEADDITIONAL INFORMATION
As permitted by the rules of the Securities and Exchange Commission, this documentproxy statement/prospectus incorporates certain important business and financial information about Wintrust from other documents that are not included in or delivered with this document.proxy statement/prospectus. These documents are available to you without charge upon your written or oral request. Your requests forYou can obtain documents incorporated by reference in this proxy statement/prospectus through the Securities and Exchange Commission’s website atwww.sec.gov or by requesting them in writing or by telephone at the following address and telephone number:
Wintrust Financial Corporation
727 North Bank Lane
Lake Forest, Illinois 60045-1951
Attention: David A. Dykstra
Senior Executive Vice President and Chief Operating Officer
(847) 615-4096
727 North Bank Lane
Lake Forest, Illinois 60045-1951
Attention: David A. Dykstra
Senior Executive Vice President and Chief Operating Officer
(847) 615-4096
In order to ensure timely delivery of these documents, you should be directedmake your request by May 12, 2006 to receive them before the following:
WINTRUST FINANCIAL CORPORATION
727 NORTH BANK LANE
LAKE FOREST, ILLINOIS 60045
ATTENTION: DAVID A. DYKSTRA
CHIEF OPERATING OFFICER
(847) 615-4096
IN ORDER TO ENSURE TIMELY DELIVERY OF THESE DOCUMENTS, YOU SHOULD MAKE
YOUR REQUESTspecial meeting.
See “Where You Can Find More Information” beginning on page 61.
VOTING BY ___________ __, 2004 TO RECEIVE THEM BEFORE THE SPECIAL MEETING.
YOU CAN ALSO OBTAIN DOCUMENTS INCORPORATED BY REFERENCE IN THIS
DOCUMENT THROUGH THE SEC'S WEBSITE AT WWW.SEC.GOV. SEE "WHERE YOU CAN FIND MORE
INFORMATION" BEGINNING ON PAGE 54.
TOWN BANKSHARES, LTD.
400 Genesse Street
Delafield, Wisconsin 53018
___________________________________
MAIL
Hinsbrook shareholders of record may submit their proxies by mail, by signing and dating each proxy card you receive, indicating your voting preference on each proposal and returning each proxy card in the prepaid envelope which accompanied that proxy card.
HINSBROOK BANCSHARES, INC.
6262 South Route 83
Willowbrook, Illinois 60527
Willowbrook, Illinois 60527
Notice of Special Meeting of Shareholders
to be held
___________ __, 2004
___________________________________
DATE:
TIME:
PLACE:
To Town Bankshares, Ltd. Shareholders:
We are pleased to notify you of and invite you to
Date: | May 30, 2006 | |
Time: | 4:00 p.m., local time | |
| Place: Main office of Hinsbrook Bank & Trust located at 6262 South Route 83, Willowbrook, Illinois 60527 | ||
TO HINSBROOK BANCSHARES, INC. SHAREHOLDERS:
NOTICE IS HEREBY GIVEN that Hinsbrook Bancshares, Inc. will hold a special meeting of shareholders. Atshareholders on May 30, 2006 at 4:00 p.m., local time, at the main office of Hinsbrook Bank & Trust located at 6262 South Route 83, Willowbrook, Illinois 60527. The purpose of the meeting you will be askedis to consider and vote on the following matters:
o Approval of the Agreement and Plan of Merger, dated as of June
14, 2004, that provides for Wintrust Financial Corporation to
acquire Town Bankshares, Ltd., as described in the attached
proxy statement/prospectus.
o To transact any other business that properly comes before the
special meeting, or any adjournments or postponements of the
special meeting.
| • | A proposal to approve the Agreement and Plan of Merger, dated as of December 5, 2005 by and between Wintrust Financial Corporation and Hinsbrook Bancshares, Inc. A copy of the merger agreement is included asAnnex Ato the proxy statement/prospectus accompanying this notice. | ||
| • | The approval to adjourn the special meeting to permit further solicitation in the event that an insufficient number of shares are present in person or by proxy to approve the merger agreement and the transactions it contemplates. | ||
| • | To transact any other business that properly comes before the special meeting, or any adjournments or postponements thereof. |
Holders of record of Town BanksharesHinsbrook common stock at the close of business on ___________ __, 2004 mayApril 24, 2006 are entitled to receive this notice and to vote at the special meeting.meeting and any adjournments or postponements thereof. Approval of the merger agreement requires the affirmative vote at the special meeting of holders of at least a majority of the voting power of the outstanding shares of Town
BanksharesHinsbrook common stock.
THE BOARD OF DIRECTORS OF TOWN BANKSHARES UNANIMOUSLY RECOMMENDS THAT YOU VOTE
"FOR" APPROVAL OF THE MERGER AGREEMENT.
Town Banksharesstock entitled to vote.
The board of directors of Hinsbrook unanimously recommends that you vote “FOR” approval of the merger agreement. Your board of directors also unanimously recommends that you vote “FOR” approval to adjourn the special meeting to permit further solicitation in the event that an insufficient number of shares are present in person or by proxy to approve the merger agreement and the transactions it contemplates and “FOR” the authorization of the proxies named in the proxy card to vote on such other matters as may properly come before the special meeting or any adjournment or postponement thereof.
Hinsbrook shareholders may dissent from the merger and, upon complying with the requirements of WisconsinIllinois law, receive cash equal to the fair value of their shares instead of the merger consideration. See "Special“Information about the special meeting of Town
Bankshares shareholders--Dissenters' rights"Hinsbrook shareholders—Dissenters’ rights” in the accompanying proxy statement/prospectus for additional information.
Your vote is important. To ensure that your shares are voted at the special meeting, please promptly complete, sign and return the proxy form in the enclosed prepaid envelope whether or not you plan to attend the meeting in person. Shareholders who attend the special meeting may revoke their proxies and vote in person, if they so desire. Delafield, Wisconsin
___________ __, 2004
To make a timely election of merger consideration, please complete, sign and return the election form in the enclosed prepaid envelope. To be considered timely, election forms must be received by 5:00 p.m., Chicago time, on the fifth business day before the effective time of the merger.
Willowbrook, Illinois
May 4, 2006
May 4, 2006
By Order of the Board of Directors
William J. Hickmann
Chairman of the Board of Directors
Robert K. Buhrke
President and Chief Executive Officer
President and Chief Executive Officer
TABLE OF CONTENTS
PAGE
QUESTIONS AND ANSWERS ABOUT THE MERGER........................................1
SUMMARY .....................................................................4
Information about Wintrust and Town Bankshares.......................4
The merger and the merger agreement..................................4
Reasons for the merger...............................................4
Board recommendation to Town Bankshares' shareholders................5
Fairness opinion of Town Bankshares' Financial Advisor...............6
Town Bankshares special meeting......................................6
Record date for the special meeting; revocability of proxies.........6
Vote required........................................................6
Voting by participants in the ESOP...................................6
What Town Bankshares shareholders will receive.......................6
Cash redemption of the Town Bankshares common stock in the ESOP......7
Regulatory approvals.................................................7
New Wintrust shares will be eligible for trading on Nasdaq...........8
Conditions to the merger.............................................8
Termination..........................................................8
Termination fee......................................................8
Interests of officers and directors in the merger
that are different from yours.....................................9
Voting agreement.....................................................9
Accounting treatment of the merger...................................9
Certain differences in shareholder rights............................9
Dissenters' rights...................................................9
Tax consequences of the merger.......................................9
Historical Comparative Per Share Data; Pro Forma Per Share Data.....10
Selected Financial Data of Wintrust.................................12
RISK FACTORS.................................................................15
There is fluctuation in the trading market of Wintrust's common
stock and the market price of the common stock you
will receive in the merger is uncertain....................15
Town Bankshares' shareholders will not control Wintrust's
future operations..........................................15
De novo operations and branch openings impact Wintrust's
profitability..............................................15
Wintrust's allowance for loan losses may prove to be
insufficient to absorb losses that may occur in its
loan portfolio.............................................16
Wintrust's premium finance business involves unique operational
risks and could expose it to significant losses............16
Wintrust may be adversely affected by interest rate changes.........17
Wintrust's shareholder rights plan and provisions in its
articles of incorporation and by-laws may delay or
prevent an acquisition of Wintrust by a third party........17
CAUTION ABOUT FORWARD-LOOKING STATEMENTS.....................................17
SPECIAL MEETING OF TOWN BANKSHARES SHAREHOLDERS..............................19
Date, place, time and purpose.......................................19
Record date, voting rights, quorum and required vote................19
Voting and revocability of proxies..................................19
Voting rights of participants in the ESOP...........................19
Dissenters' rights..................................................21
i
TABLE OF CONTENTS
(continued)
PAGE
DESCRIPTION OF THE MERGER....................................................23
General ...........................................................23
The Companies.......................................................23
Background of the merger............................................24
Wintrust's reasons for the merger...................................27
Town Bankshares' reasons for the merger and
recommendation of the board of directors.........................27
Fairness Opinion of Town Bankshares' Financial Advisor..............29
Accounting treatment................................................32
Tax consequences of the merger......................................32
Regulatory approvals................................................34
Interests of certain persons in the merger..........................34
Voting agreement....................................................36
Restrictions on resale of Wintrust common stock.....................36
DESCRIPTION OF THE MERGER AGREEMENT..........................................37
Time of completion..................................................37
Consideration to be received in the merger..........................37
Exchange of certificates............................................38
Conduct of business pending the merger and certain covenants........39
Representations and warranties......................................40
Conditions to completion of the merger..............................41
Minimum net worth and loan loss reserve requirements
closing condition................................................43
Termination.........................................................43
Termination fee.....................................................43
Management of Wintrust and Town Bank after the merger...............44
Employee benefit matters............................................44
Termination of ESOP and redemption of ESOP shares...................44
Expenses............................................................45
Nasdaq stock listing................................................45
COMPARISON OF SHAREHOLDER RIGHTS.............................................45
Authorized capital stock............................................46
Payment of dividends................................................46
Advance notice requirements for presentation of
business and nominations of directors at
annual meetings of shareholders..................................46
Quorum ...........................................................47
Election, classification and size of Board of Directors.............47
Removal of directors................................................47
Filling vacancies on the Board of Directors.........................47
Amendment of Articles of Incorporation and By-laws..................47
Mergers, acquisitions and other transactions........................48
Business combinations with interested shareholders..................48
Limitations on directors' liability.................................49
Indemnification.....................................................50
Action by shareholders without a meeting............................51
Special meetings of shareholders....................................51
Preemptive rights...................................................52
Dissenters' rights..................................................52
Certain anti-takeover effects of Wintrust's articles
and by-laws and Illinois law.....................................52
Rights plan.........................................................53
ii
TABLE OF CONTENTS
(continued)
PAGE
LEGAL MATTERS................................................................53
EXPERTS ....................................................................54
SHAREHOLDER PROPOSALS........................................................54
WHERE YOU CAN FIND MORE INFORMATION..........................................54
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE............................54
ANNEX A: AGREEMENT AND PLAN OF MERGER......................................A-1
ANNEX B: WISCONSIN DISSENTERS' RIGHTS LAW..................................B-1
ANNEX C: VOTING AGREEMENT..................................................C-1
ANNEX D: FAIRNESS OPINION OF TOWN BANKSHARES' FINANCIAL ADVISOR............D-1
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| Annex A: Agreement and Plan of Merger | A-1 | |||||||
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| Annex C: Voting Agreement | C-1 | |||||||
| Annex D: Fairness Opinion of Hinsbrook’s Financial Advisor | D-1 | |||||||
| Consent of Ernst & Young LLP | ||||||||
| Consent of Capital Market Securities, Inc. | ||||||||
| Form of Proxy Card | ||||||||
| Form of Election Card | ||||||||
iv
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: WHAT AM I BEING ASKED TO VOTE ON? WHAT IS THE PROPOSED TRANSACTION?
A: You are being asked to vote on the approval of a merger agreement that
provides for Wintrust's acquisition of Town Bankshares. Wintrust will
own all of Town Bankshares' outstanding common stock after
| Q: | What am I being asked to vote on? What is the proposed transaction? | |
| A: | You are being asked to vote on the approval of a merger agreement that provides for Wintrust’s acquisition of Hinsbrook through the merger of Hinsbrook with and into Wintrust. If you elect to receive shares of Wintrust common stock in exchange for half or all of your Hinsbrook shares or, if as a result of the proration procedures described in this proxy statement/prospectus, your cash election is prorated to include shares of Wintrust common stock, you will become a shareholder of Wintrust as a result of the merger. | |
| Q: | What will Hinsbrook shareholders be entitled to receive in the merger? | |
| A: | If the merger is completed, the shares of Hinsbrook common stock that you own immediately before the completion of the merger will be converted into the right to receive cash, shares of Wintrust common stock, or a combination of 50% cash and 50% shares of Wintrust common stock (in each case subject to possible proration). For each of your shares of Hinsbrook common stock, you will receive the “per share merger consideration” to be calculated as set forth in the merger agreement. All elections for cash consideration, stock consideration or the combination of cash and stock consideration are subject to proration as described in this proxy statement/prospectus. For example, if you elect to receive all cash consideration, depending on the elections made by other Hinsbrook shareholders, it is possible that you will receive a portion of the merger consideration in cash and a portion in stock. The same might be true if you elect to receive all stock consideration. For a description of the possible proration of elections, see “Description of the merger agreement – Consideration to be received in the merger – Proration of merger consideration.” | |
| You may elect to receive the “per share merger consideration” in cash, shares of Wintrust’s common stock, or a combination of cash and shares of Wintrust common. Subject to possible proration, if you elect to receive all cash consideration, you will receive $41.59 per share in cash. Subject to possible proration, if you elect to receive the merger consideration in all shares of Wintrust common stock, you will receive between 0.680 and 0.846 of a share of Wintrust common stock for each share of Hinsbrook common stock, depending on the average high and low sale price of Wintrust common stock on the Nasdaq National Market during the 10 trading day period ending on the fourth trading day prior to completion of the merger. If you elect to receive merger consideration consisting of cash and shares of Wintrust common stock, you will receive merger consideration consisting of cash consideration of $41.59 for one-half of your Hinsbrook shares and the above-described stock consideration for the other half of your Hinsbrook shares. | ||
| In this proxy statement/prospectus, we refer to the fraction of a share of Wintrust common stock to be issued for each share of Hinsbrook common stock subject to the stock election or the combination election as the “exchange ratio” and we refer to the average high and low sale price of Wintrust common stock on the Nasdaq National Market during the 10 trading day period ending on the fourth trading day prior to completion of the merger (which we refer to as the “reference period”) as the “reference price.” The merger agreement provides that: |
| • | The exchange ratio will adjust upward or downward to ensure that the fraction of a share of Wintrust common stock you receive for each share of Hinsbrook common stock that you own will be equal to $41.59 divided by the reference price so long as the reference price is between $49.14 and $61.14. However, the market value of the fraction of a share of Wintrust common stock that you receive in the merger may be greater or less than $41.59, as the trading price of Wintrust common stock on the date the merger is completed may be greater or less than the reference price used to determine the exchange ratio. | ||
| • | If the reference price is less than $49.14, the exchange ratio will no longer adjust upward, and you will receive 0.846 of a share of Wintrust common stock for each share of Hinsbrook common stock that you own. This means that the value of the fraction of a share of Wintrust common stock you will receive will be below $41.59 per share to the extent the market price of Wintrust common stock is below $49.14 when the merger is completed. |
1
If the reference price is greater than $61.14, the exchange ratio will no longer adjust downward, and you will becomereceive 0.680 of a shareholdershare of Wintrust.
Q: WHAT WILL I BE ENTITLED TO RECEIVE IN THE MERGER?
A: If the merger is completed,Wintrust common stock for each share of Town BanksharesHinsbrook common stock that you own immediately beforeown. This means that the completionvalue of the merger will be
converted into the right to receive sharesfraction of Wintrust common stock,
plus cash in the amounta share of $58.10. For each of your shares of Town
BanksharesWintrust common stock you will receive a number of shares of
Wintrust common stock equalwill be above $41.59 per share to the "per share stock consideration" to
be calculated as set forth inextent the merger agreement. The per share stock
consideration will be determined by dividing $71.00 by the average of
the high and low sale prices of Wintrust common stock during the 10-day
trading period ending two trading days before the merger closing date,
if the average price is at least $41.34 per share but not more than
$55.34 per share. If the average price of the Wintrust common stock
during this period is less than or equal to $41.34, you will receive
1.717 shares of Wintrust common stock and $58.10 in cash for each share
of Town Bankshares common stock you own, and if the average price of
the Wintrust common stock is greater than $55.34 per share, you will
receive 1.283 shares of Wintrust common stock and $58.10 in cash for
each share of Town Bankshares common stock you own. However, subject to
certain conditions, Wintrust may terminate the merger agreement if the
averagemarket price of Wintrust common stock is greater than $58.34 and Town
Bankshares may terminate the merger agreement if the average price of
Wintrust common stock is less than $38.34.
Town Bank's Employee Stock Ownership Plan, or the ESOP, will not
receive shares of Wintrust common stock and cash in the merger in
exchange for the shares of Town Bankshares common stock held in the
ESOP. Instead, the merger agreement provides that prior to the
effective time of the merger, Town Bankshares will terminate the ESOP
and redeem each share of Town Bankshares common stock in the ESOP for
cash in the amount of $58.10, plus the cash value of the per share
stock consideration received by Town Bankshares' shareholders in the
merger. However, the termination of the ESOP and redemption of the
shares of Town Bankshares common stock in the ESOP will not be
effective unlessabove $61.14 when the merger is subsequently completed.
Q: WHY DO TOWN BANKSHARES AND WINTRUST WANT TO MERGE?
A: Town Bankshares believes that the proposed merger will provide Town
Bankshares shareholders with substantial benefits, and Wintrust
believes that the merger will further its strategic growth plans.
Wintrust does not currently have any banking offices in Wisconsin, and
believes the acquisition of Town Bankshares provides an attractive
opportunity to expand into southeastern Wisconsin. As a larger company,
Wintrust can provide the capital and resources that Town Bank needs to
compete more effectively and to offer a broader array of products and
services to better serve its banking customers. To review the reasons
for the merger in more detail, see "Description of the
merger--Wintrust's reasons for the merger" on page 27 and "Description
of the merger--Town Bankshares' reasons for the merger and
recommendation of the board of directors" on page 27.
Q: WHAT DOES THE TOWN BANKSHARES BOARD OF DIRECTORS RECOMMEND?
A: Town Bankshares' board of directors unanimously recommends that you
vote "FOR" adoption of the merger agreement. Town Bankshares' board of
directors has determined that the merger agreement and the merger are
in the best interests of Town Bankshares and its shareholders. To
review the background and reasons for the merger in greater detail, see
pages 24 to 29.
1
Q: WHAT VOTE IS REQUIRED TO ADOPT THE MERGER AGREEMENT?
A: Holders of at least a majority of the voting power of the outstanding
shares of Town Bankshares common stock must vote in favor of the
merger. All of Town Bankshares' directors and executive officers have
agreed to vote their shares in favor of the merger at the special
meeting. These shareholders owned approximately 16.9% of Town
Bankshares' outstanding common stock on the record date. Wintrust
shareholders will not be voting on the merger agreement. See
"Description of the merger--Interests of certain persons in the merger"
on page 34 and "Description of the merger--Voting agreement" on page
36.
Q: WHAT DO I NEED TO DO NOW? HOW DO I VOTE?
A: After you have carefully read and considered the information contained
in this proxy statement/prospectus, please complete, sign, date and
mail your proxy form in the enclosed return envelope as soon as
possible. This will enable your shares to be represented at the special
meeting. You may also vote in person at the meeting. If you do not
return a properly executed proxy form and do not vote at the special
meeting, this will have the same effect as a vote against the approval
of the merger agreement. If you sign, date and send in your proxy form,
but you do not indicate how you want to vote, your proxy will be voted
in favor of approval of the merger agreement. You may change your vote
or revoke your proxy prior to the special meeting by filing with the
secretary of Town Bankshares a duly executed revocation of proxy,
submitting a new proxy form with a later date or voting in person at
the special meeting.
Q: DO PARTICIPANTS IN THE ESOP HAVE ANY VOTING RIGHTS WITH RESPECT TO THE
MERGER?
A: Yes. If you are a participant in the ESOP and shares of Town Bankshares
common stock have been allocated to your account under the ESOP as of
_________, the record date for the special meeting, you will receive
with this proxy statement/prospectus a "Direction to ESOP
Administrator" form. This form will direct the ESOP's trustees to vote
the shares allocated to your account in accordance with the
instructions that accompany the form. You should return this form to
the ESOP's trustees as indicated in the instructions that accompany the
form. Shares of Town Bankshares common stock which are not yet
allocated to participant accounts under the ESOP will be voted as
directed by the ESOP's administrator.
Q: WHAT IF I OPPOSE THE MERGER? DO I HAVE DISSENTER'S RIGHTS?
A: Town Bankshares shareholders who do not vote in favor of the merger
agreement and otherwise comply with all of the procedures of Sections
180.1301 through 180.1331 of the Wisconsin Business Corporation Law
will be entitled to receive payment in cash of the estimated fair value
of their shares of Town Bankshares common stock as ultimately
determined under the statutory process. A copy of these provisions is
attached as Annex B to this proxy statement/prospectus. This value
could be more but could also be less than the merger consideration.
Q: WHAT ARE THE TAX CONSEQUENCES OF THE MERGER TO ME?
A: It is a condition to the closing of the merger that Town Bankshares'
legal counsel render an opinion to Town Bankshares that the merger will
constitute a reorganization under Section 368(a) of the Internal
Revenue Code. If the merger constitutes a reorganization, the
conversion of your shares of Town Bankshares common stock into Wintrust
common stock may permit you to defer a portion of your "realized gain"
in the exchange. For United States federal income tax purposes, your
"realized gain" will be equal to the aggregate consideration (both
stock and cash) you receive in the reorganization less your basis in
your Town Bankshares' stock exchanged. The portion of your "realized
gain" which must be "recognized" will be equal to the lesser of the
cash received (excluding cash received in lieu of fractional shares) or
the realized gain as a result of the merger (adjusted for any gain
recognized for cash received in lieu of fractional shares). In general,
the tax basis in your shares of Town Bankshares common stock will carry
over to the shares of Wintrust common stock you receive in the merger.
The tax basis of the Wintrust common stock you receive in the merger
will equal the tax basis in your Town Bankshares common stock exchanged
for the merger consideration, decreased by the amount of any cash
received (other than cash received in lieu of fractional shares of Town
Bankshares common stock) and increased by the amount of any cash
received which was treated as a dividend and the amount of any gain
recognized in the exchange.
| Subject to certain conditions, Hinsbrook may terminate the merger agreement if the reference price of Wintrust’s common stock during the reference period is less than $47.14. | ||
| Q: | What will Hinsbrook option holders be entitled to receive in the merger? | |
| A: | If the merger is completed, each outstanding and unexercised option to purchase Hinsbrook common stock will automatically be converted into an option to purchase shares of Wintrust common stock, exercisable on generally the same terms and conditions that applied before the merger. The number of shares of Wintrust common stock subject to the substitute Wintrust option will equal the number of shares of Hinsbrook common stock subject to the option immediately prior to the merger, multiplied by the “option exchange ratio,” rounded down to the nearest whole share. The per share exercise price of each substitute Wintrust option will equal the exercise price of the option immediately prior to the merger divided by the option exchange ratio, rounded down to the nearest whole cent. The “option exchange ratio” is equal to 41.59 divided by the reference price. | |
| Q: | How do I make an election for the merger consideration? | |
| A: | You have been provided with an election form to select whether you desire to receive merger consideration of cash, Wintrust common stock or a combination of cash and Wintrust common stock. The election form is separate from the proxy form and should be returned to Illinois Stock Transfer Company in the enclosed prepaid return envelope. Depending on the results of all shareholders’ elections, the amount of stock or cash you receive may be prorated under certain circumstances. The completed election form must be received by Wintrust’s exchange agent, Illinois Stock Transfer Company, on or before the fifth business day before the effective time of the merger. Do not send in your stock certificates with your stock election form. | |
| Q: | What if I fail to make an election specifying how I desire to receive the merger consideration? | |
| A: | If you do not submit a properly completed election form by the fifth business day before the effective time of the merger, you will be deemed to have elected to receive the merger consideration in a combination of cash consideration for 50% of your Hinsbrook shares and Wintrust common stock consideration for the other 50% of your Hinsbrook shares, subject to proration. | |
| Q: | Will I get the form of consideration that I specify on my merger consideration election form? | |
| A: | There can be no assurances that you will receive the merger consideration in exactly the form you specify on your election form. The merger agreement provides that all elections for cash consideration, stock consideration or the combination of cash and stock consideration are subject to proration so that the actual number of shares of Hinsbrook common stock that may be converted into the right to receive cash consideration, in the aggregate, may not exceed 50% of Hinsbrook’s outstanding common stock and the number of shares that may be converted into the right to receive stock consideration (including any shares subject to the stock portions of a combination election), in the aggregate, may not exceed 50% of Hinsbrook’s outstanding common stock. As a result, if you elect to receive all cash consideration, depending on the elections made by other Hinsbrook shareholders, it is possible that you will receive a portion of the merger consideration in cash and a portion in stock. The same might be true if you elect to receive all stock consideration. For a description of the possible proration of elections, see “Description of the merger agreement – Consideration to be received in the merger – Proration of merger consideration.” |
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The gain recognized as a result of cash received in lieu of a
fractional share will be equal to the excess of such cash over the tax
basis attributable to the share or shares of Town Bankshares common
stock exchanged therefor.
The holding period of your Wintrust common stock received in the merger
will include the period during which you held Town Bankshares common
stock, provided that the Town Bankshares common stock surrendered was
held as a capital asset as of the time of the merger. You should
consult your tax adviser for the specific tax consequences of the
merger to you. The tax opinion of Town Bankshares' legal counsel will
be subject to a number of representations and assumptions summarized
under "Description of the merger--Tax consequences of the merger" on
page 32.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. Either at the time of closing or shortly after the merger is
completed, Wintrust's exchange agent will send you a letter of
transmittal with instructions informing you how to send in your stock
certificates to the exchange agent. You should use the letter of
transmittal to exchange your Town Bankshares stock certificates for new
certificates representing the shares of Wintrust common stock you will
own after the merger is complete. DO NOT SEND IN YOUR STOCK
CERTIFICATES WITH YOUR PROXY FORM.
Q: WHEN IS THE MERGER EXPECTED TO BE COMPLETED?
A: We will try to complete the merger as soon as possible. Before that
happens, the merger agreement must be approved and adopted by Town
Bankshares' shareholders and we must obtain the necessary regulatory
approvals. Assuming shareholders vote at least a majority of Town
Bankshares' outstanding shares of common stock in favor of the merger
agreement and we obtain the other necessary approvals, we expect to
complete the merger during the third quarter of 2004.
Q: IS COMPLETION OF THE MERGER SUBJECT TO ANY CONDITIONS BESIDES
SHAREHOLDER APPROVAL?
A: Yes. The transaction must receive the required regulatory approvals,
and there are other closing conditions that must be satisfied. For
example, as a condition to Wintrust's obligation to close, as of the
closing date, Town Bankshares must satisfy certain financial measures
set forth in the merger agreement.
Q: WHO CAN ANSWER MY OTHER QUESTIONS?
A: If you have more questions about the merger or how to submit your
proxy, or if you need additional copies of this proxy
statement/prospectus or the enclosed proxy form, you should contact Jay
C. Mack, Town Bankshares' President and Chief Executive Officer, at
(262) 646-6888.
| Q: | Why do Hinsbrook and Wintrust want to merge? | |
| A: | Hinsbrook believes that the proposed merger will provide Hinsbrook shareholders with substantial benefits, and Wintrust believes that the merger will further its strategic growth plans. As a larger company, Wintrust can provide the capital and resources that Hinsbrook Bank & Trust needs to compete more effectively and to offer a broader array of products and services to better serve its banking customers. To review the reasons for the merger in more detail, see “The merger—Wintrust’s reasons for the merger” on page 29 and “The merger—Hinsbrook’s reasons for the merger and recommendation of the board of directors” on page 28. | |
| Q: | What does the Hinsbrook board of directors recommend? | |
| A: | Hinsbrook’s board of directors unanimously recommends that you vote “FOR” approval of the merger agreement. Hinsbrook’s board of directors has determined that the merger agreement and the merger are in the best interests of Hinsbrook and its shareholders. To review the background and reasons for the merger in greater detail, see pages 26 to 29. | |
| Q: | What vote is required to approve the merger agreement? | |
| A: | Holders of at least a majority of the voting power of the outstanding shares of Hinsbrook common stock entitled to vote must vote in favor of the merger. Absentations and broker non-votes have the effect of votes against the approval of the merger agreement. On December 5, 2005, all of Hinsbrook’s directors and executive officers, including one executive officer who has since resigned, agreed to vote their shares in favor of the merger at the special meeting. These shareholders and their affiliates owned approximately 39.4% of Hinsbrook’s outstanding common stock on the record date. Wintrust’s shareholders will not be voting on the merger agreement. See “The merger—Interests of certain persons in the merger” on page 39 and “The merger—Voting agreement” on page 41. | |
| Q: | Why is my vote important? | |
| A: | Hinsbrook shareholders are being asked to approve the merger agreement and thereby approve the proposed merger. If you do not submit your proxy by mail or vote in person at the special meeting, it will be more difficult for Hinsbrook to obtain the necessary quorum to hold the special meeting. In addition, your failure to submit your proxy or attend the special meeting will have the same effect as a vote against the merger agreement and make it more difficult to obtain approval of the merger agreement. | |
| Q: | What do I need to do now? How do I vote? | |
| A: | You may vote at the special meeting if you own shares of Hinsbrook common stock of record at the close of business on April 24, 2006. After you have carefully read and considered the information contained in this proxy statement/prospectus, please complete, sign, date and mail your proxy form, which is separate from the election form, in the enclosed prepaid return envelope as soon as possible. This will enable your shares to be represented at the special meeting. You may also vote in person at the special meeting. If you do not return a properly executed proxy form and do not vote at the special meeting, this will have the same effect as a vote against the approval of the merger agreement. | |
| Q: | How will my proxy be voted? | |
| A: | If you complete, sign, date and mail your proxy form, your proxy will be voted in accordance with your instructions. If you sign, date and send in your proxy form, but you do not indicate how you want to vote, your proxy will be votedFOR approval of the merger agreement and the other proposals in the notice. | |
| Q: | Can I revoke my proxy and change my vote? | |
| A: | You may change your vote or revoke your proxy prior to the special meeting by filing with the secretary of Hinsbrook a duly executed revocation of proxy, submitting a new proxy form with a later date or voting in person at the special meeting. |
3
| Q: | What if I oppose the merger? Do I have dissenters’ rights? | |
| A: | Hinsbrook shareholders who do not vote in favor of approval of the merger agreement and otherwise comply with all of the procedures of Sections 11.65 and 11.70 of the Illinois Business Corporations Act (the IBCA), will be entitled to receive payment in cash of the fair value of their shares of Hinsbrook common stock as ultimately determined under the statutory process. A copy of these sections of the IBCA is attached asAnnex Bto this document. This value could be more than the merger consideration but could also be less. | |
| Q: | What are the tax consequences of the merger to me? | |
| In general, the conversion of your shares of Hinsbrook common stock into Wintrust common stock in the merger will be tax-free for United States federal income tax purposes. However, you will recognize gain (but not loss) in an amount limited to the amount of cash you receive in the merger. Additionally, you will recognize gain or loss on any cash that you receive instead of fractional shares of Wintrust’s common stock.You should consult with your tax adviser for the specific tax consequences of the merger to you.See “The merger – Certain federal income tax consequences of the merger” on page 37. | ||
| Q: | When and where is the special meeting? | |
| A: | The Hinsbrook special meeting will take place on May 30, 2006, at 4:00 p.m. local time, at the main office of Hinsbrook Bank & Trust located at 6262 South Route 83, Willowbrook, Illinois 60527. | |
| Q: | Should I send in my stock certificates now? | |
| A: | No. Either at the time of closing or shortly after the merger is completed, Wintrust’s exchange agent will send you a letter of transmittal with instructions informing you how to send in your stock certificates to the exchange agent. You should use the letter of transmittal to exchange your Hinsbrook stock certificates for new certificates representing the shares of Wintrust common stock you will own after the merger is complete.Do not send in your stock certificates with your proxy form or your stock election form. | |
| Q: | When is the merger expected to be completed? | |
| A: | We will try to complete the merger as soon as reasonably possible. Before that happens, the merger agreement must be approved by Hinsbrook’s shareholders and we must obtain the necessary regulatory approvals. Assuming shareholders vote at least a majority of Hinsbrook’s outstanding shares of common stock in favor of the merger agreement and we obtain the other necessary approvals, we expect to complete the merger in the second quarter of 2006. | |
| Q: | Is completion of the merger subject to any conditions besides shareholder approval? | |
| A: | Yes. The transaction must receive the required regulatory approvals, and there are other closing conditions that must be satisfied. For example, as a condition to Wintrust’s obligation to close, as of the closing date, Hinsbrook must satisfy certain financial measures set forth in the merger agreement. | |
| Q: | Are there risks I should consider in deciding to vote on approval of the merger agreement? | |
| A: | Yes, in evaluating the merger agreement, you should read this proxy statement/prospectus carefully, including the factors discussed in the section titled “Risk Factors” beginning on page 17. | |
| Q: | Who can answer my other questions? | |
| A: | If you have more questions about the merger or how to submit your proxy, or if you need additional copies of this proxy statement/prospectus or the enclosed proxy form, you should contact either Robert K. Buhrke, Hinsbrook’s President and Chief Executive Officer, at (630) 920-2700, or Illinois Stock Transfer Company, which is assisting Hinsbrook in the solicitation of proxies, at (312) 427-2951. |
4
SUMMARY
This summary highlights selected information in this proxy statement/prospectus and may not contain all of the information that is important to you. To understand the merger more fully, you should read this entire documentproxy statement/prospectus carefully, including the annexes and the documents referred to in this proxy statement/prospectus. A listcopy of the documentsmerger agreement is attached as Annex A to this proxy statement/prospectus and is incorporated by reference appearsherein. See “Where You Can Find More Information” beginning on page 54.
INFORMATION ABOUT WINTRUST AND TOWN BANKSHARES
WINTRUST FINANCIAL CORPORATION (See61.
Information about Wintrust and Hinsbrook(See page 23)
26)
Wintrust Financial Corporation
727 North Bank Lane
Lake Forest, Illinois 60045
(847) 615-4096
727 North Bank Lane
Lake Forest, Illinois 60045
(847) 615-4096
Wintrust Financial Corporation, an Illinois corporation, is a financial holding company headquartered in Lake Forest, Illinois. As of December 31, 2005, Wintrust operates tenoperated 13 community banks, all located in the greater Chicago and Milwaukee metropolitan area,areas, which provide community-oriented, personal and commercial banking services primarily to individuals and small to mid-size businesses through 4262 banking facilities asfacilities. Wintrust, through various of June 30, 2004. Wintrustits subsidiaries, also provides wealth management services, through itsincluding trust, company, investment adviserasset management and broker-dealer subsidiariesbrokerage services, to customers located primarily in the Midwest, as well as to customers of its banks. Wintrust also originates and purchases residential mortgage loans, many of which are sold into the secondary market. In addition, Wintrust is involved in specialty lending through a number of operating subsidiaries or divisions of certain of its banks. As of June 30,
2004,December 31, 2005, Wintrust had consolidated total assets of $5.33$8.17 billion, deposits of $4.32$6.73 billion and shareholders'stockholders’ equity of $374$628 million. Wintrust'sWintrust’s common stock trades on the Nasdaq National Market under the symbol "WTFC."
TOWN BANKSHARES, LTD. (See page 23)
400 Genesse Street
Delafield, Wisconsin 53018
(262) 646-6888
Town Bankshares, Ltd.“WTFC.”
Hinsbrook Bancshares, Inc.
6262 South Route 83
Willowbrook, Illinois 60527
(630) 920-2700
6262 South Route 83
Willowbrook, Illinois 60527
(630) 920-2700
Hinsbrook Bancshares, Inc., a Wisconsinan Illinois corporation, is a bank holding company headquartered in Delafield, Wisconsin.Willowbrook, Illinois. Its primary business is operating its bank subsidiary, TownHinsbrook Bank a Wisconsin& Trust, an Illinois state bank, with officesIllinois branch locations in DelafieldWillowbrook, Downers Grove, Darien, Glen Ellyn and Madison, Wisconsin. In addition to TownGeneva. Hinsbrook Bank Town Bankshares conducts
limited business activities through Town Investment Corp., a Nevada corporation.
We sometimes refer to Town Bank and Town Investment Corp. as the "subsidiaries."& Trust began operations in 1987. As of June 30, 2004, Town BanksharesDecember 31, 2005, Hinsbrook had consolidated total assets of approximately $238.0$500.0 million, deposits of $204.3$430.6 million and shareholders'shareholders’ equity of $17.8$41.4 million. Town BanksharesHinsbrook is not a public company and, accordingly, there is no established trading market for Town Bankshares'Hinsbrook’s common stock.
THE MERGER AND THE MERGER AGREEMENT (See
The merger and the merger agreement(See page 37)
Wintrust's42)
Wintrust’s acquisition of Town BanksharesHinsbrook is governed by a merger agreement. The merger agreement provides that, if all of the conditions set forth in the merger agreement are satisfied or waived, Town BanksharesHinsbrook will be merged with and into Wintrust and will cease to exist. After the consummation of the merger, TownHinsbrook Bank & Trust will become a wholly owned subsidiary of Wintrust. The merger agreement is included asAnnex Ato this proxy statement/prospectus and is incorporated by reference herein. We encourageurge you to read the merger agreement carefully and fully, as it is the legal document that governs the merger.
What Hinsbrook shareholders will receive(See page 42)
If the merger is completed, the shares of Hinsbrook common stock that you own immediately before the completion of the merger will be converted into the right to receive cash, shares of Wintrust common stock, or a combination of cash and shares of Wintrust common stock. For each of your shares of Hinsbrook common stock, you will receive the “per share merger consideration” to be calculated as set forth in the merger agreement. All elections for cash consideration, stock consideration or the combination of cash and stock consideration are subject
5
to proration as described in this proxy statement/prospectus. For example, if you elect to receive all cash consideration, depending on the elections made by other Hinsbrook shareholders, it is possible that you will receive a portion of the merger consideration in cash and a portion in stock. The same might be true if you elect to receive all stock consideration. For a description of the possible proration of elections, see “Description of the merger agreement – Consideration to be received in the merger – Proration of merger consideration.”
You may elect to receive the “per share merger consideration” in cash, shares of Wintrust’s common stock, or a combination of cash and shares of Wintrust common stock. Subject to possible proration, if you elect to receive all cash consideration, you will receive $41.59 per share in cash. Subject to possible proration, if you elect to receive the merger consideration in all shares of Wintrust common stock, you will receive between 0.680 and 0.846 of a share of Wintrust common stock for each share of Hinsbrook common stock, depending on the average high and low sale price of Wintrust common stock on the Nasdaq National Market during the 10 trading day period ending on the fourth trading day prior to completion of the merger. If you elect to receive merger consideration consisting of cash and shares of Wintrust common stock, you will receive cash consideration of $41.59 per share for one-half of your Hinsbrook shares and the above-described stock consideration for the other half of your Hinsbrook shares. The merger agreement provides that:
| • | The exchange ratio will adjust upward or downward to ensure that the fraction of a share of Wintrust common stock you receive for each share of Hinsbrook common stock that you own will be equal to $41.59 divided by the reference price so long as the reference price is between $49.14 and $61.14. However, the market value of the fraction of a share of Wintrust common stock that you receive in the merger may be greater or less than $41.59, as the trading price of Wintrust common stock on the date the merger is completed may be greater or less than the reference price used to determine the exchange ratio. | ||
| • | If the reference price is less than $49.14, the exchange ratio will no longer adjust upward, and you will receive 0.846 of a share of Wintrust common stock for each share of Hinsbrook common stock that you own. This means that the value of the fraction of a share of Wintrust common stock you will receive will be below $41.59 per share to the extent the market price of Wintrust common stock is below $49.14 when the merger is completed. | ||
| • | If the reference price is greater than $61.14, the exchange ratio will no longer adjust downward, and you will receive 0.680 of a share of Wintrust common stock for each share of Hinsbrook common stock that you own. This means that the value of the fraction of a share of Wintrust common stock you will receive will be above $41.59 per share to the extent the market price of Wintrust common stock is above $61.14 when the merger is completed. |
However, subject to certain conditions, Hinsbrook may terminate the merger agreement if the reference price of Wintrust’s common stock during the reference period is less than $47.14.
Hinsbrook shareholders will not receive fractional shares of Wintrust common stock. Instead, they will receive a cash payment for any fractional shares based on the value of Wintrust common stock determined in the manner described above.
Merger consideration election(See page 44)
With this proxy statement/prospectus, you have been provided with an election form in order to select whether you will receive merger consideration consisting of cash, Wintrust common stock or a combination of 50% cash and 50% shares of Wintrust common stock (subject to possible proration as described in this proxy statement/prospectus). The completed election form should be returned in the enclosed prepaid envelope and must be received by Wintrust’s exchange agent, Illinois Stock Transfer Company, by 5:00 p.m., Chicago time, on the fifth business day before the effective time of the merger. Once made, elections are irrevocable. If your election form is not received by this deadline, you will be deemed to have elected to receive the combination of cash and Wintrust common stock. Despite your particular election, the merger agreement provides that the aggregate number of shares that may be converted into the right to receive cash consideration (including any shares subject to the cash portion of a combination election) may not exceed 50% of Hinsbrook’s outstanding common stock, and the aggregate number of shares that may be converted into the right to receive Wintrust common stock (including any shares subject to the
6
stock portion of a combination election) may not exceed 50% of Hinsbrook’s outstanding common stock. If Hinsbrook’s shareholders elect to receive, in the aggregate, more than the maximum number of shares that may be converted into cash consideration or stock consideration under the merger agreement, Illinois Stock Transfer Company may prorate these elections so that the maximum amount of each type of consideration is not exceeded. For example, if elections to receive all cash consideration are made with respect to 80% of the shares of Hinsbrook’s common stock, Illinois Stock Transfer Company may prorate the elections so that shareholders electing all cash may receive some portion of the merger consideration in cash and some portion in stock. However, taking into account the actual results of the election process, Wintrust may direct, at any time prior to the consummation of the merger, that the proration and redesignation procedures be waived, in whole or in part, so long as such actions do not adversely affect the tax-free reorganization treatment of the merger.
Once the merger is complete, Illinois Stock Transfer Company will mail you materials and instructions for exchanging your Hinsbrook stock certificates for Wintrust stock certificates. You should not send in your Hinsbrook stock certificates with your completed proxy card or election form, and should wait until you receive the transmittal materials and instructions from the exchange agent.
Hinsbrook Employee Stock Options(See page 44)
The merger agreement provides that at the effective time of the merger, each outstanding and unexercised option granted by Hinsbrook under its 1992 Employee Stock Option Plan, as amended, will be automatically converted into an option to purchase shares of Wintrust common stock, exercisable on generally the same terms and conditions that applied before the merger. The number of shares of Wintrust common stock subject to the substitute Wintrust option will equal the number of shares of Hinsbrook common stock subject to the option immediately prior to the merger, multiplied by the “option exchange ratio,” rounded down to the nearest whole share. The per share exercise price of each substitute Wintrust option will equal the exercise price of the option immediately prior to the merger divided by the option exchange ratio, rounded down to the nearest whole cent. The “option exchange ratio” is equal to 41.59 divided by the reference price.
Fairness opinion of Hinsbrook’s Financial Advisor(See page 30)
In deciding to approve the merger, Hinsbrook’s board of directors considered, among other things, the opinion of Capital Market Securities, Inc. that the merger consideration is fair, from a financial point of view, to the holders of Hinsbrook common stock. You should read the full text of the fairness opinion, which is included as Annex Aattached to this proxy statement/prospectus.
REASONS FOR THE MERGER (Seeprospectus asAnnex D, to understand the assumptions made, limits of the reviews undertaken and other matters considered by Capital Market Securities, Inc. in rendering its opinion.
Certain federal income tax consequences of the merger(See page 27)
Town Bankshares'37)
Your receipt of shares of Wintrust common stock as part of the merger consideration generally will be tax-free for United States federal income tax purposes. However, you will recognize gain (but not loss) in an amount limited to the amount of cash you receive in the merger. Additionally, you will recognize gain or loss on any cash that you receive instead of fractional shares of Wintrust common stock.You are urged to consult your tax adviser for a full understanding of the federal, state, local and foreign tax consequences of the merger to you.
Reasons for the merger(See page 28)
Hinsbrook’s board of directors believes that the merger is in the best interests of Town BanksharesHinsbrook and its shareholders, has unanimously approved the merger agreement and unanimously recommends that its shareholders vote "FOR"“FOR” the approval of the merger agreement.
In its deliberations and in making its determination, Town Bankshares'Hinsbrook’s board of directors considered numerous factors, including the following:
o Wintrust's proposal offered
information with respect to the highest price and more
certainty to closing than any other proposal;
4
o the merger consideration of $129.10 per share, payable in cash
and shares of Wintrust common stock, as compared to Town
Bankshares' net income and book value per share and historical
sales prices for shares of Town Bankshares common stock;
o the business,businesses, earnings, operations, competitive position, financial condition, operating results, management, objectivesprospects, capital levels and prospectsasset quality of Town Bankshares;
o information concerning the business, financial condition,
operating resultsHinsbrook and competitive position of Wintrust, including the recent performance of Wintrust common stock;
o its belief that the resourcesboth individually and expertise of Wintrust as a larger organization will benefit the customers and employees
of Town Bankshares;
o Wintrust's commitment to community banking and to maintaining
local management and decision-making at its subsidiary banks;
o the opinion of Edelman & Co., Ltd. that the merger
consideration was fair, from a financial point of view, to
Town Bankshares shareholders;
o the fact that Wintrust common stock is publicly held and
traded on the Nasdaq National Market and would provide greater
liquidity than Town Bankshares common stock, which is not
publicly traded;
o the terms and conditions of the merger agreement, including
the floating exchange ratio, the agreement by Town Bankshares
not to solicit third-party offers, the termination fee
applicable in some circumstances, and the determination of the
board of directors that these terms and conditions were
appropriate in a strategic transaction of this type; and
o the option of Town Bankshares to terminate its obligation to
complete the merger if the average trading price per share of
Wintrust common stock over a 10-trading day period before the
closing of the merger is less than $38.34.
Wintrust'scombined company;
7
| • | the perceived risks and uncertainties attendant to Hinsbrook’s execution of its strategic growth plans as an independent banking organization, including the need to access additional capital on a cost-effective basis to support future growth; | ||
| • | the belief that the market value of Wintrust’s common stock prior to the execution of the merger agreement was very attractive and offered favorable prospects for future appreciation as a result of the proposed merger and other strategic initiatives being implemented by Wintrust; | ||
| • | the strategic vision of the management of Wintrust to seek profitable future expansion in the Chicago metropolitan area, leading to continued growth in overall shareholder value; | ||
| • | the fact that Wintrust is publicly held and the merger would provide access to a public trading market for Hinsbrook shareholders whose investments currently are in a privately held company, as well as enhanced access to capital markets to finance the combined company’s capital requirements; and | ||
| • | the likelihood that the merger will be approved by the relevant bank regulatory authorities. |
Wintrust’s board of directors concluded that the merger is in the best interests of Wintrust and its shareholders. In deciding to approve the merger, Wintrust'sWintrust’s board of directors considered a number of factors, including:
o management's view that the acquisition of Town Bankshares
provides an attractive opportunity
| • | Hinsbrook’s community banking orientation and its compatibility with Wintrust and its subsidiaries; | ||
| • | a review of the demographic, economic and financial characteristics of the markets in which Hinsbrook operates, including existing and potential competition and history of the market areas with respect to financial institutions; | ||
| • | management’s review of Hinsbrook’s business, operations, earnings and financial condition, including its management, capital levels and asset quality, since Hinsbrook Bank & Trust’sde novoformation in 1987; and | ||
| • | the likelihood of regulators approving the merger without undue conditions or delay. |
Board recommendation to expand into certain
markets in southeastern Wisconsin in which Wintrust does not
currently operate and which management considers to be
desirable markets;
o Town Bankshares' community banking orientation and its
compatibility with Wintrust and its subsidiaries;
o a review of the demographic, economic and financial
characteristics of the markets in which Town Bankshares
operates, including existing and potential competition and
history of the market areas with respect to financial
institutions;
o management's review of Town Bankshares' business, operations,
earnings and financial condition, including its management,
capital levels and asset quality, since its de novo formation
in 1998; and
o the likelihood of regulators approving the merger without
undue conditions or delay.
BOARD RECOMMENDATION TO TOWN BANKSHARES' SHAREHOLDERS (SeeHinsbrook’s shareholders(See page 27)
Town Bankshares'28)
Hinsbrook’s board of directors believes that the merger of Town
BanksharesHinsbrook with Wintrust is in the best interests of Town BanksharesHinsbrook and its shareholders. TOWN BANKSHARES' BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
YOU VOTE "FOR" THE MERGER.
5
FAIRNESS OPINION OF TOWN BANKSHARES' FINANCIAL ADVISOR (See page 29)
In deciding to approve the merger, Town Bankshares'Hinsbrook’s board of directors considered, among other things,unanimously recommends that you vote “FOR” the opinionmerger.
Interests of Edelman & Co., Ltd. thatofficers and directors of Hinsbrook in the merger considerationmay be different from, or in addition to, yours(See page 39)
When you consider the Hinsbrook board of directors’ recommendation to vote in favor of the approval of the merger agreement, you should be aware that some of Hinsbrook’s directors and officers may have interests in the merger that are different from, or in addition to, your interests as shareholders. Hinsbrook’s board of directors was aware of these interests and took them into account in approving the merger. For example, the merger agreement obligates Hinsbrook Bank & Trust to enter into an employment agreement with each of Jeffrey D. Baker, Andrew M. Collins, Jr., L. Thomas McNamara and Regina R. Miller upon completion of the merger. The employment agreements between Hinsbrook Bank & Trust and Jeffrey D. Baker, Andrew M. Collins, Jr., L. Thomas McNamara and Regina R. Miller, obligate Hinsbrook Bank & Trust to make severance and other benefit payments under certain circumstances.
In addition, Jeffrey D. Baker, Robert K. Buhrke, Andrew M. Collins, Jr., James R. Hannon, Jr., L. Thomas McNamara and Regina R. Miller have previously entered into change of control agreements with Hinsbrook Bank & Trust, and, in connection with the merger, each will be paid change of control payments to terminate such agreements.
8
Wintrust is also obligated under the merger agreement to provide continuing indemnification to Hinsbrook’s and Hinsbrook Bank & Trust’s directors and officers, and to provide such directors and officers with directors’ and officers’ liability insurance for a period of five years following the merger, subject to certain conditions set forth in the merger agreement.
Hinsbrook shareholders will have dissenters’ rights in connection with the merger(See page 23)
Hinsbrook shareholders may dissent from the merger and, upon complying with the requirements of the IBCA, receive cash in the amount of the fair from a financial pointvalue of view,their shares instead of the merger consideration.
A copy of the section of the IBCA pertaining to the holders of
Town Bankshares common stock.dissenters’ rights is attached asAnnex Bto this proxy statement/prospectus. You should read the full textstatute carefully and consult with your legal counsel if you intend to exercise these rights.
The merger and the performance of the fairness
opinion, which is attachedcombined company are subject to a number of risks(See page 17)
There are a number of risks relating to the merger and to the businesses of Wintrust, Hinsbrook and the combined company following the merger. See “Risk Factors” beginning on page 17 of this proxy statement/prospectus as Annex D, to
understand the assumptions made, limitsfor a discussion of the reviews undertakenthese and other matters consideredrisks and see also the documents that Wintrust has filed with the Securities and Exchange Commission and which we have incorporated by Edelman & Co., Ltd. in rendering its opinion.
TOWN BANKSHARES SPECIAL MEETING (See page 19)
The special meeting of shareholdersreference into this proxy statement/prospectus.
Hinsbrook shareholder approval will be held at
_________________________, located at _______________________________, on
_____________ ___, 2004 at __________, local time. Town Bankshares' board of
directors is soliciting proxies for use atrequired to complete the special meeting. At the special
meeting, Town Bankshares shareholders will be asked to vote on a proposal to
approve the merger agreement.
RECORD DATE FOR THE SPECIAL MEETING; REVOCABILITY OF PROXIES (See(See page 19)
You may vote at the special meeting if you own shares of Town
Bankshares common stock of record at the close of business on _____________ ___,
2004. You will have one vote for each share of Town Bankshares common stock you
owned on that date. You may revoke your proxy at any time before the vote at the
special meeting.
VOTE REQUIRED (See page 19)22)
To approve the merger, at least a majority of the voting power of the outstanding shares of Town BanksharesHinsbrook common stock entitled to vote must be voted in favor of the merger agreement at the special meeting. To satisfy the quorum requirements set forth in Town Bankshares'Hinsbrook’s by-laws, shareholders holding at least a majority of the voting power of the outstanding shares of Town BanksharesHinsbrook common stock entitled to vote at the special meeting must be present in person or by proxy at the special meeting. Shareholders may vote their shares in person at the special meeting or by signing and returning the enclosed proxy form.
All
On December 5, 2005, all of Town Bankshares'Hinsbrook’s directors and executive officers, haveincluding one executive officer who has since resigned, committed to vote their shares of common stock in favor of the merger. At the record date, these shareholders owned 50,3581,089,433 shares, constituting approximately 16.9%39.4% of the shares entitled to vote at the meeting. See "Description of the merger--Voting
agreement"“The merger—Voting agreement” on page 36.
VOTING BY PARTICIPANTS IN THE ESOP (See41.
Hinsbrook special meeting(See page 19)
Each participant in22)
The special meeting of shareholders will be held at the ESOP whose account has sharesmain office of Town
Bankshares common stock allocatedHinsbrook Bank & Trust located at 6262 South Route 83, Willowbrook, Illinois 60527 on May 30, 2006 at 4:00 p.m., local time. Hinsbrook’s board of directors is soliciting proxies for use at the special meeting. At the special meeting, Hinsbrook shareholders will be asked to it as of _____________,vote on a proposal to approve the recordmerger agreement.
Record date for the special meeting; revocability of proxies(See pages 22 and 23)
You may vote at the special meeting is eligible to direct the ESOP trustees to vote theif you own shares allocated to such participant's account by completing, signing and timely
returning the "Direction to ESOP Administrator" form. These individuals include
employees of Town Bankshares as of the record date who have shares allocated to
their ESOP accounts as well as former employees of Town Bankshares who have not
received a final distribution from the ESOP as of the record date.
WHAT TOWN BANKSHARES SHAREHOLDERS WILL RECEIVE (See page 37)
If the merger is completed, each share of Town BanksharesHinsbrook common stock that you own immediately beforeof record at the completionclose of the mergerbusiness on April 24, 2006. You will be converted
into the right to receive shares of Wintrust common stock, plus cash in the
amount of $58.10. For each of your shares of Town Bankshares common stock, you
will receive a number of shares of Wintrust common stock equal to the "per share
stock consideration" to be calculated as set forth in the merger agreement. The
per share stock consideration will be determined by dividing $71.00 by the
average of the high and low sale prices of Wintrust common stock during the
10-day trading period ending two trading days before the merger closing date, if
the average price is at least $41.34 per share but not more than $55.34 per
share. If the average price of the Wintrust common stock during this period is
less than or equal to $41.34, you will receive 1.717 shares of Wintrust common
stockhave one vote for each share of Town BanksharesHinsbrook common stock you own, and ifowned on that date. You may revoke your proxy at any time before the average
pricevote at the special meeting.
Completion of the Wintrust common stock is greater than $55.34 per share, you will
receive 1.283 shares of Wintrust common stock for each share of Town Bankshares
common stock you own.
6
In effect, the merger agreement provides that the average high and low
per share price of Wintrust common stock to be used in determining the per share
stock consideration may not be higher than $55.34 nor less than $41.34. Within
that price range, the per share stock consideration varies as the average price
of Wintrust common stock changes so that the per share value of merger
consideration which Town Bankshares shareholders receive remains constant and
the number of Wintrust shares you receive will change. However, if the average
price of Wintrust common stock is outside of that range, then the per share
stock consideration does not change as Wintrust's stock price changes. As a
result, if the average price of Wintrust common stock is less than $41.34, then
you will receive a lower per share value of merger consideration at closing than
you would receive if the average price of Wintrust common stock is within or
above the range and, if the average price of Wintrust common stock is greater
than $55.34, then you will receive a higher per share value of merger
consideration at closing than you would if the average price of Wintrust common
stock is within or below the range.
However, subject to certain conditions, Wintrust may terminate the
merger agreement if the average price of Wintrust common stock is greater than
$58.34, and Town Bankshares may terminate the merger agreement if the average
price of Wintrust common stock is less than $38.34.
Town Bankshares shareholders will not receive fractional shares of
Wintrust common stock. Instead, they will receive a cash payment for any
fractional shares based on the value of Wintrust common stock determined in the
manner described above.
Once the merger is complete, Illinois Stock Transfer Company,
Wintrust's exchange agent, will mail you materials and instructions for
exchanging your Town Bankshares stock certificates for Wintrust stock
certificates. You should not send in your Town Bankshares stock certificates
until you receive the transmittal materials and instructions from the exchange
agent.
CASH REDEMPTION OF THE TOWN BANKSHARES COMMON STOCK IN THE ESOP (See page 44)
The ESOP will not receive shares of Wintrust common stock and cash in
the merger in exchange for the shares of Town Bankshares common stock held in
the ESOP. Instead, the merger agreement provides that prior to the effective
time of the merger, Town Bankshares will terminate the ESOP and redeem each
share of Town Bankshares common stock in the ESOP for cash in the amount of
$58.10 per share, plus the cash value of the per share stock consideration
received by Town Bankshares' shareholders in the merger. We refer to such cash
payment as the "ESOP cash redemption price" in this proxy statement/prospectus.
Each participant's account will be credited with an amount equal to the number
of shares of Town Bankshares common stock allocated to such participant's
account multiplied by the ESOP cash redemption price. The ESOP cash redemption
price for the unallocated shares of Town Bankshares common stock will be used
first to repay the loan from Town Bankshares to the ESOP trust which had a total
balance due of approximately $375,100 as of June 30, 2004. Town Bankshares has
amended the ESOP to provide that the remainder of the ESOP cash redemption price
for the unallocated shares will be allocated to the accounts of the ESOP
participants pro rata based on compensation earned between January 1, 2004 and
the date of termination of the ESOP. ESOP participants must be employed by Town
Bankshares or its subsidiaries as of the date of the termination of the ESOP to
share in this allocation. However, to the extent this allocation exceeds certain
limitations under the Internal Revenue Code, the amount in excess of such
limitations will be allocated to the accounts of all ESOP participants pro rata
based on the account balances immediately prior to the redemption. The
termination of the ESOP and the redemption of the shares of Town Bankshares
common stock in the ESOP will not be effective unless the merger is subsequently
completed. Termination of the ESOP will also cause all of the account balances
of the ESOP participants to become fully vested. Following termination of the
ESOP, subject to receipt of a favorable determination letter from the Internal
Revenue Service, each ESOP participant will receive a distribution of the value
of his or her account balance under the ESOP, which can be paid directly to the
participant or rolled over to an IRA or eligible employer plan.
REGULATORY APPROVALS (Seeregulatory approvals34)39)
The merger cannot be completed until Wintrust receives the necessary regulatory approval of each of the Board of Governors of the Federal Reserve System, or the Federal Reserve, and the Division of Banking of the Illinois Department of Financial Institutions of the State of Wisconsin,and Professional Regulation, or the WDFI.IDFPR. Wintrust submitted an application toapplications with each of the Federal Reserve Bank of Chicago seeking approvaland the IDFPR in January of 2006 and received approvals from the Federal Reserve on February 24, 2006 and from the IDFPR on April 12, 2006.
9
Conditions to the merger which application is still pending. Town
7
Bankshares has filed the required application with the Division of Banking of
the WDFI, which application is still pending.
NEW WINTRUST SHARES WILL BE ELIGIBLE FOR TRADING ON NASDAQ (See45)
The shares of Wintrust common stock to be issued in the merger can be
traded on the Nasdaq National Market.
CONDITIONS TO THE MERGER (See page 41)47)
The completion of the merger is subject to the fulfillment of a number of conditions, including:
o
| • | approval of the merger agreement at the special meeting by the holders of at least a majority of the outstanding shares of Hinsbrook common stock entitled to vote; | ||
| • | approval of the transaction by the appropriate regulatory authorities, including the Federal Reserve and the IDFPR, and expiration or termination of all waiting periods required by law; | ||
| • | absence of any threatened or pending suit, judgment or other action seeking to enjoin the consummation of the merger or seeking other relief that either Wintrust or Hinsbrook reasonably believes, subject to certain conditions, would have a material adverse effect on the other party; | ||
| • | authorization for listing the shares of Wintrust common stock issuable pursuant to the merger agreement on the Nasdaq National Market, subject to notice of final issuance; | ||
| • | maintenance by Hinsbrook of certain minimum net worth and loan loss reserve requirements; | ||
| • | receipt of an opinion of counsel to Hinsbrook that the merger constitutes a “reorganization” within the meaning of Section 368(a) of the Code; | ||
| • | the holders of not more than 5% of the outstanding shares of Hinsbrook common stock giving written demand for dissenters’ rights in accordance with the IBCA; | ||
| • | no material adverse change in Wintrust or Hinsbrook since December 5, 2005; | ||
| • | the execution of amendments to certain deferred compensation agreements; | ||
| • | the execution of an employment agreement by Jeffrey D. Baker, Andrew M. Collins, Jr., L. Thomas McNamara and Regina R. Miller; and | ||
| • | the representations and warranties made by the parties in the merger agreement must be materially true and correct as of the effective date of the merger or as otherwise required in the merger agreement. |
How the merger agreement at the special meetingmay be terminated by the
holders of at least a majority of the outstanding shares of
Town Bankshares common stock;
o approval of the transaction by the appropriate regulatory
authorities, including the Federal ReserveWintrust and the Division of
Banking of the WDFI,Hinsbrook(See page 49)
Wintrust and expiration or termination of all
waiting periods required by law;
o maintenance by Town Bankshares of certain minimum
shareholders' equity and loan loss reserve requirements;
o the holders of not more than 10% of the outstanding shares of
Town Bankshares common stock give written demand for
dissenters' rights in accordance with Wisconsin law;
o no material adverse change in Wintrust or Town Bankshares
since June 14, 2004;
o the execution of employment agreements by Jay C. Mack and
Jeffrey A. Olsen; and
o the representations and warranties made by the parties inHinsbrook may mutually agree to terminate the merger agreement must be materially true and correct asabandon the merger at any time prior to completion of the effective date of the merger or as otherwise required in the
merger agreement.
TERMINATION (See page 43)merger. Subject to conditions and circumstances described in the merger agreement, either Wintrust or Town BanksharesHinsbrook may terminate the merger agreement if, among other things, any of the following occur:
o the merger is not completed by November 30, 2004 (or February
28, 2005,
| • | the merger is not completed by July 31, 2006 (or August 31, 2006, if there is a delay due to regulatory approval); | ||
| • | in certain circumstances, if a condition to the merger has become impossible to satisfy; | ||
| • | in certain circumstances, if Hinsbrook has received and accepted a superior offer to sell to a third party; or | ||
| • | in certain circumstances by Hinsbrook if the average of the high and low sales price of Wintrust’s common stock on the Nasdaq National Market during the 10 days ending four trading days before the closing date is less than $47.14. | ||
10
Termination fees and expenses may be payable under some circumstances(See page 49)
Generally, if there is a delay due to regulatory approval);
o in certain circumstances, if a condition to the merger has
become impossible to satisfy;
o a party has materially breached the merger agreement is terminated by either Hinsbrook or Wintrust because the other party has committed a material breach, subject to certain limitations, the breaching party will be required to reimburse the non-breaching party for up to $250,000 in out-of-pocket costs and failed to cure the breach;
o the holders of at least a majority of the voting power of Town
Bankshares common stock do not approve the merger;
o in certain circumstances, if Town Bankshares has received and
accepted a superior offer to sell to a third party; or
o the average of the high and low sales price of Wintrust's
common stock during the 10-day trading period ending two
trading days before the closing date is less than $38.34 or
greater than $58.34.
TERMINATION FEE (See page 43)expenses.
Under certain circumstances described in the merger agreement, including (i) the breach by Hinsbrook of its agreement not to solicit alternative proposals or (ii) the entry into, consummation of or Hinsbrook’s board’s determination to accept, an unsolicited acquisition proposal from a third party, Wintrust may be owed a $1,000,000 termination fee from Town Bankshares if the transaction
is not consummated.Hinsbrook. See "Description“Description of the merger agreement--Terminationagreement—Termination fee."
8
INTERESTS OF OFFICERS AND DIRECTORS IN THE MERGER THAT ARE DIFFERENT FROM YOURS
(See”
Voting agreement(See page 34)
You should be aware that some of Town Bankshares' directors and
officers may have interests in the merger that are different from, or in
addition to, their interests as shareholders. Town Bankshares' board of
directors was aware of these interests and took them into account in approving
the merger. For example, the merger agreement obligates Wintrust to enter into
employment agreements with Jay C. Mack, Town Bankshares' President and Chief
Executive Officer and a director of Town Bankshares, and Jeffrey A. Olsen, Town
Bankshares' Senior Vice President - Senior Lender. Town Bankshares also agreed
to pay bonuses of $330,000 to Mr. Mack and $220,000 to Mr. Olsen contingent on
(1) the execution by each executive officer of his employment agreement with
Wintrust, (2) the execution by each executive officer of a release for the
benefit of Town Bankshares, and (3) the closing of the merger. One-half of each
stay bonus payment will be payable on the closing date of the merger and the
other half will be payable on the later of the 60th-day following the closing
date or January 2,41)
On December 5, 2005, if the executive officer continues to be employed under
the terms of his employment agreement as of such date, unless involuntarily or
constructively terminated by Wintrust prior to such date.
Wintrust is also obligated under the merger agreement to provide
continuing indemnification to Town Bankshares' and Town Bank's directors and
officers, and to provide such directors and officers with directors' and
officers' liability insurance for a period of five years following the merger,
subject to certain conditions set forth in the merger agreement.
VOTING AGREEMENT (See page 36)
Allall of the directors and executive officers of Town Bankshares haveHinsbrook, including one executive officer who has since resigned, agreed to vote all of their shares of common stock in favor of the merger agreement at the special meeting. Together, they ownThe voting agreement covers approximately 16.9%39.4% of Town
Bankshares'Hinsbrook’s outstanding shares of common stock. These voting agreements terminate if the merger agreement is terminated in accordance with its terms. A copy of the form of voting agreement is attached to this proxy statement/prospectus asAnnex C.
ACCOUNTING TREATMENT OF THE MERGER (SeeC.
Accounting treatment of the merger(See page 32)37)
The merger will be accounted for as a purchase transaction in accordance with accounting principles generally accepted in the United States.
CERTAIN DIFFERENCES IN SHAREHOLDER RIGHTS (See
Certain differences in shareholder rights(See page 45)
When the merger is completed, Town Bankshares52)
The rights of shareholders whose
rightsof both Wintrust and Hinsbrook are governed by Wisconsin lawIllinois law. However, there are differences in the rights of Wintrust shareholders and Town Bankshares'Hinsbrook shareholders as a result of the provisions of the articles of incorporation, by-laws and by-laws, automaticallyother corporate documents of each company. After completion of the merger, Hinsbrook shareholders will become Wintrust shareholders and their rights will be governed by Illinois law, as well as Wintrust'sWintrust’s articles of incorporation and by-laws, in addition to laws and requirements that apply to public companies.
DISSENTERS' RIGHTS (See page 21)
Town Bankshares shareholders may dissent from the merger and, upon
complying with the requirements of Wisconsin law, receive cash in the amount of
the fair value of their
Wintrust shares instead of the merger consideration. Neither the
ESOP nor its participants, however, will have dissenters' rights because all of
the shares in the ESOP will be redeemed for cash prior to the completion of the
merger.
A copy of the sections of the Wisconsin Business Corporation Law
pertaining to dissenters' rights is attached as Annex B to this proxy
statement/prospectus. You should read the statute carefully and consult with
your legal counsel if you intend to exercise these rights.
TAX CONSEQUENCES OF THE MERGER (Seequoted on Nasdaq(See page 32)
It is a condition to the closing of the merger that Town Bankshares'
legal counsel render an opinion to Town Bankshares that the merger will
constitute a reorganization under Section 368(a) of the Internal Revenue Code.
If the merger constitutes a reorganization, the conversion of your shares of
Town Bankshares common stock into Wintrust common stock may permit you to defer
a portion of your "realized gain" in the exchange. For United States federal
income tax purposes, your "realized gain" will be equal to the aggregate
consideration (both stock and
9
cash) you receive in the reorganization less your basis in your Town Bankshares'
stock exchanged.51)
The portion of your "realized gain" which must be "recognized"
will be equal to the lesser of the cash received (excluding cash received in
lieu of fractional shares) or the realized gain as a result of the merger
(adjusted for any gain recognized for cash received in lieu of fractional
shares). In general, the tax basis in your shares of Town Bankshares common
stock will carry over to the shares of Wintrust common stock you receiveto be issued pursuant to the merger will be quoted on the Nasdaq National Market under the symbol “WTFC.”
11
Recent Developments
Wintrust’s first quarter ended March 31, 2006. Wintrust has not finalized its financial statements for this period, and it is possible that actual results may vary from the information discussed below. Set forth below is a discussion of Wintrust’s preliminary unaudited financial information for the quarter ended March 31, 2006 with comparisons to the unaudited financial information for the quarter ended March 31, 2005. Wintrust’s results of operations for the quarter ended March 31, 2006 are not necessarily indicative of the results to be expected for the entire fiscal year 2006.
Net income for the quarter ended March 31, 2006 was $19.0 million, an increase of $3.3 million, or 21%, over the $15.7 million recorded in the merger.first quarter of 2005. On a per share basis, net income for the first quarter of 2006 totaled $0.76 per diluted common share, an increase of $0.08 per share, or 12%, compared to the first quarter of 2005 total of $0.68 per diluted common share. The tax basisresults for the first quarter of 2006, when compared to the first quarter of 2005, benefited from additional trading income on the increase in the fair market value of debt swaps (approximately $0.09 per share) and a gain, net of sales expenses, from the sale of the Wayne Hummer Growth Fund (approximately $0.06 per share). Partially offsetting these increases was the impact of adopting the expensing of options under Statement of Financial Accounting Standards No. 123(R) (as amended) Share-Based Payments (approximately $0.03 per share).
Total assets rose to $8.38 billion at March 31, 2006, an increase of $1.04 billion, or 14%, compared to $7.35 billion in total assets at March 31, 2005. Total deposits as of March 31, 2006 were $6.88 billion, an increase of $956 million, or 16%, as compared to $5.93 billion at March 31, 2005. Total loans grew to $5.44 billion as of March 31, 2006, an increase of $577 million, or 12%, over the $4.86 billion as of March 31, 2005.
Additional details about Wintrust’s first quarter results can be found in Wintrust’s Current Report on Form 8-K filed with the SEC on April 21, 2006 incorporated by reference in this proxy statement/prospectus. See the section entitled “Incorporation of Certain Information by Reference” beginning on page 61.
Per Share Market Price and Dividend Information
Wintrust common stock you receive inis quoted on the merger
will equalNasdaq National Market under the tax basis in your Town Bankshares common stock exchanged for the
merger consideration, decreased by the amount of any cash received (other than
cash received in lieu of fractional shares of Town Bankshares common stock) and
increased by the amount of any cash received which was treated as a dividend and
the amount of any gain recognized in the exchange. The gain recognized as a
result of cash received in lieu of a fractional share will be equal to the
excess of such cash over the tax basis attributable to the share or shares of
Town Bankshares common stock exchanged therefor.
The holding period of your Wintrust common stock received in the merger
will include the period during which you held Town Bankshares common stock,
provided that the Town Bankshares common stock surrendered was held as a capital
asset as of the time of the merger. You should consult your tax adviser for a
full understanding of the federal, state, local and foreign tax consequences of
the merger to you.
HISTORICAL COMPARATIVE PER SHARE DATA; PRO FORMA PER SHARE DATAsymbol “WTFC.” The table below shows, for the quarters indicated, based on published financial sources, the reported high and low sales prices of Wintrust'sWintrust’s common stock during the periods indicated. This information gives
effect to a 3-for-2 stock split, effected inindicated and the formcash dividends paid per share of a 50% stock dividend,
as of March 14, 2002.
HIGH LOW
-------- --------
YEAR ENDED DECEMBER 31, 2002
First Quarter............................... $22.99 $18.33
Second Quarter.............................. 34.58 22.22
Third Quarter............................... 36.00 26.54
Fourth Quarter.............................. 32.66 25.45
YEAR ENDING DECEMBER 31, 2003
First Quarter............................... $33.65 $27.19
Second Quarter.............................. 32.40 27.74
Third Quarter............................... 38.89 29.30
Fourth Quarter.............................. 46.85 37.64
YEAR ENDING DECEMBER 31, 2004
First Quarter............................... $50.44 $41.85
Second Quarter.............................. 50.80 45.18
Third Quarter (through ________, 2004)...... __.__ __.__
10
Wintrust common stock.
| High | Low | Dividend | ||||||||||
Year Ending December 31, 2003 | ||||||||||||
| First Quarter | $ | 33.65 | $ | 27.19 | $ | 0.08 | ||||||
| Second Quarter | 32.40 | 27.74 | 0.00 | |||||||||
| Third Quarter | 38.89 | 29.30 | 0.08 | |||||||||
| Fourth Quarter | 46.85 | 37.64 | 0.00 | |||||||||
Year Ending December 31, 2004 | ||||||||||||
| First Quarter | $ | 50.44 | $ | 41.85 | $ | 0.10 | ||||||
| Second Quarter | 50.80 | 45.18 | 0.00 | |||||||||
| Third Quarter | 58.42 | 49.82 | 0.10 | |||||||||
| Fourth Quarter | 63.39 | 54.33 | 0.00 | |||||||||
Year Ending December 31, 2005 | ||||||||||||
| First Quarter | $ | 57.23 | $ | 46.78 | $ | 0.12 | ||||||
| Second Quarter | 52.93 | 45.00 | 0.00 | |||||||||
| Third Quarter | 55.50 | 49.01 | 0.12 | |||||||||
| Fourth Quarter | 59.63 | 48.00 | 0.00 | |||||||||
Year Ending December 31, 2006 | ||||||||||||
| First Quarter | $ | 58.94 | $ | 49.79 | $ | 0.14 | ||||||
| Second Quarter (through May 3) | $ | 59.64 | $ | 50.00 | $ | 0.00 | ||||||
12
Comparative Historical and Unaudited Pro Forma Per Share Data
The following table presents selected comparative per share data for Wintrust common stock and Town BanksharesHinsbrook common stock on a historical and pro forma basis and unaudited pro forma condensed combined basis,consolidated per share information giving effect to the merger using the purchase method of accounting,accounting. You should read this information in conjunction with the selected historical financial information, included elsewhere in this proxy statement/prospectus, and the historical financial statements of Wintrust and related notes that are incorporated by reference in this proxy statement/prospectus by reference. The historical per share data is derived from audited financial statements as of and for Wintrust common stock on a pro forma combined basis, giving
effect to the merger with both Town Bankshares and Wintrust's pending
acquisition of Northview Financial Corporation, or Northview.year ended December 31, 2005.
The consummation
of Wintrust's merger with Town Bankshares is not conditioned upon completion of
its pending acquisition of Northview. See "Description of the Merger--Business
of Wintrust--Recent Developments." Theunaudited pro forma combined information isdoes not necessarily indicative ofpurport to represent what the actual results thatof operations of Wintrust and Hinsbrook would have occurredbeen had the mergercompanies been consummated atcombined during the beginningperiods presented or to project Wintrust’s and Hinsbrook’s results of operations that may be achieved after completion of the periods indicated, ormerger.
| Year Ended | |||||
| December 31, 2005 | |||||
Wintrust Historical: | |||||
| Diluted earnings per share | $ | 2.75 | |||
| Cash dividends declared per share | 0.24 | ||||
| Book value per share (at period end) | 26.23 | ||||
Wintrust Pro Forma Combined:(1) | |||||
| Diluted earnings per share | $ | 2.82 | |||
| Cash dividends declared per share | 0.24 | ||||
| Book value per share (at period end) | 27.36 | ||||
Hinsbrook Historical: | |||||
| Diluted earnings per share | $ | 2.55 | |||
| Cash dividends declared per share | 0.35 | ||||
| Book value per share (at period end) | 15.03 | ||||
Hinsbrook Pro Forma Combined:(1) | |||||
| Diluted earnings per share | $ | 2.31 | |||
| Cash dividends declared per share | 0.20 | ||||
| Book value per share (at period end) | 22.38 | ||||
| (1) | Computed using per share merger consideration of $41.59 per share, assuming a Wintrust common stock price of $50.87 for the anticipated acquisition of Hinsbrook. | |
13
Selected Historical Financial Data of the
future operations of the combined entity.
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2004 DECEMBER 31, 2003
---------------- -----------------
WINTRUST HISTORICAL:
Diluted earnings per share............ $ 1.12 $ 1.98
Cash dividends declared per share..... 0.10 0.16
Book value per share (at period end).. 18.26 17.43
WINTRUST PRO FORMA COMBINED(1):
Diluted earnings per share............ $ 1.14 $ 2.01
Cash dividends declared per share..... 0.10 0.16
Book value per share (at period end).. 19.10 18.30
WINTRUST PRO FORMA COMBINED (TOWN
BANKSHARES AND NORTHVIEW)(1)(2):
Diluted earnings per share............ $ 1.15 $ 2.05
Cash dividends per share.............. 0.10 0.16
Book value per share (at period end).. 19.96 19.20
TOWN BANKSHARES HISTORICAL:
Diluted earnings per share............ $ 2.79 $ 4.19
Cash dividends declared per share..... -- --
Book value per share (at period end).. 59.70 56.98
TOWN BANKSHARES PRO FORMA COMBINED(1):
Diluted earnings per share............ $ 1.55 $ 2.74
Cash dividends declared per share..... 0.14 0.22
Book value per share (at period end).. 26.09 25.00
- ----------------------
(1) Computed using per share stock consideration of 1.3664 shares of
Wintrust common stock per share of Town Bankshares common stock,
assuming a Wintrust common stock price of $51.96.
(2) Computed using per share stock consideration of 2.9109 shares of
Wintrust common stock per share of Northview common stock, assuming a
Wintrust common stock price of $51.96.
The following table sets forth the last sales prices as reported by
Nasdaq for Wintrust common stock on the dates indicated, and the equivalent per
share value of Town Bankshares common stock, giving effect to the merger, as of
the same dates:
HISTORICAL PRICE TOWN
CLOSING PRICE TOWN BANKSHARES
WINTRUST BANKSHARES EQUIVALENT PER
COMMON STOCK COMMON STOCK SHARE VALUE
------------- -------------- ---------------
June 14, 2004(1).......... $46.85 (2) $129.10(3)
_________ __, 2004........ $____ (2) $______(4)
- ----------------------
(1) Trading date immediately preceding the date of public announcement of
the proposed merger.
(2) There is currently no market value for the shares of Town Bankshares
being acquired since Town Bankshares is not a publicly traded company.
(3) Based on per share stock consideration of 1.515 shares of Wintrust
common stock and per share cash consideration of $58.10.
(4) Based upon per share stock consideration of _____ shares of Wintrust
common stock and per share cash consideration of $_____.
11
SELECTED FINANCIAL DATA OF WINTRUST
The selected consolidated financial data presented below is being provided to assist you in your analysis of the financial aspects of the merger. The annual Wintrust historical information as of orand for each of the years in the five-year period ended December 31, 2003,2005, are derived from Wintrust'sWintrust’s audited historical financial statements. The selected
consolidated financial data presented below, as of or for the six-month periods
ended June 30, 2004 and 2003, are derived from unaudited consolidated financial
statements. In Wintrust's opinion, all adjustments, consisting only of normal
recurring adjustments, necessary for a fair statement of results as of or for
the six-month periods, have been included. Share and per share amounts have been adjusted to reflect the 3-for-2 stock split effected as a stock dividend effective as of March 14, 2002. This information is only a summary and should be read in conjunction with "Management's“Management’s Discussion and Analysis of Financial Condition and Results of Operations"Operations” and the consolidated financial statements and the notes thereto incorporated by reference into this proxy statement/prospectus from Wintrust'sWintrust’s Annual Report on Form 10-K for the fiscal year ended December 31, 2003, and
Wintrust's Quarterly Report on Form 10-Q for the period ended June 30, 2004.
Results for past periods2005. The historical results below or contained elsewhere in this proxy statement/prospectus are not necessarily indicative of results that may be
expected for anythe future period, and results forperformance of Wintrust or the six-month period ended June
30, 2004 are not necessarily indicative of results that may be expected for the
entire year ending December 31, 2004.
combined company.
| Year Ended December 31, | |||||||||||||||||||
| 2005(1) | 2004(2) | 2003(3) | 2002(4) | 2001 | |||||||||||||||
| (Dollars in thousands, except per share amounts) | |||||||||||||||||||
Statement of Income Data: | |||||||||||||||||||
| Total interest income | $ | 407,036 | $ | 261,746 | $ | 203,991 | $ | 182,233 | $ | 166,455 | |||||||||
| Total interest expense | 197,227 | 103,922 | 83,499 | 84,105 | 92,441 | ||||||||||||||
| Net interest income | 216,759 | 157,824 | 120,492 | 98,128 | 74,014 | ||||||||||||||
| Provision for loan losses | 6,676 | 6,298 | 10,999 | 10,321 | 7,900 | ||||||||||||||
| Net interest income after provision for loan losses | 210,083 | 151,526 | 109,493 | 87,807 | 66,114 | ||||||||||||||
Non-interest Income: | |||||||||||||||||||
| Gain on sale of premium finance receivables | 6,499 | 7,347 | 4,911 | 3,374 | 4,564 | ||||||||||||||
| Mortgage banking revenue | 25,913 | 18,250 | 16,718 | 13,271 | 8,106 | ||||||||||||||
| Wealth management fees | 30,008 | 31,656 | 28,871 | 25,229 | 1,996 | ||||||||||||||
| Services charges on deposit account | 5,983 | 4,100 | 3,525 | 3,121 | 2,504 | ||||||||||||||
| Administrative services revenue | 4,539 | 3,984 | 4,151 | 3,501 | 4,084 | ||||||||||||||
Premium finance Defalcation-partial settlement(5) | — | — | 500 | 1,250 | — | ||||||||||||||
| Securities (losses) gains, net | 1,063 | 1,863 | 642 | 107 | 337 | ||||||||||||||
| Other | 19,552 | 18,252 | 13,274 | 10,819 | 7,207 | ||||||||||||||
| Total non-interest Income | 93,557 | 85,452 | 72,592 | 60,672 | 28,798 | ||||||||||||||
(See footnotes on page 16)
14
| Year Ended December 31, | |||||||||||||||||||
| 2005(1) | 2004(2) | 2003(3) | 2002(4) | 2001 | |||||||||||||||
| (Dollars in thousands, except per share amounts) | |||||||||||||||||||
Non-interest Expense: | |||||||||||||||||||
| Salaries and employee benefits | $ | 118,071 | $ | 94,049 | $ | 74,775 | $ | 63,442 | $ | 35,628 | |||||||||
| Equipment expense | 11,779 | 9,074 | 7,957 | 7,191 | 6,297 | ||||||||||||||
| Occupancy expense, net | 16,176 | 10,083 | 7,436 | 6,691 | 4,821 | ||||||||||||||
| Data processing | 7,129 | 5,560 | 4,304 | 4,161 | 3,393 | ||||||||||||||
| Advertising and marketing | 4,970 | 3,403 | 2,215 | 2,302 | 1,604 | ||||||||||||||
| Professional fees | 5,609 | 5,376 | 3,342 | 2,801 | 2,055 | ||||||||||||||
| Amortization of intangibles | 3,394 | 1,110 | 640 | 324 | 685 | ||||||||||||||
Premium finance defalcation(5) | — | — | — | — | — | ||||||||||||||
| Other non-interest expenses | 31,562 | 27,436 | 22,072 | 19,072 | 11,300 | ||||||||||||||
| Total non-interest expenses | 198,690 | 156,091 | 122,741 | 105,984 | 65,783 | ||||||||||||||
| Income before taxes and cumulative effect of accounting change | 104,950 | 80,887 | 59,344 | 42,495 | 29,129 | ||||||||||||||
| Income tax expense | 37,934 | 29,553 | 21,226 | 14,620 | 10,436 | ||||||||||||||
| Income before cumulative effect of accounting change | $ | 67,016 | 51,334 | 38,118 | 27,875 | 18,693 | |||||||||||||
| Cumulative effect of change in accounting for derivatives, net of tax | — | — | — | — | (254) | ||||||||||||||
| Net income | $ | 67,016 | $ | 51,334 | $ | 38,118 | $ | 27,875 | $ | 18,439 | |||||||||
Common Share Data: | |||||||||||||||||||
| Earnings per share: | |||||||||||||||||||
| Basic | $ | 2.89 | $ | 2.49 | $ | 2.11 | $ | 1.71 | $ | 1.34 | |||||||||
| Diluted | 2.75 | 2.34 | 1.98 | 1.60 | 1.27 | ||||||||||||||
Cash dividends per common share(6) | 0.24 | 0.20 | 0.16 | 0.12 | 0.093 | ||||||||||||||
| Book value per share | 26.23 | 21.81 | 17.43 | 13.19 | 9.72 | ||||||||||||||
| Weighted average common shares outstanding: | |||||||||||||||||||
| Basic | 23,198 | 20,646 | 18,032 | 16,334 | 13,734 | ||||||||||||||
| Diluted: | 24,337 | 21,972 | 19,219 | 17,445 | 14,545 | ||||||||||||||
Selected Financial Condition Data (at end of period): | |||||||||||||||||||
| Total assets | $ | 8,117,042 | $ | 6,419,048 | $ | 4,747,398 | $ | 3,721,555 | $ | 2,705,422 | |||||||||
| Total loans | 5,213,871 | 4,348,346 | 3,297,794 | 2,556,086 | 2,018,479 | ||||||||||||||
| Mortgage loans held-for-sale | 85,985 | 104,709 | 24,041 | 90,446 | 42,904 | ||||||||||||||
| Total deposits | 6,729,434 | 5,104,734 | 3,876,621 | 3,089,124 | 2,314,636 | ||||||||||||||
| Notes payable | 1,000 | 1,000 | 26,000 | 44,025 | 46,575 | ||||||||||||||
| Subordinated notes | 50,000 | 50,000 | 50,000 | 25,000 | — | ||||||||||||||
| Long term debt – trust preferred securities | 230,458 | 204,489 | 96,811 | 50,894 | 51,050 | ||||||||||||||
| Total stockholders’ equity | 627,911 | 473,912 | 349,837 | 227,002 | 141,278 | ||||||||||||||
(See footnotes on following page)
15
| Year Ended December 31, | ||||||||||||||||||||
| 2005(1) | 2004(2) | 2003(3) | 2002(4) | 2001 | ||||||||||||||||
Selected Financial Ratios and Other Data: | ||||||||||||||||||||
Performance Ratios: | ||||||||||||||||||||
Net interest margin(7)(8) | 3.16 | % | 3.17 | % | 3.20 | % | 3.34 | % | 3.49 | % | ||||||||||
Net interest spread(7)(9)(10) | 2.92 | 2.96 | 2.99 | 3.06 | 3.08 | |||||||||||||||
Non-interest income to average assets(7) | 1.23 | 1.57 | 1.76 | 1.89 | 1.24 | |||||||||||||||
Non-interest expense to average assets(5)(7) | 2.62 | 2.86 | 2.98 | 3.30 | 2.83 | |||||||||||||||
Net overhead ratio(5)(7)(11) | 1.39 | 1.30 | 1.22 | 1.41 | 1.59 | |||||||||||||||
Efficiency ratio(5)(12) | 63.97 | 64.45 | 63.52 | 66.41 | 63.66 | |||||||||||||||
Return on average assets(5)(7) | 0.88 | 0.94 | 0.93 | 0.87 | 0.79 | |||||||||||||||
Return on average equity(5)(7) | 11.00 | 13.12 | 14.36 | 14.76 | 15.24 | |||||||||||||||
| Average loan-to-average deposit ratio | 83.4 | 87.7 | 86.4 | 88.5 | 87.4 | |||||||||||||||
Dividend payout ratio(6)(7) | 8.7 | 8.5 | 8.1 | 7.5 | 7.4 | |||||||||||||||
Asset Quality Ratios: | ||||||||||||||||||||
| Non-performing loans to total loans | 0.50 | % | 0.43 | % | 0.72 | % | 0.49 | % | 0.64 | % | ||||||||||
| Allowance for credit losses to: | ||||||||||||||||||||
| Total loans | 0.78 | 0.79 | 0.77 | 0.72 | 0.68 | |||||||||||||||
| Non-performing loans | 155.69 | 184.13 | 107.59 | 146.63 | 105.63 | |||||||||||||||
Net charge-offs to average loans(5)(7) | 0.10 | 0.07 | 0.18 | 0.24 | 0.26 | |||||||||||||||
| Non-performing assets to total assets | 0.34 | 0.29 | 0.51 | 0.34 | 0.48 | |||||||||||||||
Other data at end of period: | ||||||||||||||||||||
| Number of banking facilities | 62 | 50 | 36 | 31 | 29 | |||||||||||||||
| (1) | Wintrust completed its | |
| (2) | Wintrust completed its acquisitions of SGB Corporation d/b/a WestAmerica Mortgage Company and | |
| (3) | Wintrust completed its acquisitions of Lake Forest Capital Management Company on February 1, 2003, Advantage National Bancorp, Inc. on October 1, 2003 and Village Bancorp, Inc. | |
| (4) | Wintrust completed its acquisition of the Wayne Hummer Companies effective as of February 1, 2002. The results for the year ended December 31, 2002 include the results of the Wayne Hummer Companies since February 1, 2002. | |
| (5) | In 2000, Wintrust recorded a $4.3 million pre-tax charge ($2.6 million after-tax) related to a fraudulent loan scheme perpetrated against its premium finance subsidiary. The amount of this charge was not included in loans charged-off because a lending relationship had never been established. In the first quarter of 2002, Wintrust recovered $1.25 million (pre-tax) of this amount ($754,000 after-tax) | |
| (6) | Wintrust declared its first semi-annual dividend payment in January 2000. Dividend data reflected for the interim periods reflect semi-annual, not quarterly, dividends. | |
| (7) | These financial ratios for interim periods have been annualized. | |
| (8) | Net interest income on a tax-equivalent basis divided by average interest-earning assets. | |
| (9) | Calculated on a tax-equivalent basis. | |
| (10) | Yield earned on average interest-earning assets less rate paid on average interest-bearing liabilities. | |
| (11) | Non-interest expense less non-interest income divided by average total assets. | |
| (12) | Non-interest expense (excluding non-recurring items) divided by the sum of net interest income on a tax equivalent basis plus non-interest income (excluding securities gains and losses). |
16
RISK FACTORS
In addition to the other information contained in or incorporated by reference into this proxy statement/prospectus, including the matters addressed under the caption "Caution About Forward-Looking Statements"“Forward-Looking Statements” on page 17,21, you should consider the following risk factors carefully in deciding whether to vote for the adoptionapproval of the merger agreement. THERE IS FLUCTUATION IN THE TRADING MARKET OF WINTRUST'S COMMON STOCK AND THE
MARKET PRICE OF THE COMMON STOCK YOU WILL RECEIVE IN THE MERGER IS UNCERTAIN.
You will receiveAdditional risks and uncertainties not presently known to Wintrust common stockand Hinsbrook or that are not currently believed to be important to you, if they materialize, also may adversely affect the merger and Wintrust and Hinsbrook as a combined company.
In addition, Wintrust’s and Hinsbrook’s respective businesses are subject to numerous risks and uncertainties, including the risks and uncertainties described, in the merger. The number of
shares you receive will depend on the average pricecase of Wintrust, common stock
priorin its Annual Report onForm 10-K for the year ended December 31, 2005, which is incorporated by reference into this proxy statement/prospectus. These risks and uncertainties will continue to apply to Wintrust and Hinsbrook as independent companies if the merger is not consummated.
Risks relating to the merger. Changes inmerger
Because the market price of Wintrust common stock may result from a varietyfluctuate, you cannot be certain of factors, including general market and economic
conditions, the future financial condition and operating resultsprecise value of Wintrust,
changesthe stock portion of the merger consideration you may receive in Wintrust's business, operations and prospects and regulatory
considerations, manythe merger.
You cannot be certain of which are beyond Wintrust's control.
The pricethe precise value of the stock portion of the merger consideration to be received at closing. If the merger is completed, you will be entitled to receive, for each share of Hinsbrook common stock that you elect to convert into shares of Wintrust common stock, at completiona fraction of the merger may vary
from its pricea share of Wintrust common stock equal to an exchange ratio based on the date the merger agreement was signed, from its price on
the date of this proxy statement/prospectus, from its price on the date of the
special meeting and from the averagereference price during the 10-day pricing period usedreference price determination period. The exchange ratio will adjust to determineensure that the numberfraction of sharesa share of Wintrust common stock you arereceive will be equal to receive. You will not$41.59 divided by the reference price so long as the reference price is between $49.14 and $61.14. However, the market value of that fraction of a share of Wintrust common stock you receive may be entitled
to receive additional cashgreater or shares inless than $41.59, as the merger if thetrading price of Wintrust common stock on the closing date of the merger may be greater or less than the reference price used to determine the exchange ratio. If the reference price is less than $49.14, the average price
duringexchange ratio will no longer adjust upward. This means that the pricing period. Because the merger will be completed after the datevalue of the special meeting, at the timefraction of the special meeting you will not know
what the market valuea share of the Wintrust common stock you will receive afterwill be below $41.59 to the mergerextent the reference price is below $49.14. If the reference price is greater than $61.14, the exchange ratio will be. See "Descriptionno longer adjust downward. This means that the value of the fraction of a share of Wintrust common stock you will receive will be above $49.14 to the extent the reference price is above $49.14. The formula for calculating the exchange ratio is set forth in the section entitled “Description of the merger agreement--Considerationagreement—Consideration to be received in the merger."
Wintrust'smerger” beginning on page 42.
Wintrust’s common stock is traded on the Nasdaq National Market under the symbol "WTFC".“WTFC.” The maintenance of an active public trading market depends, however, upon the existence of willing buyers and sellers, the presence of which is beyond Wintrust'sWintrust’s control or the control of any market maker. In addition to the shares of Wintrust common stock to be issued in the merger, Wintrust also has shares of common stock covered by resale registration statements andstatements. Wintrust estimates that there are currently approximately up to 1,075,000967,000 of those shares outstanding that have not yet been resold. These remaining shares may be freely sold from time to time in the market. The market price of Wintrust'sWintrust’s common stock could drop significantly if shareholders sell or are perceived by the market as intending to sell large blocks of its shares.
TOWN BANKSHARES' SHAREHOLDERS WILL NOT CONTROL WINTRUST'S FUTURE OPERATIONS.
Wintrust and Hinsbrook may be unable to successfully integrate their operations and may not realize the anticipated benefits of combining Wintrust and Hinsbrook.
Wintrust and Hinsbrook entered into the merger agreement with the expectation that they would be able to successfully integrate their operations and that the merger would result in various benefits, including, among other things, enhanced revenues and revenue synergies, an expanded market reach and operating efficiencies. Achieving the anticipated benefits of the merger is subject to a number of uncertainties, including whether Wintrust integrates and operates Hinsbrook in an efficient and effective manner, and general competitive factors in the market place. The process of integrating operations could cause an interruption of, or loss of momentum in, the activities of one or more of the combined company’s businesses or the loss of key personnel. The diversion of management’s attention and any delays or difficulties encountered in connection with the merger and the integration of the two companies’
17
operations could have an adverse effect on the business, financial condition, operating results and prospects of the combined company after the merger. Failure to achieve these anticipated benefits could result in increased costs, decreases in the amount of expected revenues and diversion of management’s time and energy and could have an adverse effect on the combined company’s business, financial condition, operating results and prospects.
Among the factors considered by the boards of directors of Wintrust and Hinsbrook in connection with their respective approvals of the merger agreement were the benefits that could result from the merger. We cannot give any assurance that these benefits will be realized within the time periods contemplated or even that they will be realized at all.
Hinsbrook will be subject to business uncertainties while the merger is pending, which could adversely affect its business.
Uncertainty about the effect of the merger on employees and customers may have an adverse effect on Hinsbrook, and, consequently, the combined company. Although Hinsbrook intends to take steps to reduce any adverse effects, these uncertainties may impair Hinsbrook’s ability to attract, retain and motivate key personnel until the merger is consummated and for a period of time thereafter, and could cause customers and others that deal with Hinsbrook to seek to change their existing business relationships with Hinsbrook. Employee retention at Hinsbrook may be particularly challenging during the pendency of the merger, as employees may experience uncertainty about their roles with the combined company following the merger.
Some of the directors and executive officers of Hinsbrook have interests and arrangements that could have affected their respective decision to support or approve the merger.
The interests of some of the directors and executive officers of Hinsbrook in the merger are different from, and may be in addition to, those of Hinsbrook shareholders generally and could have affected their decision to support or approve the merger. These interests include:
| • | The change of control payments, pursuant to existing contracts, to each of Jeffrey D. Baker, Robert K. Buhrke, Andrew M. Collins, Jr., James R. Hannon, Jr., L. Thomas McNamara and Regina R. Miller in connection with the merger; | ||
| • | The entry into employment agreement with each of Jeffrey D. Baker, Andrew M. Collins, Jr., L. Thomas McNamara and Regina R. Miller upon completion of the merger; | ||
| • | Wintrust’s agreement to provide severance and other benefit payments under certain circumstances to Jeffrey D. Baker, Andrew M. Collins, Jr., L. Thomas McNamara and Regina R. Miller; | ||
| • | Wintrust’s agreement to provide officers and directors of Hinsbrook with continuing indemnification rights; and | ||
| • | Wintrust’s agreement to provide directors’ and officers’ insurance to the officers and directors of Hinsbrook for five years following the merger. |
As a result, the directors and officers of Hinsbrook may be more likely to recommend to Hinsbrook’s shareholders the approval of the merger agreement than if they did not have these interests.
Risks relating to the businesses of Wintrust and the combined company
Hinsbrook’s shareholders will not control Wintrust’s future operations.
Currently, Town Bankshares'Hinsbrook’s shareholders own 100% of Town BanksharesHinsbrook and have the power to approve or reject any matters requiring shareholder approval under WisconsinIllinois law and Town Bankshares'Hinsbrook’s articles of incorporation and by-laws. After the merger, Town BanksharesHinsbrook shareholders will become owners of less than ___%7% of the outstanding shares of Wintrust common stock. Even if all former Town BanksharesHinsbrook shareholders voted together on all matters presented to WintrustWintrust’s shareholders, from time to time, the former Town BanksharesHinsbrook shareholders most likely would not have a significant impact on the approval or rejection of future Wintrust proposals submitted to a shareholder vote.
DE NOVO OPERATIONS AND BRANCH OPENINGS IMPACT WINTRUST'S PROFITABILITY.
Wintrust's
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De novo operations and branch openings impact Wintrust’s profitability.
Wintrust’s financial results have been and will continue to be impacted by its strategy ofde novobank formations and branch openings. Wintrust has employed this strategy to build an infrastructure that management believes can support additional internal growth in its banks'banks’ respective markets. Wintrust opened its eighth operatesde novo bank in April 2004,banks, and expects to undertake additionalde novo bank formations or branch openings as it expands into additional communities in and around Chicago and southeasternsoutheast Wisconsin. In addition, Wintrust's recent and pending acquisitions involve relatively recently
formed fact, on December 8, 2005, Wintrust announced plans to open ade novo banks. bank in the south suburbs of Chicago with three locations. Thisde novo bank began operations in March of 2006. Based on Wintrust'sWintrust’s experience, its management believes that it generally takes from 13 to 24 months for new de novobanks to first achieve operational profitability, depending on the number of branchbanking facilities opened, the impact of organizational and overhead expenses, the start-up phase of generating deposits and the time lag typically involved in redeploying deposits into attractively priced loans and other higher yielding earning assets. However, it may take longer than expected or than the amount of time Wintrust has historically experienced for new banks and/or branchbanking facilities to reach
15
profitability, and there can be no guarantee that these new banks or branches will ever be profitable. To the extent Wintrust undertakes additionalde novobank, branch and business formations, its level of reported net income, return on average equity and return on average assets will be impacted by start-up costs associated with such operations, and it is likely to continue to experience the effects of higher expenses relative to operating income from the new operations. These expenses may be higher than Wintrust expected or than its experience has shown.
WINTRUST'S ALLOWANCE FOR LOAN LOSSES MAY PROVE TO BE INSUFFICIENT TO ABSORB
LOSSES THAT MAY OCCUR IN ITS LOAN PORTFOLIO.
Wintrust's
Wintrust’s allowance for credit losses may prove to be insufficient to absorb losses that may occur in its loan portfolio.
Wintrust’s allowance for loan losses is established in consultation with management of its operating subsidiaries and is maintained at a level considered adequate by management to absorb loan losses that are inherent in the portfolios. At June 30, 2004, Wintrust'sDecember 31, 2005, Wintrust’s allowance for loan losses was 191.34%155.69% of total nonperforming loans and 0.76%0.78% of total loans. The amount of future losses is susceptible to changes in economic, operating and other conditions, including changes in interest rates, that may be beyond its control, and such losses may exceed current estimates. Rapidly growing andde novobank loan portfolios are, by their nature, unseasoned. As a result, estimating loan loss allowances for Wintrust'sWintrust’s newer banks is more difficult, and, therefore, the banks may be more susceptible to changes in estimates, and to losses exceeding estimates, than banks with more seasoned loan portfolios. Although management believes that the allowance for loan losses is adequate to absorb losses that may develop in Wintrust'sWintrust’s existing portfolios of loans and leases, there can be no assurance that the allowance will prove sufficient to cover actual loan or lease losses in the future.
WINTRUST'S PREMIUM FINANCE BUSINESS INVOLVES UNIQUE OPERATIONAL RISKS AND COULD
EXPOSE IT TO SIGNIFICANT LOSSES.
Wintrust’s premium finance business involves unique operational risks and could expose it to significant losses.
Of Wintrust'sWintrust’s total loans at June 30, 2004, 21%December 31, 2005, 16%, or $790.9approximately $815 million, were comprised of commercial insurance premium finance receivables that it generates through First Insurance Funding Corporation. These loans, intended to enhance the average yield of earning assets of its banks, involve a different, and possibly higher, level of risk of delinquency or collection than generally associated with loan portfolios of more traditional community banks. First Insurance also faces unique operational and internal control challenges due to the relatively rapid turnover of the premium finance loan portfolio and high volume of new loan originations. The average term to maturity of these loans is less than 12 months, and the average loan size when originated is approximately
$30,000.less than $50,000.
Because Wintrust conducts lending in this segment primarily through relationships with a large number of unaffiliated insurance agents and because the borrowers are located nationwide, risk management and general supervisory oversight may be more difficult than in its banks. Wintrust may also be more susceptible to third party fraud. Acts of fraud are difficult to detect and deter, and Wintrust cannot assure investors that its risk management procedures and controls will prevent losses from fraudulent activity. For example, in the third quarter of 2000, Wintrust recorded a non-recurring after-tax charge of $2.6 million in connection with a series of fraudulent loan transactions perpetrated against First Insurance by one independent insurance agency located in Florida. Although Wintrust has since enhanced its internal controls system at First Insurance, it may continue to be exposed to the risk of significant loss in its premium finance business.
Due to continued growth in origination volume of premium finance receivables, since the second quarter of 1999, Wintrust has been selling some of the loans First Insurance originates to an unrelated third party. Wintrust has
19
recognized gains on the sales of the receivables, and the proceeds of sales have provided it with additional liquidity. Consistent with its strategy to be asset driven, Wintrust expects to pursue similar sales of premium finance receivables in the future; however, it cannot assure you that there will continue to be a market for the sale of these loans and the extent of Wintrust'sWintrust’s future sales of these loans will depend on the level of new volume growth in relation to its capacity to retain the loans within its subsidiary banks'banks’ loan portfolios. Because Wintrust has a recourse obligation to the purchaser of premium finance loans that it sells, it could incur losses in connection with the loans sold if collections on the underlying loans prove to be insufficient to repay to the purchaser the principal amount of the loans sold plus interest at the negotiated buy-rate and if the collection shortfall on the loans sold exceeds Wintrust'sWintrust’s estimate of losses at the time of sale.
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WINTRUST MAY BE ADVERSELY AFFECTED BY INTEREST RATE CHANGES.
Wintrust's
Wintrust may be adversely affected by interest rate changes.
Wintrust’s interest income and interest expense are affected by general economic conditions and by the policies of regulatory authorities, including the monetary policies of the Federal Reserve. Changes in interest rates may influence the growth rate of loans and deposits, the quality of the loan portfolio, loan and deposit pricing, the volume of loan originations in Wintrust'sWintrust’s mortgage banking business and the value that Wintrust can recognize on the sale of mortgage loans in the secondary market. Wintrust expects the results of its mortgage banking business in selling loans into the secondary market will be impacted during periods of rising interest rates. While Wintrust has taken measures intended to manage the risks of operating in a changing interest rate environment, there can be no assurance that such measures will be effective in avoiding undue interest rate risk. If market interest rates should move contrary to Wintrust's "gap"Wintrust’s “gap” position on interest earning assets and interest-bearing liabilities, the "gap"“gap” will work against it and Wintrust'sWintrust’s net interest income may be negatively affected.
The success of Wintrust's covered call option program, which Wintrust
has used in effect to hedge its interest rate risk, may also be affected by
changes in interest rates.
With the decline inrelatively low interest rates that prevailed over the last three years, to historically low levels, Wintrust has been able to augment the total return of its investment securities portfolio by selling put options and call options on fixed-income securities it owns. Wintrust recorded fee income of $7.9approximately $11.4 million during 2003,2005, compared to $6.0approximately $11.1 million in 2002,2004, from premiums earned on these covered call option transactions. During the first six months of 2004, Wintrust
recorded fee income of $4.6 million on these transactions. In a rising interest rate environment, particularly if the yield curve remains steep,interest rates continue to increase, the amount of premium income Wintrust earns on these transactions will likely decline. Wintrust'sWintrust’s opportunities to sell covered call options may be limited in the future if rates continue to rise.
WINTRUST'S SHAREHOLDER RIGHTS PLAN AND PROVISIONS IN ITS ARTICLES OF
INCORPORATION AND BY-LAWS MAY DELAY OR PREVENT AN ACQUISITION OF WINTRUST BY A
THIRD PARTY.
Wintrust's board
Provisions in Wintrust’s articles of directors has implementedincorporation and by-laws may delay or prevent an acquisition of Wintrust by a shareholder rights
plan. The rights, which are attached to Wintrust's shares and trade together
with its common stock, have certain anti-takeover effects. The plan may
discourage or make it more difficult for another party to complete a merger or
tender offer for Wintrust's shares without negotiating with Wintrust's board of
directors or to launch a proxy contest or to acquire control of a larger block
of Wintrust's shares. If triggered, the rights will cause substantial dilution
to a person or group that attempts to acquire Wintrust without approval of its
board of directors and, under certain circumstances, the rights beneficially
owned by the person or group may become void. The plan also may have the effect
of limiting shareholder participation in certain transactions such as mergers or
tender offers whether or not such transactions are favored by Wintrust's
incumbent directors and key management. In addition, Wintrust's executive
officers may be more likely to retain their positions with the company as a
result of the plan, even if their removal would be beneficial to shareholders
generally.
Wintrust'sthird party.
Wintrust’s articles of incorporation and by-laws contain provisions, including a staggered board provision, that make it more difficult for a third party to gain control or acquire Wintrust without the consent of its board of directors. These provisions also could discourage proxy contests and may make it more difficult for dissident shareholders to elect representatives as directors and take other corporate actions. These provisions of Wintrust'sWintrust’s governing documents may have the effect of delaying, deferring or preventing a transaction or a change in control that might be in the best interest of Wintrust'sWintrust’s shareholders.
CAUTION ABOUT
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FORWARD-LOOKING STATEMENTS
Certain
We have made forward-looking statements contained in this document,proxy statement/prospectus, including informationin the documents incorporated into this documentproxy statement/prospectus by reference, that are not historical facts may
constitutesubject to risks and uncertainties. These statements are based upon current expectations of each company’s management. Generally, forward-looking statements withininclude information concerning possible or assumed future actions, events or results of operations of Wintrust and the meaningcombined company. Forward-looking statements include the information in this proxy statement/prospectus regarding:
| • | management forecasts, projections and estimates; | ||
| • | efficiencies and cost savings; | ||
| • | business and growth strategies (including anticipated internal growth, plans to form additionalde novobanks and to open new branch offices, and to pursue additional potential development or acquisition of banks, wealth management entities, specialty finance business or fee-related businesses); | ||
| • | regulatory matters; | ||
| • | combined operations; | ||
| • | the economy; | ||
| • | future economic performance; | ||
| • | conditions to, and the timetable for, completing the merger; | ||
| • | future acquisitions or dispositions; | ||
| • | litigation; | ||
| • | potential and contingent liabilities; | ||
| • | management’s plans; | ||
| • | taxes; and | ||
| • | merger and integration expenses. |
Forward-looking statements may be preceded by, followed by or include the words “may,” “will,” “should,” “could,” “would,” “plan,” “potential,” “possible,” “hope,” “estimate,” “project,” “believe,” “intend,” “anticipate,” “expect,” “target” and similar expressions. We claim the protection of Section 27A of the
Securities Act of 1933, as amended, or the Securities Act, and Section 21E of
the Securities Exchange Act of 1934, as amended, or the Securities Exchange Act,
and are intended to be covered by the safe harbor provisions offor forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. The sections of this document which
containfor 1995 for all forward-looking statements include, but are not limited to, "Questions
and answers about the merger," "Summary," "Risk Factors," "Description of the
merger--Background of the merger," "Description of the merger--Wintrust's
reasons for the merger" and "Description of the merger--Town Bankshares' reasons
for the merger and recommendation of the board of directors." You can identify
these statements from our use of the words "may," "will," "should," "could,"
17
"would," "plan," "potential," "estimate," "project," "believe," "intend,"
"anticipate," "expect," "target" and similar expressions.statements.
These forward-looking statements include statements relating to:
o Wintrust's goals, intentions and expectations;
o Wintrust's business plans and growth strategies; and
o estimates of Wintrust's risks and future costs and benefits.
These forward-looking statements are subject toinvolve significant risks, assumptions and uncertainties, and could be affected by many factors including, among other things, changes in general economic and business conditions and the risks and other factors set forth in the "Risk Factors"“Risk Factors” section beginning on page 15 as well as changes in economic conditions,
competition, or other factors that may influence the anticipated growth rate of
loans17, and deposits, slower than anticipated development and growth of Tricom and
the trust and investment business, unanticipated changes in the temporary
staffing industry, the ability to adapt successfully to technological changes to
compete effectively in the marketplace, competition and the related pricing of
brokerage and asset management products and Wintrust's ability to pursue
acquisitions and expansion.documents that are incorporated by reference into this proxy statement/prospectus. Because of these and other uncertainties, Wintrust'sWintrust’s actual future results, performance or achievements, or industry results, may be materially different from the results indicated by these forward-looking statements. In addition, Wintrust'sWintrust’s past results of operations do not necessarily indicate Wintrust'sWintrust’s future results. You should not place undue reliance on any forward-looking statements, which speak only as of the dates on which they were made. Wintrust is not undertaking an obligation to update these forward-looking statements, even though its situation may change in the future, except as required under federal securities law. Wintrust qualifies all of its forward-looking statements by these cautionary statements.
Further information on other factors which could affect the financial
results of Wintrust before and after the merger is included in Wintrust's
filings with the SEC, incorporated by reference into this proxy
statement/prospectus. See "Where You Can Find More Information" on page 54.
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21
INFORMATION ABOUT THE SPECIAL MEETING OF TOWN BANKSHARESHINSBROOK SHAREHOLDERS
DATE, PLACE, TIME AND PURPOSE
Wintrust's and Town Bankshares' boards
Hinsbrook’s board of directors are sending youis using this proxy statement/prospectus and proxy form to solicit proxies from the holders of Hinsbrook common stock for use at the special meeting.meeting of Hinsbrook’s shareholders.
Date, time and place of the special meeting
The special meeting will be held at the main office of Hinsbrook Bank & Trust located at 6262 South Route 83, Willowbrook, Illinois 60527 on May 30, 2006 at 4:00 p.m., local time.
Purpose of the special meeting
At the special meeting, the Town BanksharesHinsbrook board of directors will ask you to vote on a proposal to approveupon the merger agreement. Town Banksharesfollowing:
| • | a proposal to approve the merger agreement and thereby approve the merger; | ||
| • | a proposal to approve an adjournment of the special meeting to permit further solicitation in the event that an insufficient number of shares are present in person or by proxy to approve the merger agreement and the transactions it contemplates; and | ||
| • | any other business that properly comes before the special meeting and any adjournment or postponement thereof. |
Record date and Wintrust will
share equally the costs associated with the solicitation of proxiesvoting rights for the special meeting. The special meeting will be held at
________________________________________, on ____________ ___, 2004 at _______,
local time.
RECORD DATE, VOTING RIGHTS, QUORUM AND REQUIRED VOTE
Town Bankshares
Hinsbrook has set the close of business on __________ ___, 2004,April 24, 2006, as the record date for determining the holders of its common stock entitled to notice of and to vote at the special meeting. Only Town BanksharesHinsbrook shareholders at the close of business on the record date are entitled to notice of and to vote at the special meeting. As of the record date, there were __________2,761,723 shares of Town BanksharesHinsbrook common stock outstanding and entitled to vote at the special meeting. There must be
Quorum and abstentions required vote
The presence in person or by proxy of at least a majority of Town Bankshares'Hinsbrook’s outstanding shares present in person or by proxy at the special meeting is required in order for the vote on the merger to occur. Abstentions from voting or any failure to vote will have the same effect as voting against the merger agreement.
Vote required
Approval of (1) the merger agreement will requireproposal, (2) the proposal to adjourn the special meeting to permit further solicitation in the event that an insufficient number of shares are present in person or by proxy to approve the merger agreement and the transactions it contemplates and (3) any other business that properly comes before the special meeting and any adjournment or postponement thereof, each requires the affirmative vote of at least a majority of Town Bankshares'Hinsbrook’s outstanding shares.shares entitled to vote.
Shares held by Hinsbrook officers and directors; voting agreements
Certain shareholdersofficers and directors of Town Bankshares,Hinsbrook, including one officer who has since resigned, whose aggregate ownership represents approximately 16.9%39.4% of Town Bankshares'Hinsbrook’s outstanding shares, have committed to vote their shares in favor of the merger. Wintrust does not own any shares of Town BanksharesHinsbrook common stock. See "Description of the merger--Voting agreement"“The merger—Voting agreement” on page 3641 for a description of the provisions of the voting agreement.
Abstentions from voting or any failure
How to vote will have the same
effect as voting against the merger agreement.
VOTING AND REVOCABILITY OF PROXIES
You may vote in person at the special meeting or by proxy. To ensure your representation at the special meeting, we recommend you vote by proxy even if you plan to attend the special meeting. You can always change your vote at the meeting.
22
Voting instructions are included on your proxy form.form, which should be returned in the enclosed prepaid envelope. If you properly complete and timely submit your proxy, your shares will be voted as you have directed. You may vote for, against, or abstain with respect to the approval of the merger.merger and the other proposals. If you are the record holder of your shares and submit your proxy without specifying a voting instruction, your shares will be voted "FOR"as the Hinsbrook board of directors recommends and will be voted“FOR” approval of the merger agreement.agreement and“FOR” the adjournment of the special meeting to permit further solicitation in the event that an insufficient number of shares are present in person or by proxy to approve the merger agreement and the transactions it contemplates.
In addition to your proxy form, you have received a separate election form for use in electing the merger consideration you will receive in the merger. The election form should be completed and returned to Illinois Stock Transfer Company in the enclosed prepaid envelope.
Revocability of proxies
You may revoke your proxy at any time before it is voted by:
o filing with Town Bankshares' secretary a duly executed
revocation of proxy;
o submitting a new proxy with a later date; or
o
| • | filing with Hinsbrook’s secretary a duly executed revocation of proxy; | ||
| • | submitting a new proxy with a later date; or | ||
| • | voting in person at the special meeting. |
Attendance at the special meeting will not, in and of itself, constitute a revocation of a proxy. All written notices of revocation and other communication with respect to the revocation of proxies should be addressed to: Town Bankshares, Ltd.Hinsbrook Bancshares, Inc., 400 Genesse Street, Delafield, Wisconsin 53018,6262 South Route 83, Willowbrook, Illinois 60527, Attention: Secretary.
VOTING RIGHTS OF PARTICIPANTS IN THE ESOP
As
Proxy solicitation
In addition to this mailing, proxies may be solicited by directors, officers or employees of ___________, 2004,Hinsbrook in person or by telephone or electronic transmission. None of such directors, officers or employees will be directly compensated for such services. Hinsbrook has retained Illinois Stock Transfer Company to assist in the record datedistribution and solicitation of proxies. Illinois Stock Transfer Company will be paid a fee of approximately $750, plus reasonable expenses, for these services. Hinsbrook and Wintrust will share equally the costs associated with the solicitation of proxies for the special meeting.
Other business; adjournments
Hinsbrook is not currently aware of any other business to be acted upon at the Hinsbrook special meeting. If, however, other matters are properly brought before the special meeting, or any adjournment or postponement thereof, your proxies include discretionary authority on the ESOP owned 7,700part of the individuals appointed to vote your shares to act on those matters according to their best judgment.
Adjournments may be made for the purpose of, Town Banksharesamong other things, soliciting additional proxies. Any adjournment may be made from time to time by the affirmative vote of the majority of the votes cast by holders of Hinsbrook common stock including 1,449 shares
allocatedpresent in person or by proxy at the special meeting, whether or not a quorum is present, without further notice other than by announcement at the special meeting. Hinsbrook does not currently intend to participants' accounts. Eligible ESOP participants are being
offered the opportunity to direct the ESOP administrator, who will in turn
direct the ESOP trustees, as to whether to vote such participants' allocated
shares of common stock for or against the merger. The ESOP is
19
administered by Town Bankshares. The trusteesseek an adjournment of the ESOP are Jay C. Mack,
Jeffrey A. Olsen, Randall R. Tiedt and Dennis Haefer. To direct the ESOP
administrator, an ESOP participant should complete the "Direction to ESOP
Administrator" Form (the "Direction Form") that accompanies this proxy
statement/prospectus and return it to the ESOP administrator (c/o The Pension
Specialists, Ltd., Attention: Jean Southworth, P.O. Box 4247, Rockford,special meeting.
Dissenters’ rights
Under Illinois 61110-0747), all in accordance with the instructions set forth below.
Each participant in the ESOP whose account contains shares of Town
Bankshares common stock as of the record date is eligible to vote by completing,
signing and timely returning the Direction Form to the ESOP administrator. These
individuals include employees of Town Bankshares as of the record date who have
shares allocated in their ESOP accounts as well as former employees of Town
Bankshares who have not received a final distribution from the ESOP.
ESOP participants may direct the ESOP administrator to vote their
allocated shares of Town Bankshares common stock for or against the merger.
Under the terms of the ESOP, subject to the fiduciary obligations described
below, the ESOP administrator will direct the ESOP trustees to vote the common
stock allocated to participant accounts as directed by participants. The voting
rights of such common stock will be exercised only to the extent directed by the
participant, unless the ESOP trustees determine that their fiduciary obligations
require them to vote any common stock for which no directions are received. Any
fractional share of common stock allocated to participants' accounts will be
combined with fractional shares in other participants' accounts to be voted to
reflect, to the extent the ESOP administrator deems it possible, the directions
of the participants with fractional shares in their accounts. The voting
directions with respect to the common stock of all participants will be
communicated by the ESOP administrator to the ESOP trustee for voting in
accordance therewith. The voting rights of any common stock held unallocated by
the ESOP will be voted as directed by the ESOP administrator in a manner it
determines to be in the best interests of participants. As of the record date,
1,449 shares of Town Bankshares common stock held by the ESOP were allocated to
ESOP participant accounts, and 6,251 shares were unallocated.
The ESOP trustees and administrator are subject to certain fiduciary
obligations imposed by the Employee Retirement Income Security Act of 1974. In
general, the ESOP trustees and administrator are obligated under the ESOP to
follow the ESOP participants' directions with respect to the vote, to the extent
described above, unless the ESOP trustees or the administrator independently
determines that to do so would be imprudent or contrary to the best interests of
ESOP participants. Therefore, it could be possible that, notwithstanding the
outcome of the ESOP participants' instructions, the ESOP trustees or
administrator could, in the exercise of their fiduciary obligations, decide to
vote all the ESOP shares in favor of or against the merger.
An ESOP participant who wishes to vote his or her allocated shares of
Town Bankshares common stock must properly complete and timely return the
Direction Form. To do so, after reading this proxy statement/prospectus, an ESOP
participant should:
o mark, date and sign the Direction Form.
o mail the Direction Form so that it will be received by the
ESOP administrator, c/o The Pension Specialists, Ltd.,
Attention: Jean Southworth, P.O. Box 4247, Rockford, Illinois
61110-0747, no later than __________, 2004. In order to be
effective, a Direction Form must be received by the
administrator no later than __________, 2004.
If an ESOP participant fails to sign or timely return a Direction Form,
the ESOP administrator will consider the shares of Town Bankshares common stock
represented by such Direction Form to be shares with respect to which no
instruction has been submitted. Therefore, if an ESOP participant does not want
the ESOP administrator to consider his or her allocated shares as shares with
respect to which no instruction has been submitted, the ESOP participant must
specifically mark a box on the Direction Form, sign the Direction Form and
return it to the ESOP administrator so that the ESOP administrator receives it
no later than ________, 2004.
An ESOP participant who decides to change his or her vote after having
submitted a Direction Form must obtain a new Direction Form by contacting the
ESOP administrator. By properly completing and timely returning a new Direction
Form, an ESOP participant's previously submitted Direction Form will be revoked
automatically. The ESOP administrator may be reached at the following address:
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c/o The Pension Specialists, Ltd.
Attention: Jean Southworth
P.O. Box 4247
Rockford, Illinois 61110-0747
An ESOP participant may also revoke a Direction Form by notifying the
ESOP administrator in writing of the ESOP participant's direction to revoke, but
if a new Direction Form is not timely received by the ESOP administrator, the
ESOP participant's allocated shares covered by the revoked Direction Form will
be considered by the ESOP administrator to be shares with respect to which no
instruction has been submitted. After _________, 2004, no Direction Form will be
accepted and no Direction Form will be permitted to be changed or revoked.
Each Direction Form received by The Pension Specialists, Ltd. will be
held in confidence and will not be released or divulged to representatives of
Town Bankshares. Any participant in the ESOP should contact the ESOP trustees or
administrator if he or she has been subject to pressure or coercion by any party
or if he or she is concerned about the confidentiality of instructions submitted
to The Pension Specialists, Ltd.
DISSENTERS' RIGHTS
Under Wisconsin law, Town Bankshares shareholdersyou are entitled to exercise dissenters'dissenters’ rights and obtain a cash payment for theirthe “fair value” of your shares of Town
Bankshares common stock as a result of Wintrust'sWintrust’s acquisition of Town
Bankshares,Hinsbrook, provided that such shareholdersyou comply with the applicable
provisions of Sections 180.1301 through 180.133111.65 and 11.70 of the Wisconsin Business
Corporation Law, or the WBCL. Neither the ESOP nor its participants will have
dissenters' rights because all of the shares in the ESOP will be redeemed for
cash prior to the completion of the merger. AIBCA. The following is a brief summary of those sectionsthe statutory procedures that you must follow in order to perfect your dissenters’ rights under Illinois law.This summary is set forth belownot a complete statement of the law pertaining to dissenters’ rights under the IBCA and is qualified in its entirety by reference to Sections 11.65 and 11.70 of the IBCA, a copy of themwhich is attachedincluded asAnnex C and incorporated inBto this proxy statement/prospectus by reference. If you comply withprospectus.
23
Shareholders of Hinsbrook who follow the applicable
provisions of Sections 180.1301 through 180.1331procedures set forth in Section 11.70 of the WBCL, then, uponIBCA will be entitled to dissent from the merger and to obtain payment, after the merger, for the “fair value” of their shares, if any, calculated immediately before the consummation of the merger, you willexclusive of any appreciation or depreciation in anticipation of the merger, unless such exclusion would be entitled to receive payment from
Wintrust for the "fair value" of your shares, with accrued interest. If Wintrust
and you cannot agree on the inequitable (“fair value of your shares or thevalue”), plus accrued interest thenfrom the WBCL provides for a judicial determination of these amounts. The fair
value determined by a Wisconsin court could be more or less than the value of
the consideration that you are entitled to receive under the merger agreement.
If you desire to exercise dissenters' rights, you should refer to the applicable
provisions of the WBCL in their entirety and consult with legal counsel before
taking any action to ensure that you comply strictly with the WBCL.
In summary, to exercise dissenters' rights you must initially do the
following:
o before the vote to approvetime the merger is held, delivereffective until the date of payment, at the average interest rate currently paid by Wintrust on its principal bank loans, or if none, at a rate that is fair and equitable under the circumstances (the “interest”).
A record owner may assert dissenters’ rights as to Town
Bankshares afewer than all the shares recorded in such person’s name only if such person dissents with respect to all shares beneficially owned by any one person and notifies Wintrust in writing of the name and address of each persons on whose behalf the record owner asserts such rights. A beneficial owner of shares who is not the record owner may assert dissenters’ rights only if the beneficial owner submits to Wintrust the record owner’s written notice of your intentconsent to dissent before or at the same time the beneficial owner asserts dissenters’ rights.
To dissent from the merger and demand payment ofappraisal, you must satisfy the fair value of your shares of Town
Bankshares; and
o not vote your shares of Town Bankshares common stock in favor
of the merger.following conditions:
| • | deliver a written demand for appraisal of your shares to Hinsbrook before the vote on the approval of the merger agreement at the special meeting (voting against the merger agreement will not satisfy this requirement); | ||
| • | not vote in favor of the merger agreement (if you return your signed proxy and do not specify a vote against the merger agreement or a direction to abstain, your shares will be voted in favor of the merger agreement and you will waive your right to dissent); and | ||
| • | continuously hold your Hinsbrook shares from the date of making the demand through the time the merger is completed. |
Your failure to vote against the proposal to adoptapprove the merger agreement will not constitute a waiver of your dissenters'dissenters’ rights under the WBCL.
Additionally,IBCA. Also, a vote in person or by proxy, against approval of the merger agreement will not by itself be sufficient to satisfy your obligations if you are seeking to exercise dissenters' rights.an appraisal. You must follow each of the procedures of
Sections 180.1301 through 180.1331sent forth in Section 11.70 of the WBCLIBCA to obtain dissenters'perfect dissenters’ rights. Each outstanding share of Town Bankshares common stock for whichIf you fail to so comply with these procedures and the merger becomes effective, you will receive the consideration provided in the merger agreement.
If you make a legally sufficient demand, in accordance with the WBCL and which you do
not vote in favor of approval of the merger will, after the effective time of
the merger, represent only the rights of a dissenting shareholder under the
WBCL. This includes the right to obtain payment for the estimated fair value of
those as provided under the WBCL.
If shareholders of Town Bankshares approve the merger and you make a
legally sufficient demand, then Wintrust will send you, within 10 days of
approval of the merger, a written dissenters' notice to be used to demand
payment for your shares of Town Bankshares common stock. The dissenters' notice
will:
o supply a form for demanding payment that includes the date of
the first announcement of the merger and requires each
shareholder asserting dissenters' rights to certify whether he
or she acquired beneficial ownership of the shares before that
date;
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o include a statement indicating where shareholders should send
the payment demand and when and where certificated shares must
deposited;
o include, for holders of uncertificated shares, an explanation
of the extent to which transfer of the shares will be
restricted after the payment demand is received;
o set a date by which Wintrust must receive your payment demand,
which must be no fewer than 30 and no more than 60 days after the date on which the dissenters' rights noticemerger is delivered;
and
o be accompanied by a copy of Sections 180.1301 through 180.1331
of the WBCL.
Upon receipt ofeffective or 30 days after you deliver the written dissenters' notice, if you still wish to
exercise your dissenters' rights, you must:
o demand for payment, in writing and certify that you acquired your
shares of Town Bankshares common stock before the date
specified in the dissenters' notice; and
o deposit any certificated shares in accordance with the terms
of the written dissenters' notice.
At the effective time of the merger or upon receipt of a payment
demand, whichever is later, Wintrust will pay each dissenting shareholder who
has complied with the applicable provisions of the WBCL the amount which
Wintrust estimates to be the fair value of his or her shares of Town Bankshares
common stock, plus accrued interest. The payment will be accompanied by:
o Town Bankshares' and Wintrust's latest available audited
financial statements, including footnotes and the latest
available interim financial statements;
o a statement of Wintrust's estimate of the fair value of the
shares of Town Bankshares common stock;
o an explanation of how interest was calculated;
o a statement of a dissenting shareholder's right to demand
payment under Section 180.1328 of the WBCL, ifmust send you:
| • | a statement setting forth its opinion of the fair value of the shares; | ||
| • | Hinsbrook’s latest balance sheet as of the end of a fiscal year ending not earlier than 16 months before delivery of the statement, together with the statement of income for that year; | ||
| • | the latest available interim financial statements; and | ||
| • | a commitment to pay for the shares held by the dissenting shareholder at the estimated fair value upon the transmittal to Wintrust of the certificate(s), or other evidence of ownership. |
If the dissenting shareholder is dissatisfied with the payment; and
o a copy of Sections 180.1301 through 180.1331 of the WBCL.
Under Section 180.1328 of the WBCL, you may send Wintrust your own
estimate of the fair value of your shares and the amount of any interest due and
demand payment of the difference between your estimate and the amount Wintrust
paid you, if any, in the following cases:
o if you believe that the amount Wintrust paid you is less than
the fair value of your shares or that the interest due is
incorrectly calculated;
o if you fail to receive payment within 60 days after the date
set forth in the dissenters' notice for demanding payment; or
o if the merger is not consummated, and Town Bankshares does not return deposited certificates or release any transfer
restrictions imposed on uncertificated shares within 60 days
afteragree with Wintrust as to the date set forth in the dissenters' notice for
demanding payment.
Within 30 days of receiving payment or the initial offer to pay, you
must demand payment of the difference between your estimate of the fair value of
your shares, plus interest, and the amount paid to you, or you will lose your
rights to demand payment of any such difference.
Under Section 180.1330 of the WBCL, if an agreement cannot be reached
on theestimated fair value of the shares or the amount of interest due, thensuch shareholder may, within 30 days from the delivery of Wintrust’s statement of value, notify Wintrust of such shareholder’s estimated fair value and amount of interest due. Such notice must commence a proceeding in courtdemand payment for the difference between such shareholder’s estimate of fair value and interest and the amount of payment offered by Wintrust. If within 60 days after receiptfrom delivery of your demand
for payment,the dissenting shareholder’s notification of estimated fair value and interest due, no written agreement has been reached, Wintrust must either pay the difference in value demanded by the dissenting shareholder with interest or file a petition in the circuit court of Lake County, Illinois, requesting the court to determine the fair value of yourthe shares and accrued interest. If
22
interest due. Wintrust does not commence this proceeding within sixty days, then it must pay
you the unsettled amount that you demand.
If Wintrust commences this proceeding, then it will make all dissenting
shareholders whosedissenters with unsettled demands remain unsettled (even if they are not resident of
Wisconsin) parties to the proceeding as an action against their shares, and shall serve all such parties will be served with a copy of the petition. If Wintrust fails to commence an action in circuit court, the dissenting shareholders may commence an action as permitted by law. The court mayhas power to appoint appraisersone or more appraisers. Each dissenter
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who is a party to such action is entitled to receive evidence and
recommend a decision on the question of fair value. Ifamount, if any, by which the court finds that the
amount paid to you is less than the fair value of a dissenting holder'shis or her shares, plus accrued interest, exceeds the amount paid by Wintrust.
In a proceeding brought by Wintrust to determine fair value, the court will order Wintrust to paydetermine the difference to
the dissenting shareholder.
The court will determine all costs of the appraisal proceeding, including the reasonable compensation of expenses of the appraisers appointed by the court and excluding fees and expenses of court-appointed
appraisers,counsel and assessexperts for the respective parties. If the fair value of the shares, as determined by the court, materially exceeds the price that Wintrust estimated to be the fair value of the shares or, if no estimate was given, then all or any part of the costs may be assessed against Wintrust. However,If the amount that any dissenter estimated to be the fair value of the shares materially exceeds the fair value of the shares, as determined by the court, may order
somethen all or allany part of the dissenting shareholderscosts may be assessed against that dissenter. The costs may be awarded to pay some of these costs, in
amounts that the court finds equitable,dissenter if the court finds that Wintrust did not substantially comply with the dissentersprocedures in the statute. In addition, costs can be assessed against either party if the court finds that that party acted arbitrarily vexatiously or not in good faith with respect to the dissenter’s rights.
Shareholders of Hinsbrook who are considering seeking an appraisal should bear in demanding paymentmind that the fair value of their Hinsbrook shares as determined under Section 180.132811.70 of the WBCL.IBCA could be more than, the same as, or less than the merger consideration they are to receive pursuant to the merger agreement if they do not seek appraisal of their shares.
All written demands for appraisal should be addressed to: Hinsbrook Bancshares, Inc., 6262 South Route 83, Willowbrook, Illinois 60527, Attention: President and Chief Executive Officer. A demand must be received before the vote concerning the merger agreement at the special meeting occurs, and should be executed by, or on behalf of, the holder of record.
If you give notice ofproperly exercise your intentdissenters’ rights and follow the correct procedures in the IBCA, your Hinsbrook shares will not be converted into, or represent, a right to demand dissenters'receive the consideration provided for in the merger agreement and you will not be entitled to vote or receive any dividends or other distributions on any such shares. If, however, you fail to properly perfect, effectively withdraw, waive, lose, or otherwise become ineligible to exercise dissenting shareholder’s rights for your
shares under the applicable provisions ofIBCA, then at such time, the WBCL but fail to return your
payment demand or withdraw or lose your rights to demand payment, each of your
shares of Town Bankshares common stockheld by you will be converted into the right to
receive shares of Wintrust common stock and cashconsideration provided in the amountmerger agreement.
Failure to comply strictly with these procedures will cause you to lose your dissenters’ rights. Consequently, if you desire to exercise your dissenters’ rights you are urged to consult a legal advisor before attempting to exercise these rights.
THE MERGER
This section of $58.10 in
accordance with the proxy statement/prospectus describes material aspects of the merger. While Wintrust and Hinsbrook believe that the description covers the material terms of the merger agreement.
DESCRIPTION OF THE MERGER
The followingand the related transactions, this summary may not contain all of the information describes certain aspectsthat is important to you. You should carefully read this entire proxy statement/prospectus, the attached Annexes, and the other documents to which this proxy statement/prospectus refers for a more complete understanding of the merger. The agreement and plan of merger, agreement,not this summary, is the legal document which you should read carefully,governs the merger.
General
The Hinsbrook board of directors is attached as Annex A tousing this proxy statement/prospectus to solicit proxies from the holders of Hinsbrook common stock for use at the Hinsbrook special meeting, at which Hinsbrook shareholders will be asked to vote on approval of the merger agreement and incorporated herein by reference.
GENERALthereby approve the merger. When the merger is consummated, Town BanksharesHinsbrook will merge with and into Wintrust and will cease to exist. Wintrust will survive the merger and TownHinsbrook Bank & Trust will become a wholly-owned subsidiary of Wintrust. At the effective time of the merger, holders of Town BanksharesHinsbrook common stock will exchange their shares for cash, shares of Wintrust common stock or a combination of 50% cash and cash.50% of shares of Wintrust common stock, in each case subject to proration. Each share of Town BanksharesHinsbrook common stock will be exchanged for a numberthe “per share merger consideration” the stock component of Wintrust shares equal to the "per
share stock consideration" which cannot be determined until twofour trading days before completion of the merger and cash in the amount of $58.10.merger. See "Description“Description of the merger agreement--Considerationagreement—Consideration to be received in the merger"merger” for a detailed description of the method for determining the per share stockmerger consideration.
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Only whole shares of Wintrust common stock will be issued in the merger. As a result, cash will be paid instead of any fractional shares based on the average of the high and low salesreference price of Wintrust'sWintrust’s common stock during the 10-day trading period ending two trading days before the merger is
completed.reference period. Shares of Town BanksharesHinsbrook common stock held by Town BanksharesHinsbrook shareholders who elect to exercise their dissenters'dissenters’ rights will not be converted into cash, Wintrust common stock or the combination of cash and cash.
THE COMPANIES
Business of Wintrust--GeneralWintrust common stock.
The Companies
Wintrust
Wintrust Financial Corporation, an Illinois corporation, is a financial holding company headquartered in Lake Forest, Illinois. As of December 31, 2005, Wintrust operates tenoperated 13 community banks, all located in the greater Chicago and Milwaukee metropolitan area,areas, which provide community-oriented, personal and commercial banking services primarily to individuals and small to mid-size businesses through 4262 banking facilities asfacilities. Wintrust, through various of June 30, 2004. Wintrustits subsidiaries, also provides wealth management services, through itsincluding trust, company, investment adviserasset management and broker-dealer subsidiariesbrokerage services, to customers located primarily in the Midwest, as well as to customers of its banks. Wintrust also originates and purchases residential mortgage loans, many of which are sold into the secondary market. In addition, Wintrust is involved in specialty lending through a number of operating subsidiaries or divisions of certain of its banks. Its specialty lending niches include commercial insurance premium finance, accounts receivable financing and administrative services to the temporary staffing industry and indirect auto lending in which Wintrust purchases loans through Chicago-area automobile dealerships. 23
As of June 30, 2004,December 31, 2005, Wintrust had consolidated total assets of $5.33$8.17 billion, deposits of $4.32$6.73 billion and shareholders'stockholders’ equity of $374.2$628 million. Wintrust’s common stock trades on the Nasdaq National Market under the symbol “WTFC.”
Financial and other information relating to Wintrust, including information relating to Wintrust'sWintrust’s current directors and executive officers, is set forth in Wintrust's 2003Wintrust’s 2005 Annual Report on Form 10-K, Wintrust'sWintrust’s Proxy Statement for its 20042006 Annual Meeting of Shareholders filed with the SEC on April 23, 2004, Wintrust's Quarterly Reports on Form 10-Q for each of the
quarters ended March 31, 200424, 2006 and June 30, 2004 and Wintrust'sWintrust’s Current Reports on Form 8-K filed during 2004,2006, which are incorporated by reference to this proxy statement/prospectus. Copies of these documents may be obtained from Wintrust as indicated under "Where“Where You Can Find More Information"Information” on page 54.61. See "Incorporation“Incorporation of Certain Information by Reference"Reference” on page 54.
Business of Wintrust--Recent Developments
On May 10, 2004, Wintrust announced the signing of a definitive
agreement to acquire Northview Financial Corporation, or Northview, in a merger
transaction. Northview is the parent company of Northview Bank and Trust, or
Northview Bank, which has locations in Northfield, Mundelein and Wheaton,
Illinois. Northview Bank began operations as a de novo bank in 1993, and
Northfield had total assets of approximately $343.9 million as of June 30, 2004.
In the proposed merger, each share of Northview's outstanding common
stock will be converted into the right to receive cash and a number of shares of
Wintrust's common stock to be determined based on Wintrust's average trading
price at closing determined in accordance with the definitive merger agreement.
The aggregate per share consideration equates to approximately $275, subject to
possible adjustment depending on Wintrust's average trading price at closing. At
June 30, 2004, Northview had outstanding 164,730 shares of common stock and
in-the-money options to acquire approximately 10,850 shares of common stock at
exercise prices ranging from $75.00 to $115.00 per share, with a weighted
average exercise price of approximately $98.53. The merger is expected to close
late in the third quarter of 2004 and is not expected to have a material effect
on Wintrust's 2004 earnings per share.
Business of Town Bankshares
Town Bankshares, Ltd.61.
Hinsbrook
Hinsbrook Bancshares, Inc., a Wisconsinan Illinois corporation, is a bank holding company headquartered in Delafield, Wisconsin.Willowbrook, Illinois. Its primary business is operating its bank subsidiary, TownHinsbrook Bank a Wisconsin& Trust, an Illinois state bank, with officesIllinois branch locations in DelafieldWillowbrook, Downers Grove, Darien, Glen Ellyn and Madison, Wisconsin. In addition to TownGeneva. Hinsbrook Bank Town Bankshares conducts
limited business activities through Town Investment Corp., a Nevada corporation.
We sometimes refer to Town Bank and Town Investment Corp. as the "subsidiaries."& Trust began operations in 1987. As of June 30, 2004, Town BanksharesDecember 31, 2005, Hinsbrook had consolidated total assets of approximately $238.0$500.0 million, deposits of $204.3$430.6 million and shareholders'shareholders’ equity of $17.8$41.4 million. BACKGROUND OF THE MERGER
Town Bankshares has regularly conductedHinsbrook is not a strategic planning process
each year inpublic company and, accordingly, there is no established trading market for Hinsbrook’s common stock.
Hinsbrook’s proposal
At the summer. As it commenced this process inHinsbrook special meeting, holders of shares of Hinsbrook common stock will be asked to vote on the summer of 2003,
Town Bankshares recognized that it was faced with a number of strategic
challenges that resulted from its rapid growth rate. These challenges included:
(1) keeping its capital base growing as rapidly as its assets were growing, (2)
generating core deposit growth to keep up with its loan growth, (3) pursuing new
lending business with a legal lending limit below what was desirable in the
marketplace, and (4) pursuing new private banking business with a limited
portfolio of product and service offerings.
On June 12, 2003, Town Bankshares retained Corporate Financial
Advisors, LLC, or CFA, to review its strategic alternatives to respond to these
challenges as partapproval of the strategic planning process. At a meetingmerger agreement and thereby approve the merger.The merger will not be completed unless Hinsbrook’s shareholders approve the merger agreement and thereby approve the merger.
Background of Town
Bankshares'the merger
Hinsbrook’s board of directors held on July 31, 2003, CFA presentedand senior management regularly review and evaluate Hinsbrook’s business, strategic direction, performance, prospects and strategic alternatives. This review and evaluation included regular consultation with Hinsbrook’s financial consultants, Young & Associates, Inc. In early 2005, Hinsbrook began such a numberreview. As part of this review, Hinsbrook discussed the advantages and disadvantages of remaining an independent operating concern, the historical performance and strategic alternativesdirection of Hinsbrook Bank & Trust and the lack of liquidity for Hinsbrook’s shareholders. As part of this discussion, Hinsbrook considered the increasing
26
amount of competition in Hinsbrook’s primary markets, anticipated costs and capital requirements necessary to fund Hinsbrook’s continued expansion, the manner in which Hinsbrook would continue to address loan concentration and funding challenges and trends in mergers and acquisitions in the financial services sector.
Following this discussion, the board authorized management to investigate a strategic transaction, including a possible sale transaction. To that end, the board authorized management to contact financial advisors and legal counsel for assistance with this investigation. Hinsbrook retained Capital Market Securities, an affiliate of directors of Town Bankshares, and
discussed the merits of each. These strategic alternatives included: (1) slowing
Town Bankshares' growth rate to a level whereby its capital needs could be
funded by earnings, (2) obtaining significant outside financing from an
institutional investor to expand Town Bankshares' capital base to permit faster
growth, (3) obtaining more limited financing from current shareholders or
through a private placement of trust preferred securities, and (4) selling or
merging Town Bankshares into a larger institution that could provide the
resources to maximize its perceived opportunities.
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The board of directors continued to discuss these strategic
alternatives at meetings held on August 27, 2003 and September 17, 2003. Also,
in August 2003, Town Bankshares solicited proposals from several investment
banking firms and CFA to actYoung & Associates, Inc., as its financial advisor in connection with exploring its strategic alternatives and a possible sale transaction.
Hinsbrook and Capital Market Securities signed a formal engagement letter on June 3, 2005. Also on that date, representatives of Capital Market Securities met with representatives of Hinsbrook’s management to assistdiscuss Hinsbrook’s strategic alternatives and provided a market analysis, which included an analysis of trends in exploringbank pricing and financial performance along with an analysis of bank merger activity. Capital Market Securities also discussed with Hinsbrook potential pricing Hinsbrook might anticipate should it decide to consider a possible sale transaction. Capital Market Securities began gathering information about Hinsbrook’s business operations and primary markets.
Shortly after the June 3, 2005 meeting, Capital Market Securities began a more comprehensive due diligence review of Hinsbrook and Hinsbrook Bank & Trust, meeting with members of Hinsbrook’s management on June 16 and June 17, 2005 and began developing confidential marketing materials concerning Hinsbrook.
At the regular meeting of Hinsbrook’s board held on July 26, 2005, the board continued its discussions concerning the evaluation of Hinsbrook’s strategic alternatives.alternatives and a possible sale transaction. A representative of Barack Ferrazzano Kirschbaum Perlman & Nagelberg LLP, Hinsbrook’s special counsel, attended this meeting and gave a presentation concerning Hinsbrook’s strategic alternatives as well as the fiduciary obligations of the board. Representatives of Capital Market Securities also attended this meeting and reviewed with the board a draft of the confidential marketing materials that had been developed and a proposed list of prospective bidders. Following this meeting, Hinsbrook’s management continued to work with Capital Market Securities on the development of the confidential marketing materials. Capital Market Securities began contacting prospective bidders and distributed confidentiality agreements to those bidders expressing an interest in a possible transaction with Hinsbrook.
At the regular monthly meeting of Hinsbrook’s board held on August 17, 2005, the board ratified the retention of Capital Market Securities as Hinsbrook’s financial advisor and authorized Capital Market Securities to distribute the approved confidential marketing materials to potential bidders. After this meeting, Capital Market Securities provided copies of the confidential marketing materials to each party that had executed a confidentiality agreement, worked with other potential bidders to obtain executed confidentiality agreements to be able to provide them with the confidential marketing materials and continued working with potential strategic partners with the goal of receiving initial bids by September 8, 2005.
At a special meeting of the Hinsbrook board on September 12, 2005, Capital Market Securities reviewed the results of the preliminary proposal solicitation process with Hinsbrook’s board. Capital Market Securities reported that it had contacted 26 prospective strategic partners, 20 of which had executed confidentiality agreements and received copies of the marketing materials. Of these parties, six presented Hinsbrook with written, non-binding expressions of interest for a proposed acquisition transaction, subject to due diligence and the negotiation of a definitive agreement. At the September 1712 meeting, Town Bankshares'Capital Market Securities and the board discussed the price range of directors
decided to pursue a private placement of trust preferred securities and also to
explore a possible saleeach of the company. Givensix proposals received, the interest rate environmentform of consideration offered, the reputation of each party, the strategic opportunity offered by each possible transaction and the need for capitalperceived ability of each party to support Town Bankshares' growth,consummate a transaction. Following this discussion, the board of directors
believed it was advisable to complete the trust preferred offering in the
near-term. Town Bankshares completed a private placement of $6 million of trust
preferred securities in October 2003. At the same time, the board of directors
also concluded that Town Bankshares should begin to solicit potential buyers to
determine if any buyer would offer both a good strategic fit with Town
Bankshares' operations and an attractive purchase price for its shareholders. On
September 19, 2003, Town Bankshares formally engaged CFA as its financial
advisor to begin a sale process for Town Bankshares and obtain indications of
interest for its acquisition.
In October 2003, Town Bankshares' board of directors determined to form
a special committee of independent directors to create a small group to more
effectively oversee the sale process. The special committee consisted ofauthorized three
independent directors, William J. Hickmann, Michael J. Pretasky, Sr. and Robert
N. Trunzo. Thomas A. Manthy, who is also an independent director, was appointed
as an alternate member of the Special Committee and attended a number of
meetings of the Special Committee.
Over the next several weeks after the board's September 17 meeting,
Town Bankshares, with the assistance of CFA, began the sale process, including
the preparation of an offering memorandum, the development of a list of
potential buyers and the organization of due diligence materials. After
receiving advice from CFA and completing these steps, Town Bankshares decided to
begin the process of contacting potential buyers on November 1, 2003.
Between November 1, 2003 and February 15, 2004, CFA contacted or was
contacted by a total of 141 potential buyers, principally consisting of bank
holding companies in Wisconsin, Illinois, Minnesota, Indiana, Michigan and Iowa,
concerning their possible interest in acquiring Town Bankshares. Of these 141
parties, 31 entered into confidentiality agreements with Town Bankshares and
conducted preliminary due diligence regarding Town Bankshares. Between November
1, 2003 and December 15, 2003, Town Bankshares received indications of interest
from 11 of these parties, with preliminary valuation ranges from $22.0 million
to $38.4 million. These indications of interest were based only on preliminary
due diligence. Wintrust's offer was at the upper end of these valuation ranges
and, management and the special committee believed, offered a good fit with Town
Bankshares' operations and management philosophy.
At a meeting held on February 27, 2004, the special committee reviewed
the indications of interest submitted by the potential buyers with CFA. At the
conclusion of these discussions, the special committee determined that no more
than five of the bidders, offered an adequate valuation, a good strategic fit
with Town Bankshares and reasonable certainty to closing. The special committee
authorized CFA to invite these five biddersincluding Wintrust, to conduct additionaloff-site due diligence.
Duringdiligence concerning Hinsbrook in order to obtain final bids from each.
Due diligence was conducted by each of the coursethree prospective strategic partners, including Wintrust, during the weeks of September 19 through October 3, 2005 with the expectation that final bids would be submitted to Hinsbrook on October 14, 2005. Throughout the due diligence and bidding process, Capital Market Securities remained in contact with the prospective strategic partners to assist in the due diligence process and negotiate the bidders discussed Town
Bankshares' operations, capital structure, asset quality and loan portfolio, andterms of the final offers. Wintrust submitted a revised written, non-binding expression of interest on October 14, 2005, while the two other matters raised by their due diligence with CFA and representatives of Town
Bankshares. The special committee also decided that it would solicit final bids
after Town Bankshares' operating results for the quarter ending March 31, 2004,
were available.
In May 2004, the special committee invited the remaining biddersprospective strategic partners declined to submit final proposalsbids.
27
Hinsbrook’s board met with Capital Market Securities on October 18, 2005 to acquire Town Bankshares. At this time, two bidders
submitted final proposals. Wintrust made areview Wintrust’s revised bid of $129.10approximately $41.59 per share resulting
in an aggregate valuation in the $41.0 million range (including the conversioncomprised of Town Bankshares stock options into options to purchaseapproximately 50% cash and 50% shares of Wintrust
common stock). The other final bidder's bid was for $110.12 per share, resulting
in an aggregate valuation in the $35.0 million range (including the conversion
of Town Bankshares' stock options into options to purchase shares of the other
bidder's common stock). Both of these bids contemplated merger consideration
divided into approximately equal amounts of cash andWintrust’s common stock. Unlike
Wintrust, the other bidder's common stock was not actively traded onThis discussion included a public
market, and therefore offered significantly less liquidity to Town Bankshares'
shareholders.
The board of directors met on May 13, 2004, to review the final bids.
At this meeting, the board of directors also authorized the engagement of
Reinhart Boerner Van Deuren s.c. as legal counsel, and representatives of legal
counsel and CFA attended the meeting. CFA made a presentation to the board of
directors at the meeting on the bidding process and the merits of the two final
bids. Following a detailed review of the final bids, theWintrust’s financial information, Wintrust’s history of prior transactions, Wintrust’s community bank operating philosophy and stock performance history. Following this review, Hinsbrook’s board of directors
authorized the special committee and Town Bankshares' legal counsel and
financial advisorsdetermined to workpursue a transaction with
25
Wintrust to complete its final due diligence and to negotiate a definitive
merger agreement based on its proposal. Representatives of Wintrust were
contacted and requested to prepare a draft of the merger agreement for review
and consideration by the special committee. The board of directors also
authorized the special committee to engage an investment banking firm to deliver
an opinion with respect to the fairness of the merger consideration to Town
Bankshares' shareholders from a financial point of view. On June 3, 2004, Town
Bankshares engaged Edelman & Co., Ltd. to deliver such an opinion.
On May 20, 2004, Wintrust's legal counsel delivered a draft of the
merger agreement to Town Bankshares and its legal counsel for review. On May 25,
2004, the members of the special committee met with Town Bankshares' legal
counsel and a representative from CFA to review the draft merger agreement and
the significant issues with Wintrust's draft. Legal counsel also reviewed with
the special committee the fiduciary duties of its members in connection with the
sale process.
On May 26, 2004, Town Bankshare's full board of directors met to review
the significant issues in the draft merger agreement with the members of the
special committee. At this meeting, legal counsel also reviewed the fiduciary
duties of the board of directors in connection with the sale process.
On May 28, 2004, representatives of Wintrust and Wintrust's legal
counsel metauthorized Barack Ferrazzano and Capital Market Securities to enter into discussions with Mr. Hickmann and Town Bankshares' legal counsel and financial
advisorsWintrust to negotiate the terms of a merger agreementagreement.
On October 20, 2005, Wintrust conducted additional due diligence at Hinsbrook. Further due diligence was conducted throughout the month of November.
Hinsbrook and other issues related to the
proposed transaction. During this meeting, a number of substantive issues were
resolved and Wintrust's legal counsel undertook to circulate a revisedits advisors received an initial draft of the merger agreement on June 1. Between June 1 and June 12 legal counsel forOctober 27, 2005. Thereafter, Hinsbrook, Wintrust and Town Bankshares negotiated a numbertheir respective legal advisors engaged in negotiations of the open issues on the
merger agreement. Town Bankshares delivered draft disclosure schedules to
Wintrust on June 7 and Wintrust's legal counsel conducted additional due
diligence with respect to Town Bankshares.
As part of its bid, Wintrust required that Jay C. Mack, Town
Bankshares' Chief Executive Officer and President, and Jeffrey A. Olsen, Town
Bankshares' Senior Vice President - Senior Lender, enter into an employment
agreement with Wintrust upon the closing of the merger. During the week of May
24, 2004, Wintrust delivered a draft of a form of employment agreement to Mr.
Mack, Mr. Olsen and their legal counsel. At that time, legal counsel to Mr. Mack
and Mr. Olsen suggested that each of Mr. Mack and Mr. Olsen should be paid a
stay bonus by Town Bankshares in connection with the transaction and their
commitment to execute employment agreements with Wintrust. Between May 26 and
June 14, Mr. Mack and Mr. Olsen conducted negotiations with Wintrust regarding
the terms of their employment agreements and with the special committee
regarding the terms of their stay bonus agreements.
On June 8, 2004, Town Bankshares' board of directors met with legal
counsel and representatives of CFA to review the draft merger agreement in
detail and discuss the few remaining issues on the merger agreement. The board
of directors authorized the special committee to continue to negotiate the merger agreement, in an effort to resolve allexchanging comments and revised drafts of the open issues. The boardmerger agreement.
On November 22 and November 23, 2005, representatives of directors also discussed the stay bonus agreements with Mr. MackHinsbrook and Mr. OlsenWintrust and authorized the payment of aggregate stay bonuses of $550,000.
On June 11, 2004, Edelman made a presentationboth parties’ legal advisors met by telephone to the full Town
Bankshares' board of directors regarding an analysis relating to Edelman's
opinion. Legal counsel also summarizednegotiate the terms of the merger agreement that
had changed sinceagreement. At a regular monthly meeting of the June 8Hinsbrook board meeting.
Between June 11held on November 30, 2005, representatives of Barack Ferrazzano and Capital Market Securities reviewed with the board the process leading to the proposed transaction and the morningcourse of June 14, Wintrust's legal counselnegotiations with Wintrust. Representatives of Barack Ferrazzano reviewed in detail with the board the terms of the current draft of the merger agreement, including the scope of the representations and Town Bankshares' legal counsel negotiatedwarranties, the remaining open issues onnature of Hinsbrook’s operating covenants prior to closing and the proposed closing conditions.
On December 1, 2005, members of Hinsbrook’s management and representatives of Barack Ferrazzano and Capital Market Securities met with representatives of Wintrust to conduct a due diligence review of Wintrust and its operations.
On December 2, 2005, the Hinsbrook board held a special meeting that was also attended by representatives of Barack Ferrazzano and Capital Market Securities. At this meeting, the board received a verbal report from management and its advisors concerning the due diligence review of Wintrust. Barack Ferrazzano distributed to the board an updated draft of the merger agreement and reviewed with the relatedboard the changes from the draft received on November 30 and remaining open items. Capital Market Securities provided a financial analysis to the board of the proposed transaction documents. At a meeting held beforewith Wintrust and issued to the openingboard its oral opinion that the proposed merger consideration of $41.59 per share, as adjusted to reflect the market value of the stock markets on June 14, 2004, Edelman issued its opinion
concerningportion of the fairness,consideration pursuant to the merger agreement, is fair from a financial point of view to Hinsbrook’s shareholders.
After the conclusion of the presentations and discussions at the December 2 meeting, the Hinsbrook board unanimously approved the merger agreement and resolved to recommend that Hinsbrook shareholders approve the merger and, subject to the receipt by Hinsbrook of the written fairness opinion from Capital Market Securities, authorized the president and chief executive officer of Hinsbrook to execute the merger agreement on behalf of Hinsbrook in substantially the form reviewed by the board subject to such changes agreed to by such officer.
On December 5, 2005, Capital Market Securities issued its written opinion to the Hinsbrook board that as of December 5, 2005, the merger consideration of $41.59 per share, as adjusted to reflect the market value of the stock portion of consideration pursuant to the merger agreement, was fair from a financial point of view to Hinsbrook’s shareholders. Also on December 5, the merger agreement was finalized and executed by Hinsbrook and Wintrust. Hinsbrook and Wintrust issued a joint press release on December 5, 2005 announcing the execution of the merger considerationagreement.
Hinsbrook’s reasons for the merger and recommendation of the board of directors
Hinsbrook’s board of directors believes that the merger is in the best interests of Hinsbrook and its shareholders. Accordingly, Hinsbrook’s board of directors has unanimously approved the merger agreement and unanimously recommends that its shareholders vote “FOR” the approval of the merger agreement.
Hinsbrook’s board of directors has concluded that the proposed merger offers Hinsbrook’s shareholders an attractive opportunity to Town Bankshares'achieve the board’s strategic business objectives, including increasing shareholder value,
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growing the size of the business and enhancing liquidity for Hinsbrook’s shareholders, who will gain the benefit of a public trading market for their shares.
In deciding to approve the merger agreement and Town Bankshares'the transactions it contemplates, Hinsbrook’s board of directors consulted with Hinsbrook’s management, as well as its legal counsel and financial advisor, and considered numerous factors, including the following:
| • | information with respect to the businesses, earnings, operations, financial condition, prospects, capital levels and asset quality of Hinsbrook and Wintrust, both individually and as a combined company; | ||
| • | the perceived risks and uncertainties attendant to Hinsbrook’s execution of its strategic growth plans as an independent banking organization, including the need to access additional capital and enhance its technology platform on a cost-effective basis to support future growth; | ||
| • | the belief that the market value of Wintrust’s common stock prior to the execution of the merger agreement was very attractive and offered favorable prospects for future appreciation as a result of the proposed merger and other strategic initiatives being implemented by Wintrust; | ||
| • | the strategic vision of the management of Wintrust to seek profitable future expansion in the Chicago metropolitan area, leading to continued growth in overall stockholder value; | ||
| • | the fact that Wintrust is publicly held and the merger would provide access to a public trading market for Hinsbrook’s shareholders whose investments currently are in a privately held company, as well as enhanced access to capital markets to finance the combined company’s capital requirements; and | ||
| • | the likelihood that the merger will be approved by the relevant bank regulatory authorities and the other conditions to closing satisfied. |
The above discussion of the information and factors considered by Hinsbrook’s board of directors is not intended to be exhaustive, but includes all material factors considered by Hinsbrook’s board. In arriving at its determination to approve the merger agreement and the transaction it contemplates, and recommend that Hinsbrook’s shareholders vote to approve the merger, Hinsbrook’s board of directors did not assign any relative or specific weights to the above factors, and individual directors may have given differing weights to different factors.
Hinsbrook’s board of directors believes that the merger is fair to, and in the best interests of, Hinsbrook and its shareholders. Hinsbrook’s board of directors unanimously approved the merger agreement and recommends that shareholders vote “FOR” approval of the merger agreement.
Certain directors and unanimously recommended that Town Bankshares' shareholders approveofficers of Hinsbrook have interests in the merger agreementdifferent from or in addition to their interests as shareholders generally, including certain cash payments that will be made as a result of the merger under various benefit plans and agreements currently in place in order to terminate such agreements and to be made under agreements entered into between the individuals and Wintrust in connection with the merger. You may wish to consider these interests in evaluating Hinsbrook’s board of directors’ recommendation that you vote in favor of the merger. See “The merger—Interests of certain persons in the merger.” Hinsbrook’s directors and executive officers have agreed to vote their shares in favor of the merger at the special meeting. Immediately following this meeting, Wintrust
and Town Bankshares executed
Wintrust’s reasons for the merger agreement and Wintrust publicly
announced the execution of the merger agreement before the opening of the stock
markets.
26
WINTRUST'S REASONS FOR THE MERGER
Wintrust's
Wintrust’s board of directors believes that the merger is in the best interests of Wintrust and its shareholders. In deciding to approve the merger, Wintrust'sWintrust’s board of directors considered a number of factors, including:
o management's view that the acquisition of Town Bankshares
provides an attractive opportunity to expand into desirable
markets in southeastern Wisconsin;
o Town Bankshares' community banking orientation and its
compatibility with Wintrust and its subsidiaries;
o
| • | management’s view that the acquisition of Hinsbrook provides an attractive opportunity to expand into desirable markets; | ||
| • | Hinsbrook’s community banking orientation and its compatibility with Wintrust and its subsidiaries; |
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| • | a review of the demographic, economic and financial characteristics of the markets in which Hinsbrook operates, including existing and potential competition and history of the market areas with respect to financial institutions; | ||
| • | management’s review of the business, operations, earnings and financial condition, including capital levels and asset quality, of Hinsbrook Bank & Trust since itsde novo formation in 1987; | ||
| • | efficiencies to come from integrating certain of Hinsbrook’s operations into Wintrust’s existing operations; and | ||
| • | the likelihood of regulators approving the merger without undue conditions or delay. |
The above discussion of the demographic, economicinformation and financial
characteristics of the markets in which Town Bankshares
operates, including existing and potential competition and
history of the market areas with respect to financial
institutions;
o management's review of the business, operations, earnings and
financial condition, including capital levels and asset
quality, of Town Bank since its de novo formation in 1998; and
o the likelihood of regulators approving the merger without
undue conditions or delay.
While Wintrust'sfactors considered by Wintrust’s board of directors is not intended to be exhaustive, but includes all material factors considered these and otherby Wintrust’s board. In view of the wide variety of factors considered by the Wintrust board of directors in connection with its evaluation of the merger, the Wintrust board did not consider it practical to, nor did it attempt to, quantify, rank or otherwise assign any specific or relative weights to the specific factors considered and did not make any determination with respectthat it considered. In considering the factors described above, individual directors may have given differing weights to any
individual factor. Wintrust'sdifferent factors. Wintrust’s board of directors collectively made its determination with respect to the merger based on the conclusion reached by its members, based on the factors that each of them considered appropriate, that the merger is in the best interests of Wintrust'sWintrust’s shareholders. The terms
Fairness opinion of Hinsbrook’s financial advisor
On June 3, 2005, Hinsbrook retained Capital Market Securities to act as its financial advisor in connection with a review of strategic alternatives, including a possible merger or sale and related matters. As part of its engagement, Capital Market Securities agreed, if requested by Hinsbrook, to render an opinion with respect to the fairness, from a financial point of view, to the holders of the Hinsbrook common stock of the merger wereconsideration as set forth in a definitive merger agreement.
Capital Market Securities is a NASD registered broker dealer specializing in the resultfinancial services industry. In the ordinary course of arm's-lengthits investment banking business, Capital Market Securities is regularly engaged in the valuation of financial institutions and their securities in connection with mergers and acquisitions and other corporate transactions.
Capital Market Securities acted as financial advisor to Hinsbrook in connection with the proposed merger and participated in certain aspects of the negotiations between representatives of
Wintrust and representatives of Town Bankshares.
TOWN BANKSHARES' REASONS FOR THE MERGER AND RECOMMENDATION OF THE BOARD OF
DIRECTORS
Town Bankshares'leading to the merger agreement. At the December 2, 2005 meeting at which the Hinsbrook board of directors believes that the merger is in the
best interests of Town Banksharesconsidered and its shareholders. Accordingly, Town
Bankshares' board of directors has unanimously approved the merger agreement, Capital Market Securities delivered its oral opinion, subsequently confirmed in writing on December 5, 2005 that, as of December 5, 2005, the merger consideration was fair to the holders of the Hinsbrook common stock from a financial point of view.
THE FULL TEXT OF CAPITAL MARKET SECURITIES’ WRITTEN OPINION IS INCLUDED ASANNEX DTO THIS PROXY STATEMENT/ PROSPECTUS. THE WRITTEN OPINION SETS FORTH, AMONG OTHER THINGS, THE ASSUMPTIONS MADE, PROCEDURES FOLLOWED, MATTERS CONSIDERED AND LIMITATIONS ON THE REVIEW UNDERTAKEN BY CAPITAL MARKET SECURITIES IN CONNECTION WITH ITS OPINION. HOLDERS OF HINSBROOK COMMON SHARES ARE URGED TO READ THE OPINION CAREFULLY AND IN ITS ENTIRETY IN CONNECTION WITH THEIR CONSIDERATION OF THE PROPOSED MERGER.
Capital Market Securities’ opinion speaks only as of the date of the opinion. Capital Market Securities provided its opinion for the information and unanimously recommends thatassistance of the Hinsbrook board of directors in connection with its shareholders vote "FOR"consideration of the approvaltransaction contemplated by the merger agreement and is directed only to the fairness of the merger agreement.consideration to the holders of the Hinsbrook common stock from a financial point of view. The opinion does not address the underlying business decision of Hinsbrook to engage in the merger or any other aspect of the merger and is not a recommendation to any Hinsbrook shareholder as to how that shareholder should vote at the special meeting with respect to the merger, the form of consideration such shareholders should elect or any other matter. Capital Market Securities’ opinion will not reflect any developments that have occurred or may occur after
30
the date of its opinion and prior to the completion of the merger. Capital Market Securities has no obligation to revise, update or reaffirm its opinion, and Hinsbrook does not currently expect that it will request an updated opinion from Capital Market Securities.
In connection with rendering its deliberationsDecember 5, 2005 opinion, Capital Market Securities reviewed and considered, among other things:
| • | the merger agreement; | ||
| • | certain publicly available financial statements and other historical financial information of Hinsbrook that Capital Market Securities deemed relevant; | ||
| • | certain publicly available financial statements and other historical financial information of Wintrust that Capital Market Securities deemed relevant; | ||
| • | the pro forma financial impact of the merger on Wintrust based on assumptions relating to transaction expenses, cost savings and other factors; | ||
| • | the publicly reported historical price and trading activity for Wintrust’s common stock, including a comparison of certain financial and stock market information for Wintrust with similar publicly available information for certain other banks which are publicly traded; | ||
| • | the financial terms of certain recent mergers in the banking industry, to the extent publicly available; | ||
| • | the current banking environment and economic conditions generally; and | ||
| • | such other information, financial studies, analyses and investigations and financial, economic and market criteria as Capital Market Securities considered appropriate for purposes of its analysis. |
Capital Market Securities also discussed with certain members of management of Hinsbrook the business, financial condition, results of operations and prospects of Hinsbrook and held similar discussions with certain members of management of Wintrust regarding the business, financial condition, results of operations and prospects of Wintrust.
In performing its reviews and analyses and in makingrendering its determinationopinion, Capital Market Securities relied upon and assumed, without independent verification, the accuracy and completeness of all of the financial and other information that was available to unanimously
approveit from public sources, that was provided by Hinsbrook or Wintrust or either’s respective representatives or that was otherwise reviewed by Capital Market Securities and assumed such accuracy and completeness for purposes of rendering its opinion. Capital Market Securities further relied on the assurances of management of Hinsbrook and Wintrust that they were not aware of any facts or circumstances that would make any of such information inaccurate or misleading. Capital Market Securities was not asked to and did not undertake an independent verification of any of such information and Capital Market Securities does not assume any responsibility or liability for its accuracy or completeness. Capital Market Securities did not make an independent evaluation or appraisal of the specific assets, the collateral securing assets or the liabilities (contingent or otherwise) of Hinsbrook or Wintrust or any of their subsidiaries, or the collectibility of any such assets, nor has Capital Market Securities been furnished with any such evaluations or appraisals. Capital Market Securities did not make an independent evaluation of the adequacy of the allowance for loan losses of Hinsbrook or Wintrust, nor has Capital Market Securities reviewed any individual credit files relating to Hinsbrook or Wintrust. Capital Market Securities assumed, with Hinsbrook’s consent, that the respective allowances for loan losses for both Hinsbrook and Wintrust are adequate to cover such losses.
Capital Market Securities’ opinion was necessarily based upon market, economic and other conditions as they existed on, and could be evaluated as of, and the information made available to Capital Market Securities as of, the date of its opinion. Capital Market Securities assumed, in all respects material to its analysis, that all of the representations and warranties contained in the merger agreement and all related agreements are true and correct, that each party to such agreements will perform all of the covenants required to be performed by such party under such agreements and that the conditions precedent to the merger contained in the merger agreement are not waived.
31
Capital Market Securities also assumed, with Hinsbrook’s consent, that there has been no material change in Hinsbrook’s and Wintrust’s assets, financial condition, results of operations, business or prospects since the date of the last financial statements made available to Capital Market Securities and that Hinsbrook and Wintrust will remain as going concerns for all periods relevant to its analyses. Finally, with Hinsbrook’s consent, Capital Market Securities relied, to the extent such advice was related to Capital Market Securities, upon the advice Hinsbrook received from its legal, accounting and tax advisors as to all legal, accounting and tax matters relating to the merger agreement and the other transactions contemplated by the merger agreement.
The earnings projections used and relied upon by Capital Market Securities in its analyses of Hinsbrook and Wintrust, projections of transaction costs, estimates of purchase accounting adjustments and expected cost savings relating to the merger were developed by Capital Market Securities and reviewed with the assistancemanagement of Hinsbrook, and Capital Market Securities assumed for purposes of its analyses that they reflected the best currently available estimates and judgments of Hinsbrook management of the expected future financial performance of Hinsbrook and legal advisors, Town Bankshares'Wintrust, respectively, and that such performances would be achieved. These projections, as well as the other estimates used by Capital Market Securities in its analyses, were based on numerous variables and assumptions which are inherently uncertain and, accordingly, actual results could vary materially from those set forth in such projections. Capital Market Securities also assumed that the merger will qualify as a tax-free reorganization for United States federal income tax purposes and that the other transactions contemplated by the merger agreement will be consummated as described in the merger agreement. Capital Market Securities further assumed that all governmental, regulatory or other consents and approvals necessary for the completion of the merger will be obtained without any adverse effect on Hinsbrook, Wintrust or on the contemplated benefits of the merger.
In performing its analyses, Capital Market Securities also made numerous assumptions with respect to industry performance, business and economic conditions and various other matters, many of which cannot be predicted and are beyond the control of Hinsbrook, Wintrust and Capital Market Securities. The analyses performed by Capital Market Securities are not necessarily indicative of actual values or future results, which may be significantly more or less favorable than suggested by such analyses. Capital Market Securities prepared its analyses solely for purposes of rendering its opinion and provided such analyses to the Hinsbrook board of directors considered
numerous factors,at its December 2, 2005 meeting. Estimates of the values of companies do not purport to be appraisals or necessarily reflect the prices at which companies or their securities may actually be sold. Such estimates are inherently subject to uncertainty and actual values may be materially different. Accordingly, Capital Market Securities’ analyses do not necessarily reflect the value of the Hinsbrook common stock or the Wintrust common stock or the prices at which either may be sold at any time.
In accordance with customary investment banking practice, Capital Market Securities employed generally accepted valuation methods in reaching its opinion. The following is a summary of the material financial analyses that Capital Market Securities used in reaching its opinion and presented by Capital Market Securities to Hinsbrook’s board of directors on December 2, 2005, in connection with its opinion. Some of the summaries of financial analyses are presented in tabular format. In order to understand the financial analyses used by Capital Market Securities more fully, you should read the tables together with the text of each summary. The tables alone do not constitute a complete description of Capital Market Securities’ financial analyses, including the following:
o following the multi-step process described under the heading
"Backgroundmethodologies and assumptions underlying those analyses, and if viewed in isolation could present a misleading or incomplete view of the merger" pursuantfinancial analyses performed by Capital Market Securities. The summary data set forth below do not constitute conclusions reached by Capital Market Securities with respect to which Town Bankshares
contacted or was contacted by 141 prospective buyers, executed
confidentiality agreements with 31 of these parties, and then
received indications of interest from 11 of these parties over
the courseany of the process, Wintrust's proposal offeredanalyses performed by it in connection with its opinion. In arriving at its opinion, Capital Market Securities considered all of the highest pricefinancial analyses it performed and more certaintydid not attribute any particular weight to closing than any other
proposal;
oindividual analysis or reach any specific conclusion with respect to any such analysis. Rather, Capital Market Securities made its determination as to the fairness to the holders of the Hinsbrook common stock, from a financial point of view, of the merger consideration, on the basis of $129.10its experience and professional judgment after considering the results of all of the analyses set forth in the following pages. Also, no company included in Capital Market Securities’ comparative analyses described below is identical to Hinsbrook or Wintrust and no transaction is identical to the merger. Accordingly, an analysis of comparable companies or transactions involves complex considerations and judgments concerning differences in financial and operating characteristics of the companies and other factors that could affect the public trading values or merger transaction values, as the case may be, of Hinsbrook or Wintrust and the companies to which they are being compared.
32
Summary of Merger Pricing Terms. Capital Market Securities reviewed the financial terms of the proposed transaction. Hinsbrook shareholders are to receive in exchange for their Hinsbrook common stock cash consideration, stock consideration or a combination of cash and stock consideration. The per share cash consideration is $41.59. The per share stock consideration is to be calculated as a fraction of Town
Bankshares common stock, payable in cash and sharesa share of Wintrust common stock between 0.680 and 0.846, depending on the average high and low sale price of Wintrust common stock on the Nasdaq National Market during the 10 trading day period ending on the fourth trading day prior to the completion of the merger. For purposes of its analysis, Capital Market Securities assumed the per share merger consideration would be equal to $41.59.
Based upon unaudited financial information for Hinsbrook at September 30, 2005 shown below, Capital Market Securities calculated the pricing ratios set forth below:
September 30, 2005 Financial Information
(Dollar information in thousands)
(Dollar information in thousands)
| Shareholder equity | $ | 39,888 | ||
| Tangible shareholder equity | $ | 39,888 | ||
| LTM net income | $ | 6,788 | ||
| Total deposits | $ | 424,820 | ||
| Shares Outstanding | 2,750,798 | |||
Pricing Ratios | ||||
| Price/Tangible Book Value | 287 | % | ||
| Price/Book Value | 287 | % | ||
| Price to Last Twelve Months Earnings | 16.9 | X | ||
| Purchase Price Premium above Tangible Book Value/Deposits | 17.5 | % |
Stock Trading Analysis.Capital Market Securities reviewed the history of the reported trading prices and volume of Hinsbrook’s common stock since June 30, 2005. There were a limited number of trades that have occurred, and all of the trades were Hinsbrook purchases at the price of $33.25.
Capital Market Securities reviewed the reported trading prices and volume of Wintrust’s common stock from the period December 31, 2004 through November 25, 2005. Capital Market Securities compared the relationship between the movements in the prices of Wintrust’s common stock to movements in the prices of the Nasdaq Bank Index, the Nasdaq Composite Index and the performance of a composite peer group of publicly traded banks selected by Capital Market Securities for Wintrust. The composition of the peer group for Wintrust is discussed under the section below under the heading “—Reference Financial Institution Analysis.”
During the analysis period ended November 25, 2005, Wintrust performed similarly to all of the indices and the peer group to which it was compared.
Reference Financial Institution Analysis. Capital Market Securities used publicly available information to compare selected financial and market trading information for each of Hinsbrook and Wintrust and two different peer groups of banks selected by Capital Market Securities. No company used in the following analyses is identical to Hinsbrook, Wintrust or, following the merger, the combined resulting company. Accordingly, such analyses are not purely mathematical; rather, they involve complex considerations and judgments concerning differences in financial, market and operating characteristics of the companies involved.
33
The comparable peer group for Hinsbrook consisted of the following publicly traded banks located in the Midwest. These companies were selected based upon their having comparable financial characteristics to Hinsbrook including: asset size, net worth ratio, profitability and level of nonperforming assets.
Baraboo Bancorporation, Incorporated
DCB Financial Corp
FNBH Bancorp, Inc.
Guaranty Federal Bancshares, Inc.
Monroe Bancorp
Southern Michigan Bancorp, Incorporated
DCB Financial Corp
FNBH Bancorp, Inc.
Guaranty Federal Bancshares, Inc.
Monroe Bancorp
Southern Michigan Bancorp, Incorporated
The analysis compared financial information for Hinsbrook and financial and market pricing data for the comparable peer group as of and for the most recently available 12-month period. The table below compares the data for Hinsbrook and the average data for the comparable peer group as of and for the 12-month period ending September 30, 2005 with market pricing data as of November 25, 2005.
Comparable Peer Group Analysis — Hinsbrook
| Peer Group | ||||||||
| Hinsbrook | Average | |||||||
Total Assets(in millions) | $ | 497.0 | $ | 554.8 | ||||
| Tangible Equity/Tangible Assets | 8.03 | % | 8.30 | % | ||||
| Loans/Deposits | 94.36 | % | 103.52 | % | ||||
| Total Borrowings/Total Assets | 3.88 | % | 12.79 | % | ||||
| NPAs/Assets | 0.34 | % | 0.58 | % | ||||
| ALLL/Gross Loans | 0.97 | % | 1.38 | % | ||||
| LTM Return on Average Assets | 1.42 | % | 1.19 | % | ||||
| LTM Return on Average Equity | 19.36 | % | 13.71 | % | ||||
| Net Interest Margin | 3.96 | % | 4.04 | % | ||||
| Non Interest Income/Average Assets | 0.40 | % | 0.95 | % | ||||
| Non-Interest Expense/Average assets | 1.90 | % | 2.67 | % | ||||
| Efficiency Ratio | 46.04 | % | 56.12 | % | ||||
| Price/Book Value | NM | 182.60 | % | |||||
| Price/Tangible Book Value | NM | 185.45 | % | |||||
| Price/LTM EPS | NM | 13.82 | x | |||||
The comparable group for Wintrust consisted of the following publicly traded banks located in the Midwest. These companies were selected based upon their having comparable financial characteristics to Wintrust including: asset size, net worth ratio, profitability and level of nonperforming assets.
First Midwest Bancorp, Inc.
FirstMerit Corporation
MB Financial, Inc.
Old National Bancorp
Park National Corporation.
Republic Bancorp Inc.
FirstMerit Corporation
MB Financial, Inc.
Old National Bancorp
Park National Corporation.
Republic Bancorp Inc.
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The analysis compared publicly available financial and market trading information for Wintrust and the data for the comparable peer group as of and for the most recently available 12-month period. The table below compares the data for Wintrust and the average data for the comparable peer group as of and for the 12-month period ended September 30, 2005 and, with market pricing data as of November 25, 2005.
Comparable Peer Group Analysis — Wintrust
| Peer Group | ||||||||
| Wintrust | Average | |||||||
Total Assets(in millions) | $ | 7,894 | $ | 7,217 | ||||
| Tangible Equity/Tangible Assets | 5.20 | % | 7.15 | % | ||||
| Loans/Deposits | 79.39 | % | 94.84 | % | ||||
| Total Borrowings/Total Assets | 8.91 | % | 21.12 | % | ||||
| NPAs/Assets | 0.25 | % | 0.51 | % | ||||
| ALLL/Gross Loans | 0.77 | % | 1.42 | % | ||||
| LTM Return on Average Assets | 0.90 | % | 1.28 | % | ||||
| LTM Return on Average Equity | 12.15 | % | 15.06 | % | ||||
| Net Interest Margin | 3.18 | % | 3.62 | % | ||||
| Non Interest Income/Average Assets | 1.33 | % | 1.27 | % | ||||
| Non-Interest Expense/Average assets | 2.71 | % | 2.52 | % | ||||
| Efficiency Ratio | 63.27 | % | 53.54 | % | ||||
| Price/Book Value | 216.30 | % | 251.23 | % | ||||
| Price/Tangible Book Value | 332.50 | % | 299.83 | % | ||||
| Price/LTM EPS | 20.90 | x | 17.32 | x | ||||
Analysis of Selected Merger Transactions. Capital Market Securities reviewed 19 merger transactions announced in the Midwest from September 30, 2003 through November 30, 2005 involving banks as acquired institutions with a return on equity greater than 15% at the time of the deal announcement. Capital Market Securities also reviewed 11 merger transactions announced from September 30, 2003 through November 30, 2005 involving Chicago area banks as acquired institutions. Capital Market Securities reviewed the multiples of:
| • | transaction price at announcement to book value per share, | ||
| • | transaction price to tangible book value per share, | ||
| • | transaction price to last twelve months earnings, and | ||
| • | purchase price premium above tangible book value to deposits and computed mean and median multiples and premiums for the transactions. |
The median multiples from the Midwest group and the median multiples for the Chicago area group were applied to Town Bankshares'Hinsbrook’s unaudited financial information as of September 30, 2005 to estimate implied transaction values involving Hinsbrook. As illustrated in the following table, Capital Market Securities derived imputed ranges of values per share of Hinsbrook’s common stock of $34.03 to $42.67 based upon the median multiples for the Midwest group and $36.08 to $46.01 based upon the median multiples for the Chicago area bank group.
Comparable Transaction Multiples
| Median | ||||||||||||||||
| Median | Chicago | |||||||||||||||
| Midwest | Implied | Area | Implied | |||||||||||||
| Multiple | Value | Multiple | Value | |||||||||||||
| Transaction Price/Book Value | 234.6 | % | $ | 34.03 | 256.1 | % | $ | 37.14 | ||||||||
| Transaction Price/Tangible Book Value | 244.6 | % | $ | 35.47 | 281.3 | % | $ | 40.79 | ||||||||
| Transaction Price/LTM Earnings | 17.3 | x | $ | 42.67 | 18.6 | x | $ | 46.01 | ||||||||
| Transaction Value Premium above Tangible Book Value/Deposits | 14.1 | % | $ | 36.26 | 14.0 | % | $ | 36.08 | ||||||||
Discounted Cash Flow Analysis. Capital Market Securities performed a discounted cash flow analysis to estimate a range of present values per share of Hinsbrook common stock. This range was calculated by adding the present value of the current and projected estimated future cash dividends that Hinsbrook was projected to pay based upon Capital Market Securities’ projections (which were reviewed by Hinsbrook’s management) and the present value of an estimated terminal value of the shares in year five calculated by applying multiples to the projected earnings per share in the fifth year. Capital Market Securities’ projections for Hinsbrook included the following basic assumptions: asset growth of approximately 10% annually, net interest margin declining approximately 2.5%
35
from the level recorded in the LTM period ended September 30, 2005, noninterest income and noninterest expense levels remaining similar to historical ratios and dividend growth of 5% annually.
In calculating a terminal value of Hinsbrook common stock, Capital Market Securities applied a range of pricing multiples between 15.0 and 19.0 to year five projected earnings. These multiples reflect recent bank acquisition pricing that Capital Market Securities believed would be applicable to Hinsbrook. In performing this analysis, Capital Market Securities assumed that there were no restrictions imposed upon Hinsbrook that would impact its ability to pay dividends and that Hinsbrook would increase its per share dividend 5% annually. In addition, Capital Market Securities used Hinsbrook’s 2005 budget and Hinsbrook’s management guidance for the five year projection period as the basis for estimating Hinsbrook earnings. The combined dividend stream and terminal value were then discounted to September 30, 2005 (the date of the most recent quarterly financial information available at the time of the analysis). Capital Market Securities estimated a range of discount rates of 12.5% to 17.5% as the appropriate rate to discount future cash flows for purposes of the analysis. These rates were chosen by Capital Market Securities to reflect different assumptions regarding the required rates of return to holders or prospective buyers of Hinsbrook common stock. As illustrated in the following table, this analysis indicated an imputed range of values per Hinsbrook common share of $25.22 to $43.66.
Discount Rate | 15.0 | x | 17.0 | x | 19.0 | x | ||||||
| 12.5% | $ | 34.82 | $ | 39.24 | $ | 43.66 | ||||||
| 15.0% | $ | 28.01 | $ | 31.55 | $ | 35.09 | ||||||
| �� 17.5% | $ | 25.22 | $ | 28.40 | $ | 31.58 |
In connection with its analyses, Capital Market Securities considered and discussed with the Hinsbrook board of directors how the present value analyses would be affected by changes in the underlying assumptions, including variations with respect to net income. As indicated above, the projections were prepared with the guidance of the earnings projections prepared by Hinsbrook’s management and are not necessarily indicative of actual values or actual future results and do not purport to reflect the prices at which any securities currently trade or will trade at any time in the future. Capital Market Securities noted that the discounted dividend stream and terminal value analysis is a widely used valuation methodology, but the results of such methodology are highly dependent upon the numerous assumptions that must be made, and the results thereof are not necessarily indicative of actual values or future results.
Based upon the discounted cash flow analysis as described, given that the proposed per share merger consideration is higher than most of the calculated present values, Capital Market Securities believes that this analysis supports the fairness, from a financial point of view, to Hinsbrook and its shareholders of the consideration to be paid in the merger.
Pro Forma Merger Analysis. Capital Market Securities analyzed certain potential pro forma effects of the merger, assuming the following:
| • | the merger closed on January 1, 2006, | ||
| • | 50% of the Hinsbrook shares are exchanged for Wintrust common shares and 50% of Hinsbrook’s shares are exchanged for $41.59 per share in cash, | ||
| • | projections for Hinsbrook estimated by Capital Market Securities are consistent with estimates for 2005 as provided by Hinsbrook’s management, | ||
| • | projections for Wintrust are consistent with Wintrust’s historical results, and, | ||
| • | purchase accounting adjustments, charges and transaction costs associated with the merger and cost savings estimated by Capital Market Securities. |
The analyses indicated that for the year ending December 31, 2006, the merger would be accretive to Wintrust’s projected earnings per share and the merger would be dilutive to Wintrust’s tangible book value per share. From the standpoint of a Hinsbrook shareholder electing to receive Wintrust common stock, for the year
36
ending December 31, 2006, the merger would be accretive to earnings per share and historical sales prices
for shares of Town Bankshares common stock;
odilutive to tangible book value per share. The actual results achieved by the business, operations, competitive position, financial
condition, operating results, management, objectives and
prospects of Town Bankshares;
o information concerning the business, financial condition,
operatingcombined company may vary from projected results and competitive position of Wintrust
including the recent performance of Wintrust common stock;
ovariations may be material.
Based upon the foregoing analyses and other investigations and assumptions set forth in its beliefopinion, without giving specific weightings to any one factor or comparison, Capital Market Securities determined that the resources and expertise of Wintrust as a
larger organization will benefit the customers and employees
of Town Bankshares;
27
o Wintrust's commitment to community banking and to maintaining
local management and decision-making at its subsidiary banks;
o the opinion of Edelman that theaggregate merger consideration was fair from a financial point of view to Town Bankshares
shareholders as of the time of the issuance of the opinion and
subject to the assumptions, matters considered and
qualifications and limitations on the review contained
therein;
o the fact that Wintrust common stock is publicly held and
traded on the Nasdaq National Market and would provide greater
liquidity than Town Bankshares common stock, which is not
publicly traded;
o the terms and conditions of the merger agreement, including
the floating exchange ratio if the average trading price per
share of Wintrust common stock over a 10-trading day period
before the closing of the merger is at least $41.34 and no
more than $55.34, the agreement by Town Bankshares not to
solicit third-party offers, the termination fee applicable in
some circumstances, and the determination of the board of
directors that these terms and conditions were appropriate in
a strategic transaction of this type; and
o the fact that the merger agreement allows Town Bankshares to
terminate its obligation to complete the merger if the average
trading price per share of Wintrust common stock over a
10-trading day period before the closing of the merger is less
than $38.34.
Town Bankshares' board of directors also considered certain potential
adverse consequences of the merger, including the following:
o the possibility that the agreements by Town Bankshares not to
solicit third-party offers andHinsbrook’s shareholders.
Hinsbrook has agreed to pay a termination fee to
Wintrust in some circumstances could inhibit or preclude
competing purchase offers;
o the significant costs involvedCapital Market Securities total transaction fees in connection with the merger and the risk of diverting management's attention and resources
from other strategic opportunities and operational mattersequal to focus on combining the companies;
o the board of directors acknowledged that the merger will be a
taxable transaction to the extent that shares of Town
Bankshares common stock are exchanged for cash in the merger
and, as a result, holders of shares of Town Bankshares common
stock may be required to pay taxes on any taxable gain as a
result of receipt of the cash portionone percent of the merger consideration; and
o the risks associated with possible delays in obtaining
necessary approvals and the terms of such approvals.
Town Bankshares' board concluded that the anticipated benefitsconsideration (approximately $1,150,000). Of these transaction fees, as of the merger were likely to substantially outweigh the preceding risks.
In reaching its determination to accept the merger agreement proposed
by Wintrust, Town Bankshares' boarddate of directors did not assign any relative or
specific weights to the factors considered,this proxy statement/prospectus, Capital Market Securities has received $100,000 in retainer fees and individual directors may have
given different weights to different factors. Although there can be no
assurance, Town Bankshares' board of directors also believes that the merger
will provide Town Bankshares' shareholders with increased value and liquidity
for their stock and will provide its communities and customers with expanded
services and products.
TOWN BANKSHARES' BOARD OF DIRECTORS BELIEVES THAT THE MERGER IS FAIR
TO, AND IN THE BEST INTERESTS OF, TOWN BANKSHARES AND ITS SHAREHOLDERS. TOWN
BANKSHARES' BOARD OF DIRECTORS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND
RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" APPROVAL OF THE MERGER AGREEMENT.
Certain directors and officers of Town Bankshares have interests in the
merger in addition to their interests as shareholders generally, including
entitlement to certain cash payments that will be made as a result of the merger
under various benefit plans and agreements currently in place and to be made
under agreements entered into between the individuals and Wintrust$100,000 in connection with the merger. You may wish to consider these interests in
28
evaluating Town Bankshares' boarddelivery of directors' recommendation that you vote in
favorits fairness opinion. Payment by Hinsbrook of the remainder of the transaction fees is contingent on the closing of the merger. See "DescriptionHinsbrook has also agreed to reimburse certain of the merger--Interests of certain
persons in the merger."
FAIRNESS OPINION OF TOWN BANKSHARES' FINANCIAL ADVISOR
On June 3, 2004, Town Bankshares engaged Edelman & Co., Ltd.
("Edelman") to undertake to render an opinion to the Town Bankshares board of
directors as to the fairness, from a financial point of view, to Town
Bankshares' shareholders of a proposed acquisition by Wintrust. Edelman is a
financial advisory and consulting firm engaged in advising financial
institutions and other businesses regarding mergers and acquisition transactions
and other matters. Town Bankshares selected Edelman because of its expertise
with financial institutions and mergers and acquisitions.
No limitations were imposed by Town Bankshares on the scope of
Edelman's investigation or the procedures Edelman followed in connection with
preparing its opinion. Edelman was not requested to and did not make any
recommendation to Town Bankshares' board of directors as to the terms of the
transaction, which were determined through negotiations between Town Bankshares
and Wintrust in which Edelman did not participate.
At a meeting of the Town Bankshares board of directors on June 14,
2004, Edelman provided its verbal fairness opinion to the board.
It was noted (1) that Town Bankshares and Wintrust had entered into an
Agreement and Plan of Merger ("the Agreement"), providing for the merger of Town
Bankshares with and into Wintrust, (2) that the Agreement provided for shares of
common stock, $.01 par value per share, of Town Bankshares, other than shares
held by Town Bankshares' Employee Stock Ownership Plan which are to be redeemed
for cash, to be converted into the right to receive a combination of cash and
shares of Wintrust common stock, no par value, having an aggregate value of
$129.10 (the "Consideration"), and (3) that the terms and conditions of the
merger, including but not limited to provisions concerning the number of
Wintrust shares to be issued with respect to Town Bankshares shares, and
allowing the parties to terminate the Agreement based on trading levels of
Wintrust's shares (the "Termination Right"), were more fully described in the
Agreement. Edelman's opinion, subsequently delivered in written form, indicated
that the Consideration was fair, from a financial point of view, to the holders
of Town Bankshares common stock.
THE FULL TEXT OF EDELMAN'S OPINION IS ATTACHED TO THIS PROXY
STATEMENT/PROSPECTUS AS ANNEX D AND IS INCORPORATED HEREIN BY REFERENCE. THE
SUMMARY SET FORTH IN THIS PROXY STATEMENT/PROSPECTUS IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE OPINION, AND SHAREHOLDERS ARE
URGED TO READ THE OPINION.
In forming its opinion, Edelman reviewed, among other things, (1)
Wintrust's Annual Reports on Form 10-K and Annual Reports to Shareholders for
the fiscal years ended December 31, 1999 through 2003, and its Quarterly Report
on Form 10-Q for the quarter ended March 31, 2004; (2) Town Bankshares' audited
financial statements for the fiscal years ended December 31, 1999 through 2003,
and its unaudited internal balance sheet and income statement, provided by Town
Bankshares, for the quarter ended March 31, 2004; (3) the Agreement; (4) certain
other information concerning the future prospects of Wintrust and Town
Bankshares, and of the combined entity, as furnished by the respective
companies, which Edelman discussed with the senior management of Wintrust and
Town Bankshares; (5) historical market price and trading data for Wintrust's
common stock and, as provided by Town Bankshares, for Town Bankshares common
stock; (6) the financial performance and condition of Wintrust and Town
Bankshares and similar data for other financial institutions which Edelman
believed to be relevant; (7) the financial terms of other mergers which Edelman
believed to be relevant; and (8) such other information as Edelman deemed
appropriate.
Edelman met with certain senior officers of Wintrust and Town
Bankshares to discuss the foregoing as well as other matters relevant to its
opinion including Wintrust's and Town Bankshares' past and current business
operations, financial condition and future prospects. Edelman also took into
account its assessment of general economic, market and financial conditions, and
such additional financial and other factors it deemed relevant.
In conducting its review and preparing its opinion, Edelman assumed and
relied upon the accuracy and completeness of the financial and other information
used by it without independently verifying any such information and further
relied upon the assurances of Wintrust's and Town Bankshares' respective
managements that they were
29
not aware of any facts or circumstances that would make such information
misleading or inaccurate. Edelman also relied upon the accuracy and completeness
of Wintrust's and Town Bankshares' representations, warranties and covenants
contained in the Agreement. Edelman assumed that the merger would be consummated
on the terms described in the Agreement in the absence of circumstances creating
a Termination Right on the part of Town Bankshares, that all conditions to
consummation of the merger set forth in the Agreement would be satisfied, and
that the merger would be consummated on a timely basis. Edelman relied upon
Wintrust's and Town Bankshares' respective managements in forming a view of
Wintrust's and Town Bankshares' future prospects, and in forming assumptions
regarding a variety of matters. Edelman assumed, without independent
verification, that Wintrust's and Town Bankshares' allowances for loan losses
were adequate to cover such losses. Edelman did not inspect any of Wintrust's or
Town Bankshares' properties, assets or liabilities and did not make or obtain
any evaluations or appraisals of Wintrust's or Town Bankshares' properties,
assets or liabilities.
EDELMAN'S OPINION TO TOWN BANKSHARES' BOARD OF DIRECTORS WAS DIRECTED
SOLELY TO THE FAIRNESS, FROM A FINANCIAL POINT OF VIEW, OF THE CONSIDERATION AND
DID NOT ADDRESS THE DECISION TO EFFECT THE MERGER OR CONSTITUTE A RECOMMENDATION
TO ANY TOWN BANKSHARES SHAREHOLDER AS TO HOW SUCH SHAREHOLDER SHOULD VOTE ON THE
MERGER. THE OPINION WAS BASED ON ECONOMIC AND MARKET CONDITIONS AND OTHER
CIRCUMSTANCES EXISTING AT THE TIME THE OPINION WAS RENDERED ON JUNE 14, 2004.
EDELMAN DID NOT EXPRESS ANY OPINION ON THE VALUE OF WINTRUST'S COMMON STOCK, OR
THE IMPACT THAT THE MERGER WOULD HAVE ON THE VALUE OF WINTRUST'S COMMON STOCK IN
THE FUTURE, OR ON AN APPROPRIATE COURSE OF ACTION BY TOWN BANKSHARES' BOARD OF
DIRECTORS SHOULD CIRCUMSTANCES GIVE RISE TO A TERMINATION RIGHT ON THE PART OF
TOWN BANKSHARES. EDELMAN EXPRESSED NO OPINION ON MATTERS OF A LEGAL, REGULATORY,
TAX OR ACCOUNTING NATURE.
In connection with rendering its opinion to the Town Bankshares board,
Edelman performed a variety of financial analyses that are summarized below. The
preparation of a fairness opinion is a complex process involving subjective
judgments and quantitative analysis and is not necessarily susceptible to
partial analysis or summary description. Edelman believes that its analyses and
this summary must be considered as a whole and that selecting portions of its
analyses and the factors it considered, without considering all factors and
analyses, creates an incomplete view of the analyses and processes underlying
Edelman's opinion. Any estimates or assumptions used in Edelman's analyses are
not necessarily indicative of actual future value or results, which may be
significantly more or less favorable than is suggested by these estimates. No
company or previous transaction used in Edelman's analyses was identical to
Wintrust or Town Bankshares or the merger. The fact that any specific analysis
has been referred to in the summary below is not meant to indicate that such
analysis was given more weight than any other analysis. Edelman may have given
various analyses more or less weight than other analyses, and may have deemed
various assumptions more or less probable than other assumptions.
The following is a brief summary of the analysis performed by EdelmanCapital Market Securities’ reasonable out-of-pocket expenses incurred in connection with its opinion.
1. Comparable Company Analysis. Edelman comparedengagement and to indemnify Capital Market Securities and its affiliates, their respective partners, directors, officers, agents and employees of Capital Markets Securities and its affiliates, and each other person, if any, controlling Capital Markets Securities or its affiliates against certain expenses and liabilities, including liabilities under securities laws.
Capital Market Securities is affiliated with Young & Associates, Inc., a firm that provides consulting, outsourcing and educational services to financial ratios of Town Bankshares and Wintrustinstitutions. Young & Associates has provided consulting services to those of banks and bank holding
companies (1) nationwide, (2) headquartered in the Midwest, (3) with assets of
$2 billion to $8 billion (publicly traded only), and (4) with assets of $100
million to $350 million. Ratios included return on average assets (ROA), return
on average equity (ROE), tangible equity to tangible assets (Capital), and
non-performing assets to total assets (NPA/A). Adjustments were made for
Wintrust's and Town Bankshares' securities gains, and for Town Bankshares'
expensesHinsbrook since approximately 1990, including consulting services related to the merger. Based on last 12 months dataHinsbrook’s strategic planning. In 2004, 2005 and median industry
data from SNL Financial, L.C., these results were as follows:
ROA ROE CAPITAL NPA/A
----- ----- ------- -----
Town Bankshares.............. 0.80% 9.9% 7.4% 0.00%
Wintrust..................... 0.92% 13.4% 6.5% 0.34%
Nationwide................... 1.03% 10.2% 9.3% 0.35%
Midwest...................... 1.06% 10.4% 9.5% 0.37%
$2 billion - $8 billion...... 1.17% 13.4% 6.9% 0.37%
$100 million-$350 million.... 1.07% 11.0% 9.0% 0.37%
2. Contribution Analysis. Edelman calculated the proportions of total
Town Bankshares2006, Young & Associates received fees totaling approximately $32,800, $27,900 and Wintrust tangible equity, assets, deposits, and net income
that were contributed by Town Bankshares. Net income was calculated with
adjustment for securities gains and Town Bankshares expenses related to the
merger. Results of
30
Town Bankshares$8,120, respectively, for its most recent quarter were also adjusted for a
non-recurring income item. Usingservices to Hinsbrook, which does not include the sum of the respective company values atabove described fees paid or
for the period ended March 31, 2004, the Town Bankshares contribution was 5.3%
of tangible equity, 4.5% of assets, 4.9% of deposits, 3.7% of most recent
quarter income, and 3.9% of last 12 months income. By comparison, Town
Bankshares contributed 3.8% of the sum of Wintrust's market capitalization
(based on latest available diluted shares) and Town Bankshares' value as
measured by the $41.4 million combined value of Consideration to be paid to Town
Bankshares' shareholders and consideration received by Town Bankshares' option
holders in the merger ("Deal Value").
3. Trading. Edelman analyzed various characteristics of the
trading markets for Town Bankshares and Wintrust common stock. During the period
from May 1, 2003 through June 10, 2004, Wintrust common stock had an average
daily trading volume of 105,012 shares, or .52% of its shares outstanding as of
March 31, 2004, compared to 50 shares and .02% for Town Bankshares.
Edelman further analyzed the trading value of Wintrust shares in
relation to its last 12 months earnings per share and tangible book value per
share (based on latest announced quarterly balance sheet values) in comparison
to values for all publicly traded banks (1) nationwide, (2) headquartered in the
Midwest, and (3) with assets of $2 billion to $8 billion. Using Wintrust's
recent trading pricing and median industry data (excluding pink sheet companies)
as of June 2, 2004 from SNL Financial, these results were as follows:
P/E P/TB
----- ----
Wintrust.......................... 23.4 308%
All nationally.................... 16.9 222%
Midwest only...................... 16.9 220%
Assets $2 billion - $8 billion.... 17.2 272%
Edelman further determined that based on the current dividend rate and
recent trading value of Wintrust common stock, Town Bankshares' shareholders
would receive in the merger a dividend yield of approximately .4% in relation to
the value of their holdings of Town Bankshares common stock (valued at its
latest trading price prior to announcement of the merger). Town Bankshares has
not historically paid dividends on its common stock.
4. Comparable Transaction Analysis. Edelman analyzed certain industry
pricing statistics regarding bank acquisitions and compared these to pricing
ratios in the merger. The following table shows median price to tangible book
value (P/TB), price to earnings (P/E) and price to total deposits (P/D) ratios
for three comparable transactions groups: all acquisitions of banks nationally,
acquisitions of banks headquartered in the Midwest, and acquisitions of banks
with assets of $125 million to $350 million.
P/E P/TB P/D
----- ---- -----
All nationally............... 24.7 240% 23.3%
Midwest only................. 24.4 216% 21.6%
Assets (M) $125 - $350....... 24.1 246% 23.8%
The data above was gathered from the SNL Financial database with
respect to transactions announced from May 1, 2003 through June 1, 2004. Mergers
of equals, acquisitions of thrifts, terminated transactions and transactions
with pricing data unavailable were excluded. Statistics as of transaction
announcement were used
unless closing pricing data was available. The number of transactions in the
respective groups was as follows: All nationally (167), Midwest only (43), and
assets of $125 million - $350 million (50).
By comparison, in the merger P/TB and P/D were 236% and 19.9%,
respectively. In calculating P/E with respect to the merger, different earnings
inputs and calculation methodologies were used. Based on last 12 months income,
as adjusted for securities gains and expenses related to the merger, the P/E was
22.8 using purchase price per share divided by adjusted diluted earnings per
share, while it was 24.9 using Deal Value divided by adjusted net income.
5. Wintrust Trading Price Sensitivity Analysis. Edelman noted that
Wintrust operates in an environment of several risk factors, some characteristic
of the banking industry and some particular to Wintrust, such as those disclosed
in Wintrust's SEC filings. Edelman analyzed the implications on the merger
pricing ratios
31
calculated in analysis #4 above of an assumption that Wintrust's common stock
would trade at the industry P/E ratios set forth under analysis #3 above. For
example, the national average bank trading P/E set forth under analysis #3 was
28% lower than Wintrust's trading P/E. It was calculated that a 28% reduction in
the dollar value of the stock portion of the Consideration would change the
merger P/E ratio of 24.9 set forth above under analysis #4 to 21.3. However, it
was noted that the terms of the merger include a pricing mechanism which adjusts
for fluctuations in Wintrust trading price during the pendency of the merger. It
was determined that as of closing the $129.10 Consideration price per share
could fall no more than 4.0% as a result of a decline in Wintrust's trading
price without creating a Termination Right on the part of Town Bankshares. It
was further determined that upon closing, shares of Wintrust common stock to be
received by Town Bankshares' shareholders would be freely tradeable.
6. Premium Analysis. Edelman analyzed the price to be paid for Town
Bankshares common stock in comparison to the historical trading value of the
stock. It was determined that the Consideration level of $129.10 per share
represented a premium of 83% over the latest and highest market sale price
recorded for Town Bankshares common stock.
7. Impact Analysis. Edelman analyzed the pro forma impact of the merger
on Wintrust's earnings per share ("EPS") under various scenarios and based upon
certain assumptions, including but not limited to: (a) Wintrust's guidance
suggesting a current 2004 EPS rate of $2.25 to $2.40, and (b) no cost or revenue
synergies or purchase accounting adjustments affecting income as a result of the
merger. In a scenario reflecting (1) the high end of the EPS guidance, (2) Town
Bankshares' net income for the last 12 months adjusted for securities gains and
transaction-related expense, and (3) the maximum number of Wintrust shares
issued under the Agreement (as driven by Wintrust's common stock price),
Wintrust's EPS was shown to decrease by .37%. By altering this scenario to use
the low end of the EPS guidance and the minimum Wintrust share issuance,
Wintrust's EPS was shown to increase by .35%. Edelman also analyzed the pro
forma impact of the merger on Wintrust's tangible book value per share
("TBVPS"). Depending upon the number of Wintrust's shares to be issued in the
merger, and based on assumptions including but not limited to an absence of
purchase accounting mark-to-market adjustments, TBVPS was shown to decrease 1.9%
to 2.5%.
Edelman and Town Bankshares entered into an agreement relating to the
services Edelman provided in connection with its opinion. Under the agreement,
Town Bankshares agreed to indemnify Edelman against certain liabilities.
Pursuant to the agreement, Town Bankshares has paid Edelman fees totaling
$70,000 and has agreed to reimburse Edelman for out-of-pocket expenses
associated with its services.
ACCOUNTING TREATMENTCapital Market Securities.
Accounting treatment
Wintrust will account for the merger under the "purchase"“purchase” method of accounting in accordance with accounting principles generally accepted in the United States. Using the purchase method of accounting, the assets and liabilities of Town BanksharesHinsbrook will be recorded by Wintrust at their respective fair values at the time of the completion of the merger. The excess of Wintrust'sWintrust’s purchase price over the net fair value of the assets acquired and liabilities assumed will then be allocated to identified intangible assets, with any remaining unallocated cost recorded as goodwill.
TAX CONSEQUENCES OF THE MERGER
General.
Certain federal income tax consequences of the merger
General. The following discussion addresses the materialcertain United States federal income tax consequences of the merger that are generally applicable to Town Bankshares'Hinsbrook’s shareholders. It does not address the tax consequences of the merger under foreign, state, or local tax laws or the tax consequences of transactions completed before or after the merger. Also, the following discussion does not deal with all federal income tax considerations that may be relevant to certain Town BanksharesHinsbrook shareholders in light of their particular circumstances, such as shareholders who:
o
| • | are dealers in securities; | ||
| • | are insurance companies or tax-exempt organizations; | ||
| • | are subject to alternative minimum tax; | ||
| • | hold their shares as part of a hedge, straddle, or other risk reduction transaction; or | ||
| • | are foreign persons. |
You are dealers in securities;
o are insurance companies or tax-exempt organizations;
o are subjecturged to alternative minimum tax;
32
o hold their shares as partconsult your own tax advisors regarding the tax consequences of a hedge, straddle, or other risk
reduction transaction; or
o arethe merger to you based on your own circumstances, including the applicable federal, state, local and foreign persons.
YOU ARE URGED TO CONSULT YOUR OWN TAX ADVISORS REGARDING THE TAX
CONSEQUENCES OF THE MERGER TO YOU BASED ON YOUR OWN CIRCUMSTANCES, INCLUDING THE
APPLICABLE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES.tax consequences.
The following discussion is based on the Internal Revenue Code of 1986, as amended, or the Code, applicable Treasury Regulations, judicial decisions, and administrative rulings and practice, all as of the date of this
37
document and all of which are subject to change.change, possibly with retroactive effect. Any change could be applied to transactions that were completed before the change, and could affect the accuracy of the statements and conclusions in this discussion andas well as the tax consequences of the merger to Wintrust, Town Bankshares and the Town Bankshares shareholders.
merger.
Tax Opinion of Reinhart Boerner Van Deuren s.c. Barack Ferrazzano Kirschbaum Perlman & Nagelberg LLP.Neither Wintrust nor Town BanksharesHinsbrook has requested, nor will they request, a ruling from the Internal Revenue Service with regard to the federal income tax consequences of the merger. Instead, as a condition to the closing of the merger, Reinhart Boerner Van
Deuren s.c., legalBarack Ferrazzano Kirschbaum Perlman & Nagelberg LLP, special counsel to Town Bankshares,Hinsbrook, will render its opinion to Town
Bankshares,Hinsbrook, subject to customary representations and assumptions referred to in the opinion, substantially to the effect that:
o the merger will constitute a reorganization within the meaning
of Section 368(a) of the Code and Town Bankshares and Wintrust
will each be a "party to a reorganization" within the meaning
of Section 368(b) of the Code; and
o no gain or loss will be recognized by Town Bankshares
shareholders upon the receipt of Wintrust common stock in
exchange for Town Bankshares common stock, except with respect
to the cash portion of the merger consideration and cash
received for a fractional share of Wintrust common stock;
Reinhart Boerner Van Deuren's
| • | the merger will constitute a reorganization within the meaning of Section 368(a) of the Code and Hinsbrook and Wintrust will each be a “party to a reorganization” within the meaning of Section 368(b) of the Code; and | ||
| • | no gain or loss will be recognized by Hinsbrook shareholders upon the receipt of Wintrust common stock in exchange for Hinsbrook common stock, except with respect to the cash portion of the merger consideration and cash received for fractional shares of Wintrust common stock. |
Barack Ferrazzano’s opinion will be based upon the assumption that the merger will take place substantially in the manner described in the merger agreement and will also assume the truth and accuracy of certain factual representations that will have been made by Wintrust and Town BanksharesHinsbrook and which are customarily given in transactions of this nature. Reinhart Boerner Van Deuren's
opinion will require that at least 50% of the value of the total merger
consideration issuable to the holders of shares of Town Bankshares common stock
in the merger consist of shares of Wintrust common stock (valuing the Wintrust
common stock based on the closing price of the Wintrust common stock as of the
date of the closing of the merger). If the value of the stock consideration is
less than 50% of the total merger consideration, Reinhart Boerner Van Deuren may
not be able to issue its opinion. Since the per share stock consideration in the
merger will be determined based on average price of Wintrust's common stock
during the 10-trading day pricing period ending two trading days before the
merger is completed, the closing price of Wintrust's common stock as of the date
of the merger may be less than the average price during the pricing period, or
the average price during the pricing period may be less than $41.34 per share,
resulting in a fixed exchange ratio of 1.717 shares of Wintrust common stock for
each share of Town Bankshares common stock, which in either case would decrease
the value of the stock consideration as of the closing of the merger as compared
to the cash consideration. Also, the value of the cash consideration in the
merger will increase if one or more holders of shares of Town Bankshares common
stock exercise dissenters' rights and will also be affected by the amount of
cash paid in lieu of fractional shares. Reinhart Boerner Van Deuren'sBarack Ferrazzano’s opinion will not be binding on the Internal Revenue Service or the courts and there can be no assurance that the Internal Revenue Service will not take a contrary position to one or more positions reflected herein or that the opinion will be upheld by the courts if challenged by the Internal Revenue Service.
Gain recognition and tax basis. For United States federal income tax
purposes, the "realized gain"Recognition on Receipt of a Town Bankshares shareholderCash. Hinsbrook shareholders will be equalrecognize gain (but not loss) with respect to
the aggregate consideration (both stock and cash) received in the reorganization
less the shareholder's basis in his or her Town Bankshares' common stock
exchanged. The portion of the shareholder's "realized gain" which must be
"recognized" will be equal to the lesser of the cash received (excluding cash
received in lieu of fractional shares) or the realized gain as a result of the
merger (adjusted for any gain recognized for cash received in lieu of fractional
shares). In general, the tax basis in shares of Town Bankshares common stock
will carry over to the shares of Wintrust common stock received in exchange
therefor. The tax basis of the Wintrust common stock received by Town Bankshares
shareholders in the merger will equal the tax basis in the Town Bankshares
common stock exchanged for the merger consideration, decreased by the amount
33
of any cash received (other than cash received in lieu of fractional shares of
Town Bankshares common stock) and increased by the amount of any cash received
which was treated as a dividend and the amount of any gain recognized in the
exchange. The gain recognized as a result of cash received in lieu of a
fractional share will be equal to the excess of such cash over the tax basis
attributable to the share or shares of Town Bankshares common stock exchanged
therefor.
Withholding. Any cash payments received in the merger, including the cash portion of the merger consideration andthey receive. The amount of gain will be limited to the amount of cash received. Additionally, any cash received by Hinsbrook shareholders instead of fractional shares of Wintrust’s common stock will result in lieugain or loss. The amount of the recognized gain to Hinsbrook shareholders will generally be treated as capital gain, unless the receipt of cash has the effect of the distribution of a dividend, in which case, the gain recognized will generally be treated as a dividend. Net capital gain recognized by individual and other non-corporate shareholders from the sale or exchange of stock or securities held for more than twelve months, and certain dividend income, are generally taxed at a maximum federal income tax rate of 15%.
Withholding. The cash portion of the merger consideration and any cash payments in respect of a fractional share of Wintrust common stock may be subject to the information reporting requirements of the Internal Revenue Service and to backup withholding at the current rate of 28%. Backup withholding will not apply to a payment made to you if you complete properly and timely and sign the substitute Form W-9W–9 that will be included as part of the transmittal letter and notice from Wintrust'sWintrust’s exchange agent, or you otherwise prove to Wintrust and its exchange agent that you are exempt from backup withholding.
Backup withholding is not an additional tax, but an advance payment. Any amount withheld from the payment of the merger consideration may be credited against the United States federal income tax liability of the beneficial owner subject to the withholding and may be refunded to the extent it results in an overpayment of tax. You should consult with your tax advisor as to your qualification for exemption from backup withholding and the procedures for obtaining this exemption.
Reporting and Record Keeping.Keeping. If you exchange shares of Town BanksharesHinsbrook common stock in the merger for Wintrust common stock, you are required to retain records of the transaction, and to attach to your federal income tax return for the year of the merger a statement setting forth all relevant facts with respect to the nonrecognition of gain or loss upon the exchange. At a minimum, the statement must include:
o your tax basis in the Town Bankshares common stock
surrendered; and
o
| • | your tax basis in the Hinsbrook common stock surrendered; and | ||
| • | the amount of cash (if any) received and the fair market value, as of the effective date of the merger, of the Wintrust common stock received in exchange therefor. |
38
The preceding does not purport to be a complete discussion of all potential federal income tax consequences of the merger that may be relevant to a particular Hinsbrook shareholder. You are urged to consult with your own tax advisor regarding the specific tax consequences to you as a result of the merger, including the applicability and effect of foreign, state, local and other tax laws.
Regulatory approvals
The merger cannot proceed without obtaining all requisite regulatory approvals. Wintrust common stock received in exchange therefor.
THE PRECEDING DISCUSSION DOES NOT PURPORT TO BE A COMPLETE ANALYSIS OF
ALL POTENTIAL TAX CONSEQUENCES OF THE MERGER THAT MAY BE RELEVANT TO A
PARTICULAR TOWN BANKSHARES SHAREHOLDER. YOU ARE URGED TO CONSULT WITH YOUR OWN
TAX ADVISOR REGARDING THE SPECIFIC TAX CONSEQUENCES TO YOU AS A RESULT OF THE
MERGER, INCLUDING THE APPLICABILITY AND EFFECT OF FOREIGN, STATE, LOCAL AND
OTHER TAX LAWS.
REGULATORY APPROVALShas agreed to take all appropriate actions necessary to obtain the required approvals.
The merger of Wintrust and Town BanksharesHinsbrook is subject to prior approval of each of the Federal Reserve and the Division of Banking of the WDFI.IDFPR. Wintrust submitted an application towith the Federal Reserve Bank of Chicago in January of 2006 seeking the necessary approval. Although there can be no assurance that the Federal Reserve
will approve the merger or as to the timing of approval, Wintrust currently
expects it will receivereceived approval of the merger from the Federal Reserve during
the third quarter of 2004.on February 24, 2006. Wintrust filed the required application with the DivisionIDFPR in January of Banking2006 and received approval of the WDFImerger from the IDFPR on July 23, 2004. The Division of Banking of
the WDFI is required to render a decision on the application within 30 days
after Wintrust satisfied the notice publication requirements with respect to the
application filing, which requirements were satisfied on August 11, 2004.April 12, 2006.
The merger may not be consummated until approximately 15 days after receipt of Federal Reserve approval, during which time the United States Department of Justice may challenge the merger on antitrust grounds. The commencement of an antitrust action would stay the effectiveness of the Federal Reserve'sReserve’s approval, unless a court specifically orders otherwise.
Interests of certain persons in the merger
General. Members of the board of directors and executive officers of Hinsbrook may have interests in the merger that are different from, or are in addition to, the interests of Hinsbrook shareholders generally. The Hinsbrook board of directors was aware of these interests and considered them, among other matters, in approving the merger cannot proceed without obtaining all requisite regulatory
approvals. Wintrust has agreedagreement and determining to take all appropriate actions necessaryrecommend to obtainHinsbrook shareholders to vote for approval of the required approvals.
INTERESTS OF CERTAIN PERSONS IN THE MERGERmerger agreement. As of August 18, 2004, Town Bankshares'the record date, Hinsbrook’s directors and Town Bank's directors andexecutive officers owned, in the aggregate, 50,3581,061,696 shares of Town Bankshares'Hinsbrook’s common stock, representing approximately 16.9%38.4% of Town
34
Bankshares'Hinsbrook’s outstanding shares of common stock, andstock. None of Hinsbrook’s directors or executive officers own any options to purchase an
aggregate of 38,400 shares of Town Bankshares'Hinsbrook’s common stock with a weighted
average exercise price of $57.53 per share.
Town Bankshares' stock option plan provides that all outstanding
unvested stock options to purchase Town Bankshares common stock will immediately
vest upon the completion of the merger, which would be considered a "change of
control" for purposes of these stock options.stock.
Substitute Stock Options. Wintrust has agreed to assume all outstanding Town BanksharesHinsbrook stock options.options, all of which are already vested. At the time the merger is completed, each outstanding Town BanksharesHinsbrook stock option will be converted into an option to purchase Wintrust common shares exercisable on generally the same terms as in effect immediately
prior to completion ofand conditions that applied before the merger, except that the number of shares of Wintrust common stock issuable upon the exercise of the options and the exercise price per share will be adjusted based on the per share merger consideration, and all
Town Banksharesconsideration. Hinsbrook’s employees hold options to purchase a total of 3,125 shares of Hinsbrook common stock options outstanding will become fully vested and
exercisable at the effective timea weighted average exercise price of $20.00 per share. See “Description of the merger dueagreement—Consideration to be received in the "change in control"
provisions discussed above. Accordingly, the completion of the merger will
accelerate the vesting of 8,780 options held by Town Bankshares' executive
officers to purchase shares of Town Bankshares common stock at an exercise price
of $60 per share that were not previously exercisable.
merger—Stock Options.”
Employment Agreements.Agreements. The merger agreement requires two of Town
Bankshares' executive officers, Jay C. Mack and Jeffrey A. Olsen,Hinsbrook Bank & Trust to enter into an employment agreementsagreement with Town Bank.each of Jeffrey D. Baker, Andrew M. Collins, Jr., L. Thomas McNamara and Regina R. Miller. The termsterm of boththe agreements will commence on the closing date of the merger. In this section, Jeffrey D. Baker, Andrew M. Collins, Jr., L. Thomas McNamara and Regina R. Miller are sometimes referred to individually as an “executive” or together as the “executives.”
The term of each employment agreement will be three years from the closing date of the merger, except for the employment agreement with Mr. McNamara the term of which will expire at the end of 2006. The agreements is five years. Each of
the agreements isare subject to automatic renewal for successive one-year terms unless either of the parties to each of the agreements gives notice of its intention not to renew at least 9060 days before the expiration of the then current term. The term of each agreement may be extended upon a “change in control” of Hinsbrook Bank & Trust. Each of the employment agreements containsagreement will contain a non-compete and non-solicitation provision and a confidentiality provision. Each of theThe non-compete and non-solicitation provisions will remain in effect for two years after termination of employment and the confidentiality provisions will survive indefinitely.
Each of the
39
The agreements provideswill provide for a base salary as may, from time to time, be agreed upon by the parties, providedand participation in compensation, insurance and benefit plans as may be available to employees of Wintrust or its affiliates. Additionally, the agreements will provide for severance benefits of two times base salary and any bonuses paid during the previous 12 months if the executive is terminated (i) due to death, (ii) due to permanent disability, (iii) without cause, (iv) constructively or (v) following a change of control.
Deferred Compensation Agreements and Deferred Fee Agreements. Hinsbrook Bank & Trust previously entered into deferred compensation agreements and deferred fee agreements with 16 of its officers and two of its directors. The deferred compensation arrangements generally provide that the amountindividual will be permitted to defer a portion of their salary (or fees with respect to directors) and Hinsbrook Bank & Trust will match a portion of such deferrals in a notional account on behalf of the salary may
notindividual. The notional accounts accrue interest at a stated rate, which varies by individual and currently ranges from the prime rate as reported in the Wall Street Journal plus 1% to the prime rate plus 5%, until all obligations are paid. As reported in the Wall Street Journal, the prime rate on January 4, 2006 was 7.25%. Although certain individuals have a right to require that accrued amounts be reduced belowheld in a grantor trust, the base salary asobligations to the individuals are at all times an unfunded obligation to pay amounts in the future, with such obligations subject to the claims of creditors of Hinsbrook Bank & Trust. Hinsbrook Bank & Trust’s accrued liability with respect to the effective datedeferred compensation and fee arrangements was approximately $2,986,545 and $2,401,000 at December 31, 2005 and December 31, 2004, respectively. Deferred compensation and fee expense for the year ended December 31, 2005 and December 31, 2004, was approximately $409,061 and $334,000, respectively. As discussed in “Description of the merger unless the reduction is no greater in percentage terms than a general reduction
in the base salariesagreement—Conditions to completion of the President, Chief Executive Officer and Vice
Presidentmerger,” Wintrust’s obligations under the merger agreement are subject to Hinsbrook Bank & Trust having amended each of Wintrust. As ofthe deferred compensation arrangements prior to the effective time of the merger, to eliminate any future individual deferrals or any required company matching contributions under the annual base
salariesarrangements. Other than with respect to the noted amendments, the arrangements will continue in effect per their terms.
Change in Control Agreements. Hinsbrook Bank & Trust previously entered into change of Messrs. Mackcontrol agreements with each of Jeffrey D. Baker, Robert K. Buhrke, Andrew M. Collins, Jr., James R. Hannon, L. Thomas McNamara and Olsen will be $180,000 and $135,000, respectively.
Messrs. Mack and Olsen may receive annual discretionary bonuses and salary
increases and areRegina R. Miller. The agreements generally provide that:
| • | if the executive terminates his or her employment for any reason during the 12 month period immediately following a change of control of Hinsbrook; or | ||
| • | Hinsbrook Bank & Trust terminates the executive’s employment for any reason other than “cause,” or the executive voluntarily terminates his or her employment for “good reason” during the 24 month period immediately following a change of control, |
then the executive is entitled to participate incertain payments from Hinsbrook Bank & Trust based on a multiple of the executive’s salary, and Hinsbrook Bank & Trust is required to continue to provide benefits for a period following termination including, among others, health, life, long term care and disability insurance benefits for the executive and his or her eligible dependents. The benefits provided under the agreements generally include the payment of all accrued compensation through the date of termination, a pro rata payment of the then current bonus cycle, a lump sum severance payment ranging from 1.5 to 3 times salary and the continuation of benefits for a period ranging from 18 to 36 months (through age 65 for Mr. McNamara). Upon the termination of the executive’s employment described above, the executive is required to maintain confidential the matters of Hinsbrook and return any employee insurance and fringe
benefit programs of Wintrust, including the Wintrust 1997 Stock Incentive Plan.
Stay Bonus Agreements. At the same time as the execution ofall confidential materials.
Pursuant to the merger agreement, Town Bankshares also entered into a stay bonus agreement with eachthe change of Jay C. Mack and Jeffrey A. Olsen. The stay bonuscontrol agreements provide for the
payment of a stay bonus of $330,000 to Mr. Mack and $220,000 to Mr. Olsen
contingent on (1) the execution by each executive officer of his employment
agreement with Wintrust, (2) the execution by each executive officer of a
release for the benefit of Town Bankshares and (3) the closing of the merger.
One-half of each stay bonus payment will be payable onterminated immediately prior to the closing dateeffective time of the merger and Hinsbrook Bank & Trust will make payments to the other half will be payable onrespective individuals generally equal in value to the later ofpayments which would have been received had the 60th-day following
the closing date or January 2, 2005 if the executive officer continues to be
employed under the terms of his employment agreement as of such date unless
involuntarily or constructively terminated by Wintrust prior to such date.
Amendments to Deferred Compensation Agreements. Town Bank had
previously entered into deferred compensation agreements with 12 officers and
key employees, including Jay C. Mack, Jeffrey A. Olsen and Roger L. Jensen, Town
Bankshares' Vice President - Commercial Lending and a director of Town
Bankshares. Each of these deferred compensation agreements had originally
provided that upon termination of employment for any reason other than by Town
Bank for cause following a "change of control" (which would include the merger),
such person would be entitled to payment of the greater of such person's
deferred account balance on the date of termination or such person's salary on
the date of termination. Each of these officers and key employees entered into
an amendment to such person's deferred compensation agreement at the same time
as the execution of the merger agreement. With respect to 11 of these persons,
the amendments provide that the merger will not constitute a change of control whileagreements been triggered. In consideration for canceling the amendment for the other person provides that the merger will
constitute a change of control agreements, the individuals will receive lump sum cash payments in the aggregate of approximately $1,854,000 and thatindividually ranging from approximately $153,000 to $587,000 and each such person would be entitledindividual will provide a release to a
payment equalHinsbrook with respect to the greater of such person's deferred account balance on the
date of termination or such person's salary on the date of termination upon any
termination of employment following the merger but prior to any subsequentterminated change of control of Wintrust other than a voluntary
35
termination by such person or a termination by Town Bank for cause. All ofobligations. Payments and benefits which would have been provided under the
amendments provided that upon a termination of employment other than by Town
Bank for cause following any subsequent change of control of Wintrust, the
officer or key employee would be entitledagreements are subject to paymentSection 280G of the sum of such person's
deferred account balance onInternal Revenue Code (golden parachute) cut-back limitations in the date of terminationevent that they are deemed excess parachute payments and such person's salary on
the date of termination.
Fees Payablepayments to the Membersexecutives in consideration of terminating the Special Committee. The boardchange of directors of Town Bankshares formed a special committee to oversee the sale
process and the negotiation of the merger agreement with Wintrust. The members
of the special committee met over 10 times in connection with this process, and
its members expended significant time and effort in connection with the process.
The three members of the special committee, William J. Hickmann, Michael J.
Pretasky, Sr. and Robert N. Trunzo,control agreements will receive, in the aggregate, fees of
$50,000 in connection with their services on the special committee.
be similarly limited.
40
Continued Director and Officer Liability Coverage. FollowingCoverage. For five years following the effective time, to the extent required by applicable law, Wintrust has agreed to indemnify and hold harmless the current and former directors and officers of Town BanksharesHinsbrook and each of its
subsidiariesHinsbrook Bank & Trust for all actions taken by them prior to the effective time of the merger, to the same extent as Town Banksharesthe indemnification currently provided by Hinsbrook and each of its subsidiaries
currently provide for indemnification of their officers and directors.Hinsbrook Bank & Trust. Pursuant to the terms of the merger agreement, Wintrust has agreed to provide to each of the directors and officers of Town BanksharesHinsbrook and each of its subsidiaries,Hinsbrook Bank & Trust, for five years following the effective time, insurance coverage against personal liability for actions taken after the effective time of the merger for a periodthat is substantially the same as is currently provided to directors and officers of five years after
the effective time. Wintrust's obligation to provide directors' and officers'
liability insurance is conditioned on Town Bankshares' and its subsidiaries'
insurer maintaining existing coverage after the completion of the merger. If
such insurer terminates or declines to continue coverage, Wintrust has agreed to
use commercially reasonable efforts to obtain similar coverage. If Wintrust is
unable to obtain such similar coverage, Wintrust is obligated to obtain the best
coverage available, in its reasonable judgment, for a cost not exceeding a
specified maximum dollar amount.
VOTING AGREEMENT
AllWintrust.
Voting agreement
On December 5, 2005, all directors and executive officers of Town Bankshares haveHinsbrook, including one executive officer who has since resigned, entered into a voting agreement with Wintrust. Under this agreement, these shareholders have each agreed to vote their respective shares of Town BanksharesHinsbrook common stock:
o
| • | in favor of the merger and the transactions contemplated by the merger agreement; | ||
| • | against any action or agreement that would result in a material breach of any term or obligation of Hinsbrook under the merger agreement; and | ||
| • | against any action or agreement that would impede, interfere with or attempt to discourage the transactions contemplated by the merger agreement. |
Furthermore, subject to their fiduciary duties as officers or directors of the merger and the transactions contemplated by
the merger agreement;
o against any action or agreement that would result in a
material breach of any term or obligation of Town Bankshares
under the merger agreement; and
o against any action or agreement that would impede, interfere
with or attempt to discourage the transactions contemplated by
the merger agreement.
Furthermore,Hinsbrook, each of these shareholders has also agreed not to grant any proxies, deposit any shares of Town BanksharesHinsbrook common stock into a voting trust or enter into any other voting agreement with respect to any shares of Town BanksharesHinsbrook common stock that they own or, without the prior approval of Wintrust, solicit, initiate or encourage any inquiries or proposals for a merger or other business combination involving Town Bankshares.Hinsbrook. The shares subject to the voting agreement represent approximately 16.9%39.4% of Town Bankshares'Hinsbrook’s outstanding shares of common stock on the record date. The voting agreement will terminate upon the earlier of the consummation of the merger or termination of the merger agreement in accordance with its terms.
RESTRICTIONS ON RESALE OF WINTRUST COMMON STOCK
Restrictions on resale of Wintrust common stock
All shares of Wintrust common stock issued to Town Bankshares'Hinsbrook’s shareholders in connection with the merger will be freely transferable, except that shares received by persons deemed to be "affiliates"“affiliates” of Town BanksharesHinsbrook under the Securities Act at the time of the special meeting may be resold only in transactions permitted by Rule 145 under the Securities Act or otherwise permitted under the Securities Act. This proxy statement/prospectus does not cover any resales of the shares of Wintrust common stock to be received by Town
Bankshares'Hinsbrook’s shareholders upon completion of the merger, and no person may use this proxy statement/prospectus in connection with any resale. Based on the number of shares of Wintrust common stock anticipated to be received in the merger, it is expected that Rule 145 will not limit the amount of shares that former Town Bankshares
36
Hinsbrook shareholders will be able to sell into the market. Persons who may be deemed affiliates of Town BanksharesHinsbrook for this purpose generally include directors, executive officers, and the holders of 10% or more of the outstanding shares of Town Bankshares'Hinsbrook’s common stock.
41
DESCRIPTION OF THE MERGER AGREEMENT
The following is a summary of the material terms of the merger agreement. This summary does not purport to describe all the terms of the merger agreement and is qualified by reference to the complete text of the merger agreement. A copy of the merger agreement which is attached as Annex A to this proxy statement/prospectus and is incorporated by reference into this proxy statement/prospectus. You should read the merger agreement completely and carefully as it, rather than this description, is the legal document that governs the merger.
TIME OF COMPLETION
The completiontext of the merger agreement has been included to provide you with information regarding its terms. The terms of the merger agreement (such as the representations and warranties) are intended to govern the contractual rights and relationships, and allocate risks, between the parties in relation to the merger. The merger agreement contains representations and warranties Wintrust and Hinsbrook made to each other as of specific dates. The representations and warranties were negotiated between the parties with the principal purpose of setting forth their respective rights with respect to their obligations to complete the merger. The statements embodied in those representations and warranties may be subject to important limitations and qualifications as set forth therein, including a contractual standard of materiality different from that generally applicable under federal securities laws.
General
The merger agreement provides for the merger of Hinsbrook with and into Wintrust, with Wintrust continuing as the surviving corporation. After the consummation of the merger, Hinsbrook Bank & Trust will become a wholly owned subsidiary of Wintrust.
Closing and effective time
Closing.The closing of the merger will take place on the fifth business day afterfollowing the day on which the lastsatisfaction or waiver of the conditions to closing set forth in the merger agreement, have been fulfilled or waived, or at another time that both parties mutually agree upon. See “—Conditions to completion of the merger” below for a more complete description of the conditions that must be satisfied or waived prior to closing. The completion of the merger sometimes is referred to in this proxy statement/prospectus as the closing date.
Completion of the Merger.The merger will become effective on the date when the articles of merger filed by the parties with the Illinois Secretary of State are duly filed by the Illinois Secretary of State, or at such later date and time specified in such filing as the parties mutually agree upon. The time at which the merger becomes effective is sometimes referred to in this proxy statement/prospectus as the "effective“effective time."
CONSIDERATION TO BE RECEIVED IN THE MERGER”
Consideration to be received in the merger
If the merger is completed, the shares of Town BanksharesHinsbrook common stock which you own immediately before the completion of the merger will be converted into a right to receive cash (a “cash election”), shares of Wintrust common stock (a “stock election”) or a combination of 50% cash and cash. The number50% shares of Wintrust common stock (a “combination election”). For each of your shares of Hinsbrook common stock, you will receive the “per share merger consideration” to be calculated as set forth in the merger agreement. All elections for cash consideration, stock consideration or the combination of cash and stock consideration are subject to proration. For example, if you elect to receive all cash consideration, depending on the elections made by other Hinsbrook shareholders, it is possible that you will receive for eacha portion of the merger consideration in cash and a portion in stock. The same might be true if you elect to receive all stock consideration. For a description of the possible proration of elections, see “— Proration of merger consideration.”
Subject to possible proration, if you elect to receive all cash consideration, you will receive $41.59 per share in cash. Subject to possible proration, if you elect to receive the merger consideration in all shares of Wintrust common stock, you will receive between 0.680 and 0.846 of a share of Town BanksharesWintrust common stock, that you own--a number referred to asdepending on the "per share stock
consideration"--will be determined by dividing $71.00 by the average of the high and low sales price of Wintrust's common stock during a set "pricing period,"
provided that such average is not higher than $55.34 or less than $41.34. The
pricing period is the 10-day trading period ending two trading days before the
merger is completed.
In effect, the merger agreement provides that the averagesale price of Wintrust common stock usedon the Nasdaq National Market during the 10 trading day period ending on the fourth trading day prior to calculatecompletion of the exchange ratio will not be higher
than $55.34 or less than $41.34. When the average pricemerger. If you elect to receive merger consideration consisting of Wintrust common stock
is within that range, there is an inverse relationship between the Wintrust
average pricecash and the number of Wintrust shares that you will receive. As the
average price of Wintrust common stock approaches $55.34, you would receive a
lower number of shares of Wintrust common stock, than you wouldwill receive when the
average pricecash consideration of Wintrust common stock nears $41.34. If the Wintrust common
stock price is within the range, the
42
$41.59 per share for one-half of your Hinsbrook shares and the above-described stock consideration for the other half of your Hinsbrook shares. The merger agreement provides that:
| • | The exchange ratio will adjust upward or downward to ensure that the fraction of a share of Wintrust common stock you receive for each share of Hinsbrook common stock that you own will be equal to $41.59 divided by the reference price so long as the reference price is between $49.14 and $61.14. However, the market value of the fraction of a share of Wintrust common stock that you receive in the merger may be greater or less than $41.59, as the trading price of Wintrust common stock on the date the merger is completed may be greater or less than the reference price used to determine the exchange ratio. | ||
| • | If the reference price is less than $49.14, the exchange ratio will no longer adjust upward, and you will receive 0.846 of a share of Wintrust common stock for each share of Hinsbrook common stock that you own. This means that the value of the fraction of a share of Wintrust common stock you will receive will be below $41.59 per share to the extent the market price of Wintrust common stock is below $49.14 when the merger is completed. | ||
| • | If the reference price is greater than $61.14, the exchange ratio will no longer adjust downward, and you will receive 0.680 of a share of Wintrust common stock for each share of Hinsbrook common stock that you own. This means that the value of the fraction of a share of Wintrust common stock you will receive will be above $41.59 per share to the extent the market price of Wintrust common stock is above $61.14 when the merger is completed. |
Hinsbrook may terminate the merger consideration
that you receive would be $129.10.
Ifagreement if the averagereference price of Wintrust common stock during the 10-day pricingreference period is greaterless than $55.34 per share, then$47.14, and Wintrust does not, within five business days of notice of such termination, notify Hinsbrook of its election to increase either (a) the per share stock consideration
will be $71.00 divided by $55.34, or 1.283number of shares of Wintrust common stock to be issued and/or (b) the amount of cash to be paid in exchange for each sharethose Hinsbrook shares subject to stock elections and the stock portion of Town Bankshares common stock, which meanscombination elections, in either case so that the per share valueconsideration received in exchange for such shares of Hinsbrook common stock is equal to the consideration that would be obtained using $47.14 as the reference price.
The number of shares of Wintrust common stock you will receive in the merger will be greater than
it is withinequal the range, as illustrated innumber, rounded down to the table below. Ifnearest whole number, determined by multiplying the average priceexchange ratio by the number of Wintrust common stock during the 10-day pricing period is less than $41.34
per share, then the per share stock consideration will be $71.00 divided by
$41.34, or 1.717 shares of Wintrust common stock to be issued for each share of
Town Bankshares common stock, which means the per share value of the
consideration you will receive in the merger will be less than it is within the
range.
However, subject to certain conditions, Wintrust may terminate the
merger agreement if the average price of Wintrust common stock is greater than
$58.34 and Town Bankshares may terminate the merger agreement if the average
price of Wintrust common stock is less than $38.34.
37
The following table illustrates the per share value of merger
consideration that Town Bankshares shareholders will receive in the merger based
on a range of Wintrust common stock prices.
Instead of issuing a fractional share of Wintrust common stock in connection with payment of the stock consideration, cash will be paid in an amount determined by multiplying the fractional share by the average pricereference price.
The following table illustrates the per share value of merger consideration that Hinsbrook’s shareholders will receive in the merger based on a range of Wintrust’s common stock prices and based on whether a stock election or a combination election is made. The table is for illustrative purposes only. The actual prices at which Wintrust common stock trades during the pricing period.
Stock Options. Optionsreference period will establish the actual reference price and therefore the actual exchange ratio and consideration.
| STOCK | ||||||||||
| Wintrust | CASH ELECTION | ELECTION | COMBINATION ELECTION | |||||||
| Reference | Per Share Cash | Per Share Stock | Cash | Stock | Total Per Share | |||||
| Price | Consideration | Consideration(1)(2) | Consideration | Consideration | Consideration(1)(2) | |||||
| $46.00 | $41.59 | $38.92 | $20.795 | $19.458 | $40.25 | |||||
| 47.00 | 41.59 | 39.76 | 20.795 | 19.881 | 40.68 | |||||
| 48.00 | 41.59 | 40.61 | 20.795 | 20.304 | 41.10 | |||||
| 49.00 | 41.59 | 41.45 | 20.795 | 20.727 | 41.52 | |||||
| 50.00 | 41.59 | 41.60 | 20.795 | 20.800 | 41.60 | |||||
| 51.00 | 41.59 | 41.57 | 20.795 | 20.783 | 41.58 | |||||
| 52.00 | 41.59 | 41.60 | 20.795 | 20.800 | 41.60 | |||||
| 53.00 | 41.59 | 41.61 | 20.795 | 20.803 | 41.60 | |||||
| 54.00 | 41.59 | 41.58 | 20.795 | 20.790 | 41.59 | |||||
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| STOCK | ||||||||||
| Wintrust | CASH ELECTION | ELECTION | COMBINATION ELECTION | |||||||
| Reference | Per Share Cash | Per Share Stock | Cash | Stock | Total Per Share | |||||
| Price | Consideration | Consideration(1)(2) | Consideration | Consideration | Consideration(1)(2) | |||||
| 55.00 | 41.59 | 41.58 | 20.795 | 20.790 | 41.59 | |||||
| 56.00 | 41.59 | 41.61 | 20.795 | 20.804 | 41.60 | |||||
| 57.00 | 41.59 | 41.61 | 20.795 | 20.805 | 41.60 | |||||
| 58.00 | 41.59 | 41.59 | 20.795 | 20.793 | 41.59 | |||||
| 59.00 | 41.59 | 41.60 | 20.795 | 20.798 | 41.59 | |||||
| 60.00 | 41.59 | 41.58 | 20.795 | 20.790 | 41.59 | |||||
| 61.00 | 41.59 | 41.60 | 20.795 | 20.801 | 41.60 | |||||
| 62.00 | 41.59 | 42.16 | 20.795 | 21.080 | 41.88 | |||||
| 63.00 | 41.59 | 42.84 | 20.795 | 21.420 | 42.22 | |||||
| 64.00 | 41.59 | 43.52 | 20.795 | 21.760 | 42.56 | |||||
| 65.00 | 41.59 | 44.20 | 20.795 | 22.100 | 42.90 | |||||
| 66.00 | 41.59 | 44.88 | 20.795 | 22.440 | 43.24 | |||||
| (1) | Assumes the closing price of Wintrust’s common stock on the date of the merger is the same as the reference price during the reference period. The actual trading price of Wintrust common stock is subject to market fluctuations, and Hinsbrook shareholders will not be entitled to receive additional shares in the merger if the trading price of Wintrust’s common stock on the closing date of the merger is less than the average price during the pricing period. | |
| (2) | The numbers in this column represent the value of the shares of Wintrust common stock which you will receive for each share of Hinsbrook common stock that you own, subject to the assumption in footnote 1. |
Proration of Merger Consideration. Despite your election, the merger agreement provides that the actual number of shares that may be converted into the right to purchase Town Banksharesreceive cash consideration, in the aggregate, may not exceed 50% of Hinsbrook’s outstanding common stock (the “Maximum Cash Election”) and the number of shares that may be converted into the right to receive Wintrust common stock (including any shares subject to the stock portion of a combination election), in the aggregate, may not exceed 50% of Hinsbrook’s outstanding common stock (the “Maximum Stock Election”). If, after the results of the election forms are calculated, the number of shares to be converted into cash or Wintrust common stock exceeds either the Maximum Cash Election or the Maximum Stock Election, Wintrust’s exchange agent will, on a pro rata basis, redesignate those shares to reduce the amount of cash or the number of shares in order to achieve the Maximum Cash Election or Maximum Stock Election, as the case may be. Accordingly, the amount of cash and Wintrust common stock you actually receive as part of the merger consideration may be different from your election. Wintrust may, however, taking into account the actual results of all elections, at any time prior to the effective time direct that the redesignation procedures described be waived in whole or in part, in which case the number of shares to be converted into cash or Wintrust common stock may exceed the Maximum Cash Election or Maximum Stock Election, as the case may be, although the redesignation cannot cause the tax consequences to be materially different than as described earlier.
Stock Options. If the merger is completed, each outstanding and unexercised immediatelyoption to purchase Hinsbrook common stock will automatically be converted into an option to purchase shares of Wintrust common stock, exercisable on generally the same terms and conditions that applied before the effective time of the
merger will become options to purchase Wintrust common stock.merger. The number of shares of Wintrust common stock subject to the converted stock optionssubstitute Wintrust option will be
equal to the number of shares of Town BanksharesHinsbrook common stock subject to Town
Bankshares stock optionsthe option immediately prior to the merger, multiplied by the quotient of the aggregate per share
merger consideration divided by the average price of Wintrust common stock as of
the determination date. We sometimes refer“option exchange ratio,” rounded down to the quotient of the aggregatenearest whole share. The per share merger consideration divided by the average price of the Wintrust common
stock as of the determination date as the "option exchange ratio." The exercise price of a converted stockeach substitute Wintrust option will equal the original Town Bankshares stock
option's exercise price of the option immediately prior to the merger divided by the option exchange ratio. Except as
described above,ratio, rounded down to the nearest whole cent. The “option exchange ratio” is equal to 41.59 divided by the reference price.
Merger consideration election
With this proxy statement/prospectus, you have been provided with an election form in order to select whether you will receive merger consideration consisting of cash, Wintrust common stock or a converted stock option will havecombination of cash and Wintrust common stock. The completed election form must be received by Wintrust’s exchange agent, Illinois Stock Transfer Company, by 5:00 p.m., central standard time on the same terms and
conditions as the original Town Bankshares stock option. All outstanding Town
Bankshares stock options will become vested and immediately exercisable atfifth business day before the effective time of
44
the merger. EXCHANGE OF CERTIFICATESOnce made, elections are irrevocable. If your election form is not received by this deadline you will be deemed to have elected to receive the combination of cash and Wintrust common stock. See “—Consideration to be received in the merger—Proration of merger consideration.”
Exchange of certificates
Wintrust has engaged Illinois Stock Transfer Company to act as its exchange agent to handle the exchange of Town BanksharesHinsbrook common stock for the merger consideration and the payment of cash for any fractional share interest. Within five business days after the effective time, the exchange agent will send to each Town Bankshares
38
Hinsbrook shareholder a letter of transmittal for use in the exchange with instructions explaining how to surrender Town BanksharesHinsbrook common stock certificates to the exchange agent. Town BanksharesHinsbrook shareholders that surrender their certificates to the exchange agent, together with a properly completed letter of transmittal, will receive the merger consideration. Town BanksharesHinsbrook shareholders that do not exchange their Town BanksharesHinsbrook common stock will not be entitled to receive the merger consideration or any dividends or other distributions by Wintrust until their certificates are surrendered. After surrender of the certificates representing Town BanksharesHinsbrook shares, any unpaid dividends or distributions with respect to the Wintrust common stock represented by the certificates will be paid.
CONDUCT OF BUSINESS PENDING THE MERGER AND CERTAIN COVENANTSpaid without interest.
Conduct of business pending the merger and certain covenants
Under the merger agreement, Town BanksharesHinsbrook has agreed to certain restrictions on its activities until the merger is completed or terminated. In general, Town BanksharesHinsbrook and its subsidiariesHinsbrook Bank & Trust are required to conduct their business in the usual and ordinary course, consistent with prudent banking practice.
The following is a summary of the more significant restrictions imposed upon Town Bankshares,Hinsbrook, subject to the exceptions set forth in the merger agreement:
o except with respect to the exercise of outstanding options to
purchase Town Bankshares common stock, effecting any change in
the capitalization or the number of issued and outstanding
shares of Town Bankshares or any of its subsidiaries;
o paying any dividends or other distributions, except in
connection with the ESOP share redemption;
o amending its articles of incorporation or by-laws, the charter
or by-laws of Town Bank or the organizational documents of the
other subsidiaries;
o increasing the compensation of the officers or key employees
of Town Bankshares or any of its subsidiaries or paying any
bonuses unless the amount of the increase or bonus payment
does not exceed $10,000 in the aggregate to any individual
officer or key employee;
o except with respect to the build-out of Town Bank's Madison
branch, making any expenditure for fixed assets in excess of
$25,000 for any single item, or $100,000 in the aggregate, or
entering into any lease for any fixed assets having an annual
rental in excess of $25,000;
o making or becoming party to a contract, commitment, or
transaction, acquiring or disposing of any property or asset,
or incurring any liabilities or obligations, other than in the
ordinary course of business consistent with prudent banking
practice and its current policies;
o doing or failing to do anything that will cause a breach or
default under any material contract;
o making, renewing or restructuring any loan in excess of
$1,000,000 other than in the ordinary course of business
consistent with prudent banking practice and Town Bank's
current loan policies and applicable governmental rules and
regulations;
o entering into employment, consulting, or similar agreements
that cannot be terminated with less than 30 days notice
without penalty;
o accepting or renewing any brokered deposits to the extent that
the total of outstanding brokered deposits at any one time
exceeds $60,000,000 in the aggregate;
o buying or investing in government securities that have
maturities of more than five years and a rating agency rating
below "A";
o terminating, curtailing or discontinuing any of its benefit
plans; and
o changing in any material respect any accounting or
recordkeeping procedures, policies or practices.
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| • | making changes to the charter and by-laws of Hinsbrook and Hinsbrook Bank & Trust; | ||
| • | except with respect to the exercise of outstanding options to purchase Hinsbrook common stock, effecting any change in the capitalization or the number of issued and outstanding shares of Hinsbrook or Hinsbrook Bank & Trust; | ||
| • | except as otherwise set forth in the merger agreement, paying any dividends or other distributions; | ||
| • | except as otherwise set forth in the merger agreement, increasing the compensation of the officers or key employees of Hinsbrook or any of its subsidiaries or paying any bonuses; | ||
| • | making any expenditure for fixed assets in excess of $50,000 for any single item, or $250,000 in the aggregate, or entering into any lease for any fixed assets having an annual rental in excess of $50,000; | ||
| • | making or becoming party to a contract, commitment, or transaction, acquiring or disposing of any property or asset, or incurring any liabilities or obligations, other than in the ordinary course of business consistent with prudent banking practice and its current policies; | ||
| • | doing or failing to do anything that will cause a breach or default under any material contract; | ||
| • | without Wintrust’s prior written consent, making, renewing or restructuring any loan in excess of $1,000,000, except as provided for in the merger agreement; | ||
| • | entering into employment, consulting, or similar agreements that cannot be terminated with less than 30 days notice without penalty; | ||
| • | buying or investing in government securities that have maturities of more than five years and a rating agency rating below “A”; | ||
| • | exceeding, at any time, $65,000,000 in brokered deposits; |
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| • | terminating, curtailing or discontinuing any of its benefit plans; and | ||
| • | changing in any material respect any accounting or recordkeeping procedures, policies or practices. |
Wintrust has agreed to file all applications and notices to obtain the necessary regulatory approvals for the transactions contemplated by the merger agreement. Town BanksharesHinsbrook has agreed to cooperate with Wintrust in connection with obtaining the regulatory approvals. Both parties agree:
o to use all reasonable and diligent efforts and to cooperate in
the preparation and filing of all applications, notices and
documents required to obtain regulatory approval and/or
consents from governmental authorities for the merger and the
merger agreement;
o to use reasonable and diligent good faith efforts to satisfy
the conditions required to close the merger and to consummate
the merger as soon as practicable;
o that neither will intentionally act in a manner that would
cause a breach of the merger agreement or that would cause a
representation made in the merger agreement to become untrue;
and
o to coordinate publicity of the transactions contemplated by
the merger agreement to the media and Town Bankshares'
shareholders.
Town Bankshares
| • | to use all reasonable and diligent efforts and to cooperate in the preparation and filing of all applications, notices and documents required to obtain regulatory approval and/or consents from governmental authorities for the merger and the merger agreement; | ||
| • | to use reasonable and diligent good faith efforts to satisfy the conditions required to close the merger and to consummate the merger as soon as practicable; | ||
| • | that neither will intentionally act in a manner that would cause a breach of the merger agreement or that would cause a representation made in the merger agreement to become untrue; and | ||
| • | to coordinate publicity of the transactions contemplated by the merger agreement to the media and Hinsbrook’s shareholders. |
Hinsbrook has agreed that it will not and will not permit the Bank to, directly or indirectly, solicit, encourage or facilitate any third-party inquiries or proposals to acquire Town BanksharesHinsbrook and will not participate in any negotiations or discussions regarding a proposal to acquire Town Bankshares.Hinsbrook. However, Town BanksharesHinsbrook may provide information and negotiate with a third party if Town Bankshares'Hinsbrook’s board of directors determines that failure to do so would be inconsistent with its fiduciary duties. Town
BanksharesHinsbrook is required under the merger agreement to provide Wintrust notice of any proposal that it receives to acquire Town Bankshares.
Town BanksharesHinsbrook.
Hinsbrook has also agreed to provide Wintrust with certain documents before the closing date, including:
o interim financial statements;
o prompt notice of any written assertions of dissenters' rights;
o reasonable notice of any meetings of the boards and committees
of Town Bankshares, Town Bank or Town Investment Corp.; and
o certain information regarding the loans in Town Bank's
| • | interim financial statements; | ||
| • | prompt notice of any written assertions of dissenters’ rights; | ||
| • | reasonable notice and minutes of any meetings of the boards and committees of Hinsbrook or Hinsbrook Bank & Trust; and | ||
| • | certain information regarding the loans in Hinsbrook Bank & Trust’s loan portfolio. |
The merger agreement also contains certain covenants relating to employee benefits and other matters pertaining to officers and directors. See "Description of the merger agreement--Employee“—Employee benefit matters"matters” and "Description
of the merger--Interests“The merger—Interests of certain persons in the merger."
REPRESENTATIONS AND WARRANTIES”
Representations and warranties
The merger agreement contains representations and warranties made by Town BanksharesHinsbrook and Wintrust. These include, among other things, representations relating to:
o valid corporate organization and existence;
o corporate power and authority to enter into the merger and the
merger agreement;
o capitalization;
o financial statements;
o certain tax matters;
o absence of material adverse changes;
o government approvals required in connection with the merger;
40
o absence of undisclosed investigations and litigation;
o compliance with laws;
o broker/finder fees;
o governmental registrations, licenses, permits, and reports;
and
o
| • | valid corporate organization and existence; | ||
| • | corporate power and authority to enter into the merger and the merger agreement; | ||
| • | capitalization; | ||
| • | financial statements; | ||
| • | certain tax matters; |
46
| • | absence of material adverse changes; | ||
| • | government approvals required in connection with the merger; | ||
| • | absence of undisclosed investigations and litigation; | ||
| • | compliance with laws; | ||
| • | broker/finder fees; and | ||
| • | absence of any breach of organizational documents, law or other agreements as a result of the merger. |
Wintrust also represents and warrants to Town BanksharesHinsbrook in the merger agreement regarding:
o compliance with SEC filing requirements; and
o filing of necessary reports with regulatory authorities.
Town Bankshares
| • | compliance with SEC filing requirements; | ||
| • | filing of necessary reports with regulatory authorities; and | ||
| • | its financial ability to consummate the merger. |
Hinsbrook makes additional representations and warranties to Wintrust in the merger agreement relating to, among other things:
o organizational documents and stock records;
o
| • | organizational documents, minutes and stock records; | ||
| • | title to real property, personal property and other material assets; | ||
| • | insurance matters; | ||
| • | employee benefits; | ||
| • | environmental matters; | ||
| • | ownership of Hinsbrook Bank & Trust and other subsidiaries; | ||
| • | compliance with, absence of default under and information regarding material contracts; | ||
| • | loans and its allowance for loan losses; | ||
| • | investment securities; | ||
| • | compliance with the Community Reinvestment Act; | ||
| • | conduct of business and maintenance of business relationships; | ||
| • | technology and intellectual property; | ||
| • | absence of undisclosed liabilities; and | ||
| • | affiliate transactions. |
Conditions to real property, personal property and other material
assets;
o insurance matters;
o employee benefits;
o environmental matters;
o ownershipcompletion of Town Bank and the other subsidiaries;
o compliance with, absence of default under and information
regarding material contracts;
o loans and its allowance for loan losses;
o investment securities;
o compliance with the Community Reinvestment Act;
o conduct of business and maintenance of business relationships;
o technology and intellectual property;
o absence of undisclosed liabilities; and
o affiliate transactions.
CONDITIONS TO COMPLETION OF THE MERGER
merger
Closing Conditions for the Benefit of Wintrust. Wintrust'sWintrust. Wintrust’s obligations are subject to fulfillment of the following conditions:
o
the accuracy of representations and warranties of Town
BanksharesHinsbrook in the merger agreement as of the closing date,
unless the failure to be accurate does not have a material
impact on Town Bankshares;
o performance by Town Bankshares in all material respects of its
agreements under the merger agreement;
41
o the registration statement has been declared effective by the
SEC and continues to be effective as of the effective time;
o approval of the merger by Town Bankshares' shareholders;
o the holders of not more than 10% of the outstanding shares of
Town Bankshares common stock give written demand for
dissenters' rights in accordance with Wisconsin law;
o receipt of all necessary regulatory approvals;
o no adverse material change in Town Bankshares since June 14,
2004;
o no litigation resulting from the transactions contemplated by
the merger agreement;
o receipt of certain certificates from Town Bankshares and a
legal opinion from Town Bankshares' legal counsel;
o execution of an employment agreement by each of Jay C. Mack
and Jeffrey A. Olson;
o termination of the Town Bank's Employee Stock Ownership Plan,
or the ESOP, and completion of the redemption of shares of
Town Bankshares common stock in the ESOP;
o amendment of certain deferred compensation agreements between
Town Bankshares and certain of Town Bank's officers and key
employees; and
o receipt of necessary consents, permissions and approvals.
date;
47
| • | performance by Hinsbrook in all material respects of its agreements under the merger agreement; | ||
| • | the registration statement has been declared effective by the SEC and continues to be effective as of the effective time; | ||
| • | approval of the merger agreement at the special meeting by the holders of at least a majority of the outstanding shares of Hinsbrook common stock entitled to vote; | ||
| • | the holders of not more than 5% of the outstanding shares of Hinsbrook common stock give written demand for appraisal rights in accordance with Illinois law; | ||
| • | receipt of all necessary regulatory approvals; | ||
| • | no material adverse change in Hinsbrook since December 5, 2005; | ||
| • | no threatened or pending litigation resulting from or seeking to enjoin the transactions contemplated by the merger agreement or seeking other relief that Wintrust reasonably believes, subject to certain conditions, would have a material adverse effect on Hinsbrook or its bank subsidiary; | ||
| • | execution of an employment agreement by Jeffrey D. Baker, Andrew M. Collins, Jr., L. Thomas McNamara and Regina R. Miller; | ||
| • | the entry of certain directors and officers of Hinsbrook into voting agreements; | ||
| • | amendment of Hinsbrook’s deferred compensation and deferred fee arrangements; | ||
| • | payment or accrual of an increased purchase price for certain shares of Hinsbrook’s common stock acquired from an individual in August and October of 2005 such that such individual will receive total consideration equal to $41.59 per share; and | ||
| • | receipt of necessary consents, permissions and approvals. |
Closing Conditions for the Benefit of Town Bankshares. Town Bankshares'Hinsbrook. Hinsbrook’s obligations are subject to fulfillment of the following conditions:
o accuracy of representations and warranties of Wintrust in the
merger agreement as of the closing date, unless the failure to
be accurate does not have a material impact on Wintrust;
o performance by Wintrust in all material respects of their
agreements under the merger agreement;
o Wintrust's common stock to be issued in the merger shall be
approved for trading on the Nasdaq National Market;
o approval of the merger by Town Bankshares' shareholders;
o receipt of all necessary regulatory approvals;
o execution and delivery of articles of merger suitable for
filing with the Illinois Secretary of State and the WDFI;
o the registration statement has been declared effective by the
SEC and continues to be effective as of the effective time;
o no litigation resulting from the transactions contemplated by
the merger agreement;
o no material adverse change in Wintrust since June 14, 2004;
o
| • | accuracy of representations and warranties of Wintrust in the merger agreement as of the closing date; | ||
| • | performance by Wintrust in all material respects of their agreements under the merger agreement; | ||
| • | authorization for listing the shares of Wintrust common stock issuable pursuant to the merger agreement on the Nasdaq National Market, subject to notice of final issuance; | ||
| • | receipt of all necessary regulatory approvals; | ||
| • | execution and delivery of articles of merger suitable for filing with the Illinois Secretary of State; | ||
| • | the registration statement has been declared effective by the SEC and continues to be effective as of the effective time; | ||
| • | no threatened or pending litigation resulting from or seeking to enjoin the transactions contemplated by the merger agreement or seeking other relief that Hinsbrook reasonably believes, subject to certain conditions, makes it inadvisable to consummate the merger; | ||
| • | no material adverse change in Wintrust since December 5, 2005; and |
48
receipt of certain certificates from Wintrust and a tax opinion from Town Bankshares' legalHinsbrook’s special tax counsel that the merger constitutes a “reorganization” within the meaning of Section 368(a) of the Code.
Minimum net worth and a legal opinion from
Wintrust's legal counsel; and
o receipt of necessary consents, permissions and approvals.
42
MINIMUM NET WORTH AND LOAN LOSS RESERVE REQUIREMENTS CLOSING CONDITIONloan loss reserve requirements closing condition
Also, as a condition to Wintrust'sWintrust’s obligation to close, as of the closing date:
o Town Bankshares' shareholders' equity, after disregarding any
adjustments made pursuant to FAS 115, must exceed the sum of
(1) $17,400,000, plus (2) any cash receipts and tax benefits
recorded by Town Bankshares from the exercise of outstanding
options to purchase Town Bankshares common stock, minus (3)
fees for attorneys, accountants and other advisors incurred by
Town Bankshares in connection with the merger, up to $300,000,
minus (4) the amount paid to redeem the ESOP Shares, but not
in excess of the sum of $58.10 plus the cash value of the per
share stock consideration received by holders of Town
Bankshares common stock; and
o Town Bankshares may have no more than $6,186,000 in
outstanding principal of holding company-level debt (including
trust preferred securities)
| • | Hinsbrook’s shareholders’ equity as of the closing date, adjusted to disregard any changes in the “other comprehensive income” account recorded after June 30, 2005, must be equal to or exceed the sum of the following, which we refer to in this proxy statement/prospectus as the “Minimum Adjusted Net Worth,” (1) $40,600,000, plus (2) any cash receipts and tax benefits recorded by Hinsbrook from the exercise of outstanding options to purchase Hinsbrook common stock, minus, on an after-tax basis, as appropriate (3) fees for attorneys, accountants and other advisors incurred by Hinsbrook in connection with the merger, minus (4) change of control payments due to any director or officer of Hinsbrook under existing agreements to terminate such agreements as contemplated in the merger agreement, minus (5) the amount paid by Hinsbrook to the shareholder from whom Hinsbrook repurchased shares of common stock in August and October of 2005; and | ||
| • | Hinsbrook may have no more than $8,000,000 in outstanding holding company-level debt (including any subordinated or senior debt or debentures). |
Additionally, as of the closing date, Town Bank'sHinsbrook Bank & Trust’s reserve for loan losses may not be less than 1%1.00% of its net loans. TERMINATION
TheImmediately prior to closing, Hinsbrook may distribute to its shareholders the amount by which its shareholders’ equity exceeds the Minimum Adjusted Net Worth.
Termination
Wintrust and Hinsbrook may mutually agree to terminate the merger agreement and abandon the merger at any time prior to completion of the merger. Subject to conditions and circumstances described in the merger agreement, either Wintrust or Hinsbrook may be terminated underterminate the merger agreement if, among other things, any of the following circumstances, as set forth in the merger agreement:
o at any time by written agreement of Wintrust and Town
Bankshares;
o by eitheroccur:
| • | the merger is not completed by July 31, 2006 or such later date agreed to by the parties; provided, that the termination date will be extended to August 31, 2005, if the sole impediments to closing are due to delays in receiving regulatory approval from the Federal Reserve or in the SEC declaring the registration statement effective; | ||
| • | the other party | ||
| • | Hinsbrook receives and accepts a superior proposal for acquisition by a third party. |
In addition, Hinsbrook may terminate the merger agreement required to be met by Town
Bankshares prior toif the closing date, or if it becomes
impossible for Town Bankshares to satisfy a conditionreference price of Wintrust’s common stock during the reference period is less than $47.14 and Town
Bankshares' inability to satisfy the condition wasWintrust does not, caused
by Wintrust's failure to meet anywithin five business days of notice of such termination, notify Hinsbrook of its obligations underelection to increase either (a) the Agreement and Wintrust has not waived such condition;
o by Town Bankshares if Wintrust has not satisfied a condition
under the merger agreement required to be met by Wintrust
prior to the closing date, or if it becomes impossible for
Wintrust to satisfy a condition and Wintrust's inability to
satisfy the condition was not caused by Town Bankshares'
failure to meet anynumber of its obligations under the Agreement and
Town Bankshares has not waived such condition; and
o by Wintrust, if the average of the high and low sale priceshares of Wintrust common stock duringto be issued or (b) the 10-day trading period ending
two trading days beforeamount of cash to be paid in exchange for those Hinsbrook shares subject to the closing date is greater than
$58.34, or, by Town Bankshares, ifstock elections and the pricestock portion of Wintrustcombination elections, in either case so that the per share consideration received in exchange for such shares of Hinsbrook common stock (determined inis equal to the same manner) is less than
$38.34, subjectconsideration that would be obtained using $47.14 as the reference price.
Termination fee
Termination Fees Payable by Hinsbrook.Hinsbrook has agreed to certain conditions.
TERMINATION FEEpay Wintrust may demand a $1,000,000 termination fee from Town Banksharesof $1,000,000 if the merger agreement is terminated under the following circumstances:
o
49
| • | Wintrust terminates the merger agreement because Hinsbrook breaches its covenant not to solicit an acquisition proposal from a third party; | ||
| • | Hinsbrook terminates the merger agreement upon its receipt and approval of a superior proposal for an acquisition by a third party; or | ||
| • | the merger agreement is terminated (a) by either Wintrust or Hinsbrook because the closing has not occurred by July 31, 2006 or such later date agreed to by the parties (or August 31, 2006, if the sole impediments to closing are due to delays in receiving regulatory approval from the Federal Reserve or in the SEC declaring the registration statement effective) or (b) by Wintrust because Hinsbrook has not satisfied a condition under the merger agreement required to be met by it prior to the closing date, or if it becomes impossible for Hinsbrook to satisfy a condition and its inability to satisfy the condition was not caused by Wintrust’s failure to meet any of its obligations under the merger agreement and Wintrust has not waived such condition, and in each such case, within six months after termination of the merger agreement, Hinsbrook or the Bank consummates or enters into a definitive agreement relating to an acquisition transaction which was made known to any member of Hinsbrook’s board of directors and not disclosed to Wintrust prior to the date of such termination. |
Hinsbrook has agreed to reimburse Wintrust terminates the merger agreement because Town
Bankshares breaches its covenant notfor up to solicit an acquisition
proposal from a third party;
43
o Town Bankshares terminates the merger agreement upon its
receipt$250,000 in out-of-pocket expenses and approval of a superior proposal for an acquisition
by a third party; or
ocosts if the merger agreement is terminated under the following circumstances:
| • | by Wintrust because Hinsbrook committed a material breach of its material obligations under the merger agreement and such breach is not the result of Wintrust’s failure to comply or perform in all material respects with any of its material obligations under the merger agreement; or | ||
| • | by either party because the closing has not occurred by July 31, 2006 or such later date agreed to by the parties (or August 31, 2006, if the sole impediments to closing are due to delays in receiving regulatory approval from the Federal Reserve or in the SEC declaring the registration statement effective) due to the failure of Wintrust to obtain the necessary regulatory approvals because of matters relating solely to Hinsbrook and Hinsbrook Bank & Trust. |
Termination Fees Payable by writtenWintrust.Wintrust has agreed to reimburse Hinsbrook for up to $250,000 in out-of-pocket expenses and costs if the merger agreement is terminated under the following circumstances:
| • | by Hinsbrook because Wintrust committed a material breach of its material obligations under the merger agreement and such breach is not the result of Hinsbrook’s failure to comply or perform in all material respects with any of its material obligations under the merger agreement; or | ||
| • | by either party because the closing has not occurred by July 31, 2006 or such later date agreed to by the parties (or August 31, 2006, if the sole impediments to closing are due to delays in receiving regulatory approval from the Federal Reserve or in the SEC declaring the registration statement effective) due to the failure of Wintrust to obtain the necessary regulatory approvals for any reason other than matters relating solely to Hinsbrook and Hinsbrook Bank & Trust. |
Management of Wintrust and Town Bankshares or by either Wintrust or Town
Bankshares becauseHinsbrook Bank & Trust after the closing has not occurred by November
30, 2004 (or February 28, 2004, if the sole impediments to
closing are due to delays in receiving regulatory approval
from the Federal Reserve or the WDFI or in the SEC declaring
the registration statement effective);
and in each such case, within six months after termination of the merger
agreement, Town Bankshares consummates or enters into a definitive agreement
relating to an acquisition transaction which was made known to any member of
Town Bankshares' board of directors and not disclosed to Wintrust prior to the
date of such termination.
MANAGEMENT OF WINTRUST AND TOWN BANK AFTER THE MERGER
After the merger, the Wintrust board of directors will remain the same and the TownHinsbrook Bank & Trust board of directors will likely change to include members of Wintrust'sWintrust’s management.
EMPLOYEE BENEFIT MATTERS
Employee benefit matters
The merger agreement requires Town BanksharesHinsbrook to terminate all of its employee benefit plans, other than its 401(k) plan, health, life and disability insurance plans, and long-term care plan, and deferred compensation agreements (which will be amended pursuant to the merger agreement) and to pay or accrue all liabilities relating to the terminated employee benefit plans prior to closing. Wintrust will assume those plans which Town BanksharesHinsbrook does not terminate and former Town
BanksharesHinsbrook employees may continue to participate in those plans until Wintrust terminates the plans or merges them with existing Wintrust plans. Effective as of closing, each full-time Hinsbrook employee will
50
become eligible and entitled to participate in Wintrust’s benefit plans on the same terms and conditions as all other U.S. employees of Wintrust. Wintrust reserves the right to amend or terminate these plans and arrangements in accordance with the terms of the plans and arrangements and applicable laws. If Wintrust chooses to terminate any Town BanksharesHinsbrook employee benefit or similar plan after the closing date, employees previously covered under the terminated plan will be eligible to participate in a similar Wintrust benefit plan.
TERMINATION OF ESOP AND REDEMPTION OF ESOP SHARES
Town Bankshares maintains the ESOP and has allocated 1,449 shares of
Town Bankshares' common stock to participants in the plan. The ESOP also holds
6,251 shares of Town Bankshares common stock that are unallocated. As of the
effective time of the merger, the interests of all participants in and
beneficiaries of the ESOP will fully vest and become nonforfeitable. Pursuant to
the merger agreement, Town Bankshares must undertake three actions in connection
with the ESOP prior to the effective time of the merger. First, prior to the
effective time, it must terminate the ESOP and, as promptly as practicable,
request from the Internal Revenue Service a favorable determination letter as to
the tax qualified status of the ESOP upon its termination under Section 401(a)
of the Internal Revenue Code of 1986. Second, Town Bankshares must redeem for
cash, in an amount per share equal to the sum of $58.10 plus the cash value of
the per share stock consideration received by Town Bankshares' shareholders, all
unallocated shares of Town Bankshares common stock held by the ESOP and all
shares of Town Bankshares' common stock allocated to the ESOP accounts of
current or former employees of Town Bankshares who participated in or are
beneficiaries of the ESOP. Third, Town Bankshares must cause the loan between it
and the trust formed under the ESOP to be repaid in full from the cash
consideration received pursuant to the redemption of unallocated ESOP shares.
Each participant's account will be credited with an amount equal to the number
of shares of Town Bankshares common stock allocated to such participant's
account multiplied by the ESOP cash redemption price. The ESOP cash redemption
price for the unallocated shares of Town Bankshares common stock will be used
first to repay the loan from Town Bankshares to the ESOP trust which had a total
balance due of approximately $375,100 as of June 30, 2004. Town Bankshares has
amended the ESOP to provide that the remainder of the ESOP cash redemption price
for the unallocated shares will be allocated to the accounts of the ESOP
participants pro rata based on compensation earned between January 1, 2004 and
the date of termination of the ESOP. ESOP participants must be employed by Town
Bankshares or its subsidiaries as of the date of the termination of the ESOP to
share in this allocation. However, to the extent this allocation exceeds certain
limitations under the Internal Revenue Code, the amount in excess of such
limitations will be allocated to the accounts of all ESOP participants pro rata
based on the account balances immediately prior to the redemption. The
44
termination of the ESOP and the redemption of the shares of Town Bankshares
common stock in the ESOP will not be effective unless the merger is subsequently
completed.
Town Bankshares, before the effective time, and Wintrust, after the
effective time, must use their respective reasonable and diligent efforts to
obtain a favorable final determination letter from the IRS. If, before the
effective time, Town Bankshares or, after the effective time, Wintrust
reasonably determines that the ESOP cannot obtain a favorable final
determination letter from the IRS or that the amounts held in the ESOP cannot be
applied, allocated or distributed without causing the ESOP to lose its tax
qualified status, then Town Bankshares, if before the
effective time, or Wintrust, if after the effective time, must take such action
as they reasonably determine with respect to the distribution of benefits to
ESOP participants or beneficiaries. However, the assets of the ESOP must be held
or paid only for the benefit of ESOP participants and beneficiaries and, in no
event, may any portion of the amounts held in the ESOP revert, directly or
indirectly, to Town Bankshares, or any of its subsidiaries, or Wintrust, or any
of its affiliates.
Following termination of the ESOP, subject to receipt of a favorable
determination letter from the Internal Revenue Service, each ESOP participant
will receive a distribution of the value of his or her account balance under the
ESOP. An ESOP participant may elect to have the distribution paid to him or her
or directly rolled over to an IRA that he or she establishes or an eligible
employer plan that will accept it and hold it for the participant's benefit.
If an ESOP participant chooses a direct rollover, the distribution will
not be taxed in the current year and no income tax will be withheld. The
distribution will be taxed later when the ESOP participant takes it out of the
IRA or eligible employer plan. If an ESOP participant chooses to have the
payment made directly to him or her, the ESOP participant will receive only 80%
of the taxable amount of the distribution, because the ESOP administrator will
be required to withhold 20% of the distribution as income tax withholding. If an
ESOP participant receives a distribution of the amount, he or she can elect to
roll the distribution into an IRA or an eligible employer plan within 60 days
after receipt of the distribution. If an ESOP participant makes such an election
and wants to roll over 100% of the distribution to an IRA or an eligible
employer plan, he or she must find other money to replace the 20% of the taxable
portion that was withheld. If an ESOP participant rolls over only the 80% that
was received, he or she will be taxed on the 20% that was withheld and that is
not rolled over. If the ESOP participant does not roll over any part of the
distribution into an IRA or an eligible employer plan within 60 days, the full
amount of the distribution will be taxed to the ESOP participant in the year he
or she receives the distribution. If the ESOP participant receives the payment
before age 59 1/2, he or she may have to pay an additional 10% tax. ESOP
participants should consult with their tax advisors before deciding whether to
receive the distribution or roll over the distribution into an IRA or an
eligible employer plan.
EXPENSES
Expenses
All expenses incurred in connection with the merger agreement will be paid by the party incurring the expenses, except that the fees paid in connection with the filing of the registration statement will be borne by Wintrust, and Wintrust and Town BanksharesHinsbrook have agreed to share equally the cost and expense incurred in connection with printing and mailing the registration
statement.proxy statement/prospectus. As more fully described above under “—Termination fee,” Wintrust and Town BanksharesHinsbrook have also agreed to reimburse each other for certain expenses incurred not exceeding $300,000$250,000 in the event the merger is terminated prior to the closing date for certain specified reasons relating to
its material breach of the merger agreement.
NASDAQ STOCK LISTING
Wintrust'sreasons.
Nasdaq stock listing
Wintrust’s common stock currently is listed on the Nasdaq National Market under the symbol "WTFC."“WTFC.” The shares to be issued to the Town BanksharesHinsbrook’s shareholders as merger consideration also will be eligible for trading on the Nasdaq National Market.
Amendment
The merger agreement may be amended in writing by the parties.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF HINSBROOK
The following table shows, as of April 24, 2006, the beneficial ownership of Hinsbrook common stock of each person who beneficially owns more than 5% of Hinsbrook’s outstanding common stock, of each Hinsbrook director, by each of the executive officer of Hinsbrook and certain executive officers of Hinsbrook Bank & Trust and by all of Hinsbrook’s directors and officers as a group. Other than the directors and executive officers listed below, no person or entity is known to Hinsbrook to be the beneficial owner of more than 5% of the outstanding shares of Hinsbrook common stock. Except as otherwise noted in the footnotes to the table, each individual has sole investment and voting power with respect to the shares of common stock set forth.
| Common Stock directly, | ||||||||
| indirectly or beneficially | Percent of | |||||||
| Name(1) | owned as of December 31, 2005 | Outstanding | ||||||
| Neal A. Anderson | 141,500 | (2) | 5.12 | % | ||||
| Robert K. Buhrke | 159,377 | (3) | 5.77 | % | ||||
| Jeffrey D. Baker | 7,363 | * | ||||||
| Andrew M. Collins, Jr. | 96,316 | (4) | 3.49 | % | ||||
| James R. Hannon | 170,969 | (5) | 6.19 | % | ||||
| L. Thomas McNamara | 80,586 | (6) | 2.92 | % | ||||
| Regina R. Miller | 10,222 | (7) | * | |||||
| Daniel Regan | 214,784 | (8) | 7.78 | % | ||||
| Ying-Yih Wu | 180,579 | (9) | 6.54 | % | ||||
| All directors and executive officers as a group (9 persons) | 1,061,696 | 38.44 | % | |||||
| * | Indicates that the individual or entity owns less than one percent of Hinsbrook’s common stock. |
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| (1) | The address for each of the directors and executive officers named in the table is c/o Hinsbrook Bancshares, Inc., 6262 South Route 83, Willowbrook, Illinois 60527. |
| (2) | The amount shown for Mr. Anderson includes 59,662 shares of common stock which is owned by a trust over which Mr. Anderson shares voting and investment power. |
| (3) | The amount shown for Mr. Buhrke includes 135,185 shares of common stock which is owned by trusts over which Mr. Buhrke shares voting and investment power and 19,776 shares of common stock held through the Hinsbrook Bank & Trust 401(k) Plan, pursuant to which Mr. Buhrke has shared voting and investment power. The amount shown for Mr. Buhrke also includes 4,416 shares of common stock held by Hinsbrook Bank & Trust as custodian for the benefit of an IRA for Geraldine K. Buhrke, Mr. Burke’s spouse, of which Mr. Buhrke disclaims beneficial ownership. |
| (4) | The amount shown for Mr. Collins includes 23,800 shares of common stock which is owned jointly by Mr. Collins and his spouse, Mrs. Margaret M. Collins, and 1,000 shares of common stock held through the Hinsbrook Bank & Trust 401(k) Plan, pursuant to which Mr. Collins has shared voting and investment power. |
| (5) | The amount shown for Mr. Hannon includes 48,092 shares of common stock held through the Hinsbrook Bank & Trust 401(k) Plan, pursuant to which Mr. Hannon has shared voting and investment power. The amount shown for Mr. Hannon also includes 32,318 shares of common stock owned by his spouse, Gail Hannon, and 5,310 shares of common stock held by Hinsbrook Bank & Trust as custodian for the benefit of the Gail Hannon IRA, of which Mr. Hannon disclaims beneficial ownership.. |
| (6) | The amount shown for Mr. McNamara includes 67,354 shares of common stock owned jointly by Mr. McNamara and his spouse, Mrs. Margaret McNamara and 13,232 shares of common stock held through the Hinsbrook Bank & Trust 401(k) Plan, pursuant to which Mr. McNamara has shared voting and investment power. |
| (7) | The amount shown for Ms. Miller includes 10,222 shares of common stock owned jointly with her spouse, Mr. Robert Miller. |
| (8) | The amount shown for Mr. Regan includes 54,166 shares of common stock held through the Daniel R. Regan, Inc. Profit Sharing Trust and 15,906 shares of common stock held by Hinsbrook Bank & Trust as custodian for the benefit of the Daniel R. Regan IRA. The amount shown for Mr. Regan also includes 338 shares of common stock held by Hinsbrook Bank & Trust as custodian for the benefit of an IRA for Barbara Regan, Mr. Regan’s spouse, of which Mr. Regan disclaims beneficial ownership. |
| (9) | The amount shown for Dr. Wu includes 95,519 shares of common stock held through the Wu Family Medical Center, 5,717 shares of common stock held by Hinsbrook Bank & Trust as custodian for the benefit of certain of Dr. Wu’s IRAs and 4,427 shares of common stock held by Hinsbrook Bank & Trust as custodian for the benefit of the Wu Family Medical Center IRA. |
The information presented in the table is based on information furnished by the specified persons and was determined in accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as required for purposes of this proxy statement/prospectus. Briefly stated, under that Rule shares are deemed to be beneficially owned by any person or group having the power to vote or direct the vote of, or the power to dispose or direct the disposition of, such shares, or who has the right to acquire beneficial ownership thereof within 60 days. Beneficial ownership for the purposes of this proxy statement/prospectus is not necessarily to be construed as an admission of beneficial ownership for other purposes.
COMPARISON OF SHAREHOLDER RIGHTS
The
General
As a shareholder of Hinsbrook, your rights of shareholders of Town Bankshares, a Wisconsin corporation, are governed by Town Bankshares'Hinsbrook’s articles of incorporation and its by-laws, each as well
as the Wisconsin Business Corporation Law (the "WBCL").currently in effect. Upon completion of the merger, the rights of Town BanksharesHinsbrook shareholders who receive shares of Wintrust common stock in exchange for their shares of Town BanksharesHinsbrook common stock and become shareholders of 45
Wintrust will be governed by theWintrust’s amended articles of incorporation and amended and restated by-laws, of
Wintrust. Wintrust is an Illinois corporation governed by the Illinois Business
Corporation Act ("IBCA"), as well as the rules and regulations applying to public companies. Both corporations are incorporated in Illinois and are subject to the Illinois Business Corporation Act, as amended (the “IBCA”).
52
The following discussion summarizes material differences between the rights of Town BanksharesHinsbrook and Wintrust shareholders and is not a complete description of all of the differences. This discussion is qualified in its entirety by reference to the WBCL, IBCA and Wintrust'sWintrust’s and Town Bankshares'Hinsbrook’s respective articles of incorporation and by-laws.
AUTHORIZED CAPITAL STOCK
The authorized capital stock of Town Bankshares consists of 500,000
shares of common stock, par value $0.01 per share, and 50,000 shares of
preferred stock, par value $0.01 per share. Wintrust is authorized to issue 20
million shares, without par value, of preferred stock, and 30 million shares,
without par value, of common stock. At _____________ ___, 2004, Wintrust had
___________ shares of common stock outstanding. Wintrust has not issued any
shares of preferred stock. Issuance of shares of Wintrust's preferred stock
would affect the relative rights of the holders of its common stock, depending
upon the exact terms, qualifications, limitations and relative rights and
preferences, if any, of the shares of the preferred stock as determined by
Wintrust's Board of Directors.
PAYMENT OF DIVIDENDS
The ability of Town Bankshares to pay dividends is governed by the WBCL
and its articles of incorporation. Under the WBCL, the board of directors of a
Wisconsin corporation may not pay dividends or make distributions if, after
giving effect to the dividend or distribution, the corporation would not be able
to pay its debts as they become due in the usual course of business or the
corporation's total assets would be less than the sum of its total liabilities
plus, unless the corporation's articles of incorporation permit otherwise, the
amount that would be needed, if the corporation were to be dissolved at the time
of the dividend or distribution, to satisfy the preferential rights upon
dissolution of shareholders who preferential rights are superior to those
receiving the dividend or distribution. The articles of incorporation of Town
Bankshares do not differ from the WBCL.
The IBCA governs the ability of Wintrust to pay dividends. Under the
IBCA, an Illinois corporation may not pay dividends or make other distributions
to its shareholders if the distribution would have the effect of making the
corporation insolvent or if, after payment of the dividend, the net assets of
the corporation would be less than zero or less than the maximum amount payable
at the time of distribution to shareholders having preferential rights in the
liquidation of the corporation if it were to be liquidated. Wintrust may pay
dividends if, as and when declared by its Board of Directors. As noted above,
Wintrust's ability to pay dividends is subject to limitations imposed by the
IBCA. If Wintrust issues any shares of its preferred stock in the future, the
holders of its preferred stock may have a priority over the holders of its
common stock with respect to dividends.
ADVANCE NOTICE REQUIREMENTS FOR PRESENTATION OF BUSINESS AND NOMINATIONS OF
DIRECTORS AT ANNUAL MEETINGS OF SHAREHOLDERS
Wintrust's by-laws provide that nominations for the election of
directors may be made by its board of directors or by any shareholder entitled
to vote for the election of directors, subject to the nomination having been
made in compliance with certain notice and informational requirements.
Wintrust's by-laws provide that Wintrust must receive written notice of any
shareholder director nomination or proposal for business at an annual meeting of
shareholders no later than 60 days in advance of the meeting if the date of the
meeting is within 30 days preceding the anniversary date of the prior year
annual meeting. Notice must be delivered to Wintrust no later than 90 days
before the meeting if the meeting is to be held on or after the anniversary date
of the previous year's annual meeting. With respect to any other annual or
special meeting, the required notice must be received no later than the tenth
day following the date that the date of such meeting is publicly announced.
Town Bankshares' by-laws provide that, for business to be properly
brought before an annual meeting by a shareholder and for a shareholder
nomination for the election of directors, the shareholder must give timely
written notice to Town Bankshares' Secretary. To be timely, all notices must be
received by the Secretary not later than 90 days prior to the anniversary date
of the annual meeting of shareholders in the immediately preceding year.
46
QUORUM
Town Bankshares' by-laws provide that a majority of its outstanding
shares entitled to vote on a matter, in person or by proxy, constitutes a quorum
for the taking of action at a meeting of shareholders. Wintrust's by-laws
contain essentially the same provision. Like Town Bankshares shareholders,
Wintrust shareholders are entitled to one vote for each share owned.
ELECTION, CLASSIFICATION AND SIZE OF BOARD OF DIRECTORS
Under Town Bankshares' articles of incorporation, its board of
directors must consist of not less than four and no more than 15 directors, as
may determined by the then authorized number of directors. The number of
directors currently authorized is 8. The board of directors is divided into
three classes with each class to consist, as nearly as possible, one-third of
the total number of authorized directors. Each director is elected to a term
ending on the date of the third annual meeting following the annual meeting at
which such director was elected.
Wintrust's board of directors is divided into three classes. Each class
serves a staggered term, with one class or approximately one-third of the total
number of directors being elected for a three-year term at each annual meeting
of shareholders. Wintrust's by-laws state that the number of directors shall be
14; however, the Board of Directors may increase or decrease that number so long
as there are not less than six directors at any time. The number of directors
currently designated by Wintrust is 14. Shareholders do not have any right to
cumulate votes in the election of directors. The staggered election of directors
ensures that, at any given time, approximately two-thirds of the directors
serving will have had prior experience on the board. Staggered terms for
directors also moderate the pace of any change in the board by extending the
time required to elect a majority of directors from one to two years. It would
be impossible, assuming no resignations or removals of directors, for Wintrust's
shareholders to change a majority of the directors at any annual meeting should
they consider such a change desirable, unless this provision of Wintrust's
articles of incorporation is amended by action of at least 85% of Wintrust's
voting shares.
REMOVAL OF DIRECTORS
Town Bankshares' directors may be removed, but only for cause and only
by the affirmative vote of the holders of a majority of outstanding shares
entitled to vote with respect to the election of such director at a meeting of
shareholders duly called for such purpose.
Wintrust's directors may be removed by shareholders, with or without
cause, at a duly called meeting of shareholders by the affirmative vote of the
holders of a majority of outstanding shares entitled to vote.
FILLING VACANCIES ON THE BOARD OF DIRECTORS
Wintrust's by-laws provide that any vacancies and newly created
directorships on the board of directors shall be filled for the remainder of the
unexpired term exclusively by a majority vote of the directors then in office.
Shareholders do not have the right to fill vacancies.
Town Bankshares' articles of incorporation provide that any vacancy on
the board of directors may be filled by the action of a majority of the
remaining directors, even if less than a quorum, or by a sole remaining
director. If no director remains in office, any vacancy may be filled by the
shareholders. A director elected to fill a vacancy will hold office for the
remaining term of directors of the class to which he or she has been elected and
until a successor has been elected and qualified.
AMENDMENT OF ARTICLES OF INCORPORATION AND BY-LAWS
Generally, Town Bankshares' articles of incorporation may be amended by
the affirmative vote of a majority of the combined voting power of the then
outstanding shares of common stock entitled to vote on the matter. However,
amendment of certain provisions of the articles of incorporation requires the
affirmative vote of holders of 70% or more of the combined voting power of the
then outstanding shares entitled to vote on the matter. These provisions relate
to composition of the board of directors and shareholder action by unanimous
written consent.
47
Town Bankshares' by-laws may generally be amended or repealed by a
majority vote of the board of directors or shareholders. However, amendment of
certain provisions of the by-laws requires the affirmative vote of holders of
70% or more of the combined voting power of the then outstanding shares entitled
to vote on the matter. These provisions relate to shareholder meetings and
indemnification of directors and officers. Notwithstanding, the fact that
shareholder action regarding those provisions requires a supermajority vote, the
articles of incorporation provide that the board of directors may amend or
repeal those provisions of the by-laws without a vote of
shareholders. The by-laws also limit the power of the board of directors to
adopt or amend certain other provisions of the by-laws. First, the board of
directors may not amend or repeal a bylaw provision adopted by the shareholders
if the provision limits the ability of the board of directors to do so. Second,
the board of directors may not amend or repeal a bylaw provision adopted by the
shareholders if the provision fixes a greater or lower quorum requirement or a
greater voting requirement for the board of directors than otherwise is provided
in the WBCL unless the provision expressly provides that it may be amended or
repealed by a specified vote of the board of directors.
Any amendment of Wintrust's articles of incorporation must be approved
by a majority vote of the board of directors and also by a vote of at least
two-thirds of the outstanding shares of common stock. However, amendment of
certain provisions of Wintrust's articles of incorporation requires a higher
vote of 85% or more of the outstanding shares. These include provisions relating
to: prohibiting cumulative voting rights; the prohibition of shareholder action
by written consent; indemnification of Wintrust's officers and directors; the
number and classification of the board of directors; and the provisions of the
by-laws relating to the vote required to amend certain sections of the articles
of incorporation. Wintrust's by-laws may be amended only by the board of
directors.
MERGERS, ACQUISITIONS AND OTHER TRANSACTIONS
Under the IBCA, unless a corporation's articles of incorporation
provide otherwise, approval by two-thirds of the voting power of the corporation
is required for mergers and other transactions involving any sale, lease,
exchange or disposition of all or substantially all of its assets or
dissolution. Wintrust's articles of incorporation do not specify a different
percentage than that required by law, except as discussed below regarding
business combinations with certain persons. See "Business combinations with
interested shareholders."
Under the WBCL, Town Bankshares may sell, lease, exchange or otherwise
dispose of substantially all of its property and may merge or enter into a share
exchange with another entity only if the transaction is approved by a majority
of all votes entitled to be cast at a meeting for the purpose of voting on the
transaction.
BUSINESS COMBINATIONS WITH INTERESTED SHAREHOLDERS
As a public company, Wintrust is governed by the provisions of Section
7.85 of the IBCA which applies to a transaction with an "Interested Shareholder"
(as defined below) (the "IBCA fair price provision"). Fair price provisions are
designed to impede two-step takeover transactions which might otherwise result
in disparate treatment of Wintrust's shareholders.
Under the IBCA fair price provision, the approval of at least 80% of
the shares is required in connection with any transaction involving an
Interested Shareholder except (i) in the cases where the proposed transaction
has been approved in advance by a majority of those members of the corporation's
board of directors who are unaffiliated with the Interested Shareholder and were
directors prior to the time when the Interested Shareholder became an Interested
Shareholder or (ii) if the proposed transaction meets certain conditions set
forth therein which are designed to afford the shareholders a fair price in
consideration for their shares, in which case approval of only a majority of the
outstanding shares of voting stock is required.
The term "Interested Shareholder" is defined in the IBCA to include any
individual, corporation, partnership or other entity (other than the corporation
or any subsidiary) which owns beneficially or controls, directly or indirectly,
15% or more of the outstanding shares of the corporation's voting stock or is an
affiliate or associate of the corporation and was the owner of 15% or more of
the outstanding voting stock of the corporation at any time within the three
year period immediately before the date on which the determination whether the
person is an Interest Shareholder is sought.
Town Bankshares has opted to be subject to a parallel provision of the
WBCL. The WBCL defines a "business combination" as including a merger or a share
exchange, sale of assets, issuance of stock or rights to
48
purchase stock and other transactions with interested shareholders. Under the
WBCL, an "interested shareholder" is a person who beneficially owns, directly or
indirectly, 10% of the outstanding voting stock of a corporation or who is an
affiliate or associate of the corporation and beneficially owned 10% of the
voting stock within the last three years. During the initial three-year period
after a person becomes an interested shareholder in a Wisconsin corporation,
with some exceptions, the WBCL prohibits a business combination with the
interested shareholder unless the corporation's board of directors approved the
business combination or the acquisition of the stock prior to the acquisition
date. Following this three-year period, the WBCL also prohibits a business
combination with an interested shareholder unless:
o the board of directors approved the business combination or
the acquisition of the stock prior to the acquisition date,
o the business combination is approved by a majority of the
outstanding voting shares not owned by the interested
shareholder,
o the consideration to be received by shareholders meets the
"fair price" and form requirements of the statute, or
o the business combination is of a type specifically excluded
from the coverage of the statute.
As allowed by the WBCL, Town Bankshares has opted to be subject to
Sections 180.1130 through 180.1134 of the WBCL which govern mergers or share
exchanges between public Wisconsin corporations and significant shareholders and
sales of all or substantially all of the assets of public Wisconsin corporations
to significant shareholders. These transactions must be approved by 80% of all
shareholders and two-thirds of shareholders other than the significant
shareholder, unless the shareholders receive a statutory fair price. This is
intended to insure that shareholders in a second step merger, share exchange or
asset sale receive at least what shareholders received in the first step.
Section 180.1130 of the WBCL defines a "significant shareholder" as the
beneficial owner, directly or indirectly, of 10% or more of the voting power of
the outstanding voting shares, or an affiliate of the Wisconsin corporation that
beneficially owned 10% or more of the voting power of the then- outstanding
shares within the last two years. The WBCL specifically provides that a person
is not a "beneficial owner" of securities for purposes of Section 180.1130 of
the WBCL solely because of the existence of an agreement between the person and
a record or beneficial owner of such securities under which the owner agrees to
vote the securities in favor of a proposed merger, share exchange or sale,
lease, exchange or other disposition of assets.
LIMITATIONS ON DIRECTORS' LIABILITY
Wintrust's articles of incorporation provides that no director will be
personally liable to the corporation or any of its shareholders for monetary
damages for any breach of fiduciary duty except, as required by the IBCA, as
follows:
o for breach of duty of loyalty to the corporation or the
shareholders;
o for acts and omissions not in good faith or which involved
intentional misconduct or a knowing violation of law;
o for deriving an improper personal benefit from a transaction
with the corporation; or
o under Section 8.65 of the IBCA, which creates liability for
unlawful payment of dividends and unlawful stock purchases or
redemptions.
Under the WBCL, a director will not be liable to a corporation, its
shareholders or any person asserting rights on behalf of the corporation or its
shareholders for damages or other monetary liabilities arising from a breach of,
or failure to perform, any duty resulting solely from his or her status as a
director, unless the person asserting liability proves that the breach or
failure to perform constitutes one of the following:
o a willful failure to deal fairly with the corporation or its
shareholders in connection with a matter in which the director
has a material conflict of interest;
49
o a violation of criminal law, unless the director had
reasonable cause to believe that his or her conduct was lawful
or no reasonable cause to believe that his or her conduct was
unlawful;
o a transaction from which the director derived an improper
personal benefit; or
o willful misconduct.
INDEMNIFICATION
The by-laws of Town Bankshares provide two types of indemnification to
its directors and officers. The first type is indemnification for successful
defense of claims and the second type covers indemnification for all other
claims. As to the first type, within 20 days after receipt of a written request,
Town Bankshares must indemnify a director or officer, to the extent that he or
she has been successful on the merits or otherwise in the defense of a
proceeding, for all reasonable expenses incurred in the proceeding if the
director or officer was a party to the proceeding by virtue of his or her status
as a director or officer of the corporation or a wholly-owned subsidiary of the
corporation.
As to the second type, Town Bankshares must indemnify a director or
officer against liabilities and expenses incurred by the director or officer in
a proceeding to which the director or officer was a party because he or she was
a director or officer of the corporation or one of its wholly-owned
subsidiaries, unless liability was incurred because the director or officer
breached or failed to perform a duty he or she owes the corporation and the
breach or failure to perform constitutes any of the following:
o a willful failure to deal fairly with the corporation or its
shareholders in connection with a matter in which the director
has a material conflict of interest;
o a violation of criminal law, unless the director had
reasonable cause to believe that his or her conduct was lawful
or no reasonable cause to believe that his or her conduct was
unlawful;
o a transaction from which the director derived an improper
personal benefit; or
o willful misconduct.
Unless otherwise provided by a written agreement between a director or
officer and the corporation, the director or officer seeking indemnification
must select one of the following means for determining his or her right to
indemnification:
(1) By a majority vote of a quorum of the board of directors
consisting of directors not at the time parties to the same or related
proceedings. If a quorum of disinterested directors cannot be obtained,
by majority vote of a committee duly appointed by the board of
directors and consisting solely of two or more directors who are not at
the time parties to the same or related proceedings. Directors who are
parties to the same or related proceedings may participate in the
designation of members of the committee.
(2) By independent legal counsel selected by a quorum of the
board of directors or its committee in the manner prescribed in (1)
above or, if unable to obtain such a quorum or committee, by a majority
vote of the full board of directors, including directors who are
parties to the same or related proceedings.
(3) By a panel of three arbitrators consisting of one
arbitrator selected by those directors entitled under (2) above to
select independent legal counsel, one arbitrator selected by the
director or officer seeking indemnification and one arbitrator selected
by the two arbitrators previously selected.
(4) By an affirmative vote of shares represented at a meeting
of shareholders at which a quorum of the voting group entitled to vote
thereon is present. Shares owned by, or voted under the control of,
persons who are at the time parties to the same or related proceedings,
whether as plaintiffs or defendants or in any other capacity, may not
be voted in making the determination.
50
(5) By a court as set forth in the by-laws.
(6) By any other method provided for in any additional right
to indemnification permitted under the by-laws.
In any determination described above, the burden of proof is on the
corporation to prove by clear and convincing evidence that indemnification
should not be allowed. If it is determined that indemnification is required, the
corporation shall pay all liabilities and expenses not prohibited by the by-laws
within ten days after receipt of the written determination. The corporation
shall also pay all expenses incurred by the director or officer in the
determination process described above.
Except as provided otherwise by written agreement between the director
officer and the corporation, a director or officer who is a party to a
proceeding may apply for indemnification to the court conducting the proceeding
or to another court of competent jurisdiction. Application shall be made for an
initial determination by the court under (5) above or for review by the court of
an adverse determination under (1), (2), (3), (4) or (6) above. If the court
determines that the director or officer is entitled to indemnification, the
corporation shall pay the director's or officer's expenses incurred to obtain
the court-ordered indemnification.
Under the IBCA, a corporation may indemnify its directors, officers,
employees and certain other individuals against expenses, including attorneys'
fees, judgments, fines and amounts paid in settlement in connection with
actions, suits or proceedings arising because of the person's relationship to
the corporation. The indemnification generally will cover expenses regardless of
whether it is a civil, criminal, administrative or investigative proceeding if
the individual acted in good faith and in a manner he or she reasonably believed
to be in, or not opposed to, the best interest of the corporation and, in the
case of a criminal proceeding, had no reasonable cause to believe his or her
conduct was unlawful. A similar standard applies in an action or suit by or in
the right of the corporation, but extends to only expenses, including attorneys'
fees, incurred in defense of the proceeding. In these cases, court approval is
required before there can be any indemnification when the person seeking
indemnification has been found liable to the corporation. To the extent a person
otherwise eligible for indemnification is successful on the merits or otherwise
in defense of any action, suit or proceeding described above, indemnification
for expenses, including attorneys' fees, actually and reasonably incurred is
required under the IBCA.
Wintrust's
| Wintrust Shareholder Rights | Hinsbrook Shareholder Rights | |||
Authorized Capital Stock: | Wintrust is authorized to issue 60 million shares, without par value, of common stock, and 20 million shares, without par value, of preferred stock. On April 6, 2006, Wintrust had 24,243,388 shares of common stock outstanding. Wintrust has not issued any shares of preferred stock. Issuance of shares of Wintrust’s preferred stock would affect the relative rights of the holders of its common stock, depending upon the exact terms, qualifications, limitations and relative rights and preferences, if any, of the shares of the preferred stock as determined by Wintrust’s board of directors. | Hinsbrook is authorized to issue 10 million shares of common stock, par value $0.05 per share. On the record date Hinsbrook had 2,761,723 shares of common stock outstanding. | ||
Rights of Preferred Shareholders: | Wintrust has not issued any of its authorized preferred stock. | Hinsbrook is not authorized to issue preferred stock. | ||
Dividends: | Subject to any rights of holders of preferred stock if such stock is ever issued, Wintrust may pay dividends if, as and when declared by its board of directors from any funds legally available therefor. | Hinsbrook may pay dividends if, as and when declared by its board of directors from any funds legally available therefor. | ||
Number of Directors, Classification: | The Wintrust board of directors currently consists of fourteen (14) members. Wintrust’s by-laws provide, however, that the number may be increased or decreased (provided the number is never less than nine (9)) by an amendment of the by-laws by the shareholders, or by a resolution adopted by the majority of the board of directors. | The Hinsbrook board of directors currently consists of five (5) members. Hinsbrook’s articles of incorporation provide that its board of directors must consist of not less than three (3) and no more than ten (10) directors, as may be established by resolution of the then-current board. | ||
| Wintrust’s board of directors is divided into three classes, with each class consisting of approximately one-third of the total number of directors. Directors are elected for three-year terms, with one class of directors up for election at each annual meeting of shareholders. | Hinsbrook’s board of directors consists of a single class of directors. | |||
Election of Directors: | Each Wintrust shareholder is entitled to vote the number of shares owned by such shareholder for as many persons as there are directors to be elected. | Each Hinsbrook shareholder is entitled to vote the number of shares owned by such shareholder for as many persons as there are directors to be elected. | ||
| The Wintrust by-laws provide that no cumulative voting is permitted. | The Hinsbrook by-laws provide that no cumulative voting is permitted. | |||
Removal of Directors: | A Wintrust director may be removed at a shareholders’ meeting, with or without | A Hinsbrook director may be removed at a shareholders’ meeting, with or without |
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| Wintrust Shareholder Rights | Hinsbrook Shareholder Rights | |||
| cause, by the affirmative vote of a majority of the outstanding shares entitled to vote. | cause, by the affirmative vote of a majority of the outstanding shares entitled to vote. | |||
Call of Special Meeting of Directors: | Wintrust’s by-laws provide that a special meeting of the board of directors may be called by or at the request of the chairman of the board, president or a majority of then-acting directors. | Hinsbrook’s by-laws provide that a special meeting of the board of directors may be called by or at the request of the chairman of the board, the president, secretary or any two directors. | ||
Limitation on Director Liability: | Wintrust’s articles of incorporation provide that no director will be personally liable to the corporation or any of its shareholders for monetary damages for any breach of fiduciary duty except for liability: | Hinsbrook’s articles of incorporation, provide that a director will not be liable to the corporation or any of its shareholders for monetary damages for breach of fiduciary duty except for liability: | ||
• for any breach of the director’s duty of loyalty to the corporation or its shareholders; | • for any breach of the director’s duty of loyalty to the corporation or its shareholders; | |||
• for acts and omissions not in good faith or that involve intentional misconduct or a knowing violation of law; | • for acts and omissions not in good faith or that involve intentional misconduct or a knowing violation of law; | |||
• under Section 8.65 of the IBCA (which creates liability for unlawful payment of dividends and unlawful stock purchases or redemptions), as it exists or hereafter may be amended; or | • under Section 8.65 of the IBCA (which creates liability for unlawful payment of dividends and unlawful stock purchases or redemptions), as it exists or hereafter may be amended; or | |||
• for any transaction from which the director derived an improper benefit. | • for any transaction from which the director derived an improper personal benefit. | |||
Indemnification: | Wintrust’s articles of incorporation and by-laws provide that the corporation has the power to indemnify its directors, officers, employees and agents to the fullest extent authorized by the IBCA. | Hinsbrook’s by-laws provide for indemnification of its officers and directors to the fullest extent authorized by the IBCA. | ||
| The by-laws provide that, to the extent a present or former director, officer or employee of the corporation (or of any subsidiary, as the case may be) has been successful on the merits or otherwise in defense of any proceeding, or in connection with any claim, issue or matter therein, the corporationshall indemnify the director or officer against expenses actually and reasonably incurred by him in connection with such proceeding to the extent he was a party as a result of being a director, officer or employee, provided that such person acted in good faith and in a manner he or she reasonably believed to be in, or not | The by-laws provide that, to the extent a present or former director or officer has been successful on the merits or otherwise in defense of any proceeding, or in connection with any claim, issue or matter therein, the corporationshallindemnify the director or officer against expenses actually and reasonably incurred by him in connection with such proceeding to the extent he was a party as a result of being a director or officer. The corporation shall not indemnify, however, if the liability was incurred because the director or officer breached or failed to perform a duty he owes the corporation and the breach or failure to perform constitutes any of the |
54
| Wintrust Shareholder Rights | Hinsbrook Shareholder Rights | |||
| opposed to, the best interests of the corporation. The boardmay indemnify agents of the corporation in this context. | following: | |||
• a willful failure to deal fairly with the corporation or its shareholders in connection with a matter in which the director or officer has a material conflict of interest; | ||||
• a violation of criminal law, unless the director or officer had reasonable cause to believe his conduct was lawful or no reasonable cause to believe it was unlawful; | ||||
• a transaction from which the director or officer derived an improper personal profit; or | ||||
• willful misconduct. | ||||
| In addition to the mandatory indemnification describe above, the by-laws provide that the board of directorsmay, in its sole discretion, provide indemnification to an employee or agent of the corporation who is not a director or officer in connection with any proceeding in which the employee or agent was a defendant because of his actions as an employee or agent, provided that the employee or agent acted in good faith and in a manner he reasonably believed to be in and not opposed to the best interests of the corporation. | ||||
Call of Special Meetings of Shareholders: | Wintrust’s by-laws provide that a special meeting of the shareholders may be called by the board of directors, the president or the holders of not less than one-fifth of all the outstanding shares entitled to vote on the matter for which the meeting is called, for the purpose or purposes stated in the call of the meeting. Written notice stating the place, date, hour and purpose(s) of the special meeting must be delivered, either personally or by mail, not less than ten (10) nor more than sixty (60) days before the date of the meeting. | Hinsbrook’s by-laws provide that a special meeting of the shareholders may be called by the chairman of the board, president or the board of directors, and shall be called by the president at the written request (a) of the holders of not less than one-tenth of all shares of the corporation entitled to vote at the meeting, or (b) of one-third, but in no event less than two, of the directors then in office. Written notice stating the place, day, hour and purpose(s) of the special meeting must be delivered, either personally or by mail, not less than ten (10) nor more than sixty (60) days before the date of the meeting. | ||
Quorum of Shareholders: | Wintrust’s by-laws provide that a majority of the shares entitled to vote on a matter, present in person or represented by proxy, constitutes a quorum at any meeting of shareholders. | Hinsbrook’s by-laws provide that a majority of the shares entitled to vote on a matter, present in person or represented by proxy, constitutes a quorum at any meeting of shareholders. |
55
| Wintrust Shareholder Rights | Hinsbrook Shareholder Rights | |||
Shareholders Proposals: | Wintrust’s by-laws provide that for a shareholder to properly bring business before an annual or special meeting of shareholders, written notice of such shareholder’s intent to make such proposal(s) must be given by personal delivery or U.S. mail postage prepaid and received by the secretary of the corporation no later than the following dates: (i) with respect to an annual meeting of shareholders, sixty (60) days in advance of such meeting if such meeting is to be held on a day which is within thirty (30) days preceding the anniversary date of the previous year’s annual meeting or ninety (90) days in advance of such meeting if such meeting is to be held on or after the anniversary of the previous year’s annual meeting; and (ii) with respect to any other annual or special meeting of shareholders, the close of business on the tenth (10th) day following the date of public disclosure of the date of such meeting. | Hinsbrook’s by-laws do not contain any restrictions on the making by its shareholders of proposals for annual or special meetings. | ||
| A shareholder’s notice to the secretary shall set forth as to each item of business the shareholder proposes to bring before such meeting: (a) a brief description of the business desired to be brought before the meeting; (b) the name and record address of the shareholder who proposes such business; (c) the number of shares of stock of the corporation beneficially owned by such shareholder; and (d) a description of all arrangements or understandings between the shareholder and any other person(s) pursuant to which the proposal or proposals are to be made by the shareholder and any material interest of the shareholder in the business being proposed. | ||||
Shareholder Action by Written Consent: | Wintrust’s articles of incorporation and by-laws provide that its shareholders are not permitted to act by written consent. Any action required or permitted to be taken at a meeting of the shareholders must be effected at a duly called annual or special meeting. | Hinsbrook’s by-laws provide that any action required to be taken at a meeting of the shareholders, or any other action which may be taken at a meeting of the shareholders, may be taken without a meeting if a consent in writing, setting forth the action so taken, is signed by the holders of outstanding shares having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voting. | ||
56
| Wintrust Shareholder Rights | Hinsbrook Shareholder Rights | |||
Appointment and Removal of Officers: | Wintrust’s by-laws provide that the officers shall be elected annually by the board of directors at the first meeting of the board of directors held after each annual meeting of the shareholders. Each officer will hold office until his successor is duly elected or until his prior death, resignation or removal. | Hinsbrook’s by-laws provide that the officers shall be elected annually by the board of directors at the first meeting of the board of directors held after each annual meeting of the shareholders. Each officer will hold office until his successor is duly elected or until his prior death, resignation or removal. | ||
| Any officer may be removed by the board of directors whenever in its judgment the best interests of the corporation will be served thereby. | Any officer may be removed by the board of directors whenever in its judgment the best interests of the corporation will be served thereby. | |||
Required Vote for Certain Transactions | The Wintrust articles of incorporation do not specifically discuss transactions involving merger, consolidation, or sale, lease or exchange of all or substantially all of the property or assets of the corporation. But the applicable IBCA provisions state that such a transaction must be approved by two-thirds of the outstanding shares of stock entitled to vote on the matter. The corporation may, however, without approval by a vote of shareholders, merge into itself any corporation of which at least ninety percent (90%) of the outstanding shares of each class is owned by the corporation. | As provided in the Hinsbrook articles of incorporation, the following transactions require the affirmative vote of the holders of at least eighty percent (80%) of the outstanding shares of stock entitled to vote on the matter: • any merger or consolidation of the corporation with one or more other corporations (regardless of which is the surviving corporation); or • any sale, lease or exchange of all or substantially all of the property and assets of the corporation to or with one or more other corporations, persons or other entities. | ||
| However, the affirmative vote of the holders of a simple majority of the outstanding shares of stock entitled to vote on either of these matters shall apply to any such transaction which is approved by resolution adopted by the affirmative vote of the majority of the entire board of directors in office at the time. | ||||
| In addition, the articles of incorporation provide that the corporation may merge into itself any corporation of which at least ninety percent (90%) of the outstanding shares of each class is owned by the corporation, without approval by a vote of shareholders of either corporation. | ||||
Amendment to Charter and By-laws: | Otherwise, as provided by the IBCA or discussed below, the articles of incorporation may be amended by the affirmative vote of at least two-thirds of the shares entitled to vote on the proposal after the board of directors has passed a resolution by majority vote setting forth the proposed amendment and directing that it | Hinsbrook’s articles of incorporation may be amended, altered, changed or repealed by the affirmative vote of at least two-thirds of all outstanding shares of stock entitled to vote on such amendment; provided, however, that in the case of an amendment relating to the tenure and number of directors, repurchase rights, mergers, |
57
| Wintrust Shareholder Rights | Hinsbrook Shareholder Rights | |||
| be submitted to a vote at a shareholders’ meeting. An amendment to the articles of incorporation that relates to certain provisions, including, the prohibition of cumulative voting, shareholder purchase rights, the prohibition of shareholder action by written consent, the number and classification of the board of directors, director liability, indemnification and insurance, number, tenure and qualification of directors or the amendment process, must be approved by the affirmative vote of the holders of eighty-five percent (85%) or more of the voting power of the then-outstanding shares of stock entitled to vote generally in the election of directors, voting together as a single class. Otherwise, as provided by the IBCA, the articles of incorporation may be amended by the affirmative vote of at least two-thirds of the shares entitled to vote on the proposal after the board of directors has passed a resolution by majority vote setting forth the proposed amendment and directing that it be submitted to a vote at a shareholders’ meeting. The power to make, alter, amend or repeal the by-laws of the corporation is vested in the shareholders or the board of directors by a resolution adopted by a majority of the board of directors. | consolidations, the sale, lease or exchange of all or substantially all of the corporation’s property and assets, or the amendment process, the affirmative vote of the holders of at least eighty percent (80%) of the outstanding shares of stock entitled to vote on such amendment is required. However, the affirmative vote of the holders of a simple majority of the outstanding shares entitled to vote is sufficient for any amendment which is approved by resolution of a majority of the board of directors. Hinsbrook’s by-laws may be amended, altered, changed or repealed by the affirmative vote of at least two-thirds of all outstanding shares of stock entitled to vote on such amendment; provided, however, that in the case of an amendment relating to the tenure and qualifications of directors, the affirmative vote of the holders of at least eighty percent (80%) of the outstanding shares of stock entitled to vote on such amendment is required. However, the affirmative vote of the holders of a majority of the outstanding shares entitled to vote is sufficient for any amendment which is approved by resolution of a majority of the board of directors. The by-laws may also be altered, amended or repealed and new by-laws may be adopted by the affirmative vote of a majority of the board of directors present at any meeting at which a quorum is in attendance; provided, however, that no by-law adopted by the shareholders may be amended or repealed by the board of directors if the by-law adopted by the shareholders so provides. | |||
Shareholder Rights Plan: | None. | None. | ||
Preemptive Rights: | None. | None. |
Certain anti-takeover effects of Wintrust’s articles and by-laws generally provide for
the same indemnification as the IBCA, including the advancement of expenses to
the extent permitted by law.
ACTION BY SHAREHOLDERS WITHOUT A MEETING
Under the IBCA, unless the articles of incorporation provide otherwise,
shareholders may act by written consent if the consent is signed by shareholders
who collectively own the number of shares that would have been required to take
action at an actual shareholder meeting. Wintrust's articles of incorporation
and by-laws provide that its shareholders are not permitted to act by written
consent. All action required or permitted to be taken by Wintrust's shareholders
must be effected at a duly called annual or special meeting of its shareholders.
Town Bankshares' articles of incorporation provide that shareholders
may not act without a meeting unless the unanimous written consent of all
shareholders is obtained.
SPECIAL MEETINGS OF SHAREHOLDERS
Town Bankshares' by-laws state that a special meeting may be called
only by the board of directors pursuant to a resolution adopted by
three-quarters of the entire board of directors and must be called by the board
of directors upon the demand of the holders of record of shares representing 10%
of all shares entitled to be cast on any issue proposed to be considered at the
special meeting.
Wintrust's by-laws state that special meetings only may be called by
the chairman of the board of directors or the president of Wintrust.
51
PREEMPTIVE RIGHTS
Under both the WBCL and the IBCA, preemptive rights will not be
available unless a corporation's articles of incorporation specifically provide
for these rights. Neither Wintrust's nor Town Bankshares' articles of
incorporation provide for preemptive rights. Accordingly, Wintrust shareholders
are not entitled to preemptive rights with respect to any shares that Wintrust
may issue in the future.
DISSENTERS' RIGHTS
Under the WBCL, the rights of dissenting shareholders to obtain the
fair value for their shares may be available in connection with a merger or
consolidation in certain situations. Dissenters' rights are available to Town
Bankshares shareholders in connection with the merger because the merger
requires shareholder approval. For a description of dissenters' rights, see
"Special meeting of Town Bankshares shareholders--Dissenters' rights."
CERTAIN ANTI-TAKEOVER EFFECTS OF WINTRUST'S ARTICLES
AND BY-LAWS AND ILLINOIS LAWIllinois law
Certain provisions of Wintrust'sWintrust’s articles of incorporation, by-laws and the IBCA may have the effect of impeding the acquisition of control of Wintrust by means of a tender offer, a proxy fight, open-market purchases or otherwise in a transaction not approved by Wintrust'sWintrust’s board of directors.
58
These provisions may have the effect of discouraging a future takeover attempt which is not approved by Wintrust'sWintrust’s board of directors but which individual Wintrust shareholders may deem to be in their best interests or in which Wintrust shareholders may receive a substantial premium for their shares over then-current market prices. As a result, shareholders who might desire to participate in such a transaction may not have an opportunity to do so. Such provisions will also render the removal of Wintrust'sWintrust’s current board of directors or management more difficult.
These provisions of Wintrust'sWintrust’s articles of incorporation and by-laws include the following:
(1) Wintrust'sWintrust’s board of directors may issue additional authorized shares of Wintrust'sWintrust’s capital stock to deter future attempts to gain control of Wintrust, including the authority to determine the terms of any one or more series of preferred stock, such as voting rights, conversion rates, and liquidation preferences. As a result of the ability to fix voting rights for a series of preferred stock, the board has the power, to the extent consistent with its fiduciary duty, to issue a series of preferred stock to persons friendly to management in order to attempt to block a merger or other transaction by which a third party seeks control, and thereby assist the incumbent board of directors and management to retain their respective positions;
(2) Wintrust'sWintrust’s staggered board is intended to provide for continuity of its board of directors and to make it more difficult and time consuming for a shareholder group to fully use its voting power to gain control of the board of directors without the consent of Wintrust'sWintrust’s incumbent board of directors;
(3) Wintrust'sWintrust’s articles of incorporation do not provide for cumulative voting for any purpose, and its articles of incorporation and by-laws also provide that any action required or permitted to be taken by its shareholders may be taken only at an annual or special meeting and prohibit shareholder action by written consent in lieu of a meeting;
(4) Wintrust'sWintrust’s articles of incorporation expressly elect to be governed by the provisions of Section 7.85 of the IBCA, as discussed above. Under the IBCA fair price provision and Wintrust'sWintrust’s articles of incorporation, the approval of at least 80% of its shares is required in connection with any transaction involving an Interested Shareholder, subject to certain exceptions. Fair price provisions are designed to impede a two-step takeover transactions which might otherwise result in disparate treatment of Wintrust'sWintrust’s shareholders; and
(5) Amendment of Wintrust'sWintrust’s articles of incorporation must be approved by a majority vote of the board of directors and also by a two-thirds vote of the outstanding shares of Wintrust common stock, provided, however, that an affirmative vote of at least 85% of the outstanding voting stock entitled to vote is required to amend or repeal certain provisions of the articles of incorporation, including provisions 52
(a) prohibiting cumulative voting rights, (b) relating to certain business combinations, (c) limiting the shareholders'shareholders’ ability to act by written consent, (d) regarding the number, classification of directors, filling of board vacancies and newly created directorships, (e) indemnification of directors and officers by Wintrust and limitation of liability for directors, and (f) regarding amendment of the foregoing supermajority provisions of Wintrust'sWintrust’s articles of incorporation. Wintrust'sWintrust’s by-laws may be amended only by the board of directors.
The provisions described above are intended to reduce Wintrust'sWintrust’s vulnerability to takeover attempts and certain other transactions which have not been negotiated with and approved by members of its board of directors.
RIGHTS PLAN
Wintrust has a shareholders rights plan which could discourage
unsolicited or hostile takeover attempts which are not negotiated with its board
of directors.
DESCRIPTION OF WINTRUST COMMON STOCK
The plan discourages such attempts by causing substantial dilution
to any person who acquires an amount in excess of a specified percentage of
Wintrust's common stock and by making an acquisition of Wintrust, without the
consent of its board of directors, prohibitively expensive. Thefollowing description of the rights plan set forth belowcapital stock of Wintrust does not purport to be complete and is qualified, in its entiretyall respects, to applicable Illinois law and provisions of Wintrust’s amended and restated articles of incorporation, as amended, and Wintrust’s by-laws. Wintrust’s amended and restated articles of incorporation and Wintrust’s by- laws are incorporated by reference and will be sent to shareholders of Wintrust and Hinsbrook upon request. See “Where You Can Find More Information.”
59
Authorized Capital Stock
Under its amended and restated articles of incorporation, Wintrust has the descriptionauthority to issue 60 million shares of the rights plan set forth in
Wintrust's Registration Statement on Form 8-A dated August 28, 1998. See
"Incorporationcommon stock, without par value, and 20 million shares of Certain Information by Reference" on page 54.
Each sharepreferred stock, without par value. As of April 6, 2006 there were issued and outstanding 24,243,388 shares of Wintrust common stock. No shares of preferred stock has attached to it a stock purchase
right having the terms set forth in a rights agreement between are currently outstanding.
Wintrust and
IllinoisCommon Stock Transfer Company, as rights agent. Each right will entitle its
registered holder to purchase from
Wintrust one one-hundredth of a share of
Junior Serial PreferredCommon Stock A, without par value, at a price of $85.00 per one
one-hundredth share, subject to certain adjustments. Generally, the rights
become exercisable when any person or group (i) acquires or obtains the right to
acquire 15% or more of Wintrust's common stock, or (ii) commences (or announces
its intention to commence) a tender or exchange offer to acquire 15% or more of
Wintrust's common stock.
In the event that any person or group becomes the beneficial owner of
15% or more of Wintrust's common stock, rights owned by that person or group
will immediately become null and void. Thereafter, other registered rights
holders will have the right to receive, upon exercise at the then-current
exercise price of the right, Wintrust common stock having a value equal to two
times the exercise price of the right. Additionally, if, after any person or
group has acquired 15% or more Wintrust's common stock, Wintrust is acquired in
a merger or other business combination or 50% or more of Wintrust's assets or
earning power are sold, then each registered right holder will receive the right
to purchase, for the exercise price, common stock of the entity which acquires
or survives Wintrust having a value equal to twice the exercise price of the
right.
Prior to any person or group acquiring 15% or more of Wintrust's common
stock, Wintrust may redeem the rights in whole, but not in part, at a price of
$0.01 per right, to be paid in cash,Outstanding. The outstanding shares of Wintrust common stock or other
consideration. In addition, at any time after a person or group acquires 15%are, and the shares of Wintrust'sWintrust common stock but priorissued pursuant to such person or group acquiring 50% or morethe merger will be, duly authorized, validly issued, fully paid and non-assessable. The rights, preferences and privileges of Wintrust'sholders of Wintrust common stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of Wintrust preferred stock which Wintrust may exchangedesignate and issue in the rights, in whole or in
part, at an exchange ratiofuture. Shares of one share ofWintrust common stock per right. The rights
will expiremay be certificated or uncertificated, as provided by the IBCA.
Voting Rights. Each holder of Wintrust common stock is entitled to one vote for each share held on July 31, 2008 unless exercised, redeemed, exchanged or otherwise
cancelled before that date.
Town Banksharesall matters submitted to a vote of shareholders of Wintrust and does not have cumulative voting rights. Accordingly, holders of a majority of the shares of Wintrust common stock entitled to vote in any election of directors of Wintrust may elect all of the directors standing for election.
Dividend Rights. The holders of Wintrust common stock are entitled to receive dividends, if and when declared payable by the Wintrust board of directors from any funds legally available for the payment of dividends, subject to any preferential dividend rights of outstanding Wintrust preferred stock. Upon the liquidation, dissolution or winding up of Wintrust, the holders of Wintrust common stock are entitled to share pro rata in the net assets of Wintrust available after the payment of all debts and other liabilities and subject to the prior rights of any outstanding Wintrust preferred stock.
Preemptive Rights. Under its restated articles of incorporation, the holders of Wintrust common stock have no preemptive, subscription, redemption or conversion rights.
Wintrust Preferred Stock
Wintrust Preferred Stock Outstanding. As of the date of this proxy statement/prospectus, no shares of Wintrust preferred stock were issued and outstanding.
Blank Check Preferred Stock. Under its amended and restated articles of incorporation, the Wintrust board of directors has the authority to issue preferred stock in one or more classes or series, and to fix for each class or series the voting powers and the distinctive designations, preferences and relative, participation, optional or other special rights and such qualifications, limitations or restrictions, as may be stated and expressed in the resolution or resolutions adopted by the Wintrust board of directors providing for the issuance of such class or series as may be permitted by the IBCA, including dividend rates, conversion rights, terms of redemption and liquidation preferences and the number of shares constituting each such class or series, without any further vote or action by the shareholders rights plan.
of Wintrust.
Exchange Agent and Registrar
Illinois Stock Transfer Company is the exchange agent and registrar for the Wintrust common stock.
LEGAL MATTERS
Certain matters pertaining to the validity of the authorization and issuance of the Wintrust common stock to be issued in the proposed merger will
behave been passed upon by Vedder, Price, Kaufman & Kammholz, P.C., 222 North LaSalleSidley Austin LLP, One South Dearborn Street, Chicago, Illinois 60601.60603.
Certain matters pertaining to the federal income tax consequences of the proposed merger will behave been passed upon by Reinhart
Boerner Van Deuren s.c., 1000 North Water Street,Barack Ferrazzano Kirschbaum Perlman & Nagelberg LLP, 333 West Wacker Drive, Suite 2100, Milwaukee,
Wisconsin 53202. Certain shareholders of Reinhart Boerner Van Deuren s.c. hold
shares of Town Bankshares common stock.
53
2700, Chicago, Illinois 60606.
60
EXPERTS
The consolidated financial statements of Wintrust as of December 31, 20032005 and 2002,2004, and for each of the three years in the period ended December 31, 2003,2005, included in Wintrust'sWintrust’s Annual Report on Form 10-K for the year ended December 31, 2003,2005, have been audited by Ernst & Young LLP, an independent registered public accounting firm, as set forth in their report thereon included in Wintrust'sWintrust’s Annual Report on Form 10-K for the year ended December 31, 2003,2005, and are incorporated by reference herein in reliance upon such report given on the authority of Ernst & Young LLP as experts in accounting and auditing.
SHAREHOLDER PROPOSALS
After the merger is completed, the next annual meeting of Wintrust'sWintrust’s shareholders will be held in 2005.2007. To be considered for inclusion in Wintrust'sWintrust’s proxy materials for that annual meeting, any shareholder proposal must behave been received in writing at Wintrust'sWintrust’s principal office at 727 North Bank Lane, Lake Forest, Illinois 60045, no later thanby December 24, 2004.26, 2006. All shareholder proposals submitted for inclusion in Wintrust'sWintrust’s proxy materials will be subject to the requirements of the proxy rules adopted under the Securities Exchange Act, and, as with any shareholder proposal, Wintrust'sWintrust’s articles of incorporation and by-laws and Illinois law.
Furthermore, in order for any shareholder to properly propose any business for consideration at Wintrust's 2005Wintrust’s 2007 annual meeting, including the nomination of any person for election as a director, or any other matter raised other than pursuant to Rule 14a-8 of the proxy rules adopted under the Securities Exchange Act, written notice of the shareholder'sshareholder’s intention to make such proposal must be furnished to Wintrust in accordance with its by-laws. Under the existing provisions of Wintrust'sWintrust’s by-laws, if the 20052006 annual meeting is held on May 26,
2005,24, 2006, the deadline for such notice is March 27, 2005.
25, 2007.
WHERE YOU CAN FIND MORE INFORMATION
Wintrust files annual, quarterly and current reports, proxy statements and other information with the SEC. These filings are available to the public over the Internet at the SEC'sSEC’s website at www.sec.gov. You may also read and copy any document Wintrust files with the SEC at itsthe SEC’s public reference room located at 450 Fifth100 F Street, N.W.N.E., Washington D.C. 20549. Copies of these documents also can be obtained at prescribed rates by writing to the Public Reference Section of the SEC, at 450 Fifth100 F Street, N.W.N.E., Washington D.C. 20549 or by calling 1-800-SEC-0330 for additional information on the operation of the public reference facilities. Wintrust'sWintrust’s SEC filings are also available on its Web site at http://www.wintrust.com, and at the office of the Nasdaq National Market. For further information on obtaining copies of Wintrust'sWintrust’s public filings at the Nasdaq National Market, you should call (212) 656-5060.
Wintrust filed with the SEC a registration statement on Form S-4 under the Securities Act to register the shares of Wintrust common stock to be issued to Town BanksharesHinsbrook’s shareholders inupon completion of the merger. This proxy statement/prospectus is a part of that registration statement and constitutes a prospectus of Wintrust in addition to being a proxy statement of Town BanksharesHinsbrook for its special meeting. As permitted by the SEC rules, this proxy statement/prospectus does not contain all of the information that you can find in the registration statement or in the exhibits to the registration statement. The additional information may be inspected and copied as set forth above.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The SEC allows Wintrust to incorporate by reference information into this proxy statement/prospectus. This means that Wintrust can disclose important information to you by referring you to another document filed separately with the SEC. The information incorporated by reference is an important part of this proxy statement/prospectus, except for any information superseded by information in this proxy statement/prospectus. This proxy statement/prospectus incorporates by reference the documents set forth below that Wintrust has filed previously with the SEC:
o Wintrust's
Wintrust’s Annual Report on Form 10-K for the year ended December 31, 20032005 (File No. 0-21923);
54
o Wintrust's proxy statement in connection with its 2004 annual
meeting of shareholders filed with the SEC on April 23, 2004;
o Wintrust's Quarterly Report on Form 10-Q for the three months
ended March 31, 2004 (File No. 0-21923);
o Wintrust's Quarterly Report on Form 10-Q for the three months
ended June 30, 2004 (File No. 0-21923);
o Wintrust's Current Report on Form 8-K filed with the SEC on
January 21, 2004 (File No. 0-21923);
o Wintrust's Current Report on Form 8-K filed with the SEC on
April 20, 2004 (File No. 0-21923);
o Wintrust's Current Report on Form 8-K filed with the SEC on
May 11, 2004 (File No. 0-21923);
o Wintrust's Current Report on Form 8-K filed with the SEC on
June 14, 2004 (File No. 0-21923);
o Wintrust's Current Report on Form 8-K filed with the SEC on
July 20, 2004 (File No. 0-21923); and
o the description of (a) Wintrust's common stock contained in
Wintrust's Registration Statement on Form 8-A dated January 3,
1997 (File No. 0-21923), and (b) the associated preferred
share purchase rights contained in Wintrust's Registration
Statement on Form 8-A dated August 28, 1998
61
| • | Wintrust’s proxy statement in connection with its 2006 annual meeting of shareholders filed with the SEC on April 24, 2006; | ||
| • | Wintrust’s Current Reports on Form 8-K filed with the SEC on January 5, January 20, January 31, February 15, February 28, March 16, March 30 and April 21, 2006; and | ||
| • | the description of Wintrust’s common stock contained in Wintrust’s Registration Statement on Form 8-A dated January 3, 1997 filed pursuant to Section 12 of the Securities Exchange Act of 1934 (File No. 0-21923). |
Wintrust also incorporates by reference any additional filings it makes with the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act after the date of this proxy statement/prospectus and before the special meeting.
Any statement contained in a document incorporated by reference in this
proxy statement/prospectus shall be deemed to be modified or superseded for
purposes of this proxy statement/prospectus to the extent that a statement
contained in this proxy statement/prospectus, or in any other document filed
later which is also incorporated in this proxy statement/prospectus by
reference, modifies or supersedes the statement. Any statement so modified or
superseded shall not be deemed to constitute a part of this proxy
statement/prospectus except as so modified or superseded. The information
relating to Wintrust contained in this proxy statement/prospectus should be read
together with the information in the documents incorporated in this proxy
statement/prospectus by reference.
You may request, either orally or in writing, and Wintrust will provide, a copy of these filings without charge by contacting David A. Dykstra, Wintrust'sWintrust’s Chief Operating Officer, at 727 North Bank Lane, Lake Forest, Illinois 60045, (847) 615-4096. IF YOU WOULD LIKE TO REQUEST DOCUMENTS, PLEASE
DO SO BY _____________ ___, 2004, TO RECEIVE THEM BEFORE THE SPECIAL MEETING.If you would like to request documents, please do so by May 12, 2006, to receive them before the special meeting.
All information concerning Wintrust and its subsidiaries has been furnished by Wintrust, and all information concerning Town BanksharesHinsbrook and Hinsbrook Bank & Trust has been furnished by Town Bankshares.
55
ANNEXHinsbrook.
You should rely only on the information contained or incorporated by reference in this proxy statement/prospectus to vote on the proposals to Hinsbrook shareholders in connection with the merger. We have not authorized anyone to provide you with information that is different from what is contained in this proxy statement/prospectus. This proxy statement/prospectus is dated ___, 2006. You should not assume that the information contained in this proxy statement/prospectus is accurate as of any date other than such date, and neither the mailing of this proxy statement/prospectus to shareholders nor the issuance of shares of Wintrust common stock as contemplated by the merger agreement will create any implication to the contrary.
62
Annex A
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
WINTRUST FINANCIAL CORPORATION
AND
TOWN BANKSHARES, LTD.
DATED AS OF JUNE 14, 2004
HINSBROOK BANCSHARES, INC.
Dated December 5, 2005
TABLE OF CONTENTS
| ARTICLE I THE | A-1 | |||||||
| 1.1 | The | A-1 | ||||||
| 1.2 | Effective | A-1 | ||||||
| 1.3 | Effect of the | A-1 | ||||||
| 1.4 | Conversion of Shares | A-1 | ||||||
| 1.5 | Company Stock | A-2 | ||||||
| 1.6 | Cancellation of Treasury | A-2 | ||||||
| 1.7 | Dissenting Shares | A-2 | ||||||
| 1.8 | Recapitalization | A-3 | ||||||
| 1.9 | Tax | A-3 | ||||||
| 1.10 | Closing | A-3 | ||||||
| ARTICLE II CONVERSION AND EXCHANGE OF | A-3 | |||||||
| 2.1 | Per Share Merger Consideration | A-3 | ||||||
| 2.2 | Election Procedures | A-4 | ||||||
| 2.3 | Proration and | A-4 | ||||||
| 2.4 | No Fractional | A-5 | ||||||
| 2.5 | Exchange of | A-5 | ||||||
| ARTICLE III REPRESENTATIONS AND WARRANTIES CONCERNING THE | A-7 | |||||||
| 3.1 | Organization | A-7 | ||||||
| 3.2 | Organizational Documents; Minutes and Stock | A-7 | ||||||
| 3.3 | Capitalization | A-8 | ||||||
| 3.4 | Authorization; No | A-8 | ||||||
| 3.5 | Consents and | A-8 | ||||||
| 3.6 | Financial | A-9 | ||||||
| 3.7 | No Undisclosed | A-9 | ||||||
| 3.8 | Loans; | A-10 | ||||||
| 3.9 | Properties and | A-10 | ||||||
| 3.10 | Material | A-11 | ||||||
| 3.11 | No | A-12 | ||||||
| 3.12 | Conflict of Interest | A-12 | ||||||
| 3.13 | Investments | A-12 | ||||||
| 3.14 | Compliance with Laws; Legal | A-13 | ||||||
| 3.15 | Insurance | A-13 | ||||||
| 3.16 | Taxes | A-13 | ||||||
| 3.17 | Environmental Laws and | A-14 | ||||||
| 3.18 | Community Reinvestment Act | A-15 | ||||||
| 3.19 | Company Regulatory | A-15 | ||||||
| 3.20 | Employee Benefit | A-15 | ||||||
| 3.21 | Technology and Intellectual | A-17 | ||||||
| 3.22 | No Adverse | A-18 | ||||||
| 3.23 | Conduct of Business in | A-18 | ||||||
| 3.24 | Change in Business | A-18 | ||||||
| 3.25 | Brokers’ and | A-18 | ||||||
A-i
| 3.26 | Section 280G | A-18 | ||||||
| 3.27 | No Omissions | A-18 | ||||||
| ARTICLE IV REPRESENTATIONS AND WARRANTIES CONCERNING | A-18 | |||||||
| 4.1 | Organization | A-18 | ||||||
| 4.2 | Capitalization | A-18 | ||||||
| 4.3 | Authorization; No | A-19 | ||||||
| 4.4 | Consents and | A-19 | ||||||
| 4.5 | Wintrust SEC | |||||||
| A-19 | ||||||||
| 4.6 | Compliance with Laws; Legal | A-20 | ||||||
| 4.7 | Wintrust Regulatory | A-20 | ||||||
| 4.8 | No Adverse | A-20 | ||||||
| 4.9 | Brokers’ and | A-21 | ||||||
| 4.10 | Taxation of the | A-21 | ||||||
| 4.11 | Financial Ability | A-21 | ||||||
| 4.12 | No | A-21 | ||||||
| ARTICLE V AGREEMENTS AND | A-21 | |||||||
| 5.1 | Conduct of | A-21 | ||||||
| 5.2 | Access to | A-22 | ||||||
| 5.3 | Meeting of Shareholders of the | A-23 | ||||||
| 5.4 | Registration Statement and Regulatory | A-23 | ||||||
| 5.5 | Listing of | A-24 | ||||||
| 5.6 | Reasonable and Diligent | A-24 | ||||||
| 5.7 | Business Relations and | A-24 | ||||||
| 5.8 | No Conduct Inconsistent with this | A-24 | ||||||
| 5.9 | Loan Charge-Off; Pre-Closing Loan | A-25 | ||||||
| 5.10 | Board of | A-25 | ||||||
| 5.11 | Untrue Representations and | A-26 | ||||||
| 5.12 | Director and Officer | A-26 | ||||||
| 5.13 | Interim Financial | A-26 | ||||||
| 5.14 | Dissent | A-26 | ||||||
| 5.15 | Section 368(a) | A-26 | ||||||
| 5.16 | Exercise of | A-26 | ||||||
| 5.17 | Converted | A-26 | ||||||
| 5.18 | Termination of Ownership Interests | A-27 | ||||||
| ARTICLE VI EMPLOYEE BENEFIT | A-27 | |||||||
| 6.1 | Benefit | A-27 | ||||||
| 6.2 | No Rights or | A-27 | ||||||
| ARTICLE VII CONDITIONS PRECEDENT TO OBLIGATIONS OF | A-28 | |||||||
| 7.1 | Representations and Warranties; Performance of | A-28 | ||||||
| 7.2 | Closing | A-28 | ||||||
| 7.3 | Regulatory and Other | A-28 | ||||||
| 7.4 | Approval of Merger and Delivery of | A-28 | ||||||
| 7.5 | Effectiveness of the Registration | A-28 | ||||||
A-ii
| 7.6 | No | A-28 | ||||||
| 7.7 | Environmental Surveys | A-28 | ||||||
| 7.8 | Opinion of | A-29 | ||||||
| 7.9 | Employment | A-29 | ||||||
| 7.10 | No Adverse | A-29 | ||||||
| 7.11 | Minimum Net Worth and Loan Loss Reserve | A-29 | ||||||
| 7.12 | Voting Agreements | A-29 | ||||||
| 7.13 | Amendments to Deferred Compensation | A-29 | ||||||
| 7.14 | Settlement | A-30 | ||||||
| 7.15 | Consents | A-30 | ||||||
| 7.16 | Other | A-30 | ||||||
| ARTICLE VIII CONDITIONS PRECEDENT TO OBLIGATIONS OF THE | A-30 | |||||||
| 8.1 | Representations and Warranties; Performance of | A-30 | ||||||
| 8.2 | Closing | A-30 | ||||||
| 8.3 | Regulatory and Other | A-30 | ||||||
| 8.4 | Delivery of | A-30 | ||||||
| 8.5 | Effectiveness of the Registration | |||||||
| A-30 | ||||||||
| 8.6 | No | A-30 | ||||||
| 8.7 | Opinions of | A-31 | ||||||
| 8.8 | No Adverse | A-31 | ||||||
| 8.9 | Nasdaq | A-31 | ||||||
| 8.10 | Other | A-31 | ||||||
| ARTICLE IX NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND | A-31 | |||||||
| 9.1 | Non-Survival | A-31 | ||||||
| ARTICLE X GENERAL | A-31 | |||||||
| 10.1 | Expenses | A-31 | ||||||
| 10.2 | Termination | A-33 | ||||||
| 10.3 | Confidential | A-34 | ||||||
| 10.4 | Non-Assignment | A-34 | ||||||
| 10.5 | Notices | A-34 | ||||||
| 10.6 | Counterparts | A-34 | ||||||
| 10.7 | Knowledge | A-34 | ||||||
| 10.8 | Interpretation | A-35 | ||||||
| 10.9 | Entire | A-35 | ||||||
| 10.10 | Governing | A-35 | ||||||
| 10.11 | Severability | A-35 | ||||||
A-iii
DEFINED TERMS
| Acquisition | A-24 | |||
| Agreement | A-1 | |||
| Articles of | A-1 | |||
| Bank | A-1 | |||
| Benefit | A-15 | |||
| BHCA | A-7 | |||
| Cash Consideration | A-3 | |||
| Cash Election | A-4 | |||
| Cash Election Shares | A-4 | |||
| CERCLA | A-15 | |||
| Closing | A-3 | |||
| Closing | A-29 | |||
| Closing Date | A-3 | |||
| Code | A-1 | |||
| Combination Election | A-4 | |||
| Commission | A-9 | |||
| Company | A-1 | |||
| Company | A-8 | |||
| Company Common | A-1 | |||
| Company Option | A-2 | |||
| Company Regulatory | A-15 | |||
| Company | A-5 | |||
| Confidentiality | A-23 | |||
| Conversion | A-6 | |||
| Converted | A-2 | |||
| CRA | A-15 | |||
| Dissenting | A-2 | |||
| Effective | A-1 | |||
| Election Deadline | A-4 | |||
| Election Form | A-4 | |||
| Employees | A-27 | |||
| Encumbrances | A-10 | |||
| Environmental | A-14 | |||
| ERISA | A-15 | |||
| ERISA | A-15 | |||
| Exchange | A-19 | |||
| Exchange | A-4 | |||
| FDIC | A-10 | |||
| Federal | A-9 | |||
| Federal Reserve | A-9 | |||
| Financial | A-9 | |||
| GAAP | A-7 | |||
| Governmental | A-8 | |||
| Hazardous | A-15 | |||
| IDFPR | A-9 |
A-iv
| IDFPR Application | A-9 | |||
| Illinois | A-1 | |||
| Intellectual | A-17 | |||
| Interim Balance | A-9 | |||
| Interim Financial | A-9 | |||
| Investment | A-12 | |||
| IRS | A-16 | |||
| IT |
| A-17 | ||||
| knowledge | A-34 | |||
| Licenses | A-13 | |||
| Loans | A-10 | |||
| Material Adverse | A-7 | |||
| Material | A-11 | |||
| Maximum | A-4 | |||
| Maximum Stock Election Number | A-4 | |||
| Merger | A-1 | |||
| Minimum Adjusted Net Worth | A-29 | |||
| OCC | A-20 | |||
| Option Conversion | A-2 | |||
| Options | A-8 | |||
| Ordinary Course of | A-9 | |||
| OREO | ||||
| Outstanding Company | A-2 | |||
| Parties | A-1 | |||
| Per Share Merger | A-3 | |||
| Permitted Encumbrances | A-10 | |||
| Plan Amendments | A-2 | |||
| Price Per Share | A-3 | |||
| Proxy Statement/ | A-9 | |||
| Registration | A-23 | |||
| Representatives | A-4 | |||
| Retained | A-27 | |||
| Securities | A-9 | |||
| Shareholders | A-23 | |||
| Stock Consideration | A-3 | |||
| Stock Election | A-4 | |||
| Stock Election Shares | A-5 | |||
| Superior Acquisition | A-25 | |||
| Surviving | A-1 | |||
| Tax Return | A-14 | |||
| Taxes | A-14 | |||
| Wintrust | A-1 | |||
| Wintrust Common Stock | A-3 | |||
| Wintrust Regulatory | A-20 | |||
| Wintrust SEC | A-19 | |||
| Wintrust Stock | A-5 |
A-v
DISCLOSURE SCHEDULES
| Ownership Interests | 3.1 | (b) | ||
| Schedule of Option Holders | 3.3 | (a) | ||
| Stock Owned by the | 3.3 | (b) | ||
| Authorization; No | 3.4 | |||
| Required Consents | 3.5 | |||
| Financial | 3.6 | |||
| Schedule of Real | 3.9 | (a) | ||
| Schedule of Tangible Personal | 3.9 | (b) | ||
| Schedule of Material | 3.10 | |||
| Schedule of | 3.12 | |||
| Schedule of Investments | 3.13 | (a) | ||
| Schedule of Restricted Investment Securities | 3.13 | (b) | ||
| Schedule of Disposed Investment Securities | 3.13 | (c) | ||
| Legal | 3.14 | (c) | ||
| Schedule of Insurance | 3.15 | |||
| Taxes | 3.16 | |||
| Environmental | 3.17 | |||
| Change of Control Provisions Under Benefit | 3.20 | (b) | ||
| Medical Benefits | 3.20 | (c) | ||
| Exceptions Under Benefit Plans | 3.20 | (e) | ||
| Schedule of Intellectual | 3.21 | |||
| Conduct of | 3.23 | |||
| Brokers’ and Finders’ Fees | 3.25 | |||
| 280G Payments | 3.26 | |||
| Scheduled Compensation Changes | 5.1 | (c) | ||
| Employees | 6.1 | |||
| Employment Agreements | 7.9 | |||
| Signatories to Voting Agreement | 7.12 | |||
| Deferred Compensation Agreements | 7.13 | |||
| Settlement | 7.14 |
EXHIBITS
| Exhibit | Form of Option Conversion Agreement | |||
| Exhibit | Form of Opinion of Company Counsel | |||
| Exhibit | Form of | |||
| Exhibit | Form of Voting Agreement | |||
| Exhibit E | Forms of Amendment to Deferred Compensation Agreements | |||
| Exhibit F | Form of Opinion of Wintrust Counsel |
A-vi
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement"“Agreement”), is entered into as of the 14th5th day of June, 2004,December, 2005, by and between WINTRUST FINANCIAL CORPORATION, an Illinois corporation ("Wintrust"(“Wintrust”), and TOWN BANKSHARES, LTD.HINSBROOK BANCSHARES, INC., a Wisconsinan Illinois corporation (the "Company"“Company”). Wintrust and the Company are together referred to collectively in this Agreement as the "Parties."
“Parties.”
RECITALS
WHEREAS, the boards of directors of each of the Parties have approved and declared it advisable and in the best interest of the Parties and their respective shareholders to effect a reorganization, whereby the Company will merge with and into Wintrust, in the manner and on the terms and subject to the conditions set forth in Article I below (the "Merger"“Merger”), as a result of which the Company will merge out of existence and TownHinsbrook Bank a Wisconsin& Trust, an Illinois state bank and wholly owned subsidiary of the Company (the "Bank"“Bank”), will become a wholly owned subsidiary of Wintrust.
WHEREAS, as a condition to the willingness of Wintrust to enter into
this Agreement, certain shareholders of the Company are simultaneously herewith
entering into a Voting Agreement, in the form attached hereto as Exhibit A.
WHEREAS, for federal income tax purposes the Parties desire and intend that the Merger qualify as a reorganization in accordance with Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code"“Code”).
NOW THEREFORE, in consideration of the premises and the mutual promises herein made, and in consideration of the representations, warranties and covenants herein contained, the Parties hereby agree as follows.
follows:
ARTICLE 1
I
THE MERGER
1.1 The Merger. At the Effective Time, as defined in Section 1.2, in accordance with this Agreement and the Illinois Business Corporation Act (the "Illinois Act") and the
Wisconsin Business Corporation Law (the "Wisconsin Act"“Illinois Act”), the Company shall be merged with and into Wintrust, and Wintrust shall continue as the corporation surviving the Merger (sometimes referred to herein as the "Surviving
Corporation"“Surviving Corporation”).
1.2 Effective Time. As of the Closing, as defined in Section 1.10, with respect to the Merger the Parties will cause articles of merger (the "Articles“Articles of Merger"Merger”) with respect to the Merger to be executed and filed with the Illinois Secretary of State of the State of Illinois as provided in the Illinois Act and with the Department of Financial Institutions of the State
of Wisconsin (the "WDFI") as provided in the Wisconsin Act. The Merger shall become effective on the date and time aton which the Articles of Merger are duly filed by the Secretary of State of the State of Illinois, and the WDFI, or at such othertime on such filing date and time as is agreed among the Parties and specified in the Articles of Merger (the "Effective Time"“Effective Time”).
1.3 Effect of the Merger. At and after the Effective Time, the Merger shall have the effecteffects set forth in Section 11.50 of the Illinois Act and Section
180.1106Act.
1.4 Conversion of the Wisconsin Act.
1.4 Merger Consideration.Shares. At the Effective Time, by virtue of the Merger and without any action on the part of the Parties or the shareholders of the Company, each share of common sharestock of the Company, par value $0.01$0.05 per share (each, a "Company(“Company Common Share" and
collectively, "Company Common Shares"Stock”), issued and outstanding immediately prior to the Effective Time (other than (i)shares of Company Common SharesStock to be cancelledcanceled pursuant to Section 1.7, (ii)1.6 and Dissenting Shares and (iii) any ESOP Shares)to the extent provided in Section 1.7), shall by reason of the Merger and without any action by the holder thereof, be
converted into the right to receive shares of common stock, no par value, of
Wintrust ("Wintrust Common Stock") and cash having an aggregate value of $129.10
(the "Per Share Merger Consideration"), determined as follows:
(a) Per Share Stock Consideration. The number of shares of
Wintrust Common Stock issuable upon conversion of each Company Common
Share (the "Per Share Stock Consideration") shall be determined as
follows:
A-1
(i) If the unweighted average of the high and low
sale prices of a share of Wintrust Common Stock as reported on
the Nasdaq National Market for each of the ten trading days
ending on the second trading day preceding the Closing Date
(as defined in Section 1.10) (the "Wintrust Common Stock
Price") is at least $41.34 and no more than $55.34 the Per
Share Stock Consideration shall be the number of shares,
rounded to the nearest thousandth of a share, equal to the
quotient obtained by dividing $71.00 by the Wintrust Common
Stock Price.
(ii) If the Wintrust Common Stock Price is less than
$41.34, the Per Share Stock Consideration shall be the number
of shares, rounded to the nearest thousandth of a share, equal
to the quotient obtained by dividing $71.00 by 41.34.
(iii) If the Wintrust Common Stock Price is greater
than $55.34, the Per Share Stock Consideration shall be the
number of shares, rounded to the nearest thousandth of a
share, equal to the quotient obtained by dividing $71.00 by
$55.34.
(b) Per Share Cash Consideration. The amount of cash payable
upon conversion of each Company Common Share (the "Per Share Cash
Consideration") shall be equal to $58.10.
1.5 Effect on Capital Shares; Dissenting Shares.
(a) Each Company Common Share converted into the right to receive the Per Share Merger Consideration, as defined in accordance with thisand pursuant to Article III. At the Effective Time, each share of Company Common Stock shall no longer be outstanding and shall automatically be cancelledcanceled and retired and shall cease to exist, as of the Effective
Time, and each certificate previously representingevidencing any such share (other than shares canceled pursuant to Section 1.6 and Dissenting Shares) shall thereafter represent only the right to receive, upon surrender of such certificate in accordance with Section 2.5, the Per Share Merger Consideration, payable in the manner provided in Article II, and cash in lieu of any fractional shares of Wintrust Common Stock issuable in connection therewith. The holders of such certificates previously evidencing such shares of Company Common SharesStock outstanding immediately prior to the Effective Time shall cease to have any rights with respect thereto except as otherwise provided in this Agreement or by law.
A-1
1.5 Company Stock Options.
(a) At the Effective Time, each option granted by the Company under the terms of the Hinsbrook Bancshares, Inc. 1992 Stock Option Plan (the “Company Option Plan”) to purchase shares of Company Common Stock that is outstanding and unexercised immediately prior to the Effective Time (an “Outstanding Company Option”) shall cease to represent a right to receiveacquire shares of Company Common Stock and shall be converted automatically into an option to purchase shares of Wintrust Common Stock in an amount and at an exercise price determined pursuant to this Section 1.5 (a “Converted Option”), subject to the terms, benefits, rights and features of the Company Option Plan and the agreements evidencing grants of such options thereunder as in existence immediately prior to the Effective Time, which shall continue to apply to each Converted Option from and after the Effective Time.
(b) The number of shares of Wintrust Common Stock to be subject to each Converted Option shall be equal to the product obtained by multiplying (i) the number of shares of Company Common Stock under each Outstanding Company Option by (ii) the quotient of (a) the Price Per Share, as defined in Section 2.1(a)(i), divided by (b) the Wintrust Common Stock Price, as defined in Section 2.1(c),provided that any fractional shares of Wintrust Common Stock resulting from such determination shall be rounded down to the nearest whole share.
(c) The exercise price per share of Wintrust Common Stock under each Converted Option shall be equal to (i) the exercise price per share of Company Common Stock under the original option divided by (ii) the quotient of (a) the Price Per Share divided by (b) the Wintrust Common Stock Price,provided that such exercise price shall be rounded down to the nearest whole cent.
(d) The adjustments provided herein with respect to any Outstanding Company Options that are “incentive stock options” as defined in Section 422 of the Code shall be effected in a manner consistent with the requirements of Section 424(a) of the Code.
(e) The Company Option Plan shall be amended, effective as of the Effective Time, to provide for the conversion of Outstanding Company Options in accordance with this Section 2.3(a)1.5 (the “Plan Amendment”). The Company shall provide to Wintrust, not less than five (5) business days prior to the Closing Date, copies of an agreement in the form ofExhibit A attached hereto (the “Option Conversion Agreement”) from each of the holders of Outstanding Company Options acknowledging their agreement and consent to the Plan Amendment and to such terms of conversion set forth in this Section 1.5.
1.6 Cancellation of Treasury Shares. At the Effective Time, each share of Company Common Stock held as treasury stock or otherwise held by the Company or the Bank (other than in a fiduciary capacity), if any, immediately prior to the Effective Time shall automatically be canceled and retired and cease to exist, and no Per Share StockMerger Consideration and cash in lieu of any fractional shares
thereof determined pursuant to Section 2.2, and (ii) the Per Share Cash
Consideration.
(b)shall be exchanged therefor.
1.7 Dissenting Shares. Any holder of Company Common Shares otherwise entitled to receive the Per Share Merger Consideration in exchange for each of his or her Company Common Shares shall be entitled to dissent from the
corporate action being taken hereby and demand payment in cash of the fair value for his or her Company Common Shares as specified in Sections 180.1301 to 180.133111.65 and 11.70 of the WisconsinIllinois Act if the holder followsfully complies with the proceduresrequirements specified therein (such shares hereinafter referred to as "Dissenting Shares"“Dissenting Shares”). No holder of Dissenting Shares shall, after the Effective Time, be entitled to receive any shares of Wintrust Common Stock or the Per Shareany payment of Cash Consideration pursuant to this Agreement, or be entitled to vote for any purpose or receive any dividends or other distributions with respect to such Wintrust Common Stock;provided,however, that Company Common Shares held by a dissenting shareholder who subsequently withdraws a demand for payment, fails to comply with the requirements of the WisconsinIllinois Act, or otherwise fails to establish the right of such shareholder to receive payment in cash of the fair value forof such shareholder'sshareholder’s shares under the WisconsinIllinois Act shall be deemed to be converted into the right to receive the Per Share Merger Consideration pursuantin exchange for each such share, to the terms and
conditions specified herein.
1.6 Company Stock Options.
(a) At the Effective Time, each option granted by the Company
under the termsbe payable as Cash Consideration, without interest thereon, upon surrender of the Town Bankshares, Ltd. 1997 Stock Incentive Plan,
as amended (the "Company Option Plan") to purchase Company Commoncertificate or certificates that formerly evidenced such Dissenting Shares that is outstanding and unexercised immediately prior to the
Effective Time (an "Outstanding Company Option"), shall be converted
into an option to purchase shares of Wintrust Common Stock (a
"Converted Option") in such number and at such exercise price as set
forth herein and otherwise having the same terms and conditions as in
effect immediately prior to the Effective Time except to the extent
that such Outstanding Company Options shall be altered in accordance
with their terms as a result of the Merger contemplated hereby, as
follows: (i) the number of shares of Wintrust Common Stock to be
subject to the Converted Option shall be equal to the product obtained
by multiplying (1) the number of Company Common Shares subject to the
original Outstanding Company Option by (2) the quotient obtained by
dividing the Per Share Merger Consideration by the Wintrust Common
Stock Price (such quotient, the "Option Exchange Ratio"); (ii) the
exercise price per share of Wintrust Common Stock under the Converted
Option shall be equal to the quotient obtained by dividing (1) the
exercise price per Company Common Share under the original Outstanding
Company Option by (2) the Option Exchange Ratio; and (iii) upon
exercise of each Converted Option by a holder thereof, the aggregate
number of shares of Wintrust
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Common Stock deliverable upon such exercise shall be rounded down, if
necessary, to the nearest whole share and the aggregate exercise price
shall be rounded up, if necessary, to the nearest cent.
(b) The adjustments provided herein with respect to any
Outstanding Company Options that are "incentive stock options" (as
defined in Section 422 of the Code) shall be effected in a manner
consistent with the requirements of Section 424(a) of the Code.
(c) The Company Option Plan shall be amended, effective as of
the Effective Time, to provide for the conversion of Outstanding
Company Options in accordance with Section 1.6(a) (the "Plan
Amendment"). The Company shall provide to Wintrust, not less than five
(5) business days prior to the Closing Date, copies of an agreement in the form of Exhibit B attached hereto (the "Option Conversion
Agreement") from each of the holders of Outstanding Company Options
acknowledging their agreement and consent to the Plan Amendment and to
such terms of conversionmanner set forth in this Section 1.6.
1.7 Cancellation of Treasury Shares. At the Effective Time, each
Company Common Share held as treasury stock, if any, immediately prior to the
Effective Time shall automatically be cancelled and retired and cease to exist,
and no shares of Wintrust Common Stock or other consideration shall be exchanged
therefor.2.5.
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1.8 Recapitalization. In the event that Wintrust changes (or establishes a record date for changing) the number of shares of Wintrust Common Stock issued and outstanding as a result of a stock dividend, stock split, recapitalization, reclassification, combination or similar transaction with respect to the outstanding shares of Wintrust Common Stock and the record date therefor shall be after the date of this Agreement and prior to the Effective Time, then the calculations of the Per Share Stock Considerationconversion provisions described in Section 1.4(a)Article II shall be appropriately and proportionately adjusted.
1.9 Tax Treatment. It is intended that the Merger shall constitute a reorganization within the meaning of Section 368(a) of the Code, and that this Agreement shall constitute a "plan“plan of reorganization"reorganization” for purposes of Section 368 of the Code.
1.10 Closing. The consummation of the transactions contemplated by this Agreement shall take place at a closing (the "Closing"“Closing”) to be held on the fifth business day following the date on which all of the conditions set forth in Sections 7.3Articles VII and 7.4VIII of this Agreement have been satisfied, or on such other date as Wintrust and the CompanyParties may mutually agree (the "Closing Date"“Closing Date”). In the event of the filing of any motion for rehearing or any appeal from the decision of any regulatory authority approving the transactions contemplated in this Agreement or any legal proceedings of the type contemplated by Sections 7.6 or 8.6, Wintrust or the Company may postpone the Closing by written notice to the other parties until such approvals have been obtained or such motion, appeal or litigation has been resolved, but in no event shall such Closing be postponed beyond the close of business on November 30, 2004July 31, 2006 (except as may be extended pursuant to Section 10.2(b)) without the consent of the boards of directors of Wintrust and the Company. The Closing shall take place at 10:00 a.m., local time, on the Closing Date at the offices of Schiff Hardin LLP, 6600 Sears Tower, Chicago, Illinois, or at such other place and time upon which the partiesParties may agree.
ARTICLE 2II
CONVERSION AND EXCHANGE OF CERTIFICATES IN MERGER
2.1 Wintrust to Make SharesPer Share Merger Consideration.
(a) Each share of Company Common Stock issued and Cash Available. At oroutstanding immediately prior to the Effective Time (other than shares of Company Common Stock to be canceled pursuant to Section 1.6 and Dissenting Shares) shall be converted into the right to receive the appropriate elected or otherwise assigned Per Share Merger Consideration, subject to the provisions of this Article II. “Per Share Merger Consideration” shall mean one of the following: