FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): November 24, 1997
First Savings Bank of Washington Bancorp, Inc.
(Exact name of registrant as specified in its charter)
Delaware 0-26584 91-1632900
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State or other jurisdiction Commission (I.R.S. Employer
of incorporation File Number Identification No.)
10 S. First Avenue, Walla Walla, Washington 99362
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number (including area code): (509) 527-3636
Not Applicable
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(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS
On November 24, 1997, First Savings Bank of Washington Bancorp, Inc. (the
"Company") entered into an Agreement and Plan of Merger ("Agreement") with
Towne Bancorp, Inc. ("Towne") and its wholly-owned subsidiary Towne Bank of
Woodinville (the "Bank"), pursuant to which the Company will acquire all of the
outstanding stock of Towne. The Agreement provides that shareholders of Towne
will receive either 3.85 shares of the Company's common stock, $91.62 in cash
or a combination of stock and cash in exchange for each share of Towne common
stock. Shareholders of Towne will have the opportunity to indicate on a form of
election whether they wish to receive cash or stock for each share of Towne
common stock that they own. Elections will be subject to proration in the event
that shareholders elect to exchange fewer than 51% or more than 70% of the
shares of Towne common stock for the Company's common stock. The Company will
also assume all outstanding Towne stock options.
Pursuant to the Agreement, Towne has agreed to pay the Company a
termination fee of $1,350,000 in the event the Agreement is terminated under
certain conditions, including the acquisition by a third party of securities
representing 25% or more of the voting shares of Towne or the agreement between
Towne and a third party to engage in a merger or consolidation.
Consummation of the acquisition is subject to several conditions,
including receipt of applicable regulatory approval, completion of due
diligence by the Company and approval by Towne's shareholders. For information
regarding the terms of the proposed transaction, reference is made to the
Agreement and the press release dated November 24, 1997, which are attached
hereto as Exhibits 2 and 99, respectively, and incorporated herein by
reference.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
Exhibit
2 Agreement and Plan of Merger dated as of November 24, 1997 by
and among First Savings Bank of Washington Bancorp, Inc.,
Towne Bancorp, Inc. and Towne Bank of Woodinville.
99 Press Release dated November 24, 1997.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
FIRST SAVINGS BANK OF WASHINGTON
BANCORP INC.
DATE: December 4, 1997 By: /s/ Gary Sirmon
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Gary Sirmon
President
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EXHIBIT 2
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AGREEMENT AND PLAN OF MERGER
dated as of November 24, 1997
by and among
FIRST SAVINGS BANK OF WASHINGTON BANCORP, INC.
and
TOWNE BANCORP, INC.
and
TOWNE BANK OF WOODINVILLE
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TABLE OF CONTENTS
Page
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AGREEMENT AND PLAN OF MERGER............................................. 6
RECITALS................................................................. 6
AGREEMENT................................................................ 6
ARTICLE 1
DEFINITIONS
1.1 Definitions.................................................. 6
ARTICLE 2
THE MERGER AND RELATED MATTERS
2.1 Merger
(a) Surviving Corporation.................................. 10
(b) Certificate of Incorporation and Bylaws................ 10
(c) Effects of the Merger.................................. 10
(d) Transfer of Assets..................................... 10
(e) Assumption of Liabilities.............................. 11
2.2 Effective Time............................................... 11
2.3 Conversion of Towne Common Stock............................. 11
2.4 Acquiror Common Stock........................................ 11
2.5 Dissenting Shares............................................ 11
2.6 Fractional Shares............................................ 11
2.7 Anti-Dilution Provisions..................................... 12
2.8 Options...................................................... 12
2.9 Elections and Proration...................................... 12
2.10 Exchange of Towne Common Stock............................... 14
2.11 Closing...................................................... 15
2.12 Reservation of Right to Revise Transaction................... 15
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF ACQUIROR
3.1 Organization and Corporate Authority......................... 16
3.2 Authorization, Execution and Delivery; Merger Agreement
Not in Breach.............................................. 16
3.3 No Legal Bar................................................. 16
3.4 Government Approvals......................................... 17
3.5 Acquiror Financial Statements................................ 17
3.6 Absence of Certain Changes................................... 17
3.7 Tax Matters.................................................. 17
3.8 Litigation................................................... 17
3.9 Capitalization of Acquiror................................... 17
3.10 Disclosure................................................... 17
3.11 Absence of Regulatory Actions................................ 18
3.12 Reports...................................................... 18
3.13 Year 2000 Issues............................................. 18
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF TOWNE AND THE BANK
4.1 Organization and Qualification of Towne and Subsidiaries..... 18
4.2 Organization and Qualification of the Bank................... 19
4.3 Authorization, Execution and Delivery; Merger Agreement
Not in Breach.............................................. 19
4.4 No Legal Bar................................................. 19
4.5 Government and Other Approvals............................... 20
4.6 Compliance With Law.......................................... 20
4.7 Charter Documents............................................ 20
4.8 Financial Statements......................................... 20
4.9 Absence of Certain Changes................................... 21
4.10 Deposits..................................................... 22
4.11 Properties................................................... 22
4.12 Towne Subsidiaries........................................... 22
4.13 Condition of Fixed Assets and Equipment...................... 22
4.14 Tax Matters.................................................. 22
4.15 Litigation................................................... 23
4.16 Hazardous Materials.......................................... 23
4.17 Insurance.................................................... 25
4.18 Labor and Employment Matters................................. 26
4.19 Records and Documents........................................ 26
4.20 Capitalization of Towne...................................... 26
4.21 Capitalization of the Bank................................... 26
4.22 Sole Agreement............................................... 27
4.23 Disclosure................................................... 27
4.24 Absence of Undisclosed Liabilities........................... 27
4.25 Allowance for Loan Losses.................................... 27
4.26 Compliance with Laws......................................... 28
4.27 Absence of Regulatory Actions................................ 28
4.28 Employee Benefit Plans....................................... 28
4.29 Material Contracts........................................... 32
4.30 Material Contract Defaults................................... 33
4.31 Reports...................................................... 34
4.32 Statements True and Correct.................................. 34
4.33 Brokers and Finders.......................................... 34
4.34 Derivatives Contracts; Structured Notes, etc. ............... 34
4.35 Year 2000 Issues............................................. 34
ARTICLE 5
COVENANTS OF ACQUIROR
5.1 Regulatory Approvals......................................... 34
5.2 Preparation of Registration Statement........................ 35
5.3 Registration Statement Effectiveness......................... 35
5.4 Employees.................................................... 35
5.5 Reasonable Efforts to Close.................................. 35
5.6 Addition to Board of Directors............................... 36
5.7 Indemnification and Insurance................................ 36
5.8 Access....................................................... 36
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ARTICLE 6
COVENANTS OF TOWNE AND THE BANK
6.1 Shareholders Meeting......................................... 36
6.2 Conduct of Business -- Affirmative Covenants................. 37
6.3 Conduct of Business -- Negative Covenants.................... 38
6.4 Conduct of Business -- Certain Actions....................... 40
6.5 Accruals and Reserves........................................ 41
6.6 Access; Information.......................................... 41
6.7 Affiliate Agreements......................................... 41
6.8 Addition to Board of Directors............................... 41
6.9 Employee Stock Purchase Plan................................. 41
ARTICLE 7
CONDITIONS TO CLOSING
7.1 Conditions to the Obligations of Towne and the Bank.......... 42
(a) Performance............................................ 42
(b) Representations and Warranties......................... 42
(c) Documents.............................................. 42
(d) Opinion of Acquiror's Counsel.......................... 42
(e) No Material Adverse Change............................. 43
7.2 Conditions to the Obligations of Acquiror.................... 44
(a) Performance............................................ 44
(b) Representations and Warranties......................... 44
(c) Documents.............................................. 44
(d) Destruction of Property................................ 44
(e) Inspections Permitted.................................. 44
(f) No Material Adverse Change............................. 45
(g) Opinion of Towne's and the Bank's Counsel.............. 45
(h) Other Business Combinations, Etc. ..................... 46
(i) Maintenance of Certain Covenants, Etc. ................ 46
(j) Dissenting Shares...................................... 46
(k) Accruals and Reserves.................................. 46
(l) Employment Agreements.................................. 46
(m) Receipt of Affiliate Agreements........................ 46
(n) Employee Stock Purchase Plan........................... 47
7.3 Conditions to Obligations of All Parties..................... 47
(a) No Pending or Threatened Claims........................ 47
(b) Governmental Approvals and Acquiescence Obtained....... 47
(c) Effective Registration Statement....................... 47
(d) Tax Opinion............................................ 47
(e) Shareholder Vote....................................... 47
ARTICLE 8
TERMINATION
8.1 Termination.................................................. 47
8.2 Effect of Termination........................................ 49
8.3 Termination Fee.............................................. 49
8.4 Acquiror Fee................................................. 49
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ARTICLE 9
GENERAL PROVISIONS
9.1 Notices...................................................... 50
9.2 Assignability and Parties in Interest........................ 51
9.3 Governing Law................................................ 51
9.4 Counterparts................................................. 51
9.5 Best Efforts................................................. 51
9.6 Publicity.................................................... 51
9.7 Entire Agreement............................................. 51
9.8 Severability................................................. 52
9.9 Modifications, Amendments and Waivers........................ 52
9.10 Interpretation............................................... 52
9.11 Payment of Expenses.......................................... 52
9.12 Equitable Remedies........................................... 52
9.13 Attorneys' Fees.............................................. 53
9.14 No Waiver.................................................... 53
9.15 Remedies Cumulative.......................................... 53
9.16 Non-Survival of Representations and Warranties............... 53
Exhibit A Plan of Merger
Exhibit B Affiliate Agreement
Exhibit C Employment Agreements
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Merger Agreement") is made and
entered into this 24th day of November, 1997, by and between FIRST SAVINGS BANK
OF WASHINGTON BANCORP, INC. ("Acquiror"), a corporation chartered and existing
under the laws of the State of Delaware, TOWNE BANCORP, INC., a corporation
chartered and existing under the laws of the State of Washington ("Towne") and
TOWNE BANK OF WOODINVILLE (the "Bank"), a commercial bank chartered and
existing under the laws of the State of Washington.
RECITALS
A. Acquiror, Towne and the Bank, on the terms and conditions hereinafter
set forth, desire to effect an acquisition transaction pursuant to which
Acquiror will acquire all of the shares of Towne Common Stock (as hereinafter
defined) outstanding at the Effective Time (as hereinafter defined) at a
purchase price per share equal to the amount set forth in Section 2.3(a)
hereof.
B. To effect the acquisition, Towne shall be merged with and into
Acquiror (the "Merger") pursuant to the Plan of Merger substantially in the
form attached hereto as Exhibit A. Acquiror will be the surviving corporate
entity in the Merger (the "Surviving Corporation").
C. The parties hereto desire to make certain representations, warranties,
covenants and agreements in connection with the Merger and also to prescribe
various conditions to the Merger.
D. Concurrently with the execution and delivery of this Merger Agreement,
and as an inducement to Acquiror's willingness to enter into this Merger
Agreement, each member of the Board of Directors of Towne has entered into an
agreement with Acquiror pursuant to which, among other things, they have agreed
to vote in favor of approval of the transactions contemplated by this Merger
Agreement at the Shareholders Meeting (as hereinafter defined).
E. The respective Boards of Directors of Acquiror, Towne and the Bank
have duly approved this Merger Agreement and have duly authorized its execution
and delivery.
NOW THEREFORE, in consideration of the foregoing premises and the mutual
representations, warranties, covenants and agreements herein contained and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the Parties agree as follows:
AGREEMENT
ARTICLE 1
DEFINITIONS
1.1 Definitions . As used in this Merger Agreement, the following
terms have the definitions indicated:
"AFFILIATE" of a party means any person, partnership, corporation,
association or other legal entity directly or indirectly controlling,
controlled by or under common control, with that party.
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"ACQUIROR" shall mean First Savings Bank of Washington Bancorp,
Inc., a Delaware-chartered bank holding company having its principal place of
business in Walla Walla, Washington.
"ACQUIROR COMMON STOCK" shall mean the common stock, par value
$0.01 per share, of Acquiror.
"ACQUIROR DUE DILIGENCE REVIEW" shall have the meaning assigned to
such term in Section 8.1(j) of this Merger Agreement.
"ACQUIROR DUE DILIGENCE REVIEW PERIOD" shall have meaning assigned
to such term in Section 8.1(j) of this Merger Agreement.
"ACQUIROR FEE" shall have the meaning assigned to such term in
Section 8.4 of this Merger Agreement.
"ACQUIROR OPTION" shall mean an option to acquire shares of
Acquiror Common Stock.
"ACQUISITION PROPOSAL" shall have the meaning assigned to such term
in Section 6.4 of this Merger Agreement.
"APPLICABLE ENVIRONMENTAL LAWS" shall have the meaning assigned to
such term in Section 4.16(a) of this Merger Agreement.
"BALANCE SHEET DATE" shall have the meaning assigned to such term
in Section 4.9 of this Merger Agreement.
"BANK" shall mean Towne Bank of Woodinville, a commercial bank
chartered and existing under the laws of the State of Washington.
"BANK COMMON STOCK" shall have the meaning assigned to such term in
Section 4.21 of this Merger Agreement.
"BANK FINANCIAL STATEMENTS" shall have the meaning assigned to such
term in Section 4.8 of this Merger Agreement.
"BHCA" shall mean the Bank Holding Company Act.
"CERCLA" shall have the meaning set forth in Section 4.16(a) of
this Merger Agreement.
"CERTIFICATE" shall have the meaning assigned to such term in
Section 2.10 of this Merger Agreement.
"CLOSING" shall have the meaning assigned to such term in Section
2.11 of this Merger Agreement.
"CLOSING DATE" shall have the meaning assigned to such term in
Section 2.11 of this Merger Agreement.
"DGCL" shall mean the Delaware General Corporation Law.
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"DEPOSITS" shall mean all deposits (including, but not limited to,
certificates of deposit, savings accounts, NOW accounts and checking accounts)
of the Bank.
"DERIVATIVES CONTRACT" shall have the meaning assigned to such term
in Section 4.34 of this Merger Agreement.
"DISSENTING SHARES" shall have the meaning assigned to such term in
Section 2.5 of this Merger Agreement.
"EFFECTIVE DATE OF THE MERGER" shall mean that date on which the
Effective Time shall have occurred.
"EFFECTIVE TIME" shall have the meaning assigned in Section 2.2 of
this Merger Agreement.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"EXCHANGE AGENT" shall mean the independent agent selected by
Acquiror to effect the exchange of certificates representing Towne Common Stock
for the consideration described in Section 2.3.
"FDIC" means the Federal Deposit Insurance Corporation, or any
successor thereto.
"FRB" shall mean the Board of Governors of the Federal Reserve
System.
"GAAP" shall mean generally accepted accounting principles,
consistently applied.
"GOVERNMENT APPROVALS" shall have the meaning assigned to such term
in Section 3.4 of this Merger Agreement.
"HAZARDOUS SUBSTANCES" shall have the meaning set forth in Section
4.16(a) of this Merger Agreement.
"INTERNAL REVENUE CODE" shall mean the Internal Revenue Code of
1986, as amended.
"LOAN PROPERTY" shall have the meaning assigned to such term in
Section 4.16(a) of this Merger Agreement.
"MERGER" shall, as described in Section 2.1 of this Merger
Agreement, mean the merger of Towne with and into Acquiror, which shall survive
the Merger as the Surviving Corporation.
"MERGER AGREEMENT" means this Agreement and Plan of Merger together
with the Plan of Merger (Exhibit A) and all Exhibits and Schedules annexed to,
and incorporated by specific reference as a part of, this Merger Agreement.
"NASD" means the National Association of Securities Dealers, Inc.
"OFFICER" shall have the meaning set forth in Section 4.9(k) of
this Merger Agreement.
"PARTIES" shall mean Towne, the Bank and Acquiror collectively;
Towne or the Bank on the one hand, or Acquiror on the other hand, may sometimes
be referred to as a "PARTY."
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"PENSION PLAN" shall mean any employee pension benefit plan as such
term is defined in Section 3(2) of ERISA which is maintained by the referenced
Party.
"PERSON" shall mean any natural person, fiduciary, corporation,
partnership, joint venture, association, business trust or any other entity of
any kind.
"PLAN OF MERGER" shall mean the Plan of Merger substantially in the
form of Exhibit A hereto to be executed by authorized representatives of Towne
and Acquiror and filed with the Secretary of State of the State of Washington
along with the Articles of Merger in accordance with Washington law and with
the Secretary of State of the State of Delaware along with a Certificate of
Merger in accordance with Delaware law and providing for the Merger of Towne
with and into Acquiror as contemplated by Section 2.1 of this Merger Agreement.
"PROPERTY" shall have the meaning assigned to such term in Section
4.16(a) of this Merger Agreement.
"PROXY STATEMENT/PROSPECTUS" shall mean the proxy statement to be
used by Towne to solicit proxies with a view to securing the approval of the
Towne Shareholders of this Merger Agreement and the Plan of Merger, which shall
also serve as the prospectus for the shares of Acquiror Common Stock to be
issued to the Towne Shareholders.
"REALTY" means the real property of the Bank owned or leased by the
Bank or any Subsidiary of the Bank.
"RECORDS" means all available records, minutes of meetings of the
Board of Directors, committees and shareholders of Towne and the Bank, original
instruments and other documentation, pertaining to Towne and the Bank, Towne's
and the Bank's assets (including plans and specifications relating to the
Realty), and liabilities, the Towne Common Stock, the Deposits and the loans,
and all other business and financial records which are necessary or customary
for use in the conduct of Towne's and the Bank's business by Acquiror and the
Bank on and after the Effective Time as it was conducted prior to the Closing
Date.
"REGISTRATION STATEMENT" shall have the meaning assigned to such
term in Section 5.2 of this Merger Agreement.
"REGULATORY AUTHORITIES" shall mean, collectively, the Department
of Justice, the FRB, the FDIC, the SEC, the Washington Department, or any other
state or federal governmental or quasi-governmental entity which has, or may
hereafter have, jurisdiction over any of the transactions described in this
Merger Agreement.
"RELEASE" shall have the meaning assigned to such term in Section
4.16(b)(i) of this Merger Agreement.
"SEC" shall mean the Securities and Exchange Commission, or any
successor thereto.
"SECURITIES LAWS" shall mean the Securities Act of 1933, as amended
("1933 Act"), the Securities Exchange Act of 1934, as amended, ("1934 Act"),
the Investment Company Act of 1940, as amended, the Investment Advisers Act of
1940, as amended, the Trust Indenture Act of 1939, as amended, and the rules
and regulations of the SEC promulgated thereunder, as well as any similar state
securities laws and any similar rules and regulations promulgated by the
applicable federal bank Regulatory Authorities.
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"SHAREHOLDERS MEETING" shall mean the special meeting of Towne
Shareholders to be held pursuant to Section 6.1 of this Merger Agreement,
including any adjournment or adjournments thereof.
"SUBSIDIARIES" shall mean all of those corporations, or other
entities of which the entity in question owns or controls 5% or more of the
outstanding voting equity securities either directly or through an unbroken
chain of entities as to each of which 5% or more of the outstanding equity
securities is owned directly or indirectly by its parent.
"SURVIVING CORPORATION" shall mean Acquiror as the corporation
resulting from the consummation of the Merger as set forth in Section 2.1 of
this Merger Agreement.
"TOWNE" shall mean Towne Bancorp, Inc., a Washington-chartered bank
holding company having its principal place of business in Woodinville,
Washington.
"TOWNE COMMON STOCK" has the meaning assigned to such terms in
Section 2.3(a) of this Merger Agreement.
"TOWNE OPTION" shall mean an option granted by Towne to purchase
shares of Towne Common Stock.
"TOWNE SHAREHOLDERS" shall mean the holders of the Towne Common
Stock.
"WBCA" shall mean the Washington Business Corporation Act.
"WASHINGTON DEPARTMENT" shall mean the Department of Financial
Institutions of the State of Washington.
ARTICLE 2
THE MERGER AND RELATED MATTERS
2.1 Merger. Subject to the terms and conditions of this Merger
Agreement, and pursuant to the provisions of the WBCA, the DGCL, the BHCA and
the rules and regulations promulgated thereunder, at the Effective Time (as
hereinafter defined):
(a) Surviving Corporation. Towne shall be merged with and
into Acquiror pursuant to the terms and conditions set forth herein and
pursuant to the Plan of Merger attached hereto as Exhibit A. Upon consummation
of the Merger, the separate existence of Towne shall cease and Acquiror shall
continue as the Surviving Corporation.
(b) Certificate of Incorporation and Bylaws. The certificate
of incorporation and bylaws of Acquiror, in effect immediately prior to the
Effective Time, shall become the certificate of incorporation and bylaws of the
Surviving Corporation.
(c) Effects of the Merger . The separate existence of Towne
shall cease, and Towne shall be merged with and into Acquiror which, as the
Surviving Corporation, shall thereupon and thereafter possess all of the
assets, rights, privileges, appointments, powers, licenses, permits and
franchises of the two merged corporations, whether of a public or a private
nature, and shall be subject to all of the liabilities, restrictions,
disabilities and duties of both Acquiror and Towne.
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(d) Transfer of Assets . All rights, assets, licenses,
permits, franchises and interests of Acquiror and Towne in and to every type of
property, whether real, personal, or mixed, whether tangible or intangible,
shall be deemed to be vested in Acquiror as the Surviving Corporation by virtue
of the Merger becoming effective and without any deed or other instrument or
act of transfer whatsoever.
(e) Assumption of Liabilities . The Surviving Corporation
shall become and be liable for all debts, liabilities, obligations and
contracts of Acquiror as well as those of Towne, whether the same shall be
matured or unmatured; whether accrued, absolute, contingent or otherwise; and
whether or not reflected or reserved against in the balance sheets, other
financial statements, books of account or records of Acquiror or Towne.
2.2 Effective Time. As soon as practicable after each of the
conditions set forth in Article 7 hereof have been satisfied or waived, the
Parties will file, or cause to be filed, with the Secretary of State of the
State of Washington and the Secretary of State of the State of Delaware such
articles of merger and certificate of merger as they may deem necessary or
appropriate for the Merger which articles of merger shall be in the form
required by and executed in accordance with the applicable provisions of the
WBCA and the DGCL. The Merger shall become effective at such time as may be
specified in such articles of merger and certificate of merger (the "Effective
Time").
2.3 Conversion of Towne Common Stock. At the Effective Time:
(a) Each share of common stock of Towne, $10.00 par value per
share ("Towne Common Stock"), issued and outstanding immediately prior thereto
(except for Dissenting Shares, as defined herein) shall, by virtue of the
Merger and without any action on the part of the holder thereof, be converted
into the right to receive from Acquiror either (1) $91.62 in cash, without
interest ("Per Share Cash Amount"), (2) 3.85 shares of Acquiror Common Stock
("the Exchange Ratio"), or (3) a combination of shares of Acquiror Common Stock
and cash, all as determined in accordance with Section 2.9.
Notwithstanding any other provision of this Merger Agreement,
any shares of Towne Common Stock issued and outstanding immediately prior to
the Effective Time which are then owned beneficially or of record by Acquiror,
Towne or by any direct or indirect Subsidiary of any of them or are held in the
treasury of Towne shall, by virtue of the Merger, be canceled without payment
of any consideration therefor and without any conversion thereof.
(b) The holders of certificates representing shares of Towne
Common Stock shall cease to have any rights as stockholders of Towne, except
such rights, if any, as they may have pursuant to the WBCA. Except as provided
above, until certificates representing shares of Towne Common Stock are
surrendered for exchange, each such certificate shall, after the Effective
Time, represent for all purposes only the right to receive the amount of
consideration into which their shares of Towne Common Stock shall have been
converted by the Merger as provided above.
(c) The stock transfer books of Towne shall be closed and no
transfer of shares of Towne Common Stock shall be made thereafter.
2.4 Acquiror Common Stock. At the Effective Time, the shares of
Acquiror Common Stock issued and outstanding immediately prior to the Effective
Time shall, on and after the Effective Time, remain issued and outstanding as
shares of Acquiror Common Stock.
2.5 Dissenting Shares. Any shares of Towne Common Stock held by a
holder who dissents from the Merger in accordance with the WBCA and becomes
entitled to obtain payment for the fair value of such shares of Towne Common
Stock pursuant to the applicable provisions of the WBCA shall be
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herein called "Dissenting Shares." Notwithstanding any other provision of this
Merger Agreement, any Dissenting Shares shall not, after the Effective Time, be
entitled to vote for any purpose or receive any dividends or other
distributions and shall be entitled only to such rights as are afforded in
respect of Dissenting Shares pursuant to the WBCA.
2.6 Fractional Shares. Notwithstanding any other provision hereof,
no fractional shares of Acquiror Common Stock and no certificates or scrip
therefor, or other evidence of ownership thereof, will be issued in the Merger;
instead, Acquiror shall pay to each holder of Towne Common Stock who would
otherwise be entitled to a fractional share an amount in cash determined by
multiplying such fraction by $23.80.
2.7 Anti-Dilution Provisions. In the event Acquiror changes the
number of shares of Acquiror Common Stock issued and outstanding prior to the
Effective Time as a result of a stock split, stock dividend or recapitalization
with respect to the outstanding Acquiror Common Stock and the record date
therefor shall be prior to the Effective Date, the number of shares of Acquiror
Common Stock into which each share of Towne Common Stock may be converted shall
be proportionately adjusted.
2.8 Options. At the Effective Time, by virtue of the Merger, and
without any action on the part of any holder of an option, each Towne Option
that is then outstanding and unexercised shall be converted into and become an
Acquiror Option on the same terms and conditions as are in effect with respect
to the Towne Option immediately prior to the Effective Time, except that (i)
each such Towne Option assumed may be exercised solely for shares of Acquiror
Common Stock, (ii) the number of shares of Acquiror Common Stock subject to
such Towne Option shall be equal to the number of shares of Towne Common Stock
subject to such Towne Option immediately prior to the Effective Time multiplied
by the Exchange Ratio, the product being rounded, if necessary, up or down to
the nearest whole share, and (iii) the per share exercise price under each such
Acquiror Option shall be adjusted by dividing the per share exercise price of
the Towne Option by the Exchange Ratio, and rounding up to the nearest cent. It
is intended that the foregoing assumption shall be effected in a manner which
is consistent with the requirements of Section 424 of the Internal Revenue
Code, as to any Towne Stock Option that is an incentive stock option. The
number of shares of Towne Common Stock which are issuable upon exercise of
Towne Options as of the date hereof is set forth on Schedule 2.8.
2.9 Elections and Proration.
(a) The number of shares of Towne Common Stock to be
converted into the right to receive cash in the Merger shall not be more than
49% ("Maximum Cash Election Number") nor less than 30% of the number of shares
of Towne Common Stock outstanding immediately prior to the Effective Time, and
the number of shares of Towne Common Stock to be converted into the right to
receive Acquiror Common Stock in the Merger shall not be more than 70%
("Maximum Stock Election Number") nor less than 51% of the number of shares of
Towne Common Stock outstanding immediately prior to the Effective Time.
Notwithstanding any other provision of this Merger Agreement, if the number of
Dissenting Shares and/or the application of the provisions of this Section
would result in the aggregate amount of cash to be paid to Towne Shareholders
pursuant to this Merger Agreement exceeding 49% of the aggregate value of the
total consideration to be paid to Towne Shareholders, then the number of shares
of Towne Common Stock to be converted into the right to receive cash in the
Merger shall be adjusted so that the aggregate amount of cash to be paid to
Towne Shareholders equals 49% of the aggregate value of the total consideration
to be paid to Towne Shareholders.
(b) Subject to the allocation and election procedure set
forth in this Section 2.9, each record holder of Towne Common Stock immediately
prior to the Effective Time will be entitled (1) to elect to receive cash for
all of such shares ("Cash Election"), (2) to elect to receive Acquiror Common
Stock for
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all of such shares ("Stock Election"), (3) to elect to receive Acquiror Common
Stock for a stated percentage of such shares ("Partial Stock Election") and to
receive cash for a stated percentage of such shares ("Partial Cash Election")
or (4) to indicate that such record holder has no preference as to the receipt
of cash or Acquiror Common Stock for such shares ("Non-Election"). All such
elections shall be made on a form designated for that purpose ("Form of
Election"). Holders of record of shares of Towne Common Stock who hold such
shares a nominees, trustees or in any other representative capacities
("Representative") may submit multiple Forms of Election, provided that such
Representative certifies that each such Form of Election covers the shares of
Towne Common Stock held by each Representative for a particular beneficial
owner.
(c) If the sum of the number of shares covered by Cash
Elections and Partial Cash Elections ("Cash Election Shares") exceeds the
Maximum Cash Election Number, all shares of Towne Common Stock covered by Stock
Elections and Partial Stock Elections ("Stock Election Shares") and all shares
of Towne Common Stock covered by Non-Elections ("Non-Election Shares") shall be
converted into the right to receive Acquiror Common Stock and the Cash Election
Shares shall be converted into the right to receive Acquiror Common Stock and
cash in the following manner:
Each Cash Election Share shall be converted into the right to
receive(i) an amount in cash (rounded to the nearest cent), without
interest, equal to the product of (x) the Per Share Cash Amount and
(y) a fraction ("Cash Fraction"), the numerator of which shall be
the Maximum Cash Election Number and the denominator of which shall
be the total number of Cash Election Shares, and (ii) a number of
shares of Acquiror Common Stock equal to the product(rounded to the
nearest one-thousandth) of (x) the Exchange Ratio and(y) a fraction
equal to one minus the Cash Fraction.
(d) If the aggregate number of Stock Election Shares exceeds
the Maximum Stock Election Number, all Cash Election Shares and all
Non-Election Shares shall be converted into the right to receive cash, and all
Stock Election Shares shall be converted into the right to receive Acquiror
Common Stock and cash in the following manner:
Each Stock Election Share shall be converted into the right to
receive(i) a number of shares of Acquiror Common Stock equal to the
product (rounded to the nearest one-thousandth) of (x) the Exchange
Ratio and (y) a fraction ("Stock Fraction"), the numerator of which
shall be the Maximum Stock Election and the denominator of which
shall be the total number of Stock Election Shares, and (ii) an
amount in cash (rounded to the nearest cent), without interest,
equal to the product of (x) the Per Share Cash Amount and (y) a
fraction equal to one minus the Stock Fraction.
(e) In the event that neither Section 2.9(c) nor Section
2.9(d) above is applicable, all Cash Election Shares shall be converted into
the right to receive cash, all Stock Election Shares shall be converted into
the right to receive Acquiror Common Stock, and the Non-Election Shares, if
any, shall be converted into the right to receive either cash or cash and
Acquiror Common Stock in the following manner:
(1) If the sum of the number of Cash Election
Shares plus the number of Non-Election Shares is equal to or less than the
Maximum Cash Election Number, then all Non-Election Shares shall be deemed to
be Cash Election Shares and each Non-Election Share shall be converted into the
right to receive an amount in cash, without interest, equal to the Per Share
Cash Amount, or
(2) If the number of the Cash Election Shares plus
the Non-Election Shares exceeds the Maximum Cash Election Number, then each
Non-Election Share shall be converted into the right to receive (i) an amount
in cash (rounded to the nearest cent), without interest, equal to the product
of (x) the Per Share Cash Amount and (y) a fraction ("Non-Election Fraction")
the numerator of which shall
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be the excess of the (a) Maximum Cash Election Number over (b) the number of
Cash Election Shares and the denominator of which shall be the excess of (A)
the number of shares of Towne Common Stock outstanding immediately prior to the
Effective Time over (B) the sum of the total number of Cash Election Shares and
the total number of Stock Election Shares and (ii) a number of shares of
Acquiror Common Stock equal to the product (rounded to the nearest one-
thousandth) of (x) the Exchange Ratio and (y) a fraction equal to one minus the
Non-Election Fraction.
(f) Elections shall be made by holders of Towne Common Stock
by mailing to the Exchange Agent, the Form of Election delivered to the
shareholders of Towne with the Prospectus/Proxy Statement for the Merger. To be
effective, a Form of Election must be properly completed, signed and submitted
by the shareholder (or by an appropriate trust company in the United States or
a member of a registered national securities exchange or the NASD) together
with the certificate or certificates representing the shares of Towne Common
Stock for which an election is made to the Exchange Agent not later than seven
days following the date of the Shareholders Meeting ("Election Deadline").
Acquiror shall have the discretion, which it may delegate in whole or in part
to the Exchange Agent, to determine whether Forms of Election have been
properly completed, signed and submitted for a vote and to disregard immaterial
defects in Forms of Election. The decision of Acquiror, or the Exchange Agent,
as to such matters shall be conclusive and binding. Neither Acquiror nor the
Exchange Agent will be under any obligation to notify any person of any defect
in a Form of Election submitted to the Exchange Agent. The Exchange Agent also
shall make all computations contemplated by this Section 2.9 and all such
computations shall be conclusive and binding on the holders of Towne Common
Stock.
(g) For the purposes hereof, a holder of Towne Common Stock
who does not submit a Form of Election which is received by the Exchange Agent
prior to the Election Deadline shall be deemed to have made a Non-Election. If
Acquiror or the Exchange Agent shall determine that any purported Cash
Election, Partial Cash Election, Stock Election or Partial Stock Election was
not properly made, such purported election shall be deemed to be of no force
and effect and the shareholder making such purported Cash Election, Partial
Cash Election, Stock Election or Partial Stock Election shall for purposes
hereof be deemed to have made a Non-Election.
(h) Acquiror and Towne shall mail the Form of Election with
the Prospectus/Proxy Statement to all holders of Towne Common Stock on the
Record Date for the Towne shareholders meeting and shall make the Form of
Election available to all persons who become holders of Town Common Stock
subsequent to such day and no later than the close of business on the business
day prior to the Election Deadline. All elections may be revoked until the
Election Deadline.
2.10 Exchange of Towne Common Stock
(a) As soon as practicable after the Effective Time, each
holder of record of certificates formerly representing shares of Towne Common
Stock (the "Certificates") who has not previously submitted properly completed
an Election Form accompanied by all Certificates representing the shares of
Towne Common Stock held of record by such person shall be instructed to tender
such Certificates to the Exchange Agent pursuant to a letter of transmittal
that Acquiror shall deliver or cause to be delivered to such holder. Such
letter of transmittal shall specify that risk of loss and title to Certificates
shall pass only upon acceptance of such Certificates by the Exchange Agent.
(b) After the Effective Time, each holder of a Certificate
that surrenders such Certificate to the Exchange Agent will, upon acceptance
thereof by the Exchange Agent, be entitled to the consideration payable in
respect of the shares represented thereby. At or before the Effective Time,
Acquiror shall deposit, or cause to be deposited, with the Exchange Agent, for
the benefit of the holders of Towne
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Common Stock, an amount of cash equal to the product of the number of Cash
Election Shares and the Per Share Cash Amount.
(c) The Exchange Agent shall accept Certificates upon
compliance with such reasonable terms and conditions as Acquiror or the
Exchange Agent may impose to effect an orderly exchange thereof in accordance
with customary exchange practices. Certificates shall be appropriately endorsed
or accompanied by such instruments of transfer as Acquiror or the Exchange
Agent may reasonably require in accordance with customary and prudent exchange
procedures.
(d) Each outstanding Certificate, other than those
representing Dissenting Shares, shall until duly surrendered to Acquiror or the
Exchange Agent be deemed to evidence the right to receive the consideration
specified herein.
(e) After the Effective Time, holders of Certificates shall
cease to have rights with respect to Towne Common Stock previously represented
by such Certificates, and their sole rights (other than the holders of
Certificates representing Dissenting Shares) shall be to exchange such
Certificates for the consideration specified herein. After the Effective Time,
there shall be no further transfer on the records of Towne of Certificates, and
if such Certificates are presented to Towne for transfer, they shall be
canceled against delivery of such consideration. Acquiror shall not be
obligated to deliver the consideration to any holder of Towne Common Stock
until such holder surrenders the Certificates as provided herein. Any portion
of the aggregate consideration or the proceeds of any investments thereof that
remains unclaimed by the shareholders of Towne for twelve (12) months after the
Effective Time shall be repaid by the Exchange Agent to Acquiror. Any
shareholders of Towne who have not theretofore complied with this Section 2.9
shall thereafter look only to Acquiror for payment of their consideration
deliverable in respect of each share of Towne Common Stock such stockholder
holds as determined pursuant to this Merger Agreement without any interest
thereon. If outstanding Certificates are not surrendered or the payment for
them not claimed prior to the date on which such payments would otherwise
escheat to or become the property of any governmental unit or agency, the
unclaimed items shall, to the extent permitted by abandoned property and any
other applicable law, become the property of Acquiror (and to the extent not in
its possession shall be paid over to it), free and clear of all claims or
interest of any person previously entitled to such claims. Neither the Exchange
Agent nor any party to this Merger Agreement nor any affiliate thereof shall be
liable to any holder of Towne Common Stock represented by any Certificate for
any consideration paid to a public official pursuant to applicable abandoned
property, escheat or similar laws. Acquiror and the Exchange Agent shall be
entitled to rely upon the stock transfer books of Towne to establish the
identity of those persons entitled to receive the consideration, which books
shall be conclusive with respect thereto. In the event of a dispute with
respect to ownership of stock represented by any Certificate, Acquiror and the
Exchange Agent shall be entitled to deposit any consideration in respect
thereof in escrow with an independent third party and thereafter be relieved
with respect to any claims thereto.
2.11 Closing. Subject to the provisions of Article 7 hereof, the
closing of the transactions contemplated by this Merger Agreement (the
"Closing") shall take place as soon as practicable after satisfaction or waiver
of all of the conditions to Closing, and shall be on such date, time and
location as is mutually agreed to by Acquiror and Towne. At the Closing the
Parties shall use their respective best efforts to deliver the certificates,
letters and opinions which constitute conditions to effecting the Merger and
each Party will provide the other Parties with such proof or indication of
satisfaction of the conditions to the obligations of such other Parties to
consummate the Merger as such other Parties may reasonably require. If all
conditions to the obligations of each of the Parties shall have been satisfied
or lawfully waived by the Party entitled to the benefits thereof, the Parties
shall, at the Closing, duly execute the Plan of Merger for filing with the
Secretary of State of the State of Washington and the Secretary of State of the
State of Delaware and promptly thereafter shall take all steps necessary or
desirable to consummate the Merger in accordance with all applicable laws,
rules and regulations and the Plan of Merger which is attached hereto as
Exhibit A and
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incorporated by reference as part of this Merger Agreement. The Parties shall
thereupon take such other and further actions as may be required by law or this
Merger Agreement to consummate the transactions contemplated herein. The date
on which the Closing actually occurs is herein referred to as the "Closing
Date."
2.12 Reservation of Right to Revise Transaction. Acquiror shall
have the unilateral right to revise the method of effecting the Merger in order
to achieve tax benefits or for any other reason which Acquiror may deem
advisable; provided, however, that Acquiror shall not have the right, without
the prior written approval of the Board of Directors of Towne and, if required,
the approval of the Towne Shareholders, to make any revision to the structure
of the Merger which changes the amount or kind of the consideration which the
Towne Shareholders are entitled to receive (determined in the manner provided
in Section 2.3 of this Merger Agreement). Acquiror may exercise this right of
revision by giving written notice thereof to Towne in the manner provided in
Section 9.1 of this Merger Agreement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF ACQUIROR
Acquiror represents and warrants to Towne and the Bank as follows:
3.1 Organization and Corporate Authority . Acquiror is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. Acquiror (i) has the requisite corporate power
and authority to own, operate and lease its material properties and carry on
its businesses as they are currently being conducted; (ii) is in good standing
and is duly qualified to do business in each jurisdiction where the character
of its properties owned or held under lease or the nature of its business makes
such qualification necessary and where the failure to so qualify would
individually or in the aggregate have a material adverse affect on the
condition (financial or otherwise), affairs, business, assets or prospects of
Acquiror and; (iii) has in effect all federal, state, local and foreign
governmental authorizations, permits and licenses necessary for it to own or
lease its properties and assets and to carry on its businesses as they are
currently being conducted. The Certificate of Incorporation and Bylaws of
Acquiror, as amended to date, are in full force and effect as of the date of
this Merger Agreement.
3.2 Authorization, Execution and Delivery; Merger Agreement Not
in Breach.
(a) Acquiror has all requisite corporate power and authority
to execute and deliver this Merger Agreement and to consummate the transactions
contemplated hereby. This Merger Agreement, and all other agreements and
instruments contemplated to be executed in connection herewith by Acquiror,
have been (or upon execution will have been) duly executed and delivered by
Acquiror, have been (or upon execution will have been) effectively authorized
by all necessary action, corporate or otherwise, and no other corporate
proceedings on the part of Acquiror are (or will be) necessary to authorize
such execution and delivery, and, subject to receipt of any required Government
Approvals, constitute (or upon execution will constitute) legal, valid and
enforceable obligations of Acquiror, subject, as to enforceability, to
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally, and to the
application of equitable principles and judicial discretion.
(b) The execution and delivery of this Merger Agreement, the
consummation of the transactions contemplated hereby and the fulfillment of the
terms hereof will not result in a breach of any of the terms or provisions of,
or constitute a default under (or an event which, with the passage of time or
the giving of notice or both, would constitute a default under), or conflict
with, or permit the acceleration of any obligation under, (i) any material
mortgage, lease, covenant, agreement, indenture or other instrument to which
Acquiror is a party or by which it or its property or any of its assets are
bound, (ii) the Certificate of
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Incorporation or Bylaws of Acquiror, (iii) any material judgment, decree, order
or award of any court, governmental body or arbitrator by which Acquiror is
bound, or (iv) any material permit, concession, grant, franchise, license, law,
statute, ordinance, rule or regulation applicable to Acquiror or its
properties; or result in the creation of any lien, claim, security interest,
encumbrance, charge, restriction or right of any third party of any kind
whatsoever upon the property or assets of Acquiror, except that the Government
Approvals shall be required in order for Acquiror to consummate the Merger.
3.3 No Legal Bar . Acquiror is not a party to, subject to or bound
by any agreement, judgment, order, writ, prohibition, injunction or decree of
any court or other governmental body of competent jurisdiction which would
prevent the execution of this Merger Agreement by Acquiror, its delivery to
Towne and the Bank or (upon receipt of Governmental Approvals) the consummation
of the transactions contemplated hereby, and no action or proceeding is pending
or threatened against Acquiror in which the validity of this Merger Agreement,
any of the transactions contemplated hereby or any action which has been taken
by any of the Parties in connection herewith or in connection with any of the
transactions contemplated hereby is at issue.
3.4 Government Approvals . No consent, approval, order or
authorization of, or registration, declaration or filing with, any federal,
state or local governmental authority is required to be made or obtained by
Acquiror in connection with the execution and delivery of this Merger Agreement
or the consummation of the transactions contemplated hereby by Acquiror, except
for the prior approval of the FRB, the FDIC, the Washington Department and such
other agencies as may have jurisdiction (collectively, the "Government
Approvals"). Acquiror is not aware of any facts, circumstances or reasons why
such Government Approvals should not be forthcoming or which would prevent or
hinder such approvals from being obtained.
3.5 Acquiror Financial Statements . The consolidated balance sheets
of Acquiror as of March 31, 1997 and 1996, and the related consolidated
statements of income and changes in stockholders' equity and cash flows of
Acquiror for the years ended March 31, 1997, 1996 and 1995 included in
Acquiror's Annual Report on Form 10-K for the fiscal year ended March 31, 1997
as filed with the SEC and the comparative interim financial statements for any
subsequent quarter ending after March 31, 1997 and prior to the date hereof
included in Acquiror's Quarterly Reports on Form 10-Q as filed with the SEC
(collectively, the "Acquiror Financial Statements") (i) were prepared from the
books and records of Acquiror, which are complete and accurate in all material
respects and have been maintained in accordance with good business practices;
(ii) were prepared in accordance with GAAP; (iii) accurately present Acquiror's
consolidated financial condition and the consolidated results of its
operations, changes in stockholders' equity and cash flows as stated including
any amendments thereto at the relevant dates thereof and for the periods
covered thereby (subject, in the case of financial statements for interim
periods, to normal recurring adjustments); (iv) do contain or reflect all
necessary adjustments and accruals for an accurate presentation of Acquiror's
consolidated financial condition and the consolidated results of Acquiror's
operations and cash flows for the periods covered by the Acquiror Financial
Statements; (v) do contain and reflect adequate provisions for loan losses, for
real estate owned reserves and for all reasonably anticipatable liabilities for
all taxes, federal, state, local or foreign, with respect to the periods then
ended; and (vi) do contain and reflect adequate provisions for all reasonably
anticipated liabilities for Post Retirement Benefits Other Than Pensions
("OPEB") pursuant to FASB 106 and 112.
3.6 Absence of Certain Changes . Since March 31, 1997 there has not
been any material adverse change in the financial condition or results of
operations of Acquiror and its subsidiaries taken as a whole.
3.7 Tax Matters. As of the date of this Merger Agreement, there is
no audit, examination, deficiency, or refund litigation or matter in
controversy with respect to any taxes that might result in a determination
materially adverse to Acquiror or any Acquiror Subsidiary except as fully
reserved for in the Acquiror Financial Statements.
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3.8 Litigation . There is no action, suit or proceeding pending, or
to the best knowledge of Acquiror, threatened against Acquiror or any Acquiror
Subsidiary before any court or arbitrator or any governmental body, agency or
official which, in the aggregate, will have, or is reasonably expected to have,
a material adverse effect on the business, financial condition or results of
operations of Acquiror and its subsidiaries taken as whole.
3.9 Capitalization of Acquiror . The authorized capital stock of
Acquiror consists of 25,000,000 shares of Acquiror Common Stock and 500,000
shares of preferred stock having a par value of $.01 per share. As of the close
of business on September 30, 1997, 10,246,513 shares of Acquiror Common Stock
were issued and outstanding, 664,112 shares of Acquiror Common Stock were held
by Acquiror as treasury stock and no shares of the preferred stock were issued
and outstanding.
3.10 Disclosure . The information concerning, and the
representations or warranties made by Acquiror as set forth in this Merger
Agreement, or in any document, statement, certificate or other writing
furnished or to be furnished by Acquiror to Towne and the Bank pursuant hereto,
do not and will not contain any untrue statement of a material fact or omit to
state a material fact required to be stated herein or therein which is
necessary to make the statements and facts contained herein or therein, in
light of the circumstances under which they were or are made, not false or
misleading. Copies of all documents heretofore or hereafter delivered or made
available to Towne and the Bank by Acquiror pursuant hereto were complete and
accurate copies of such documents.
3.11 Absence of Regulatory Actions. Neither Acquiror nor any
Acquiror Subsidiary is a party to any cease and desist order, written agreement
or memorandum of understanding with, or a party to any commitment letter or
similar undertaking to, or is subject to any order or directive by, or is a
recipient of any extraordinary supervisory letter from, or has adopted any
board resolutions at the request of, federal or state governmental authorities
charged with the supervision or regulation of depository institutions or
depository institution holding companies or engaged in the insurance of bank
and/or savings and loan deposits nor has it been advised by any such
governmental authority that it is contemplating issuing or requesting (or is
considering the appropriateness of issuing or requesting) any such order,
directive, written agreement, memorandum of understanding, extraordinary
supervisory letter, commitment letter, board resolutions or similar
undertaking.
3.12 Reports . Since April 1, 1994, Acquiror and each Acquiror
Subsidiary has filed all reports and statements, together with any amendments
required to be made with respect thereto, that it was required to file with (i)
the SEC; (ii) the FDIC; (iii) the FRB; and (iv) any other applicable federal or
state securities or banking authorities. As of their respective dates, each of
such reports and documents, including the financial statements, exhibits, and
schedules thereto, complied in all material respects with all of the
requirements of their respective forms and all of the statutes, rules, and
regulations enforced or promulgated by the Regulatory Authority with which they
were filed. All such reports were true and complete in all material respects
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.
3.13 Year 2000 Issues. Expenses associated with resolving Year 2000
technology issues are not expected to have a material adverse effect on the
financial condition or results of operations of Acquiror, nor are Year 2000
technology issues expected to have a material adverse effect on the operations
of Acquiror.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF TOWNE AND THE BANK
Each of Towne and the Bank hereby represents and warrants to Acquiror as
follows:
4.1 Organization and Qualification of Towne and Subsidiaries .
Towne is a corporation, duly organized, validly existing and in good standing
under the laws of the State of Washington. Towne is registered as a bank
holding company with the FRB and engages only in activities permitted by the
BHCA and the rules and regulations promulgated by the FRB thereunder. Towne (a)
has all requisite corporate power and authority to own, operate and lease its
properties and to carry on its business as it is currently being conducted and
(b) is in good standing and is duly qualified to do business in each
jurisdiction where the character of its properties owned or held under lease or
the nature of its business makes such qualification necessary and where the
failure to so qualify would individually or in the aggregate have a material
adverse effect on the condition (financial or otherwise), affairs, business,
assets or prospects of Towne, the Bank and all Towne Subsidiaries, taken as a
whole. Each Towne Subsidiary is duly organized, validly existing and in good
standing under the laws of the state or jurisdiction of its organization and
(a) has all requisite corporate power and authority to own, operate and lease
its properties and to carry on its business as it is currently being conducted
and (b) is in good standing and is duly qualified to do business in each
jurisdiction where the character of its properties owned or held under lease or
the nature of its business makes such qualification necessary and where the
failure to so qualify would individually or in the aggregate have a material
adverse effect on the condition (financial or other), affairs, business, assets
or prospects of Towne, the Bank and the Towne Subsidiaries taken as a whole.
The activities of the Towne Subsidiaries are permitted for subsidiaries of bank
holding companies pursuant to the BHCA.
4.2 Organization and Qualification of the Bank . The Bank is a
Washington-chartered bank, duly organized, validly existing and in good
standing under the laws of the State of Washington and engages only in
activities (and holds properties only of the types) permitted by Washington law
and the rules and regulations promulgated by the Washington Department
thereunder or the FDIC for insured depository institutions. The Bank (a) has
all requisite corporate power and authority to own, operate and lease its
properties and to carry on its business as it is currently being conducted
(including all requisite authority to operate branches in the State of
Washington) and (b) is in good standing and is duly qualified to do business in
each jurisdiction where the character of its properties owned or held under
lease or the nature of its business makes such qualification necessary and
where the failure to so qualify would individually or in the aggregate have a
material adverse effect on the condition (financial or otherwise), affairs,
business, assets or prospects of the Bank and all Towne Subsidiaries, taken as
a whole. The Bank's deposit accounts are insured by the Bank Insurance Fund as
administered by the FDIC to the fullest extent permitted under applicable law.
4.3 Authorization, Execution and Delivery; Merger Agreement Not
in Breach.
(a) Towne and the Bank have all requisite corporate power and
authority to execute and deliver this Merger Agreement and the Plan of Merger
and to consummate the transactions contemplated hereby and thereby. The
execution and delivery of this Merger Agreement and the Plan of Merger and the
consummation of the proposed transaction have been duly authorized by the
Boards of Directors of Towne and the Bank and, except for the approval of the
Towne Shareholders, no other corporate proceedings on the part of Towne and the
Bank are necessary to authorize the execution and delivery of this Merger
Agreement and the Plan of Merger and the consummation of the transactions
contemplated hereby and thereby. This Merger Agreement and all other agreements
and instruments herein contemplated to be executed and delivered by Towne and
the Bank have been (or upon execution and delivery will have been) duly
executed and delivered by Towne and the Bank and (subject to any requisite
shareholder approval and Government Approvals hereof) constitute (or upon
execution and delivery will constitute) legal, valid and enforceable
obligations of Towne and the Bank, subject, as to enforceability, to applicable
bankruptcy,
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insolvency, receivership, conservatorship, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally and to
the application of equitable principles and judicial discretion.
(b) The execution and delivery of this Merger Agreement, the
consummation of the transactions contemplated hereby, and the fulfillment of
the terms hereof and thereof will not result in a violation or breach of any of
the terms or provisions of, or constitute a default under (or an event which,
with the passage of time or the giving of notice, or both, would constitute a
default under), or conflict with, or permit the acceleration of, any obligation
under (i) any mortgage, lease, covenant, agreement, indenture or other
instrument to which Towne, the Bank or any Towne Subsidiary is a party or by
which Towne, the Bank or any Towne Subsidiary is bound, (ii) the Articles of
Incorporation or Bylaws of Towne and the Bank, (iii) any judgment, decree,
order, regulatory letter of understanding or award of any court, governmental
body, authority or arbitrator or, (iv) (subject to the receipt of the
Government Approvals) any permit, concession, grant, franchise, license, law,
statute, ordinance, rule or regulation applicable to Towne, the Bank or any
Towne Subsidiary or the properties of any of them; or result in the creation of
any lien, claim, security interest, encumbrance, charge, restriction or right
of any third party of any kind whatsoever upon the properties or assets of
Towne, the Bank or any Towne Subsidiary.
4.4 No Legal Bar . Neither Towne nor the Bank is a party to, or
subject to, or bound by, any agreement or judgment, order, letter of
understanding, writ, prohibition, injunction or decree of any court or other
governmental authority or body, or any law which would prevent the execution of
this Merger Agreement or the Plan of Merger by Towne or the Bank, the delivery
thereof to Acquiror, or (upon receipt of Government Approvals) the consummation
of the transactions contemplated hereby and thereby, and no action or
proceeding is pending against Towne or the Bank in which the validity of this
Merger Agreement, the transactions contemplated hereby or any action which has
been taken by any of the Parties in connection herewith or in connection with
the transactions contemplated hereby is at issue.
4.5 Government and Other Approvals . Except for the Government
Approvals described in Section 3.4, no consent, approval, order or
authorization of, or registration, declaration or filing with, any federal,
state or local governmental authority is required to be made or obtained by
Towne or the Bank in connection with the execution and delivery of this Merger
Agreement or the consummation of the transactions contemplated by this Merger
Agreement nor is any consent or approval required from any landlord, licensor
or other non-governmental party which has granted rights to Towne or the Bank
in order to avoid forfeiture or impairment of such rights. Neither Towne nor
the Bank is aware of any facts, circumstances or reasons why such Government
Approvals should not be forthcoming or which would prevent or hinder such
approvals from being obtained.
4.6 Compliance With Law . Towne, the Bank and all Towne
Subsidiaries hold all licenses, franchises, permits and authorizations
necessary for them to own or lease their respective properties and assets and
for the lawful conduct of their respective businesses, as they are presently
conducted, and Towne and the Bank have complied in all material respects with
all applicable statutes, laws, ordinances, rules and regulations of all
federal, state and local governmental bodies, agencies and subdivisions having,
asserting or claiming jurisdiction over Towne and the Bank's properties or over
any other part of Towne's and the Bank's assets, liabilities or operations. The
benefits of all of such licenses, franchises, permits and authorizations are in
full force and effect and, to the best knowledge of Towne and the Bank, may
continue to be enjoyed by Towne and the Bank subsequent to the Closing of the
transactions contemplated herein without any consent or approval. Neither
Towne, the Bank nor any Towne Subsidiary has received notice of any proceeding
for the suspension or revocation of any such license, franchise, permit, or
authorization and no such proceeding is pending or has been threatened by any
governmental authority.
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4.7 Charter Documents . Included in Schedule 4.7 hereto are true
and correct copies of the Articles of Incorporation and Bylaws of Towne and the
Bank. The Articles of Incorporation and Bylaws of Towne and the Bank, as
amended to date, are in full force and effect.
4.8 Financial Statements .
(a) Attached as Schedule 4.8(a) hereto are true copies of the
consolidated balance sheets of the Bank as of December 31, 1996 and 1995, and
the related consolidated statements of income and changes in stockholders'
equity and cash flows of the Bank for the years ended December 31, 1996, 1995
and 1994 ("Bank Financial Statements"). Such financial statements (i) were
prepared from the books and records of the Bank, which are complete and
accurate in all material respects and have been maintained in accordance with
good business practices; (ii) were prepared in accordance with GAAP; (iii)
accurately present the Bank's consolidated financial condition and the
consolidated results of its operations, changes in stockholders' equity and
cash flows as stated including any amendments thereto at the relevant dates
thereof and for the periods covered thereby; (iv) do contain or reflect all
necessary adjustments and accruals for an accurate presentation of the Bank's
consolidated financial condition and the consolidated results of the Bank's
operations and cash flows for the periods covered by the Bank Financial
Statements; (v) do contain and reflect adequate provisions for loan losses, for
real estate owned reserves and for all reasonably anticipatable liabilities for
all taxes, federal, state, local or foreign, with respect to the periods then
ended; and (vi) do contain and reflect adequate provisions for all reasonably
anticipated liabilities for OPEB pursuant to FASB 106 and 112.
(b) Towne has delivered to Acquiror (or will deliver, when
available, with respect to periods ended after the date of this Merger
Agreement) true, correct and complete copies of (i) all Call Reports, including
any amendments thereto, filed with any Regulatory Authorities by the Bank and
(ii) all reports, including any amendments thereto filed with any Regulatory
Authorities by Towne, each for any quarter ending after December 31, 1996. Such
reports (i) were (or will be) prepared from the books and records of Towne or
the Bank, which are complete and accurate in all material respects and have
been maintained in accordance with good business practices; (ii) were (or will
be) prepared in accordance with regulatory accounting principles consistently
applied; (iii) accurately present (or, when prepared, will present) Towne's and
the Bank's consolidated financial condition and the consolidated results of its
operations and changes in stockholders' equity at the relevant dates thereof
and for the periods covered thereby; (iv) do contain or reflect (or, when
prepared, will contain and reflect) all necessary adjustments and accruals for
an accurate presentation of Towne's or the Bank's consolidated financial
condition and the consolidated results of Towne's or the Bank's operations for
the periods covered thereby; (v) do contain and reflect (or, when prepared,
will contain and reflect) adequate provisions for loan losses, for real estate
owned reserves and for all reasonably anticipatable liabilities for all taxes,
federal, state, local or foreign, with respect to the periods then ended; and
(vi) do contain and reflect adequate provisions for all reasonably anticipated
liabilities for OPEB pursuant to FASB 106 and 112.
4.9 Absence of Certain Changes . Except as disclosed in Schedule
4.9 or as provided for or contemplated in this Merger Agreement, since December
31, 1996 (the "Balance Sheet Date") there has not been:
(a) any material transaction by Towne or the Bank not in the
ordinary course of business and in conformity with past practice;
(b) any material adverse change in the business, property,
assets (including loan portfolios), liabilities (whether absolute, accrued,
contingent or otherwise), prospects, operations, liquidity, income, condition
(financial or otherwise) or net worth of Towne or the Bank;
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(c) any damage, destruction or loss, whether or not covered
by insurance, which has had or may have a material adverse effect on any of the
properties, business or prospects of Towne and the Bank or their future use and
operation by Towne and the Bank;
(d) any acquisition or disposition by Towne or the Bank of
any property or asset of Towne or the Bank, whether real or personal, having a
fair market value, singularly or in the aggregate, in an amount greater than
Twenty Thousand Dollars ($20,000), except in the ordinary course of business
and in conformity with past practice;
(e) any mortgage, pledge or subjection to lien, charge or
encumbrance of any kind on any of the respective properties or assets of Towne
or the Bank, except to secure extensions of credit in the ordinary course of
business and in conformity with past practice;
(f) any amendment, modification or termination of any contract
or agreement, relating to Towne or the Bank, to which Towne or the Bank is a
party which would have a material adverse effect upon the financial condition
or operations of Towne and the Bank;
(g) any increase in, or commitment to increase, the
compensation payable or to become payable to any officer, director, employee or
agent of Towne or the Bank, or any bonus payment or similar arrangement made to
or with any of such officers, directors, employees or agents, other than
routine
increases made in the ordinary course of business not exceeding the greater of
five percent (5%) per annum or $5,000 for any of them individually;
(h) any incurring of, assumption of, or taking of, by Towne or
the Bank, any property subject to, any liability, except for liabilities
incurred or assumed or property taken subsequent to the Balance Sheet Date in
the ordinary course of business and in conformity with past practice;
(i) any material alteration in the manner of keeping the
books, accounts or Records of the Bank, or in the accounting policies or
practices therein reflected;
(j) any release or discharge of any obligation or liability of
any person or entity related to or arising out of any loan made by the Bank of
any nature whatsoever, except in the ordinary course of business and in
conformity with past practice; or
(k) any loan by the Bank to any Officer, director or 2%
shareholder of the Bank or any Affiliate of the Bank; or to any member of the
immediate family of such Officer, director or 2% shareholder of the Bank or any
Affiliate of the Bank; or to any Person in which such Officer, director or 2%
shareholder directly or indirectly owns beneficially or of record ten percent
(10%) or more of any class of equity securities in the case of a corporation,
or of any equity interest, in the case of a partnership or other non-corporate
entity; or to any trust or estate in which such Officer, director or 2%
shareholder has a ten percent (10%) or more beneficial interest; or as to which
such Officer, director or 2% shareholder serves as a trustee or in a similar
capacity. As used herein, "Officer" shall refer to a person who holds the title
of chairman, president, executive vice president, senior vice president,
controller, chief financial officer, secretary, cashier or treasurer.
4.10 Deposits . Except as set forth in Schedule 4.10, none of the
Bank Deposits is a "brokered" Deposit or subject to any encumbrance, legal
restraint or other legal process and no portion of the Deposits represents a
Deposit by any Affiliate of the Bank.
4.11 Properties . Except as described in Schedule 4.11 hereto or
adequately reserved against in the Bank Financial Statements, Towne, the Bank
and each Towne Subsidiary have good and marketable title free and clear of all
material liens, encumbrances, charges, defaults, or equities of whatever
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character to all of its properties and assets, tangible or intangible, other
than as reflected in the Bank Financial Statements. All buildings, and all
fixtures, equipment, and other property and assets that are material to the
business of Towne, the Bank and the Towne Subsidiaries, taken as a whole, held
under leases or subleases by Towne, the Bank or any Towne Subsidiary, are held
under valid instruments enforceable in accordance with their respective terms
(except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or other laws affecting the enforcement of
creditors' rights generally, and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the
discretion of the court before which any proceedings may be pending).
4.12 Towne Subsidiaries . Schedule 4.12 hereto lists all of the
active and inactive Towne Subsidiaries as of the date of this Merger Agreement
and describes generally the business activities conducted, or permitted to be
conducted, by each Towne Subsidiary. No equity securities of any of the Towne
Subsidiaries are or may become required to be issued (other than to the Bank)
by reason of any options, warrants, scrip, rights to subscribe to, calls, or
commitments of any character whatsoever relating to, or securities or rights
convertible into or exchangeable for, shares of the capital stock of any Towne
Subsidiary, and there are no contracts, commitments, understandings, or
arrangements by which any Towne Subsidiary is bound to issue (other than to the
Bank) any additional shares of its capital stock or options, warrants, or
rights to purchase or acquire any additional shares of its capital stock. All
of the shares of capital stock of each Towne Subsidiary held by the Bank or by
any Towne Subsidiary are fully paid and nonassessable and are owned by the Bank
or such Towne Subsidiary free and clear of any claim, lien, or encumbrance of
any nature whatsoever, whether perfected or not. Except as set forth on
Schedule 4.12, neither the Bank nor any Towne Subsidiary holds any interest in
a partnership or joint venture of any kind.
4.13 Condition of Fixed Assets and Equipment . Except as disclosed
in Schedule 4.13 hereto, all of Towne's, the Bank's and the Towne Subsidiaries'
buildings, structures and equipment in regular use are in good and serviceable
condition, normal wear and tear excepted. None of the buildings, structures and
equipment of Towne, the Bank or any Towne Subsidiary violates or fails to
comply in any material respect with any applicable health, fire, environmental,
safety, zoning or building laws or ordinances or any restrictive covenant
pertaining thereto.
4.14 Tax Matters . Except as described in Schedule 4.14 hereto:
(a) All federal, state, local, and foreign tax returns and
information returns required to be filed by or on behalf of Towne, the Bank and
each Towne Subsidiary have been timely filed or requests for extensions have
been timely filed, granted, and have not expired for periods ended on or before
the date of this Merger Agreement, and all returns filed are, and the
information contained therein is, complete and accurate. All tax obligations
reflected in such returns have been paid or adequately provided for. As of the
date of this Merger Agreement, there is no audit examination, deficiency, or
refund litigation or matter in controversy with respect to any taxes that might
result in a determination materially adverse to Towne, the Bank or any Towne
Subsidiary except as fully reserved for in the Bank Financial Statements. All
taxes, interest, additions, and penalties due with respect to completed and
settled examinations or concluded tax litigation have been paid.
(b) Neither Towne, the Bank nor any Towne Subsidiary has
executed an extension or waiver of any statute of limitations on the assessment
or collection of any tax due that is currently in effect.
(c) Adequate provision for any federal, state, local, or
foreign taxes due or to become due for Towne, the Bank and all Towne
Subsidiaries for all periods through and including December 31, 1996, has been
made and is reflected on the December 31, 1996 financial statements included in
the Bank Financial Statements and has been and will continue to be made with
respect to periods ending after December 31, 1996 and subsequent periods.
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(d) Deferred taxes of Towne, the Bank and each Towne
Subsidiary have been and will be provided for in accordance with GAAP.
(e) To the best knowledge of Towne and the Bank, neither the
Internal Revenue Service nor any foreign, state, local or other taxing
authority is now asserting or threatening to assert against Towne, the Bank or
any Towne Subsidiary any deficiency or claim for additional taxes, or interest
thereon or penalties in connection therewith. All income, payroll, withholding,
property, excise, sales, use, franchise and transfer taxes, and all other
taxes, charges, fees, levies or other assessments, imposed upon Towne or the
Bank by the United States or by any state, municipality, subdivision or
instrumentality of the United States or by any other taxing authority,
including all interest, penalties or additions attributable thereto, which are
due and payable by Towne, the Bank or any Towne Subsidiary, either have been
paid in full, or have been properly accrued and reflected in the Bank Financial
Statements.
4.15 Litigation . Except as set forth in Schedule 4.15 hereto,
there is no action, suit or proceeding pending, or to the best knowledge of
Towne and the Bank, threatened against Towne, the Bank or any Towne Subsidiary
before any court or arbitrator or any governmental body, agency or official,
including, but not limited to, any action suit or proceeding that (i) has been
brought by or on behalf of any person employed or formerly employed by Towne,
the Bank or any Towne Subsidiary or (ii) purports or seeks to enjoin or
restrain the transactions contemplated by this Merger Agreement. Except as set
forth on Schedule 4.15 there are no actions, suits, or proceedings pending or,
to the best knowledge of Towne and the Bank, threatened against any officers or
directors of Towne, the Bank or any Towne Subsidiary by any stockholder of
Towne, the Bank or any Towne Subsidiary (or by any former stockholder of Towne,
the Bank or any Towne Subsidiary) relating to or arising out of such person's
status as a stockholder.
4.16 Hazardous Materials .
(a) To the best knowledge of Towne and the Bank, Towne, the
Bank and all the Towne Subsidiaries have obtained all permits, licenses and
other authorizations which are required to be obtained by them with respect to
the Property (as defined herein) under all Applicable Environmental Laws (as
defined herein). All Property controlled, directly or indirectly, by Towne, the
Bank or any Towne Subsidiary is in compliance with the terms and conditions of
all of such permits, licenses and authorizations, and, to the best of knowledge
of Towne and the Bank, is also in compliance with all other limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules and timetables contained in any Applicable Environmental Laws or in
any regulation, code, plan, order, decree, judgment, injunction, notice or
demand letter issued, entered, promulgated or approved thereunder, except as
described in detail in Schedule 4.16 hereto. For purposes hereof, the following
terms shall have the following meanings:
"APPLICABLE ENVIRONMENTAL LAWS" shall mean all federal,
state, local and municipal environmental laws, rules or regulations to the
extent applicable to the Property, including, but not limited to, (a) the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
Section 9601 et seq. ("CERCLA"); (b) the Resource Conservation and Recovery
Act, 42 U.S.C. Section 6901 et seq. "RCRA"; (c) the Federal Water Pollution
Control Act, 33 U.S.C. Section 1251 et seq.; (d) the Clean Air Act, 42 U.S.C.
Section 7401 et seq.; (e) the Hazardous Materials Transportation Act, 49 U.S.C.
Section 1471 et seq.; (f) the Toxic Substances Control Act, 15 U.S.C. Section
2601 et seq.; (g) the Emergency Planning and Community Right-to-Know Act, 42
U.S.C. Section 11001 et seq.; (h) the National Environmental Policy Act, 42
U.S.C. Section 4321 et seq.; (i) the Rivers and Harbours Act of 1899, 33 U.S.C.
Section 401 et seq.; (j) the Occupational Safety and Health Act, 29 U.S.C.
Section 651 et seq.; (k) the Safe Drinking Water Act, 42 U.S.C. Section 300(f)
et seq.; (l) the Oil Pollution Act of 1990, 33 U.S.C. Section 2701 et seq.; and
(m) any rule, regulation, order, injunction, judgment, declaration or decree
implementing or interpreting any of the foregoing Acts, as amended.
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"HAZARDOUS SUBSTANCES" shall mean any substance,
material, waste, or pollutant that is now (or prior to the Closing) listed,
defined, characterized or regulated as hazardous, toxic or dangerous under or
pursuant to any statute, law, ordinance, rule or regulation of any federal,
state, regional, county or local governmental authority having jurisdiction
over the Property of Towne, the Bank or any Towne Subsidiary or its use or
operation, including, without limitation, (a) any substance, material, element,
compound, mixture, solution, waste, chemical or pollutant listed, defined,
characterized or regulated as hazardous, toxic or dangerous under any
Applicable Environmental Laws, (b) petroleum, petroleum derivatives or
by-products, and other hydrocarbons, (c) polychlorinated biphenyls (PCBs),
asbestos and urea formaldehyde, and (d) radioactive substances, materials or
waste.
"LOAN PROPERTY" means any property in which Towne,
the Bank or a Towne Subsidiary holds a security interest.
"PROPERTY" means any real property owned, controlled,
leased or held by Towne, the Bank or a Towne Subsidiary, in whole or in part,
solely or in a joint venture or other business arrangement, either for
operational or investment purposes, and whether assigned, purchased, or
obtained through foreclosure (or similar action) or in satisfaction of debts
previously contracted.
(b) In addition, except as set forth in Schedule 4.16(b)
hereto:
(i) No notice, notification, demand, request for
information, citation, summons or order has been received by Towne or the
Bank, no complaint has been filed and served on the Bank, no penalty has
been assessed and to the best knowledge of Towne and the Bank no
investigation or review is pending by any governmental or other entity
with respect to any alleged failure by Towne, the Bank or any Towne
Subsidiary to have any permit, license or authorization required in
connection with the conduct of the business of Towne, the Bank or any
Towne Subsidiary or with respect to any generation, treatment, storage,
recycling, transportation, release or disposal, or any release as defined
in 42 U.S.C. Section 9601(22) ("Release"), of any Hazardous Substances at
any Property or any Loan Property;
(ii) To the best of knowledge of Towne and the Bank, no
Property or Loan Property has received or held any Hazardous Substances
in such amount and in such manner as to constitute a violation of the
Applicable Environmental Laws, and no Hazardous Substances have been
Released or disposed of on, in or under any of the Property during or
prior to Towne's, the Bank's or any Towne Subsidiary's occupancy thereof,
or during or prior to the occupancy thereof by any assignee or sublessee
of the Bank or any Towne Subsidiary, except in compliance with all
Applicable Environmental Laws;
(iii) To the best knowledge of Towne and the Bank, there
are no Hazardous Substances being stored at any Property or Loan Property
or located in, on or upon, any Property or Loan Property (including the
subsurface thereof) or installed or affixed to structures or equipment on
any Property or Loan Property; and, to the best knowledge of Towne and
the Bank, there are no underground storage tanks for Hazardous
Substances, active or abandoned, at any Property; and
(iv) To the best knowledge of Towne and the Bank, no
Hazardous Substances have been Released in a reportable quantity, where
such a quantity has been established by statute, ordinance, rule,
regulation or order, at, on or under any Property.
(c) Neither Towne, the Bank nor any Affiliate of Towne has
knowingly transported or arranged for the transportation of any Hazardous
Substances to any location which is listed on
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the National Priorities List under CERCLA, listed for possible inclusion on the
National Priorities List by the Environmental Protection Agency in the CERCLA
Information System ("CERCLIS") or on any similar state list or which is the
subject of federal, state or local enforcement actions or other investigations
which may lead to claims against the owner of the Property for cleanup costs,
remedial work, damages to natural resources or for personal injury claims,
including, but not limited to, claims under CERCLA.
(d) No Hazardous Substances have been knowingly generated,
recycled, treated, stored, disposed of or Released by, Towne, the Bank or any
Affiliate of Towne in violation of Applicable Environmental Laws.
(e) No oral or written notification of a Release of Hazardous
Substances has been given or filed by or on behalf of Towne, the Bank or any
Affiliate of Towne relating to any Property and no Property is listed or
proposed for listing on the National Priority List promulgated pursuant to
CERCLA, on CERCLIS or on any similar state list of sites requiring
investigation or clean-up.
(f) To the best knowledge of Towne and the Bank, there are no
liens arising under or pursuant to any Applicable Environmental Laws on any
Property, and no government actions have been taken or, to the best knowledge
of Towne and the Bank, threatened, or are in process which could subject any
Property to such liens and none of the Property would be required to place any
notice or restriction relating to the presence of Hazardous Substances at any
Property in any deed to such Property.
(g) There have been no environmental investigations, studies,
audits, tests, reviews or other analyses conducted by or which are in the
possession of Towne, the Bank or any Affiliate of Towne and the Bank in
relation to any Property, which have not been made available to Acquiror.
(h) Neither Towne nor the Bank is aware of any facts which
might suggest that Towne, the Bank or any Towne Subsidiary has engaged in any
management practice with respect to any of its past or existing borrowers which
could reasonably be expected to subject Towne, the Bank or any Towne Subsidiary
or any Property or Loan Property to any liability under any Applicable
Environmental Laws.
4.17 Insurance. Towne, the Bank and all of Towne's and the Bank's
material assets, businesses, real property and other material properties are
insured against fire, casualty, theft, liability, loss, interruption, title and
such other events against which it is customary in the banking industry to
insure, all such insurance policies being in amounts that are adequate and
consistent with past practice and experience. Set forth on Schedule 4.17 is a
list of all insurance policies (excluding policies maintained on one- to
four-family residential properties acquired through foreclosure) maintained by
or for the benefit of Towne, the Bank or any of the Towne Subsidiaries or their
respective directors, officers, employees or agents. All such insurance
policies are in full force and effect. Each of Towne, the Bank and the Towne
Subsidiaries has taken or will take all requisite action (including without
limitation the making of claims and the giving of notices) pursuant to its
directors' and officers' liability insurance policy or policies in order to
preserve all rights thereunder with respect to all matters (other than matters
arising in connection with this Merger Agreement and the transactions
contemplated hereby) occurring prior to the Effective Time that are known to
Towne or the Bank. Neither Towne, the Bank nor any of the Towne Subsidiaries
has had an insurance policy canceled or been denied insurance coverage for
which any of such companies has applied. The fidelity bonds in effect as to
which the Bank is a named insured are believed by Towne and the Bank to be
sufficient.
4.18 Labor and Employment Matters . Except as reflected in Schedule
4.18 hereto, there is no (i) collective bargaining agreement or other labor
agreement to which Towne, the Bank or any Towne Subsidiary is a party or by
which any of them is bound; (ii) employment, profit sharing, deferred
compensation, bonus, stock option, purchase, retainer, consulting, retirement,
welfare or incentive plan or contract to which Towne, the Bank or any Towne
Subsidiary is a party or by which it is bound; or (iii) plan or agreement under
which "fringe benefits" (including, but not limited to, vacation plans or
programs, sick leave plans or programs
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and related benefits) are afforded any of the employees of Towne, the Bank or
any Towne Subsidiary. Neither Towne nor the Bank has received any notice that
any party to any such agreement, plan or contract is in default with respect to
any material term or condition thereof, nor has any event occurred which,
through the passage of time or the giving of notice, or both, would constitute
a default thereunder or would cause the acceleration of any obligation of any
party thereto. Neither Towne, the Bank nor any Towne Subsidiary has received
notice from any governmental agency of any alleged violation of applicable laws
that remains unresolved respecting employment and employment practices, terms
and conditions of employment and wages and hours. Towne, the Bank and each
Towne Subsidiary have complied in all material respects with all applicable
laws, rules and regulations relating to the employment of labor, including
those related to its employment practices, employee disabilities, wages, hours,
collective bargaining and the payment and withholding of taxes and other sums
as required by the appropriate governmental authorities, and Towne, the Bank
and each Towne Subsidiary have withheld and paid to the appropriate
governmental authorities or are holding for payment not yet due to such
authorities, all amounts required to be withheld from the employees of Towne,
the Bank and each Towne Subsidiary and are not liable for any arrears of wages,
taxes, penalties or other sums for failure to comply with any of the foregoing.
Except as set forth in Schedule 4.18, there is no: unfair labor practice
complaint against Towne, the Bank or any Towne Subsidiary pending before the
National Labor Relations Board or any state or local agency; pending labor
strike or, to the best of knowledge of Towne and the Bank, other labor trouble
affecting Towne, the Bank or any Towne Subsidiary; labor grievance pending
against Towne, the Bank or any Towne Subsidiary; to the best knowledge of Towne
and the Bank, pending representation question respecting the employees of
Towne, the Bank or any Towne Subsidiary; pending arbitration proceedings
arising out of or under any collective bargaining agreement to which Towne, the
Bank or any Towne Subsidiary is a party, or to the best knowledge of Towne and
the Bank, any basis for which a claim may be made under any collective
bargaining agreement to which Towne, the Bank or any Towne Subsidiary is a
party.
4.19 Records and Documents . The Records of Towne and the Bank are
and will be sufficient to enable the Bank to continue conducting its business
as a commercial bank under similar standards as Towne and the Bank has
heretofore conducted such business.
4.20 Capitalization of Towne . The authorized capital stock of
Towne consists of 600,000 shares of Towne Common Stock. As of the date of this
Merger Agreement, 282,191 shares of the Towne Common Stock were issued and
outstanding, no shares of the Towne Common Stock were held by Towne as treasury
stock and no shares of the preferred stock were issued and outstanding. All of
the outstanding Towne Common Stock is validly issued, fully-paid and
nonassessable and has not been issued in violation of any preemptive rights of
any Towne Shareholder. Except as described on Schedule 4.20 hereto, as of the
date hereof, there are no outstanding securities or other obligations which are
convertible into Towne Common Stock or into any other equity or debt security
of Towne, and there are no outstanding options, warrants, rights, scrip, rights
to subscribe to, calls or other commitments of any nature which would entitle
the holder, upon exercise thereof, to be issued Towne Common Stock or any other
equity or debt security of Towne. Accordingly, immediately prior to the
Effective Time, there will be not more than 314,025 shares of Towne Common
Stock issued and outstanding.
4.21 Capitalization of the Bank . The authorized capital stock of
the Bank consists of 600,000 shares of common stock having a par value of
$10.00 per share (the "Bank Common Stock"). As of the date of this Merger
Agreement, 297,125 shares of Bank Common Stock were issued and outstanding and
no shares of Bank Common Stock were held by the Bank as treasury stock. All of
the outstanding Bank Common Stock is held beneficially and of record by Towne,
free and clear of any lien, claim, security interest, encumbrance, charge,
restriction or right of any third party of any kind whatsoever. All of the
outstanding Bank Common Stock is validly issued, fully-paid and nonassessable
and has not been issued in violation of any preemptive rights of any
shareholder of the Bank. There are no outstanding securities or other
obligations which are convertible into Bank Common Stock or into any other
equity or debt security of the Bank, and there are no outstanding options,
warrants, rights, scrip, rights to subscribe to, calls or other commitments of
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any nature which would entitle the holder, upon exercise thereof, to be issued
Bank Common Stock or any other equity or debt security of the Bank.
4.22 Sole Agreement . With the exception of this Merger Agreement,
neither Towne, the Bank nor any Towne Subsidiary has been a party to: any
letter of intent or agreement to merge, to consolidate, to sell or purchase
assets (other than in the normal course of its business) or to any other
agreement which contemplates the involvement of Towne, the Bank or any Towne
Subsidiary of either (or any of their assets) in any business combination of
any kind; or any agreement obligating Towne or the Bank to issue or sell or
authorize the sale or transfer of Bank Common Stock. Except as described in
Schedule 4.22 hereto, there are no (nor will there be at the Effective Time
any) shares of capital stock or other equity securities of the Bank
outstanding, except for shares of the Bank Common Stock presently issued and
outstanding, and there are no (nor will there be at the Effective Time any)
contracts, commitments, understandings, or arrangements by which Towne or the
Bank is or may be bound to issue additional shares of their capital stock or
options, warrants, or rights to purchase or acquire any additional shares of
their capital stock. There are no (nor will there be at the Effective Time any)
contracts, commitments, understandings, or arrangements by which Towne or any
Towne Subsidiary is or may be bound to transfer or issue to any third party any
shares of the capital stock of any Towne Subsidiary, and there are no (nor will
there be at the Effective Time any) contracts, agreements, understandings or
commitments relating to the right of Towne or the Bank to vote or to dispose of
any such shares.
4.23 Disclosure . The information concerning, and representations
and warranties made by, Towne and the Bank set forth in this Merger Agreement,
or in the Schedules of Towne and the Bank hereto, or in any document,
statement, certificate or other writing furnished or to be furnished by Towne
and the Bank to Acquiror pursuant hereto, does not and will not contain any
untrue statement of a material fact or omit to state a material fact required
to be stated herein or therein necessary to make the statements and facts
contained herein or therein, in light of the circumstances in which they were
or are made, not false or misleading. Copies of all documents heretofore or
hereafter delivered or made available to Acquiror by Towne and the Bank
pursuant hereto were or will be complete and accurate copies of such documents.
4.24 Absence of Undisclosed Liabilities . Except as described in
Schedule 4.24 hereto, neither Towne, the Bank nor any Towne Subsidiary has any
obligation or liability (contingent or otherwise) that is material to the
financial condition or operations of Towne, the Bank or any Towne Subsidiary,
or that, when combined with all similar obligations or liabilities, would be
material to the financial condition or operations of Towne, the Bank or any
Towne Subsidiary (i) except as disclosed in the Bank Financial Statements
delivered to Acquiror prior to the date of this Merger Agreement or (ii) except
obligations or liabilities incurred in the ordinary course of its business
consistent with past practices or (iii) except as contemplated under this
Merger Agreement. Since December 31, 1996, neither Towne, the Bank nor any
Towne Subsidiary has incurred or paid any obligation or liability which would
be material to the financial condition or operations of Towne, the Bank or such
Towne Subsidiary, except for obligations paid by the Bank under the terms of
this Merger Agreement (all such obligations or payments are fully described by
the Bank in Schedule 4.24 hereto) or in connection with transactions made by it
in the ordinary course of its business consistent with past practices, laws and
regulations applicable to the Bank or any Towne Subsidiary.
4.25 Allowance for Loan Losses . The allowance for loan losses
shown on the Bank Financial Statements is (with respect to periods ended on or
before December 31, 1996) or will be (with respect to periods ending subsequent
to December 31, 1996) adequate in all respects to provide for anticipated
losses inherent in loans outstanding or for commitments to extend credit or
similar off-balance sheet items (including accrued interest receivable) as of
the dates thereof and is in compliance with the requirements of GAAP. Except as
disclosed in Schedule 4.25 hereto, as of the date thereof, the Bank does not
have any loan which has been criticized or classified by bank examiners
representing any Regulatory Authority or by its independent auditors as
"Special Mention," "Substandard," "Doubtful" or "Loss" or as a "Potential
Problem Loan."
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The allowance for possible losses on other real estate owned ("OREO")
shown on the Bank Financial Statements is (with respect to periods ended on or
before December 31, 1996) or will be (with respect to periods ending subsequent
to December 31, 1996) adequate in all respects to provide for anticipated
losses inherent in OREO or held by the Bank or any Towne Subsidiary and the net
book value of OREO on the Balance Sheet of the Bank Financial Statements is the
fair value of the OREO in accordance with Statement of Position 92-3.
4.26 Compliance with Laws. Except as disclosed in Schedule 4.26,
Towne, the Bank and each Towne Subsidiary:
(a) Is in compliance with all laws, rules, regulations,
reporting and licensing requirements, and orders applicable to its business or
employees conducting its business (including, but not limited to, those
relating to consumer disclosure and currency transaction reporting) the breach
or violation of which would or could reasonably be expected to have a material
adverse effect on the financial condition or operations of Towne, the Bank or
any Towne Subsidiary, or which would or could reasonably be expected to subject
Towne, the Bank or any Towne Subsidiary or any of its directors or officers to
civil money penalties;
(b) Has received no notification or communication from any
agency or department of federal, state, or local government or any of the
Regulatory Authorities, or the staff thereof (i) asserting that Towne, the Bank
or any Towne Subsidiary is or may not be in compliance with any of the
statutes, rules, regulations, or ordinances which such governmental authority
or Regulatory Authority enforces, which, as a result of such noncompliance,
would result in a material adverse impact on Towne, the Bank or any Towne
Subsidiary, (ii) threatening to revoke any license, franchise, permit, or
governmental authorization which is material to the financial condition or
operations of Towne, the Bank or any Towne Subsidiary, or (iii) requiring
Towne, the Bank or any Towne Subsidiary to enter into a cease and desist order,
consent, agreement, or memorandum of understanding; and
(c) Is in material compliance with the applicable provisions
of the Community Reinvestment Act ("CRA") and the regulations promulgated
thereunder, and the Bank currently has a CRA rating of satisfactory or better.
To the best knowledge of Towne and the Bank, there is no fact or circumstance
or set of facts or circumstances which would cause the Bank to fail to comply
with such provisions or cause the CRA rating of the Bank to fall below
satisfactory.
4.27 Absence of Regulatory Actions. Neither Towne, the Bank nor any
of the Towne Subsidiaries is a party to any cease and desist order, written
agreement or memorandum of understanding with, or a party to any commitment
letter or similar undertaking to, or is subject to any order or directive by,
or is a recipient of any extraordinary supervisory letter from, or has adopted
any board resolutions at the request of, federal or state governmental
authorities charged with the supervision or regulation of depository
institutions or depository institution holding companies or engaged in the
insurance of bank and/or savings and loan deposits nor has it been advised by
any such governmental authority that it is contemplating issuing or requesting
(or is considering the appropriateness of issuing or requesting) any such
order, directive, written agreement, memorandum of understanding, extraordinary
supervisory letter, commitment letter, board resolutions or similar
undertaking.
4.28 Employee Benefit Plans.
(a) Towne and the Bank have previously provided to Acquiror
true and complete copies of each "employee pension benefit plan," as defined in
Section 3(2) of ERISA which, to the best of knowledge of Towne and the Bank, is
subject to any provision of ERISA and covers any employee, whether active or
retired, of Towne, the Bank or any Towne Subsidiary or any other entity which
is a member of a controlled group or is under common control with Towne, the
Bank or any Towne Subsidiary in the manner defined and further described in
Section 414(b), (c), or (m) of the Internal Revenue Code. Such plans are
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hereinafter referred to collectively as the "Employee Pension Benefit Plans",
and each such Employee Pension Benefit Plan is listed in Schedule 4.28(a)
hereto. Towne and the Bank have also provided to Acquiror true and complete
copies of all trust agreements, collective bargaining agreements, and insurance
contracts related to such Employee Pension Benefit Plans.
To the best knowledge of Towne and the Bank, each Employee
Pension Benefit Plan which is intended to be qualified under Section 401(a) of
the Internal Revenue Code is so qualified and each trust forming a part thereof
is exempt from tax pursuant to Section 501(a) of the Internal Revenue Code.
Copies of the latest determination letters concerning the qualified status of
each Employee Pension Benefit Plan which is intended to be qualified under
Section 401(a) of the Internal Revenue Code have been provided to Acquiror.
Requests for determination letters relating to amendments required to cause
such Employee Pension Benefit Plans to be in compliance with the Tax Equity and
Fiscal Responsibility Act of 1982, the Deficit Reduction Act of 1984 and the
Retirement Equity Act of 1984 were timely filed and have been received by
Towne, the Bank and the Towne Subsidiaries. Requests for determination letters
relating to any subsequent amendments to such plans which are currently pending
have been provided to Acquiror. All such requests were timely and properly
filed and appropriate notice of any such filing was timely and properly
provided to affected plan participants and beneficiaries.
Each of the Employee Pension Benefit Plans has been operated
in substantial conformity with the written provisions of the applicable plan
documents which have been delivered to Acquiror and in compliance with the
requirements prescribed by all statutes, orders, rules, and regulations
including, but not limited to, ERISA and the Internal Revenue Code, which are
applicable to such Employee Pension Benefit Plans. To the extent that the
operation of an Employee Pension Benefit Plan has deviated from the written
provisions of the plan, such operational deviations have been disclosed in
Schedule 4.26(a) hereto. All such deviations have been made in conformity with
applicable laws, including ERISA and the Internal Revenue Code.
With respect to Employee Pension Benefit Plans which are
subject to the annual report requirement of ERISA Section 103 or to the annual
return requirement of Internal Revenue Code Section 6047, all required annual
reports and annual returns, or such other documents as may have been required
as alternative means of compliance with the annual report requirement, have
been timely filed. Copies of all such annual returns/reports, including all
attachments and Schedules, for the three (3) plan years immediately preceding
the current date have been delivered to Acquiror. With respect to Employee
Pension Benefit Plans which complied with the annual return requirement by
satisfaction of an alternate compliance method, any documents required to be
filed with the Department of Labor in satisfaction of such requirements have
been provided to Acquiror.
With respect to all Employee Pension Benefit Plans which are
subject to the summary plan description requirement of ERISA Section 102, all
such summary plan descriptions as were or will be required to be filed with the
Department of Labor and distributed to participants and beneficiaries have been
filed and timely distributed. Copies of all such summary plan descriptions have
been delivered to Acquiror. No Employee Pension Benefit Plan constitutes a
"multi-employer plan" as defined in Section 4001(a)(3) of ERISA.
No Employee Pension Benefit Plan subject to Part III of
Subtitle B of ERISA or Section 412 of the Internal Revenue Code, or both, has
incurred an "accumulated funding deficiency" within the meaning of Internal
Revenue Code Section 412, whether or not waived. All required contributions to
all Employee Pension Benefit Plans have been timely made. Any penalties or
taxes which have been incurred by Towne, the Bank or any Towne Subsidiary or by
any Employee Pension Benefit Plan with respect to the timing or amount of
payment of any contribution to an Employee Pension Benefit Plan have been
timely paid. The limitations of Internal Revenue Code Section 415 have not been
exceeded with respect to any Employee Pension Benefit Plan or combination of
such plans to which such limitations apply.
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No "reportable event" (as described in Section 4043(b) of
ERISA) has occurred with respect to any Employee Pension Benefit Plan. No
Employee Pension Benefit Plan or any trust created thereunder, nor any
"disqualified person" with respect to the plan (as defined in Section 4975 of
the Internal Revenue Code), has engaged in a "prohibited transaction", as such
term is defined in Section 4975 of the Internal Revenue Code, which could
subject such Employee Pension Benefit Plan, any such trust or any such
disqualified person (other than a person for whom neither Towne, the Bank nor
any Towne Subsidiary is directly or indirectly responsible) to liability under
Title I of ERISA or to the imposition of any tax under Section 4975 of the
Internal Revenue Code.
No condition exists with regard to any Employee Pension
Benefit Plan which constitutes grounds for the termination of such plan
pursuant to Section 4042 of ERISA.
No Employee Pension Benefit Plan is subject to Title IV of
ERISA.
No tax has been, will be, or is reasonably anticipated to be
imposed under Internal Revenue Code Section 4978, 4978A, 4978B, or 4979A due to
the operation of an Employee Pension Benefit Plan sponsored by Towne, the Bank
or any Towne Subsidiary which is an employee stock ownership plan ("ESOP").
Except as disclosed in Schedule 4.28(a) hereto, all Employee
Pension Benefit Plans were in effect for substantially all of calendar year
1996. There has been no material amendment of any such plans (other than
amendments required to comply with applicable law) or material increase in the
cost of maintaining such plans or providing benefits thereunder on or after the
last day of the plan year which ended in calendar year 1996 for each such
Employee Pension Benefit Plan.
Towne and the Bank have provided to Acquiror copies of the
annual actuarial valuation or allocation report for each Employee Pension
Benefit Plan for the three (3) plan years for such plan immediately preceding
the current date. With regard to Employee Pension Benefit Plans which are not
intended to be qualified under Section 401(a) of the Internal Revenue Code,
copies of financial statements or reports containing information regarding the
expense of maintaining any such Employee Pension Benefit Plan for the three (3)
plan years preceding the current date have been delivered to Acquiror.
Towne and the Bank have provided to Acquiror copies of all
filings regarding the Employee Pension Benefit Plans which have been made with
the Regulatory Authorities for the three (3) plan years preceding the current
date.
(b) Towne and the Bank have furnished to Acquiror true and complete
copies of each "Employee Welfare Benefit Plan" as defined in Section 3(1) of
ERISA, which, to the best knowledge of Towne and the Bank, is subject to any
provision of ERISA and covers any employee, whether active or retired, of
Towne, the Bank or any Towne Subsidiary or members of a controlled group or
entities under common control with Towne, the Bank or the Towne Subsidiaries in
the manner defined and further described in Section 414(b), (c), or (m) of the
Internal Revenue Code. Such plans are hereinafter referred to collectively as
the "Employee Welfare Benefit Plans", and each such Employee Welfare Benefit
Plan is listed in Schedule 4.28(b) hereto.
Towne and the Bank have also provided to Acquiror true and
complete copies of documents establishing all funding instruments for such
Employee Welfare Benefit Plans, including but not limited to, trust agreements,
cafeteria plans (pursuant to Internal Revenue Code Section 125), and voluntary
employee beneficiary associations (pursuant to Internal Revenue Code Section
501(c)(9)). Each of the Employee Welfare Benefit Plans has been operated in
substantial conformity with the written provisions of the plan documents which
have been delivered to Acquiror and in compliance with the requirements
prescribed by all statutes, orders, rules, and regulations including, but not
limited to, ERISA and the Internal
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Revenue Code, which are applicable to such Employee Welfare Benefit Plans. Any
deviation in the operation of such plans from the requirements of the plan
documents or of applicable laws have been listed in Schedule 4.28(b) hereto.
Towne and the Bank have provided any notification required by law to any
participant covered under any Employee Welfare Benefit Plan which has failed to
comply with the requirements of any Internal Revenue Code section which results
in the imposition of a tax on benefits provided to such participants under such
plan.
With respect to all Employee Welfare Benefit Plans which are
subject to the annual report requirement of ERISA Section 103 or to the annual
return requirement of Internal Revenue Code Section 6039D, all annual reports
and annual returns as were required to be filed pursuant to such sections have
been timely filed. Copies of all such annual returns/reports, including all
attachments and Schedules, for the three (3) plan years immediately preceding
the current date for all plans subject to such requirements have been delivered
to Acquiror. With respect to all Employee Welfare Benefit Plans which are
subject to the summary plan description requirement of ERISA Section 102, all
such summary plan descriptions as were required to be filed with the Department
of Labor and distributed to participants and beneficiaries have been timely
filed and distributed. Copies of all such summary plan descriptions have been
delivered to Acquiror.
Except as disclosed in Schedule 4.28(b) hereto, all Employee
Welfare Benefit Plans which are in effect were in effect for substantially all
of calendar year 1996. Except as disclosed in Schedule 4.28(b) hereto, there
has been with respect to such Employee Welfare Benefit Plans no material
amendment thereof or material increase in the cost thereof or benefits payable
thereunder on or after January 1, 1997.
No Employee Welfare Benefit Plan or any trust created
thereunder, nor any "party in interest" with respect to the plan (as defined in
Section 3(14) of ERISA), has engaged in a "prohibited transaction," as such
term is defined in Section 406 of ERISA, which could subject such Employee
Welfare Benefit Plan, any such trust, or any party in interest (other than a
person for whom neither Towne, the Bank nor any Towne Subsidiary is directly or
indirectly responsible) to the imposition of a penalty for such prohibited
transaction under Section 502(i) of ERISA. The Department of Labor has not
assessed any such penalty or served notice to Towne, the Bank or any Towne
Subsidiary that such a penalty may be imposed upon any Employee Welfare Benefit
Plan.
Neither Towne, the Bank nor any Towne Subsidiary has failed
to make any contribution to, or pay any amount due and owing by Towne, the Bank
or a Towne Subsidiary under the terms of, an Employee Welfare Benefit Plan.
Except as disclosed in Schedule 4.28(b) hereto, no claims have been incurred
with respect to any Employee Welfare Benefit Plan which may, to the best
knowledge of Towne and the Bank, constitute a liability for Towne, the Bank or
any Towne Subsidiary after the application of any insurance, trust or other
funds which are applicable to the payment of such claims.
Except as disclosed in Schedule 4.28(b) hereto, to the best
knowledge of Towne and the Bank, no condition exists that could subject any
Employee Welfare Benefit Plan or any person (other than a person for whom
neither Towne, the Bank nor any Towne Subsidiary is directly or indirectly
responsible) to liabilities, damages, losses, taxes, or sanctions that arise
under Section 4980B of the Internal Revenue Code or Sections 601 through 608 of
ERISA for failure to comply with the continuation health care coverage
requirements of ERISA Sections 601 through 608 and Internal Revenue Code
Section 4980B with respect to any current or former employee of Towne, the Bank
or any Towne Subsidiary, or the beneficiaries of such employee.
(c) Towne and the Bank have furnished to Acquiror true and complete
copies and/or descriptions of each plan or arrangement maintained or otherwise
contributed to by Towne, the Bank or any Towne Subsidiary which is not an
Employee Pension Benefit Plan and is not an Employee Welfare Benefit Plan and
which (exclusive of base salary and base wages) provides for any form of
current or deferred
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compensation, bonus, stock option, profit sharing, retirement, group health or
insurance, welfare benefits, fringe benefits, or similar plan or arrangement
for the benefit of any employee or class of employees, whether active or
retired, or independent contractors of Towne, the Bank or any Towne Subsidiary.
Such plans and arrangements shall collectively be referred to herein as
"Benefit Arrangements" and all such Benefit Arrangements of Towne, the Bank and
the Towne Subsidiaries are listed on Schedule 4.28(c) hereto. Except as
disclosed in Schedule 4.28(c) hereto, there are no other benefit arrangements
of Towne and the Bank and all Benefit Arrangements which are in effect were in
effect for substantially all of calendar year 1996. Except as disclosed in
Schedule 4.28(c) hereto, there has been with respect to Benefit Arrangements no
material amendment thereof or material increase in the cost thereof or benefits
payable thereunder on or after January 1, 1997. There has been no material
increase in the base salary and wage levels of Towne, the Bank or any Towne
Subsidiary and, except in the ordinary course of business, no change in the
terms or conditions of employment (including severance benefits) compared, in
each case, to those prevailing for substantially all of calendar year 1996.
Except as disclosed in Schedule 4.28(c) hereto, there has been no material
increase in the compensation of, or benefits payable to, any senior executive
employee of Towne, the Bank or any Towne Subsidiary on or after January 1,
1997, nor has any employment, severance, or similar contract been entered into
with any such employee, nor has any amendment to any such contract been made on
or after January 1, 1997.
With respect to all Benefit Arrangements which are subject to
the annual return requirement of Internal Revenue Code Section 6039D, all
annual returns as were required to be filed have been timely filed. Copies of
all such annual returns for the three (3) plan years immediately preceding the
current date have been delivered to Acquiror.
(d) Listed in Schedule 4.28(d) hereto are all Employee Pension
Benefit Plans, Employee Welfare Benefit Plans, and Benefit Arrangements which
provide compensation or benefits which become effective upon a change in
control of Towne, the Bank or any Towne Subsidiary, including, but not limited
to, additional compensation or benefits, or acceleration in the amount or
timing of payment of compensation or benefits which had become effective prior
to the date of such acceleration. Except as disclosed in Schedule 4.28(d)
hereto, there is no Employee Pension Benefit Plan, Employee Welfare Benefit
Plan, or Benefit Arrangement covering any employee of Towne, the Bank or any
Towne Subsidiary which individually or collectively could give rise to the
payment of any amount which would constitute an "excess parachute payment", as
such term is defined in Section 280G of the Internal Revenue Code and
Regulations proposed pursuant to that section.
(e) Except as described in Schedule 4.28(e) hereto, each Employee
Pension Benefit Plan, Employee Welfare Benefit Plan, or Benefit Arrangement and
each personal services contract, fringe benefit, consulting contract or similar
arrangement with or for the benefit of any officer, director, employee, or
other person may be terminated by Towne or the Bank within a period of no more
than thirty (30) days following the effective time of the merger, without
payment of any amount as a penalty, bonus, premium, severance pay, or other
compensation for such termination. No limitation on the right to terminate any
such plan has been communicated by Towne, the Bank or any Towne Subsidiary to
employees, former employees, or retirees who are or may be participants in or
beneficiaries of such plans or arrangements. No Employee Pension Benefit Plan
which is qualified under Section 401(a) of the Internal Revenue Code is a
qualified defined benefit pension plan.
(f) Except as disclosed in Schedule 4.28(f) hereto, neither Towne,
the Bank nor any Towne Subsidiary has received notice from any governmental
agency of any alleged violation of applicable laws or of any prospective audit
or other investigation for the purpose of reviewing compliance with applicable
laws with respect to any Employee Pension Benefit Plan, Employee Welfare
Benefit Plan or Benefit Arrangement.
Except as disclosed in Schedule 4.28(f) hereto, no suits,
actions, or claims have been filed in any court of law or with any governmental
agency regarding the operation of any Employee Pension
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Benefit Plan, Employee Welfare Benefit Plan, or Benefit Arrangement and no such
additional suits, actions, or claims are, to the best knowledge of Towne and
the Bank, anticipated to be filed.
4.29 Material Contracts. (a) Except as set forth on Schedule 4.29
(and with a true and correct copy of the document or other item in question
attached to such Schedule), neither Towne, the Bank nor any Towne Subsidiary is
a party or subject to any of the following (whether written or oral, express or
implied):
(i) any agreement, arrangement or commitment (A) not
made in the ordinary course of business or (B) pursuant to which Towne,
the Bank or any Towne Subsidiary is or may become obligated to invest in
or contribute capital to any Towne Subsidiary or any other entity;
(ii) any agreement, indenture or other instrument not
disclosed in the Bank Financial Statements relating to the borrowing of
money by Towne, the Bank or any Towne Subsidiary or the guarantee by
Towne, the Bank or any Towne Subsidiary of any such obligation (other
than trade payables or instruments related to transactions entered into
in the ordinary course of business by any Towne Subsidiary, such as
deposits, Fed Funds borrowings and repurchase agreements);
(iii) any contract, agreement or understanding with any
labor union or collective bargaining organization;
(iv) any contract containing covenants which limit the
ability of Towne, the Bank or any Towne Subsidiary to compete in any line
of business or with any person or containing any restriction of the
geographical area in which, or method by which, Towne, the Bank or any
Towne Subsidiary may carry on its business (other than as may be required
by law or any applicable Regulatory Authority);
(v) any contract or agreement which is a "material
contract" within the meaning of Item 601(b)(10) of Regulation S-K
promulgated by the SEC;
(vi) any lease with annual rental payments aggregating
$25,000 or more;
(vii) consulting agreement (other than data processing,
software programming and licensing contracts entered into in the ordinary
course of business) involving the payment of more than $25,000 per annum;
(viii) any agreement with any executive officer or other
key employee of Towne, the Bank or any Towne Subsidiary the benefits of
which are contingent, or the terms of which are materially altered or any
payments or rights are accelerated, upon the occurrence of a transaction
involving Towne, the Bank or any of the Towne Subsidiaries of the nature
contemplated by this Merger Agreement;
(ix) any agreement with respect of any executive officer
of Towne, the Bank or any Towne Subsidiary providing any term of
employment or compensation guarantee extending for a period longer than
one year and for the payment of in excess of $50,000 per annum;
(x) any agreement with any director or executive officer
of Towne, the Bank or any Towne Subsidiary providing for indemnification
of such person; or
(xi) agreement or plan, including any stock option plan,
stock appreciation rights plan, restricted stock plan or stock purchase
plan, any of the benefits of which will
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be increased, or the vesting of the benefits of which will be accelerated,
by the occurrence of any of the transactions contemplated by this Merger
Agreement or the value of any of the benefits of which will be calculated
on the basis of any of the transactions contemplated by this Merger
Agreement.
(b) Except as disclosed on Schedule 4.29, no officer or
director of Towne, the Bank or any "associate" (as such term is defined in Rule
12b-2 under the Securities Exchange Act) of any such officer or director, has
any material interest in any material contract or property (real or personal),
tangible or intangible, used in or pertaining to the business of Towne, the
Bank or any of the Towne Subsidiaries.
4.30 Material Contract Defaults . Neither Towne, the Bank nor any
Towne Subsidiary is in default in any respect under any contract, agreement,
commitment, arrangement, lease, insurance policy, or other instrument to which
it is a party or by which its respective assets, business, or operations may be
bound or affected or under which it or its respective assets, business, or
operations receives benefits, and which default is reasonably expected to have
either individually or in the aggregate a material adverse effect on the
condition (financial or other) of Towne, the Bank or any Towne Subsidiary, and
there has not occurred any event that, with the lapse of time or the giving of
notice or both, would constitute such a default.
4.31 Reports . Since January 1, 1994, Towne and the Bank have filed
all reports and statements, together with any amendments required to be made
with respect thereto, that it was required to file with (i) the FDIC; (ii) the
FRB; and (iii) any other applicable federal or state securities or banking
authorities. As of their respective dates, each of such reports and documents,
including the financial statements, exhibits, and schedules thereto, complied
in all material respects with all of the requirements of their respective forms
and all of the statutes, rules, and regulations enforced or promulgated by the
Regulatory Authority with which they were filed. All such reports were true and
complete in all material respects 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. Towne and the Bank have previously
provided to Acquiror true and correct copies of all such reports and any
amendments thereto filed by Towne or the Bank after January 1, 1994.
4.32 Statements True and Correct . None of the information prepared
by, or on behalf of, Towne, the Bank or any Towne Subsidiary regarding Towne,
the Bank or any Towne Subsidiary included in the Proxy Statement/Prospectus
mailed to Towne's shareholders in connection with the Shareholders Meeting, and
any other documents filed with the FRB, the FDIC or any other Regulatory
Authority in connection with the transaction contemplated herein (if
applicable), will be, at the respective times such documents are filed, and,
with respect to the Proxy Statement/Prospectus, when first mailed to the
shareholders of Towne, false or misleading with respect to any material fact,
or will omit to state any material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, or, in the case of the Proxy Statement/Prospectus or any amendment
thereof or supplement thereto, at the time of the Shareholders Meeting, false
or misleading with respect to any material fact, or omit to state any material
fact necessary to make any statements therein, in light of the circumstances
under which they were made, not misleading.
4.33 Brokers and Finders. Neither Towne, the Bank nor any Towne
Subsidiary nor any of their respective officers, directors or employees has
employed any broker or finder or incurred any liability for any financial
advisory fees, brokerage fees, commissions or finder's fees, and no broker or
finder has acted directly or indirectly for Towne, the Bank or any Towne
Subsidiary, in connection with this Merger Agreement or the transactions
contemplated hereby.
4.34 Derivatives Contracts; Structured Notes; Etc. Neither Towne,
the Bank nor any Towne Subsidiary is a party to or has agreed to enter into an
exchange traded or over-the-counter equity, interest rate, foreign exchange or
other swap, forward, future, option, cap, floor or collar or any other contract
that is not included on the balance sheet and is a derivative contract
(including various combinations thereof)
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(each a "Derivatives Contract") or owns securities that (1) are referred to
generically as "structured notes," "high risk mortgage derivatives," "capped
floating rate notes" or "capped floating rate mortgage derivatives" or (2) are
likely to have changes in value as a result of interest or exchange rate
changes that significantly exceed normal changes in value attributable to
interest or exchange rate changes, except for those Derivatives Contracts and
other instruments legally purchased or entered into in the ordinary course of
business, consistent with safe and sound banking practices and regulatory
guidance, and listed (as of the date hereof) on Schedule 4.34.
4.35 Year 2000 Issues. Expenses associated with resolving Year 2000
technology issues are not expected to have a material adverse effect on the
financial condition or results of operations of Towne or the Bank, nor are Year
2000 technology issues expected to have a material adverse effect on the
operations of Towne or the Bank.
ARTICLE 5
COVENANTS OF ACQUIROR
5.1 Regulatory Approvals. Within a reasonable time after execution
of this Merger Agreement, Acquiror shall file any and all applications with the
appropriate government Regulatory Authorities in order to obtain the Government
Approvals and shall take such other actions as may be reasonably required to
consummate the transactions contemplated in this Merger Agreement and the Plan
of Merger with reasonable promptness. Acquiror shall pay all fees and expenses
arising in connection with such applications for regulatory approval. Acquiror
agrees to provide the appropriate Regulatory Authorities with the information
required by such authorities in connection with Acquiror's applications for
regulatory approval and Acquiror agrees to use its best efforts to obtain such
regulatory approvals, and any other approvals and consents as may be required
for the Closing, as promptly as practicable; provided, however, that nothing in
this Section 5.1 shall be construed to obligate Acquiror to take any action to
meet any condition required to obtain prior regulatory approval if any such
condition materially differs from conditions customarily imposed by such
Regulatory Authorities in orders approving acquisitions of the type
contemplated by this Merger Agreement, constitutes a significant impediment
upon Acquiror's ability to carry on its business or acquisition programs (as
may be determined in the sole discretion of Acquiror) or requires Acquiror to
increase the Bank's capital ratios to amounts in excess of the FDIC's minimum
capital ratio guidelines which may be in effect from time to time.
5.2 Preparation of Registration Statement . Acquiror, in
cooperation with Towne, shall prepare and file with the SEC a Registration
Statement on Form S-4 with respect to the shares of Acquiror Common Stock to be
issued in the Merger ("Registration Statement"). Such Registration Statement
shall contain a Proxy Statement/Prospectus which shall serve as the proxy
statement of Towne for the Shareholders Meeting and as the prospectus of
Acquiror for the shares of Acquiror Common Stock to be issued in the Merger.
Acquiror shall use its best efforts to cause the Registration Statement to
become effective.
5.3 Registration Statement Effectiveness. Acquiror will advise
Towne, promptly after Acquiror receives notice thereof, of the time when the
Registration Statement has become effective or any supplement or amendment has
been filed, of the issuance of any stop order or the suspension of the
qualification of the Acquiror Common Stock for offering or sale in any
jurisdiction, of the initiation or threat of any proceeding for any such
purpose, or of any request by the SEC for the amendment or supplement of the
Registration Statement or for additional information.
5.4 Employees . Upon consummation of the Merger, all employees of
Towne, the Bank and the Towne Subsidiaries shall be deemed to be at-will
employees except for those employees who are parties to a written employment
agreement. After the Effective Date of the Merger, Acquiror will maintain the
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existing retirement, welfare benefit and similar plans of Towne and the Bank
for the benefit of eligible employees of the Bank; provided, however, that
Acquiror may, in its sole discretion, combine such plans with similar plans of
Acquiror or its subsidiaries or otherwise substitute such plans for plans
providing substantially similar benefits. In the event that Towne's existing
plans are combined with similar plans of Acquiror or its subsidiaries, then (i)
for the purpose of determining eligibility to participate in Acquiror's plans
and the vesting of benefits under Acquiror's plans (but not for the accrual of
benefits under such plans), Acquiror shall give effect to years of service with
the Bank, as if such service were with Acquiror or its subsidiaries and (ii)
there shall be no exclusion from coverage under Acquiror's health insurance
plan as a result of pre-existing conditions to the extent such conditions were
covered under any health insurance plan maintained by Towne or the Bank prior
to the Effective Date of the Merger.
5.5 Reasonable Efforts to Close . Subject to the terms and
conditions of this Merger Agreement, Acquiror agrees to use all its best
efforts and to take, or to cause to be taken, all actions, and to do, or to
cause to be done, all things necessary, proper, or advisable under applicable
laws and regulations to consummate and make effective, with reasonable
promptness after the date of this Merger Agreement, the transactions
contemplated by this Merger Agreement, including, without limitation, using
reasonable efforts to lift or rescind any injunction or restraining or other
order adversely affecting the ability of the Parties to consummate the
transaction contemplated by this Merger Agreement; provided, however, that such
efforts do not impose unreasonable expense or obligations on Acquiror. Acquiror
shall use, and shall cause each of its Subsidiaries to use, its best efforts to
obtain consents of all third parties and Regulatory Authorities necessary or
desirable for the consummation of each of the transactions contemplated by this
Merger Agreement.
5.6 Addition to Board of Directors. As promptly as practicable
following the Effective Time, Acquiror shall take such action as may be
necessary to cause the size of Acquiror's Board of Directors to be increased by
one person and to cause the appointment of Rick Meikle to the Board of
Directors of Acquiror.
5.7 Indemnification and Insurance.
(a) Acquiror agrees that all rights to indemnification or
exculpation now existing in favor of the directors and officers of Towne and
the Bank as provided in their respective articles, bylaws, indemnification
agreements or other written agreements in effect as of the date hereof with
respect to matters occurring prior to the Closing Date shall survive the Merger
and shall continue in full force and effect. If Acquiror or any of its
successors or assigns (i) shall consolidate with or merge into any other
corporation or entity and shall not be the continuing or surviving corporation
or entity of such consolidation or merger or (ii) shall transfer all or
substantially all of its properties and assets to any individual, corporation
or other entity, then, in each such case, Acquiror shall use its best efforts
to cause the successor and assigns of Acquiror to assume the obligations set
forth in this Section 5.7.
(b) Acquiror shall use its best efforts to cause the persons
serving as officers and directors of Towne and the Bank immediately prior to
the Closing Date to be covered for a period of two years after the Closing Date
by the current policies of directors and officers liability insurance
maintained by Towne with respect to acts or omissions occurring prior to the
Closing Date which were committed to such officers and directors in their
capacity as such (provided that Acquiror may substitute therefor policies of at
least the same coverage and amounts containing the terms and conditions which
are no less advantageous to such officers and directors); provided, however,
that Acquiror shall not be obligated to make annual premium payments for such
insurance to the extent such premiums exceed 150% of the premiums paid as of
the date hereof by Towne for such insurance. The provision of this Section 5.7
are intended to be for the benefit of, and shall be enforceable by, each of the
present and former officers and directors of Towne and the Bank and each such
person's respective heirs and representatives.
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5.8 Access. Upon notice of at least 48 hours, Acquiror shall afford
Towne and its representatives access, during normal business hours throughout
the period up to the Effective Date, to all of the properties, books and
records, provided that no investigation pursuant to this Section 5.8 shall
affect or be deemed to modify or waive any representation or warranty made by
Acquiror in this Merger Agreement or the conditions to the obligations of
Acquiror to consummate the transactions contemplated by this Merger Agreement.
ARTICLE 6
COVENANTS OF TOWNE AND THE BANK
6.1 Shareholders Meeting . Towne shall call a special meeting of
the holders of Towne Common Stock to be held as soon as practicable for
purposes of voting upon the transactions contemplated hereby and Towne shall
use its best efforts to solicit and obtain the votes of the holders of Towne
Common Stock in favor of the transactions contemplated hereby and, subject to
the exercise of its fiduciary duties, the Board of Directors of Towne shall
recommend approval of such transactions by such holders. In connection with the
Shareholders Meeting, the Acquiror and Towne shall cooperate in the preparation
of the Proxy Statement/Prospectus and, with the approval of each of the
Acquiror and Towne, which approvals will not be unreasonably withheld, the
Proxy Statement/Prospectus will be mailed to the shareholders of Towne.
6.2 Conduct of Business -- Affirmative Covenants . Unless the prior
written consent of Acquiror shall have been obtained, and, except as otherwise
contemplated herein:
(a) Towne and the Bank shall, and shall cause each Towne
Subsidiary to:
(i) Operate its business only in the usual,
regular, and ordinary course;
(ii) Preserve intact its business organizations and
assets and to maintain its rights and franchises;
(iii) Take no action, unless otherwise required by law,
rules or regulation, that would (A) materially adversely affect the
ability of any of them or Acquiror to obtain any necessary approvals of
Regulatory Authorities required to consummate the transactions
contemplated by this Merger Agreement, or (B) adversely affect the
ability of such Party to perform its covenants and agreements under this
Merger Agreement;
(iv) Except as they may terminate in accordance with
their terms, keep in full force and effect, and not default in any of
their obligations under, all material contracts;
(v) Keep in full force and effect insurance coverage
with responsible insurance carriers which is reasonably adequate in
coverage and amount for companies the size of the Towne, Bank or such
Towne Subsidiary and for the businesses and properties owned by each and
in which each is engaged, to the extent that such insurance is reasonably
available;
(vi) Use its best efforts to retain the Bank's present
customer base and to facilitate the retention of such customers after the
Effective Time;
(vii) Maintain, renew, keep in full force and effect,
and preserve its business organization and material rights andfranchises,
permits and licenses, and to use its best efforts to maintain positive
relations with its present employees so that such employees will continue
to perform effectively and will be available to Towne and the Bank or
Acquiror and Acquiror's Subsidiaries at and after the Effective Time, and
to use its best efforts to maintain its existing, or substantially
equivalent, credit arrangements with banks and other financial
institutions and to assure the continuance of the Bank's customer
relationships; and
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(b) Towne and the Bank agree to use their best efforts to
assist Acquiror in obtaining the Government Approvals necessary to complete the
transactions contemplated hereby, and Towne and the Bank shall provide to
Acquiror or to the appropriate governmental authorities all information
reasonably required to be submitted in connection with obtaining such
approvals;
(c) Towne and the Bank, at their own cost and expense, shall
use their best efforts to secure all consents and releases, if any, of third
parties necessary or desirable for the consummation of the transactions
contemplated by this Merger Agreement and shall comply with all applicable
laws,regulations and rulings in connection with this Merger Agreement and the
consummation of the transactions contemplated hereby;
(d) At all times to and including, and as of, the Closing,
Towne and the Bank shall inform Acquiror in writing of any and all facts
necessary to amend or supplement the representations and warranties made herein
and the Schedules attached hereto as necessary so that the representations and
warranties and information provided in the schedules remain true and correct in
all respects; provided, however, that any such updates to Schedules shall be
required prior to the Closing only with respect to matters which represent
material changes to the Schedules and the information contained therein; and
provided further, that before such amendment, supplement or update may be
deemed to be a part of this Merger Agreement, Acquiror shall have agreed in
writing to each amendment, supplement or update to the Schedules made
subsequent to the date of this Merger Agreement as an amendment to this Merger
Agreement;
(e) At all times to and including, and as of, the Closing,
Towne and the Bank shall give such further assistance to Acquiror and shall
execute, acknowledge and deliver all such documents and instruments as Acquiror
may reasonably request and take such further action as may be reasonably
necessary or appropriate effectively to consummate the transactions
contemplated by this Merger Agreement;
(f) Towne and the Bank have taken or will take all steps
necessary to exempt the transactions contemplated by this Merger Agreement from
any applicable state takeover or similar law or takeover or similar provision
in the charter documents or bylaws of Towne and the Bank, including without
limitation any provisions of the Articles of Incorporation of Towne restricting
the ownership or acquisition of Towne's capital stock or imposing any "fair
price" or supermajority director or stockholder vote requirements;
(g) Subject to the terms and conditions of this Merger
Agreement, Towne and the Bank agree to use all reasonable efforts and to take,
or to cause to be taken, all actions, and to do, or to cause to be done, all
things necessary, proper, or advisable under applicable laws and regulations to
consummate and make effective, with reasonable promptness after the date of
this Merger Agreement, the transactions contemplated by this Merger Agreement,
including, without limitation, using reasonable efforts to lift or rescind any
injunction or restraining or other order adversely affecting the ability of the
Parties to consummate the transaction contemplated by this Merger Agreement;
provided, however, that such efforts do not impose unreasonable expense or
obligations on Towne and the Bank.
(h) At the request of Acquiror, Towne and the Bank shall hire
an outside consultant reasonably acceptable to Acquiror to undertake to
determine as soon as reasonably practicable but in any event prior to Closing
whether or not there are any underground storage tanks, asbestos,
ureaformaldehyde, polychlorinated biphenyls, solid wastes or hazard substances,
as defined in the Model Toxics Control Act, CERCLA or any other applicable
Environmental Laws, present at or on any of the "other real estate owned" of
Towne, the Bank or any Towne Subsidiary (excluding any one- to four-family
residential property with appraised value less than $150,000) or at or on any
of the branch or office facilities owned by Towne, the Bank or any Towne
Subsidiary. Such investigation shall be conducted in a manner reasonably
satisfactory to Acquiror, and the results of such investigation shall be set
forth in a written report delivered to Acquiror prior to Closing. The scope and
detail of such report shall be reasonably satisfactory to Acquiror. It is
understood that the investigation shall be a "Phase I." In the event the
transaction contempleted by this Merger Agreement is not consummated and the
failure to consummate is not due to an adverse environmental assessment or
other actions on the part of Towne, Acquiror will reimburse Towne for the cost
of any environmental assessment requested by Acquiror pursuant to this section.
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6.3 Conduct of Business -- Negative Covenants . From the date of
this Merger Agreement until the earlier of the Effective Time or the
termination of this Merger Agreement, Towne and the Bank covenant and agree
they will neither do, nor agree or commit to do, nor permit any Towne
Subsidiary to do or commit or agree to do, any of the following without the
prior written consent of the chief executive officer, president, or chief
financial officer of Acquiror:
(a) Except as expressly contemplated by this Merger Agreement
or the Plan of Merger, amend its Articles of Incorporation or Bylaws; or
(b) Impose, or suffer the imposition, on any share of capital
stock held by it or by any of its Subsidiaries of any lien, charge, or
encumbrance, or permit any such lien, charge, or encumbrance to exist; or
(c) (i) Repurchase, redeem, or otherwise acquire or exchange,
directly or indirectly, any shares of its capital stock or other equity
securities or any securities or instruments convertible into any shares of its
capital stock, or any rights or options to acquire any shares of its capital
stock or other equity securities except as expressly permitted by this Merger
Agreement or the Plan of Merger; or (ii) split or otherwise subdivide its
capital stock; or (iii) recapitalize in any way; or (iv) declare a stock
dividend on the Towne Common Stock; or (v) pay or declare a cash dividend or
make or declare any other type of distribution on the Towne Common Stock; or
(d) Except as expressly permitted by this Merger Agreement,
acquire direct or indirect control over any corporation, association, firm,
organization or other entity, other than in connection with (i) mergers,
acquisitions, or other transactions approved in writing by Acquiror, (ii)
internal reorganizations or consolidations involving existing Subsidiaries,
(iii) foreclosures in the ordinary course of business and not knowingly
exposing it to liability by reason of Hazardous Substances, (iv) acquisitions
of control in its fiduciary capacity, or (v) the creation of new subsidiaries
organized to conduct or continue activities otherwise permitted by this Merger
Agreement; or
(e) Except as expressly permitted by this Merger Agreement or
the Plan of Merger, to (i) issue, sell, agree to sell, or otherwise dispose of
or otherwise permit to become outstanding any additional shares of Towne Common
Stock (other than the issuance of shares upon the exercise of outstanding stock
options and pursuant to the Towne Bank Employee Stock Purchase Plan) or any
other capital stock of Towne, the Bank or of any Towne Subsidiary, or any stock
appreciation rights, or any option, warrant, conversion, call, scrip, or other
right to acquire any such stock, or any security convertible into any such
stock, unless any such shares of such stock are directly sold or otherwise
directly transferred to Towne, the Bank or any Towne Subsidiary, or (ii) sell,
agree to sell, or otherwise dispose of any substantial part of the assets or
earning power of Towne, the Bank or of any Towne Subsidiary; or (iii) sell,
agree to sell, or otherwise dispose of any asset of Towne, the Bank or any
Towne Subsidiary other than in the ordinary course of business for reasonable
and adequate consideration; or (iv) buy, agree to buy or otherwise acquire a
substantial part of the assets or earning power of any other Person or entity;
or
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(f) Incur, or permit any Towne Subsidiary to incur, any
additional debt obligation or other obligation for borrowed money except in the
ordinary course of the business of Towne, the Bank or such Towne Subsidiary
consistent with past practices; or
(g) Except as described in Schedule 4.9, grant any increase
in compensation or benefits to any of its employees or officers; pay any bonus;
enter into any severance agreements with any of its officers or employees;
grant any increase in fees or other increases in compensation or other benefits
to any director of Towne, the Bank or of any Towne Subsidiary; or effect any
change in retirement benefits for any class of its employees or officers,
unless such change is required by applicable law; or
(h) Amend any existing employment contract between it and any
person (unless such amendment is required by law); enter into or amend any
indemnification agreement with any person; or enter into any new employment
contract with any person that Towne or the Bank (or its successors) does not
have the unconditional right to terminate without liability (other than
liability for services already rendered), at any time on or after the Effective
Time; or
(i) Adopt any new employee benefit plan or terminate or make
any material change in or to any existing employee benefit plan other than any
change that is required by law or that, in the opinion of counsel, is necessary
or advisable to maintain the tax-qualified status of any such plan (except for
a termination resulting from Acquiror's decision not to continue any such
plan); or
(j) Enter into any new service contracts, purchase or sale
agreements or lease agreements that are material to Towne, the Bank or any
Towne Subsidiary; or
(k) Make any capital expenditure except for ordinary
purchases, repairs, renewals or replacements in an amount less than $15,000 per
individual expenditure and $35,000 in the aggregate; or
(l) Other than in the ordinary course of business consistent
with past practice, sell, transfer, mortgage, encumber or otherwise dispose of
any of its properties, leases or assets to any person, or cancel, release or
assign any indebtedness of any person, except pursuant to contracts or
agreements in force at the date of this Merger Agreement; or
(m) Other than as contemplated by this Merger Agreement,
enter into, renew or terminate any material contract or agreement or make any
change in any of its material leases or contracts; or
(n) Settle any claim, action or proceeding involving any
liability of Towne, the Bank or any Towne Subsidiaries for money damages in
excess of $25,000 or agree in connection with any such settlement to material
restrictions upon the operations of Towne, the Bank or any Towne Subsidiaries;
or
(o) Change its method of accounting in effect at December 31,
1996, except as required by changes in GAAP as concurred in by Towne's
independent auditors or as required by regulatory accounting principles or
regulatory requirements; or
(p) Enter into any new activities or lines of business, or
cease to conduct any material activities or lines of business that it conducts
on the date hereof, or conduct any material business activity not consistent
with past practice; or
(q) Except in the ordinary course of business, make,
renegotiate, renew, increase, extend or purchase any loan, lease (credit
equivalent), advance, credit enhancement or other extension of credit, or make
any commitment in respect of any of the foregoing; or
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(r) Enter into, renew or purchase any Derivatives Contracts;
or
(s) Purchase any investment securities other than in the
ordinary course of business consistent with past practices; or
(t) Enter into any transactions other than in the ordinary
course of business; or
(u) Grant or commit to grant any new extension of credit to
any officer, director or holder of 2% or more of the outstanding the Towne
Common Stock, or to any corporation, partnership, trust or other entity
controlled by any such person, if such extension of credit, together with all
other credits then outstanding to the same borrower and all affiliated persons
of such borrower, would exceed two percent (2%) of the capital of the Bank or
amend the terms of any such credit outstanding on the date hereof; or
(v) Agree in writing or otherwise to take any of the foregoing
actions or engage in any activity, enter into any transaction or take or omit
to take any other act which would make any of the representations and
warranties in Article 4 of this Merger Agreement untrue or incorrect in any
material respect if made anew after engaging in such activity, entering into
such transaction, or taking or omitting such other act.
6.4 Conduct of Business -- Certain Actions.
(a) Towne and the Bank shall not, and shall use their best
efforts to ensure that their directors, officers, employees, and advisors do
not, directly or indirectly, institute, solicit, or knowingly encourage
(including by way of furnishing any information not legally required to be
furnished) any inquiry, discussion, or proposal, or participate in any
discussions or negotiations with, or, except for actions reasonably considered
by the Boards of Directors of Towne and the Bank based upon the written advice
of outside legal counsel to be required in order to fulfill its fiduciary
obligations, provide any confidential or non-public information to or negotiate
with, any corporation, partnership, person or other entity or group (other than
to Acquiror or any Acquiror Subsidiary) concerning any "Acquisition Proposal"
(as defined below). Towne and the Bank shall notify Acquiror immediately if any
Acquisition Proposal has been or should hereafter be received by Towne or the
Bank, such notice to contain, at a minimum, the identity of such persons, and,
subject to disclosure being consistent with the fiduciary obligations of
Towne's and the Bank's Boards of Directors, a copy of any written inquiry, the
terms of any proposal or inquiry, any information requested or discussions
sought to be initiated, and the status of any reports, negotiations or
expressions of interest. For purposes of this Section, "Acquisition Proposal"
means any tender offer, agreement, understanding or other proposal of any
nature pursuant to which any corporation, partnership, person or other entity
or group, other than Acquiror or any Acquiror Subsidiary, would directly or
indirectly (i) acquire or participate in a merger, share exchange,
consolidation or any other business combination involving Towne or the Bank;
(ii) acquire the right to vote ten percent (10%) or more of the outstanding
Towne Common Stock; (iii) acquire a significant portion of the assets or
earning power of the Bank; or (iv) acquire in excess of ten percent (10%) of
the outstanding Towne Common Stock.
(b) Towne and the Bank shall immediately terminate all
negotiations or discussions concerning any Acquisition Proposal with parties
other than Acquiror and enforce the terms of all confidentiality agreements
with such other parties.
6.5 Accruals and Reserves. At the request of Acquiror, Towne and the
Bank shall establish such additional accruals and reserves as may be necessary
to conform Towne's and the Bank's accounting and credit loss reserve practices
and methods to those of Acquiror; provided, however, that Towne and the Bank
shall not be required to take such action until all of the conditions to the
Closing shall have been satisfied or waived and all Government Approvals shall
have been received.
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6.6 Access; Information. Upon reasonable notice, Towne and the Bank
shall afford Acquiror and its officers, employees, counsel, accountants and
other authorized representatives, access, during normal business hours
throughout the period up to the Effective Date, to all of the properties,
books, contracts, commitments and records of Towne, the Bank and the Towne
Subsidiaries and, during such period, Towne and the Bank shall furnish promptly
to Acquiror (i) a copy of each material report, schedule and other document
filed by Towne, the Bank and the Towne Subsidiaries with any Regulatory
Authority and (ii) all other information concerning the business, properties
and personnel of Towne, the Bank and the Towne Subsidiaries as Acquiror may
reasonably request, provided that no investigation pursuant to this Section 6.6
shall affect or be deemed to modify or waive any representation or warranty
made by Towne and the Bank in this Merger Agreement or the conditions to the
obligations of Towne and the Bank to consummate the transactions contemplated
by this Merger Agreement.
6.7 Affiliate Agreements. Towne will cause each person who is an
affiliate of Towne for purposes of Rule 145 under the 1933 Act to execute and
deliver to the Company on or before the mailing of the Proxy
Statement/Prospectus for the Shareholders Meeting an agreement in the form
attached hereto as Exhibit B restricting the disposition of the shares of
Acquiror Common Stock to be received by such person in exchange for such
person's shares of Towne Common Stock. Schedule 6.7 hereto lists the affiliates
of Towne as of the date hereof.
6.8 Addition to Board of Directors. As soon as practicable
following the Effective Time, the Bank shall take such action as may be
necessary to cause the size of the Board of Directors of the Bank to be
increased by one or more persons and to cause the appointment of Gary Sirmon to
the Board of Directors of the Bank.
6.9 Employee Stock Purchase Plan. The Bank shall suspend the
operation of the Towne Bank Employee Stock Purchase Plan as of January 1, 1998
so that no additional shares may be purchased pursuant to such plan after such
date.
ARTICLE 7
CONDITIONS TO CLOSING
7.1 Conditions to the Obligations of Towne and the Bank . Unless
waived in writing by Towne and the Bank, the obligations of Towne and the Bank
to consummate the transaction contemplated by this Merger Agreement are subject
to the satisfaction at or prior to the Closing Date of the following
conditions:
(a) Performance . Each of the material acts and undertakings
of Acquiror to be performed at or prior to the Closing Date pursuant to this
Merger Agreement shall have been duly performed;
(b) Representations and Warranties . The representations and
warranties of Acquiror contained in Article 3 of this Merger Agreement shall be
true and correct, in all material respects, on and as of the Effective Time
with the same effect as though made on and as of the Effective Time;
(c) Documents . In addition to the other deliveries of
Acquiror described elsewhere in this Merger Agreement, Towne and the Bank shall
have received the following documents and instruments:
(i) a certificate signed by the Secretary or an
assistant secretary of Acquiror dated as of the Closing Date certifying that:
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(A) Acquiror's Board of Directors has duly adopted
resolutions (copies of which shall be attached to such certificate)
approving the substantive terms of this Merger Agreement (including
the Plan of Merger) and authorizing the consummation of the
transactions contemplated by this Merger Agreement and certifying
that such resolutions have not been amended or modified and remain
in full force and effect;
(B) each person executing this Merger Agreement on
behalf of Acquiror is an officer of Acquiror holding the office or
offices specified therein, with full power and authority to execute
this Merger Agreement and any and all other documents in connection
with the Merger, and that the signature of each person set forth on
such certificate is his or her genuine signature; and
(C) the charter documents of Acquiror attached to
such certificate remain in full force and effect.
(ii) a certificate signed by a duly authorized officer
of Acquiror stating that the conditions set forth in Section 7.1(a),
Section 7.1(b) and Section 7.1(e) of this Merger Agreement have been
fulfilled;
(d) Opinion of Acquiror's Counsel . Towne and the Bank shall
have been furnished with an opinion of counsel to Acquiror, dated as of the
Closing Date, addressed to and in form and substance satisfactory to Towne and
the Bank, to the effect that:
(i) Acquiror is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and
is qualified to do business as a foreign corporation in the State of
Washington.
(ii) The execution and delivery of the Merger Agreement
by Acquiror,and the consummation by Acquiror of the transactions provided
for therein, have been duly authorized by all requisite corporate action
on the part of Acquiror.
(iii) The Merger Agreement has been duly executed and
delivered by Acquiror and is a valid and binding obligation of Acquiror
enforceable in accordance with its terms, except as the enforceability
thereof may be limited by (1) bankruptcy, insolvency, moratorium,
reorganization, receivership, conservatorship or similar laws relating to
or affecting the enforcement of creditors' rights generally and (2)
general principles of equity, whether applied by a court of law or
equity.
(iv) Except for the filing of articles of merger with
the Secretary of State for the State of Washington and a certificate of
merger with the Secretary of State for the State of Delaware, no consent
or approval under any statutory law or regulation applicable to Acquiror,
other than such consents and approvals as have been obtained, is required
for Acquiror to consummate the transactions provided for in the Merger
Agreement.
(v) The Registration Statement has become effective
under the 1933 Act, and, to the best of our knowledge, no stop order
suspending the effectiveness of the Registration Statement has been
issued and no proceedings for that purpose have been instituted or are
pending or contemplated by the SEC or any state securities or other
regulatory authority.
(vi) The shares of Acquiror Common Stock to be issued in
exchange for shares of Towne Common Stock in connection with the
consummation of the transactions
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contemplated in the Merger Agreement have been duly authorized and, when
issued in accordance with the terms of the Agreement will be validly
issued, fully paid and non-assessable, and conform as to legal matters in
all material respects to the description of such shares contained in the
Registration Statement.
(vii) The execution, delivery and performance of the
Merger Agreement by Acquiror did not, and the consummation of the
transactions contemplated thereby by Acquiror does not and will not (i)
violate any statutory law or regulation applicable to Acquiror or any
judgment, decree or order that specifically names Acquiror, which
violation is reasonably likely, individually or in the aggregate, to have
a material adverse effect on the financial condition and results of
operations of Acquiror and its subsidiaries, taken as a whole; (ii)
violate the Certificate of Incorporation or Bylaws of Acquiror; or (iii)
require any consent or approval under any such law or regulation or under
any such judgment, decree or order other than such consents and approvals
as have been obtained.
(viii) To the best of such counsel's knowledge, there is
no litigation or proceeding against Acquiror or any Acquiror Subsidiary
pending before any court or governmental agency which, individually or in
the aggregate, is reasonably likely to have a material adverse effect on
the financial condition or results of operations of Acquiror and its
subsidiaries, taken as a whole.
Such opinion may (i) expressly rely as to matters of fact upon certificates
furnished by appropriate officers of Acquiror or appropriate government
officials; (ii) in the case of matters of law governed by the laws of the
states in which they are not licensed, reasonably rely upon the opinions of
legal counsel duly licensed in such states and may be limited, in any event, to
Federal Law and the laws of the States of Washington and Delaware; and (iii)
incorporate, be guided by, and be interpreted in accordance with, the Legal
Opinion Accord of the ABA Section of Business Law (1991); and
(e) No Material Adverse Change . No material adverse change
in the financial condition or results of operations of Acquiror and its
subsidiaries, taken as a whole, shall have occurred since the date of this
Merger Agreement. In the event of such a material adverse change with respect
to Acquiror, Towne may elect either (i) to close the contemplated transactions
in accordance with the terms of this Merger Agreement or (ii) to terminate this
Merger Agreement without penalty.
7.2 Conditions to the Obligations of Acquiror . Unless waived in
writing by Acquiror, the obligation of Acquiror to consummate the transactions
contemplated by this Merger Agreement is subject to the satisfaction at or
prior to the Closing Date of the following conditions:
(a) Performance . Each of the material acts and undertakings
of Towne and the Bank to be performed at or before the Closing Date pursuant to
this Merger Agreement shall have been duly performed;
(b) Representations and Warranties . The representations and
warranties of Towne and the Bank contained in Article 4 of this Merger
Agreement shall be true and correct, in all material respects, on and as of the
Closing Date with the same effect as though made on and as of the Closing Date;
(c) Documents . In addition to the documents described
elsewhere in this Merger Agreement, Acquiror shall have received the following
documents and instruments:
(i) a certificate signed by the Secretary or an
assistant secretary of Towne and the Bank dated as of the Closing Date
certifying that:
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(A) Towne's and the Bank's Boards of Directors and
shareholders have duly adopted resolutions (copies of which shall
be attached to such certificate) approving the substantive terms of
this Merger Agreement(including the Plan of Merger) and authorizing
the consummation of the transactions contemplated by this Merger
Agreement and certifying that such resolutions have not been
amended or modified and remain in full force and effect;
(B) each person executing this Merger Agreement on
behalf of Towne and the Bank, is an officer of Towne or the Bank,
as the case may be, holding the office or offices specified
therein, with full power and authority to execute this Merger
Agreement and any and all other documents in connection with the
Merger, and that the signature of each person set forth on such
certificate is his or her genuine signature; and
(C) the charter documents of Towne and the Bank
attached to such certificate remain in full force and effect; and
(ii) a certificate signed by the President, Chief
Executive Officer or an Executive Vice President of Towne and the Bank
stating that the conditions set forth in Section 7.2(a), Section 7.2(b)
and Section 7.2(f) this Merger Agreement have been satisfied.
(d) Destruction of Property . Between the date of this Merger
Agreement and the Closing Date, there shall have been no damage to or
destruction of real property, improvements or personal property of Towne and
the Bank which materially reduces the market value of such property, and no
zoning or other order, limitation or restriction imposed against the same that
might have a material adverse impact upon the operations, business or prospects
of Towne, the Bank and the Towne Subsidiaries taken as a whole; provided,
however, that the availability of insurance coverage shall be taken into
account in determining whether there has been such a material adverse impact or
material reduction in market value. In the event of such damage, destruction,
order, limitation or restriction, Acquiror may elect either (i) to close the
contemplated transactions in accordance with the terms of this Merger Agreement
or (ii) to terminate this Merger Agreement without penalty;
(e) Inspections Permitted . Between the date of this Merger
Agreement and the Closing Date, Towne and the Bank shall have afforded Acquiror
and its authorized agents and representatives reasonable access during normal
business hours to the properties, operations, books, records, contracts,
documents, loan files and other information of or relating to Towne and the
Bank. Towne and the Bank shall have caused all Towne and Bank personnel to
provide reasonable assistance to Acquiror in its investigation of matters
relating to Towne and the Bank;
(f) No Material Adverse Change . No material adverse change
in the business, property, assets (including loan portfolios), liabilities
(whether absolute, contingent or otherwise), prospects, operations, liquidity,
income, or condition (financial or otherwise) of Towne and the Bank shall have
occurred since the date of this Merger Agreement. In the event of such a
material adverse change with respect to Towne and the Bank, Acquiror may elect
either (i) to close the contemplated transactions in accordance with the terms
of this Merger Agreement or (ii) to terminate this Merger Agreement without
penalty;
(g) Opinion of Towne's and the Bank's Counsel . Acquiror
shall have been furnished with an opinion of legal counsel to Towne and the
Bank, dated the Closing Date, addressed to and in form and substance
satisfactory to Acquiror, to the effect that:
(i) Towne is a corporation duly organized, validly
existing and in good standing under the laws of the State of Washington.
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(ii) The Bank is a bank duly organized, validly existing
and in good standing under the laws of the State of Washington.
(iii) Each of the Towne Subsidiaries is a corporation
duly organized, validly existing, and in good standing under the laws of
its jurisdiction of incorporation or organization.
(iv) The Bank is an "insured depository institution" as
defined in the Federal Deposit Insurance Act and applicable regulations
thereunder.
(v) The execution and delivery of the Merger Agreement
by Towne and the Bank, and the consummation by Towne and the Bank of the
transactions provided for therein, have been duly authorized by all
requisite corporate action on the part of Towne and the Bank.
(vi) The Merger Agreement has been duly executed and
delivered by Towne and the Bank and is a valid and binding obligation of
Towne and the Bank enforceable in accordance with its terms, except as the
enforceability thereof may be limited by (1) bankruptcy, insolvency,
moratorium, reorganization, receivership, conservatorship or similar laws
relating to or affecting the enforcement of creditors' rights generally or
the rights of creditors of depository institutions whose accounts are
insured by the FDIC and (2) general principles of equity, whether applied
by a court of law or equity.
(vii) The execution, delivery and performance of the
Merger Agreement by Towne and the Bank did not, and the consummation of
the transactions contemplated thereby by Towne and the Bank does not and
will not (i) violate any statutory law or regulation applicable to Towne,
the Bank or any of the Towne Subsidiaries or any judgment, decree or order
that specifically names Towne or the Bank, which violation is reasonably
likely, individually or in the aggregate, to have a material adverse
effect on the financial condition and results of operations of Towne, the
Bank and the Towne Subsidiaries, taken as a whole; (ii) constitute a
breach of or default under any agreement or other arrangement that is
listed on Schedule 4.27 to the Merger Agreement, which breach or default
is reasonably likely, individually or in the aggregate, to have a material
adverse effect on the financial condition or results of operations of
Towne, the Bank and the Towne Subsidiaries, taken as a whole; (iii)
violate the Articles of Incorporation, Charter or Bylaws of Towne, the
Bank or any of the Towne Subsidiaries; or (iv) require any consent or
approval under any such law or regulation or under any such judgment,
decree or order, or the consent or approval of any other party to any such
agreement or other arrangement, other than such consents and approvals as
have been obtained.
(viii) To the best of such counsel's knowledge: (i)
there is no litigation or proceeding against Towne, the Bank or any Towne
Subsidiary pending before any court or governmental agency which,
individually or in the aggregate, is reasonably likely to have a material
adverse effect on the financial condition or results of operations of
Towne, the Bank and the Towne Subsidiaries, taken as a whole, or which
alleges claims under any fair lending law or other law relating to
discrimination, including, without limitation, the Equal Credit
Opportunity Act, the Fair Housing Act, the Towne Reinvestment Act and the
Home Mortgage Disclosure Act, and no such litigation or proceeding has
been threatened; (ii) neither Towne, the Bank nor any Towne Subsidiary or
any of its or their properties, officers, directors, or controlling
persons is a party to or is subject to any order, decree, agreement,
memorandum of understanding or similar arrangement with, or a commitment
letter or similar submission to, any Regulatory Authority; and (iii)
neither Towne, the Bank nor any Towne Subsidiary has been advised by any
such Regulatory Authority that such authority is contemplating issuing or
requesting (or is considering the appropriateness of issuing or
requesting) any such order, decree, agreement, memorandum of
understanding, commitment letter or similar submission.
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(ix) The Merger has been duly approved by the Towne
Shareholders.
Such opinion may (i) expressly rely as to matters of fact upon certificates
furnished by appropriate officers of Towne and the Bank or appropriate
government officials; (ii) in the case of matters of law governed by the laws
of the states in which they are not licensed, reasonably rely upon the opinions
of legal counsel duly licensed in such states and may be limited, in any event,
to Federal Law and the law of the State of Washington and (iii) incorporate, be
guided by, and be interpreted in accordance with, the Legal Opinion Accord of
the ABA Section of Business Law (1991);
(h) Other Business Combinations, Etc . Other than as
contemplated hereunder, subsequent to the date of this Merger Agreement,
neither Towne nor the Bank shall have entered into any agreement, letter of
intent, understanding or other arrangement pursuant to which Towne or the Bank
would merge; consolidate with; effect a business combination with; sell any
substantial part of Towne's or the Bank's assets; acquire a significant part of
the shares or assets of any other Person or entity (financial or otherwise);
adopt any "poison pill" or other type of anti-takeover arrangement, any
shareholder rights provision, any "golden parachute" or similar program which
would have the effect of materially decreasing the value of Towne and the Bank
or the benefits of acquiring the Towne Common Stock;
(i) Maintenance of Certain Covenants, Etc . At the time of
Closing (i) neither Towne nor the Bank shall have issued or repurchased from
the date hereof any additional equity or debt securities, or any rights to
purchase or repurchase such securities (therefore, there shall be not more than
314,025 shares of Towne Common Stock validly issued and outstanding at the
Effective Time); and (ii) from December 31, 1996, there shall have been no
extraordinary sale of assets.
(j) Dissenting Shares. Towne Shareholders holding or
controlling no more than five percent (5%) of the shares of the Towne Common
Stock issued and outstanding immediately prior to the Effective Time shall have
perfected and maintained in perfected status their dissenters' rights in
accordance with the WBCA;
(k) Accruals and Reserves . Towne and the Bank shall have
established the accruals and reserves described in Section 6.5; and
(l) Employment Agreements. The Employment Agreements between
Acquiror, the Bank and S. Rick Meikle and other senior executive officers of
the Bank designated by Acquiror substantially in the form attached as Exhibit C
shall have been duly executed and delivered by all parties to such agreements;
(m) Receipt of Affiliate Agreements. Acquiror shall have
received from each affiliate of Towne the agreements referred to in Section
6.7; and
(n) Employee Stock Purchase Plan. The Bank shall have
terminated the Towne Bank Employee Stock Purchase Plan as of the Effective
Time of the Merger.
7.3 Conditions to Obligations of All Parties . The obligation of
each party to effect the transactions contemplated hereby shall be subject to
the fulfillment, at or prior to the Closing, of the following conditions:
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(a) No Pending or Threatened Claims . That no claim, action,
suit, investigation or other proceeding shall be pending or threatened before
any court or governmental agency which presents a substantial risk of the
restraint or prohibition of the transactions contemplated by this Merger
Agreement or the obtaining of material damages or other relief in connection
therewith; and
(b) Government Approvals and Acquiescence Obtained . The
Parties hereto shall have received all applicable Government Approvals for the
consummation of the transactions contemplated herein and all waiting periods
incidental to such approvals or notices given shall have expired.
(c) Effective Registration Statement. The Registration
Statement shall have become effective and no stop order or other order
suspending the Registration Statement shall have been issued and no proceedings
for that purpose shall have been initiated or threatened by the SEC or any
other Regulatory Authority.
(d) Tax Opinion. Acquiror and Towne shall have received an
opinion from Breyer & Aguggia to the effect that (i) the Merger constitutes a
reorganization under Section 368 of the Code, and (ii) no gain or loss will be
recognized by Towne Shareholders to the extent they receive shares of the
Acquiror Common Stock in exchange for their shares of Towne Common Stock, and,
in rendering their opinion, Breyer & Aguggia may require and rely upon
representations contained in certificates of officers of the Company, Towne and
others.
(e) Shareholder Vote. The Towne Shareholders shall have
approved of the transactions contemplated hereby by the requisite vote.
ARTICLE 8
TERMINATION
8.1 Termination . This Merger Agreement and the Plan of Merger may
be terminated at any time prior to the Closing, as follows:
(a)(a) By mutual consent in writing of the Parties;
(b) By Acquiror, should Towne, the Bank or any Towne
Subsidiary fail to conduct its business pursuant to the covenants made in
Article 6 if such failure cannot be or has not been cured with fifteen (15)
days after the giving of written notice to Towne by Acquiror of such failure;
(c) By Acquiror or Towne in the event the Closing shall not
have occurred by September 30, 1998, unless the failure of the Closing to occur
shall be due to the failure of the Party seeking to terminate this Merger
Agreement to perform its obligations hereunder in a timely manner. If Acquiror
shall have filed any and all applications to obtain the requisite Government
Approvals within sixty (60) days of the date hereof, and if the Closing shall
not have occurred solely because of a delay caused by a government regulatory
agency or authority in its review of the application before it, then Towne and
the Bank shall, upon Acquiror's written request, extend the Closing Date until
such time as all Government Approvals have been obtained and any stipulated
waiting periods have expired.
(d) By either Acquiror or Towne, upon written notice to the
other Party, upon denial of any Governmental Approval necessary for the
consummation of the Merger (or should such approval be conditioned upon a
substantial deviation from the transactions contemplated); provided, however,
that either Acquiror or Towne may, upon written notice to the other, extend the
term of this Merger Agreement
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for only one sixty (60) day period to prosecute diligently and overturn such
denial, provided that such denial has been appealed within ten (10) business
days of the receipt thereof;
(e) By Acquiror in the event the conditions set forth in
Section 7.2 or Section 7.3 are not satisfied in all material respects as of the
Closing Date, or by Towne if the conditions set forth in Section 7.1 or Section
7.3 are not satisfied in all material respects as of the Closing Date, and such
failure has not been waived prior to the Closing;
(f) By Acquiror upon the occurrence of any event or
circumstance which may have the effect of limiting or restricting Acquiror's
voting power or other rights normally enjoyed by the registered holders of the
Towne Common Stock which are the subject of this transaction;
(g) By Acquiror or Towne in the event that there shall have
been a material breach of any obligation of the other Party hereunder and such
breach shall not have been remedied within thirty (30) days after receipt by
the breaching Party of written notice from the other Party specifying the
nature of such breach and requesting that it be remedied;
(h) By Acquiror should Towne, the Bank or any Towne
Subsidiary enter into any letter of intent or agreement with a view to being
acquired by or effecting a business combination with any other Person; or any
agreement to merge, to consolidate, to combine or to sell a material portion of
its assets or to be acquired in any other manner by any other Person or to
acquire a material amount of assets or a material equity position in any other
Person, whether financial or otherwise; or
(i) By Acquiror should Towne, the Bank or any Towne Subsidiary
enter into any formal agreement, letter of understanding, supervisory
agreement, cease and desist order, consent agreement, memorandum or other
similar arrangement with any bank regulatory agency.
(j) By Acquiror in the event that (i) any situation, event,
circumstance or other matter shall come to the attention of Acquiror during the
course of the Acquiror Due Diligence Review which Acquiror shall, in a good
faith exercise of its reasonable discretion, believe (A) to be inconsistent in
any material respect with any of the representations and warranties of Towne
and the Bank, (B) to be of such significance as to have a material adverse
effect on the financial condition, prospects, results of operations or business
of Towne and the Bank, or (C) is a material deviation from the Bank Financial
Statements, and (ii) Acquiror notifies Towne and the Bank of such matters
within five (5) business days after the end of the Acquiror Due Diligence
Review Period and such matters are not capable of being cured or have not been
cured within thirty (30) days after written notice thereof to Towne and the
Bank. For purposes of this Section, (i) "Acquiror Due Diligence Review" shall
mean a review by Acquiror of Towne's and the Bank's operations, business
affairs, prospects and financial condition, including without limitation, those
matters which are the subject of the representations and warranties of Towne
and the Bank and (ii) "Acquiror Due Diligence Review Period" shall mean a
fifteen (15) day period beginning on the date of this Merger Agreement.
Notwithstanding anything in this Section contained or implied to the contrary,
the Acquiror Due Diligence Review shall not limit, restrict or preclude
Acquiror, at any time or from time to time, from conducting such reviews or
from exercising any rights available to it hereunder as a result of the
existence or occurrence prior to the Acquiror Due Diligence Review Period of
any event or condition which was not detected in the Acquiror Due Diligence
Review by Acquiror and which constitutes a breach of any representation or
warranty of Towne and the Bank under this Merger Agreement.
If a Party should elect to terminate this Merger Agreement pursuant to
subsections (b), (c), (d), (e), (f), (g), (h), (i) or (j) of this Section 8.1,
it shall give notice to the other Party, in writing, of its election in the
manner prescribed in Section 9.1 ("Notices") of this Merger Agreement.
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8.2 Effect of Termination. In the event that this Merger Agreement
should be terminated pursuant to Section 8.1 hereof, all further obligations of
the Parties under this Merger Agreement shall terminate without further
liability of any Party to another; provided, however, that a termination under
Section 8.1 hereof shall not relieve any Party of any liability for a breach of
this Merger Agreement or for any misstatement or misrepresentation made
hereunder prior to such termination, or be deemed to constitute a waiver of any
available remedy for any such breach, misstatement or misrepresentation.
8.3 Termination Fee. The parties hereby acknowledge that, in
negotiating and executing this Merger Agreement and in taking the steps
necessary or appropriate to effect the transaction contemplated hereby, the
Parties have incurred and will incur direct and indirect monetary and other
costs (including without limitation attorneys' fees and costs of employee and
management time) and will forego discussions with respect to other potential
acquisitions.
(a) To compensate Acquiror for such costs and to induce it to
forego initiating discussions regarding other acquisitions, if (i) this Merger
Agreement terminates because Towne and the Bank do not use their best efforts
to consummate the transactions contemplated by this Merger Agreement in
accordance with the terms of this Merger Agreement (unless a condition set
forth in Section 7.1 is not satisfied and such nonsatisfaction has not been the
result of the failure of Towne and the Bank to use their best efforts to
consummate this Merger Agreement in accordance to the terms of this Merger
Agreement); (ii) Towne terminates this Merger Agreement for any reason other
than the grounds for termination set out in Sections 8.1(a), 8.1(c), 8.1(d),
8.1(e) or 8.1(g) or (iii) the Towne Shareholders do not approve the Merger,
then Towne and the Bank shall be obligated to pay Acquiror on demand (and in no
event more than three days after such demand) in immediately available funds
Two Hundred Fifty Thousands and No/100 Dollars ($250,000.00). It is further
understood and agreed that the fee payable under this Section shall be due and
owing even though the event or condition which caused the fee to be payable was
the result (in part or in whole) of the directors of Towne and the Bank
complying with their fiduciary duties.
(b) To compensate Towne for such costs and to induce it to
forego initiating discussions regarding other acquisitions, if (i) this Merger
Agreement terminates because Acquiror does not use its best efforts to
consummate the transactions contemplated by this Merger Agreement in accordance
with the terms of this Merger Agreement (unless a condition set forth in
Section 7.2 is not satisfied and such nonsatisfaction has not been the result
of the failure of Acquiror to use its best efforts to consummate this Merger
Agreement in accordance to the terms of this Agreement); or (ii) Acquiror
terminates this Merger Agreement for any reason other than the grounds for
termination set out in Sections 8.1, then Acquiror shall be obligated to pay
Towne on demand (and in no event more than three days after such demand) in
immediately available funds Two Hundred Fifty Thousands and No/100 Dollars
($250,000.00).
8.4 Acquiror Fee. Towne and the Bank hereby agree to pay Acquiror
on demand (and in no event more than three days after such demand) in
immediately available funds $1,350,000 (the "Acquiror Fee") if within 18 months
after the date hereof the Merger has not been completed and there occurs any of
the events set forth in subparagraphs (a), (b) or (c) below.
(a) Any person other than Acquiror or an affiliate of Acquiror
acquires beneficial ownership of 25% or more of the then-outstanding Towne
Common Stock;
(b) Towne or the Bank, without having received Acquiror's prior
written consent, enters into an agreement to engage in an Acquisition
Transaction (as defined below) with any person (the term "person" for purposes
of this section having the meaning assigned thereto in Sections 3(a)(9) and
13(d)(3) of the 1934 Act and the rules and regulations thereunder) other than
Acquiror or any of its Subsidiaries, or Towne's Board of Directors recommends
that the Towne Shareholders approve or accept any Acquisition Transaction with
any person other than Acquiror or any of its Subsidiaries. For purposes of this
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section, "Acquisition Transaction" shall mean (a) a merger or consolidation, or
any similar transaction, involving Towne or the Bank, (b) a purchase, lease or
other acquisition of all or substantially all of the assets of Towne or the
Bank, or (c) a purchase or other acquisition (including by way of merger,
consolidation, share exchange or otherwise) of securities representing 10% or
more of the voting power of Towne or the Bank; or
(c) A bona fide proposal is made by a third party to Towne or the
Bank to engage in an Acquisition Transaction and after such proposal is made
any of the following events occurs: Towne or the Bank willfully breaches this
Merger Agreement and such breach entitles Acquiror to terminate this Merger
Agreement; the Towne Shareholders do not approve this Merger Agreement at the
Shareholders Meeting; the Shareholders Meeting is not held or is canceled prior
to termination of this Merger Agreement for reasons other than the fault of
Acquiror; or Towne's Board of Directors modifies in a manner adverse to
Acquiror its recommendation with respect to this Merger Agreement.
Notwithstanding the foregoing, Towne and the Bank shall not be obligated
to pay to Acquiror the Acquiror Fee if, prior to the occurrence of any of the
events specified in 8.4(a), (b), or (c), Towne validly terminates this Merger
Agreement pursuant to Section 8.1(a) or 8.1(g) (but only in the event that
Acquiror materially breaches a representation, warranty or covenant contained
herein and, as a result thereof, Towne exercises its right to terminate this
Merger Agreement under Section 8.1(g) at a time when Acquiror was not entitled
to terminate this Merger Agreement under Section 8.1(c), 8.1(g)) or Section
8.1(d). The parties further agree that this Section 8.4 is without prejudice to
any other rights that the parties hereto may have for any failure to perform
this Merger Agreement.
ARTICLE 9
GENERAL PROVISIONS
9.1 Notices . Any notice, request, demand and other communication
which either Party hereto may desire or may be required hereunder to give shall
be in writing and shall be deemed to be duly given if delivered personally or
mailed by certified or registered mail (postage prepaid, return receipt
requested), air courier or facsimile transmission, addressed or transmitted to
such other Party as follows:
If to Towne and the Bank: Towne Bancorp, Inc.
Towne Bank of Woodinville
17530 132nd Avenue NE
Woodinville, Washington 98072
Fax: (206) 483-9745
Attn: S. Rick Meikle, President and
Chief Executive Officer
With a copy to: Gerrish & McCreary
700 Colonial Road, Suite 200
Memphis, Tennessee 38117
Fax: (901) 684-2339
Attn: Jeffrey C. Gerrish, Esq.
If to Acquiror: First Savings Bank of Washington Bancorp, Inc.
10 South First Avenue
Walla Walla, Washington
Fax: (509) 527-3633
Attn: Gary Sirmon, President and
Chief Executive Officer
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With a copy to: Breyer & Aguggia
1300 I Street, N.W.
Suite 470 East
Washington, D.C. 20005
Fax: (202) 737-7979
Attn: John F. Breyer, Jr., Esq.
or to such other address as any Party hereto may hereafter designate to the
other Parties in writing. Notice shall be deemed to have been given on the date
reflected in the proof or evidence of delivery, or if none, on the date
actually received.
9.2 Assignability and Parties in Interest . This Merger Agreement
shall not be assignable by any of the Parties hereto; provided, however, that
Acquiror may assign, set over and transfer all, or any part of its rights and
obligations under this Merger Agreement to any one or more of its present or
future Affiliates. This Merger Agreement shall inure to the benefit of, and be
binding only upon the Parties hereto and their respective successors and
permitted assigns and no other Persons.
9.3 Governing Law . This Merger Agreement shall be governed by, and
construed and enforced in accordance with, the internal laws, and not the laws
pertaining to choice or conflicts of laws, of the State of Washington, unless
and to the extent that federal law controls. Any dispute arising between the
Parties in connection with the transactions which are the subject of this
Merger Agreement shall be heard in a court of competent jurisdiction located in
Walla Walla County, Washington.
9.4 Counterparts . This Merger Agreement may be executed
simultaneously in one or more counterparts (any of which may be facsimile
copies), each of which shall be deemed an original, but all of which shall
constitute but one and the same instrument.
9.5 Best Efforts . Towne, the Bank and Acquiror each agrees to use
its best efforts to complete the transactions contemplated by this Merger
Agreement; provided, however, that the use of best efforts by Acquiror shall
not obligate Acquiror to obtain or to provide Towne additional capital in an
amount, to divest any Subsidiary or branch, or to meet any other condition
which may be imposed by any Regulatory Authority as a condition to approval
which Acquiror shall deem, in good faith, to be unreasonable in the
circumstances.
9.6 Publicity . The Parties agree that press releases and other
public announcements to be made by any of them with respect to the transactions
contemplated hereby shall be subject to mutual agreement.
9.7 Entire Agreement . This Merger Agreement, together with the
Plan of Merger which is Exhibit A hereto, the Schedules, Exhibits and
certificates required to be delivered hereunder and any amendments or addenda
hereafter executed and delivered in accordance with Section 9.9 hereof
constitute the entire agreement of the Parties hereto pertaining to the
transaction contemplated hereby and supersede all prior written and oral (and
all contemporaneous oral) agreements and understandings of the Parties hereto
concerning the subject matter hereof. The schedules, annexes, exhibits and
certificates attached hereto or furnished pursuant to this Merger Agreement are
hereby incorporated as integral parts of this Merger Agreement. Except as
provided herein, by specific language and not by mere implication, this Merger
Agreement is not intended to confer upon any other person not a Party to this
Merger Agreement any rights or remedies hereunder.
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9.8 Severability . If any portion or provision of this Merger
Agreement should be determined by a court of competent jurisdiction to be
invalid, illegal or unenforceable in any jurisdiction, such portion or
provision shall be ineffective as to that jurisdiction to the extent of such
invalidity, illegality or unenforceability, without affecting in any way the
validity or enforceability of the remaining portions or provisions hereof in
such jurisdiction or rendering that or any other portions or provisions of this
Merger Agreement invalid, illegal or unenforceable in any other jurisdiction.
9.9 Modifications, Amendments and Waivers . At any time prior to
the Closing or termination of this Merger Agreement, the Parties may, solely by
written agreement executed by their duly authorized officers:
(a) extend the time for the performance of any of the
obligations or other acts of the other Party hereto;
(b) waive any inaccuracies in the representations and
warranties made by the other Party contained in this Merger Agreement or in the
Schedules or Exhibits hereto or any other document delivered pursuant to this
Merger Agreement;
(c) waive compliance with any of the covenants or agreements
of the other Party contained in this Merger Agreement; and
(d) amend or add to any provision of this Merger Agreement or
the Plan of Merger; provided, however, that no provision of this Merger
Agreement may be amended or added to except by an agreement in writing signed
by the Parties hereto or their respective successors in interest and expressly
stating that it is an amendment to this Merger Agreement.
9.10 Interpretation . The headings contained in this Merger
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Merger Agreement.
9.11 Payment of Expenses . Except as set forth herein, Acquiror and
Towne and the Bank shall each pay its own fees and expenses (including, without
limitation, legal fees and expenses) incurred by it in connection with the
transactions contemplated hereunder.
9.12 Equitable Remedies . The Parties hereto agree that, in the
event of a breach of this Merger Agreement by Towne and the Bank, Acquiror will
be without an adequate remedy at law by reason of the unique nature of Towne
and the Bank. In recognition thereof, in addition to (and not in lieu of) any
remedies at law which may be available to Acquiror, Acquiror shall be entitled,
at its sole discretion, either (i) to obtain equitable relief, including the
remedies of specific performance and injunction, in the event of a breach of
this Merger Agreement by Towne or the Bank or (ii) if applicable, to receive
the payment described in Section 8.3 hereof. Towne and the Bank covenant that
they shall not contend in any such proceeding that Acquiror is not entitled to
a decree of specific performance by reason of having an adequate remedy at law.
Notwithstanding the foregoing, if Towne and the Bank accept an Acquisition
Proposal from a third party and Acquiror receives an opinion of counsel from
Towne and the Bank that the failure of the Boards of Directors of Towne and the
Bank to accept such Acquisition Proposal would constitute a breach of such
directors' fiduciary duty to the shareholders of Towne, Acquiror shall not be
entitled to the equitable remedy of specific performance. No attempt on the
part of Acquiror to obtain such equitable relief shall be deemed to constitute
an election of remedies by Acquiror which would preclude Acquiror from
obtaining any remedies at law to which it would otherwise be entitled.
9.13 Attorneys' Fees . If any Party hereto shall bring an action at
law or in equity to enforce its rights under this Merger Agreement (including
an action based upon a misrepresentation or the breach of any warranty,
covenant, agreement or obligation contained herein), the prevailing Party in
such action shall be entitled to recover from the other Party its reasonable
costs and expenses necessarily incurred in connection with such action
(including fees, disbursements and expenses of attorneys and costs of
investigation).
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9.14 No Waiver. No failure, delay or omission of or by any Party
in exercising any right, power or remedy upon any breach or default of any
other Party shall impair any such rights, powers or remedies of the Party not
in breach or default, nor shall it be construed to be a waiver of any such
right, power or remedy, or an acquiescence in any similar breach or default;
nor shall any waiver of any single breach or default be deemed a waiver of any
other breach or default theretofore or thereafter occurring. Any waiver,
permit, consent or approval of any kind or character on the part of any Party
of any provisions of this Merger Agreement must be in writing and must be
executed by the Parties to this Merger Agreement and shall be effective only to
the extent specifically set forth in such writing.
9.15 Remedies Cumulative. All remedies provided in this Merger
Agreement, by law, equity or otherwise, shall be cumulative and not
alternative.
9.16 Non-Survival of Representations and Warranties. No
representations and warranties made by the Parties hereto or in any instrument
or document furnished in connection herewith shall survive the Closing. This
Section 9.16 shall not apply to covenants and agreements which by their terms
are intended to be performed after the Closing or the termination of this
Merger Agreement. Nothing in this Section 9.16 shall limit Towne's or
Acquiror's rights or remedies for misrepresentations, breaches of this Merger
Agreement or any other improper action or inaction by the other Party hereto
prior to its termination.
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IN WITNESS WHEREOF, each of the Parties hereto has duly executed and
delivered this Merger Agreement or has caused this Merger Agreement to be
executed and delivered in its name and on its behalf by its representative
thereunto duly authorized, all as of the date first written above.
TOWNE BANCORP, INC.
By: /s/ S. Rick Meikle
------------------
S. Rick Meikle
Its: President
ATTEST:
/s/ Pete Botting
- ----------------
Pete Botting,
Chairman of the Board
TOWNE BANK OF WOODINVILLE
By: /s/ S. Rick Meikle
------------------
S. Rick Meikle
Its: President and Chief Executive Officer
ATTEST:
/s/ Pete Botting
- ----------------
Pete Botting,
Chairman of the Board
FIRST SAVINGS BANK OF WASHINGTON BANCORP, INC.
By: /s/ Gary Sirmon
---------------
Gary Sirmon
Its: President and Chief Executive Officer
ATTEST:
/s/ D. Allan Roth
- -----------------
D. Allan Roth, Secretary
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EXHIBIT 99
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NEWS RELEASE
- -------------------------------------------------------------------------------
- -
FIRST SAVINGS BANK OF WASHINGTON BANCORP, INC. SIGNS
----------------------------------------------------
DEFINITIVE AGREEMENT TO ACQUIRE TOWNE BANCORP,INC.
--------------------------------------------------
Walla Walla, WA - November 24, 1997 -- First Savings Bank of Washington
Bancorp, Inc. (NASDAQ; FWWB) today announced it has signed a definitive
agreement to acquire Towne Bancorp, Inc., the holding company for Towne Bank,
Woodinville, Washington, for approximately $28.1 million,including the
assumption of outstanding Towne Bank stock options.
According to the terms of the definitive agreement, First Savings Bank of
Washington Bancorp will offer Towne Bancorp shareholders the option to receive
either 3.85 shares of its common stock or $91.62 in cash for each Towne Bancorp
share. A minimum of 51% and a maximum of 70% of Towne Bancorp common stock
currently outstanding must be exchanged for First Savings Bank of Washington
Bancorp stock. The selection of the method of payment by Towne Bancorp's
shareholders will be subject to allocation and proration if the stock portion
of the total merger consideration would be less that the minimum or greater
than the maximum. The acquisition, which has been approved by the Boards of
Directors of each company, is subject to, among other contingencies, approval
by regulators and Towne Bancorp shareholders. The transaction is expected to
close by April 1, 1998.
Founded in 1991, Towne Bank is a community business bank with
approximately $132 million in total assets, $120 million in deposits, $102
million in loans and $8.4 million in shareholders' equity at October 31, 1997.
Towne Bank operates four full service branches in Woodinville, Redmond,
Bellevue and Renton, in the greater Seattle area.
"Acquiring Towne Bank is another step in the Bancorp's regional
expansion, which significantly enhances our operation in the rapidly growing
Seattle metropolitan area. Towne Bank's business banking focus will diversify
our operations in Western Washington. Over the last ten years, First Savings
Bank has established lending relationships with homebuilders, developers and
homeowners in the region through our loan production offices in Bellevue and
Puyallup, but we have not been able to offer our customers deposit and checking
services. Bringing Towne under the Bancorp umbrella should provide very real
opportunities to cross sell a wide range of products and services to our
borrowers. Towne Bank will retain its name and maintain its strong local
identity. Like First Savings Bank of Washington and Inland Empire Bank, Towne
Bank will operate as a wholly owned subsidiary of FWWB," said Gary Sirmon,
President and CEO of FWWB.
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"This transaction should be transparent to Towne Bank customers. There
are no plans to change Towne Bank's successful management or operational
structure. The management and staff of Towne Bank will continue to make
decisions locally with a significant degree of autonomy, but will enjoy the
benefits of being associated with a larger, diversified, financially strong
organization. I will serve on Towne Bank's Board of Directors, and Rick
Meikle, Towne Bank's President and CEO, will join the FWWB Board. Since there
will be no consolidation of branches, there should be little, if any, impact on
employees, " stated Sirmon. Together, the Bancorp's three institutions will
have 24 branch offices in nine counties in Washington and Oregon.
"Towne Bank fits very well with our existing franchise," Sirmon said.
"The Bank shares our corporate philosophy of community involvement, high
quality staff and management, competitive products and services, local decision
making and a strong work ethic. We have a common belief that our employees and
officers play the key role in our success.
"The management and employees of Towne Bank have done a terrific job of
growing their business," Sirmon continued. "Towne Bank's total assets
increased 64% in the twelve months prior to October 31, 1997. In the same
period, total loans grew 56% and total deposits rose 67%. The Bank's return on
assets was 1.64% and return on equity was 21.3% in the first ten months of the
year. Towne Bank knows and understands its markets, and we are proud to be
associated with such a vibrant, fast growing bank."
"We are pleased to join forces with First Savings Bank and Inland Empire
Bank and believe partnering with FWWB will be a win-win situation for all
parties," said Rick Meikle. "Towne Bank's community banking focus has been
very successful in our local market. We have grown rapidly and have
established an excellent foundation for asset, loan and deposit growth in a
dynamic economy. FWWB will provide Towne Bank with the necessary capital and
additional funding to sustain this rapid growth."
"The Bancorp is paying approximately 3.3 times Towne Bank's book value
and 18.0 times earnings for the past 12 months. Using growth assumptions
significantly less than Towne Bank's historical trends, and making no
provisions for operating cost savings, we expect this acquisition to
immediately add to net income and to cause only minor dilution to earnings per
share in the first year," said Allan Roth, CFO of First Savings Bank.
First Savings Bank, founded in 1890, and Inland Empire Bank, founded in
1948, are community-oriented institutions that operate a combined total of 20
branch offices and five loan offices in Washington and Oregon. First Savings
Bank's lending business is primarily residential mortgage loans for the
purchase of homes and for home construction and is currently expanding into
consumer, non-mortgage commercial and agriculture lending. Inland Empire Bank
specializes in agriculture, commercial and consumer lending, and has recently
established a construction lending operation. At September 30, 1997, the
Bancorp had total assets of $1.1 billion, and total shareholders' equity of
$150.3 million.
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