Filed pursuant to Rule 424(b)(3)
File No. 333-122178
[FIRST NORTHWEST BANCORP, INC. LOGO] WINTRUST FINANCIAL CORPORATION
________________
PROXY STATEMENT OF FIRST NORTHWEST BANCORP, INC.
________________
PROSPECTUS OF WINTRUST FINANCIAL CORPORATION
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Merger Proposed - Your Vote Is Very Important
DEAR FIRST NORTHWEST BANCORP, INC. STOCKHOLDERS:
You are cordially invited to attend a special meeting of stockholders
of First Northwest Bancorp, Inc. which will be held on March 15, 2005, at 3:00
p.m., local time, at the offices of First Northwest located at 234 West
Northwest Highway, Arlington Heights, Illinois 60004.
At the meeting, you will be asked to approve a merger agreement between
First Northwest and Wintrust Financial Corporation that provides for Wintrust's
acquisition of First Northwest through the merger of First Northwest with and
into Wintrust. If the merger is completed, you may elect to convert each share
of First Northwest common stock into either shares of Wintrust's common stock,
or a combination of cash and shares of Wintrust common stock, valued at $7.20
plus an amount that will depend upon the average price of Wintrust common stock
determined at the time of closing. If the average price determined at closing of
Wintrust's common stock is:
o less than $51.00 per share, you would receive merger
consideration valued at $7.20 plus 0.2822 times the average
price;
o between $51.00 and $57.00 per share, you would receive merger
consideration valued at $7.20 plus $14.39;
o between $57.00 and $64.00 per share, you would receive merger
consideration valued at $7.20 plus 0.2525 times the average
price; and
o greater than $64.00 per share, you would receive merger
consideration valued at $7.20 plus $16.16.
For example, if the average price of Wintrust's common stock determined
at closing is $54.72 (the closing price of the stock on February 8, 2005), you
would receive per share merger consideration valued at $21.59 ($7.20 plus
$14.39). Subject to certain conditions, First Northwest may terminate the merger
agreement if the average price of Wintrust's common stock is equal to or less
than $48.99.
Wintrust's common stock is traded on the Nasdaq National Market under
the symbol "WTFC." The closing price of Wintrust common stock on February 8,
2005, was $54.72.
The merger cannot be completed unless the holders of at least a
majority of the voting power of the outstanding shares of First Northwest common
stock vote in favor of the merger agreement. All of the directors and executive
officers of First Northwest have agreed to vote all of their shares of common
stock in favor of the merger agreement at the special meeting. Together they own
approximately 68.5% of First Northwest's outstanding shares of common stock. As
a result, approval of the merger agreement at the special meeting is virtually
assured. Nevertheless, under Delaware corporate law and its certificate of
incorporation, First Northwest is required to hold a special meeting and obtain
stockholder approval of the merger. As a result, you are encouraged to mail your
proxy or vote at the special meeting. YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY
APPROVED THE MERGER AGREEMENT AND RECOMMENDS THAT YOU APPROVE IT.
Additional information regarding the transaction, the merger agreement,
First Northwest and Wintrust is set forth in the attached proxy
statement/prospectus. This document also serves as the prospectus for up to
605,000 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" BEGINNING ON PAGE 14.
Sincerely,
/s/ S. Michael Polanski
S. Michael Polanski
President and Chief Executive Officer
First Northwest Bancorp, Inc.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
REGULATORY BODY HAS APPROVED OR DISAPPROVED OF THE SECURITIES 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 FEBRUARY 11, 2005, AND IS FIRST BEING
MAILED TO FIRST NORTHWEST STOCKHOLDERS ON OR ABOUT FEBRUARY 11, 2005.
AVAILABLE INFORMATION
As permitted by the rules of the Securities and Exchange Commission,
this document incorporates certain important business and financial information
about Wintrust from other documents that is not included in or delivered with
this document. These documents are available to you without charge upon your
written or oral request. Your requests for these documents should be directed to
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 REQUEST BY FEBRUARY 21, 2005 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 49.
FIRST NORTHWEST BANCORP, INC.
234 W. Northwest Highway
Arlington Heights, Illinois 60004
___________________________________
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD
MARCH 15, 2005
___________________________________
DATE: MARCH 15, 2005
TIME: 3:00 P.M.
PLACE: FIRST NORTHWEST BANCORP, INC.
234 WEST NORTHWEST HIGHWAY
ARLINGTON HEIGHTS, ILLINOIS 60004
To First Northwest Bancorp, Inc. Stockholders:
We are pleased to notify you of and invite you to a special meeting of
stockholders. At the meeting you will be asked to vote on the following matters:
o Approval of the Agreement and Plan of Merger, dated as of November
17, 2004, that provides for Wintrust Financial Corporation to
acquire First Northwest Bancorp, Inc., through the merger of First
Northwest with and into Wintrust, 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.
Holders of record of First Northwest common stock at the close of business on
February 10, 2005 may vote at the special meeting. 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 First
Northwest common stock.
THE BOARD OF DIRECTORS OF FIRST NORTHWEST UNANIMOUSLY RECOMMENDS THAT YOU VOTE
"FOR" APPROVAL OF THE MERGER AGREEMENT.
First Northwest stockholders may dissent from the merger and, upon complying
with the requirements of Delaware law, receive cash equal to the fair value of
their shares instead of the merger consideration. See "Special Meeting of First
Northwest Stockholders--Appraisal rights" in the accompanying proxy
statement/prospectus for additional information.
To ensure that your shares are voted at the special meeting, please promptly
complete, sign and return the proxy form in the enclosed envelope whether or not
you plan to attend the meeting in person. Stockholders who attend the special
meeting may revoke their proxies and vote in person, if they so desire. To make
a timely election of merger consideration, please complete, sign and return the
election form in the enclosed envelope.
Arlington Heights, Illinois
February 11, 2005
By Order of the Board of Directors
/s/ S. Michael Polanski
S. Michael Polanski
President and Chief Executive Officer
TABLE OF CONTENTS
PAGE
QUESTIONS AND ANSWERS ABOUT THE MERGER...........................................................................1
SUMMARY..........................................................................................................4
Information about Wintrust and First Northwest..........................................................4
The merger and the merger agreement.....................................................................4
Reasons for the merger..................................................................................4
Board recommendation to First Northwest's stockholders..................................................5
Fairness opinion of First Northwest's Financial Advisor.................................................5
First Northwest special meeting.........................................................................5
Record date for the special meeting; revocability of proxies............................................6
Vote required...........................................................................................6
What First Northwest stockholders will receive..........................................................6
Merger consideration election...........................................................................6
Series A Convertible Preferred Stock....................................................................7
Regulatory approvals....................................................................................7
New Wintrust shares will be eligible for trading on Nasdaq..............................................7
Conditions to the merger................................................................................7
Termination.............................................................................................8
Termination fee.........................................................................................8
Interests of officers and directors in the merger that are different from yours.........................8
Voting agreement........................................................................................8
Accounting treatment of the merger......................................................................8
Certain differences in shareholder rights...............................................................9
Appraisal rights........................................................................................9
Certain federal income tax consequences of the merger...................................................9
Historical Comparative Per Share Data; Pro Forma Per Share Data.........................................9
Selected Financial Data of Wintrust....................................................................11
RISK FACTORS....................................................................................................14
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..................................14
First Northwest's stockholders will not control Wintrust's future operations...........................14
De novo operations and branch openings impact Wintrust's profitability.................................14
Wintrust's allowance for loan losses may prove to be insufficient to absorb losses that may
occur in its loan portfolio...................................................................15
Wintrust's premium finance business involves unique operational risks and could expose it to
significant losses............................................................................15
Wintrust may be adversely affected by interest rate changes............................................16
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..............................16
CAUTION ABOUT FORWARD-LOOKING STATEMENTS........................................................................17
SPECIAL MEETING OF FIRST NORTHWEST STOCKHOLDERS.................................................................18
Date, place, time and purpose..........................................................................18
Record date, voting rights, quorum and required vote...................................................18
Voting and revocability of proxies.....................................................................18
Appraisal rights.......................................................................................18
DESCRIPTION OF THE MERGER.......................................................................................20
General................................................................................................20
i
TABLE OF CONTENTS
(continued)
PAGE
The Companies..........................................................................................20
Background of the Merger...............................................................................21
First Northwest's reasons for the merger and recommendation of the board of directors..................23
Wintrust's reasons for the merger......................................................................24
Fairness Opinion of First Northwest's Financial Advisor................................................25
Accounting treatment...................................................................................30
Certain federal income tax consequences of the merger..................................................31
Regulatory approvals...................................................................................32
Interests of certain persons in the merger ............................................................32
Voting agreement.......................................................................................33
Restrictions on resale of Wintrust common stock........................................................34
DESCRIPTION OF THE MERGER AGREEMENT.............................................................................34
Time of completion.....................................................................................34
Consideration to be received in the merger.............................................................34
Series A Convertible Preferred Stock...................................................................36
Merger consideration election .........................................................................36
Exchange of certificates...............................................................................36
Conduct of business pending the merger and certain covenants...........................................36
Representations and warranties.........................................................................38
Conditions to completion of the merger.................................................................39
Minimum net worth and loan loss reserve requirements closing condition.................................40
Termination............................................................................................40
Termination fee........................................................................................41
Management of Wintrust and First Northwest Bank after the merger.......................................41
Employee benefit matters...............................................................................41
Expenses...............................................................................................41
Nasdaq stock listing...................................................................................42
COMPARISON OF SHAREHOLDER RIGHTS................................................................................42
Authorized capital stock...............................................................................42
Payment of dividends...................................................................................42
Advance notice requirements for presentation of business and nominations of directors at annual
meetings of shareholders......................................................................42
Quorum.................................................................................................43
Election, classification and size of board of directors................................................43
Removal of directors...................................................................................43
Filling vacancies on the board of directors............................................................43
Amendment of charter and by-laws.......................................................................44
Mergers, acquisitions and other transactions...........................................................44
Business combinations with interested shareholders.....................................................44
Limitations on directors' liability....................................................................45
Indemnification........................................................................................45
Action by shareholders without a meeting...............................................................46
Special meetings of shareholders.......................................................................46
Preemptive rights......................................................................................46
Appraisal rights of dissenting shareholders............................................................46
Certain anti-takeover effects of Wintrust's articles and by-laws and Illinois law......................46
Rights plan............................................................................................47
LEGAL MATTERS...................................................................................................48
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EXPERTS .......................................................................................................48
SHAREHOLDER PROPOSALS...........................................................................................48
WHERE YOU CAN FIND MORE INFORMATION.............................................................................49
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE...............................................................49
ANNEX A: AGREEMENT AND PLAN OF MERGER.........................................................................A-1
ANNEX B: DELAWARE APPRAISAL RIGHTS LAW........................................................................B-1
ANNEX C: FORM OF VOTING AGREEMENT.............................................................................C-1
ANNEX D: FAIRNESS OPINION OF FIRST NORTHWEST'S FINANCIAL ADVISOR............................................. D-1
iii
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 First Northwest through the
merger of First Northwest with and into Wintrust. As a result of the
merger, you will become a shareholder of Wintrust.
Q: WHAT WILL I BE ENTITLED TO RECEIVE IN THE MERGER?
A: If the merger is completed, the shares of First Northwest common stock
that you own immediately before the completion of the merger will be
converted into the right to receive either shares of Wintrust common
stock, or a combination of 40% cash and 60% shares of Wintrust common
stock (subject to possible proration as described below). For each of
your shares of First Northwest common stock, you will receive the "per
share merger consideration" to be calculated as set forth in the merger
agreement. The per share merger consideration will be the sum of $7.20,
plus an amount that will vary depending on the average of the high and
low sales price of Wintrust common stock during the 10 trading days
ending three trading days before the merger closing date. If the
average price determined at closing of Wintrust's common stock is:
o less than $51.00 per share, you would receive merger
consideration valued at $7.20 plus 0.2822 times the average
price;
o between $51.00 and $57.00 per share, you would receive merger
consideration valued at $7.20 plus $14.39;
o between $57.00 and $64.00 per share, you would receive merger
consideration valued at $7.20 plus 0.2525 times the average
price; and
o greater than $64.00 per share, you would receive merger
consideration valued at $7.20 plus $16.16.
Subject to certain conditions, First Northwest may terminate the merger
agreement if the average price of Wintrust's common stock is equal to
or less than $48.99.
Q: HOW DO I MAKE AN ELECTION FOR THE MERGER CONSIDERATION?
A: You have been provided with an election form to select whether you will
receive merger consideration of Wintrust common stock or a combination
of cash and Wintrust common stock. Depending on your election, 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.
If you do not submit a properly completed election form by this
deadline, you will be deemed to have elected to receive a combination
of cash and Wintrust common stock.
Q: WHY DO FIRST NORTHWEST AND WINTRUST WANT TO MERGE?
A: First Northwest believes that the proposed merger will provide First
Northwest stockholders 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 First
Northwest 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 24 and
"Description of the merger--First Northwest's reasons for the merger
and recommendation of the board of directors" on page 23.
Q: WHAT DOES THE FIRST NORTHWEST BOARD OF DIRECTORS RECOMMEND?
1
A: First Northwest's board of directors unanimously recommends that you
vote "FOR" adoption of the merger agreement. First Northwest's board of
directors has determined that the merger agreement and the merger are
in the best interests of First Northwest and its stockholders. To
review the background and reasons for the merger in greater detail, see
pages 21 to 25.
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 First Northwest common stock must vote in favor of the
merger. All of First Northwest's directors and executive officers have
agreed to vote their shares in favor of the merger at the special
meeting. These stockholders owned approximately 68.5% of First
Northwest's outstanding common stock on the record date. Wintrust's
shareholders will not be voting on the merger agreement. See
"Description of the merger--Interests of certain persons in the merger"
on page 32 and "Description of the merger--Voting agreement" on page
33.
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 First Northwest a duly executed revocation of proxy,
submitting a new proxy form with a later date or voting in person at
the special meeting.
Q: WHAT IF I OPPOSE THE MERGER? DO I HAVE APPRAISAL RIGHTS?
A: First Northwest stockholders who do not vote in favor of the merger
agreement and otherwise comply with all of the procedures of Section
262 of the Delaware General Corporation Law, or the DGCL, will be
entitled to receive payment in cash of the fair value of their shares
of First Northwest common stock as ultimately determined under the
statutory process. A copy of this section of the DGCL is attached as
Annex B to 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 First Northwest 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 "Description of the merger -
Certain federal income tax consequences of the merger" on page 31.
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 First Northwest 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 possible. Before that
happens, the merger agreement must be approved and adopted by First
Northwest's stockholders and we must obtain the necessary regulatory
approvals. Assuming stockholders vote at least a majority of First
Northwest's outstanding shares of
2
common stock in favor of the merger agreement and we obtain the other
necessary approvals, we expect to complete the merger late in the first
quarter or early in the second quarter of 2005.
Q: IS COMPLETION OF THE MERGER SUBJECT TO ANY CONDITIONS BESIDES
STOCKHOLDER 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, First Northwest 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 S.
Michael Polanski, First Northwest's President and CEO, at (847)
670-1000.
3
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 document carefully, including the annexes and the documents referred to
in this proxy statement/prospectus. A list of the documents incorporated by
reference appears on pages 49-50.
INFORMATION ABOUT WINTRUST AND FIRST NORTHWEST
WINTRUST FINANCIAL CORPORATION (See page 20)
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, 2004,
Wintrust operates 12 community banks, located in the greater Chicago and
Milwaukee metropolitan areas, which provide community-oriented, personal and
commercial banking services primarily to individuals and small to mid-size
businesses through 50 banking facilities. Wintrust also provides wealth
management services, including trust, asset management and brokerage 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 operating subsidiaries or divisions of certain of
its banks. As of December 31, 2004, Wintrust had consolidated total assets of
$6.42 billion, deposits of $5.10 billion and shareholders' equity of $474
million. Wintrust's common stock trades on the Nasdaq National Market under the
symbol "WTFC."
FIRST NORTHWEST BANCORP, INC. (See page 21)
234 W. Northwest Highway
Arlington Heights, Illinois 60004
(847) 670-1000
First Northwest Bancorp, Inc., a Delaware corporation, is a bank
holding company headquartered in Arlington Heights, Illinois. Its primary
business is operating its bank subsidiary, First Northwest Bank, an Illinois
state bank with two branches in Arlington Heights, Illinois. As of December 31,
2004, First Northwest had consolidated total assets of approximately $261
million, deposits of $221 million and stockholders' equity of $14.6 million.
First Northwest is not a public company and, accordingly, there is no
established trading market for First Northwest's common stock.
THE MERGER AND THE MERGER AGREEMENT (see page 34)
Wintrust's acquisition of First Northwest 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, First Northwest will be
merged with and into Wintrust and will cease to exist. After the consummation of
the merger, First Northwest Bank will become a wholly owned subsidiary of
Wintrust. We encourage you to read the merger agreement, which is included as
Annex A to this proxy statement/prospectus.
REASONS FOR THE MERGER (see page 23)
First Northwest's board of directors believes that the merger is in the
best interests of First Northwest and its stockholders, has unanimously approved
the merger agreement and unanimously recommends that its stockholders vote "FOR"
the approval of the merger agreement.
In its deliberations and in making its determination, First Northwest's
board of directors considered numerous factors, including the following:
4
o information with respect to the businesses, earnings,
operations, financial condition, prospects, capital levels and
asset quality of First Northwest and Wintrust, both
individually and as a combined company;
o the perceived risks and uncertainties attendant to First
Northwest'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;
o 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;
o 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;
o the fact that Wintrust is publicly held and the merger would
provide access to a public trading market for First Northwest
stockholders 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
o 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's board of directors considered a number of factors, including:
o First Northwest's 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 First Northwest
operates, including existing and potential competition and
history of the market areas with respect to financial
institutions;
o management's review of First Northwest's business, operations,
earnings and financial condition, including its management,
capital levels and asset quality, since First Northwest Bank's
de novo formation in 1995; and
o the likelihood of regulators approving the merger without
undue conditions or delay.
BOARD RECOMMENDATION TO FIRST NORTHWEST'S STOCKHOLDERS (see page 24)
First Northwest's board of directors believes that the merger of First
Northwest with Wintrust is in the best interests of First Northwest and its
stockholders. FIRST NORTHWEST'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
YOU VOTE "FOR" THE MERGER.
FAIRNESS OPINION OF FIRST NORTHWEST'S FINANCIAL ADVISOR (see page 25)
In deciding to approve the merger, First Northwest's board of directors
considered, among other things, the opinion of Hovde Financial LLC that the
merger consideration is fair, from a financial point of view, to the holders of
First Northwest common stock. You should read the full text of the fairness
opinion, which is attached to this proxy statement/prospectus as Annex D, to
understand the assumptions made, limits of the reviews undertaken and other
matters considered by Hovde Financial LLC in rendering its opinion.
FIRST NORTHWEST SPECIAL MEETING (see page 18)
The special meeting of stockholders will be held at the offices of
First Northwest, located at 234 West Northwest Highway, Arlington Heights,
Illinois 60004 on March 15, 2005 at 3:00 p.m., local time. First
5
Northwest's board of directors is soliciting proxies for use at the special
meeting. At the special meeting, First Northwest stockholders will be asked to
vote on a proposal to approve the merger agreement.
RECORD DATE FOR THE SPECIAL MEETING; REVOCABILITY OF PROXIES (see page 18)
You may vote at the special meeting if you own shares of First
Northwest common stock of record at the close of business on February 10, 2005.
You will have one vote for each share of First Northwest 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 18)
To approve the merger, at least a majority of the voting power of the
outstanding shares of First Northwest common stock must be voted in favor of the
merger agreement at the special meeting. To satisfy the quorum requirements set
forth in First Northwest's by-laws, stockholders holding at least a majority of
the voting power of the outstanding shares of First Northwest common stock
entitled to vote at the special meeting must be present in person or by proxy at
the special meeting. Stockholders may vote their shares in person at the special
meeting or by signing and returning the enclosed proxy form.
All of First Northwest's directors and executive officers have
committed to vote their shares of common stock in favor of the merger. At the
record date, these stockholders owned 1,013,356 shares, constituting
approximately 68.5% of the shares entitled to vote at the meeting. See
"Description of the merger--Voting agreement" on page 33.
WHAT FIRST NORTHWEST STOCKHOLDERS WILL RECEIVE (see page 34)
If the merger is completed, the shares of First Northwest common stock
that you own immediately before the completion of the merger will be converted
into the right to receive either shares of Wintrust common stock, or a
combination of cash and shares of Wintrust common stock. For each of your shares
of First Northwest common stock, you will receive the "per share merger
consideration" to be calculated as set forth in the merger agreement. The per
share merger consideration will be the sum of $7.20, plus an amount that will
vary depending on the average of the high and low sales price of Wintrust's
common stock during the 10 trading days ending three trading days before the
merger closing date. If the average price determined at closing of Wintrust's
common stock is:
o less than $51.00 per share, you would receive merger
consideration valued at $7.20 plus 0.2822 times the average
price;
o between $51.00 and $57.00 per share, you would receive merger
consideration valued at $7.20 plus $14.39;
o between $57.00 and $64.00 per share, you would receive merger
consideration valued at $7.20 plus 0.2525 times the average
price; and
o greater than $64.00 per share, you would receive merger
consideration valued at $7.20 plus $16.16.
However, subject to certain conditions, First Northwest may terminate
the merger agreement if the average price of Wintrust common stock is equal to
or less than $48.99.
First Northwest stockholders 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 36)
With this proxy statement/prospectus, you have been provided with an
election form in order to select whether you will receive merger consideration
of Wintrust common stock or a combination of 40% cash and 60% shares of Wintrust
common stock (subject to possible proration as described below). The completed
election form 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
6
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 election
to receive cash and/or shares of Wintrust common stock, the merger agreement
provides that the number of shares that may be converted into the right to
receive cash consideration, in the aggregate, may not exceed 34% of First
Northwest's outstanding common stock, 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 66% of First Northwest's outstanding common stock. If First
Northwest's stockholders 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 will
prorate these elections so that the maximum amount of each type of consideration
is not exceeded.
Once the merger is complete, Illinois Stock Transfer Company will mail
you materials and instructions for exchanging your First Northwest stock
certificates for Wintrust stock certificates. You should not send in your First
Northwest 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.
SERIES A CONVERTIBLE PREFERRED STOCK (see page 36)
The merger agreement provides that prior to the effective time of the
merger, each outstanding share of First Northwest's outstanding Series A
Convertible Preferred Stock will be converted into shares of First Northwest's
common stock, subject to the mandatory conversion provisions of the securities.
Following the conversion, former holders of the Series A Convertible Preferred
Stock will be entitled to receive the merger consideration discussed above.
Because the shares of Series A Preferred Stock will not be converted into shares
of First Northwest common stock until after the record date for the special
meeting, those shares will not be eligible to vote for approval of the merger
agreement.
REGULATORY APPROVALS (see page 32)
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 Banks and Real Estate of the
Illinois Department of Financial and Professional Regulation, or the DBRE.
Wintrust submitted an application to the Federal Reserve Bank of Chicago on
December 17, 2004, which was approved on January 31, 2005. Wintrust submitted an
application to the DBRE on December 17, 2004. This application was approved
effective January 31, 2005.
NEW WINTRUST SHARES WILL BE ELIGIBLE FOR TRADING ON NASDAQ (see page 42)
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 36-40)
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
First Northwest common stock;
o approval of the transaction by the appropriate regulatory
authorities, including the Federal Reserve and the DBRE, and
expiration or termination of all waiting periods required by
law;
o maintenance by First Northwest of certain minimum net worth
and loan loss reserve requirements;
o the holders of not more than 5% of the outstanding shares of
First Northwest common stock giving written demand for
appraisal rights in accordance with the DGCL;
o no material adverse change in Wintrust or First Northwest
since November 17, 2004;
o the execution of an employment agreement by S. Michael
Polanski; and
7
o 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.
TERMINATION (see page 40)
Subject to conditions and circumstances described in the merger
agreement, either Wintrust or First Northwest may terminate the merger agreement
if, among other things, any of the following occur:
o the merger is not completed by June 30, 2005 (or July 31,
2005, 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 and
failed to cure the breach;
o the holders of at least a majority of the voting power of
First Northwest common stock do not approve the merger;
o in certain circumstances, if First Northwest has received and
accepted a superior offer to sell to a third party; or
o in certain circumstances by First Northwest if the average of
the high and low sales price of Wintrust's common stock during
the 10 days ending three trading days before the closing date
is less than or equal to $48.99.
TERMINATION FEE (see page 41)
Under certain circumstances described in the merger agreement, Wintrust
may be owed a $1,000,000 termination fee from First Northwest if the transaction
is not consummated. See "Description of the merger agreement--Termination fee."
INTERESTS OF OFFICERS AND DIRECTORS IN THE MERGER THAT ARE DIFFERENT FROM YOURS
(see page 32)
You should be aware that some of First Northwest's directors and
officers may have interests in the merger that are different from, or in
addition to, their interests as stockholders. First Northwest's board of
directors was aware of these interests and took them into account in approving
the merger. For example, the merger agreement obligates First Northwest Bank to
enter into an employment agreement with S. Michael Polanski on completion of the
merger. Additionally, pursuant to the employment agreement between First
Northwest and Mr. Polanski, First Northwest is obligated to make certain cash
payments to Mr. Polanski once the merger is consummated.
Wintrust is also obligated under the merger agreement to provide
continuing indemnification to First Northwest's and First Northwest 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 33)
All of the directors and executive officers of First Northwest have
agreed to vote all of their shares of common stock in favor of the merger
agreement at the special meeting. Together, they own approximately 68.5% of
First Northwest'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 as Annex C.
ACCOUNTING TREATMENT OF THE MERGER (see page 30)
The merger will be accounted for as a purchase transaction in
accordance with accounting principles generally accepted in the United States.
8
CERTAIN DIFFERENCES IN SHAREHOLDER RIGHTS (see page 42)
When the merger is completed, First Northwest stockholders, whose
rights are governed by Delaware law and First Northwest's certificate of
incorporation and by-laws, automatically will become Wintrust shareholders and
their rights will be governed by Illinois law, as well as Wintrust's articles of
incorporation and by-laws, in addition to laws and requirements that apply to
public companies.
APPRAISAL RIGHTS (see page 18)
First Northwest stockholders may dissent from the merger and, upon
complying with the requirements of the DGCL, receive cash in the amount of the
fair value of their shares instead of the merger consideration.
A copy of the section of the DGCL pertaining to appraisal 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.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER (see page 31)
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 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 DATA
The table below shows the reported high and low sales prices of
Wintrust's common stock during the periods indicated.
HIGH LOW
------ ------
YEAR ENDED 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 ENDED DECEMBER 31, 2004
First Quarter................................ $50.44 $41.85
Second Quarter............................... 50.80 45.18
Third Quarter................................ 58.42 49.82
Fourth Quarter............................... 63.39 54.33
YEAR ENDING DECEMBER 31, 2005
First Quarter (through February 8, 2005)..... $57.23 $53.15
9
The following table presents selected comparative per share data for
Wintrust common stock and First Northwest common stock on a historical and pro
forma combined basis, giving effect to the merger using the purchase method of
accounting, and for Wintrust common stock on a pro forma combined basis, giving
effect to the anticipated merger with First Northwest, Wintrust's acquisition of
Town Bankshares, Ltd., or Town Bankshares, and its acquisition of Antioch
Holding Company, or Antioch. See "Description of the Merger--Business of
Wintrust--Recent Developments." The pro forma combined information is not
necessarily indicative of the actual results that would have occurred had the
merger been consummated at the beginning of the periods indicated, or of the
future operations of the combined entity.
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 2004 DECEMBER 31, 2003
------------------ -----------------
WINTRUST HISTORICAL:
Diluted earnings per share............ $ 1.71 $ 1.98
Cash dividends declared per share..... 0.20 0.16
Book value per share (at period end).. 20.42 17.43
WINTRUST PRO FORMA COMBINED(1):
Diluted earnings per share............ $ 1.72 $ 1.96
Cash dividends declared per share..... 0.20 0.16
Book value per share (at period end).. 21.77 18.94
WINTRUST PRO FORMA COMBINED (FIRST
Northwest, Town Bankshares and
Antioch)(1)(2)(3):
Diluted earnings per share............ $ 1.66 $ 2.09
Cash dividends per share.............. 0.20 0.16
Book value per share (at period end).. 23.67 21.08
FIRST NORTHWEST HISTORICAL:
Diluted earnings per share............ $ 0.73 $ 0.53
Cash dividends declared per share..... -- --
Book value per share (at period end).. 9.26 8.84
First Northwest Pro Forma Combined(1):
Diluted earnings per share............ $ 0.44 $ 0.50
Cash dividends declared per share..... 0.05 0.04
Book value per share (at period end).. 5.50 4.78
<FN>
- ------------------
(1) Computed using per share merger consideration of $22.59, assuming a
Wintrust common stock price of $55.00 for the anticipated acquisition
of First Northwest.
(2) Computed using actual per share merger consideration of $55.34 for the
acquisition of Town Bankshares.
(3) Computed assuming per share cash consideration of $55.93 for the
acquisition of Antioch.
</FN>
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 First Northwest common stock, giving effect to the merger, as of
the same dates:
CLOSING PRICE HISTORICAL PRICE FIRST NORTHWEST
WINTRUST FIRST NORTHWEST EQUIVALENT PER
COMMON STOCK COMMON STOCK SHARE VALUE
------------ ------------ -----------
November 16, 2004(1)...... $61.05 (2) $ 22.62(3)
February 8, 2005.......... $54.72 (2) $ 21.59(3)
<FN>
- ------------------
(1) Trading date immediately preceding the date of public announcement of
the proposed merger.
(2) There is no established trading market for the shares of First
Northwest; as a result there is no readily obtainable market price for
the shares of First Northwest.
(3) See "Description of the Merger Agreement -- Consideration to be
received in the merger" on page 34.
</FN>
10
SELECTED FINANCIAL DATA OF WINTRUST
The selected consolidated financial data presented below, as of or for
each of the years in the five-year period ended December 31, 2003, are derived
from Wintrust's audited historical financial statements. The selected
consolidated financial data presented below, as of or for the nine-month periods
ended September 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 nine-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 should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements and the notes thereto
incorporated by reference into this proxy statement/prospectus from Wintrust'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 September 30,
2004. Results for past periods are not necessarily indicative of results that
may be expected for any future period, and results for the nine-month period
ended September 30, 2004 are not necessarily indicative of results that may be
expected for the entire year ended December 31, 2004.
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------- -----------------------------------------------------------
2004(1) 2003 2003(2) 2002(3) 2001 2000 1999
------- -------- ------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
STATEMENT OF INCOME
DATA:
Total interest income.. $184,683 $148,977 $203,991 $182,233 $166,455 $148,184 $109,331
Total interest expense. 72,364 62,154 83,499 84,105 92,441 87,184 61,597
-------- -------- -------- -------- -------- -------- --------
Net interest income. 112,319 86,823 120,492 98,128 74,014 61,000 47,734
Provision for loan
losses.............. 5,020 8,402 10,999 10,321 7,900 5,055 3,713
-------- -------- -------- -------- -------- -------- --------
Net interest income
after provision
for loan losses.. 107,299 78,421 109,493 87,807 66,114 55,945 44,021
Non-interest Income:
Gain on sale of
premium finance
receivables...... 5,365 3,470 4,910 3,374 4,564 3,831 1,033
Mortgage banking
revenue.......... 12,549 14,877 16,718 13,271 8,106 3,139 3,423
Wealth management
fees............. 23,659 20,669 28,871 25,229 1,996 1,971 1,171
Service charges on
deposit accounts. 2,944 2,611 3,525 3,121 2,504 1,936 1,562
Administrative
services revenues 2,927 3,178 4,151 3,501 4,084 4,402 996
Premium finance
defalcation-partial
settlement(4).... -- -- 500 1,250 -- -- --
Securities (losses)
gains, net....... 1,731 637 642 107 337 (40) 5
Other............... 12,453 9,849 13,275 10,819 7,207 3,067 1,618
-------- -------- -------- -------- -------- -------- --------
Total
non-interest
income......... 61,628 55,291 72,592 60,672 28,798 18,306 9,808
-------- -------- -------- -------- -------- -------- --------
(See footnotes on page 13)
11
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------- -----------------------------------------------------------
2004(1) 2003 2003(2) 2002(3) 2001 2000 1999
------- -------- ------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Non-interest Expense:
Salaries and
employee benefits $ 66,841 $ 55,673 $ 74,775 $ 63,442 $ 35,628 $ 28,119 $ 20,808
Equipment expense... 6,626 5,727 7,957 7,191 6,297 5,101 3,199
Occupancy expense,
net.............. 7,026 5,626 7,436 6,691 4,821 4,252 2,991
Data processing..... 3,909 3,193 4,304 4,161 3,393 2,837 2,169
Advertising and
marketing........ 2,376 1,645 2,215 2,302 1,604 1,309 1,402
Professional fees... 3,432 2,565 3,342 2,801 2,055 1,681 1,203
Amortization of
intangibles...... 587 448 640 324 685 713 251
Premium finance
defalcation(4)... -- -- -- -- -- 4,320 --
Other non-interest
expenses......... 19,312 16,382 22,072 19,072 11,300 9,471 7,655
-------- -------- -------- -------- -------- -------- --------
Total
non-interest
expense........ 110,109 91,259 122,741 105,984 65,783 57,803 39,678
-------- -------- -------- -------- -------- -------- --------
Income before taxes
and cumulative
effect of
accounting change... 58,818 42,453 59,344 42,495 29,129 16,448 14,151
Income tax expense..... 21,655 15,264 21,226 14,620 10,436 5,293 4,724
-------- -------- -------- -------- -------- -------- --------
Income before
cumulative effect
of accounting change $ 37,163 27,189 38,118 27,875 18,693 11,155 9,427
Cumulative effect of
change in
accounting for
derivatives, net of
tax................. -- -- -- -- (254) --- --
-------- -------- -------- -------- -------- -------- --------
Net income.......... $ 37,163 $ 27,189 $ 38,118 $ 27,875 $ 18,439 $ 11,155 $ 9,427
======== ======== ======== ======== ======== ======== ========
COMMON SHARE DATA:
Earnings per share:
Basic............... $ 1.83 $ 1.56 $ 2.11 $ 1.71 $ 1.34 $ 0.85 $ 0.76
Diluted............. 1.71 1.46 1.98 1.60 1.27 0.83 0.73
Cash dividends per
common share(5)..... 0.20 0.16 0.16 0.12 0.093 0.067 --
Book value per share... 20.42 15.87 17.43 13.19 9.72 7.92 7.06
Weighted average
common shares
outstanding:
Basic............... 20,347 17,445 18,032 16,334 13,734 13,066 12,373
Diluted............. 21,674 18,582 19,219 17,445 14,545 13,411 12,837
SELECTED FINANCIAL
CONDITION DATA (AT
END OF PERIOD):
Total assets........... $5,817,286 $4,304,877 $4,747,398 $3,721,555 $2,705,422 $2,102,806 $1,679,382
Total loans............ 4,000,175 2,949,143 3,297,794 2,556,086 2,018,479 1,547,596 1,270,126
Mortgage loans
held-for-sale....... 80,074 65,240 24,041 90,446 42,904 10,424 8,123
Total deposits......... 4,751,593 3,529,196 3,876,621 3,089,124 2,314,636 1,826,576 1,463,622
Notes payable.......... 1,000 26,000 26,000 44,025 46,575 27,575 8,350
Subordinated notes..... 50,000 50,000 50,000 25,000 -- -- --
Long term debt - trust
preferred securities 146,465 76,512 96,811 50,894 51,050 51,050 31,050
Total stockholders'
equity.............. 430,153 299,874 349,837 227,002 141,278 102,276 92,947
(See footnotes on following page)
12
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------- -----------------------------------------------------------
2004(1) 2003 2003(2) 2002(3) 2001 2000 1999
------- -------- ------- -------- -------- -------- --------
SELECTED FINANCIAL
RATIOS AND OTHER
DATA:
Performance Ratios:
Net interest
margin(6)(7)..... 3.16% 3.20% 3.20% 3.34% 3.49% 3.66% 3.54%
Net interest
spread(6)(8)(9).. 2.95 2.99 2.99 3.06 3.08 3.29 3.23
Non-interest income
to average
assets(4)(6)..... 1.58% 1.86% 1.76% 1.89% 1.24% 0.99% 0.66%
Non-interest
expense to
average
assets(4)(6)..... 2.83 3.07 2.98 3.30 2.83 3.12 2.65
Net overhead
ratio(4)(6)(10).. 1.25 1.21 1.22 1.41 1.59 2.13 2.00
Efficiency
ratio(4)(11)..... 63.74 64.23 63.52 66.41 63.66 72.33 68.63
Return on average
assets(4)(6)..... 0.95 0.91 0.93 0.87 0.79 0.60 0.63
Return on average
equity(4)(6)..... 13.46 14.92 14.36 14.76 15.24 11.51 11.58
Average
loan-to-average
deposit ratio.... 88.1 87.1 86.4 88.5 87.4 87.7 86.6
Dividend payout
ratio(5)(6)...... 8.8 8.2 8.1 7.5 7.4 8.0 --
Asset Quality Ratios:
Non-performing
loans to total
loans............ 0.45% 0.48% 0.72% 0.49% 0.64% 0.63% 0.55%
Allowance for loan
losses to:
Total loans...... 0.79 0.77 0.77 0.72 0.68 0.67 0.69
Non-performing
loans.......... 175.97 160.33 107.59 146.63 105.63 107.75 126.10
Net charge-offs to
average
loans(4)(6)...... 0.06 0.19 0.18 0.24 0.26 0.24 0.19
Non-performing
assets to total
assets........... 0.33 0.34 0.51 0.34 0.48 0.46 0.41
Other data at end of
period:
Number of banking
facilities....... 47 32 36 31 29 28 24
<FN>
- ----------------------
(1) Wintrust completed its acquisitions of SGB Corporation d/b/a WestAmerica
Mortgage Company and Guardian Real Estate Services, Inc. on May 19,
2004, and Northview Financial Corporation on September 30, 2004. The
results for the nine months ended September 30, 2004 include the results
of WestAmerica and Guardian since the effective date of the acquisition.
(2) 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. on December 5, 2003. The results for
the nine months ended September 30, 2003 and year ended December 31,
2003 include the results of the companies acquired as of and since the
effective date of the acquisitions only.
(3) 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.
(4) 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), and in the fourth
quarter of 2003, it recovered $500,000 (pre-tax) of this amount
($302,000 after-tax).
(5) Wintrust declared its first semi-annual dividend payment in January
2000. Dividend data reflected for the interim periods reflect
semi-annual, not quarterly, dividends.
(6) These financial ratios for interim periods have been annualized.
(7) Net interest income on a tax-equivalent basis divided by average
interest-earning assets.
(8) Calculated on a tax-equivalent basis.
(9) Yield earned on average interest-earning assets less rate paid on
average interest-bearing liabilities.
(10) Non-interest expense less non-interest income divided by average total
assets.
(11) 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).
</FN>
13
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" on page 17, you
should consider the following risk factors carefully in deciding whether to vote
for the adoption 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 receive shares of Wintrust common stock in the merger. The
number of shares you receive will depend on the average price of Wintrust's
common stock prior to the merger, your election and the ultimate proration, if
any. Changes in the market price of Wintrust's common stock may result from a
variety of factors, including general market and economic conditions, Wintrust's
future financial condition and operating results, changes in Wintrust's
business, operations and prospects and regulatory considerations, many of which
are beyond Wintrust's control.
The price of Wintrust's common stock at completion of the merger may
vary from its price 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 average price during the 10-day pricing period
used to determine the number of shares you are to receive. You will not be
entitled to receive additional cash or shares in the merger if the price of
Wintrust's common stock on the closing date of the merger is less than the
average price during the pricing period. Because the merger will be completed
after the date of the special meeting, at the time of the special meeting you
will not know what the market value of the Wintrust common stock you will
receive after the merger will be. See "Description of the merger
agreement--Consideration to be received in the merger."
Wintrust's common stock is traded on the Nasdaq National Market under
the symbol "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'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. Wintrust
estimates that there are currently approximately up to 1,012,000 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's common
stock could drop significantly if shareholders sell or are perceived by the
market as intending to sell large blocks of its shares.
FIRST NORTHWEST'S STOCKHOLDERS WILL NOT CONTROL WINTRUST'S FUTURE OPERATIONS.
Currently, First Northwest's stockholders own 100% of First Northwest
and have the power to approve or reject any matters requiring stockholder
approval under Delaware law and First Northwest's certificate of incorporation
and by-laws. After the merger, First Northwest stockholders will become owners
of less than 3% of the outstanding shares of Wintrust common stock. Even if all
former First Northwest stockholders voted together on all matters presented to
Wintrust's shareholders, from time to time, the former First Northwest
stockholders 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 financial results have been and will continue to be impacted
by its strategy of de novo bank formations and branch openings. Wintrust has
employed this strategy to build an infrastructure that management believes can
support additional internal growth in its banks' respective markets. Wintrust
opened its eighth de novo bank in April 2004, and expects to undertake
additional de novo bank formations or branch openings as it expands into
additional communities in and around Chicago and southeast Wisconsin. Based on
Wintrust's experience, its management believes that it generally takes from 13
to 24 months for de novo banks to first achieve operational profitability,
depending on the number of banking 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 banking facilities to reach
14
profitability, and there can be no guarantee that these new banks or branches
will ever be profitable. To the extent Wintrust undertakes additional de novo
bank, 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 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 September 30, 2004, Wintrust's allowance for loan losses was
175.97% of total nonperforming loans and 0.79% 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 and de novo bank
loan portfolios are, by their nature, unseasoned. As a result, estimating loan
loss allowances for Wintrust'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'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.
Of Wintrust's total loans at September 30, 2004, 19%, or approximately
$765 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.
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
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'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' 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's
estimate of losses at the time of sale.
15
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'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 West America, its newly acquired 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" position
on interest earning assets and interest-bearing liabilities, the "gap" will work
against it and Wintrust's net interest income may be negatively affected.
The success of Wintrust's covered call and put 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 relatively low interest rates
that prevailed over the last three years, 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
$8 million during 2003, compared to approximately $6 million in 2002, from
premiums earned on these option transactions. During the first nine months of
2004, Wintrust recorded fee income of $7 million on these transactions. In a
rising interest rate environment, particularly if interest rates continue to
increase, the amount of premium income Wintrust earns on these transactions will
likely decline. Wintrust'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 of directors has implemented 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'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'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's shareholders.
16
CAUTION ABOUT FORWARD-LOOKING STATEMENTS
Certain statements contained in this document, including information
incorporated into this document by reference, that are not historical facts may
constitute forward-looking statements within the meaning 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 of the Private
Securities Litigation Reform Act of 1995. The sections of this document which
contain 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--First Northwest's
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," "would," "plan," "potential," "estimate," "project," "believe,"
"intend," "anticipate," "expect," "target" and similar expressions. These
forward-looking statements include statements relating to our projected growth,
anticipated improvements in financial performance, and management's long-term
performance goals, as well as statements relating to the anticipated effects on
results of operations and financial condition from expected developments or
events, its business and growth strategies, including anticipated internal
growth, plans to form additional de novo banks 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.
These forward-looking statements are subject to significant risks,
assumptions and uncertainties, and could be affected by many factors including,
among other things, changes in general economic and business condition and the
risks and other factors set forth in the "Risk Factors" section beginning on
page 14.
Because of these and other uncertainties, Wintrust'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's past results of operations do not necessarily indicate
Wintrust'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 49.
17
SPECIAL MEETING OF FIRST NORTHWEST STOCKHOLDERS
DATE, PLACE, TIME AND PURPOSE
Wintrust's and First Northwest's boards of directors are sending you
this proxy statement/prospectus and proxy form to use at the special meeting. At
the special meeting, the First Northwest board of directors will ask you to vote
on a proposal to approve the merger agreement. First Northwest and Wintrust will
share equally the costs associated with the solicitation of proxies for the
special meeting. The special meeting will be held at the offices of First
Northwest, located at 234 West Northwest Highway, Arlington Heights, Illinois
60004 on March 15, 2005 at 3:00 p.m., local time.
RECORD DATE, VOTING RIGHTS, QUORUM AND REQUIRED VOTE
First Northwest has set the close of business on February 10, 2005, as
the record date for determining the holders of its common stock entitled to
notice of and to vote at the special meeting. Only First Northwest stockholders
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 1,561,600 shares
of First Northwest common stock outstanding and entitled to vote at the special
meeting. There must be at least a majority of First Northwest's outstanding
shares present in person or by proxy at the special meeting in order for the
vote on the merger to occur.
Approval of the merger agreement will require the affirmative vote of
at least a majority of First Northwest's outstanding shares. Certain
stockholders of First Northwest, whose aggregate ownership represents
approximately 68.5% of First Northwest's outstanding shares, have committed to
vote their shares in favor of the merger. Wintrust does not own any shares of
First Northwest common stock. See "Description of the merger--Voting agreement"
on page 33 for a description of the provisions of the voting agreement.
Abstentions from voting or any failure 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.
Voting instructions are included on your proxy form. 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. If you are the record holder of your shares and submit your proxy
without specifying a voting instruction, your shares will be voted "FOR"
approval of the merger agreement.
You may revoke your proxy before it is voted by:
o filing with First Northwest's secretary a duly executed
revocation of proxy;
o submitting a new proxy with a later date; or
o 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:
First Northwest Bancorp, Inc., 234 W. Northwest Highway, Arlington Heights,
Illinois, 60004, Attention: S. Michael Polanski.
APPRAISAL RIGHTS
Pursuant to Section 262 of the DGCL, you may dissent from the merger
and elect to have the fair value of your shares judicially determined and paid
in cash, but only if you comply with the provisions of Section 262.
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The following is a brief summary of the statutory procedures that you
must follow in order to perfect your appraisal rights under Delaware law. THIS
SUMMARY IS NOT INTENDED TO BE COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SECTION 262 OF THE DGCL, A COPY OF WHICH IS INCLUDED AS ANNEX C TO
THIS PROXY STATEMENT/PROSPECTUS.
To dissent from the merger and demand appraisal, you must satisfy the
following conditions:
o deliver a written demand for appraisal of your shares to First
Northwest before the vote on the adoption of the merger
agreement at the special meeting;
o not vote in favor of the merger agreement (the return of a
signed proxy which does not specify a vote against the merger
agreement or a direction to abstain, will be voted in favor of
the merger agreement and constitute a waiver of your right of
appraisal); and
o continuously hold your First Northwest shares from the date of
making the demand through the time the merger is completed.
If you fail to comply with any of these conditions and the merger
becomes effective, you will be entitled to receive only the consideration
provided in the merger agreement. Failure to vote on the merger agreement will
not constitute a waiver of your appraisal rights. Voting against the merger
agreement will not satisfy the requirement of a written demand for appraisal.
All written demands for appraisal should be addressed to: First
Northwest Bancorp, Inc., 234 W. Northwest Highway, Arlington Heights, Illinois
60004, Attention: S. Michael Polanski. 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 First Northwest shares
are owned of record in a fiduciary capacity, as by a trustee, guardian or
custodian, execution of a demand for appraisal should be made in that capacity.
If First Northwest shares are owned of record by more than one person, as in a
joint tenancy or tenancy in common, the demand must be executed by or for all
joint owners. An authorized agent, including one for two or more joint owners,
may execute the demand for appraisal for a stockholder of record; however, the
agent must identify the record owner or owners and expressly disclose the fact
that, in executing the demand, he or she is acting as agent for the record
owner. A record owner, such as a broker or trustee, who holds First Northwest
shares as a nominee for others may exercise his or her rights of appraisal with
respect to the shares held for one or more beneficial owners, while not
exercising such right for other beneficial owners. In that case, the written
demand should set forth the number of shares as to which the record owner
dissents. Where no number of shares is expressly mentioned, the demand will be
presumed to cover all shares of First Northwest shares in the name of that
record owner.
Within 10 days after the merger, Wintrust must give written notice that
the merger has become effective to each holder of First Northwest shares who
filed a written demand for appraisal and who did not vote in favor of the merger
agreement. Any stockholder entitled to appraisal rights may, within 20 days
after the date of mailing of the notice, demand in writing from Wintrust the
appraisal of his or her First Northwest shares. Within 120 days after the
completion of the merger, either Wintrust, or any First Northwest stockholder
who has complied with Section 262, may file a petition in the Delaware Court of
Chancery demanding a determination of the value of the First Northwest shares
held by all stockholders entitled to appraisal of their shares. Wintrust does
not presently intend to file such a petition. Because Wintrust has no obligation
to file such a petition, the failure of a stockholder to do so within the period
specified could nullify the stockholder's previous written demand for appraisal.
If a petition for appraisal is duly filed by a stockholder and a copy
is delivered to Wintrust, Wintrust will then be obligated within 20 days of
receipt of the copy to provide the Court of Chancery with a duly verified list
containing the names and addresses of all stockholders who have demanded an
appraisal of their shares and with whom agreement as to the value of their
shares has not been reached. After notice to these stockholders, the Court of
Chancery is empowered to conduct a hearing to determine which stockholders are
entitled to appraisal rights.
The Court of Chancery will then appraise the First Northwest shares,
determining their fair value exclusive of any element of value arising from the
accomplishment or expectation of the merger. When the value is determined, the
Court will direct the payment by Wintrust of this value, with interest thereon,
simple or compound, if the Court so determines, to the stockholders entitled to
receive this money.
19
Stockholders of First Northwest who are considering seeking an
appraisal should bear in mind that the fair value of their First Northwest
shares as determined under Section 262 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.
Costs of the appraisal proceeding may be assessed against the
stockholder by the court as the court deems equitable in the circumstances.
Failure to comply strictly with these procedures will cause you to lose
your appraisal rights. Consequently, if you desire to exercise your appraisal
rights you are urged to consult a legal advisor before attempting to exercise
these rights.
DESCRIPTION OF THE MERGER
The following information describes certain aspects of the merger. The
merger agreement, which you should read carefully, is attached as Annex A to
this proxy statement/prospectus, and incorporated herein by reference.
GENERAL
When the merger is consummated, First Northwest will merge with and
into Wintrust and will cease to exist. Wintrust will survive the merger and
First Northwest Bank will become a wholly-owned subsidiary of Wintrust. At the
effective time of the merger, holders of First Northwest common stock will
exchange their shares for either shares of Wintrust common stock or a
combination of 40% cash and 60% of shares of Wintrust common stock, subject to
proration described below. Each share of First Northwest common stock will be
exchanged for the "per share merger consideration" which cannot be determined
until three trading days before completion of the merger. See "Description of
the merger agreement--Consideration to be received in the merger" for a detailed
description of the method for determining the per share merger consideration.
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 sales price of Wintrust's common stock during
the 10-day trading period ending three trading days before the merger is
completed. Shares of First Northwest common stock held by First Northwest
stockholders who elect to exercise their appraisal rights will not be converted
into Wintrust common stock and/or cash.
THE COMPANIES
Business of Wintrust--General
Wintrust Financial Corporation, an Illinois corporation, is a financial
holding company headquartered in Lake Forest, Illinois. As of December 31, 2004,
Wintrust operates 12 community banks, all located in the greater Chicago and
Milwaukee metropolitan areas, which provide community-oriented, personal and
commercial banking services primarily to individuals and small to mid-size
businesses through 50 banking facilities. Wintrust also provides wealth
management services, including trust, asset management and brokerage services,
to customers, 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. As of December 31,
2004, Wintrust had consolidated total assets of $6.42 billion, deposits of $5.10
billion and shareholders' equity of $474 million.
Financial and other information relating to Wintrust, including
information relating to Wintrust's current directors and executive officers, is
set forth in Wintrust's 2003 Annual Report on Form 10-K, Wintrust's Proxy
Statement for its 2004 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, 2004, June 30, 2004 and September 30, 2004 and
20
Wintrust's Current Reports on Form 8-K filed during 2004 and 2005, which are
incorporated by reference to this proxy statement/prospectus. Copies of these
documents may be obtained from Wintrust as indicated under "Where You Can Find
More Information" on page 49. See "Incorporation of Certain Information by
Reference" on page 49.
Business of Wintrust--Recent Developments
On October 15, 2004, Wintrust completed its acquisition of Town
Bankshares, Ltd., parent company of Town Bank with banking locations in
Delafield and Madison, Wisconsin. Town Bank began operations as a de novo bank
in 1998, and had total assets of approximately $261 million as of September 30,
2004. The aggregate purchase price, including the value of in-the-money options,
was approximately $41.1 million.
On December 13, 2004, Wintrust issued $50 million of floating rate
trust preferred securities in a private placement offering. The trust preferred
securities were issued by its newly established subsidiary, Wintrust Capital
Trust VII. The trust preferred securities have a maturity of 30 years and are
redeemable by Wintrust in whole or in part after five years. Distributions on
the trust preferred securities will be paid quarterly at a rate equal to
three-month LIBOR plus 1.95%, except for the first distribution period ending on
March 15, 2005, which will bear a rate equal to LIBOR of 2.47% plus 1.95%.
Wintrust used the proceeds of the trust preferred offering to fund a portion of
the aggregate purchase price of its acquisition of Antioch Holding Company.
On December 14, 2004, Wintrust entered into a forward sale agreement
with Royal Bank of Canada, an affiliate of RBC Capital Markets Corporation,
relating to the forward sale by Wintrust of 1,200,000 shares of its common
stock, which amount equals the number of shares to be borrowed and sold by Royal
Bank of Canada under the forward sale agreement. Pursuant to an underwriting
agreement dated December 14, 2004, RBC Capital Markets Corporation, acting as
representative of the several underwriters, agreed to purchase from Royal Bank
of Canada 1,200,000 shares of Wintrust's common stock. Royal Bank of Canada also
granted the underwriters the option to purchase up to an additional 180,000
shares of common stock that may be sold to cover over-allotments, if any. The
shares sold by Royal Bank of Canada, acting at Wintrust's request, were
registered under the Securities Act pursuant to Wintrust's existing shelf
registration statement.
On January 18, 2005, Wintrust completed its acquisition of Antioch
Holding Company, the parent company of State Bank of The Lakes, with locations
in Antioch, Lindenhurst, Grayslake, Spring Grove and McHenry, Illinois. Antioch
had total assets of approximately $445 million as of September 30, 2004. The
aggregate purchase price for the acquisition was approximately $95 million,
which Wintrust paid in cash at the closing.
On January 20, 2005, Wintrust announced its earnings for the quarter
and year ended December 31, 2004. A copy of the press release relating to
Wintrust's earnings results is attached to the Current Report on Form 8-K that
Wintrust filed with the SEC on January 20, 2005, which is incorporated herein by
reference.
Business of First Northwest
First Northwest Bancorp, Inc., a Delaware corporation, is a bank
holding company headquartered in Arlington Heights, Illinois. Its primary
business is operating its bank subsidiary, First Northwest Bank, an Illinois
state bank with two branches in Arlington Heights, Illinois. As of December 31,
2004, First Northwest had consolidated total assets of approximately $261
million, deposits of $221 million and stockholders' equity of $14.6 million.
BACKGROUND OF THE MERGER
First Northwest Bank was organized in 1995 and First Northwest was
formed in 1996 for the purpose of owning all of the capital securities of First
Northwest Bank. First Northwest Bank has remained an independent financial
institution since its organization and has served as a community bank serving
Arlington Heights, Illinois and the immediately surrounding communities. First
Northwest Bank provides full-service commercial and consumer banking from its
two offices located in Arlington Heights, Illinois with both of its locations
offering all of the usual services, including: demand savings and time deposits;
commercial, industrial, consumer and real estate lending; and associated banking
services. First Northwest Bank has focused on growing its business in accordance
with its business plan. Its strategy is to provide a local banking alternative
to the national and regional financial institutions that dominate its market
area. Management has operated First Northwest Bank to focus on and become
21
a leader in the community, on profit improvement, staffing, training, marketing,
community affairs, technology, products and services. This strategy proved to be
successful and by September 30, 2004 it had grown to over $267 million in assets
and had profits for the previous twelve months in excess of $2.2 million.
At a meeting held on May 18, 2004, the First Northwest Bank Board
reviewed the success of First Northwest's business and financial strategies as
reflected in its increases in earnings per share and per share book value. The
Board considered possible investments that would be necessary to continue its
growth. Also considered was the lack of liquidity for First Northwest's stock
for its stockholders. After discussing these factors as well as current
conditions for bank acquisitions, the Board considered the possibility that an
affiliation by First Northwest with a larger entity might result in improved
stockholder value as compared to continuation as an independent, privately held
company. A representative from Barack Ferrazzano Kirschbaum Perlman & Nagelberg
LLP, First Northwest's special legal counsel, attended the meeting and gave a
presentation regarding the Board's fiduciary duties to shareholders regarding
strategic transactions.
After the presentation, the Board determined that an affiliation with a
larger entity might indeed produce superior value for First Northwest's
stockholders. The Board authorized the Executive Committee of the Board to
interview different financial advisors to represent First Northwest through any
possible transaction. The Executive Committee interviewed several different
financial advisors and recommended to the Board that the firm of Hovde Financial
LLC be retained to serve as First Northwest's financial advisor for this
process. The Board approved retention of Hovde at a meeting on June 18, 2004 and
Hovde and First Northwest entered into an agreement shortly thereafter.
The following week, First Northwest's Executive Committee and Hovde
developed a process to contact and elicit interest from a group of logical
prospective strategic partners who would be provided a confidential descriptive
memorandum presenting data on First Northwest and its business, subject to the
prior execution of a confidentiality agreement. First Northwest's Executive
Committee and Hovde began preparation of the confidential descriptive
memorandum. In late June, Hovde began contacting potential strategic partners
and distributed confidentiality agreements to those who expressed an initial
interest.
During July, the confidentiality agreements were received from the
prospective strategic partners and First Northwest and Hovde made final
revisions to the confidential descriptive memorandum. In late July, each
prospective strategic partner that had executed a confidentiality agreement
received a copy of the memorandum. On August 12, 2004, Hovde reviewed the
results of the preliminary proposal solicitation process with the First
Northwest Executive Committee. Hovde reported that it had contacted eight
potential strategic partners that entered into confidentiality agreements and
received the confidential descriptive memorandum. Of these parties, four
presented First Northwest with written, non-binding expressions of interest for
an affiliation with First Northwest, subject to due diligence and the
negotiation of a definitive agreement. The expressions of interest from three
parties, including Wintrust, featured a price or range of prices meeting the
prior price expectations of the First Northwest Board. Two of such expressions
of interest proposed a mix of stock and cash, while the third proposed all cash.
The Executive Committee decided to continue the process and authorized S.
Michael Polanski, First Northwest's President and Chief Executive Officer, to
proceed with the due diligence process with such three parties. The due
diligence process was concluded by September 3, 2004, and Hovde continued to
communicate with these three parties.
On September 16, 2004, Hovde reviewed with the Executive Committee the
current status of the strategic option process. At that time, the three
companies, including Wintrust continued to express interest in a possible
affiliation with First Northwest. The Executive Committee authorized Hovde to
schedule presentations by each of the three companies to First Northwest's Board
of Directors. On September 21, 2004, each of the companies made a presentation
to the Board and Hovde covering its proposed acquisition price, its operating
philosophy, its views on community banking, its strategic synergies with First
Northwest and a tentative timetable for the transaction and integration of
business operations.
After the final presentations, Hovde's representative summarized the
perceived advantages and disadvantages of each proposal. Each director gave his
or her individual evaluation of the presentations and of each company serving as
a possible strategic partner. As part of the decision process, the Board
considered the aggregate value of each proposal, the form of the consideration
offered, the long-term growth prospects of each of the potential strategic
partners which offered stock as a component of its consideration, or each
potential partner's capital
22
structure, ability to complete the transaction in a timely manner, as well as
each party's community banking focus and general culture. Based on the proposals
submitted by the three interested parties, the Board concluded that Wintrust
provided the best strategic opportunity for First Northwest and its
shareholders. At the conclusion of the meeting, the First Northwest Board
instructed Hovde to focus its attention on Wintrust, continue its business
review of Wintrust, identify any unresolved issues and to report findings to the
Executive Committee.
Over the ensuing weeks and with regular updates to First Northwest's
Executive Committee a Hovde representative continued negotiations with Wintrust
with respect to a mutually satisfactory price protection mechanism. The parties
eventually agreed that the merger consideration would consist of two parts - a
fixed part and a variable part that increased or decreased with the Wintrust
stock price. As part of the negotiations, Wintrust insisted upon the inclusion
of a mechanism that fixed the variable portion of the consideration if
Wintrust's market share price exceeded $64.00 per share. Additionally, to
protect First Northwest stockholders, First Northwest required that it be given
the option to terminate the agreement if Wintrust's share price dropped to or
below $48.99 and if Wintrust refused to increase the amount of cash
consideration.
After reaching substantial agreement on this issue, the parties,
assisted by their financial and legal advisers, began negotiating a definitive
merger agreement. On November 8, 2004, First Northwest and Wintrust executives,
Hovde and the parties' respective legal advisers met and reached substantial
agreement on the form of the definitive merger agreement, and on November 11,
2004, the final form of the merger agreement was distributed to First
Northwest's Board for its review. The closing of the transaction was subject to
a number of conditions, such as regulatory approvals, receipt of various legal
opinions, shareholder approval, as well as a minimum shareholder's equity
requirement for First Northwest.
The First Northwest Board held a meeting on November 16, 2004 that was
also attended by representatives of Hovde and Barack Ferrazzano. The meeting
included a detailed discussion of the proposed transaction with Wintrust, a
presentation of certain materials provided by Hovde and a description by Barack
Ferrazzano of the terms of the current draft of the merger agreement. Hovde
reviewed the process leading to the proposed transaction, provided a financial
analysis of the proposed transaction and told the Board that upon execution of
the merger agreement, it was prepared to deliver a written opinion as to the
fairness of the proposed merger consideration to First Northwest stockholders
from a financial point of view. First Northwest's Executive Officers discussed
with the Directors the scope of the representations, warranties and covenants
contained in the merger agreement, the disclosures made to First Northwest
during the agreement's negotiation and their general satisfaction with the draft
of the merger agreement presented to Directors. Barack Ferrazzano reviewed legal
aspects of the proposed transaction and the current draft of the merger
agreement with the First Northwest Board and answered Directors' questions.
After the conclusion of this presentation and discussion, the First
Northwest Board unanimously approved the merger agreement and authorized its
Chief Executive Officer to execute the merger agreement on behalf of First
Northwest. First Northwest and Wintrust issued a joint press release on November
17, 2004 announcing the execution of the merger agreement.
FIRST NORTHWEST'S REASONS FOR THE MERGER AND RECOMMENDATION OF THE BOARD OF
DIRECTORS
First Northwest's board of directors believes that the merger is in the
best interests of First Northwest and its stockholders. Accordingly, First
Northwest's board of directors has unanimously approved the merger agreement and
unanimously recommends that its stockholders vote "FOR" the approval of the
merger agreement.
First Northwest's board of directors has concluded that the proposed
merger offers First Northwest's stockholders an extremely attractive opportunity
to achieve the board's strategic business objectives, including increasing
stockholder value, growing the size of the business and enhancing liquidity for
First Northwest's stockholders, who will gain the benefit of a public trading
market for their shares.
In deciding to approve the merger agreement and the transaction it
contemplates, First Northwest's board of directors consulted with First
Northwest's management, as well as its legal counsel, and considered numerous
factors, including the following:
23
o information with respect to the businesses, earnings,
operations, financial condition, prospects, capital levels and
asset quality of First Northwest and Wintrust, both
individually and as a combined company;
o the perceived risks and uncertainties attendant to First
Northwest'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;
o 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;
o 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;
o the fact that Wintrust is publicly held and the merger would
provide access to a public trading market for First Northwest
stockholders 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
o the likelihood that the merger will be approved by the
relevant bank regulatory authorities.
The above discussion of the information and factors considered by First
Northwest's board of directors is not intended to be exhaustive, but includes
all material factors considered by First Northwest's board. In arriving at its
determination to approve the merger agreement and the transaction it
contemplates, and recommend that First Northwest's stockholders vote to approve
the merger, First Northwest'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.
FIRST NORTHWEST'S BOARD OF DIRECTORS BELIEVES THAT THE MERGER IS FAIR
TO, AND IN THE BEST INTERESTS OF, FIRST NORTHWEST AND ITS STOCKHOLDERS. FIRST
NORTHWEST'S BOARD OF DIRECTORS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND
RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" APPROVAL OF THE MERGER AGREEMENT.
Certain directors and officers of First Northwest have interests in the
merger in addition to their interests as stockholders 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 in connection
with the merger. You may wish to consider these interests in evaluating First
Northwest's board of directors' recommendation that you vote in favor of the
merger. See "Description of the merger--Interests of certain persons in the
merger." All members of First Northwest's board of directors have agreed to vote
their shares in favor of the merger at the special meeting.
WINTRUST'S REASONS FOR THE MERGER
Wintrust's board of directors believes that the merger is in the best
interests of Wintrust and its stockholders. In deciding to approve the merger,
Wintrust's board of directors considered a number of factors, including:
o management's view that the acquisition of First Northwest
provides an attractive opportunity to expand into desirable
markets;
o First Northwest's 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 First Northwest
operates, including existing and potential competition and
history of the market areas with respect to financial
institutions;
24
o management's review of the business, operations, earnings and
financial condition, including capital levels and asset
quality, of First Northwest Bank since its de novo formation
in 1995; and
o the likelihood of regulators approving the merger without
undue conditions or delay.
While Wintrust's board of directors considered these and other factors,
the board of directors did not assign any specific or relative weights to the
factors considered and did not make any determination with respect to any
individual factor. 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's shareholders. The terms of the
merger were the result of arm's-length negotiations between representatives of
Wintrust and representatives of First Northwest.
FAIRNESS OPINION OF FIRST NORTHWEST'S FINANCIAL ADVISOR
Hovde Financial LLC has acted as financial advisor to First Northwest
in connection with the proposed merger. Hovde is a nationally recognized
investment banking firm with substantial experience in transactions similar to
the merger and is familiar with First Northwest. As part of its investment
banking business, Hovde is continually engaged in the valuation of businesses
and their securities in connection with, among other things, mergers and
acquisitions.
At a meeting of First Northwest's board of directors on November 16,
2004, Hovde reviewed the financial aspects of the proposed merger with the board
of directors and rendered an opinion that the consideration to be received by
First Northwest stockholders in the merger was fair to those stockholders from a
financial point of view. In addition to the oral presentation, Hovde delivery to
First Northwest's board of directors a written opinion dated November 16, 2004.
The full text of Hovde's written opinion is included in this proxy
statement/prospectus as Annex D and is incorporated herein by reference. First
Northwest stockholders are urged to read the opinion in its entirety for a
description of the procedures followed, assumptions made, matters considered,
and qualifications and limitations on the review undertaken by Hovde.
Hovde's opinion is directed to First Northwest's board of directors and
addresses only the fairness from a financial point of view, of the aggregate
merger consideration to First Northwest stockholders. It does not address the
underlying business decision to proceed with the merger and does not constitute
a recommendation to any First Northwest stockholder as to how such stockholder
should vote at the special meeting on the merger agreement or any related
matter.
In rendering its opinion, Hovde:
o reviewed the merger agreement;
o reviewed certain historical publicly available business and
financial information concerning First Northwest and Wintrust;
o reviewed certain internal financial statements and other
financial and operating data concerning First Northwest and
Wintrust;
o analyzed certain financial projections prepared by First
Northwest's management;
o conducted meetings with members of the senior management of
First Northwest and Wintrust for the purpose of reviewing the
future prospects of First Northwest and Wintrust, including
financial forecasts related to the respective businesses,
earnings, assets, liabilities and the amount and timing of
cost savings (the "Synergies") expected to be achieved as a
result of the merger;
o evaluated the pro forma contribution of First Northwest's
assets, liabilities, equity and earnings to the pro forma
company;
25
o reviewed the terms of recent merger and acquisition
transactions, to the extent publicly available, involving
banks and bank holding companies that it considered relevant;
o analyzed the pro forma impact of the merger on the combined
company's earnings per share, consolidated capitalization and
financial ratios; and
o performed analyses and considered such other factors as it
deemed appropriate.
Hovde also took into account its assessment of general economic, market
and financial conditions and its experience in other transactions, as well as
its knowledge of the banking industry and its general experience in securities
valuations.
In rendering its opinion, Hovde assumed, without independent
verification, the accuracy and completeness of the financial and other
information and representations contained in the materials provided to it by
First Northwest and Wintrust and in the discussions it had with the management
of each of First Northwest and Wintrust. Hovde also assumed that the financial
forecasts, including without limitation, the Synergies and projections regarding
under-performing and non-performing assets and net charge-offs were reasonably
prepared on a basis reflecting the best currently available information and
judgments and estimates of First Northwest and Wintrust and that such forecasts
will be realized in the amounts and at the times contemplated thereby. Hovde is
not an expert in the evaluation of loan and lease portfolios for purposes of
assessing the adequacy of the allowances for loan losses with respect thereto.
Hovde has assumed that such allowances for First Northwest and Wintrust are in
the aggregate adequate to cover such losses. Hovde was not retained to and did
not conduct a physical inspection of any of the properties or facilities of
First Northwest or Wintrust. In addition, Hovde did not review individual credit
files or make an independent evaluation or appraisal of the assets and
liabilities of First Northwest or Wintrust, and Hovde was not furnished with any
such evaluations or appraisals.
Hovde assumed that the merger will be consummated substantially in
accordance with the terms set forth in the merger agreement. Hovde also assumed
that the merger will be accounted for as a purchase under GAAP. Hovde assumed
that the merger is, and will be, in compliance with all laws and regulations
that are applicable to First Northwest and Wintrust. Hovde further assumed that,
in the course of obtaining the necessary regulatory and government approvals, no
restriction will be imposed on Wintrust that would have a material adverse
effect on Wintrust or the contemplated benefits of the merger. Hovde also
assumed that there would not occur any change in applicable law or regulation
that would cause a material adverse change in the prospects or operations of
Wintrust after the merger.
First Northwest engaged Hovde on June 18, 2004, to provide it with an
analysis of its strategic options. Pursuant to its engagement agreement, First
Northwest paid Hovde a fee of $40,000 at the time of the execution of the merger
agreement and the delivery to First Northwest's board of directors of Hovde's
fairness opinion. At the time the merger is completed, First Northwest will pay
Hovde a total fee based on the merger consideration including the special
dividend, if any, paid by First Northwest to its stockholders at/or just prior
to closing. Based on Wintrust's closing price on December 5, 2004, the remaining
fee paid to Hovde at the time the merger is completed is estimated at $745,000.
Pursuant to the engagement agreement, First Northwest also agreed to reimburse
Hovde for all reasonable out-of-pocket expenses incurred in performing its
services and to indemnify Hovde against certain liabilities relating to the
merger or Hovde's engagement.
Hovde's opinion is not an expression of an opinion as to the prices at
which shares of Wintrust common stock will trade following the announcement of
the merger or the actual value of the Wintrust common stock when issued pursuant
to the merger or the prices at which the Wintrust common stock will trade
following the completion of the merger.
In performing its analyses, Hovde made numerous assumptions with
respect to industry performance, general business, economic, market and
financial conditions and other matters, many of which are beyond the control of
Hovde, Wintrust and First Northwest. Any estimates contained in the analyses
performed by Hovde are not necessarily indicative of actual values or future
results, which may be significantly more or less favorable than suggested by
these analyses. Additionally, estimates of the value of businesses or securities
do not purport to be appraisals or to reflect the prices at which such
businesses or securities may be sold. Accordingly, these analyses and estimates
are inherently subject to substantial uncertainty. In addition, the Hovde
opinion was among several
26
factors taken into consideration by First Northwest's board of directors in
making its determination to approve the merger agreement and the merger.
Consequently, the analyses described below should not be viewed as solely
determinative of the decision of First Northwest's board of directors or First
Northwest's management with respect to the fairness of the merger consideration.
The following is a summary of the material analyses presented by Hovde
to First Northwest's board of directors on November 16, 2004, in connection with
its opinion. The summary is not a complete description of the analyses
underlying the Hovde opinion or the presentation made by Hovde to First
Northwest's board of directors, but summarizes the material analyses performed
and presented in connection with such opinion. The preparation of a fairness
opinion is a complex analytic process involving various determinations as to the
most appropriate and relevant methods of financial analysis in the application
of those methods to the particular circumstances. Therefore, a fairness opinion
is not readily susceptible to partial analysis or summary description. In
arriving at its opinion, Hovde did not attribute any particular weight to any
analysis or factor that it considered, but rather made qualitative judgments as
to the significance and relevance of each analysis and factor. The financial
analyses summarized below include the information presented in tabular format.
The analyses and the summary of the analyses must be considered as a whole and
selecting portions of the analyses and factors or focusing on the information
presented below in tabular format, without considering all analyses and factors
or the full narrative description of the financial analyses, including the
methodologies and assumptions underlying the analyses, could create a misleading
or incomplete view of the process underlying the analyses and opinion of Hovde.
The tables alone are not a complete description of the financial analyses.
Selected Transaction Analysis. As part of its analysis, Hovde reviewed
comparable mergers involving banks located in the Chicago Metropolitan
Statistical Area announced since January 1, 2001 in which the seller had assets
between $100 million and $1 billion (the "Chicago Merger Group"). The Chicago
Merger Group consisted of the following 14 transactions:
BUYER SELLER
- ------------------------------ ---------------------------------
Wintrust Financial Corporation Antioch Holding Company
BMO Financial Group Mercantile Bancorp, Inc.
Wintrust Financial Corporation Northview Financial Corporation
Metropolitan Bank Group, Inc. Citizens Bank Illinois NA
BMO Financial Group Lakeland Financial Corporation
Northern States Financial Corp. Round Lake Bankcorp, Inc.
Wintrust Financial Corporation Advantage National Bancorp
Bridgeview Bancorp, Inc. Upbancorp, Inc.
Standard Bancshares, Inc. East Side Bancorporation, Inc.
MB Financial, Inc. South Holland Bancorp, Inc.
Metropolitan Bank Group, Inc. Firstcom Bancorp, Inc.
MB Financial, Inc. First Lincolnwood Corporation
First Banks, Inc. Plains Financial Corporation
MAF Bancorp, Inc. Mid Town Bancorp, Inc.
Hovde calculated the medians for the following relevant transaction
ratios in the Chicago Merger Group:
o the percentage of the merger consideration to the acquired
company's total assets;
o the multiple of the merger consideration per share to the
acquired company's tangible book value per share;
o the multiple of the merger consideration per share to the
acquired company's earnings per share for the 12 months
preceding the announcement date of the transaction; and
o the tangible book value premium to core deposits.
Hovde used the medians of these multiples for the Chicago Merger Group
to estimate an implied transaction value involving First Northwest. These values
and the corresponding multiples were then compared to
27
the value of the consideration expressed in the merger agreement. In calculating
the multiples for the merger, Hovde used core deposits (total deposits net of
CDs greater than $100,000) and earnings for the last 12 months at September 30,
2004, for First Northwest. The table below shows the results of this analysis
comparing the multiples based on the merger agreement versus the implied
multiples to First Northwest based on the medians of the corresponding group's
multiples.
TANGIBLE
IMPLIED BOOK VALUE
AGGREGATE PREMIUM TO
VALUE TOTAL TANGIBLE LTM CORE
(MILLIONS) ASSETS BOOK VALUE(1) EARNINGS DEPOSITS
---------- ------ ----------- -------- --------
First Northwest............ $47.1 17.6% 357.7% 21.3x 19.3%
Chicago Merger Group....... 37.8 14.1 286.9 17.1 11.5
<FN>
- ----------------------
(1) Utilized First Northwest's estimated tangible book value at closing
($13.2 million).
</FN>
Comparative Company Analysis. Using publicly available information,
Hovde compared the financial performance of First Northwest with the Chicago
Merger Group. The performance highlights for First Northwest are based on
last-twelve-months information at September 30, 2004. The tangible book value
for First Northwest represent an estimated value at closing of $13.2 million.
PERFORMANCE HIGHLIGHTS
NON
EQUITY/ EFFICIENCY INT. NPA/ RESERVES/
ROA ROE ASSETS RATIO INC/ASSETS ASSETS NPA
--- --- ------ ----- ---------- ------ ---
First Northwest..... 0.92% 16.81% 4.92%(1) 60.34% 0.39% 0.06% 1,778.9
Chicago Merger
Group
Median........... 0.92 11.03 8.31 70.17 0.94 0.36 65.1
<FN>
- ----------------------
(1) Utilized First Northwest's estimated tangible book value at closing
($13.2 million).
</FN>
No company or transaction used as comparison in the above analysis is
identical to First Northwest, Wintrust or the merger. Accordingly, an analysis
of these results is not mathematical. Rather, it involves complex considerations
and judgments concerning differences in financial and operating characteristics
of the companies.
Discounted Cash Flow Analysis. Hovde estimated the present value of the
First Northwest common stock by starting with estimated earnings of $2.9 million
in 2005 and assuming a 12.5% annual growth rate in earnings through 2009, which
resulted in projected net income of $3.3 million, $3.7 million, $4.1 million and
$4.6 million in 2006, 2007, 2008 and 2009, respectively. In arriving at the
terminal value of First Northwest's earnings stream at the end of 2009, Hovde
then assumed the earnings of First Northwest would increase perpetually at an
annual rate of 5.0%. The present value of the earnings plus terminal value was
then calculated assuming a discount rate of 13.5% resulting in an implied
present value of $38.1 million. This process was repeated with a range of
perpetuity growth rates between 4.0% to 6.0% and discount rates between 12.0%
and 15.0%. These rates and values were chosen to reflect different assumptions
regarding the required rates of return of holders or prospective buyers of First
Northwest common stock. This analysis and its underlying assumptions yielded a
range of values for First Northwest, the median is outlined in the table below:
28
TANGIBLE
IMPLIED BOOK VALUE
AGGREGATE TANGIBLE PREMIUM TO
VALUE TOTAL BOOK LTM CORE
(MILLIONS) ASSETS VALUE(1) EARNINGS DEPOSITS
---------- ------ -------- -------- --------
First Northwest............ $47.1 17.6% 357.7% 21.3x 19.3%
Discount Cash Flow (Median) 38.1 14.2 289.4 17.2 14.2
<FN>
- ----------------------
(1) Utilized First Northwest's estimated tangible book value at closing
($13.2 million).
</FN>
Hovde stated that the discounted cash flow present value analysis is a
widely used valuation methodology but noted that it relies on numerous
assumptions, including asset and earnings growth rates, terminal values and
discount rates. The analysis does not purport to be indicative of the actual
values or expected values of First Northwest common stock.
Contribution Analysis. Hovde prepared a contribution analysis showing
percentages of assets, loans, deposits, total equity and total tangible equity
at September 30, 2004, for First Northwest and Wintrust, and last-twelve-months
and estimated fiscal year 2004 net income that would be contributed to the
combined company on a pro forma basis by First Northwest and Wintrust. Notably,
First Northwest's contribution to the pro forma company based on total equity
value would be approximately 2.97%. In comparison, the analysis showed that if
all of the outstanding First Northwest common stock is exchanged for 100%
Wintrust common stock, holders of First Northwest common stock would own
approximately 3.44% of the outstanding shares of Wintrust following the
transaction on a pro forma basis for the stock portion of the consideration. The
contribution analysis was based on an exchange ratio of 0.3774 shares of
Wintrust common stock for each share of First Northwest common stock.
FIRST NORTHWEST WINTRUST
CONTRIBUTION TO CONTRIBUTION TO
PRO FORMA COMBINED PRO FORMA COMBINED
------------------ ------------------
Total Assets.................................. 4.40% 95.60%
Total Net Loans............................... 4.20 95.80
Total Deposits................................ 4.54 95.46
Net Income - Estimated 2004(1)................ 4.46 95.54
Net Income - LTM(2)........................... 4.39 95.61
Total Tangible Equity(3)...................... 3.79 96.21
Total Equity(3)............................... 2.97 97.03
Pro Forma Ownership Assuming a 100% Stock
Exchange................................... 3.44 96.56
<FN>
- ----------------------
(1) Based on calendar 2004 estimates of GAAP earnings for Wintrust of $2.34
per share and estimated 2004 net income of $2.3 million for First
Northwest.
(2) Based on last-twelve-months GAAP earnings for Wintrust of $2.28 per
share and last-twelve-months net income of $2.2 million for First
Northwest at September 30, 2004.
(3) Based on First Northwest's estimated tangible book value at closing
($13.2 million).
</FN>
Comparison Analysis of Wintrust and Selected Publicly Traded Reference
Companies. As part of its analysis, Hovde reviewed and compared publicly
available financial data, market information and trading multiples for Wintrust
with 18 other selected publicly traded high growth bank holding reference
companies that were based in metropolitan markets with assets between $1 billion
and $10 billion and a compounded annual growth rate for assets over the last
five years in excess of 15% (the "High-Growth Reference Group").
REFERENCE COMPANIES
---------------------------------
Alabama National Bancorp.
Boston Private Financial Holdings
Cathay General Bancorp, Inc.
CoBiz Inc.
29
East West Bancorp, Inc.
First Community Bancorp
First Republic Bank
First State Bancorporation
Hanmi Financial Corporation
Main Street Banks, Inc.
MB Financial, Inc.
Nara Bancorp, Inc.
PrivateBancorp, Inc.
Prosperity Bancshares, Inc.
Southwest Bancorp of Texas
UCBH Holdings, Inc.
Umpqua Holdings Corp.
Vineyard National Bancorp
For the High-Growth Reference Group, Hovde analyzed, among other
things, stock price as a multiple of earnings for the last twelve months,
estimated fiscal year 2004 and 2005 earnings per share, book value per share,
tangible book value per share. All multiples were based on closing stock prices
as of November 15, 2004. Estimated earnings per share for the reference
companies were based on First Call consensus estimates. The following table sets
forth the median and average multiples indicated by the market analysis of the
High-Growth Reference Group:
PRICE TO PRICE TO
PRICE TO PRICE TO ESTIMATED ESTIMATED
PRICE TO TANGIBLE LTM 2004 2005
BOOK VALUE BOOK VALUE EARNINGS(1) EARNINGS(1) EARNINGS(1)
---------- ---------- ----------- ----------- -----------
Wintrust................... 278.8% 358.5% 25.4x 24.3x 20.6x
High-Growth Reference Group
Median Values........... 265.2 410.9 21.9 20.2 17.0
Average Values.......... 290.9 437.6 22.6 21.5 18.0
<FN>
- ----------------------
(1) Based on LTM earnings at September 30, 2004, and First Call consensus
estimates for the fiscal years 2004 and 2005.
</FN>
No company used as comparison in the above analysis is identical to
Wintrust. Accordingly, an analysis of these results is not mathematical. Rather,
it involves complex considerations and judgments concerning differences in
financial and operating characteristics of the companies.
Other Factors and Analyses. Hovde took into consideration various other
factors and analyses, including but not limited to: historical market prices,
trading volumes and analyst coverage for Wintrust's common stock; movements in
the common stock of selected publicly traded companies; movements in the S&P 500
Index and the NASDAQ Composite Index; and analyses of the weighted average costs
of capital of selected publicly traded companies.
Based upon the foregoing analyses and other investigations and
assumptions set forth in its opinion, without giving specific weightings to any
one factor or comparison, Hovde determined that the aggregate merger
consideration was fair from a financial point of view to First Northwest's
stockholders.
ACCOUNTING TREATMENT
Wintrust will account for the merger under the "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 First Northwest will be recorded by Wintrust at their respective
fair values at the time of the completion of the merger. The excess of
Wintrust'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.
30
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
General. The following discussion addresses certain United States
federal income tax consequences of the merger that are generally applicable to
First Northwest's stockholders. 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 First Northwest stockholders in light of their particular
circumstances, such as stockholders who:
o are dealers in securities;
o are insurance companies or tax-exempt organizations;
o are subject to alternative minimum tax;
o hold their shares as part of a hedge, straddle, or other risk
reduction transaction; or
o are 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.
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 document and
all of which are subject to 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
as well as the tax consequences of the merger.
Tax Opinion of Vedder, Price, Kaufman & Kammholz, P.C. Neither Wintrust
nor First Northwest 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, Vedder, Price,
Kaufman & Kammholz, P.C., special tax counsel to First Northwest, will render
its opinion to First Northwest, 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 First Northwest 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 First Northwest
stockholders upon the receipt of Wintrust common stock in
exchange for First Northwest common stock, except with respect
to the cash portion of the merger consideration and cash
received for fractional shares of Wintrust common stock.
Vedder Price'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 First Northwest and
which are customarily given in transactions of this nature. Vedder Price'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 on Receipt of Cash. First Northwest stockholders will
recognize gain (but not loss) with respect to the cash portion of the merger
consideration they receive. The amount of gain will be limited to the amount of
cash received. Additionally, any cash received by First Northwest stockholders
instead of fractional shares of Wintrust's common stock will result in gain or
loss. The amount of the recognized gain to First Northwest stockholders 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 stockholders 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%.
31
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-9 that will be included as part of the transmittal
letter and notice from Wintrust'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. If you exchange shares of First Northwest
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 First Northwest common stock
surrendered; and
o 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.
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 FIRST NORTHWEST STOCKHOLDER. 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 of Wintrust and First Northwest is subject to prior approval
of each of the Federal Reserve and the DBRE. Wintrust submitted an application
to the Federal Reserve Bank of Chicago on December 17, 2004 seeking the
necessary approval. As of January 31, 2005, the Federal Reserve approved the
merger application, contingent upon the expiration of a 15-day waiting period
and Wintrust's compliance with its commitments and representations in the
application. Wintrust filed the required application with the DBRE on December
22, 2004. This application was approved effective January 31, 2005.
The merger may not be consummated until approximately 30 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's approval, unless a court specifically orders otherwise.
The merger cannot proceed without obtaining all requisite regulatory
approvals. Wintrust has agreed to take all appropriate actions necessary to
obtain the required approvals.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
As of the record date, First Northwest's directors and executive
officers owned, in the aggregate, 1,013,356 shares of First Northwest's common
stock, representing approximately 68.5% of First Northwest's outstanding shares
of common stock, plus options to purchase an aggregate of 87,000 shares of First
Northwest's common stock with a weighted average exercise price of $5.59 per
share. Additionally, First Northwest's directors and officers own 3,181 shares
of Series A Preferred Stock, convertible into 461,022 shares of First Northwest
common stock.
Wintrust has agreed to assume all outstanding First Northwest stock
options, all of which are already vested. At the time the merger is completed,
each outstanding First Northwest stock option will be converted into an option
to purchase Wintrust common shares on the same terms as in effect immediately
prior to completion of the
32
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. First Northwest's employees hold
options to purchase a total of 139,200 shares of First Northwest common stock at
a weighted average exercise price of $5.59 per share.
Employment Agreement. The merger agreement requires First Northwest's
President and Chief Executive Officer, S. Michael Polanski, to enter into an
employment agreement with First Northwest Bank. The term of the agreement will
commence on the closing date of the merger.
The term of the employment agreement is five years. The agreement is
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 90 days before the expiration of the then current term. The employment
agreement contains a non-compete and non-solicitation provision and a
confidentiality provision. The non-compete and non-solicitation provisions will
remain in effect for two years after termination of employment and the
confidentiality provisions will survive indefinitely.
The agreement provides for a base salary as may, from time to time, be
agreed upon by the parties, provided that the amount of the salary may not be
reduced below the base salary as of the effective date of the merger unless the
reduction is no greater in percentage terms than a general reduction in the base
salaries of the President, Chief Executive Officer and Vice Presidents of
Wintrust. As of the effective time of the merger, the annual base salary of Mr.
Polanski will be $185,000. Additionally, the agreement provides that if Mr.
Polanski is terminated following a change of control, Mr. Polanski is entitled
to an amount equal to twice his base salary from the previous year plus any
bonuses paid to him during the previous 12 months. Mr. Polanski currently has an
employment agreement with First Northwest, pursuant to which he will be entitled
to receive approximately $435,000 upon consummation of the merger.
Continued Director and Officer Liability Coverage. For five years
following the effective time, Wintrust has agreed to indemnify and hold harmless
the current and former directors and officers of First Northwest and First
Northwest Bank for all actions taken by them prior to the effective time of the
merger, to the same extent as First Northwest and First Northwest Bank currently
provide for indemnification of their officers and directors. Pursuant to the
terms of the merger agreement, Wintrust has agreed to provide to each of the
directors and officers of First Northwest and First Northwest Bank, following
the effective time, coverage against personal liability for actions taken after
the effective time of the merger that is substantially the same as is currently
provided to directors and officers of Wintrust.
VOTING AGREEMENT
All directors and executive officers of First Northwest have entered
into a voting agreement with Wintrust. Under this agreement, these stockholders
have each agreed to vote their respective shares of First Northwest common
stock:
o in favor 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 First Northwest
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, each of these stockholders has also agreed not to grant
any proxies, deposit any shares of First Northwest common stock into a voting
trust or enter into any other voting agreement with respect to any shares of
First Northwest 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 First Northwest. The shares subject to
the voting agreement represent approximately 68.5% of First Northwest'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.
33
RESTRICTIONS ON RESALE OF WINTRUST COMMON STOCK
All shares of Wintrust common stock issued to First Northwest's
stockholders in connection with the merger will be freely transferable, except
that shares received by persons deemed to be "affiliates" of First Northwest
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 First
Northwest's stockholders 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 First Northwest stockholders will be able to sell into the market.
Persons who may be deemed affiliates of First Northwest for this purpose
generally include directors, executive officers, and the holders of 10% or more
of the outstanding shares of First Northwest's common stock.
DESCRIPTION OF THE MERGER AGREEMENT
The following summary of the merger agreement is qualified by reference
to the complete text of the merger agreement. A copy of the merger agreement 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 completion of the merger will take place on the last day of the
calendar month in which the last 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. The completion of the merger sometimes is referred
to in this proxy statement/prospectus as the closing date. The time at which the
merger becomes effective is sometimes referred to in this proxy
statement/prospectus as the "effective time."
CONSIDERATION TO BE RECEIVED IN THE MERGER
If the merger is completed, the shares of First Northwest common stock
which you own immediately before the completion of the merger will be converted
into a right to receive either shares of Wintrust common stock (a "stock
election") or a combination of 40% cash and 60% shares of Wintrust common stock
(a "combination election"), subject to possible proration as described below.
For each of your shares of First Northwest common stock, you will receive the
"per share merger consideration" to be calculated as set forth in the merger
agreement. The per share merger consideration will be the sum of $7.20, plus an
amount that will vary depending on the average of the high and low sales price
of Wintrust's common stock during the 10 trading days ending three trading days
before the merger closing date. If the average price determined at closing of
Wintrust's common stock is:
o less than $51.00 per share, you would receive merger
consideration valued at $7.20 plus 0.2822 times the average
price;
o between $51.00 and $57.00 per share, you would receive merger
consideration valued at $7.20 plus $14.39;
o between $57.00 and $64.00 per share, you would receive merger
consideration valued at $7.20 plus 0.2525 times the average
price; and
o greater than $64.00 per share, you would receive merger
consideration valued at $7.20 plus $16.16.
First Northwest may terminate the merger agreement if the average price
of Wintrust common stock is equal to or less than $48.99, unless Wintrust
increases the variable portion of the merger consideration to $13.83.
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The following table illustrates the per share value of merger
consideration that First Northwest's stockholders 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.
STOCK ELECTION COMBINATION ELECTION
VALUE OF PER SHARE -------------- --------------------------------------
WINTRUST AVERAGE MERGER PER SHARE STOCK CASH PER SHARE STOCK
STOCK PRICE CONSIDERATION(1) CONSIDERATION(2) CONSIDERATION(3) CONSIDERATION(2)
---------------- ---------------- ---------------- ---------------- ----------------
$49.00 $21.03 0.4292 $8.41 0.2576
50.00 21.31 0.4262 8.52 0.2558
51.00 21.59 0.4233 8.64 0.2539
52.00 21.59 0.4152 8.64 0.2490
53.00 21.59 0.4074 8.64 0.2443
54.00 21.59 0.3998 8.64 0.2398
55.00 21.59 0.3925 8.64 0.2355
56.00 21.59 0.3855 8.64 0.2313
57.00 21.59 0.3788 8.64 0.2272
58.00 21.85 0.3767 8.74 0.2260
59.00 22.10 0.3746 8.84 0.2247
60.00 22.35 0.3725 8.94 0.2235
61.00 22.60 0.3705 9.04 0.2223
62.00 22.86 0.3687 9.14 0.2213
63.00 23.11 0.3668 9.24 0.2202
64.00 23.36 0.3650 9.34 0.2191
65.00 23.36 0.3594 9.34 0.2157
66.00 23.36 0.3539 9.34 0.2124
<FN>
- ----------------------
(1) Assumes the closing price of Wintrust's common stock on the date of the
merger is the same as the average price during the pricing period. The
actual trading price of Wintrust common stock is subject to market
fluctuations, and First Northwest stockholders 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 number of shares of Wintrust
common stock which you will receive for each share of First Northwest
common stock that you own.
(3) The numbers in this column represent the amount of cash consideration
you will receive for each share of First Northwest common stock you own.
</FN>
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 receive cash consideration, in the aggregate, may not exceed 34% of
First Northwest'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 66% of First Northwest'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, at any time prior to the effective time direct that the
redesignation procedures described above not be implemented, 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.
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 price
during the pricing period.
35
Stock Options. Options to purchase First Northwest common stock that
are outstanding and unexercised immediately before the effective time of the
merger will become options to purchase Wintrust common stock. The number of
shares of Wintrust common stock subject to the converted stock options will be
equal to the number of shares of First Northwest common stock subject to First
Northwest stock options 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 to the quotient of the aggregate 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 stock option will equal the original First Northwest stock
option's exercise price divided by the option exchange ratio. Except as
described above, a converted stock option will have the same terms and
conditions as the original First Northwest stock option.
SERIES A CONVERTIBLE PREFERRED STOCK
The merger agreement provides that prior to the effective time of the
merger, each outstanding share of First Northwest's outstanding Series A
Convertible Preferred Stock will be converted into shares of First Northwest's
common stock, pursuant to the mandatory conversion provisions of the securities.
Because the shares of Series A Preferred Stock will not be converted into shares
of First Northwest common stock until after the record date for the special
meeting, those shares will not be eligible to vote for approval of the merger
agreement. Each share of Series A Convertible Preferred Stock will be converted
into 144.93 shares of First Northwest common stock. As of January 19, 2005,
there were 3,181 outstanding shares of First Northwest's Series A Convertible
Preferred Stock, which would result in the issuance of 461,022 shares of First
Northwest common stock upon mandatory conversion. After the conversion, former
holders of the Series A Convertible Preferred Stock will be entitled to receive
the merger consideration discussed above.
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
of Wintrust common stock or a combination 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., Chicago 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. 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 First Northwest common stock for the
merger consideration and the payment of cash for any fractional share interest.
Within 10 business days after the effective time, the exchange agent will send
to each First Northwest stockholder a letter of transmittal for use in the
exchange with instructions explaining how to surrender First Northwest common
stock certificates to the exchange agent. First Northwest stockholders that
surrender their certificates to the exchange agent, together with a properly
completed letter of transmittal, will receive the merger consideration. First
Northwest stockholders that do not exchange their First Northwest 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 First Northwest shares, any unpaid
dividends or distributions with respect to the Wintrust common stock represented
by the certificates will be paid without interest.
CONDUCT OF BUSINESS PENDING THE MERGER AND CERTAIN COVENANTS
Under the merger agreement, First Northwest has agreed to certain
restrictions on its activities until the merger is completed or terminated. In
general, First Northwest and First Northwest Bank 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 First Northwest, subject to the exceptions set forth in the merger
agreement:
o making changes to the charter and by-laws of First Northwest
and First Northwest Bank;
36
o except with respect to the exercise of outstanding options to
purchase First Northwest common stock, and the conversion of
all of the outstanding shares of First Northwest's Series A
Convertible Preferred Stock, effecting any change in the
capitalization or the number of issued and outstanding shares
of First Northwest or First Northwest Bank;
o except as otherwise set forth in the merger agreement, paying
any dividends or other distributions;
o except as otherwise set forth in the merger agreement,
increasing the compensation of the officers or key employees
of First Northwest or any of its subsidiaries or paying any
bonuses;
o 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;
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 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;
o entering into employment, consulting, or similar agreements
that cannot be terminated with less than 30 days notice
without penalty;
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.
Wintrust has agreed to file all applications and notices to obtain the
necessary regulatory approvals for the transactions contemplated by the merger
agreement. First Northwest 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 First Northwest's
stockholders.
First Northwest has agreed that it will not solicit, encourage or
facilitate any third-party inquiries or proposals to acquire First Northwest and
will not participate in any negotiations or discussions regarding a proposal to
acquire First Northwest. However, First Northwest may provide information and
negotiate with a third party if First Northwest's board of directors determines
that failure to do so would be inconsistent with its fiduciary duties. First
Northwest is required under the merger agreement to provide Wintrust notice of
any proposal that it receives to acquire First Northwest.
37
First Northwest 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 appraisal rights;
o reasonable notice and minutes of any meetings of the boards
and committees of First Northwest or First Northwest Bank; and
o certain information regarding the loans in First Northwest
Bank'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 benefit matters" and "Description
of the merger--Interests of certain persons in the merger."
REPRESENTATIONS AND WARRANTIES
The merger agreement contains representations and warranties made by
First Northwest 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;
o absence of undisclosed investigations and litigation;
o compliance with laws;
o broker/finder fees; and
o absence of any breach of organizational documents, law or
other agreements as a result of the merger.
Wintrust also represents and warrants to First Northwest in the merger
agreement regarding:
o compliance with SEC filing requirements; and
o filing of necessary reports with regulatory authorities.
First Northwest makes additional representations and warranties to
Wintrust in the merger agreement relating to, among other things:
o organizational documents, minutes and stock records;
o title to real property, personal property and other material
assets;
o insurance matters;
38
o employee benefits;
o environmental matters;
o ownership of First Northwest Bank and 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
Closing Conditions for the Benefit of Wintrust. Wintrust's obligations
are subject to fulfillment of the following conditions:
o the accuracy of representations and warranties of First
Northwest in the merger agreement as of the closing date;
o performance by First Northwest in all material respects of its
agreements under the merger agreement;
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 First Northwest's stockholders;
o the holders of not more than 5% of the outstanding shares of
First Northwest common stock give written demand for appraisal
rights in accordance with Delaware law;
o receipt of all necessary regulatory approvals;
o no adverse material change in First Northwest since November
17, 2004;
o no litigation resulting from the transactions contemplated by
the merger agreement;
o receipt of certain certificates from First Northwest and a
legal opinion from First Northwest's legal counsel;
o execution of an employment agreement by S. Michael Polanski;
o liquidation of First Northwest Bank's subsidiaries; and
o receipt of necessary consents, permissions and approvals.
39
Closing Conditions for the Benefit of First Northwest. First
Northwest'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;
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 receipt of all necessary regulatory approvals;
o execution and delivery of articles of merger suitable for
filing with the Illinois and Delaware Secretaries of State;
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 November 17,
2004; and
o receipt of certain certificates from Wintrust, a tax opinion
from First Northwest's special tax counsel and a legal opinion
from Wintrust's legal counsel.
MINIMUM NET WORTH AND LOAN LOSS RESERVE REQUIREMENTS CLOSING CONDITION
Also, as a condition to Wintrust's obligation to close, as of the
closing date:
o First Northwest's stockholders' equity, after disregarding any
adjustments made pursuant to FAS 115 subsequent to August 31,
2004, must exceed the sum of (1) $13,100,000, plus (2) any
cash receipts and tax benefits recorded by First Northwest
from the exercise of outstanding options to purchase First
Northwest common stock, minus, on an after-tax basis, if
appropriate (3) fees for attorneys, accountants and other
advisors incurred by First Northwest in connection with the
merger, minus (4) any change of control payments due to Mr.
Polanski under his existing employment agreement as a result
of the merger (the "Minimum Adjusted Net Worth"); and
o First Northwest may have no more than $5,155,000 in
outstanding principal of holding company-level debt (including
trust preferred securities).
Additionally, as of the closing date, First Northwest Bank's reserve
for loan losses may not be less than 1.20% of its net loans. Immediately prior
to closing, First Northwest may distribute to its stockholders the amount by
which its stockholders' equity exceeds the Minimum Adjusted Net Worth.
TERMINATION
The merger agreement may be terminated under any of the following
circumstances, as set forth in the merger agreement:
o at any time by written agreement of Wintrust and First
Northwest;
o by either party if the closing has not occurred by June 30,
2005 or such later date agreed to by the parties; provided,
that the termination date will be extended to July 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;
o First Northwest receives and accepts a superior proposal for
acquisition by a third party;
40
o by Wintrust if First Northwest has not satisfied a condition
under the merger agreement required to be met by First
Northwest prior to the closing date, or if it becomes
impossible for First Northwest to satisfy a condition and
First Northwest's inability to satisfy the condition was not
caused by Wintrust's failure to meet any of its obligations
under the Agreement and Wintrust has not waived such
condition;
o by First Northwest 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 First Northwest's
failure to meet any of its obligations under the Agreement and
First Northwest has not waived such condition; and
o by First Northwest, if the average of the high and low sales
price of Wintrust's common stock during the 10-day trading
period ending three trading days before the closing date is
equal to or less than $48.99, subject to certain conditions.
TERMINATION FEE
Wintrust is entitled to a $1,000,000 termination fee from First
Northwest if the merger agreement is terminated under the following
circumstances:
o Wintrust terminates the merger agreement because First
Northwest breaches its covenant not to solicit an acquisition
proposal from a third party;
o First Northwest terminates the merger agreement upon its
receipt and approval of a superior proposal for an acquisition
by a third party; or
o the merger agreement is terminated by either Wintrust or First
Northwest because the closing has not occurred by June 30,
2005 (or July 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) and in each such case, within six months
after termination of the merger agreement, First Northwest
consummates or enters into a definitive agreement relating to
an acquisition transaction which was made known to any member
of First Northwest's board of directors and not disclosed to
Wintrust prior to the date of such termination.
MANAGEMENT OF WINTRUST AND FIRST NORTHWEST BANK AFTER THE MERGER
After the merger, the Wintrust board of directors will remain the same
and the First Northwest Bank board of directors will likely change to include
members of Wintrust's management.
EMPLOYEE BENEFIT MATTERS
The merger agreement requires First Northwest 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 to pay or accrue all liabilities
relating to the terminated employee benefit plans prior to closing. Wintrust
will assume those plans which First Northwest does not terminate and former
First Northwest employees may continue to participate in those plans until
Wintrust terminates the plans or merges them with existing Wintrust plans.
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 First Northwest 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.
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 First Northwest have agreed to share equally the cost
and expense incurred in connection with printing and mailing the registration
statement. Wintrust and First Northwest have also agreed to reimburse
41
each other for certain expenses incurred not exceeding $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's common stock currently is listed on the Nasdaq National
Market under the symbol "WTFC." The shares to be issued to First Northwest's
stockholders as merger consideration also will be eligible for trading on the
Nasdaq National Market.
COMPARISON OF SHAREHOLDER RIGHTS
The rights of stockholders of First Northwest, a Delaware corporation,
are governed by First Northwest's certificate of incorporation and by-laws as
well as the Delaware General Corporation Law (the "DGCL"). Upon completion of
the merger, the rights of First Northwest stockholders who receive shares of
Wintrust common stock in exchange for their shares of First Northwest common
stock and become shareholders of Wintrust will be governed by the articles of
incorporation and 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. The following discussion
summarizes material differences between the rights of First Northwest 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
DGCL, IBCA and Wintrust's and First Northwest's charter and by-laws.
AUTHORIZED CAPITAL STOCK
The authorized capital stock of First Northwest consists of 3 million
shares of common stock, par value $0.01 per share, and 100,000 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 February 8, 2005, Wintrust had
21,799,103 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 First Northwest to pay dividends is governed by the
DGCL. First Northwest may pay dividends only out of its surplus or, if there is
no surplus, out of net profits for the fiscal year in which the dividend is
declared and/or for the preceding fiscal year. Delaware law also provides that
dividends may not be paid out of net profits if, after the payment of the
dividends, the capital of the corporation would be less than the capital
represented by the outstanding stock of all classes having preference upon the
distribution of assets.
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
42
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.
First Northwest's by-laws provide that, for business to be properly
brought before an annual meeting by a stockholder and for a stockholder
nomination for the election of directors, the stockholder must give timely
written notice to First Northwest's Secretary. To be timely, all notices must be
received by the Secretary no later than 30 and no more than 90 days prior to the
anniversary date of the annual meeting of stockholders in the immediately
preceding year, respectively.
QUORUM
First Northwest's 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 stockholders. Wintrust's by-laws
contain essentially the same provision. Like First Northwest stockholders,
Wintrust shareholders are entitled to one vote for each share owned.
ELECTION, CLASSIFICATION AND SIZE OF BOARD OF DIRECTORS
Under First Northwest's certificate of incorporation, its board of
directors must consist of not less than 12 and no more than 18 directors, as may
determined by the then authorized number of directors. The number of directors
currently authorized is 12. The board of directors is divided into three classes
with each class to consist, as nearly as possible, of 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
First Northwest's directors may be removed, but only for cause and only
by the affirmative vote of the holders of two-thirds of outstanding shares
entitled to vote with respect to the election of such director at an annual
meeting of stockholders or at a meeting of stockholders 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.
First Northwest's by-laws 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.
43
AMENDMENT OF CHARTER AND BY-LAWS
Generally, under the DGCL, First Northwest's certificate of
incorporation may be amended by the affirmative vote of 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 certificate of
incorporation requires the affirmative vote of holders of two-thirds or more of
the combined voting power of the then outstanding shares entitled to vote on the
matter. These provisions relate to amendment of the bylaws, composition of the
board of directors, business combinations and special meetings of stockholders.
First Northwest's by-laws may generally be amended or repealed by a
majority vote of the board of directors or by the affirmative vote of the
holders of two-thirds or more of the then outstanding shares of common stock
entitled to vote on the matter.
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."
Generally, under the DGCL, First Northwest 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. First Northwest's certificate of incorporation
provides that two-thirds stockholder approval for any such transaction will be
required unless certain conditions are met.
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.
44
First Northwest has opted to be subject to a parallel provision of the
DGCL, which prohibits it from entering into certain business combination
transactions with any interested stockholder for a period of three years from
the time such stockholder becomes an interested stockholder unless certain
supermajority votes are obtained. Under the DGCL, an "interested stockholder" is
a person who beneficially owns, directly or indirectly, 15% of the outstanding
voting stock of a corporation or who is an affiliate or associate of the
corporation and beneficially owned 15% of the voting stock within the last three
years. The prohibition will not apply if:
o the board of directors has approved either the proposed
business combination or the transaction resulting in
interested stockholder status prior to the date that the
stockholder became an interested stockholder,
o upon consummation of the transaction in which the stockholder
became an interested stockholder, the interested stockholder
owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, or
o after the date that the stockholder became an interested
stockholder, the interested stockholder obtains the approval
of the board of directors and the approval at an annual or
special meeting (and not by written consent) of two-thirds of
the shares outstanding that are not held by the interested
stockholder.
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 Northwest's certificate of incorporation, consistent with the
DGCL, a director will not be liable to a corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director.
INDEMNIFICATION
First Northwest's certificate of incorporation requires the company to
indemnify its officers and directors to the fullest extent authorized by the
DGCL. Under the DGCL, 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 only extends to 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 DGCL.
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
45
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 articles of incorporation 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.
First Northwest's certificate of incorporation provides that
stockholders may not act without a meeting.
SPECIAL MEETINGS OF SHAREHOLDERS
First Northwest's certificate of incorporation states that a special
meeting may be called only by two-thirds of the board of directors then in
office.
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.
PREEMPTIVE RIGHTS
Under both the DGCL and the IBCA, preemptive rights will not be
available unless a corporation's certificate of incorporation or articles of
incorporation, respectively, specifically provide for these rights. Neither
Wintrust's nor First Northwest's 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.
APPRAISAL RIGHTS OF DISSENTING SHAREHOLDERS
Under Delaware law, the rights of dissenting stockholders to obtain the
fair value for their shares (so-called "appraisal rights") may be available in
connection with a statutory merger or consolidation in certain specific
situations. Appraisal rights are available to First Northwest stockholders in
connection with the merger since First Northwest's common stock is not listed on
a national securities exchange or designated as a national market system
security. For a description of appraisal rights, see "Special meeting of First
Northwest stockholders--Appraisal rights."
CERTAIN ANTI-TAKEOVER EFFECTS OF WINTRUST'S ARTICLES AND BY-LAWS AND ILLINOIS
LAW
Certain provisions of Wintrust'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's board of directors.
These provisions may have the effect of discouraging a future takeover
attempt which is not approved by Wintrust'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
46
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's current board of directors or management more difficult.
These provisions of Wintrust's articles of incorporation and by-laws
include the following:
(1) Wintrust's board of directors may issue additional
authorized shares of Wintrust'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'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's incumbent board of directors;
(3) Wintrust'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'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'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's shareholders; and
(5) Amendment of Wintrust'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 (a) prohibiting cumulative voting rights, (b) relating to
certain business combinations, (c) limiting the 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's articles of
incorporation. Wintrust's by-laws may be amended only by the board of
directors.
The provisions described above are intended to reduce Wintrust'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. 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. The description of
the rights plan set forth below does not purport to be complete and is qualified
in its entirety by reference to the description of the rights plan set forth in
Wintrust's Registration Statement on Form 8-A dated August 28, 1998. See
"Incorporation of Certain Information by Reference" on page 49.
Each share of Wintrust common stock has attached to it a stock purchase
right having the terms set forth in a rights agreement between Wintrust and
Illinois 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 Preferred Stock A,
47
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 of 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, shares of Wintrust common stock or other
consideration. In addition, at any time after a person or group acquires 15% of
Wintrust's common stock, but prior to such person or group acquiring 50% or more
of Wintrust's common stock, Wintrust may exchange the rights, in whole or in
part, at an exchange ratio of one share of common stock per right. The rights
will expire on July 31, 2008 unless exercised, redeemed, exchanged or otherwise
cancelled before that date.
First Northwest does not have a stockholders rights plan.
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 and
the federal income tax consequences of the proposed merger have been passed upon
by Vedder, Price, Kaufman & Kammholz, P.C., 222 North LaSalle Street, Chicago,
Illinois 60601.
EXPERTS
The consolidated financial statements of Wintrust as of December 31,
2003 and 2002, and for each of the three years in the period ended December 31,
2003, included in Wintrust's Annual Report on Form 10-K for the year ended
December 31, 2003, have been audited by Ernst & Young LLP, an independent
registered public accounting firm, as set forth in their report thereon included
in Wintrust's Annual Report on Form 10-K for the year ended December 31, 2003,
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's
shareholders will be held in 2005. To be considered for inclusion in Wintrust's
proxy materials for that annual meeting, any shareholder proposal must be
received in writing at Wintrust's principal office at 727 North Bank Lane, Lake
Forest, Illinois 60045, no later than December 24, 2004. All shareholder
proposals submitted for inclusion in Wintrust'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'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 2005 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 Exchange
Act, written notice of the shareholder's intention to make such proposal must be
furnished to Wintrust in accordance with its by-laws. Under the existing
provisions of Wintrust's by-laws, if the 2005 annual meeting is held on May 26,
2005, the deadline for such notice is March 27, 2005.
48
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's website at www.sec.gov. You may also read and
copy any document Wintrust files with the SEC at its public reference room
located at 450 Fifth Street, N.W., 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 Fifth Street, N.W., Washington D.C. 20549
or by calling 1-800-SEC-0330 for additional information on the operation of the
public reference facilities. Wintrust's SEC filings are also available on its
Web site at http://www.wintrust.com, and at the office of Nasdaq National
Market. For further information on obtaining copies of Wintrust'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 First Northwest's stockholders in 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 First Northwest 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 Annual Report on Form 10-K for the year ended
December 31, 2003 (File No. 0-21923);
o Wintrust's proxy statement in connection with its 2004 annual
meeting of stockholders 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 Quarterly Report on Form 10-Q for the three months
ended September 30, 2004 (File No. 0-21293);
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);
o Wintrust's Current Report on Form 8-K filed with the SEC on
September 30, 2004 (File No. 0-21293);
o Wintrust's Current Reports on Form 8-K filed with the SEC on
October 15, 2004 (File No. 0-21293);
49
o Wintrust's Current Report on Form 8-K filed with the SEC on
November 17, 2004 (File No. 0-21293);
o Wintrust's Current Reports on Form 8-K filed with the SEC on
December 14, 2004 (File No. 0-21293);
o Wintrust's Current Report on Form 8-K filed with the SEC on
December 15, 2004 (File No. 0-21293);
o Wintrust's Current Report on Form 8-K filed with the SEC on
January 18, 2005 (File No. 0-21293);
o Wintrust's Current Report on Form 8-K filed with the SEC on
January 20, 2005 (File No. 0-21293);
o Wintrust's Current Report on Form 8-K filed with the SEC on
February 1, 2005 (File No. 0-21293);
o Wintrust's Current Report on Form 8-K filed with the SEC on
February 3, 2005 (File No. 0-21293); 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 (File No.
0-21923).
Wintrust also incorporates by reference any 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'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 FEBRUARY 21, 2005, TO RECEIVE THEM BEFORE THE SPECIAL MEETING.
All information concerning Wintrust and its subsidiaries has been
furnished by Wintrust, and all information concerning First Northwest has been
furnished by First Northwest.
50
ANNEX A
-------
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
WINTRUST FINANCIAL CORPORATION
AND
FIRST NORTHWEST BANCORP, INC.
DATED NOVEMBER 17, 2004
ANNEX A
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
WINTRUST FINANCIAL CORPORATION
AND
FIRST NORTHWEST BANCORP, INC.
DATED NOVEMBER 17, 2004
TABLE OF CONTENTS
PAGE
ARTICLE I THE MERGER...................................................................................A-1
1.1 The Merger...................................................................................A-1
1.2 Effective Time...............................................................................A-1
1.3 Effect of the Merger.........................................................................A-1
1.4 Conversion of Securities.....................................................................A-1
1.5 Company Stock Options........................................................................A-2
1.6 Cancellation of Treasury Shares..............................................................A-2
1.7 Appraisal Rights.............................................................................A-2
1.8 Recapitalization.............................................................................A-3
1.9 Tax Treatment................................................................................A-3
1.10 Closing......................................................................................A-3
ARTICLE II CONVERSION AND EXCHANGE OF CERTIFICATES IN MERGER............................................A-3
2.1 Per Share Merger Consideration...............................................................A-3
2.2 Election Procedures..........................................................................A-4
2.3 Proration and Redesignation Procedures.......................................................A-5
2.4 No Fractional Shares.........................................................................A-5
2.5 Exchange of Certificates.....................................................................A-6
ARTICLE III REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY........................................A-7
3.1 Organization.................................................................................A-7
3.2 Organizational Documents; Minutes and Stock Records..........................................A-8
3.3 Capitalization...............................................................................A-8
3.4 Authorization; No Violation..................................................................A-8
3.5 Consents and Approvals.......................................................................A-9
3.6 Financial Statements.........................................................................A-9
3.7 No Undisclosed Liabilities...................................................................A-9
3.8 Loans; Loan Loss Reserves...................................................................A-10
3.9 Properties and Assets.......................................................................A-10
3.10 Material Contracts..........................................................................A-11
3.11 No Defaults.................................................................................A-12
3.12 Conflict of Interest Transactions...........................................................A-12
3.13 Investments.................................................................................A-12
3.14 Compliance with Laws; Legal Proceedings.....................................................A-13
3.15 Insurance...................................................................................A-13
3.16 Taxes.......................................................................................A-13
3.17 Environmental Laws and Regulations..........................................................A-14
3.18 Community Reinvestment Act Compliance.......................................................A-15
3.19 Company Regulatory Reports..................................................................A-15
3.20 Employee Benefit Plans......................................................................A-15
3.21 Technology and Intellectual Property........................................................A-17
3.22 No Adverse Change...........................................................................A-17
3.23 Conduct of Business in Normal Course........................................................A-18
3.24 Change in Business Relationships............................................................A-18
3.25 Brokers' and Finders' Fees..................................................................A-18
3.26 Section 280G Payments.......................................................................A-18
3.27 No Omissions................................................................................A-18
ARTICLE IV REPRESENTATIONS AND WARRANTIES CONCERNING WINTRUST..........................................A-18
4.1 Organization................................................................................A-18
i
TABLE OF CONTENTS
(continued)
PAGE
4.2 Capitalization..............................................................................A-18
4.3 Authorization; No Violations................................................................A-19
4.4 Consents and Approvals......................................................................A-19
4.5 Wintrust SEC Filings and Financial Statements...............................................A-19
4.6 Compliance with Laws; Legal Proceedings.....................................................A-20
4.7 Wintrust Regulatory Reports.................................................................A-20
4.8 No Adverse Change...........................................................................A-20
4.9 Brokers' and Finders' Fees..................................................................A-20
4.10 Taxation of the Merger......................................................................A-20
4.11 No Omissions................................................................................A-20
ARTICLE V AGREEMENTS AND COVENANTS....................................................................A-21
5.1 Conduct of Business.........................................................................A-21
5.2 Access to Information.......................................................................A-22
5.3 Meeting of Stockholders of the Company......................................................A-22
5.4 Registration Statement and Regulatory Filings...............................................A-23
5.5 Listing of Shares...........................................................................A-23
5.6 Reasonable and Diligent Efforts.............................................................A-23
5.7 Business Relations and Publicity............................................................A-23
5.8 No Conduct Inconsistent with this Agreement.................................................A-24
5.9 Loan Charge-Off; Pre-Closing Loan Review....................................................A-24
5.10 Board of Directors' Notices and Minutes.....................................................A-25
5.11 Untrue Representations and Warranties.......................................................A-25
5.12 Director and Officer Liability Coverage.....................................................A-25
5.13 Interim Financial Statements................................................................A-25
5.14 Dissent Process.............................................................................A-25
5.15 Section 368(a) Reorganization...............................................................A-26
5.16 Exercise of Options.........................................................................A-26
5.17 Converted Options...........................................................................A-26
5.18 Termination of Tax Sharing Agreement........................................................A-26
ARTICLE VI EMPLOYEE BENEFIT MATTERS....................................................................A-26
6.1 Benefit Plans...............................................................................A-26
6.2 No Rights or Remedies.......................................................................A-26
ARTICLE VII CONDITIONS PRECEDENT TO OBLIGATIONS OF WINTRUST.............................................A-27
7.1 Representations and Warranties; Performance of Agreements...................................A-27
7.2 Closing Certificate.........................................................................A-27
7.3 Regulatory and Other Approvals..............................................................A-27
7.4 Approval of Merger and Delivery of Agreement................................................A-27
7.5 Effectiveness of the Registration Statement.................................................A-27
7.6 No Litigation...............................................................................A-27
7.7 Environmental Surveys.......................................................................A-27
7.8 Opinion of Counsel..........................................................................A-28
7.9 Employment Agreements.......................................................................A-28
7.10 No Adverse Changes..........................................................................A-28
7.11 Minimum Net Worth and Loan Loss Reserve Requirements........................................A-28
7.12 Voting Agreements...........................................................................A-28
7.13 Consents....................................................................................A-28
7.14 Liquidation of Subsidiaries.................................................................A-28
7.15 Other Documents.............................................................................A-29
ii
TABLE OF CONTENTS
(continued)
PAGE
ARTICLE VIII CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY..........................................A-29
8.1 Representations and Warranties; Performance of Agreements...................................A-29
8.2 Closing Certificates........................................................................A-29
8.3 Regulatory and Other Approvals..............................................................A-29
8.4 Delivery of Agreement.......................................................................A-29
8.5 Effectiveness of the Registration Statement.................................................A-29
8.6 No Litigation...............................................................................A-29
8.7 Opinions of Counsel.........................................................................A-29
8.8 No Adverse Changes..........................................................................A-30
8.9 Nasdaq Listing..............................................................................A-30
8.10 Supplemental Indenture......................................................................A-30
8.11 Other Documents.............................................................................A-30
ARTICLE IX NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS...................................A-30
9.1 Non-Survival................................................................................A-30
ARTICLE X GENERAL.....................................................................................A-30
10.1 Expenses....................................................................................A-30
10.2 Termination.................................................................................A-31
10.3 Confidential Information....................................................................A-32
10.4 Non-Assignment..............................................................................A-32
10.5 Notices.....................................................................................A-32
10.6 Counterparts................................................................................A-33
10.7 Knowledge...................................................................................A-33
10.8 Interpretation..............................................................................A-33
10.9 Entire Agreement............................................................................A-33
10.10 Governing Law...............................................................................A-33
10.11 Severability................................................................................A-33
iii
DEFINED TERMS
Acquisition Proposal..........................................................................................A-24
Agreement......................................................................................................A-1
Bank...........................................................................................................A-1
Benefit Plans.................................................................................................A-16
BHCA...........................................................................................................A-7
Cash Consideration.............................................................................................A-3
Cash Election Shares...........................................................................................A-5
CERCLA........................................................................................................A-15
Certificate of Designation.....................................................................................A-1
Closing........................................................................................................A-3
Closing Balance Sheet.........................................................................................A-28
Closing Date...................................................................................................A-3
Code...........................................................................................................A-1
Combination Election...........................................................................................A-4
Commission.....................................................................................................A-9
Company........................................................................................................A-1
Company Board..................................................................................................A-8
Company Common Stock...........................................................................................A-2
Company Option Plans...........................................................................................A-2
Company Preferred Stock........................................................................................A-1
Company Regulatory Reports....................................................................................A-15
Company Stock Certificates.....................................................................................A-5
Confidentiality Agreement.....................................................................................A-22
Conversion Fund................................................................................................A-6
Converted Option...............................................................................................A-2
CRA...........................................................................................................A-15
DE Certificate of Merger.......................................................................................A-1
DGCL...........................................................................................................A-1
Dissenting Shares..............................................................................................A-3
Effective Time.................................................................................................A-1
Election Deadline..............................................................................................A-4
Election Form..................................................................................................A-4
Employees.....................................................................................................A-26
Encumbrances..................................................................................................A-10
Environmental Laws............................................................................................A-14
ERISA Affiliate...............................................................................................A-16
ERISA Plans...................................................................................................A-15
Exchange Act..................................................................................................A-19
Exchange Agent.................................................................................................A-4
FDIC..........................................................................................................A-10
Federal Reserve................................................................................................A-9
Federal Reserve Application....................................................................................A-9
Financial Statements...........................................................................................A-9
First Northwest Financial......................................................................................A-7
GAAP...........................................................................................................A-7
Governmental Authority.........................................................................................A-9
Hazardous Substance...........................................................................................A-15
IDFPR..........................................................................................................A-9
IDFPR Application..............................................................................................A-9
IL Articles of Merger..........................................................................................A-1
Illinois Act...................................................................................................A-1
Insurance LLC..................................................................................................A-7
Intellectual Property.........................................................................................A-17
Interim Balance Sheet..........................................................................................A-9
iv
Interim Financial Statements...................................................................................A-9
Investment Securities.........................................................................................A-12
IRS...........................................................................................................A-16
IT Assets.....................................................................................................A-17
knowledge.....................................................................................................A-33
Licenses......................................................................................................A-13
Loans.........................................................................................................A-10
Material Adverse Effect........................................................................................A-7
Material Contracts............................................................................................A-11
Maximum Cash Election Number...................................................................................A-4
Maximum Stock Election Number..................................................................................A-4
Merger.........................................................................................................A-1
Minimum Adjusted Net Worth....................................................................................A-28
Mortgage LLC...................................................................................................A-7
OCC...........................................................................................................A-20
Option Conversion Agreement....................................................................................A-2
Options........................................................................................................A-8
Ordinary Course of Business....................................................................................A-9
OREO..........................................................................................................A-10
Outstanding Company Option.....................................................................................A-2
Parties........................................................................................................A-1
Per Share Merger Consideration.................................................................................A-3
Permitted Encumbrances........................................................................................A-10
Plan Amendments................................................................................................A-2
Proxy Statement/Prospectus.....................................................................................A-9
Registration Statement........................................................................................A-23
Representatives................................................................................................A-4
Retained Plans................................................................................................A-26
Securities Act.................................................................................................A-9
Stock Consideration............................................................................................A-3
Stock Election.................................................................................................A-4
Stock Election Shares..........................................................................................A-5
Stockholders Meeting..........................................................................................A-22
Superior Acquisition Proposal.................................................................................A-24
Surviving Corporation..........................................................................................A-1
Tax Return....................................................................................................A-14
Tax Sharing Agreement.........................................................................................A-14
Taxes.........................................................................................................A-14
Trust Preferred Indenture.....................................................................................A-30
Variable Portion...............................................................................................A-3
Wintrust.......................................................................................................A-1
Wintrust Common Stock Price....................................................................................A-4
Wintrust Regulatory Reports...................................................................................A-20
Wintrust SEC Documents........................................................................................A-19
Wintrust Stock Certificates....................................................................................A-6
v
DISCLOSURE SCHEDULES
Subsidiaries................................................................................................3.1(b)
Schedule of Option Holders..................................................................................3.3(a)
Stock Owned by the Bank.....................................................................................3.3(b)
Authorization; No Violation....................................................................................3.4
Required Consents..............................................................................................3.5
Financial Statements...........................................................................................3.6
Schedule of Real Property...................................................................................3.9(a)
Schedule of Tangible Personal Property......................................................................3.9(b)
Schedule of Material Contracts................................................................................3.10
Schedule of Interested Transactions...........................................................................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 Proceedings..........................................................................................3.14(c)
Schedule of Insurance.........................................................................................3.15
Environmental Matters.........................................................................................3.17
Change of Control Provisions Under Benefit Plans...........................................................3.20(b)
Schedule of Intellectual Property.............................................................................3.21
Conduct of Business in Normal Course; Exceptions..............................................................3.23
Brokers' and Finders' Fees....................................................................................3.25
Wintrust Regulatory Matters.................................................................................4.6(b)
Scheduled Compensation Changes..............................................................................5.1(c)
Employees......................................................................................................6.1
Employment Agreements..........................................................................................7.9
Signatories to Voting Agreement...............................................................................7.12
EXHIBITS
Exhibit A......................................................................Form of Option Conversion Agreement
Exhibit B.......................................................................Form of Opinion of Company Counsel
Exhibit C.............................................................................Form of Employment Agreement
Exhibit D.................................................................................Form of Voting Agreement
Exhibit E......................................................................Form of Opinion of Wintrust Counsel
vi
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement"), is entered into
as of the 17th day of November, 2004, by and between WINTRUST FINANCIAL
CORPORATION, an Illinois corporation ("Wintrust") and FIRST NORTHWEST BANCORP,
INC., a Delaware corporation (the "Company"). Wintrust and the Company are
referred to collectively in this Agreement as the "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 stockholders 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"), as a result of which the
Company will merge out of existence and First Northwest Bank, an Illinois state
bank and wholly owned subsidiary of the Company (the "Bank") will become a
wholly owned subsidiary of Wintrust.
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").
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 agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time, as defined in Section 1.2,
in accordance with this Agreement, the Illinois Business Corporation Act (the
"Illinois Act") and the Delaware General Corporation Law (the "DGCL"), 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").
1.2 Effective Time. As of the Closing, as defined in Section 1.10,
with respect to the Merger the Parties will cause (i) articles of merger (the
"IL Articles of Merger") to be executed and filed with the Illinois Secretary of
State as provided in the Illinois Act, and (ii) a certificate of merger (the "DE
Certificate of Merger") to be executed and filed with the Delaware Secretary of
State as provided in the DGCL. The Merger shall become effective on the date on
which the IL Articles of Merger and DE Certificate of Merger are duly filed by
the Secretaries of State of Illinois and Delaware, respectively, at such time on
such filing date as is agreed among the Parties and specified in the IL Articles
of Merger and the DE Certificate of Merger (the "Effective Time").
1.3 Effect of the Merger. At and after the Effective Time, the
Merger shall have the effects set forth in Section 11.50 of the Illinois Act and
Section 259(a) of the DGCL.
1.4 Conversion of Securities.
(a) Company Preferred Stock. After the execution of this
Agreement and prior to the Effective Time, the Company will deliver to each
holder of record of Series A Convertible Preferred Stock of the Company, par
value $0.01 per share ("Company Preferred Stock") a Mandatory Conversion Notice,
as defined in, and pursuant to, the Company's Certificate of Designation of
Series A Convertible Preferred Stock (the "Certificate of Designation").
Immediately prior to the Effective Time, and pursuant to the provisions of the
Certificate of Designation, each share of Company Preferred Stock shall be
converted into shares of Company Common Stock, as defined in Section 1.4(b),
pursuant to the terms governing a Mandatory Conversion (as defined in the
Certificate of Designation). Thereafter, such shares of Company Common Stock
shall be converted into and become the right to receive the consideration
provided in this Agreement.
(b) Company Common Stock. At the Effective Time, by
virtue of the Merger and without any action on the part of the Parties or the
stockholders of the Company, each share of common stock of the
A-1
Company, par value $0.01 per share ("Company Common Stock"), issued and
outstanding immediately prior to the Effective Time (other than shares of
Company Common Stock to be cancelled pursuant to Section 1.6 and Dissenting
Shares to the extent provided in Section 1.7), shall be converted into the right
to receive the Per Share Merger Consideration, as defined in and pursuant to
Article II. At the Effective Time, each share of Company Common Stock shall no
longer be outstanding and shall automatically be canceled and retired and shall
cease to exist, and each certificate previously evidencing 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 Stock
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.
1.5 Company Stock Options.
(a) At the Effective Time, each option granted by the
Company under the terms of the 1998 First Northwest Bancorp, Inc. Stock Option
Plan and the 2002 First Northwest Bancorp, Inc. Stock Option Plan (together, the
"Company Option Plans") 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 acquire 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 applicable 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 Per Share Merger
Consideration 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 if less than or equal to one half (1/2) of a share and rounded up to the
nearest whole share if greater than one half (1/2) of a 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 Per Share Merger Consideration 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 Plans shall each be amended,
effective as of the Effective Time, to provide for the conversion of Outstanding
Company Options in accordance with this Section 1.5 (the "Plan Amendments"). 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 A attached
hereto (the "Option Conversion Agreement") from each of the holders of
Outstanding Company Options acknowledging their agreement and consent to the
Plan Amendments 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 Merger Consideration shall be exchanged
therefor.
1.7 Appraisal Rights. Notwithstanding any other provision of this
Agreement to the contrary, shares of Company Common Stock that are outstanding
immediately prior to the Effective Time and which are held by stockholders (a)
who shall not have voted in favor of adoption of this Agreement and (b) who
shall be entitled to and
A-2
shall have demanded properly in writing appraisal for such shares in accordance
with Section 262 of the DGCL ("Dissenting Shares"), shall not be converted into
or represent the right to receive the Per Share Merger Consideration in exchange
for each such share unless such stockholders fail to perfect, withdraw or
otherwise lose their right to appraisal. Such stockholders shall be entitled to
receive a cash payment of the appraised value of such Dissenting Shares in
accordance with the provisions of the DGCL. If, after the Effective Time, any
such stockholder fails to perfect, withdraws or loses his or her right to
appraisal, such shares of Company Common Stock shall be treated as if they had
been converted as of the Effective Time into the right to receive the Per Share
Merger Consideration in exchange for each such share, to be payable as Cash
Consideration, without interest thereon, upon surrender of the certificate or
certificates that formerly evidenced such Dissenting Shares in the manner set
forth in Section 2.5.
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 conversion provisions described in 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 Section 368(a) of the Code, and that this
Agreement shall constitute a "plan of 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") to be held on or as
of the last day of the calendar month in which all of the conditions set forth
in Articles VII and VIII of this Agreement have been satisfied, or on such other
date as the Parties may mutually agree (the "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 June 30, 2005 (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 Parties may
agree.
ARTICLE II
CONVERSION AND EXCHANGE OF CERTIFICATES IN MERGER
2.1 Per Share Merger Consideration.
(a) Subject to the provisions of this Article II, each
share of Company Common Stock issued and outstanding immediately prior to the
Effective Time (other than shares of Company Common Stock to be cancelled
pursuant to Section 1.6 and Dissenting Shares) shall be converted into the right
to receive the Per Share Merger Consideration, as determined below. The Per
Share Merger Consideration shall be payable in shares of Wintrust Common Stock
("Stock Consideration") or in cash ("Cash Consideration"), as provided in
Sections 2.2 and 2.3. The number of shares of Wintrust Common Stock issuable as
Stock Consideration shall be that number of shares, rounded to the nearest
thousandth of a share, equal to the Per Share Merger Consideration divided by
the Wintrust Common Stock Price.
(b) "Per Share Merger Consideration" means the sum of (i)
a fixed amount of $7.20 plus (ii) an amount that shall vary with the Wintrust
Common Stock Price (the "Variable Portion") as follows:
(1) If the Wintrust Common Stock Price is at
least $51.00 and not greater than $57.00, the Variable Portion
shall be $14.39.
A-3
(2) If the Wintrust Common Stock Price is
greater than $57.00 but not greater than $64.00, the Variable
Portion shall be the product obtained by multiplying the
Wintrust Common Stock Price by 0.2525, which is the ratio of
$14.39 (the Variable Portion in (1) above) to a Wintrust
Common Stock Price of $57.00 (i.e., $14.39/$57.00).
(3) If the Wintrust Common Stock Price is
greater than $64.00, the Variable Portion shall be $16.16,
which is the amount that would make up the Variable Portion
under (2) above if the Wintrust Common Stock Price were $64.00
(i.e., 0.2525 x $64.00).
(4) If the Wintrust Common Stock Price is less
than $51.00, subject to adjustment pursuant to Section
10.2(f), the Variable Portion shall be the product obtained by
multiplying the Wintrust Common Stock Price by 0.2822, which
is the ratio of $14.39 to a Wintrust Common Stock Price of
$51.00 (i.e., $14.39/$51.00).
(c) "Wintrust Common Stock Price" means 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 (10) trading days
ending on the third (3rd) trading day preceding the Closing Date.
(d) The number of shares of Company Common Stock to be
converted into the right to receive Cash Consideration for such shares
(including any such shares subject to the cash portion of a Combination Election
(as defined below)), shall be 34% of the number of shares of Company Common
Stock outstanding immediately prior to the Effective Time (excluding shares to
be cancelled pursuant to Section 1.6 and Dissenting Shares) (the "Maximum Cash
Election Number"). The number of shares of Company Common Stock to be converted
into the right to receive Stock Consideration for such shares (including any
such shares subject to the stock portion of a Combination Election) shall be 66%
of the number of shares of Company Common Stock outstanding immediately prior to
the Effective Time (excluding shares to be cancelled pursuant to Section 1.6 and
Dissenting Shares) (the "Maximum Stock Election Number"). Notwithstanding the
foregoing, the percentages used in the preceding definitions (and those set
forth in Section 2.2(a) below) are subject to adjustment pursuant to Section
10.2(f).
2.2 Election Procedures.
(a) Subject to the proration and redesignation procedures
set forth in Section 2.3 below, each holder of record of shares of Company
Common Stock (excluding shares to be cancelled pursuant to Section 1.6 and
Dissenting Shares) will be entitled to elect to receive (i) Stock Consideration
for all such shares (a "Stock Election") or (ii) Cash Consideration for 40% of
such shares and Stock Consideration for 60% of such shares (a "Combination
Election"). All such elections shall be made on a form designed for that purpose
prepared by the Company and acceptable to Wintrust (an "Election Form"). Holders
of record of shares of Company Common Stock who hold such shares as nominees,
trustees or in other representative capacities ("Representatives") may submit
multiple Election Forms, provided that such Representative certifies that each
such Election Form covers all the shares of Company Common Stock held by each
such Representative for a particular beneficial owner.
(b) The Election Form shall be mailed with the Proxy
Statement/Prospectus to all holders of record of shares of Company Common Stock
as of the record date of the Stockholders Meeting. Thereafter the Company and
Wintrust shall each use its reasonable and diligent efforts to (i) mail the
Election Form to all persons who become holders of shares of Company Common
Stock during the period between the record date for the Stockholders Meeting and
5:00 pm., Chicago Time, on the date ten (10) business days prior to the
anticipated Effective Time and (ii) make the Election Form available to all
persons who become holders of shares of Company Common Stock subsequent to such
day and no later than the close of business on the fifth (5th) business day
prior to the Effective Time. In order to be effective an Election Form must be
received by Illinois Stock Transfer Company, Wintrust's exchange agent (the
"Exchange Agent"), on or before 5:00 p.m., Chicago Time, on the fifth (5th)
business day prior to the Effective Time (the "Election Deadline"). An election
shall have been properly made only if the Exchange Agent shall have actually
received a properly completed Election Form by the Election Deadline. Subject to
the terms of this Agreement and the Election Form, the Exchange Agent shall have
reasonable discretion to determine whether any election has been properly or
timely made and to disregard immaterial defects in any
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Election Form, and any good faith decisions of the Exchange Agent regarding such
matters shall be binding and conclusive. All elections will be irrevocable.
(c) A holder of Company Common Shares whose properly
completed Election Form is not received by the Exchange Agent prior to the
Election Deadline shall be deemed to have made a Combination Election. If the
Exchange Agent shall have determined that any purported Stock Election was not
properly made, such purported Stock Election shall be deemed to be of no force
and effect and the holder of shares of Company Common Stock making such
purported Stock Election shall for purposes hereof be deemed to have made a
Combination Election.
2.3 Proration and Redesignation Procedures.
(a) All shares of Company Common Stock which are subject
to Combination Elections and would, but for the application of this Section 2.3,
be converted into Cash Consideration are referred to herein as "Cash Election
Shares." All shares of Company Common Stock which are subject to Stock
Elections, and that portion of shares of Company Common Stock that are subject
to Combination Elections and would, but for the application of this Section 2.3,
be converted into Stock Consideration, are referred to herein as "Stock Election
Shares."
(b) If, after the results of the Election Forms are
calculated, the number of shares of Company Common Stock to be converted into
shares of Wintrust Common Stock exceeds the Maximum Stock Election Number,
Wintrust shall cause the Exchange Agent to determine the number of Stock
Election Shares which must be redesignated as Cash Election Shares in order to
reduce the number of such shares to the Maximum Stock Election Number. All
holders who have Stock Election Shares shall, on a pro rata basis, have such
number of their Stock Election Shares redesignated as Cash Election Shares so
that the Maximum Stock Election Number is achieved.
(c) If, after the results of the Election Forms are
calculated, the number of shares of Company Common Stock to be converted into
cash exceeds the Maximum Cash Election Number, Wintrust shall cause the Exchange
Agent to determine the number of Cash Election Shares which must be redesignated
as Stock Election Shares in order to reduce the amount of such cash to the
Maximum Cash Election Number. All holders who have Cash Election Shares shall,
on a pro rata basis, have such number of their Cash Election Shares redesignated
as Stock Election Shares so that the Maximum Cash Election Number is achieved.
(d) Notwithstanding the foregoing, Wintrust may, in its
sole discretion, direct at any time prior to the Effective Time that the
redesignation procedures provided in this Section 2.3 not be implemented.
(e) After the redesignation procedures, if any, required
by this Section 2.3 are completed, all Cash Election Shares shall be converted
into the right to receive the Cash Consideration, and all Stock Election Shares
shall be converted into the right to receive the Stock Consideration.
Certificates previously evidencing shares of Company Common Stock ("Company
Stock Certificates") shall be exchanged, as applicable, for (i) certificates
evidencing the Stock Consideration, or (b) the Cash Consideration, multiplied in
each case by the number of shares previously evidenced by the cancelled Company
Stock Certificate, upon the surrender of such certificates in accordance with
the provisions of Section 2.5, without interest.
2.4 No Fractional Shares. Notwithstanding anything to the contrary
contained in this Agreement, no fractional shares of Wintrust Common Stock shall
be issued as Stock Consideration in the Merger. Each holder of shares of Company
Common Stock who would otherwise be entitled to receive a fractional part of a
share of Wintrust Common Stock pursuant to this Article II shall instead be
entitled to receive an amount in cash (without interest) rounded to the nearest
whole cent, determined by multiplying the Wintrust Common Stock Price by the
fractional share of Wintrust Common Stock to which such former holder would
otherwise be entitled.
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2.5 Exchange of Certificates.
(a) At or prior to the Effective Time, Wintrust shall
authorize the issuance of and shall make available to the Exchange Agent, for
the benefit of the holders of Company Stock Certificates for exchange in
accordance with this Article II, (i) a sufficient number of certificates for
shares of Wintrust Common Stock (the "Wintrust Stock Certificates") to be issued
pursuant to Section 2.3, (ii) sufficient cash for payment of the Cash
Consideration pursuant to Section 2.3, and (iii) sufficient cash for payment of
cash in lieu of any fractional shares of Wintrust Common Stock in accordance
with Section 2.4. Such Wintrust Stock Certificates and cash, together with any
dividends or distributions with respect thereto paid after the Effective Time,
are referred to in this Article II as the "Conversion Fund." Wintrust shall be
solely responsible for the payment of any fees and expenses of the Exchange
Agent.
(b) Within ten (10) business days after the Closing Date,
the Surviving orporation shall cause the Exchange Agent to mail to each holder
of record of one or more Company Stock Certificates a letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and title
to Company Stock Certificates shall pass, only upon delivery of such
certificates to the Exchange Agent) and instructions for use in effecting the
surrender of the Company Stock Certificates pursuant to this Agreement.
(c) Upon proper surrender of a Company Stock Certificate
for exchange to the Exchange Agent, together with such properly completed letter
of transmittal, duly executed, the holder of such Company Stock Certificate
shall be entitled to receive in exchange therefor his or her portion of the
Merger Consideration (in the form or forms elected by such holder subject to the
provisions of this Article II) deliverable in respect of the shares of Company
Common Stock represented by such Company Stock Certificate, and such Company
Stock Certificate shall forthwith be canceled. No interest will be paid or
accrued on the Merger Consideration deliverable upon surrender of a Company
Stock Certificate.
(d) If any Wintrust Stock Certificate is to be issued in
a name other than that in which the Company Stock Certificate surrendered in
exchange therefor is registered, it shall be a condition of the issuance thereof
that the Company Stock Certificate so surrendered shall be properly endorsed (or
accompanied by an appropriate instrument of transfer) and otherwise in proper
form for transfer, and that the person requesting such exchange shall pay to the
Exchange Agent in advance any transfer or other taxes required by reason of the
issuance of a Wintrust Stock Certificate in any name other than that of the
registered holder of the Company Stock Certificate surrendered, or required for
any other reason, or shall establish to the satisfaction of the Exchange Agent
that such tax has been paid or is not payable.
(e) After the Effective Time, there shall be no transfers
on the stock transfer books of the Company of the shares of Company Common Stock
that were issued and outstanding immediately prior to the Effective Time.
(f) Any portion of the Conversion Fund that remains
unclaimed by the stockholders of the Company for twelve (12) months after the
Effective Time shall be paid to the Surviving Corporation, or its successors in
interest. Any stockholders of the Company who have not theretofore complied with
this Article II shall thereafter look only to the Surviving Corporation, or its
successors in interest, for the issuance of certificates representing shares of
Wintrust Common Stock, the payment of the Cash Consideration and the payment of
cash in lieu of any fractional shares and any unpaid dividends and distributions
on Wintrust Common Stock deliverable in respect of each share of Company Common
Stock such stockholder holds as determined pursuant to this Agreement.
Notwithstanding the foregoing, none of Wintrust (including in its capacity as
Surviving Corporation), the Exchange Agent or any other person shall be liable
to any former holder of shares of Company Common Stock or Outstanding Company
Options, for any amount delivered in good faith to a public official pursuant to
applicable abandoned property, escheat or similar laws.
(g) In the event any Company Stock Certificate shall have
been lost, stolen or destroyed, upon the making of an affidavit of that fact by
the person claiming such Company Stock Certificate to be lost, stolen or
destroyed and, if reasonably required by the Surviving Corporation, the posting
by such person of a bond in such amount as the Exchange Agent may determine is
reasonably necessary as indemnity against any claim that may be made against it
with respect to such Company Stock Certificate, the Exchange Agent will issue in
exchange for such
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lost, stolen or destroyed Company Stock Certificate, and in accordance with
Article II, the Per Share Merger Consideration (in the form or forms pursuant to
the election procedures set forth in this Article II) and cash in lieu of any
fractional shares deliverable in respect thereof pursuant to this Agreement.
(h) No dividends or other distributions declared with
respect to Wintrust Common Stock and payable to the holders of record thereof
after the Effective Time shall be paid to the holder of any unsurrendered
Company Stock Certificate until the holder thereof shall surrender such Company
Stock Certificate in accordance with this Article II. Promptly after the
surrender of a Company Stock Certificate in accordance with this Article II, the
record holder thereof shall be entitled to receive any such dividends or other
distributions, without interest thereon, which theretofore had become payable
with respect to shares of Wintrust Common Stock represented by such Company
Stock Certificate. No holder of an unsurrendered Company Stock Certificate shall
be entitled, until the surrender of such Company Stock Certificate, to vote the
shares of Wintrust Common Stock into which Company Common Stock shall have been
converted.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
CONCERNING THE COMPANY
The Company hereby represents and warrants to Wintrust as follows:
3.1 Organization.
(a) The Company is duly registered as a bank holding
company under the Bank Holding Company Act of 1956, as amended (the "BHCA"), is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware, and has the corporate power and authority to own
its properties and to carry on its business as presently conducted. The Company
is duly qualified and in good standing as a foreign corporation in each other
jurisdiction where the location and character of its properties and the business
conducted by it require such qualification, except where the failure to be so
qualified would not have a Material Adverse Effect on the Company. As used in
this Agreement, "Material Adverse Effect" shall mean, with respect to the
Company or Wintrust, as the case may be, a material adverse effect on (i) the
business, assets, properties, results of operations or financial condition of a
Party and its subsidiaries, taken as a whole or (ii) the ability of a Party to
consummate the Merger; provided, however, that a Material Adverse Effect shall
not be deemed to result from: (1) changes in banking or similar laws of general
applicability or interpretations thereof by Governmental Authorities (as defined
in Section 3.5), or other changes affecting depository institutions (including
banks and their holding companies) generally, including changes in general
economic conditions and changes in prevailing interest and deposit rates; (2)
changes in generally accepted accounting principles ("GAAP") or regulatory
accounting requirements applicable to banks and their holding companies, as such
would apply to the financial statements of a Party on a consolidated basis; (3)
changes resulting from transaction expenses (such as legal, accounting,
investment banker or other professional fees) incurred in connection with this
Agreement and the Merger, including the costs of litigation defending any of the
transactions contemplated by this Agreement; (4) the payment by the Company or
the Bank of amounts due to, or provision of any other benefits to, any officers
or employees of the Company or the Bank in accordance with the terms of any
employment agreements or Benefit Plans (as defined in Section 3.20(a)); and (5)
actions or omissions taken by a Party as required hereunder.
(b) Other than (i) the Bank, (ii) First Northwest
Financial, Inc., an Illinois corporation and wholly owned subsidiary of the Bank
("First Northwest Financial"), (iii) First Northwest Mortgage, LLC, an Illinois
limited liability company and wholly owned subsidiary of First Northwest
Financial ("Mortgage LLC"), and (iv) First Northwest Insurance, LLC, an Illinois
limited liability company and wholly owned subsidiary of First Northwest
Financial ("Insurance LLC"), the Company does not own, whether directly or
indirectly, any voting stock, equity securities or membership, partnership,
joint venture or similar ownership interest in any corporation, association,
partnership, limited liability company or other entity.
(c) The Bank is an Illinois state bank, duly chartered
and organized, validly existing and currently authorized to transact the
business of banking under the laws of the state of Illinois, and has the
requisite power and authority to own its properties and to carry on its business
as presently conducted.
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(d) First Northwest Financial is an Illinois corporation
duly organized, validly existing and in good standing under the laws of the
State of Illinois, and has the requisite power and authority to own its
properties and to carry on its business as presently conducted.
(e) Mortgage LLC and Insurance LLC are each an Illinois
limited liability company duly organized, validly existing and in good standing
under the laws of the State of Illinois, and each has the requisite power and
authority to own its respective properties and to carry on its respective
business as presently conducted.
3.2 Organizational Documents; Minutes and Stock Records. The
Company has furnished Wintrust with copies of the certificate of incorporation
and by-laws of the Company and the charter and by-laws of the Bank, in each case
as amended to the date hereof, and with such other documents as requested by
Wintrust relating to the authority of the Company and the Bank to conduct their
respective businesses. All such documents are complete and correct. The stock
registers and minute books of the Company and the Bank are each complete,
correct and accurately reflect, in each case in all material respects, all
meetings, consents, and other actions of the organizers, incorporators,
stockholders, board of directors, and committees of the board of directors of
the Company and the Bank, respectively, and all transactions in such entity's
capital stock occurring since the initial organization of the Company and the
Bank, respectively.
3.3 Capitalization.
(a) The Company. The authorized capital stock of the
Company consists of (i) 3,000,000 shares of common stock, par value $0.01 per
share, of which 1,479,800 shares were issued and outstanding and 62,600 shares
were held in treasury, and (ii) 100,000 shares of preferred stock, par value
$0.01 per share, of which 4,500 shares are designated as Series A Convertible
Preferred Stock of which 3,181 shares of Series A Convertible Preferred Stock
were issued and outstanding as of September 30, 2004. Each share of Company
Preferred Stock is convertible into 144.93 shares of Company Common Stock. The
issued and outstanding shares of Company Common Stock have been duly and validly
authorized and issued and are fully paid and nonassessable. The Company has
issued options for the purchase of 139,400 shares of Company Common Stock (the
"Options"), the beneficial and record holders of which are set forth on Schedule
3.3(a). The Options have been duly authorized by all necessary corporate action
(including stockholder approval if necessary), have been validly executed,
issued and delivered by the Company, constitute the legal, valid and binding
obligations of the Company, and are enforceable as to the Company in accordance
with their terms. The shares of Company Common Stock to be issued upon exercise
of the Options are validly authorized and, upon such exercise of the Options in
accordance with their terms, will be validly issued, fully paid, and
nonassessable. The Company Common Stock is subject to no preferences,
qualifications, limitations, restrictions or special or relative rights under
the Company's certificate of incorporation. Except for the Options, there are no
warrants, agreements, contracts, or other rights in existence to purchase or
acquire from the Company any shares of capital stock of the Company, whether now
or hereafter authorized or issued.
(b) The Bank. The authorized capital stock of the Bank
consists of (i) 1,000,000 shares of common stock, par value $0.01 per share, of
which 640,000 are issued and outstanding and (ii) 100,000 shares of preferred
stock of which no shares are issued or outstanding. The issued and outstanding
shares of common stock of the Bank have been duly and validly authorized and
issued and are fully paid and nonassessable (except as provided in 12 U.S.C.
ss.55) and owned by the Company. There are no options, agreements, contracts, or
other rights in existence to purchase or acquire from the Bank any shares of
capital stock of the Bank, whether now or hereafter authorized or issued. Other
than as set forth in Schedule 3.3(b), the Bank does not own, whether directly or
indirectly, any voting stock, equity securities or membership, partnership,
joint venture or similar ownership interest in any corporation, association,
partnership, limited liability company or other entity.
3.4 Authorization; No Violation. The execution and delivery of
this Agreement and the performance of the Company's obligations hereunder have
been duly and validly authorized by the Board of Directors of the Company (the
"Company Board"), and do not violate or conflict with the Company's certificate
of incorporation, by-laws, the DGCL, or any applicable law, court order or
decree to which the Company or the Bank is a party or subject, or by which the
Company, the Bank or their respective properties are bound, subject to the
approval of this Agreement and the Merger by the stockholders of the Company.
Except as set forth on Schedule 3.4, the execution and delivery of this
Agreement and the performance of the Company's obligations hereunder do not and
will not
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result in any default or give rise to any right of termination, cancellation or
acceleration under any material note, bond, mortgage, indenture or other
agreement by which the Company, the Bank or their respective properties are
bound. This Agreement, when executed and delivered, and subject to the
regulatory approvals described in Section 3.5, will be a valid, binding and
enforceable obligation of the Company, subject to applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors
generally and to general principles of equity.
3.5 Consents and Approvals. No consents or approvals of, or
filings or registrations with, any court, administrative agency or commission or
other governmental authority or instrumentality (each, a "Governmental
Authority") or with any third party are necessary in connection with the
execution and delivery by the Company of this Agreement and the consummation by
the Company of the Merger except for (a) those third-party consents, approvals,
filings or registrations set forth on Schedule 3.5, (b) the filing by Wintrust
of an application with the Board of Governors of the Federal Reserve System (the
"Federal Reserve") under the BHCA (the "Federal Reserve Application"), (c) the
filing by Wintrust of an application with the Illinois Department of Financial
and Professional Regulation (the "IDFPR") under the Illinois Banking Act (the
"IDFPR Application"), (d) the filing with the Securities and Exchange Commission
(the "Commission") of a proxy statement in definitive form and a registration
statement on an appropriate form under the Securities Act of 1933, as amended
(the "Securities Act"), relating to the meeting of the Company's stockholders to
be held in connection with this Agreement and the Merger and the registration of
the shares of Wintrust Common Stock (the "Proxy Statement/Prospectus"), (e) the
filing of the IL Articles of Merger with the Illinois Secretary of State under
Section 11.25 of the Illinois Act, and the DE Certificate of Merger with the
Delaware Secretary of State under Section 252 of the DGCL, and (f) the approval
of this Agreement and the Merger by the requisite vote of the stockholders of
the Company.
3.6 Financial Statements. Schedule 3.6 sets forth true and
complete copies of the following financial statements (collectively, the
"Financial Statements"): (a) the audited consolidated balance sheets of the
Company as of December 31, 2003, 2002 and 2001 and the related statements of
income, changes in stockholders' equity and cash flows for the fiscal years then
ended, and (b) the unaudited consolidated interim balance sheet of the Company
as of September 30, 2004 (the "Interim Balance Sheet") and the related statement
of income for the nine-month period then ended (together with the Interim
Balance Sheet, the "Interim Financial Statements"). The Financial Statements are
complete and correct and have been prepared in conformity with GAAP applied on a
consistent basis throughout the periods involved. Each balance sheet (including
any related notes) included in the Financial Statements presents fairly the
consolidated financial position of the Company as of the date thereof, and each
income statement (including any related notes) and statement of cash flow
included in the Financial Statements presents fairly the consolidated results of
operations and cash flow, respectively, of the Company for the period set forth
therein; provided, however, that the Interim Financial Statements contain all
adjustments necessary for a fair presentation, subject to normal, recurring
year-end adjustments (which adjustments will not be, individually or in the
aggregate, material), and lack footnotes. Each of the audited Financial
Statements has been certified by the Company's independent auditor, who has
expressed an unqualified opinion on such Financial Statements, and each of the
Interim Financial Statements has been certified by the Company's chief executive
officer and principal accounting officer. The books, records and accounts of
each of the Company and the Bank accurately and fairly reflect, in reasonable
detail, all transactions and all items of income and expense, assets and
liabilities and accruals relating to the Company and the Bank, as applicable.
3.7 No Undisclosed Liabilities. The Company has no liabilities,
whether accrued, absolute, contingent, or otherwise, existing or arising out of
any transaction or state of facts existing on or prior to the date hereof,
except (a) as and to the extent disclosed, reflected or reserved against in the
Financial Statements, (b) as and to the extent arising under contracts,
commitments, transactions, or circumstances identified in the Schedules provided
for herein, excluding any liabilities for Company breaches thereunder, and (c)
liabilities, not material in the aggregate and incurred in the Ordinary Course
of Business, which, under GAAP, would not be required to be reflected on a
balance sheet prepared as of the date hereof. An action taken in the "Ordinary
Course of Business" shall mean an action taken in the ordinary course of
business of the Company or the Bank, as applicable, consistent with past custom
and practice (including with respect to quantity and frequency) and where for
such action to be taken, no separate authorization by the Company Board or the
board of directors of the Bank, as applicable, is required. Any liabilities
incurred in connection with litigation or judicial, administrative or
arbitration proceedings or claims against the Company shall not be deemed to be
incurred in the Ordinary Course of Business. Notwithstanding the foregoing, the
making or renewal of loans or other credit arrangements to directors or
executive
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officers of the Company or the Bank made in accordance with all regulatory
requirements and that are consistent with the Company's and the Bank's past
practice and custom shall be deemed to have been made in the Ordinary Course of
Business.
3.8 Loans; Loan Loss Reserves.
(a) Each outstanding loan, loan agreement, note, lease or
other borrowing agreement, any participation therein and any guaranty, renewal
or extension thereof (collectively, "Loans") reflected on the books and records
of the Bank is evidenced by appropriate and sufficient documentation and
constitutes the legal, valid and binding obligation of the obligor named
therein, enforceable in accordance with its terms, except to the extent such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights and remedies generally from time to time in effect and by
applicable laws which may effect the availability of equitable remedies. No
obligor named in any Loan has provided notice (whether written or, to the
knowledge of the Company, oral) to the Company or the Bank that such obligor
intends to attempt to avoid the enforceability of any term of any Loan under any
such laws or equitable remedies, and no Loan is subject to any valid defense,
set-off, or counterclaim that has been asserted with respect to such Loan. All
Loans that are secured, as evidenced by the appropriate and sufficient ancillary
security documents, are so secured by valid and enforceable liens. Neither the
Bank nor the Company has entered into any loan repurchase agreements.
(b) The reserves for loan and lease losses shown on each
of the balance sheets contained in the Financial Statements are adequate in the
judgment of management and consistent with the standards of the Federal Deposit
Insurance Corporation (the "FDIC") and under GAAP to provide for losses, net of
recoveries relating to loans and leases previously charged off, on loans and
leases outstanding (including accrued interest receivable) as of the applicable
date of such balance sheet. The aggregate loan balances of the Bank as of
September 30, 2004 in excess of such reserves as shown on the Interim Balance
Sheet are, to the knowledge of the Company, collectible in accordance with their
terms.
3.9 Properties and Assets.
(a) Real Property. Attached as Schedule 3.9(a) is a
Schedule of Real Property, which sets forth a complete and correct description
of all real property owned or leased by the Company or the Bank or in which
either the Company or the Bank has an interest (other than as a mortgagee). No
real property or improvements are carried on the Bank's books and records as
Other Real Estate Owned. The Company and the Bank own, or have a valid right to
use or a leasehold interest in, all real property used by them in the conduct of
their respective businesses as such businesses are presently conducted. Except
as otherwise set forth on Schedule 3.9(a), the ownership or leasehold interest
of the Company or the Bank in such real property is not subject to any mortgage,
pledge, lien, option, conditional sale agreement, encumbrance, security
interest, title exceptions or restrictions or claims or charges of any kind
(collectively, "Encumbrances"), except for Permitted Encumbrances. As used in
this Agreement, "Permitted Encumbrances" shall mean (i) Encumbrances arising
under conditional sales contracts and equipment leases with third parties under
which the Company or the Bank is not delinquent or in default, (ii) carriers',
workers', repairers', materialmen's, warehousemen liens' and similar
Encumbrances incurred in the Ordinary Course of Business, (iii) Encumbrances for
taxes not yet due and payable or that are being contested in good faith and for
which proper reserves have been established and reflected on the Interim Balance
Sheet, (iv) minor defects in title to real property that do not materially
impair the intended use thereof, (v) zoning and similar restrictions on the use
of real property, and (vi) in the case of any leased assets, (A) the rights of
any lessor under the applicable lease agreement or any Encumbrance granted by
any such lessor and (B) any statutory lien for amounts not yet due and payable,
or that are being contested in good faith and for which proper reserves have
been established and reflected on the Interim Balance Sheet. All material
certificates, licenses and permits required for the lawful use and occupancy of
any real property by the Company or the Bank, as the case may be, have been
obtained and are in full force and effect.
(b) Personal Property. Attached as Schedule 3.9(b) is a
Schedule of Tangible Personal Property, which sets forth a complete and correct
description of all tangible personal property owned by the Company or the Bank
or used by the Company or the Bank in the conduct of their respective businesses
that is reflected as a capital asset in the Interim Balance Sheet. Except as
otherwise set forth on Schedule 3.9(b), (i) the
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Company or the Bank owns, or has a valid right to use or a leasehold interest
in, all such personal property, (ii) all such property is owned free and clear
of any Encumbrances, except for Permitted Encumbrances, and (iii) all such
property is in good working condition, normal wear and tear excepted.
(c) Assets. The assets reflected on the Interim Balance
Sheet or identified in this Agreement or on the Schedules provided for herein
include all of the material assets (i) owned by the Company or the Bank, except
for those assets subsequently disposed of or purchased by the Company or the
Bank for fair value in the Ordinary Course of Business, and (ii) used, intended
or required for use by the Company or the Bank in the conduct of their
respective businesses.
3.10 Material Contracts. Attached as Schedule 3.10 is a Schedule of
Material Contracts, true and complete copies of which have been delivered to
Wintrust, except with respect to those Material Contracts described in Section
3.10(f) for which the Company has delivered to Wintrust a complete and correct
list and made available to Wintrust copies of such items upon request. "Material
Contracts" include every contract, commitment, or arrangement (whether written
or oral) of a material nature (or that assumes materiality because of its
continuing nature) under which the Company or the Bank is obligated on the date
hereof, including the following:
(a) all consulting arrangements, and contracts for
professional, advisory, and other services, including contracts under which the
Company or the Bank performs services for others;
(b) all leases of real estate and personal property;
(c) all contracts, commitments and agreements for the
acquisition, development or disposition of real or personal property other than
conditional sales contracts and security agreements whereunder total future
payments are, in each instance, less than $50,000;
(d) all contracts relating to the employment, engagement,
compensation or termination of directors, officers, employees, consultants or
agents of the Company or the Bank, and all pension, retirement, profit sharing,
stock option, stock purchase, stock appreciation, insurance or similar plans or
arrangements for the benefit of any employees, officers or directors of the
Company, including all Benefit Plans as defined in Section 3.20;
(e) all loans, loan commitments, promissory notes,
letters of credit or other financial accommodations or arrangements or evidences
of indebtedness, including modifications, waivers or amendments thereof,
extended to or for the benefit of the Company or the Bank;
(f) all loans, loan commitments, promissory notes,
letters of credit or other financial accommodations or arrangements or evidences
of indebtedness, including modifications, waivers or amendments thereof,
extended to or for the benefit of any single borrower or related group of
borrowers if the aggregate amount of all such loans, loan commitments,
promissory notes, letters of credit or other financial accommodations or
arrangements or evidences of indebtedness extended to such borrower or related
group of borrowers exceeds $500,000;
(g) all union and other labor contracts;
(h) all agreements, contracts, mortgages, loans, deeds of
trust, leases, commitments, indentures, notes, instruments and other
arrangements which are with officers or directors of the Company or the Bank,
any "affiliates" of the Company or the Bank within the meaning of Section 23A of
the Federal Reserve Act or any record or beneficial owner of 5% or more of
Company Common Stock, or any member of the immediate family or a related
interest (as such terms are defined in 12 C.F.R. ss.215.2(m)) of any such
person, excepting any ordinary and customary loans and deposits that comply with
applicable banking regulations;
(i) any contract involving total future payments by the
Company or the Bank of more than $50,000 or which requires performance by the
Company or the Bank beyond the second anniversary of the Closing Date, that by
its terms does not terminate or is not terminable by the Company or the Bank
without penalty within 30 days after the date of this Agreement;
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(j) except for provisions of the certificate of
incorporation and by-laws of the Company and the charter and by-laws of the
Bank, all contracts under which the Company or the Bank has any obligation,
direct, indirect, contingent or otherwise, to assume or guarantee any liability
or to indemnify any person (other than in a fiduciary capacity);
(k) all joint venture or marketing agreements with any
other person or entity; and
(l) all other material contracts, made other than in the
Ordinary Course of Business of the Company or the Bank, to which the Company or
the Bank is a party or under which the Company or the Bank is obligated.
3.11 No Defaults. Each of the Company and the Bank has fulfilled
and taken all action reasonably necessary to date to enable it to fulfill, when
due, all of its material obligations under all Material Contracts to which it is
a party. There are no breaches or defaults by the Company or the Bank under any
Material Contract that could give rise to a right of termination or claim for
material damages under such Material Contract, and no event has occurred that,
with the lapse of time or the election of any other party, will become such a
breach or default by the Company or the Bank. To the knowledge of the Company,
no breach or default by any other party under any Material Contract has occurred
or is threatened that will or could impair the ability of the Company or the
Bank to enforce any of its rights under such Material Contract.
3.12 Conflict of Interest Transactions. Except as set forth on
Schedule 3.12, no principal officer or director of the Company or the Bank, or
holder of 10% or more of the Company Common Stock or any member of the immediate
family or a related interest (as such terms are defined in 12 C.F.R.
ss.215.2(m)) of such person: (a) has any direct or indirect ownership interest
in (i) any entity which does business with, or is a competitor of, the Company
or the Bank (other than the ownership of not more than 1% of the outstanding
capital stock of such entity if such stock is listed on a national securities
exchange or market or is regularly traded in the over-the-counter market by a
member of a national securities exchange or market) or (ii) any property or
asset which is owned or used by the Company or the Bank in the conduct of its
business; (b) has any financial, business or contractual relationship or
arrangement with the Company or the Bank, excluding any agreements and
commitments entered into in respect of the Bank's acceptance of deposits and
investments or the making of any loans, in each case in the Ordinary Course of
Business of the Bank.
3.13 Investments.
(a) Set forth on Schedule 3.13(a) is a complete and
correct list and description as of September 30, 2004, of all investment and
debt securities, mortgage-backed and related securities, marketable equity
securities and securities purchased under agreements to resell that are owned by
the Company or the Bank, other than in a fiduciary or agency capacity (the
"Investment Securities"). The Company and the Bank each has good and marketable
title to all Investment Securities held by it, free and clear of all
Encumbrances, except for Permitted Encumbrances, and except to the extent such
Investment Securities are pledged in the Ordinary Course of Business consistent
with prudent banking practices to secure obligations of the Company or the Bank.
The Investment Securities are valued on the books of the Company and the Bank in
accordance with GAAP.
(b) Except as set forth on Schedule 3.13(b), and as may
be imposed by applicable securities laws and the documents and instruments
governing the terms of such securities, none of the Investment Securities is
subject to any restriction, whether contractual or statutory, that materially
impairs the ability of the Company or the Bank freely to dispose of such
investment at any time. With respect to all material repurchase agreements to
which the Company or the Bank is a party, the Company or the Bank, as the case
may be, has a valid, perfected first lien or security interest in the securities
or other collateral securing each such repurchase agreement, and the value of
the collateral securing each such repurchase agreement equals or exceeds the
amount of the debt secured by such collateral under such agreement.
(c) Except as set forth on Schedule 3.13(c), neither the
Company nor the Bank has sold or otherwise disposed of any Investment Securities
in a transaction in which the acquiror of such Investment Securities
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or other person has the right, either conditionally or absolutely, to require
the Company or the Bank to repurchase or otherwise reacquire any such Investment
Securities.
(d) There are no interest rate swaps, caps, floors,
option agreements or other interest rate risk management arrangements to which
the Company or the Bank is bound.
3.14 Compliance with Laws; Legal Proceedings.
(a) The Company and the Bank are each in compliance with
all applicable federal, state, county and municipal laws and regulations (i)
that regulate or are concerned in any way with the ownership and operation of
banks and their holding companies or the business of banking or of acting as a
fiduciary, including those laws and regulations relating to the investment of
funds, the taking of deposits, the lending of money, the collection of interest,
the extension of credit and the location and operation of banking facilities, or
(ii) that otherwise relate to or affect the business or assets of the Company or
the Bank or the assets owned, used, occupied or managed by either of them,
except for matters concerning such compliance that would not be material to the
Company or the Bank.
(b) The Company and the Bank hold all material licenses,
certificates, permits, authorizations, franchises and rights from all
appropriate federal, state or other Governmental Authorities necessary for the
conduct of their businesses and the ownership of their assets (collectively,
"Licenses"), all Licenses are in full force and effect, and the Company has
received no notice (whether written or, to the knowledge of the Company, oral)
of any pending or threatened action by any Governmental Authority to suspend,
revoke, cancel or limit any License.
(c) Except as set forth on Schedule 3.14(c), there are no
claims, actions, suits or proceedings pending or, to the knowledge of the
Company, threatened or contemplated against or affecting the Company or the
Bank, at law or in equity, or before any federal, state or other Governmental
Authority or any arbitrator or arbitration panel, whether by contract or
otherwise, and there is no decree, judgment or order or supervisory agreement of
any kind in existence against or restraining the Company or the Bank from taking
any action of any kind in connection with the business of the Company or the
Bank. Except as set forth on Schedule 3.14(c), neither the Company nor the Bank
has received from any federal, state or other Governmental Authority any notice
or threat (whether written or, to the knowledge of the Company, oral) of
enforcement actions, or any criticism or recommendation of a material nature,
and neither the Company nor the Bank has any reasonable basis for believing that
any such notice or threat, criticism, recommendation or suggestion not otherwise
disclosed herein is contemplated, concerning capital, compliance with laws or
regulations, safety or soundness, fiduciary duties or other banking or business
practices that has not been resolved to the reasonable satisfaction of such
Governmental Authority.
3.15 Insurance. Attached as Schedule 3.15 is a Schedule of
Insurance, which sets forth a complete and correct list of all policies of
insurance in which the Company or the Bank is named as an insured party, which
otherwise relate to or cover any assets, properties, premises, operations or
personnel of the Company or the Bank, or which is owned or carried by the
Company or the Bank. The Company and the Bank has in full force and effect
policies of insurance issued by reputable insurance companies against loss or
damage of the kinds and in the amounts identified in the policy summaries, and
all premiums and costs with respect thereto are set forth on Schedule 3.15.
Neither the Company nor the Bank has received notice (whether written or, to the
knowledge of the Company, oral) from any party of interest in or to any such
policies claiming any breach or violation of any provisions thereof, disclaiming
or denying coverage thereof or canceling or threatening cancellation of any such
insurance contracts.
3.16 Taxes.
(a) The Company and the Bank have each duly and timely
filed all Tax Returns required to be filed or delivered by the Company or the
Bank, respectively, in connection with the Company's or the Bank's business and
operations, all information included in such Tax Returns is accurate in all
material respects, and all Taxes required to be shown on such Tax Returns as
payable by the Company or the Bank with respect to the income of the Company or
the Bank have been paid when due. No application for an extension of time for
filing any Tax
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Return or consent to any extension of the period of limitations applicable to
the assessment or collection of any Tax is in effect with respect to the Company
or the Bank. Neither the Company nor the Bank is delinquent in the payment of
any Taxes claimed to be due from the Company or the Bank by any taxing
authority, and adequate reserves for Taxes (including any penalties and
interest) payable by the Company have been made on the books of the Company and
on the most recent of the Financial Statements. The Company has not received any
notice (whether written or, to the knowledge of the Company, oral) of any
proposed audit or proposed deficiency for any Tax due from the Company or the
Bank with respect to the business and operations of the Company or the Bank, as
the case may be, and there are no pending audits or claims with respect thereto.
(b) Except for that certain Consolidated Return Agreement
by and between the Company and the Bank dated August 1, 1996 (the "Tax Sharing
Agreement"), neither the Company nor the Bank is, and within the past five
years, neither has been, a party to any contract, agreement or arrangement under
which the Company or the Bank has agreed to share the Tax liability of any
person.
(c) "Taxes" shall mean any and all taxes, charges, fees,
levies or other assessments, including net income, gross receipts, excise, real
or personal property, sales, withholding, social security, occupation, use,
service, service use, value added, license, net worth, payroll, franchise,
transfer, recording, gross income, alternative or add-on minimum, environmental,
goods and services, capital stock, profits, single business, employment,
severance, stamp, unemployment, customs and duties taxes, fees and charges,
imposed by any taxing authority (whether domestic or foreign including any
state, local or foreign government or any subdivision or taxing agency thereof),
whether computed on a separate, consolidated, unitary, combined or any other
basis; and such term shall include any interest, penalties or additional amounts
attributable to, or imposed upon, or with respect to, any such taxes, charges,
fees, levies or other assessments. "Tax Return" shall mean any report, return,
document, declaration or other information or filing required to be supplied to
any taxing authority or jurisdiction (foreign or domestic) with respect to
Taxes.
3.17 Environmental Laws and Regulations.
(a) Except as set forth on Schedule 3.17, the Company and
the Bank:
(i) have had and now have all environmental
approvals, consents, licenses, permits and orders required to conduct
the businesses in which they have been or are now engaged;
(ii) have been and are in compliance in all
material respects with all applicable federal, state, county and
municipal laws, regulations, authorizations, licenses, approvals,
permits and orders relating to air, water, soil, solid waste
management, hazardous or toxic substances, or the protection of health
or the environment (collectively, "Environmental Laws").
(b) Except as set forth on Schedule 3.17:
(i) there are no claims, actions, suits or
proceedings pending or, to the knowledge of the Company, threatened or
contemplated against, or involving, the Company or the Bank, any assets
of the Company or the Bank, under any of the Environmental Laws
(whether by reason of any failure to comply with any of the
Environmental Laws or otherwise);
(ii) no decree, judgment or order of any kind
under any of the Environmental Laws has been entered against the
Company or the Bank;
(iii) neither the Company nor the Bank:
(1) is or was a generator or
transporter of hazardous waste, or the owner, operator,
lessor, sublessor, lessee or, to its knowledge, mortgagee of a
treatment, storage, or disposal facility or underground
storage tank as those terms are defined under the Resource
Conservation and Recovery Act, as amended, or regulations
promulgated thereunder, or of real
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property on which such a treatment, storage or disposal
facility or underground storage tank is or was located;
(2) owns, operates, leases, subleases
or, to its knowledge, holds a security interest in, or owned,
operated, leased or subleased (A) any facility at which any
Hazardous Substances (as defined below) were treated, stored
in significant quantities, recycled, disposed or are or were
installed or incorporated or (B) any real property on which
such a facility is or was located;
(3) arranged for the disposal or
treatment, arranged with a transporter for transport for
disposal or treatment of Hazardous Substances at any facility
from which there is a release or threat of release, or accepts
or accepted Hazardous Substances for transport for disposal or
treatment at any facility, as those terms are defined under
the Comprehensive Environmental Response, Compensation and
Liability Act, as amended ("CERCLA"); or
(4) is or was the holder of a security
interest where the party giving the security is or was the
owner or operator of a treatment, storage or disposal
facility, underground storage tank or any facility at which
any Hazardous Substances are or were treated, stored in
significant quantities, recycled or disposed and where either
the Company or the Bank participates or participated in
management decisions concerning the facility's waste disposal
activities.
(c) To the Company's knowledge, there are no other facts,
conditions or situations, whether now or heretofore existing, that could form
the basis for any claim against, or result in any liability of, the Company or
the Bank under any of the Environmental Laws.
(d) For purposes of this Section 3.17, "Hazardous
Substance" shall mean a hazardous substance (as defined in CERCLA) and
petroleum, including crude oil or any fraction thereof, but excluding
underground crude oil in its natural unrefined state, prior to its initial
extraction.
3.18 Community Reinvestment Act Compliance. Neither the Company nor
the Bank has received any notice of non-compliance with the applicable
provisions of the Community Reinvestment Act ("CRA") and the regulations
promulgated thereunder, and the Bank has received a CRA rating of satisfactory
or better from the FDIC or other applicable Governmental Authority. The Company
knows of no facts or circumstances which would cause either the Company or the
Bank to fail to comply with such provisions or the Bank to receive a rating less
than satisfactory.
3.19 Company Regulatory Reports. Since January 1, 2002, the Company
and the Bank have each timely filed all reports, registrations and statements,
together with any amendments required to be made with respect thereto, required
to be filed with the Federal Reserve, the FDIC and any other Governmental
Authority or self-regulatory organization with jurisdiction over any of the
activities of the Company or the Bank (the "Company Regulatory Reports"), and
have paid all fees and assessments due and payable in connection therewith. As
of their respective dates, the Company Regulatory Reports complied in all
material respects with the statutes, rules and regulations enforced or
promulgated by the applicable regulatory authority with which they were filed
and did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statement
therein, in light of the circumstances under which they were made, not
misleading.
3.20 Employee Benefit Plans.
(a) The Schedule of Material Contracts, attached as
Schedule 3.10, includes a complete and correct list of each employee benefit
plan within the meaning of Section 3(3) of ERISA (the "ERISA Plans"), each
compensation, consulting, employment or collective bargaining agreement, and
each stock option, stock purchase, stock appreciation right, life, health,
disability or other insurance or benefit, bonus, deferred or incentive
compensation, severance or separation, profit sharing, retirement, or other
employee benefit plan, practice, policy or arrangement of any kind, oral or
written, covering employees or former employees of the Company or the Bank which
the Company or the Bank maintains or contributes to (or, with respect to any
employee pension benefit plan (as defined in Section 3(2) of ERISA) has
maintained or contributed to since the date of its incorporation) or to
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which the Company or the Bank is a party or by which it is otherwise bound
(collectively, together with the ERISA Plans, the "Benefit Plans"). None of the
Benefit Plans is a "defined benefit plan" (as defined in Section 414(j) of the
Code). Neither the Company nor the Bank has, and has ever had, an affiliate that
would be treated as a single employer together with the Company or the Bank (an
"ERISA Affiliate") under Section 414 of the Code.
(b) Except as set forth in Schedule 3.20(b), neither the
Company nor the Bank has entered into or maintained any Benefit Plan which
includes any change of control provisions which would cause an increase or
acceleration of benefits or benefit entitlements to employees or former
employees of the Company or the Bank or any other increase in the liabilities of
the Company or the Bank under such Benefit Plan as a result of the transactions
contemplated by this Agreement.
(c) Neither the Company nor the Bank maintains or
participates, and has ever maintained or participated, in a multiemployer plan
within the meaning of Section 3(37) of ERISA. None of the Company, the Bank, any
director or employee of the Company or the Bank, or any fiduciary of any ERISA
Plan has engaged in any transaction in violation of Section 406 or 407 of ERISA
or any "prohibited transaction" (as defined in Section 4975(c)(1) of the Code)
for which no exemption exists under Section 408(b) of ERISA or Section 4975(d)
of the Code in connection with such ERISA Plan. Neither the Company nor the Bank
provides nor has ever provided medical benefits to former employees, except as
required by Section 601 of ERISA.
(d) Each ERISA Plan that is intended to qualify under
Section 401 and related provisions of the Code is the subject of a favorable
determination letter from the Internal Revenue Service ("IRS"), or satisfies the
provisions of IRS Announcement 2001-77, Section II, if applicable, to the effect
that it is so qualified under the Code and that its related funding instrument
is tax exempt under Section 501 of the Code. Nothing has occurred since the date
of such determination letter that would adversely affect such determination or
the qualified tax exempt status of such ERISA Plan and its related funding
instrument.
(e) Each Benefit Plan is, and since its inception, has
been administered in material compliance with its terms and with all applicable
laws, rules and regulations governing such Benefit Plan, including the rules and
regulations promulgated by the Department of Labor, the Pension Benefit Guaranty
Corporation and the IRS under ERISA, the Code or any other applicable law.
Neither the Company nor any affiliate of the Company that is a fiduciary with
respect to any Benefit Plan, has breached any of the responsibilities,
obligations or duties imposed on it by ERISA. No Benefit Plan is currently the
subject of a submission under IRS Employee Plans Compliance Resolution System or
any similar system, nor under any Department of Labor amnesty program, and
neither the Company nor the Bank anticipates any such submission of any Benefit
Plan.
(f) There is no litigation, claim or assessment pending
or, to the Company's knowledge, threatened by, on behalf of, or against any of
the Benefit Plans or against the administrators or trustees or other fiduciaries
of any of the Benefit Plans that alleges a violation of applicable state or
federal law. To the Company's knowledge, there is no reasonable basis for any
such litigation, claim or assessment.
(g) No Benefit Plan fiduciary or any other person has, or
has had, any liability to any Benefit Plan participant, beneficiary or any other
person under any provisions of ERISA or any other applicable law by reason of
any action or failure to act in connection with any Benefit Plan, including, but
not limited to, any liability by any reason of any payment of, or failure to
pay, benefits or any other amounts or by reason of any credit or failure to give
credit for any benefits or rights. Every Benefit Plan fiduciary and official is
bonded to the extent required by Section 412 of ERISA.
(h) All accrued contributions and other payments to be
made by the Company or the Bank to any Benefit Plan through the date hereof have
been made or reserves adequate for such purposes have been set aside therefor
and reflected in the Financial Statements. Neither the Company nor the Bank is
in default in performing any of its contractual obligations under any of the
Benefit Plans or any related trust agreement or insurance contract. There are no
outstanding liabilities with respect to any Benefit Plan other than liabilities
for benefits to be paid to participants in such Benefit Plan and their
beneficiaries in accordance with the terms of such Benefit Plan.
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(i) No Benefit Plan provides for payment of any amount
which, considered in the aggregate with amounts payable pursuant to all other
Benefit Plans, would exceed the amount deductible for federal income tax
purposes by virtue of Section 280G or 162(m) of the Code.
(j) There are no obligations or liabilities, whether
outstanding or subject to future vesting, for any post-retirement benefits to be
paid to participants under any of the Benefit Plans.
3.21 Technology and Intellectual Property.
(a) Attached as Schedule 3.21 is a Schedule of
Intellectual Property, which sets forth a complete and correct list of all (i)
registered trademarks, service marks, copyrights and patents; (ii) applications
for registration or grant of any of the foregoing; (iii) unregistered
trademarks, service marks, trade names, logos and assumed names; and (iv)
licenses for any of the foregoing, in each case, owned by the Company or the
Bank or used in or necessary to conduct the Company's or the Bank's business as
presently conducted. The items on Schedule 3.21, together with all other
trademarks, service marks, trade names, logos, assumed names, patents,
copyrights, trade secrets, computer software, licenses, formulae, customer lists
or other databases, business application designs and inventions currently used
in or necessary to conduct the business of the Company constitute the
"Intellectual Property."
(b) Except as set forth on Schedule 3.21, the Company or
the Bank has ownership of, or such other rights by license, lease or other
agreement in and to, the Intellectual Property as is necessary to permit the
Company and the Bank to use the Intellectual Property in the conduct of their
respective businesses as presently conducted. Neither the Company nor the Bank
has received notice (whether written or, to the knowledge of the Company, oral)
alleging that the Company or the Bank has infringed or violated any trademark,
trade name, copyright, patent, trade secret right or other proprietary right of
others, and to the Company's knowledge, it has not committed any such violation
or infringement. Other than as set forth on Schedule 3.21, to the Company's
knowledge, there is no reason to believe that, upon consummation of the
transactions contemplated hereby, the Company or the Bank will be in any way
more restricted in its use of any of the Intellectual Property than it was on
the date hereof under any contract to which the Company or the Bank is a party
or by which it is bound, or that use of such Intellectual Property by the
Company or the Bank will, as a result of such consummation, violate or infringe
the rights of any person, or subject Wintrust, the Company or the Bank to
liability of any kind, under any such contract.
(c) The IT Assets operate and perform in all material
respects in accordance with their documentation and functional specifications
and otherwise as required by the Company and the Bank in connection with their
respective businesses, and have not materially malfunctioned or failed within
the past three (3) years. "IT Assets" means the computers, computer software,
firmware, servers, workstations, routers, hubs, switches, data communications
lines and all other information technology equipment, and all associated
documentation, owned or leased by the Company or the Bank. To the knowledge of
the Company or the Bank, the IT Assets do not contain any worms, viruses, bugs,
faults or other devices or effects that (i) enable or assist any person or
entity to access without authorization the IT Assets, or (ii) otherwise
significantly adversely affect the functionality of the IT Assets, except as
disclosed in its documentation. To the knowledge of the Company, no person or
entity has gained unauthorized access to the IT Assets. The Company and the Bank
have implemented reasonable back-up and disaster recovery technology consistent
with industry practices. To the knowledge of the Company, none of the IT Assets
contains any shareware, open source code, or other software the use of which
requires disclosure or licensing of any intellectual property.
3.22 No Adverse Change. Other than as specifically disclosed in
this Agreement, the Financial Statements, or the Schedules delivered pursuant to
this Agreement, there has not occurred (a) since December 31, 2003 any Material
Adverse Effect on the Company or the Bank, or (b) any changes or condition,
event, circumstance, fact or other occurrence, whether occurring before or since
December 31, 2003 that may reasonably be expected to have or result in a
Material Adverse Effect on the Company or the Bank. No fact or condition exists
with respect to the business, operations or assets of the Company or the Bank
which the Company has reason to believe may cause the Federal Reserve
Application, the IDFPR Application or any of the other regulatory approvals
referenced in Section 7.3 or 8.3 to be denied or unduly delayed.
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3.23 Conduct of Business in Normal Course. Except as set forth on
Schedule 3.23 and for actions taken in connection with entering into this
Agreement, since December 31, 2003 the businesses of each of the Company and the
Bank have been conducted only in the Ordinary Course of Business.
3.24 Change in Business Relationships. Neither the Company nor the
Bank has received notice (whether written or, to the knowledge of the Company,
oral), whether on account of the transactions contemplated by this Agreement or
otherwise, (a) that any customer, agent, representative, supplier, vendor or
business referral source of the Company or the Bank intends to discontinue,
diminish or change its relationship with the Company or the Bank, the effect of
which would be material to the Company or the Bank, or (b) that any executive
officer of the Company or the Bank intends to terminate or substantially alter
the terms of his or her employment. There have been no complaints or disputes
(in each case set forth in writing) with any customer, employee, agent,
representative, supplier, vendor, business referral source or other parties that
have not been resolved which are reasonably likely to be material to the Company
or the Bank.
3.25 Brokers' and Finders' Fees. Except as set forth in Schedule
3.25, neither the Company nor the Bank has incurred any liability for brokerage
commissions, finders' fees, or like compensation with respect to the
transactions contemplated by this Agreement.
3.26 Section 280G Payments. Neither the execution of this Agreement
nor the consummation of the transactions contemplated hereby will result in any
payment that would be deemed an "excess parachute payment" under Section 280G of
the Code.
3.27 No Omissions. None of the representations and warranties
contained in Article III, in the Schedules provided for herein by the Company or
in the Financial Statements is false or misleading in any material respect or
omits to state a fact herein or therein necessary to make such statements not
misleading in any material respect.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
CONCERNING WINTRUST
Wintrust hereby represents to the Company as follows:
4.1 Organization. Wintrust is a corporation duly organized,
validly existing and in good standing under the laws of the State of Illinois,
has the corporate power and authority to own its own properties and to carry on
its business as it is now being conducted, and is duly qualified and in good
standing as a foreign corporation in each jurisdiction where the location and
character of its properties and the business conducted by it require such
qualification, except where the failure to be so qualified would not have a
Material Adverse Effect.
4.2 Capitalization. The authorized capital stock of Wintrust
consists of (i) 30,000,000 shares of common stock, no par value per share, of
which 21,064,496 shares were issued and outstanding as of September 30, 2004,
(ii) 20,000,000 shares of preferred stock, no par value per share, of which
100,000 shares are designated Junior Serial Preferred Stock A, no par value per
share, and no shares of preferred stock are issued and outstanding, and (iii) no
shares are held in treasury. As of September 30,2004 there were (i) outstanding
options in respect of 3,131,223 shares of Wintrust Common Stock, (ii)
outstanding warrants for the purchase of 159,807 shares of Wintrust Common
Stock, and (iii) preferred share purchase rights outstanding pursuant to the
Rights Agreement between Wintrust and Illinois Stock Transfer Company, as Rights
Agent, dated July 28, 1998. Such options, warrants and rights have been duly
authorized by all necessary corporate action (including shareholder approval, if
necessary). Such options and warrants have been validly executed, issued and
delivered by Wintrust, and constitute the legal, valid and binding obligations
of Wintrust, and are enforceable as to Wintrust in accordance with their terms.
The shares of Wintrust Common Stock to be issued upon exercise of such options
and warrants are validly authorized and, upon such exercise in accordance with
their terms, will be validly issued, fully paid, and nonassessable. The Wintrust
Common Stock is subject to certain preferences, qualifications, limitations,
restrictions or special or relative rights under Wintrust's articles of
incorporation, a true and complete copy of which has been
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previously provided to the Company. Except for such options and warrants and
preferred share purchase rights, there are no options, agreements, contracts or
other rights in existence to purchase or acquire from Wintrust any shares of
capital stock of Wintrust, whether now or hereafter authorized or issued, other
than shares issuable pursuant to employee benefit or compensation plans referred
to in the Wintrust SEC Documents.
4.3 Authorization; No Violations. The execution and delivery of
this Agreement and the performance of Wintrust's obligations hereunder have been
duly and validly authorized by the Board of Directors of Wintrust, do not
violate or conflict with its articles of incorporation or by-laws, the Illinois
Act, or any applicable law, court order or decree to which Wintrust is a party
or subject, or by which Wintrust is bound, and require no further corporate or
shareholder approval on the part of Wintrust. The execution and delivery of this
Agreement and the performance of Wintrust's obligations hereunder do not and
will not result in any default or give rise to any right of termination,
cancellation or acceleration under any material note, bond, mortgage, indenture
or other agreement by which Wintrust is bound. This Agreement, when executed and
delivered, and subject to the regulatory approval described in Section 4.4, will
be a valid, binding and enforceable obligation of Wintrust, subject to
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors generally and to general principles of equity.
4.4 Consents and Approvals. No consents or approvals of, or
filings or registrations with, any Governmental Authority or with any third
party are necessary in connection with the execution and delivery by Wintrust of
this Agreement and the consummation by Wintrust of the Merger except for (a) the
filing by Wintrust of the Federal Reserve Application and the IDFPR Application,
(b) the filing of the Registration Statement (as defined in Section 5.4(a), and
(c) the filing of the IL Articles of Merger with the Illinois Secretary of State
under Section 11.25 of the Illinois Act, and the DE Certificate of Merger with
the Delaware Secretary of State under Section 252 of the DGCL.
4.5 Wintrust SEC Filings and Financial Statements.
(a) Since January 1, 2002, Wintrust has timely filed all
reports, registration statements and other documents (including any amendments
thereto) required to be filed with the Commission under the Securities Act, the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and the rules
and regulations of the Commission (the "Wintrust SEC Documents"), and all such
Wintrust SEC Documents have complied in all material respects, as of their
respective filing dates and effective dates, as the case may be, with all
applicable requirements of the Securities Act or the Exchange Act. As of their
respective filing and effective dates, none of the Wintrust SEC Documents
contained an untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(b) The audited consolidated financial statements
contained or incorporated by reference in Wintrust's Annual Report on Form 10-K
for the years ended December 31, 2002 and 2003 and the unaudited interim
financial statements included in Wintrust's most recent Quarterly Report on Form
10-Q have been prepared in conformity with GAAP applied on a consistent basis,
and, together with the notes thereto, present fairly the consolidated financial
position of Wintrust and its subsidiaries at the dates shown and the
consolidated results of their operations, changes in shareholders' equity and
cash flows for the periods then ended. The interim financial statements as of,
and for, the periods ending after December 31, 2003 included in Wintrust's
Quarterly Reports on Form 10-Q, as filed with the Commission, include all
adjustments necessary for a fair presentation of the financial position of
Wintrust and its subsidiaries and the results of their operations for the
interim periods presented, subject to normal, recurring year-end adjustments and
the omission of footnote disclosure.
(c) The reserves for loan losses shown on each of the
balance sheets contained in the Wintrust SEC Documents are adequate in the
judgment of management and consistent with the standards of the FDIC and GAAP to
provide for losses, net of recoveries relating to loans previously charged off,
on loans outstanding (including accrued interest receivable) as of the
applicable date of such balance sheet.
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4.6 Compliance with Laws; Legal Proceedings.
(a) Wintrust and its subsidiaries are each in compliance
in all material respects with all applicable federal, state, county and
municipal laws and regulations (i) that regulate or are concerned in any way
with the ownership and operation of banks or the business of banking or of
acting as a fiduciary, including those laws and regulations relating to the
investment of funds, the taking of deposits, the lending of money, the
collection of interest, the extension of credit and the location and operation
of banking facilities, or (ii) that otherwise relate to or affect the business
or assets of Wintrust or any of its subsidiaries or the assets owned, used,
occupied or managed by Wintrust or any of its subsidiaries, except for such
noncompliance which individually or in the aggregate would not have a Material
Adverse Effect on Wintrust. Wintrust and its subsidiaries (direct and indirect)
hold all material licenses, certificates, permits, franchises and rights from
all appropriate federal, state or other Governmental Authorities necessary for
the conduct of their respective businesses and the ownership of their respective
assets.
(b) Except as may be disclosed in the Wintrust SEC
Documents, there are no material claims, actions, suits or proceedings pending
or, to the knowledge of Wintrust, threatened or contemplated against or
affecting Wintrust or its subsidiaries, at law or in equity, or before any
federal, state or other Governmental Authority or any arbitrator or arbitration
panel, whether by contract or otherwise, and there is no decree, judgment or
order or supervisory agreement of any kind in existence against or restraining
Wintrust or its subsidiaries from taking any action of any kind in connection
with their respective businesses. Except as may be disclosed in the Wintrust SEC
Documents or as set forth on Schedule 4.6(b), none of Wintrust or its
subsidiaries has received from any federal, state or other Governmental
Authority any notice or threat (whether written or, to the knowledge of
Wintrust, oral) of any enforcement action, criticism or recommendation
concerning capital, compliance with laws or regulations, safety or soundness,
fiduciary duties or other banking or business practices that has not been
resolved to the reasonable satisfaction of such Governmental Authority and that
would be materially adverse to Wintrust and its subsidiaries taken as a whole,
and Wintrust has no reasonable basis to believe that any such enforcement
action, criticism or recommendation not otherwise disclosed herein is
contemplated.
4.7 Wintrust Regulatory Reports. Since January 1, 2002, Wintrust
and its subsidiaries have filed all reports, registrations and statements,
together with any amendments required to be made with respect thereto, required
to be filed with the Federal Reserve, the Office of the Comptroller of the
Currency (the "OCC") and any other Governmental Authority or self-regulatory
organization with jurisdiction over any of the activities of Wintrust or its
subsidiaries (the "Wintrust Regulatory Reports"), and have paid all fees and
assessments due and payable in connection therewith. As of their respective
dates, the Wintrust Regulatory Reports complied in all material respects with
the statutes, rules and regulations enforced or promulgated by the applicable
regulatory authority with which they were filed and did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
4.8 No Adverse Change. Except as disclosed in the Wintrust SEC
Documents, this Agreement, or the Schedules delivered pursuant to this Agreement
there has not occurred (a) since December 31, 2003, any Material Adverse Effect
on Wintrust, or (b) any change, condition, event, circumstance, fact or other
occurrence, whether occurring before or since December 31, 2003 that may
reasonably be expected to have or result in a Material Adverse Effect on
Wintrust. No fact or condition exists with respect to the business, operations
or assets of Wintrust or its subsidiaries which Wintrust has reason to believe
may cause the Federal Reserve Application, the IDFPR Application or any of the
other regulatory approvals referenced in Section 7.3 or 8.3 to be denied or
unduly delayed.
4.9 Brokers' and Finders' Fees. Wintrust has not incurred any
liability for brokerage commissions, finders' fees, or like compensation with
respect to the transactions contemplated by this Agreement.
4.10 Taxation of the Merger. Neither Wintrust nor any subsidiary of
Wintrust has engaged in any act that would preclude or adversely affect the
Merger from qualifying as a tax-free reorganization under Section 368(a) of the
Code.
4.11 No Omissions. None of the representations and warranties
contained in Article IV or in the Schedules provided for herein is false or
misleading in any material respect or omits to state a fact herein necessary to
make such statements not misleading in any material respect.
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ARTICLE V
AGREEMENTS AND COVENANTS
5.1 Conduct of Business. During the period commencing on the date
hereof and continuing until the Effective Time, the Company shall conduct the
Company's business and shall cause the Bank to conduct its business in the
Ordinary Course of Business consistent with prudent banking practice. Without
limiting the foregoing, without the prior written consent of Wintrust:
(a) no change shall be made in the certificate of
incorporation or by-laws of the Company or the charter or by-laws of the Bank;
(b) except with respect to the exercise of any Option, no
change shall be made in the capitalization of the Company or the Bank or in the
number of issued and outstanding shares of Company Common Stock or Options;
(c) the compensation of officers or key employees of the
Company or the Bank shall not be increased, nor any bonuses paid except as set
forth on Schedule 5.1(c);
(d) no Loan, or renewal or restructuring of a Loan, in
the amount of $1,000,000 or more (including Loans to any one borrower or related
group of borrowers which, in the aggregate, equal or exceed $1,000,000) shall be
made by the Bank except after delivering to Wintrust a complete loan package for
such Loan, renewal or restructuring, in a form consistent with the Bank's
policies and practice, and obtaining Wintrust's prior consent, which consent
shall not be unreasonably withheld or delayed and shall be deemed given if
Wintrust shall have not responded to the Company's request within two (2)
business days after receipt of such complete loan package, and such Loan or
renewal or restructuring of a Loan shall be made in the Ordinary Course of
Business consistent with prudent banking practices, the Bank's current loan
policies and applicable rules and regulations of applicable Governmental
Authorities with respect to amount, term, security and quality of such
borrower's or borrowers' credit;
(e) no dividends or other distributions shall be declared
or paid by the Company to the extent it would cause the stockholders' equity in
the Company, as adjusted pursuant to Section 7.11 below, to fall below the
Minimum Adjusted Net Worth, or as otherwise would not be permitted under
applicable law;
(f) no dividends or other distributions shall be declared
or paid by the Bank to the extent it would cause the minimum net worth of the
Bank to fall below well-capitalized status, as defined by applicable FDIC
regulations, or as would not be permitted under applicable law;
(g) the Company and the Bank shall each use their
commercially reasonable efforts to maintain their present insurance coverage in
respect to its properties and business;
(h) no significant changes shall be made in the general
nature of the business conducted by the Company or the Bank;
(i) no employment, consulting or similar agreements shall
be entered into by the Company or the Bank that are not terminable by the
Company or the Bank on 30 days' or fewer notice without penalty or obligation;
(j) neither the Company nor the Bank shall take any
action that would result in a termination, partial termination, curtailment,
discontinuance of a Benefit Plan or merger of any Benefit Plan into another plan
or trust;
(k) the Company and the Bank shall file all Tax Returns
in a timely manner and shall not make any application for or consent to any
extension of time for filing any Tax Return or any extension of the period of
limitations applicable thereto;
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(l) neither the Company nor the Bank shall make any
expenditure any expenditure for fixed assets in excess of $50,000 for any single
item, or $250,000 in the aggregate, or shall enter into leases of fixed assets
having an annual rental in excess of $50,000;
(m) neither the Company nor the Bank shall incur any
liabilities or obligations, make any commitments or disbursements, acquire or
dispose of any property or asset, make any contract or agreement, or engage in
any transaction except in the Ordinary Course of Business consistent with
prudent banking practices and the Bank's current policies;
(n) neither the Company nor the Bank shall do or fail to
do anything that will cause a breach by the Company or the Bank of, or default
by the Company or the Bank under, any Material Contract;
(o) the Bank shall not engage or agree to engage in any
"covered transaction" within the meaning of Sections 23A or 23B of the Federal
Reserve Act (without regard to the applicability of any exemptions contained in
Section 23A) or any transaction of the kind referred to in Section 3.12, unless
the Bank has complied with Sections 23A and B of the Federal Reserve Act;
(p) the Bank shall only purchase or invest in obligations
of the government of the United States or agencies of the United States or state
or local governments having maturities of not more than five (5) years and which
municipal obligations have been assigned a rating of A or better by Moody's
Investors Service or by Standard and Poor's, provided, however, that the Bank
shall be permitted to purchase up to an aggregate of $5,000,000 of (i)
mortgage-backed securities with an average maturity of seven (7) years or less
issued by the Government National Mortgage Association, the Federal National
Mortgage Association or the Federal Home Loan Mortgage Corporation and (ii)
securities issued by the United States Small Business Administration so long as
such securities are not purchased at a premium.
(q) no changes of a material nature shall be made in
either the Company's or the Bank's accounting procedures, methods, policies or
practices or the manner in which the Company or the Bank maintain their records.
5.2 Access to Information.
(a) To the extent permissible under applicable law and
pending the Closing, representatives of Wintrust shall, during normal business
hours and on reasonable advance notice to the Company, be given full access to
the Company's and the Bank's records and business activities and be afforded the
opportunity to observe their business activities and consult with their officers
and employees regarding the same on an ongoing basis (without limiting the
foregoing, to verify compliance by the Company with all terms of this
Agreement); provided, however, that the foregoing actions do not interfere with
the business operations of the Company and the Bank.
(b) Wintrust will use such information as is provided to
it by the Company or the Bank, or representatives thereof, solely for the
purpose of conducting business, legal and financial reviews of the Company and
the Bank and for such other purposes as may be related to this Agreement, and
Wintrust will, and will direct all of its agents, employees and advisors to,
maintain the confidentiality of all such information in accordance with the
terms of the letter agreement regarding confidentiality entered into by and
between Hovde Financial LLC, on behalf of the Company and the Bank, and Wintrust
dated June 30, 2004 (the "Confidentiality Agreement").
5.3 Meeting of Stockholders of the Company. As soon as practicable
after the date of this Agreement and the effectiveness of the Registration
Statement pursuant to Section 5.4, the Company shall call and hold a meeting of
its stockholders for the purpose of voting upon this Agreement, the Merger and
the transactions herein contemplated in accordance with the Company's
certificate of incorporation, its by-laws and the DGCL (the "Stockholders
Meeting"). The Company shall, through the Company Board, recommend to its
stockholders, subject to its fiduciary duties, approval of this Agreement and
the Merger.
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5.4 Registration Statement and Regulatory Filings.
(a) Wintrust shall file with the Commission within 30
days after the execution of this Agreement or as soon as practicable, a
registration statement on an appropriate form under the Securities Act covering
Wintrust Common Stock to be issued pursuant to this Agreement and shall use its
reasonable and diligent efforts to cause the same to become effective and
thereafter, until the Effective Time or termination of this Agreement, to keep
the same effective and, if necessary, amend and supplement the same. Such
registration statement and any amendments and supplements thereto are referred
to herein as the "Registration Statement." The Registration Statement shall
include a Proxy Statement/Prospectus thereto reasonably acceptable to Wintrust
and the Company, prepared by Wintrust and the Company for use in connection with
the meeting of stockholders of the Company referred to in Section 5.3, all in
accordance with the rules and regulations of the Commission. Wintrust shall, as
soon as practicable after the execution of this Agreement, make all filings, if
any, required to obtain all blue sky permits, authorizations, consents or
approvals required for the issuance of Wintrust Common Stock. In advance of
filing the Registration Statement, Wintrust shall provide the Company and its
counsel with a copy of the Registration Statement and provide an opportunity to
comment thereon, and thereafter shall promptly advise the Company and its
counsel of any material communication received by Wintrust or its counsel from
the Commission with respect to the Registration Statement. None of the
information furnished by Wintrust or the Company for inclusion in the
Registration Statement, the Proxy Statement/Prospectus or any other document
filed with the Commission or any state securities commission, at the respective
times at which such documents are filed with the Commission or such state
securities commission, or, in the case of the Registration Statement, when it
becomes effective, or in the case of the Proxy Statement/Prospectus, when mailed
or at the time of the Stockholders Meeting, shall be false or misleading with
respect to any material fact or shall omit to state any material fact necessary
in order to make the statements therein, in light of the circumstances in which
they were made, not misleading.
(b) Wintrust, within 30 days following execution and
delivery of this Agreement, will file the Federal Reserve Application and the
IDFPR Application and take all other appropriate actions (except as otherwise
specified in Section 5.4(a) above) necessary to obtain the regulatory approvals
referred to in Sections 7.3 and 8.3 hereof, and the Company will use all
reasonable and diligent efforts to assist in obtaining all such approvals. The
obligation to take all appropriate actions shall not be construed as including
an obligation to accept any terms of or conditions to a consent, authorization,
order, or approval of, or any exemption by, any Governmental Authority or other
party that are not acceptable to Wintrust, in its sole reasonable discretion, or
to change the business practices of Wintrust or any of its subsidiaries in a
manner not acceptable to Wintrust, in its sole reasonable discretion. In advance
of filing any applications for such regulatory approvals, Wintrust shall provide
the Company and its counsel with a copy of such applications (but excluding any
information contained therein regarding Wintrust and its business or operations
for which confidential treatment has been requested) and provide an opportunity
to comment thereon, and thereafter shall promptly advise the Company and its
counsel of any material communication received by Wintrust or its counsel from
any regulatory authorities with respect to such applications.
5.5 Listing of Shares. Wintrust shall use all reasonable and
diligent efforts to cause the shares of Wintrust Common Stock issuable in the
Merger to be approved for listing on the Nasdaq National Market.
5.6 Reasonable and Diligent Efforts. The Parties shall use
reasonable and diligent efforts in good faith to satisfy the various conditions
to Closing and to consummate the Merger as soon as practicable. None of the
Parties will intentionally take or intentionally permit to be taken any action
that would be in breach of the terms or provisions of this Agreement (including
any action that would impair or impede the timely obtainment of the regulatory
approvals referenced in Sections 7.3 and 8.3) or that would cause any of the
representations contained herein to be or become untrue.
5.7 Business Relations and Publicity. The Company shall use
reasonable and diligent efforts to preserve the reputation and relationship of
the Company and the Bank with suppliers, clients, customers, employees, and
others having business relations with the Company or the Bank. Wintrust and the
Company shall coordinate all publicity relating to the transactions contemplated
by this Agreement and, except as otherwise required by applicable law or the
rules of the Nasdaq National Market, or with respect to employee meetings,
neither Party shall issue any press release, publicity statement or other public
notice or communication, whether written or oral, relating to this Agreement or
any of the transactions contemplated hereby without obtaining the prior consent
of the other, which consent shall not be unreasonably withheld, conditioned or
delayed. The Company shall obtain the prior
A-23
consent (which shall not be unreasonably withheld, conditioned or delayed) of
Wintrust to the content of any communication to the Company's stockholders. In
furtherance of the foregoing the Parties acknowledge that immediately after
execution of this Agreement Wintrust shall issue a news release (after
consultation with the Company as to its content) and file the same with the
Commission on Form 8-K.
5.8 No Conduct Inconsistent with this Agreement.
(a) The Company shall not, and shall cause the Bank to
not, during the term of this Agreement, directly or indirectly, solicit,
encourage or facilitate inquiries or proposals or enter into any agreement with
respect to, or initiate or participate in any negotiations or discussions with
any person or entity concerning, any proposed transaction or series of
transactions involving or affecting the Company or the Bank (or the securities
or assets of either) that, if effected, would constitute an acquisition of
control of either the Company or the Bank within the meaning of 12 U.S.C.A.
ss.1817(j) (disregarding the exceptions set forth in 12 U.S.C.A. ss.1817(j)(17))
and the regulations of the Federal Reserve thereunder (each, an "Acquisition
Proposal"), or furnish any information to any person or entity proposing or
seeking an Acquisition Proposal.
(b) Notwithstanding the foregoing, in the event that the
Company Board determines in good faith and after consultation with outside
counsel, that in light of a Superior Acquisition Proposal (as defined herein) it
is necessary to pursue such Superior Acquisition Proposal in order to act in a
manner consistent with such Board's fiduciary duties, the Company Board may, in
response to an Acquisition Proposal which was not solicited by or on behalf of
the Company or the Bank or which did not otherwise result from a breach of
Section 5.8(a), subject to its compliance with Section 5.8(c), (i) furnish
information with respect to the Company or the Bank to such person or entity
making such Superior Acquisition Proposal pursuant to a customary
confidentiality agreement that is no less restrictive than the Confidentiality
Agreement, (ii) participate in discussions or negotiations regarding such
Superior Acquisition Proposal, (iii) withdraw, modify or otherwise change in a
manner adverse to Wintrust, the Company's recommendation to its stockholders
with respect to this Agreement and the Merger, and/or (iv) terminate this
Agreement in order to concurrently enter into an agreement with respect to such
Superior Acquisition Proposal; provided, however, that the Company Board may not
terminate this Agreement pursuant to this Section 5.8(b) unless and until (x)
five (5) business days have elapsed following the delivery to Wintrust of a
written notice of such determination by the Company Board and during such five
(5) business-day period, the Company and the Bank otherwise cooperate with
Wintrust with the intent of enabling the Parties to engage in good faith
negotiations so that the Merger and other transactions contemplated hereby may
be effected and (y) at the end of such five (5) business-day period the Company
Board continue reasonably to believe the Acquisition Proposal at issue
constitutes a Superior Acquisition Proposal. A "Superior Acquisition Proposal"
shall mean any Acquisition Proposal containing terms which the Company Board
determines in its good faith judgment (based on the advice of an independent
financial advisor) to be more favorable to the Company's stockholders than the
Merger and for which financing, to the extent required, is then committed or
which, in the good faith judgment of the Company Board, is reasonably capable of
being obtained by such third party, but shall exclude any Acquisition Proposal
the terms of which were made known to the Company Board prior to the date of
this Agreement.
(c) In addition to the obligations of the Company set
forth in Section 5.8(a) and (b), the Company shall immediately advise Wintrust
orally and in writing of any request for information or of any Acquisition
Proposal, the material terms and conditions of such request or Acquisition
Proposal and the identity of the person or entity making such request or
Acquisition Proposal. The Company shall keep Wintrust reasonably informed of the
status and details (including amendments or proposed amendments) of any such
request or Acquisition Proposal, including the status of any discussions or
negotiations with respect to any Superior Acquisition Proposal.
5.9 Loan Charge-Off; Pre-Closing Loan Review.
(a) The Company shall cause the Bank, prior to the
Closing Date, to write off all Loans of the Bank that are required to be written
off by the Bank's regulators or that, in conformity with past practices and
policies of the Bank and GAAP, should be written off as Loan losses.
(b) The Company shall make available to Wintrust full
information regarding the status of each Loan contained in the Loan portfolio of
the Bank, as of a date not more than 15 days prior to the Closing Date.
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(c) Wintrust and the Company shall negotiate in good
faith regarding the write down, in conformity with the provisions of Section
5.9(a) above, of potential Loan losses (net of reasonably conservative estimates
of collateral recoveries and of applicable reserves) identified to the Company
by Wintrust; provided, however, that: (i) the Company shall not be required to
take any actions as a result of such good faith negotiations (1) more than five
(5) days prior to the Closing Date and (2) until such time as the Company shall
have received reasonable assurances that all conditions precedent to Wintrust's
obligations under this Agreement (except for the completion of actions to be
taken at the Closing) have been satisfied; (ii) any such actions taken as a
result of such good faith negotiation (1) shall not have any effect on the
representations and warranties under Section 3.8 made by the Company as of the
date of this Agreement but (2) shall be taken into account in determining the
Minimum Adjusted Net Worth (as defined in Section 7.9 below) of the Company as
of the Closing Date; and (iii) nothing in this Section 5.9 shall require the
Company to make any additional provision to the Bank's reserve for loan losses
so long as such reserve, determined as described in Section 3.8 and in
compliance with the second sentence of Section 5.13 below, is adequate and not
less than 1.20% of the Bank's total Loans (gross Loans less unearned discounts).
5.10 Board of Directors' Notices and Minutes. The Company shall
give reasonable notice to Wintrust of all meetings of the Company Board and any
of its committees, and the board of directors of the Bank and any of its
committees, and if known, the agenda for or business to be discussed at such
meetings. To the extent permissible under law, the Company shall promptly
transmit to Wintrust copies of all notices, minutes, consents and other
materials that the Company or the Bank provides to their directors, other than
materials relating to any proposed acquisition of the Company or the Bank, or
this Agreement or the Merger, subject to the Company's compliance with Section
5.8. Wintrust agrees to hold in confidence all such information pursuant to the
Confidentiality Agreement.
5.11 Untrue Representations and Warranties. During the term of this
Agreement, if any Party becomes aware of any facts, circumstances or of the
occurrence or impending occurrence of any event that would cause one or more of
such Party's representations and warranties contained in this Agreement to be or
to become untrue as of the Closing Date then:
(a) such Party shall promptly give detailed written
notice thereof to the other Parties; and
(b) such Party shall use reasonable and diligent efforts
to change such facts or events to make such representations and warranties true,
unless the same shall have been waived in writing by the other Parties.
5.12 Director and Officer Liability Coverage. Wintrust agrees to
provide each of the directors and officers of the Company and the Bank after the
Effective Time substantially the same insurance coverage against personal
liability for actions taken after the Effective Time as is provided to directors
and officers of Wintrust. Wintrust further agrees to cause the Surviving
Corporation, or its successors in interest, for a period of five (5) years after
the Effective Time, to indemnify the current and past directors and officers of
the Company and the Bank for all actions taken by them prior to the Effective
Time in their respective capacities as directors and officers of the Company and
the Bank to the same extent as the indemnification provided by the Company and
the Bank under their respective by-laws to such directors and officers
immediately prior to the Effective Time.
5.13 Interim Financial Statements. Prior to the Closing Date, the
Company shall deliver to Wintrust a monthly balance sheet, income statement and
statement of stockholders' equity of the Company and the Bank as of the end of
each month as promptly as practicable after they become available. Such monthly
financial statements shall be prepared consistent with past practice and in
conformity in all material respects with GAAP (excluding footnote disclosure)
applied on a basis consistent with the Financial Statements. Notwithstanding the
preceding sentence, such monthly financial statements (a) shall not reflect any
negative loan loss provisions with respect to the Company or the Bank and (b)
shall reflect a monthly loan loss provision of at least $5,000 recorded by the
Bank.
5.14 Dissent Process. The Company will give to Wintrust prompt
notice of any written notice relating to the exercise of appraisal rights
granted under the DGCL, including the name of the dissenting stockholder and the
number of shares of Company Common Stock to which the dissent relates. Wintrust
will have the right to participate in all negotiations and proceedings relating
thereto, and exceptions required by law. The Company will
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not make any payment with respect to, or settle or offer to settle, any
appraisal demands without Wintrust's prior written consent.
5.15 Section 368(a) Reorganization. Either prior to or after the
Closing Date, none of the Parties shall take or cause to be taken any action, or
omit to take any action or cause any omission, which would cause the Merger not
to qualify as a reorganization under Section 368(a) of the Code.
5.16 Exercise of Options. Notwithstanding anything contained in
this Agreement to the contrary, Wintrust and the Company each acknowledge and
agree that the holder of any Option may, at any time prior to the fifth business
day preceding the Closing Date, exercise such Option in accordance with its
terms and conditions.
5.17 Converted Options. Wintrust agrees to assume and honor each of
the Converted Options in accordance with their terms. As soon as reasonably
practicable following the Closing Date, Wintrust shall file a registration
statement with the Commission with respect to the shares of Wintrust Common
Stock to be covered by such Converted Options. Such shares of Wintrust Common
Stock shall be duly authorized and, upon exercise of such Converted Options,
shall be validly issued, fully paid and nonassessable, and not in violation of
or subject to any preemptive rights except as set forth in Wintrust's articles
of incorporation. Wintrust shall after the Effective Time have reserved
sufficient shares of Wintrust Common Stock for issuance with respect to such
options.
5.18 Termination of Tax Sharing Agreement. The Company shall, and
shall cause the Bank to, terminate the Tax Sharing Agreement effective
immediately prior to the Effective Time.
ARTICLE VI
EMPLOYEE BENEFIT MATTERS
6.1 Benefit Plans. Schedule 6.1 lists all of the employees of the
Company and the Bank (the "Employees"). Wintrust and the Company Board shall
together review the Benefit Plans and the coverages provided thereunder. The
Company Board shall cause the Company to terminate effective as of the Closing
Date all Benefit Plans other than the Company's 401(k) plan, health, life and
disability insurance plans, and long-term care plan (the "Retained Plans"), and
to pay prior to the Closing or accrue fully any liabilities under the Benefit
Plans (including the Retained Plans) or arising out of such termination of
Benefit Plans. Effective as of the Closing Date each full-time Employee shall
become eligible for and entitled to participate in Wintrust's benefit plans
(other than those benefit plans for which such Employee is covered under the
Retained Plans) on the same terms and subject to the same conditions as all
other U.S. employees of Wintrust and its subsidiaries. From and after the
Closing Date Wintrust shall continue coverage for the Employees under the
Retained Plans in effect prior to the Closing Date, to the extent not in
violation of any statute, law (including common law), ordinance, rule or
regulation applicable to such plans or the qualifications or requirements of
such plans, until such time as Wintrust determines such plans are to be
terminated or merged with existing Wintrust plans, at which time all Employees
previously covered under such Retained Plans shall become eligible for and
entitled to participate in Wintrust's similar plans on the same terms and
subject to the same conditions as all other U.S. employees of Wintrust and its
subsidiaries. To the extent permitted by applicable law, the Company shall cause
its health insurance provider to (i) provide to Wintrust a schedule of
de-identified information regarding the claims experience of insured persons
under the applicable Benefit Plans, and (ii) inform Wintrust of whether such
health provider is aware of any significant pre-existing conditions of any
insured persons that are not reflected in such schedule. Wintrust shall use its
reasonable and diligent efforts to cause any pre-existing condition limitations
under Wintrust's medical benefit plans to be waived to the extent such
conditions have been waived under the Company's health insurance plans. For
purposes of determining eligibility to participate in and, where applicable,
vesting under Wintrust's applicable retirement savings plan and employee stock
purchase plan, Wintrust's short-term disability plans and vacation policy, each
Employee shall receive past service credit for his or her prior employment with
the Company as if such Employee had then been employed by Wintrust. Wintrust
reserves the right to change or terminate its employee benefit plans at any
time.
6.2 No Rights or Remedies. Nothing in this Article shall confer
upon any Employee or his or her legal representative, any rights or remedies,
including any right to employment, or continued employment, for any specified
period, or any nature or kind whatsoever under or by reason of this Agreement.
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ARTICLE VII
CONDITIONS PRECEDENT TO
OBLIGATIONS OF WINTRUST
Unless the conditions are waived by Wintrust, all obligations of
Wintrust under this Agreement are subject to the fulfillment, on or before the
Closing, of each of the following conditions:
7.1 Representations and Warranties; Performance of Agreements.
Each of the representations and warranties contained in Article III of this
Agreement that are qualified by materiality shall be true and correct in all
respects as of the Closing Date, and each of the representations and warranties
contained in Article III that are not qualified by materiality shall be true and
correct in all material respects, except to the extent such representations and
warranties speak as of an earlier date, they shall be tested as of such earlier
date. The Company shall have performed in all material respects all agreements
herein required to be performed by the Company on or before the Closing.
7.2 Closing Certificate. Wintrust shall have received a
certificate of the Company signed by a senior executive officer of the Company,
dated as of the Closing Date, certifying in such detail as Wintrust may
reasonably request, as to the fulfillment of the conditions to the obligations
of Wintrust set forth in this Agreement that are required to be fulfilled by the
Company on or before the Closing.
7.3 Regulatory and Other Approvals. Wintrust shall have obtained
the approval of all appropriate regulatory entities of the transactions
contemplated by this Agreement and the Merger, all required regulatory waiting
periods shall have expired, and there shall be pending on the Closing Date no
motion for rehearing or appeal from such approval or any suit or action seeking
to enjoin the Merger or to obtain substantial damages in respect of such
transaction.
7.4 Approval of Merger and Delivery of Agreement. This Agreement
and the Merger shall have been approved by the stockholders of the Company in
accordance with the Company's articles of incorporation, by-laws and the DGCL,
and the proper officers of the Company shall have executed and delivered to
Wintrust the IL Articles of Merger and the DE Certificate of Merger, each in
form suitable for filing with the Illinois Secretary of State and Delaware
Secretary of State, respectively, and shall have executed and delivered all such
other certificates, statements or instruments as may be necessary or appropriate
to effect such a filing. The holders of not more than 5% of the shares of
Company Common Stock shall have given written demand for appraisal rights in
accordance with the DGCL.
7.5 Effectiveness of the Registration Statement. The Registration
Statement shall have become effective with respect to the shares of Wintrust
Common Stock to be issued in the Merger, no stop order suspending the
effectiveness of such Registration Statement shall have been issued and no
proceeding for that purpose shall have been instituted or threatened in writing.
7.6 No Litigation. No suit or other action shall have been
instituted or threatened in writing seeking to enjoin the consummation of the
Merger or to obtain other relief in connection with this Agreement or the
transactions contemplated herein that Wintrust believes, in good faith and with
the written advice of outside counsel, makes it undesirable or inadvisable to
consummate the Merger by reason of the probability that the proceeding would
result in the issuance of an order enjoining the Merger or in a determination
that the Company or the Bank has failed to comply with applicable legal
requirements of a material nature in connection with the Merger or actions
preparatory thereto or would have a Material Adverse Effect on the Company or
the Bank.
7.7 Environmental Surveys. Wintrust shall have the right, at its
sole option and cost, to obtain Phase I environmental audits of all real
property or facilities owned or used by either the Company or the Bank in the
conduct of their respective businesses, conducted by an independent
environmental consultant selected by Wintrust. No such environmental audit shall
have identified any violation of the Environmental Laws or condition relating to
the environment, human health or safety which could reasonably be expected to
have a Material Adverse Effect on the Company.
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7.8 Opinion of Counsel. Wintrust shall have received the opinion
of Barack Ferrazzano Kirschbaum Perlman & Nagelberg LLP, counsel for the
Company, dated as of the Closing Date, and in form substantially similar to
Exhibit B and reasonably satisfactory to Wintrust and its counsel.
7.9 Employment Agreements. Those persons identified on Schedule
7.9 shall each have entered into an employment agreement with Wintrust or the
Bank, dated the Closing Date, in substantially the form attached as Exhibit C,
and shall each be capable of performing his or her duties under his or her
employment agreement as of the Closing Date.
7.10 No Adverse Changes. Between the date of this Agreement and the
Closing Date, the business of the Company and the Bank, taken as a whole, shall
have been conducted in the Ordinary Course of Business, in all respects
consistent with prudent banking practices, and there shall not have occurred any
change or any condition, event, circumstance, fact or occurrence, other than as
provided in this Agreement, that would have a Material Adverse Effect on the
Company.
7.11 Minimum Net Worth and Loan Loss Reserve Requirements. The
Company shall have delivered to Wintrust a balance sheet as of the Closing Date
(the "Closing Balance Sheet"), prepared in conformity with past practices and
policies of the Company and GAAP applied on a basis consistent with the
preparation of the Financial Statements, which shall reflect that stockholders'
equity in the Company, adjusted to reflect the following adjustments,
specifications and charges (which adjustments, specifications and charges shall
be made by the Company on or prior to the Closing Date), shall be equal to or
greater than the sum of $13,100,000.00 plus any cash receipts and attendant tax
benefits recorded from the exercise of Options on or after October 21, 2004 in
accordance with Section 5.16 (such sum, after giving effect to such adjustments,
specifications and charges, the "Minimum Adjusted Net Worth"):
(a) the Closing Balance Sheet shall reflect accruals for,
on an after-tax basis if appropriate, (i) any professional fees and expenses
(including legal, investment banking and accounting fees) actually incurred by
the Company in connection with this Agreement and the transactions contemplated
hereby, and (ii) any change of control payments due to Mr. S. Michael Polanski
under his existing employment agreement with the Company as a result of the
Merger, which shall be paid to Mr. Polanski by the Company concurrently with the
Closing;
(b) any changes in the Other Comprehensive Income account
recorded as equity after August 31, 2004 shall be disregarded for purposes of
determining Minimum Adjusted Net Worth;
(c) the Company shall have no more than $5,155,000 of
indebtedness (including trust preferred securities issued and outstanding); and
(d) the Bank's reserve for loan losses, determined as
described in Section 3.8 and in compliance with the second sentence of Section
5.13, shall be not less than 1.20% of the Bank's net Loans (gross Loans less
unearned discounts). The Company may distribute to its stockholders immediately
prior to Closing the amount by which stockholders' equity is greater than the
Minimum Adjusted Net Worth.
7.12 Voting Agreements. On or before November 30, 2004, Wintrust
shall have received a Voting Agreement, in the form attached hereto as Exhibit
D, executed by each of those stockholders of the Company identified on Schedule
7.12.
7.13 Consents. The Company shall have obtained or caused to be
obtained (a) all written consents under those Material Contracts set forth on
Schedule 3.5, and (b) all other written consents, permissions and approvals as
required under any agreements, contracts, appointments, indentures, plans,
trusts or other arrangements with third parties required to effect the
transactions contemplated by this Agreement where failure to obtain such
consents, permissions and approvals would have a Material Adverse Effect on the
Company or Wintrust's rights under this Agreement.
7.14 Liquidation of Subsidiaries. The Company shall have, and shall
have caused the Bank to, dissolve, wind up and liquidate each of First Northwest
Financial, Mortgage LLC and Insurance LLC.
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7.15 Other Documents. Wintrust shall have received at the Closing
such other customary documents, certificates, or instruments as they may have
reasonably requested evidencing compliance by the Company with the terms and
conditions of this Agreement.
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS
OF THE COMPANY
Unless the conditions are waived by the Company, all obligations of the
Company under this Agreement are subject to the fulfillment, on or before the
Closing, of each of the following conditions:
8.1 Representations and Warranties; Performance of Agreements.
Each of the representations and warranties contained in Article IV of this
Agreement that are qualified by materiality shall be true and correct in all
respects as of the Closing Date, and each of the representations and warranties
contained in Article IV that are not qualified by materiality shall be true and
correct in all material respects, except to the extent such representations and
warranties speak as of an earlier date, they shall be tested as of such earlier
date. Wintrust shall have performed in all material respects all agreements
herein required to be performed by Wintrust on or before the Closing.
8.2 Closing Certificates. The Company shall have received
certificates signed by the Chief Executive Officer, a Senior Executive Vice
President, an Executive Vice President, or a Senior Vice President of Wintrust
dated as of the Closing Date, certifying in such detail as the Company may
reasonably request, as to the fulfillment of the conditions to the obligations
of the Company as set forth in this Agreement.
8.3 Regulatory and Other Approvals. Wintrust shall have obtained
the approval of all appropriate regulatory entities of the transactions
contemplated by this Agreement and the Merger, all required regulatory waiting
periods shall have expired, and there shall be pending on the Closing Date no
motion for rehearing or appeal from such approval or any suit or action seeking
to enjoin the Merger or to obtain substantial damages in respect of such
transaction.
8.4 Delivery of Agreement. The proper officers of Wintrust shall
have executed and delivered to the Company the IL Articles of Merger and the DE
Certificate of Merger, each in form suitable for filing with the Illinois
Secretary of State and Delaware Secretary of State, respectively, and shall have
executed and delivered all such other certificates, statements or instruments as
may be necessary or appropriate to effect such a filing.
8.5 Effectiveness of the Registration Statement. The Registration
Statement shall have become effective with respect to the shares of Wintrust
Common Stock to be issued in the Merger, no stop order suspending the
effectiveness of such Registration Statement shall have been issued, no
proceeding for that purpose shall have been instituted or threatened in writing.
8.6 No Litigation. No suit or other action shall have been
instituted or threatened in writing seeking to enjoin the consummation of the
Merger or to obtain other relief in connection with this Agreement or the
transactions contemplated herein that the Company believes, in good faith and
with the written advice of outside counsel, makes it undesirable or inadvisable
to consummate the Merger by reason of the probability that the proceeding would
result in the issuance of an order enjoining the Merger or in a determination
that Wintrust has failed to comply with applicable legal requirements of a
material nature in connection with the Merger or actions preparatory thereto or
would have a Material Adverse Effect on Wintrust.
8.7 Opinions of Counsel.
(a) The Company shall have received the opinion of Schiff
Hardin LLP, special counsel for Wintrust, dated as of the Closing Date, and in
form substantially similar to Exhibit E and reasonably satisfactory to the
Company and its counsel.
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(b) The Company shall have received the opinion of
Vedder, Price, Kaufman & Kammholz, P.C., as special counsel to the Company,
dated as of the Closing Date, to the effect that the Merger will constitute a
"reorganization" within the meaning of Section 368(a) of the Code, that the
Company and Wintrust will each be a party to such reorganization within the
meaning of Section 368(a) of the Code, and that no gain or loss will be
recognized by the holders of shares of Company Common Stock upon the receipt of
shares of Wintrust Common Stock in exchange for their shares of Company Common
Stock, except to the extent of any Cash Consideration received in the Merger and
any cash received in lieu of fractional share of Wintrust Common Stock. The tax
opinion shall be supported by one or more fact certificates or affidavits from
Wintrust, in such form and content as may reasonably be requested by counsel to
the Company.
8.8 No Adverse Changes. Between the date of this Agreement and the
Closing Date, there shall not have occurred any change or any condition, event,
circumstance, fact or occurrence, other than as provided in this Agreement, that
would have a Material Adverse Effect on Wintrust.
8.9 Nasdaq Listing. The Wintrust Common Stock to be issued to
holders of Company Common Stock pursuant to the Merger shall have been approved
for listing on the Nasdaq National Market, subject to official notice of
issuance if required.
8.10 Supplemental Indenture. Pursuant to the Junior Subordinated
Indenture between the Company and Wilmington Trust Company dated May 25, 2004
(the "Trust Preferred Indenture"), Wintrust shall have entered into a
supplemental indenture and taken such other actions as reasonably required under
the Trust Preferred Indenture for Wilmington Trust Company to consent to the
change in control of the Company, provided that the Company shall have taken all
actions required under the Trust Preferred Indenture in connection with such
change in control, including delivery to Wilmington Trust Company of an
officer's certificate of the Company and opinion of Company counsel.
8.11 Other Documents. The Company shall have received at the
Closing all such other customary documents, certificates, or instruments as they
may have reasonably requested evidencing compliance by Wintrust with the terms
and conditions of this Agreement.
ARTICLE IX
NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS
9.1 Non-Survival. None of the representations, warranties,
covenants and agreements in this Agreement shall survive the Effective Time,
except for those covenants or agreements contained herein which by their terms
apply in whole or in part after the Effective Time.
ARTICLE X
GENERAL
10.1 Expenses. Except as otherwise provided in this Section 10.1,
all costs and expenses incurred in the consummation of this transaction,
including any brokers' or finders' fees, shall be paid by the Party incurring
such cost or expense.
(a) Each of Wintrust and the Company shall bear and pay
one-half of the costs and expenses incurred in connection with the printing and
mailing of the Registration Statement, excluding legal and accounting fees and
expenses related thereto which shall be borne and paid by the Party incurring
such fees and expenses. Registration Statement filing fees to be paid to the
Commission shall be borne and paid by Wintrust.
(b) In the event that this Agreement is terminated by
Wintrust because the Company committed a material breach of its material
obligations under this Agreement, unless such breach is a result of the failure
by Wintrust to perform and comply in all material respects with any of its
material obligations under this Agreement which are to be performed or complied
with by it prior to or on the date of such termination, then,
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provided Wintrust is in material compliance with all of its material obligations
under this Agreement, the Company shall reimburse Wintrust in an amount, not to
exceed $250,000, for the out-of-pocket expenses and costs, subject to
verification thereof, that Wintrust (i) has incurred in furtherance of this
Agreement and the transactions contemplated herein and (ii) is reasonably
expected to incur as a result of the Company's breach of this Agreement,
including, but not limited to, reasonable fees of professionals engaged for such
purpose by or on behalf of Wintrust; provided, however, that except as provided
in Section 10.1(c), such sums shall constitute liquidated damages and the
receipt thereof shall be Wintrust's sole and exclusive remedy under this
Agreement. Notwithstanding the foregoing, if this Agreement is terminated by
Wintrust as a result of the Company's willful breach of this Agreement, then in
addition to recovery of its out-of-pocket expenses and costs, Wintrust shall be
entitled to recover such other amounts, including consequential damages, as it
may be entitled to receive at law or in equity.
(c) In the event that this Agreement is terminated (i) by
Wintrust as a result of a breach by the Company of its covenant in Section
5.8(a), (ii) by the Company pursuant to Section 10.2(e), or (iii) pursuant to
Sections 10.2(b) or 10.2(c) and within six months after the date of such
termination the Company or the Bank has either consummated or entered into a
definitive agreement relating to an Acquisition Proposal which was made known to
any member of the Company Board and not disclosed to Wintrust prior to the date
of such termination, then the Company shall pay to Wintrust a termination fee
equal to $1,000,000.
(d) In the event that this Agreement is terminated by the
Company because Wintrust committed a material breach of its material obligations
under this Agreement, unless such breach is a result of the failure by the
Company or the Bank to perform and comply in all material respects with any of
its material obligations under this Agreement which are to be performed or
complied with by it prior to or on the date of such termination, then, provided
the Company is in material compliance with all of its material obligations under
this Agreement, Wintrust shall reimburse the Company in an amount, not to exceed
$250,000, for the out-of-pocket expenses, subject to verification thereof, that
the Company (i) has incurred in furtherance of this Agreement and the
transactions contemplated herein and (ii) is reasonably expected to incur as a
result of Wintrust's breach of this Agreement, including, but not limited to,
reasonable fees of professionals engaged for such purpose by or on behalf of the
Company; provided, however, that such sums shall constitute liquidated damages
and the receipt thereof shall be the Company's sole and exclusive remedy under
this Agreement. Notwithstanding the foregoing, if this Agreement is terminated
by the Company as a result of Wintrust's willful breach of this Agreement, then
in addition to recovery of its out-of-pocket expenses and costs, the Company
shall be entitled to recover such other amounts, including consequential
damages, as it may be entitled to receive at law or in equity.
(e) In the event this Agreement is terminated pursuant to
Section 10.2(b) because Wintrust fails to obtain all of the necessary regulatory
approvals described in Sections 7.3 and 8.3 for any reason other than regulatory
matters relating solely to the Company or the Bank, Wintrust shall pay to the
Company $250,000, provided, however, that such sums shall constitute liquidated
damages and the receipt thereof shall be the Company's sole and exclusive remedy
under this Agreement.
(f) In the event this Agreement is terminated pursuant to
Section 10.2(b) because Wintrust fails to obtain all of the necessary regulatory
approvals described in Sections 7.3 and 8.3 because of regulatory matters
relating solely to the Company or the Bank, the Company shall pay to Wintrust
$250,000, provided, however, that except as provided in Section 10.1(c), such
sums shall constitute liquidated damages and the receipt thereof shall be
Wintrust's sole and exclusive remedy under this Agreement.
All costs and expenses reasonably estimated to have been incurred by the Company
shall be either paid or accrued for on or prior to the Closing Date; provided,
however, that nothing in this Section 10.1 shall be deemed to relieve the
Company of its liability to pay any expenses incurred in connection with this
Agreement following the Closing.
10.2 Termination. This Agreement may be terminated:
(a) at any time by written agreement between Wintrust and
the Company;
(b) by either Wintrust or the Company if the Closing has
not occurred (other than through the failure of any Party seeking to terminate
this Agreement to comply fully with its material obligations under this
Agreement) by June 30, 2005, or such later date agreed to by the Parties,
provided, however, that such termination
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date shall automatically be extended until July 31, 2005, if the sole impediment
to Closing is a delay in either (i) the determination of the effectiveness of
the Registration Statement or (ii) the Federal Reserve's approval of the Federal
Reserve Application;
(c) by Wintrust by written notice to the Company, if (i)
any of the conditions in Article VII has not been satisfied as of the Closing
Date or if satisfaction of such a condition is or becomes impossible (other than
through the failure of Wintrust to comply with its obligations under this
Agreement); and (ii) Wintrust has not waived such condition on or before the
Closing Date;
(d) by the Company by written notice to Wintrust, if (i)
any of the conditions in Article VIII has not been satisfied as of the Closing
Date or if satisfaction of such a condition is or becomes impossible (other than
through the failure of the Company or the Bank to comply with its obligations
under this Agreement); and (ii) the Company has not waived such condition on or
before the Closing Date; or
(e) by the Company, if pursuant to Section 5.8(b) the
Company Board determines that its fiduciary duties require it to accept an
unsolicited Acquisition Proposal from a third party, or by Wintrust if an
Acquisition Proposal from a third party is accepted by the Company or
consummated, in each case by written notice to the other party; or
(f) by the Company, if the Wintrust Common Stock Price is
equal to or less than $48.99, provided, however, that the Company may not
terminate the Agreement pursuant to this Section 10.2(f) unless and until five
(5) business days have elapsed following the delivery to Wintrust of written
notice of such termination, and prior to the end of such five (5) business-day
period Wintrust fails to notify the Company that Wintrust elects to increase the
Variable Portion of the Per Share Merger Consideration to $13.83, and pay in
connection therewith additional Stock Consideration and/or Cash Consideration,
so long as the Maximum Cash Election Number does not exceed 45% of the number of
shares of Company Common Stock outstanding immediately prior to the Effective
Time (excluding shares to be cancelled pursuant to Section 1.6 and Dissenting
Shares).
Any termination of this Agreement shall not affect any rights accrued prior to
such termination.
10.3 Confidential Information. Wintrust and the Company each
covenant that, in the event the transactions contemplated by this Agreement are
not consummated, each such Party will keep in strict confidence and return all
documents containing any information concerning the properties, business, and
assets of the other Parties that may have been obtained in the course of
negotiations or examination of the affairs of each other Party either prior or
subsequent to the execution of this Agreement (other than such information as
shall be in the public domain or otherwise ascertainable from public or outside
sources), except to the extent that disclosure is required by judicial process
or governmental or regulatory authorities.
10.4 Non-Assignment. Neither this Agreement nor any of the rights,
interests or obligations of the Parties under this Agreement shall be assigned
by any Party (whether by operation of law or otherwise) without the prior
written consent of the other Party. Notwithstanding the foregoing, Wintrust may
assign its rights hereunder to another wholly owned subsidiary of Wintrust.
Subject to the foregoing, this Agreement shall be binding upon and inure to the
benefit of the respective successors and assigns of the Parties.
10.5 Notices. All notices, requests, demands, and other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been given (a) when delivered in person, (b) the third business
day after being deposited in the United States mail, registered or certified
mail (return receipt requested), or (c) the first business day after being
deposited with Federal Express or any other recognized national overnight
courier service, in each case addressed as follows:
(i) If to the Company, addressed to:
First Northwest Bancorp, Inc.
234 W. Northwest Highway
Arlington Heights, Illinois 60004
Attention: S. Michael Polanski, President
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with a copy to:
John E. Freechack
Barack Ferrazzano Kirschbaum Perlman & Nagelberg LLP
333 West Wacker Drive, Suite 2700
Chicago, Illinois 60606
(ii) If to Wintrust, addressed to:
Wintrust Financial Corporation
727 North Bank Lane
Lake Forest, Illinois 60045
Attention: David A. Dykstra,
Senior Executive Vice President and
Chief Operating Officer
with a copy to:
Matthew G. Galo
Schiff Hardin LLP
6600 Sears Tower
Chicago, Illinois 60606-6473
10.6 Counterparts. This Agreement may be executed in any number of
counterparts with the same effect as if the signatures to each counterpart were
upon the same instrument.
10.7 Knowledge. References in this Agreement to the "knowledge" of
a party shall mean, with respect to a natural person, the actual knowledge of
such person after reasonable investigation and with respect to an entity, the
actual knowledge of its officers and directors after reasonable investigation.
10.8 Interpretation. The words "hereof," "herein" and "herewith"
and words of similar import shall, unless otherwise stated, be construed to
refer to this Agreement as a whole. Article, Section, Exhibit and Schedule
references are to the Articles, Sections, Exhibits and Schedules of this
Agreement unless otherwise specified. The table of contents and headings
contained in this Agreement are for reference purposes only and will not affect
in any way the meaning or interpretation of this Agreement. Whenever the words
"include," "includes," "including" or similar expressions are used in this
Agreement, they will be understood to be followed by the words "without
limitation." The words describing the singular shall include the plural and vice
versa, and words denoting any gender shall include all genders and words
denoting natural persons shall include corporations, partnerships and other
entities and vice versa. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event of an ambiguity or
question of intent or interpretation arises, this Agreement will be construed as
if drafted jointly by the Parties and no presumption or burden of proof will
arise favoring or disfavoring any Party by virtue of the authorship of any
provision of this Agreement.
10.9 Entire Agreement. This Agreement, including the Schedules and
agreements delivered pursuant hereto, and the Confidentiality Agreement, sets
forth the entire understanding of the parties and supersedes all prior
agreements, arrangements, and communications, whether oral or written. This
Agreement shall not be modified or amended other than by written agreement of
the parties hereto. Captions appearing in this Agreement are for convenience
only and shall not be deemed to explain, limit, or amplify the provisions
hereof.
10.10 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Illinois, without giving
effect to the conflicts of laws principles thereof.
10.11 Severability. In the event that a court of competent
jurisdiction shall finally determine that any provision of this Agreement or any
portion thereof is unlawful or unenforceable, such provision or portion thereof
shall be deemed to be severed from this Agreement, and every other provision and
portion thereof that is not
A-33
invalidated by such determination shall remain in full force and effect. To the
extent that a provision is deemed unenforceable by virtue of its scope but may
be made enforceable by limitation thereof, such provision shall be enforceable
to the fullest extent permitted under the laws and public policies of the state
whose laws are deemed to govern enforceability.
** Signature Page Follows **
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IN WITNESS WHEREOF, Wintrust and the Company have each executed this
Agreement and Plan of Merger as of the day and year first written above.
WINTRUST FINANCIAL CORPORATION
By: /s/ David A. Dykstra
-------------------------------
Name: David A. Dykstra
Title: Senior Executive Vice President
and Chief Operating Officer
FIRST NORTHWEST BANCORP, INC.
By: /s/ S. Michael Polanski
-------------------------------
Name: S. Michael Polanski
Title: President and Chief Executive
Officer
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ANNEX B
SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW
DISSENTERS' RIGHTS OF APPRAISAL
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to Section 228
of this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of the stockholder's shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record of a nonstock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation; and the
words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or fractions thereof,
solely of stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to Section 251 (other than a merger effected pursuant to
Section 251(g) of this title), Section 252, Section 254, Section 257, Section
258, Section 263 or Section 264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which stock,
or depository receipts in respect thereof, at the record date fixed to determine
the stockholders entitled to receive notice of and to vote at the meeting of
stockholders to act upon the agreement of merger or consolidation, were either
(i) listed on a national securities exchange or designated as a national market
system security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or (ii) held of record by more than 2,000 holders;
and further provided that no appraisal rights shall be available for any shares
of stock of the constituent corporation surviving a merger if the merger did not
require for its approval the vote of the stockholders of the surviving
corporation as provided in subsection (f) of Section 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series of
stock of a constituent corporation if the holders thereof are required by the
terms of an agreement of merger or consolidation pursuant to Sections 251, 252,
254, 257, 258, 263 and 264 of this title to accept for such stock anything
except:
a. Shares of stock of the corporation surviving or resulting from such
merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts in
respect thereof, which shares of stock (or depository receipts in respect
thereof) or depository receipts at the effective date of the merger or
consolidation will be either listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or held of record
by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a. and b. of this paragraph; or
d. Any combination of the shares of stock, depository receipts and cash
in lieu of fractional shares or fractional depository receipts described in the
foregoing subparagraphs a., b. and c. of this paragraph.
B-1
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under Section 253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall be
available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation
that appraisal rights under this section shall be available for the shares of
any class or series of its stock as a result of an amendment to its certificate
of incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting, shall
notify each of its stockholders who was such on the record date for such meeting
with respect to shares for which appraisal rights are available pursuant to
subsection (b) or (c) hereof that appraisal rights are available for any or all
of the shares of the constituent corporations, and shall include in such notice
a copy of this section. Each stockholder electing to demand the appraisal of
such stockholder's shares shall deliver to the corporation, before the taking of
the vote on the merger or consolidation, a written demand for appraisal of such
stockholder's shares. Such demand will be sufficient if it reasonably informs
the corporation of the identity of the stockholder and that the stockholder
intends thereby to demand the appraisal of such stockholder's shares. A proxy or
vote against the merger or consolidation shall not constitute such a demand. A
stockholder electing to take such action must do so by a separate written demand
as herein provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become effective;
or
(2) If the merger or consolidation was approved pursuant to Section 228
or Section 253 of this title, then either a constituent corporation before the
effective date of the merger or consolidation or the surviving or resulting
corporation within 10 days thereafter shall notify each of the holders of any
class or series of stock of such constituent corporation who are entitled to
appraisal rights of the approval of the merger or consolidation and that
appraisal rights are available for any or all shares of such class or series of
stock of such constituent corporation, and shall include in such notice a copy
of this section. Such notice may, and, if given on or after the effective date
of the merger or consolidation, shall, also notify such stockholders of the
effective date of the merger or consolidation. Any stockholder entitled to
appraisal rights may, within 20 days after the date of mailing of such notice,
demand in writing from the surviving or resulting corporation the appraisal of
such holder's shares. Such demand will be sufficient if it reasonably informs
the corporation of the identity of the stockholder and that the stockholder
intends thereby to demand the appraisal of such holder's shares. If such notice
did not notify stockholders of the effective date of the merger or
consolidation, either (i) each such constituent corporation shall send a second
notice before the effective date of the merger or consolidation notifying each
of the holders of any class or series of stock of such constituent corporation
that are entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send such a
second notice to all such holders on or within 10 days after such effective
date; provided, however, that if such second notice is sent more than 20 days
following the sending of the first notice, such second notice need only be sent
to each stockholder who is entitled to appraisal rights and who has demanded
appraisal of such holder's shares in accordance with this subsection. An
affidavit of the secretary or assistant secretary or of the transfer agent of
the corporation that is required to give either notice that such notice has been
given shall, in the absence of fraud, be prima facie evidence of the facts
stated therein. For purposes of determining the stockholders entitled to receive
either notice, each constituent corporation may fix, in advance, a record date
that shall be not more than 10 days prior to the date the notice is given,
provided, that if the notice is given on or after the effective date of the
merger or consolidation, the record date shall be such effective date. If no
record date is fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next preceding the day on
which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled
B-2
to appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw such stockholder's demand for appraisal and to accept the terms offered
upon the merger or consolidation. Within 120 days after the effective date of
the merger or consolidation, any stockholder who has complied with the
requirements of subsections (a) and (d) hereof, upon written request, shall be
entitled to receive from the corporation surviving the merger or resulting from
the consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which demands
for appraisal have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the stockholder within 10 days
after such stockholder's written request for such a statement is received by the
surviving or resulting corporation or within 10 days after expiration of the
period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the
Court shall appraise the shares, determining their fair value exclusive of any
element of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted
such stockholder's certificates of stock to the Register in Chancery, if such is
required, may participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal rights under this
section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
B-3
(j) The costs of the proceeding may be determined by the Court and
taxed upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation,
no stockholder who has demanded appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of such
stockholder's demand for an appraisal and an acceptance of the merger or
consolidation, either within 60 days after the effective date of the merger or
consolidation as provided in subsection (e) of this section or thereafter with
the written approval of the corporation, then the right of such stockholder to
an appraisal shall cease. Notwithstanding the foregoing, no appraisal proceeding
in the Court of Chancery shall be dismissed as to any stockholder without the
approval of the Court, and such approval may be conditioned upon such terms as
the Court deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation. (Last amended by Ch.
82, L. '01, eff. 7-1-01).
B-4
ANNEX C
FORM OF VOTING AGREEMENT
THIS AGREEMENT ("Agreement") is made and entered into as of the ___ day
of November, 2004, by and between the undersigned stockholders (each, a
"Stockholder," and collectively, the "Stockholders"), of FIRST NORTHWEST
BANCORP, INC., a Delaware corporation (the "Company"), and WINTRUST FINANCIAL
CORPORATION, an Illinois corporation ("Wintrust").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company and Wintrust have entered into an Agreement and
Plan of Merger dated as of the date hereof (the "Merger Agreement") (capitalized
terms used but not defined in this Agreement shall have the meanings given them
in the Merger Agreement);
WHEREAS, each of the Stockholders is a director or executive officer of
the Company or its wholly owned subsidiary, First Northwest Bank;
WHEREAS, it is a condition precedent to Wintrust's obligations under
the Merger Agreement that the Stockholders shall have executed and delivered
this Agreement, solely in their capacities as stockholders of the Company; and
WHEREAS, each Stockholder owns and is entitled to vote the number of
issued and outstanding shares of common stock of the Company (the "Company
Common Shares") set forth opposite such Stockholder's name on Schedule 1
attached hereto and has agreed to vote such Stockholder's Company Common Shares
pursuant to the terms set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and the respective
representations, warranties, covenants and agreements set forth herein, the
Stockholders and Wintrust hereby agree as follows:
Section 1. Voting of Shares. Each Stockholder hereby agrees that at any
meeting of the stockholders of the Company and in any action by written consent
of the stockholders of the Company, such Stockholder shall vote the Company
Common Shares which such Stockholder owns and is entitled to vote (a) in favor
of the transactions contemplated by the Merger Agreement, (b) against any action
or agreement which would result in a breach of any term of, or any other
obligation of the Company under, the Merger Agreement, and (c) against any
action or agreement which would impede, interfere with or attempt to discourage
the transactions contemplated by the Merger Agreement; provided, however, that
nothing in this Agreement shall prevent a Stockholder, in his or her capacity as
a director of the Company, from discharging his or her fiduciary duties to the
Company. Each Stockholder agrees that the Company shall be authorized to include
in any proxy or material transmitted to stockholders of the Company, a statement
to the effect that the Stockholder is a party to this Agreement and has
committed to vote in favor of the transactions contemplated by the Merger
Agreement.
Section 2. Term of Agreement. This Agreement shall be effective from
the date hereof and shall terminate and be of no further force and effect upon
the earlier of (i) the Effective Time (as defined in the Merger Agreement), or
(ii) the termination of the Merger Agreement in accordance with its terms, which
includes termination in the event the Company Board determines that its
fiduciary duties require it to accept an unsolicited Acquisition Proposal from a
third party pursuant to Section 5.8(b) of the Merger Agreement.
Section 3. Covenants of Stockholders. Each Stockholder agrees not to:
except to the extent contained in this Agreement, grant any proxies, deposit any
Company Common Shares into a voting trust or enter into a voting agreement with
respect to any Company Common Shares; or without the prior written approval of
Wintrust, solicit, initiate or encourage any inquiries or proposals for a merger
or other business combination involving the Company.
Section 4. Representations and Warranties of Stockholders. Each
Stockholder represents and warrants to Wintrust as follows: (a) such Stockholder
owns - and is entitled to vote in accordance with such
C-1
Stockholder's commitments under this Agreement - the number of Company Common
Shares set forth opposite his or her name on Schedule 1 hereto, and, except as
disclosed on Schedule 3.3(a) of the Merger Agreement, does not own or have any
right to acquire any Company Common Shares not listed on Schedule 1; (b) such
Stockholder has the right, power and authority to execute, deliver and perform
under this Agreement; such execution, delivery and performance will not violate,
or require any consent, approval, or notice under any provision of law or result
in the breach of any outstanding agreements or instruments to which such
Stockholder is a party or is subject; and this Agreement has been duly executed
and delivered by such Stockholder and constitutes a legal, valid and binding
agreement of such Stockholder, enforceable in accordance with its terms; (c)
except as set forth in the next sentence, such Stockholder's Company Common
Shares listed as owned on Schedule 1 hereto are now and will remain owned by
such Stockholder, free and clear of all voting trusts, voting agreements,
proxies, liens, claims, liabilities, security interests, marital property rights
or any other encumbrances whatsoever (other than (i) pledges for loans entered
into in the ordinary course and (ii) rights of Wintrust and encumbrances
respecting such Company Common Shares created pursuant to this Agreement or the
Merger Agreement); and (d) other than this Agreement and the Merger Agreement,
there are no outstanding options, warrants or rights to purchase or acquire, or
agreements related to, such Stockholder's Company Common Shares. Notwithstanding
anything contained in this Agreement to the contrary, at any time prior to the
Closing, each Stockholder shall be permitted to transfer ownership and voting
rights of up to an aggregate of five percent (5%) of such Stockholder's Company
Common Shares listed as owned on Schedule 1 to a family member of such
Stockholder without obtaining Wintrust's prior consent or approval of such
transfer. For purposes of the preceding sentence, "family member" shall mean any
child, step-child, grandchild, parent, step-parent, grandparent, spouse,
sibling, nephew, niece, mother-in-law, father-in-law, son-in-law,
daughter-in-law, brother-in-law or sister-in-law and shall include adoptive
relationships.
Section 5. Representations and Warranties of Wintrust. Wintrust has the
right, power and authority to execute and deliver this Agreement; such execution
and delivery will not violate, or require any consent, approval, or notice under
any provision of law or result in the breach of any outstanding agreements or
instruments to which Wintrust is a party or is subject; and this Agreement has
been duly executed and delivered by Wintrust and constitutes a legal, valid and
binding agreement of Wintrust, enforceable in accordance with its terms.
Section 6. Transferability. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties, except that Wintrust may assign this
Agreement to a direct or indirect wholly-owned subsidiary or affiliate of
Wintrust, provided that no such assignment shall relieve Wintrust of its
obligations hereunder.
Section 7. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement was not performed by any of the Stockholders in accordance with its
specific terms or was otherwise breached. It is accordingly agreed that Wintrust
shall be entitled to an injunction(s) to prevent breaches of this Agreement by
the Stockholders and to enforce specifically the terms and provisions hereof in
addition to any other remedy to which Wintrust is entitled at law or in equity.
Section 8. Further Assurances. Each Stockholder agrees to execute and
deliver all such further documents and instruments and take all such further
action as may be necessary or appropriate in order to consummate the
transactions contemplated hereby.
Section 9. Entire Agreement and Amendment. (a) Except for the Merger
Agreement and its ancillary agreements and instruments, this Agreement contains
the entire agreement between the parties hereto with respect to the transactions
contemplated hereunder and supersedes all prior arrangements or understandings
with respect hereto.
(b) This Agreement may not be modified, amended, altered or
supplemented except upon the execution and delivery of a written
agreement executed by the parties hereto.
Section 10. Notices. Each notice, demand or other communication which
may be or is required to be given under this Agreement shall be in writing and
shall be deemed to have been properly given when delivered personally at the
address set forth herein for Wintrust or the address on Schedule 1 for each of
the Stockholders, when sent by facsimile or other electronic transmission to the
respective facsimile transmission numbers of the
C-2
parties with telephone confirmation of receipt, or the day after sending by
recognized overnight courier or if by the United States registered or certified
mail, return receipt requested, postage prepaid two days after deposit therein.
Section 11. General Provisions. This Agreement shall be governed by the
laws of the State of Illinois. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original. Headings are for convenience
only and shall not affect the meaning of this Agreement. Any term of this
Agreement which is invalid or unenforceable shall be ineffective only to the
extent of such invalidity or unenforceability without rendering invalid or
unenforceable the remaining terms of this Agreement.
[SIGNATURE PAGE FOLLOWS]
C-3
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
Wintrust Financial Corporation, an Illinois
Corporation:
By:
---------------------------------------
Its:
---------------------------------------
Address for Notices: With a copy to
Wintrust Financial Corporation Matthew G. Galo
727 North Bank Lane Schiff Hardin & Waite
Lake Forest, Illinois 60045 6600 Sears Tower
Attn: David A. Dykstra Chicago, Illinois 60606-6473
Senior Executive Vice President Facsimile No.: (312) 258-5700
and Chief Operating Officer
Facsimile No.: (847) 615-4091
STOCKHOLDERS
- ------------------------------------- -------------------------------------
- ------------------------------------- -------------------------------------
- ------------------------------------- -------------------------------------
- ------------------------------------- -------------------------------------
- ------------------------------------- -------------------------------------
- ------------------------------------- -------------------------------------
C-4
SCHEDULE 1
NUMBER OF COMPANY COMMON SHARES
NAME, ADDRESS AND FACSIMILE NUMBER OF COMPANY COMMON SHARES OWNED ISSUABLE UNDER OPTIONS HELD BY
NUMBER OF STOCKHOLDER BY STOCKHOLDER STOCKHOLDER
C-5
ANNEX D
[Hovde Financial LLC Letterhead]
November 15, 2004
Board of Directors
First Northwest Bancorp, Inc.
234 W. Northwest Highway
Arlington Heights, Illinois 60004
Dear Members of the Board:
We understand that Wintrust Financial Corporation, an Illinois
corporation ("WTFC"), and First Northwest Bancorp, Inc., a Delaware corporation
("FNBI") have entered into an Agreement and Plan of Merger, dated November 12,
2004 (the "Agreement"), pursuant to which the Board of Directors of each of WTFC
and FNBI have determined that it is in the best interests of the parties to the
Agreement and their respective shareholders to enter into a transaction wherein
WTFC shall acquire FNBI pursuant to the merger of FNBI with and into WTFC (the
"Merger"). All capitalized terms used herein, unless otherwise defined herein,
shall have the meanings attributed to them in the Agreement. As set forth in the
Agreement, at the Effective Time of the Merger, (a) each share of common stock
of FNBI that is issued and outstanding immediately prior to the Effective Time
of the Merger shall be converted into the right to received the sum (the "Merger
Consideration") of (i) a fixed amount of Seven Dollars and Twenty Cents ($7.20)
plus (ii) an amount that shall vary with the WTFC Common Stock Price (the
"Variable Portion) as set forth in Section 2.1 of the Agreement, plus (iii) a
special dividend at closing based on the Minimum Net Worth requirements of
Section 7.11 of the Agreement. In connection therewith, you have requested our
opinion as to the fairness, from a financial point of view, of the Merger
Consideration to the shareholders of FNBI.
Hovde Financial LLC ("Hovde"), as part of its investment banking
business, is continually engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, competitive bidding, secondary distributions of listed and
unlisted securities, private placements and valuations for estate, corporate and
other purposes. We are familiar with FNBI, having acted as its financial advisor
in connection with, and having participated in the negotiations leading to, the
Agreement. We are also familiar with WTFC, through our continued Merger
negotiations and due diligence.
We were retained by FNBI to act as its financial advisor in connection
with the Agreement and the Merger. We will receive compensation from FNBI in
connection with our services, a significant portion of which is contingent upon
the consummation of the Merger. FNBI has agreed to indemnify us for certain
liabilities arising out of our engagement. In the ordinary course of their
businesses, affiliates of Hovde may actively trade the equity securities of FNBI
or WTFC for their own account or for the accounts of customers and, accordingly,
they may at any time hold long or short positions in such securities.
During the course of our engagement and for the purposes of the opinion
set forth herein, we have:
(i) reviewed the Agreement;
(ii) reviewed certain historical publicly available business and
financial information concerning FNBI and WTFC;
(iii) reviewed certain internal financial statements and other
financial and operating data concerning FNBI and WTFC;
(iv) analyzed certain financial projections prepared by the
management of FNBI;
Board of Directors
First Northwest Bancorp, Inc.
November 15, 2004
Page 2
(v) conducted meetings with members of the senior management of
FNBI and WTFC for the purpose of reviewing the future
prospects of FNBI and WTFC, including financial forecasts
related to the respective businesses, earnings, assets,
liabilities and the amount and timing of cost savings (the
"Synergies") expected to be achieved as a result of the
Merger;
(vi) evaluated the pro forma contribution of FNBI's assets,
liabilities, equity and earnings to the pro forma company;
(vii) analyzed the pro forma impact of the Merger on the combined
company's earnings per share, consolidated capitalization and
financial ratios;
(viii) reviewed the terms of recent merger and acquisition
transactions, to the extent publicly available, involving
banks and bank holding companies that we considered relevant;
and
(ix) performed such other analyses and considered such other
factors as we have deemed appropriate.
We also took into account our assessment of general economic, market
and financial conditions and our experience in other transactions, as well as
our knowledge of the banking industry and our general experience in securities
valuations.
In rendering this opinion, we have assumed, without independent
verification, the accuracy and completeness of the financial and other
information and representations contained in the materials provided to us by
FNBI and WTFC and in the discussions with FNBI and WTFC managements. In that
regard, we have assumed that the financial forecasts, including, without
limitation, the synergies and projections regarding under-performing and
nonperforming assets and net charge-offs have been reasonably prepared on a
basis reflecting the best currently available information and judgments and
estimates of FNBI and WTFC and that such forecasts will be realized in the
amounts and at the times contemplated thereby. We are not experts in the
evaluation of loan and lease portfolios for purposes of assessing the adequacy
of the allowances for losses with respect thereto and have assumed that such
allowances for FNBI and WTFC are in the aggregate adequate to cover such losses.
We were not retained to and did not conduct a physical inspection of any of the
properties or facilities of FNBI and WTFC. In addition, we have not reviewed
individual credit files nor have we made an independent evaluation or appraisal
of the assets and liabilities of FNBI and WTFC and we were not furnished with
any such evaluations or appraisals.
We have assumed that the Merger will be consummated substantially in
accordance with the terms set forth in the Agreement. We have further assumed
that the Merger will be accounted for as a purchase under generally accepted
accounting principles and that it will qualify as a tax-free reorganization for
United States federal income tax purposes. We have assumed that the Merger is,
and will be, in compliance with all laws and regulations that are applicable to
FNBI and WTFC. In rendering this opinion, we have been advised by FNBI and WTFC
and we have assumed that there are no factors that would impede any necessary
regulatory or governmental approval of the Merger and we have further assumed
that, in the course of obtaining the necessary regulatory and governmental
approvals, no restriction will be imposed on FNBI and WTFC that would have a
material adverse effect on WTFC, as the surviving corporation, or the
contemplated benefits of the Merger. We have also assumed that there would be no
change in applicable law or regulation that would cause a material adverse
change in the prospects or operations of WTFC, as the surviving corporation,
after the Merger.
Our opinion is based solely upon the information available to us and
the economic, market and other circumstances as they exist as of the date
hereof. Events occurring and information that becomes available after the date
hereof could materially affect the assumptions and analyses used in preparing
this opinion. We have not undertaken to reaffirm or revise this opinion or
otherwise comment upon any events occurring or information that becomes
available after the date hereof, except as otherwise agreed in our engagement
letter.
We are not expressing any opinion herein as to the prices at which
shares of WTFC issued in the Merger may trade if and when they are issued or at
any future time, nor does our opinion constitute a recommendation to
Board of Directors
First Northwest Bancorp, Inc.
November 15, 2004
Page 3
any FNBI shareholder as to how such holder should vote with respect to the
Agreement at any meeting of FNBI shareholders. Our opinion does not address the
underlying business decision to proceed with the Merger.
This letter is solely for the information of the Board of Directors of
FNBI and is not to be used, circulated, quoted or otherwise referred to for any
other purpose, nor is it to be filed with, included in or referred to in whole
or in part in any registration statement, proxy statement or any other document,
except in each case in accordance with our prior written consent which shall not
be unreasonably withheld; provided, however, that we hereby consent to the
inclusion and reference to this letter in any registration statement, proxy
statement, information statement or tender offer document to be delivered to the
holders of FNBI Common Stock in connection with the Merger if and only if this
letter is quoted in full or attached as an exhibit to such document and this
letter has not been withdrawn prior to the date of such document.
Subject to the foregoing and based on our experience as investment
bankers, our activities and assumptions as described above, and other factors we
have deemed relevant, we are of the opinion as of the date hereof that the
Merger Consideration that will be paid pursuant to the Agreement to the
shareholders of FNBI is fair, from a financial point of view.
Sincerely,
/s/ Hovde Financial LLC
HOVDE FINANCIAL LLC