West Town Bancorp, Inc. (OTCPK:WTWB) signed a definitive agreement to acquire Sound Banking Company (OTCPK:SNBN) for $23.2 million on February 17, 2017. Under the terms of the agreement, each share of Sound Bank common stock will be converted at closing of the merger into the right to receive either $12.75 in cash or 0.60 shares of West Town common stock. The exchange ratio of 0.60 shares of West Town common stock for each share of Sound Bank common stock will be adjusted down if the weighted average closing price of West Town common stock on the ten most recent trading days preceding the merger closing is greater than $27.75 per share. In such an event, the exchange ratio would be reduced only such amount as would be necessary so that the average market value of a share of West Town common stock multiplied by the adjusted exchange ratio would approximate $16.65. Sound Bank shareholders will have the opportunity to elect between West Town common stock, cash or a combination of West Town stock and cash, subject to the limitation that 65% of Sound Bank shares will be exchanged for West Town stock and 35% of Sound Bank shares will be exchanged for cash. At the effective time, all rights with respect to Sound Bank common stock pursuant to stock options will be converted into and have option with respect to West Town common stock, and West Town shall assume each Sound Bank option.

As part of the transaction, West Town Bancorp has entered into securities purchase agreements with certain investors pursuant to which the company expects to raise gross proceeds of $17.5 million consisting 0.45 million shares of voting common stock at a per share purchase price of $23 and 0.03 million shares of a non-voting convertible perpetual preferred stock at a per share purchase price of $230 per share which will be used to fund the Sound Bank merger. West Town has an existing $5.0 million revolving credit facility and will increase this facility to $10.0 million for the purpose of funding Sound Banking Company and other transaction. The combined bank will operate under the name “Sound Bank” from branch offices in both North Carolina and Illinois. After completion of the transaction, Sound Bank will operate as a subsidiary of West Town Bancorp. If either party terminates the merger agreement by reason of the other party's material breach of its representations, warranties and/or covenants in the merger agreement, the parties agree that the party in breach will pay $0.25 million as liquidated damages to the non-breaching party. Sound Bank shall pay to West Town a termination fee of $0.75 million.

Following the merger, four non-employee members of Sound Bank's existing Board of Directors will join the seven existing members of the West Town and West Town Bank & Trust's Boards of Directors to lead the combined organization. Eric J. Bergevin will remain President and Chief Executive Officer of West Town and Chief Executive Officer of the combined bank. At closing, S. Phillip Collins will become the President of the combined bank and will also be added to the combined bank's Board of Directors as a fifth legacy Sound Bank Director. After the merger, Sound Bank's entire Board of Directors will be appointed to the Board of Directors of surviving Bank, which will be composed of ten current Directors of Sound Bank, two Directors from West Town including Eric J. Bergevin and Marc H. McConnell, and a Board nominee of Patriot Financial.

The transaction is subject to the receipt of the regulatory approval from the FDIC, Board of Governors of the Federal Reserve System or the applicable Federal Reserve Bank and the North Carolina Commissioner of Banks, West Town shall have received the private placement proceeds or the gross private placement proceeds, appraisal rights, the net worth of West Town and Sound shall be equal to shall be equal to or greater than $26 million and $16 million respectively, the number of shares of Sound Bank common stock outstanding as of the closing date of the merger shall not exceed 1.89 million shares, Sound Bank and each of S. Phillip Collins and Richard T. McIntyre, Jr., shall have executed and delivered to West Town the settlement, waiver and release agreements and such agreements shall remain in full force and effect; support agreements have been executed, and the approval of the merger by the shareholders of Sound Bank. Sound Bank's board of directors unanimously adopted and approved the merger and the merger agreement. The transaction was approved by Board of West Town Bancorp and West Town Bank & Trust. The transaction was approved by Federal Reserve Bank of Chicago on June 6, 2017. As of July 31, 2017, the transaction was approved by North Carolina Commissioner of Banks.

As of April 10, 2017, an amended agreement was entered wherein the structure of the transaction was amended. All of Sound Banking Directors have entered into support agreements with West Town pursuant to which they have agreed to vote the shares of our common stock over which such directors have voting power in favor of approval of the merger agreement proposal. The transaction is expected to close in latter part of the third quarter or early fourth quarter of 2017. John Schramm of FIG Partners, LLC acted as the financial advisor and Todd H. Eveson of Wyrick Robbins Yates & Ponton LLP acted as the legal advisor to West Town. Raymond James & Associates, Inc. acted as financial advisor to Sound Banking Company. Performance Trust Capital Partners, LLC acted as acted as financial advisor and fairness opinion provider to Sound Banking Company and will receive a fees of $35,000. William R. Lathan, Jr. of Ward & Smith acted as the legal counsel to Sound Banking Company. Regan & Associates, Inc. acted as information agent for Sound Banking Company. American Stock Transfer & Trust Company, LLC acted as exchange agent for West Town Bancorp. Brooks Pierce McLendon acted as legal advisor to Sound Bank.