As filed with the Securities and Exchange Commission on March 12, 1999
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
WESBANCO, INC.
(Exact name of registrant as specified in its charter)
WEST FIRGINIA 6711 55-0571723
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Classification Identification No.)
incorporation or Code Number)
organization)
ONE BANK PLAZA
WHEELING, WEST VIRGINIA 26003
(304) 234-9000
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
EDWARD M. GEORGE, PRESIDENT
WESBANCO, INC.
ONE BANK PLAZA
WHEELING, WEST VIRGINIA 26003
(304) 234-9000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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WITH COPIES TO:
JAMES C. GARDILL J. ROBERT VAN KIRK CHARLES D. DUNBAR
PHILLIPS, GARDILL, KIRKPATRICK & LOCKHART LLP ELIZABETH OSENTON LORD
KAISER & ALTMEYER 1500 OLIVER BUILDING JACKSON & KELLY, PLLC
61 FOURTEENTH STREET PITTSBURGH, PENNSYLVANIA 1600 LAIDLEY TOWER
WHEELING, WEST VIRGINIA 15222-2312 P.O. BOX 553
26003 (412) 355-6500 CHARLESTON, WV 25322
(304) 232-6810 (304) 340-1000
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Approximate date of commencement of the proposed sale of the securities to
the public: AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION
STATEMENT.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
CALCULATION OF REGISTRATION FEE
PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH AMOUNT TO BE OFFERING AGGREGATE AMOUNT OF
CLASS OF SECURITES REGISTERED (1) PRICE PER OFFERING REGISTRATION
TO BE REGISTERED UNIT (2) PRICE (2) FEE (2)
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Common Stock, 460,621 shares $8.07 $3,715,141 $1,033
$2.0833 par value
(1)Represents the maximum number of shares of common stock, par value $2.0833
per share, of WesBanco, Inc. issuable to holders of common stock, $10.00 par
value per share, of The Heritage Bank of Harrison County, Inc. pursuant to
the Agreement and Plan of Merger described herein.
(2)Estimated solely for the purpose of calculating the registration fee;
computed in accordance with Rule 457(f)(2) on the basis of the book value of
$15.51 per share of Heritage common stock on December 31, 1998. The proposed
maximum aggregate offering price per share has been determined by dividing
the proposed maximum aggregate offering price by the number of shares being
registered.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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The Heritage Bank of Harrison County, Inc.
140 West Main Street
P.O. Box 1110
Clarksburg, West Virginia 26302
(304) 623-1400
, 1999
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Dear Heritage Shareholder:
You are cordially invited to attend a Special Meeting of Shareholders of
The Heritage Bank of Harrison County, Inc. ("Heritage") to be held on
, 1999, at Heritage's principal executive offices, 140 West Main
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Street, P.O. Box 1110, Clarksburg, West Virginia 26302, commencing at 9:00 a.m.,
local time.
At the Special Meeting, you will be asked to approve and adopt an Agreement
and Plan of Merger and the transactions contemplated thereby providing for the
business combination of WesBanco, Inc. ("WesBanco") and Heritage. Pursuant to
the Agreement and Plan of Merger, Heritage will merge into WesBanco Bank
Fairmont, Inc. ("Fairmont"), a wholly-owned subsidiary of WesBanco, with
Fairmont being the surviving corporation, and each outstanding share of Heritage
common stock will be converted into the right to receive a number of shares of
WesBanco common stock. The number of shares of WesBanco common stock that you
will receive in the merger will be within a range between 1.515 and 1.923 shares
of WesBanco common stock for each share of Heritage common stock that you hold
at the time of the merger.
The board of directors of Heritage has determined that the transaction is
in the best interests of Heritage and its shareholders and recommends that you
vote FOR the proposal to approve and adopt the Agreement and Plan of Merger and
the transactions contemplated thereby. The accompanying proxy
statement/prospectus more fully describes the proposal to be considered at the
Special Meeting. You are urged to give it your careful attention.
Approval of the proposal to approve and adopt the Agreement and Plan of
Merger by Heritage shareholders will require the affirmative vote of the holders
of at least a majority of the outstanding shares of Heritage common stock. It is
very important that your shares be represented at the Special Meeting whether or
not you are personally able to attend. In order to ensure that you will be
represented, we ask you to complete and return the enclosed proxy card promptly.
A postage-paid return envelope is enclosed for your convenience.
You should not send in certificates representing shares of Heritage common
stock at this time. Following consummation of the transaction, information will
be sent to you regarding the procedure for surrendering your stock certificates
and receiving certificates for the shares of WesBanco common stock to be issued
in exchange for your Heritage shares.
Sincerely,
Gary F. Jarrell
President and Chief Executive Officer
THE HERITAGE BANK OF HARRISON COUNTY, INC.
140 WEST MAIN STREET
P.O. BOX 1110
CLARKSBURG, WEST VIRGINIA 26302
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NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON , 1999
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NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of The
Heritage Bank of Harrison County, Inc., a West Virginia banking corporation
("Heritage"), will be held on , 1999, at the principal executive offices
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of Heritage, 140 West Main Street, P.O. Box 1110, Clarksburg, West Virginia,
commencing at 9:00 a.m., local time, to consider and vote upon the following
matters described in the accompanying proxy statement/prospectus:
1. Approval and adoption of the Agreement and Plan of Merger, dated
as of November 10, 1998 (the "Merger Agreement"), among Heritage, WesBanco,
Inc., a West Virginia corporation ("WesBanco"), and WesBanco Bank Fairmont,
Inc. ("Fairmont"), a West Virginia banking corporation and wholly-owned
subsidiary of WesBanco, pursuant to which Heritage will be merged with and
into Fairmont. A copy of the Merger Agreement and First Amendment thereto are
attached as Appendices I and II to the accompanying proxy
statement/prospectus.
2. The transaction of such other business as may properly come
before the Special Meeting or any adjournment or postponement thereof.
Only holders of record of Heritage common stock at the close of business
on , 1999, will be entitled to notice of, and to vote at, the Special
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Meeting and any adjournment or postponement thereof.
Whether or not you plan to attend the Special Meeting, please complete,
date, sign and return the enclosed proxy card promptly. A return envelope is
enclosed for your convenience and requires no postage for mailing in the United
States.
By Order of the Board of Directors,
Mary K. Romeo
Corporate Secretary
Clarksburg, West Virginia
, 1999
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YOUR VOTE IS VERY IMPORTANT
TO VOTE YOUR SHARES, PLEASE COMPLETE, DATE AND SIGN THE
ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN THE
ENCLOSED RETURN ENVELOPE.
PROXY STATEMENT
OF
THE HERITAGE BANK OF HARRISON COUNTY, INC.
PROSPECTUS
OF
WESBANCO, INC.
This proxy statement/prospectus is being furnished to you because you are a
holder of common stock, par value $10.00 per share, of The Heritage Bank of
Harrison County, Inc., a West Virginia banking corporation ("Heritage"). The
board of directors of Heritage is soliciting your proxy for use at a special
meeting of the Heritage shareholders to be held on , 1999, at Heritage's
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principal executive offices, 140 West Main Street, Clarksburg, West Virginia,
commencing at 9:00 a.m., local time, and at any adjournment or postponement
thereof.
The purpose of the special meeting is the approval and adoption by you of
the Agreement and Plan of Merger dated as of November 10, 1998, among Heritage,
WesBanco, Inc., a West Virginia corporation ("WesBanco"), and WesBanco Bank
Fairmont, Inc. ("Fairmont"), a West Virginia banking corporation and a wholly
owned subsidiary of WesBanco, and the transactions contemplated thereby.
Pursuant to the Merger Agreement, Heritage will be merged into Fairmont. Each
issued and outstanding share of Heritage common stock immediately prior to the
effective time of the merger, subject to some exceptions, will be converted into
the right to receive between 1.515 and 1.923 shares of WesBanco common stock.
Copies of the Merger Agreement and the First Amendment thereto are attached as
Appendices I and II, respectively, to this proxy statement/prospectus.
This proxy statement/prospectus also constitutes the prospectus of WesBanco
for up to 460,621 shares of WesBanco common stock to be issued in the merger in
exchange for outstanding shares of Heritage common stock. WesBanco common stock
is quoted on the Nasdaq Stock Market and traded under the symbol "WSBC".
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THE SHARES OF
WESBANCO COMMON STOCK TO BE ISSUED HEREUNDER OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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This proxy statement/prospectus is first being mailed to shareholders of
Heritage on or about , 1999.
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THE DATE OF THIS PROXY STATEMENT/PROSPECTUS IS , 1999.
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TABLE OF CONTENTS
Page
Forward-Looking Statements............................................... 1
Where You Can Find More Information About WesBanco....................... 1
Summary.................................................................. 2
Common Questions and Answers About the Merger......................... 2
The Companies......................................................... 4
The Special Meeting................................................... 5
Voting at the Special Meeting......................................... 5
Ownership of Heritage Common Stock by Interested Persons.............. 5
The Merger............................................................ 6
Ownership of WesBanco Following the Merger............................ 6
Certain Federal Income Tax Consequences............................... 6
Dissenters' Rights.................................................... 6
Regulatory Approvals.................................................. 7
Effective Date........................................................ 7
Exchange of Certificates.............................................. 7
Comparison of Shareholder Rights...................................... 7
Conditions to the Merger.............................................. 7
Termination of the Merger Agreement................................... 8
Interests of Certain Persons in the Merger............................ 8
Accounting Treatment.................................................. 9
WesBanco Anti-Takeover Provisions..................................... 9
WesBanco, Inc. Selected Financial Data................................... 10
The Heritage Bank of Harrison County, Inc. Selected Financial Data....... 11
Pro Forma Combined Financial Information................................. 12
Pro Forma Combined Balance Sheet...................................... 13
Pro Forma Combined Income Statements.................................. 14
Notes to Pro Forma Financial Information.............................. 15
Comparative Per Share Data............................................... 17
Market Prices and Dividend Data.......................................... 18
WesBanco Common Stock Dividend Policy................................. 18
Heritage Common Stock Dividend Policy................................. 19
The Special Meeting...................................................... 19
General............................................................... 19
Date, Time and Place of the Special Meeting........................... 19
Record Date; Voting at the Special Meeting............................ 20
The Merger............................................................... 21
Background of the Merger.............................................. 21
Recommendation of the Heritage Board.................................. 21
Heritage Reasons for the Merger....................................... 22
WesBanco Reasons for the Merger....................................... 22
Interest of Certain Persons in the Merger............................. 23
Effects of the Merger: The Surviving Corporation...................... 23
Government Approvals.................................................. 24
Rights of Dissenting Shareholders..................................... 24
Resale Restrictions................................................... 26
Accounting Treatment.................................................. 27
Certain Federal Income Tax Consequences of the Merger................. 27
The Merger Agreement..................................................... 28
The Merger............................................................ 28
Conversion of Securities.............................................. 29
Representations and Warranties........................................ 30
Mutual Covenants...................................................... 31
Additional Covenants of Heritage...................................... 31
Additional Covenants of WesBanco...................................... 32
Conditions to Obligations of the Parties.............................. 33
Conditions to Obligations of WesBanco................................. 34
Conditions to Obligations of Heritage................................. 34
Termination; Expenses................................................. 34
Amendment or Waiver................................................... 35
Comparative Rights of Shareholders....................................... 36
Description of WesBanco Capital Stock................................. 36
Description of Heritage Capital Stock................................. 36
Comparison of Rights of WesBanco and Heritage Shareholders............ 37
Differences in Rights................................................. 37
Advantages of WesBanco Anti-Takeover Provisions....................... 38
Disadvantages of WesBanco Anti-Takeover Provisions.................... 38
Information with Respect to Heritage..................................... 39
History and Operations................................................ 39
Competition........................................................... 39
Security Ownership of Certain Beneficial Owners and Management........ 41
Directors and Executive Officers...................................... 43
Compensation of Messrs. Hansberry and D'Annunzio...................... 43
Legal Matters............................................................ 43
Experts.................................................................. 43
Appendix I--Agreement and Plan of Merger dated as of November 10, 1998, by and
between WesBanco, Inc., The Heritage Bank of Harrison County, Inc. and
WesBanco Bank Fairmont, Inc.
Appendix II--First Amendment to Agreement and Plan of Merger dated as of
February 19, 1999, by and between WesBanco, Inc., The Heritage Bank of
Harrison County, Inc. and WesBanco Bank Fairmont, Inc.
Appendix III -- West Virginia Dissenters' Rights Statute -- West Virginia
Code...............................................Annotated Section 31-1-123
FORWARD-LOOKING STATEMENTS
This proxy statement/prospectus, including the information that WesBanco
incorporates by reference, includes forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, and Section 21E of the
Securities Exchange Act of 1934. You can identify these forward-looking
statements by the words "believes," "contemplates," "expects," "may," "will,"
"should," "would," "anticipates," and similar expressions. Discussions of
strategy are also forward-looking statements.
We caution you that these statements are not guarantees of future
performance and involve risks and uncertainties. In addition, many of these
forward-looking statements are based on assumptions about the future that may
prove to be inaccurate. Accordingly, actual results may differ materially from
those expressed in the forward-looking statements.
Factors that could cause forward-looking statements to be inaccurate
include:
o changes in the regional and national economies;
o changes in interest rates;
o changes in federal and state regulations; and
o increased competition.
WHERE YOU CAN FIND MORE INFORMATION ABOUT WESBANCO
WesBanco files annual, quarterly and special reports, proxy statements and
other information with the Securities and Exchange Commission. These filings are
available over the internet from the SEC's web site at www.sec.gov. You may
inspect and copy WesBanco's filings at the public reference facilities of the
SEC at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C., 20549. You may
also obtain WesBanco's filings from the Public Reference Section of the SEC at
450 Fifth Street, N.W., Washington, D.C., 20549 at prescribed rates. Please call
the SEC at 1-800-SEC-0330 for further information about the public reference
rooms.
This proxy statement/prospectus is part of a registration statement on Form
S-4 that WesBanco has filed under the Securities Act of 1933 with respect to the
WesBanco common stock to be issued pursuant to the Merger Agreement. As
permitted by the SEC, this proxy statement/prospectus does not contain all of
the information set forth in the registration statement. If you would like to
view the additional information contained in the registration statement, you may
do so in the manner discussed in the preceding paragraph.
Statements in this proxy statement/prospectus that refer to the contents of
any omitted documents may be incomplete. In those cases, you are referred to the
omitted document for a more complete description. Such reference modifies any
statements made in this proxy statement/prospectus.
The SEC allows WesBanco to "incorporate by reference" the information that
WesBanco files with the SEC, which means that WesBanco can disclose important
information to you by referring you to those documents. The information
incorporated by reference is an important part of this proxy
statement/prospectus, and
1
information that WesBanco files later with the SEC will automatically update and
supersede this information.
WesBanco incorporates by reference its Annual Report on Form 10-K for the
fiscal year ended December 31, 1998 and any future filings with the SEC under
Sections 13(a), 13(c), 14 or 14(d) of the Securities Exchange Act of 1934.
Future filings include filings made after the date of this proxy
statement/prospectus and prior to the date of the special meeting.
You may request a free copy of this information by writing or telephoning
WesBanco at the following address or telephone number:
Larry G. Johnson, Secretary
WesBanco, Inc.
One Bank Plaza
Wheeling, West Virginia 26003
(304) 234-9000
In order to ensure timely delivery of any documents, you must make your request
no later than , 1999.
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You should rely only on the information contained in this proxy
statement/prospectus or to which WesBanco has referred you. We have not
authorized any person to give any information or to make any representations
that are different from those in this document.
This proxy statement/prospectus is not an offer to sell, and it is not
soliciting an offer to buy, any securities other than those offered in this
document. This proxy statement/prospectus also is not an offer to sell, and it
is not soliciting an offer to buy, any securities offered in this document in
any circumstances in which such offer or solicitation is unlawful.
You should not assume that the information in this proxy statement/
prospectus is accurate as of any date other than the date on the first page of
this proxy statement/prospectus.
All information concerning Heritage contained in this proxy
statement/prospectus has been supplied by Heritage and all information
concerning WesBanco contained in this proxy statement/prospectus has been
supplied by WesBanco. In this proxy statement/prospectus, the words "we" and
"us" refer to WesBanco and Heritage together.
SUMMARY
The following summary highlights certain information contained elsewhere
in this proxy statement/prospectus. This summary is not complete and is
qualified in its entirety by the more detailed information and financial
statements contained or incorporated in this proxy statement/ prospectus. You
are urged to read the entire proxy statement/prospectus before deciding how to
vote your shares.
COMMON QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: Who are the parties to the merger?
A: Heritage will merge with Fairmont, a wholly owned subsidiary of WesBanco.
After the merger, Heritage will cease to exist and Fairmont will continue
as the surviving corporation.
2
Q: What am I being asked to vote on?
A: You are being asked to vote on the merger. We cannot complete the merger
unless the holders of a majority of the Heritage's common stock vote to
approve the merger.
Q: If the merger goes through, what will I receive?
A: If the merger is completed, each share of Heritage common stock owned by
you will be converted into a number of shares of WesBanco common stock.
Q: How many shares of WesBanco common stock will I receive in the merger?
A: You will receive between 1.515 and 1.923 shares ofWesBanco common stock for
each share of Heritage common stock that you hold at the time of the
merger, depending on the average market price of WesBanco common stock
during a specified period of ten trading days. If this average price is
below $26, you will receive 1.923 shares of WesBanco common stock for each
share of Heritage common stock that you own. If this average price equals
or exceeds $33, you will receive 1.515 shares of WesBanco common stock. If
this average price is equal to or greater than $26 and less than $33, you
will receive a number of shares of WesBanco common stock between 1.515 and
1.923.
Q: Does the Heritage board of directors recommend that I approve the merger?
A: Yes. The Heritage board of directors recommends that you vote for the
merger. The Heritage board of directors believes that the merger will
produce a stronger combined entity better able to compete with banks and a
variety of non-bank institutions in a financial services industry that has
changed and is in the process of changing further.
Q: How will I be affected by the merger?
A: After the merger you will own shares in WesBanco. Although WesBanco is a
much larger company than Heritage, because it is a bank holding company (as
opposed to a bank) there are different regulatory requirements applicable
to WesBanco. You should carefully review these differences, which are
discussed beginning on page .
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Q: What are the tax consequences to Heritage shareholders from the merger?
A: We expect that the merger will be a tax-free transaction for federal
income tax purposes for Heritage shareholders. However, you will have to
pay taxes on any cash received for dissenters' shares and any cash received
in lieu of fractional shares. The tax consequences of the merger to you
will depend on your own situation. Therefore, you should consult your tax
advisor for a full understanding of the tax consequences of the merger.
3
Q: What regulatory approvals are required?
A: The merger must be approved by the Federal Deposit Insurance Corporation
and the West Virginia Board of Banking and Financial Institutions.
Q: When will the merger be completed?
A: Assuming we receive the required approvals, we expect the merger to be
completed during the second quarter of 1999.
Q: How can I vote if I do not plan to attend the special meeting?
A: You should read this document carefully and then mail your signed proxy
card approving or disapproving the merger in the enclosed return envelope
as soon as possible. A failure to vote or turn in a proxy card has the same
effect as voting against the merger. The special meeting is scheduled to
take place on , 1999.
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Q: Can I change my vote after having mailed in a signed proxy card?
A: Yes. After you have mailed a signed proxy card, you can change your vote
at any time before the proxy is voted at the special meeting. You can do so
in one of three ways prior to the special meeting. First, you can send a
written notice stating that you would like to revoke your proxy to the
Secretary of Heritage at the address given below. Second, you can complete
a new proxy card and send it to the Secretary of Heritage at the address
given below. Third, you can attend the special meeting and vote in person.
You should send any written notice or new proxy card to the Secretary of
Heritage at 140 West Main Street, P.O. Box 1110, Clarksburg, West Virginia
26302. You may also request a new proxy card by calling the Secretary at
(304) 623-1400.
Q: What if I do not approve of the merger and do not want my shares converted
if the merger is approved?
A: Dissenting shareholders' rights are available if you comply with the
requirements of Section 13-1-123 of the West Virginia Corporation Act. If
you comply with the requirements of that section and the merger is
approved, you are entitled to payment in cash of the fair value of your
shares.
Q: Should I send in my stock certificates now?
A: No. If the merger is completed, we will send you written instructions for
exchanging your Heritage common stock for WesBanco common stock.
Q: Where can I get more information about WesBanco and the merger?
A: You may obtain more information about WesBanco and the merger in this
document and in the other sources listed on page .
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THE COMPANIES
WesBanco is a multi-bank holding company chartered under the laws of the
4
State of West Virginia. WesBanco has banking subsidiaries located in West
Virginia and Ohio and, through these subsidiaries, conducts a general banking,
commercial and trust business. The principal executive offices of WesBanco are
located at One Bank Plaza, Wheeling, West Virginia 26003. Its telephone number
is (304) 234-9000.
Heritage is a bank chartered under the laws of the State of West Virginia.
Heritage is located in Harrison County, West Virginia, and provides general
banking services, including personal lines of credit, commercial, agricultural,
real estate and installment loans, checking, savings, NOW and money market
accounts, certificates of deposit and individual retirement accounts. The
offices of Heritage are located at 140 West Main Street, P.O. Box 1110,
Clarksburg, West Virginia 26302. Its telephone number is (304) 623-1400.
Fairmont is a West Virginia banking corporation and a wholly owned
subsidiary of WesBanco. Fairmont has 18 offices in and around the Fairmont, West
Virginia area. Following the merger, the business of Heritage will be conducted
by Fairmont. The principal executive offices of Fairmont are located at 301
Adams Street, Fairmont, West Virginia 26554. Its telephone number is (304)
368-5000.
THE SPECIAL MEETING
The purpose of the special meeting is to consider and vote upon the Merger
Agreement and the merger.
The special meeting will be held on , 1999 at 9:00 a.m., local time
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at the offices of Heritage at 140 West Main Street, Clarksburg, West Virginia.
VOTING AT THE SPECIAL MEETING
You may vote at the special meeting only if you owned shares of Heritage
common stock at the close of business on , 1999. You may cast one vote for
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each share of Heritage common stock owned at that date. In order to approve the
merger, the holders of a majority of the outstanding shares of Heritage common
stock must vote in favor of the merger. As of March 2, 1999 there were 272,032
shares of Heritage common stock outstanding, held by approximately 330 holders
of record.
You can vote your shares by attending the special meeting and voting in
person, or by marking the enclosed proxy card with your vote, signing it and
mailing it in the enclosed return envelope.
You can revoke your proxy as late as the date of the special meeting either
by sending in a new proxy received prior to the special meeting or by attending
the special meeting and voting in person.
OWNERSHIP OF HERITAGE COMMON STOCK BY INTERESTED PERSONS
Each director and executive officer of Heritage who owns shares of Heritage
common stock has advised Heritage that he or she intends to vote FOR adoption
and approval of the Merger Agreement. As of March 2, 1999, the directors,
executive officers and affiliates of Heritage beneficially owned 61,635 shares,
or approximately 23%, of the outstanding shares of Heritage common stock.
WesBanco owns 32,500 shares of Heritage common stock, representing
approximately 12% of the outstanding
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shares. William E. Witschey, a director of WesBanco, beneficially owns 3,250
shares of Heritage common stock, representing approximately 1% of the
outstanding shares. Thomas J. Hansberry, a director and the President and Chief
Executive Officer of Fairmont, and the former President of Heritage,
beneficially owns 11,295 shares of Heritage common stock, representing
approximately 4.2% of the outstanding shares. No other directors, officers or
affiliates of WesBanco owns shares of Heritage common stock.
THE MERGER
We propose a merger between Fairmont and Heritage, with Fairmont continuing
as the surviving corporation. Fairmont will retain its articles of incorporation
and by-laws. Fairmont will also retain its officers and directors, except that
Vincent F. D'Annunzio, a current director of Heritage, will be added to the
board of directors of Fairmont when the merger is completed.
In the merger, for each share of Heritage common stock you own, you will
receive a number of shares of WesBanco common stock in a range between 1.515 and
1.923. The exact number of shares of WesBanco common stock you receive will be
calculated according to a formula described in greater detail in this proxy
statement/prospectus.
You will not receive any fractional shares. Instead, you will receive a
check in payment for any fractional shares based on the average market value of
a share of WesBanco common stock during a specified period prior to the merger.
Alternatively, you may purchase the remaining fraction of a share of WesBanco
common stock from WesBanco at the value referred to above.
Your shares of Heritage common stock will be canceled as a result of the
merger. However, unless you properly exercise dissenters' rights, you will
receive shares of a much larger and more diversified company, as more fully
described in this proxy statement/prospectus.
OWNERSHIP OF WESBANCO FOLLOWING THE MERGER
The shares of WesBanco common stock to be issued in the merger will
constitute approximately 2.2% of the outstanding shares of WesBanco common stock
after the merger. The current shareholders of WesBanco will hold the remaining
97.6% of the outstanding shares of WesBanco common stock after the merger.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
We intend the merger to be a reorganization for federal income tax
purposes. If we obtain this treatment, you will not recognize any gain or loss
for federal income tax purposes upon receipt of shares of WesBanco common stock
in exchange for your shares of Heritage common stock. However, you will have to
pay taxes on any cash received in lieu of fractional shares.
Because of the complexity of the tax laws and the individual nature of
certain tax consequences of the merger to a shareholder, you should consult your
own tax advisor concerning all federal, state, local and foreign tax
consequences of the merger that may apply to you.
6
DISSENTERS' RIGHTS
In connection with the merger, you may be entitled to dissenters' rights
under Section 31-1-123 of the West Virginia Corporation Act, the text of which
is attached to this proxy statement/prospectus as Appendix III. If you wish to
exercise dissenters' rights, you must comply fully with the requirements of
Section 31-1-123. If you fail to comply with those requirements, you will lose
your dissenters' rights.
If you properly exercise your dissenters' rights, you will be entitled to
receive in cash the fair value of your shares determined as of the day prior to
the date of the special meeting, without regard to any appreciation or
depreciation in anticipation of the merger. It is a condition to the merger that
holders of not more than 10% of Heritage common stock exercise their dissenters'
rights.
REGULATORY APPROVALS
In addition to your approval, the merger is subject to the approval of the
Federal Deposit Insurance Corporation and the West Virginia Board of Banking and
Financial Institutions. The West Virginia Board of Banking and Financial
Institutions approved the merger on March 8, 1999. We have applied for the
approval of the Federal Deposit Insurance Corporation and we expect to receive
the approval prior to the special meeting. We cannot guarantee, however, that
the Federal Deposit Insurance Corporation will approve the merger or, if
approved, whether we will receive the approval in the time frame contemplated by
the Merger Agreement. We also cannot predict whether conditions will be attached
to its approval.
EFFECTIVE DATE
We expect the merger to occur as soon as practicable after shareholder and
regulatory approvals have been received, and all applicable regulatory waiting
periods have expired. We expect this to occur during the second quarter of 1999.
EXCHANGE OF CERTIFICATES
Do not send in your stock certificates until you are instructed to do so
after the merger is completed.
COMPARISON OF SHAREHOLDER RIGHTS
The rights of the shareholders of WesBanco and Heritage are governed by the
articles of incorporation and bylaws of the respective organizations and West
Virginia law, and are similar in many respects. For example, shareholders of
each are entitled to one vote for each share held, to receive pro rata any
assets distributed to shareholders upon liquidation, to approve major corporate
transactions by majority vote, to use cumulative voting in the election of
directors, and to exercise dissenters' rights in certain corporate transactions.
Despite these similarities, important differences exist. For example, WesBanco's
bylaws require prior notification to nominate a director, WesBanco's directors
are elected for staggered terms of three years, and WesBanco's articles of
incorporation contain a "super majority provision" requiring a 75% vote to
change the classification of directors.
7
CONDITIONS TO THE MERGER
Several conditions must be satisfied or waived before the merger can be
completed. These include:
o approval of the merger by the Federal Deposit Insurance Corporation and the
West Virginia Board of Banking and Financial Institutions;
o approval of the Merger Agreement by the holders of a majority of the
outstanding shares of Heritage;
o no stop order suspending the effectiveness of the registration statement
and no proceedings for that purpose initiated or threatened by the SEC;
o receipt of all permits or approvals required under state securities laws;
o the absence of any legal restraint blocking the merger;
o the holders of not more than 10% of the Heritage common stock shall have
exercised dissenters' rights; and
o receipt of an opinion of counsel with respect to certain federal income tax
consequences of the merger.
TERMINATION OF THE MERGER AGREEMENT
We may agree to terminate the Merger Agreement at any time without
completing the merger, even after you have approved it.
In addition, either party may decide, without the consent of the other, to
terminate the Merger Agreement if:
o any of the conditions to a party's obligations to close have not been
satisfied as of the date of the closing, and compliance with that condition
has not been waived by the party adversely affected by the non-compliance;
o the merger would violate any court order or other governmental decree;
o the merger has not occurred by November 10, 1999; or
o the shareholders of Heritage fail to approve the merger.
Subject to WesBanco's right to prevent the exercise of the following right,
Heritage has a unilateral right to terminate the Merger Agreement if the value
of WesBanco common stock falls below two specified threshholds. If (a) the
average market value of WesBanco common stock used for purposes of calculating
the number of shares of WesBanco common stock that you will receive in the
merger is below $26, and (b) the WesBanco common stock has underperformed an
index of other bank stocks by more than 20%, then Heritage may terminate the
Merger Agreement. The mechanics of this termination right are very complicated.
You should carefully review the complete description of this right contained
later in this document.
8
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Thomas J. Hansberry was the President of Heritage from its inception until
March 1, 1999. WesBanco has agreed to acquire Heritage because, among other
reasons, it wants to obtain the services of Mr. Hansberry following the Merger.
Accordingly, the Merger Agreement provided that, when the Merger became
effective, Mr. Hansberry would execute an employment agreement with Fairmont and
be appointed to Fairmont's board of directors. The Merger Agreement also
provided that Mr. Hansberry would be appointed to the board of directors of
WesBanco and to the executive committee of that board after the merger becomes
effective.
WesBanco wanted Mr. Hansberry to begin work at Fairmont prior to the
closing of the merger, but FDIC rules prohibit his employment by Fairmont and
Heritage at the same time. Therefore, on March 1, 1999, Mr. Hansberry resigned
from Heritage and was hired as the President and Chief Executive Officer of
Fairmont. On the same day, he was appointed to the Fairmont board of directors.
After the merger closes, Mr. Hansberry will be appointed to the WesBanco board
of directors.
Pursuant to the Merger Agreement, Mr. D'Annunzio will become a director of
Fairmont after the merger.
ACCOUNTING TREATMENT
The merger will be treated as a purchase for accounting purposes.
WesBanco Anti-Takeover Provisions
Because you will receive shares of WesBanco common stock in the merger, you
should know that the articles of incorporation of WesBanco contain certain
provisions that may have the effect of discouraging or deterring others from
attempting to acquire control of WesBanco.
These provisions include, among others, a provision establishing a
staggered board of directors and a requirement that 75% of the WesBanco
shareholders approve any change to the provision of the articles of
incorporation establishing the staggered board.
The staggered board provision makes it more difficult to change the full
board of directors at any one time. It also reduces the number of directors to
be elected at each annual meeting, so that minority shareholders may be in a
less favorable position to elect directors through cumulative voting.
WesBanco's articles of incorporation also allow the board of directors to
issue, without shareholder approval, up to 1,000,000 shares of preferred stock
with rights that the board of directors may determine. Your rights as a holder
of WesBanco common stock would be subject to the rights and preferences of any
preferred stock issued in the future.
Under certain circumstances, additional shares of WesBanco common stock or
preferred stock which are authorized but not issued could be used to create
voting impediments or to frustrate persons seeking to gain control of WesBanco
by buying a substantial number of shares of WesBanco common stock.
9
These anti-takeover provisions provide the continuity and stability of
management that the board of WesBanco considers essential to providing
shareholders with long-term value on their investments. They also allow the
board greater flexibility because they permit the issuance of additional common
and preferred shares without the expense and delay of a shareholder's meeting.
10
WESBANCO, INC.
SELECTED FINANCIAL DATA
(UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------------------------------------------------------
1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- -----------
SUMMARY STATEMENT OF INCOME:
Interest income $ 162,718 $ 157,790 $ 144,383 $ 138,507 $ 128,653
Interest expense 73,925 70,005 61,612 59,122 49,281
----------- ----------- ----------- ----------- -----------
Net interest income 88,793 87,785 82,771 79,385 79,372
Provision for loan losses 4,392 5,574 4,795 3,206 6,490
----------- ----------- ----------- ----------- -----------
Net interest income after
provision
for loan losses 84,401 82,211 77,976 76,179 72,882
Other income 25,715 17,701 15,657 14,385 13,043
Other expense 68,308 65,182 57,043 55,683 55,826
----------- ----------- ----------- ----------- -----------
Income before income taxes 41,808 34,730 36,590 34,881 30,099
Income tax provision 13,495 9,519 10,648 9,832 7,809
----------- ----------- ----------- ----------- -----------
Net Income $ 28,313 $ 25,211 $ 25,942 $ 25,049 $ 22,290
=========== =========== =========== =========== ===========
Preferred stock dividends
and
discount accretion 164 387
----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Net income available to
common Shareholders $ 28,313 $ 25,211 $ 25,942 $ 24,885 $ 21,903
=========== =========== =========== =========== ===========
AS OF DECEMBER 31,
-----------------------------------------------------------------------------------
1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- -----------
Basic earnings per share $ 1.36 $ 1.23 $ 1.31 $ 1.26 $ 1.12
Average shares outstanding 20,867,193 20,461,742 19,855,791 19,824,740 19,966,919
Dividends per common share $ 0.840 $ 0.786 $ 0.720 $ 0.640 $ 0.573
SELECTED BALANCE SHEET DATA:
Assets $ 2,242,712 $ 2,211,543 $ 2,090,750 $ 1,934,675 $ 1,905,055
Securities
680,550 629,218 600,283 609,712 672,043
Net loans
1,353,920 1,321,640 1,305,766 1,140,950 1,051,385
Deposits
1,787,642 1,779,867 1,702,660 1,595,428 1,578,545
Shareholders' equity
296,483 287,995 268,527 245,199 225,913
Book value per common share 14.35 13.97 13.17 12.33 11.37
11
THE HERITAGE BANK OF HARRISON COUNTY, INC.
SELECTED FINANCIAL DATA
(UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
FOR THE YEARS ENDED FOR THE SIX
DECEMBER 31, MONTHS ENDED
------------------- DECEMBER 31,
------------
1998 1997 1996*
------- -------- ------------
SUMMARY STATEMENT OF
Income:
Interest income $2,098 $1,275 $263
Interest expense 1,155 794 181
------------------------------------------
Net interest income 943 481 82
Provision for loan losses 89 148 45
------------------------------------------
Net interest income after
provision for loan losses 854 333 37
Other income 205 244 8
Other expense 1,130 977 (198)
------------------------------------------
Loss before income taxes (71) (400) (471)
Income tax benefit (26) (190) (198)
------------------------------------------
Net Loss ($45) ($210) ($273)
==========================================
Basic loss per share ($0.17) ($0.91) ($1.18)
Cash dividend declared $0.00 $0.00 $0.00
Average shares outstanding 265,295 231,607 231,607
AS OF DECEMBER 31,
---------------------------------------------
1998 1997 1996
------- --------- ------------
SELECTED BALANCE SHEET DATA:
Assets $33,049 $25,376 $15,011
Securities 2,005 2,465 3,988
Net loans 25,327 16,826 5,606
Deposits 28,685 21,816 8,828
Shareholders' equity 4,219 3,453 3,666
Book value per common share 15.51 14.91 15.83
*The Heritage Bank of Harrison County began operations in July 1996.
12
PRO FORMA COMBINED FINANCIAL INFORMATION
The following unaudited pro forma combined balance sheet as of December 31,
1998 and the pro forma combined statement of income for the year ended December
31, 1998 were prepared as if the merger occurred on January 1 of the period
presented and are for informational purposes only. The pro forma information is
based on the historical financial statements of WesBanco and Heritage. These pro
forma statements may not be indicative of the results that actually would have
occurred if the merger had been in effect on the dates indicated or which may be
obtained in the future. Minor differences may result from rounding. The
following information should be read in conjunction with the other financial
information of Heritage and WesBanco presented or incorporated in this document,
including the notes thereto. Expenses of Heritage relating to the merger are
estimated to be between $100,000 and $150,000.
The merger will be accounted for under the purchase method of accounting.
In the merger, Heritage shareholders will receive WesBanco common stock at an
exchange ratio which will depend on the average market value of WesBanco common
stock over a specified period of time. See "The Merger Agreement - Conversion of
Securities" for a complete explanation of the calculation of the average market
value and the exchange ratio. For purposes of the following pro forma financial
information, the market value as of December 31, 1998 of $29.50 per share was
used as the average market value of WesBanco common stock. Assuming an average
market value of $29.50 per share, the exchange ratio would be 1.695 shares of
WesBanco common stock for each share of Heritage common stock.
WesBanco owns 32,500 shares of Heritage common stock having an aggregate
book value of approximately $650,000. These shares were not considered in the
transaction value. The total transaction value is approximately $11,977,000.
13
WESBANCO, INC.
PRO FORMA COMBINED BALANCE SHEET AS OF DECEMBER 31, 1998
(UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
Adjustments
----------------- Proforma
WesBanco Heritage Debit Credit Combined
--------------------------- ---------- --------- ---------
ASSETS
Cash and due from banks $62,989 $969 $93(g) $63,865
Due from banks - interest bearing 5,174 - 5,174
------------ ------------ ---------- --------- ----------
Total cash and due from banks 68,163 969 - 93 69,039
Federal funds sold 38,055 1,586 2,056(a) 37,585
Available for sale securities 465,705 2,006 650(c) 467,061
Held to maturity securities 214,845 - 214,845
------------ ------------ ---------- --------- ----------
Total securities 680,550 2,006 - 650 681,906
Investment in subsidiaries 0 $11,977(b) 11,977(c) -
Loans, net of unearned income 1,373,018 25,555 1,398,573
Allowance for loan losses (19,098) (228) (19,326)
------------ ------------ ---------- --------- ----------
Net loans 1,353,920 25,327 - - 1,379,247
Bank premises and equipment 47,999 2,466 720(d) 6(e) 51,179
Goodwill and other intangibles 14,837 0 8,411(c) 512(f) 22,016
Other assets 39,188 695 720(d) 39,883
------------ ------------ ---------- --------- ----------
TOTAL ASSETS $2,242,712 $33,049 $9,131 $3,525 $2,280,855
============ ============ ========== ========= ==========
LIABILITIES
Non interest bearing deposits $227,349 $2,915 $230,264
Interest bearing 1,560,293 25,770 1,586,063
------------ ------------ ---------- --------- ----------
Total deposits 1,787,642 28,685 - - 1,816,327
Other borrowings 134,705 - ---------- --------- 134,705
------------ ------------
Total interest bearing liabilities 1,922,347 28,685 - - 1,951,032
Other liabilities 23,882 145 $40(i) 23,987
------------ ------------ ---------- --------- ----------
TOTAL LIABILITIES 1,946,229 28,830 40 - 1,975,019
SHAREHOLDERS' EQUITY
Common stock 43,742 2,720 2,720(c) 43,742
Capital surplus 60,283 2,094 2,094(c) $500(b) 60,783
Retained earnings 198,269 (598) 571(h) 598(c) 197,698
Treasury stock (9,421) - 2,056(a) 11,477(b) -
Market value adjustment on securities
available for sale-net of tax effect 3,610 3 3,613
------------ ------------ ---------- --------- ----------
TOTAL SHAREHOLDERS'EQUITY 296,483 4,219 7,441 12,575 305,836
------------ ------------ ---------- --------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $2,242,712 $33,049 $7,481 $12,575 $2,280,855
============ ============ ========== ========= ==========
Book value per share $14.35 $15.51 $14.52
Shares outstanding 20,660,235 272,032 21,066,242
SEE NOTES TO PRO FORMA COMBINED FINANCIAL INFORMATION
14
WESBANCO, INC.
PRO FORMA COMBINED INCOME STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1998
(UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT FOR SHARE DATA)
Adjustments
------------ Proforma
WesBanco Heritage Debit Credit Combined
------------------ ------ ----------------
INTEREST INCOME
Interest and fees on loans $118,766 $1,779 $120,545
Interest on securities 40,797 184 40,981
Interest on federal funds sold 3,155 135 $93(g) 3,197
---------- ------- ------ ---- ----------
Total interest income 162,718 2,098 93 - 164,723
INTEREST EXPENSE
Interest on deposits 67,612 1,155 68,767
Interest on other borrowings 6,313 0 6,313
---------- ------- ------ ------ ----------
TOTAL INTEREST EXPENSE 73,925 1,155 - - 75,080
NET INTEREST INCOME 88,793 943 93 - 89,643
Provision for possible 4,392 89 4,481
loan losses
---------- ------- ------ ------ ----------
NET INTEREST INCOME AFTER 84,401 854 93 - 85,162
PROVISION FOR LOAN LOSSES
OTHER INCOME
Trust fees 9,066 100 9,166
Service charges and other 15,139 96 15,235
income
Net securities gains 1,510 9 1,519
---------- ------- ------ ------ ----------
TOTAL OTHER INCOME 25,715 205 - - 25,920
OTHER EXPENSE
Salaries, wages, and employee 35,395 666 36,061
benefits
Premises and equipment - net 9,517 91 6(e) 9,614
Goodwill amortization 1,048 0 512(f) 1,560
Other operating 22,348 373 22,721
---------- ------- ------ ------ ----------
TOTAL OTHER EXPENSE 68,308 1,130 518 - 69,956
Income (loss) before income 41,808 (71) 611 - 41,126
Taxes
Provision (benefit) for income 13,495 (26) $40(i) 13,429
---------- ------- ------ ------ ----------
NET INCOME (LOSS) $28,313 ($45) $611 $40 $27,697
========== ======= ====== ====== ==========
Earnings (Loss) Per Share $1.36 ($0.17) $1.30
Average Shares Outstanding 20,867,193 265,295 21,273,200
SEE NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS
15
WesBanco, Inc.
Notes to Pro Forma Financial Information
NOTE 1
The following represents the estimated pro forma and purchase accounting
adjustments related to the acquisition of the net assets of Heritage. Under the
purchase method of accounting, the acquiring company records the net assets
received at their fair value at the time of the business combination. Excess of
the cost over the fair value of the net assets acquired is allocated to goodwill
and amortized over a period of fifteen years. These statements and the purchase
accounting adjustments are primarily estimates and are not intended to reflect
the final valuations at the date of acquisition.
(a) Purchase of treasury stock at $29.50 per share for use in the acquisition
of Heritage. The treasury shares purchased may vary from the pro forma
results as of the effective date of the transaction. On the acquisition
date, WesBanco will issue all or a portion of these shares from existing
treasury share balances, with the remaining shares being originally issued.
(b) Investment in Heritage through the issuance of 406,007 treasury shares at
fair value of $11,977,000.
(c) Eliminate the shareholders' equity of Heritage and record the excess over
purchase price of assets acquired of Heritage (goodwill), excluding the
effects of the fair accounting adjustments for Bank Premises, Equipment,
Loans and Deposits.
(d) Estimated market valuation adjustment of Heritage's Bank Premises.
(e) Represents current period amortization on Heritage's market value
adjustment on Bank Premises over an estimated remaining life using the
straight-line method.
(f) Current year amortization of Heritage goodwill.
(g) Reduction in interest income and cash balance due to the decrease in
Federal Funds using a 4.50% average yield.
(h) Change in net income resulting from the pro forma and purchase accounting
adjustments.
(i) Adjustment of tax expense and liability created by the net purchase
accounting adjustments.
NOTE 2
Under the purchase method of accounting, assets and liabilities of Heritage
are required to be adjusted to fair market value. The estimated market value
adjustments included in the pro forma financial statements have been determined
by WesBanco based upon information available. WesBanco cannot be sure that such
estimated market values represent the market values that will ultimately result
when the proposed transaction is consummated. The actual valuation will depend
16
upon the composition of various components of assets and liabilities along with
the respective weighted average remaining lives.
NOTE 3
Summary of Consideration:
Heritage's common stock outstanding as of December 31, 1998: 272,032
Heritage stock owned by WesBanco: (32,500)
-----------
Net stock exchange: 239,532
Exchange ratio: 1.695
-----------
WesBanco common stock to be exchanged: 406,007
Fair Value of WesBanco stock as of December 31, 1998: $29.50
-----------
Total Consideration: $11,977,206
===========
17
COMPARATIVE PER SHARE DATA
(unaudited)
The following table sets forth for WesBanco and Heritage certain historical
and pro forma per share financial information for the year ended December 31,
1998. The pro forma equivalent per share information is computed, where
applicable, using the WesBanco pro forma information and an exchange ratio of
1.6951 shares of WesBanco common stock for each share of Heritage common stock.
The proforma information could be higher or lower than set forth below,
depending on the actual exchange ratio used in the merger. The information in
these tables is not necessarily an indicator of future operations and should be
read in conjunction with the historical, supplemental and unaudited pro forma
financial statements which are furnished within this proxy statement/prospectus.
FOR THE YEAR ENDED DECEMBER 31, 1998
---------------------------------------
ACTUAL PRO FORMA
------ ---------
WESBANCO COMMON STOCK:
Primary earnings per share $1.36 $1.30
Dividends per share $0.84 $0.84
Book value per share $14.35 $14.52
HERITAGE COMMON STOCK:
Primary earnings (loss) $0.17) $2.20
per share
Dividends per share $0.00 $1.42
Book value per share $15.51 $24.61
- -------------------------------
1 On December 31, 1998, the closing price of a share of WesBanco common stock
was $29.50. If the exchange ratio was calculated in the manner provided in the
Merger Agreement and $29.50 per share was used as the "Average Market Value" of
WesBanco common stock, the exchange ratio would equal 1.695.
18
MARKET PRICES AND DIVIDEND DATA
WesBanco common stock is quoted on the Nasdaq Stock Market and traded under
the symbol "WSBC." The table below sets forth for the calendar quarters
indicated, the range of high and low sales prices of WesBanco common stock as
reported by the Nasdaq Stock Market and the cash dividends declared on WesBanco
common stock. There is no established trading market for the Heritage common
stock.
WESBANCO COMMON STOCK
HIGH LOW DIVIDENDS
---- --- ---------
1997
First Quarter * 22.17 21.17 .193
Second Quarter 27.17 21.33 .193
Third Quarter 30.50 25.75 .200
Fourth Quarter 31.25 27.50 .200
1998
First Quarter 31.13 27.00 .210
Second Quarter 30.94 23.88 .210
Third Quarter 28.25 22.00 .210
Fourth Quarter 30.00 25.38 .210
1999
First Quarter 29.00 28.38 .220
(through March 8, 1999)
- ----------
* Restated to reflect a 50% stock dividend declared June 19, 1997.
On November 9, 1998, the last full trading day prior to the execution of
the Merger Agreement, the closing price per share of WesBanco common stock as
reported on the Nasdaq Stock Market was $28.94. On March , 1999, the most
--
recent practicable date prior to the printing of this proxy
statement/prospectus, the closing price per share of WesBanco common stock as
reported on the Nasdaq Stock Market was $ .
-------
You are urged to obtain current market quotations for WesBanco common
stock. Prices at which WesBanco common stock may trade prior to the merger may
not be indicative of prices at which WesBanco common stock may trade following
the merger.
Heritage common stock is not listed on any exchange, quotation system or
over-the-counter market and is not actively traded. However, since November 8,
1996, a total of 5,255 shares of Heritage common stock have been traded in
approximately 15 transactions known to Heritage. In each of these transactions,
the buyer paid $20.00 for each share of Heritage common stock.
19
WESBANCO COMMON STOCK DIVIDEND POLICY
WesBanco has historically declared and paid cash dividends on a quarterly
basis. WesBanco anticipates that, after the merger, it will initially declare
quarterly dividends on shares of WesBanco common stock of $0.22 per share. You
are cautioned, however, that the WesBanco board of directors may, at any time
and without notice, stop declaring dividends or reduce the amount of the
dividend.
Whether WesBanco pays a dividend, and the amount of any dividend, will
depend upon WesBanco's results of operations, financial condition, cash
requirements, future prospects, limitations imposed by credit agreements or
senior securities and other factors deemed relevant by the WesBanco board of
directors. Because WesBanco's principal source of income is dividends from its
subsidiaries, its ability to pay future dividends will depend upon the financial
condition and earnings of its subsidiaries.
WesBanco may pay dividends at the discretion of its board of directors out
of any funds legally available for the payment of dividends under West Virginia
law. Under the West Virginia Corporation Act, dividends may be paid out of
unreserved and unrestricted earned surplus, and, additionally, in certain
circumstances and with the affirmative vote of holders of a majority of
WesBanco's outstanding shares, out of capital surplus. WesBanco may never pay a
dividend, however, if, at the time of or after payment of the dividend, it is or
would be insolvent.
HERITAGE COMMON STOCK DIVIDEND POLICY
Heritage has never declared or paid a dividend on the Heritage common
stock. Heritage may pay dividends at the discretion of its board of directors
out of any funds legally available for the payment of dividends under West
Virginia law. Under the West Virginia Corporation Act, dividends may be paid out
of unreserved and unrestricted earned surplus, and, additionally, in certain
circumstances and with the affirmative vote of holders of a majority of its
outstanding shares, out of capital surplus. Heritage may never pay a dividend,
however, if at the time of or after payment of the dividend, it is or would be
insolvent.
THE SPECIAL MEETING
GENERAL
This proxy statement/prospectus and the accompanying proxy card are being
mailed to you on or about , 1999. The Heritage board of directors is
---------
soliciting proxies from the holders of Heritage common stock to be voted at the
special meeting. The special meeting has been called to consider and vote upon
the Merger Agreement providing for (i) the merger of Heritage with Fairmont, and
(ii) the exchange of each outstanding share of Heritage common stock for shares
of WesBanco common stock.
The Heritage board of directors unanimously has approved the Merger
Agreement and recommends that you vote FOR approval thereof.
Copies of the Merger Agreement and the First Amendment to the Merger
Agreement are attached to this proxy statement/prospectus as Appendices I and II
and are incorporated by reference herein in their entirety. You should read
these agreements carefully.
DATE, TIME AND PLACE OF THE SPECIAL MEETING
The special meeting will be held on , at 9:00 a.m., local time,
-----------
in the
20
principal executive offices of Heritage, at 140 West Main Street, Clarksburg,
West Virginia.
RECORD DATE; VOTING AT THE SPECIAL MEETING
Only holders of record of Heritage common stock on , 1999, will
----------
be entitled to notice of and to vote at the special meeting and any adjournments
or postponements thereof. On , there were 272,032 shares of Heritage
------
common stock outstanding and entitled to vote at the special meeting. Each such
share is entitled to one vote. As of March 2, 1999, there were approximately 330
holders of record of Heritage common stock.
The presence, in person or by proxy, of the holders of a majority of the
outstanding shares of Heritage common stock is necessary to constitute a quorum
at the special meeting. The affirmative vote of the holders of at least a
majority of the outstanding shares of Heritage common stock is required for
approval of the Merger Agreement and the merger. Abstentions and broker
non-votes will have the effect of a vote against approval of the Merger
Agreement and the merger.
Each director and executive officer of Heritage who owns or has control
over shares of Heritage common stock has advised Heritage that he or she will
vote FOR adoption and approval of the Merger Agreement. As of March 2, 1999, the
directors, executive officers and affiliates of Heritage owned or controlled the
vote of 61,635 shares of Heritage common stock, constituting approximately 23%
of the outstanding shares of Heritage common stock.
WesBanco owns 32,500 shares of Heritage common stock, representing
approximately 12% of the outstanding shares of Heritage common stock. William E.
Witschey, a director of WesBanco, indirectly owns 3,250 shares of Heritage
common stock, representing approximately 1% of the outstanding shares. These
shares are owned directly by Witschey Realty, Inc., a corporation of which Mr.
Witschey is a director, officer and significant shareholder. Mr. Hansberry, a
director and the President and Chief Executive Officer of Fairmont, and the
former President of Heritage, beneficially owns 11,295 shares of Heritage common
stock representing approximately 4.2% of the outstanding shares.
All shares of Heritage common stock represented at the special meeting by
properly executed proxies received prior to or at the special meeting, and not
revoked, will be voted at the special meeting in accordance with the
instructions on the proxies. If you properly execute a proxy but include no
voting instructions, your shares will be voted to approve the Merger Agreement
and authorize the merger.
The Heritage board of directors does not know of any matters, other than as
described in the notice of special meeting, which are to come before the special
meeting. If any other matters are properly presented at the special meeting for
action, the persons named in the enclosed form of proxy will have the authority
to vote on such matters in their discretion.
If you give a proxy, you have the right to revoke it at any time before it
is voted. You may revoke your proxy by (i) filing with the Secretary of Heritage
a written notice of revocation bearing a later date than the proxy, (ii) duly
executing a later dated proxy relating to the same shares and delivering it to
the Secretary of Heritage before the taking of the vote at the special meeting,
or (iii) attending the special meeting and voting in person. Any written notice
of revocation or subsequent proxy should be sent so as to be delivered to
21
Heritage, 140 West Main Street, P.O. Box 1110, Clarksburg, West Virginia 26302,
Attention: Corporate Secretary, or hand delivered to the foregoing
representative of Heritage, at or before the taking of the vote at the special
meeting.
Heritage will bear the cost of the solicitation of proxies, except that
WesBanco will bear the costs of preparing, printing and mailing this proxy
statement/prospectus. In addition to solicitation by use of the mails, proxies
may be solicited by directors, officers and employees of Heritage in person or
by telephone, telegram or other means of communication. These directors,
officers and employees will not be additionally compensated but may be
reimbursed for out-of-pocket expenses they incur in connection with the
solicitation. Arrangements will also be made with custodians, nominees and
fiduciaries for the forwarding of solicitation materials to the beneficial
owners of Heritage common stock held of record by such persons. Heritage may
reimburse these custodians, nominees and fiduciaries for reasonable
out-of-pocket expenses they incur in connection therewith.
DO NOT SEND YOUR STOCK CERTIFICATES WITH YOUR PROXY CARD.
THE MERGER
The following description of the terms of the merger is qualified in its
entirety by reference to the provisions of the Merger Agreement and the First
Amendment to the Merger Agreement, which are attached to this proxy
statement/prospectus as Appendices I and II and incorporated herein by
reference. You are strongly encouraged to read the Merger Agreement for a more
complete description of the terms of the merger.
BACKGROUND OF THE MERGER
Prior to the formation of Heritage, Wesbanco received regulatory approval
from the Federal Reserve Bank of Cleveland to acquire up to 12-1/2% of the stock
of Heritage. Pursuant to this approval, WesBanco became an original shareholder
of Heritage. Thomas J. Hansberry, the President and Chief Executive Officer of
Heritage from its inception until March 1, 1999, formerly served as the
Commissioner of Banking of the West Virginia Division of Banking and was
personally acquainted with Edward M. George, the President of WesBanco. Mr.
Hansberry also served with Mr. George as a member of the West Virginia Board of
Banking and Financial Institutions and, accordingly, had occasions, from time to
time, to discuss their respective banking organizations.
On August 6, 1998, Mr. George initiated informal discussions with Mr.
Hansberry regarding Heritage's operating philosophy, products and services. Mr.
George and Mr. Hansberry also met on August 18th, October 20th and October 29th,
1998. The main focus of these meetings was the compatibility of Heritage and
WesBanco and the similarities in, and the differences between, their operating
philosophies. During the October meetings, the parties began negotiating the
terms of an acquisition transaction.
The negotiations and discussions lead the parties to conclude that a
combination of WesBanco and Heritage would create a more competitive financial
institution in downtown Clarksburg, West Virginia, than either could be alone,
and that the combination would better serve the needs of the banks' respective
customers in Clarksburg. On November 10, 1998, the parties agreed on the terms
of a transaction and executed the definitive Merger Agreement.
22
RECOMMENDATION OF THE HERITAGE BOARD
The Heritage board of directors has unanimously approved the Merger
Agreement and recommends that you vote FOR approval and adoption of the Merger
Agreement. The Heritage board of directors has determined that the merger is in
your best interests and in the best interests of the employees and customers of
Heritage.
HERITAGE REASONS FOR THE MERGER
Financial Terms of Merger. The Heritage board of directors believes that,
based on historical and anticipated trading prices for WesBanco common stock,
the value of the consideration to be received by you represents fair multiples
of Heritage's per share book value and earnings. The board also considered that
the merger will result in a substantial increase in dividend income per share to
you, although there can be no assurance that WesBanco's current dividends are
indicative of future dividends.
Non-financial Terms of the Merger. The Heritage board of directors also
considered the social and economic effects of the merger on Heritage's
employees, depositors, customers, and others dealing with Heritage, and the
community in which Heritage is located and operates. The board also believed
that the shareholders would benefit by owning shares in a publicly traded
company.
Certain Financial and Other Information Concerning WesBanco. The Heritage
board of directors also considered the business and financial condition of
WesBanco and its position among its peer group of financial institutions in West
Virginia and Ohio in terms of profitability, capital adequacy and asset quality.
The board considered that historical dividends per share and net income per
share of WesBanco common stock represent a substantial increase in historical
dividends per share and net income per share of Heritage common stock, although
there can be no assurance that pro forma amounts are indicative of future
dividends or income per share of WesBanco common stock. The board further
considered the reputation and business practices of WesBanco and its management
as they would affect the employees of Heritage.
Other Possible Alternatives. Having thoroughly explored other possible
alternatives to the transaction with WesBanco, including remaining independent,
the Heritage board of directors believes that the transaction with WesBanco is
the best available alternative for you and Heritage at this time. The Heritage
board of directors believes that the merger and the Merger Agreement are
advisable and are fair to and in the best interests of you and Heritage. The
Heritage board of directors unanimously recommends that you vote FOR approval
and adoption of the merger and the Merger Agreement.
WESBANCO REASONS FOR THE MERGER
WesBanco's board of directors believes that the combination of its
resources with those of Heritage will afford the resulting combined institution
better opportunities to compete with other financial and non-financial
institutions (including other commercial banks, thrift institutions, finance
companies, credit unions, money market mutual funds, brokerage firms, investment
companies, credit companies, insurance companies and retail stores that maintain
their own credit operations) in the markets in which Heritage and WesBanco's
subsidiary banks conduct their business. The merger will also provide WesBanco
with a presence in
23
downtown Clarksburg, West Virginia, which will afford WesBanco an opportunity
for future growth in that market. The combined entity will also benefit from the
elimination of duplicative expenses.
The combined entity will be able to offer a broader range of services than
that currently available to Heritage customers. These additional services
include mutual funds, broader loan programs and, through participation by
affiliated banks, the ability to service larger loan transactions.
In summary, WesBanco's board of directors believes that the merger will
enable both Heritage and WesBanco to better serve the financial needs of their
communities. The WesBanco board of directors also believes that WesBanco will
obtain these benefits at a cost that, under all the facts and circumstances, is
reasonable.
INTEREST OF CERTAIN PERSONS IN THE MERGER
As of March 2, 1999, directors and officers of Heritage beneficially owned,
in the aggregate, 61,635 shares of Heritage common stock, representing
approximately 23% of the outstanding shares of Heritage common stock.
All of Heritage's directors and officers will, as a result of the merger,
obtain an equity interest in WesBanco in exchange for their shares of Heritage
common stock. Each of them will receive the same number of shares of WesBanco
common stock for each share of Heritage common stock owned by him or her as
every other Heritage shareholder. Directors and officers of Heritage will be
treated the same as other Heritage shareholders, except that they may be subject
to certain restrictions on any resale of WesBanco common stock received by them
pursuant to the merger. See "Resale Restrictions" below.
The executive officers and directors of Heritage do not own any shares of
WesBanco common stock.
Pursuant to the Merger Agreement, after the merger, Mr. Hansberry will
become a director of WesBanco and a member of the executive committee of that
board. Mr. D'Annunzio will become a director of Fairmont.
As of March 2, 1999, WesBanco held 32,500 shares of Heritage common stock,
representing approximately 12% of the outstanding shares of Heritage common
stock. Other than Mr. Hansberry, the President and Chief Executive Officer of
Fairmont, who owns 11,295 shares, and Mr. Witschey, a director of WesBanco who
indirectly owns 3,250 shares, no directors, executive officers or affiliates of
WesBanco own shares of Heritage common stock.
Except for counsel fees paid to a director of WesBanco in the ordinary
course of business in connection with this transaction, no directors, officers
or affiliates of WesBanco have any special interest in the merger or are
receiving any special consideration or compensation as a result of the merger.
No outstanding transactions between Heritage or WesBanco and their
respective affiliates, and any directors, officers, or principal shareholders of
Heritage or WesBanco or their respective associates, including any outstanding
loans or trust relationships, will be affected by the merger.
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EFFECTS OF THE MERGER: THE SURVIVING CORPORATION
The merger will become effective at the time the Articles of Merger are
filed with, and the Certificate of Merger is issued by, the Secretary of State
of the State of West Virginia. At that time, the separate existence of Heritage
will cease and Fairmont will be the surviving corporation. The assets,
liabilities, and capital of Heritage will be merged into Fairmont and those
assets, liabilities and capital will then constitute part of the assets,
liabilities and capital of Fairmont. Fairmont will continue to operate under its
articles of incorporation and bylaws effective as of the day of the merger.
The articles of incorporation and bylaws of WesBanco will be unaffected by
the merger. The tenure of the directors and officers of WesBanco immediately
prior to the merger will be unaffected by the merger. For information concerning
WesBanco's current management, see WesBanco's Annual Proxy Statement filed
pursuant to Section 14(a) of the Securities Exchange Act on , 1999. See
--------
"Where You Can Find More Information About WesBanco."
If the merger had occurred as of December 31, 1998, Heritage would have, on
a pro forma consolidated basis, constituted approximately 1.6% of deposits, 1.4%
of assets, and 1.4% of equity of WesBanco, and its shareholders would have held
approximately 2.2% of the total outstanding shares of WesBanco. In addition, for
the year ended December 31, 1998, Heritage would have contributed approximately
1.0% of net interest income and 0.0% of net income to WesBanco on a pro forma
consolidated basis.
These percentages reflect the relative size of Heritage as of December 31,
1998 and may change with the normal variances in the rates of growth for
deposits and loans for all WesBanco affiliates. Additionally, it is contemplated
that WesBanco may combine with other financial institutions in the future and
these mergers may affect the percentages shown above. WesBanco is not presently
involved in any other material merger transactions for which definitive
agreements or letters of intent have been executed.
GOVERNMENT APPROVALS
The completion of the merger is conditioned upon the approval of the merger
by the West Virginia Board of Banking and Financial Institutions and the Federal
Deposit Insurance Corporation.
Applications for approval were filed with the Federal Deposit Insurance
Corporation and the West Virginia Board of Banking and Financial Institutions on
January 23, 1999 and January 21, 1999, respectively. Approval of the merger was
received from the West Virginia Board of Banking and Financial Institutions on
March 8, 1999. Approval of the merger has not yet been received from the Federal
Deposit Insurance Corporation.
The merger cannot proceed in the absence of these regulatory approvals.
Although there can be no assurances, we believe that the required governmental
approval of the Federal Deposit Insurance Corporation will be obtained.
RIGHTS OF DISSENTING SHAREHOLDERS
If you object to the merger and comply with Section 31-1-123 of the West
Virginia Corporation Act, you are entitled to payment of the fair value of your
shares. The fair value of the shares will be determined as of the day prior to
the date of the special meeting without regard to any appreciation or
depreciation in anticipation of the merger.
The following is a brief summary of the steps you must take to perfect your
dissenters' rights under West Virginia law.
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This summary does not purport to be complete and is subject in all respects to
the provisions of, and is qualified in its entirety by reference to, the
provisions of Section 31-1-123 of the West Virginia Corporation Act, which is
reproduced in full as Appendix III to this proxy statement/prospectus.
You Must Object to the Merger in Writing. You must file written objection
to the proposed merger with the Secretary of Heritage prior to or at the special
meeting.
You Must Not Vote in Favor of the Merger. You must not vote your
shares in favor of the merger. You are not required to vote against the
merger, but if you vote for the merger you will lose your right to exercise
dissenters' rights.
You Must Make Written Demand for Fair Value. You must make written
demand on Heritage or the surviving corporation for payment of the fair
value of your shares within 10 days after the vote is taken at the special
meeting. Voting against the merger does not constitute the demand for
payment required by law. If you fail to make such written demand within the
10-day period, you will be bound by the terms of the Merger Agreement. The
written demand may be addressed to Gary F. Jarrell, President, The Heritage
Bank of Harrison County, Inc., 140 West Main Street, P.O. Box 1110,
Clarksburg, West Virginia 26302. Once you demand to be paid the fair value
of your shares, you cannot withdraw your demand without the permission of
Heritage or the surviving corporation.
Your Rights as a Dissenting Shareholder. If you make such a demand,
you shall thereafter be entitled only to payment as a dissenting
shareholder as provided by law and you shall not be entitled to vote or to
exercise any other rights of a shareholder of Heritage. Your right to be
paid the fair value of your shares will cease, and your status as a
shareholder of Heritage will be restored, without prejudice to any
corporate proceedings which may have been taken during the interim, if any
of the following events occurs:
o your demand is withdrawn with the consent of Heritage or the surviving
corporation;
o the merger is abandoned or rescinded;
o the Heritage shareholders revoke the authority to effect the merger;
o no demand or petition for the determination of fair value by a court of
general civil jurisdiction has been made or filed within the time provided
by statute; or
o a court of general civil jurisdiction determines that you are not
entitled to relief as a dissenting shareholder.
You Must Surrender your Certificate(s). You must surrender your stock
certificates to Heritage or the surviving corporation within 20 days after
demanding payment for your shares so that a notation that such demand has
been made may be placed on your stock certificates. Your failure to
surrender your certificates shall, at Heritage's or the surviving
corporation's option, terminate your dissenters' rights unless a court, for
good cause shown, directs otherwise.
Surviving Corporation Must Make Offer. If you have demanded to be paid
the fair value of your shares, within 10 days after the merger becomes
effective the surviving corporation must give you written notice of the
merger and offer, in writing, to purchase
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your shares at a price deemed by the surviving corporation to be the fair value
of your shares. The offer must be accompanied by a balance sheet of Heritage as
of the latest available date, which shall not be more than twelve months prior
to the making of the offer, and a profit and loss statement of Heritage for the
twelve month period ended on the date of that balance sheet. If within 30 days
after the merger becomes effective, you and the surviving corporation agree upon
the fair value, you will be entitled to receive the agreed payment for your
shares within 90 days after the merger becomes effective upon surrender of your
shares. Upon payment of the agreed value, you shall cease to have any interest
in your shares of Heritage common stock.
Filing Suit. If you and the surviving corporation fail to agree upon the
fair value within 30 days after the merger becomes effective then, within 30
days after receipt of written demand from any dissenting shareholder, which
written demand must be given within 60 days after the merger becomes effective,
the surviving corporation will file a complaint in the Circuit Court of Harrison
County, West Virginia, requesting that the fair value of the shares be found and
determined. If the surviving corporation fails to institute such a proceeding,
you or any other dissenting shareholder may do so in the name of the surviving
corporation.
To exercise your dissenters' rights, strict adherence to the provisions of
West Virginia law is required. If you think you may desire to exercise your
dissenters' rights, you should carefully review the statutory provisions
attached to this proxy statement/prospectus as Appendix III. As in all legal
matters, you would be well advised to seek the guidance of an attorney.
If you receive cash for the fair value of your shares of Heritage common
stock, that cash will be subject to federal income taxes. The amount of gain or
loss and its character as ordinary or capital gain or loss will be determined in
accordance with Sections 302 and 1001 (and in certain cases, other provisions)
of the Internal Revenue Code of 1986 (the "IRC"). If you are contemplating the
possible exercise of dissenters' rights, you are urged to consult a tax advisor
as to the federal (and any applicable state and local) income tax consequences
resulting from such an election.
RESALE RESTRICTIONS
The shares of WesBanco common stock that you will receive in the merger
will be registered under the Securities Act of 1933. Under current law, if you
are not an affiliate of WesBanco or Heritage within the meaning of Rule 144
under the Securities Act of 1933, you may sell or transfer any shares of
WesBanco common stock that you receive in the merger without need of further
registration under the Securities Act of 1933.
If you are an affiliate of Heritage before the merger or an affiliate of
WesBanco after the merger, you may resell the shares of WesBanco common stock
issued to you in the merger only:
o in transactions permitted by Rules 144 and 145 under the Securities Act of
1933;
o pursuant to an effective registration statement; or
o in transactions exempt from registration.
Generally, if you are an executive officer, director or a principal
shareholder or other control person of Heritage or WesBanco, you may be deemed
to be an affiliate for these purposes. Other
27
shareholders would not be deemed to be affiliates. Rules 144 and 145, insofar as
relevant to shares acquired in the merger, impose restrictions on the manner in
which affiliates may make resales and also on the quantity of resales that such
affiliates, and others with whom they might act in concert, may make within any
three-month period.
It is a condition to WesBanco's obligation to consummate the merger that
Heritage deliver to WesBanco a schedule specifying the persons who may be deemed
to be affiliates of Heritage and use its best efforts to cause each affiliate to
deliver to WesBanco, prior to the closing of the merger, an affiliate's letter.
An affiliate's letter is a letter that states that the shares of WesBanco common
stock issued to an affiliate pursuant to the merger will not be sold or
otherwise disposed of except:
o in accordance with Rule 145 (where the affiliate has given WesBanco
evidence of compliance with the rule reasonably satisfactory to WesBanco);
or
o pursuant to an effective registration statement under the Securities Act
of 1933 unless such person has furnished to WesBanco a no-action or
interpretive letter from the SEC or an opinion of counsel reasonably
satisfactory to WesBanco that such transaction is exempt from or otherwise
complies with the registration requirements of the Securities Act of 1933.
An affiliate's letter also acknowledges that the certificates representing
the shares of WesBanco common stock received by the affiliate may bear a legend
regarding these restrictions.
ACCOUNTING TREATMENT
The merger will be accounted for as a purchase by WesBanco. The results of
this accounting treatment are shown in the unaudited combined pro forma
financial data included on pages through of this proxy
--- ---
statement/prospectus.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The merger is conditioned upon receipt of a legal opinion as to the
principal federal income tax consequences expected to result from the merger.
Counsel for WesBanco, Kirkpatrick & Lockhart LLP, will provide this opinion.
The following summary of the material federal income tax consequences
expected to result from the merger is qualified in its entirety by reference to
the full text of the opinion of Kirkpatrick & Lockhart, including the
assumptions upon which that opinion is based. The opinion is filed as Exhibit 8
to the registration statement of which this proxy statement/prospectus is a
part. Neither the opinion nor this summary addresses any tax considerations
under foreign, state or local laws, or the tax considerations to shareholders
other than individual United States citizens who hold their shares of WesBanco
common stock or Heritage common stock as a capital asset within the meaning of
Section 1221 of the IRC.
No rulings have been requested from the Internal Revenue Service as to the
federal income tax consequences of the merger. You should be aware that the
opinion of Kirkpatrick & Lockhart is not binding on the IRS and the IRS is not
precluded from taking a different position. You should also be aware that some
of the federal income tax
28
consequences of the merger are governed by provisions of the IRC as to which
there are no final regulations and little or no judicial or administrative
guidance. Kirkpatrick & Lockhart's opinion is based upon the federal income tax
laws as in effect on the date of the opinion and as those laws are currently
interpreted. There can be no assurance that future legislation, regulations,
administrative rulings or court decisions will not adversely affect the accuracy
of the statements contained herein or in the opinion.
The federal income tax consequences discussed below are conditioned upon,
and Kirkpatrick & Lockhart's opinion is based upon, the accuracy, as of the date
of this proxy statement/prospectus and at, as of and after the time the merger
becomes effective, of certain assumptions. These assumptions include, but are
not limited to, the following:
o that the shareholders of Heritage receive shares of WesBanco common stock
stock with a value on the date the merger becomes effective of not less
than fifty percent (50%) of the value of the Heritage common stock as of
the same date;
o that following the merger, WesBanco will continue the historic business of
of Heritage or use a significant portion of Heritage's historic business
assets in a business; and
o that a bona fide corporate business purpose exists for the merger.
As of the date of this proxy statement/prospectus, WesBanco and Heritage
believe that all of these assumptions are now, and will be at, as of and after
the time the merger becomes effective, accurate. If either WesBanco or Heritage
learns before that time that the assumptions are false and that its counsel
therefore believes that the merger is unlikely to be treated as a tax-free
reorganization, then additional shareholder approval will be obtained before
consummation of the merger.
Subject to the limitations and assumptions described above, Kirkpatrick &
Lockhart will render an opinion to WesBanco and Heritage that the merger will
have the following federal income tax consequences:
o No gain or loss will be recognized by WesBanco, Heritage or Fairmont as a
a result of the transactions contemplated in the Merger Agreement;
o No gain or loss will be recognized by the shareholders of Heritage as a
result of their exchange of Heritage common stock for WesBanco common
stock, except to the extent any shareholder receives cash in lieu of a
fractional share or as a dissenting shareholder;
o The holding period of the WesBanco common stock received in the merger will
will include the period during which the stock of Heritage exchanged
therefor was held, provided such stock was a capital asset in the hands of
the holder on the date of exchange; and
o The federal income tax basis of the WesBanco common stock received in the
the merger will be the same as the basis of the Heritage common stock
exchanged therefor.
The tax consequences of the merger may vary depending upon your particular
29
circumstances. You are urged to consult your own tax advisor to determine the
particular tax consequences of the merger to you, including the applicability
and effect of any state, local or foreign income, property, transfer and other
tax laws.
THE MERGER AGREEMENT
The following summary of the Merger Agreement is qualified in its entirety
by reference to the Merger Agreement and the First Amendment to the Merger
Agreement, copies of which are attached to this proxy statement/prospectus as
Appendices I and II, respectively. You are urged to read these documents for a
more complete description of the merger.
THE MERGER
After approval and adoption of the Merger Agreement by the Heritage
shareholders, and the satisfaction or waiver of other conditions to the merger,
Heritage will be merged into Fairmont, with Fairmont continuing as the surviving
corporation. The articles of incorporation and bylaws of Fairmont immediately
prior to the merger will constitute the articles of incorporation and bylaws of
the surviving corporation.
CONVERSION OF SECURITIES
In the merger, each share of Heritage common stock issued and outstanding
immediately prior to the time the merger becomes effective (subject to certain
exceptions) will be exchanged for and become, without action on the part of the
shareholder, the right to receive a certain number of shares of WesBanco common
stock.
In the Merger Agreement, the term "Exchange Ratio" refers to the number of
shares of WesBanco common stock that each share of Heritage common stock will be
exchanged for. The Exchange Ratio depends on the market value of WesBanco common
stock over a specified period of time. The Exchange Ratio will be determined as
follows:
o if the WesBanco Market Value (as defined below) is greater than or
equal to $33.00, then each share of Heritage common stock will be exchanged
for 1.515 shares of WesBanco common stock;
o if the WesBanco Market Value is less than $33.00 but greater than or
equal to $26.00, then each share of Heritage common stock will be exchanged
for the number of shares of WesBanco common stock obtained by dividing
$50.00 per share by the WesBanco Market Value; and
o if the WesBanco Market Value is less than $26.00, then each share of
Heritage common stock will be exchanged for 1.923 shares of WesBanco common
stock.
The "WesBanco Market Value" is the average of the closing prices of
WesBanco common stock on the Nasdaq Stock Market for each of the 10 consecutive
trading days ending on the 5th trading day before the "Determination Date."
The "Determination Date" is the date on which the last required
governmental approval is obtained with respect to the merger without regard to
any requisite waiting period. If the merger does not become effective on or
before the 16th day following the last regulatory approval solely because of the
non-expiration of waiting periods, then the Determination Date will be
30
the date 5 business days before the date the merger becomes effective.
Shares of Heritage common stock held by Heritage in its treasury or
beneficially owned by Fairmont or WesBanco (other than in a fiduciary capacity
by them for others) will not be exchanged for shares of WesBanco common stock in
the merger. Instead, these shares will be canceled and retired. Shares of
Heritage common stock as to which dissenters' rights are properly exercised also
will not be exchanged for shares of WesBanco common stock in the merger. See the
discussion of dissenters' rights above on page .
---
No fractional shares of WesBanco common stock will be issued in the merger.
Either cash will be paid in lieu of fractional shares, or, at your election you
may purchase the remaining fraction of a share. In either case, the value of the
fractional share will be based on a whole share value of the WesBanco Market
Value.
Promptly after the merger becomes effective, American Stock Transfer &
Trust Company will mail transmittal forms and exchange instructions to each
holder of record of Heritage common stock to be used to exchange shares of
Heritage common stock for shares of WesBanco common stock. These transmittal
letters will be accompanied by instructions specifying other details of the
exchange. You should not send in your certificates until you receive a
transmittal form and instructions.
After the merger becomes effective, each certificate evidencing shares of
Heritage common stock will be deemed to evidence only the right to receive:
o the number of shares of WesBanco common stock that the holder is entitled
to receive by virtue of the merger; and
o the cash payment for any fractional share of WesBanco common stock which
which the holder does not elect to purchase.
The holder of an unexchanged certificate will not be entitled to receive
any dividend or other distribution payable by WesBanco until the certificate has
been exchanged.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various customary representations and
warranties of Heritage, WesBanco, and Fairmont. These representations and
warranties, which will terminate when the merger becomes effective, relate to,
among other things:
o the corporate organization and qualification of Heritage, WesBanco, and
WesBanco's subsidiaries, including Fairmont, and certain similar corporate
matters;
o the authorization, execution, delivery, and enforceability of the Merger
Agreement and related matters;
o the absence of any violation under the charters and bylaws of Heritage,
WesBanco, or WesBanco's subsidiaries, or under contracts or laws;
o the financial statements of each of Heritage and WesBanco;
o the absence of undisclosed suits, actions, proceedings, claims, or
investigations against either Heritage, WesBanco, or
31
WesBanco's subsidiaries;
o the capital structure of Heritage, WesBanco, and Fairmont;
o material contracts;
o the absence of materially adverse contracts;
o the absence of undisclosed liabilities;
o title to properties;
o the accuracy of information provided in this proxy statement/prospectus;
o taxes, tax returns and audits, and certain tax matters;
o the absence of certain materially adverse changes or events;
o the maintenance of fidelity bonds by Heritage, WesBanco, and WesBanco's
subsidiaries;
o certain benefit matters;
o the absence of labor disputes;
o the adequacy of reserves for possible loan losses;
o the ownership by Heritage and WesBanco of their subsidiaries;
o the filing and delivery of certain reports under the Securities Exchange
Act of 1934; and
o the authority of WesBanco to issue shares of WesBanco common stock under
under the Merger Agreement.
MUTUAL COVENANTS
Pursuant to the Merger Agreement, Heritage and WesBanco have agreed that,
until the merger becomes effective or the Merger Agreement is terminated,
whichever occurs first, each will, with some exceptions:
o use its best efforts to take, or cause to be taken, all action required
under the Merger Agreement on its part to be taken so as to permit the
consummation of the merger at the earliest possible date;
o cooperate in furnishing information for the preparation and filing of this
proxy statement/prospectus;
o cooperate in the filing of any regulatory applications with respect to the
merger; and
o advise the other of any materially adverse change in its financial
condition, assets, business, or operations, or of any material changes or
inaccuracies in data provided to the other party pursuant to the Merger
Agreement.
ADDITIONAL COVENANTS OF HERITAGE
HERITAGE HAS FURTHER AGREED THAT:
o it will not make any change in its authorized capital stock;
o it will not issue any shares of Heritage common stock;
32
o it will not issue or grant any options, warrants, or other rights to
purchase shares of Heritage common stock;
o it will not declare or pay any dividends or other distributions on any
shares of Heritage common stock;
o it will not purchase, otherwise acquire, or agree to acquire for
consideration any Heritage common stock (other than in a fiduciary
capacity);
o except as otherwise contemplated by the Merger Agreement or required by
law, it will not amend any employment agreement, or any pension,
retirement, stock option, profit sharing, deferred compensation,
consultant, bonus, group insurance, or similar plan;
o it will not take any action materially and adversely affecting the
financial condition (present or prospective), businesses, properties, or
operations of Heritage;
o it will not acquire or merge with any other company or acquire any
branch or, other than in the ordinary course of business, any assets of any
other company;
o except in the ordinary course of business, it will not mortgage,
pledge, or subject any of its material assets to a lien or other
encumbrance, or incur or cancel any material debts or claims;
o it will not increase any compensation or benefits payable to its
officers or employees, except in the ordinary course of its business as
heretofore conducted;
o it will not take any other action not in the ordinary course of its
business as heretofore conducted or incur any material obligation or enter
into any material contract;
o it will not amend its charter or bylaws, except as necessary to carry out
the merger or as required by law;
o it will advise WesBanco of the name and address of, and the number of
shares of Heritage common stock held by, each shareholder who elects to
exercise his or her right to dissent from the merger;
o it will operate its business only in the ordinary course and consistent
with past practice;
o it will not, and will not permit any person acting on its behalf to,
solicit any acquisition proposal, including any proposal to merge or
consolidate with, or acquire all or any substantial portion of the assets
of, Heritage, or any tender or exchange offer (or proposal to make any
tender or exchange offer) for any shares of stock of Heritage, or any
proposal to acquire more than 5% of the outstanding shares of stock of
Heritage or any options, warrants, or rights to acquire, or securities
convertible into or exchangeable for, more than 5% of the outstanding
shares of stock of Heritage; and
33
o it will maintain its insurance at existing levels.
ADDITIONAL COVENANTS OF WESBANCO
WesBanco has further agreed that:
o prior to or at the closing of the merger, it will deliver to American
Stock Transfer & Trust Company shares of WesBanco common stock and cash
sufficient in amount to meet the requirements of the merger;
o it will cause Fairmont to execute and enter into the Merger Agreement and
cause Fairmont to take the actions required of it in the Merger Agreement;
o it will deliver to Heritage copies of its Forms 10-K, 10-Q and 8-K filed
after the execution of the Merger Agreement; and
o as of the time the merger becomes effective, it will appoint Mr.
Hansberry to the board of directors of WesBanco and to the executive
committee of the board.
CONDITIONS TO OBLIGATIONS OF THE PARTIES
The respective obligations of Heritage and WesBanco to effect the merger
are subject to the following conditions, among others:
o the approval of the Merger Agreement by a majority of the shareholders of
Heritage;
o the absence of an order by the West Virginia Board of Banking and
Financial Institutions disapproving the acquisition of Heritage by WesBanco
and the merger of Heritage with and into Fairmont pursuant to the Merger
Agreement;
o the issuance of a Certificate of Merger by the West Virginia Secretary of
State for the merger;
o the approval by the Federal Deposit Insurance Corporation of the
application of Fairmont to merge with Heritage;
o the effective status of the registration statement on the date the
merger closes and a declaration of effectiveness regarding, or a withdrawal
of, all post-effective amendments thereto by that date;
o the absence of a pending or threatened stop order or proceedings
seeking a stop order suspending the effectiveness of the registration
statement or any amendments thereto;
o the receipt of all required state securities and "Blue Sky" permits or
approvals;
o the absence of any order to restrain, enjoin, or otherwise prevent the
consummation of the merger entered by any court or administrative body
which remains in effect on the date the merger closes;
o the receipt of all material governmental or other consents, approvals, and
permissions, including the filing of the registration statement with the
34
SEC and the West Virginia Securities Commissioner;
o the expiration of all periods for review, objection, or appeal of or to any
consents, approvals or permissions required for the consummation of the
merger;
o the exercise of dissenters' rights in accordance with the West Virginia
Corporation Act by not more than 10% of the holders of Heritage common
stock;
o on or before the date the merger closes, the receipt of a ruling from the
IRS, or instead, at the option of Heritage, an opinion from counsel for
WesBanco, to the effect that for federal income tax purposes the merger
will be treated as a tax-free reorganization within the meaning of Section
368(a) of the IRC, and regarding certain other tax matters;
o the absence of any action, proceeding, regulation, or legislation
before any court, governmental agency, or legislative body to enjoin,
restrain or prohibit, or to obtain substantial damages with respect to, the
Merger Agreement or the consummation of the transactions contemplated
therein;
o the absence of any required divestiture or cessation of any significant
part of the present operations of Heritage, WesBanco, or any of their
subsidiaries;
o the accuracy in all material respects of the representations and warranties
of the parties set forth in the Merger Agreement;
o the receipt of legal opinions from the parties' counsel; and
o the delivery of certified copies of the resolutions duly adopted by the
boards of directors of Heritage, WesBanco, and Fairmont, and the
shareholders of Heritage and Fairmont, approving the Merger Agreement and
authorizing the transactions contemplated therein.
CONDITIONS TO OBLIGATIONS OF WESBANCO
In addition to the conditions discussed above, the consummation of the
merger by WesBanco is conditioned upon:
o the receipt of a schedule identifying all persons who may be deemed to be
affiliates of Heritage under Rule 145 of the Securities Act of 1933, and
the delivery of affiliate letters by those persons; and
o the absence of any suit, action, or proceeding pending against Heritage or
or its officers or directors in their capacity as such, which, in the
reasonable judgment of WesBanco would, if successful, have a materially
adverse effect on the financial condition or operations of Heritage.
CONDITIONS TO OBLIGATIONS OF HERITAGE
The consummation of the merger by Heritage is also conditioned upon:
35
o the absence of any suit, action, or proceeding pending against WesBanco or
any of its subsidiaries or the officers or directors of WesBanco or of any
of its subsidiaries in their capacity as such, which, in the reasonable
judgment of Heritage would, if successful, have a materially adverse effect
on the financial condition or operations of WesBanco or any of its
subsidiaries; and
o the absence of any change in control of WesBanco since September 30, 1998.
TERMINATION; EXPENSES
The Merger Agreement may be terminated at any time prior to the closing of
the merger, either before or after the special meeting:
o by mutual consent of Heritage and WesBanco;
o by either Heritage or WesBanco if any of the conditions to such party's
obligations to close under the Merger Agreement have not been met as of the
date the merger is to close and such conditions have not been waived by the
party adversely affected thereby;
o by either Heritage or WesBanco if the merger will violate any
non-appealable final order, decree, or judgment of any court or
governmental body having competent jurisdiction;
o by either Heritage or WesBanco if the merger has not closed by November 10,
1999;
o by either Heritage or WesBanco in the event that the shareholders of
Heritage vote against consummation of the merger; or
o by the Heritage board of directors if, on the Determination Date, both of
of the following conditions are satisfied:
(i) the WesBanco Market Value is less than $26.00, and
(ii) the number obtained by dividing the WesBanco Market Value by $28.50
(the "Heritage Ratio") is less than the number obtained by dividing
the Average Index Value by the Index Value on the date of this
Agreement, and subtracting 0.20 from that quotient (the "Index
Ratio").
If Heritage elects to exercise the termination right described immediately
above, it must give prompt notice to WesBanco. During the two days commencing
with its receipt of the notice, WesBanco will have the option to adjust the
Exchange Ratio to equal the lesser of (A) the quotient established by dividing
(a) the product of $26.00 and the Exchange Ratio as then in effect by (b) the
WesBanco Market Value and (B) the quotient obtained by dividing (a) the product
of the Index Ratio and the Exchange Ratio as then in effect by (b) the Heritage
Ratio. If WesBanco exercises the option, the Merger Agreement will not be
terminated.
The "Average Index Value" is the average of the close of the Nasdaq Bank
Index as published in the Wall Street Journal for the ten consecutive full
Nasdaq trading days ending at the close of trading on the
36
Determination Date. The "Index Value" on a given date means the Nasdaq Bank
Index close for such date.
In the event of any termination of the Merger Agreement by either Heritage
or WesBanco as provided above, all further obligations of Heritage and WesBanco
under the Merger Agreement, except with respect to specified matters, including
without limitation those related to confidentiality and expenses, will terminate
without further liability of the parties.
Whether or not the merger is consummated, all legal and accounting fees,
and other costs and expenses incurred in connection with the Merger Agreement
and the transactions contemplated therein, will be paid by the party incurring
such expenses.
AMENDMENT OR WAIVER
The provisions of the Merger Agreement may be waived at any time by the
party which is, or the shareholders of which are, entitled to the benefit of
those provisions, by action taken by the board of directors of that party. Any
of the terms of the Merger Agreement may be amended or modified in writing
before or after the special meeting at any time prior to the closing of the
merger. The Exchange Ratio and any other material terms of the merger will not
be amended after the special meeting unless the amended terms are resubmitted to
the shareholders of Heritage for approval.
The Merger Agreement may not be modified or terminated except by a written
statement signed by the party against which the enforcement of the modification
or termination is sought. COMPARATIVE RIGHTS OF SHAREHOLDERS
DESCRIPTION OF WESBANCO CAPITAL STOCK
The authorized capital stock of WesBanco consists of 50,000,000 shares of
common stock, par value $2.0833 per share, and 1,000,000 shares of preferred
stock without par value. As of March 2, 1999, there were approximately
20,507,144 shares of WesBanco common stock outstanding, held of record by
approximately 5,577 holders.
As of the date of this proxy statement/prospectus, there were no shares of
preferred stock outstanding. Shares of preferred stock may be issued in one or
more classes or series with such preferences, voting rights, full or limited,
but not to exceed one vote per share, conversion rights and other special rights
as the WesBanco board of directors may fix in the resolution providing for the
issuance of the shares. The issuance of shares of preferred stock could affect
the relative rights of the WesBanco common stock.
Depending upon the exact terms, limitations and relative rights and
preferences, if any, of the shares of preferred stock as determined by the board
of directors at the time of issuance, the holders of preferred stock may be
entitled to a higher dividend rate than that paid on the WesBanco common stock,
a prior claim on funds available for the payment of dividends, a fixed
preferential payment in the event of liquidation and dissolution of WesBanco,
redemption rights, rights to convert their preferred stock into shares of
WesBanco common stock, and voting rights which would tend to dilute the voting
control of WesBanco by the holders of WesBanco common stock.
Subject to the above limitations, in the event of any liquidation,
dissolution or
37
winding up of WesBanco, and subject to the application of state and federal
laws, holders of WesBanco common stock are entitled to share ratably in the
assets available for distribution to stockholders remaining after payment of
WesBanco's obligations.
Each share of WesBanco common stock is entitled to one vote, and to
cumulate votes in the election of directors. No holder of shares of WesBanco
common stock has any preemptive right to subscribe for or purchase any other
securities of WesBanco, and there are no conversion rights or redemption or
sinking fund provisions applicable to WesBanco common stock. However, WesBanco
elects directors on a staggered basis by class with terms of three years. This
provision of its articles of incorporation requires a super majority vote of its
shareholders to change. See "Comparison of Rights of WesBanco and Heritage
Shareholders."
DESCRIPTION OF HERITAGE CAPITAL STOCK
The authorized capital stock of Heritage consists of 300,000 shares of
common stock, par value of $10.00 per share. As of March 2, 1999, there were
approximately 272,032 shares of Heritage common stock outstanding, held of
record by approximately 330 holders.
Each share of Heritage common stock is entitled to one vote. No holder of
shares of Heritage common stock has any preemptive right to subscribe for or
purchase any other securities of Heritage, and there are no conversion rights or
redemption or sinking fund provisions applicable to Heritage common stock.
Dividends may be paid on Heritage common stock at the discretion of the
Heritage board of directors out of any funds legally available therefor. For a
discussion of Heritage's dividend policy and restrictions on the payment of
dividends, see "Market Prices and Dividend Data."
In the event of a dissolution of Heritage, the liquidation of its assets,
or the winding up of its affairs, and subject to the application of state and
federal laws, the holders of Heritage common stock will be entitled to share
ratably in the assets of Heritage available for distributions to its
shareholders remaining after payment of Heritage's obligations. Comparison of
Rights of WesBanco and Heritage Shareholders
The rights of the Heritage shareholders and the WesBanco shareholders are
governed by the respective articles of incorporation and bylaws of each
corporation and West Virginia law. In many respects, the rights of Heritage
shareholders and WesBanco shareholders are similar. For example:
o Holders of common stock of each corporation are entitled to one vote for
each share of common stock and to receive pro rata any assets distributed
to shareholders upon liquidation.
o Neither corporation's shareholders have preemptive rights.
o The shareholders of both corporations have the right under West
Virginia law to dissent from certain corporate transactions and to elect
dissenters' rights.
o The shareholders of both corporations have cumulative voting in the
election of directors.
38
DIFFERENCES IN RIGHTS
There are, however, differences between the rights of Heritage shareholders
and WesBanco shareholders. For example:
o WesBanco's bylaws require that shareholders who intend to nominate
candidates for election to the board of directors must give written notice
of such intent at least 30 days prior to the date of any shareholders
meeting called for such purpose. Heritage's bylaws do not require prior
written notice of shareholder nominations for directors.
o The directors of WesBanco are elected for staggered terms of three years,
with no more than one-third of the directors being elected in any one year.
The directors of Heritage are elected annually, each to serve for a term of
one year.
o WesBanco's articles of incorporation contain certain "super majority
provisions." These provisions provide that the affirmative vote of the
holders of not less than 75% of the outstanding shares of the voting stock
of WesBanco will be required to amend or repeal the articles of
incorporation provision dealing with the classification of the board of
directors into three separate classes, each to serve for staggered terms of
three years. Heritage's articles of incorporation contain no such
provision.
In addition, Heritage, as a banking corporation, is subject to certain
restrictions on dividends under West Virginia law that WesBanco, as a bank
holding company, is not subject to. Section 31A-4-25 of the West Virginia Code
provides that not less than one-tenth part of the net profits of the preceding
half year (in the case of quarterly or semi-annual dividends) or the preceding
two consecutive half-year periods (in the case of annual dividends) must be
carried to a bank's surplus fund until the surplus fund equals the amount of its
capital stock. The prior approval of the West Virginia Commissioner of Banking
is required if the total dividends declared by a state bank in any calendar year
will exceed the bank's net profits for that year combined with its retained net
profits for the preceding two years. Section 31A-4-12 of the West Virginia Code
provides that the outstanding shares of a bank may be assessed if its common
stock becomes impaired by losses or otherwise.
ADVANTAGES OF WESBANCO ANTI-TAKEOVER PROVISIONS
Some of the provisions of WesBanco's articles of incorporation and bylaws
discussed above may constitute defensive measures in that they may discourage or
deter a third party from attempting to acquire control of WesBanco. They are
designed, in part, to discourage and to insulate the corporation against hostile
takeover efforts, which the WesBanco board of directors might determine are not
in the best interests of WesBanco and its shareholders. The provisions are
designed as reasonable precautions to protect against, and to assure the
opportunity to assess and evaluate, such confrontations.
DISADVANTAGES OF WESBANCO ANTI-TAKEOVER PROVISIONS
The classification of the board of directors makes it more difficult to
change directors since they are elected for terms of three years rather than one
year, and at least
39
two annual meetings instead of one are required to change a majority of the
board of directors. Furthermore, due to the smaller number of directors to be
elected at each annual meeting, holders of a minority of the voting stock may be
in a less favorable position to elect directors through the use of cumulative
voting.
The super majority provision makes it more difficult for shareholders to
effect changes in the classification of directors.
The ability of the board of directors to issue additional shares of common
and preferred stock also permits the board of directors to authorize issuances
of stock which may be dilutive and, in the case of preferred stock, which may
affect the substantive rights of shareholders without requiring an additional
shareholder vote.
Collectively, the provisions may be beneficial to management in a hostile
takeover attempt, making it more difficult to effect changes, and at the same
time, adversely affecting shareholders who might wish to participate in such a
takeover attempt.
The foregoing identification of certain specific differences between the
rights of WesBanco and Heritage shareholders is not intended to indicate that
other equally or more significant differences do not exist. This summary is
qualified in its entirety by reference to the West Virginia Corporation Act and
the articles and bylaws of WesBanco and Heritage.
INFORMATION WITH RESPECT TO HERITAGE
HISTORY AND OPERATIONS
Heritage is a West Virginia state-chartered bank which was incorporated on
March 14, 1995, and opened for business on July 15, 1996. The FDIC insures
Heritage's deposits. Heritage engages in general banking business with the
primary market area being Harrison County, West Virginia.
Heritage provides consumers, businesses and governments with a broad range
of banking services, including personal lines of credit, commercial,
agricultural, real estate and installment loans, checking, savings, NOW and
money market accounts, certificates of deposit and individual retirement
accounts. At December 31, 1998, Heritage had total assets of approximately
$33,049,000, deposits of approximately $28,685,000 and shareholders' equity of
approximately $4,219,000.
The FDIC insures all of Heritage's deposit accounts up to the maximum
allowed by law (generally $100,000 per depositor, subject to aggregation rules).
Heritage solicits these accounts from individuals, businesses, associations and
organizations, and governmental authorities.
Heritage also offers a full range of short-to-medium-term commercial and
personal loans. Commercial loans include both secured and unsecured loans for
working capital (including inventory and receivables), business expansion
(including acquisition of real estate and improvements) and purchase of
equipment and machinery. Consumer loans include secured and unsecured loans for
financing automobiles, home improvements, education and personal investments.
Heritage originates and holds or sells into the secondary market fixed and
variable rate mortgage loans and real estate construction and acquisition loans.
COMPETITION
For most of the services that Heritage performs, there is competition from
financial institutions other than commercial banks. For
40
instance, credit unions and issuers of commercial paper and money market funds
actively compete for funds and for various types of loans. In addition, personal
and corporate trust and investment counseling services are offered by insurance
companies, investment counseling firms and other business firms and individuals.
Due to the geographic location of Heritage's primary market area, the
existence of larger financial institutions in Clarksburg, West Virginia,
influences the competition in the market area. In addition, larger regional and
national corporations continue to be increasingly visible in offering a broad
range of financial services to all types of commercial and consumer customers.
The principal competitive factors in the markets for deposits and loans are
interest rates, either paid or charged. The chartering of numerous new banks in
West Virginia has increased competition for Heritage. The 1986 legislation
passed by the West Virginia legislature allowing state-wide branch banking
provides increased opportunities for Heritage, but it also increases competition
for Heritage in its service area.
In addition, in 1994, Congress passed the Riegle-Neal Interstate Banking
and Branching Efficiency Act. Under this act, absent contrary action by a
state's legislature, interstate branch banking may occur after June 1, 1997.
States are permitted to participate to a variety of degrees in interstate
banking or states may elect to "opt out." In 1996, the West Virginia legislature
elected to "opt in" effective May 31, 1997. Accordingly, out-of-state banks may
form de novo banks or may acquire existing branches of West Virginia banks on a
reciprocal basis.
41
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 2, 1999, information with
respect to the securities holdings of all persons known to Heritage to be the
beneficial owners of more than 5% of the outstanding shares of Heritage common
stock. Also set forth in the table is the beneficial ownership of all shares of
Heritage common stock as of such date of all directors and named executive
officers, individually, and all directors and executive officers as a group.
Unless otherwise indicated, the address of each person in the following table is
140 West Main Street, Clarksburg, WV 26302.
Number of Shares
Name and Address Beneficially Owned Percent of Class
- ---------------- ------------------ ----------------
H. Thomas Corrie 52,750 19.39%
950 Kanawha Blvd. East
Charleston, WV 25301
WesBanco, Inc. 32,500 11.95
One Bank Plaza
Wheeling, WV 26003
Thomas J. Hansberry(1)
301 Adams Street
Fairmont, WV 26554 11,295 4.15
David G. Allen 3,900(2) 1.43
David B. Alvarez 4,625(3) 1.70
Samuel J. Cann 1,300 *
Vincent F. D'Annunzio 7,500(4) 6.43
James T. Goots 1,500 *
Gary F. Jarrell 10,400(5) 3.82
Thomas W. Kupec 650 *
Roger J. Lehosit 1,300(6) *
James A. Matish 4,050(7) 1.49
Amo J.S. Paas 3,250(8) 1.19
Angela R. Policano 2,080(9) *
James P. Rogers 2,900(10) 1.07
David H. Rollins 6,750 2.48
Mary K. Romeo 130 *
J. Thomas Small 650 *
David K. Turner 650 *
All executive officers
and directors as a group
(16 persons) 61,635 22.66
- ---------
* Less than 1%
(1) Mr. Hansberry resigned as the President of Heritage on March 1, 1999 and on
the same date became the President and Chief Executive Officer of Farimont.
Mr. Hansberry is not included in "All executive officers and directors as a
group" in this table.
42
(2) Includes 2,600 shares held by a trust of which Mr. Allen is trustee.
(3) Includes 4,000 shares held by Mr. Alvarez as custodian for related minors.
Excludes 1,000 shares held by Mr. Alvarez's wife. Mr. Alvarez disclaims
beneficial ownership of the shares held by his wife.
(4) Includes 9,500 shares owned by Beverage Distributors, Inc., a corporation
in which Mr. D'Annunzio has a substantial interest and of which he is
President. Also includes 6,500 shares held by a profit sharing plan of
which Mr. D'Annunzio is trustee.
(5) Includes 5,500 shares held in Mr. Jarrell's IRA account.
(6) Mr. Lehosit shares voting authority over these shares with his wife.
(7) Includes 150 shares over which Mr. Matish shares voting authority.
(8) Includes 650 shares owned by Mr. Paas' minor children.
(9) Includes 1,950 shares over which Ms. Policano shares voting authority with
her husband. (10) Includes 500 shares owned by Mercer Drug Store, Inc., a
corporation in which Mr. Rogers has a substantial interest and of which he
is President. Also includes 1,500 shares over which Mr. Rogers shares
voting authority with his wife.
43
DIRECTORS AND EXECUTIVE OFFICERS
After the merger, Mr. Hansberry will serve on the board of directors of
WesBanco and Mr. D'Annunzio will serve as a director of Fairmont.
Since March 1, 1999 Mr. Hansberry has been a director and the President and
Chief Executive Officer of Fairmont. Prior to that, he was a member of the
Heritage board of directors and the President and Chief Executive Officer of
Heritage, positions he has held since March 14, 1995. Prior to that, he served
as the Vice President of the West Virginia Bankers Association.
Mr. D'Annunzio has been a director of Heritage since March, 1995. He has
been the President of Beverage Distributors, Inc. since 1987.
COMPENSATION OF MESSRS. HANSBERRY AND D'ANNUNZIO
Directors of Heritage receive no compensation for their service on the
Heritage board of directors . Set forth below is certain summary information
concerning compensation paid to Mr. Hansberry by Heritage.
Year Salary Bonus
---- ------ -----
1998 $72,115 $500
1997 $50,000 $250
1996 $50,000 $500
LEGAL MATTERS
Certain matters will be passed upon for WesBanco by its counsel, Phillips,
Gardill, Kaiser & Altmeyer, 61 Fourteenth Street, Wheeling, West Virginia 26003.
As of March 2, 1998, the members of Phillips, Gardill, Kaiser & Altmeyer
participating in the preparation of this proxy statement/prospectus owned an
aggregate of 48,669 shares of WesBanco common stock. James C. Gardill, a partner
in that firm, serves as Chairman and as a director of WesBanco, and as a
director of its subsidiary, WesBanco Bank Wheeling.
EXPERTS
The consolidated financial statements of WesBanco for the years ended
December 31, 1998 and 1997 and for each of the three years in the periods ended
December 31, 1998, 1997, and 1996, which are included in WesBanco's Annual
Report on Form 10-K for the year ended December 31, 1998, have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report thereon,
included in such Form 10-K and incorporated herein by reference. Such
consolidated financial statements as to the years 1997 and 1996 are based in
part on the report of Harman, Thompson, Mallory & Ice, A.C., independent
auditors. Such consolidated financial statements are incorporated herein by
reference in reliance upon such reports, given upon the authority of such firms
as experts in auditing and accounting.
The financial statements of Heritage as of December 31, 1998 and 1997, and
for each of the three years in the periods ended December 31, 1998, 1997 and
1996, included in this proxy statement/prospectus, have been so included in
reliance on the report of Arnett & Foster P.L.L.C., independent public
accountants, appearing elsewhere herein, and upon the authority of said firm as
experts in auditing and accounting.
44
INDEX TO FINANCIAL STATEMENTS FOR HERITAGE
PAGE
----
F-2
Consolidated Balance Sheets as of December 31, 1998 and 1997 F-3
Consolidated Statements of Operations for the years ended
December 31, 1998, 1997 and 1996 F-4
Consolidated Statements of Comprehensive Income for the years
ended F-5
December 31, 1998, 1997 and 1996
Consolidated Statements of Shareholders' Equity for the years
ended F-6
December 31, 1998, 1997 and 1996
Consolidated Statements of Cash Flows for the years ended
December 31, 1998, 1997 and 1996 F-8
Notes to Consolidated Financial Statements F-10
Management's Discussion and Analysis of Financial Condition
and Results of Operation F-23
F-1
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
The Heritage Bank of
Harrison County, Inc. and Subsidiary
Clarksburg, West Virginia
We have audited the accompanying consolidated balance sheets of The Heritage
Bank of Harrison County, Inc. and Subsidiary, as of December 31, 1998 and 1997,
and the related consolidated statements of operations, comprehensive income,
shareholders' equity and cash flows for each of the three years ended December
31, 1998. These consolidated financial statements are the responsibility of the
Bank's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall consolidated
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of The Heritage Bank of
Harrison County, Inc. and Subsidiary, as of December 31, 1998 and 1997, and the
results of their operations and cash flows for each of the three years ended
December 31, 1998, in conformity with generally accepted accounting principles.
ARNETT & FOSTER, P.L.L.C.
Charleston, West Virginia
January 21, 1999
F-2
THE HERITAGE BANK OF HARRISON COUNTY, INC.
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
ASSETS 1998 1997
----------- -----------
Cash and due from banks $ 969,325 $ 696,360
Federal funds sold 1,585,858 2,234,918
Securities available for sale 2,005,469 1,464,515
Securities held to maturity (estimated fair value
1998 $0; 1997 $1,000,000) 1,000,000
Loans, less allowance for loan losses of $227,747
and $186,556, respectively 25,326,921 16,826,162
Bank premises and equipment, net 2,465,892 2,525,880
Other assets 695,304 628,305
----------- -----------
TOTAL ASSETS $33,048,769 $25,376,140
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Deposits:
Non interest bearing $ 2,915,205 $ 2,981,081
Interest bearing 25,769,531 18,835,265
----------- -----------
Total deposits 28,684,736 21,816,346
Other liabilities 144,827 106,652
TOTAL LIABILITIES 28,829,563 21,922,998
----------- -----------
Commitments and Contingencies
SHAREHOLDERS' EQUITY
Common Stock, $10 par value, 300,000
shares authorized, Issued and
outstanding 1998 272,032; 1997 231,607 2,720,320 2,316,070
Capital surplus 2,094,227 1,692,070
Retained earnings (deficit), including deficit
accumulated during the development stage of
($96,088) in 1996 (598,266) (552,783)
Accumulated other comprehensive income 2,925 (2,215)
-------------------------
TOTAL SHAREHOLDERS' EQUITY 4,219,206 3,453,142
-------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $33,048,769 $25,376,140
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-3
THE HERITAGE BANK OF HARRISON COUNTY, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
1998 1997 1996
- -------------------------------------------------- ---------- -----------
INTEREST INCOME:
Interest and fees on loans $ 1,778,990 $ 967,013 $ 82,904
Interest on Federal funds sold 135,447 144,745 32,791
Interest on taxable securities 183,821 163,457 91,482
Interest earnings during
development stage 55,368
----------- ---------- -----------
TOTAL INTEREST INCOME 2,098,258 1,275,215 262,545
----------- ---------- -----------
INTEREST EXPENSE:
Interest on deposits 1,155,425 642,031 86,313
Interest on other borrowings 151,973 94,496
----------- ---------- -----------
TOTAL INTEREST EXPENSE 1,155,425 794,004 180,809
----------- ---------- -----------
NET INTEREST INCOME 942,833 481,211 81,736
Provision for loan losses 88,792 147,721 45,205
----------- ---------- -----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 854,041 333,490 36,531
----------- ---------- -----------
OTHER INCOME
Service fee income 96,334 67,063 831
Gain (loss) on sale of property 121,145
Trust income 100,065 47,204
Gain on sale of available for
sale securities 937
Other, net 7,588 8,210 7,136
----------- ---------- -----------
204,924 243,622 7,967
- -------------------------------------------------- ---------- -----------
OTHER EXPENSES:
Organization and preopening expenses 82,602
Salaries and employee benefits 665,966 503,074 203,987
Net occupancy expense 91,382 134,703 45,794
Insurance 14,845 7,546 17,335
Data processing 97,934 69,540 28,188
Stationery and supplies 30,591 44,352 49,354
Other taxes 29,867 22,411 18,331
Other 199,423 195,637 70,310
--------- ---------- -----------
1,130,008 977,263 515,901
- -------------------------------------------------- ----------- -----------
INCOME (LOSS) BEFORE INCOME TAX
EXPENSE (BENEFIT) (71,043) (400,151) (471,403)
Income tax expense (benefit) (25,560) (189,673) (197,952)
--------- ----------- -----------
NET INCOME (LOSS) $(45,483) $ (210,478) $ (273,451)
========= =========== ===========
Basic earnings (loss)
per common share $ (.17) $ (.91) $ (1.18)
========= =========== ===========
Average common shares outstanding 265,295 231,607 231,607
========= ========== ===========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-4
THE HERITAGE BANK OF HARRISON COUNTY, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
1998 1997 1996
---- ---- ----
NET INCOME (LOSS) $ (45,483) $ (210,478) $ (273,451)
----------- ------------ ------------
OTHER COMPREHENSIVE INCOME:
Unrealized gains (losses)
on securities:
Gain (loss) arising
during the period 5,140 (2,215) -
Other Comprehensive Income 5,140 (2,215) -
----------- ------------ ------------
COMPREHENSIVE INCOME $ (40,343) $ (212,693) $ (273,451)
=========== ============ ============
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-5
THE HERITAGE BANK OF HARRISON COUNTY, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
Accumulated
Retained Other Total
Common Common Capital Earnings Comprehensive Shareholders'
Shares Stock Surplus (Deficit) Income Equity
------ ------ ------- ---------- ------------- -------------
Balance, December 31,
1995 $(68,854) $ (68,854)
Net income loss
during
development (27,234) (27,234)
stage
Issuance of
common stock
for cash during 189,557 $1,895,570 $1,895,570 3,791,140
June, 1996 at
inception
Issuance of 10,000
shares of
common stock
during June,
1996, to
organizers for 10,800 108,000 108,000 216,000
subscriptions
received during
the Bank's
development
stage
Issuance of
common stock to
reflect the 31,250 312,500 (311,500) 1,000
acquisition of
HBHC
Corporation
Net income (loss)
after opening for (246,217) (246,217)
------- ---------- ---------- --------- ------------- -----------
business on July
15, 1996
Balance, December
31, 1996 231,607 2,316,070 1,692,070 (342,405) 3,665,835
Net income (loss) (210,478) (210,478)
Change in net
unrealized gain
(loss) (2,215) (2,215)
------- ---------- ---------- ---------- ------------- -----------
on securities
Balance, December 31,
1997 231,607 2,316,070 1,692,070 (552,783) (2,215) 3,453,142
Net income (loss) (45,483) (45,483)
Issuance of
common stock
F-6
for cash during
February, 1998 40,425 404,250 402,157 806,407
Change in net
unrealized gain
(loss) on
securities 5,140 5,140
------- ---------- ---------- ---------- ------------- -----------
Balance, December 31, 272,032 $2,720,320 $2,094,227 $(598,266) $2,925 $4,219,206
1998 ======= ========== ========== ========== ============= ===========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-7
THE HERITAGE BANK OF HARRISON COUNTY, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
1998 1997 1996
- --------------------------------------------------------------------- ------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (45,483) $ (210,478) $ (273,451)
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation 107,977 105,145 40,857
Provision for loan losses 88,792 147,721 45,205
Deferred income tax expense (benefit) (25,560) (189,673) (197,952)
Amortization of organization costs 6,947 6,877 2,864
Amortization of premiums on securities 188 2,144
Interest income on discount security
obligations (31,795) (64,684) (69,688)
Common sale of securities available for sale (937)
Gain (loss) on sale of fixed assets (121,188)
Decrease (increase) in other assets (10,824) (39,998) (19,131)
Decrease (increase) in accrued interest
receivable (40,988) (68,892) (43,209)
Increase (decrease) in other liabilities 38,175 36,161 70,491
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 86,492 (396,865) (444,014)
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Principal collected on (loans made to)
customers, net (8,589,551) (11,368,411) (5,650,677)
Purchases of bank premises and equipment (47,989) (142,138) (1,416,881)
Purchase of securities held to maturity (2,437,716) (4,418,532)
Purchase of securities available for sale (5,000,781) (1,463,422)
Proceeds from the sale of fixed assets 545,014
(Increase) decrease in Federal funds
sold, net 649,060 (1,334,918) (900,000)
Proceeds from maturities of securities
held to maturity 1,000,000 5,483,693 500,000
Proceeds for maturities and calls of
securities available for sale 3,000,937
Proceeds from the sale of securities
available for sale 1,500,000
------------ ------------ ------------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES (7,488,324) (10,717,898) (11,886,090)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in non interest
bearing deposits (65,876) 2,109,175 871,906
Net increase (decrease) in NOW accounts
and savings accounts 4,864,439 5,744,505 3,001,616
Proceeds from the sales of (payments
for matured) time deposits, net 2,069,827 5,135,080 4,954,064
Proceeds from longterm borrowings 872,238
Repayments of longterm borrowings (2,447,475) (2,525)
Proceeds from the sale of common stock 806,407 3,791,140
Proceeds from advances from organizers 50,000
------------ ------------ ------------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 7,674,797 10,541,285 13,538,439
Increase (decrease) in cash and due
from banks 272,965 (573,478) 1,208,335
Cash and due from banks:
Beginning 696,360 1,269,838 61,503
------------ ------------ ------------
Ending $ 969,325 $ 696,360 $ 1,269,838
============ ============ ============
(CONTINUED)
F-8
THE HERITAGE BANK OF HARRISON COUNTY, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
1998 1997 1996
- --------------------------------------------------------------------- ------------- -------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash payments for:
Interest on deposits $ 1,154,731 $ 615,192 $ 36,657
============ ============ ============
Longterm borrowings $ $ 151,973 $ 94,496
============ ============ ============
SUPPLEMENTAL DISCLOSURES OF NONCASH
INVESTING AND FINANCING ACTIVITIES
Issuance of 8,300 shares of common
stock to organizers for
subscriptions received during
the Bank's development stage $ $ $ 166,000
============ ============ ============
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-9
THE HERITAGE BANK OF HARRISON COUNTY, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS: The Heritage Bank of Harrison County, Inc. is a state
chartered community bank operating from one banking location in Clarksburg, West
Virginia. The bank provides retail and commercial loans and deposit and trust
services to individuals and small businesses. The Bank's wholly owned
subsidiary, HBHC Corporation is the lessor of the banking facility.
BASIS OF FINANCIAL STATEMENT PRESENTATION: The accounting and reporting policies
of The Heritage Bank of Harrison County, Inc. and its subsidiary conform to
generally accepted accounting principles and to general practices within the
banking industry.
PRINCIPLES OF CONSOLIDATION: The accompanying consolidated financial statements
include the accounts of The Heritage Bank of Harrison County, Inc., and its
subsidiary, HBHC Corporation. All significant intercompany accounts and
transactions have been eliminated in consolidation.
During August 1997, the Bank completed the acquisition of HBHC Corporation by
exchanging 31,250 shares of its common stock for all of the 1,000 shares of
common stock issued and outstanding of HBHC Corporation. The transaction was
accounted for as a pooling of interests. The historical financial statements of
the Bank, as of and for the year ended December 31, 1996, have been restated to
include the consolidated results of operations, financial position and cash
flows of HBHC Corporation. (Note 13)
ORGANIZATION AND DEVELOPMENT OF THE BANK: The Bank was incorporated on March 14,
1995, and undertook an offering to sell up to 300,000 shares of its $10 par
value stock for $20 per share. On June 1, 1996, after completion of the stock
offering and obtaining the requisite regulatory approvals, the Bank was
capitalized with the $4,007,140 proceeds from the stock offering. The cost of
issuance of the Bank's common stock was capitalized as part of organization
costs due to its insignificance. The results of operations of the newly
organized Bank for the period January 1, 1996 to December 31, 1996, are
reflected in the accompanying financial statements. The Bank was considered a
development stage entity for the period from March 14, 1995, date of inception,
to July 15, 1996.
USE OF ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
PRESENTATION OF CASH FLOWS: For purposes of reporting cash flows, cash and cash
equivalents includes cash on hand and due from banks (including cash items in
process of clearing). Cash flows from demand deposits, NOW accounts, savings
accounts and Federal funds sold are reported net since their original maturities
are less than three months. Cash flows from loans and certificates of deposits
and other time deposits are reported net.
SECURITIES: Debt and equity securities are classified as "held to maturity",
"available for sale" or "trading" according to management's intent. The
appropriate classification is determined at the time of purchase of each
security and reevaluated at each reporting date.
SECURITIES HELD TO MATURITY: Debt securities for which the Bank has the
positive intent and ability to hold to maturity are reported at cost and
adjusted for amortization of premiums and accretion of discounts.
F-10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SECURITIES AVAILABLE FOR SALE: Securities not classified as "held to
maturity" or as "trading" are classified as "available for sale". Securities
classified as "available for sale" are those securities the Bank intends to
hold for an indefinite period of time, but not necessarily to maturity.
"Available for sale" securities are reported at fair value, net of unrealized
gains or losses, which are adjusted for applicable income taxes and reported
as a separate component of shareholders' equity.
TRADING SECURITIES: There are no securities classified as "trading" in the
accompanying financial statements.
Realized gains and losses on sales of securities are recognized on the
specific identification method. Amortization of premiums and accretion of
discounts is computed using methods which approximate the interest method of
accounting.
LOANS AND ALLOWANCE FOR LOAN LOSSES: Loans are stated at the amount of unpaid
principal, reduced by an allowance for loan losses. Interest income on loans is
accrued and credited to operations using methods that approximate a level yield
on principal amounts outstanding.
The allowance for loan losses is maintained at a level considered adequate to
provide for losses that can be reasonably anticipated. The allowance is
increased by provisions charged to operating expense and reduced by net
chargeoffs. The Bank makes continuous credit reviews of the loan portfolio and
considers current economic conditions, historical loan loss experience of
similar banks, review of specific problem loans and other factors in determining
the adequacy of the allowance for loan losses. Loans are charged against the
allowance for loan losses when management believes that collectibility is
unlikely. While management uses the best information available to make its
evaluation, future adjustments to the allowance may be necessary if there are
significant changes in conditions.
A loan is impaired when, based on current information and events, it is probable
that the Bank will be unable to collect all amounts due in accordance with the
contractual terms of the specific loan agreement. Impaired loans, other than
certain large groups of smaller balance, homogeneous loans that are collectively
evaluated for impairment, are required to be reported at the present value of
expected future cash flows discounted using the loan's original effective
interest rate or, alternatively, at the loan's observable market price, or at
the fair value of the loan's collateral if the loan is collateral dependent. The
method selected to measure impairment is made on a loan by loan basis, unless
foreclosure is deemed to be probable, in which case the fair value of the
collateral method is used.
Loans are placed on nonaccrual status when management believes that the
borrower's financial condition, after giving consideration to economic and
business conditions and collection efforts, is such that collection of interest
is doubtful. Interest is accrued daily on impaired loans unless the loan is
placed on nonaccrual status. Impaired loans are placed on nonaccrual status when
the payments of principal and interest are in default for a period of 90 days,
unless the loan is both well secured and in the process of collection. Interest
on nonaccrual loans is recognized primarily using the cost recovery method.
Certain loan fees and direct loan costs are recognized as income or expense when
incurred. Statement Number 91 of the Financial Accounting Standards board
requires that such fees and costs be deferred and amortized as adjustments of
the related loan's yield over the contractual life of the loan. The Bank's
method of recognition of loan fees and direct loan costs produce results which
are not materially different from those that would have been recognized had
Statement Number 91 been adopted.
F-11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BANK PREMISES AND EQUIPMENT: Bank premises and equipment are stated at cost less
accumulated depreciation. Depreciation is computed primarily by the straightline
method for Bank premises and equipment over the estimated useful lives of the
assets. Repairs and maintenance expenditures are charged to operating expenses
as incurred. Major improvements and additions to premises and equipment are
capitalized.
ORGANIZATION COSTS: Organization costs, which are insignificant, are being
amortized on a straightline basis over a period of 60 months beginning in July
1996.
TRUST ASSETS: Assets of the trust department, other than trust cash on deposit
at the Bank, are not included in these financial statements because they are not
assets of the Bank.
INCOME TAXES: The provision for income taxes includes Federal and state income
taxes and is based on pretax income reported in the financial statements,
adjusted for transactions that may never enter into the computation of income
taxes payable. Deferred tax assets and liabilities are determined based on
differences between the financial statement and tax bases of assets and
liabilities that will result in taxable or deductible amounts in the future
based on enacted tax laws and rates applicable to the periods in which the
differences are expected to affect taxable income. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and rates on the
date of enactment. Valuation allowances are established, when deemed necessary,
to reduce deferred tax assets to the amount expected to be realized.
BASIC EARNINGS PER SHARE: Earnings per common share are computed based upon the
weighted average shares outstanding since the opening of the Bank on July 15,
1996. The weighted average number of shares outstanding was 265,295, 231,607 and
231,607 for the years ended December 31, 1998, 1997 and 1996, respectively.
COMPREHENSIVE INCOME: During the year ended December 31, 1998, the Bank adopted
Financial Accounting Standards board Statement No. 130, Reporting Comprehensive
Income. The Statement requires that financial statements presented for earlier
periods be reclassified. The Statement allows the Bank to omit certain data
regarding reclassification adjustments for earlier periods. The Bank has elected
to omit data regarding reclassification adjustments for the years ended December
31, 1997 and 1996, as permitted by the Statement.
RECLASSIFICATIONS: Certain accounts in the financial statements for 1997 and
1996, as previously reported, have been reclassified to conform to current year
classifications.
EMERGING ACCOUNTING STANDARDS: In June 1998, the Financial Accounting Standards
board issued Statement No. 133, Accounting for Derivative Instruments and
Hedging Activities, which is required to be adopted in years beginning after
June 15, 1999. The Statement permits early adoption as of the beginning of any
fiscal quarter after its issuance. The Bank expects to adopt the new Statement
effective December 31, 1999. The Statement will require the Bank to recognize
all derivatives on the balance sheet at fair value. Derivatives that are hedges
must be adjusted to fair value through income. If the derivative is a hedge,
depending on the nature of the hedge, changes in the fair value of derivatives
will either be offset against the change in fair value of the hedged assets,
liabilities, or firm commitments through earnings or recognized in other
comprehensive income until the hedged item is recognized in earnings. The
ineffective portion of a derivative's change in fair value will be immediately
recognized in earnings. Because the Bank has not used derivatives in the past,
management does not anticipate that the adoption of the new Statement will have
a significant effect on the Bank's earnings or financial position.
F-12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. CASH CONCENTRATIONS
At December 31, 1997, the Bank had a concentration of risk totaling $1,707,918
in its cash balances on deposit with a correspondent bank. These cash balances
are comprised of balances in due from correspondence accounts and Federal funds
sold and are generally unsecured by the correspondent bank.
The Bank maintains compensating balances with the Federal Reserve Bank and
WesBanco BankWheeling in the amounts of $25,000 and $10,000, respectively, as of
December 31, 1998.
NOTE 3. SECURITIES
The amortized cost, unrealized gains and losses and estimated fair values of
securities at December 31, 1998 and 1997, are summarized as follows:
CARRYING
VALUE
UNREALIZED (ESTIMATED
AMORTIZED ------------------------- FAIR
COST GAINS LOSSES VALUE)
- ------------------------------------------------- ----------- ----------- -----------
1998
AVAILABLE FOR SALE
U.S. Government agencies
and corporations $ 2,000,594 $ 7,375 $ (2,500) $ 2,005,469
=========== =========== =========== ===========
1997
AVAILABLE FOR SALE
U.S. Government agencies
and corporations $ 1,468,206 $ $ (3,691) $ 1,464,515
=========== =========== =========== ===========
CARRYING
VALUE UNREALIZED ESTIMATED
(AMORTIZED ------------------------- FAIR
COST) GAINS LOSSES VALUE
----------- ----------- ----------- -----------
1998
HELD TO MATURITY
U.S. Government agencies
and corporations $ $ $ $
=========== =========== =========== ===========
1997
HELD TO MATURITY
U.S. Government agencies
and corporations $ 1,000,000 $ $ $ 1,000,000
=========== =========== =========== ===========
F-13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The maturities, amortized cost and estimated fair values of securities at
December 31, 1998, are summarized as follows:
HELD TO MATURITY AVAILABLE FOR SALE
---------------------- ---------------------
CARRYING
CARRYING VALUE
VALUE ESTIMATED (ESTIMATED
(AMORTIZED FAIR AMORTIZED FAIR
COST) VALUE COST VALUE)
---------- ----------- ----------- -----------
Due within one year $ $ $ $
Due after one but within five years 2,000,594 2,005,469
Due after five but within ten years
Due after ten years
---------- ----------- ----------- -----------
$ $ $ 2,000,594 $ 2,005,469
========== =========== =========== ===========
Maturities presented in the above schedule are based on the contractual maturity
date of the securities.
The proceeds from sales, calls and maturities of securities, including principal
payments received on mortgage backed obligations and the related gross gains and
losses realized, are as follows:
PROCEEDS FROM GROSS
----------------------- ---------------------
FOR THE YEARS ENDED CALLS AND PRINCIPAL GAINS LOSSES
DECEMBER 31, SALES MATURITIES REALIZED REALIZED
------------------------------ ---------- ---------- --------- ---------
1998
Securities held to maturity $ $1,000,000 $ $
Securities available for
sale 3,000,937 1,500,000 937
---------- ---------- --------- ---------
$3,000,937 $2,500,000 $ 937 $
========== ========== ========= =========
1997
Securities held to maturity $ $5,483,693 $ $
Securities available for
sale
--------- ---------- --------- ---------
$ $5,483,693 $ $
========= ========== ========= =========
At December 31, 1998 and 1997, securities carried at $1,667,208 and $1,099,368,
respectively, with estimated fair values of $1,667,388 and $1,098,115 were
pledged to secure public deposits and for other purposes required or permitted
by law.
NOTE 4. LOANS
Loans are summarized as follows: 1998 1997
------------ ------------
Commercial, financial and agriculture $ 14,884,157 $ 7,940,251
Real estate 4,338,077 3,835,361
Consumer installment 6,330,228 5,218,971
Other 2,206 18,135
------------ ------------
TOTAL LOANS 25,554,668 17,012,718
Less allowance for loan losses (227,747) (186,556)
------------ ------------
LOANS, NET $ 25,326,921 $ 16,826,162
============ ============
F-14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Scheduled maturities on loans are as follows at December 31, 1998:
DUE AFTER
DUE WITHIN 1 YEAR BUT DUE AFTER
1 YEAR WITHIN 5 YEARS 5 YEARS TOTAL
- ------------------------------------------- -------------- ------------ -----------
Commercial, financial
and agriculture $ 2,951,604 $ 4,948,883 $ 6,983,670 $14,884,157
Real estate 600,968 872,747 2,864,362 4,338,077
Consumer installment 2,228,084 4,102,144 6,330,228
Other 2,206 2,206
----------- ----------- ----------- -----------
TOTAL $ 5,782,862 $ 9,923,774 $ 9,848,032 $25,554,668
=========== =========== =========== ===========
LOANS DUE AFTER 1 YEAR WITH:
Variable rates $ 5,913,659
Fixed rates 13,858,147
-----------
TOTAL $19,771,806
===========
The majority of the real estate loan portfolio consists of loans with 20 year
amortizations with 5 year adjustable rate features. Interest rates on floating
rate loans specifically reprice every 5 years based on indices which are set by
sources independent of the Bank and are subject to interest rate floors, caps
and ceilings which may limit changes in the interest rate over the life of the
loan.
LOANS TO RELATED PARTIES: The Bank has had, and may be expected to have in the
future, banking transactions in the ordinary course of business with directors,
principal officers, their immediate families and affiliated companies in which
they are principal stockholders (commonly referred to as related parties), all
of which have been in the opinion of management are on the same terms, interest
rates and collateral, as those prevailing at the time for comparable
transactions with others.
The following presents the activity with respect to related party loans during
the years ended December 31, 1998 and 1997:
1998 1997
----------- ----------
BALANCE BEGINNING $ 3,583,435 $1,195,405
Additions 3,886,125 2,627,383
Amounts collected (1,451,178) (239,353)
----------- ----------
BALANCE, ENDING $ 6,018,382 $3,583,435
=========== ==========
At December 31, 1998 and 1997, loans outstanding to directors, officers and
employees totaled $6,053,992 and $3,636,632, respectively.
CONCENTRATION OF CREDIT RISK: The Bank grants installment, commercial and
residential loans to customers primarily in Harrison County, West Virginia and
adjacent counties. Although the Bank strives to maintain a diversified loan
portfolio, exposure to credit losses can be adversely impacted by downturns in
local economic and employment conditions.
In addition to the geographic concentration noted above, the Bank has a
concentration of indirect car loans, which at December 31, 1998 and 1997,
approximated $3,558,250 or 14.0% and $3,448,508 or 20.5% of total loans,
respectively.
F-15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5. ALLOWANCE FOR LOAN LOSSES
An analysis of the allowance for loan losses for the years ended December 31,
1998, 1997 and 1996, is as follows:
1998 1997 1996
--------- ----------------------
BALANCE, BEGINNING OF PERIOD $ 186,556 $ 45,205 $
--------- --------- ---------
LOSSES:
Commercial, financial and agriculture 35,000
Real estate
Consumer installment 12,601 6,370
Other
--------- --------- ---------
TOTAL 47,601 6,370
--------- --------- ---------
RECOVERIES:
Commercial, financial and agriculture
Real estate
Consumer installment
Other
--------- --------- ---------
TOTAL
--------- --------- ---------
Net recoveries (losses) (47,601) (6,370)
--------- --------- ---------
Provision for loan losses 88,792 147,721 45,205
--------- --------- ---------
BALANCE, END OF PERIOD $ 227,747 $ 186,556 $ 45,205
========= ========= =========
The Bank's total recorded investment in impaired loans at December 31, 1997,
approximated $138,148, for which there was no required allowance for loan losses
as determined in accordance with SFAS Nos. 114 and 118. The Bank's average
investment in impaired loans approximated $135,000 for the year ended December
31, 1997. The impaired loans at December 31, 1997, were collateral dependent,
and accordingly, the fair value of the loan's collateral was used to measure the
impairment.
For purposes of SFAS Nos. 114 and 118, when evaluating impairment, the Bank
considers groups of smaller balance, homogeneous loans to include: mortgage
loans secured by residential property, other than those which significantly
exceed the bank's typical residential mortgage loan amount; installment loans to
individuals, exclusive of those loans in excess of $50,000; and "other" loans,
which include small balance, overdraft protection lines and installment loans to
individuals.
For the year ended December 31, 1997, the Bank recognized approximately $7,300
in interest income on the impaired loans. Using a cash basis method of
accounting, the Bank would have recognized approximately $4,000 of interest
income on the loans for the year ended December 31, 1997.
The Bank did not have any loans classified as impaired during the years ended
December 31, 1998 and 1996.
F-16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6. BANK PREMISES AND EQUIPMENT
The major categories of Bank premises and equipment and accumulated depreciation
at December 31, 1998 and 1997, are summarized as follows:
1998 1997
---------- -----------
Land $ 751,409 $ 751,409
Building and improvements 1,556,264 1,543,911
Furniture and equipment 411,663 376,027
---------- -----------
2,719,336 2,671,347
Less accumulated depreciation (253,444) (145,467)
---------- -----------
BANK PREMISES AND EQUIPMENT $2,465,892 $ 2,525,880
========== ===========
Depreciation expense for the years ended December 31, 1998, 1997 and 1996,
totaled $107,977, $105,145 and $40,857, respectively.
HBHC, Inc., a wholly owned subsidiary of the Heritage Bank of Harrison County,
Inc., exists for the sole purpose of owning and operating the building premises.
The rental revenue generated from leasing space to nonaffiliated tenants was
$101,065, $75,032 and $15,333 for the years ending December 31, 1998, 1997 and
1996, respectively.
NOTE 7. DEPOSITS
The following is a summary of interest bearing deposits by type as of December
31, 1998 and 1997:
1998 1997
----------- -----------
NOW and Super NOW accounts $ 416,814 $ 543,402
Money market accounts 11,902,197 6,913,152
Savings accounts 1,316,685 1,314,703
Certificates of deposit 12,133,835 10,064,008
----------- -----------
Total $25,769,531 $18,835,265
=========== ===========
Time certificates of deposit in denominations of $100,000 or more totaled
$3,675,165 and $3,817,054 at December 31, 1998 and 1997, respectively. Interest
paid on time certificates in denominations of $100,000 or more totaled $233,726,
$169,631 and $20,691 for the years ended December 31, 1998, 1997 and 1996,
respectively.
The following is a summary of the maturity distribution of certificates of
deposits in amounts of $100,000 or more as of December 31, 1998:
AMOUNT PERCENT
--------- -------
Three months or less $588,460 16.0
Three through six months 427,328 11.6
Six through twelve months 1,454,179 39.6
Over twelve months 1,205,198 32.8
---------- -------
Total $3,675,165 100.0%
========== =======
F-17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A summary of the maturities on time deposits is as follows:
Year Ending
DECEMBER 31, AMOUNT
------------ ----------
1999 $ 8,801,240
2000 2,011,619
2001 417,566
2002 817,987
2003 85,423
-----------
Total $12,133,835
===========
The Bank is the holder of deposits from related parties totaling $2,566,643 or
8.9%, and $965,050 or 4.4%, of total deposits at December 31, 1998 and 1997,
respectively, of which approximately $959,482 and $413,372 are from two
individuals and their related interests, respectively.
NOTE 8. EMPLOYEE BENEFITS
The Bank has established a salary deferral plan under Section 401(k) of the
Internal Revenue Code which covers substantially all employees meeting minimum
age and length of service requirements during 1998. The plan allows participants
to contribute up to 15% of their annual compensation. Such deferrals accumulate
on a tax deferred basis until the employee withdraws the funds. The Bank, at its
option, may match a portion of the employees' contribution. For 1998, the Bank
did not match any employee contributions.
NOTE 9. FINANCIAL INSTRUMENTS WITH OFFBALANCE SHEET RISK
The Bank is a party to financial instruments with offbalance sheet risk in the
normal course of business to meet the financing needs of its customers. These
financial instruments include commitments to extend credit and standby letters
of credit. Those instruments involve to varying degrees, elements of credit and
interest rate risk in excess of the amount recognized in the statement of
financial position. The contract amounts of these instruments reflect the extent
of involvement the Bank has in particular cases of financial instruments. At
December 31, 1998 and 1997, the Bank's financial instruments with offbalance
sheet risk are as follows:
CURRENT AMOUNT
FINANCIAL INSTRUMENTS WHOSE CONTRACT ------------------
AMOUNTS REPRESENT CREDIT RISK 1998 1997
-------------------------------------- ---------- ------------
Unused open lines of credit and other $ 208,740 $ 299,391
Letters of credit and performance bonds 122,960 512,960
Unused construction loans 665,761 367,024
---------- ------------
TOTAL $ 997,461 $ 1,179,375
========== ============
The Bank's exposure to credit loss in the event of nonperformance by the other
party to the financial instrument for commitments to extend credit and standby
letters of credit is represented by the contractual amount of those instruments.
The Bank uses the same credit policies in making commitments and conditional
obligations as it does for onbalance sheet instruments.
Standby letters of credit are conditional commitments issued by the Bank to
guarantee the performance of a customer to a third party. Those guarantees are
primarily issued to support public and private borrowing arrangements. The
credit risk involved in issuing letters of credit is essentially the same as
that involved in extending loans to customers. These letters of credit are
generally uncollateralized.
F-18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10. COMMITMENTS AND CONTINGENCIES
COMMITMENTS UNDER SERVICING AGREEMENT: The Bank has contracted with a thirdparty
service center to perform substantially all electronic data processing services
for the Bank. Pursuant to this agreement, certain payments may become due if the
agreement is terminated before July 2001. As of December 31, 1998, the
contingent liability to the Bank's service center is estimated to be $179,040,
plus the actual costs incurred in connection with the termination.
"YEAR 2000 COMPLIANT": A team was assembled to study, test and remedy Year 2000
issues ("Issue") because the Bank, as well as some of its suppliers, customers
and service providers are heavily dependent on computers in the conduct of
business activities. As a result, a remediation plan was developed. The
thirdparty costs associated with this issue were not material and were expensed
or capitalized, as appropriate during 1998. To complete the execution of the
plan, additional testing is scheduled for the first half of 1999. The
anticipated costs of such are not expected to be significant. Based on the
actions taken to resolve the Bank's Year 2000 issue, management believes it will
be Year 2000 compliant to meet the needs of its customers. However, there may be
unforeseen external or internal issues which could impact the Bank's status.
NOTE 11. INCOME TAXES
The components of applicable income tax expense (benefit) for the years ended
December 31, 1998, 1997 and 1996, is as follows:
1998 1997 1996
--------- --------- ---------
CURRENT:
Federal $ $ $
State
--------- --------- ---------
--------- --------- ---------
DEFERRED:
Federal (22,452) (137,274) (137,059)
State (3,108) (52,399) (60,893)
--------- --------- ---------
TOTAL $ (25,560) $(189,673) $(197,952)
========= ========= =========
A reconciliation between the amount of reported income tax expense (benefit) and
the amount computed by multiplying the statutory income tax rate by book pretax
income for the years ended December 31, 1998, 1997 and 1996, is as follows:
1998 1997 1996
------------------- -------------------- -------------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
------ ------- ------ ------- ------ -------
Computed tax at
applicable
statutory rate $ (24,155) (34.0) $(136,051) (34.0) $(160,253) (34.0)
Increase (decrease)
in taxes resulting
from:
State deferred
tax benefits (3,108) (4.4) (52,399) (13.1) (60,893) (12.9)
Preopening
income 24,620 5.2
Other, net 1,703 2.4 (1,223) (.3) (1,426) (.3)
--------- ------ --------- ----- --------- -----
$ (25,560) (36.0) $(189,673) (47.4) $(197,952) (42.0)
========= ====== ========= ===== ========= =====
F-19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Deferred income taxes reflect the impact of "temporary differences" between
amounts of assets and liabilities for financial reporting purposes and such
amounts as measured for tax purposes. Deferred tax assets and liabilities
represent the future tax return consequences of temporary differences, which
will either be taxable or deductible when the related assets and liabilities are
recovered or settled.
The tax effects of temporary differences which create the Bank's deferred tax
assets and liabilities as of December 31, 1998 and 1997, are as follows:
1998 1997
--------- ---------
DEFERRED TAX ASSETS:
Startup costs deferred for
tax purposes $ 46,456 $ 65,038
Federal and state net operating loss
carryforward 379,104 352,575
Allowance for loan losses 44,969 28,287
Depreciation 1,818 1,765
Charitable contribution carryforward 2,303 1,424
Unrealized loss on securities 1,476
--------- ---------
474,650 450,565
--------- ---------
DEFERRED TAX LIABILITY:
Net unrealized gain on securities (1,950)
--------- ---------
(1,950)
--------- ---------
NET DEFERRED TAX ASSET $ 472,700 $ 450,565
========= =========
As of December 31, 1998 and 1997, the Bank had approximately $818,000 and
$745,000 in Federal income tax losses and $1,122,000 and $1,032,000 in State
income tax losses available as carryforwards to reduce taxable income in future
periods. These net operating loss carryforwards expire in the years 2011 through
2013.
NOTE 12. RESTRICTIONS ON DIVIDENDS AND CAPITAL
COMMON STOCK OFFERING: In February 1998, the Bank completed an offering of
shares of $10 par value common stock to the existing shareholders of the Bank
for $20 per share for the purpose of raising additional capital. On February 27,
1998, the Bank issued 40,425 shares of $10 par value common stock for $806,407,
net of $2,093 issuance costs.
RESTRICTIONS ON DIVIDENDS: Dividends paid by the Bank are subject to
restrictions by banking regulations. The most restrictive provision requires
approval by the regulatory agency if dividends declared in any year exceed the
year's net income, as defined, plus the retained net profits of the two
preceding years. Since the Bank has a net retained deficit, there are no net
retained profits available for distribution.
REGULATORY CAPITAL REQUIREMENTS: The Bank is subject to various regulatory
capital requirements administered by the Federal banking agencies. Under capital
adequacy guidelines and the regulatory framework for prompt corrective action,
the Bank must meet specific capital guidelines that involve quantitative
measures of the Bank's assets, liabilities and certain offbalance sheet items as
calculated under regulatory accounting practices. The Bank's capital amounts and
classification are also subject to qualitative judgments by the regulators about
components, risk weightings and other factors.
F-20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the table
below) of total and Tier I capital (as defined in the regulations) to
riskweighted assets (as defined) and of Tier I capital (as defined) to average
assets (as defined). Management believes, as of December 31, 1998, that the Bank
meets all capital adequacy requirements to which it is subject.
The most recent notification from the Federal Deposit Insurance Corporation
categorized the Bank as well capitalized under the regulatory framework for
prompt correction action. To be categorized as well capitalized, the Bank must
maintain minimum total riskbased, Tier I riskbased and Tier I leverage ratios as
set forth in the following table. There are no conditions or events since its
last financial reporting that management believes have changed the institution's
category.
The Bank's actual capital amounts and ratios are also presented in the following
table (in thousands).
TO BE WELL CAPITALIZED
FOR CAPITAL UNDER PROMPT CORRECTIVE
ACTUAL ADEQUACY PURPOSES ACTION PROVISIONS
---------------- ----------------- -----------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
------ ----- ------ ----- ------ -----
AS OF DECEMBER
31, 1998:
Total Capital $3,972 14.7% $2,169 8.0% $2,711 10.0%
(to RiskWeighted
Assets)
Tier I Capital $3,745 13.8% $1,085 4.0% $1,627 6.0%
(to RiskWeighted
Assets)
Tier I Capital $3,745 12.7% $1,177 4.0% $1,495 5.0%
(to Average Assets)
AS OF DECEMBER
31, 1997:
Total Capital $3,181 16.6% $1,539 8.0% $1,924 10.0%
(to RiskWeighted
Assets)
Tier I Capital $3,004 15.6% $ 770 4.0% $1,154 6.0%
(to RiskWeighted
Assets)
Tier I Capital $3,004 16.5% $ 729 4.0% $ 911 5.0%
(to Average Assets)
NOTE 13. PROPOSED MERGER
On November 10, 1998, the board of directors entered into an Agreement and Plan
of Merger with WesBanco, Inc. The Agreement calls for the shareholders of The
Heritage Bank of Harrison County, Inc. to receive shares of WesBanco, Inc. at a
predetermined exchange ratio dependent upon the market value of WesBanco, Inc.
common stock prior to the proposed merger. The proposed merger is subject to
regulatory and shareholder approval.
Upon consummation of the proposed merger, which is expected at or near the end
of the first quarter of 1999, it is anticipated The Heritage Bank of Harrison
County, Inc. will merge into and become part of WesBanco Bank Fairmont, Inc., a
wholly owned subsidiary of WesBanco, Inc.
F-21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14. BUSINESS COMBINATION
During August, 1997, the Bank completed an acquisition with HBHC Corporation, by
exchanging 31,250 shares of common stock for all of the 1,000 shares of common
stock outstanding of HBHC Corporation. HBHC Corporation is the company that was
formed by an independent third party to purchase and develop the land known as
Heritage Square. HBHC Corporation constructed the building from which the Bank
is currently operating. Prior to the acquisition, HBHC had an operating lease
with the Bank, whereby the Bank had agreed to lease the entire building for a
period of ten years.
The acquisition constituted a taxfree reorganization and has been accounted for
as a pooling of interests under the Accounting Principles board Opinion No. 16.
Accordingly, all prior period financial statements presented have been restated
to include the consolidated results of operations, financial position and cash
flows of HBHC Corporation for all periods presented. The effect of the
intercompany rental payments on net income have been eliminated in the
consolidated results of operations for all periods presented. Immediately prior
to the acquisition, HBHC Corporation had total assets of $2,261,059, total
liabilities of $2,271,342 and an accumulated deficit of $10,283.
F-22
THE HERITAGE BANK OF HARRISON COUNTY, INC.
MANAGEMENT DISCUSSION AND ANALYSIS
GENERAL
Heritage is a community bank located in Clarksburg, West Virginia. The
Bank was incorporated March 14, 1995 and began operations July 15, 1996. The
Bank was considered in a developmental stage from March 14, 1995 to July 15,
1996. Since opening, Heritage has experienced a steady and increasing demand for
its products and services. The competitive environment in Harrison County
mirrors that of much of the banking industry with a continued rise in both bank
competition as well as non bank competition for customers.
In August of 1997, the Bank acquired HBHC Corporation through an exchange
of Heritage stock for that of HBHC. HBHC was the owner of the building which
Heritage occupies as their banking facility. The transaction was accounted for
as a pooling of interests. The information included herein has been restated to
reflect that transaction. In November, 1998, the Bank's board of directors
entered into an agreement whereby Heritage would be acquired by WesBanco through
the exchange of WesBanco stock for that of Heritage. The proposed merger is
subject to regulatory and shareholder approval. If the appropriate approvals are
received, the merger would be anticipated to be completed at or near the end of
the first quarter of 1999.
This discussion and analysis should be read in conjunction with Heritage's
financial statements and the notes thereto at December 31, 1998 and 1997 and for
the years ended December 31, 1998, 1997 and 1996. Due to the start up of the
Bank at July 15, 1996, many of the comparisons of data for 1996 to subsequent
years are limited in value and this analysis should be read with that in mind.
Any forward looking statements included in this analysis are subject to risks
and uncertainties including, but not limited to economic, competitive,
governmental and technological factors which could affect the Bank's operations,
market, products and services, etc.
F-23
RESULTS OF OPERATIONS
The following table reflects the financial highlights of the Bank's
performance since it's startup in July of 1996:
TABLE I - SELECTED FINANCIAL DATA
($ in thousands)
1998 1997 1996*
---- ---- -----
Year End Balances
Assets $ 33,049 $ 25,376 $ 15,011
Loans 25,555 17,012 5,651
Deposits 28,685 21,816 8,828
Long Term Debt 0 0 2,447
Shareholders Equity 4,219 3,453 3,666
Income for the Year
Interest Income $ 2,098 $ 1,275 $ 263
Interest Expense 1,155 794 181
Net Interest Income 943 481 82
Provision for Loan Losses 89 148 45
Other Income 205 244 8
Other Expense 1,130 977 516
Income Taxes Expense (benefit) (26) (190) (198)
Net Income (loss) from operations $ (45) $ (210) $ (273)
PER SHARE DATA ON COMMON STOCK
Net Income (loss) from operations ($0.17) ($0.91) ($1.18)
Cash Dividends declared $ 0.00 $ 0.00 $ 0.00
Shareholders Equity $ 15.51 $ 14.91 $ 15.83
* Heritage commenced banking operations on July15, 1996
The following paragraphs provide an analysis of the changes in the
financial performance for 1996 through 1998. All data has been restated to
reflect the pooling of interest acquisition that occurred in August of 1997.
PERFORMANCE SUMMARY 1998 VERSUS 1997
The Bank experienced a loss for the year ended December 31, 1998 of
$45,483. While still in a loss position, the 1998 performance improved
substantially over the 1997 loss of $210,478. The earnings per share loss was
$.17 for 1998, down from the 1997 loss per share of $0.91. The loss improvement
was driven by several components. Net interest Income for 1998 improved by
$461,622 (95%) over the 1997 levels. Provision for loan losses expense was
F-24
$88,792 for 1998 versus $147,721 for 1997 for a decrease of $58,929. Other
Income decreased $38,698 from the 1997 level of $243,622 which included a one
time gain on sale of property of $121,145. Other Expense increased by $152,745
for 1998 to $1,130,008 versus $977,263 for 1997. Please see the following
sections for more detailed analysis of these major components.
PERFORMANCE SUMMARY 1997 VERSUS 1996
The Bank was only considered to be in operation from July 15, 1996 through
December 31, 1996. The remainder of the year (January 1 1996 to July 15, 1996)
it was considered to be a developmental stage entity. Accordingly, most of the
variances for this period are the result of the 1996 data involving only a
partial year. The Bank had a loss of $210, 478 for 1997 which was down from the
loss of $273,451 for 1996. Net Interest Income improved to $481,211 for 1997
from the 1996 level of $81,736. Provision for loan losses was $147,721 for 1997,
an increase of $102,516 from the 1996 provision expense of $45,205. Other Income
improved to $243,622 for 1997 versus $7,967 for 1996. Other Expense increased by
$461,362 to a level of $977,263 for 1997 versus the 1996 level of $515,901.
Please see the following sections for more detailed analysis of these major
components.
NET INTEREST MARGIN
The two following tables reflect the major components of the net interest
margin. The first schedule details the average balances for each of the three
years the Bank has been in operation (the Bank began operations on July 15,
1996) along with the average yields on those balances. The second schedule
(rate/volume) reflects on a summarized basis the net interest margin for each of
the three years the Bank has been in operation as well as a breakdown of the
various components of the margin changes between the various years. The changes
are broken down to reflect the portions that are attributable to rate changes
and those attributable to volume changes. Since the Bank had no tax exempt
investments, there are no adjustments to reflect tax equivalency. Loan fees are
not included in the calculations of yield. Interest on non accrual loans is not
recognized until payments are received. Any such interest included in the
following schedules would be immaterial.
F-25
TABLE II - YIELD ANALYSIS
($ in thousands)
1998 1997 1996
- -------------------------------------------------------------- --------------------------------- ----------------------------
AVERAGE YIELD/ AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INTEREST RATE BALANCE INTEREST RATE BALANCE INTEREST RATE
Assets
Loans:
Commercial, Financial,
and Agriculture $ 10,180 $ 879 8.63% $ 4,811 $ 425 8.83% $ 599 $ 55 9.18%
Real Estate Mortgage 4,202 353 8.40% 2,290 193 8.43% 302 25 8.28%
Installment 6,040 536 8.87% 3,689 343 9.30% 204 0 0.00%
Other 7 0 0.00% 3 0.00% 1 0.00%
-------- -------- --------- -------- -------- --------- -------- -------- -----
Total Loans 20,429 1,768 8.65% 10,793 961 8.90% 1,106 80 7.23%
-------- -------- --------- -------- -------- --------- -------- -------- -----
Investments:
Taxable 3,099 184 5.94% 2,836 163 5.75% 1,662 146 8.78%
Tax Exempt 0 0 0.00% 0 0 0.00% 0 0 0.00%
-------- -------- -------- -------- -------- --------- -------- --------
Total Investments 3,099 184 5.94% 2,836 163 5.75% 1,662 146 8.78%
-------- -------- -------- -------- -------- --------- -------- -------- -----
Federal Funds Sold 2,551 135 5.29% 2,669 145 5.43% 629 33 5.25%
-------- -------- --------- -------- -------- --------- -------- -------- -----
Total Earning Assets 26,079 $ 2,087 8.00% 16,298 $ 1,269 7.79% 3,397 $ 259 7.62%
Cash and Due From Banks 843 710 283
Premises and Equipment 2,506 2,622 1,169
Allowance for Loan Losses (198) (100) (4)
Other Assets 677 744 86
-------- -------- --------
Total Assets $ 29,907 $ 20,274 $ 4,931
======== ======== =========
Liabilities and
Shareholders Equity
Interest Bearing Deposits:
Demand $ 9,904 $ 450 4.54% $ 4,530 $ 198 4.37% $ 585 $ 20 3.42%
Savings 1,300 35 2.69% 1,058 32 3.02% 208 6 2.88%
Time 11,447 670 5.85% 7,120 412 5.79% 1,071 60 5.60%
-------- -------- --------- -------- -------- --------- -------- -------- -----
Total Interest
Bearing Deposits 22,651 1,155 5.10% 12,708 642 5.05% 1,864 86 4.61%
-------- -------- --------- -------- -------- --------- -------- -------- -----
Borrowings 0 0 0.00% 1,600 152 9.50% 994 94 9.46%
-------- -------- --------- -------- -------- --------- -------- -------- -----
F-26
Total Interest 22,651 $ 1,155 5.10% 14,308 $ 794 5.55% 2,858 $ 180 6.30%
Bearing Liabilities
Non-interest Bearing
Deposits 2,960 2,440 335
Other Liabilities 164 80 30
Equity 4,132 3,446 1,708
-------- -------- --------
Total Liabilities and
Equity $ 29,907 $ 20,274 $ 4,931
======== ======== =========
Net Interest Margin $ 26,079 $ 932 3.57% $ 16,298 $ 475 2.91% $ 3,397 $ 79 2.33%
======== ======== ========= ======== ======== ========= ========= ======== =====
F-27
TABLE III - RATE VOLUME ANALYSIS
($ in thousands)
1998 VERSUS 1997 1997 VERSUS 1996
98 VS 97------INTEREST CHANGE DUE TO------ 97 VS 96------INTEREST CHANGE DUE TO-----
RATE VOLUME ANALYSIS 1998 1997 1996 CHANGE RATE VOLUME RATE/VOL TOTAL CHANGE RATE VOLUME RATE/
VOL TOTAL
Loans:
Commercial $ 879 $ 425 $ 55 $ 454 $ (10) $ 474 $ (11) $ 454 $ 370 $ (2) $ 387 $ (15) $ 370
Real Estate Mortgage 353 193 25 160 (1) 161 (1) 160 168 0 165 3 168
Installment 536 343 0 193 (16) 219 (10) 193 343 19 0 324 343
Other 0 0 0 0 0 0 0 0 0 0 0 0 0
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
1,768 961 80 807 (26) 854 (21) 807 881 17 551 312 881
Total Loans
Investments:
Taxable 184 163 146 21 5 15 0 21 17 (50) 103 (36) 17
Tax Exempt 0 0 0 0 0 0 0 0 0 0 0 0 0
Total Investments 184 163 146 21 5 15 0 21 17 (50) 103 (36) 17
Federal Funds Sold 135 145 33 (10) (4) (6) 0 (10) 112 1 107 4 112
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total Earning $2,087 $1,269 $ 259 $ 818 $ (24) $ 863 $ (21) $ 818 $1,010 $ (32) $ 761 $ 280 $1,010
Assets
Interest Bearing
Deposits:
Demand $ 450 $ 198 $ 20 $ 252 $ 8 $ 235 $ 9 $ 252 $ 178 $ 6 $ 135 $ 38 $ 178
Savings 35 32 6 3 (4) 7 (1) 3 26 0 25 1 26
Time 670 412 60 258 5 250 3 258 352 2 339 11 352
Total Interest
Bearing Deposits 1,155 642 86 513 9 493 11 513 556 8 498 50 556
Borrowings 0 152 94 (152) (152) (152) 152 (152) 58 0 57 0 58
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total Interest Bearing
Bearing Liabilities $1,155 $ 794 $ 180 $ 361 $ (143) $ 341 $ 163 $ 361 $ 614 $ 8 $ 555 $ 50 $ 614
Net Interest Income $ 932 $ 475 $ 79 $ 457 $ 119 $ 522 $ (184) $ 457 $ 396 $ (40) $ 206 $ 230 $ 397
====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ======
F-28
As the schedules indicate, the increases to net interest margin for both 1998
versus 1997 and 1997 versus 1996 were driven primarily by volume. In both
instances increases in loan and investment balances outstanding and the related
margin income therefrom, substantially exceeded the increase to deposit balances
outstanding and the related interest expense created to result in increases to
margin. While the volume growth percentages are significant for both 1998 over
1997 and 1997 over 1996, this growth is typical of a startup community bank and
therefore growth at the levels experienced in the years presented may not occur
in future years. Further discussions of the various major net interest
components follows:
INVESTMENTS
As shown in the table below, the Bank's investments are in United States
Government agencies. They all mature in the category of from one to five years
and had an average yield of 5.94% as of December 31, 1998.
TABLE IV - INVESTMENT PORTFOLIO
($ in thousands)
STATES AND
U.S. POLITICAL
TREASURY AGENCIES SUBDIVISIONS OTHER TOTAL
December 31, 1998 Book Balance $ 2,005 $2,005
December 31, 1997 Book Balance $ 2,464 $2,464
December 31, 1996 Book Balance $ 1,002 $ 2,986 $3,988
------------Agencies-----------
December 31, 1998 Balance Yield
Maturity:
Within one year
After one year through five years $ 2,005 5.94%
After five years through ten years
After ten years
Total Book Value $ 2,005 5.94%
Note: There were no tax exempt investments and therefore no tax equivalency adjustments.
F-29
LOANS AND CREDIT RISK
The following table reflects information regarding the Bank's loan
balances by type, by maturity, rate structure, and past dues and non performing
loans.
TABLE V - MATURITIES AND RATE SENSITIVITY
($ in thousands)
DECEMBER 31,1998 DECEMBER 31, 1997 DECEMBER 31, 1996
END OF PERIOD END OF PERIOD END OF PERIOD
BALANCE BALANCE BALANCE
Commercial, Financial and Other $ 14,885 $ 7,940 $ 3,104
Real Estate - Mortgage 4,338 3,835 1,456
Installment Loans 6,330 5,219 1,088
Other 2 18 3
-------- -------- -------
Total Loans $ 25,555 $ 17,012 $ 5,651
======== ======== =======
December 31, 1998
Maturity Schedule
One Year or Less $ 5,783
After one year to five years 9,924
After five years 9,848
-------
Total $25,555
=======
Loans Due after one year with:
Floating Rates $ 5,914
Predetermined Rates 13,858
-------
Total $19,772
=======
DECEMBER 31, 1998 DECEMBER 31, 1997 DECEMBER 31, 1996
Risk Elements
Loans Contractually Past Due over
90 days and still accruing $ 0 $ 0 $ 0
Non Accrual Loans 59 135 0
Restructured Loans 0 0 0
------- -------- -------
Total Non performing Loans $ 59 $ 135 $ 0
======= ======== =======
As the schedule indicates, loans outstanding have increased significantly
since banking operations began in July, 1996 (up 50.2% for 1998 versus 1997 and
up 301% for 1997 versus 1996). Again these increases are felt to be normal in a
startup community bank such as this and future growth rates may not achieve
these levels. At December 31, 1998, there were no concentrations of loans
exceeding 10% of total loans. Over 60% of the portfolio will mature in five
years or less making it imperative to continue volume growths for the Bank's
overall continued growth. $13.8 million or 70% of the loans that mature past one
year are fixed rate in nature and therefore are not subject to repricing in the
event of overall rate changes. The current levels of both past dues and non
performing loans are at acceptable levels to management. Non performing loans
consist of loans on non accrual and loans renegotiated to earn interest at a
reduced rate. Loans on non accrual are those which either (a) contain elements
of principal or interest loss potential in which the principal or interest is
ninety days past due; or (b) are now current but management has serious doubts
as to the ability of the borrower to comply with the present loan repayment
terms. Any unpaid interest amounts at risk and previously accrued on these loans
are reversed from income and thereafter interest is recognized only to the
extent payments are received or
F-30
the loan has otherwise been rehabilitated. The amount of interest included in
1998 derived from non accrual loans was considered immaterial and if all such
loans were current, the amount of interest that would have been added to income
is also considered immaterial.
DEPOSITS
The Bank's deposits outstanding continue to show significant increases.
1998 deposits increased by $6,868,390 (23.9%) to a level of $28,684,736. At the
same time, 1997 deposit levels of $21,816,346 were an increase of 147.1% over
1996 year end deposits of $8,827,586. This significant growth in deposits is
considered normal in this startup situation. However those growth levels may not
be attained moving forward. Of the deposits outstanding at December 31, 1998,
$3,675,165 related to deposits of $100,000 or more. These deposits are
considered to be more volatile than other deposits and more subject to leaving
the bank upon maturity. A schedule of the periods of maturity of these accounts
is as follows:
TABLE VI - TIME DEPOSITS OVER $100,000
($ in thousands)
Maturity of Time Deposits $100,000
And over at December 31, 1998:
3 months or less $ 589
Over 3 through 6 months 427
Over 6 through 12 months 1,454
Over 12 months 1,205
-------
Total Time deposits $100,000 and over $ 3,675
=======
SHORT TERM BORROWINGS
The Bank had no short-term borrowings during the periods reported.
SUMMARY OF LOAN LOSS EXPERIENCE
Management continually monitors charge-off history, current charge-off
trends, economic trends for the geographic area and specific industries, and
credit knowledge on specific credits in arriving at the level of loan loss
reserve deemed adequate to cover anticipated loan losses in the portfolio. A
summary of the reserve activity for 1998, 1997 and 1996 is as follows:
TABLE VII - SUMMARY OF LOAN LOSS EXPERIENCE
($ in thousands)
FOR THE YEAR ENDED FOR THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997 DECEMBER 31, 1996
Reserve Activity
Balance at beginning $187 $ 45 $ 0
of period
Chargeoffs:
Commercial, Financial and Other 35
Real Estate Mortgage
Installment 13 6
Other
---- ---- ----
Total Chargeoffs 48 6 0
---- ---- ----
F-31
Recoveries:
Commercial, Financial and Other
Real Estate Mortgage
Installment
Other
---- ---- ----
Total Recoveries 0 0 0
---- ---- ----
Net Chargeoffs 48 6 0
---- ---- ----
Provision Expense 89 148 45
Balance at end of period $228 $187 $ 45
==== ==== ====
Ratio of Net Chargeoffs to
Average Loans Outstanding 0.23% 0.06% 0.00%
==== ==== ====
RESERVE ALLOCATION DECEMBER 31, 1998 DECEMBER 31, 1997 DECEMBER 31, 1996
PERCENT OF PERCENT OF PERCENT OF
ALLOWANCE TOTAL ALLOWANCE TOTAL ALLOWANCE TOTAL
Commercial $124 54.38% $ 64 34.22% $ 25 55.55%
Real Estate Mortgage 16 7.02% 19 10.16% 12 26.67%
Installment 88 38.60% 104 55.62% 8 17.78%
Other 0 0.00% 0 0.00% 0 0.00%
---- ------ ---- ------ ---- ------
Total $228 100.00% $187 100.00% $ 45 100.00%
==== ====== ==== ====== ==== ======
During 1996 the Bank placed an overall reserve level, based upon industry
averages, on the loans outstanding due to the startup nature of the entity.
There were no charge-offs. In 1997, as the Bank grew in loans and had the
opportunity to better assess the risks, the reserve levels were adjusted based
upon the risks judged to be inherent in the portfolio at that time. In 1998 the
Bank experienced some charge-offs and continued to assess the overall risks
within the portfolio based upon identified and unidentified risks felt to be
inherent within the portfolio. The 1998 provision was slightly lower than the
1997 levels as loan growth leveled, and was not as significant as in 1997. As
indicated on the schedule, about one half of the reserve is allocated toward
commercial loans which based upon management's reviews have a greater potential
for losses on the current loans outstanding.
NON INTEREST INCOME
Non interest income reflected a decrease for the year ended December 31,
1998 versus 1997 from $243,622 down to $204,924. This decrease was the result of
gains on the sale of property adjoining the banking facility of $121,145 in
1997. Without such gains, non interest income would have shown an increase of
$82,477. This increase was primarily the result of $52,861 of new trust fees
generated and $29,271 of additional service fee income. 1997 showed a
significant increase in non interest income as well, rising from $7,967 in 1996
to the $243,622 in 1997. The primary drivers of this increase was the additional
trust income of $47,204 and the gains on property sales as discussed above.
NON INTEREST EXPENSE
Non interest expense increased in each of the three years the Bank has
been operating. The 1998 non interest expense totaled $1,130,008 and was up
$152,745 over the 1997 level of $977,263. This increase was
F-32
driven primarily by increased payroll and data processing costs which more than
offset decreases to some of the other areas of expense. 1997 expenses of
$977,263 were up significantly from the $515,901 of expenses for 1996. This of
course was primarily due to 1996 having only a part year of operation versus a
full year in 1997.
INCOME TAXES
Due to the net losses the Bank has incurred since startup, the Bank
experienced tax benefits of $25,560 for 1998 compared to a benefit of $189,673
for 1997 and $197,952 of benefit for 1996. The reason for the year to year
decrease is of course the reduction in pretax loss each year. At December 31,
1998, the Bank had $818,000 of federal income tax losses and $1,122,000 of state
income tax losses available to use as carry forwards to reduce taxable income in
the future. These benefits will only occur if the Bank creates positive taxable
income to apply these carryforwards to. The net operating loss carryforwards
will expire in the years 2011 through 2013 if not used.
YEAR 2000
Historically, certain computerized systems have had two digits rather than
four to define the applicable year, which could result in the year 2000 being
recognized by those systems as the year 1900. This could result in failures or
miscalculations and is generally referred to as the year 2000 issue.
The Bank is conducting ongoing comprehensive reviews of its computer
systems which could be affected by the "Year 2000 issue", is making inquiries of
outside vendors and servicers, and is developing contingency and remediation
plans if any problems should arise. Based upon its ongoing reviews and
representations from its vendors, manufacturers and servicers, management
believes that both it's computer hardware and software are either currently
compliant or will be compliant before the year 2000. Management will continue to
evaluate and test its systems and software until the project is completed. The
anticipated costs relating to the year 2000 compliance should not be
significant. While the Bank believes the tests and procedures in place should
minimize the year 2000 risks and enable it to meet the need of its customers in
the year 2000, the Bank cannot quantify the potential impact of any unforeseen
year 2000 failures that might occur either internally or from external third
parties.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity is defined as the Bank's ability to generate the amount needed
by the enterprise to meet it's cash requirements. The Bank constantly monitors
it's ability to meet it's anticipated liquidity needs over the next twelve
months including in such analysis the dividend requirements (no dividends being
paid currently) and limitations as well as other operational funding needs.
Based upon these reviews as well as current trends, management feels the
availability of funds should more than outweigh the anticipated needs for
liquidity. Should the Bank's cash needs exceed it's cash generated, it has the
ability to borrow funds from the federal government and other financial
institutions to get the funds needed very quickly. Details of both the sources
and uses of cash are outlined in the statements of cash flows contained in the
financial statements.
The Bank also monitors the interest rate risk that the Bank has from
interest rate changes. The Bank uses analysis of maturity and rate sensitivity
to ensure that the bank does not develop mismatches in repricing of loans and
deposits that are at levels that would be unacceptable to the Bank. As shown in
table VIII below, the Bank currently has a cumulative negative gap in the one to
three year range of 8.6 million. This means that 8.6 million more deposits are
maturing or repricing during that period than assets. Accordingly, should
overall
F-33
interest rates rise during that period, the Bank's net interest margin could be
negatively affected. Alternatively, should rates fall during that same period,
the Bank's net interest margin could be positively affected. In the three to
five year range and in total, the Bank has a positive gap, which means that if
rates rise during that period net interest margin could be positively affected
and similarly, if rates should fall, the net interest margin could be negatively
affected.
TABLE VIII - ASSET AND LIABILITY MATURITY AND RATE SENSITIVITY
DECEMBER 31, 1998
($ in thousands)
THREE 3-12 1 TO 3 3 TO 5 OVER 5
MONTHS OR MONTHS YEARS YEARS YEARS TOTAL
LESS
Loans:
Commercial $ 1,713 $ 1,426 $ 6,656 $ 4,827 $ 263 $ 14,885
Real Estate 443 61 1,896 1,553 385 4,338
Consumer and other 620 131 1,217 3,580 784 6,332
-------- -------- -------- -------- -------- --------
Total Loans 2,776 1,618 9,769 9,960 1,432 25,555
Investments 500 1,505 2,005
Federal Funds sold and other 1,586 1,586
Total Earning Assets $ 4,362 $ 1,618 $ 10,269 $ 11,465 $ 1,432 $ 29,146
======== ======== ======== ======== ======== ========
Deposits:
Savings $ 1,317 $ 12,319 $ 0 $ 0 $ 13,636
CD's 1,642 7,160 $ 2,429 $ 903 $ 0 $ 12,134
-------- -------- -------- -------- -------- --------
Total Deposits 2,959 19,479 2,429 903 0 25,770
Borrowings 0 0 0 0 0 0
Total Interest Bearing
Liabilities $ 2,959 $ 19,479 $ 2,429 $ 903 $ 0 $ 25,770
======== ======== ======== ======== ======== ========
Interest Sensitivity Gap $ 1,403 $(17,861) $ 7,840 $ 10,562 $ 1,432 $ 3,376
======== ======== ======== ======== ======== ========
Cumulative Gap $ 1,403 $(16,458) $ (8,618) $ 1,944 $ 3,376
======== ======== ======== ======== ========
Cumulative Gap as a percent of
Earning Assets 32.17% -1017.47% -83.93% 16.96% 235.76%
======== ======== ======== ======== ========
F-34
While the Bank's performance has remained in a loss position through 1998
which was it's third year, as the chart below shows, its performance has
improved since it began operations in July of 1996.
TABLE IX - RETURNS ON EQUITY AND ASSETS
($ in thousands)
1998 1997 1996
------- ------- -------
Return on Assets -0.15% -1.04% -5.54%
Return on Equity -1.09% -6.09% -15.98%
Dividend Payout ratio 0.00% 0.00% 0.00%
Equity to Assets Percent 13.82% 17.00% 34.64%
As the chart shows, the Bank continues to have negative ROA and ROE, although
the negative percentages have improved in each of the two years since the Bank
began operation. This improvement has come as the result of the net loss being
reduced in each year primarily by improvements to net interest margin through
asset growth as discussed elsewhere in this analysis. Due to the losses since
the Bank began operations and therefore no retained earnings, the Bank, due to
regulations, could not pay any dividends in any of the three years presented.
Even with the negative though improving income performance, the Banks equity to
assets ratio remains strong at 13.82 percent at the end of 1998. The equity to
assets ratio has dropped each year due to the large growth in assets in each
year since 1996 as would be expected in a startup entity. Further, for
regulatory purposes, the Bank has a risk weighted capital to assets ratio of
12.7% which qualifies it as a well capitalized Bank at December 31, 1998. The
Bank had no material outstanding capital expenditure commitments at December 31,
1998. During the three years the Bank has been in operation, the expenditures
for premises and equipment totaled $47,181 in 1998, $142,138 in 1997 and
$1,416,881 in 1996. The 1998 level of expenditures are more normal to the
ongoing operation. The 1997 and in particular 1996 levels were affected by the
initial startup expenditures of the Bank.
F-35
Appendix I
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (hereinafter called "Agreement"), made
and entered into as of the ____ day of November, 1998, by and between WESBANCO,
INC., a West Virginia corporation, with its principal place of business located
at Bank Plaza, Wheeling, West Virginia (hereinafter called "Wesbanco"), party of
the first part, and THE HERITAGE BANK OF HARRISON COUNTY, INC., a West Virginia
banking corporation, with its principal place of business located at 140 West
Main Street, P.O. Box 1110, Clarksburg, West Virginia, 26302-11 10 (hereinafter
called "Heritage") party of the second part, and WESBANCO BANK FAIRMONT, INC.
(hereinafter called "Fairmont"), a West Virginia banking corporation and a
wholly-owned subsidiary of Wesbanco, party of the third part.
WHEREAS, Wesbanco is a West Virginia corporation duly organized and validly
existing under the laws of the State of West Virginia, and is a registered bank
holding company under the Bank Holding Company Act of 1956, as amended, and
WHEREAS, Heritage is a West Virginia banking corporation duly organized and
validly existing under the laws of the State of West Virginia, and WHEREAS,
Fairmont is a West Virginia banking corporation duly organized and validly
existing under the laws of the State of West Virginia which corporation shall be
a party to the merger contemplated by this Agreement, and
WHEREAS, it is anticipated that the Board of Directors of Wesbanco will, by
a majority vote
of all the members thereof, approve this Agreement and authorize the execution
hereof in counterparts; and it is anticipated that the Board of Directors of
Fairmont will, by a majority vote of all of the members and shareholders
thereof, approve this Agreement and authorize the execution hereof in
counterparts, and
WHEREAS, the Board of Directors of Heritage, by a majority vote of all of
the members thereof, has approved this Agreement and has determined that,
subject to all of the conditions of this Agreement, including but not limited to
the requirement that certain tax rulings be obtained, it would be in the best
interests of Heritage and its shareholders for Heritage to enter into this
Agreement to become affiliated with Wesbanco, and
WHEREAS, it is proposed that Wesbanco, Heritage and Fairmont enter into
this Agreement whereby Heritage will merge with and into Fairmont and the
outstanding shares of common stock of Heritage ("Heritage Common Stock") will be
converted into shares of common stock of Wesbanco ("Wesbanco Common Stock"),
NOW, THEREFORE, for and in consideration of the mutual promises and
covenants hereinafter set forth, and in accordance with the provisions of
applicable law, and intending to be legally bound hereby, the parties hereto do
hereby agree as follows:
SECTION 1
FAIRMONT
1.1 EXECUTION OF AGREEMENT. Wesbanco shall cause Fairmont to take all
necessary and proper action to ratify, approve, adopt and execute the Agreement
and to undertake the performance of all of the terms and conditions of the
Agreement to be performed by Fairmont.
1.2 VOTING OF FAIRMONT SHARES.Wesbanco, as sole shareholder of Fairmont,
shall vote all of the shares of Fairmont in favor of the Merger.
SECTION 2
THE MERGER
2.1 THE MERGER. At the Effective Time (as defined in Section 2.5), subject
to the provisions of this Agreement, Heritage shall merge with Fairmont (the
"Merger"), under the charter of Fairmont. Fairmont shall be the surviving
corporation (hereinafter sometimes called the "Surviving Corporation").
2.2 EFFECT OF MERGER. At the Effective Time, the corporate existence of
Fairmont, with all of its purposes, powers and objects, and all of its rights,
assets, liabilities and obligations, shall continue unaffected and unimpaired by
the Merger, and Fairmont as the Surviving Corporation shall continue to be
governed by the laws of the State of West Virginia. Fairmont as the Surviving
Corporation shall also-succeed to all of the rights, assets, liabilities and
obligations of Heritage in accordance with the West Virginia Corporation Act
("WVCA"). Upon the Effective Date, (as defined in Section 11.5 hereof), the
separate existence and corporate organization of Heritage shall cease.
2.3 CLOSING. Wesbanco, Heritage and Fairmont will jointly request the
Secretary of State of West Virginia to issue a Certificate of Merger on the date
of the closing described in Section 11.4 hereof (the "Closing" and the "Closing
Date").
2.4 HERITAGE'S OBLIGATIONS. Heritage shall at any time, or from time to
time, as and when requested by the Surviving Corporation, or by its successors
and assigns, execute and deliver, or cause to be executed and delivered in its
name by its last acting officers, or by the corresponding of ricers of the
Surviving Corporation, all such conveyances, assignments, transfers, deeds, or
other instruments, and shall take or cause to be taken such further or other
action as the Surviving Corporation, its successors or assigns, may deem
necessary or desirable
in order to evidence the transfer, vesting or devolution of any property, right,
privilege or franchise or to vest or perfect in or confirm to the Surviving
Corporation, its successors and assigns, title to and possession of all the
property, rights, privileges, powers, immunities, franchises and interests
referred to in this Agreement and otherwise to carry out the intent and purposes
hereof, all at the expense of the Surviving Corporation.
2.5 ARTICLES OF MERGER. Subject to the terms and conditions herein
provided, Articles of Merger, incorporating this Agreement, shall be executed to
comply with the applicable filing requirements of the WVCA at the Closing and on
the Closing Date. On the Closing Date, such Articles of Merger shall be filed
with the Secretary of State of the State of West Virginia, who will duly issue a
Certificate of Merger. The Surviving Corporation shall record said Certificate
of Merger in the offices of the Clerks of the County Commission of Harrison and
Marion Counties. The Merger shall become effective on the date (the "Effective
Date") and at the time (which time is hereinafter called the "Effective Time")
when such Certificate of Merger is issued by the Secretary of State.
SECTION 3
ARTICLES OF INCORPORATION;
BYLAWS; BOARD OF DIRECTORS AND OFFICERS
3.1 FAIRMONT. The Articles of Incorporation of Fairmont, as organized,
shall constitute the Articles of Incorporation of the Surviving Corporation. The
Bylaws of Fairmont as in effect on the Effective Date shall constitute the
Bylaws of the Surviving Corporation. The directors and officers of Fairmont on
the Effective Date shall become the directors and officers of the Surviving
Corporation, except that Thomas J. Hansberry and Vincent F. D'Anunzio shall be
elected, as of the Effective Date, as additional Directors of Fairmont. Any
vacancy in the Board
of Directors or of ricers be filled in the manner provided in the Bylaws of the
Surviving Corporation. The directors and officers shall hold office as
prescribed in the Bylaws.
3.2 WESBANCO DIRECTORS. Wesbanco covenants and agrees that as of the
Effective Date it will appoint as a director of Wesbanco Thomas J. Hansberry,
or, if he should be unwilling or unable to serve, a person or persons to be
designated by Heritage ("Substituted Person"), and acceptable to Wesbanco. Such
individual shall serve until the next annual meeting of shareholders, and
Wesbanco shall include such person on the list of nominees for the position of
director presented by the Wesbanco Board of Directors and for which said Board
shall solicit proxies at its next annual meeting of shareholders, with such
person to be nominated for such term as is available under Wesbanco's Bylaws;
and provided that in the event that the Heritage nominee is nominated as set
forth above by the Wesbanco Board of Directors for less than a full three year
term, upon the expiration of any such lesser term, Wesbanco covenants and agrees
that it will again include such person on the list of nominees for the position
of Wesbanco director presented by its Board of Directors for a full three year
term and shall solicit proxies for said person for the annual meeting of
shareholders at which such election shall be held.
3.3 WESBANCO EXECUTIVE COMMITTEE. Wesbanco also covenants and agrees that
as of the Effective Date it will appoint Thomas J. Hansberry as a member of the
Executive Committee of the Board of Directors of Wesbanco, and covenants and
agrees that it will continue to appoint or elect Thomas J. Hansberry (or the
designated Substituted Person for the said Thomas J. Hansberry if he should be
unable to serve) for so long as he serves as a Director of Wesbanco pursuant to
the requirements of Section 3.2. If the foregoing named individual or his
Substituted Person should be unwilling or unable to serve as such, then Wesbanco
shall appoint the next Substituted Person as designated pursuant to Section 3.2,
to such Executive Committee.
SECTION 4
SHAREHOLDER APPROVALS
4.1 HERITAGE SHAREHOLDERS' MEETING. Heritage Shareholders' Meeting.
Heritage shall submit this Agreement to its shareholders in accordance with the
WVCA at a meeting duly called, properly noticed and held at the earliest
practicable date (considering the regulatory approvals required to be obtained).
In connection with such meeting, Heritage shall send to its shareholders the
Proxy Statement referred to in Section 13.1 hereof Subject to the fiduciary
duties of the Board of Directors of Heritage to Heritage and its shareholders,
the Board of Directors of Heritage shall recommend a vote in favor of the Merger
and shall use its best efforts to obtain at such meeting the affirmative vote of
the Heritage shareholders required to effectuate the transactions contemplated
by the Agreement.
4.2 FAIRMONT SHAREHOLDER MEETING. Fairmont shall promptly submit the
Agreement to its shareholder, Wesbanco, for approval in accordance with the
WVCA.
SECTION 5
CONVERSION OF SHARES
5.1 CONVERSION AND EXCHANGE RATIO. The manner of converting or exchanging
the shares of Fairmont and Heritage shall be as follows:
(a) Each share of Heritage Common Stock issued and outstanding
immediately prior to the Effective Time, except shares of Heritage Common
Stock issued and held in treasury of Heritage or beneficially owned by
Fairmont or Wesbanco, other than in a fiduciary capacity by them for
others, and shares as to which dissenters' rights are exercised pursuant to
W.Va. Code Annot. Section 31-1-122, shall by virtue of the Merger and at
the Effective Time of the Merger:
(i) Be exchanged for and become, without action on the part of
the holder thereof, in accordance with the Exchange Ratio, the
appropriate number of shares of Wesbanco Common Stock, having equal
rights and privileges with respect to all other Wesbanco Common Stock
issued and outstanding as of the Effective Time of the Merger.
(ii) For purposes of this Agreement, the Exchange Ratio shall be:
(1) If the Wesbanco Market Value (as hereinafter defined)
is greater than or equal to $33.00, then 1.515 fully paid and
nonassessable shares of Wesbanco Common Stock;
(2) If the Wesbanco Market Value is less than $33.00 but
greater than or equal to $26.00, then the number of fully paid
and nonassessable shares of Wesbanco Common Stock (rounded to the
nearest one thousandth) obtained by dividing (A) $50.00 per share
by (B) the Wesbanco Market Value; and
(3) If the Wesbanco Market Value is less than $26.00, then
1.923 fully paid and nonassessable shares of Wesbanco Common
Stock.
(4) As used herein, the term "Wesbanco Market Value" shall
mean the average of the closing prices of Wesbanco Common Stock
on the Nasdaq Stock Market for each of the ten ( 10) consecutive
trading days ending on the fifth trading day before the
Determination Date. The term "Determination Date" shall mean the
date on which the last required approval of a federal or state
governmental entity is obtained with respect to the Merger
without regard to any requisite waiting period in respect
thereof, except if the Effective Date does not occur on or before
the 16th day following the last regulatory approval solely
because of the non-expiration of waiting periods, then it shall
mean the date five (5) business days before the Effective Date.
(iii) No fractional shares of Wesbanco Common Stock will be
issued in connection with the Merger. In lieu thereof each stockholder
of Heritage otherwise entitled to a fractional share of Wesbanco will
receive cash therefore in an amount based on the Wesbanco Market Value
per whole share of Wesbanco stock, at the time of the exchange, or at
the election of such holder, shall be entitled to purchase the
remaining fraction of such share from Wesbanco based on such price.
(iv) In the event of any change in Wesbanco Common Stock, after
the Determination Date, by reason of stock dividends, split-ups,
mergers, recapitalizations, combinations, exchanges of shares or the
like, the type and number of shares to be issued pursuant to Section
5. l(a)(ii) hereof shall be adjusted proportionately.
5.2 SHARES OWNED BY HERITAGE, WESBANCO OR FAIRMONT. Each share of
Heritage Common Stock issued and held in the treasury of Heritage or
beneficially owned by Wesbanco or Fairmont, other than in a fiduciary capacity,
at the Effective Time of the Merger shall be canceled and retired, and no shares
of stock or the securities of Wesbanco shall be issuable with respect thereto.
5.3 EXCHANGE FOR STOCK. On and after the Effective Date of the Merger,
each holder of Heritage Common Stock, upon presentation and surrender of a
certificate or certificates therefore to American Stock Transfer & Trust Co.
(the "Exchange Agent"), shall be entitled to receive in exchange therefore a
certificate or certificates representing the number of shares of Wesbanco Common
Stock to which he or she is entitled as provided herein, and payment in cash for
any fractional share of common stock which he or she is entitled to receive,
without interest, should such shareholder not elect to purchase the remaining
fraction of such share of common stock at the price above set forth. Until so
presented and surrendered in exchange for a certificate representing Wesbanco
Common Stock, each certificate which represented issued and outstanding shares
of Heritage Common Stock immediately prior to the Effective Time shall be deemed
for all purposes to evidence ownership of the number of shares of Wesbanco
Common Stock into which such shares of stock have been converted pursuant to the
Merger. Until
surrender of such certificates in exchange for certificates representing the
converted stock, the holder thereof shall not receive any dividend or other
distribution payable to holders of shares of such stock; provided, however, that
upon surrender of such certificates representing such converted stock in
exchange for certificates representing the stock into which it has been
converted, there shall be paid to the record holder of the certificate
representing Wesbanco Common Stock issued upon such surrender, the amount of
dividends or other distributions (without interest) which theretofore became
payable with respect to the number of shares of such stock represented by the
certificate or certificates to be issued upon such surrender, together with
payment of cash for any fractional share to which such holder is entitled, as
above set forth.
5.4 Closing of Stock Transfer Books. On the Effective Date, the stock
transfer books of Heritage shall be closed, and no shares of Heritage Common
Stock outstanding the day prior to the Effective Date shall thereafter be
transferred. 5.5. Director's Qualifying Shares. Immediately upon completion of
the conversion provided for above, the continuing Director of Heritage shall
maintain at least the minimum number of shares of common stock of Wesbanco as
are required to be held as directors' qualifying shares under applicable law for
membership on the Board of Directors of Fairmont.
SECTION 6
DISSENTERS RIGHTS
6.1 Subject to the rights of Wesbanco and Heritage, as permitted by
Section 11.1 (i) of the Agreement, to terminate the Agreement and abandon the
Merger in the event that the number of Objecting Shares (as hereinafter defined)
shall exceed 10% of the shares of Heritage issued and outstanding on the date of
the shareholders' meeting described in Sections 4.1 and 13.1 of this Agreement
and entitled to vote on this Agreement (hereinafter, "Voting Shares"), the
rights and remedies of a dissenting shareholder under the WVCA shall be afforded
to any shareholder of Heritage who objects to the Merger in a timely manner in
accordance with the WVCA, and who takes the necessary steps in a timely manner
in accordance with the WVCA to perfect such shareholder's rights as a dissenting
shareholder (such shareholder being hereafter referred to as a "Dissenting
Shareholder"). The Surviving Corporation will make such payments as are required
to be made to Dissenting Shareholders in the exercise of such rights. The term
"Objecting Shares" shall mean the shares of those holders of Heritage Common
Stock who shall file written objections with respect to such shares, in a timely
manner in accordance with the WVCA, to the Agreement, shall not vote in favor of
the Agreement, and have made written demand for the fair value of such shares
within ten days, in accordance with WVCA Section 31-1-123. The Objecting Shares
held by shareholders who do not become Dissenting Shareholders shall be
converted into Wesbanco Common Stock in accordance with Section 5 hereof.
SECTION 7
REPRESENTATIONS, WARRANTIES AND COVENANTS OF HERITAGE
Heritage represents and warrants to and covenants with Wesbanco
and Fairmont, that:
7.1 ORGANIZATION AND QUALIFICATION OF HERITAGE. Heritage is a corporation
duly organized, validly existing and in good standing under the laws of the
State of West Virginia and has the full corporate power and authority to own all
of its properties and assets and to carry on its business as it is now being
conducted, and neither the ownership of its property nor the conduct of its
business requires it to be qualified to do business in any other jurisdiction,
except where the failure to be so qualified, considering all such cases in the
aggregate, does not involve a material risk to the business, properties,
financial position or results of operations of Heritage taken as a whole.
7.2 AUTHORIZATION OF AGREEMENT. The Board of Directors of Heritage has
authorized the execution of this Agreement as set forth herein, and subject to
the approval of this Agreement by the shareholders of Heritage as provided in
the Articles of Incorporation and Bylaws of Heritage and West Virginia Code
31-1-1 17, Heritage has the corporate power and is duly authorized to merge with
Fairmont pursuant to this Agreement, and this Agreement is a valid and binding
agreement of Heritage enforceable in accordance with its terms, except as
enforceability may be subject to applicable bankruptcy, insolvency, moratorium
or other similar laws affecting the enforcement of creditors' rights generally
and to any equitable principles limiting the right to obtain specific
performance of certain obligations thereunder.
7.3 NO VIOLATION OF OTHER INSTRUMENTS. Subject to obtaining any required
consent (which consents will be obtained by Heritage prior to Closing), the
execution and delivery of this Agreement do not, and the consummation of the
Merger and the transactions contemplated hereby will not, violate any provisions
of Heritage's Articles of Incorporation or Bylaws, or any provision of, or
result in the acceleration of any obligation under, any material mortgage, deed
of trust, note, lien, lease, franchise, license, permit, agreement, instrument,
law, order, arbitration award, judgment or decree or in the termination of any
material license, franchise, lease or permit to which Heritage is a party or by
which it is bound. After the approval of this Agreement by the shareholders of
the common stock of Heritage, the Board of Directors and the shareholders of
Heritage will have taken all corporate action required by applicable law, the
Articles of Incorporation of Heritage, its Bylaws or otherwise to authorize the
execution and delivery of this Agreement and to authorize the Merger of Heritage
and Fairmont pursuant to this Agreement.
7.4 FINANCIAL STATEMENTS. Heritage has delivered to Wesbanco copies of its
consolidated
statements of condition as of December 31, 1997 and 1996, and its consolidated
statements of income, consolidated statements of changes in shareholders' equity
and consolidated statements of changes in financial position for the two year
period ended December 31, 1997, together with the notes thereto, accompanied by
appropriate reviews relating to the financial statements for the two years ended
December 31, 1997 and 1996, of Arnett & Foster P.L.L.C., certified public
accountants, and its unaudited consolidated statement of condition, consolidated
statement of income, consolidated statement of changes in shareholders' equity
and consolidated statement of changes in financial condition for any interim
periods ending prior to the Effective Date. Such statements, together with the
related notes to all of said financial statements, present fairly the
consolidated financial position of Heritage and the consolidated results of its
operations as of the dates and for the periods ended on the dates specified in
accordance with generally accepted accounting principles consistently applied
throughout the periods indicated, except as may be specifically disclosed in
those financial statements, including the notes to the financial statements
attached thereto and subject to normal recurring year end adjustments.
7.5 SUBSIDIARIES OF HERITAGE. Heritage maintains one subsidiary
corporation, HBHC Corporation, a West Virginia corporation. It has the power and
authority to own and lease its property and to conduct its business as it is now
being conducted. Heritage owns 100% of the issued and outstanding stock of such
corporation.
7.6 NO ACTION, ETC. Except as disclosed in the Disclosure Schedule of
Heritage dated not more than 30 days from the date hereof (the "Heritage
Disclosure Schedule"), and as supplemented on the Effective Date, there are no
suits, actions, proceedings, claims or investigations (formal or informal)
pending, or to the knowledge of Heritage, threatened against or relating to
Heritage, its business or any of its properties or against any of its officers
or directors (in their capacity as such) in law or in equity or before any
governmental agency. There are no suits, actions, proceedings, claims or
investigations against Heritage, its properties or against any of its officers
or
directors (in their capacity as such) in law or in equity or before any
governmental agency which, individually or in the aggregate, would, or is
reasonably likely to, if determined adversely to such party, materially
adversely affect the financial condition (present or prospective), businesses,
properties or operations of Heritage or the ability of Heritage to conduct its
business as presently conducted or to consummate the transaction contemplated
hereby, and Heritage does not know of any basis for any such action or
proceeding. Except as disclosed in the Heritage Disclosure Schedule, Heritage is
not a party or subject to any cease and desist order, agreement or similar
arrangement with a regulatory authority which restricts its operations or
requires any action, and Heritage is not transacting business in material
violation of any applicable law, ordinance, requirement, rule, regulation or
order.
7.7 CAPITALIZATION. The authorized capital stock of Heritage consists of
300,000 shares of common stock, par value of $10.00 per share, of which 272,032
shares are duly authorized, validly issued and outstanding and are fully paid as
of the date hereof. There are no options, warrants, calls or commitments of any
kind entitling any person to acquire, or securities convertible into, Heritage
Common Stock.
7.8 COPIES OF ALL CONTRACTS, LEASES, ETC. Heritage has furnished to
Wesbanco true and complete copies of all material contracts, leases and other
agreements to which Heritage is a party or by which it is bound and of all
employment, pension, retirement, stock option, profit sharing, deferred
compensation, consultant, bonus, group insurance or similar plan with respect to
any of the directors, of officers or other employees of Heritage. A list of all
such documents is set forth in the Heritage Disclosure Schedule, and as updated
on the Effective Date.
7.9 MATERIALLY ADVERSE CONTRACTS. Heritage is not a party to or otherwise
bound by any contract, agreement, plan, lease, license, commitment or
undertaking which is materially adverse, materially onerous or materially
harmful to Heritage taken as a whole. There is no breach or default by any party
of or with respect to any material provision of any material contract to which
Heritage is a party that would have a material adverse effect upon the financial
condition, operations, results of operations, business or prospects of Heritage
taken as a whole.
7.10 UNDISCLOSED LIABILITIES. Heritage has no material liabilities other
than those liabilities disclosed on or provided for in the financial statements
delivered pursuant to Section 7.4 hereof, or as disclosed in the Heritage
Disclosure Schedule attached hereto and made a part hereof.
7.11 TITLE TO PROPERTIES. Except for capitalized leases, liens and
encumbrances not material to the property and liens and encumbrances on property
acquired by Heritage in foreclosure of loans and existing at the time of
foreclosure, Heritage has good and marketable title to all of the property,
interests in properties and other assets, real and personal, set forth in its
consolidated balance sheet as of December 31, 1997, and applicable interim
period balance sheet or acquired since the date thereof, other than property
disposed of since such date, subject to no material liens, mortgages, pledges,
encumbrances or charges of any kind except liens reflected on said balance sheet
or set forth in the financial statements delivered pursuant to Section 7.4
hereof, and all of its material leases are in full force and effect and Heritage
is not in material default thereunder. No asset included in the financial
statements referred to above has been valued in such statements in excess of its
cost less depreciation or, in the case of investment securities, in excess of
cost, adjusted for amortization of premiums or accretion of discounts. All
material real and tangible personal property owned by Heritage and used or
leased by Heritage in
its business is in good condition, normal wear and tear excepted, and is in good
operating order. All of such property is insured against loss for at least 70%
of the full replacement value thereof (less applicable deductibles) by reputable
insurance companies authorized to transact business in the State of West
Virginia.
7.12 PROXY STATEMENT. The Proxy Statement referred to in Section l 3 or
any amendment or supplement thereto mailed to the holders of the common stock of
Heritage will not contain any untrue statement of a material fact concerning
Heritage or omit to state a material fact concerning Heritage required to be
stated therein or necessary to make the statements contained therein, in light
of the circumstances under which they were made, not misleading with respect to
Heritage, and will comply, as to form in all material respects, with the
requirements of federal and West Virginia securities laws and any other
applicable Blue Sky Laws.
7.13 ERISA. Except as disclosed in the Heritage Disclosure Schedule, (i)
each employee benefit plan subject to Titles I and/or IV of ERISA and
established or maintained for persons including employees or former employees of
Heritage, (hereinafter referred to as "Plan") has been maintained, operated,
administered and funded in accordance with its terms and with all material
provisions of ERISA and the Internal Revenue Code ("IRC") applicable thereto;
(ii) no event reportable under Section 4043 of ERISA has occurred and is
continuing with respect to any Plan; (iii) no liability to PBGC has been
incurred with respect to any Plan, other than for premiums due and payable, and
all premiums required to have been paid to PBGC as of the date hereof have and
as of the Effective Date will have been paid; (iv) no Plan has been terminated,
no proceedings have been instituted to terminate any Plan, and no decision has
been made to terminate or institute proceedings to terminate any Plan; (v) no
Plan is a multi-employer Plan; (vi) there has been no cessation of, and no
decision has been made to cease, operations at a
facility or facilities where such cessation could reasonably be expected to
result in a separation from employment of more than 20% of the total number of
employees who are participants under any plan; (vii) each Plan which is an
employee pension plan meets the requirements of "qualified plans" under Section
401 (a) of the IRC; (viii) no accumulated funding deficiency within the meaning
of Section 412 of the IRC or Section 302 of ERISA has been incurred with respect
to any Plan subject to the funding standards of those provisions; (ix) with
respect to each Plan, there have been no prohibited transactions as defined in
Section 406 of ERISA or Section 4975 of the IRC, and there are no actions, suits
or claims with respect to the assets thereof (other than routine claims for
benefits) pending or threatened; arid (x) all required reports, descriptions and
notices (including, but not limited to, Form 5500 Annual Reports, Summary Annual
Reports and Summary Plan Descriptions) have been appropriately filed or
distributed with respect to each Plan.
7.14 LABOR DISPUTES. Except as disclosed in the Heritage Disclosure
Schedule, Heritage is not directly or indirectly involved in or threatened with
any labor dispute, including, without limitation, matters regarding
discrimination by reason of age, race, creed, sex, handicap or national origin,
which would materially and adversely affect its financial condition, assets,
businesses or operations taken as a whole. No collective bargaining
representatives represent any employees of Heritage, and no petition for
election of any collective bargaining representative has been filed, and to the
knowledge of Heritage, no organizational campaign on behalf of any collective
bargaining unit has been undertaken by or on behalf of the employees of
Heritage.
7.15 RESERVE FOR POSSIBLE LOAN LOSSES. The reserve for possible loan losses
shown on the consolidated balance sheet of Heritage as of December 31, 1997,
delivered pursuant to this
Agreement is adequate in all material respects as of the date thereof, and the
reserve for possible loan losses reflected on the interim statement for the
period ending September 30, 1998, is adequate in all material respects as of the
date of this Agreement.
7.16 TAXES. Except as disclosed in the Heritage Disclosure Schedule:
(a) Heritage has timely and properly filed all Federal Income Tax
Returns and all other federal, state, municipal and other tax returns which
it is required to file, either on its own behalf or on behalf of its
employees or other persons or entities, all such returns and reports being
true and correct and complete in all material respects, and has paid all
taxes, including penalties and interest, if any, which have become due
pursuant to such returns or reports or forms or pursuant to assessments
received by it;
(b) Neither the Internal Revenue Service nor any other taxing
authority is now asserting against Heritage, or, to its knowledge,
threatening to assert against it, any material deficiency or claim for
additional taxes, interest or penalty;
(c) There is no pending or, to its knowledge, threatened examination
of the Federal Income Tax Returns of Heritage, and, except for tax years
still subject to the assessment and collection of additional Federal income
taxes under the three year period of limitations prescribed in IRC Section
6501(a), no tax year of Heritage remains open to the assessment and
collection of additional material Federal Income Taxes, and
(d) There is no pending or, to its knowledge, threatened examination
of the West Virginia Business Franchise Tax Returns of Heritage, and,
except for tax years still subject to the assessment and collection of
additional Business
Franchise Taxes under the three year period of limitations prescribed in W.Va.
Code Annot. Section 11-10-l5, no tax year of Heritage remains open to the
assessment and collection of additional Business Franchise Taxes.
(e) Heritage has properly accrued and reflected on its December 31,
1997, consolidated balance sheet, delivered pursuant to Section 7.4 hereof,
and has thereafter to the date hereof properly accrued, and will from the
date hereof through the Closing Date properly accrue, all liabilities for
taxes and assessments, and will timely and properly file all such federal,
state, local and foreign tax returns and reports and forms which it is
required to file, either on its own behalf or on behalf of its employees or
other persons or entities, all such returns and reports and forms to be
true and correct and complete in all respects, and will pay or cause to be
paid when due all taxes, including penalties and interest, if any, which
have become due pursuant to such-returns or reports or forms or pursuant to
assessments received by it, all such accruals being in the aggregate
sufficient for payment of all such taxes and assessments.
7.17 ABSENCE OF CERTAIN CHANGES. Except as may be disclosed in the Heritage
Disclosure Schedule, or except in connection with the transactions contemplated
by this Agreement, since December 31, 1997:
(a) There has been no change in the material assets, financial
condition or liabilities (contingent or otherwise), business, or results of
operations of Heritage which has had, or changes which in the aggregate
have had, a materially adverse effect on such material assets, financial
condition or results of operations
of Heritage taken as a whole, nor to its knowledge, has any event or condition
occurred which may result in such change or changes;
(b) There has not been any material damage, destruction or loss by
reason of fire, flood, accident or other casualty (whether insured or not
insured) materially and adversely affecting the assets, financial
condition, business or operations of Heritage taken as a whole;
(c) Other than in the ordinary course of business, Heritage has not
disposed of, or agreed to dispose of, any of its material properties or
assets, nor has it leased to others, or agreed to so lease, any of such
material properties or assets;
(d) There has not been any change in the authorized, issued or
outstanding capital stock of Heritage except as provided for in this
Agreement, nor any material change in the outstanding debt of Heritage,
other than changes due to payments in accordance with the terms of such
debt or changes in deposits, Federal funds purchased, repurchase agreements
or other short- term borrowings in the ordinary course of business;
(e) Except as otherwise disclosed in this Agreement, Heritage has not
granted any warrant, option or right to acquire, or agreed to repurchase,
redeem or otherwise acquire, any shares of its capital stock or any other
of its securities whatsoever;
(f) Heritage has, and shall have at Closing, personnel sufficient to
adequately staff all key positions within its operations. There has not
been any material increase in the compensation or fees payable by Heritage
to its respective
directors or officers for services in their capacities as such, other than
increases in the regular course of business in accordance with past
practices or the personnel policies of Heritage;
(g) Heritage has not made any material loan or advance other than in
the ordinary course of business;
(h) Heritage has not made any expenditure or major commitment for the
purchase, acquisition, construction or improvement of any material asset or
assets which in the aggregate would be material other than in the ordinary
course of business;
(i) Heritage has not entered into any other material transaction,
contract or lease or incurred any other material obligation or liability
other than in the ordinary course of business; and
(j) There has not been any other event, condition or development of
any kind which materially and adversely affects the material assets,
financial condition or results of operations of Heritage, taken as a whole,
and Heritage has no knowledge of any such event, condition or development
which may materially and adversely affect the assets, financial condition
or results of operations of Heritage, taken as a whole.
7.18 FIDELITY BONDS. Heritage has continuously maintained fidelity bonds
insuring it against acts of dishonesty by its of ricers and employees in such
amounts as are required by law and as are customary, usual and prudent for banks
of its size. Since January 1, 1998, there have been no claims under such bonds
and, except as disclosed in the Heritage Disclosure Schedule, Heritage is not
aware of any facts which would form the basis of a claim under such bonds.
Heritage has no reason to believe that its fidelity coverage will not be renewed
by the applicable carrier on substantially the same terms as its existing
coverage.
7.19 NEGATIVE COVENANTS. Except as otherwise contemplated hereby, between
the date hereof and the Effective Date, or the time when this Agreement
terminates as provided herein, Heritage will not, except as contemplated by this
Agreement, without the prior written approval of Wesbanco:
(a) Make any change in its authorized capital stock;
(b) Issue any shares of its common stock, securities convertible into
its common stock, or any long term debt securities;
(c) Issue or grant any options, warrants or other rights to purchase
shares of its common stock;
(d) Declare or pay any dividends or other distributions on any shares
of common stock;
(e) Purchase or otherwise acquire, or agree to acquire, for a
consideration any share of its capital stock (other than in a fiduciary
capacity);
(f) Except as otherwise contemplated by this Agreement or as disclosed
in or permitted by or under the conditions set forth in Section 7.1 7(f)
above and except for any amendments required by law, enter into or amend
any employment, pension, retirement, stock option, profit sharing, deferred
compensation, consultant, bonus, group insurance or similar plan in respect
of any of its directors, of ricers or other employees for services in their
capacities as such or materially increase its contribution to any pension
plan, except as disclosed in
the Heritage Disclosure Schedule, regarding pension or retirement plans or
increases in accordance with past practices;
(g) Take any action materially and adversely affecting the financial
condition (present or prospective), businesses, properties or operations of
Heritage, taken as a whale;
(h) Acquire or merge with any other company or acquire any branch or,
other than in the ordinary course of business, any assets of any other
company;
(i) Except in the ordinary course of business as heretofore conducted,
and except as hereinabove provided, mortgage, pledge or subject to a lien
or any other encumbrance any of its material assets, dispose of any of its
material assets, incur or cancel any material debts or claims, or increase
any compensation or benefits payable to its officers or employees (other
than as permitted in Sections 7.1 7(f) and 7.1 9(f) hereof), except in the
ordinary course of business as heretofore conducted, or take any other
action not in the ordinary course of its business as heretofore conducted
or incur any material obligation or enter into any material contract; or
(j) Amend its Articles of Incorporation or Bylaws, except as may be
necessary to carry out this Agreement or as required by law.
7.20 ADDITIONAL COVENANTS. Except as otherwise contemplated by this
Agreement, Heritage covenants and agrees:
(a) That it will promptly advise Wesbanco in writing of the name and
address of, and the number of shares of Heritage Common Stock held by,
each
stockholder who elects to exercise his or her right to dissent to the Merger
pursuant to West Virginia Code Annot. Sections 31-1-122 and 123;
(b) Subsequent to the date of this Agreement and prior to the
Effective Date, that it will operate its business only in the ordinary
course and in a manner consistent with past practice;
(c) To the extent consistent with the fiduciary duties of the Board of
Directors to Heritage and its shareholders and in compliance with
applicable law, that it will use its best efforts to take or cause to be
taken all action required under this Agreement on its part to be taken as
promptly as practicable so as to permit the consummation of the Merger at
the earliest possible date and to cooperate fully with the other parties to
that end;
(d) Heritage will not, and will not permit any person acting on behalf
of Heritage to, directly or indirectly, initiate or solicit any acquisition
proposal by any person, corporation or entity. For the purposes of this
subsection, "acquisition proposal" means any proposal to merge or
consolidate with, or acquire all or any substantial portion of the assets
of, Heritage, or any tender or exchange offer (or proposal to make any
tender or exchange offer) for any shares of stock of Heritage, or any
proposal to acquire more than 5% of the outstanding shares of stock of
Heritage or any options, warrants or rights to acquire, or securities
convertible into or exchangeable for, more than 5% of the outstanding
shares of stock of Heritage. Heritage will give Wesbanco notice by
telephone, promptly after receipt thereof, of all material facts relating
to any acquisition proposal or any inquiry with respect to any acquisition
proposal and shall such notice in writing immediately thereafter;
(e) To promptly advise Wesbanco of any material adverse change in the
financial condition, assets, businesses or operations of Heritage, taken as
a whole, or any material changes or inaccuracies in data provided to
Wesbanco pursuant to this Agreement;
(f) To maintain in full force and effect its present fire, casualty,
public liability, employee fidelity and other insurance coverages or
replacement insurance coverage at substantially the same premium and
insurance levels;
(g) To cooperate with Wesbanco in furnishing such information
concerning the business and affairs of Heritage and its respective
directors and officers as is reasonably necessary or requested in order to
prepare and file any application for regulatory or governmental approvals,
including, but not limited to, an application to the Federal Deposit
Insurance Corporation and the West Virginia Department of Banking for prior
approval of the merger of Heritage with Fairmont as contemplated hereunder.
Consistent with its fiduciary duties, Heritage will use its best efforts to
obtain the approval or consent of any federal, state or other regulatory
agency having jurisdiction and of any other party to the extent that such
approvals or consents are required to effect the Merger and the
transactions contemplated hereby or are required with respect to the
documents described in Section 7.3 hereof; and
(h) To cooperate with Wesbanco in furnishing such information
concerning the business of Heritage as is reasonably necessary or requested
in
order to prepare and file any Registration Statement to be prepared in
connection with the issuance of Wesbanco Common Stock as provided in
Section 13 hereof.
SECTION 8
REPRESENTATIONS, WARRANTIES AND
COVENANTS OF WESBANCO AND FAIRMONT
Wesbanco and Fairmont represent and warrant to Heritage and covenant with
Heritage that:
8.1 CORPORATE ORGANIZATION OF WESBANCO AND SUBSIDIARIES. Wesbanco and
Fairmont are corporations duly organized, validly existing and in good standing
under the laws of the State of West Virginia, with full corporate power and
authority to carry on their businesses as they are now being conducted and as
contemplated by the Agreement and to own the properties and assets which they
own, and neither the ownership of their property nor the conduct of their
business requires them, or any of their subsidiaries, to be qualified to do
business in any other jurisdiction except where the failure to be so qualified,
considering all such cases in the aggregate, does not involve a material risk to
the business, properties, financial position or results of operations of
Wesbanco, Fairmont and their subsidiaries taken as a whole. Each of Wesbanco's
subsidiaries ("Wesbanco Subs"), is a West Virginia, Delaware or Ohio
corporation, duly organized and validly existing in good standing under the laws
of Delaware, Ohio or West Virginia, as the case may be, with full corporate
power and authority to carry on its business as it is now being conducted and to
own the properties and assets which it owns. All issued and outstanding shares
of stock of Wesbanco Subs are held, beneficially and of record, by Wesbanco and
have been fully paid, were validly issued and are nonassessable. There are no
options, warrants to purchase or contracts to issue, or contracts or any other
rights entitling anyone to
acquire, any other stock of or any of the Wesbanco Subs or securities
convertible into shares of stock of the Wesbanco Subs.
8.2 CORPORATE POWER AND ACTION. Subject to the approval hereof by the
Board of Directors of Wesbanco, and subject to its Bylaws and the WVCA, Wesbanco
has the corporate power and is duly authorized to execute this Agreement, and
this Agreement is a valid and binding agreement of Wesbanco enforceable in
accordance with its terms, except as enforceability may be subject to applicable
bankruptcy, insolvency, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and to any equitable principles
limiting the right to obtain specific performance of certain obligations
thereunder. Upon execution hereof by Fairmont and subject to the approval hereof
by Wesbanco as its sole shareholder, Fairmont has the corporate power to execute
and deliver this Agreement and has taken all action required by law, its
Articles of Incorporation, its Bylaws or otherwise to authorize and approve such
execution and delivery, the performance of the Agreement, the Merger and the
consummation of the transactions contemplated hereby; and this Agreement is a
valid and binding agreement of Fairmont enforceable in accordance with its
terms, except as enforceability may be subject to applicable bankruptcy,
insolvency, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and to any equitable principles limiting the right
to obtain specific performance of certain obligations thereunder.
8.3 TRANSFER OF SECURITIES TO EXCHANGE AGENT PRIOR TO, OR AS OF THE
CLOSING DATE. Prior to, or at the Closing Date, Wesbanco will deliver to the
Exchange Agent, for the benefit of the holders of the common stock of Heritage,
an amount of common stock of Wesbanco and cash sufficient to meet the necessary
amount of securities and cash required pursuant to Section 5.
8.4 NO VIOLATION OF OTHER INSTRUMENTS. Subject to obtaining any required
consents (which consents will be obtained by Wesbanco prior to the Closing), the
execution and delivery of this Agreement do not, and the consummation of the
Merger and the transactions contemplated hereby will not, violate any provision
of the Articles of Incorporation or Bylaws of Wesbanco or any of the Wesbanco
Subs or any provision of, or result in the acceleration of any obligation under,
any material mortgage, Deed of Trust, note, lien, lease, franchise, license,
permit, agreement, instrument, law, order, arbitration award, judgment or
decree, or in the termination of any material license, franchise, lease or
permit, to which Wesbanco or any of the Wesbanco Subs, is a party or by which it
is bound.
8.5 APPROVAL BY FAIRMONT. Wesbanco shall cause Fairmont to execute and
enter into this Agreement and cause Fairmont to take such action as is provided
in this Agreement on Fairmont's part to be taken.
8.6 GOOD FAITH. Wesbanco shall use its best efforts in good faith to take
or cause to be taken all action required under this Agreement on its part to be
taken as promptly as practicable so as to permit the consummation of this
Agreement at the earliest possible date and cooperate fully with the other
parties to that end.
8.7 EXCHANGE ACT REPORTS. Wesbanco has delivered to Heritage true and
correct copies of its Form 10-K (Annual Report) for the year ended December 31,
1997, and its Forms 10-Q (Quarterly Report) for the quarters ended March 31,
1998, June 30, 1998, and September 30, 1998, as filed with the SEC, all of which
were prepared and filed in accordance with the applicable requirements and
regulations of the SEC. Wesbanco has also delivered to Heritage true and correct
copies of all documents and reports filed by Wesbanco with the SEC pursuant to
the Exchange Act since January 1, 1998 (the "Wesbanco Reports"). Wesbanco has
filed and will
continue to file all reports and other documents required to be filed with the
SEC pursuant to the Exchange Act in a timely manner. All of the Wesbanco Reports
complied in all material respects with the Act and did not contain, as of their
respective dates, any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein not misleading in light
of the circumstances under which they were made.
8.8 SUBSIDIARIES OF WESBANCO. In addition to Fairmont, the subsidiaries
of Wesbanco are Wesbanco Bank Charleston, a West Virginia banking corporation,
Wesbanco Bank Wheeling, a West Virginia banking corporation, Wesbanco Bank
Parkersburg, Inc., a West Virginia banking corporation, Wesbanco Properties,
Inc., a West Virginia corporation, Hunter Agency, Inc., a West Virginia
corporation, Hometown Finance Company, a West Virginia corporation, CommBanc
Investments, Inc., an Ohio corporation, and Vandalia National Corporation, a
Delaware corporation. All have the requisite corporate power and authority to
own and lease their respective properties and to conduct their respective
businesses as they are now being conducted and are currently contemplated to be
conducted. Wesbanco owns 100% of the issued and outstanding stock of all such
corporations.
8.9 REGISTERED BANK HOLDING COMPANY. Wesbanco is a duly registered bank
holding company under the Bank Holding Company Act of 1956, as amended.
8.10 AUTHORITY TO ISSUE SHARES. The shares of common stock of Wesbanco to
be issued pursuant to this Agreement will be duly authorized at the time the
Merger is consummated. When issued upon the terms and conditions specified in
this Agreement, such shares shall be validly issued, fully paid, and
nonassessable. The shareholders of Wesbanco have, and will have, no preemptive
rights with respect to the issuance of the shares of Wesbanco to be authorized
and issued in the transaction contemplated in this Agreement.
8.11 FINANCIAL STATEMENTS. Wesbanco has delivered to Heritage copies of
its consolidated balance sheets as of December 31, 1997, 1996 and 1995 and any
applicable interim period, its consolidated statements of income, consolidated
statements of changes in shareholders' equity and consolidated statements of
changes in financial position for the three year period ended December 31, 1997,
and any applicable interim period, together with the notes thereto, accompanied
by an audit report of Ernst & Young, LLP, independent auditors. Such statements
and the related notes to all of said financial statements, present fairly the
consolidated financial position of Wesbanco and its consolidated subsidiaries
and the consolidated results of their operations as of the dates and for the
periods ended on the dates specified in accordance with generally accepted
accounting principles consistently applied throughout the periods indicated,
except as may be specifically disclosed in those financial statements, including
the notes to the financial statements attached thereto, and subject to normal
recurring year end adjustments.
8.12 NO ACTION, ETC. Except as disclosed in the Wesbanco Disclosure
Schedule, dated not more than 30 days from the date hereof (the "Wesbanco
Disclosure Schedule"), and as supplemented on the Effective Date, there are no
suits, actions, proceedings, claims or investigations (formal or informal)
pending, or to the knowledge of Wesbanco pending or threatened, against or
relating to Wesbanco, its subsidiaries, its businesses or any of its properties
or against any of their of ricers or directors (in their capacity as such) in
law or in equity or before any governmental agency. There are no suits, actions,
proceedings, claims or investigations against or redating to Wesbanco, its
subsidiaries, its businesses, its properties or against any of their officers or
directors (in their capacity as such) in law or in equity or before any
governmental agency, which, individually or in the aggregate, would, or is
reasonably likely
to, if determined adversely to such party, materially adversely affect the
financial condition (present or prospective), businesses, properties or
operations of Wesbanco or its subsidiaries or the ability of Wesbanco or its
subsidiaries to conduct its business as presently conducted or consummate the
transaction contemplated hereby, and Wesbanco does not know of any basis for any
such action or proceeding. Neither Wesbanco nor any of its subsidiaries are a
party or subject to any cease and desist order, agreement or similar arrangement
with a regulatory authority which restricts its operations or requires any
action and neither Wesbanco nor any of its subsidiaries are transacting business
in material violation of any applicable law, ordinance, requirement, rule, order
or regulation.
8.13 CAPITALIZATION. The authorized capital stock of Wesbanco consists of
50,000,000 shares of common stock, par value of $2.0833 per share, of which
20,895,579 shares are duly authorized, validly issued and outstanding (as of
September 30, 1998) and are fully paid and nonassessable, and 1,000,000 shares
of preferred stock, without par value, none of which are issued and outstanding.
There are no options, warrants, calls or commitments of any kind entitling any
person to acquire, or securities convertible into, Wesbanco Common Stock. At
September 30, 1998, Wesbanco held 83,075 shares of its common stock as treasury
stock. Wesbanco has no other reserve commitments with respect to its common
stock.
Upon execution hereof by Fairmont, the authorized capital stock of
Fairmont consists of 700,100 shares of common stock, par value of $ 10.00 per
share, of which all such shares are duly authorized and validly issued and
outstanding and fully paid and nonassessable. There are no options, warrants,
calls or commitments of any kind relating to, or securities convertible into
Fairmont common stock.
8.14 COPIES OF ALL CONTRACTS. Leases. Etc. Wesbanco has furnished to
Heritage true and complete copies of all material contracts, leases and other
agreements to which Wesbanco is a party or by which it is bound and of all
employment, pension, retirement, stock option, profit sharing, deferred
compensation, consultant, bonus, group insurance and similar plans with respect
to any of the directors, officers or other employees of Wesbanco. A list of all
such documents is set forth in the Wesbanco Disclosure Schedule, and as
supplemented on the Effective Date.
8.15 MATERIALLY ADVERSE CONTRACTS. Neither Wesbanco nor any of its
subsidiaries are a party to or otherwise bound by any contract, agreement, plan,
lease, license, commitment or undertaking, which is materially adverse,
materially onerous, or materially harmful to Wesbanco or its subsidiaries taken
as a whole. There is no breach or default by any party of or with respect to any
material provision of any material contract to which Wesbanco or its
subsidiaries is a party that would have a material adverse effect upon the
financial condition, operations, results of operations, business or prospects of
Wesbanco or its subsidiaries taken as a whole.
8.16 UNDISCLOSED LIABILITIES. Wesbanco and the Wesbanco Subs have no
material liabilities other than those liabilities disclosed on or provided for
in the financial statements delivered pursuant to Section 8.1 1 of this
Agreement, or on the Wesbanco Disclosure Schedule.
8.17 TITLE TO PROPERTIES. Except for capitalized leases and liens and
encumbrances not material to the property and liens and encumbrances on property
acquired by Wesbanco Subs in foreclosure of loans and existing at the time of
foreclosure, Wesbanco and its subsidiaries have good and marketable title to all
of the property, interest in properties and other assets, real or personal, set
forth in its consolidated balance sheet as of December 31, 1997, and applicable
interim periods, or acquired since that date, subject to no material liens,
mortgages, pledges,
encumbrances, or charges of any kind except liens reflected on said balance
sheets, and all of its leases are in full force and effect and neither Wesbanco
nor any of its subsidiaries is in material default thereunder.
No asset included in the financial statements referred to above has been
valued in such statements in excess of cost less depreciation or, in the case of
investment securities, in excess of cost, adjusted for amortization of premiums
or accretion of discounts. All real and tangible personal property owned by
Wesbanco or its subsidiaries and used or leased by Wesbanco or its subsidiaries,
or for its business is in good condition, normal wear and tear excepted, and is
in good operating order. All of such proper is insured against loss for at least
80% of the full replacement value thereof (less applicable deductibles) by
reputable insurance companies authorized to transact business in the State of
West Virginia.
8.18 REGISTRATION STATEMENT. The Registration Statement referred to in
Section 13.2 of this Agreement or any amendment or supplement thereto mailed to
the holders of the common stock of Heritage will 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 contained therein, in light
of the circumstances under which they were made, not misleading with respect to
Wesbanco, and will comply as to form in all material respects with the
requirements of federal and West Virginia securities laws and any other
applicable Blue Sky laws.
8.19 TAXES. Except as disclosed in the Wesbanco Disclosure Schedule:
(a) Wesbanco and its subsidiaries have timely and properly filed all
Federal Income Tax Returns and all other federal, state, municipal and
other tax returns which they are required to file, either on their own
behalf or on behalf of their employees or other persons or entities, all
such returns and reports being true
and correct and complete in all material respects, and have paid all taxes,
including penalties and interest, if any, which have become due pursuant to
such returns or reports or forms or pursuant to assessments received by
them;
(b) Neither the Internal Revenue Service nor any other taxing
authority is now asserting against Wesbanco or any of its subsidiaries, or,
to its knowledge, threatening to assert against them, or any of them, any
material deficiency or claim for additional taxes, interest or penalty;
(c) There is no pending or, to its knowledge, threatened examination
of the Federal Income Tax Returns of Wesbanco or any of its subsidiaries,
except for a pending audit by the Internal Revenue Service for the year
1996, and, except for tax years still subject to the assessment and
collection of additional federal income taxes under the three-year period
of limitations prescribed in IRC Section 6501(a), no tax year of Wesbanco
or any of its subsidiaries remains open to the assessment and collection of
additional material Federal Income Taxes; and
(d) There is no pending or, to its knowledge, threatened examination
of the West Virginia Business Franchise Tax Returns of Wesbanco or any of
its subsidiaries, and, except for tax years still subject to the assessment
and collection of additional Business Franchise Taxes under the three-year
period of limitations prescribed in W.Va. Code Annot. Section 11-10-15, no
tax year of Wesbanco or any of its subsidiaries remains open to the
assessment and collection of additional Business Franchise Taxes.
(e) Wesbanco, and its subsidiaries, have properly accrued and
reflected on their December 31, 1997, consolidated balance sheet, delivered
pursuant to Section 8.1 1 hereof, and have thereafter to the date hereof
properly accrued, and will, from the date hereof, through the Closing Date,
properly accrue all liabilities for taxes and assessments, and will timely
and properly file all such federal, state, local and foreign tax returns
and reports and forms which they are required to file, either on their own
behalf or on behalf of their employees or other persons or entities, all
such returns and reports and forms to be true and correct and complete in
all respects, and will pay or cause to be paid when due all taxes,
including penalties and interest, if any, which have become due pursuant to
such returns or reports or forms or pursuant to assessments received by
them, all such accruals being in the aggregate sufficient for payment of
all such taxes and assessments.
8.20 ABSENCE OF CERTAIN CHANGES. Except as may be disclosed in the
Wesbanco Disclosure Schedule, or except in connection with the transactions
contemplated by this Agreement, since September 30, 1998:
(a) There has been no change in the material assets, financial
condition, liabilities (contingent or otherwise), business or results of
operation of Wesbanco and its subsidiaries which has had, or changes in the
aggregate which have had, a materially adverse effect on the material
assets, financial condition or results of operations of Wesbanco, nor, to
its knowledge, has any event or condition occurred which may result in such
change or changes;
(b) There has not been any material damage, destruction, or loss by
reason of fire, flood, accident or other casualty (whether insured or not
insured)
materially and adversely affecting the assets, financial condition,
business or operations of Wesbanco or any of its subsidiaries taken as a
whole;
(c) Other than in the ordinary course of business, neither Wesbanco
nor any of its subsidiaries have disposed of, or agreed to dispose of, any
of their material properties or assets, nor have they leased to others, or
agreed to so lease, any of such material properties or assets;
(d) There has not been any change in the authorized, issued or
outstanding capital stock of Wesbanco, except as provided for in this
Agreement, and except for the share repurchase program of up to 1,000,000
shares of Wesbanco Common Stock currently in progress, or any material
change in the outstanding debt of Wesbanco or any of its subsidiaries,
other than changes due to payments in accordance with the terms of such
debt or changes in deposits, federal funds purchased, repurchase agreements
or other short-term borrowings in the ordinary course of business;
(e) Except as otherwise disclosed in this Agreement, Wesbanco has not
granted any warrant, option or right to acquire, or agreed to repurchase,
redeem or otherwise acquire, any shares of its capital stock or any other
of its securities whatsoever;
(f) Neither Wesbanco nor any of its subsidiaries have made any
material loan or advance other than in the ordinary course of business;
(g) Neither Wesbanco nor any of its subsidiaries has entered into any
other material transaction, contract or lease or incurred any other
material obligation or liabilities other than in the ordinary course of
business;
(h) Neither Wesbanco nor any of its subsidiaries have made any
expenditure or major commitment for the purchase, acquisition, construction
or improvement of any material asset or assets which in the aggregate would
be material other than in the ordinary course of business;
(i) There have not been any dividends or other distributions declared
or paid on any shares of Wesbanco Common Stock which, taken in the
aggregate with all other such distributions declared or paid in the same
tax year, exceed 55% of the after-tax income of Wesbanco for the tax year
in which paid;
(j) Business has been conducted by Wesbanco in the ordinary course and
in a manner consistent with past practice;
(k) There has been no change in the Articles of Incorporation or
Bylaws of Wesbanco which would in the reasonable opinion of Heritage have a
material adverse effect on the rights of holders of Wesbanco Common Stock;
and
(l) There has not been any other event, condition or development of
any kind which materially and adversely affects the material assets,
financial condition or results of operations of Wesbanco or any of its
subsidiaries, and neither Wesbanco nor any of its subsidiaries have
knowledge of any such event, condition or development which may materially
and adversely affect the material assets, financial condition or results of
operations of Wesbanco and its subsidiaries.
8.21 FIDELITY BONDS. Each of the Wesbanco Subs has continuously maintained
fidelity bonds insuring it against acts of dishonesty by each of its officers
and employees in such amounts as are required by law and as are customary, usual
and prudent for a bank of its size.
Since January l, 1998, there have been no claims under such bonds (except as
disclosed in the Wesbanco Disclosure Schedule) and, except as disclosed in
writing to Heritage, neither Wesbanco nor any Wesbanco Subs are aware of any
facts which would form the basis of a claim under such bonds. Neither Wesbanco
nor any Wesbanco Subs have any reason to believe that any fidelity coverage will
not be renewed by their carriers on substantially the same terms as the existing
coverage.
8.22 ERISA. Except as disclosed in the Wesbanco Disclosure Schedule (i)
each employee benefit plan subject to Titles I and/or IV of ERISA and
established or maintained for persons including employees or former employees of
Wesbanco, or any of its subsidiaries, (hereinafter referred to as "Plan") has
been maintained' operated, administered and funded in accordance with its terms
and with all material provisions of ERISA and the IRC applicable thereto; (ii)
no event reportable under Section 4043 of ERISA has occurred and is continuing
with respect to any Plan; (iii) no liability to PBGC has been incurred with
respect to any Plan, other than for premiums due and payable and all premiums
required to have been paid to PBGC as of the date hereof have been and as of the
Effective Date will have been paid; (iv) other than the termination of the
defined benefit pension plans of Wheeling Dollar Bank, First National Bank and
Trust Company, Wirt County Bank, First-Tyler Bank & Trust Company, Brooke
National Bank, First National Bank of Barnesville and Albright National Bank, no
Plan has been terminated, no proceedings have been instituted to terminate any
Plan, and no decision has been made to terminate or institute proceedings to
terminate any Plan; (v) with respect to the termination of the defined benefit
pension plans of Wheeling Dollar Bank, First National Bank and Trust Company,
Wirt County Bank, First-Tyler Bank & Trust Company, Brooke National Bank, First
National Bank of Barnesville and Albright National Bank, all required
governmental
and regulatory approvals of such terminations have been obtained, all
participants in such Plans or their beneficiaries have received single premium
annuity contracts or other benefits which will provide those participants or
beneficiaries with the retirement income calculated under the terms and
conditions of such Plans, all liabilities of such Plans have been paid,
released, discharged or merged, and any surplus assets remaining in such Plans
after satisfaction of all of its liabilities have been recovered by Wesbanco or
its subsidiaries; (vi) neither Wesbanco nor any of its subsidiaries currently
are a participating employer in any multi-employer or multiple employer employee
benefit pension plan (including any multi-employer plans as defined in Section
3(37) of ERISA) and, with respect to any multi-employer or multiple employer
plan in which Wesbanco or any of its subsidiaries was a participating employer,
all contributions due from Wesbanco or any of its subsidiaries to any such
multi-employer or multiple employer plan have been timely paid and any
additional contributions due on or before the Effective Date shall have been
paid; (vii) with respect to any multi-employer pension plan subject to the
Multi-employer Pension Plan Amendments Act of 1980 in which Wesbanco or any of
its subsidiaries was a participating employer, neither Wesbanco nor any of its
subsidiaries have incurred or will incur any withdrawal liability, complete or
partial, under Section 4201,4203, or 4205 of ERISA, as a consequence of
discontinuing participating in such multi-employer pension plan; (viii) there
has been no cessation of, and no decision has been made to cease, operations at
a facility or facilities where such cessation could reasonably be expected to
result in a separation from employment of more than 20% of the total number of
employees who are participants under any Plan; (ix) each Plan which is an
employee pension plan meets the requirements of "qualified plans" under Section
401 (a) of the IRC; (x) no accumulated funding deficiency within the meaning of
Section 412 of the IRC or Section 302 of ERISA has been incurred with respect to
any Plan subject to the
funding standards of those provisions; (xi) with respect to each Plan, there
have been no prohibited transactions as defined in Section 406 of ERISA or
Section 4975 of the IRC, and there are no actions, suits or claims with respect
to the assets thereof (other than routine claims for benefits) pending or
threatened; and (xii) all required reports, descriptions and notices (including,
but not limited to, Form 5500 Annual Reports, Summary Annual Reports and Summary
Plan Descriptions) have been appropriately filed with the government or
distributed to participants with respect to each Plan.
8.23 LABOR DISPUTES. Except as disclosed in the Wesbanco Disclosure
Schedule, neither Wesbanco nor any of its subsidiaries are directly or
indirectly involved in or threatened with any labor dispute, including, without
limitation, matters regarding discrimination by reason of age, race, creed, sex,
handicap or national origin, which would materially and adversely effect their
financial condition, assets, businesses or operations taken as a whole. No
collective bargaining representatives represent any Wesbanco, or Wesbanco Subs,
employees and no petition for election of any collective bargaining
representative has been filed and, to the knowledge of Wesbanco and its
subsidiaries, no organizational campaign on behalf of any collective bargaining
unit has been undertaken by or on behalf of any Wesbanco, or Wesbanco Subs
employees.
8.24 RESERVE FOR POSSIBLE LOAN LOSSES. The reserve for possible loan losses
shown on the consolidated balance sheet of Wesbanco and its subsidiaries as of
September 30, 1998, delivered pursuant to this Agreement is adequate in all
material respects as of the date thereof.
8.25 ADDITIONAL COVENANTS. Except as otherwise contemplated by this
Agreement, Wesbanco covenants and agrees:
(a) That it will use its best efforts in good faith to take, or cause
to be taken all action required under this Agreement on its part, or
Fairmont's part, to be taken as promptly as practicable so as to permit the
consummation of the Merger at the earliest possible date and to cooperate
fully with the other parties to that end, and that it will, in all such
efforts, give priority to this acquisition of Heritage;
(b) To deliver to Heritage all Forms 10-K, 10-Q and 8-K filed for
periods ending after the date of this Agreement within seven (7) days after
the filing of each such report with the SEC;
(c) To promptly advise Heritage of any material adverse change in the
financial condition, assets, businesses or operations of Wesbanco or any of
its subsidiaries, or any material changes or inaccuracies in data provided
to Heritage pursuant to this Agreement or any "acquisition proposal" with
respect to Wesbanco received by Wesbanco;
(d) To cooperate with Heritage in furnishing such information
concerning the business and affairs of Wesbanco and its subsidiaries and
its directors and officers as is reasonably necessary or requested in order
to prepare and file any application for regulatory or governmental
approvals, including but not limited to an application to the Federal
Deposit Insurance Corporation and the West Virginia Department of Banking
for prior approval of the merger of Heritage into Fairmont as contemplated
hereunder. Wesbanco will use its best efforts to obtain the approval or
consent of any federal, state or other regulatory agency having
jurisdiction and of any other party to the extent that such approvals
or consents are required to effect the Merger and the transactions contemplated
hereby or are required with respect to the documents described in Section 8.4
hereof; and
(e) To cooperate with Heritage in furnishing such information
concerning the business of Wesbanco and its subsidiaries as is reasonably
necessary or requested in order to prepare any Proxy Statement to be
prepared in connection with the Merger.
SECTION 9
INVESTIGATION
Subject to the conditions set forth in this Section 9, prior to the
Effective Time, Wesbanco and Heritage may directly and through their
representatives, make such investigation of the assets and business of Wesbanco
and Heritage, and Wesbanco's subsidiaries, as each deems necessary or advisable.
Wesbanco and Heritage and their representatives, including their accountants,
shall have, at reasonable times after the date of execution by Wesbanco and
Heritage hereof, full access to the premises and to all the property, documents,
material contracts, books and records of each, and its subsidiaries, and to all
documents, information and working papers concerning each held by such party's
accountants, without interfering in the ordinary course of business of such
entity, and the officers of each will furnish to the other such financial and
operating data and other information with respect to the business and properties
of each other and their subsidiaries as each shall from time to time reasonably
request; provided, however, that neither party shall be required to give such
access or information to the other party to the extent that it is prohibited
therefrom by rule, regulation, or order of any regulatory body, and further
provided that confidential information of individual banking customers shall not
be photocopied
or removed from the premises of such institution. All data and information
received by Wesbanco and its authorized representatives from Heritage and by
Heritage and its authorized representatives from Wesbanco shall be held in
strict confidence by such party and its authorized representatives, and neither
party nor its authorized representatives will use such data or information or
disclose the same to others except with the written permission of the other
party. For a period of 45 days after the date of execution hereof, or prior
completion of the investigation herein provided, this Agreement may be
terminated by each such corporation if such investigation reveals to the other
any information concerning the other which in the opinion of such corporation
would have a material adverse effect on the present or future value of the other
such corporation and its subsidiaries' assets, net worth, business or income
taken as a whole. Each such corporation shall provide prompt written notice to
the other of such decision and the matters relied on therefore.
SECTION 10
NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES
The representations and warranties included or provided herein shall not
survive the Effective Date.
SECTION 11
CONDITIONS PRECEDENT; CLOSING DATE AND EFFECTIVE DATE
11.1 CONDITIONS PRECEDENT OF WESBANCO AND HERITAGE. The consummation of
this Agreement by Wesbanco and Heritage and the Merger is conditioned upon the
following:
(a) The shareholders of Heritage shall have approved this Agreement by
such vote as required by law;
(b) The West Virginia Banking Board shall not, within 120 days from
the date of Wesbanco's submission to the Banking Board pursuant to West
Virginia Code Section 31 A-8A- 4(a), have entered an order disapproving the
acquisition of Heritage by Wesbanco and its merger with and into Fairmont
pursuant to this Agreement;
(c) The Secretary of State of West Virginia shall have issued a
Certificate of Merger for the merger of Heritage with and into Fairmont;
(d) The Federal Deposit Insurance Corporation shall have approved the
application of Fairmont to merge with Heritage.
(e) The Registration Statement of Wesbanco shall still be effective on
the date of the Closing and all post-effective amendments filed shall have
been declared effective or shall have been withdrawn by that date. No stop
orders suspending the effectiveness thereof shall have been issued which
remain in effect on the date of the Closing or shall have been threatened,
and no proceedings for that purpose shall, before the Closing, have been
initiated or, to the knowledge of Wesbanco, threatened by the SEC. All
state securities and "Blue Sky" permits or approvals required (in the
opinion of Wesbanco and Heritage to carry out the transaction contemplated
in this Agreement) shall have been received.
(f) No order to restrain, enjoin or otherwise prevent the consummation
of the transaction contemplated in this Agreement shall have been entered
by any court or administrative body which remains in effect on the date of
the Closing.
(g) Wesbanco, Heritage and Fairmont shall have received, in form and
substance satisfactory to Wesbanco's and Heritage's counsel; all consents,
federal,
state, governmental, regulatory and other approvals and permissions and the
satisfaction of all the requirements prescribed by law which are necessary
to the carrying out of the transactions contemplated hereby shall have been
procured, including the filing of an effective Registration Statement with
the Securities and Exchange Commission and the West Virginia Securities
Commissioner, and in addition, Wesbanco and Heritage shall have received
any and all consents required with respect to the documents described
pursuant to Section 7.3 and Section 8.4 hereof;
(h) All delay periods and all periods for review, objection or appeal
of or to any of the consents, approvals or permissions required with
respect to the consummation of the Merger and this Agreement shall have
expired;
(i) Unless waived by Wesbanco and Heritage, the holders of not more
than ten percent (10%) of the Voting Shares (as defined in Section 6.1
hereof) shall have filed written objections to the Agreement in accordance
with the WVCA, not have voted in favor of the Agreement at the special
meeting of Heritage shareholders referred to in Section 13.1 hereof and
have made written demand for the fair value of such Voting Shares within
ten days;
(j) On or before the Closing Date, there shall have been received from
the Internal Revenue Service a ruling or rulings, or, at the option of
Heritage, in lieu thereof an opinion from counsel for Heritage
substantially to the effect that for Federal Income Tax purposes:
(i) The statutory merger of Heritage with Fairmont will
constitute a reorganization within the meaning of Section 368(a)(1) of
the Internal Revenue Code of 1986 ("IRC"), and Wesbanco,
Heritage and Fairmont will each be a "party to the reorganization" as
defined in IRC Section 368(b);
(ii) No gain or loss will be recognized by Wesbanco, Heritage or
Fairmont as a result of the transactions contemplated in the
Agreement;
(iii) No gain or loss will be recognized by the shareholders of
Heritage as a result of their exchange of Heritage's Common Stock for
Wesbanco's Common Stock except to the extent any shareholder receives
cash in lieu of a fractional share or as a dissenting shareholder;
(iv) The holding period of the Wesbanco Common Stock received by
each holder of Heritage's Common Stock will include the period during
which the stock of Heritage surrendered in exchange therefor was held,
provided such stock was a capital asset in the hands of the holder on
the date of exchange; and
(v) The Federal Income Tax Basis of the Wesbanco Common Stock
received by each holder of Heritage's Common Stock will be the same as
the basis of the stock exchanged therefore.
(k) No action, proceeding, regulation or legislation shall have been
instituted before any court, governmental agency or legislative body to
enjoin, restrain or prohibit, or to obtain substantial damages with respect
to, the Agreement or the consummation of the transactions contemplated
hereby, which, in the reasonable judgment of Wesbanco or Heritage, would
make it inadvisable to consummate such transactions (it being understood
and agreed that a written request by governmental authorities for
information with respect to the Merger may not be deemed by either party to
be a threat of material litigation or proceeding, regardless of whether
such request is received before or after execution of the Agreement).
(l) The approvals referred to in subparagraphs (b) and (d) of
Subsection 1 1.1 herein shall not have required the divestiture or
cessation of any significant part of the present operations conducted by
Wesbanco, Heritage or any of their subsidiaries, and shall not have imposed
any other condition, which divestiture, cessation or condition Wesbanco
reasonably deems to be materially disadvantageous or burdensome.
11.2 CONDITIONS PRECEDENT OF WESBANCO. The consummation of this Agreement
by Wesbanco and the Merger is also conditioned upon the following:
(a) Unless waived by Wesbanco, the representations and warranties of
Heritage contained in this Agreement shall be correct on and as of the
Effective Date with the same effect as though made on and as of such date,
except for representations and warranties expressly made only as of a
particular date and except for changes which have been consented to by
Wesbanco or which are not, in the aggregate, material and adverse, to the
financial condition, businesses, properties or operations of Heritage, or
which are the result of expenses or transactions contemplated or permitted
by the Agreement, and Heritage shall have performed in all material
respects all of its obligations and agreements hereunder theretofore to be
performed by it; and Wesbanco and Fairmont shall have received on the
Effective Date an appropriate certificate (in affidavit form) dated the
Effective Date and executed on behalf of Heritage by one or more
appropriate executive officers of Heritage to the effect that such officers
have no knowledge of the non-fulfillment of the foregoing condition;
(b) Opinion of Heritage Counsel. An opinion of Jackson & Kelly,
counsel for Heritage, shall have been delivered to Wesbanco, dated the
Closing Date, and in form and substance satisfactory to Wesbanco and its
counsel, to the effect that:
(i) Heritage is a corporation duly organized, validly existing
and in good standing under the laws of the State of West Virginia and
has the full corporate power and authority to own all of its
properties and assets and to carry on its business as it is now being
conducted, and neither the ownership of its property nor the conduct
of its business requires it to be qualified to do business in any
other jurisdiction except where the failure to be so qualified,
considering all such cases in the aggregate, does not involve a
material risk to the business, properties, financial position or
results of operations of Heritage, taken as a whole.
(ii) Heritage has the full corporate power to execute and deliver
the Agreement and Plan of Merger. All corporate action of Heritage
required to duly authorize the Agreement and Plan of Merger and the
actions contemplated thereby has been taken, and the Agreement and
Plan of Merger is valid and binding on Heritage in accordance with its
terms, subject, as to the enforcement of remedies, to applicable
bankruptcy, insolvency, moratorium, or other similar laws affecting
the enforcement of creditors' rights generally from time to time in
effect, and subject to any equitable principles limiting the right to
obtain specific performance of certain obligations thereunder.
(iii) All shares of common stock of Heritage issued and
outstanding as of the Effective Date are duly authorized, validly
issued and fully paid.
(iv) The consummation of the merger contemplated by the Agreement
and Plan of Merger will not violate any provision of Heritage's
Articles of Incorporation or Bylaws, or violate any provision of, or
result in the acceleration of any material obligation under, any
material mortgage, loan agreement, order, judgment, law or decree
known to such counsel to which Heritage is a party or by which it is
bound and will not violate or conflict with any other material
restriction of any kind or character known to such counsel to which
Heritage is subject, which would have a
materially adverse effect on the assets, business or operations of
Heritage, taken as a whole.
(v) To the best of such counsel's knowledge, as of the date
hereof, Heritage is not involved in any litigation against it (with
possible exposure of $100,000.00 or more), pending or threatened, that
has not been disclosed to Wesbanco.
(c) Unless waived by Wesbanco, on or before the Effective Date, Ernest
& Young, LLP, the independent public accountants for Wesbanco, shall have
rendered an opinion to Wesbanco that the Merger will be treated as a
"purchase" for accounting purposes.
(d) Heritage shall have delivered to Wesbanco a schedule identifying
all persons who may be deemed to be "affiliates" of Heritage under Rule 145
of the Securities Act of 1933, as amended, and shall use its best efforts
to cause each affiliate to deliver to Wesbanco prior to the Effective Date
a letter substantially in the form attached hereto as Exhibit "A".
(e) Thomas J. Hansberry shall have duly executed and delivered an
employment agreement with Heritage, dated as of the Closing Date, in
substantially the form agreed to by the parties thereto.
(f) Heritage shall have furnished Wesbanco with a certified copy of
resolutions duly adopted by the Board of Directors and the shareholders of
Heritage approving the Agreement and authorizing the Merger and the
transactions contemplated hereby.
(g) Unless waived by Wesbanco, on the Closing Date, there shall not be
pending against Heritage or the officers or directors of Heritage in their
capacity as such, any suit, action or proceeding which, in the reasonable
judgment
of Wesbanco, if successful, would have material adverse effect on the
financial condition or operations of Heritage.
11.3 CONDITIONS PRECEDENT OF HERITAGE. The consummation of this Agreement
by Heritage and the Merger is also conditioned upon the following:
(a) Unless waived by Heritage, the representations and warranties of
Wesbanco and Fairmont contained in this Agreement shall be correct on and
as of the Effective Date with the same effect as though made on and as of
such date, except for representations and warranties expressly made only as
of a particular date and except for changes which have been consented to by
Heritage or which are not in the aggregate material and adverse to the
financial condition, businesses, properties or operations of Wesbanco and
Fairmont are the result of expenses or transactions contemplated or
permitted by this Agreement, and Wesbanco and Fairmont shall have performed
in all material respects all of their obligations and agreements hereunder
theretofore to be performed by them; and Heritage shall have received on
the Effective Date an appropriate certificate (in affidavit form) dated the
Effective Date and executed on behalf of Wesbanco and Fairmont by one or
more appropriate executive officers of each of them to the effect that such
officers have no knowledge of the nonfulfillment of the foregoing
conditions;
(b) OPINION OF WESBANCO COUNSEL. An opinion of Phillips, Gardill,
Kaiser & Altmeyer, counsel for Wesbanco, shall have been delivered to
Heritage, dated the Closing Date, and in form and substance satisfactory to
Heritage and its counsel, to the effect that:
(i) Wesbanco and Fairmont are corporations duly organized,
validly existing and in good standing under the laws of the State of
West Virginia and have the full corporate power and authority to own
all of their properties and assets and to carry on their businesses as
they are now being conducted, and neither the ownership of their
property nor the conduct of their businesses require them to be
qualified to do business in any other jurisdiction except where the
failure to be so qualified, considering all such cases in the
aggregate, does not involve a material risk to the business,
properties, financial position or results of operations of Wesbanco,
Fairmont and the Wesbanco Subs, taken as a whole.
(ii) Wesbanco and Fairmont have the full corporate power to
execute and deliver the Agreement and Plan of Merger. All corporate
action of Wesbanco and Fairmont required to duly authorize the
Agreement and Plan of Merger and the actions contemplated thereby has
been taken, and the Agreement and Plan of Merger is valid and binding
on Wesbanco and Fairmont in accordance with its terms, subject, as to
the enforcement of remedies, to applicable bankruptcy, insolvency,
moratorium, or other similar laws affecting the enforcement of
creditors' rights generally from time to time in effect, and subject
to any equitable principles limiting the right to obtain specific
performance of certain obligations thereunder.
(iii) The shares of common stock of Wesbanco into which shares of
common stock of Heritage shall be converted pursuant to the terms of
the Agreement and Plan of Merger have been duly authorized, and when
delivered pursuant to the terms of the Agreement and Plan of Merger,
will have been legally and validly issued, and will be filly paid and
nonassessable.
(iv) The consummation of the merger contemplated by the Agreement
and Plan of Merger will not violate any provision of Wesbanco's or
Fairmont's Articles of Incorporation or Bylaws, or violate any
provision of, or result in the acceleration of any material obligation
under, any material mortgage, loan agreement, order, judgment, law or
decree known to such counsel to which Wesbanco or Fairmont are a party
or by which it is bound, and will not violate or conflict with any
other material restriction of any kind or character known to such
counsel to which Wesbanco or Fairmont are subject which would have a
material adverse effect on the assets, business or operations of
Wesbanco and Fairmont, taken as a whole.
(v) Each of Wesbanco's subsidiaries is duly organized, validly
existing and in good standing under the laws of the state of its
organization and has the requisite corporate power and authority to
own and lease its properties and to conduct its business as it is now
being conducted. To the best of such counsel's knowledge, Wesbanco
owns 100% of the issued and outstanding stock of each such
corporation.
(vi) To the best of such counsel's knowledge, as of the date
hereof, neither Wesbanco nor any of its subsidiaries were involved in
any litigation against them (with possible exposure of $100,000.00 or
more), pending or threatened, that has not been disclosed to Heritage.
(vii) The Registration Statement for the stock to be delivered
pursuant to the Agreement and Plan of Merger has become effective
under the Securities Act of 1933, and such counsel is not aware of any
stop orders in effect with regard to such Registration Statement.
(c) Wesbanco and Fairmont shall have furnished Heritage with certified
copies of resolutions duly adopted by the Boards of Directors of Wesbanco
and Fairmont and the shareholders of Fairmont approving the Agreement and
authorizing the Merger and transactions contemplated hereby.
(d) Unless waived by Heritage, on the Closing Date, there shall not be
pending against Wesbanco or any of its subsidiaries or the officers or
directors of Wesbanco or any of its subsidiaries in their capacity as such,
any suit, action or proceeding which, in the reasonable judgment of
Heritage, if successful, would have a material adverse effect on the
financial condition or operations of Wesbanco or any of its subsidiaries.
(e) Unless waived by Heritage, there shall not have been any change in
control of Wesbanco since September 30, 1998.
11.4 CLOSING DATE. The Closing shall be effected as soon as practicable
after all of the conditions contained herein shall have been satisfied on the
Closing Date as defined in Section 2.3 hereof, which Closing Date shall be the
latest of:
(a) The day of the meetings of the shareholders of Heritage or
Fairmont, whichever is later, at which the Agreement is approved;
(b) The fifteenth (15th) day after the approval of the acquisition of
Heritage by the Federal Deposit Insurance Corporation ("FDIC");
(c) The day after any stay of the FDIC's approval of the acquisition
of Heritage shall be vacated or shall have expired or the day after any
injunction against the closing of the Merger shall be lifted, discharged or
dismissed;
(d) The day after the approval of the acquisition of Heritage by the
West Virginia Department of Banking is received by Wesbanco;
(e) The date on which the conditions set forth in Section 11 are
satisfied or waived;
(f) Such other date as shall be mutually agreed to by Wesbanco and
Heritage.
The Closing shall be held in Clarksburg, West Virginia, at such time and place
as the parties may agree upon. The date and time of closing are herein called
the "Closing Date". Promptly after the Closing, the Articles of Merger with
respect to the Merger shall be filed with the Secretary of State of West
Virginia.
11.5 EFFECTIVE DATE. The Merger shall become effective (the "Effective
Date") on the date on which the Certificate of Merger approving the Merger is
issued by the Secretary of State
of West Virginia. The Surviving Corporation shall record said Certificate of
Merger in the offices of the Clerks of the County Commission of Marion and
Harrison Counties.
SECTION 12
TERMINATION OF AGREEMENT
12.1 GROUNDS FOR TERMINATION. This Agreement and the transactions
contemplated hereby may be terminated at any time prior to the Closing Date
either before or after the meeting of the shareholders of Heritage:
(a) By mutual consent of Heritage and Wesbanco;
(b) By either Heritage or Wesbanco if any of the conditions hereto to
such party's obligations to close have not been met as of the Closing Date
and the same has not been waived by the party adversely affected thereby;
(c) By either Heritage or Wesbanco if the Merger shall violate any
non-appealable final order, decree or judgment of any court or governmental
body having competent jurisdiction;
(d) By Heritage or Wesbanco, if the Closing Date has not occurred by
the first anniversary of the date of execution of this Agreement;
(e) By the Heritage Board, if at any time during the ten ( 10) day
period commencing two (2) days after the Determination Date if both of the
following conditions are satisfied:
(i) The Wesbanco Market Value (as herein defined) is less than
$26.00, and
(ii) (A) The number obtained by dividing the Wesbanco Market
Value by $28.50 (the "Heritage Ratio") is less than (B) the
number obtained by dividing the Average Index Value (as defined
herein) by the Index Value (as defined herein) on the date of this
Agreement, and subtracting 0.20 from the quotient (such number being
referred to herein as the "Index Ratio").
Provided, however, that if Heritage elects to exercise the termination
right contemplated by the foregoing clause, it will give prompt written
notice to Wesbanco (which notice may be withdrawn at any time within the
aforementioned ten (10)day period) and during the five (5) days commencing
with its receipt of such notice, Wesbanco will have the option to adjust
the Exchange Ratio to equal the lesser of (A) the quotient established by
dividing (a) the product of $26.00 and the Exchange Ratio (as then in
effect) by (b) the Wesbanco Market Value, and (B) the quotient obtained by
dividing (a) the product of the Index Ratio and the Exchange Ratio (as then
in effect) by (b) the Heritage Ratio (and, if Wesbanco makes an election
contemplated by the preceding sentence within the five (5) day period, it
will give prompt written notice to Heritage of such election and the
revised Exchange Ratio, whereby no termination will have occurred as a
result of this right of termination and this Agreement will remain in
effect in accordance with its terms (except for the modification of the
Exchange Ratio), and any references in the Agreement to "Exchange Ratio"
will thereafter be deemed to refer to the Exchange Ratio as so adjusted,
and a corresponding modification will be made to the Section S of the
Agreement).
For purposes of the right of termination and adjustment described
herein, the following terms are defined as follows: "Wesbanco Market Value"
has the
meaning ascribed in Section 5 hereof. "Average Index Value" means the
average of the close of the Nasdaq Bank Index for the ten (10) consecutive
full Nasdaq trading days ending at the close of trading on the
Determination Date, as published in the Wall Street Journal. "Determination
Date" has the meaning ascribed to such term in Section S hereof. "Index
Value" on a given date means the Nasdaq Bank Index close for such date.
(f) By either party in the event that the shareholders of Heritage
vote against consummation of the Merger.
(g) By Wesbanco or Heritage within 45 days of the date hereof pursuant
to the provisions of Section 9 of this Agreement.
12.2 EFFECT OF TERMINATING; RIGHT TO PROCEED. In the event this Agreement
shall be terminated pursuant to Section 12.1, all further obligations of
Wesbanco and Heritage under this Agreement, except Sections 9, 12.1, 12.2, and
l9 hereof, shall terminate without further liability of Wesbancp and Fairmont to
Heritage, or of Heritage to Wesbanco and Fairmont.
12.3 RETURN OF DOCUMENTS IN EVENT OF TERMINATION. In the event of
termination of this Agreement for any reason, Wesbanco and Heritage shall each
promptly deliver to the other all documents, work papers and other material
obtained from each other relating to the transactions contemplated hereby,
whether obtained before or after the execution hereof, including information
obtained pursuant to Section 9 hereof, and will take all practicable steps to
have any information so obtained kept confidential, and thereafter, except for
any breach of the continuing sections of the Agreement, each party shall be
mutually released and discharged from liability to the other party or to any
third parties hereunder, and no party shall be liable to any other party for any
costs or expenses paid or incurred in connection herewith.
SECTION 13
MEETING OF SHAREHOLDERS OF HERITAGE
13.1 Heritage shall take all steps necessary to call and hold a special
meeting of its shareholders, in accordance with applicable law and the Articles
of Incorporation and Bylaws of Heritage as soon as practicable (considering the
regulatory approvals required to be obtained) for the purpose of submitting this
Agreement to its shareholders for their consideration and approval and will send
to its shareholders for purposes of such meeting a Proxy Statement which will
not contain any untrue statement of a material fact with respect to Heritage or
omit to state a material fact with respect to Heritage required to be stated
therein or necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading, and which otherwise
materially complies as to form with all applicable laws, rules and regulations.
13.2 It is understood that as an integral part of the transaction
contemplated by this Agreement, Wesbanco shall file a Registration Statement
with respect to the offering of its common shares to be issued in the Merger.
The term "Registration Statement" as used in this Agreement includes all
preliminary filings, post-effective amendments and any Proxy Statement of
Heritage. Accordingly, Wesbanco and Heritage agree to assist and cooperate fully
with each other in the preparation of the Registration Statement. Both Heritage
and Wesbanco further agree to deliver to each other, both as of the Effective
Date of the Registration Statement and as of the Closing, a letter, in form and
substance satisfactory to the other party and its counsel, stating that, to the
best of their knowledge and belief, all of the facts with respect to either
Wesbanco or Heritage, as the case may be, set forth in the Registration
Statement, are true and correct in all material respects, and that the
Registration Statement does not omit any material
fact necessary to make the facts stated therein with respect to such party not
misleading in light of the circumstances under which they were made.
SECTION 14
BROKERS
Heritage represents and warrants to Wesbanco and Wesbanco represents and
warrants to Heritage that no broker or finder has been employed, or is entitled
to a fee, commission or other compensation, with respect to this Agreement or
the transactions contemplated hereby.
SECTION 15
GOVERNING LAW; SUCCESSORS AND
ASSIGNS; COUNTERPARTS; ENTIRE AGREEMENT
This Agreement (a) shall be governed by and construed under and in
accordance with the laws of the State of West Virginia; (b) shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns, provided, however, that this Agreement may not be
assigned by any party without the written consent of the other parties hereto;
(c) may be executed in one or more counterparts, all of which shall be
considered one and the same agreement, and shall become effective and binding as
to Wesbanco, Fairmont and Heritage when one or more counterparts shall have been
signed and delivered by Wesbanco, Fairmont and Heritage; and (d) embodies the
entire Agreement and understanding of the parties with respect to the subject
matter hereof; and (e) supersedes all prior agreements and understandings,
written or oral, between Heritage and Wesbanco relating to the subject matter
hereof.
SECTION 16
EFFECT OF CAPTIONS
The captions of this Agreement are included for convenience only and shall
not in any way affect the interpretation or construction of any of the
provisions hereof.
SECTION 17
NOTICES
Except as specifically provided in Section 7.20(d) hereof, any notices or
other communication required or permitted hereunder shall be sufficiently given
if delivered personally or sent by first class, registered or certified mail
postage prepaid, with return receipt requested addressed as follows:
To Heritage:
The Heritage Bank of Harrison County, Inc.
140 West Main Street
P.O. Box lll0
Clarksburg, WV 26302-11 l0
ATTENTION: Thomas J. Hansberry, President
With a copy to:
Jackson & Kelly
P.O. Box 553
Charleston, WV 25322-0553
ATTENTION: Charles D. Dunbar, Esq.
To Wesbanco:
Wesbanco, Inc.
One Bank Plaza
Wheeling, WV 26003
ATTENTION: Edward M. George, President
With a copy to:
Phillips, Gardill, Kaiser & Altmeyer
61 Fourteenth Street
Wheeling, WV 26003
ATTENTION: James C. Gardill, Esq.
or such other addresses as shall be furnished in writing by either party to the
other party. Any such notice or communication shall be deemed to have been given
as of the date so mailed.
SECTION 18
AMENDMENTS
Any of the terms or conditions of the Agreement may be waived at any time
by the party which is, or the shareholders of which are, entitled to the benefit
thereof, by action taken by the Board of Directors of such party, or any of such
terms or conditions may be amended or modified in whole or in part at any time
as follows. This Agreement may be amended in writing (signed by all parties
hereto) before or after the meeting of Heritage shareholders at any time prior
to the Closing Date with respect to any of the terms contained herein, provided,
however, that if amended after such meeting of shareholders, the conversion
ratio per share at which each share of common stock of Heritage shall be
converted in the Merger and any other material terms of the Merger shall not be
amended after the meeting of Heritage shareholders unless the amended terms are
resubmitted to the shareholders for approval. Neither the Agreement nor any
provisions hereof, may be changed, waived, discharged or terminated orally, or
by the passage of time, except by a statement in writing signed by the party
against which the enforcement of such change, waiver, discharge or termination
is sought.
SECTION 19
EXPENSES
Each party to this Agreement shall pay its own legal and accounting fees
and other costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby.
SECTION 20
MISCELLANEOUS
20.1 PUBLICITY. The parties will not publicly release any information
about the transactions contemplated hereby except as they may mutually agree or
as may be required by law.
20.2 INCORPORATION BY REFERENCE. Any and all schedules, exhibits, annexes,
statements, reports, certificates or other documents or instruments referred to
herein or attached hereto are incorporated herein by reference as though fully
set forth at the point referred to in the Agreement.
20.3 MATERIAL ADVERSE CHANGE. In determining whether there has been a
material adverse change for purposes of this Agreement, costs and expenses of
the transactions contemplated hereby shall not be taken into account provided,
however, that only the first $50,000 of such expenses shall be so excluded.
20.4 BINDING DATE. This Agreement is effective and binding as to Wesbanco,
Fairmont and Heritage upon the date first above written.
IN WITNESS WHEREOF, Wesbanco, Fairmont and Heritage have each caused this
Agreement to be executed on its behalf by its officers "hereunto duly authorized
all as of the day and year first above written.
WESBANCO, INC., a West Virginia
corporation
By /s/ Edward M. George
----------------------------------
Its President and CEO
----------------------------
(SEAL)
ATTEST:
/s/ Mary R. Gessler
- -------------------------------------
ASSISTANT SECRETARY
THE HERITAGE BANK OF HARRISON
COUNTY, INC., a West Virginia banking
corporation
By /s/ Thomas J. Hansberry
-----------------------------------
Its President
----------------------------
(SEAL)
ATTEST:
/s/ Gary Jarrell
- -------------------------------------
SECRETARY
WESTBANCO BANK FAIRMONT, a West
Virginia banking corporation
By /s/ Rudy F. Torjak, Jr.
-----------------------------------
Its Executive Vice President
----------------------------
(SEAL)
ATTEST:
/s/ E. Jean Lambert
- -------------------------------------
SECRETARY
EXHIBIT A
AFFILIATE LETTER
----------------------
Wesbanco, Inc.
Bank Plaza
Wheeling, WV 26003
Gentlemen:
Reference is made to the Agreement and Plan of Merger (the "Agreement"),
dated as of the _______ day of _______________, 1998, by and between Wesbanco,
Inc. ("Wesbanco") and The Heritage Bank of Harrison County, Inc. ("Heritage")
providing for the merger ("Merger") of Heritage with Wesbanco Bank Fairmont,
Inc. ("Fairmont") a wholly owned subsidiary of Wesbanco, whereby Wesbanco shall
acquire all of the outstanding common stock of Heritage through and as a result
of such Merger in exchange for shares of the common stock of Wesbanco. The
undersigned stockholder of Heritage has been identified as a person who may be
an "Affiliate" of Heritage for purposes of Rule 145 of the Securities Act of
1933, as amended (the "Act"). As a result of the transactions contemplated by
the Agreement, the undersigned stockholder will receive shares of Wesbanco
stock. In consideration of the receipt of such shares, the undersigned
stockholder warrants and covenants as follows:
(1) Until the expiration of the limitation on the transfer as
provided in Rule 145 of the shares of Wesbanco Common Stock received as a
result of the Merger, the undersigned stockholder will not sell, transfer
or assign, and Wesbanco shall not be required to give effect to any
attempted sale, transfer or assignment, except pursuant to (i) a
Registration Statement then in effect under the Act, (ii) a transaction
permitted by Rule 145 as to which Wesbanco has received evidence of
compliance with the provisions of Rule 145 reasonably satisfactory to it,
or (iii) a transaction which, in the opinion of counsel or as described in
a "no action" or interpretive letter from the staff of the Securities and
Exchange Commission, in either case in form and substance reasonably
satisfactory to Wesbanco, is exempt from or otherwise complies with the
registration requirements of the Act.
(2) Until the expiration of any limitation on the transfer of the
Wesbanco Common Stock as provided in Rule 145(d), each certificate the
undersigned receives for Wesbanco Common Stock as a result of the Merger
may bear a restrictive legend in substantially the following form:
Wesbanco, Inc.
- ------------------------
Page 2
"The shares represented by this certificate have been issued to the
registered holder as a result of a transaction to which Rule l 45 under
the Securities Act of 1933 (the "Act") as amended, applies. The shares
represented by this certificate may not be sold, transferred, or assigned,
and the issuer shall not be required to give effect to any attempted sale,
transfer or assignment, except pursuant to (i) the Registration Statement
then in effect under the Act, (ii) a transaction permitted by said Rule
145 reasonably satisfactory to it, or (iii) a transaction which, in the
opinion of counsel or as described in a `no action' or interpretive lever
from the staff of the Securities and Exchange Commission, in each case
satisfactory in form and substance to the issuer, is exempt from the
registration requirements of the Act."
Very truly yours,
--------------------------------------
ACCEPTED this day of
----
, 1998.
- -----------------
WESBANCO, INC.
By
-----------------------------
Its
----------------------
Appendix II
FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER
THIS AMENDMENT AGREEMENT, made this 19th day of February, 1999, by and
between WESBANCO, INC., a West Virginia corporation, with its principal place of
business located at Bank Plaza, Wheeling, West Virginia (hereinafter called
"Wesbanco"), party of the first part, and THE HERITAGE BANK OF HARRISON COUNTY,
INC., a West Virginia banking corporation, with its principal place of business
located at 140 West Main Street, P.O. Box 1110, Clarksburg, West Virginia,
26301-1110 (hereinafter called "Heritage"), party of the second part, and
WESBANCO BANK FAIRMONT, INC. a West Virginia banking corporation and a
wholly-owned subsidiary of Wesbanco (hereinafter called "Fairmont"), party of
the third party.
WHEREAS, Wesbanco, Heritage and Fairmont heretofore entered into a certain
Agreement and Plan of Merger dated the 10th day of November, 1998, (hereinafter
called "Agreement") providing for the acquisition of Heritage by Wesbanco
through a statutory merger with and into Fairmont, and
WHEREAS, the parties desire to amend certain provisions of said Agreement
in light of a conflict in the language in the original Agreement.
NOW, THEREFORE, for and in consideration of the mutual promises and
covenants hereinafter set forth, the parties hereto, intending to be legally
bound hereby, do hereby agree as follows:
1. Subsection (e) of Section 12.1 of said Agreement is hereby deleted and
the following Subsection (e) is substituted therefore:
(e) By the Heritage Board, if on the Determination Date both of the
following conditions are satisfied:
(i) The Wesbanco Market Value (as herein defined) is less than
$26.00, and
(ii) (A) The number obtained by dividing the Wesbanco Market
Value by $28.50 (the "Heritage Ratio")
is less than (B) the number obtained by dividing the Average
Index Value (as defined herein) by the Index Value (as defined
herein) on the date of this Agreement, and subtracting 0.20 from
the quotient (such number being referred to herein as the "Index
Ratio").
Provided, however, that if Heritage elects to exercise the termination
right contemplated by the foregoing clause, it will give prompt written
notice to Wesbanco (which notice may be withdrawn at any time) and during
the two (2) days commencing with its receipt of such notice, Wesbanco will
have the option to adjust the Exchange Ratio to equal the lesser of (A) the
quotient established by dividing (a) the product of $26.00 and the Exchange
Ratio (as then in effect) by (b) the Wesbanco Market Value, and (B) the
quotient obtained by dividing (a) the product of the Index Ratio and the
Exchange Ratio (as then in effect) by (b) the Heritage Ratio (and, if
Wesbanco makes an election contemplated by the preceding sentence within
the two (2) day period, it will give prompt written notice to Heritage of
such election and the revised Exchange Ratio, whereby no termination will
have occurred as a result of this right of termination and this Agreement
will remain in effect in accordance with its terms (except for the
modification of the Exchange Ratio), and any references in the Agreement to
"Exchange Ratio" will thereafter be deemed to refer to the Exchange Ratio
as so adjusted, and a corresponding modification will be made to the
Section 5 of the Agreement).
For purposes of the right of termination and adjustment described
herein, the following terms are defined as follows: "Wesbanco Market Value"
has the meaning ascribed in Section 5 hereof. "Average Index Value" means
the average of the close of the Nasdaq Bank Index for the ten (10)
consecutive full Nasdaq trading days ending at the close of trading on the
Determination Date, as published in the Wall Street Journal. "Determination
Date" has the meaning ascribed to such term in Section 5 hereof. "Index
Value" on a given date means the Nasdaq Bank Index close for such date.
2. In all other respects, said Agreement is hereby ratified, confirmed and
affirmed. IN WITNESS WHEREOF, Wesbanco, Fairmont and Heritage have each caused
this agreement to be executed on its behalf by its officers thereunto duly
authorized all as of the day and year first above written.
WESBANCO, INC., a West Virginia
corporation
By /s/ Edward M. George
------------------------------------------
Its President and CEO
------------------------------------
(SEAL)
ATTEST:
/s/ Mary R. Gessler
- ------------------------------------
SECRETARY
THE HERITAGE BANK OF HARRISON
COUNTY, INC., a West Virginia banking
corporation
By /s/ Thomas J. Hansberry
------------------------------------------
Its President
-----------------------------------
(SEAL)
ATTEST:
/s/ Gary Jarrell
- ------------------------------------
SECRETARY
WESBANCO BANK FAIRMONT, a West
Virginia banking corporation
By /s/ Rudy F. Torjak, Jr.
------------------------------------------
Its Executive Vice President
-----------------------------------
(SEAL)
ATTEST:
/s/ E. Jean Lambert
- -----------------------------------
SECRETARY
APPENDIX III
WEST VIRGINIA DISSENTERS' RIGHTS STATUTE
W. VA. CODE ANNOT. SECTION 31-1-123
(a) Any shareholder electing to exercise his right to dissent, pursuant to
section one hundred twenty-two (Section 31-1-122) of this article, shall file
with the corporation, prior to or at the meeting of shareholders at which such
proposed corporate action is submitted to a vote, a written objection to such
proposed corporate action. If such proposed corporate action be approved by the
required vote and such shareholder shall not have voted in favor thereof, such
shareholder may, within ten days after the date on which the vote was taken or
if a corporation is to be merged without a vote of its shareholders into another
corporation, any of its shareholders may, within fifteen days after the plan of
such merger shall have been mailed to such shareholders, make written demand on
the corporation, or, in the case of a merger or consolidation, on the surviving
or new corporation, domestic or foreign, for payment of the fair value of such
shareholder's shares, and, if such proposed corporate action is effected, such
corporation shall pay to such shareholder, upon surrender of the certificate or
certificates representing such shares, the fair value thereof as of the day
prior to the date on which the vote was taken approving the proposed corporate
action, excluding any appreciation or depreciation in anticipation of such
corporate action. Any shareholder failing to make demand within the ten-day
period shall be bound by the terms of the proposed corporate action. Any
shareholder making such demand shall thereafter be entitled only to payment as
in this section provided and shall not be entitled to vote or to exercise any
other rights of a shareholder.
(b) No such demand may be withdrawn unless the corporation shall consent
thereto. If, however, such demand shall be withdrawn upon consent, or if the
proposed corporate action shall be abandoned or rescinded or the shareholders
shall revoke the authority to effect such action, or if, in the case of a
merger, on the date of the filing of the articles of merger the surviving
corporation, is the owner of all the outstanding shares of the other
corporations, domestic and foreign, that are parties to the merger, or if no
demand or petition for the determination of fair value by a court of general
civil jurisdiction have been made or filed within the time provided in
subsection (e) of this section, or if a court of general civil jurisdiction
shall determine that such shareholder is not entitled to the relief provided by
this section, then the right of such shareholder to be paid the fair value of
his shares shall cease and his status as a shareholder shall be restored,
without prejudice to any corporate proceedings which may have been taken during
the interim.
(c) Within ten days after such corporate action is effected, the corporation,
or, in the case of a merger or consolidation, the surviving or new corporation,
domestic or foreign, shall give written notice thereof to each dissenting
shareholder who has made demand as herein provided, and shall make a written
offer to each shareholder to pay for such shares at a specified price deemed by
such corporation to be fair value thereof. Such notice and offer shall be
accompanied by a balance sheet of the corporation the shares of which the
dissenting shareholder holds, as of the latest available date and not more than
twelve months prior to the making of such offer, and a profit and loss statement
of such corporation for the twelve months' period ended on the date of such
balance sheet.
(d) If within thirty days after the date on which such corporate action is
effected the fair value of such shares is agreed upon between any such
dissenting shareholder and the corporation, payment therefor shall be made
within ninety days after the date on which such corporate action was effected,
upon surrender of the certificate or certificates representing such shares. Upon
payment of the agreed value the dissenting shareholder shall cease to have any
interest in such shares.
(e) If within such period of thirty days, a dissenting shareholder and the
corporation do not so agree, then the corporation shall within thirty days after
receipt of written demand from any dissenting shareholder, which written demand
must be given within sixty days after the date on which such corporate action
was effected, file a complaint in a court of general civil jurisdiction
requesting that the fair value of such shares be found and determined, or the
corporation may file such complaint at any time within such sixty-day period at
its own election. Such complaint shall be filed in any court of general civil
jurisdiction in the county in which the principal office of the corporation is
situated, or, if there be no such office in this State, in the county in which
any dissenting shareholder resides or is found or in which the property of such
corporation, or any part of it, may be. If the corporation shall fail to
institute such proceedings, any dissenting shareholder may do so in the name of
the corporation. All dissenting shareholders wherever residing, may be made
parties to the proceedings as an action against their shares quasi in rem. A
copy of the complaint shall be served on each dissenting shareholder who is a
resident of this State in the same manner as in other civil actions. Dissenting
shareholders who are nonresidents of this State shall be served a copy of the
complaint by registered or certified mail, return receipt requested. In
addition, service upon such nonresident shareholders shall be made by
publication, as provided in Rule 4(e)(2) of the
West Virginia Rules of Civil Procedure. All shareholders who are parties to the
proceeding shall be entitled to judgment against the corporation for the amount
of the fair value of their shares. The court may, if it so elects, appoint one
or more persons as appraisers to receive evidence and recommend a decision on
the question of fair value. The appraisers shall have such power and authority
as shall be specified in the order of their appointment or any subsequent
appointment. The judgment shall be payable only upon and concurrently with the
surrender to the corporation of the certificate or certificates representing
such shares. Upon payment of the judgment, the dissenting shareholder shall
cease to have any interest in such shares.
The judgment shall include an allowance for interest at such rate as the
court may find to be fair and equitable in all the circumstances, from the date
on which the vote was taken on the proposed corporate action to the date of
payment.
The costs and expenses of any such proceeding shall be determined by the
court and shall be assessed against the corporation, but all or any part of such
costs and expenses may be apportioned and assessed as the court may deem
equitable against any or all of the dissenting shareholders who are parties to
the proceeding to whom the corporation shall have made an offer to pay for the
shares if the Court shall find that the action of such shareholders in failing
to accept such offer was arbitrary or vexatious or not in good faith. Such
expenses shall include reasonable compensation for and reasonable expenses of
the appraisers, but shall exclude the fees and expenses of counsel for and
experts employed by any part; but if the fair value of the shares as determined
materially exceeds the amount which the corporation offered to pay therefor, or
if no offer was made, the court in its discretion may award to any shareholder
who is a party to the proceeding such sum as the court may determine to be
reasonable compensation to any expert or experts employed by the shareholder in
the proceeding. Any party to the proceeding may appeal any judgment or ruling of
the court as in other civil cases.
(f) Within twenty days after demanding payment for his shares, each
shareholder demanding payment shall submit the certificate or certificates
representing his shares to the corporation for notation thereon that such demand
has been made. His failure to do so shall, at the option of the corporation,
terminate his rights under this section unless a court of general civil
jurisdiction, for good and sufficient cause shown, shall otherwise direct. If
shares represented by a certificate on which notation has been so made shall be
transferred, each new certificate issued therefor shall bear similar notation,
together with the name of the original dissenting holder of such shares, and a
transferee of such shares shall acquire by such transfer no rights in the
corporation other than those which the original dissenting shareholder had after
making demand for payment of the fair value thereof.
(g) Shares acquired by a corporation pursuant to payment of the agreed value
therefor or to payment of the judgment entered therefor, as in this section
provided, may be held and disposed of by such corporation as in the case of
other treasury shares, except that, in the case of a merger or consolidation,
they may be held and disposed of as the plan of merger or consolidation may
otherwise provide.
(1974, c.13)
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 20. Indemnification of Directors and Officers.
WesBanco's Bylaws provide, and West Virginia law permits (W. Va. Code Section
31-1-9), the indemnification of directors and officers against certain
liabilities. Officers and directors of WesBanco and its subsidiaries are
indemnified generally against expenses reasonably incurred in connection with
proceedings in which they are made parties by reason of their being or having
been directors or offices of the corporation, except in relation to matters as
to which a recovery may be obtained by reason of an officer or director having
been finally adjudged derelict in such action or proceeding in the performance
of his duties.
A.Excerpts from Article VI of the Bylaws of WesBanco:
Indemnification of Directors and Officers
Each director and officer, whether or not then in office, shall be
indemnified by the corporation against all costs and expenses reasonably
incurred by and imposed upon him in connection with or resulting from any
action, suit or proceeding, to which he may be made a party by reason of his
being or having been a director or officer of the corporation, or of any other
company which he served at the request of the corporation, except in relation to
matters as to which a recovery shall be had against him by reason of his having
been finally adjudged derelict in such action, suit or proceeding, in the
performance of his duties as such director or officer, and the foregoing right
of indemnification shall not be exclusive of other rights to which he may be
entitled as a matter of law.
B.West Virginia Corporation Law, W. Va. Code Section 31-1-9:
Section 31-1-9. Indemnification of officers, directors, employees and agents.
(a) A corporation shall have power to indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines, taxes and penalties and interest thereon, and amounts
paid in settlement actually and reasonably incurred by him in connection with
such action or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action or proceeding by judgment, order, settlement, conviction, or upon a plea
of nolo contendere or its equivalent, shall not, of itself, create a presumption
that the person did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interest of the corporation, and,
with respect to any criminal action or proceeding, that such person did have
reasonable cause to believe that his conduct was unlawful.
(b) A corporation shall have power to indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or proceeding by or in the right of the corporation to procure
judgment in its favor by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or proceeding if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation, except that no indemnification
shall be made in respect of any claim, issue or matter, including, but not
limited to, taxes or any interest or penalties thereon, as to which such person
shall have been adjudged to be liable for negligence or misconduct in the
performance of his duty to the corporation unless and only to the extent that
the court in which such action or proceeding was brought shall determine upon
application that, despite the adjudication of liability but in view of all
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which such court shall deem proper.
(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action or proceeding referred to in subsection (a) or (b), or in defense of any
claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
(d) Any indemnification under subsection (a) or (b) (unless ordered by a
court) shall be made by the corporation only as authorized in the specific case
upon a determination that indemnification of the director, officer, employee or
agent is proper in the circumstances because he has met the applicable standard
of conduct set forth in subsection (a) or (b). Such determination shall be made
(1) by the board of directors by a majority vote of a quorum consisting of
directors who were not parties to such action or proceeding, or (2) if such a
quorum is not obtainable, or even if obtainable a quorum of disinterested
directors so directs, by independent legal counsel in a written opinion, or (3)
by the shareholders or members.
(e) Expenses (including attorney's fees) incurred in defending a civil or
criminal action or proceeding may be paid by the corporation in advance of the
final disposition of such action or proceeding as authorized in the manner
provided in Subsection (d) upon receipt of an undertaking by or on behalf of the
director, officer, employee or agent to repay such amount unless it shall
ultimately be determined that he is entitled to be indemnified by the
corporation as authorized in this section.
(f) The indemnification provided by this section shall not be deemed
exclusive of any other rights to which any shareholder or member may be entitled
under any bylaw, agreement, vote of shareholders, members or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office, and shall continue as to a
person who has ceased to be a director, officer, employee or agent and shall
inure to the benefit of the heirs, executors, and administrators of such a
person.
(g) A corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee, or agent of another corporation, partnership, joint
partnership, joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity or arising out of
his status as such, whether or not the corporation would have the power to
indemnify him against such liability under the provisions of this section.
(1961,c.15; 1974,c.13; 1975,c.118.)
WesBanco does provide indemnity insurance to its officers and directors. Such
insurance will not, however, indemnify officers or directors for willful
misconduct or gross negligence in the performance of a duty to WesBanco.
Item 21. Exhibits and Financial Statement Schedules.
EXHIBIT TITLE PAGE
- ------- ----- ----
2.1 Agreement and Plan of Merger (incorporated by reference to
Appendix I of the Proxy Statement/Prospectus included in
this Registration Statement).
2.2 First Amendment to Agreement and Plan of Merger
(incorporated by reference to Appendix II of the Proxy
Statement/Prospectus included in this Registration
Statement).
3.1 Articles of Incorporation of WesBanco, Inc., restated as *(1)
of November 17, 1995.
3.2 Articles of Amendment to the Articles of Incorporation of *(6)
WesBanco, Inc.
3.3 Bylaws of WesBanco, Inc. *(1)
4 Specimen Certificate of WesBanco, Inc. Common Stock. *(2)
5 Opinion of Phillips, Gardill, Kaiser & Altmeyer, regarding
the validity of the WesBanco common stock being
registered, filed herewith.
8 Form of opinion of Kirkpatrick & Lockhart LLP as to
certain tax consequences of the merger, filed herewith.
10.1 Restated WesBanco Directors' Deferred Compensation Plan, *(1)
effective December 15, 1994.
10.2 Employment Agreement by and among Thomas J. Hansberry,
WesBanco, Inc. and WesBanco Bank Fairmont, Inc., dated
March 3, 1999, filed herewith.
10.3 Employment Agreement by and among Ernest S. Fragale, *(4)
WesBanco Mortgage Company and WesBanco, Inc., dated
August 20, 1996.
10.4 Employment Agreement by and among Frank R. Kerekes, First *(3)
National Bank in Fairmont and WesBanco, dated March 2, 1994.
10.5 Employment Agreement by and among Edward M. George, *(3)
WesBanco and WesBanco Bank Wheeling, effective
January 1, 1993.
10.6 Employment Agreement by and among Paul M. Limbert, *(3)
WesBanco and WesBanco Bank Wheeling, effective
January 1, 1993.
10.7 Employment Agreement by and among Dennis P. Yeager, *(3)
WesBanco and WesBanco Bank Wheeling, effective
January 1, 1993.
10.9 Employment Agreement by and among Jerome B. Schmitt, *(3)
WesBanco and WesBanco Bank Wheeling, effective
January 1, 1993.
10.10 Employment Agreement by and among Stephen F. Decker, *(3)
Albright National Bank of Kingwood and WesBanco, effective
December 2, 1991.
10.11 Employment Agreement by and among John W. Moore, Jr., *(3)
WesBanco and WesBanco Bank Wheeling, effective
December 1, 1993.
10.12 Key Executive Incentive Bonus and Option Plan. *(7)
10.13 Employment Continuity Agreement by and between Commercial *(5)
BancShares, Incorporated, and William E. Mildren, Jr.,
dated November 1, 1996.
10.14 Employment Continuity Agreement by and between Commercial *(5)
BancShares, Incorporated, and Larry G. Johnson, dated
November 1, 1996.
10.15 Employment Agreement effective January 2, 1998 by and *(5)
between J. Christopher Thomas, WesBanco Bank Charleston
and WesBanco, Inc.
10.16 Employment Agreement effective March 31, 1998 by and among *(8)
William E. Mildren, Jr., WesBanco, Inc. and WesBanco Bank
Commercial.
10.17 Employment Agreement effective March 31, 1998, by and *(8)
among Larry G. Johnson, WesBanco, Inc. and WesBanco Bank
Commercial.
11 Computation of Earnings Per Share. *(5)
21 Subsidiaries of the Registrant. *(5)
23.1 Consent of Ernst & Young LLP, independent accountants for
WesBanco, filed herewith.
23.2 Consent of Arnett & Foster P.L.L.C., independent accountants
for Heritage, filed herewith.
23.3 Consent of Phillips, Gardill, Kaiser & Altmeyer, contained
in the opinion filed as Exhibit 5 hereto.
23.4 Consent of Kirkpatrick & Lockhart LLP, contained in the
opinion filed as Exhibit 8 hereto.
23.5 Consent of Harman, Thompson, Mallory & Ice, A.C., dated *(5)
March 8, 1999.
24 Power of Attorney, contained in the signature page hereto.
27 Financial Data Schedule *(5)
* Indicates document incorporated by reference.
(1) This exhibit is being incorporated by reference to a prior Registration
Statement filed by the Registrant on Form S-4 under Registration No.
333-3905 which was filed with the Securities and Exchange Commission on
June 20, 1996.
(2) This exhibit is being incorporated by reference to a prior Registration
Statement filed by the Registrant on Form S-4 under Registration No.
33-42157 which was filed with the Securities and Exchange Commission on
August 9, 1991.
(3) This exhibit is being incorporated by reference to a prior Registration
Statement filed by the Registrant on Form S-4 under Registration No.
33-72228 which was filed with the Securities and Exchange Commission on
November 30, 1993.
(4) This exhibit is being incorporated by reference to a prior Registration
Statement by the Registrant on Form S-4 under Registration No. 333-11461
which was filed with the Securities and Exchange Commission on November 6,
1996.
(5) This exhibit is being incorporated by reference to a Form 10-K filed by
WesBanco, Inc. with the Securities and Exchange Commission on March 11,
1999.
(6) This exhibit is being incorporated by reference to Form 10-Q filed by
WesBanco, Inc. with the Securities and Exchange Commission on May 15, 1998.
(7) This exhibit is being incorporated by reference to Schedule 14A (Appendix
A) filed by WesBanco, Inc. with the Securities and Exchange Commission on
March 13, 1998.
(8) This exhibit is being incorporated by reference to Form 8-K filed by
WesBanco, Inc. with the Securities and Exchange Commission on April 15,
1998.
Item 22. Undertakings.
The undersigned registrant hereby undertakes as follows:
(a) The undersigned registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
Prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering Prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(b) The registrant undertakes that every Prospectus (i) that is filed
pursuant to Paragraph (b) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(d) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one (1) business day of receipt
of such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(e) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(f) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Wheeling, West Virginia,
on March 12, 1999. .
WESBANCO, INC.
By: /s/ Edward M. George
-------------------------------------
Edward M. George
Its President and Chief
Executive Officer
POWER OF ATTORNEY
We, the undersigned officers and directors of WesBanco, Inc., hereby
severally constitute James C. Gardill and Edward M. George, and each of them
singly, our true and lawful attorneys with full power to them, and each of them
singly, to sign for us and in our names and in the capacities indicated below,
the registration statement filed herewith and any and all such things in our
name and behalf in our capacities as officers and directors to enable WesBanco,
Inc. to comply with the provisions of the Securities Act of 1933, as amended,
and all requirements of the Securities Act of 1933, as amended, hereby ratifying
and confirming our signatures as they may be signed by our attorneys, or any of
them, to said registration statement and any and all amendments thereto.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement and Power of Attorney have been signed by the following
persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ----------------------- -------------------------- --------------------
Director March , 1999
- -----------------------
Frank K. Abruzzino
/s/ James E. Altmeyer Director March 12, 1999
- -----------------------
James E. Altmeyer
/s/ Earl C. Atkins Director March 12, 1999
- -----------------------
Earl C. Atkins
/s/ James G. Bradley Director March 12, 1999
- -----------------------
James G. Bradley
/s/ Ray A. Byrd Director March 12, 1999
- -----------------------
Ray A. Byrd
Director March , 1999
- -----------------------
R. Peterson Chalfant
/s/ John H. Cheffy Director March 12, 1999
- -----------------------
John H. Cheffy
/s/ Christopher V. Criss Director March 12, 1999
- -----------------------
Christopher V. Criss
/s/ Stephen F. Decker Director March 12, 1999
- -----------------------
Stephen F. Decker
Director March , 1999
- -----------------------
James D. Entress
Director March , 1999
- -----------------------
Ernest S. Fragale
/s/ James C. Gardill Chairman, Director March 12, 1999
- -----------------------
James C. Gardill
/s/ Edward M. George President, Chief Executive March 12, 1999
- ----------------------- Officer & Director
Edward M. George (Principal Executive Office)
/s/ Roland L. Hobbs Director March 12, 1999
- -----------------------
Roland L. Hobbs
Director March , 1999
- -----------------------
Larry G. Johnson
Director March , 1999
- -----------------------
John W. Kepner
/s/ Frank R. Kerekes Director March 12, 1999
- -----------------------
Frank R. Kerekes
/s/ Paul M. Limbert Executive Vice President March 12, 1999
- ----------------------- & Chief Financial Officer
Paul M. Limbert (Principal Financial and
Accounting Officer)
Director March , 1999
- -----------------------
Robert H. Martin
/s/ William E. Mildren, Jr. Director March 12, 1999
- -----------------------
William E. Mildren, Jr.
Director March , 1999
- -----------------------
George M. Molnar
Director March , 1999
- -----------------------
Eric Nelson
Director March , 1999
- -----------------------
Richard K. Riederer
Director March , 1999
- -----------------------
Melvin C. Snyder, Jr.
Director March , 1999
- -----------------------
Joan C. Stamp
/s/ Carter W. Strauss Director March 12, 1999
- -----------------------
Carter W. Strauss
/s/ James W. Swearingen Director March 12, 1999
- -----------------------
James W. Swearingen
/s/ Reed J. Tanner Director March 12, 1999
- -----------------------
Reed J. Tanner
/s/ Robert K. Tebay Director March 12, 1999
- -----------------------
Robert K. Tebay
Director March , 1999
- -----------------------
J. Christopher Thomas
/s/ John A. Welty Director March 12, 1999
- -----------------------
John A. Welty
Director March , 1999
- -----------------------
William E. Witschey
EXHIBIT INDEX
EXHIBIT TITLE PAGE
- ------- ----- ----
2.1 Agreement and Plan of Merger (incorporated by reference to
Appendix I of the Proxy. Statement/Prospectus which is
included in this Registration Statement).
2.2 First Amendment to Agreement and Plan of Merger
(incorporated by reference to Appendix II of the Proxy
Statement/Prospectus which is included in this
Registration Statement).
3.1 Articles of Incorporation of WesBanco, Inc., restated as *(1)
of November 17, 1995.
3.2 Articles of Amendment to the Articles of Incorporation of *(6)
WesBanco, Inc.
3.3 Bylaws of WesBanco, Inc. *(1)
4 Specimen Certificate of WesBanco, Inc. Common Stock. *(2)
5 Opinion of Phillips, Gardill, Kaiser & Altmeyer, regarding
the validity of the WesBanco common stock being
registered, filed herewith.
8 Form of opinion of Kirkpatrick & Lockhart LLP as to
certain tax consequences of the merger, filed herewith.
10.1 Restated WesBanco Directors' Deferred Compensation Plan, *(1)
effective December 15, 1994.
10.2 Employment Agreement by and among Thomas J. Hansberry,
WesBanco, Inc. and WesBanco Bank Fairmont, Inc., dated
March 3, 1999 filed herewith.
10.3 Employment Agreement by and among Ernest S. Fragale, *(4)
WesBanco Mortgage Company and WesBanco, Inc., dated
August 20, 1996.
10.4 Employment Agreement by and among Frank R. Kerekes, First *(3)
National Bank in Fairmont and WesBanco, dated March 2, 1994.
10.5 Employment Agreement by and among Edward M. George, *(3)
WesBanco and WesBanco Bank Wheeling, effective
January 1, 1993.
10.6 Employment Agreement by and among Paul M. Limbert, *(3)
WesBanco and WesBanco Bank Wheeling, effective
January 1, 1993.
10.7 Employment Agreement by and among Dennis P. Yeager, *(3)
WesBanco and WesBanco Bank Wheeling, effective
January 1, 1993.
10.9 Employment Agreement by and among Jerome B. Schmitt, *(3)
WesBanco and WesBanco Bank Wheeling, effective
January 1, 1993.
10.10 Employment Agreement by and among Stephen F. Decker, *(3)
Albright National Bank of Kingwood and WesBanco, effective
December 2, 1991.
10.11 Employment Agreement by and among John W. Moore, Jr., *(3)
WesBanco and WesBanco Bank Wheeling, effective
December 1, 1993.
10.12 Key Executive Incentive Bonus and Option Plan. *(7)
10.13 Employment Continuity Agreement by and between Commercial *(5)
BancShares, Incorporated, and William E. Mildren, Jr.,
dated November 1, 1996.
10.14 Employment Continuity Agreement by and between Commercial *(5)
BancShares, Incorporated, and Larry G. Johnson, dated
November 1, 1996.
10.15 Employment Agreement effective January 2, 1998 by and *(5)
between J. Christopher Thomas, WesBanco Bank Charleston
and WesBanco, Inc.
10.16 Employment Agreement effective March 31, 1998 by and among
William E. Mildren, Jr., WesBanco, Inc. and WesBanco Bank *(8)
Commercial.
10.17 Employment Agreement effective March 31, 1998, by and *(8)
among Larry G. Johnson, WesBanco, Inc. and WesBanco Bank
Commercial.
11 Computation of Earnings Per Share. *(5)
21 Subsidiaries of the Registrant. *(5)
23.1 Consent of Ernst & Young LLP, independent accountants for
WesBanco, filed herewith.
23.2 Consent of Arnett & Foster P.L.L.C., independent accountants
for Heritage, filed herewith.
23.3 Consent of Phillips, Gardill, Kaiser & Altmeyer, contained
in the opinion filed as Exhibit 5 hereto.
23.4 Consent of Kirkpatrick & Lockhart LLP, contained in the
opinion filed as Exhibit 8 hereto.
23.5 Consent of Harman, Thompson, Mallory & Ice, A.C., dated *(5)
March 8, 1999.
24 Power of Attorney, contained in the signature page hereto.
27 Financial Data Schedule *(5)
* Indicates document incorporated by reference.
(1) This exhibit is being incorporated by reference to a prior Registration
Statement filed by the Registrant on Form S-4 under Registration No.
333-3905 which was filed with the Securities and Exchange Commission on
June 20, 1996.
(2) This exhibit is being incorporated by reference to a prior Registration
Statement filed by the Registrant on Form S-4 under Registration No.
33-42157 which was filed with the Securities and Exchange Commission on
August 9, 1991.
(3) This exhibit is being incorporated by reference to a prior Registration
Statement filed by the Registrant on Form S-4 under Registration No.
33-72228 which was filed with the Securities and Exchange Commission on
November 30, 1993.
(4) This exhibit is being incorporated by reference to a prior Registration
Statement by the Registrant on Form S-4 under Registration No. 333-11461
which was filed with the Securities and Exchange Commission on November 6,
1996.
(5) This exhibit is being incorporated by reference to a Form 10-K filed by
WesBanco, Inc. with the Securities and Exchange Commission on March 11,
1999.
(6) This exhibit is being incorporated by reference to Form 10-Q filed by
WesBanco, Inc. with the Securities and Exchange Commission on May 15, 1998.
(7) This exhibit is being incorporated by reference to Schedule 14A (Appendix
A) filed by WesBanco, Inc. with the Securities and Exchange Commission
on March 13, 1998.
(8) This exhibit is being incorporated by reference to Form 8-K filed by
WesBanco, Inc. with the Securities and Exchange Commission on April 15,
1998.