<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [ ]
File by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
TOWNE FINANCIAL CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Not Applicable
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount
<PAGE> 2
on which the filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE> 3
TOWNE FINANCIAL CORPORATION
4811 COOPER ROAD
BLUE ASH, OHIO 45242
<TABLE>
<CAPTION>
<S> <C>
PROXY FOR This Proxy when properly executed will be voted in
ANNUAL MEETING the manner directed herein by the undersigned
OF shareholder. IF NO DIRECTION IS MADE, THE PROXY
SHAREHOLDERS WILL BE VOTED FOR PROPOSALS 1, 2 AND 3.
OCTOBER 29, 1997
</TABLE>
--------------------------------
Signature
--------------------------------
Signature if held jointly
Dated: _______________, 1997
Please sign exactly as name appears hereon. When
shares are held by joint tenants, both should
sign. When signing as attorney, as executor,
administrator, trustee or guardian, please give
full title as such. If a corporation, please
sign in full corporate name by President or
other authorized officer. If a partnership,
please sign in partnership name by authorized
person.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
<PAGE> 4
TOWNE FINANCIAL CORPORATION
4811 Cooper Road
Blue Ash, Ohio 45242
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD OCTOBER 29, 1997
To the Shareholders of TOWNE FINANCIAL CORPORATION:
Notice is hereby given that the Annual Meeting of Shareholders of Towne
Financial Corporation (the "Corporation"), an Ohio corporation, will be held at
the Corporation's main office at 4811 Cooper Road, Blue Ash, Ohio, on October
29, 1997, at 10:00 a.m., Eastern Standard Time, for the purpose of considering
and acting upon the following:
1. A proposal to elect one director for a three year term ending in
2000.
2. A proposal to adopt the Towne Financial Corporation 1997 Stock
Option Plan.
3. A proposal to ratify the appointment of Grant Thornton LLP as
the Corporation's independent public accountants for the year
ending June 30, 1998.
4. Such other business as may properly be brought before the Annual
Meeting or any adjournment(s) thereof.
The Board of Directors has fixed the close of business on September 9,
1997 as the record date for the determination of the shareholders entitled to
receive notice of, and to vote at, the meeting and any adjournment(s) thereof,
notwithstanding any subsequent transfers of stock.
Your attention is called to the accompanying Proxy and Proxy Statement
submitted with this Notice.
A copy of the Corporation's 1997 Annual Report is being forwarded to you
herewith, but it is not deemed to be part of the official proxy soliciting
material. If any shareholder fails to receive a copy of the Annual Report, one
may be obtained by writing to the Chief Financial Officer of the Corporation.
BY ORDER OF THE BOARD OF DIRECTORS
Mildred Martin, Secretary
Blue Ash, Ohio
September 26, 1997
ALL SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. WHETHER YOU
EXPECT TO ATTEND OR NOT, PLEASE DATE AND SIGN THE ENCLOSED PROXY AND MAIL IT
PROMPTLY IN THE STAMPED ENVELOPE PROVIDED. IN THE EVENT YOU ATTEND THE MEETING,
YOU MAY REVOKE YOUR PROXY AND VOTE YOUR SHARES IN PERSON.
<PAGE> 5
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation
of proxies by Towne Financial Corporation (hereinafter referred to as the
"Corporation"), the holding company for The Blue Ash Building and Loan Company
("Blue Ash"), for the Annual Meeting of Shareholders of the Corporation, to be
held at the Corporation's main office at 4811 Cooper Road, Blue Ash, Ohio, on
October 29, 1997. Such solicitation is being made by mail, although the
Corporation may also use its officers and regular employees to solicit proxies
from shareholders personally, or by telephone, telegraph or letter. The costs of
this solicitation will be borne by the Corporation. The Corporation may request
nominees and brokers to solicit their principals and customers for their
proxies, and in such event the Corporation may reimburse such nominees and
brokers for their reasonable out-of-pocket expenses.
All shares represented by valid proxies received pursuant to this
solicitation, and not revoked, will be voted at the Annual Meeting, and where a
specification is made on the proxy, such shares will be voted in accordance with
such specification. In the absence of any indication to the contrary, shares
will be voted in favor of the proposals set forth in the accompanying Notice of
Meeting and for the nominee for Director set forth herein and, in the discretion
of the appointed proxies, upon such other matters as may properly come before
the meeting. Any proxy may be revoked by the shareholder at any time prior to
the voting thereof, by giving written notice to the Corporation prior to the
Annual Meeting or by giving oral notice to the Corporation at the Annual
Meeting.
The Board of Directors has fixed the close of business on September 9,
1997 as the record date for the determination of the shareholders entitled to
receive notice of, and to vote at, the Annual Meeting and at any adjournment(s)
thereof, notwithstanding any subsequent transfers of stock.
VOTING SECURITIES
On September 9, 1997, the record date for the meeting, there were
208,500 shares outstanding of common stock, $1.00 par value (the "Common
Stock"), all of one class and each entitled to one vote, owned by approximately
125 shareholders of record. A list of shareholders of the Corporation may be
examined at the offices of the Corporation at the address given previously.
There is no other class of securities of the Corporation outstanding which has
voting rights. The presence either in person or by proxy of the persons entitled
to vote a majority of the Corporation's outstanding common shares is necessary
for a quorum for the transaction of business at the Annual Meeting of
Shareholders.
The following table sets forth certain information regarding the
beneficial ownership of the Common Stock (the Corporation's only outstanding
voting securities on September 9, 1997) (i) by each person who is known by the
Corporation to own beneficially more than 5% of the Common Stock, (ii) by each
Director or Director Emeritus who owns Common Stock, (iii) by
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<PAGE> 6
the executive officers named in the Summary Compensation Table in the Proxy
Statement and (iv) by all Directors and Officers of the Corporation as a group.
<TABLE>
<CAPTION>
Name of Beneficial Amount & Nature
Owner or Identity of Beneficial Percent
of Group Ownership of Class (1)
- ------------------ --------------- ------------
<S> <C> <C>
Neil S. Strawser 11,350 (2) 5.3% (2)
Ralph E. Heitmeyer 11,350 (3) 5.3% (3)
William S. Siders 13,619 (4) 6.3% (4)
Herb L. Krombholz 11,350 (5) 5.3% (5)
William T. Thornell 2,670 (6) 1.2% (6)
John M. Kuhnell 7,350 3.4%
Daniel H. Hosbrook 20,700 9.7%
Linda L. Lovitt 12,609 (7) 5.9% (7)
All Directors and 68,472 (8) 31.9% (8)
Officers as a Group
(8 in number)
- ------------
<FN>
(1) Percentages are based on the aggregate of 208,500 shares of Common Stock
outstanding and 6,000 shares subject to presently exercisable options.
(2) Includes 6,000 shares owned by his IRA account, for which he has power to
dispose or direct the disposition and to vote or direct the voting and 1,000
shares subject to presently exercisable options.
(3) Includes 1,000 shares subject to presently exercisable options.
(4) Includes 1,760 shares owned by his IRA account and 532 shares in his SEP
account, for which he has power to dispose or direct the disposition and to vote
or direct the voting, 1,000 shares subject to presently exercisable options and
2,269 allocated Employee Stock Ownership Plan ("ESOP") shares which are 100%
vested.
</TABLE>
(Footnotes continued on page 4)
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<PAGE> 7
(5) Includes 6,275 shares owned by his IRA account, for which he has power to
dispose or direct the disposition and to vote or direct the voting and 1,000
shares subject to presently exercisable options.
(6) Includes 500 shares subject to presently exercisable options and 1,570
allocated ESOP shares which are 80% vested.
(7) Includes 3,757 shares owned by her IRA account, 2,157 in IRA account of
husband for which they have the power to dispose or direct the disposition and
to vote or direct the voting and 584 allocated ESOP shares which are 100%
vested.
(8) Includes 6,000 presently exercisable options held by eight officers and
directors and 5,271 allocated ESOP shares held by four officers. Percentages are
based on presently outstanding shares of 208,500 plus 6,000 shares subject to
options.
None of the above persons have shared voting or investment powers with
regard to their shares of Common Stock.
ELECTION OF DIRECTORS
The Board of Directors of the Corporation presently consists of five
members. The Corporation's Articles of Incorporation and Code of Regulations
provide for the classification of the Board of Directors into three classes. At
each annual meeting of shareholders, directors constituting a class are elected
for a three year term. At the meeting, the director in Class III is to be
elected to a term which will expire at the 2000 Annual Meeting and until his
successor is elected and qualified. The nominee is currently a director. The
shares represented by the enclosed Proxy will be voted for the election as
director of the nominee named below unless otherwise indicated on the Proxy in
accordance with the foregoing. If the nominee becomes unavailable for any reason
or if a vacancy should occur before the election (which events are not
anticipated), the shares represented by the enclosed Proxy may be voted for such
other persons as may be determined by the holders of such proxies.
Information concerning the nominee and continuing Directors is set forth
below:
CLASS I DIRECTORS
(Terms Expire in 1998)
<TABLE>
<CAPTION>
Director Positions Currently Held with
Name Age Since (1) the Corporation and Blue Ash
---- --- --------- ----------------------------
<S> <C> <C> <C>
Neil S. Strawser 54 1976 Chairman of the Board and Director of the
Corporation and Blue Ash
</TABLE>
4
<PAGE> 8
<TABLE>
<CAPTION>
<S> <C> <C> <C>
William T. Thornell 54 1996 Vice President and Director of
the Corporation and Blue Ash
and Chief Lending Officer of
Blue Ash
</TABLE>
<TABLE>
<CAPTION>
CLASS II DIRECTORS
(Terms Expire in 1999)
Director Positions Currently Held with
Name Age Since (1) the Corporation and Blue Ash
---- --- --------- ----------------------------
<S> <C> <C> <C>
William S. Siders 50 1987 Executive Vice President and
Director of the Corporation
and Blue Ash and Managing
Officer of Blue Ash
Herb L. Krombholz 66 1972 Vice President and Director of
the Corporation and Blue Ash
</TABLE>
<TABLE>
<CAPTION>
CLASS III DIRECTOR
(Nominee for Term Expiring in 2000)
Director Positions Currently Held with
Name Age Since (1) the Corporation and Blue Ash
---- --- --------- ----------------------------
<S> <C> <C> <C>
Ralph E. Heitmeyer 74 1960 President and Director of the
Corporation and Blue Ash
DIRECTOR EMERITUS
Director Positions Currently Held with
Name Age Since (1) the Corporation and Blue Ash
---- --- --------- ----------------------------
John M. Kuhnell 81 1958 Director Emeritus of the
Corporation and Blue Ash
- ---------------
<FN>
(1) The Corporation was organized in August, 1991 and each of the current
directors of the Corporation has served in such capacity since that
date, except for Mr. Thornell, who began his term in 1996. The years
listed in the table are the years in which each director became a
director of Blue Ash.
</TABLE>
5
<PAGE> 9
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS ELECTION
OF THE ABOVE CLASS III NOMINEE FOR DIRECTOR
The business experience of each of the directors for the past five years
is as follows:
Nominee:
- --------
RALPH E. HEITMEYER. Mr. Heitmeyer has been the President of the
Corporation since August, 1991 and the President of Blue Ash since 1982. Mr.
Heitmeyer formerly owned and managed Elmer Heitmeyer Nursery in Kenwood, Ohio.
Continuing Directors:
- ---------------------
NEIL S. STRAWSER. Mr. Strawser has served as Chairman of the Boards of
the Corporation and Blue Ash since August, 1995. Prior to this Mr. Strawser
served as Vice-Chairman of the Board of the Corporation since June, 1993 and
also served as Vice-Chairman of the Board of Blue Ash, having held this position
since June, 1993. Mr. Strawser is a part owner and actively involved in the
management of Parrott & Strawser Properties, Inc., a land development and home
building company located in Cincinnati, Ohio.
WILLIAM T. THORNELL. Mr. Thornell has served as Vice President of the
Corporation and Vice President and Chief Loan Officer of Blue Ash since August,
1992. Prior thereto Mr. Thornell worked for Seven Hills Savings Association of
Cincinnati for seventeen years.
WILLIAM S. SIDERS. Mr. Siders has served as Executive Vice President of
the Corporation since August, 1991. Mr. Siders has also been Blue Ash's
Executive Vice President and Managing Officer since 1982. Mr. Siders is
responsible for the daily operations of Blue Ash.
HERB L. KROMBHOLZ. Mr. Krombholz has served as Vice President of the
Corporation since August, 1991 and Vice President of Blue Ash since 1980. Mr.
Krombholz is the Chairman of the Board of a family-owned jewelry store in
Montgomery, Ohio.
Director Emeritus:
- ------------------
JOHN M. KUHNELL. Mr. Kuhnell has been Director Emeritus of the
Corporation and Blue Ash since his retirement from the Boards of the Corporation
and Blue Ash in June, 1996. Mr. Kuhnell served as Chairman of the Board of the
Corporation since its organization in August, 1991 to August, 1995. Mr. Kuhnell
also served as Chairman of Blue Ash from 1978 to August, 1995. Prior to
retiring, Mr. Kuhnell held the position of Chief of Police for the Silverton,
Ohio police department.
None of the Directors are related.
6
<PAGE> 10
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
Meetings of the Corporation's Board of Directors are held regularly on a
quarterly basis. Additional Special Meetings may be held by the Board of
Directors of the Corporation during the course of a year in order to discuss and
vote upon important matters that give rise to immediate attention and action.
During the year ended June 30, 1997, the Board of Directors of the Corporation
held a total of 9 regular and special meetings. Meetings of Blue Ash's Board of
Directors are generally held twice a month. During the year ended June 30, 1997,
the Board of Directors of Blue Ash held a total of 23 meetings. No incumbent
director attended fewer than 90% of the total number of meetings of the Board of
Directors of the Corporation and Blue Ash.
In addition, the Executive Committee of Blue Ash, which consists of any
three directors, generally meets during weeks when the full Board of Directors
does not. The Executive Committee exercises the power of the full Board of
Directors and all actions are reviewed and ratified by the full Board of
Directors. This committee met 24 times during the year ended June 30, 1997.
The Board of Directors does not have standing audit, nominating or
compensation committees or committees performing similar functions.
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
Mildred Martin, age 63, currently serves as Secretary of the
Corporation, having served in such capacity since its organization in August,
1991. Ms. Martin also serves as Secretary of Blue Ash and has held that office
for over sixteen years.
Joseph L. Michel, age 32, currently serves as Vice President, Chief
Financial Officer and Treasurer of the Corporation and Blue Ash, having served
as such since March, 1994. Prior thereto Mr. Michel worked for over six years
with the accounting firm of Grant Thornton LLP specializing in financial
institution audit and tax work.
EXECUTIVE COMPENSATION
The following table is a summary of certain information with respect to
the compensation paid by Blue Ash to certain executive officers of the
Corporation during each of the last three fiscal years. No other executive
officer of the Corporation received compensation in the aggregate exceeding
$100,000 during the last fiscal year.
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<PAGE> 11
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation
-------------------
All Other
Name and Salary Bonus Compensation
Principal Position Year $ (1) $ $ (2)
- ------------------ ---- -------- ------ ------------
<S> <C> <C> <C> <C>
William S. Siders, 1997 105,240 23,700 14,921
Executive Vice 1996 99,185 19,000 11,969
President and 1995 93,755 20,000 14,697
Managing Officer
William T. Thornell, 1997 84,150 20,000 10,815
Vice President 1996 61,244 16,800 8,933
and Chief 1995 56,150 15,800 10,927
Lending Officer
- -------
<FN>
(1) For Mr. Siders, includes additional compensation received for directors
fees of $20,000 and automobile allowance of $4,800 for each of the years 1997,
1996 and 1995. For Mr. Thornell, includes additional compensation received
for directors fees of $20,000 in 1997 and $1,444 in 1996.
(2) For Mr. Siders, includes the Corporation's contribution to his ESOP
valued at $11,496, $9,237 and $11,662 for 1997, 1996 and 1995, respectively,
and the Corporation's payment of $3,425, $2,732 and $3,035 for his health,
life and disability insurance premiums for 1997, 1996 and 1995, respectively.
For Mr. Thornell, includes the Corporation's contribution to his ESOP valued
at $9,307, $7,636 and $9,461 for 1997, 1996 and 1995, respectively, and the
Corporation's payment of $1,508, $1,297 and $1,466 for his health, life and
disability insurance premiums for 1997, 1996 and 1995, respectively.
</TABLE>
STOCK OPTIONS
No options were granted to or exercised by the named executive officers
in the Summary Compensation Table during the year ended June 30, 1997.
The following table sets forth certain information concerning the
number and value of stock options at June 30, 1997, held by the named executive
officers in the Summary Compensation Table.
<TABLE>
<CAPTION>
Shares Acquired Value Number of Options Value of Options at
Name on Exercise Realized June 30, 1997 June 30, 1997(1)
- ---- --------------- -------- -------------------------- ---------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William S. Siders -- -- 1,000 1,500 $16,000 $24,000
William T. Thornell -- -- 500 1,500 8,000 24,000
- ------------------
<FN>
(1) Value at June 30, 1997 is based on the most recent trade of the
Corporation's Common Stock of $27.50.
</TABLE>
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<PAGE> 12
COMPENSATION OF THE BOARD OF DIRECTORS
AND OTHER COMPENSATION
The directors of the Corporation currently do not receive any
renumeration in their capacity as such. The directors of Blue Ash receive an
annual fee for service on the Board. Messrs. Strawser and Heitmeyer each receive
$22,600 and Messrs. Siders, Krombholz and Thornell each receive $20,000. In his
capacity as Director Emeritus of Blue Ash, Mr. Kuhnell receives an annual fee of
$6,000. In addition, Messrs. Heitmeyer and Siders each receive a yearly
automobile allowance of $4,800 for the use of their automobile in the course of
business.
EMPLOYMENT AGREEMENTS
Blue Ash has entered into employment agreements with Mr. Siders, Mr.
Thornell and Mr. Michel, which establish their respective duties and
compensation. Blue Ash has agreed to employ such individuals for terms of three
years in their current respective positions. The terms of the employment
agreements may be extended for an additional year after a review of the
officers' performances by the Board of Directors of Blue Ash. The Board of
Directors of Blue Ash will annually review the officers' performances and may
extend the terms of the agreements and make such other changes to the agreements
as they deem appropriate; however, any material changes would be subject to
approval by the Regional Director of the Office of Thrift Supervision. The
agreements provide for annual salaries of $107,545 for Mr. Siders, $86,000 for
Mr. Thornell and $58,245 for Mr. Michel, exclusive of bonuses. The current terms
of employment under these agreements are for periods of three years, which
commenced on January 1, 1997. Unless the terms of employment are annually
extended by one additional year by the Board of Directors of Blue Ash, the
current employment agreements are set to expire on December 31, 1999.
The agreements provide that they may be terminated by Blue Ash at any
time for cause, as defined in the agreements, or upon 90 days prior written
notice without cause. If the agreements are terminated for cause, the officers
will not be entitled to receive any compensation or other benefits after the
termination. If the officers are terminated by Blue Ash for any reason other
than cause, the officers would be entitled to receive for the duration of the
terms of the agreements, monthly severance payments equal to the highest monthly
salary paid to the officers at any time pursuant to the agreements; provided,
however, that such severance payments would be deferred if payment thereof would
cause Blue Ash to fail to meet its minimum regulatory capital requirements.
Additionally, if as a result of regulatory intervention, the officers are
suspended or are prohibited from participating in the business affairs of Blue
Ash, the officers' compensation will likewise be suspended or terminated.
Further, with respect to the officers' employment following a Change of Control
of the Corporation, as defined in the agreements, the officers would be entitled
to severance payments equal to three times the officers' average compensation,
less $1.00.
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<PAGE> 13
EMPLOYEE STOCK OWNERSHIP PLAN AND TRUST
The Board of Directors of Blue Ash has adopted an Employee Stock
Ownership Plan ("ESOP") for the exclusive benefit of eligible employees.
Employees age 21 or older who have completed at least six months of service with
Blue Ash are eligible to participate in the ESOP. The ESOP may be funded by Blue
Ash's discretionary contributions of cash, which will be invested primarily in
the Common Stock. Benefits under the ESOP may be paid in shares of Common Stock
or in cash.
Contributions to the ESOP and shares released from the suspense accounts
will be allocated among participants on the basis of compensation in the year of
allocation. Participants' benefits generally become vested 20% per year or 100%
upon completion of five years of credited service. Forfeitures will be
reallocated among remaining participating employees in the same proportion as
contributions. Benefits may be payable upon death, retirement or separation from
service. Blue Ash's contributions to the ESOP are not fixed, so benefits payable
under the ESOP cannot be estimated.
The ESOP may also purchase Common Stock in the open market. The ESOP is
subject to the requirements of the Employee Retirement Income Security Act of
1974, as amended, and the regulations of the Internal Revenue Service and the
Department of Labor thereunder.
The Board of Directors has appointed The Fifth Third Bank as the Plan
Administrator. First National Bank, Dayton is the trustee for the ESOP ("ESOP
Trustee"). The ESOP Trustee generally will vote all shares of stock held under
the Plan; however, the ESOP Trustee will be required to vote allocated shares in
accordance with the participants' instructions under circumstances specified in
the ESOP. As of September 9, 1997, the ESOP held 20,264 shares of Common Stock.
STOCK OPTION PLAN
In August, 1997, the Board of Directors of the Corporation adopted the
Towne Financial Corporation 1997 Stock Option Plan (the "1997 Plan") for key
management personnel and directors of the Corporation and Blue Ash. The 1997
Plan is being submitted to shareholders for approval at this annual meeting. See
PROPOSAL TO ADOPT THE TOWNE FINANCIAL CORPORATION 1997 STOCK OPTION PLAN for
more information.
CERTAIN TRANSACTIONS
Blue Ash, like many financial institutions, has followed a policy of
granting loans to eligible officers, directors and employees for the financing
of their personal residences and for consumer purposes. Blue Ash's policy does
not include the granting of unsecured personal loans. Real estate loans have
been made in the ordinary course of business and remain on substantially the
same terms and conditions as those of comparable transactions prevailing at the
time, and do not involve more than the normal risk of collectibility or present
other unfavorable features. All
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<PAGE> 14
loans by Blue Ash to its directors and executive officers are subject to OTS
regulations restricting loan and other transactions with affiliated persons of
Blue Ash. Prior to the passage of the Financial Institutions Reform, Recovery,
and Enforcement Act of 1989 ("FIRREA"), Blue Ash made loans to executive
officers and directors without closing costs and at a reduced interest rate of
one percent over the cost of funds. FIRREA prohibits Blue Ash from making loans
to its executive officers and directors at favorable rates or on terms not
comparable to those prevailing to the general public. Blue Ash's policy towards
loans to executive officers and directors currently complies with this
limitation. The aggregate dollar amount of loans to related parties was
approximately $3,000 at June 30, 1997.
PROPOSAL TO ADOPT THE TOWNE FINANCIAL CORPORATION
1997 STOCK OPTION PLAN
The Board of Directors recommends the adoption of a long term incentive
compensation plan for key management personnel and the Board of Directors of the
Corporation and Blue Ash, the 1997 Plan. Adoption of the 1997 Plan will require
the affirmative vote of the holders of a majority of the issued and outstanding
shares of Common Stock. The full text of the proposed 1997 Plan is set forth in
Appendix A to this Proxy Statement and the following discussion is qualified in
its entirety by reference to such text.
The purposes of the proposed 1997 Plan are to encourage key management
personnel and the Board of Directors of the Corporation and Blue Ash, which
currently consist of approximately eight persons, to acquire a proprietary and
vested interest in the growth and performance of the Corporation and to motivate
these individuals to contribute to the Corporation's future success and
prosperity, thus enhancing the value of the Corporation for the benefit of the
shareholders. The Corporation will receive no consideration for the grant of
options under the 1997 Plan.
The Board of Directors adopted the 1997 Plan on August 20, 1997, subject
to the approval of the 1997 Plan by the shareholders at this annual meeting. The
principal provisions of the 1997 Plan are as follows:
1. SHARES RESERVED FOR ISSUANCE. Subject to the adjustment in the
cash of certain changes in the capital structure of the
Corporation, an aggregate of 20,000 shares of Common Stock shall
be available for grant. If any option granted under the 1997
Plan ceases to be exercisable, the shares of Common Stock
subject to the award shall again be available for grant.
2. ADMINISTRATION. The 1997 Plan will be administered by the Board
of Directors.
3. TYPES OF AWARDS. Awards under the 1997 Plan may be either
incentive stock options (ISOs) within the meaning of Section
422A of the Internal Revenue code of 1986 (the "Internal Revenue
Code") or non-statutory stock options under Section 83 of the
Internal Revenue Code. No incentive stock options shall be
11
<PAGE> 15
granted under the Plan after ten years from the date the Plan
was approved by the Board of Directors.
4. STOCK OPTIONS. The 1997 Plan provides that the purchase price of
shares of Common Stock purchasable under any stock option shall
be not less than 100% of the fair market value of the Common
Stock on the date that the option is granted unless the option
is granted to a 10% beneficial owner of the outstanding Common
Stock in which case the purchase price shall be not less than
110% of the fair market value. The value of the Common Stock on
September 9, 1997 was $27.50. Each option granted under the 1997
Plan is exercisable as to not more than 20% of the total number
of shares granted under the option each year from the date of
grant, but no option may be exercised later than 10 years after
the date of grant, and in the case of an option granted to a 10%
beneficial owner, the option may not be exercised after 5 years
from the date of grant.
5. CHANGE OF CONTROL. In order to maintain all of the participants'
rights in the event of a Change in Control (as defined in the
1997 Plan) of the Corporation, the Board of Directors, as
constituted before such Change of Control, in its sole
discretion, may, as to any outstanding option, either at the
time an option is granted or any time thereafter, take any one
or more of the following actions: (a) provide for the
acceleration of any time period relating to the exercise or
realization of any such option so that such option may be
exercised or realized in full on or before a date fixed by the
Board of Directors; (b) provide for the purchase of any such
option by the Corporation, upon a participant's request, for an
amount of cash equal to the amount which could have been
attained upon the exercise of such option or realization of such
participant's rights had such option been currently exercisable
or payable; (c) make such adjustment to any such award then
outstanding as the Board of Directors deems appropriate to
reflect such Change of Control; or (d) cause any such option
then outstanding to be assumed, or new rights substituted
therefor, by the acquiring or surviving corporation in such
Change of Control.
6. AMENDMENT AND TERMINATION. The 1997 Plan may be amended or
terminated by the Board of Directors, provided that no amendment
shall be made without shareholder approval which shall (a)
increase the total number of shares reserved for issuance
pursuant to the 1997 Plan, (b) change the class of eligible
participants, or (c) materially increase the benefits under the
1997 Plan.
7. FEDERAL INCOME TAX CONSEQUENCES. The following are the federal
income tax consequences generally arising with respect to
options granted under the 1997 Plan. The grant of an ISO or a
non-statutory option will create no tax consequences for an
optionee or the Corporation. The optionee will have no taxable
income upon exercising an ISO (except that the alternative
minimum tax may apply), and the Corporation will receive no
deduction when an ISO is
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exercised. Upon exercising a non-statutory option the optionee
must recognize ordinary income equal to the difference between
the exercise price and the fair market value of the Common
Stock on the date of exercise; the Corporation will be
entitled to a deduction for the same amount. The treatment to
an optionee of a disposition of Common Stock acquired through
the exercise of an option depends on how long the shares of
Common Stock have been held; gains or losses arising from the
sale of shares will result in a short-term capital gain or
loss for shares held six months or less and long-term capital
gain or loss if held more than six months. Generally, there
will be no tax consequences to the Corporation in connection
with a disposition of Common Stock acquired under either an
ISO or a non-statutory option.
NEW PLAN BENEFITS
The number of options, if any, that will be granted to key management
personnel and directors pursuant to the 1997 Plan cannot be determined since
such grants are subject to the discretion of the Board of Directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
ADOPTION OF THE 1997 PLAN
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed Grant Thornton LLP as independent
public accountants of the Corporation with respect to its operations for the
year ending June 30, 1998, subject to ratification by the holders of Common
Stock. In taking this action, the members of the Board considered carefully
Grant Thornton LLP's performance for the Corporation in that capacity since its
original retention in 1995, its independence with respect to the services to be
performed and its general reputation for adherence to professional auditing
standards. Representatives of the firm are expected to be present at the Annual
Meeting and to be available to respond to appropriate questions from
shareholders. Their representatives will also be provided an opportunity to make
a statement, if they desire to do so.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
RATIFICATION OF GRANT THORNTON LLP AS THE CORPORATION'S
INDEPENDENT PUBLIC ACCOUNTANTS
COMPLIANCE WITH SECTION 16(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Corporation's directors and executive officers, and persons who own more than
ten percent of the Common Stock, to file with the Securities and Exchange
Commission initial reports of stock ownership and reports of changes in stock
ownership. Due to administrative oversight, Mr. Thornell, Director and Vice
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President of the Corporation and Director, Vice President and Chief Loan Officer
of Blue Ash, filed a late Form 5 reporting his purchase of shares of Common
Stock in fiscal 1997.
OTHER MATTERS
Management does not know of any other matters which may come before the
meeting. However, if any other matters are properly presented to the meeting, or
any adjournment thereof, it is the intention of the persons named in the
accompanying Proxy to vote, or otherwise act, in accordance with their judgment
on such matters.
SHAREHOLDER PROPOSALS
Proposals intended to be presented by shareholders at the next Annual
Meeting of the Corporation must be received by the Corporation, to be considered
for inclusion in any proxy material, no later than June 5, 1998, at the
Corporation's main office at 4811 Cooper Road, Blue Ash, Ohio 45242.
BY THE ORDER OF THE BOARD OF DIRECTORS
Mildred Martin, Secretary
Blue Ash, Ohio
September 26, 1997
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APPENDIX A
TOWNE FINANCIAL CORPORATION
1997 STOCK OPTION PLAN
1. PURPOSE.
The purpose of the 1997 Stock Option Plan (the "Plan") is to provide
opportunities to key management personnel and the Board of Directors of Towne
Financial Corporation (the "Corporation") and its subsidiary to purchase common
shares (the "Common Stock") of the Corporation, thereby encouraging them to
acquire a proprietary and vested interest in the growth and performance of the
Corporation, and, in general, to generate an increased incentive to contribute
to the Corporation's future success and prosperity, thus enhancing the value of
the Corporation for the benefit of shareholders. The Plan shall be subject to
approval by a majority of the shareholders of the Corporation within twelve
months of the date of adoption of the Plan by the Board of Directors of the
Corporation. Each stock option granted under the Plan is intended to be an
incentive stock option within the meaning of Section 422A of the Internal
Revenue Code of 1986 (the "Internal Revenue Code") except (i) to the extent that
any such option would exceed the limitations set forth in Section 6 below; (ii)
for options specifically designated at the time of grant as not being incentive
stock options; and (iii) for options granted to directors who are not salaried
employees of the Corporation or its subsidiary.
2. ADMINISTRATION.
The Plan shall be administered by the Board of Directors of the
Corporation (the "Board"). Subject to the provisions of the Plan, the Board
shall be authorized to interpret the Plan, to establish, amend, and rescind any
rules and regulations relating to the Plan, and to make all other determinations
necessary or advisable for the administration of the Plan. The Board may correct
any defect, supply any omission or reconcile any inconsistency in the Plan or in
any option in the manner and to the extent it shall deem desirable to carry it
into effect. The determinations of the Board in the administration of the Plan,
as described herein, shall be final and conclusive. The validity, construction
and effect of the Plan and any rules and regulations relating to the Plan shall
be determined in accordance with the laws of Ohio.
The Board may from time to time appoint a Stock Option Committee (the
"Committee") consisting of not less than two members of the Board, none of whom
shall be a salaried employee of the Corporation or its subsidiary, and each of
whom shall qualify in all respects as a "disinterested person" as defined in
Rule 16b-3 of the Securities and Exchange Commission under the Securities
Exchange Act of 1934. The Board, in its sole discretion, may provide that the
role of the Committee shall be limited to making recommendations to the Board
concerning any determinations to be made and actions to be taken by the Board
pursuant to or with respect to the Plan, or the Board may delegate to the
Committee such powers and authorities related to the administration of the Plan
as the Board shall determine, consistent with the Articles of Incorporation and
the Code of Regulations of the Corporation and applicable law. The Board
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may remove members, add members, and fill vacancies on the Committee from time
to time, all in accordance with the Corporation's Articles of Incorporation and
the Code of Regulations, and with applicable law. The majority vote of the
Committee, or acts reduced to or approved in writing by a majority of the
members of the Committee, shall be the valid acts of the Committee.
3. ELIGIBILITY.
Persons eligible to participate under the Plan (the "Participants")
shall be limited to key management personnel and the Board of Directors of the
Corporation and its subsidiary as designated by the Board.
Nothing in the Plan or in any option granted thereunder shall confer any
right on a Participant to continue in the employ of the Corporation or its
subsidiary or shall interfere in any way with the right of the Corporation or
its subsidiary, as the case may be, to terminate the Participant's employment at
any time.
A Participant's rights with respect to options granted under the Plan
shall be subject to the approval of the Plan by the majority of the shareholders
of the Corporation within twelve months of the adoption of the Plan by the
Board.
4. TYPES OF AWARDS.
Awards under the Plan may be either incentive stock options (ISOs)
within the meaning of Section 422A of the Internal Revenue Code, or
non-statutory options under Section 83 of the Internal Revenue Code. No
incentive stock options shall be granted under the Plan after ten years from the
date the Plan is adopted by the Board or approved by the shareholders of the
Corporation, whichever is earlier.
5. SHARES SUBJECT TO PLAN.
Subject to adjustment as provided in Section 10 below, an aggregate of
20,000 shares of Common Stock of the Corporation shall be reserved and available
for grant under the Plan. If an option ceases to be exercisable in whole or in
part, the shares representing such option shall continue to be available under
the Plan for purposes of granting options with respect thereto. In the future,
if another company is acquired, any Common Stock covered by or issued as a
result of the assumption or substitution of outstanding grants of the acquired
company shall not be deemed issued under the Plan and shall not be subtracted
from the shares of Common Stock available for grant under the Plan. The Common
Stock deliverable under the Plan may consist in whole or in part of authorized
and unissued shares or treasury shares.
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6. STOCK OPTIONS.
All stock options granted under the Plan shall be subject to the
following terms and conditions:
(a) The Board may, subject to the provisions of the Plan and such other
terms and conditions as the Board may prescribe, grant to any Participant
options to purchase shares of Common Stock, which options may be ISOs or
non-statutory options or both. The grant of an option shall be evidenced by a
signed written agreement ("Stock Option Agreement") containing such terms and
conditions as the Board may prescribe.
(b) The purchase price per share of Common Stock of options granted
under the Plan shall be determined by the Board but shall not be less than one
hundred (100%) percent of the fair market value of the Common Stock on the date
the option is granted, or not less than one hundred ten (110%) percent of the
fair market value of the Common Stock if the employee owns in excess of ten
(10%) percent of the total combined voting power of all classes of stock of the
Corporation or its subsidiary, as defined in Section 422A of the Internal
Revenue Code ("a 10% Stockholder"). The fair market value of the Common Stock
shall be determined in good faith by the Board. If as of the date the option is
granted the Common Stock is traded over-the-counter, the fair market value shall
be deemed to be the mean "bid" and "asked" prices of the Common Stock. The Board
shall determine the exercise price for non-statutory options.
(c) Unless otherwise prescribed by the Board in the Stock Option
Agreement, each option granted under the Plan shall be exercisable (i) as to not
more than 20% of the total number of shares granted under the option, during the
first year after the grant of the option; (ii) as to not more than 40%, during
the first two years after the grant of the option; (iii) as to not more than
60%, during the first three years after the grant of the option; (iv) as to not
more than 80%, during the first four years after the grant of the option; and
(v) the total number of shares not previously exercised, during the remaining
term of the option. The right of cumulation shall exist in that, to the extent
not previously exercised or terminated, option installments shall accumulate and
be exercisable, in whole or in part, in any subsequent period, but no
installment of the option shall be exercisable later than ten years from the
date the option is granted. No option shall be exercisable after the expiration
of ten (10) years from the date it is granted, except in the case of "a 10%
Stockholder", in which case no option shall be exercisable after the expiration
of five (5) years from the date it is granted.
(d) The Board shall establish procedures governing the exercise of
options and shall require that written notice of exercise be given and that the
option price be paid in full in cash at the time of exercise. As soon as
practicable after receipt of each notice and full payment, the Corporation shall
deliver to the Participant a certificate or certificates representing the
acquired Common Stock.
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7. COMPLIANCE WITH SECURITIES LAWS.
At the time of exercise of any option, the Board may require the
Participant to execute any document or take any action which may be then
necessary to comply with the Securities Act of 1933 and the rules and
regulations promulgated thereunder, or any other applicable federal or state
laws regulating the sale and issuance of securities, and the Board may, if it
deems necessary, include provisions in the Stock Option Agreement to assure such
compliance. The Board may, from time to time, change its requirements with
respect to enforcing compliance with federal and state securities laws,
including the request for and enforcement of letters of investment intent, such
requirements to be determined by the Board in its judgment as necessary to
assure compliance with said laws. Such changes may be made with respect to any
particular option or stock issued upon exercise thereof.
8. NONASSIGNABILITY OF AWARDS.
No option granted under the Plan shall be assigned, transferred, pledged
or otherwise encumbered by a Participant, otherwise than by will, by designation
of a beneficiary after death or by the laws of descent and distribution. Each
option shall be exercisable during the Participant's lifetime only by the
Participant or, if permissible under applicable law, by the Participant's
guardian, legal representative or attorney-in-fact.
9. CHANGE OF CONTROL.
In order to maintain all of the Participants' rights in the event of a
Change of Control, the Board, as constituted before such Change of Control, in
its sole discretion, may, as to any outstanding option, either at the time an
option is made or any time thereafter, take any one or more of the following
actions: (a) provide for the acceleration of any time periods relating to the
exercise of any such option so that such option may be exercised in full on or
before a date fixed by the Board; (b) provide for the purchase of any such
option by the Corporation for its fair market value; (c) make such adjustment to
any such option then outstanding as the Board deems appropriate to reflect such
Change of Control; or (d) cause any such option then outstanding to be assumed,
or new rights substituted therefore, by the acquiring or surviving corporation
in such Change of Control. The Board may, in its discretion, include such
further provisions and limitations in any agreement documenting such options as
it may deem equitable and in the best interests of the Corporation. A "Change of
Control" shall be deemed to have occurred if (i) a tender offer shall be made
and consummated for the ownership of 30% or more of the outstanding voting
securities of the Corporation; (ii) the Corporation shall be merged or
consolidated with another corporation and as a result of such merger or
consolidation less than 75% of the outstanding voting securities of the
surviving or resulting corporation shall be owned in the aggregate by the former
shareholders of the Corporation as the same shall have existed immediately prior
to such merger or consolidation; however, for purposes of this calculation
voting securities of the Corporation held by affiliates (within the meaning of
the Securities Exchange Act of 1934) of any party to such merger or
consolidation shall not be included in the aggregate shares owned by the "former
shareholders of the Corporation"; (iii) the Corporation
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shall sell substantially all of its assets to another corporation which is not a
wholly owned subsidiary; (iv) a person within the meaning of Section 3(a)(9) or
of Section 13(d)(3) of the Securities Exchange Act of 1934, shall acquire after
the date this Plan is adopted 20% or more of the outstanding voting securities
of the Corporation (whether directly, beneficially or of record), or a person,
within the meaning of Section 3(a)(9) or Section 13(d)(3) of the Securities
Exchange Act of 1934, controls in any manner the election of a majority of the
directors of the Corporation; or (iv) within any period of two consecutive years
after the effective date of the Plan, individuals who at the beginning of such
period constitute the Corporation's Board cease for any reason to constitute at
least a majority thereof, unless the election of each director who was not a
director at the beginning of such period has been approved in advance by
directors representing at least two-thirds of the directors then in office who
were directors at the beginning of the period. For purposes hereof, ownership of
voting securities shall take into account and shall include ownership as
determined by applying the provisions of Rule 13d-3(d)(1)(i) pursuant to the
Securities Exchange Act of 1934.
10. ADJUSTMENTS.
(a) In the event of any change affecting the Common Stock by reason of
any stock dividend or split, recapitalization, merger, consolidation, spin-off,
combination or exchange of shares or other corporate change, or any
distributions to common shareholders other than cash dividends, the Board shall
make such substitution or adjustment in the aggregate number or class of shares
which may be distributed under the Plan and in the number, class and option
price or other price of shares subject to the outstanding options granted under
the Plan as it deems to be appropriate in order to maintain the purpose of the
original grant.
(b) The Board shall be authorized to make adjustments in performance
award criteria or in the terms and conditions of the options in recognition of
unusual or non-recurring events affecting the Corporation or its financial
statements or changes in applicable laws, regulations or accounting principles.
The Board may correct any defect, supply any omission or reconcile any
inconsistency in the Plan or any option in the manner and to the extent it shall
deem desirable to carry it into effect.
11. WITHHOLDING.
At the Board's discretion, the recipient of any option under the Plan
may be required to pay to the Corporation, in cash, Common Stock or other
property, or in a combination thereof, the amount of any taxes required to be
withheld with respect to such option or, the Corporation shall have the right to
retain from such option a sufficient number of shares of Common Stock to satisfy
the applicable withholding tax obligation.
12. AMENDMENT OF THE PLAN.
The Plan may at any time or from time to time be terminated, modified or
amended by the shareholders of the Corporation, or by the affirmative vote of a
majority interest of the
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Common Stock of the Corporation. The Board may amend, alter or discontinue the
Plan or any portion thereof at any time the Plan in such respects as it shall
deem advisable and to the extent permitted by the Internal Revenue Code and
Securities and Exchange Act of 1934 and the rules and regulations promulgated
thereunder, provided that no amendment shall be made without shareholder
approval which shall (a) increase the total number of shares reserved for
issuance pursuant to the Plan; (b) change the class of eligible Participants; or
(c) materially increase the benefits under the Plan. No modification or
amendment of the Plan shall adversely affect options granted to a participant
which are exercisable at the time of the modification or amendment.
13. INDEMNIFICATION OF BOARD.
In addition to such other rights of indemnification as they may have as
Directors or as members of the Board, the members of the Board shall be
indemnified by the Corporation against the reasonable expenses, including
attorneys' fees actually and necessarily incurred in connection with the defense
of any action, suit or proceedings, or in connection with any appeal thereof, to
which they or any of them may be a party by reason of any action taken or
failure to act under or in connection with the Plan or any option granted
thereunder, and against all amounts paid by them in settlement thereof (provided
such settlement is approved by independent legal counsel selected by the
Corporation) or paid by them in satisfaction of a judgment in any such action,
suit or proceeding, except in relation to matters as to which it shall be
adjudged in such action, suit or proceeding that such Board member is liable for
negligence or misconduct in the performance of his duties; provided that within
sixty (60) days after initiation of any such action, suit or proceeding the
Board member shall in writing offer the Corporation the opportunity, at its own
expense, to pursue and defend the same.
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REVOCABLE PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS
TOWNE FINANCIAL CORPORATION
<TABLE>
<CAPTION>
<S> <C>
PROXY FOR The undersigned hereby appoints Mildred Martin and William S.
ANNUAL MEETING Siders as Proxies, each with the power to appoint his or her
OF substitute, and hereby authorizes them to represent and to vote,
SHAREHOLDERS as designated below, all the shares of common stock held of record
OCTOBER 29, 1997 by the undersigned on September 9, 1997 at the Annual Meeting of
Shareholders of the Corporation to be held on October 29, 1997 or
any adjournment thereof.
</TABLE>
1. ELECTION OF DIRECTOR
FOR the nominee listed below _________
WITHHOLD AUTHORITY
to vote for the nominee listed below ________
RALPH E. HEITMEYER
2. PROPOSAL TO ADOPT THE TOWNE FINANCIAL
CORPORATION 1997 STOCK OPTION PLAN
FOR ____________
AGAINST ____________
ABSTAIN ____________
3. RATIFICATION OF GRANT THORNTON LLP AS
INDEPENDENT PUBLIC ACCOUNTANTS FOR THE
YEAR ENDING JUNE 30, 1998.
FOR ____________
AGAINST ____________
4. In their discretion, the Proxies are authorized to
vote upon such other business as may properly come
before the meeting.
<PAGE> 25
TOWNE FINANCIAL CORPORATION
4811 COOPER ROAD
BLUE ASH, OHIO 45242
<TABLE>
<CAPTION>
<S> <C>
PROXY FOR This Proxy when properly executed will be voted in
ANNUAL MEETING the manner directed herein by the undersigned
OF shareholder. IF NO DIRECTION IS MADE, THE PROXY
SHAREHOLDERS WILL BE VOTED FOR PROPOSALS 1, 2 AND 3.
OCTOBER 29, 1997
</TABLE>
--------------------------------
Signature
--------------------------------
Signature if held jointly
Dated: _______________, 1997
Please sign exactly as name appears hereon. When
shares are held by joint tenants, both should
sign. When signing as attorney, as executor,
administrator, trustee or guardian, please give
full title as such. If a corporation, please
sign in full corporate name by President or
other authorized officer. If a partnership,
please sign in partnership name by authorized
person.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
