AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 7, 2004
REGISTRATION NO. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
WESBANCO, INC.
(Exact name of registrant as specified in its charter)
WEST VIRGINIA 6021 55-0571723
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
ONE BANK PLAZA PAUL M. LIMBERT
WHEELING, WEST VIRGINIA 26003 PRESIDENT AND CHIEF EXECUTIVE OFFICER
(304) 234-9000 WESBANCO, INC.
(Address, including zip code, ONE BANK PLAZA
and telephone number, including WHEELING, WEST VIRGINIA 26003
area code of registrant's (304) 234-9000
principal executive offices) (Name, address, including zip
code, and telephone number, including
area code, of agent for service)
-------------------------
WITH COPIES TO:
JAMES C. GARDILL, ESQ. KRISTEN LARKIN STEWART, ESQ.
PHILLIPS, GARDILL, KAISER & KIRKPATRICK & LOCKHART LLP
ALTMEYER, PLLC HENRY W. OLIVER BUILDING
61 FOURTEENTH STREET 535 SMITHFIELD STREET
WHEELING, WEST VIRGINIA 26003 PITTSBURGH, PA 15222-2312
(304) 232-6810 (412) 355-6500
-------------------------
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
AMOUNT OFFERING AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF TO BE PRICE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE PRICE(3) FEE
----------------------------------------------------------------------------------------------
Common Stock, $2.0833 par value 1,169,322 shares (2) $38,464,848 $4,875
(1) Reflects the estimated maximum number of shares of common stock of
WesBanco, Inc. which may be issued in connection with the proposed merger
of Western Ohio Financial Corporation with and into WesBanco.
(2) Not applicable.
(3) Computed, in accordance with Rule 457(f)(1), as the product of (x) the
average of the high and low prices of the common stock of Western Ohio on
June 2, 2004 multiplied by (y) the estimated maximum number of shares of
Western Ohio common stock to be received by WesBanco in exchange for the
securities registered hereby.
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, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
[WESTERN OHIO LOGO]
Proxy Statement of Western Ohio Financial Corporation
Prospectus of WesBanco, Inc.
Dear Western Ohio Stockholder:
You are cordially invited to attend a special meeting of stockholders of
Western Ohio Financial Corporation ("Western Ohio") to be held on _______, 2004
at the Springfield Inn located at 100 South Fountain Avenue, Springfield, Ohio,
commencing at _____ local time. At this special meeting, you will be asked to
vote upon an Agreement and Plan of Merger pursuant to which Western Ohio will be
merged with and into WOFC, Inc., a wholly owned subsidiary of WesBanco, Inc.
("WesBanco"). If the merger agreement is approved at the special meeting and the
merger is completed, for each share of common stock of Western Ohio that you own
you will receive, at your election, either 1.18 shares of WesBanco common stock
or $35.00 in cash, subject to certain limitations and possible adjustment in
accordance with the terms of the merger agreement.
The merger cannot be completed unless Western Ohio's stockholders approve
the merger agreement at the special meeting. If you were a stockholder of record
of Western Ohio common stock on ________, 2004, you are entitled to vote at the
special meeting. WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE
TAKE THE TIME TO VOTE BY COMPLETING AND MAILING THE ENCLOSED PROXY CARD.
This proxy statement/prospectus also constitutes the prospectus of
WesBanco for the ______ shares of WesBanco common stock to be issued in the
merger, based on Western Ohio's outstanding shares on _____, 2004. WesBanco and
Western Ohio common stock are quoted on the Nasdaq National Market and traded
under the symbols "WSBC" and "WOFC," respectively. On ______, 2004, the closing
prices of WesBanco and Western Ohio common stock were $___ and $___,
respectively.
THE BOARD OF DIRECTORS OF WESTERN OHIO BELIEVES THAT THE MERGER IS IN THE
BEST INTERESTS OF WESTERN OHIO'S STOCKHOLDERS. THE BOARD HAS APPROVED THE MERGER
WITH WESBANCO AND RECOMMENDS THAT YOU VOTE IN FAVOR OF THE PROPOSAL TO APPROVE
THE MERGER AGREEMENT.
Sincerely,
John W. Raisbeck
President and Chief Executive Officer
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THE WESBANCO COMMON STOCK TO BE ISSUED IN
THE MERGER OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS DOCUMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This proxy statement/prospectus provides you with detailed information
about the merger, WesBanco and the shares of WesBanco common stock that will be
issued if the merger is completed. We encourage you to read this entire document
carefully. Please see the section entitled "Risk Factors" beginning on page 18
for a discussion of potential risks associated with the merger and in owning
WesBanco common stock.
This proxy statement/prospectus is dated ______, 2004 and is first being
mailed to Western Ohio stockholders on or about _______, 2004.
WESTERN OHIO FINANCIAL CORPORATION
28 EAST MAIN STREET
SPRINGFIELD, OHIO 45502
(937) 327-1112
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON ________, 2004
Notice is hereby given that a special meeting of stockholders of Western
Ohio Financial Corporation, a Delaware corporation ("Western Ohio"), will be
held on ______, 2004, at the Springfield Inn located at 100 South Fountain
Avenue, Springfield, Ohio, commencing at _____, 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 April 1, 2004 by and among Western Ohio, WesBanco, Inc., a West
Virginia corporation ("WesBanco"), and WOFC, Inc., a West Virginia
corporation and a wholly owned subsidiary of WesBanco formed solely for
the purpose of effecting the merger ("WOFC"), pursuant to which Western
Ohio will be merged with and into WOFC.
2. To act on such other matters as may properly come before the
special meeting or any adjournment or postponement of the special meeting.
The merger agreement is more completely described in the accompanying
proxy statement/prospectus, and a copy of the merger agreement is attached as
Annex A to the proxy statement/prospectus. PLEASE REVIEW THESE MATERIALS
CAREFULLY AND CONSIDER FULLY THE INFORMATION SET FORTH THEREIN.
Only holders of record of Western Ohio common stock at the close of
business on _____, 2004 will be entitled to notice of, and to vote at, the
special meeting and any adjournment or postponement thereof. Approval of the
merger agreement and the merger requires the affirmative vote of the holders of
at least a majority of the votes entitled to be cast at the special meeting, if
the holders of at least one-third of the shares of Western Ohio common stock
outstanding on the record date are present in person or by proxy at the special
meeting.
THE BOARD OF DIRECTORS OF WESTERN OHIO RECOMMENDS THAT STOCKHOLDERS VOTE
"FOR" THE APPROVAL OF THE MERGER AGREEMENT.
Your vote is important. Whether or not you plan to attend the special
meeting, please complete, date, sign and return the enclosed proxy card
promptly. This will assure your representation at the special meeting and may
avoid the cost of additional communications. This will not prevent you from
voting in person at the special meeting. You may revoke your proxy at any time
before it is voted by signing and returning a later dated proxy with respect to
the same shares, by filing with the Secretary of Western Ohio a written
revocation bearing a later date, or by attending and voting in person at the
special meeting.
By Order of the Board of Directors,
David L. Dillahunt
Chairman
Springfield, Ohio
______, 2004
YOUR VOTE IS VERY IMPORTANT
TO VOTE YOUR SHARES, PLEASE COMPLETE, DATE, SIGN AND MAIL THE ENCLOSED PROXY
CARD, WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING.
ADDITIONAL INFORMATION
This proxy statement/prospectus incorporates business and financial
information about WesBanco and Western Ohio from other documents that are not
included in or delivered with this document. This information is available to
you without charge upon your written or oral request. You can obtain these
documents by requesting them in writing or by telephone from the appropriate
company at either:
WesBanco, Inc. Western Ohio Financial Corporation
Attn: Larry G. Johnson, Secretary Attn: Deborah S. Horton, Secretary
One Bank Plaza 28 East Main Street
Wheeling, West Virginia 26003 Springfield, Ohio 45502
(304) 234-9000 (937) 325-4683
If you would like to request any documents, please do so by _______, 2004
in order to receive them before the Western Ohio special meeting.
For further information about Western Ohio, please refer to Western Ohio's
annual report on Form 10-K for the fiscal year ended December 31, 2003, and its
Form 10-Q for the quarter ended March 31, 2004, which accompany this proxy
statement/prospectus, and see "Where You Can Find More Information About
WesBanco and Western Ohio." For further information about WesBanco, see "Where
You Can Find More Information About WesBanco and Western Ohio."
TABLE OF CONTENTS
PAGE
----
QUESTIONS AND ANSWERS............................................................................................. i
SUMMARY .......................................................................................................... 1
The Merger................................................................................................... 1
The Companies................................................................................................ 1
What Western Ohio Stockholders Will Receive in the Merger.................................................... 1
How to Choose Stock or Cash for Your Western Ohio Shares..................................................... 2
Treatment of Western Ohio Stock Options...................................................................... 2
Western Ohio Employee Stock Ownership Plan................................................................... 2
The Special Meeting.......................................................................................... 3
Appraisal Rights............................................................................................. 3
Ownership of WesBanco after the Merger....................................................................... 3
Certain Federal Income Tax Consequences...................................................................... 3
Western Ohio's Reasons for the Merger and Recommendation to Stockholders..................................... 4
Opinion of Western Ohio's Financial Advisor.................................................................. 5
Resale of WesBanco Shares Received in the Merger............................................................. 5
Certain Differences in the Rights of Stockholders............................................................ 5
Conditions to the Merger..................................................................................... 5
Termination of the Merger Agreement.......................................................................... 6
Termination Fee.............................................................................................. 6
Effective Date of the Merger................................................................................. 6
Regulatory Approvals......................................................................................... 7
Interests of Certain Persons in the Merger................................................................... 7
Ownership of Western Ohio Common Stock by Western Ohio Directors, Executive Officers and Affiliates.......... 7
Recent Developments.......................................................................................... 7
Comparative Per Share Data........................................................................................ 8
Share Information and Market Prices............................................................................... 10
Selected Historical Financial Data of WesBanco.................................................................... 11
Selected Historical Financial Data of Western Ohio................................................................ 12
Unaudited Pro Forma Condensed Combined Financial Information...................................................... 13
Unaudited Pro Forma Condensed Combined Balance Sheet.............................................................. 13
Unaudited Pro Forma Condensed Combined Statement of Income........................................................ 14
Unaudited Pro Forma Condensed Combined Statement of Income........................................................ 15
RISK FACTORS...................................................................................................... 18
THE SPECIAL MEETING............................................................................................... 23
General...................................................................................................... 23
Date, Time and Place of the Special Meeting.................................................................. 23
Record Date and Required Vote................................................................................ 23
Beneficial Ownership of Western Ohio Officers, Directors and Affiliates...................................... 23
Voting and Revocation of Proxies............................................................................. 23
Solicitation of Proxies...................................................................................... 24
Recommendation of Western Ohio Board of Directors............................................................ 24
THE MERGER........................................................................................................ 25
General...................................................................................................... 25
What Western Ohio Stockholders Will Receive in the Merger.................................................... 25
Effects of the Merger........................................................................................ 26
Consideration Election Procedures and Exchange of Western Ohio Certificates.................................. 27
Treatment of Western Ohio Stock Options...................................................................... 27
Western Ohio Employee Stock Ownership Plan................................................................... 28
Restricted Stock Awards...................................................................................... 28
Background of the Merger..................................................................................... 28
Recommendation of the Western Ohio Board..................................................................... 29
Opinion of Western Ohio's Financial Advisor.................................................................. 29
Western Ohio's Reasons for the Merger........................................................................ 35
WesBanco's Reasons for the Merger............................................................................ 36
Interests of Certain Persons in the Merger................................................................... 36
Regulatory Approvals......................................................................................... 38
Appraisal Rights............................................................................................. 39
Restrictions on Resales by Affiliates of Western Ohio........................................................ 41
Accounting Treatment......................................................................................... 42
Certain Federal Income Tax Consequences of the Merger........................................................ 42
Conduct of Business Prior to the Merger...................................................................... 45
Conditions to the Merger..................................................................................... 48
Termination of the Merger Agreement.......................................................................... 49
Expenses..................................................................................................... 52
Termination Fee.............................................................................................. 52
Amendment or Waiver.......................................................................................... 52
INFORMATION ABOUT WESBANCO........................................................................................ 52
INFORMATION ABOUT WESTERN OHIO.................................................................................... 53
DESCRIPTION OF WESBANCO CAPITAL STOCK............................................................................. 54
COMPARATIVE RIGHTS OF STOCKHOLDERS................................................................................ 55
WHERE YOU CAN FIND MORE INFORMATION ABOUT WESBANCO AND WESTERN OHIO............................................... 61
FORWARD LOOKING STATEMENTS........................................................................................ 62
LEGAL MATTERS..................................................................................................... 63
EXPERTS .......................................................................................................... 63
Annex A - Agreement and Plan of Merger
Annex B - Opinion of Friedman Billings Ramsey & Co., Inc.
Annex C - Section 262 of the Delaware General Corporation Law
QUESTIONS AND ANSWERS
Q: WHAT AM I BEING ASKED TO VOTE ON?
A: You are being asked to vote on the merger of Western Ohio with and into a
subsidiary of WesBanco.
Q: IF THE MERGER IS COMPLETED, WHAT WILL I RECEIVE?
A: If the merger is completed, for each share of Western Ohio common stock that
you own you will receive, at your election, either 1.18 shares of WesBanco
common stock or $35.00 in cash. You may elect either of these options for each
Western Ohio share you own and, if you desire, you may elect to exchange some of
your Western Ohio shares for cash and some for WesBanco common stock. Elections
will be limited by a requirement that 55% of the total number of outstanding
shares of Western Ohio common stock be exchanged for WesBanco common stock.
Therefore, the form of consideration you receive will depend on the elections of
other Western Ohio stockholders and you may not receive all, or any of, the
consideration in the form that you selected. For example, if all Western Ohio
stockholders elected to receive cash only, 55% of the total Western Ohio shares
would nevertheless be exchanged for WesBanco common stock, not cash, and only
the remaining 45% of the Western Ohio shares would be exchanged for cash.
Q: HOW DO I ELECT TO RECEIVE CASH, WESBANCO STOCK OR A COMBINATION OF BOTH FOR
MY WESTERN OHIO STOCK?
A: A form for making an election will be sent to you separately prior to the
effective date of the merger along with instructions explaining how to elect the
consideration you want to receive. For your election to be effective, your
properly completed election form, along with your Western Ohio stock
certificates or an appropriate guarantee of delivery, must be sent to and
received by Computershare Investor Services, LLC, the exchange agent, on or
before 5:00 p.m., Eastern Standard Time (EST), on the 33rd day following the
mailing of the election form. If you do not properly make a timely election, you
will be allocated WesBanco common stock and/or cash depending on the elections,
if any, made by other Western Ohio stockholders.
Q: WHAT DO I NEED TO DO NOW?
A: After reviewing this document, submit your proxy by executing and returning
the enclosed proxy card. By submitting your proxy, you authorize the individuals
named in the proxy to represent you and vote your shares at the special meeting
in accordance with your instructions. Your vote is important. Whether or not you
plan to attend the special meeting, please submit your duly completed proxy
promptly in the enclosed envelope. You do not need to elect the consideration
you would like to receive in the merger at this time.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. You should not send in your Western Ohio certificates until you receive
the election form from the exchange agent.
Q: WHEN WILL THE MERGER BE COMPLETED?
A: We are attempting to complete the merger as quickly as possible. In addition
to stockholder approval, we must also obtain certain regulatory approvals. We
expect to complete the merger during the third quarter of 2004.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
A: Your broker will vote your shares only if you instruct your broker on how to
vote. Your broker will send you directions on how you can instruct your broker
to vote. Your broker cannot vote your shares without instructions from you. You
should therefore be sure to provide your broker with instructions on how to vote
your shares.
Q: HOW WILL MY SHARES BE VOTED IF I RETURN A BLANK PROXY CARD?
A: If you sign, date and send in your proxy card and do not indicate how you
want to vote, your proxy will be
i
counted as a vote for the merger.
Q: WHAT WILL BE THE EFFECT IF I DO NOT VOTE?
A. If you abstain, do not return your proxy card or otherwise fail to vote at
the special meeting, your failure to vote will have the same effect as if you
voted against the merger.
Q: CAN I CHANGE MY MIND AND REVOKE MY PROXY?
A: Yes. You may revoke your proxy and change your vote at any time before the
special meeting by:
- signing another proxy with a later date;
- giving written notice of the revocation of your proxy to the
Secretary of Western Ohio prior to the special meeting; or
- voting in person at the special meeting.
Your latest dated proxy or vote will be counted.
Q: WHOM DO I CALL IF I HAVE QUESTIONS ABOUT THE MEETING OR THE MERGER?
A: Please contact John W. Raisbeck or Robert Kuehl of Western Ohio at (937)
327-1112 or (937) 327-1107, respectively, with any questions about the meeting
or the merger.
ii
SUMMARY
This summary highlights selected information from this proxy
statement/prospectus and may not contain all of the information that is
important to you. The merger agreement is attached to this proxy
statement/prospectus as Annex A. To fully understand the merger and for a more
complete description of the terms of the merger, you should carefully read this
entire document, including the exhibits, and the documents we refer you to under
the caption "Where You Can Find More Information About WesBanco and Western
Ohio."
THE MERGER
We propose a merger of Western Ohio with and into WOFC, Inc., a
wholly-owned subsidiary of WesBanco that has been formed under the laws of the
State of West Virginia solely for the purpose of effecting the merger. If the
merger is consummated, WOFC, Inc. will continue as the surviving corporation and
as a wholly-owned subsidiary of WesBanco. The Articles of Incorporation and
Bylaws of WOFC, Inc. will continue as the Articles of Incorporation and Bylaws
of the surviving corporation until amended or repealed in accordance with
applicable law. The officers and directors of WOFC, Inc. will continue as the
officers and directors of the surviving corporation.
THE COMPANIES
WESBANCO, INC.
One Bank Plaza
Wheeling, West Virginia 26003
(304) 234-9000
WesBanco, a bank holding company headquartered in Wheeling, West Virginia,
offers through its various subsidiaries a full range of financial services
including retail banking, corporate banking, personal and corporate trust
services, brokerage services, mortgage banking and insurance. As of March 31,
2004, WesBanco had approximately $3.4 billion of consolidated total assets, $2.5
billion of deposits and $326 million of stockholders' equity.
WESTERN OHIO FINANCIAL CORPORATION
28 East Main Street
Springfield, Ohio 45502
(937) 327-1112
Western Ohio is a savings and loan holding company headquartered in
Springfield, Ohio. Western Ohio is the parent of Cornerstone Bank, a federal
savings bank, and CornerstoneBanc Financial Services, Incorporated, which
together provide retail banking, corporate banking and mortgage banking
services. As of March 31, 2004, Western Ohio had approximately $407 million of
consolidated total assets, $258 million of deposits and $45 million of
stockholders' equity.
WHAT WESTERN OHIO STOCKHOLDERS WILL RECEIVE IN THE MERGER
If the merger is completed, for each share of Western Ohio common stock
that you own you will receive, at your election, either 1.18 shares of WesBanco
common stock or $35.00 in cash, subject to certain limitations and possible
adjustment in accordance with the terms of the merger agreement as discussed
below, unless, in each case, you properly perfect your appraisal rights under
Delaware law. You may elect to exchange your Western Ohio common stock for cash,
WesBanco common stock or a combination of both. Instead of fractional shares of
1
WesBanco, you will receive a check for any fractional shares based on a value of
$35.00 per whole share of WesBanco common stock.
The total amount of cash and WesBanco common stock that will be paid to
all Western Ohio stockholders in the merger is fixed by a requirement that 55%
of the total number of outstanding shares of Western Ohio common stock be
exchanged for WesBanco common stock and that 45% of the total number of
outstanding shares of Western Ohio common stock be exchanged for cash.
Accordingly, your election may be subject to pro-ration, which means that you
may not receive all, or any of, the consideration in the form that you select.
See "The Merger - What Western Ohio Stockholders Will Receive in the Merger"
beginning on page 25 for a detailed discussion of the pro-ration procedures to
be employed.
The 1.18 exchange ratio is subject to adjustment if certain termination
provisions, based on the market price of WesBanco's common stock, have been
triggered and the Western Ohio board of directors elects to terminate the merger
agreement. Western Ohio's right to terminate the merger agreement would arise if
the average closing price of WesBanco common stock during a specified period
before receipt of the last required regulatory approval of the merger is less
than $24.896 per share and WesBanco common stock underperforms an index of
financial institution stocks by a specified amount. However, Western Ohio would
not have the right to terminate the merger agreement if WesBanco were to elect
to make a compensating adjustment in the exchange ratio. See "The Merger -
Termination of the Merger Agreement" beginning on page 50. The exchange ratio is
also subject to adjustment if WesBanco completes certain corporate transactions,
such as a stock split, reverse stock split or stock dividend.
HOW TO CHOOSE STOCK OR CASH FOR YOUR WESTERN OHIO SHARES
You will be sent an election form by the exchange agent on which you may
specify whether you wish to receive cash, WesBanco common stock or a combination
of stock and cash in exchange for your shares of Western Ohio common stock. You
may also make "no election" as to whether you receive cash or WesBanco common
stock as payment for your Western Ohio shares. Your choice will be honored to
the extent possible, but because of the overall limitations on the number of
Western Ohio shares that will be exchanged for cash and the number of Western
Ohio shares that will be exchanged for WesBanco common stock, whether you
receive the amount of cash and/or stock that you request will depend on what
other Western Ohio stockholders elect to receive as consideration for their
shares. Therefore, you may not receive exactly the form of consideration that
you elect. We make no recommendation as to whether you should elect to receive
cash or stock in the merger. You must make your own decision with respect to
your election. See "The Merger - Consideration Election Procedures and Exchange
of Western Ohio Certificates" beginning on page 27.
TREATMENT OF WESTERN OHIO STOCK OPTIONS
Under the merger agreement, holders of options to purchase Western Ohio
common stock may select how they want their options treated in the merger. All
option holders may choose to hold their stock options and have them converted
into options to purchase shares of WesBanco common stock at the effective time
of the merger. In addition, holders of stock options with an exercise price of
less than $35.00 can elect to have such options deemed exercised and, in
exchange for such deemed exercised options, receive cash in an amount equal to
the difference between $35.00 and the exercise price of the stock options. See
"The Merger - Treatment of Western Ohio Stock Options" beginning on page 27.
WESTERN OHIO EMPLOYEE STOCK OWNERSHIP PLAN
Participants in Western Ohio's Employee Stock Ownership Plan ("ESOP") are
entitled to direct the vote of shares of Western Ohio common stock allocated to
their plan account with respect to the proposal to approve the merger. If
participants fail to direct the vote of any of these allocated shares, such
shares will not be voted in the
2
merger and will have the effect of a vote against the merger. Shares not
allocated to the accounts of participants in the ESOP are voted by the ESOP
trustees. The ESOP will be terminated at the effective time of the merger and
the account balances of ESOP participants shall be distributed to them after the
indebtedness of the ESOP is paid off.
THE SPECIAL MEETING
A special meeting of Western Ohio's stockholders will be held on _____,
_____, 2004, at the Springfield Inn located at 100 South Fountain Avenue,
Springfield, Ohio. At the special meeting, Western Ohio stockholders will be
asked to approve the merger agreement and the related merger.
You may vote at the special meeting only if you owned shares of Western
Ohio common stock at the close of business on ________, 2004. You may cast one
vote for each share of Western Ohio common stock owned by you on that date. The
holders of at least a majority of the shares of Western Ohio entitled to vote at
the special meeting must vote in favor of the merger in order to approve the
merger. As of March 31, 2004, there were 1,801,729 shares of Western Ohio common
stock outstanding, held by approximately 1,596 holders of record. As of the
record date for the special meeting, the directors and executive officers of
Western Ohio controlled approximately 17.6% of the outstanding shares of Western
Ohio common stock entitled to vote at the special meeting.
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 change your vote 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.
APPRAISAL RIGHTS
You have the right to demand appraisal for your shares of Western Ohio
common stock. This means that if you do not vote in favor of the merger, make a
written demand to Western Ohio for payment in cash of the fair value of your
shares and strictly comply with the applicable statutory procedures regarding
appraisal, you will be entitled to receive a judicial determination of the fair
value of your Western Ohio shares and to receive payment of this fair value in
cash, together with a fair rate of interest. See "The Merger - Appraisal Rights"
beginning on page 58, and Annex C.
OWNERSHIP OF WESBANCO AFTER THE MERGER
WesBanco will issue approximately 1,169,322 shares of its common stock to
Western Ohio stockholders in connection with the merger, based on the number of
shares of Western Ohio outstanding on March 31, 2004, which would constitute
approximately 6% of the outstanding stock of WesBanco after the merger, based on
the number of shares of WesBanco common stock outstanding on March 31, 2004. The
shares will be listed for trading on the Nasdaq National Market. WesBanco common
stock is traded on the Nasdaq National Market under the symbol "WSBC."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
It is a condition to the completion of the merger, unless waived by the
parties in writing, that each of WesBanco and Western Ohio receives a legal
opinion from their respective tax counsel to the effect that the merger will
qualify as a "reorganization" for United States federal income tax purposes
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Tax Code"). Accordingly, we expect the merger to generally be
tax-free to holders of Western Ohio common stock for United States federal
income tax purposes to the extent that they receive WesBanco shares pursuant to
the merger. If the merger does not qualify as a
3
"reorganization," the holders of Western Ohio common stock generally will be
required to recognize gain or loss measured by the difference between the fair
market value of the WesBanco common stock plus cash received by such holders in
the transaction and the adjusted tax basis in their Western Ohio common stock
surrendered in the transaction. If the merger qualifies as a "reorganization,"
the tax consequences to holders of shares of Western Ohio common stock will
generally be as follows:
- Western Ohio stockholders who exchange their Western Ohio
common stock solely for cash will recognize gain or loss for
federal income tax purposes.
- Western Ohio stockholders who exchange their Western Ohio
common stock for a combination of cash and WesBanco common
stock may recognize gain, but not loss, for federal income tax
purposes in respect of the Western Ohio shares exchanged for
cash.
- Western Ohio stockholders who exchange their Western Ohio
common stock solely for WesBanco common stock will not
recognize gain or loss for federal income tax purposes, other
than gain or loss attributable to the receipt of cash in lieu
of fractional shares.
The actual federal income tax consequences of the transaction to you will
not be ascertainable at the time you make your election because we will not know
at that time if the transaction will qualify as a "reorganization" and to what
extent the allocation and proration procedures will apply to your election. You
should read the summary under the caption "The Merger -- Certain Federal Income
Tax Consequences of the Merger" beginning on page 42 for a more complete
discussion of the federal income tax consequences of the merger. You should also
consult your own tax advisor concerning all federal, state, local and foreign
tax consequences of the merger that may apply to you.
WESTERN OHIO'S REASONS FOR THE MERGER AND RECOMMENDATION TO STOCKHOLDERS
The Western Ohio board of directors believes that the terms of the merger
agreement and the merger are fair to, and in the best interests of, Western Ohio
and its stockholders. In reaching its decision, the Western Ohio board
considered the following factors, among others:
- the belief of the Western Ohio board that WesBanco has offered a
fair price to Western Ohio stockholders for their Western Ohio
common stock;
- the per share equivalent impact of the merger with respect to
earnings per share and dividends per share on a pro forma basis for
Western Ohio stockholders electing to receive WesBanco common stock;
- the potential benefits to be received by Western Ohio's customers
from the merger and WesBanco's commitment to community banking;
- an evaluation of the potential long-term prospects of WesBanco;
- the dividend history of WesBanco common stock;
- the liquidity of WesBanco common stock; and
- WesBanco's intention to retain most of Western Ohio's employees.
4
The Western Ohio board of directors believes that the financial services
industry is becoming increasingly competitive, and that the merger will enable
Western Ohio's customers to be better served and will provide Western Ohio's
stockholders with substantial benefits. The merger will also provide
opportunities for Western Ohio's customers to be offered more diverse products
and services. WESTERN OHIO'S BOARD OF DIRECTORS BELIEVES THAT THE MERGER IS FAIR
TO YOU AND IN YOUR BEST INTEREST AND RECOMMENDS THAT YOU VOTE FOR THE APPROVAL
AND ADOPTION OF THE MERGER AGREEMENT.
OPINION OF WESTERN OHIO'S FINANCIAL ADVISOR
Western Ohio asked its financial advisor, Friedman Billings Ramsey & Co.,
Inc. ("FBR"), for advice on the fairness to Western Ohio's stockholders of the
consideration that WesBanco is offering in the merger. FBR performed a number of
analyses in which it compared the companies' historical stock prices and other
measures of performance, compared the financial terms of the merger to those of
other similar publicly announced transactions, and estimated the relative values
of WesBanco and Western Ohio based on past and anticipated future performance
and the benefits that could be expected from the merger. FBR delivered its
written opinion, dated April 1, 2004, that the merger consideration was fair to
Western Ohio stockholders from a financial point of view as of such date. See
"The Merger - Opinion of Western Ohio's Financial Advisor" beginning on page 29.
FBR's fairness opinion has been updated to the date of this proxy
statement/prospectus and is attached as Annex B.
RESALE OF WESBANCO SHARES RECEIVED IN THE MERGER
The shares of WesBanco common stock that you receive in the merger will be
registered under the Securities Act of 1933. Therefore, you may sell shares that
you receive in the merger without restriction unless you are considered an
affiliate of Western Ohio or you become an affiliate of WesBanco. A director,
executive officer or stockholder who beneficially owns 10% or more of the
outstanding shares of a company is generally deemed to be an affiliate of that
company.
If you are considered an affiliate of Western Ohio or become an affiliate
of WesBanco, you may resell the shares of WesBanco common stock you receive
pursuant to an effective registration statement under the securities laws, or
pursuant to Rule 145 of the SEC's rules, or in transactions otherwise exempt
from registration under the securities laws. WesBanco is not obligated and does
not intend to register for resale the shares issued to affiliates of Western
Ohio.
CERTAIN DIFFERENCES IN THE RIGHTS OF STOCKHOLDERS
Western Ohio is a Delaware corporation governed by Delaware law and
WesBanco is a West Virginia corporation governed by West Virginia law. Once the
merger occurs, Western Ohio stockholders that receive WesBanco common stock in
the merger will become stockholders of WesBanco and their rights will be
governed by West Virginia law and WesBanco's corporate governing documents
rather than Delaware law and Western Ohio's governing documents. Because of the
differences between the laws of the states of Delaware and West Virginia and the
respective corporate governing documents of Western Ohio and WesBanco, Western
Ohio stockholders' rights as stockholders will change as a result of the
merger. See "Comparative Rights of Stockholders" beginning on page 55.
CONDITIONS TO THE MERGER
Completion of the merger is subject to the satisfaction or waiver of the
conditions specified in the merger agreement, including, among others, those
listed below:
- the approval of the merger agreement by the stockholders of Western
Ohio;
5
- an aggregate of less than 10% of the shares of WesBanco common stock
to be issued in the merger shall be (i) subject to purchase as
fractional shares and (ii) proposed to be issued to Western Ohio
stockholders who have perfected their appraisal rights in accordance
with Delaware law;
- no law or injunction may effectively prohibit the merger;
- Western Ohio and WesBanco must receive all necessary approvals of
governmental and regulatory authorities; and
- on or before the date the merger closes, the receipt of an opinion
from each party's tax counsel to the effect that for federal income
tax purposes the merger will be treated as a reorganization within
the meaning of Section 368 of the Internal Revenue Code.
TERMINATION OF THE MERGER AGREEMENT
The parties can agree to terminate the merger agreement at any time prior
to completion of the merger, and either Western Ohio or WesBanco can terminate
the merger agreement if, among other reasons, any of the following occurs:
- the merger is not approved by the stockholders of Western Ohio;
- the merger is not completed by December 31, 2004;
- a court or other governmental authority permanently prohibits the
merger; or
- the other party breaches or materially fails to comply with any of
its representations or warranties or obligations under the merger
agreement.
Western Ohio will also have the right to terminate the merger agreement if
the average closing price of WesBanco stock during a specified period before
receipt of the last required regulatory approval of the merger is less than
$24.896 and WesBanco common stock underperforms an index of financial
institutions by a specified amount, unless WesBanco were to elect to make a
compensating adjustment to the exchange ratio. Western Ohio may also terminate
the merger agreement in order to enter into an agreement with respect to an
unsolicited proposal that if consummated would result in a transaction more
favorable to Western Ohio's stockholders from a financial point of view,
provided that WesBanco does not make a counteroffer that is at least as
favorable as the other proposal and Western Ohio pays the termination fee
described below.
TERMINATION FEE
Western Ohio must pay WesBanco a termination fee of $2.5 million if the
merger agreement is terminated (i) because the Western Ohio stockholders did not
approve the merger agreement or Western Ohio breached certain provisions of the
merger agreement and prior to such termination or within six months thereafter
Western Ohio enters into an agreement for a competing acquisition proposal, (ii)
because the Western Ohio board withdraws or modifies its recommendation of the
merger after a competing acquisition proposal has been made and either the
Western Ohio stockholders do not adopt the merger agreement at a stockholders
meeting after a takeover proposal has been made or Western Ohio's stockholders
fail to meet by December 15, 2004 or (iii) by Western Ohio after receiving a
superior proposal for the acquisition of Western Ohio.
EFFECTIVE DATE OF THE MERGER
6
We expect the merger to be completed as soon as practicable after all
regulatory approvals and stockholder approval has been received. We expect this
to occur during the third quarter of 2004.
REGULATORY APPROVALS
In addition to your approval, the merger is subject to the approval of the
Board of Governors of the Federal Reserve System and the West Virginia Board of
Banking and Financial Institutions. If the Federal Reserve approves the merger,
the United States Department of Justice has 15 days in which to challenge the
approval on antitrust grounds. We may not consummate the merger until expiration
of the 15-day waiting period. These governmental authorities may impose
conditions for granting approval of the merger. We must also provide notice of
the merger to the Office of Thrift Supervision.
Western Ohio and WesBanco have filed all required applications for
regulatory review and approval or notice in connection with the merger. Neither
Western Ohio nor WesBanco can offer any assurance that all necessary approvals
will be obtained or the date when any such approvals will be obtained.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
When you consider the Western Ohio board's recommendation that Western
Ohio stockholders vote in favor of the merger, you should be aware that a number
of Western Ohio's executive officers and directors may have interests in the
merger that may be different from, or in addition to, yours. See "The Merger -
Interests of Certain Persons in the Merger" beginning on page 37.
OWNERSHIP OF WESTERN OHIO COMMON STOCK BY WESTERN OHIO DIRECTORS, EXECUTIVE
OFFICERS AND AFFILIATES
As of March 31, 2004, the directors, executive officers and affiliates of
Western Ohio owned or controlled the vote of 316,462 shares of Western Ohio
common stock constituting approximately 17.6% of the outstanding shares of
Western Ohio common stock. The holders of at least a majority of the outstanding
shares of Western Ohio common stock entitled to vote must vote in favor of the
merger in order to approve the merger. See "The Special Meeting - Beneficial
Ownership of Western Ohio Officers, Directors and Affiliates" beginning on page
23 for more information about Western Ohio directors, executive officers and
affiliates.
RECENT DEVELOPMENTS
During the second quarter of 2004, Western Ohio experienced a higher level
of prepayments on mortgage loans, primarily purchased loans, resulting in
accelerated amortization of purchased premiums that will negatively impact net
interest income and earnings. This will be mostly offset by a higher valuation
of mortgage servicing rights and Bank-Owned Life Insurance (BOLI) due to the
recent increase in interest rates, which extends the life and resulting value of
mortgage servicing. While the recent rise in interest rates will likely result
in a lower level of mortgage refinancing and prepayments in future quarters, a
continuation of the current prepayment level, though not expected, could
continue to negatively impact earnings without a corresponding offset.
7
COMPARATIVE PER SHARE DATA
(UNAUDITED)
Set forth below are the basic earnings, diluted earnings, cash dividends
and book value per common share data for Western Ohio and WesBanco on a
historical basis, on a pro forma combined basis, and on a pro forma equivalent
basis per common share of Western Ohio, at or for the three month period ending
March 31, 2004, and at or for the year ended December 31, 2003.
The pro forma data was derived by combining the historical consolidated
financial information of Western Ohio and WesBanco using the purchase method of
accounting for business combinations and assumes the transaction is completed as
contemplated.
The Western Ohio pro forma equivalent share information shows the effect
of the merger from the perspective of an owner of Western Ohio common stock. The
information was computed by multiplying the pro forma information by an exchange
ratio of 1.18 so that the per share amounts are equated to the respective
amounts for one share of Western Ohio common stock. This represents the WesBanco
common stock Western Ohio stockholders will receive for each share of Western
Ohio common stock they exchange for WesBanco common stock.
The Western Ohio pro forma equivalent share information is equated
to the value for each share of Western Ohio common stock being acquired.
However, under the merger agreement elections will be limited by a requirement
that 55% of the total number of outstanding shares of Western Ohio common stock
be exchanged for WesBanco common stock. Some stockholders may elect all cash for
some or all of their shares equal to $35.00 per share. Western Ohio stockholders
may also elect to exchange some of their shares for cash and some of their
shares for WesBanco common stock. Therefore, the form of actual consideration
Western Ohio stockholders receive will depend in part on the elections of other
Western Ohio stockholders. For more information, see "The Merger - What Western
Ohio Stockholders Will Receive in the Merger."
You should read the information below together with historical
financial statements and related notes and other information included and
incorporated by reference in this proxy statement/prospectus. The unaudited pro
forma combined data below is for illustrative purposes only. The companies may
have performed differently had they always been combined. You should not rely on
this information as being indicative of the historical results that would have
been achieved had the companies always been combined or the future results that
the combined company will experience after the merger, nor should you rely on
the three-month information as being indicative of results expected for the
entire year or for any future interim period.
THREE
MONTHS ENDED YEAR ENDED
MARCH 31, 2004 DECEMBER 31, 2003
-------------- -----------------
WESBANCO COMMON STOCK:
Earnings per share
Historical (basic) .................................. $ 0.49 $ 1.80
Historical (diluted) ................................ 0.49 1.80
Pro forma combined (basic) .......................... 0.48 1.78
Pro forma combined (diluted) ........................ 0.48 1.78
Cash dividends per share
Historical .......................................... 0.25 0.96
Pro forma combined .................................. 0.25 0.96
8
Book value per share
Historical .......................................... 16.55 16.13
Pro forma combined .................................. 17.35 16.95
WESTERN OHIO COMMON STOCK:
Earnings per share
Historical (basic) .................................. 0.29 1.44
Historical (diluted) ................................ 0.28 1.42
Pro forma equivalent (basic) ........................ 0.57 2.10
Pro forma equivalent (diluted) ...................... 0.57 2.10
Cash dividends per share
Historical .......................................... 0.25 1.00
Pro forma equivalent ................................ 0.30 1.13
Book value per share
Historical .......................................... 25.16 24.92
Pro forma equivalent ................................ 20.47 20.00
9
SHARE INFORMATION AND MARKET PRICES
The following table presents the closing market prices for Western Ohio
and WesBanco common stock on April 1, 2004 and ______________, 2004. April 1,
2004 was the last full trading day prior to the date on which the signing of the
merger agreement was announced. ________________, 2004 was the last practicable
trading day for which information was available prior to the printing of this
proxy statement/prospectus. The table also presents the equivalent price per
share of Western Ohio common stock, giving effect to the merger, as of such
dates. The equivalent per share price of Western Ohio common stock is determined
by multiplying the closing market price per share of WesBanco common stock on
each date by the exchange ratio of 1.18.
WesBanco common stock trades on the Nasdaq National Market under the
trading symbol "WSBC." Western Ohio common stock trades on the Nasdaq National
Market under the trading symbol "WOFC." The market prices of shares of WesBanco
common stock and Western Ohio common stock fluctuate from day to day. As a
result, you should obtain current market quotations to evaluate the merger.
These quotations are available from stockbrokers, in major newspapers such as
The Wall Street Journal, and on the Internet. The market price of the WesBanco
common stock at the effective time of the merger or at the time stockholders of
Western Ohio receive certificates evidencing shares of WesBanco common stock may
be higher or lower than the market price at the time the merger agreement was
executed, at the date of mailing of this document or at the time of the special
meeting.
WESTERN OHIO
WESTERN EQUIVALENT PER
WESBANCO OHIO SHARE PRICE
-------- ------- --------------
April 1, 2004................. $31.12 $30.91 $36.72
_______, 2004................. $_____ $_____ $_____
10
SELECTED HISTORICAL FINANCIAL DATA OF WESBANCO
(Dollars in thousands, except per share data)
The following table sets forth certain historical financial data
concerning WesBanco for the three months ended March 31, 2004 and 2003 and for
each of the five fiscal years ended December 31, 2003. This information is based
on information contained in WesBanco's quarterly reports on Form 10-Q and annual
reports on Form 10-K filed with the Securities and Exchange Commission.
AT OR FOR THE THREE MONTHS
ENDED MARCH 31, AT OR FOR THE YEARS ENDED DECEMBER 31,
------------------------ ------------------------------------------------------------------
2004 2003 2003 2002 2001 2000 1999
---------- ---------- ---------- ---------- ---------- ---------- ----------
(Unaudited)
SUMMARY STATEMENT OF INCOME:
Net interest income ....... $ 26,327 $ 24,842 $ 103,004 $ 103,600 $ 87,585 $ 83,527 $ 86,630
Provision for loan losses . 1,800 1,980 9,612 9,359 5,995 3,225 4,295
Other income .............. 8,761 8,247 33,230 27,852 25,001 23,376 24,581
Other expense ............. 21,135 20,055 81,810 76,647 65,307 64,483 67,813
Income tax provision ...... 2,394 2,165 8,682 10,620 12,282 12,271 11,465
Net income ................ 9,759 8,889 36,130 34,826 29,002 26,924 27,638
PER SHARE INFORMATION:
Earnings
Basic ............... 0.49 0.44 1.80 1.70 1.60 1.41 1.37
Diluted ............. 0.49 0.44 1.80 1.70 1.60 1.41 1.37
Dividends ................. 0.25 0.24 0.96 0.935 0.92 0.895 0.88
Book value ................ 16.55 15.89 16.13 15.89 14.46 13.92 13.63
SELECTED RATIOS:
Return on average assets .. 1.16% 1.09% 1.08% 1.13% 1.21% 1.18% 1.23%
Return on average equity .. 12.23% 11.14% 11.38% 10.95% 11.28% 10.42% 9.85%
SELECTED BALANCE SHEET DATA:
Assets .................... $3,376,512 $3,356,427 $3,445,006 $3,297,231 $2,474,454 $2,310,137 $2,269,726
Securities ................ 1,142,074 1,205,979 1,201,109 1,193,896 758,470 546,389 567,928
Net loans ................. 1,922,912 1,799,874 1,907,303 1,795,805 1,518,909 1,570,672 1,503,694
Deposits .................. 2,460,864 2,455,540 2,482,082 2,399,956 1,913,458 1,870,361 1,814,001
Stockholders' equity ...... 325,623 321,013 318,436 325,171 258,201 258,506 269,664
11
SELECTED HISTORICAL FINANCIAL DATA OF WESTERN OHIO
(Dollars in thousands, except per share data)
The following table sets forth certain historical financial data
concerning Western Ohio for the three months ended March 31, 2004 and 2003 and
for each of the five fiscal years ended December 31, 2003. This information is
based on information contained in Western Ohio's quarterly reports on Form 10-Q
and annual reports on Form 10-K filed with the Securities and Exchange
Commission.
AT OR FOR THE THREE
MONTHS
ENDED MARCH 31, AT OR FOR THE YEARS ENDED DECEMBER 31,
------------------------ ------------------------------------------------------------------
2004 2003 2003 2002 2001 2000 1999
---------- ---------- ---------- ---------- ---------- ---------- ----------
(Unaudited)
SUMMARY STATEMENT OF INCOME:
Net interest income ........ $ 2,501 $ 2,393 $ 9,410 $ 9,919 $ 9,519 $ 9,894 $ 9,783
Provision for loan losses .. 84 84 286 343 358 349 246
Other income ............... 722 825 3,643 3,093 1,939 1,294 1,261
Other expense .............. 2,369 2,246 9,229 9,136 8,216 7,899 8,127
Income tax expense ......... 258 267 1,037 1,186 1,009 1,089 988
Net income ................. 512 621 2,501 2,347 1,875 1,851 1,683
PER SHARE INFORMATION:
Earnings
Basic ............... 0.29 0.36 1.44 1.36 1.08 1.01 0.86
Diluted ............. 0.28 0.35 1.42 1.35 1.08 1.01 0.85
Dividends .................. 0.25 0.25 1.00 1.00 1.00 1.00 1.00
Book value ................. 25.16 24.64 24.92 24.62 23.89 23.15 21.82
SELECTED RATIOS:
Return on average assets ... 0.52% 0.73% 0.70% 0.68% 0.54% 0.54% 0.52%
Return on average equity ... 4.55% 5.77% 5.72% 5.47% 4.43% 4.50% 3.75%
SELECTED BALANCE SHEET DATA:
Assets ..................... $ 407,486 $ 351,244 $ 399,540 $ 346,795 $ 341,711 $ 352,562 $ 329,685
Securities ................. 35,374 41,110 32,735 46,001 39,648 48,653 50,366
Net loans .................. 337,370 279,888 334,469 256,883 269,300 283,604 254,871
Deposits ................... 257,530 216,951 248,681 219,169 220,287 208,332 202,331
Stockholders' equity ....... 45,334 43,334 44,357 43,205 41,945 41,810 42,989
12
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The following Unaudited Pro Forma Condensed Financial Information is based
on the historical financial statements of WesBanco and Western Ohio and has been
prepared to illustrate the financial effect of the merger described below. The
pro forma financial information should be read in conjunction with WesBanco's
and Western Ohio's unaudited consolidated financial statements for the three
months ended March 31, 2004 and audited consolidated financial statements for
the year ended December 31, 2003.
The Unaudited Pro Forma Condensed Combined Balance Sheet as of March 31,
2004 assumes the merger was accounted for as a purchase and consummated on March
31, 2004. The Unaudited Condensed Combined Statements of Income for the three
months ended March 31, 2004 and for the year ended December 31, 2003, give
effect to the merger of Western Ohio as if such transaction had been effective
during the entire period shown. These pro forma financial statements reflect the
merger based upon preliminary purchase accounting adjustments. Actual
adjustments will be made on the basis of evaluations as of the effective date of
the merger and, therefore, may differ from those reflected in the Unaudited Pro
Forma Condensed Financial Information.
Estimates of non-recurring merger related expenses expected to occur after
the date of consummation are included in the pro forma financial information.
Non-recurring expenses are projected to range in total from $0.3 million to $0.5
million. Estimates of cost savings associated with the merger are not included
in the pro forma information. WesBanco expects cost savings to approximate 24%
to 28% of Western Ohio's estimated annualized pre-tax operating expenses of $9.3
million for 2004. These estimates may differ from the actual costs incurred and
cost savings achieved in the merger.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
(Dollars in thousands, except per share amounts)
AS OF MARCH 31, 2004
-----------------------------------------------------------------
WESTERN OHIO PRO FORMA
FINANCIAL PRO FORMA COMBINED
WESBANCO, INC. CORPORATION ADJUSTMENTS WESBANCO, INC.
-------------- ------------ ------------ --------------
ASSETS
Cash and cash equivalents .............. $ 85,028 $ 9,223 $ 94,251
Available for sale securities .......... 726,077 35,374 761,451
Held to maturity securities ............ 415,997 415,997
Net loans .............................. 1,922,912 337,370 $ 5,482 (A) 2,265,764
Goodwill and other intangibles ......... 57,514 25,935 (A) 83,449
Other assets ........................... 168,984 25,519 (10)(A) 194,493
------------ ------------ ------------ ------------
TOTAL ASSETS ......................... $ 3,376,512 $ 407,486 $ 31,407 $ 3,815,405
============ ============ ============ ============
LIABILITIES
Deposits ............................... $ 2,460,864 $ 257,530 $ 2,129 (A) $ 2,720,523
Other borrowings ....................... 512,463 101,834 12,856 (A)(C) 627,153
Other liabilities ...................... 46,626 2,788 2,937 (B) 52,351
Subordinated debentures ................ 30,936 22,000 (C) 52,936
------------ ------------ ------------ ------------
TOTAL LIABILITIES .................... 3,050,889 362,152 39,922 3,452,963
STOCKHOLDERS' EQUITY ................... 325,623 45,334 (8,515)(A) 362,442
------------ ------------ ------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY ............................... $ 3,376,512 $ 407,486 $ 31,407 $ 3,815,405
============ ============ ============ ============
Book value per share ................... $ 16.55 $ 25.16 $ 17.35
Shares outstanding ..................... 19,673,103 1,801,729 20,885,082
SEE NOTES TO THE UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION
13
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
(Dollars in thousands, except per share amounts)
FOR THE THREE MONTHS ENDED MARCH 31, 2004
---------------------------------------------------------------------
WESTERN OHIO PRO FORMA
FINANCIAL PRO FORMA COMBINED
WESBANCO, INC. CORPORATION ADJUSTMENTS WESBANCO, INC.
-------------- ------------- ------------ --------------
INTEREST INCOME:
Loans, including fees ............... $ 28,162 $ 4,541 $ (343)(A) $ 32,360
Securities and other ................ 11,669 334 87 (D) 12,090
------------ ------------ ------------ ------------
TOTAL INTEREST INCOME ............ 39,831 4,875 (256) 44,450
INTEREST EXPENSE:
Deposits ............................ 9,344 1,348 (333)(A) 10,359
Other borrowings .................... 4,160 1,026 101 (A)(C) 5,287
------------ ------------ ------------ ------------
TOTAL INTEREST EXPENSE ............ 13,504 2,374 (232) 15,646
------------ ------------ ------------ ------------
NET INTEREST INCOME ............... 26,327 2,501 (24) 28,804
Provision for loan losses ........... 1,800 84 1,884
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES ................... 24,527 2,417 (24) 26,920
Other income ........................ 8,761 722 9,483
Other expense ....................... 21,135 2,369 245 (A)(B) 23,749
------------ ------------ ------------ ------------
Income before income taxes ........ 12,153 770 (269) 12,654
------------ ------------ ------------ ------------
Provision (benefit) for income taxes 2,394 258 (94)(A) 2,558
------------ ------------ ------------ ------------
NET INCOME .......................... $ 9,759 $ 512 $ (175) $ 10,096
============ ============ ============ ============
Earnings per share (Basic) .......... $ 0.49 $ 0.29 $ 0.48
Earnings per share (Diluted) ........ $ 0.49 $ 0.28 $ 0.48
Average shares outstanding (Basic) .. 19,719,934 1,786,556 20,931,913
Average shares outstanding (Diluted) 19,769,505 1,828,876 20,981,484
SEE NOTES TO THE UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION
14
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
(Dollars in thousands, except per share amounts)
FOR THE YEAR ENDED DECEMBER 31, 2003
--------------------------------------------------------------------
WESTERN OHIO PRO FORMA
FINANCIAL PRO FORMA COMBINED
WESBANCO, INC. CORPORATION ADJUSTMENTS WESBANCO, INC.
------------- ------------ ------------ -------------
INTEREST INCOME:
Loans, including fees ............... $ 115,311 $ 17,092 $ (760)(A) $ 131,643
Securities and other ................ 50,205 1,467 565 (D) 52,237
------------ ------------ ------------ ------------
TOTAL INTEREST INCOME ............ 165,516 18,559 (195) 183,880
INTEREST EXPENSE:
Deposits ............................ 44,739 5,214 (1,009)(A) 48,944
Other borrowings .................... 17,773 3,935 1,097 (A)(C) 22,805
------------ ------------ ------------ ------------
TOTAL INTEREST EXPENSE ............ 62,512 9,149 88 71,749
------------ ------------ ------------ ------------
NET INTEREST INCOME ............... 103,004 9,410 (283) 112,131
Provision for loan losses ........... 9,612 286 9,898
------------ ------------ ------------ ------------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES ................... 93,392 9,124 (283) 102,233
Other income ........................ 33,230 3,643 36,873
Other expense ....................... 81,810 9,229 980 (A)(B) 92,019
------------ ------------ ------------ ------------
Income before income taxes ........ 44 812 3,538 (1,263) 47,087
Provision (benefit) for income taxes 8,682 1,037 (442)(A) 9,277
------------ ------------ ------------ ------------
NET INCOME .......................... $ 36,130 $ 2,501 $ (821) $ 37,810
============ ============ ============ ============
Earnings per share (Basic) .......... $ 1.80 $ 1.44 $ 1.78
Earnings per share (Diluted) ........ $ 1.80 $ 1.42 $ 1.78
Average shares outstanding (Basic) .. 20,056,849 1,734,203 21,260,950
Average shares outstanding (Diluted) 20,082,672 1,764,963 21,286,773
SEE NOTES TO THE UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION
15
The following table sets forth an estimate of the expected effects of the
projected aggregate purchase accounting adjustments reflected in the pro forma
combined financial statements on the future pre-tax net income of WesBanco after
the merger (in thousands):
DISCOUNT ACCRETION (PREMIUM AMORTIZATION)
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------------------------------
(Unaudited, dollars in thousands) 2004 2005 2006 2007 2008
--------------------------------- ------- ------- ------- ------- -------
Loans $(1,372) $(1,372) $(1,372) $(1,366) --
Customer/deposit base (544) (544) (544) (544) $ (544)
Time deposits 1,345 784 -- -- --
Borrowings 1,140 1,140 1,140 1,140 171
------- ------- ------- ------- -------
Increase (decrease) in pre-tax net income $ 569 $ 8 $ (776) $ (770) $ (373)
======= ======= ======= ======= =======
On the effective date of the merger, the interest rates used in the
valuation of Western Ohio's assets and liabilities may be different than those
at March 31, 2004. This may change the purchase accounting adjustments and their
estimated effects on future pre-tax net income. The following table shows the
estimated effects on the purchase accounting adjustments and the pro forma
annual pre-tax net income of a 50 basis point and a 100 basis point increase in
the interest rates used to determine the estimated fair value of the indicated
assets and liabilities. The income effect has been determined by changing the
relevant interest rate.
PURCHASE ACCOUNTING ADJUSTMENTS
----------------------------------------------------
50 BASIS POINT 100 BASIS POINT
INCREASE IN INCREASE IN
(Unaudited, dollars in thousands) PRO FORMA RATES RATES
--------------------------------- --------- ------------- ----------------
Loans $ 5,482 $ 3 $(4,417)
Customer/deposit base 4,342 5,404 6,465
Time deposits (2,129) (1,384) (638)
Borrowings (4,731) (2,964) (1,197)
------- ------- -------
Total adjustment $ 2,964 $ 1,059 $ 213
======= ======= =======
IMPACT ON PRO FORMA PRE-TAX NET INCOME FOR THE YEARS ENDED
DECEMBER 31,
-------------------------------------------------------------------
(Unaudited, dollars in thousands) 2004 2005 2006 2007 2008
--------------------------------- ------- -------- ------- -------- ---------
50 Basis Point Increase in Rates $ 974 $ 628 $ 109 $ 110 $ (496)
100 Basis Point Increase in Rates 1,192 1,032 793 794 (554)
======= ======= ====== ======= =======
NOTES TO THE UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION
NOTE A
The pro forma adjustments represent the purchase accounting entries to
record the merger of Western Ohio Financial Corporation. The excess of the
purchase price over the fair value of the net assets acquired, net of deferred
taxes, is allocated to goodwill. Estimated fair value adjustments included in
the Unaudited Pro Forma Condensed Balance Sheet have been determined based on
information available as of March 31, 2004. Because the final determination of
fair value of assets and liabilities will be made based on the fair values as of
the effective date of the merger, the final amounts may differ from estimates
provided herein. Fair value adjustments are amortized on a straight-line basis
over their estimated average remaining lives. Tax expense related to the net
fair value adjustments is calculated at a 35% tax rate.
Included in the pro forma adjustments is an allocation of the purchase
price to core deposit intangibles. The core deposit intangible is separated from
goodwill and amortized over its estimated average remaining life, subject to an
annual impairment test. The remaining goodwill, which is not subject to
amortization, will also be annually evaluated for possible impairment.
16
NOTE B
The pro forma adjustment represents estimated direct acquisition costs of
approximately $2.9 million accrued as other liabilities and merger - related
expenses expected to occur after the date of consummation, which are estimated
at $0.1 million and $0.4 million for the three months ended March 31, 2004 and
year ended December 31, 2003, respectively. These costs include certain
severance payments, legal fees and accounting and advisory fees.
NOTE C
The pro forma adjustment represents estimated borrowings needed to fund
the transaction through junior subordinated debt related to the issuance of $22
million in trust preferred securities and the use of a line of credit with an
independent commercial bank and to record the related interest expense.
NOTE D
The pro forma adjustment represents the net amortization/accretion that
would be recorded by WesBanco if the investment securities of Ohio Western would
have been held by WesBanco at the beginning of the period. The adjustment
reverses out the net amortization and accretion Western Ohio recorded in their
Statement of Income and records the net amortization/accretion WesBanco would
have recorded in its Statement of Income.
17
RISK FACTORS
The acquisition of WesBanco common stock in connection with the merger
involves significant risks. You should give careful attention to the following
statements respecting certain risks associated with the merger and with the
ownership of WesBanco common stock.
RISKS SPECIFICALLY RELATED TO THE MERGER
THE MIX OF CONSIDERATION - CASH AND STOCK - THAT WESTERN OHIO STOCKHOLDERS
ACTUALLY RECEIVE MAY BE DIFFERENT THAN THE FORM OF CONSIDERATION THAT SUCH
STOCKHOLDERS ELECT TO RECEIVE. WESTERN OHIO STOCKHOLDERS WILL NOT KNOW THE MIX
OF THE CONSIDERATION THAT THEY WILL ACTUALLY RECEIVE IN THE MERGER WHEN THEY
ELECT THEIR CONSIDERATION. THIS COULD ADVERSELY IMPACT WESTERN OHIO
STOCKHOLDERS' EXPECTATIONS OF THE FEDERAL INCOME TAX TREATMENT OF THE MERGER
CONSIDERATION THEY RECEIVE.
The total amount of cash and WesBanco common stock that will be paid to all
Western Ohio stockholders in the merger is fixed by a requirement that 55% of
the total number of outstanding shares of Western Ohio common stock be exchanged
for WesBanco common stock and that 45% of the total number of outstanding shares
of Western Ohio common stock be exchanged for cash. The amount of cash, stock or
combination of cash and stock that a Western Ohio stockholder receives in the
merger will depend on whether the stockholder has submitted an election form,
whether the stockholder has elected to receive the consideration in all stock or
all cash, and the elections made by all other stockholders. Accordingly, the mix
of consideration that a Western Ohio stockholder receives may be different than
the mix that the stockholder has elected to receive and will not be determined
until after the merger is approved. Therefore, Western Ohio stockholders will
not know the actual mix of consideration that they will eventually receive at
the time of the special meeting or when they elect their consideration. Assuming
the merger qualifies as a "reorganization" for U.S. federal income tax purposes,
a Western Ohio stockholder who has elected to receive only stock with the
expectation of having tax-free treatment and instead receives a combination of
cash and stock as a result of the application of the proration procedures may be
required to recognize gain on the exchange, but will not be permitted to
recognize any loss on the exchange. On the other hand, a Western Ohio
stockholder who elects to receive only cash with the expectation that he or she
will recognize a loss as a result of the merger may receive WesBanco common
stock, in which case the loss would not be recognized. For a more detailed
discussion of the federal income tax consequences of the proposed transaction,
see the discussion under the caption "The Merger -- Certain Federal Income Tax
Consequences of the Merger."
WESBANCO MAY ENCOUNTER INTEGRATION DIFFICULTIES OR MAY FAIL TO REALIZE THE
ANTICIPATED BENEFITS OF THE MERGER.
WesBanco and Western Ohio may not be able to integrate their operations without
encountering difficulties including, without limitation, the loss of key
employees and customers, the disruption of their respective ongoing businesses
or possible inconsistencies in standards, controls, procedures and policies.
Additionally, in determining that the merger is in the best interests of
WesBanco and Western Ohio, as the case may be, the board of directors of each of
WesBanco and Western Ohio considered that enhanced earnings may result from the
consummation of the merger, including from reduction of duplicate costs,
improved efficiency and cross-marketing opportunities. However, there can be no
assurance that any enhanced earnings will result from the merger.
BECAUSE THE MARKET PRICE OF WESBANCO COMMON STOCK MAY FLUCTUATE, YOU CANNOT BE
CERTAIN OF THE MARKET VALUE OF THE COMMON STOCK THAT WESTERN OHIO STOCKHOLDERS
WILL RECEIVE IN THE MERGER.
The merger agreement requires that 55% of the total number of outstanding shares
of Western Ohio common stock be exchanged for WesBanco common stock.
Accordingly, many Western Ohio stockholders will receive WesBanco common stock
in connection with the merger. Any change in the price of WesBanco common stock
prior to the merger will affect the market value of the stock that Western Ohio
stockholders will receive on the date of the merger. Stock price changes may
result from a variety of factors, including general market and economic
conditions, changes in WesBanco's businesses, operations and prospects, and
regulatory considerations. Many of these factors are beyond WesBanco's control.
18
The prices of WesBanco common stock and Western Ohio common stock at the closing
of the merger may vary from their respective prices on the date the merger
agreement was executed, on the date of this proxy statement/prospectus and on
the date of the Western Ohio special meeting. As a result, the value represented
by the exchange ratio will also vary. For example, based on the range of closing
prices of WesBanco common stock during the period from April 1, 2004, the last
trading day before public announcement of the merger, through _____________,
2004, the exchange ratio represented a value ranging from a high of $______ to a
low of $_______ for each share of Western Ohio common stock. Because the date
the merger is completed will be later than the date of the special meeting, you
will not know what the market value of WesBanco common stock will be upon
completion of the merger when you vote on the merger at the Western Ohio special
meeting or when you make your election to receive cash or stock.
FUTURE RESULTS OF THE COMBINED COMPANIES MAY MATERIALLY DIFFER FROM THE PRO
FORMA FINANCIAL INFORMATION PRESENTED IN THIS DOCUMENT.
Future results of the combined company may be materially different from those
shown in the pro forma financial statements that only show a combination of the
historical results of WesBanco and Western Ohio. We have estimated that the
combined company will record approximately $2.9 million of merger-related
charges. The charges may be higher or lower than we have estimated, depending
upon how costly or difficult it is to integrate the two companies. Furthermore,
these charges may decrease the capital of the combined company that could be
used for profitable, income-earning investments in the future.
RISKS RELATED TO OWNING WESBANCO COMMON STOCK
INCREASED BANK SECRECY ACT CONTROLS AND PROCEDURES MAY NEGATIVELY IMPACT
WESBANCO'S EARNINGS DUE TO INCREASED COMPLIANCE COSTS.
On July 22, 2003, WesBanco Bank, Inc., a wholly-owned banking subsidiary of
Wesbanco, entered into an informal agreement styled as a Memorandum of
Understanding with the Federal Reserve Bank of Cleveland (the "Federal Reserve")
and the West Virginia Department of Banking (collectively the "regulatory
agencies") to improve and strengthen WesBanco Bank's Bank Secrecy Act and
anti-money laundering controls and procedures. The informal agreement requires
quarterly reporting of WesBanco Bank's corrective actions under the plan until
all corrections required under the terms of the informal agreement are completed
to the satisfaction of the regulatory agencies. WesBanco Bank has worked with
the Federal Reserve and outside consultants to implement revised policies and
enhanced procedures, which includes improvements in its bank secrecy and
anti-money laundering record-keeping and reporting procedures, implementation of
an enhanced customer due diligence program with additional technological
resources, improvements to internal compliance procedures and audit programs and
testing of the processes and controls. An independent third party audit firm has
completed an audit of the newly-implemented procedures. These necessary
improvements will most likely lead to higher expenses, which could negatively
impact WesBanco's future earnings.
ACQUISITION OPPORTUNITIES MAY NOT BE AVAILABLE TO WESBANCO IN THE FUTURE.
WesBanco continually evaluates opportunities to acquire other businesses.
However, WesBanco may not have the opportunity to make suitable acquisitions on
favorable terms in the future, which could negatively impact the growth of its
business. WesBanco expects that other banking and financial companies, many of
which have significantly greater resources, will compete with it to acquire
compatible businesses. This competition could increase prices for acquisitions
that WesBanco would likely pursue, and its competitors may have greater
resources than it does. Also, acquisitions of regulated business such as banks
are subject to various regulatory approvals. If WesBanco fails to receive the
appropriate regulatory approvals, it will not be able to consummate an
acquisition that it believes is in its best interests. Any future acquisitions
may result in unforeseen difficulties, which could require significant time and
attention from our management that would otherwise be directed at developing our
existing business. In addition, we could discover undisclosed liabilities
resulting from any acquisitions for which we may become responsible. Further,
the benefits that we anticipate from these acquisitions may not develop.
WESBANCO MAY BE REQUIRED TO WRITE DOWN GOODWILL AND OTHER INTANGIBLE ASSETS,
CAUSING ITS FINANCIAL CONDITION AND RESULTS TO BE NEGATIVELY AFFECTED.
When WesBanco acquires a business, a portion of the purchase price of the
acquisition is allocated to goodwill and other identifiable intangible assets.
The amount of the purchase price which is allocated to goodwill and other
19
intangible assets is determined by the excess of the purchase price over the net
identifiable assets acquired. At March 31, 2004, WesBanco's goodwill and other
identifiable intangible assets were approximately $57.5 million. Under current
accounting standards, if WesBanco determines goodwill or intangible assets are
impaired, it would be required to write down the value of these assets. WesBanco
conducts an annual review to determine whether goodwill and other identifiable
intangible assets are impaired. WesBanco completed such an impairment analysis
in the fourth quarter of 2003 and concluded that no impairment charge was
necessary for the year ended December 31, 2003. WesBanco cannot provide
assurance that it will not be required to take an impairment charge in the
future. Any impairment charge would have a negative effect on its stockholders'
equity and financial results and may cause a decline in WesBanco's stock price.
DUE TO INCREASED COMPETITION, WESBANCO MAY NOT BE ABLE TO ATTRACT AND RETAIN
BANKING CUSTOMERS AT CURRENT LEVELS.
WesBanco faces competition from the following:
- local, regional and national banks;
- savings and loans;
- internet banks;
- credit unions;
- finance companies; and
- brokerage firms serving WesBanco's market areas.
In particular, WesBanco Bank's competitors include several major national
financial companies whose greater resources may afford them a marketplace
advantage by enabling them to maintain numerous banking locations and mount
extensive promotional and advertising campaigns. Additionally, banks and other
financial institutions may have products and services not offered by WesBanco,
which may cause current and potential customers to choose those institutions.
Areas of competition include interest rates for loans and deposits, efforts to
obtain deposits and range and quality of services provided. If WesBanco is
unable to attract new and retain current customers, loan and deposit growth
could decrease causing WesBanco's results of operations and financial condition
to be negatively impacted.
WESBANCO MAY NOT BE ABLE TO EXPAND ITS TRUST AND INVESTMENT SERVICES SEGMENT AND
RETAIN ITS CURRENT CUSTOMERS.
As of March 31, 2004, WesBanco had approximately $2.8 billion in assets under
management, which account for 7.3% of WesBanco's revenues. WesBanco may not be
able to attract new and retain current investment management clients due to
competition from the following:
- commercial banks and trust companies;
- mutual fund companies;
- investment advisory firms;
- law firms;
- brokerage firms; and
- other financial services companies.
WesBanco's ability to successfully attract and retain investment management
clients is dependent upon its ability to compete with competitors' investment
products, level of investment performance, client services and marketing and
distribution capabilities. Due to the changes in economic conditions, the
performance of WesBanco's Trust and Investment services segment may be
negatively impacted by the financial markets in which investment customer's
assets are invested, causing the customer to seek other alternative investment
options. If WesBanco is not successful, its results from operations and
financial position may be negatively impacted.
CUSTOMERS MAY DEFAULT ON THE REPAYMENT OF LOANS.
WesBanco Bank's customers may default on the repayment of loans, which may
negatively impact WesBanco's earnings due to loss of principal and interest
income. Increased operating expenses may result from the allocation of
20
management time and resources to the collection and work-out of the loan.
Collection efforts may or may not be successful causing WesBanco to write off
the loan or repossess the collateral securing the loan, which may or may not
exceed the balance of the loan. Management evaluates the adequacy of the
allowance for loan losses at least quarterly, which includes testing certain
individual loans as well as collective pools of loans for impairment. This
evaluation includes an assessment of actual loss experience within each category
of the portfolio, individual commercial and commercial real estate loans that
exhibit credit weakness; current economic events, including employment
statistics, trends in bankruptcy filings, and other pertinent factors; industry
or geographic concentrations, and regulatory guidance. Additions to the
allowance for loan loss may result in an expense for the period. WesBanco's
regulatory agencies periodically review the allowances for loan losses. Based on
their assessment the regulatory agencies may require WesBanco to adjust the
allowance for loan loss. These adjustments could negatively impact WesBanco
Banks' results of operations or financial position.
ECONOMIC CONDITIONS IN WESBANCO'S MARKET AREAS COULD NEGATIVELY IMPACT EARNINGS.
A downturn in the local and regional economies could negatively impact
WesBanco's banking business. WesBanco Bank serves both individuals and business
customers throughout the state of West Virginia, Central and Eastern Ohio and
Western Pennsylvania. The ability of WesBanco Bank's customers to repay their
loans is strongly tied to the economic conditions in these areas. These economic
conditions may also force customers to utilize deposits held by WesBanco Bank in
order to pay current expenses causing WesBanco Bank's deposit base to shrink. As
a result WesBanco Bank may have to borrow funds at higher rates in order to meet
liquidity needs. These events may have a negative impact on WesBanco's earnings.
CURRENT MARKET INTEREST RATES AND COST OF FUNDS MAY NEGATIVELY IMPACT WESBANCO'S
BANKING BUSINESS.
Fluctuations in interest rates may negatively impact the business of WesBanco
Bank. WesBanco Bank's main source of income from operations is net interest
income, which is equal to the difference between the interest income received on
interest-bearing assets (usually loans and investment securities) and the
interest expense incurred in connection with interest-bearing liabilities
(usually deposits and borrowings). These rates are highly sensitive to many
factors beyond WesBanco's control, including general economic conditions, both
domestic and foreign and the monetary and fiscal policies of various
governmental and regulatory authorities. WesBanco Bank's net interest income can
be affected significantly by changes in market interest rates. Changes in
relative interest rates may reduce WesBanco Bank's net interest income as the
difference between interest income and interest expense decreases. As a result,
WesBanco Bank has adopted asset and liability management policies to minimize
the potential adverse effects of changes in interest rates on net interest
income, primarily by altering the mix and maturity of loans, investments and
funding sources. However, even with these policies in place, WesBanco cannot
assure you that an increase or decrease in interest rates will not negatively
impact its results from operations or financial position. WesBanco's cost of
funds for banking operations may increase as a result of general economic
conditions, interest rates and competitive pressures. WesBanco Bank has
traditionally obtained funds principally through deposits and through
borrowings. As a general matter, deposits are a cheaper source of funds than
borrowings, because interest rates paid for deposits are typically less than
interest rates charged for borrowings. If, as a result of general economic
conditions, market interest rates, competitive pressures or otherwise, the
amount of deposits at WesBanco Bank decreases relative to its overall banking
operations, WesBanco Bank may have to rely more heavily on borrowings as a
source of funds in the future.
CHANGES IN REGULATORY CAPITAL REGULATIONS BY THE FEDERAL RESERVE BOARD MAY
NEGATIVELY IMPACT WESBANCO'S CAPITAL LEVELS.
WesBanco currently has $30.9 million in junior subordinated debt related to the
issuance of $30.0 million in trust preferred securities on its balance sheet.
The trust preferred securities are presented as a separate category of long-term
debt on the Consolidated Balance Sheet. For regulatory purposes, the trust
preferred securities are included in Tier I Capital in accordance with
regulatory reporting requirements. In July 2003, the Federal Reserve Board
issued a supervisory letter indicating that trust preferred securities currently
will continue to qualify as Tier 1 capital for regulatory purposes until further
notice. On May 6, 2004, the Federal Reserve Board proposed a rule that would
retain trust preferred securities in Tier 1 capital, but with stricter
quantitative limits and clearer qualitative standards. Under the proposal, after
a three-year transition period, the aggregate amount of trust preferred
securities and certain other capital elements would be limited to 25 percent of
Tier 1 capital elements, net of goodwill. The amount of trust preferred
securities and certain other elements in excess of the limit could be included
in Tier 2 capital, subject to restrictions. Should the Board disallow trust
preferred securities to be treated as Tier 1 capital due to changes made by the
Financial Accounting Standards Board ("FASB") WesBanco's Tier 1 capital ratio
may be negatively
21
impacted. WesBanco's earnings may also be negatively impacted due to the
possible prepayment penalties associated with the redemption of the trust
preferred securities.
BORROWINGS FROM THE FEDERAL HOME LOAN BANK SYSTEM.
WesBanco Bank is currently a member bank of the Federal Home Loan of Pittsburgh
("FHLB"). Membership in this system allows WesBanco Bank to participate in
various programs offered by its member banks. WesBanco Bank borrows funds from
the FHLB, which are secured by a blanket lien on certain residential mortgage
loans or securities with a market value at least equal to the outstanding
balances. Recent weakness with certain Federal Home Loan Banks, including
Pittsburgh, may impact the collateral necessary to secure borrowings and limit
the borrowings extended to its member banks, as well as require additional
capital contributions by its member banks. Should this occur WesBanco's short
term liquidity needs could be negatively impacted. At March 31, 2004 WesBanco
Bank owns $23.0 million of FHLB stock, which has a dividend yield approximating
1.38%. This dividend may be eliminated by the FHLB at anytime in the future in
order for the FHLB to restore its retained earnings. In such case, the FHLB
stock owned by WesBanco may be deemed a non-earning asset.
WESBANCO'S FUTURE DEPENDS ON THE SUCCESSFUL GROWTH OF ITS SUBSIDIARIES.
WesBanco's primary business activity for the foreseeable future will be to act
as the holding company of WesBanco Bank and subsidiaries. Therefore, WesBanco's
future profitability will depend on the success and growth of these
subsidiaries. In the future, part of WesBanco's growth may come from buying
other banks and buying or establishing other companies. Such entities may not be
profitable after they are purchased or established, and they may lose money or
be dilutive to earnings per share, particularly for the first few years. A newly
acquired bank or company may bring with it unexpected liabilities, bad loans, or
poor employee relations, or the newly acquired bank or company may lose
customers and the associated revenue.
WESBANCO'S ABILITY TO PAY DIVIDENDS IS LIMITED.
Holders of shares of WesBanco's common stock are entitled to dividends if, when,
and as declared by the WesBanco's board of directors out of funds legally
available for that purpose. Although the board of directors has declared cash
dividends in the past, the current ability to pay dividends is largely dependent
upon the receipt of dividends from WesBanco Bank. Federal and state laws impose
restrictions on the ability of WesBanco Bank to pay dividends. Additional
restrictions are placed upon WesBanco by the policies of federal regulators,
including the Federal Reserve Board's November 14, 1985 policy statement, which
provides that bank holding companies should pay dividends only out of the past
year's net income, and then only if their prospective rate of earnings retention
appears consistent with their capital needs, asset quality, and overall
financial condition. In general, future dividend policy is subject to the
discretion of the board of directors and will depend upon a number of factors,
including the WesBanco's and WesBanco Bank's future earnings, capital
requirements, regulatory constraints and financial condition.
22
THE SPECIAL MEETING
GENERAL
This section contains information about the special stockholder meeting
Western Ohio has called to consider and vote on the approval of the merger
agreement. Western Ohio is mailing this proxy statement/prospectus to you on or
about _______, 2004. Together with this proxy statement/prospectus, Western Ohio
is also sending to its stockholders a notice of the Western Ohio special meeting
and a form of proxy that Western Ohio's board of directors is soliciting for use
at the special meeting and at any adjournments or postponements of the meeting.
A copy of the merger agreement is attached to this proxy
statement/prospectus as Annex A and is incorporated by reference into this
document in its entirety. You should read the entire merger agreement carefully.
DATE, TIME AND PLACE OF THE SPECIAL MEETING
The special meeting will be held on ________, _______, 2004, at ______,
local time, the Springfield Inn located at 100 South Fountain Avenue,
Springfield, Ohio.
RECORD DATE AND REQUIRED VOTE
Only holders of record of Western Ohio common stock on ______, 2004 will
be entitled to notice of and to vote at the special meeting and any adjournments
or postponements of the special meeting. On March 31, 2004, there were 1,801,729
shares of Western Ohio common stock outstanding and entitled to vote at the
special meeting. Each share is entitled to one vote. As of March 31, 2004, there
were approximately 1,596 holders of record of Western Ohio common stock.
The presence, in person or by proxy, of the holders of at least one-third
of the outstanding shares of Western Ohio common stock entitled to vote is
necessary to constitute a quorum at the special meeting. The holders of at least
a majority of the shares of Western Ohio common stock entitled to vote must vote
in favor of the merger in order to approve the merger. Abstentions and broker
non-votes will have the effect of a vote against approval of the merger
agreement and the merger.
BENEFICIAL OWNERSHIP OF WESTERN OHIO OFFICERS, DIRECTORS AND AFFILIATES
As of March 31, 2004, the directors, executive officers and affiliates of
Western Ohio owned or controlled the vote of 316,462 shares of Western Ohio
common stock, constituting approximately 17.6% of the outstanding shares of
Western Ohio common stock. Each director and executive officer of Western Ohio
who owns or has control over shares of Western Ohio common stock has advised
Western Ohio that he or she will vote FOR adoption and approval of the merger
agreement.
VOTING AND REVOCATION OF PROXIES
You may use the accompanying proxy if you are unable to attend the special
meeting in person or wish to have your shares voted by proxy even if you attend
the meeting. All shares of Western Ohio 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 Western Ohio 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 those matters in their discretion.
23
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 Western
Ohio 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 Western Ohio before the taking of the vote at the special
meeting, or (iii) attending the special meeting and voting in person. Your
attendance at the special meeting will not, in and of itself, constitute a
revocation of your proxy. Any written notice of revocation or subsequent proxy
should be sent so as to be delivered to Western Ohio Financial Corporation, 28
East Main Street, Springfield, Ohio 45502, Attention: Corporate Secretary, or
hand delivered to the foregoing representative of Western Ohio, at or before the
taking of the vote at the special meeting. For a notice of revocation or later
proxy to be valid, it must actually be received by Western Ohio prior to the
vote of the stockholders. If your shares are held by a broker in street name and
you wish to change the instructions you have given your broker about how to vote
your shares, you must follow the instructions provided by the broker in order to
change your vote.
SOLICITATION OF PROXIES
Western Ohio will bear the cost of the solicitation of proxies. In
addition to solicitation by use of the mails, proxies may be solicited by
directors, officers and employees of Western Ohio 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 brokerage houses, custodians, nominees and
fiduciaries for the forwarding of solicitation materials to the beneficial
owners of Western Ohio common stock held of record by such persons. Western Ohio
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.
RECOMMENDATION OF WESTERN OHIO BOARD OF DIRECTORS
THE WESTERN OHIO BOARD OF DIRECTORS BELIEVES THAT THE MERGER IS IN THE
BEST INTERESTS OF WESTERN OHIO AND ITS STOCKHOLDERS, AND RECOMMENDS THAT THE
STOCKHOLDERS OF WESTERN OHIO VOTE "FOR" APPROVAL OF THE MERGER AGREEMENT.
In the course of reaching its decision to approve the merger agreement and
the transactions contemplated thereby, the Western Ohio board of directors,
among other things, consulted with its legal advisors regarding the legal terms
of the merger agreement and with its financial advisor as to the fairness, from
a financial point of view, of the consideration to be paid to the holders of
shares of Western Ohio common stock. For a discussion of the factors considered
by the Western Ohio board of directors in reaching its conclusion, see "The
Merger - Western Ohio's Reasons for the Merger."
24
THE MERGER
The following summary of certain terms and provisions of the merger
agreement is qualified in its entirety by reference to the provisions of the
merger agreement, which is attached to this proxy statement/prospectus as Annex
A and is incorporated into this document by reference. You are strongly
encouraged to read the merger agreement in its entirety.
GENERAL
At the effective time of the merger, Western Ohio will be merged with and
into WOFC, Inc., a subsidiary of WesBanco that has been formed solely for the
purpose of effecting the merger, with WOFC, Inc. continuing as the surviving
corporation and as a subsidiary of WesBanco. The Articles of Incorporation and
Bylaws of WOFC, Inc. immediately prior to the merger will constitute the
Articles of Incorporation and Bylaws of the surviving corporation.
WHAT WESTERN OHIO STOCKHOLDERS WILL RECEIVE IN THE MERGER
If the merger is completed, for each share of Western Ohio common stock
that you own you will receive, at your election, either 1.18 shares of WesBanco
common stock, which we will call a stock election, or $35.00 in cash, which we
will call a cash election, subject to certain limitations and possible
adjustment in accordance with the terms of the merger agreement as discussed
below, unless, in each case, you properly perfect your appraisal rights under
Delaware law. You may elect to exchange all of your shares of Western Ohio
common stock for cash or WesBanco common stock, or you may elect to exchange
some of your Western Ohio shares for cash and some for WesBanco common stock.
Instead of fractional shares of WesBanco, you will receive a check for any
fractional shares based on a value of $35.00 per whole share of WesBanco common
stock.
The total amount of cash and WesBanco common stock that will be paid to
all Western Ohio stockholders in the merger is fixed by a requirement that 55%
of the total number of outstanding shares of Western Ohio common stock be
exchanged for WesBanco common stock and that 45% of the total number of
outstanding shares of Western Ohio common stock be exchanged for cash.
Accordingly, your election may be subject to allocation and pro-ration
procedures, which means that you may not receive all, or any of, the
consideration in the form that you selected.
If Western Ohio stockholders in the aggregate elect to receive more or
fewer shares of WesBanco common stock than WesBanco has agreed to issue, the
merger agreement specifies the allocation and pro-ration procedures to be used.
These allocation and pro-ration procedures are summarized as follows:
- If the number of shares for which cash elections have been
made exceeds 45% of the product obtained by multiplying $35.00
by the number of shares of Western Ohio common stock
outstanding on the third day prior to the effective time of
the merger (the "total cash amount"), then all shares for
which stock elections were made and all shares for which no
elections were made will receive stock, but the shares for
which cash elections were made shall be prorated so that the
cash paid in the merger equals the total cash amount as
closely as practicable.
- If the number of shares for which cash elections have been
made is less than the total cash amount, then all shares for
which cash elections were made will receive $35.00 cash per
share. The exchange agent will then prorate the shares for
which no election was made such that the cash paid in the
merger equals the total cash amount as closely as practicable.
If after such pro-ration of all no election shares, the
aggregate of all cash election shares and no election shares
is still less than the total cash amount, only then will the
exchange agent prorate the stock election shares such that the
cash paid in the merger equals the total cash amount as
closely as practicable.
For purposes of determining the total cash amount, the number of shares of
Western Ohio common stock outstanding shall not include shares underlying
Western Ohio stock options deemed to be exercised by election of the holder of
such stock option in connection with the merger. See "The Merger - Treatment of
Western Ohio Stock Options." Western Ohio common stock subject to restricted
stock awards that are outstanding immediately prior to the effective time will,
however, be considered outstanding for purposes of determining the total cash
amount and will be entitled to receive the merger consideration.
25
No guarantee can be made that you will receive the amounts of cash and/or
stock you elect. As a result of the allocation procedures and other limitations
outlined in this document and in the merger agreement, you may receive WesBanco
common stock or cash in amounts that vary from the amounts you elect to receive.
The 1.18 exchange ratio is subject to adjustment in the event that certain
termination provisions, based on the market price of WesBanco's common stock,
have been triggered and the Western Ohio board of directors elects to terminate
the merger agreement. Western Ohio's right to terminate the merger agreement
would arise if the average closing price of WesBanco common stock during a
specified period before receipt of the last required regulatory approval of the
merger is less than $24.896 per share and WesBanco common stock underperforms an
index of financial institution stocks by a specified amount. However, Western
Ohio would not have the right to terminate the merger agreement if WesBanco were
to elect to make a compensating adjustment in the exchange ratio. See "The
Merger -Termination of the Merger Agreement" for a description of the possible
exchange ratio adjustments that may result from this termination provision. In
addition, the merger agreement provides that the exchange ratio and the $35.00
cash consideration will be adjusted in the event WesBanco changes the number of
shares of WesBanco common stock issued and outstanding prior to the effective
time of the merger as a result of a stock split, stock dividend,
recapitalization, reclassification, or similar transaction.
EFFECTS OF THE MERGER
The merger shall become effective on the date and at the time the
certificates of merger are accepted for filing by the West Virginia Secretary of
State and the Delaware Secretary of State or such other later date and time as
is agreed to by the parties and specified in the certificates of merger. At that
time, the separate existence of Western Ohio will cease and WOFC, Inc. will be
the surviving corporation. The assets, liabilities and capital of Western Ohio
will be merged with those of WOFC, Inc. and those assets, liabilities and
capital will then constitute part of the assets, liabilities and capital of
WOFC, Inc. WOFC, Inc. will continue to operate under its Articles of
Incorporation and Bylaws effective as of the day of the merger, and the officers
and directors of WOFC, Inc. will continue as the officers and directors of the
surviving corporation. 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.
At the effective time of the merger, each share of Western Ohio common
stock issued and outstanding immediately prior to the time the merger becomes
effective will be converted automatically into the right to receive the merger
consideration, unless you properly perfect your appraisal rights under Delaware
law. Shares of Western Ohio common stock held by Western Ohio in its treasury or
beneficially owned by WOFC, Inc. or WesBanco (other than in a fiduciary capacity
by them for others) will not be exchanged for the merger consideration in the
merger. Instead, these shares will be canceled and retired. Shares of Western
Ohio common stock as to which appraisal rights are properly exercised also will
not be exchanged for the merger consideration.
After the merger becomes effective, each certificate evidencing shares of
Western Ohio common stock as to which appraisal rights have not been perfected
will be deemed to evidence only the right to receive the merger consideration.
The holder of an unexchanged certificate will not receive any dividend or other
distribution payable by WesBanco until the certificate has been exchanged.
Giving effect to the merger, as of March 31, 2004, on a pro forma
consolidated basis, Western Ohio would have constituted approximately 9.47% of
deposits, 10.68% of assets, and 12.51% of equity of WesBanco, and its
stockholders would have held approximately 5.80% of the total outstanding shares
of WesBanco. In addition, for the three months ended March 31, 2004, Western
Ohio would have contributed approximately 8.68% of net interest income and 5.07%
of net income to WesBanco on a pro forma consolidated basis.
These percentages reflect the relative size of Western Ohio as of March
31, 2004 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.
26
CONSIDERATION ELECTION PROCEDURES AND EXCHANGE OF WESTERN OHIO CERTIFICATES
On or about the 35th day prior to the effective time of the merger,
Computershare Investor Services, LLC, WesBanco's exchange agent, will mail
transmittal materials, including an election form pursuant to which Western Ohio
stockholders will be able to select the form of consideration they prefer to
receive in the merger, and exchange instructions to each holder of record of
Western Ohio common stock on the fifth business day prior to the date such
transmittal materials are mailed.
Each election form will permit the holder of the Western Ohio common stock
to elect to receive cash, WesBanco common stock, or a combination of cash and
stock, or make no election with respect to the merger consideration you wish to
receive. An election will be properly made only if Computershare Investor
Services LLC, the exchange agent, actually receives a properly completed
election form on or before 5:00 pm Eastern Standard Time (EST) on the 33rd day
after the date that the exchange agent mails the transmittal materials. An
election form will be deemed properly completed only if it is accompanied by the
certificates representing the Western Ohio common stock covered by the election
form or an appropriate guarantee of delivery. Risk of loss and title to the
certificates theretofore representing shares of Western Ohio common stock shall
pass only upon proper delivery of such certificates to the exchange agent.
WESTERN OHIO STOCKHOLDERS SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL THEY
RECEIVE THE ELECTION FORM AND INSTRUCTIONS.
You may revoke or change a previously submitted election form any time at
or prior to the election date. If you properly revoke an election form, the
shares of Western Ohio common stock covered by such revoked election form shall
become no election shares and the exchange agent shall promptly return the share
certificates to you at no charge upon your written request.
If you have a preference as to the form of consideration that you receive,
you should make a timely election once you receive your election form. If you do
not submit an election form or fail to return your election form by the
specified deadline, you will be deemed to have made no election for purposes of
determining the form of consideration to be received by Western Ohio
stockholders. Neither Western Ohio nor the Western Ohio board of directors make
any recommendation as to whether you should elect cash, WesBanco common stock,
or a combination of stock and cash. You must make your own election decision.
The exchange agent will deliver the merger consideration in exchange for
lost, stolen, mutilated, or destroyed certificates of shares of Western Ohio
common stock only upon receipt of a lost stock affidavit and a bond indemnifying
WesBanco against any claim arising out of the allegedly lost, stolen, mutilated,
or destroyed certificate.
TREATMENT OF WESTERN OHIO STOCK OPTIONS
Options issued by Western Ohio to certain of its employees and directors
to purchase an aggregate of 140,307 shares of Western Ohio common stock were
outstanding as of the record date. Stock option holders can choose how they want
their stock options treated in the merger. Holders of stock options having an
exercise price of less than $35.00 may elect to have such stock options deemed
exercised on a net exercise basis immediately prior to the effective time of the
merger. However, such stock option holders shall only have the right to receive
cash in exchange for such deemed exercised stock options and shall have no right
to receive WesBanco common stock in exchange therefore. The net effect of such
an election is that the stock option holders will receive cash in an amount
equal to the product of the number of shares of Western Ohio common stock
underlying stock options for which such an election is made multiplied by the
difference between $35.00 and the exercise price of the stock options. For
example, if a Western Ohio stock option holder holds options to purchase 100
shares of Western Ohio common stock with an exercise price of $20 per share and
the option holder makes the election described above, the option holder will
receive $1,500 in cash in exchange for such deemed exercised stock options. If a
Western Ohio stock option holder does not elect to have his options deemed
exercised prior to the closing of the merger as described in this paragraph, his
options will automatically be converted into options to purchase WesBanco common
stock in the manner described in the next paragraph.
If a Western Ohio stock option holder fails to elect to have his options
deemed exercised as described in the previous paragraph or if the option holder
elects to have his Western Ohio stock options converted into WesBanco
27
stock options, his Western Ohio stock options will be converted into options to
purchase a number of shares of WesBanco common stock equal to the number of
shares of Western Ohio common stock which such holder could have purchased
pursuant to his Western Ohio stock options multiplied by the exchange ratio. The
exercise price of the converted options to purchase WesBanco common stock will
be determined by dividing the exercise price of the Western Ohio option by the
exchange ratio. For example, if a Western Ohio stock option holder holds options
to purchase 100 shares of Western Ohio common stock with an exercise price of
$20 per share immediately prior to the closing of the merger and elects to have
his Western Ohio options converted into options to purchase WesBanco common
stock, such holder will receive options to purchase 118 shares of WesBanco
common stock with an exercise price of $16.95 per share, based on a 1.18
exchange ratio.
Except as otherwise provided in the merger agreement, the Western Ohio
stock options assumed by WesBanco at the effective time of the merger will be
subject to the same terms and conditions (including expiration date and vesting)
as were applicable to such options immediately prior to the effective time of
the merger. Any restrictions or limitations on transfer with respect to shares
of Western Ohio common stock subject to Western Ohio options or any other plan,
program, or arrangement of Western Ohio or of any subsidiary of Western Ohio, to
the extent that such restrictions or limitations will not have already lapsed,
and except as otherwise expressly provided under the terms of such stock
options, will remain in full force and effect with respect to such options after
the effective time of the merger and after assumption of the options by
WesBanco.
WesBanco will file a registration statement on Form S-8 with the SEC
within 30 days after the merger becomes effective to register the shares of
WesBanco common stock issuable upon exercise of the stock options assumed in the
merger. WesBanco will maintain the effectiveness of the registration statement
covering these assumed stock options as long as they remain outstanding.
WESTERN OHIO EMPLOYEE STOCK OWNERSHIP PLAN
Pursuant to the terms of Western Ohio's Employee Stock Ownership Plan,
participants in the plan are entitled to instruct the plan's trustees as to how
to vote shares of Western Ohio common stock allocated to their account with
respect to the merger. Accordingly, if you are a participant in Western Ohio's
Employee Stock Ownership Plan you can direct the plan's trustees how to vote all
plan shares that are allocated to your account with respect to the merger. If
you fail to direct the trustees as to how to vote the shares allocated to your
plan account, the shares will not be voted on these matters and will be treated
as a vote against the merger. Therefore, it is important that you instruct the
plan trustees how to vote shares allocated to your account.
Under the plan, any shares not allocated to the accounts of participants
are to be voted by the trustees. The trustees have informed Western Ohio that
they intend to vote all such shares, if any, FOR approval of the merger.
At the effective time of the merger, Western Ohio's Employee Stock
Ownership Plan will be terminated. Immediately after the effective time of the
merger, the ESOP's trustees will sell a sufficient number of the shares of
WesBanco common stock received in the merger in exchange for Western Ohio shares
that were unallocated to the accounts of plan participants to pay off the ESOP's
outstanding indebtedness. Any remaining unallocated shares of WesBanco common
stock and cash shall then be allocated to the ESOP participants in accordance
with the terms of the ESOP and applicable laws. The account balances of the
ESOP's participants shall be distributed to them as soon as practicable after
the earlier of the effective time of the merger or the receipt of a favorable
determination letter for termination of the ESOP from the IRS. ESOP participants
will be permitted to roll such shares over to an IRA or a qualified plan, if the
terms of the qualified plan permit the acceptance of the distribution in stock.
RESTRICTED STOCK AWARDS
Each share of Western Ohio common stock subject to a restricted stock
award outstanding immediately prior to the effective time of the merger shall be
entitled to receive the merger consideration.
BACKGROUND OF THE MERGER
In recent years, the board of directors of Western Ohio has regularly
analyzed competitive and market conditions affecting the banking industry in
general, as well as those affecting Western Ohio in particular. From time to
time, this assessment has involved meetings with outside experts, such as
Friedman, Billings, Ramsey & Co., Inc. ("FBR") to discuss stock market
conditions and merger and acquisition market conditions.
In connection with those analyses, the board of directors of Western Ohio
has considered a number of strategic options, including acquisitions, merger of
equals transactions and, during 2003, a negotiated transaction in which Western
Ohio would have been the seller. The board consulted with FBR and its outside
legal counsel from KMZR in connection with a number of these strategic
discussions. The board was concerned that Western Ohio did not have the adequate
size and profitability levels to continue to grow and deliver acceptable returns
to shareholders, given the increasing competitiveness in the consolidating
industry, additional technology expenditures, increasing regulatory burdens and
other factors. The board also considered the possible future effect on Western
Ohio if a dissident shareholder were to launch a costly and distracting proxy
battle concerning the election of directors.
The possible negotiated sale of Western Ohio involved discussions which
began in April 2003 between Western Ohio and a bank holding company introduced
to Western Ohio by FBR. Over the next several months, several meetings and
conversations took place between senior executives of Western Ohio and senior
executives of the bank holding company. Board members of Western Ohio also met
the senior executives of the bank holding company to discuss a possible merger,
and the Western Ohio board authorized management and the board to exchange
financial and other information and conduct due diligence procedures. Following
the bank holding company's due diligence investigation of Western Ohio in
September 2003, the Western Ohio board authorized management and its advisors to
enter into negotiations regarding a definitive agreement under the terms
proposed by the bank holding company. Further due diligence and negotiations
ensued until the bank holding company terminated the merger discussions in
October 2003 as a result of the bank holding company's concerns about the
changing interest rate environment and the impact which that may have on Western
Ohio's and the bank holding company's respective earnings.
Thereafter, in December 2003, the Western Ohio board of directors
unanimously agreed to instruct FBR to explore a possible sale of Western Ohio.
In conjunction with this engagement, FBR solicited various financial
institutions for indications of
28
interest. As part of this solicitation process, on January 16, 2004, a
representative of FBR contacted WesBanco to determine its interest in reviewing
information relative to a possible acquisition of Western Ohio. Pursuant to this
contact, a Confidentiality Agreement was executed between WesBanco and Western
Ohio on January 16, 2004, and FBR provided a confidential memorandum regarding
Western Ohio and its business to WesBanco on or about January 17, 2004.
WesBanco undertook a review of the financial information and descriptive
material provided by FBR and subsequently scheduled a meeting with John W.
Raisbeck, President and Chief Executive Officer of Western Ohio, on January 29,
2004 at Western Ohio's principal offices in Springfield, Ohio. Paul M. Limbert,
President and Chief Executive Officer of WesBanco, and Robert H. Young,
Executive Vice President and Chief Financial Officer of WesBanco, met with Mr.
Raisbeck and toured the facilities of Western Ohio, including most of its seven
branch locations.
Subsequent thereto, WesBanco and three other potential purchasers each
submitted a preliminary nonbinding proposal to Western Ohio on February 5, 2004.
Following receipt of these proposals, Western Ohio invited representatives of
WesBanco and two of the other three potential purchasers to conduct due
diligence, which, in the case of WesBanco, was conducted offsite in the
Springfield, Ohio area on February 11th, 12th and 13th. Thereafter, WesBanco and
one other potential purchaser each submitted a final nonbinding proposal to
Western Ohio on February 26, 2004. After Western Ohio's board of directors
reviewed the bids at a March 1, 2004 meeting and, following such review,
instructed FBR to contact each of the bidders to determine if their bids
reflected their final and best offers, the board directed FBR to notify WesBanco
that it had submitted the bid preferred by the Western Ohio board of directors
based on its review of bid proposals received.
Western Ohio then conducted its own due diligence with respect to WesBanco
on March 3 and March 4, 2004. A number of officers of Western Ohio participated
in this due diligence process that occurred at the principal offices of WesBanco
in Wheeling, West Virginia. The parties began negotiations on a definitive
Agreement and Plan of Merger on or about March 10, 2004.
The results of the due diligence and the preliminary round of negotiations
were reviewed at a meeting of the Executive Committee of the board of directors
of WesBanco held on March 17, 2004, at which time management was authorized to
proceed with the negotiations toward a definitive agreement.
Subsequent meetings were held with various principals involved, including
a meeting at WesBanco's offices on March 23 between John W. Raisbeck and Paul M.
Limbert and the respective attorneys for the two institutions. An additional
meeting was held with these parties on March 24, 2004. In the interim, the board
of directors of WesBanco Bank reviewed the due diligence and the status of the
negotiations on March 23, 2004, and authorized management of WesBanco Bank to
finalize negotiations toward a definitive agreement. Throughout this period, the
board of directors of Western Ohio was kept informed of the status of due
diligence and negotiations, and management of Western Ohio was also instructed
to finalize negotiations towards a definitive agreement.
On April 1, 2004, at a combined meeting of the board of directors of
Cornerstone Bank and Western Ohio, the boards of these two institutions reviewed
the proposed definitive merger agreement, discussed various aspects of the
agreement with legal counsel and obtained an oral fairness opinion from FBR,
following which the board of Western Ohio approved the execution of a definitive
Agreement and Plan of Merger that was then executed late in the afternoon on
that date.
RECOMMENDATION OF THE WESTERN OHIO BOARD
The board of directors of Western Ohio believes that the merger and the
merger agreement are advisable and are fair to and in the best interests of
Western Ohio and its stockholders. THE BOARD OF DIRECTORS OF WESTERN OHIO
UNANIMOUSLY RECOMMENDS THAT THE WESTERN OHIO STOCKHOLDERS VOTE FOR THE APPROVAL
OF THE MERGER AGREEMENT AND THE MERGER.
OPINION OF WESTERN OHIO'S FINANCIAL ADVISOR
GENERAL. Western Ohio retained FBR to act as its sole financial advisor in
connection with a possible merger and related matters. As part of its
engagement, FBR agreed, if requested by Western Ohio, to render an opinion with
respect to the fairness, from a financial point of view, to the holders of
Western Ohio Financial common shares, of the merger consideration as set forth
in a definitive merger agreement.
FBR is a nationally recognized investment bank with considerable
experience related to the financial services industry in general, and has
extensive experience in advising banks and thrifts. FBR is regularly engaged in
evaluations of financial institutions and in advising institutions with regard
to mergers and acquisitions, as well as raising debt and equity capital. Western
29
Ohio selected FBR as its financial advisor based upon FBR's qualifications,
expertise and reputation in such capacity, as well as Western Ohio's
longstanding relationship with FBR.
On April 1, 2004, FBR delivered its oral opinion that the merger
consideration that would be paid pursuant to the merger agreement was fair to
Western Ohio stockholders, from a financial point of view, as of the date of
such opinion. FBR also delivered to the Western Ohio board of directors a
written fairness opinion dated as of April 1, 2004, confirming and updating its
oral opinion. FBR further updated its April 1, 2004 opinion as of the date of
this proxy statement/prospectus. No limitations were imposed by Western Ohio on
FBR with respect to the investigations made or the procedures followed in
rendering its written opinion.
THE FULL TEXT OF FBR'S WRITTEN OPINION TO THE WESTERN OHIO BOARD OF
DIRECTORS, DATED AS OF THE DATE OF THIS DOCUMENT, IS ATTACHED IN ITS ENTIRETY AS
ANNEX B. THE WRITTEN OPINION SETS FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED
AND EXTENT OF REVIEW BY FRIEDMAN BILLINGS & RAMSEY. IT SHOULD BE READ CAREFULLY
AND IN ITS ENTIRETY IN CONJUNCTION WITH THIS DOCUMENT. THE FOLLOWING SUMMARY OF
FBR'S OPINION IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE
WRITTEN OPINION. FBR'S WRITTEN OPINION IS ADDRESSED TO THE WESTERN OHIO BOARD OF
DIRECTORS AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY STOCKHOLDER OF WESTERN
OHIO AS TO HOW SUCH STOCKHOLDER SHOULD VOTE AT THE WESTERN OHIO SPECIAL MEETING
DESCRIBED IN THIS DOCUMENT.
FBR, in connection with rendering its opinion:
- reviewed Western Ohio's Annual Report to Shareholders and
Annual Report on Form 10-K for each of the years ended
December 31, 2003, December 31, 2002 and December 31, 2001,
including the audited financial statements contained therein;
- reviewed WesBanco's Annual Report to Shareholders and Annual
Report on Form 10-K for each of the years ended December 31,
2003, December 31, 2002 and December 31, 2001, including the
audited financial statements contained therein;
- reviewed certain other public and non-public information,
primarily financial in nature, relating to the respective
businesses, earnings, assets and prospects of Western Ohio and
WesBanco provided to FBR or that was publicly available;
- participated in meetings and telephone conferences with
members of senior management of Western Ohio and WesBanco
concerning the financial condition, business, assets,
financial forecasts and prospects of the respective companies,
as well as other matters FBR believed relevant to its inquiry;
- reviewed certain stock market information for Western Ohio
common stock and WesBanco common stock and compared it with
similar information for certain companies, the securities of
which are publicly traded;
- compared the results of operations and financial condition of
Western Ohio and WesBanco with that of certain companies that
FBR deemed to be relevant for purposes of its opinion;
- reviewed the financial terms, to the extent publicly
available, of certain acquisition transactions that FBR deemed
to be relevant for purposes of its opinion;
- reviewed the merger agreement and certain related documents;
and
- performed such other reviews and analyses as FBR deemed
appropriate.
30
The oral and written opinions provided by FBR to the Western Ohio board of
directors were necessarily based upon economic, monetary, financial market and
other relevant conditions as of the dates thereof.
In connection with its review and arriving at its opinion, FBR relied upon
the accuracy and completeness of the financial information and other pertinent
information provided by Western Ohio and WesBanco to FBR for purposes of
rendering its opinion. FBR did not assume any obligation to verify independently
any of the provided information as being complete and accurate in all material
respects. With regard to the financial forecasts established and developed for
Western Ohio and WesBanco with the input of the respective management teams, as
well as projections of cost savings, revenue enhancements and operating
synergies, FBR assumed that these materials had been reasonably prepared on
bases reflecting the best available estimates and judgments of Western Ohio and
WesBanco as to the future performance of the separate and combined entities and
that such projections provided a reasonable basis upon which FBR could formulate
its opinion. Neither Western Ohio nor WesBanco publicly discloses such internal
management projections of the type utilized by FBR in connection with FBR's role
as financial advisor to Western Ohio with respect to the review of the merger.
Therefore, such projections cannot be assumed to have been prepared with a view
towards public disclosure. The projections were based upon numerous variables
and assumptions that are inherently uncertain, including, among others, factors
relative to the general economic and competitive conditions facing Western Ohio
and WesBanco. Accordingly, actual results could vary significantly from those
set forth in the respective projections.
FBR does not claim to be an expert in the evaluation of loan portfolios or
the allowance for loan losses with respect thereto and therefore assumes that
such allowances for Western Ohio and WesBanco are adequate to cover such losses.
In addition, FBR does not assume responsibility for the review of individual
credit files and did not make an independent evaluation, appraisal or physical
inspection of the assets or individual properties of Western Ohio or WesBanco,
nor was FBR provided with such appraisals. Furthermore, FBR assumes that the
merger will be consummated in accordance with the terms set forth in the merger
agreement, without any waiver of any material terms or conditions by Western
Ohio, and that obtaining the necessary regulatory approvals for the merger will
not have an adverse effect on either separate entity or the combined entity.
In connection with rendering its April 1, 2004 written opinion to the
Western Ohio board of directors, FBR performed a variety of financial and
comparative analyses, which are briefly summarized below. Such summary of
analyses does not purport to be a complete description of the analyses performed
by FBR. Moreover, FBR believes that these analyses must be considered as a whole
and that selecting portions of such analyses and the factors considered by it,
without considering all such analyses and factors, could create an incomplete
understanding of the scope of the process underlying the analyses and, more
importantly, the opinion derived from them.
The preparation of a financial advisor's opinion is a complex process
involving subjective judgments and is not necessarily susceptible to partial
analyses or a summary description of such analyses. In its full analysis, FBR
also included assumptions with respect to general economic, financial market and
other financial conditions. Furthermore, FBR drew from its past experience in
similar transactions, as well as its experience in the valuation of securities
and its general knowledge of the banking industry as a whole. Any estimates in
FBR's analyses were not necessarily indicative of actual future results or
values, which may significantly diverge more or less favorably from such
estimates. Estimates of company valuations do not purport to be appraisals nor
to necessarily reflect the prices at which companies or their respective
securities actually may be sold. None of the analyses performed by FBR were
assigned a greater significance by FBR than any other in deriving its opinion.
COMPARABLE COMPANY ANALYSIS. FBR reviewed and compared actual stock market
data and actual and estimated selected financial information for Western Ohio
with corresponding information for 11 publicly traded Midwest thrifts with
assets between $200 million and $700 million, equity to assets ratio above 10%
and core return on average equity ratio below 6% (the "Western Ohio Peer
Group"). The following is the Western Ohio Peer Group:
TICKER BANK NAME CITY, STATE
------ --------- -----------
1. LNCB Lincoln Bancorp Plainfield, IN
2. WAYN Wayne Savings Bancshares, Inc. Wooster, OH
3. CFSL Chesterfield Financial Corp. Chicago, IL
4. NLVS Northern Savings & Loan Company* Elyria, OH
31
5. FFBI First Federal Bancshares, Inc.* Colchester, IL
6. UCBC Union Community Bancorp Crawfordsville, IN
7. PFED Park Bancorp, Inc.* Chicago, IL
8. NEIB Northeast Indiana Bancorp, Inc. Huntington, IN
9. FBTC First BancTrust Corporation Paris, IL
10. FBEI First Bancorp of Indiana, Inc. Evansville, IN
11. MCBF Monarch Community Bancorp, Inc. Coldwater, MI
The following table represents a summary analysis of the Western Ohio Peer
Group based on market prices as of March 26, 2004 and the latest publicly
available financial data as of or for the twelve months ended December 31, 2003
(or September 30, 2003 as indicated by asterisk):
Western Ohio Peer Group
----------------------------------
Mean Median
---- ------
Price to last twelve months core earnings 20.0x 20.7x
Price to book value 123.3% 120.2%
Price to tangible book value 126.0% 121.8%
Dividend yield 2.2% 2.5%
Core return on average assets 0.7% 0.8%
Core return on average equity 5.4% 6.5%
Tangible equity to tangible assets ratio 13.6% 12.7%
Efficiency ratio 66.4% 67.2%
FBR reviewed and compared actual stock market data and actual and
estimated selected financial information for WesBanco with corresponding
information for 13 publicly traded banks headquartered in West Virginia and its
contiguous states with assets between $1.0 billion and $5.0 billion and a core
return on average assets between 0.75% and 1.25% (the "WesBanco Peer Group").
The following is the WesBanco Peer Group:
TICKER BANK NAME CITY, STATE
------ --------- -----------
1. SUSQ Susquehanna Bancshares, Inc. Lititz, PA
2. PBKS Provident Bankshares Corporation Baltimore, MD
3. FCF First Commonwealth Financial Corp. Indiana, PA
4. FFBC First Financial Bancorp. Hamilton, OH
5. NPBC National Penn Bancshares, Inc. Boyertown, PA
6. CTBI Community Trust Bancorp, Inc. Pikeville, KY
7. CMTY Community Banks, Inc. Harrisburg, PA
8. PEBO Peoples Bancorp Inc. Marietta, OH
9. VFGI Virginia Financial Group, Inc. Culpeper, VA
10. FNBP FNB Corporation Christianburg, VA
11. FFKT Farmers Capital Bank Corporation Frankfort, KY
12. FUNC First United Corporation Oakland, MD
13. CBMD Columbia Bancorp Columbia, MD
The following table represents a summary analysis of the WesBanco Peer
Group based on market prices as March 26, 2004 and the latest publicly available
financial data as of or for the twelve months ended December 31, 2003:
WesBanco Peer Group
-------------------------
Mean Median
---- ------
Price to last twelve months core earnings 17.7x 18.0x
Price to book value 200.9% 203.1%
Price to tangible book value 242.5% 237.9%
Dividend yield 3.0% 3.2%
32
Core return on average assets 1.0% 1.0%
Core return on average equity 12.0% 11.6%
Tangible equity to tangible assets ratio 7.4% 7.3%
Efficiency ratio 62.2% 62.1%
COMPARABLE TRANSACTION ANALYSIS. FBR reviewed and compared actual
information for groups of comparable pending (as of March 26, 2004) and
completed transactions (since December 31, 2002) it deemed pertinent to an
analysis of the merger. The implied acquisition price was compared to the median
ratios of (i) price to last twelve months earnings, (ii) price to book value,
(iii) price to tangible book value and (iv) core deposit premium, for each of
the following five pending and recently completed transaction comparable groups:
- all thrift acquisitions with the selling thrift headquartered
in the Midwest region ("Comparable Regional Deals");
- all thrift acquisitions with the target thrift having assets
between $150 million and $500 million ("Comparable Asset
Size");
- all thrift acquisitions with the target thrift having an
equity to assets ratio between 10.0% and 15.0% ("Comparable
Capitalization");
- all thrift acquisitions with the target thrift having a core
return on average assets between 0.25% and 1.00% ("Comparable
Profitability"); and
- all thrift acquisitions with the target thrift having a
nonperforming assets to assets ratio of between 0.25% and
1.00% ("Comparable Asset Quality").
FBR calculated an implied valuation for Western Ohio by applying the
median price to book value, tangible book value and earnings and core deposit
premium for each of the groups of comparable transactions described above to
Western Ohio's current book value, tangible book value, earnings, and core
deposits. FBR concluded that this analysis implied a valuation range of $59.0
million to $72.1 million for Western Ohio as compared to the $65.1 million
WesBanco proposal under the merger agreement.
CONTRIBUTION ANALYSIS. FBR analyzed the contribution of each company to
the resulting combined company relative to the approximate ownership of the
resulting combined company assuming 100% stock consideration. This analysis
indicated that Western Ohio stockholders would hold approximately 9.9% of the
pro forma equity of the combined company. Western Ohio's approximate
contributions are listed below by category:
Western Ohio Peer Group
-----------------------
Loans 14.8%
Deposits 9.1%
Equity 12.2%
Tangible equity 14.5%
Last twelve month core earnings 6.8%
2004 estimated earnings 6.9%
ACCRETION/DILUTION ANALYSIS. On the basis of financial projections and
estimates of ongoing cost savings accruing to the resulting combined company
provided to FBR by management of Western Ohio and WesBanco, as well as estimated
one-time costs related to the merger, FBR compared per share equivalent
earnings, cash dividends, book value and tangible book value of the resulting
combined company to the stand-alone projections for Western Ohio and WesBanco.
No assumptions were made regarding revenue enhancements following the completion
of the transaction.
The accretion/dilution analysis demonstrated that, among other things, the
merger would result in:
33
- an estimated 50.5% accretion to cash earnings per share for
Western Ohio stockholders in fiscal year 2005; and an
estimated 2.9% accretion to cash earnings per share for
WesBanco stockholders in fiscal year 2005;
- an estimated dividend of $0.22 per share for Western Ohio
stockholders assuming WesBanco maintained its current dividend
policy; and no change in cash dividends for WesBanco
stockholders; and
- an estimated 16.0% dilution to book value and 33.4% dilution
to tangible book value for Western Ohio stockholders; and an
estimated 5.1% accretion and 0.4% dilution to book value and
tangible book value per share, respectively, for WesBanco
stockholders.
DISCOUNTED CASH FLOW ANALYSIS. FBR performed a discounted cash flow
analysis with regard to Western Ohio in an acquisition scenario. This analysis
utilized a range of discount rates of 9.0% to 14.0% and a range of terminal
earnings multiples of 14.5x to 16.5x. The analysis resulted in a range of
present values of $51.1 million to $71.7 million for Western Ohio as compared to
the $65.1 million WesBanco proposal pursuant to the merger agreement. As
indicated above, this analysis was based on Western Ohio's and WesBanco's senior
management estimates and is not necessarily indicative of actual values or
actual future results and does not purport to reflect the prices at which any
securities currently trade or will trade at any time in the future. FBR included
the discounted cash flow analysis because it is a widely used valuation
methodology, but noted that the results of such methodology are highly dependent
upon numerous assumptions that must be made, including earnings growth rates,
discount rates, and terminal values.
OTHER ANALYSES. FBR also reviewed certain other information including pro
forma estimated balance sheet composition, pro forma financial performance and
pro forma deposit market share.
NO COMPANY USED AS A COMPARISON IN THE ABOVE ANALYSES IS IDENTICAL TO
WESTERN OHIO, WESBANCO OR THE COMBINED RESULTING COMPANY, AND NO OTHER
TRANSACTION IS IDENTICAL TO THE MERGER. ACCORDINGLY, AN ANALYSIS OF THE RESULTS
OF THE FOREGOING IS NOT PURELY MATHEMATICAL; RATHER, SUCH ANALYSES INVOLVE
COMPLEX CONSIDERATIONS AND JUDGMENTS CONCERNING DIFFERENCES IN FINANCIAL MARKET
AND OPERATING CHARACTERISTICS OF THE COMPANIES AND OTHER FACTORS THAT COULD
AFFECT THE PUBLIC TRADING VOLUME OF THE COMPANIES TO WHICH WESTERN OHIO,
WESBANCO AND THE COMBINED RESULTING COMPANY ARE BEING COMPARED.
IN CONNECTION WITH THE DELIVERY OF ITS WRITTEN OPINION DATED AS OF THE
DATE OF THIS DOCUMENT, FBR PERFORMED PROCEDURES TO UPDATE, AS NECESSARY, CERTAIN
OF THE ANALYSES DESCRIBED ABOVE AND REVIEWED THE ASSUMPTIONS ON WHICH SUCH
ANALYSES DESCRIBED ABOVE WERE BASED AND THE FACTORS CONSIDERED IN CONNECTION
THEREWITH. FBR DID NOT PERFORM ANY ANALYSES IN ADDITION TO THOSE DESCRIBED ABOVE
IN UPDATING THE WRITTEN OPINION.
For its financial advisory services provided to Western Ohio, FBR has
been paid a fee of $___,000 as of the date of this document and will be paid an
additional fee at the time of closing of the merger such that the total fees
paid to FBR will equal 1.00% of the aggregate transaction value. In addition,
Western Ohio has agreed to reimburse FBR for all reasonable out-of-pocket
expenses incurred by it on Western Ohio's behalf, as well as to indemnify FBR
against certain liabilities, including any such liabilities which may arise
under the federal securities laws.
FBR IS A MEMBER OF ALL PRINCIPAL SECURITIES EXCHANGES IN THE UNITED STATES
AND IN THE CONDUCT OF ITS BROKER-DEALER ACTIVITIES MAY FROM TIME TO TIME
PURCHASE SECURITIES FROM, AND SELL SECURITIES TO, WESTERN OHIO AND/OR WESBANCO.
FBR MAY ALSO HAVE PURCHASED AND SOLD THE SECURITIES OF BOTH WESTERN OHIO AND
WESBANCO FOR FBR'S OWN ACCOUNT AND FOR THE ACCOUNTS OF ITS CUSTOMERS. FBR HAS IN
THE PAST, AND MAY IN THE FUTURE, SEEK TO PROVIDE INVESTMENT BANKING SERVICES FOR
WESBANCO.
34
WESTERN OHIO'S REASONS FOR THE MERGER
Western Ohio's board of directors believes that the merger is fair to, and
in the best interests of, Western Ohio and its stockholders and has approved the
merger agreement. In reaching this determination, the Western Ohio board of
directors, without assigning any relative or specific weights, considered a
number of factors, both from a short-term and long-term perspective, including,
without limitation, the following:
- The current and prospective environment in which Western Ohio
operates, including national, state and local economic conditions,
Western Ohio's competitive environment, the increased regulatory
burdens on financial institutions generally and smaller community
banks in particular, the trend towards consolidation in the
financial services industry in general and among financial
institutions in Ohio and the likely effect of the foregoing factors
on Western Ohio's potential growth, development, productivity and
profitability;
- The business, financial condition, results of operation, market
valuations and acquisition history of WesBanco and the opportunity
for Western Ohio stockholders to participate in any future growth of
WesBanco by obtaining WesBanco common stock in the merger;
- The assessment of the Western Ohio board of WesBanco's existing
business, financial condition, and results of operations, and
potentially, including, but not limited to, its capability for
expansion, development, productivity and profitability;
- A detailed study of the financial impact of the merger on Western
Ohio's stockholders which confirmed, (A) based on an exchange ratio
of 1.18 and the closing price of $31.12 for WesBanco common stock as
of April 1, 2004, the last trading day before the merger was
announced publicly, Western Ohio stockholders would receive an 18.8%
premium to Western Ohio's market value of $30.91 per share of its
common stock on April 1, 2004 and (B) based on a price of $35.00
cash per Western Ohio share, Western Ohio stockholders would receive
a 13.2% premium to Western Ohio's market value of $30.91 per share
of its common stock on April 1, 2004. On a per share equivalent
basis, Western Ohio's shareholders would experience an increase in
earnings per share of 51.9% in 2005 as well as an increase in
dividends of 22.3%;
- The anticipated tax-free treatment of the exchange of Western Ohio
common stock for WesBanco common stock for Western Ohio stockholders
receiving WesBanco common stock in the merger (except for cash in
lieu of fractional shares), (See "The Merger -- Certain Federal
Income Tax Consequences of the Merger");
- The due diligence review of WesBanco's operations, financial
records, capital position and legal matters conducted by Western
Ohio's employees, financial advisors, and attorneys;
- The presentation and analysis by FBR to Western Ohio's board of
directors on April 1, 2004, and the written opinion of FBR that, as
of April 1, 2004, the merger consideration was fair to the
stockholders of Western Ohio from a financial point of view;
- The condition in the merger agreement that permits Western Ohio to
terminate the merger agreement if the average closing price of
WesBanco common stock during a specified period before receipt of
the last required regulatory approval of the merger is less than
$24.896 and WesBanco common stock underperforms an index of
financial institutions by a specified amount, unless WesBanco were
to elect to make a compensating adjustment to the exchange ratio;
and
- Other benefits of the WesBanco offer including (i) the WesBanco
offer containing no collar in the event WesBanco's stock price was
to increase in the period between signing and closing and (ii) the
WesBanco offer including one board seat on WesBanco's banking
subsidiary for a Western Ohio director and seats on an advisory
board for all members of Western Ohio's board of directors;
- The ability to provide Wesbanco's Wealth and Asset Management
services (Trust, Insurance and Brokerage) to existing and
prospective Western Ohio commercial and upscale retail customers
that are currently not available that would likely require
significant investment of time and money to develop at Western Ohio
coupled with the ability to provide newly developed
products and services more timely and cost-effectively;
35
- Cornerstone Bank's ability to initially operate as a separate region
with selected autonomy within WesBanco's organizational structure
with the retention of the President and key managers who are
familiar with the Springfield/Dayton local commercial and retail
banking market; and
- WesBanco's intention to retain most of Western Ohio's employees.
WESBANCO'S REASONS FOR THE MERGER
The board of directors of WesBanco considered a number of reasons in
voting to approve the proposed merger. First, the merger will provide WesBanco
with the opportunity to significantly expand its existing franchise to include
markets which it perceives offer significant growth opportunities in the
Dayton-Springfield area of Ohio. Western Ohio operates in three counties in
this region, namely, Montgomery County, Clark County and Green County. Its seven
locations in these counties give access to markets with a significant population
base with a median income in excess of $40,000. Given the limited product
offerings which Cornerstone Bank has had available to offer its customers,
WesBanco believes that Cornerstone Bank, upon its merger with WesBanco Bank,
will be able to compete more effectively for commercial loans, trust and
investment services through offerings of new and alternative products not
previously offered by Cornerstone Bank. These new product offerings should
facilitate a more competitive position for Cornerstone Bank in the
Springfield-Dayton market and give it opportunities for significant expansion
and growth within that market.
Secondly, the board of directors of WesBanco considered the geographic
diversification that the Dayton-Springfield market offered to its own
stockholders by expanding into areas other than West Virginia where it currently
holds approximately 84% of its total loans. The expansion in Ohio will permit
WesBanco to approximately double its total loans outside the State of West
Virginia from 16% to approximately 32%. This shifting of assets will permit
greater economic and geographic diversification for its existing stockholders
and help insulate it from economic downturns in specific geographic markets in
which it currently operates.
Third, the board of directors noted the success that WesBanco has enjoyed
in the Columbus market in expanding its commercial lending function during the
past year by growing commercial loans in excess of $60 million in the prior
twelve months. Its ability to compete in that growing market encouraged
WesBanco's board to expand into other regions within close proximity to the
Columbus area to permit it to provide a regional commercial lending effort. The
acquisition of Western Ohio will assist in that endeavor.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Western Ohio board of directors
with respect to the merger agreement, Western Ohio stockholders should be aware
that certain persons, including some of the directors and executive officers of
Western Ohio, have interests in the merger that are in addition to their
interests as stockholders of Western Ohio generally. The Western Ohio board was
aware of these interests and considered them in approving the merger.
Change in Control Provisions. John W. Raisbeck, the President and Chief
Executive Officer of Western Ohio, will be entitled to certain benefits as a
result of the merger under the terms of his employment agreement with Western
Ohio and under the Amended and Restated Western Ohio Financial Corporation
Deferred Compensation Plan. As a result of the merger, Mr. Raisbeck will be
entitled to receive a lump sum payment of $499,500 under the terms of his
pre-existing employment agreement with Western Ohio, his accrued and vested
balance of deferred compensation of $1.1 million due to his participation in the
plan for a number of years prior to the merger and an additional $100,000 for
bringing the transaction to successful closure, which was specifically approved
by the board of directors of Western Ohio for services to Western Ohio prior to
the execution of the merger agreement and was not contingent on the merger.
36
In addition, under the terms of existing employment agreements between
Western Ohio and certain of its executive officers, if the merger is consummated
and in connection with or within 12 months following the effective date of the
merger either (i) the executive's employment is terminated for any reason other
than for Cause (as defined in the respective agreements), or (ii) the executive
terminates his employment following (A) a reduction in the executive's salary,
(B) a diminution of the executive's duties or (C) a relocation of the
executive's work location of more than 60 miles from his previous work location,
the executive will be entitled to receive a lump-sum cash payment equal to the
greater of:
- two years salary, or
- the executive's applicable salary for the remaining term of
his employment agreement.
Execution of New Employment Agreements. In connection with the proposed
merger, John Raisbeck entered into an employment agreement with WesBanco,
contingent upon completion of the merger, to become WesBanco's market president
of the Springfield, Ohio market. The employment agreement is for a term of one
year and provides Mr. Raisbeck an annual base salary of at least $299,550 and
provides Mr. Raisbeck substantially the same benefits that Mr. Raisbeck received
as President and Chief Executive Officer of Western Ohio and provides certain
death and disability benefits. After the initial one-year term, the employment
period may be extended only with the mutual consent of Mr. Raisbeck and
WesBanco. After the employment period ends, Mr. Raisbeck is obligated to refrain
from competition, to observe confidentiality provisions and to provide
consulting services for an additional two years. For the two-year
non-competition, confidentiality and consulting period, Mr. Raisbeck will
receive 25 monthly payments of $10,000 each. If Mr. Raisbeck's employment is
terminated for other than Cause (as defined in the employment agreement) or he
resigns for Good Reason (as defined in the employment agreement), Mr. Raisbeck
generally will be entitled to receive the remainder of the salary he would have
received had his employment not been terminated, any unreimbursed business
expenses and unpaid accrued vacation and any other amounts he would be entitled
to under any benefit plan or by law. Mr. Raisbeck is also to be appointed to the
board of directors of WesBanco Bank for a minimum period of one year under his
employment agreement and the merger agreement.
Also in connection with the proposed merger, Robert P. Brezing, Senior
Vice President of Western Ohio, Philip R. Teusink, Vice President of Cornerstone
Bank and William E. Whitmoyer, Senior Vice President of Western Ohio, have each
entered into employment agreements with WesBanco and its banking subsidiary,
WesBanco Bank, and non-competition and confidentiality agreements with WesBanco
Bank, all of which are contingent upon the consummation of the merger. Each of
the employment agreements provides for a term of two years. Messrs. Brezing,
Whitmoyer and Teusink will each receive an annual base salary in an amount to be
determined by the board of directors of WesBanco Bank, but in no event shall
such amount be less than $140,295 in the case of Mr. Brezing, $115,500 in the
case of Mr. Whitmoyer, and $95,238 in the case of Mr. Teusink. In addition, each
executive will be entitled to receive such other benefits and perquisites as
WesBanco Bank provides to its other executives. If WesBanco Bank terminates the
employment of any of Messrs. Brezing, Whitmoyer and Teusink without cause (as
defined in the employment agreements), or other than due to death of the
executive or by mutual agreement, WesBanco will be obligated to pay such person
an amount equal to the greater of (i) six months of base salary at his then
current base rate or (ii) the base salary such person would have received had he
continued to be employed through the end of the existing term of the employment
agreement. The non-competition and confidentiality agreements provide one-time
payments to Messrs. Brezing, Whitmoyer and Teusink at the closing of the merger
in the amounts of $140,295, $115,500 and $95,238, respectively.
Employee Severance Benefits. Pursuant to the merger agreement, WesBanco
has agreed to use commercially reasonable efforts to continue the employment of
most of the employees of Western Ohio and its subsidiaries after the merger. Any
employees that are not offered the opportunity to continue as employees after
the merger will be entitled to receive:
- severance compensation of not less than one week of pay for each
year of service with Western Ohio, with a minimum of four weeks of
severance pay and a maximum of 26 weeks of severance pay; and
- certain outplacement consultation services at a cost not to exceed
$1,000 per employee.
37
Continued Board Service. Pursuant to the merger agreement, one Western
Ohio director shall be appointed to the board of directors of WesBanco Bank for
at least one year. Mr. Raisbeck is entitled to be the Western Ohio director so
appointed under his employment agreement with WesBanco. In addition, each member
of the Western Ohio board of directors at the effective time of the merger shall
be appointed to a newly created advisory board for WesBanco Bank. Each such
advisory board member shall serve for at least one year and shall receive annual
compensation in an amount equal to the amount received by such member in the
fiscal year ended December 31, 2003 for service on the Western Ohio board of
directors.
Indemnification. WesBanco has agreed that it will, following the effective
time of the merger for a period of six years, indemnify, defend, and hold
harmless the current and former directors and officers of Western Ohio against
all costs, expenses, claims, damages, or liabilities arising out of actions or
omissions occurring at or prior to the effective time of the merger to the
fullest extent permitted by applicable law, including provisions relating to
advances of expenses. The merger agreement further provides that WesBanco shall
provide six years of extended liability insurance to provide for continued
coverage of Western Ohio's directors and officers with respect to matters
occurring prior to the effective time of the merger.
Ownership by Western Ohio Officers and Directors. As of March 31, 2004,
directors and officers of Western Ohio beneficially owned, in the aggregate,
316,462 shares of Western Ohio common stock, representing approximately 17.6% of
the outstanding shares of Western Ohio common stock. All of Western Ohio's
directors and officers that own Western Ohio common stock will, as a result of
the merger, be entitled to elect to receive the same merger consideration for
each share of Western Ohio common stock owned by him or her as every other
Western Ohio stockholder. Directors and officers of Western Ohio will be treated
the same as other Western Ohio stockholders, except that they may be subject to
certain restrictions on any resale of WesBanco common stock received by them
pursuant to the merger.
REGULATORY APPROVALS
WesBanco and Western Ohio have agreed to use their best efforts to obtain
all regulatory approvals required to consummate the acquisition, which include
approval from the Board of Governors of the Federal Reserve System under the
Bank Merger Act and the Bank Holding Company Act. In reviewing applications for
transactions of this type, the Federal Reserve Board must consider, among other
factors, the financial and managerial resources and future prospects of the
existing and resulting institutions, and the convenience and needs of the
communities to be served. In addition, the Federal Reserve Board may not approve
a transaction if it will result in a monopoly or otherwise be anticompetitive.
Furthermore, a period of 15 to 30 days must expire following approval by the
Federal Reserve Board before completion of the merger is allowed, within which
period the United States Department of Justice may file objections to the merger
under the federal antitrust laws. While we believe that the likelihood of
objection by the Department of Justice is remote in this case, there can be no
assurance that the Department of Justice will not initiate proceedings to block
the merger or, if any proceeding is instituted, as to the result of the
challenge. On May 20, 2004, the Federal Reserve accepted for filing WesBanco's
application for approval of the merger.
As required by the Home Owners' Loan Act and the Bank Merger Act, we
provided notice of the merger to the Office of Thrift Supervision on May 25,
2004.
The merger is also subject to the prior approval of the West Virginia
Board of Banking and Financial Institutions. We have filed the requisite
application for approval of the merger with the West Virginia Board of Banking
and Financial Institutions and are scheduled to appear in front of that board on
June 14, 2004.
Western Ohio and WesBanco have filed all required applications for
regulatory review and approval or notice in connection with the merger. The
merger cannot proceed in the absence of the requisite regulatory approvals.
There can be no assurance that the requisite regulatory approvals will be
obtained, and if obtained, there can be no assurance as to the date of any
approval. There can also be no assurance that any regulatory approvals will not
contain a condition or requirement that causes the approvals to fail to satisfy
the condition set forth in the merger agreement and described under "The Merger
--Conditions to the Merger."
38
The approval of any application merely implies the satisfaction of
regulatory criteria for approval, which does not include review of the merger
from the standpoint of the adequacy of the cash consideration or the exchange
ratio for converting Western Ohio common stock to WesBanco common stock.
Furthermore, regulatory approvals do not constitute an endorsement or
recommendation of the merger.
APPRAISAL RIGHTS
If the merger is consummated, a holder of record of Western Ohio common
stock who properly makes a demand for appraisal, as described below, will be
entitled to have those shares appraised by the Delaware Court of Chancery under
Section 262 of the Delaware General Corporation Law and to receive payment for
the "fair value" of those shares, instead of the consideration provided for in
the merger agreement. In order to be eligible to receive this payment, however,
a Western Ohio common stockholder must (1) continue to hold his or her shares
through the effective time of the merger; (2) strictly comply with the
procedures of Section 262; and (3) not vote in favor of the merger agreement.
This proxy statement/prospectus is being sent to all holders of record of
Western Ohio common stock on the record date for the Western Ohio special
meeting and constitutes notice of the appraisal rights available to those
holders under Section 262. All references in this summary of appraisal rights to
a "stockholder" or "holder" of shares of Western Ohio common stock are to the
record holder or holders of shares of Western Ohio common stock.
The statutory right of appraisal granted by Section 262 requires strict
compliance with the procedures of Section 262. Failure to follow any of these
procedures may result in a termination or waiver of appraisal rights under
Section 262. The following is a summary of the principal provisions of Section
262. The following summary is not a complete statement of Section 262 of the
Delaware General Corporation Law, and is qualified in its entirety by reference
to Section 262, which is incorporated herein by reference. A copy of Section 262
is attached as Annex C to this proxy statement/prospectus.
A holder of Western Ohio common stock who elects to exercise appraisal
rights under Section 262 must not vote in favor of the merger and must deliver a
written demand for appraisal of such holder's shares of Western Ohio common
stock prior to the vote on the merger agreement. A vote against the merger
agreement does not constitute a demand for appraisal. The written demand must
identify the stockholder of record and state the stockholder's intention to
demand appraisal of his or her shares. All demands should be delivered to John
W. Raisbeck, President and Chief Executive Officer of Western Ohio Financial
Corporation, 28 East Main Street, Springfield, Ohio 45502.
Only a record holder of shares of Western Ohio common stock on the date of
making a written demand for appraisal who continuously holds those shares
through the effective time of the merger is entitled to seek appraisal. Demand
for appraisal must be executed by or for the holder of record and must
reasonably inform Western Ohio of the identity of the stockholder of record. If
Western Ohio common stock is owned of record in a fiduciary capacity by a
trustee, guardian or custodian, the demand should be made in that capacity. If
Western Ohio common stock is owned of record by more than one person, as in a
joint tenancy or tenancy in common, the demand should be made by or for all
owners of record. An authorized agent, including an agent for two or more joint
owners, may execute the demand for appraisal for a holder of record; that agent,
however, must identify the record owner or owners and expressly disclose in the
demand that the agent is acting as agent for the record owner or owners of the
shares. If a stockholder holds shares of Western Ohio common stock through a
broker who in turn holds shares of Western Ohio common stock through a central
securities depository nominee such as Cede & Co., a demand for appraisal of such
shares must be made by or on behalf of the depository nominee and must identify
the depository nominee as record holder.
A record holder such as a broker who holds shares of Western Ohio common
stock as a nominee for beneficial owners, some of whom desire to demand
appraisal, must exercise appraisal rights on behalf of those beneficial owners
with respect to the shares of Western Ohio common stock held for those
beneficial owners. In that case, the written demand for appraisal should state
the number of shares of Western Ohio common stock covered by it. Unless a demand
for appraisal specifies a number of shares, the demand will be presumed to cover
all shares of Western Ohio common stock held in the name of the record owner.
Beneficial owners who are not record owners and who intend to exercise
appraisal rights should instruct the
39
record owner to comply with the statutory requirements with respect to the
exercise of appraisal rights before the date of the Western Ohio special
meeting.
Within 10 days after the effective date of the merger, the surviving
corporation to the merger is required to send notice of the adoption of the
merger agreement to all stockholders who have complied with Section 262 and who
have not voted in favor of the merger.
Within 120 days after the effective date of the merger, the surviving
corporation or any stockholder who has complied with the requirements of Section
262 may file a petition in the Delaware Court of Chancery demanding a
determination of the fair value of the shares of Western Ohio common stock held
by all stockholders seeking appraisal. A dissenting stockholder must serve a
copy of the petition on the surviving corporation. If no petition is filed by
either the surviving corporation or any dissenting stockholder within the
120-day period, the rights of all dissenting stockholders to appraisal will
cease. Stockholders seeking to exercise appraisal rights should assume that the
surviving corporation will not file a petition with respect to the appraisal of
the fair value of their shares and should not assume that the surviving
corporation will initiate any negotiations with respect to the fair value of
those shares. The surviving corporation is under no obligation to and has no
present intention to take any action in this regard. Accordingly, stockholders
who wish to seek appraisal of their shares should initiate all necessary action
with respect to the perfection of their appraisal rights within the time periods
and in the manner prescribed in Section 262. Failure to file the petition on a
timely basis will cause the stockholder's right to an appraisal to cease.
Within 120 days after the effective date of the merger, any stockholder
who has complied with subsections (a) and (d) of Section 262 is entitled, upon
written request, to receive from the surviving corporation a statement setting
forth the total number of shares of Western Ohio common stock not voted in favor
of the merger agreement with respect to which demands for appraisal have been
received by the surviving corporation and the number of holders of those shares.
The statement must be mailed within 10 days after the surviving corporation has
received the written request or within 10 days after the time for delivery of
demands for appraisal under subsection (d) of Section 262 has expired, whichever
is later.
If a petition for appraisal is duly filed by a stockholder, a copy of the
petition will be delivered to the surviving corporation, which will then be
obligated, within 20 days after receiving service of a copy of the petition, to
provide the Delaware Court of Chancery with a duly verified list containing the
names and addresses of all stockholders who have demanded an appraisal of their
shares of Western Ohio common stock. After notice to dissenting stockholders,
the Delaware Court of Chancery is empowered to conduct a hearing upon the
petition, and to determine those stockholders who have complied with Section 262
and who have become entitled to the appraisal rights provided thereby. The
Delaware Court may require the stockholders who have demanded an appraisal for
their shares and who hold stock represented by certificates to submit their
certificates of stock to the Register in Chancery for notation thereon of the
pendency of the appraisal proceedings; and if any stockholder fails to comply
with such direction, the Delaware Court may dismiss the proceedings as to such
stockholder. Where proceedings are not dismissed, the court will determine the
fair value of those shares, exclusive of any element of value arising from the
accomplishment or expectation of the merger, together with a fair rate of
interest, to be paid, if any, upon the fair value.
Stockholders who consider seeking appraisal should consider that the fair
value of their shares under Section 262 could be more than, the same as, or less
than, the value of the consideration provided for in the merger agreement
without the exercise of appraisal rights. Moreover, WesBanco and Western Ohio do
not anticipate that the surviving corporation will offer more than the merger
consideration to any stockholder exercising appraisal rights and reserve the
right to assert, in any appraisal proceeding, that, for purposes of Section 262,
the "fair value" of a share of Western Ohio common stock is less than the merger
consideration. In determining "fair value", the Delaware Court is required to
take into account all relevant factors. In Weinberger v. UOP, Inc. the Delaware
Supreme Court discussed the factors that could be considered in determining fair
value in an appraisal proceeding, stating that "proof of value by any techniques
or methods which are generally considered acceptable in the financial community
and otherwise admissible in court" should be considered and that "[f]air price
obviously requires consideration of all relevant factors involving the value of
a company." The Delaware Supreme Court has stated that in making this
determination of fair value the court must consider market value, asset value,
dividends, earnings prospects, the nature of the enterprise and any other facts
which could be ascertained as of the date of the merger
40
which throw any light on future prospects of the merged corporation. Section 262
provides that fair value is to be "exclusive of any element of value arising
from the accomplishment or expectation of the merger." In Cede & Co. v.
Technicolor, Inc., the Delaware Supreme Court stated that such exclusion is a
"narrow exclusion [that] does not encompass known elements of value," but which
rather applies only to the speculative elements of value arising from such
accomplishment or expectation. In Weinberger, the Delaware Supreme Court
construed Section 262 to mean that "elements of future value, including the
nature of the enterprise, which are known or susceptible of proof as of the date
of the merger and not the product of speculation, may be considered." The Court
of Chancery may determine the cost of the appraisal proceeding and assess it
against the parties as the Court deems equitable. However, costs do not include
attorneys' and expert witness fees. Upon application of a dissenting
stockholder, the Court may order that all or a portion of the expenses incurred
by any dissenting stockholder in connection with the appraisal proceeding
(including, without limitation, reasonable attorney's fees and the fees and
expenses of experts) be charged pro rata against the value of all shares of
Western Ohio common stock entitled to appraisal. In the absence of a court
determination or assessment, each party bears its own expenses.
Any stockholder who has demanded appraisal in compliance with Section 262
will not, after the merger, be entitled to vote such stockholder's Western Ohio
common stock for any purpose or receive payment of dividends or other
distributions, if any, on the Western Ohio common stock, except for dividends or
distributions, if any, payable to stockholders of record at a date prior to the
effective time of the merger.
A stockholder may withdraw a demand for appraisal and accept the
consideration payable pursuant to the merger agreement at any time within 60
days after the effective time of the merger; after this period, the stockholder
may withdraw such demand for appraisal only with the consent of the surviving
corporation. If an appraisal proceeding is properly instituted, it may not be
dismissed as to any stockholder without the approval of the Delaware Court of
Chancery, and any such approval may be conditioned on the Court of Chancery's
deeming the terms to be just. If, after the merger, a holder of Western Ohio
common stock who had demanded appraisal for such holder's shares fails to
perfect or loses the right to appraisal, those shares will be treated as if they
were converted into the consideration payable pursuant to the merger agreement
at the time of the merger.
In view of the complexity of these provisions of the Delaware General
Corporation Law, any Western Ohio stockholder who is considering exercising
appraisal rights should consult a legal advisor.
RESTRICTIONS ON RESALES BY AFFILIATES OF WESTERN OHIO
The shares of WesBanco common stock that you will receive in the merger
will be registered under the Securities Act of 1933. Such shares may be traded
freely and without restriction by those stockholders not deemed to be
"affiliates" of Western Ohio or WesBanco as that term is defined under the
Securities Act of 1933.
If you are an affiliate of Western Ohio 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:
- pursuant to an effective registration statement;
- pursuant to Rule 145 under the Securities Act of 1933; or
- in transactions exempt from registration.
An "affiliate" of Western Ohio, as defined by the rules promulgated
pursuant to the Securities Act, is a person who directly, or indirectly through
one or more intermediaries, controls, is controlled by, or is under common
control with Western Ohio. The foregoing restrictions are expected to apply to
the directors, executive officers, and the beneficial holders of 10% or more of
the shares of Western Ohio common stock (and to certain relatives or the spouse
of any such person and any trusts, estates, corporations, or other entities in
which any such person has a 10% or greater beneficial or equity interest). Stop
transfer instructions will be given by WesBanco to its transfer agent with
respect to the WesBanco common stock to be received by persons subject to the
restrictions described above. Western Ohio has agreed to use its diligent
efforts to obtain from each of those persons identified by Western Ohio as its
affiliates appropriate agreements that each such individual will not make any
sales of shares of WesBanco
41
common stock received upon consummation of the merger, except in compliance with
the restrictions described in this paragraph. WesBanco is not obligated and does
not intend to register for resale the shares issued to affiliates of Western
Ohio.
ACCOUNTING TREATMENT
WesBanco will account for the merger using the purchase method of
accounting. Under this method of accounting, WesBanco will record the estimated
fair value of Western Ohio's assets and liabilities on its financial statements.
The difference between the purchase price paid by WesBanco and the estimated
fair value of Western Ohio's tangible and identifiable intangible assets net of
its liabilities will be recorded on WesBanco's books as goodwill. The
application of this accounting treatment is shown in the unaudited pro forma
condensed combined financial information included on pages __ through __ of this
proxy statement/prospectus.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following discussion addresses the material United States federal
income tax consequences of the merger to holders of Western Ohio common stock.
The discussion is based on the Tax Code, Treasury regulations promulgated
thereunder, administrative rulings and judicial decisions, all as currently in
effect and all of which are subject to change (possibly with retroactive effect)
and to differing interpretations. This discussion applies only to Western Ohio
stockholders that hold their Western Ohio common stock as a capital asset within
the meaning of Section 1221 of the Tax Code. This discussion does not address
all aspects of United States federal taxation that may be relevant to a
particular shareholder in light of its personal circumstances or to shareholders
subject to special treatment under the United States federal income tax laws,
including:
- banks or trusts,
- tax-exempt organizations,
- insurance companies,
- dealers in securities or foreign currency,
- traders in securities who elect to apply a mark-to-market method of
accounting,
- pass-through entities and investors in such entities,
- foreign persons,
- shareholders who received their Western Ohio common stock through
the exercise of employee stock options, through a tax-qualified
retirement plan or otherwise as compensation, and
- shareholders who hold Western Ohio common stock as part of a hedge,
straddle, constructive sale, conversion transaction or other
integrated investment.
In addition, the discussion does not address any alternative minimum tax
or any state, local or foreign tax consequences of the merger.
EACH HOLDER OF WESTERN OHIO COMMON STOCK SHOULD CONSULT ITS TAX ADVISOR WITH
RESPECT TO THE PARTICULAR TAX CONSEQUENCES OF THE MERGER TO SUCH HOLDER.
The merger is conditioned upon receipt at the closing of legal opinions
from Kirkpatrick & Lockhart LLP, tax counsel to WesBanco, and Katten Muchin
Zavis Rosenman, counsel to Western Ohio, to the effect that, on the basis of the
facts, assumptions, and representations set forth in such opinion and
certificates to be obtained from officers of WesBanco, WOFC and Western Ohio,
the merger will qualify as a "reorganization" within the meaning
42
of Section 368(a) of the Tax Code and each of WesBanco, Western Ohio and WOFC
will be a "party" to the reorganization within the meaning of Section 368(b) of
the Tax Code. Neither of these opinions is binding on the Internal Revenue
Service or the courts, and neither Western Ohio nor WesBanco intends to request
a ruling from the Internal Revenue Service regarding the United States federal
income tax consequences of the merger. Consequently, no assurance can be given
that the Internal Revenue Service will not assert, or that a court would not
sustain, a position contrary to any of those set forth below. In addition, if
any of the representations or assumptions upon which such opinions are based is
inconsistent with the actual facts, the United States federal income tax
consequences of the merger could be adversely affected.
In this regard, Wesbanco and WOFC have represented that the aggregate
value of the Wesbanco common stock to be received by Western Ohio stockholders
in the merger will not be less than 42.5% of the aggregate value of the total
consideration received by the Western Ohio stockholders in the merger. If this
representation is not true as of the closing, Kirkpatrick & Lockhart LLP and
Katten Muchin Zavis Rosenman may be unable to render the opinions upon which the
closing is conditioned.
As of the date of this Proxy Statement/Prospectus, each of WesBanco and
Western Ohio believes that all of these representations and assumptions are now,
and will be at, as of, and after the time the merger becomes effective,
accurate; however, the representation regarding the relative value of our stock
to the aggregate consideration to be received by the holders of Western Ohio in
the merger can be made only at the close of business on the effective date of
the merger. If either WesBanco or Western Ohio learns at or before that time
that the representations and the assumptions are false or materially incorrect
and that its counsel therefore believes that the merger is unlikely to be
treated as a tax-free reorganization, then additional stockholder approval will
be obtained before consummation of the merger.
The remainder of this discussion assumes that the merger will qualify as a
"reorganization" within the meaning of Section 368(a) of the Tax Code.
The United States federal income tax consequences of the merger to a
Western Ohio stockholder generally will depend on whether the stockholder
exchanges its Western Ohio common stock for cash, Wesbanco common stock or a
combination of cash and Wesbanco common stock.
RECEIPT OF CASH ONLY
Gain or Loss. In general, a Western Ohio stockholder who, pursuant to the
merger, receives only cash in exchange for Western Ohio common stock will
recognize capital gain or loss equal to the difference between the amount of
cash received and such Western Ohio stockholder's adjusted tax basis in the
Western Ohio common stock shares surrendered (unless the Western Ohio
stockholder actually or constructively owns WesBanco common stock and the
receipt of cash has the effect of the distribution of a dividend for U.S.
federal income tax purposes as discussed below under "--Receipt of WesBanco
Common Stock and Cash"). Such gain or loss will be long-term capital gain or
loss if, as of the effective date of the merger, the holding period for such
Western Ohio common stock shares is more than one year.
RECEIPT OF WESBANCO COMMON STOCK ONLY
No Gain or Loss. A Western Ohio stockholder who, pursuant to the merger,
receives only WesBanco common stock in exchange for Western Ohio common stock
will not recognize any gain or loss upon such exchange, except in respect of
cash received in lieu of a fractional share of WesBanco common stock (as
discussed below under "--Cash in Lieu of a Fractional Share").
Tax Basis. The aggregate adjusted tax basis of WesBanco common stock
received in the merger generally will be equal to the aggregate adjusted tax
basis of the Western Ohio common stock surrendered therefor, decreased by the
amount of any tax basis allocable to any fractional share interest in WesBanco
common stock for which cash is received.
Holding Period. The holding period of WesBanco common stock received in
the merger will include the period during which the shares of Western Ohio
common stock were held.
43
RECEIPT OF WESBANCO COMMON STOCK AND CASH
Gain But No Loss. A Western Ohio stockholder who, pursuant to the merger,
receives a combination of cash and WesBanco common stock in exchange for Western
Ohio common stock will recognize gain, but not loss in an amount equal to the
lesser of:
- the amount of gain realized with respect to the Western Ohio common
stock; and
- the amount of cash received (other than cash received in lieu of a
fractional share of WesBanco common stock, which will be taxed as
discussed below under "-- Cash in Lieu of a Fractional Share").
The amount of gain realized with respect to the Western Ohio common stock
exchanged will equal the excess, if any, of:
- the sum of the cash received plus the fair market value of WesBanco
common stock received over
- the Western Ohio stockholder's adjusted tax basis in such Western
Ohio common stock shares.
For this purpose, gain or loss must be calculated separately for each
identifiable block of shares of Western Ohio common stock surrendered in the
merger, and a loss realized on one block of shares may not be used to offset a
gain realized on another block of shares. Holders should consult their tax
advisors regarding the manner in which cash and WesBanco common stock shares
should be allocated among different blocks of their Western Ohio common stock
shares surrendered in the merger.
Any gain recognized will be treated as capital gain unless, as discussed
below under "--Possible Treatment of Cash as a Dividend," the receipt of the
cash has the effect of the distribution of a dividend for U.S. federal income
tax purposes, in which case such gain will be treated as ordinary dividend
income to the extent of the Western Ohio stockholder's ratable share of
accumulated earnings and profits of WesBanco. Any capital gain will be long-term
capital gain if, as of the date of the exchange, the holding period for the
shares of Western Ohio common stock exchanged is more than one year.
Tax Basis. The aggregate adjusted tax basis of WesBanco common stock
received in the merger generally will be equal to the aggregate adjusted tax
basis of the shares of Western Ohio common stock surrendered in the merger,
reduced by the amount of cash received by the holder in the merger (excluding
any cash received instead of a fractional share), and increased by the amount of
gain recognized by the holder in the merger (including any portion of the gain
that is treated as a dividend, as described below under "-- Possible Treatment
of Cash as a Dividend," but excluding any gain or loss resulting from fractional
shares).
Holding Period. The holding period of WesBanco common stock received in
the merger will include the holding period of the Western Ohio common stock
exchanged therefor.
Possible Treatment of Cash as a Dividend. For purposes of this
determination, the holder of Western Ohio common stock is treated as if it first
exchanged all of its shares of Western Ohio common stock solely for WesBanco
common stock and then WesBanco immediately redeemed a portion of the WesBanco
common stock in exchange for the cash the holder actually received. The gain
recognized in this deemed redemption will be treated as capital gain, and not as
dividend if the deemed redemption is (1) "substantially disproportionate" with
respect to the holder or, (2) "not essentially equivalent to a dividend" (i.e.,
the deemed redemption results in a "meaningful reduction" in the Western Ohio
stockholder's interest in WesBanco common stock). The exchange would be
substantially disproportionate with respect to the holder if the holder's
percentage interest in WesBanco common stock (including stock constructively
owned by the holder) immediately after the merger is less than 80 % of what the
percentage interest would have been if, hypothetically, the holder had elected
to receive solely WesBanco common stock in exchange for all Western Ohio common
stock shares owned or constructively owned by the holder before the merger.
Whether an exchange would result in a meaningful reduction depends on the
particular Western Ohio stockholder's facts and circumstances. The Internal
Revenue Service has ruled that a shareholder in a publicly
44
held corporation whose stock interest is minimal (e.g., less than 1%) and who
exercises no control with respect to corporate affairs can be considered to have
a "meaningful reduction" if that shareholder has a minor reduction in its
percentage stock ownership in the deemed redemption. Accordingly, the gain
recognized in the deemed exchange by such a shareholder would be treated as
capital gain. In determining a Western Ohio stockholder's interest in WesBanco
common stock, the Western Ohio stockholder would be deemed to own any shares of
WesBanco common stock owned, or constructively owned, by certain persons related
to such Western Ohio stockholder or that are subject to an option held by the
Western Ohio stockholder or a related person.
These rules are complex and dependent upon the specific factual
circumstances particular to each Western Ohio stockholder. Additionally, if
pro-ration of the merger consideration occurs, the risk of unintended dividend
characterization may be increased. Consequently, each holder should consult its
tax advisor as to the application of these rules to the particular facts
relevant to such holder. Western Ohio stockholders that are corporations should
consult their tax advisors regarding their eligibility for a dividends received
deduction and the treatment of the dividend as an "extraordinary dividend" under
section 1059 of the Tax Code.
CASH RECEIVED IN LIEU OF A FRACTIONAL SHARE OF WESBANCO COMMON STOCK
A Western Ohio stockholder who receives cash instead of a fractional share
of WesBanco common stock will generally be treated as having received such
fractional share and then as having received such cash in redemption of that
fractional share by WesBanco. A Western Ohio stockholder who receives cash in
lieu of a fractional share of WesBanco common stock and who does not otherwise
hold shares of WesBanco common stock generally will recognize gain or loss equal
to the difference between the amount of cash received and the Western Ohio
stockholder's tax basis in such fractional share. Such gain or loss will be
long-term capital gain or loss if, as of the date of the exchange, the holding
period for such shares is more than one year. Western Ohio stockholders who
separately hold shares of WesBanco common stock should consult their own tax
advisors concerning the treatment of cash received for a fractional share.
REPORTING REQUIREMENTS
A holder of Western Ohio common stock receiving WesBanco common stock as a
result of the merger may be required to retain records related to such holder's
Western Ohio common stock and file with its United States federal income tax
return a statement setting forth certain facts relating to the merger.
The foregoing discussion is intended only as a summary and does not
purport to be a complete analysis or listing of all potential U.S. federal
income tax consequences of the merger.
YOU ARE URGED TO CONSULT YOUR TAX ADVISORS CONCERNING THE U.S. FEDERAL, STATE,
LOCAL AND FOREIGN TAX CONSEQUENCES OF THE MERGER TO YOU.
CONDUCT OF BUSINESS PRIOR TO THE MERGER
Pursuant to the merger agreement, Western Ohio and WesBanco have agreed
that, until the merger becomes effective or the merger agreement is terminated,
whichever occurs first, each will, with some exceptions:
- use its best efforts to take, or cause to be taken, all necessary
actions required to consummate the transactions contemplated by the
merger agreement;
- take all necessary steps to exempt the merger agreement and the
merger from applicable anti-takeover laws and charter provisions;
- cooperate in furnishing information for the preparation and filing
of the proxy statement/prospectus;
- cooperate in the filing of any regulatory applications with respect
to the merger; and
45
- advise the other party of any material breaches of the
representations and warranties, covenants or conditions contained in
the merger agreement or any event that is reasonably likely to have
a material adverse effect on the party.
In addition, Western Ohio has agreed that:
- it will conduct and cause each of its subsidiaries to conduct their
respective businesses only in the ordinary and usual course
consistent with past practice and not in a manner inconsistent with
any representation or warranty contained in the merger agreement;
- it will not sell, transfer, mortgage, pledge, or subject any of its
material assets to a lien or other encumbrance except for (A)
internal reorganizations or consolidations involving existing
subsidiaries that would not be likely to present a material risk of
any material delay in the receipt of any required regulatory
approval, (B) securitization activities in the ordinary course of
business and (C) other dispositions of assets, including
subsidiaries, if the fair market value of the total consideration
received therefrom does not exceed in the aggregate, $50,000;
- it will not make any capital expenditures, additions or betterments
which individually exceed $100,000 or exceed $500,000 in the
aggregate and which otherwise are in any manner inconsistent in any
material respect with Western Ohio's 2004 capital budget;
- it will not enter into any material contract that would be
reasonably likely to (A) have a material adverse effect on Western
Ohio, (B) materially impair Western Ohio's ability to perform its
obligations under the merger agreement or (C) prevent or materially
delay the consummation of the transactions contemplated by the
merger agreement;
- it will not declare or pay any dividends or other distributions on
any shares of Western Ohio common stock other than Western Ohio's
regular quarterly dividend of $0.25 per share and dividends by a
subsidiary of Western Ohio to its parent;
- it will not purchase, redeem or otherwise acquire any Western Ohio
capital stock other than pursuant to repurchase rights of Western
Ohio or certain put rights granted to employees or former employees
of Western Ohio;
- it will not issue or grant any options or other rights to acquire
shares of Western Ohio capital stock or its voting debt other than
(A) the issuance of Western Ohio common stock pursuant to the
existing warrants or options and (B) certain issuances by a
subsidiary of Western Ohio;
- it will not amend its Certificate of Incorporation or Bylaws, except
as expressly contemplated by the merger agreement or so required by
regulatory agencies;
- it will not merge or consolidate with any other person or otherwise
reorganize;
- it will not acquire any portion of the assets, business, deposits or
properties of any other entity other than (A) by way of
foreclosures, (B) acquisitions of control in a bona fide fiduciary
capacity or in satisfaction of debts previously contracted in good
faith, in each case in the ordinary and usual course of business
consistent with past practice and (C) internal reorganizations or
consolidations involving existing subsidiaries that would not be
likely to present a material risk of any material delay in the
receipt of any required regulatory approval;
- other than in the ordinary course of business and except as required
by law or certain existing contractual obligations, it will not
adopt or amend any pension, retirement, stock option, stock
purchase, savings, profit-sharing, deferred compensation,
consulting, bonus, group insurance or other employee benefit,
incentive or welfare plan (or similar arrangement);
46
- with certain exceptions, it will not increase any compensation or
benefits payable to its officers or employees;
- it will not incur or guarantee certain long-term indebtedness or
issue long-term debt securities other than (i) in replacement of
existing or maturing debt, (ii) certain indebtedness of its
subsidiaries, or (iii) in the ordinary course of business consistent
with past practice;
- except as previously publicly disclosed, it will not change its
accounting principles, practices or methods, other than as may be
required by GAAP, or the rules and regulations of the SEC or Nasdaq;
- it will not change its existing deposit policy, incur deposit
liabilities, other than deposit liabilities incurred in the ordinary
course of business consistent with past practice, or accept any
brokered deposit having a maturity longer than 365 days, other than
in the ordinary course of business;
- sell, purchase, enter into a lease, relocate, open or close any
banking or other office, or file any application pertaining to such
action with any regulatory authority;
- it will not change any of its commercial or consumer loan policies
in any material respect or make any material exceptions thereto,
unless so required by applicable law;
- it will not purchase any mortgage loan servicing rights;
- it will, and will cause the its subsidiaries to, use their
commercially reasonable efforts to maintain and keep their
respective properties and facilities in their present condition and
working order, ordinary wear and tear excepted, except with respect
to such properties and facilities, the loss of which would not
reasonably be expected to have a material adverse effect on Western
Ohio;
- it will, and will cause the its subsidiaries to, perform all of
their obligations under all agreements relating to or affecting
their respective properties, rights and businesses, except where
nonperformance would not have a material adverse effect on Western
Ohio;
- it will, and will cause the its subsidiaries to, use their
commercially reasonable efforts to maintain and preserve their
respective business organizations intact, to retain present key
employees and to maintain the respective relationships of customers,
suppliers and others having business relationships with them;
- it will maintain its insurance at existing levels;
- it will provide WesBanco with a schedule of all persons Western Ohio
believes to be affiliates of Western Ohio under Rule 145 of the
Securities Act of 1933 no later than the 15th day prior to the
mailing of this proxy statement/prospectus, and will use its
diligent efforts to cause each of those persons to execute and
deliver an affiliate letter to WesBanco; and
- it will not, and will not permit any person acting on its behalf to,
solicit, initiate or knowingly encourage or participate in any
discussions or furnish any information with respect to any proposal
that is reasonably likely to lead to the acquisition of (A) assets
or businesses constituting 20% or more of the total consolidated
revenues or assets of Western Ohio and its subsidiaries or (B) 20%
or more of Western Ohio's common stock.
In addition, WesBanco has further agreed that:
47
- it will use commercially reasonable efforts to continue the
employment of the employees of Western Ohio and its subsidiaries
and, for those employees whose employment is not continued, WesBanco
will provide those individuals with certain benefits;
- it will cause WOFC, Inc. to honor each of the employment agreements
as in effect with each of Western Ohio's subsidiaries;
- it will permit Western Ohio to create a retention bonus pool to
encourage the senior management of Western Ohio to continue their
employment through the effective time of the merger;
- it will use commercially reasonable efforts to cause the shares of
WesBanco common stock to be issued in the merger to be approved for
listing on Nasdaq;
- it will provide certain indemnification to the directors and
officers of Western Ohio and its subsidiaries for a period of six
years after the effective time of the merger;
- it will cause one director of Western Ohio to be appointed to the
board of directors of WesBanco Bank for a term of at least one year
after the effective date of the merger; and
- it will cause WOFC, Inc. to create an advisory board to which each
director of Western Ohio will be appointed for at least one year and
will receive annual compensation equal to which such directors
received during the fiscal year ended December 31, 2003.
CONDITIONS TO THE MERGER
The respective obligations of Western Ohio and WesBanco to effect the
merger are subject to the following conditions, among others:
- the approval of the merger agreement by the stockholders of Western
Ohio;
- 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;
- the effective status of the Registration Statement on the date the
merger closes;
- 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;
- the receipt of all material governmental or other consents,
approvals, and permissions;
- the receipt of all consents required by the merger agreement to be
obtained by WesBanco and Western Ohio;
- on or before the date the merger closes, the receipt of an opinion
from each party's tax counsel 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 of the Internal Revenue Code, and
regarding certain other tax matters;
- the accuracy in all material respects of the representations and
warranties of the parties and the performance by the parties in all
material respects of all of their obligations set forth in the
merger agreement, and the receipt of a certificate from an
appropriate officer certifying the foregoing;
- the receipt of legal opinions from the parties' counsel;
48
- the shares of WesBanco common stock to be issued in the merger shall
have been approved for listing on Nasdaq;
- the parties shall be satisfied with the deductibility of certain
payments to be made to John W. Raisbeck in connection with the
merger;
- Western Ohio's subsidiary shall have entered into certain agreements
with certain of Western Ohio's senior executives; and
- the delivery of certified copies of the resolutions duly adopted by
the boards of directors and the stockholders of Western Ohio, WOFC,
Inc. and WesBanco Bank, and the board of directors of WesBanco
approving the merger agreement and authorizing the transactions
contemplated therein.
In addition to the conditions discussed above, WesBanco's obligation to
consummate the merger is conditioned upon in the aggregate, an amount of less
than 10% percent WesBanco common stock to be issued in the merger being (i)
subject to purchase as fractional shares, and (ii) proposed to be issued to
Western Ohio stockholders who have perfected their appraisal rights.
The consummation of the merger by Western Ohio is also conditioned upon
Western Ohio having received from its financial advisor an opinion reasonably
acceptable to Western Ohio, dated as of the date of the first mailing of this
proxy statement/prospectus, to the effect that the consideration to be received
by Western Ohio stockholders in the merger is fair, from a financial point of
view.
TERMINATION OF THE MERGER AGREEMENT
The merger agreement may be terminated at any time prior to the closing of
the merger, either before or after the special meeting of Western Ohio
stockholders:
- by mutual consent of Western Ohio and WesBanco;
- by either Western Ohio 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;
- by either Western Ohio or WesBanco if the merger will violate any
non-appealable final order, decree, or judgment of any court or
governmental body having competent jurisdiction;
- by either Western Ohio or WesBanco if the merger has not closed by
December 31, 2004; and
- by either Western Ohio or WesBanco in the event that the
stockholders of Western Ohio do not adopt the merger agreement by
the requisite vote at the special meeting or any adjournment
thereof.
In addition, Western Ohio may terminate the merger agreement:
- in order to enter into an agreement with respect to an unsolicited
proposal that if consummated would result in a transaction more
favorable to Western Ohio's stockholders from a financial point of
view, provided that WesBanco does not make a counteroffer that is at
least as favorable to the other proposal and Western Ohio pays the
termination fee described below;
- if Western Ohio's financial advisor shall have refused to deliver
the required fairness opinion as of the date of first mailing of
this proxy statement/prospectus;
49
- during the five-day period ("Election Period") commencing on the
first day following the date on which all governmental approvals
have been obtained (the "Approval Date"), if each of the following
conditions is satisfied:
(i) the average daily per share closing prices of WesBanco's common
stock during the twenty trading days preceding Approval Date (the
"WesBanco Ending Price") is less than $24.896;
(ii) the quotient obtained by dividing the WesBanco Ending Price by
$31.12 (the "WesBanco Starting Price") is less than the difference
obtained by subtracting 0.20 from the quotient obtained by dividing the
Index Price on the Approval Date by the Index Price on April 1, 2004 (the
term "Index Price" is defined in the following paragraph);
(iii) Western Ohio notifies WesBanco of Western Ohio's intention to
terminate the merger agreement during the Election Period; and
(iv) WesBanco elects not to increase the exchange ratio in
accordance with the formula described below within the five-day period
following its receipt of notice that Western Ohio intends to so terminate
the merger agreement.
The "Index Price" on a particular date means the closing value of
the Nasdaq Bank Index as reported on Bloomberg.com.
The Western Ohio board of directors has made no decision as to whether it
would elect to terminate the merger agreement in the event the first two
conditions described above are satisfied. Any such decision would be made by the
Western Ohio board of directors in light of the circumstances existing at the
time. Prior to making any determination to elect to terminate the merger
agreement, the Western Ohio board of directors would consult with its financial
and other advisors and would consider all financial and other information it
deemed relevant to its decision. In this regard, the Western Ohio board of
directors would consider many of the same factors that it considered in
determining whether to approve and adopt the merger agreement, including the
principal factors discussed under "The Merger - Western Ohio's Reasons for the
Merger." In particular, the Western Ohio board of directors would analyze, among
other factors, whether the then current consideration to be received in the
merger would deliver more value to Western Ohio stockholders than the value that
could be expected in the event Western Ohio were to continue as an independent
company (which would occur if the Western Ohio board of directors were to elect
to abandon the merger and WesBanco determined not to increase the exchange
ratio). In addition, the Western Ohio board of directors would consider whether,
in light of market and other industry conditions at the time of such decision,
the exchange ratio continued to be fair from a financial point of view to
Western Ohio's stockholders. There can be no assurance that the Western Ohio
board of directors would exercise its right to terminate the merger agreement if
the first two conditions set forth above were satisfied. If Western Ohio elected
not to terminate the merger agreement, which it could do without any action on
the part of Western Ohio stockholders, the exchange ratio of WesBanco common
stock would remain 1.18.
If each of the first two conditions set forth above were satisfied and the
Western Ohio board of directors were to elect to terminate the merger agreement,
WesBanco would then have the option of increasing the consideration payable to
Western Ohio stockholders by adjusting the exchange ratio in the manner
described below. WesBanco would be under no obligation to adjust the exchange
ratio and there can be no assurance that WesBanco would elect to adjust the
exchange ratio if Western Ohio were to exercise its option to terminate the
merger agreement. Any such decision would be made by WesBanco in light of the
circumstances existing at the time. If WesBanco were to elect to adjust the
exchange ratio, Western Ohio would then not have any right to terminate the
merger agreement as a result of the above-described circumstances, and the
merger agreement would remain in effect, with the adjusted exchange ratio.
The operation of the conditions permitting Western Ohio to terminate the
merger agreement based on a decrease in the market price of the WesBanco common
stock reflects the parties' agreement that Western Ohio stockholders would
assume the risk of a decline in value of the WesBanco common stock to $24.896
per share under any circumstances and that such stockholders would assume the
risk of a more significant decline in value of the WesBanco common stock unless
the percentage decline in the value of the WesBanco common stock from $31.12 to
50
the average value of WesBanco common stock during the twenty day period
immediately preceding the Approval Date is more than 20 percentage points
greater than the percentage decrease, if any, in the Index Price from April 1,
2004 to the Approval Date. The premise of this agreement is that a decline in
the value of WesBanco's common stock which is comparable to the decline in the
value of an index of comparable publicly-traded stocks is indicative of a
broad-based change in market and economic conditions affecting the financial
services industry generally rather than factors which affect the value of the
WesBanco common stock in particular.
The operation and effect of the provisions of the merger agreement dealing
with a decline in the market price of WesBanco's common stock may be illustrated
by the following three scenarios:
(1) One scenario is that the WesBanco Ending Price is above $24.896. In
this event, there would be no adjustment to the 1.18 exchange ratio and Western
Ohio would be obligated to consummate the merger regardless of the change in the
Index Price (assuming all other conditions to Western Ohio's obligations were
satisfied or waived).
(2) A second scenario is that the WesBanco Ending Price is less than
$24.896 but that the percentage decline in the price of the WesBanco common
stock from the initial measurement price of $31.12 is not more than 20
percentage points greater than the percentage decline, if any, in the Index
Price. Under such circumstances, there would be no adjustment to the 1.18
exchange ratio and Western Ohio would be obligated to consummate the merger
(assuming all other conditions to Western Ohio's obligations were satisfied or
waived).
(3) A third scenario is that the WesBanco Ending Price is less than
$24.896 and the percentage decline in the price of WesBanco common stock from
the initial measurement price is more than 20 percentage points greater than the
decline in the Index Price. Under such circumstances, Western Ohio would have
the right, but not the obligation, to terminate the merger agreement unless
WesBanco elected to increase the exchange ratio to the lesser of:
- the number obtained by dividing (A) $29.377 (the product of the
WesBanco Starting Price, 0.80 and the exchange ratio of 1.18) by (B)
the WesBanco Ending Price; and
- the number equal to the product of the exchange ratio multiplied by
a fraction, the numerator of which is the number obtained by
subtracting 0.20 from the quotient obtained by dividing the Index
Price on the Approval Date by the Index Price on April 1, 2004, and
the denominator of which is the price determined in the bullet above
divided by the WesBanco Starting Price.
For example, if the WesBanco Ending Price was $23.00 and the Index Price
was 2,966.47 on April 1, 2004 and 2,900 on the Approval Date, Western Ohio would
have the right to elect to terminate the merger agreement because (i) the
WesBanco Ending Price would be less than $24.896 and (ii) the WesBanco Ending
Price divided by the WesBanco Starting Price ($23.00 / $31.12 = .74) would be
less than the difference obtained by subtracting 0.20 from the quotient obtained
by dividing the Index Price on the Approval Date by the Index Price on April 1,
2004 (2,900 / 2,966.47 - 0.20 = 0.78). If Western Ohio were to exercise its
right to terminate the merger agreement under such circumstances, WesBanco would
have the option to increase the exchange ratio to the lesser of (i) 1.277 (the
number determined by dividing $29.377 by the $23.00 WesBanco Ending Price), and
(ii) 1.241 (the number determined by multiplying 1.18 (the exchange ratio) by a
fraction, the numerator of which is 0.78 (the Index Price on the Approval Date
(2,900) divided by the Index Price on April 1, 2004 (2,966.47) less 0.20) and
the denominator of which is .74 (the WesBanco Ending Price ($23.00) divided by
the WesBanco Starting Price ($31.12))). If WesBanco exercised its option to
adjust the exchange ratio, the exchange ratio would be 1.241 and Western Ohio
would be obligated to consummate the merger (assuming all other conditions to
Western Ohio's obligations were satisfied or waived).
If, between the April 1, 2004 and the Approval Date, WesBanco declares or
effects a stock dividend, reclassification, recapitalization, split-up,
combination, exchange of shares or similar transaction, the prices for the
common stock of WesBanco shall be appropriately adjusted for purposes of the
above-discussed termination provision.
51
In the event of any termination of the merger agreement by either Western
Ohio or WesBanco as provided above, all further obligations of Western Ohio 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.
EXPENSES
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. WesBanco will pay all governmental and regulatory authority fees
incurred in connection with the transactions contemplated by the merger
agreement. If the merger agreement is terminated because the parties fail to
obtain Federal Reserve Board approval, WesBanco will reimburse Western Ohio for
its out-of-pocket costs and expenses incurred in connection with the merger
agreement and the transactions contemplated by the merger agreement.
TERMINATION FEE
Western Ohio will pay WesBanco a termination fee in the amount of
$2,500,000 under the following circumstances:
- if Western Ohio enters into any agreement in respect of an
acquisition proposal prior to termination of the merger agreement or
within six months after termination of the merger agreement and if
the merger agreement is terminated because the Western Ohio
stockholders failed to approve the merger agreement or because
Western Ohio breached any of its representations and warranties or
failed to perform its covenants contained in the merger agreement;
- if after Western Ohio or its stockholders receive an acquisition
proposal, the Western Ohio board of directors withdraws or modifies
its recommendation to the stockholders in a manner materially
adverse to WesBanco and either (i) the Western Ohio stockholders
fail to adopt the merger agreement at a stockholders' meeting and a
Takeover Proposal (as defined in the merger agreement and summarized
below) was made prior to such meeting or (ii) the Western Ohio
stockholders fail to meet by December 15, 2004 to vote on adoption
of the merger agreement; or
- if Western Ohio terminates the merger agreement after it receives a
Superior Proposal (as defined in the merger agreement and summarized
below).
Under the merger agreement, the term "Takeover Proposal" is generally
defined as any proposal that is reasonably likely to lead to the acquisition of
(A) assets or businesses constituting 20% or more of the total revenues or
assets of Western Ohio and its subsidiaries or (B) 20% or more of Western Ohio's
common stock. In addition, the term "Superior Proposal" is generally defined to
mean a written offer which would result in the acquisition of more than 50% of
the voting power of Western Ohio or all or substantially all of the consolidated
assets of Western Ohio and its subsidiaries on terms that are more favorable,
from a financial point of view, to Western Ohio's stockholders than the merger.
AMENDMENT OR WAIVER
The provisions of the merger agreement may be waived at any time by the
party that is 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 the special meeting of Western Ohio
stockholders. The merger agreement may be amended after the special meeting and
prior to the closing of the merger only to the extent permitted by applicable
laws.
INFORMATION ABOUT WESBANCO
52
WesBanco is a bank holding company headquartered in Wheeling, West
Virginia. WesBanco provides a full range of financial services including retail
banking, corporate banking, personal and corporate trust services, brokerage
services, mortgage banking and insurance. WesBanco offers these services through
two reportable segments, community banking and trust and investment services. As
of March 31, 2004, WesBanco had approximately $3.4 billion in consolidated total
assets, $2.5 billion in deposits and $326 million of stockholder's equity.
WesBanco's main office is located at One Bank Plaza, Wheeling, West Virginia,
26003 and its telephone number is (304) 234-9000.
WesBanco's community banking segment offers services traditionally offered
by full-service commercial banks, including commercial demand, individual demand
and time deposit accounts as well as commercial, mortgage and individual
installment loans. The trust and investment services segment offers trust
services as well as various alternative investment products including mutual
funds and annuities. The market value of assets under management of the trust
and investment services segment was approximately $2.8 billion at March 31,
2004. These assets are held by WesBanco's affiliate, WesBanco Bank, Inc. in
fiduciary or agency capacities for its customers.
As of March 31, 2004, WesBanco's commercial banking subsidiary, WesBanco
Bank, was operated through 72 offices and 105 ATM machines located in West
Virginia, Central and Eastern Ohio, and Western Pennsylvania. Total assets of
WesBanco Bank as of March 31, 2004 approximated $3.4 billion.
WesBanco offers additional services through its non-banking affiliates,
WesBanco Insurance Services, Inc., a multi-line insurance agency specializing in
property, casualty and life insurance for personal and commercial clients and
WesBanco Securities, Inc., a full service broker-dealer, which also offers
discount brokerage services. WesBanco Asset Management, Inc. and WesBanco
Services, Inc., which were incorporated in November 2002, collectively hold
certain investment securities and real estate loans of WesBanco Bank, Inc. and
assist in managing these assets. There were approximately 1,133 full-time
equivalent employees employed by all WesBanco affiliates as of March 31, 2004.
The lending philosophy of WesBanco is to minimize credit losses by
underwriting loans to uniform credit standards (which includes independent
analysis of the repayment capacity of each borrower; adequacy of collateral, if
any, to secure each loan; and other factors unique to each loan that may
increase or mitigate their risk), diversifying its loan portfolio to avoid
concentrations of credit to any single borrower, group of related borrowers,
industry, or collateral type, and conducting ongoing reviews and monitoring of
the loan portfolio. WesBanco makes commercial, commercial real estate,
residential real estate (including home equity), and direct and indirect
consumer loans to individuals and businesses that are primarily located within
its market areas.
No material portion of the deposits of WesBanco Bank has been obtained
from a single or small group of customers, and the loss of any customer's
deposits or a small group of customers' deposits would not have a material
adverse effect on the business of WesBanco.
WesBanco also serves as investment adviser to a family of mutual funds
under the name "WesMark Funds" which includes the WesMark Growth Fund, the
WesMark Balanced Fund, the WesMark Bond Fund, the WesMark West Virginia
Municipal Bond Fund, the WesMark Small Company Growth Fund and the Automated
Cash Management Trust.
As part of its operations, WesBanco regularly evaluates the potential
acquisition of, and holds discussions with, various financial institutions and
other businesses of a type eligible for financial holding company investment. In
addition, WesBanco regularly analyzes the values of, and submits bids for, the
acquisition of customer-based funds and other liabilities and assets of such
financial institutions and other businesses. As a general rule, WesBanco
publicly announces such material acquisitions when a definitive agreement has
been reached.
For further information about WesBanco, see "Where You Can Find More
Information."
INFORMATION ABOUT WESTERN OHIO
Western Ohio, a Delaware corporation, was organized in March 1994 for the
purpose of becoming a savings and loan holding company. Western Ohio owns
Cornerstone Bank, the principal business of which has traditionally
53
consisted of attracting deposits from the general public, and making loans
secured by residential and non-residential real estate. In October 1997, Western
Ohio formed another subsidiary, CornerstoneBanc Financial Services, Incorporated
(formerly West Central Mortgage Services, Incorporated). This subsidiary
originates and purchases mortgage loans, which are outside of the primary market
area for Cornerstone Bank.
Western Ohio is subject to supervision by the Office of Thrift
Supervision, Department of Treasury ("OTS") and Cornerstone Bank is subject to
comprehensive regulation, examination and supervision by the OTS and by the
Federal Deposit Insurance Corporation ("FDIC"). Cornerstone Bank is a member of
the Federal Home Loan Bank system and its deposits are backed by the full faith
and credit of the United States Government and are insured up to applicable
limits by the FDIC.
Western Ohio serves its customers through its main office in Springfield,
Ohio and six branch offices in Enon, New Carlisle, Springfield, Yellow Springs,
Beavercreek and Centerville. At March 31, 2004, Western Ohio had total assets of
$407.5 million, deposits of $257.5 million and stockholders' equity of $45.3
million. Western Ohio's common stock is traded on the Nasdaq National Market
under the symbol "WOFC."
Western Ohio has been a community-oriented savings and loan holding
company offering a variety of financial services to meet the needs of the
communities it serves. The principal business of Western Ohio consists of
attracting retail deposits from the general public and investing those funds
primarily in one-to-four family residential real estate, commercial and
multi-family real estate, construction loans and consumer and commercial
business loans, all primarily within Western Ohio's market areas.
For further information about Western Ohio, please refer to Western Ohio's
annual report on Form 10-K for the fiscal year ended December 31, 2003, and its
Form 10-Q for the quarter ended March 31, 2004, which accompany this proxy
statement/prospectus, and see "Where You Can Find More Information."
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 31, 2004, there were approximately
19,673,103 shares of WesBanco common stock outstanding, held of record by
approximately 5,527 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 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 3 years. This
provision of its Articles of Incorporation requires a super majority vote of its
stockholders to change.
54
COMPARATIVE RIGHTS OF STOCKHOLDERS
GENERAL
At the effective time of the merger, stockholders of Western Ohio that
receive WesBanco common stock in the merger will become stockholders of WesBanco
and their rights will be governed by WesBanco's Articles of Incorporation,
WesBanco's Bylaws and the West Virginia Business Corporations Act ("WVBCA"). The
following summary, which is not a complete statement of all differences between
the rights of the holders of Western Ohio stock and WesBanco stock, discusses
differences between Western Ohio's Certificate of Incorporation and Bylaws and
WesBanco's Articles of Incorporation and Bylaws and the differences between the
Delaware General Corporation Law ("DGCL") and the WVBCA. For information as to
how to get the full text of each document, see "Where You Can Find More
Information."
REMOVAL OF DIRECTORS; FILLING VACANCIES ON THE BOARD OF DIRECTORS
Western Ohio's Certificate of Incorporation provides that a director or
the entire board of directors of Western Ohio may be removed only for cause and
only by the affirmative vote of the holders of at least 80% of the outstanding
shares of Western Ohio entitled to vote in the election of directors. Western
Ohio's Certificate of Incorporation provides that vacancies on the board of
directors of Western Ohio, including vacancies resulting from an increase in the
number of directors, may be filled by a majority vote of the remaining
directors, though less than a quorum, and each person so elected shall serve
until the annual meeting of stockholders at which the term of office of the
class to which the director has been elected expires, and until his or her
successor has been elected and qualified.
Under the WVBCA, directors may be removed by a corporation's stockholders
with or without cause if the votes cast to remove such director exceed the
number of votes cast not to remove such director; provided that, if a director
is elected by a voting group, only the stockholders of that voting group may
participate in the vote to remove him. Article III of WesBanco's Bylaws provides
that its stockholders may remove any director for cause and fill the vacancy
thus created. WesBanco's Bylaws further provide that any vacancies not created
by such removal, including vacancies resulting from an increase in the number of
directors, may be filled by the remaining directors. Any director so elected to
fill a vacancy by the other directors shall hold office for a term that expires
at the first meeting of stockholders thereafter or until his or her successor is
elected and has qualified.
QUORUM OF STOCKHOLDERS
The DGCL provides that a corporation's certificate of incorporation or
bylaws shall specify the required quorum but in no event shall a quorum consist
of less than one-third of the shares entitled to vote at the particular meeting
of stockholders. Western Ohio's Bylaws provide that the holders of at least
one-third of all of the shares of the stock entitled to vote at the meeting,
present in person or by proxy, shall constitute a quorum for all purposes,
unless or except to the extent that the presence of a larger number may be
required by law. Western Ohio's Bylaws provide that, if a meeting called for the
election of directors is adjourned, and a notice of any adjourned special
meeting of stockholders is sent to all stockholders entitled to vote thereat
stating that it will be held with those present constituting a quorum, then
except as otherwise required by law, those present at such adjourned meeting
shall constitute a quorum, and all matters shall be determined by a majority of
the votes cast at such meeting.
WesBanco's Bylaws and the WVBCA provide that the holders of a majority of
the issued and outstanding stock entitled to vote, represented in person or by
proxy, constitutes a quorum.
NOTICE AND ADJOURNMENT OF STOCKHOLDER MEETINGS
Western Ohio's Bylaws provide that written notice of the place, date, and
time of all meetings of the stockholders shall be given, not less than ten nor
more than 60 days before the date on which the meeting is to be held, to each
stockholder entitled to vote at such meeting. Western Ohio's Bylaws provide that
if a quorum shall fail to attend any meeting, the chairman of the meeting or the
holders of a majority of the shares of stock entitled to vote
55
who are present, in person or by proxy, may adjourn the meeting. When a meeting
is adjourned to another place, date or time, Western Ohio's Bylaws provide that
written notice need not be given of the adjourned meeting if the place, date and
time thereof are announced at the meeting at which the adjournment is taken;
provided, however, that if the date of any adjourned meeting is more than thirty
(30) days after the date for which the meeting was originally noticed, or if a
new record date is fixed for the adjourned meeting, written notice of the place,
date and time of the adjourned meeting shall be given.
WesBanco's Bylaws provide that notice of every meeting of stockholders
shall be given either (i) by an advertisement in a Wheeling, West Virginia
newspaper once a week for at least two weeks preceding the date of the meeting
or (ii) by written notice mailed to each stockholder at least five days before
the date of the meeting. WesBanco's Bylaws provide that stockholders may adjourn
a meeting at which quorum is not present without notice other than announcement
at the meeting.
CALL OF SPECIAL MEETINGS OF STOCKHOLDERS
Western Ohio's Bylaws provide that, subject to the rights of the holders
of any class or series of Western Ohio preferred stock, special meetings of
stockholders may be called only by the board of directors pursuant to a
resolution adopted by a majority of the total number of directors which Western
Ohio would have if there were no vacancies on the board of directors. WesBanco's
Bylaws provide that special meetings of the stockholders may be called by the
board of directors, the President or by the holders of at least 10% of the
outstanding shares of WesBanco.
STOCKHOLDER CONSENT IN LIEU OF MEETING
Western Ohio's Bylaws provide that any action required or permitted to be
taken by the Western Ohio stockholders must be effected at a duly called annual
or special meeting of stockholders and may not be effected by any consent in
writing by such stockholders. The WVBCA permits any action which may be taken at
a meeting of the stockholders of WesBanco to be taken without a meeting if a
consent or consents in writing setting forth the date of signature and action so
taken shall be signed by all of the stockholders who would be entitled to vote
at a meeting for such purpose and shall be filed with WesBanco's minutes or
corporate records.
APPRAISAL RIGHTS
Under West Virginia law, stockholders are entitled to rights of appraisal
with regard to corporate actions involving certain mergers, share exchanges,
asset dispositions and certain article amendments that reduce the shares of a
stockholder to a fraction of a share where the corporation has an obligation to
repurchase the share fraction. No appraisal rights exist, however, if the stock
of the merging corporation is listed on a national securities exchange or
designated as a national market system security by the NASD.
Under the DGCL, dissenting stockholders are generally entitled to
appraisal rights only with respect to mergers or consolidations. No appraisal
rights exist, however, if the stock of the merging corporation is listed on a
national securities exchange or designated as a national market system security
by the NASD, or is held of record by more than 2,000 stockholders, unless the
holders are required to accept anything other than (i) the stock of the
surviving corporation, (ii) stock of another of a corporation whose shares are
listed on a national securities exchange or quoted on the NASDAQ National
Market, or held of record by more than 2,000 holders or (iii) cash in lieu of
fractional shares. In addition, appraisal rights exist irrespective of whether
the shares are publicly traded in the event of a "short-form" merger. See "The
Merger -- Appraisal Rights" beginning on page 58 for additional information
regarding appraisal rights under Delaware law.
DIRECTOR NUMBER AND TERM
Western Ohio's Certificate of Incorporation and Bylaws provide that the
number of directors on the Western Ohio board of directors shall be fixed from
time to time exclusively by the board of directors and that the directors shall
be divided into three classes, as equal in number as possible, with each
director serving a staggered, three-year term. In the absence of a designation
by the board, the Bylaws provide that the board shall be composed of seven
members.
56
The WesBanco Bylaws provide that the board of directors of WesBanco shall
consist not less than fifteen nor more than thirty-five members, with the number
to be set by the board at its January meeting each year. The WesBanco Bylaws
further provide that the WesBanco board of directors shall be divided into three
classes, as equal in number as possible, with each director having a staggered,
three-year term. Currently, the WesBanco board of directors has 18 members.
NOMINATION OF DIRECTORS
The Western Ohio Bylaws provide that any stockholder who intends to
nominate or cause to be nominated any candidate to the Western Ohio board must
notify the Secretary of Western Ohio of his or her intention not less than 30
days prior to the date of the meeting, or, if less than 40 days notice of the
meeting is given to stockholders, within ten days after notice of the meeting is
given. The notice required by the Western Ohio Bylaws must include, among other
things:
- all information regarding each proposed nominee as would be required
to be disclosed under Regulation 14A under the Securities Exchange
Act of 1934; and
- the name, address and class and number of shares of Western Ohio
stock owned by the stockholder making the nomination.
WesBanco's Bylaws provide that any stockholder who intends to nominate or
cause to be nominated any candidate to the WesBanco board, other than a
candidate proposed by the WesBanco board, must notify the Secretary of WesBanco
in writing not less than 30 days prior to the date of the meeting called for the
election of directors, or five days after the giving of notice of the meeting,
whichever is later.
CUMULATIVE VOTING
In an election of directors utilizing cumulative voting, each share of
stock normally having one vote is entitled to a number of votes equal to the
number of directors to be elected. Under West Virginia law and WesBanco's
Articles of Incorporation, WesBanco stockholders are entitled to cumulative
voting in the election of directors. Pursuant to the Western Ohio Certificate of
Incorporation, Western Ohio stockholders are not entitled to cumulative voting.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Under the DGCL, a corporations' certificate of incorporation may limit or
eliminate the personal liability of a director for breach of fiduciary as a
director except in matters involving (i) the breach of a director's duty of
loyalty, (ii) actions or omissions not in good faith, intentional misconduct or
knowing violations of law, (iii) the unlawful payment of dividends, stock
purchases or redemptions or (iv) any transaction from which a director derives
an improper personal benefit. A corporation may indemnify a person who is or was
a director, officer, employee or agent of the corporation for actions brought
against that person because of the position held with the corporation if the
person acted in good faith, in a manner reasonably believed to be in, or not
opposed to, the best interests of the corporation and, with respect to criminal
matters, the person had no reasonable cause to believe the person's conduct was
unlawful, except that with respect to actions brought by or in the right of the
corporation, the corporation may provide indemnification only for expenses, and
only where the indemnitee has not been adjudged liable to the corporation, or
where a court has found that the indemnitee is fairly and reasonably entitled to
such indemnification. In addition, a corporation shall indemnify such a person
to the extent such person is successful, on the merits or otherwise, in the
defense of such actions. The Western Ohio Certificate of Incorporation provides
for indemnification of its directors, officers, employees and agents to the
fullest extent permitted by the DGCL. The Western Ohio Certificate of
Incorporation also provides that Western Ohio shall advance expenses incurred by
an officer or director upon an undertaking by such person to repay such amount
if it is ultimately determined that he or she is not entitled to
indemnification, if such undertaking is required by the DGCL. The Western Ohio
Certificate of Incorporation also provides for the elimination of personal
liability of its directors to the fullest extent permitted by the DGCL.
57
Under the WVBCA, a corporation is generally permitted to indemnify a
director if the director conducted himself or herself in good faith, he or she
reasonably believed the conduct to be in the best interests of the corporation
(or at least not opposed to the best interests of the corporation for all
conduct that was not in his or her official capacity) and, in the case of any
criminal proceeding, he or she had no reasonable cause to believe his or her
conduct was unlawful. In addition, the WVBCA permits a corporation to include
broader indemnification in its articles of indemnification so long as the
provision does not limit the liability for (i) receipt of a financial benefit to
which he or she is not entitled, (ii) an intentional infliction of harm on the
corporation or its stockholders, (iii) certain unlawful distributions, or (iv)
an intentional violation of criminal law. The articles of incorporation may also
contain a provision (an "elimination provision") eliminating or limiting the
personal liability of a director to the corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director so long as the
provision does not eliminate or limit the liability of a director for (i) any
breach of the director's duty of loyalty to the corporation or its stockholders,
(ii) acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) certain unlawful distributions, or (iv) any
transaction from which the director derived an improper personal benefit. This
articles of incorporation provision may not apply to conduct occurring prior to
the provision's adoption. The WVBCA requires a corporation to indemnify a
director was wholly successful, on the merits or otherwise, in the defense of
any proceeding to which he or she was a party because he or she was a director
of the corporation against reasonable expenses incurred by him or her in
connection with the proceeding.
The WVBCA permits a corporation, before final disposition of a proceeding,
to advance funds to pay for or reimburse the reasonable expenses incurred by a
director who is a party to a proceeding because he or she is a director if he or
she delivers to the corporation:
- a written affirmation of his or her good faith belief that he or she
has met the relevant standard of conduct described in the first
sentence of the preceding paragraph or that the proceeding involves
conduct for which liability has been eliminated under an elimination
provision; and
- a written undertaking to repay any funds advanced if he or she is
not entitled to mandatory indemnification and it is ultimately
determined that he or she has not met the relevant standard of
conduct.
The WVBCA provides that a corporation may indemnify its officers to the
same extent as a director and, if the officer is not a director or if the
officer is a party to the proceeding solely in his capacity as an officer, to a
further extent as may be provided by the articles of incorporation, the bylaws,
a resolution of the board of directors or contract, except that such additional
indemnification may not be provided for liability in connection with a
proceeding by or in the right of the corporation other than for reasonable
expenses incurred in connection with the proceeding or liability arising out of
conduct that constitutes (i) receipt by him or her of a financial benefit to
which he or she is not entitled, (ii) an intentional infliction of harm on the
corporation or the stockholders or (iii) an intentional violation of criminal
law. The WVBCA requires mandatory indemnification of officers that are not
directors to the same extent as directors.
Under the WesBanco Bylaws, WesBanco will indemnify each of its directors
and officers, whether or not then in office, against all costs and expenses
reasonably incurred in connection with any suit to which he is a party by reason
of having been an officer or director of WesBanco or another company which he
served at the request of WesBanco unless he is adjudged derelict in the
performance of his duties as director or officer. In addition, the WesBanco
Bylaws provide that an "institution-affiliated party" (as defined in 12 U.S.C.
Section 1813(u)) may not receive a "prohibited indemnification payment," which
is defined as any payment by WesBanco to an institution-affiliated party to pay
or agreement to reimburse such person for any liability or legal expenses in any
administrative proceeding brought by the appropriate federal banking agency that
results in a final order or settlement in which the institution- affiliated
party is assessed a civil money penalty, is removed or prohibited from banking,
or is required to cease an action or take any affirmative action, including
making restitution, with respect to WesBanco. Further, WesBanco may make or
agree to make a reasonable indemnification payment only if all of the following
conditions are met: (i) WesBanco's board of directors determines in writing that
the institution-affiliated party acted in good faith and the best interests of
WesBanco; (ii) the board determines that the payment will not materially affect
WesBanco's safety and soundness; (iii) the payment does not fall within the
definition of a prohibited indemnification payment; and (iv) the
institution-affiliated party agrees in writing to reimburse WesBanco, to the
extent not covered by permissible insurance, for payments made in the event that
the administrative action results in
58
a final order or settlement in which the institution-affiliated party is
assessed a civil money penalty, is removed or prohibited from banking, or is
required, under a final order, to cease an action or take any affirmative
action.
AMENDMENT OF CERTIFICATE AND ARTICLES OF INCORPORATION AND BYLAWS
Under the DGCL, an amendment to a corporation's certificate of
incorporation must be approved by the holders of a majority of the outstanding
stock entitled to vote on the amendment and a majority of the outstanding stock
of each class entitled to vote on the amendment. Generally, the DGCL requires a
separate class vote on an amendment to the certificate of incorporation if the
amendment would change the par value of, or increase or decrease the aggregate
number of, authorized shares of such class, or alter or change the powers,
preferences or special rights of shares of such class so as to affect them
adversely. The Western Ohio Certificate of Incorporation provides that the
affirmative vote of the holders of at least 80% of the voting power of its
outstanding stock, voting together as a single class, is required to amend or
repeal provisions of the Western Ohio Certificate of Incorporation relating to
certain voting requirements and other stockholder rights, certain board of
director matters and other specified provisions of the Western Ohio Certificate
of Incorporation.
Under West Virginia law, the Wesbanco Articles of Incorporation or Bylaws
generally may be amended by the affirmative vote of a majority of all votes of
stockholders entitled to be cast on the matter amendment and a majority of the
outstanding stock of each class entitled to vote on the amendment, unless a
greater number is specified in the articles of incorporation. The WesBanco
Articles of Incorporation provide that the affirmative vote of the holders of
not less than 75% of the outstanding shares of the voting stock shall be
required to amend the article provision dealing with the classes of directors.
The Wesbanco Bylaws require that the affirmative vote of the holders of not less
than 75% of the outstanding shares of the voting stock of the corporation will
be required to amend or repeal the Bylaw provisions dealing with the composition
of the board of directors. The other Bylaw provisions may be amended by a
majority of the board of directors of WesBanco.
VOTE REQUIRED FOR EXTRAORDINARY CORPORATE TRANSACTIONS
Under the DGCL, a merger, consolidation, sale of all or substantially all
of a corporation's assets other than in the regular course of business or
dissolution of a corporation must be approved by holders of a majority of the
outstanding shares entitled to vote. No vote of stockholders of a constituent
corporation surviving a merger, however, is required (unless the corporation
provides otherwise in its certificate of incorporation) if (i) the merger
agreement does not amend the certificate of incorporation of the surviving
corporation, (ii) each share of stock of the surviving corporation outstanding
before the merger is an identical outstanding or treasury share after the
merger, and (iii) the number of shares to be issued by the surviving corporation
in the merger does not exceed 20% of the shares outstanding immediately prior to
the merger. In addition, certain mergers effected to create a holding company
structure may be effected without a stockholder vote. The Certificate of
Incorporation of Western Ohio provides that the affirmative vote of at least 80%
of the outstanding shares of Western Ohio entitled to vote in the election of
directors, voting together as a single class, shall be required to approve the
following transactions:
- certain mergers and consolidations;
- certain dispositions of at least 25% of the combined assets of
Western Ohio and its subsidiaries to an interested
stockholder;
- certain issuances of securities of Western Ohio to an
interested stockholder;
- the adoption of a plan of liquidation or dissolution; and
- certain reclassifications and recapitalizations.
Notwithstanding the foregoing, the above transactions only require the
approval of a majority of the outstanding shares of Western Ohio if they are
approved by a majority of Western Ohio's disinterested directors or if certain
other conditions are satisfied. For these purposes, an "interested stockholder"
generally includes any person other than Western Ohio or its subsidiaries that
(i) beneficially owns more than 10% of the voting power of
59
Western Ohio, (ii) is an affiliate of Western Ohio and at any time within the
preceding two years was the beneficial owner of at least 10% of the voting power
of Western Ohio or (iii) holds shares of Western Ohio voting stock which were at
any time in the preceding two years held by an interested stockholder if such
shares were acquired in a transaction or series of transactions not involving a
public offering under the Securities Act of 1933. The term "disinterested
director" generally means any member of the Western Ohio board of directors who
is unaffiliated with an interested stockholder and either (i) was a member of
the board prior to the time that the interested stockholder became an interested
stockholder or (ii) becomes a member of the board after the time that the
interested stockholder became an interested stockholder but was recommended by a
majority of the disinterested directors.
Under the WVBCA, a merger, consolidation, sale of all or substantially all
of a corporation's assets other than in the regular course of business or
dissolution of a corporation must be approved by holders of a majority of the
outstanding shares entitled to vote. The WesBanco Articles of Incorporation and
Bylaws do not provide for a greater vote. In addition, under the WVBCA no
stockholder approval of a merger or share exchange is required if (i) the
corporation will survive the merger or is the acquiring corporation in a share
exchange, (ii) the articles of incorporation of the surviving corporation will
not be amended, (iii) each stockholder of the corporation whose shares were
outstanding immediately before the effective date of the merger or share
exchange will hold the same number of shares, with identical preferences,
limitations and relative rights, immediately after the effective date, and (iv)
the issuance in the merger or share exchange of shares or other securities
convertible into or rights exercisable for shares does not otherwise require
stockholder approval under the WVBCA.
INTERESTED STOCKHOLDER TRANSACTIONS AND VOTING
Except under certain circumstances, the DGCL prohibits a "business
combination" between a corporation and an "interested stockholder" (as defined
in the DGCL) within three years of the stockholder becoming an "interested
stockholder." Generally, an "interested stockholder" under the DGCL is a person
or group that directly or indirectly controls, or has the right to acquire or
control, the voting or disposition of 15% or more of the outstanding voting
stock or is an affiliate or associate of the corporation and was the owner of
15% or more of such voting stock at any time within the previous three years. A
"business combination" is defined broadly to include, among others (i) mergers
and sales or other dispositions of 10% or more of the assets of a corporation
with or to an interested stockholder, (ii) certain transactions resulting in the
issuance or transfer to the interested stockholder of any stock of the
corporation or its subsidiaries, (iii) certain transactions which would result
in increasing the proportionate share of the stock of a corporation or its
subsidiaries owned by the interested stockholder, and (iv) receipt by the
interested stockholder of the benefit (except proportionately as a stockholder)
of any loans, advances, guarantees, pledges, or other financial benefits.
A business combination between a corporation and an interested stockholder
is prohibited unless (i) prior to the date the person became an interested
stockholder, the board of directors approved either the business combination or
the transaction which resulted in the person becoming an interested stockholder,
(ii) upon consummation of the transaction that resulted in the person becoming
an interested stockholder, that person owns at least 85% of the corporation's
voting stock outstanding at the time the transaction is commenced (excluding
shares owned by persons who are both directors and officers and shares owned by
employee stock plans in which participants do not have the right to determine
confidentially whether shares will be tendered in a tender or exchange offer),
or (iii) the business combination is approved by the board of directors and
authorized by the affirmative vote (at an annual or special meeting and not by
written consent) of at least 662/3% of the outstanding voting stock not owned by
the interested stockholder.
These restrictions placed on interested stockholders by the DGCL do not
apply under certain circumstances, including, but not limited to, the following:
(i) if the corporation's original certificate of incorporation contains a
provision expressly electing not to be governed by Section 203 of the DGCL; or
(ii) if the corporation, by action of its stockholders, adopts an amendment to
its bylaws, articles of incorporation or certificate of incorporation expressly
electing not to be governed by the Section 203 of the DGCL, provided that such
an amendment is approved by the affirmative vote of not less than a majority of
the outstanding shares entitled to vote. Such an amendment, however, generally
will not be effective until 12 months after its adoption and will not apply to
any business combination with a person who became an interested stockholder at
or prior to such adoption. In addition, the restrictions are not applicable to
certain business combinations proposed between the announcement
60
and the consummation or abandonment of certain transactions, including mergers
and tender offers. Western Ohio has not elected to take itself outside the
coverage of Section 203 of the DGCL.
In addition to the interested stockholder provisions contained in the
DGCL, Western Ohio's Certificate of Incorporation contains provisions addressing
interested stockholders. Western Ohio's Certificate of Incorporation provides
that the acquisition by Western Ohio of any equity security from any "interested
person" must be approved by the holders of at least 80% of the voting stock of
Western Ohio that is not beneficially owned by such interested person. Such
stockholder approval is not required, however, for (i) acquisitions made as part
of a tender or exchange offer by Western Ohio or its subsidiaries that complies
with the Securities Exchange Act of 1934, (ii) acquisitions made pursuant to an
open market purchase program approved by a majority of Western Ohio's board of
directors, including a majority of the disinterested directors, or (iii)
acquisitions approved by a majority of Western Ohio's board, including a
majority of the disinterested directors, made at no more than the market price
on the date agreement is reached.
The Western Ohio Certificate of Incorporation also provides that any
beneficial owner of more than 10% of the outstanding common stock of Western
Ohio may note vote any shares in excess of such 10% on any matter.
Neither the WVBCA or WesBanco's Articles of Incorporation or Bylaws
contain any provisions address interested stockholder transactions.
WHERE YOU CAN FIND MORE INFORMATION ABOUT WESBANCO AND WESTERN OHIO
WesBanco and Western Ohio each file annual, quarterly and special reports,
proxy statements and other information with the SEC. These filings are available
over the internet from the SEC's web site at WWW.SEC.GOV. You may read and copy
any reports, statements or other information filed by WesBanco or Western Ohio
at the SEC's public reference room at 450 Fifth Street, N.W. Suite 1024,
Washington, D.C. 20549. You may also obtain copies of this information by mail
from the public reference section of the SEC, 450 Fifth Street, N.W., Suite
1024, Washington, D.C. 20549, at prescribed rates. Please call the SEC at
1-800-SEC-0330 for further information about the operation of its public
reference room.
The common stock of WesBanco and Western Ohio is listed on the Nasdaq
National Market under the symbols "WSBC" and "WOFC," respectively. You may
inspect reports and other information concerning WesBanco and Western Ohio at
the offices of the National Association of Securities Dealers, Inc., 1735 K
Street, N.W., Washington, D.C. 20006.
WesBanco maintains an Internet site that contains information about
WesBanco and its subsidiaries. Its address is www.wesbanco.com. Western Ohio
maintains an Internet site that contains information about Western Ohio and its
subsidiaries. Its address is www.cornerstone-online.com.
This proxy statement/prospectus is part of a Registration Statement on
Form S-4 that WesBanco has filed with the SEC with respect to the WesBanco
common stock to be issued in the merger. This proxy statement/prospectus
constitutes a prospectus of WesBanco and a proxy statement of Western Ohio for
its special meeting. As permitted by the SEC, this proxy statement/prospectus
does not contain all of the information contained in the Registration Statement.
You may obtain copies of the Form S-4 and any amendments thereto, in the manner
described above.
The SEC allows the "incorporation by reference" of information into this
proxy statement/prospectus, which means that WesBanco and Western Ohio can
disclose important information to you by referring you to another document filed
separately with the SEC by WesBanco or Western Ohio. The information
incorporated by reference is deemed to be part of this proxy
statement/prospectus, except for any information that is superseded by
information in this proxy statement/prospectus. This proxy statement/prospectus
incorporates by reference the documents set forth below that WesBanco or Western
Ohio have previously filed with the SEC. These documents contain important
information about WesBanco and Western Ohio.
61
The following documents, which have been filed with the SEC by WesBanco,
are hereby incorporated by reference into this proxy statement/prospectus:
- WesBanco's Annual Report on Form 10-K for the fiscal year ended
December 31, 2003;
- WesBanco's Quarterly Report on Form 10-Q for the quarter ended March
31, 2004;
- WesBanco's Current Reports on Form 8-K filed on January 22, 2004,
February 26, 2004, April 5, 2004 and April 22, 2004 and its amended
Current Report on Form 8-K filed on April 27, 2004;
- the description of WesBanco common stock contained in WesBanco's
registration statement on Form 8-A filed by WesBanco pursuant to
Section 12 of the Exchange Act, including any amendment or report
filed for purpose of updating the description, as filed on May 2,
1977.
The following documents, which have been filed with the SEC by Western
Ohio, are hereby incorporated by reference into this proxy statement/prospectus:
- Western Ohio's Annual Report on Form 10-K for the fiscal year ended
December 31, 2003 (including Exhibit 13 thereto, which contains
portions of Western Ohio's 2003 Annual Report to Shareholders, a
complete copy of which 2003 Annual Report to Shareholders is
enclosed with this proxy statement/prospectus);
- Western Ohio's Quarterly Report on Form 10-Q for the quarter ended
March 31, 2004 (a complete copy of which Form 10-Q is enclosed with
this proxy statement/prospectus);
- Western Ohio's Current Reports on Form 8-K filed on January 20,
2004, February 9, 2004, March 5, 2004, April 5, 2004 and April 26,
2004.
All documents filed by WesBanco pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934 after the date of this document and
before the date of the special meeting of Western Ohio's stockholders are
incorporated by reference into and are deemed to be a part of this document from
the date of filing of those documents.
You should rely only on the information contained in this proxy
statement/prospectus or on information to which we have 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.
If you would like to receive a copy of any of the documents incorporated
by reference, please contact WesBanco or Western Ohio at the address or
telephone number listed under the heading "Additional Information."
FORWARD LOOKING STATEMENTS
WesBanco and Western Ohio have each made forward-looking statements in
this document and in other documents to which this document refers. These
statements are subject to risks and uncertainties. These statements are based on
the beliefs and assumptions of the management of WesBanco and Western Ohio and
on information currently available to them or, in the case of information that
appears under the heading "The Merger" beginning on page 25, information that
was available to management of WesBanco and Western Ohio as of the date of the
merger agreement. Forward looking statements include, but are not limited to,
the information concerning possible or assumed future results of operations of
WesBanco. 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 that we cannot predict. In
addition, many of these forward-looking statements are based on
62
assumptions about the future that may prove to be inaccurate. Accordingly,
actual results may differ materially from those expressed in the forward-looking
statements.
Any statements in this document about the anticipated effect of the merger
and WesBanco's performance in future periods are subject to risks relating to,
among other things, the following:
- expected cost savings from the merger may not be fully realized or
realized within the expected time frame;
- the loss of deposits, customers or revenues following the merger may
be greater than expected;
- competitive conditions in the financial services industry;
- costs or difficulties related to the integration of the businesses
of WesBanco and Western Ohio may be greater than expected;
- changes in interest rates, spreads on earning assets and
interest-bearing liabilities, and associated interest rate
sensitivity;
- the effect of changing regional and national economic conditions;
- legislative and federal and state regulatory actions and reform; and
- competitors of WesBanco and Western Ohio may develop products that
enable those competitors to compete more successfully than WesBanco
or Western Ohio.
Both WesBanco and Western Ohio believe the forward-looking statements
about the merged company are reasonable. However, Western Ohio's stockholders
should not place undue reliance on them. Forward-looking statements are not
guarantees of performance. They involve risks, uncertainties and assumptions.
The future results and stockholder values of WesBanco following the merger may
differ materially from those expressed or implied in these forward looking
statements. Many of the factors that will determine these results and values are
beyond WesBanco's and Western Ohio's ability to control or predict.
We expressly qualify all subsequent written and oral forward looking
statements concerning the merger or other matters addressed in this document and
attributable to WesBanco or Western Ohio or any person acting on their behalf by
the foregoing cautionary statements. Neither Westbanco nor Western Ohio
undertakes any obligation to release publicly any revisions to these
forward-looking statements to reflect events or circumstances after the date of
this document or to reflect the occurrence of unanticipated events.
LEGAL MATTERS
Certain matters relating to the validity of the WesBanco common stock
issuable in connection with the merger will be passed upon for WesBanco by its
counsel, Phillips, Gardill, Kaiser & Altmeyer, PLLC, 61 Fourteenth Street,
Wheeling, West Virginia 26003. As of March 31, 2004, the members of Phillips,
Gardill, Kaiser & Altmeyer, PLLC participating in the preparation of this proxy
statement/prospectus owned an aggregate of 42,647 shares of WesBanco common
stock. Kirkpatrick & Lockhart LLP, as tax counsel to WesBanco, and Katten Muchin
Zavis Rosenman, as tax counsel to Western Ohio, each will pass upon certain tax
consequences related to the merger.
EXPERTS
The consolidated financial statements of WesBanco, Inc. incorporated by
reference in WesBanco's Annual Report on Form 10-K for the year ended December
31, 2003, have been audited by Ernst & Young LLP, independent registered public
accounting firm, as set forth in their report thereon, included therein and
incorporated herein by reference.
63
Such consolidated financial statements are incorporated herein by reference in
reliance upon such report, given on the authority of such firm as experts in
auditing and accounting.
The consolidated financial statements of Western Ohio Financial
Corporation incorporated by reference in Western Ohio's Annual Report on Form
10-K for the year ended December 31, 2003, have been audited by Crowe Chizek and
Company LLC, independent auditors, as set forth in their report thereon,
included therein and incorporated herein by reference. Such consolidated
financial statements are incorporated herein by reference in reliance upon such
report, given on the authority of such firm as experts in auditing and
accounting.
64
ANNEX A
AGREEMENT AND PLAN OF MERGER
DATED AS OF
APRIL 1, 2004
BY AND BETWEEN
WESBANCO, INC.,
WOFC, INC.,
AND
WESTERN OHIO FINANCIAL CORPORATION
-i-
TABLE OF CONTENTS
PAGE
----
ARTICLE ONE -- THE MERGER.................................................................................. 2
1.01. Merger; Surviving Corporation................................................................ 2
1.02. Effective Time............................................................................... 2
1.03. Effects of the Merger........................................................................ 2
ARTICLE TWO -- CONVERSION OF SHARES; SURRENDER OF CERTIFICATES............................................. 2
2.01. Conversion of Seller Shares.................................................................. 2
2.02. Election and Exchange and Payment Procedures................................................. 4
2.03. Seller Shareholders' Appraisal Rights........................................................ 10
2.04. Anti-Dilution Provisions..................................................................... 11
ARTICLE THREE -- REPRESENTATIONS AND WARRANTIES OF SELLER.................................................. 11
3.01. Representations and Warranties of Seller..................................................... 11
ARTICLE FOUR -- REPRESENTATIONS AND WARRANTIES OF BUYER.................................................... 31
4.01. Representations and Warranties of Buyer...................................................... 31
ARTICLE FIVE -- FURTHER COVENANTS OF SELLER................................................................ 45
5.01. Operation of Business........................................................................ 45
5.02. Notification................................................................................. 49
5.03. Acquisition Proposals........................................................................ 50
5.04. Delivery of Information...................................................................... 52
5.05. Affiliates Compliance with the Securities Act................................................ 52
5.06. Takeover Laws................................................................................ 52
5.07. No Control................................................................................... 52
ARTICLE SIX -- FURTHER COVENANTS OF BUYER.................................................................. 53
6.01. Access to Information........................................................................ 53
6.02. Opportunity of Employment; Employee Benefits................................................. 53
6.03. Exchange Listing............................................................................. 54
6.04. Notification................................................................................. 54
6.05. Takeover Laws................................................................................ 55
6.06. Officers' and Directors' Indemnification..................................................... 55
6.07. Election of a Seller Director(s) to Buyer Board of Directors................................. 56
-i-
ARTICLE SEVEN -- FURTHER OBLIGATIONS OF THE PARTIES........................................................ 57
7.01. Seller Stock Options......................................................................... 57
7.02. Necessary Further Action..................................................................... 59
7.03. Cooperative Action........................................................................... 59
7.04. Satisfaction of Conditions................................................................... 60
7.05. Press Releases............................................................................... 60
7.06. Registration Statements; Proxy Statement; Shareholders' Meeting.............................. 60
7.07. Regulatory Applications...................................................................... 62
7.08. Coordination of Dividends.................................................................... 63
ARTICLE EIGHT -- CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PARTIES.................................... 63
8.01. Conditions to the Obligations of Buyer....................................................... 63
8.02. Conditions to the Obligations of Seller...................................................... 64
8.03. Mutual Conditions............................................................................ 65
ARTICLE NINE -- CLOSING.................................................................................... 66
9.01. Closing...................................................................................... 66
9.02. Closing Transactions Required of Buyer....................................................... 66
9.03. Closing Transactions Required of Seller...................................................... 67
ARTICLE TEN -- NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS................................... 67
10.01. Non-Survival of Representations, Warranties and Covenants.................................... 67
ARTICLE ELEVEN -- TERMINATION.............................................................................. 68
11.01. Termination.................................................................................. 68
11.02. Effect of Termination........................................................................ 71
ARTICLE TWELVE -- MISCELLANEOUS............................................................................ 72
12.01. Notices...................................................................................... 72
12.02. Counterparts................................................................................. 73
12.03. Entire Agreement............................................................................. 73
12.04. Successors and Assigns....................................................................... 73
12.05. Captions..................................................................................... 73
12.06. Governing Law................................................................................ 73
12.07. Payment of Fees and Expenses................................................................. 73
12.08. Amendment.................................................................................... 74
12.09. Waiver....................................................................................... 74
12.10. Disclosure Schedules......................................................................... 74
12.11. No Third-Party Rights........................................................................ 74
12.12. Waiver of Jury Trial......................................................................... 75
12.13. Severability................................................................................. 75
-ii-
GLOSSARY OF DEFINED TERMS
The following terms, when used in this Agreement, have the meanings
ascribed to them in the corresponding Sections of this Agreement listed below:
"Acquisition Proposal" -- Section 5.04
"Agreement" -- Preamble
"Aggregate Cash Consideration" -- Section 2.01(c)
"BHC Act" -- Section 4.01(a)
"Buyer" -- Preamble
"Buyer Balance Sheet Date" -- Section 4.01(g)
"Buyer Disclosure Schedule" -- Preamble
"Buyer ERISA Affiliate" -- Section 4.01(s)
"Buyer ERISA Affiliate Plan" -- Section 4.01(s)
"Buyer Financial Statements" -- Section 4.01(g)
"Buyer Pension Plans" -- Section 4.01(s)
"Buyer Shares" -- Preamble
"Buyer Stock Option Plans" -- Section 4.01(c)
"Cash Election Shares" -- Section 2.02(b)
"Cash Percentage" -- Section 2.01(c)
"CERCLA" -- Section 3.01(y)
"CBank" -- Section 3.01(a)
"Closing Date" -- Section 9.01
"Closing" -- Section 9.01
"Code" -- Preamble
"Compensation and Benefit Plans" -- Section 3.01(t)
"Confidentiality Letter" -- Section 12.03
"Constituent Corporations" -- Preamble
"Consultants" -- Section 3.01(t)
"Costs" -- Section 6.06(a)
"CRA" -- Section 3.01(hh)
"Delaware Secretary of State" -- Section 1.02
"Determination Date" -- Section 2.01(b)
"DGCL" -- Section 1.01
"Directors" -- Section 3.01(t)
"DOL" -- Section 3.01(t)
"DPC Shares" -- Section 2.01(c)
"Effective Time" -- Section 1.02
"Election Deadline" -- Section 2.02(b)
"Election Form" -- Section 2.02(a)
"Election Form Record Date" -- Section 2.02(b)
"Employees" -- Section 3.01(t)
"Environmental Law" -- Section 3.01(y)
"ERISA" -- Section 3.01(t)
"Exchange Act" -- Section 3.01(g)
"Exchange Agent" -- Section 2.02(a)
"Exchange Ratio" -- Section 2.01(b)
-iii-
"FDIC" -- Section 3.01(a)
"Financial Services" -- Section 3.01(a)
"GAAP" -- Section 3.01(f)
"Governmental Authority" -- Section 3.01(q)
"HOLA" -- Section 3.01(a)
"Hazardous Substances" -- Section 3.01(y)
"IRS" -- Section 3.01(m)
"Indemnified Party" -- Section 6.06(a)
"Insurance Amount" -- Section 6.06(b)
"Loan Assets" -- Section 3.01(j)
"Loan Documentation" -- Section 3.01(j)
"Mailing Date" -- Section 2.02(b)
"material adverse effect" -- Section 3.01(a)
"material" -- Section 3.01(a)
"Merger" -- Preamble
"Merger Consideration" -- Section 2.01(a)
"No-Election Shares" -- Section 2.02(b)
"Officers" -- Section 3.01(t)
"OTS" -- Section 3.01(a)
"PBGC" -- Section 3.01(t)
"PCBs" -- Section 3.01(y)
"Per Share Cash Consideration" -- Section 2.01(b)
"Per Share Stock Consideration" -- Section 2.01(b)
"Proxy Statement" -- Section 5.03(b)
"Proxy Statement/Prospectus" -- Section 7.06(a)
"Reallocated Cash Shares" -- Section 2.02(d)
"Reallocated Stock Shares" -- Section 2.02(d)
"Registration Statement" -- Section 7.06(a)
"Regulatory Authorities" -- Section 3.01(p)
"Rule 145 Affiliates" -- Section 5.06(a)
"SEC" -- Section 3.01(c)
"Securities Act" -- Section 3.01(v)
"Seller" -- Preamble
"Seller Balance Sheet Date" -- Section 3.01(f)
"Seller Central" -- Section 3.01(a)
"Seller Certificates" -- Section 2.02(g)
"Seller Disclosure Schedule" -- Preamble
"Seller Dissenting Share" -- Section 2.03
"Seller ERISA Affiliate Plan" -- Section 3.01(t)
"Seller ERISA Affiliate Plan" -- Section 3.01(t)
"Seller ESOP" -- Section 7.01(a)
"Seller Financial Statements" -- Section 3.01(f)
"Seller Meeting" -- Section 5.03(b)
"Seller Pension Plan" -- Section 3.01(t)
"Seller Real Properties" -- Section 3.01(n)
"Seller Shares" -- Preamble
"Seller Stock Option Plans" -- Section 3.01(b)
-iv-
"Seller Stock Options" -- Section 3.01(b)
"Seller Subsidiaries" -- Section 3.01(a)
"Seller Subsidiary Real Estate Collateral" -- Section 3.01(y)
"Stock Election Shares" -- Section 2.02(b)
"Subsidiary" -- Section 3.01(c)
"Surviving Corporation" -- Section 1.01
"Takeover Laws" -- Section 3.01(z)
"Tax" -- Section 3.01(m)
"Tax Returns" -- Section 3.01(m)
"Total Cash Amount -- Section 2.01(b)
"Trust Account Shares" -- Section 2.01(c)
"Updated Buyer Disclosure Schedule" -- Section 6.04
"Updated Seller Disclosure Schedule" -- Section 5.02
"WVBCA" -- Section 1.01
"West Virginia Secretary of State" -- Section 1.02
-v-
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "AGREEMENT"), dated as of April
1, 2004, is made and entered into by and between WesBanco, Inc., a West Virginia
corporation ("BUYER"), WOFC, Inc., a West Virginia corporation and a wholly
owned subsidiary of Buyer ("ACQUISITION SUB") and Western Ohio Financial
Corporation, a Delaware corporation ("SELLER") (Acquisition Sub and Seller are
sometimes hereinafter collectively referred to as the "CONSTITUENT
CORPORATIONS").
W I T N E S S E T H:
WHEREAS, the Boards of Directors of Seller, Acquisition Sub and Buyer
have each determined that it is in the best interests of their respective
corporations and shareholders for Buyer to acquire Seller pursuant to a merger
of Seller with and into Acquisition Sub (the "MERGER"), upon the terms and
subject to the conditions set forth in and pursuant to the terms of this
Agreement; and
WHEREAS, the Boards of Directors of Seller, Acquisition Sub and Buyer
have each approved this Agreement and the consummation of the transactions
contemplated hereby; and
WHEREAS, as a result of the Merger, in accordance with the terms of
this Agreement, Seller will cease to have a separate corporate existence, and
shareholders of Seller will receive from Buyer in exchange for each share of
common stock, $0.01 par value per share, of Seller ("SELLER SHARES"), (a) $35.00
in cash, or (b) 1.18 shares of common stock, $2.0833 par value per share, of
Buyer, as may be adjusted as provided herein ("BUYER SHARES"), all as determined
in accordance with the terms of this Agreement; and
WHEREAS, for Federal income tax purposes, it is intended that the
Merger contemplated by this Agreement qualify as a "reorganization" under the
provisions of Section 368(a) of the Internal Revenue Code of 1986, as amended
(the "CODE"); and
WHEREAS, Seller has previously provided to Buyer a schedule disclosing
additional information about Seller (the "SELLER DISCLOSURE SCHEDULE"), and
Buyer has previously provided to Seller a schedule disclosing additional
information about Buyer (the "BUYER DISCLOSURE SCHEDULE");
NOW, THEREFORE, in consideration of the premises and the respective
representations, warranties, covenants, agreements and conditions hereinafter
set forth, Seller and Buyer, intending to be legally bound hereby, agree as
follows:
ARTICLE ONE
THE MERGER
1.01. MERGER; SURVIVING CORPORATION
Upon the terms and subject to the conditions of this Agreement, at the
Effective Time (as defined in Section 1.02), Seller shall merge with and into
Acquisition Sub in accordance with the West Virginia Business Corporation Act
(the "WVBCA") and the Delaware General Corporation Law (the "DGCL"). Acquisition
Sub shall be the continuing and surviving corporation in the Merger, shall
continue to exist under the laws of the State of West Virginia and shall be the
only one of the Constituent Corporations to continue its separate corporate
existence after the Effective Time. As used in this Agreement, the term
"SURVIVING CORPORATION" refers to Acquisition Sub at and after the Effective
Time. As a result of the Merger, the outstanding shares of capital stock and the
treasury shares of the Constituent Corporations shall be converted in the manner
provided in Article Two.
1.02. EFFECTIVE TIME
The Merger shall become effective upon the latest of the following: (a)
the filing of the appropriate certificate of merger with the Secretary of State
of the State of West Virginia (the "WEST VIRGINIA SECRETARY OF STATE"), (b) the
filing of the appropriate certificate of merger with the Secretary of State of
the State of Delaware (the "DELAWARE SECRETARY OF STATE") or (c) such time
thereafter as is agreed to in writing by Buyer and Seller and so provided in the
certificates of merger filed as set forth above. The date and time at which the
Merger shall become effective is referred to in this Agreement as the "EFFECTIVE
TIME."
1.03. EFFECTS OF THE MERGER
At the Effective Time:
(a) the certificate of incorporation of Acquisition Sub as in
effect immediately prior to the Effective Time shall be the
articles of the Surviving Corporation;
(b) the bylaws of Acquisition Sub as in effect immediately prior
to the Effective Time shall be the regulations of the
Surviving Corporation; and
(c) the Merger shall have the effects prescribed in the WVBCA and
DGCL.
ARTICLE TWO
CONVERSION OF SHARES; SURRENDER OF CERTIFICATES
2.01. CONVERSION OF SELLER SHARES
At the Effective Time, by virtue of the Merger and without any action
on the part of the holder thereof:
2
(a) Conversion of Seller Shares. Subject to the other provisions
of this Article Two, each Seller Share issued and outstanding
immediately prior to the Effective Time (other than (i) Seller
Shares held directly or indirectly by Buyer or Seller or any
of their respective Subsidiaries (as defined below) (except
for Trust Account Shares and DPC Shares, as such terms are
defined in Section 2.01(b) hereof), and (ii) Seller Dissenting
Shares (as defined in Section 2.03)) shall, by virtue of this
Agreement and without any action on the part of the holder
thereof, be converted into and exchangeable for the right to
receive, at the election of the holder thereof as provided in
and subject to the provisions of this Section 2.01, either (i)
the Per Share Stock Consideration (as defined below) or (ii)
the Per Share Cash Consideration (as defined below). The Per
Share Stock Consideration and the Per Share Cash Consideration
are referred to herein collectively as the "MERGER
CONSIDERATION."
(b) Definitions. For purposes of this Agreement, the following
terms shall have the following meanings:
i. "PER SHARE STOCK CONSIDERATION" shall mean a number of
Buyer Shares equal to the Exchange Ratio;
ii. "PER SHARE CASH CONSIDERATION" shall mean $35.00;
iii. "EXCHANGE RATIO" shall mean 1.18;
iv. "TOTAL CASH AMOUNT" shall mean 45% of the product
obtained by multiplying (x) the Per Share Cash
Consideration and (y) the total number of shares of
Seller Shares outstanding as of the close of business on
the Determination Date; and
v. "DETERMINATION DATE" shall mean the third calendar day
immediately prior to the Effective Time, or if such
calendar day is not a trading day on the Nasdaq, then
the trading day immediately preceding such calendar day.
(c) At the Effective Time, all Seller Shares that are owned
directly or indirectly by Buyer or Seller or any of their
respective Subsidiaries (other than Seller Shares (x) held
directly or indirectly in trust accounts, managed accounts and
the like or otherwise held in a fiduciary capacity for the
benefit of third parties (any such shares, and shares of Buyer
Common Stock which are similarly held, whether held directly
or indirectly by Buyer or Seller, as the case may be, being
referred to herein as "TRUST ACCOUNT SHARES") or (y) held by
Buyer or Seller or any of their respective Subsidiaries in
respect of a debt previously contracted (any such Seller
Shares, and Buyer Shares which are similarly held, whether
held directly or indirectly by Buyer or Seller, being referred
to herein as "DPC
3
SHARES")) shall be cancelled and shall cease to exist and no
Buyer Shares, cash or other consideration shall be delivered
in exchange therefor. All Buyer Shares that are owned by
Seller or any of its Subsidiaries (other than Trust Account
Shares and DPC Shares) shall become treasury stock of Buyer.
(d) The calculations required by this Section 2.01 shall be
prepared jointly by Buyer and Seller prior to the Closing
Date.
2.02 ELECTION AND EXCHANGE AND PAYMENT PROCEDURES
(a) Election Procedure. An election form and other appropriate and
customary transmittal materials (which shall specify that
delivery shall be effected, and risk of loss and title to the
certificates theretofore representing the Seller Shares shall
pass, only upon proper delivery of such certificates to the
Exchange Agent (as defined below)) in such form as Buyer and
Seller shall mutually agree (the "ELECTION FORM") shall be
mailed 35 days prior to the anticipated Effective Time or on
such other date as Seller and Buyer shall mutually agree (the
"MAILING DATE") to each holder of record of Seller Shares as
of the close of business on the fifth business day prior to
the Mailing Date (the "ELECTION FORM RECORD DATE").
(b) Election. Each Election Form shall permit the holder (or the
beneficial owner through appropriate and customary
documentation and instructions) to specify (i) the number of
such holder's Seller Shares with respect to which such holder
elects to receive the Per Share Stock Consideration ("STOCK
ELECTION SHARES"), (ii) the number of such holder's Seller
Shares with respect to which such holder elects to receive the
Per Share Cash Consideration ("CASH ELECTION SHARES"), or
(iii) that such holder makes no election with respect to such
holder's Seller Shares ("NO ELECTION SHARES"). All Seller
Shares with respect to which the Exchange Agent has not
received an effective, properly completed Election Form on or
before 5:00 p.m., on the 33rd day following the Mailing Date
(or such other time and date as Buyer and Seller may mutually
agree) (the "ELECTION DEADLINE") shall also be deemed to be No
Election Shares.
(c) Exchange Agent; Election Forms. Buyer will designate
Computershare Investor Services, LLC or such other entity as
reasonably shall be approved by Seller in writing to act as
agent (the "EXCHANGE AGENT") for purposes of conducting the
election procedure and the exchange and payment procedures as
described in this Section 2.02. Buyer shall make available one
or more Election Forms as may reasonably be requested from
time to time by all persons who become holders (or beneficial
owners) of Seller Shares between the Election Form Record Date
and the close of business on the business day prior to the
Election Deadline, and
4
Seller shall provide to the Exchange Agent all information
reasonably necessary for it to perform as specified herein.
(d) Proper Election. Any such election shall have been properly
made only if the Exchange Agent shall have actually received a
properly completed Election Form by the Election Deadline. An
Election Form shall be deemed properly completed only if
accompanied by one or more certificates (or customary
affidavits and indemnification regarding the loss or
destruction of such certificates or the guaranteed delivery of
such certificates) representing all Seller Shares covered by
such Election Form, together with duly executed transmittal
materials included in the Election Form. Any Election Form may
be revoked or changed by the person submitting such Election
Form at or prior to the Election Deadline. If an Election Form
is revoked prior to the Election Deadline, the Seller Shares
represented by such Election Form shall become No Election
Shares and Buyer shall cause the certificates representing
such Seller Shares to be promptly returned without charge to
the Person submitting the Election Form upon written request
to that effect from the holder who submitted the Election
Form. Subject to the terms of this Agreement and of the
Election Form, the Exchange Agent shall have reasonable
discretion to determine whether any election, revocation or
change has been properly or timely made and to disregard
immaterial defects in the Election Forms, and any good faith
decisions of the Exchange Agent such matters shall be binding
and conclusive. Neither Buyer nor the Exchange Agent shall be
under any obligation to notify any person of any defect in an
Election Form.
(e) Pro Rata Allocation. Within ten business days after the
Election Deadline, unless the Effective Time has not yet
occurred, in which case as soon thereafter as practicable,
Buyer shall cause the Exchange Agent to effect the allocation
among the holders of Seller Shares of rights to receive Buyer
Shares or cash in the Merger in accordance with the Election
Forms as follows:
(1) Cash Election Shares More Than Total Cash Amount. If
the aggregate cash amount that would be paid upon the
conversion in the Merger of the Cash Election Shares
(the "SECTION 2.02(e) CASH AMOUNT") is greater than
the Total Cash Amount, then:
(A) all Stock Election Shares and No Election
Shares shall be converted into the right to
receive the Per Share Stock Consideration,
(B) the Exchange Agent shall then select
from among the Cash Election Shares, by a
pro rata selection process, a sufficient
number of shares ("STOCK DESIGNATED SHARES")
such that the aggregate cash amount that
will be paid in the Merger (excluding,
however, without limitation, any cash paid
in respect of options to purchase Seller
Shares under Section 7.01 or any other
5
provision of this Agreement) equals as
closely as practicable the Total Cash
Amount, and all Stock Designated Shares
shall be converted into the right to receive
the Per Share Stock Consideration; and
(B) the Cash Election Shares that are not Stock
Designated Shares will be converted into the
right to receive the Per Share Cash
Consideration.
(2) Cash Election Shares Less Than Total Cash Amount. If
the Section 2.02(e) Cash Amount is less than the
Total Cash Amount, then:
(A) all Cash Election Shares shall be converted
into the right to receive the Per Share Cash
Consideration;
(B) the Exchange Agent shall then select first
from among the No Election Shares and then
(if necessary) from among the Stock Election
Shares, by a pro rata selection process
(excluding, to the extent possible, Seller
Shares acquired through the exercise of any
incentive stock option at any time within
twelve months prior to the Effective Time,
which shares are identified on Exhibit
2.01(e)(2)(B) hereto), a sufficient number
of shares ("CASH DESIGNATED SHARES") such
that the aggregate cash amount that will be
paid in the Merger (excluding, however,
without limitation, any cash paid in respect
of options to purchase Seller Shares under
Section 7.01 or any other provision of this
Agreement) equals as closely as practicable
the Total Cash Amount, and all Cash
Designated Shares shall be converted into
the right to receive the Per Share Cash
Consideration; and
(C) the Stock Election Shares and the No
Election Shares that are not Cash Designated
Shares shall be converted into the right to
receive the Per Share Stock Consideration.
(3) Cash Election Shares Equal to Total Cash Amount. If
the Section 2.02(e) Cash Amount is equal or nearly
equal (as determined by the Exchange Agent) to the
Total Cash Amount, then subparagraphs (1) and (2)
above shall not apply, all Cash Election Shares shall
be converted into the right to receive the Per Share
Cash Consideration and all Stock Election Shares and
No Election Shares shall be converted into the right
to receive the Per Share Stock Consideration.
6
The pro rata selection process to be used by the Exchange Agent shall
consist of such equitable pro ration processes as shall be mutually
determined by Buyer and Seller.
(f) Deposit with Exchange Agent; Exchange Fund. At or prior to the
Effective Time, Buyer shall provide to the Exchange Agent the
number of Buyer Shares issuable pursuant to Section 2.01(a),
the Aggregate Cash Consideration payable pursuant to Section
2.02(e), the cash in respect of fractional Buyer Shares
payable pursuant to Section 2.02(j), and the amount of all
other cash payable in the Merger, if any, all of which shall
be held by the Exchange Agent in trust for the holders of
Seller Shares (collectively, the "EXCHANGE FUND"). No later
than ten days after the Election Deadline, the Exchange agent
shall distribute such Buyer Shares and make payment of such
cash as provided herein. The Exchange Agent shall not be
entitled to vote or exercise any rights of ownership with
respect to the Buyer Shares held by it from time to time
hereunder, except that it shall receive and hold in trust for
the recipients of the Buyer Shares until distributed thereto
pursuant to the provisions of this Agreement all dividends or
other distributions paid or distributed with respect to such
Buyer Shares for the account of the persons entitled thereto.
The Exchange Fund shall not be used for any purpose other than
as set forth in this paragraph. The Exchange Agent shall
invest cash in the Exchange Fund, as directed by Buyer, on a
daily basis; provided, however, that all such investments
shall be in (1) obligations of, or guaranteed by, the United
States of America, (2) commercial paper obligations receiving
the highest rating from either Moody's Investors Services,
Inc. or Standard and Poor's Corporation, or (3) certificates
of deposit of commercial banks (not including any Subsidiary
or affiliate of Buyer) with capital exceeding $1.0 billion.
All interest and other income resulting from such investments
shall be paid to Buyer.
(g) Surrender of Seller Certificates. After the completion of the
foregoing allocation, each holder of an outstanding
certificate or certificates which prior thereto represented
shares of Seller Shares ("SELLER CERTIFICATE"), who surrenders
such Seller Certificate to the Exchange Agent shall, upon
acceptance thereof by the Exchange Agent, be entitled to a
certificate representing the full number of Buyer Shares
and/or the amount of cash into which the aggregate number of
Seller Shares previously represented by such Seller
Certificate surrendered shall have been converted pursuant to
this Agreement and, if such holder's Seller Shares have been
converted into Buyer Shares, any other distribution
theretofore paid with respect to Buyer Shares issuable in the
Merger which remains unpaid at the Effective Time, in each
case without interest. The Exchange Agent shall accept such
Seller Certificates upon compliance with such reasonable terms
and conditions as the Exchange Agent may impose to effect an
orderly exchange thereof in accordance with normal exchange
practices. Each Seller Certificate that is not surrendered to
the Exchange Agent in
7
accordance with the procedures provided for herein shall,
except as otherwise herein provided, until duly surrendered to
the Exchange Agent be deemed to evidence ownership of the
number of Buyer Shares or the right to receive the amount of
cash into which such Seller Shares shall have been converted.
After the Effective Time, there shall be no further transfer
on the records of Seller of Seller Certificates representing
Seller Shares and, if such Seller Certificates are presented
to Seller for transfer, they shall be canceled against
delivery of certificates for Buyer Shares and/or cash as
hereinabove provided.
(h) Lost Certificates. If there shall be delivered to the Exchange
Agent by any person who is unable to produce any Seller
Certificate for Seller Shares for surrender to the Exchange
Agent in accordance with this Section 2.02:
(i) evidence to the reasonable satisfaction of the
Surviving Corporation that such Seller Certificate
has been lost, wrongfully taken, or destroyed;
(ii) such security or indemnity as reasonably may be
requested by the Surviving Corporation to save it
harmless (which may include the requirement to obtain
a third party bond or surety); and
(iii) evidence to the reasonable satisfaction of the
Surviving Corporation that such person was the owner
of the Seller Shares theretofore represented by each
such Seller Certificate claimed by him to be lost,
wrongfully taken or destroyed and that he is the
person who would be entitled to present such Seller
Certificate for exchange pursuant to this Agreement;
then the Exchange Agent, in the absence of actual notice to it that
any Seller Shares theretofore represented by any such Seller
Certificate have been acquired by a bona fide purchaser, shall deliver
to such person the cash and/or Buyer Shares (and cash in lieu of
fractional Buyer Share interests, if any) that such person would have
been entitled to receive upon surrender of each such lost, wrongfully
taken or destroyed Seller Certificate.
(i) No Further Ownership Rights in Seller Shares. All cash and
Buyer Shares issued upon conversion of Seller Shares in
accordance with the terms hereof (including any cash paid
pursuant to Section 2.02(g) or 2.02(j)) shall be deemed to
have been issued in full satisfaction of all rights pertaining
to such Seller Shares, subject, however, to the Surviving
Corporation's obligation to pay any dividends or make any
other distributions with a record date prior to the Effective
Time which may have been declared or made by Seller on such
Seller Shares in accordance with the terms of this Agreement
on or prior to the Effective Time and which remain unpaid at
the Effective Time.
8
(j) No Fractional Buyer Shares.
(i) No certificates or scrip representing fractional
Buyer Shares shall be issued upon the surrender for
exchange of Seller Certificates evidencing Seller
Shares, and such fractional Buyer Share interests
will not entitle the owner thereof to vote or to any
rights of a shareholder of the Surviving Corporation.
(ii) Each holder of Seller Shares who would otherwise be
entitled to receive a fractional Buyer Share shall
receive from the Exchange Agent an amount of cash
equal to the product obtained by multiplying (a) the
fractional Buyer Share interest to which such holder
(after taking into account all Seller Shares held at
the Effective Time by such holder) would otherwise be
entitled by (b) $35.00.
(k) Termination of Exchange Fund. Any portion of the Exchange Fund
delivered to the Exchange Agent by Buyer pursuant to Section
2.02(f) which remains undistributed to the shareholders of
Seller for twelve (12) months after the Effective Time shall
be delivered to the Surviving Corporation, upon demand, and
any shareholders of Seller who have not theretofore complied
with this Article Two shall thereafter look only to the
Surviving Corporation for payment of the Per Share Stock
Consideration, the Per Share Cash Consideration, any cash in
lieu of fractional Buyer Share interest and any dividends or
distributions with respect to Buyer Shares, in each case
without interest.
(l) No Liability. None of Buyer, Seller, the Exchange Agent or the
Surviving Corporation shall be liable to any former holder of
Seller Shares for any payment of the Per Share Stock
Consideration, the Per Share Cash Consideration, any cash in
lieu of fractional Buyer Share interest or any dividends or
distributions with respect to Buyer Shares delivered to a
public official if required by any applicable abandoned
property, escheat or similar law.
(m) Withholding Rights. Buyer or the Exchange Agent shall be
entitled to deduct and withhold from the consideration
otherwise payable pursuant to this Agreement to any holder of
Seller Certificates such amounts as Buyer or the Exchange
Agent is required to deduct and withhold with respect to the
making of such payment under the Code, or any other provision
of domestic or foreign (whether national, federal, state,
provincial, local or otherwise) tax law. To the extent that
amounts are so withheld and paid over to the appropriate
taxing authority by Buyer or the Exchange Agent, such withheld
amounts shall be treated for all purposes of this Agreement as
having been paid to the holder of the Seller Certificates in
respect of which such deduction and withholding was made by
Buyer, the Surviving Corporation or the Exchange Agent.
9
(n) Waiver. The Surviving Corporation may from time to time, in
the case of one or more persons, waive one or more of the
rights provided to it in this Article Two to withhold certain
payments, deliveries and distributions; and no such waiver
shall constitute a waiver of its rights thereafter to withhold
any such payment, delivery or distribution in the case of any
person.
(o) Section 16(a) Exemption. Prior to the Effective Time, Buyer
and Seller shall take all such steps as may be required to
cause any acquisitions of Buyer equity securities (including
derivative securities with respect to any Buyer equity
securities) and dispositions of Seller equity securities
(including derivative securities with respect to any Seller
equity securities) resulting from the transactions
contemplated by this Agreement by each individual who is
anticipated to be subject to the reporting requirements of
Section 16(a) of the Exchange Act with respect to Buyer or who
is subject to the reporting requirements of Section 16(a) of
the Exchange Act with respect to Seller, to be exempt under
Rule 16b-3 promulgated under the Exchange Act.
2.03. SELLER SHAREHOLDERS' APPRAISAL RIGHTS
Anything contained in this Agreement or elsewhere to the contrary
notwithstanding, if any holder of an outstanding Seller Share who is entitled to
demand and properly demands appraisal of such Seller Share in accordance with
Section 262 of the DGCL (a "SELLER DISSENTING SHARE"), then such Seller
Dissenting Share shall not be converted into the right to receive the Per Share
Stock Consideration or the Per Share Cash Consideration, and instead:
(a) Each such Seller Dissenting Share shall nevertheless be deemed
to be extinguished at the Effective Time as provided elsewhere
in this Agreement;
(b) Each holder perfecting such appraisal rights shall thereafter
have only such rights (and shall have such obligations) as are
provided in Section 262 of the DGCL, and the Surviving
Corporation shall not be required to deliver any cash payments
to such person in substitution for each such Seller Dissenting
Share in accordance with this Agreement; provided, however,
that if any such person shall have failed to perfect or shall
withdraw or lose such holder's rights under subsection (k) of
Section 262 of the DGCL, each such holder's Seller Dissenting
Shares shall thereupon be deemed to have been converted as of
the Effective Time into the right to receive the Per Share
Stock Consideration or the Per Share Cash Consideration, as
shall have been designated by each such holder prior to the
such perfection, or if no such designation shall have been
made, the Per Share Cash Consideration, without any interest
thereon, pursuant to Section 2.01.
10
No holder of Seller Dissenting Shares shall be entitled to submit a letter
of transmittal, and any letter of transmittal submitted by a holder of Seller
Dissenting Shares shall be invalid, unless and until the demand for appraisal
rights made in respect of such Seller Dissenting Shares shall have been or is
deemed to have been withdrawn.
2.04. ANTI-DILUTION PROVISIONS
The Exchange Ratio and the Per Share Stock Consideration shall be
adjusted fully to reflect any occurrence, subsequent to the date of this
Agreement but prior to the Effective Time, pursuant to which the outstanding
Buyer Shares shall have been increased, decreased, changed into or exchanged for
a different number or kind of shares or securities through reorganization,
recapitalization, reclassification, stock dividend, stock split, reverse stock
split or other like changes in Buyer's capitalization; provided, however, that
nothing contained herein shall require any adjustment to the Exchange Ratio or
the Per Share Stock Consideration as a result of the issuance of additional
Buyer Shares for consideration which, if such issuance was for more than 19.9%
of the then outstanding Buyer Shares, would not require the approval of the
Buyer shareholders. Nothing contained herein shall be deemed to permit any
action which may be proscribed by this Agreement.
ARTICLE THREE
REPRESENTATIONS AND WARRANTIES OF SELLER
3.01. REPRESENTATIONS AND WARRANTIES OF SELLER
Except as set forth on the Seller Disclosure Schedule (with specific
reference to the Section or Subsection of this Agreement to which the
information stated in such disclosure relates, provided that any fact, item,
contract, agreement, document or instrument listed or described, and any
information disclosed, in any Section or Subsection thereof shall be deemed
listed, described and disclosed in all other applicable Sections and Subsections
even though not expressly set forth in such other Section(s) or Subsection(s)),
Seller represents and warrants to Buyer and Acquisition Sub as follows:
(a) Corporate Status.
(i) Seller is a Delaware corporation and a unitary
savings and loan holding company registered under the
Home Owners Loan Act, as amended ("HOLA"). Seller is
duly organized, validly existing and in good standing
under the laws of the State of Delaware and has the
full corporate power and authority to own its
property, to carry on its business as presently
conducted, and to enter into and, subject to the
required adoption of this Agreement by the Seller
shareholders and the obtaining of appropriate
approvals of Governmental Authorities and Regulatory
Authorities, perform its obligations under this
Agreement and consummate the transactions
contemplated by this Agreement. Seller is qualified
to do business in the State of Ohio, but is not
qualified to do business in any other jurisdiction or
required to be so qualified to do business in any
11
other jurisdiction except where the failure to be so
qualified would not have a material adverse effect on
Seller. Seller has made available to Buyer true and
complete copies of the certificate of incorporation
and bylaws of Seller, in each case as amended to the
date of this Agreement.
(ii) CornerstoneBanc Financial Services, Incorporated, a
Delaware corporation ("FINANCIAL SERVICES"), West
Central Financial Services, Inc., an Ohio corporation
("CENTRAL FINANCIAL"), and Cornerstone Bank, a
federal savings bank ("CBANK" and, together with
Financial Services and Central Financial, the "SELLER
SUBSIDIARIES") are the only Subsidiaries (as that
term is defined in Section 3.01(c)) of Seller. CBank
is a federal savings bank, is a member bank of the
Federal Home Loan Bank of Cincinnati and is regulated
by the Office of Thrift Supervision (the "OTS") and
the Federal Deposit Insurance Corporation (the
"FDIC"). Each of the Seller Subsidiaries is duly
organized, validly existing and in good standing
under the laws of their respective jurisdictions of
incorporation and each has full power and authority,
corporate or otherwise, to own their property and to
carry on its business as presently conducted. Each
Seller Subsidiary is qualified to do business in the
State of Ohio, but is not qualified to do business in
any other jurisdiction or required to be qualified to
do business in any other jurisdiction except where
the failure to be so qualified would have a material
adverse effect on Seller. Seller has made available
to Buyer true and complete copies of the governing
instruments of each Seller Subsidiary, in each case
as amended to the date of this Agreement.
(iii) As used in this Agreement, (A) any reference to any
event, change or effect being "material" with respect
to any entity means an event, change or effect which
is material in relation to the financial condition,
properties, assets, liabilities, businesses or
results of operations of such entity and its
subsidiaries taken as a whole and (B) the term
"material adverse effect" means, with respect to an
entity, a material adverse effect on the financial
condition, properties, assets, liabilities,
businesses or results of operations of such entity
and its subsidiaries taken as a whole or on the
ability of such entity to perform its obligations
under this Agreement or consummate the Merger and the
other material transactions contemplated by this
Agreement other than, in any case, any state of
facts, change, development, event, effect, condition
or occurrence (i) resulting from changes in the
United States economy or the United States securities
markets in general; (ii) resulting from changes in
the industries in which Seller or Buyer, as the case
may be, operates and not specifically relating to the
Seller or Buyer, as the case may be; (iii) resulting
from any
12
litigation or loss of current or prospective
customers, employee or revenues that the party
against which the material adverse effect or material
adverse change is sought to be enforced successfully
bears the burden of proving arose from the entering
into of this Agreement, or (iv) resulting from the
Merger generally; provided, however, that in no event
shall a decrease in the trading price of Seller
Shares or Buyer Shares, or litigation relating
thereto, be considered a material adverse effect or
material adverse change.
(b) Capitalization of Seller.
(i) The authorized capital of Seller consists solely of
7,250,000 Seller Shares, of which 2,645,000 Seller
Shares are issued and outstanding, and 250,000 shares
of preferred stock, par value $.01 per share, none of
which have been issued or are outstanding. As of
March 25, 2004, 805,092 Seller Shares are held in its
treasury by Seller. All outstanding Seller Shares
have been duly authorized and are validly issued,
fully paid and non-assessable, and were not issued in
violation of the preemptive rights of any person. All
Seller Shares issued have been issued in compliance
in all material respects with all applicable federal
and state securities laws. As of March 25, 2004,
138,307 Seller Shares were reserved for issuance upon
the exercise of outstanding stock options (the
"SELLER STOCK OPTIONS") granted under the Seller
Financing Corporation 1995 Stock Option and Incentive
Plan and the Seller Financing Corporation 1998
Omnibus Incentive Plan (collectively, the "SELLER
STOCK OPTION PLANS"). Seller has furnished to Buyer a
true, complete and correct copy of the Seller Stock
Option Plans, and a list of all participants in the
Seller Stock Option Plans as of February 29, 2004 is
set forth in Section 3.01(b)(i) of the Seller
Disclosure Schedule, which list identifies the number
of Seller Shares subject to Seller Stock Options held
by each such participant, the exercise price or
prices of such Seller Stock Options and the dates
each such Seller Stock Option was granted, becomes
exercisable and expires.
(ii) As of February 29, 2004, except for this Agreement
and the Seller Stock Options, there are no options,
warrants, calls, rights, commitments or agreements of
any character to which Seller is a party or by which
it is bound obligating Seller to issue, deliver or
sell, or cause to be issued, delivered or sold, any
additional Seller Shares or obligating Seller to
grant, extend or enter into any such option, warrant,
call, right, commitment or agreement. As of the date
of this Agreement, there are no outstanding
contractual obligations of Seller to repurchase,
redeem or otherwise acquire any Seller Shares except
for such obligations arising under the Seller Stock
Option Plans.
13
(iii) Except as disclosed in Section 3.01(b) of the Seller
Disclosure Schedule, since February 29, 2004, Seller
has not (A) issued or permitted to be issued any
Seller Shares, or securities exercisable for or
convertible into Seller Shares, other than upon
exercise of the Seller Stock Options granted prior to
the date hereof under the Seller Stock Option Plans;
(B) repurchased, redeemed or otherwise acquired,
directly or indirectly through any Seller Subsidiary
or otherwise, any Seller Shares; or (C) declared, set
aside, made or paid to the shareholders of Seller
dividends or other distributions on the outstanding
Seller Shares.
(iv) No bonds, debentures, notes or other indebtedness of
Seller having the right to vote on any matters on
which Seller's shareholders may vote are issued or
outstanding.
(c) Subsidiaries. The Seller Subsidiaries are the only
Subsidiaries of Seller. Seller owns of record and beneficially
all of the issued and outstanding equity securities of CBank,
and CBank owns of record and beneficially all of the issued
and outstanding equity securities of Financial Services and
Central Financial. There are no options, warrants, calls,
rights, commitments or agreements of any character to which
Seller or any Seller Subsidiary is a party or by which any of
them is bound obligating any Seller Subsidiary to issue,
deliver or sell, or cause to be issued, delivered or sold,
additional equity securities of any Seller Subsidiary (other
than to Seller, with respect to CBank, or CBank, with respect
to Financial Services and Central Financial) or obligating
Seller or any Seller Subsidiary to grant, extend or enter into
any such option, warrant, call, right, commitment or
agreement. There are no contracts, commitments, understandings
or arrangements relating to Seller's rights to vote or to
dispose of the equity securities of CBank, and all of the
equity securities of CBank held by Seller are fully paid and
non-assessable and are owned by Seller free and clear of any
charge, mortgage, pledge, security interest, hypothecation,
restriction, claim, option, lien, encumbrance or interest of
any persons whatsoever. There are no contracts, commitments,
understandings or arrangements relating to CBank's rights to
vote or to dispose of the equity securities of Financial
Services or Central Financial, and all of the equity
securities of Financial Services and Central Financial held by
CBank are fully paid and non-assessable and are owned by CBank
free and clear of any charge, mortgage, pledge, security
interest, hypothecation, restriction, claim, option, lien,
encumbrance or interest of any persons whatsoever. Except as
disclosed in Section 3.01(c) of the Seller Disclosure
Schedule, Seller does not own beneficially, directly or
indirectly, any equity securities or similar interests of any
person, or any interest in a partnership or joint venture of
any kind, other than the Seller Subsidiaries.
14
For purposes of this Agreement, "Subsidiary" has the meaning
ascribed to it in Rule 1-02 of Regulation S-X promulgated by
the Securities and Exchange Commission (the "SEC").
(d) Corporate Proceedings. Assuming the accuracy of the
representations and warranties of Buyer and Acquisition Sub
set forth in Section 4.01(y), all corporate proceedings of
Seller necessary to authorize the execution, delivery and
performance of this Agreement and the consummation of the
transactions contemplated hereby, in each case by Seller, have
been duly and validly taken, except for the adoption of this
Agreement by the holders of at least a majority of the
outstanding Seller Shares entitled to vote thereon (which is
the only required shareholder vote thereon) and subject, in
the case of the consummation of the Merger, to the filing and
recordation of a certificate of merger as required by the DGCL
and compliance with the applicable provisions of the WVBCA.
The Board of Directors of Seller has, by a vote of a majority
of the "Disinterested Directors" of such Board (as such term
is defined in Article Eighth of Seller's certificate of
incorporation), duly adopted resolutions (i) approving and
declaring advisable this Agreement, the Merger and the other
transactions contemplated hereby and thereby, (ii) declaring
that it is in the best interests of Seller's stockholders that
Seller enter into this Agreement and consummate the Merger on
the terms and subject to the conditions set forth in this
Agreement, (iii) declaring that this Agreement is fair to
Seller's stockholders, (iv) directing that this Agreement be
submitted to a vote at a meeting of Seller's stockholders to
be held as promptly as practicable and (v) recommending that
Seller's stockholders adopt this Agreement, which resolutions
have not been subsequently rescinded, modified or withdrawn in
any way except as permitted by Section 5.03.
(e) Authorized and Effective Agreement. This Agreement has been
duly executed and delivered by Seller, and assuming the due
authorization, execution and delivery by Buyer and Acquisition
Sub, constitutes a valid and binding obligation of Seller,
enforceable against Seller in accordance with its terms,
except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance
and other similar laws relating to or affecting the
enforcement of creditors' rights generally, by general
equitable principles (regardless of whether enforceability is
considered in a proceeding in equity or at law) and by an
implied covenant of good faith and fair dealing. Seller has
the right, power, authority and capacity to execute and
deliver this Agreement and, subject to the required adoption
of this Agreement by Seller's shareholders, the obtaining of
appropriate approvals by Regulatory Authorities and
Governmental Authorities and the expiration of applicable
regulatory waiting periods, to perform its obligations under
this Agreement.
15
(f) Financial Statements of Seller. The financial statements
(including the related notes) included in the Seller SEC
Documents (as defined below) comply as to form in all material
respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect
thereto, have been prepared in accordance with generally
accepted accounting principles ("GAAP") (except, in the case
of unaudited statements, as permitted by Form 10-Q of the SEC)
applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto) and fairly
present in all material respects the consolidated financial
position of Seller and its consolidated subsidiaries as of the
dates thereof and their respective consolidated results of
operations and cash flows for the periods then ended (subject,
in the case of unaudited statements, to normal year-end audit
adjustments).
(g) SEC Filings. Seller has filed all reports and proxy materials
required to be filed by it with the SEC pursuant to the
Securities Exchange Act of 1934, as amended (the "EXCHANGE
ACT"), since January 1, 2001 (together with all information
incorporated therein by reference, the "SELLER SEC
DOCUMENTS"), except for any reports or proxy materials the
failure to file which would not have a material adverse effect
upon Seller. All such filings, at the time of filing, complied
in all material respects as to form and included all exhibits
required to be filed under the applicable rules of the SEC
applicable to such Seller SEC Documents. None of such
documents, as subsequently supplemented or amended prior to
the date hereof, contains any untrue statement of a material
fact or omits to state a material fact required to be stated
therein or necessary in order to make the statements therein,
in light of the circumstances under which they were made, not
misleading.
(h) Absence of Undisclosed Liabilities. Except as set forth in
Seller SEC Documents filed and publicly available prior to the
date of this Agreement (the "SELLER FILED SEC DOCUMENTS")
(including the financial statements included therein, as
corrected pursuant to the Corrective Release filed as Exhibit
99.2 to the Form 8-K filed by Seller with the SEC on March 5,
2004) or in Section 3.01(h) of the Seller Disclosure Schedule
and except as arising hereunder, Seller and its subsidiaries
have no liabilities or obligations (whether accrued, absolute,
contingent or otherwise) at December 31, 2003 (the "SELLER
BALANCE SHEET DATE"), other than liabilities and obligations
that individually or in the aggregate could not reasonably be
expected to have a material adverse effect on Seller. Except
as set forth in the Seller Filed SEC Documents or otherwise
disclosed in Section 3.01(h) of the Seller Disclosure
Schedule, all debts, liabilities, guarantees and obligations
of Seller and the Seller Subsidiaries incurred since the
Seller Balance Sheet Date have been incurred in the ordinary
course of business and are usual and normal in amount both
individually and in the aggregate. Except as disclosed in
Section 3.01(h) of the Seller Disclosure Schedule, neither
Seller nor any Seller Subsidiary is in default
16
or breach of any material agreement to which Seller or the
Seller Subsidiary is a party other than any such breaches or
defaults that individually or in the aggregate would not
reasonably be expected to have a material adverse effect on
Seller. To the knowledge of Seller, no other party to any
material agreement to which Seller or any Seller Subsidiary is
a party is in default or breach of such agreement, which
breach or default would reasonably be expected to have a
material adverse effect on Seller.
(i) Absence of Changes. Except (i) as set forth in the Seller
Filed SEC Documents, (ii) as set forth in Section 3.01(i) of
the Seller Disclosure Schedule, or (iii) in the ordinary
course of business consistent with Seller's past practice,
since the Seller Balance Sheet Date: (a) there has not been
any material adverse change in the business, operations,
assets or financial condition of Seller and the Seller
Subsidiaries taken as a whole, and, to the knowledge of
Seller, no fact or condition exists which Seller believes will
cause such a material adverse change in the future; and (b)
Seller has not taken or permitted any of the actions described
in Section 5.01(b) of this Agreement.
(j) Loan Documentation. The documentation ("LOAN DOCUMENTATION")
governing or relating to the material loan and credit-related
assets ("LOAN ASSETS") included in the loan portfolio of each
Seller Subsidiary is legally sufficient for the purposes
intended thereby and creates enforceable rights of such Seller
Subsidiary in accordance in all material respects with the
terms of such Loan Documentation, subject to applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance and other similar laws relating to or affecting the
enforcement of creditors' rights generally, by general
equitable principles (regardless of whether enforceability is
considered in a proceeding in equity or at law) and by an
implied covenant of good faith and fair dealing, except for
such insufficiencies as would not reasonably be expected to
have a material adverse effect on Seller. Except as set forth
in the Seller Filed SEC Documents or in Section 3.01(j) of the
Seller Disclosure Schedule, no debtor under any of the Loan
Documentation has asserted any claim or defense with respect
to the subject matter thereof, which claim or defense, if
determined adversely to Seller, would reasonably be expected
to have a material adverse effect on Seller. Except as set
forth in the Seller SEC Documents or in Section 3.01(j) of the
Seller Disclosure Schedule, none of the Seller Subsidiaries is
a party to a loan, including any loan guaranty, with any
director, executive officer or five percent (5%) shareholder
of Seller or any Seller Subsidiary, or any person, corporation
or enterprise controlling, controlled by or under common
control with either Seller or any Seller Subsidiary. All loans
and extensions of credit that have been made by a Seller
Subsidiary comply in all material respects with applicable
regulatory limitations and procedures except for such failures
to comply as would not reasonably be expected to have a
material adverse effect on Seller.
17
(k) Allowance for Loan Losses. Except as set forth in the Seller
SEC Documents or in Section 3.01(k) of the Seller Disclosure
Schedule, there is no loan which was made by any Seller
Subsidiary and which is reflected as an asset of such Seller
Subsidiary on the Seller Financial Statements that (A)(i) is
90 days or more delinquent or (ii) has been classified by
examiners (regulatory or internal) as "Substandard,"
"Doubtful" or "Loss," and (B) the default by the borrower
under which would reasonably be expected to have a material
adverse effect on Seller. The allowance for loan losses
reflected on the Seller Financial Statements has been
determined in accordance with GAAP in all material respects
and in accordance in all material respects with all rules and
regulations applicable to Seller and the Seller Subsidiaries
and is adequate in all material respects, except for such
failures and inadequacies which would not reasonably be
expected to have a material adverse effect on Seller.
(l) Reports and Records. Seller and the Seller Subsidiaries have
filed all reports and maintained all records required to be
filed or maintained by them under the rules and regulations of
the OTS and the FDIC, except for such reports and records the
failure to file or maintain would not reasonably be expected
to have a material adverse effect on Seller. All such
documents and reports complied in all material respects with
applicable requirements of law and rules and regulations in
effect at the time such documents and reports were filed and
contained in all material respects the information required to
be stated therein, except for such documents and records the
failure to file or contain such information would not
reasonably be expected to have a material adverse effect on
Seller. None of such documents or reports, when filed,
contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading,
other than such reports and documents which the failure to
file in such fashion would not reasonably be expected to have
a material adverse effect on Seller.
(m) Taxes. Except as set forth in Section 3.01(m) of the Seller
Disclosure Schedule, Seller and the Seller Subsidiaries have
timely filed all material returns, statements, reports and
forms (including elections, declarations, disclosures,
schedules, estimates and information returns) (collectively,
the "TAX RETURNS") with respect to all material federal,
state, local and foreign income, gross income, gross receipts,
gains, premium, sales, use, ad valorem, transfer, franchise,
profits, withholding, payroll, employment, excise, severance,
stamp, occupancy, license, lease, environmental, customs,
duties, property, windfall profits and all other material
taxes (including any interest, penalties or additions to tax
with respect thereto, individually, a "TAX" and, collectively,
"TAXES") required to be filed with the appropriate tax
authority through the date of this Agreement. Such Tax Returns
are and will be true, correct and complete in all material
18
respects. Seller and the Seller Subsidiaries have paid and
discharged all Taxes shown as due on such Tax Returns, other
than such Taxes that are adequately reserved as shown on the
Seller Financial Statements or have arisen in the ordinary
course of business since the Seller Balance Sheet Date. Except
as set forth in Section 3.01(m) of the Seller Disclosure
Letter, neither the Internal Revenue Service (the "IRS") nor
any other taxing agency or authority, domestic or foreign, has
asserted, is now asserting or, to the knowledge of Seller, is
threatening to assert against Seller or any Seller Subsidiary
any deficiency or claim for additional Taxes, which deficiency
or claim, if upheld, would reasonably be expected to have a
material adverse effect on Seller. There are no unexpired
waivers by Seller or any Seller Subsidiary of any statute of
limitations with respect to Taxes. The accruals and reserves
for Taxes reflected in the Seller Financial Statements are
adequate in all material respects for the periods covered.
Seller and the Seller Subsidiaries have withheld or collected
and paid over to the appropriate Governmental Authorities or
are properly holding for such payment all Taxes required by
law to be withheld or collected, except for such failures to
withhold or collect as would not reasonably be expected to
have a material adverse effect on Seller. There are no liens
for Taxes upon the assets of Seller or any Seller Subsidiary,
other than liens for current Taxes not yet due and payable and
liens that individually or in the aggregate would not
reasonably be expected to have a material adverse effect on
Seller. Neither Seller nor any Seller Subsidiary has agreed to
make, or is required to make, any adjustment under Section
481(a) of the Code. Except as set forth in the Seller SEC
Documents or in Section 3.01(l) of the Seller Disclosure
Schedule, neither Seller nor any Seller Subsidiary is a party
to any agreement, contract, arrangement or plan that has
resulted, or could result, individually or in the aggregate,
in the payment of "excess parachute payments" within the
meaning of Section 280G of the Code. Neither Seller nor any
Seller Subsidiary has ever been a member of an affiliated
group of corporations, within the meaning of Section 1504 of
the Code, other than an affiliated group of which Seller is or
was the common Buyer corporation. No Tax is required to be
withheld pursuant to Section 1445 of the Code as a result of
the transactions contemplated by this Agreement.
(n) Property and Title. Section 3.01(n) of the Seller Disclosure
Schedule lists and describes all real property, and any
leasehold interest in real property, owned or held by Seller
or any Seller Subsidiary and used in the business of Seller or
any Seller Subsidiary (collectively, the "SELLER REAL
PROPERTIES"). The Seller Real Properties constitute all of the
material real property and interests in real property used in
the businesses of Seller and the Seller Subsidiaries. Copies
of all leases of Seller Real Properties to which Seller or any
Seller Subsidiary is a party have been provided to Buyer. Such
leasehold interests have not been assigned or subleased. All
Seller Real Properties which are owned by Seller or any Seller
Subsidiary
19
are free and clear of all mortgages, liens, security
interests, defects, encumbrances, easements, restrictions,
reservations, conditions, covenants, agreements,
encroachments, rights of way and zoning laws, except (i) those
set forth in the Seller SEC Documents or Section 3.01(n) of
the Seller Disclosure Schedule; (ii) easements, restrictions,
reservations, conditions, covenants, rights of way, zoning
laws and other defects and irregularities in title and
encumbrances which do not materially impair the use thereof
for the purposes for which they are held; (iii) the lien of
current taxes not yet due and payable and (iv) other defects
in title, easements, restrictive covenants and similar
encumbrances that individually or in the aggregate would not
reasonably be expected to have a material adverse effect on
Seller. Seller and the Seller Subsidiaries own, and are in
rightful possession of, and have good title to, all of the
other assets indicated in the Seller SEC Documents as being
owned by Seller or a Seller Subsidiary, free and clear of any
charge, mortgage, pledge, security interest, hypothecation,
restriction, claim, option, lien, encumbrance or interest of
any persons whatsoever except (i) those described in the
Seller SEC Documents or Section 3.01(n) of the Seller
Disclosure Schedule, (ii) for those assets disposed of in the
ordinary course of business consistent with past practices,
(iii) for such as are no longer used or useful in the conduct
of its businesses and (iv) for defects in title, easements,
restrictive covenants and similar encumbrances that
individually or in the aggregate would not reasonably be
expected to have a material adverse effect on Seller. The
assets of Seller and the Seller Subsidiaries, taken as a
whole, are adequate to continue to conduct the businesses of
Seller and the Seller Subsidiaries as such businesses are
presently being conducted.
(o) Legal Proceedings. Except as set forth in the Seller Filed SEC
Documents or Section 3.01(o) of the Seller Disclosure
Schedule, there are no actions, suits, proceedings, claims or
investigations pending or, to the knowledge of Seller and the
Seller Subsidiaries, threatened in any court, before any
governmental agency or instrumentality or in any arbitration
proceeding (i) against Seller or any Seller Subsidiary which,
if adversely determined against Seller or any Seller
Subsidiary, would have a material adverse effect on Seller; or
(ii) against or by Seller or any Seller Subsidiary which, if
adversely determined against Seller or any Seller Subsidiary,
would prevent the consummation of this Agreement or any of the
transactions contemplated hereby or declare the same to be
unlawful or cause the rescission thereof.
(p) Regulatory Matters. None of Seller, the Seller Subsidiaries
and the respective properties of Seller and the Seller
Subsidiaries is a party to or subject to any order, judgment,
decree, agreement, memorandum of understanding or similar
arrangement with, or a commitment letter or similar submission
to, or extraordinary supervisory letter from, any court or
federal or state governmental agency or authority, including
any such
20
agency or authority charged with the supervision or regulation
of financial institutions (or their holding companies) or
issuers of securities or engaged in the insurance of deposits
(including, without limitation, the OTS, the FDIC and the SEC)
or the supervision or regulation of Seller or any Seller
Subsidiary (collectively, the "REGULATORY AUTHORITIES") that
individually or in the aggregate would reasonably be expected
to have a material adverse effect on Seller. Neither Seller
nor any Seller Subsidiary has been advised by any Regulatory
Authority that such Regulatory Authority is contemplating
issuing or requesting (or is considering the appropriateness
of issuing or requesting) any such order, judgment, decree,
agreement, memorandum of understanding, commitment letter,
supervisory letter or similar submission that individually or
in the aggregate would reasonably be expected to have a
material adverse effect on Seller.
(q) No Conflict. Subject to the required adoption of this
Agreement by the shareholders of Seller, receipt of the
required approvals of Regulatory Authorities and Governmental
Authorities, expiration of applicable regulatory waiting
periods, and required filings under federal and state
securities laws, the execution, delivery and performance of
this Agreement, and the consummation of the transactions
contemplated hereby, by Seller do not and will not (i)
conflict with, or result in a violation of, or result in the
breach of or a default (or which with notice or lapse of time
would result in a default) under, any provision of: (A) any
federal, state or local law, regulation, ordinance, order,
rule or administrative ruling of any administrative agency or
commission or other federal, state or local governmental
authority or instrumentality (each, a "GOVERNMENTAL
AUTHORITY") applicable to Seller or any Seller Subsidiary or
any of their respective properties; (B) the certificate of
incorporation or bylaws of Seller, or the governing
instruments of any Seller Subsidiary; (C) any material
agreement, indenture or instrument to which Seller or any
Seller Subsidiary is a party or by which it or its properties
or assets may be bound; or (D) any order, judgment, writ,
injunction or decree of any court, arbitration panel or any
Governmental Authority applicable to Seller or any Seller
Subsidiary, other than, in the case of clauses (A), (C) and
(D), any such conflicts, violations, breaches or defaults that
individually or in the aggregate would not reasonably be
expected to have a material adverse effect on Seller; (ii)
result in the creation or acceleration of any security
interest, mortgage, option, claim, lien, charge or encumbrance
upon or interest in any property of Seller or any Seller
Subsidiary, other than such security interests, mortgages,
options, claims, liens, charges or encumbrances that
individually or in the aggregate would not reasonably be
expected to have a material adverse effect on Seller; or (iii)
violate the terms or conditions of, or result in the
cancellation, modification, revocation or suspension of, any
material license, approval, certificate, permit or
authorization held by Seller or any Seller Subsidiary, other
than such violations, cancellations, modifications,
revocations or suspensions
21
that individually or in the aggregate would not reasonably be
expected to have a material adverse effect on Seller.
(r) Brokers, Finders and Others. Except for the fees paid or
payable to Friedman Billings Ramsey & Co., Inc., Seller's
financial advisor ("SELLER'S FINANCIAL ADVISOR"), there are no
fees or commissions of any sort whatsoever claimed by, or
payable by Seller or any Seller Subsidiary to, any broker,
finder, intermediary, attorney, accountant or any other
similar person in connection with effecting this Agreement or
the transactions contemplated hereby, except for ordinary and
customary legal and accounting fees.
(s) Employment Agreements. Except as disclosed in Section 3.01(s)
of the Seller Disclosure Schedule, neither Seller nor any
Seller Subsidiary is a party to any employment, change in
control, severance or consulting agreement not terminable at
will. Neither Seller nor any Seller Subsidiary is a party to,
bound by or negotiating, any collective bargaining agreement,
nor are any of their respective employees represented by any
labor union or similar organization. Seller and Seller
Subsidiaries are in compliance in all material respects with
all applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and
hours other than with respect to any noncompliance that
individually or in the aggregate would not reasonably be
expected to have a material adverse effect on Seller, and
neither Seller nor any Seller Subsidiary has engaged in any
unfair labor practice that would not reasonably be expected to
have a material adverse effect on Seller.
(t) Employee Benefit Plans.
(i) Section 3.01(t)(i) of the Seller Disclosure Schedule
contains a complete and accurate list of all bonus,
incentive, deferred compensation, pension (including,
without limitation, Seller Pension Plans defined
below), retirement, profit-sharing, thrift, savings,
employee stock ownership, stock bonus, stock
purchase, restricted stock, stock option, severance,
welfare (including, without limitation, "welfare
plans" within the meaning of Section 3(1) of the
Employee Retirement Income Security Act of 1974, as
amended ("ERISA")), fringe benefit plans, employment
or severance agreements and all similar practices,
policies and arrangements maintained or contributed
to (currently or within the last six years) by (A)
Seller or any Seller Subsidiary and in which any
employee or former employee (the "Employees"),
consultant or former consultant (the "CONSULTANTS"),
officer or former officer (the "OFFICERS"), or
director or former director (the "DIRECTORS") of
Seller or any Seller Subsidiary participates or to
which any such Employees, Consultants, Officers or
Directors either participate or are parties or (B)
any Seller ERISA Affiliate (as defined below)
22
(collectively, the "COMPENSATION AND BENEFIT PLANS").
Neither Seller nor any Seller Subsidiary has any
commitment to create any additional Compensation and
Benefit Plan or to modify or change any existing
Compensation and Benefit Plan, except to the extent
required by law and as otherwise contemplated by
Sections 6.02 and 7.01 of this Agreement.
(ii) Each Compensation and Benefit Plan has been operated
and administered in accordance with its terms and
with applicable law, including, but not limited to,
ERISA, the Code, the Securities Act (as defined in
Section 3.01(u)), the Exchange Act (as defined in
Section 3.01(g)), the Age Discrimination in
Employment Act, or any regulations or rules
promulgated thereunder, and all filings, disclosures
and notices required by ERISA, the Code, the
Securities Act, the Exchange Act, the Age
Discrimination in Employment Act and any other
applicable law have been timely made, except with
respect to such failures as would not reasonably be
expected to have a material adverse effect on Seller.
Each Compensation and Benefit Plan which is an
"employee pension benefit plan" within the meaning of
Section 3(2) of ERISA (a "SELLER PENSION PLAN") and
which is intended to be qualified under Section
401(a) of the Code has received a favorable
determination letter (including a determination that
the related trust under such Compensation and Benefit
Plan is exempt from tax under Section 501(a) of the
Code) from the IRS and Seller is not aware of any
circumstances likely to result in revocation of any
such favorable determination letter. There is no
material pending or, to the knowledge of Seller,
threatened legal action, suit or claim relating to
the Compensation and Benefit Plans other than routine
claims for benefits thereunder. Neither Seller nor
any Seller Subsidiary has engaged in a transaction,
or omitted to take any action, with respect to any
Compensation and Benefit Plan that would reasonably
be expected to subject Seller or any Seller
Subsidiary to a tax or penalty imposed by either
Section 4975 of the Code or Section 502 of ERISA,
assuming for purposes of Section 4975 of the Code
that the taxable period of any such transaction
expired as of the date hereof.
(iii) No liability (other than for payment of premiums to
the Pension Benefit Guaranty Corporation ("PBGC")
which have been made or will be made on a timely
basis) under Title IV of ERISA has been or is
expected to be incurred by Seller or any Seller
Subsidiary with respect to any ongoing, frozen or
terminated "single-employer plan," within the meaning
of Section 4001(a)(15) of ERISA, currently or
formerly maintained by any of them, or any
single-employer plan of any entity (a "SELLER ERISA
AFFILIATE PLAN") which is considered one employer
with Seller under
23
Section 4001(a)(14) of ERISA or Section 414(b), (c)
or (m) of the Code (a "SELLER ERISA AFFILIATE"). None
of Seller, the Seller Subsidiaries nor any Seller
ERISA Affiliate has contributed, or has been
obligated to contribute, to a multiemployer plan
under Subtitle E of Title IV of ERISA (as defined in
ERISA Sections 3(37)(A) and 4001(a)(3)) at any time
since September 26, 1980. No notice of a "reportable
event", within the meaning of Section 4043 of ERISA,
for which the 30-day reporting requirement has not
been waived, has been required to be filed for any
Compensation and Benefit Plan or by any Seller ERISA
Affiliate Plan within the 12-month period ending on
the date hereof, and no such notice will be required
to be filed as a result of the transactions
contemplated by this Agreement. The PBGC has not
instituted proceedings to terminate any Seller
Pension Plan or Seller ERISA Affiliate Plan and, to
Seller's knowledge, no condition exists that presents
a material risk that such proceedings will be
instituted. There is no pending investigation or
enforcement action by the PBGC, the Department of
Labor (the "DOL"), the IRS or any other Governmental
Authority with respect to any Compensation and
Benefit Plan. Under each Seller Pension Plan and
Seller ERISA Affiliate Plan, as of the date of the
most recent actuarial valuation performed prior to
the date of this Agreement, the actuarially
determined present value of all "benefit
liabilities", within the meaning of Section
4001(a)(16) of ERISA (as determined on the basis of
the actuarial assumptions contained in such actuarial
valuation of such Seller Pension Plan or Seller ERISA
Affiliate Plan), did not exceed the then current
value of the assets of such Seller Pension Plan or
Seller ERISA Affiliate Plan and since such date there
has been neither an adverse change in the financial
condition of such Seller Pension Plan or Seller ERISA
Affiliate Plan nor any amendment or other change to
such Seller Pension Plan or Seller ERISA Affiliate
Plan that would increase the amount of benefits
thereunder which reasonably could be expected to
change such result and that individually or in the
aggregate would reasonably be expected to have a
material adverse effect on Seller.
(iv) All contributions required to be made under the terms
of any Compensation and Benefit Plan or Seller ERISA
Affiliate Plan or any employee benefit arrangements
under any collective bargaining agreement to which
Seller or any Seller Subsidiary is a party have been
timely made or have been reflected on the Seller
Financial Statements. Neither any Seller Pension Plan
nor any Seller ERISA Affiliate Plan has an
"accumulated funding deficiency" (whether or not
waived) within the meaning of Section 412 of the Code
or Section 302 of ERISA and all required payments to
the PBGC with respect to each Seller Pension Plan or
24
Seller ERISA Affiliate Plan have been made on or
before their due dates. None of Seller, the Seller
Subsidiaries nor any Seller ERISA Affiliate (x) has
provided, or would reasonably be expected to be
required to provide, security to any Seller Pension
Plan or to any Seller ERISA Affiliate Plan pursuant
to Section 401(a)(29) of the Code, and (y) has taken
any action, or omitted to take any action, that has
resulted, or would reasonably be expected to result,
in the imposition of a lien under Section 412(n) of
the Code or pursuant to ERISA that individually or in
the aggregate would reasonably be expected to have a
material adverse effect on Seller.
(v) Except as disclosed in Section 3.01(t)(v) of the
Seller Disclosure Schedule, neither Seller nor any
Seller Subsidiary has any obligations to provide
retiree health and life insurance or other retiree
death benefits under any Compensation and Benefit
Plan, other than benefits mandated by Section 4980B
of the Code.
(vi) Seller and the Seller Subsidiaries do not maintain
any foreign Compensation and Benefit Plans.
(vii) With respect to each Compensation and Benefit Plan of
Seller, Seller has, if applicable, provided or made
available to Buyer, true and complete copies of
existing: (A) Compensation and Benefit Plan documents
and amendments thereto; (B) trust instruments and
insurance contracts; (C) most recent actuarial report
and financial statement; (D) most recent summary plan
description; (E) forms filed with the PBGC within the
past year (other than for premium payments); (E) most
recent determination letter issued by the IRS; and
(G) any Form 5310, Form 5310A, Form 5300 or Form 5330
filed within the past year with the IRS.
(viii) Except as disclosed in the Seller Disclosure Schedule
or on Section 3.01(t)(viii) of the Seller Disclosure
Schedule, the consummation of the transactions
contemplated by this Agreement would not, directly or
indirectly (including, without limitation, as a
result of any termination of employment prior to or
following the Effective Time), reasonably be expected
to (A) entitle any Employee, Consultant or Director
to any payment (including severance pay or similar
compensation) or any increase in compensation, (B)
result in the vesting or acceleration of any benefits
under any Compensation and Benefit Plan of Seller or
(C) result in any material increase in benefits
payable under any Compensation and Benefit Plan of
Seller, any of which reasonably would be expected to
have a material adverse effect on Seller.
(u) Compliance with Laws. Except with respect to Environmental
Laws (as defined in Section 3.01(y)) and Taxes, which are the
subject of Sections
25
3.01(y) and 3.01(m), respectively, each of Seller and the
Seller Subsidiaries:
(i) has been in compliance with all applicable federal,
state, local and foreign statutes, laws, regulations,
ordinances, rules, judgments, orders or decrees
applicable thereto or to the employees conducting
such business, including, without limitation, the
Equal Credit Opportunity Act, as amended, the Fair
Housing Act, as amended, the Federal Community
Reinvestment Act, as amended, the Home Mortgage
Disclosure Act, as amended, and all other applicable
fair lending laws and other laws relating to
discriminatory business practices, except for
failures to be in compliance which, individually or
in the aggregate, have not had or would not
reasonably be expected to have a material adverse
effect on Seller;
(ii) has all permits, licenses, authorizations, orders and
approvals of, and has made all filings, applications
and registrations with, all Governmental Authorities
that are required in order to permit it to own or
lease its properties and to conduct its business as
presently conducted, except where the failure to
obtain any of the foregoing or to make any such
filing, application or registration has not had or
would not reasonably be expected to have a material
adverse effect on Seller; all such permits, licenses,
certificates of authority, orders and approvals are
in full force and effect and to Seller's knowledge,
no suspension or cancellation of any of them has been
threatened in writing; and
(iii) has received no written notification or communication
from any Governmental Authority since January 1,
2003, (A) asserting that Seller or any Seller
Subsidiary is not in compliance with any of the
statutes, regulations or ordinances which such
Governmental Authority enforces, except for failures
to be in compliance that individually or in the
aggregate would not reasonably be expected to have a
material adverse effect on Seller, or (B) threatening
to revoke any license, franchise, permit or
governmental authorization, which revocations,
individually or in the aggregate would reasonably be
expected to have a material adverse effect on Seller,
which has not been resolved to the satisfaction of
the Governmental Authority which sent such
notification or communication. There is no event
which has occurred that, to the knowledge of Seller,
would reasonably be expected to result in the
revocation of any such license, franchise, permit or
governmental authorization.
26
(v) Insurance.
(i) Section 3.01(v) of the Seller Disclosure Schedule
lists all of the material insurance policies, binders
or bonds maintained by Seller or any Seller
Subsidiary and a description of all material claims
filed by Seller or any Seller Subsidiary against the
insurers of Seller and the Seller Subsidiaries since
December 31, 2002. Seller and the Seller Subsidiaries
are insured with reputable insurers against such
risks and in such amounts as the management of Seller
reasonably has determined to be prudent in accordance
with industry practices. All such insurance policies
are in full force and effect, Seller and the Seller
Subsidiaries are not in material default thereunder
and all claims thereunder have been filed in due and
timely fashion, except with respect to such policies
and claims, the failure to maintain or file would not
reasonably be expected to have a material adverse
effect on Seller.
(ii) The savings accounts and deposits of CBank are
insured up to applicable limits by the FDIC in
accordance with the Federal Deposit Insurance Act,
and CBank has paid all assessments and filed all
reports required by the Federal Deposit Insurance
Act, except for such failures as would not reasonably
be expected to have a material adverse effect on
CBank or the availability of such insurance.
(w) Governmental and Third-Party Proceedings. No consent,
approval, authorization of, or registration, declaration or
filing with, any court, Governmental Authority or any other
third party is required to be made or obtained by Seller or
any Seller Subsidiary in connection with the execution,
delivery or performance by Seller of this Agreement or the
consummation by Seller of the transactions contemplated
hereby, except for (A) filings of applications and notices, as
applicable, with and the approval of certain federal and state
banking authorities, (B) the filing of the appropriate
certificates of merger with the Secretaries of State of West
Virginia and Delaware pursuant to the WVBCA and the DGCL, (C)
the adoption of this Agreement by Seller's shareholders, (D)
the filing of a premerger notification and report form by
Seller under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended (the "HSR ACT") or any other applicable
competition, merger control, antitrust or similar law or
regulation, (E) the filing with the SEC of the Proxy
Statement/Prospectus and such reports under the Exchange Act,
as may be required in connection with this Agreement, the
Merger and the other transactions contemplated hereby, (F) any
filings required under the rules and regulations of Nasdaq and
the Buyer's Exchange, and (G) such other consents, approvals,
orders, authorizations, registrations, declarations and
filings the failure of which to be obtained or made
individually or in the
27
aggregate would not reasonably be expected to have a material
adverse effect on Seller.
(x) Contracts. (i) Except for Contracts filed as exhibits to the
Seller SEC Documents, there are no Contracts that are required
to be filed as an exhibit to any Seller SEC Document under the
Exchange Act and the rules and regulations promulgated
thereunder. Except for Contracts filed in unredacted form as
exhibits to the Seller SEC Documents and purchase orders
entered into in the ordinary course of business, Section
3.01(x) of the Seller Disclosure Schedule sets forth a true
and complete list as of the date of this Agreement of all
Contracts in existence as of the date of this Agreement (other
than those which have been performed completely): (A) which
involve the payment by or to Seller or any Seller Subsidiary
of more than $100,000 in connection with the purchase of
property or goods or the performance of services or (B) which
are not in the ordinary course of their respective businesses.
True, complete and correct copies of all such Contracts have
been delivered to Buyer. Neither Seller nor any Seller
Subsidiary, nor, to the knowledge of Seller, any other party
thereto, is in default under any such contract, agreement,
commitment, arrangement or other instrument to which it is a
party, by which its respective assets, business or operations
may be bound or affected in any way, or under which it or its
respective assets, business or operations receive benefits,
and there has not occurred any event that, with the lapse of
time or the giving of notice or both, would constitute such a
default except, in each case, for defaults that individually
or in the aggregate would not reasonably be expected to have a
material adverse effect on Seller.
(y) Environmental Matters. Except as otherwise disclosed in
Section 3.01(y) of the Seller Disclosure Schedule: (i) Seller
and the Seller Subsidiaries are and have been at all times in
compliance in all material respects with all applicable
Environmental Laws (as that term is defined in this Section
3.01(y)), and, to the knowledge of Seller, neither Seller nor
any Seller Subsidiary has engaged in any activity in violation
of any applicable Environmental Law except for failures to be
in compliance that individually or in the aggregate could not
reasonably be expected to have a material adverse effect on
Seller; (ii)(A) to the knowledge of Seller, no investigations,
inquiries, orders, hearings, actions or other proceedings by
or before any court or Governmental Authority are pending or
have been threatened in writing in connection with any of
Seller's or any Seller Subsidiary's activities and any Seller
Real Properties or improvements thereon, and (B) to the
knowledge of Seller, no investigations, inquiries, orders,
hearings, actions or other proceedings by or before any court
or Governmental Authority are pending or threatened in
connection with any real properties in respect of which any
Seller Subsidiary has foreclosed or holds a mortgage or
mortgages (hereinafter referred to as the "SELLER SUBSIDIARY
REAL ESTATE COLLATERAL"); (iii) to the knowledge of Seller, no
28
claims are pending or threatened by any third party against
Seller or any Seller Subsidiary, or with respect to the Seller
Real Properties or improvements thereon, or, to the knowledge
of Seller, the Seller Subsidiary Real Estate Collateral or
improvements thereon, relating to damage, contribution, cost
recovery, compensation, loss, injunctive relief, remediation
or injury resulting from any Hazardous Substance (as that term
is defined in this Section 3.01(x)) which have not been
resolved to the satisfaction of the involved parties and which
have had or are reasonably expected to have a material adverse
effect on Seller or any Seller Subsidiary; (iv) to the
knowledge of Seller, no Hazardous Substances have been
integrated into the Seller Real Properties or improvements
thereon or any component thereof, or the Seller Subsidiary
Real Estate Collateral or improvements thereon or any
component thereof in such manner or quantity as may reasonably
be expected to or in fact would pose a threat to human health
or the value of the real property and improvements; and (v)
neither Seller nor any Seller Subsidiary has knowledge that
(A) any of the Seller Real Properties or improvements thereon,
or the Seller Subsidiary Real Estate Collateral or
improvements thereon has been used for the treatment, storage
or disposal of Hazardous Substances or has been contaminated
by Hazardous Substances, (B) any of the business operations of
Seller or any Seller Subsidiary have contaminated lands,
waters or other property of others with Hazardous Substances,
except routine, office-generated solid waste, or (C) any of
the Seller Real Properties or improvements thereon, or the
Seller Subsidiary Real Estate Collateral or improvements
thereon have in the past or presently contain underground
storage tanks, friable asbestos materials or PCB-containing
equipment, which in any event would reasonably be expected to
have a material adverse effect on Seller.
For purposes of this Agreement, (i) "ENVIRONMENTAL LAW" means
the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended ("CERCLA"); the Resource
Conservation and Recovery Act of 1976, as amended; the
Hazardous Materials Transportation Act, as amended; the Toxic
Substances Control Act, as amended; the Federal Water
Pollution Control Act, as amended; the Safe Drinking Water
Act, as amended; the Clean Air Act, as amended; the
Occupational Safety and Health Act of 1970, as amended; the
Hazardous & Solid Waste Amendments Act of 1984, as amended;
the Superfund Amendments and Reauthorization Act of 1986, as
amended; the regulations promulgated thereunder, and any other
federal, state, county, municipal, local or other statute,
law, ordinance or regulation which may relate to or deal with
human health or the environment, as of the date of this
Agreement, and (ii) "HAZARDOUS SUBSTANCES" means, at any time:
(a) any "hazardous substance" as defined in Section 101(14) of
CERCLA or regulations promulgated thereunder; (b) any "solid
waste," "hazardous waste," or "infectious waste," as such
terms are defined in any other Environmental Law as of the
date of this Agreement; and (c) friable
29
asbestos, urea-formaldehyde, polychlorinated biphenyls
("PCBs"), nuclear fuel or material, chemical waste,
radioactive material, explosives, known carcinogens, petroleum
products and by-products, and other dangerous, toxic or
hazardous pollutants, contaminants, chemicals, materials or
substances listed or identified in, or regulated by, any
Environmental Law.
(z) Takeover Laws. Assuming the accuracy of the representations
and warranties of Buyer set forth in Section 4.01(y), the
approval of this Agreement and the Merger by the Board of
Directors of Seller constitutes approval of the Merger for
purposes of Section 203 of the DGCL and represents all of the
action necessary to ensure that the restrictions on business
combinations (as such term is defined therein) set forth in
Section 203 of the DGCL do not and will not apply to the
execution or delivery of this Agreement (including any
amendments to this Agreement) or the consummation of the
Merger and the other transactions contemplated hereby.
(aa) Seller Information. True and complete copies of all documents
listed in the Seller Disclosure Schedule have been made
available or provided to Buyer. The books of account, stock
record books and other financial and corporate records of the
Seller and its Subsidiaries, all of which have been made
available to Buyer, are complete and correct in all material
respects, including the maintenance of a system of internal
accounting controls sufficient to provide reasonable assurance
that transactions are executed with its management's
authorizations and such books and records are accurately
reflected in all material respects in the Seller Filed SEC
Documents.
(bb) Ownership of Buyer Shares. As of the date hereof, except as
otherwise disclosed in Section 3.01(cc) of the Seller
Disclosure Schedule, neither Seller nor, to the knowledge of
Seller, any of its affiliates or associates (as such terms are
defined under the Exchange Act), (i) beneficially owns,
directly or indirectly, or (ii) is a party to any agreement,
arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of, any Buyer Shares.
(cc) Fairness Opinion. The Board of Directors of Seller has
received the opinion of Seller's Financial Advisor dated the
date of this Agreement to the effect that the consideration to
be received by Seller's shareholders in the Merger is fair,
from a financial point of view, to Seller's shareholders.
(dd) CRA Compliance. Neither Seller nor any Seller Subsidiary has
received any notice of non-compliance with the applicable
provisions of the Federal Community Reinvestment Act, as
amended ("CRA"), and the regulations promulgated thereunder,
and CBank has received a CRA rating of satisfactory or better
from the FDIC. Seller knows of no fact or circumstance or set
of facts or circumstances which would be reasonably likely to
cause Seller or any Seller Subsidiary to receive any notice of
30
non-compliance with such provisions or cause the CRA rating of
Seller or any Seller Subsidiary to fall below satisfactory.
ARTICLE FOUR
REPRESENTATIONS AND WARRANTIES OF BUYER
4.01. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer and Acquisition Sub hereby jointly and severally warrant and
represent to Seller that:
(a) Corporate Status. Buyer is a West Virginia corporation and a
bank holding company registered under the Bank Holding Company
Act of 1956, as amended (the "BHC ACT"). Acquisition Sub is a
West Virginia corporation. Each of Buyer and Acquisition Sub
is duly organized, validly existing and in good standing under
the laws of the state of its incorporation and has the full
corporate power and authority to own its property, to carry on
its business as presently conducted and to enter into and,
subject to the required obtaining of appropriate approvals of
Governmental Authorities and Regulatory Authorities, perform
its obligations under this Agreement and consummate the
transactions contemplated by this Agreement, and is duly
qualified or licensed to do business and is in good standing
in the State of Ohio and each other jurisdiction in which the
nature of its business or the ownership, leasing or operation
of its properties makes such qualification or licensing
necessary, other than where the failure to be so organized,
existing, qualified or licensed or in good standing
individually or in the aggregate could not reasonably be
expected to have a material adverse effect on Buyer. Buyer has
made available to Seller true and complete copies of its and
Acquisition Sub's certificates of incorporation and bylaws,
each as amended to the date of this Agreement.
(b) Corporate Proceedings. All corporate proceedings of Buyer and
Acquisition Sub necessary to authorize the execution, delivery
and performance of this Agreement, and the consummation of the
transactions contemplated by this Agreement, in each case by
Buyer and Acquisition Sub, have been duly and validly taken.
This Agreement has been validly executed and delivered by duly
authorized officers of Buyer and Acquisition Sub. No vote of
Buyer's stockholders is required to be obtained in connection
with the consummation of the transactions contemplated hereby.
(c) Capitalization of Buyer.
(i) As of February 27, 2004, the authorized capital stock
of Buyer consists of 50,000,000 common shares, 2.0833
par value per share, of which 19,718,128 common
shares are issued and outstanding
31
and 1,601,220 common shares are held in treasury by
Buyer, and 1,000,000 preferred shares, no par value
per share, of which no shares are issued or
outstanding. The outstanding Buyer Shares have been
duly authorized and are validly issued, fully paid
and non-assessable, and were not issued in violation
of the preemptive rights of any person. As of
February 27, 2004, 1,000,000 Buyer Shares were
reserved for issuance upon the exercise of
outstanding stock options granted under Buyer's stock
option plans (the "BUYER STOCK OPTION PLANS") and
578,070 Buyer Shares were available for future grants
of stock options under the Buyer Stock Option Plans.
As of the date of this Agreement, except for the
Buyer Shares issuable pursuant to this Agreement and
as disclosed in Section 4.01(c) of the Buyer
Disclosure Schedule, Buyer has no other commitment or
obligation to issue, deliver or sell any Buyer
Shares. As of the date of this Agreement, there are
no bonds, debentures, notes or other indebtedness of
Buyer, and no securities or other instruments or
obligations of Buyer the value of which is in any way
based upon or derived from any capital or voting
stock of Buyer, having the right to vote (or
convertible into, or exchangeable for, securities
having the right to vote) on any matters on which
stockholders of Buyer may vote. Except as set forth
above, as of the date of this Agreement, there are no
material Contracts of any kind to which Buyer is a
party or by which Buyer is bound obligating Buyer to
issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock
of, or other equity or voting interests in, or
securities convertible into, or exchangeable or
exercisable for, shares of capital stock of, or other
equity or voting interests in, Buyer or obligating
Buyer to issue, grant, extend or enter into any such
security, option, warrant, call, right or Contract.
As of the date of this Agreement, there are no
outstanding material contractual obligations of Buyer
to repurchase, redeem or otherwise acquire any shares
of capital stock of, or other equity or voting
interests in, Buyer.
(ii) The Buyer Shares to be issued in exchange for Seller
Shares in the Merger, when issued in accordance with
the terms of this Agreement, will be duly authorized,
validly issued, fully paid and non-assessable, will
not be subject to any preemptive or other statutory
right of stockholders and will be issued in
compliance with applicable United States federal and
state securities laws.
(d) Authorized and Effective Agreement. This Agreement constitutes
the legal, valid and binding obligation of Buyer and
Acquisition Sub, enforceable against Buyer and Acquisition Sub
in accordance with its terms, except as the same may be
limited by bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance and other similar laws relating to or
affecting the enforcement of creditors' rights generally, by
32
general equitable principles (regardless of whether
enforceability is considered in a proceeding in equity or at
law) and by an implied covenant of good faith and fair
dealing. Each of Buyer and Acquisition Sub has the absolute
and unrestricted right, power, authority and capacity to
execute and deliver this Agreement and, subject to the
satisfaction of the requirements referred to in Section
4.01(j), the expiration of applicable regulatory waiting
periods, and required filings under federal and state
securities laws, to perform its obligations under this
Agreement.
(e) No Conflict. Subject to the receipt of the required approvals
of Regulatory Authorities and Governmental Authorities, the
expiration of applicable regulatory waiting periods, the
execution, delivery and performance of this Agreement, and the
consummation of the transactions contemplated by this
Agreement by Buyer and Acquisition Sub do not and will not (i)
conflict with, or result in a violation of, or result in the
breach of or a default (or which with notice or lapse of time
would result in a default) under, any provision of: (A) any
federal, state or local law, regulation, ordinance, order,
rule or administrative ruling of any Governmental Authority
applicable to Buyer or Acquisition Sub or any of its or their
properties; (B) the certificates of incorporation or bylaws of
Buyer or Acquisition Sub; (C) any material agreement,
indenture or instrument to which Buyer or Acquisition Sub is a
party or by which it or their properties or assets may be
bound; or (D) any order, judgment, writ, injunction or decree
of any court, arbitration panel or any Governmental Authority
applicable to Buyer or Acquisition Sub; (ii) result in the
creation or acceleration of any security interest, mortgage,
option, claim, lien, charge or encumbrance upon or interest in
any property of Buyer; or (iii) violate the terms or
conditions of, or result in the cancellation, modification,
revocation or suspension of, any material license, approval,
certificate, permit or authorization held by Buyer or
Acquisition Sub.
(f) SEC Filings. Buyer has filed all reports and proxy materials
required to be filed by it with the SEC pursuant to the
Exchange Act, except for any reports or proxy materials the
failure to file which would not have a material adverse effect
upon Buyer and its Subsidiaries taken as a whole. All such
filings, at the time of filing, complied in all material
respects as to form and included all exhibits required to be
filed under the applicable rules of the SEC. None of such
documents, when filed, contained any untrue statement of a
material fact or omitted to state a material fact required to
be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were
made, not misleading.
(g) Financial Statements of Buyer. Buyer has furnished to Seller
consolidated financial statements of Buyer consisting of the
consolidated balance sheets as of December 31 for each of the
years 2003, 2002 and 2001, and the related consolidated
statements of income, changes in shareholders' equity
33
and cash flows for the three years ended December 31, 2003
(the "BUYER BALANCE SHEET DATE"), including accompanying notes
and the report thereon of Ernst & Young LLP (collectively, all
of such consolidated financial statements are referred to as
the "BUYER FINANCIAL STATEMENTS"). The Buyer Financial
Statements were prepared in conformity with GAAP applied on a
consistent basis and present fairly, in all material respects,
the consolidated financial condition of Buyer at the dates,
and the consolidated results of operations and cash flows for
the periods, stated therein; subject, in the case of the
interim financial statements, to normal year-end audit
adjustments which are not expected to be, individually or in
the aggregate, materially adverse to Buyer and the absence of
full footnotes.
(h) Takeover Laws. Buyer has taken all action required to be taken
by it in order to exempt this Agreement and the transactions
contemplated hereby from, and this Agreement and the
transactions contemplated hereby are exempt from, the
requirements of any "moratorium", "control share", "fair
price", "affiliate transaction", "business combination" or
other anti-takeover laws or regulations of any state
(collectively, "TAKEOVER LAWS") applicable to it, including,
without limitation, those of the States of West Virginia and
Delaware.
(i) Brokers, Finders and Others. Except for the fees paid or
payable to Keefe, Bruyette & Woods, Inc., Buyer's financial
advisor, there are no fees or commissions of any sort
whatsoever claimed by, or payable by Buyer to, any broker,
finder, intermediary or any other similar person in connection
with effecting this Agreement or the transactions contemplated
hereby.
(j) Governmental and Third-Party Proceedings. No consent,
approval, authorization of, or registration, declaration or
filing with, any court, Governmental Authority or any other
third party is required to be made or obtained by Buyer in
connection with the execution, delivery or performance by
Buyer of this Agreement or the consummation by Buyer of the
transactions contemplated hereby, except for (A) filings of
applications or notices, as applicable, with and the approval
of certain federal and state banking authorities, (B) the
filing of the appropriate certificate of merger with the
Secretaries of State of West Virginia and Delaware pursuant to
the WVBCA and DGCL and (C) receipt of the approvals set forth
in Section 7.09. As of the date hereof, Buyer is not aware of
any reason why the approvals set forth in Section 7.09 will
not be received without the imposition of a condition,
restriction or requirement of the type described in Section
7.09.
(k) Buyer Information. None of the information relating to Buyer
and its Subsidiaries to be contained in (i) the Registration
Statement (as defined in Section 7.06(a) below) will, at the
time the Registration Statement is filed with the SEC and at
the time it becomes effective under the
34
Securities Act, contain any untrue statement of a material
fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein,
in light of the circumstances under which they were made, not
misleading and (ii) the Proxy Statement, as of the date such
Proxy Statement is mailed to shareholders of Seller and up to
and including the date of the meeting of Seller's shareholders
to which such Proxy Statement relates, will contain any untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under
which they were made, not misleading, provided that, in each
case, information as of a later date shall be deemed to modify
information as of an earlier date. All information about Buyer
and its Subsidiaries included in the Proxy Statement will be
deemed to have been supplied by Buyer.
(l) Absence of Undisclosed Liabilities. Except as set forth in
Buyer SEC Documents filed and publicly available prior to the
date of this Agreement (the "BUYER FILED SEC DOCUMENTS")
(including the financial statements included therein) or in
Section 4.01(l) of the Buyer Disclosure Schedule and except as
arising hereunder, Buyer and its subsidiaries have no
liabilities or obligations of any nature (whether accrued,
absolute, contingent or otherwise) at the Buyer Balance Sheet
Date, other than liabilities and obligations that individually
or in the aggregate could not reasonably be expected to have a
material adverse effect on Buyer. Except as set forth in the
Buyer Filed SEC Documents or otherwise disclosed in Section
4.01(l) of the Buyer Disclosure Schedule, all debts,
liabilities, guarantees and obligations of Buyer and the Buyer
Subsidiaries incurred since the Buyer Balance Sheet Date have
been incurred in the ordinary course of business and are usual
and normal in amount both individually and in the aggregate.
Except as disclosed in Section 4.01(l) of the Buyer Disclosure
Schedule, neither Buyer nor any Buyer Subsidiary is in default
or breach of any material agreement to which Buyer or the
Buyer Subsidiary is a party other than any such breaches or
defaults that individually or in the aggregate would not
reasonably be expected to have a material adverse effect on
Buyer. To the best knowledge of Buyer, no other party to any
material agreement to which Buyer or any Buyer Subsidiary is a
party is in default or breach of such agreement, which breach
or default would reasonably be expected to have a material
adverse effect on Buyer.
(m) Absence of Changes. Except (i) as set forth in the Buyer Filed
SEC Documents (ii) as set forth in Section 4.01(n) of the
Buyer Disclosure Schedule, or (iii) in the ordinary course of
business consistent with past practice, since the Buyer
Balance Sheet Date, there has not been any material adverse
change in the business, operations, assets or financial
condition of Buyer and the Buyer Subsidiaries taken as a
whole, and, to
35
the knowledge of Buyer, no fact or condition exists which
Buyer believes will cause such a material adverse change in
the future.
(n) Allowance for Loan Losses. Except as set forth in the Buyer
SEC Documents or in Section 3.01(m) of the Buyer Disclosure
Schedule, there is no loan which was made by any Buyer
Subsidiary and which is reflected as an asset of such Buyer
Subsidiary on the Buyer Financial Statements that (A)(i) is 90
days or more delinquent or (ii) has been classified by
examiners (regulatory or internal) as "Substandard,"
"Doubtful" or "Loss," and (B) the default by the borrower
under which could reasonably be expected to have a material
adverse effect on Buyer. The allowance for loan losses
reflected on the Buyer Financial Statements has been
determined in accordance with GAAP in all material respects
and in accordance in all material respects with all rules and
regulations applicable to Buyer and the Buyer Subsidiaries and
is adequate in all material respects, except for such failures
and inadequacies which would not reasonably be expected to
have a material adverse effect on Buyer. Buyer has considered
all potential losses known to Buyer in establishing the
current allowance for loan losses for each Buyer Subsidiary,
other than such losses that if incurred would not have a
material adverse effect on Buyer.
(o) Reports and Records. Buyer and the Buyer Subsidiaries have
filed all reports and maintained all records required to be
filed or maintained by them under the rules and regulations of
the Board of Governors of the Federal Reserve System and the
West Virginia Division of Banking, except for such reports and
records the failure to file or maintain would not reasonably
be expected to have a material adverse effect on Buyer. All
such documents and reports complied in all material respects
with applicable requirements of law and rules and regulations
in effect at the time such documents and reports were filed
and contained in all material respects the information
required to be stated therein, except for such documents and
records the failure to file or contain such information would
not reasonably be expected to have a material adverse effect
on Buyer. None of such documents or reports, when filed,
contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading,
other than such reports and documents which the failure to
file in such fashion would not reasonably be expected to have
a material adverse effect on Buyer.
(p) Taxes. Except as set forth in Section 4.01(p) of the Buyer
Disclosure Schedule, Buyer and the Buyer Subsidiaries have
timely filed all material Tax Returns with respect to all
material Taxes required to be filed with the appropriate tax
authority through the date of this Agreement. Such Tax Returns
are and will be true, correct and complete in all material
respects.
36
Buyer and the Buyer Subsidiaries have paid and discharged all
Taxes shown as due on such Tax Returns, other than such Taxes
that are adequately reserved as shown on the Buyer Financial
Statements or have arisen in the ordinary course of business
since the Buyer Balance Sheet Date. Except as set forth in
Section 4.01(p) of the Buyer Disclosure Letter, neither the
IRS nor any other taxing agency or authority, domestic or
foreign, has asserted, is now asserting or, to the knowledge
of Buyer, is threatening to assert against Buyer or any Buyer
Subsidiary any deficiency or claim for additional Taxes, which
deficiency or claim, if upheld, would reasonably be expected
to have a material adverse effect on Buyer. There are no
unexpired waivers by Buyer or any Buyer Subsidiary of any
statute of limitations with respect to Taxes. The accruals and
reserves for Taxes reflected in the Buyer Financial Statements
are adequate in all material respects for the periods covered.
Buyer and the Buyer Subsidiaries have withheld or collected
and paid over to the appropriate Governmental Authorities or
are properly holding for such payment all Taxes required by
law to be withheld or collected, except for such failures to
withhold or collect as would not reasonably be expected to
have a material adverse effect on Buyer. There are no liens
for Taxes upon the assets of Buyer or any Buyer Subsidiary,
other than liens for current Taxes not yet due and payable and
liens that individually or in the aggregate would not
reasonably be expected to have a material adverse effect on
Buyer. Neither Buyer nor any Buyer Subsidiary has agreed to
make, or is required to make, any adjustment under Section
481(a) of the Code. Except as set forth in the Buyer SEC
Documents or in Section 4.01(p) of the Buyer Disclosure
Schedule, neither Buyer nor any Buyer Subsidiary is a party to
any agreement, contract, arrangement or plan that has
resulted, or could result, individually or in the aggregate,
in the payment of "excess parachute payments" within the
meaning of Section 280G of the Code. Neither Buyer nor any
Buyer Subsidiary has ever been a member of an affiliated group
of corporations, within the meaning of Section 1504 of the
Code, other than an affiliated group of which Buyer is or was
the common Buyer corporation. No Tax is required to be
withheld pursuant to Section 1445 of the Code as a result of
the transactions contemplated by this Agreement.
(q) Legal Proceedings. Except as set forth in the Buyer Filed SEC
Documents or Section 4.01(q) of the Buyer Disclosure Schedule,
there are no actions, suits, proceedings, claims or
investigations pending or, to the knowledge of Buyer and the
Buyer Subsidiaries, threatened in any court, before any
governmental agency or instrumentality or in any arbitration
proceeding (i) against Buyer or any Buyer Subsidiary which, if
adversely determined against Buyer or any Buyer Subsidiary,
could have a material adverse effect on Buyer; or (ii) against
or by Buyer or any Buyer Subsidiary which, if adversely
determined against Buyer or any Buyer Subsidiary, could
prevent the consummation of this Agreement or any of
37
the transactions contemplated hereby or declare the same to be
unlawful or cause the rescission thereof.
(r) Regulatory Matters. Except as set forth in Section 4.01(r) of
the Buyer Disclosure Schedule, none of Buyer, the Buyer
Subsidiaries nor the respective properties of Buyer and the
Buyer Subsidiaries is a party to or subject to any order,
judgment, decree, agreement, memorandum of understanding or
similar arrangement with, or a commitment letter or similar
submission to, or extraordinary supervisory letter from, any
Regulatory Authorities that individually or in the aggregate
could reasonably be expected to have a material adverse effect
on Buyer. Neither Buyer nor any Buyer Subsidiary has been
advised by any Regulatory Authority that such Regulatory
Authority is contemplating issuing or requesting (or is
considering the appropriateness of issuing or requesting) any
such order, judgment, decree, agreement, memorandum of
understanding, commitment letter, supervisory letter or
similar submission that individually or in the aggregate could
reasonably be expected to have a material adverse effect on
Buyer.
(s) Employee Benefit Plans.
(i) Section 4.01(s)(i) of the Buyer Disclosure Schedule
contains a complete and accurate list of all bonus,
incentive, deferred compensation, pension (including,
without limitation, Buyer Pension Plans defined
below), retirement, profit-sharing, thrift, savings,
employee stock ownership, stock bonus, stock
purchase, restricted stock, stock option, severance,
welfare (including, without limitation, "welfare
plans" within the meaning of Section 3(1) of ERISA,
fringe benefit plans, employment or severance
agreements and all similar practices, policies and
arrangements maintained or contributed to (currently
or within the last six years) by (A) Buyer or any
subsidiary of Buyer and in which any employee or
former employee (the "BUYER EMPLOYEES"), consultant
or former consultant (the "BUYER CONSULTANTS"),
officer or former officer (the "BUYER OFFICERS"), or
director or former director (the "BUYER DIRECTORS")
of Buyer or any subsidiary of Buyer participates or
to which any such Buyer Employees, Buyer Consultants,
Buyer Officers or Buyer Directors either participate
or are parties or (B) any Buyer ERISA Affiliate (as
defined below) (collectively, the "BUYER COMPENSATION
AND BENEFIT PLANS"). Neither Buyer nor any subsidiary
of Buyer has any commitment to create any additional
Buyer Compensation and Benefit Plan or to modify or
change any existing Buyer Compensation and Benefit
Plan, except to the extent required by law and as
otherwise contemplated by Sections 6.02 and 7.01 of
this Agreement.
(ii) Except in a manner that would not reasonably be
expected to have a material adverse effect, each
Buyer Compensation and Benefit
38
Plan has been operated and administered in accordance
with its terms and with applicable law, including,
but not limited to, ERISA, the Code, the Securities
Act (as defined in Section 3.01(u)), the Exchange Act
(as defined in Section 3.01(g)), the Age
Discrimination in Employment Act, or any regulations
or rules promulgated thereunder, and all filings,
disclosures and notices required by ERISA, the Code,
the Securities Act, the Exchange Act, the Age
Discrimination in Employment Act and any other
applicable law have been timely made. Each Buyer
Compensation and Benefit Plan which is an "employee
pension benefit plan" within the meaning of Section
3(2) of ERISA (a "BUYER PENSION PLAN") and which is
intended to be qualified under Section 401(a) of the
Code has received a favorable determination letter
(including a determination that the related trust
under such Buyer Compensation and Benefit Plan is
exempt from tax under Section 501(a) of the Code)
from the IRS and Buyer is not aware of any
circumstances likely to result in revocation of any
such favorable determination letter. There is no
material pending or, to the knowledge of Buyer,
threatened legal action, suit or claim relating to
the Buyer Compensation and Benefit Plans other than
routine claims for benefits thereunder. Neither Buyer
nor any subsidiary of Buyer has engaged in a
transaction, or omitted to take any action, with
respect to any Buyer Compensation and Benefit Plan
that would reasonably be expected to subject Buyer or
any subsidiary of Buyer to a tax or penalty imposed
by either Section 4975 of the Code or Section 502 of
ERISA, assuming for purposes of Section 4975 of the
Code that the taxable period of any such transaction
expired as of the date hereof.
(iii) No liability (other than for payment of premiums to
the PBGC which have been made or will be made on a
timely basis) under Title IV of ERISA has been or is
expected to be incurred by Buyer or any subsidiary of
Buyer with respect to any ongoing, frozen or
terminated "single-employer plan," within the meaning
of Section 4001(a)(15) of ERISA, currently or
formerly maintained by any of them, or any
single-employer plan of any entity (a "BUYER ERISA
AFFILIATE PLAN") which is considered one employer
with Buyer under Section 4001(a)(14) of ERISA or
Section 414(b), (c) or (m) of the Code (a "BUYER
ERISA AFFILIATE"). None of Buyer, any subsidiary of
Buyer or any Buyer ERISA Affiliate has contributed,
or has been obligated to contribute, to a
multiemployer plan under Subtitle E of Title IV of
ERISA (as defined in ERISA Sections 3(37)(A) and
4001(a)(3)) at any time since September 26, 1980. No
notice of a "reportable event", within the meaning of
Section 4043 of ERISA, for which the 30-day reporting
requirement has not been waived, has been required to
be filed for any Buyer Compensation and Benefit Plan
or by any
39
Buyer ERISA Affiliate Plan within the 12-month period
ending on the date hereof, and no such notice will be
required to be filed as a result of the transactions
contemplated by this Agreement. The PBGC has not
instituted proceedings to terminate any Buyer Pension
Plan or Buyer ERISA Affiliate Plan and, to Buyer's
knowledge, no condition exists that presents a
material risk that such proceedings will be
instituted. There is no pending investigation or
enforcement action by the PBGC, the DOL, the IRS or
any other Governmental Authority with respect to any
Buyer Compensation and Benefit Plan. Except as
disclosed in Section 4.01(r)(iii) of the Buyer
Disclosure Schedule, under each Buyer Pension Plan
and Buyer ERISA Affiliate Plan, as of the date of the
most recent actuarial valuation performed prior to
the date of this Agreement, the actuarially
determined present value of all "benefit
liabilities", within the meaning of Section
4001(a)(16) of ERISA (as determined on the basis of
the actuarial assumptions contained in such actuarial
valuation of such Buyer Pension Plan or Buyer ERISA
Affiliate Plan), did not exceed the then current
value of the assets of such Buyer Pension Plan or
Buyer ERISA Affiliate Plan and since such date there
has been neither an adverse change in the financial
condition of such Buyer Pension Plan or Buyer ERISA
Affiliate Plan nor any amendment or other change to
such Buyer Pension Plan or Buyer ERISA Affiliate Plan
that would increase the amount of benefits thereunder
which reasonably could be expected to change such
result.
(iv) All contributions required to be made under the terms
of any Buyer Compensation and Benefit Plan or Buyer
ERISA Affiliate Plan or any employee benefit
arrangements under any collective bargaining
agreement to which Buyer or any subsidiary of Buyer
is a party have been timely made or have been
reflected on the Buyer Financial Statements. Neither
any Buyer Pension Plan nor any Buyer ERISA Affiliate
Plan has an "accumulated funding deficiency" (whether
or not waived) within the meaning of Section 412 of
the Code or Section 302 of ERISA and all required
payments to the PBGC with respect to each Buyer
Pension Plan and each Buyer ERISA Affiliate Plan have
been made on or before their due dates. None of
Buyer, the any subsidiary of Buyer nor any Buyer
ERISA Affiliate (x) has provided, or would reasonably
be expected to be required to provide, security to
any Buyer Pension Plan or to any Buyer ERISA
Affiliate Plan pursuant to Section 401(a)(29) of the
Code, and (y) has taken any action, or omitted to
take any action, that has resulted, or would
reasonably be expected to result, in the imposition
of a lien under Section 412(n) of the Code or
pursuant to ERISA.
40
(v) Except as disclosed in Section 4.01(s)(v) of the
Buyer Disclosure Schedule, neither Buyer nor any
subsidiary of Buyer has any obligations to provide
retiree health and life insurance or other retiree
death benefits under any Buyer Compensation and
Benefit Plan, other than benefits mandated by Section
4980B of the Code.
(vi) Buyer and the subsidiaries of Buyer do not maintain
any foreign Buyer Compensation and Benefit Plans.
(vii) With respect to each Buyer Compensation and Benefit
Plan, if applicable, Buyer has provided or made
available to Seller, true and complete copies of
existing: (A) Buyer Compensation and Benefit Plan
documents and amendments thereto; (B) trust
instruments and insurance contracts; (C) most recent
actuarial report and financial statement; (D) most
recent summary plan description; (E) forms filed with
the PBGC within the past year (other than for premium
payments); (F) most recent determination letter
issued by the IRS; and (G) any Form 5310, Form 5310A,
Form 5300 or Form 5330 filed within the past year
with the IRS.
(viii) Except as disclosed on Section 4.01(s)(viii) of the
Buyer Disclosure Schedule, the consummation of the
transactions contemplated by this Agreement would
not, directly or indirectly (including, without
limitation, as a result of any termination of
employment prior to or following the Effective Time),
reasonably be expected to (A) entitle any Buyer
Employee, Buyer Consultant or Buyer Director to any
payment (including severance pay or similar
compensation) or any increase in compensation, (B)
result in the vesting or acceleration of any benefits
under any Buyer Compensation and Benefit Plan or (C)
result in any material increase in benefits payable
under any Buyer Compensation and Benefit Plan.
(ix) Except as disclosed on Section 4.01(s)(ix) of the
Buyer Disclosure Schedule, neither Buyer nor any
subsidiary of Buyer maintains any compensation plans,
programs or arrangements the payments under which
would not reasonably be expected to be deductible as
a result of the limitations under Section 162(m) of
the Code and the regulations issued thereunder.
(x) Except as disclosed on Section 4.01(s)(x) of the
Buyer Disclosure Schedule, as a result, directly or
indirectly, of the transactions contemplated by this
Agreement (including, without limitation, as a result
of any termination of employment prior to or
following the Effective Time), none of Buyer, Seller
or the Surviving Corporation, or any of their
respective Subsidiaries will be obligated to make a
payment that would be characterized as an "excess
parachute payment" to an individual who is a
"disqualified
41
individual" (as such terms are defined in Section
280G of the Code) of Buyer on a consolidated basis,
without regard to whether such payment is reasonable
compensation for personal services performed or to be
performed in the future.
(t) Compliance with Laws. Except with respect to Environmental
Laws and Taxes, which are the subject of Sections 4.01(p) and
4.01(v), respectively, each of Buyer and the Buyer
Subsidiaries:
(i) has been in compliance with all applicable federal,
state, local and foreign statutes, laws, regulations,
ordinances, rules, judgments, orders or decrees
applicable thereto or to the employees conducting
such business, including, without limitation, the
Equal Credit Opportunity Act, as amended, the Fair
Housing Act, as amended, the Federal Community
Reinvestment Act, as amended, the Home Mortgage
Disclosure Act, as amended, and all other applicable
fair lending laws and other laws relating to
discriminatory business practices, except for
failures to be in compliance which, individually or
in the aggregate, have not had or would not
reasonably be expected to have a material adverse
effect on Buyer;
(ii) has all permits, licenses, authorizations, orders and
approvals of, and has made all filings, applications
and registrations with, all Governmental Authorities
that are required in order to permit it to own or
lease its properties and to conduct its business as
presently conducted, except where the failure to
obtain any of the foregoing or to make any such
filing, application or registration has not had or
would not reasonably be expected to have a material
adverse effect on Buyer; all such permits, licenses,
certificates of authority, orders and approvals are
in full force and effect and to Buyer's knowledge, no
suspension or cancellation of any of them has been
threatened in writing; and
(iii) has received no written notification or communication
from any Governmental Authority since January 1,
2002, (A) asserting that Buyer or any Buyer
Subsidiary is not in compliance with any of the
statutes, regulations or ordinances which such
Governmental Authority enforces, except for failures
to be in compliance that individually or in the
aggregate would not reasonably be expected to have a
material adverse effect on Buyer, or (B) threatening
to revoke any license, franchise, permit or
governmental authorization, which revocations,
individually or in the aggregate would reasonably be
expected to have a material adverse effect on Buyer,
which has not been resolved to the satisfaction of
the Governmental Authority which sent such
notification or communication. There is no event
which has occurred that, to the knowledge of Buyer,
would reasonably be expected to result in the
42
revocation of any such license, franchise, permit or
governmental authorization.
(u) Contracts. (i) Except for Contracts filed as exhibits to the
Buyer SEC Documents, there are no Contracts that are required
to be filed as an exhibit to any Buyer SEC Document under the
Exchange Act and the rules and regulations promulgated
thereunder. Neither Buyer nor any Buyer Subsidiary, nor, to
the knowledge of Buyer, any other party thereto, is in default
under any such contract, agreement, commitment, arrangement or
other instrument to which it is a party, by which its
respective assets, business or operations may be bound or
affected in any way, or under which it or its respective
assets, business or operations receive benefits, and there has
not occurred any event that, with the lapse of time or the
giving of notice or both, would constitute such a default
except, in each case, for defaults that individually or in the
aggregate would not reasonably be expected to have a material
adverse effect on Buyer.
(v) Environmental Matters. Except as otherwise disclosed in
Section 4.01(v) of the Buyer Disclosure Schedule: (i) Buyer
and the Buyer Subsidiaries are and have been at all times in
compliance in all material respects with all applicable
Environmental Laws, and, to the knowledge of Buyer, neither
Buyer nor any Buyer Subsidiary has engaged in any activity in
violation of any applicable Environmental Law except for
failures to be in compliance that individually or in the
aggregate could not reasonably be expected to have a material
adverse effect on Buyer; (ii)(A) to the knowledge of Buyer, no
investigations, inquiries, orders, hearings, actions or other
proceedings by or before any court or Governmental Authority
are pending or have been threatened in writing in connection
with any of Buyer's or any Buyer Subsidiary's activities and
any Buyer Real Properties or improvements thereon, and (B) to
the knowledge of Buyer, no investigations, inquiries, orders,
hearings, actions or other proceedings by or before any court
or Governmental Authority are pending or threatened in
connection with any real properties in respect of which any
Buyer Subsidiary has foreclosed or holds a mortgage or
mortgages (hereinafter referred to as the "BUYER SUBSIDIARY
REAL ESTATE COLLATERAL"); (iii) to the knowledge of Buyer, no
claims a pending or threatened by any third party against
Buyer or any Buyer Subsidiary, or with respect to the Buyer
Real Properties or improvements thereon, or, to the knowledge
of Buyer, the Buyer Subsidiary Real Estate Collateral or
improvements thereon, relating to damage, contribution, cost
recovery, compensation, loss, injunctive relief, remediation
or injury resulting from any Hazardous Substance which have
not been resolved to the satisfaction of the involved parties
and which have had or are reasonably expected to have a
material adverse effect on Buyer or any Buyer Subsidiary; (iv)
to the knowledge of Buyer, no Hazardous Substances have been
integrated into the Buyer Real Properties or improvements
43
thereon or any component thereof, or the Buyer Subsidiary Real
Estate Collateral or improvements thereon or any component
thereof in such manner or quantity as may reasonably be
expected to or in fact would pose a threat to human health or
the value of the real property and improvements; and (v)
neither Buyer nor any Buyer Subsidiary has knowledge that (A)
any of the Buyer Real Properties or improvements thereon, or
the Buyer Subsidiary Real Estate Collateral or improvements
thereon has been used for the treatment, storage or disposal
of Hazardous Substances or has been contaminated by Hazardous
Substances, (B) any of the business operations of Buyer or any
Buyer Subsidiary have contaminated lands, waters or other
property of others with Hazardous Substances, except routine,
office-generated solid waste, or (C) any of the Buyer Real
Properties or improvements thereon, or the Buyer Subsidiary
Real Estate Collateral or improvements thereon have in the
past or presently contain underground storage tanks, friable
asbestos materials or PCB-containing equipment, which in any
event would reasonably be expected to have a material adverse
effect on Buyer.
(w) Buyer Information. True and complete copies of all documents
listed in the Buyer Disclosure Schedule have been made
available or provided to Buyer. The books of account, stock
record books and other financial and corporate records of the
Buyer and its Subsidiaries, all of which have been made
available to Buyer, are complete and correct in all material
respects, including the maintenance of a system of internal
accounting controls sufficient to provide reasonable assurance
that transactions are executed with its management's
authorizations and such books and records are accurately
reflected in all material respects in the Buyer Filed SEC
Documents.
(x) CRA Compliance. Neither Buyer nor any Buyer Subsidiary has
received any notice of non-compliance with the applicable
provisions of the CRA and the regulations promulgated
thereunder, and each Subsidiary of Buyer has received a CRA
rating of satisfactory or better from the FDIC. Buyer knows of
no fact or circumstance or set of facts or circumstances which
would be reasonably likely to cause Buyer or any Buyer
Subsidiary to receive any notice of non-compliance with such
provisions or cause the CRA rating of Buyer or any Buyer
Subsidiary to fall below satisfactory.
(y) Ownership of Seller Shares. As of the date hereof, except as
otherwise disclosed in Section 4.01(y) of the Buyer Disclosure
Schedule, neither Buyer nor any of its affiliates or
associates (as such terms are defined under the Exchange Act),
(i) beneficially owns, directly or indirectly, (ii) is a party
to any agreement, arrangement or understanding for the purpose
of acquiring, holding, voting or disposing of, any Seller
Shares, (iii) has been an "interested shareholder" (as such
term in defined in Section 203 of the DGCL) of Seller at any
time within the last three (3) years or (iv) is an "Interested
Stockholder" of Seller (as such term is defined in Article
Eighth of Seller's certificate of incorporation).
44
(z) Operation of Acquisition Sub. Acquisition Sub was formed
solely for the purpose of engaging in the transactions
contemplated hereby and has engaged in no business other than
in connection with the transactions contemplated by this
Agreement.
ARTICLE FIVE
FURTHER COVENANTS OF SELLER
5.01. OPERATION OF BUSINESS
Seller covenants to Buyer that, throughout the period from the date of
this Agreement to and including the Closing, except as expressly contemplated or
permitted by this Agreement or to the extent that Buyer shall otherwise consent
in writing:
(a) Conduct of Business. Seller's business, and the business of
each Seller Subsidiary, will be conducted only in the ordinary
and usual course consistent with past practice. Without the
written consent of Buyer, Seller shall not, and shall cause
each Seller Subsidiary not to, take any action which would be
inconsistent with any representation or warranty of Seller set
forth in this Agreement or which would cause a breach of any
such representation or warranty if made at or immediately
following such action, subject to such exceptions as do not,
and would not reasonably be expected to have, individually or
in the aggregate, a material adverse effect on Buyer or the on
the Surviving Corporation following the Effective Time or
except, in each case, as may be required by applicable law or
regulation.
(b) Changes in Business and Capital Structure. Except as provided
for by this Agreement, as set forth in Section 5.01(b) of the
Seller Disclosure Schedule or as otherwise approved expressly
in writing by Buyer, Seller will not, and will cause each
Seller Subsidiary not to:
(i) sell, transfer, mortgage, pledge or subject to any
lien or otherwise encumber any of the assets of
Seller or any Seller Subsidiary, tangible or
intangible, which are material, individually or in
the aggregate, to Seller except for (A) internal
reorganizations or consolidations involving existing
subsidiaries that would not be likely to present a
material risk of any material delay in the receipt of
any required regulatory approval, (B) securitization
activities in the ordinary course of business and (C)
other dispositions of assets, including subsidiaries,
if the fair market value of the total consideration
received therefrom does not exceed in the aggregate,
$50,000;
(ii) make any capital expenditure or capital additions or
betterments which individually exceed $100,000 or
exceed $500,000 in the
45
aggregate and which otherwise are in any manner
inconsistent in any material respect with Seller's
capital budget for 2004;
(iii) become bound by, enter into, or perform any material
contract, commitment or transaction party which if so
entered into, would be reasonably likely to (A) have
a material adverse effect on Seller, (B) impair in
any material respect the ability of Seller to perform
its obligations under this Agreement or (C) prevent
or materially delay the consummation of the
transactions contemplated by this Agreement;
(iv) declare, pay or set aside for payment any dividends
or make any distributions on its capital shares
issued and outstanding other than quarterly cash
dividends on Seller Shares in respect of each fiscal
quarter ending on or after February 29, 2004 in an
amount not to exceed $0.25 per Seller Share and (B)
dividends by a direct or indirect wholly owned
subsidiary of Seller to its parent;
(v) purchase, redeem, retire or otherwise acquire any of
its capital shares other than pursuant to rights of
repurchase granted to Seller, or put rights granted
to any of its employees or former employees, pursuant
to the Seller Stock Option Plans;
(vi) issue or grant any option or right to acquire any of
its capital shares or any Voting Debt other than (A)
the issuance of Seller Shares pursuant to the
exercise of warrants or options outstanding as of the
date of this Agreement and (B) issuances by a
wholly-owned subsidiary of its capital stock or
Voting Debt to its parent or another wholly-owned
subsidiary of Seller, or effect, directly or
indirectly, any share split or share dividend,
recapitalization, combination, exchange of shares,
readjustment or other reclassification;
(vii) amend or propose to amend its certificate of
incorporation, by-laws or other governing documents
except as otherwise expressly contemplated by this
Agreement;
(viii) merge or consolidate with any other person or
otherwise reorganize except for the Merger;
(ix) acquire all or any portion of the assets, business,
deposits or properties of any other entity other than
(A) by way of foreclosures, (B) acquisitions of
control in a bona fide fiduciary capacity or in
satisfaction of debts previously contracted in good
faith, in each case in the ordinary and usual course
of business consistent with past practice and (C)
internal reorganizations or consolidations involving
existing subsidiaries that would not be
46
likely to present a material risk of any material
delay in the receipt of any required regulatory
approval;
(x) other than in the ordinary course of business
consistent with past practice, enter into, establish,
adopt or amend any pension, retirement, stock option,
stock purchase, savings, profit-sharing, deferred
compensation, consulting, bonus, group insurance or
other employee benefit, incentive or welfare
contract, plan or arrangement, or any trust agreement
(or similar arrangement) related thereto, in respect
of any Director, Officer or Employee of Seller or any
Seller Subsidiary, or take any action to accelerate
the vesting or exercisability of stock options,
restricted stock or other compensation or benefits
payable thereunder; provided, however, that Seller
may take such actions in order to satisfy either
applicable law or contractual obligations, including
those arising under its benefit plans, existing as of
the date hereof and disclosed in the Seller
Disclosure Schedule or regular annual renewals of
insurance contracts.
(xi) announce or pay any general wage or salary increase
or bonus, other than normal pay increases and bonuses
consistent with past practices, or enter into or
amend or renew any employment, consulting, severance
or similar agreements or arrangements with any
Officer, Director or Employee, except, in each case,
for changes which are required by applicable law or
to satisfy contractual obligations existing as of the
date hereof and disclosed in the Seller Disclosure
Schedule; provided, however, that Seller shall be
permitted to pay (A) pro rata bonuses as of the
Closing Date to those officers of Seller and CBank
listed in Section 5.01(b)(xi) of the Seller
Disclosure Schedule based on (i) the bonuses being
accrued on Seller's or CBank's books for each of such
officers in respect of Seller's current fiscal year
in accordance with the bonus policies of Seller and
CBank in effect as of the start of such fiscal year
and (ii) the actual number of days elasped from the
start of Seller's current fiscal year to the Closing
Date or, if the Closing Date occurs after December 1,
2004, the full amount of such bonus that otherwise
would have been paid by Seller or CBank in respect of
such fiscal year and (B) quarterly performance and
referral bonuses to employees of CBank consistent
with CBank's current policy with respect to such
bonus payments;
(xii) incur any long-term indebtedness for money borrowed,
guarantee any such long-term indebtedness or issue or
sell and long-term debt securities other than (i) in
replacement of existing or maturing debt, (ii)
indebtedness of one subsidiary of Seller to Seller or
another subsidiary of Seller, or (iii) in the
ordinary course of business consistent with past
practice;
47
(xiii) except as disclosed in any Seller SEC Document filed
prior to the date of this Agreement, implement or
adopt any change in its accounting principles,
practices or methods, other than as may be required
by GAAP, or the rules and regulations of the SEC or
Nasdaq;
(xiv) change its existing deposit policy, incur deposit
liabilities, other than deposit liabilities incurred
in the ordinary course of business consistent with
past practice, or accept any brokered deposit having
a maturity longer than 365 days, other than in the
ordinary course of business;
(xv) sell, purchase, enter into a lease, relocate, open or
close any banking or other office, or file any
application pertaining to such action with any
Regulatory Authority;
(xvi) change any of its commercial or consumer loan
policies in any material respect, including credit
underwriting criteria, or make any material
exceptions thereto, unless so required by applicable
law or Governmental Authority;
(xvii) purchase any mortgage loan servicing rights; or
(xviii) enter into any agreement to do any of the foregoing.
(c) Maintenance of Property. Seller shall, and shall cause the
Seller Subsidiaries to, use their commercially reasonable
efforts to maintain and keep their respective properties and
facilities in their present condition and working order,
ordinary wear and tear excepted, except with respect to such
properties and facilities, the loss of which would not
reasonably be expected to have a material adverse effect on
Seller.
(d) Performance of Obligations. Seller shall, and shall cause the
Seller Subsidiaries to, perform all of their obligations under
all agreements relating to or affecting their respective
properties, rights and businesses, except where nonperformance
would not have a material adverse effect on Seller.
(e) Maintenance of Business Organization. Seller shall, and shall
cause the Seller Subsidiaries to, use their commercially
reasonable efforts to maintain and preserve their respective
business organizations intact, to retain present key Employees
and to maintain the respective relationships of customers,
suppliers and others having business relationships with them.
(f) Insurance. Seller shall, and shall cause the Seller
Subsidiaries to, maintain insurance coverage with reputable
insurers, which in respect of amounts, premiums, types and
risks insured, were maintained by them at the Seller
48
Balance Sheet Date, and upon the renewal or termination of
such insurance, Seller and the Seller Subsidiaries will use
their commercially reasonable efforts to renew or replace such
insurance coverage with reputable insurers, in respect of the
amounts, premiums, types and risks insured or maintained by
them at the Balance Sheet Date.
(g) Access to Information. (a) Seller shall, and shall cause each
of its Subsidiaries to, afford to Buyer and to Buyer's
officers, employees, investment bankers, attorneys,
accountants and other advisors and representatives reasonable
and prompt access during normal business hours during the
period prior to the Effective Time or the termination of this
Agreement to all their respective properties, assets, books,
contracts, commitments, directors, officers, employees,
attorneys, accountants, auditors, other advisors and
representatives and records and, during such period, Seller
shall, and shall cause each of its subsidiaries to, make
available to Buyer on a prompt basis (i) a copy of each
report, schedule, form, statement and other document filed or
received by it during such period pursuant to the requirements
of domestic or foreign (whether national, federal, state,
provincial, local or otherwise) laws and (ii) all other
information concerning its business, properties and personnel
as Buyer may reasonably request (including the financial and
tax work papers of Crowe, Chizek and Company, LLP), provided
that Buyer shall not unreasonably interfere with Seller's
business operations and Seller may, in its discretion, limit
Buyer's access to Seller's employees whose work product Seller
reasonably wishes to keep confidential.
5.02. NOTIFICATION
Between the date of this Agreement and the Closing Date, Seller
promptly shall notify Buyer in writing if Seller becomes aware of any fact or
condition that (a) causes or constitutes a breach in any material respect of any
of Seller's representations and warranties or (b) would (except as expressly
contemplated by this Agreement) cause or constitute a breach in any material
respect of any such representation or warranty had such representation or
warranty been made as of the time of occurrence or discovery of such fact or
condition. Should any such fact or condition require any change in the Seller
Disclosure Schedule, Seller will promptly deliver to Buyer a supplement to the
Seller Disclosure Schedule specifying such change ("UPDATED SELLER DISCLOSURE
SCHEDULE"); provided, however, that the disclosure of such change in the Updated
Seller Disclosure Schedule shall not be deemed to constitute a cure of any
breach of any representation or warranty made pursuant to this Agreement unless
consented to in writing by Buyer. During the same period, Seller will promptly
notify Buyer of (i) the occurrence of any breach in any material respect of any
of Seller's covenants contained in this Agreement, (ii) the occurrence of any
event that may make the satisfaction of the conditions in this Agreement
impossible or unlikely in any material respect or (iii) the occurrence of any
event that is reasonably likely, individually or taken with all other facts,
events or circumstances known to Seller, to result in a material adverse effect
with respect to Seller.
49
5.03. ACQUISITION PROPOSALS
(a) From the date hereof until this Agreement has been terminated
as provided herein, Seller shall not, nor shall it permit any of its
subsidiaries to, or authorize or permit any director, officer or employee of
Seller or any of its subsidiaries or any investment banker, attorney, accountant
or other advisor or representative of Seller or any of its subsidiaries (the
"SELLER REPRESENTATIVES") to, directly or indirectly, (i) solicit, initiate or
knowingly encourage any Takeover Proposal (as defined below) or any inquiries or
the making of any proposal that constitutes or could reasonably be expected to
lead to a Takeover Proposal or (ii) enter into, continue or otherwise
participate in any discussions or negotiations regarding, or furnish to any
person any information with respect to, or otherwise cooperate in any way with
respect to, any Takeover Proposal; provided, however, that at any time prior to
obtaining the approval of its shareholders, the Board of Directors of Seller or
Seller Representatives may, in response to a bona fide written Takeover Proposal
that such Board of Directors determines in good faith constitutes or is
reasonably likely to lead to a Superior Proposal (as defined below), and which
Takeover Proposal was unsolicited and did not otherwise result from a breach of
this Section 5.03, and subject to compliance with Section 5.03(c) and (d), (x)
furnish information with respect to Seller and its subsidiaries to the person
making such Takeover Proposal (and its representatives) pursuant to a customary
confidentiality agreement, provided that all such information is provided to
Buyer or has been previously provided to Buyer, and (y) participate in
discussions or negotiations with the person making such Takeover Proposal (and
its representatives) regarding such Takeover Proposal.
The term "TAKEOVER PROPOSAL" means any inquiry, proposal or offer from
any person relating to, or that is reasonably likely to lead to, any direct or
indirect acquisition, in one transaction or a series of transactions, including
any merger, consolidation, tender offer, exchange offer, stock acquisition,
asset acquisition, share exchange, business combination, recapitalization,
liquidation, dissolution, joint venture or similar transaction, of (A) assets or
businesses that constitute or represent 20% or more of the total revenue or
assets of Seller and its subsidiaries, taken as a whole, or (B) 20% or more of
the outstanding Seller Shares, or other equity or voting interests in, any of
Seller's Subsidiaries directly or indirectly holding, individually or taken
together, the assets or businesses referred to in clause (A) above, in each case
other than the transactions contemplated by this Agreement.
(b) Neither the Board of Directors of Seller nor any committee
thereof shall, unless the Board of Directors or a committee thereof determines
in good faith, after consulting with legal counsel, that the failure to take any
such action set forth in this Section 5.03(b) would be reasonably likely to
result in a breach of its fiduciary duties under applicable laws (i) (A)
withdraw (or modify in a manner adverse to Buyer) the recommendation by such
Board of Directors or any such committee of this Agreement or the Merger, (B)
determine that this Agreement or the Merger is no longer advisable, (C)
recommend that the stockholders of Seller reject this Agreement or the Merger,
(D) recommend the approval or adoption of any Takeover Proposal or (E) resolve,
agree or propose publicly to take any such actions, (ii) adopt or approve any
Takeover Proposal, or withdraw its approval of this Agreement, or resolve or
agree to take any such actions, (iii) without limiting Section 5.03(b)(i),
propose publicly to adopt or approve any Takeover Proposal or propose publicly
to withdraw its approval of this Agreement, or resolve or agree to take any such
actions, or (iv) cause or permit Seller to enter into any letter of
50
intent, memorandum of understanding, agreement in principle, acquisition
agreement, merger agreement, option agreement, joint venture agreement,
partnership agreement or other agreement (each, an "ACQUISITION AGREEMENT")
constituting or related to, or which is intended to or is reasonably likely to
lead to, any Takeover Proposal (other than a confidentiality agreement referred
to in Section 5.03(a)), or resolve or agree to take any such actions.
Notwithstanding anything in this Section 5.03 to the contrary, at any time prior
to obtaining the Stockholder Approval, the Board of Directors of Seller may, in
response to a Superior Proposal and that did not result from a breach of Section
5.03(a), cause Seller to terminate this Agreement pursuant to Section
11.01(d)(iii) and concurrently enter into a binding Acquisition Agreement
containing the terms of a Superior Proposal; provided, however, however, that
Seller shall not exercise its right to terminate this Agreement pursuant to
Section 11.01(d)(iii) until after the third business day following Buyer's
receipt of written notice (a "NOTICE OF SUPERIOR PROPOSAL") from Seller advising
Buyer that the Board of Directors of Seller has received a Superior Proposal and
that such Board of Directors intends to, subject to any action taken by Buyer
pursuant to this sentence, cause Seller to accept such Superior Proposal and
terminate this Agreement, specifying the terms and conditions of the Superior
Proposal and identifying the person making such Superior Proposal (it being
understood and agreed that any amendment to the price or any other material term
of a Superior Proposal shall require a new Notice of Superior Proposal and a new
three business day period).
The term "SUPERIOR PROPOSAL" means any bona fide binding written offer
not solicited by or on behalf of Seller and received subsequent to the date
hereof made by a third party that if consummated would result in such third
party (or in the case of a direct merger between such third party and Seller,
the stockholders of such third party) acquiring, directly or indirectly, more
than 50% of the voting power of Seller or all or substantially all the assets of
Seller and its subsidiaries, taken as a whole, that the Board of Directors of
Seller determines in its good faith judgment (after consultation with its
financial advisor or other financial advisor of nationally recognized
reputation) is reasonably likely to result in terms which are more favorable
from a financial point of view to Seller's stockholders than the Merger, taking
into account, among other things, any changes to the terms of this Agreement
offered by Buyer in response to such Superior Proposal or otherwise.
(c) In addition to the obligations of Seller set forth in
paragraphs (a) and (b) of this Section 5.03, Seller promptly shall, but in any
case within 24 hours, advise Buyer in writing of any request for information
that Seller reasonably believes could lead to or contemplates a Takeover
Proposal or of any Takeover Proposal, or any inquiry Seller reasonably believes
could lead to any Takeover Proposal, the terms and conditions of such request,
Takeover Proposal or inquiry (including any subsequent material amendment or
modification to such terms and conditions) and the identity of the person making
any such request, Takeover Proposal or inquiry. Seller shall keep Buyer informed
in all material respects on a timely basis of the status and details (including
material amendments or proposed amendments) of any such request, Takeover
Proposal or inquiry.
(d) Nothing contained in this Section 5.03 or elsewhere in this
Agreement shall prohibit Seller from (i) taking and disclosing to its
stockholders a position contemplated by Rule 14e-2(a) and Rule 14d-9 promulgated
under the Exchange Act or (ii) making any disclosure to Seller's stockholders
if, in the good faith judgment of the Board of Directors of Seller, after
51
consultation with outside counsel, failure so to disclose would be inconsistent
with applicable law.
5.04. DELIVERY OF INFORMATION
Seller shall furnish to Buyer promptly after such documents are
available: (a) all reports, proxy statements or other communications by Seller
to its shareholders generally; and (b) all press releases relating to any
transactions.
5.05. AFFILIATES COMPLIANCE WITH THE SECURITIES ACT
(a) No later than the 15th day prior to the mailing of the Seller
Proxy Statement, Seller shall deliver to Buyer a schedule of
all persons who Seller reasonably believes are, or are likely
to be, as of the date of the Seller Meeting, deemed to be
"affiliates" of Seller as that term is used in Rule 145 under
the Securities Act and/or Accounting Series Releases 130 and
135, as amended, of the SEC (the "RULE 145 AFFILIATES").
Thereafter and until the Effective Time, Seller shall identify
to Buyer each additional person whom Seller reasonably
believes to have thereafter become a Rule 145 Affiliate.
(b) Seller shall use its diligent efforts to cause each person who
is identified as a Rule 145 Affiliate pursuant to Section
5.06(a) above (who has not executed and delivered the same
concurrently with the execution of this Agreement) to execute
and deliver to Buyer on or before the date of mailing of the
Seller Proxy Statement, a written agreement, substantially in
the form of Exhibit A attached hereto.
5.06. TAKEOVER LAWS
Seller shall take all necessary steps to (a) exempt (or cause the
continued exemption of) this Agreement and the Merger from the requirements of
Section 203 of the DGCL and from any provisions under its certificate of
incorporation and bylaws, as applicable, by action of the Board of Directors of
Seller or otherwise, and (b) assist in any challenge by Buyer to the validity,
or applicability to the Merger, of any Takeover Law.
5.07. NO CONTROL
Nothing contained in this Agreement shall give Buyer, directly or
indirectly, the right to control or direct the operations of Seller or any
Seller Subsidiary prior to the Effective Time. Prior to the Effective Time each
of Seller and Buyer shall exercise, consistent with the terms of this Agreement,
complete control and supervision over its and its subsidiaries respective
operations.
52
ARTICLE SIX
FURTHER COVENANTS OF BUYER
6.01. ACCESS TO INFORMATION
Buyer shall furnish to Seller promptly after such documents are
available: (i) all reports, proxy statements or other communications by Buyer to
its shareholders generally; and (ii) all press releases relating to any
transactions.
6.02. OPPORTUNITY OF EMPLOYMENT; EMPLOYEE BENEFITS
(a) Buyer agrees to use its commercially reasonable efforts to
continue the employment of substantially all of the Employees
of Seller and the Seller Subsidiaries after the Merger.
Employees of Seller and the Seller Subsidiaries (other than
employees who are otherwise parties to employment or change in
control agreements) who are not offered the opportunity to
continue as employees following the Effective Time shall be
entitled to receive (a) severance compensation of not less
than one (1) week of pay for each year of service with Seller
and/or any Seller Subsidiary, with a minimum severance of 4
weeks of pay and a maximum severance of 26 weeks of pay, and
(b) outplacement consultation services of a type and nature to
be agreed upon by Seller and Buyer prior to the Effective Time
and with a cost of up to $1,000 for each employee of Seller or
any Seller Subsidiary not offered employment after, or
otherwise terminated within three (3) months after, the
Effective Time. Nothing in this section or elsewhere in this
Agreement shall be deemed to be a contract of employment or be
construed to give said employees any rights other than as
employees at will under Ohio law and said employees shall not
be deemed to be third-party beneficiaries of this provision.
From and after the Effective Time, the Employees of Seller and
the Seller Subsidiaries that remain an employee thereof after
the Effective Time ("CONTINUING EMPLOYEES") shall be provided
with employee benefits that do not discriminate between
employees who were covered by the Compensation and Benefit
Plans and employees who were covered by the Buyer Compensation
and Benefit plans. Each such Seller Employee and/or Seller
Subsidiary Employee shall be credited with years of service
with Seller, the appropriate Seller Subsidiary and, to the
extent credit would have been given by Seller or the
appropriate Seller Subsidiary for years of service with a
predecessor (including any business organization acquired by
Seller or any Seller Subsidiary), years of service with a
predecessor of Seller or a Seller Subsidiary, for purposes of
eligibility and vesting (but not for benefit accrual purposes)
in the employee benefit plans of Buyer, and shall not be
subject to any exclusion or penalty for pre-existing
conditions that were covered under the Seller Compensation and
Benefit Plans immediately prior to the Effective Time, or to
any waiting period relating to such coverage. Notwithstanding
the foregoing, all then active Seller Employees and all then
active Seller Subsidiary Employees shall commence
participation in Buyer's Employee Stock
53
Ownership Plan and its Defined Benefit Pension Plan as of the
Effective Time. The foregoing covenants shall survive the
Merger, and Buyer shall before the Effective Time adopt
resolutions that amend its tax-qualified retirement plans to
provide for the Seller or Seller Subsidiary service credits
referenced herein.
(b) The Surviving Corporation shall cause CBank or its successor
to honor the terms of each of the employment agreements as in
effect at the Seller Subsidiaries in accordance with their
terms after the Effective Time.
(c) Seller shall be entitled to create a retention bonus pool from
which Seller's senior management shall, subject to Buyer's
prior approval, with such approval not to be withheld or
delayed unreasonably, be able to offer retention bonuses to
employees of Seller whom such senior management wishes to
encourage to remain in Seller's employ until the Effective
Time.
6.03. EXCHANGE LISTING
Buyer shall file a listing application with Nasdaq for the Buyer Shares
to be issued to the former holders of Seller Shares in the Merger at the time
prescribed by applicable rules and regulations of the Buyer Exchange, and shall
use all commercially reasonable efforts to cause the Buyer Shares to be issued
in connection with the Merger to be approved for listing on the Buyer Exchange,
subject to official notice of issuance, prior to the Closing Date. In addition,
Buyer will use its best efforts to maintain its listing on Nasdaq.
6.04. NOTIFICATION
Between the date of this Agreement and the Closing Date, Buyer promptly
shall notify Seller in writing if Buyer becomes aware of any fact or condition
that (i) causes or constitutes a breach in any material respect of any of
Buyer's or Acquisition Sub's representations and warranties or (ii) would
(except as expressly contemplated by this Agreement) cause or constitute a
breach in any material respect of any such representation or warranty had such
representation or warranty been made as of the time of occurrence or discovery
of such fact or condition. Should any such fact or condition require any change
in the Buyer Disclosure Schedule, Buyer promptly shall deliver to Seller a
supplement to the Buyer Disclosure Schedule specifying such change ("UPDATED
BUYER DISCLOSURE SCHEDULE"); provided, however, that the disclosure of such
change in the Updated Buyer Disclosure Schedule shall not be deemed to
constitute a cure of any breach of any representation or warranty made pursuant
to this Agreement unless consented to in writing by Seller. During the same
period, Buyer promptly shall notify Seller of (i) the occurrence of any breach
in any material respect of any of Buyer's or Acquisition Sub's covenants
contained in this Agreement, (ii) the occurrence of any event that may make the
satisfaction of the conditions in this Agreement impossible or unlikely in any
material respect or (iii) the occurrence of any event that is reasonably likely,
individually or taken with all other facts, events or circumstances known to
Buyer, to result in a material adverse effect with respect to Buyer.
54
6.05. TAKEOVER LAWS
Buyer shall take all necessary steps to (a) exempt (or cause the
continued exemption of) this Agreement and the Merger from the requirements of
any Takeover Law and from any provisions under its Articles and Regulations, as
applicable, by action of the Board of Directors of Buyer or otherwise, and (b)
assist in any challenge by Seller to the validity, or applicability to the
Merger, of any Takeover Law.
6.06. OFFICERS' AND DIRECTORS' INDEMNIFICATION
(a) For a period of six (6) years following the Effective Time,
Buyer shall, to the fullest extent permitted by applicable
law, indemnify, defend and hold harmless, and provide
advancement of expenses to, each person who is not, or has
been at any time prior to the date hereof or who becomes prior
to the Effective Time, a Director or Officer of Seller or any
Seller Subsidiary (each, an "INDEMNIFIED PARTY") against all
costs or expenses (including reasonable attorneys' fees),
judgments, fines, losses, claims, damages or liabilities
(collectively, "COSTS") incurred in connection with any claim,
action, suit, proceeding or investigation, whether civil,
criminal, administrative or investigative, arising out of
actions or omissions occurring on or prior to the Effective
Time (including, without limitation, matters, acts or
omissions occurring in connection with the approval of this
Agreement and the consummation of the transactions
contemplated hereby), whether asserted or claimed prior to, at
or after the Effective Time; provided that any determination
required to be made with respect to whether an Indemnified
Party's conduct complies with the standards set forth under
applicable law for indemnification shall be made by the court
in which the claim, action, suit or proceeding was brought or
by independent counsel (which shall not be counsel that
provides material services to Buyer) selected by Buyer and
reasonably acceptable to such Indemnified Party.
(b) If Buyer, the Surviving Corporation or any of its successors
or assigns (i) consolidates with or merges into any other
person and is not the continuing or surviving corporation or
entity of such consolidation or merger, (ii) transfers or
conveys all or substantially all its properties and assets to
any person or (iii) transfers, by means of a distribution,
sale, assignment or other transaction, all of the stock of the
Surviving Corporation or all or substantially all of its
assets, to any person, then, and in each such case, Buyer
shall cause proper provision to be made so that the successor
and assign of Buyer or the Surviving Corporation assumes the
obligations set forth in this Section and in such event all
references to the Surviving Corporation in this Section shall
be deemed a reference to such successor and assign.
(c) For a period of six (6) years from the Effective Time, Buyer
shall provide that portion of directors' and officers'
liability insurance that serves to reimburse the present and
former Officers and Directors of Seller and the
55
Seller Subsidiaries (determined as of the Effective Time) (as
opposed to Seller) with respect to claims against such
Officers and Directors arising from facts or events which
occurred before the Effective Time, on terms no less favorable
than those in effect on the date hereof; provided, however,
that Buyer may substitute therefor policies providing at least
comparable coverage containing terms and conditions no less
favorable than those in effect on the date hereof; provided,
however that in no event shall Buyer be required to expend
more than 250% of the current amount expended by Seller (the
"INSURANCE AMOUNT") to maintain or procure such directors' and
officers' liability insurance coverage; provided, further that
if Buyer is unable to maintain or obtain the insurance called
for by this Section 6.06(c), Buyer shall obtain as much
comparable insurance as, in the good faith judgment of the
Surviving Corporation's board, is available for the Insurance
Amount.
(d) Any Indemnified Party wishing to claim indemnification under
Section 6.06(a), upon learning of any claim, action, suit,
proceeding or investigation described above, shall promptly
notify Buyer thereof; provided that the failure so to notify
shall not affect the obligations of Buyer under Section
6.06(a) unless and to the extent that Buyer is actually and
materially prejudiced as a result of such failure.
(e) The provisions of this Section 6.06 shall survive consummation
of the Merger and are intended to be for the benefit of, and
will be enforceable by, each indemnified party, his or her
heirs and his or her representatives. The Surviving
Corporation shall pay (as incurred) all expenses, including
reasonable expenses of counsel, that an Indemnified Party may
incur in enforcing the indemnity and other obligations
provided for in this Section 6.06.
6.07. ELECTION OF A SELLER DIRECTOR TO BOARD OF DIRECTORS; ADVISORY
BOARD
(a) Buyer shall, or shall cause the board of directors of Buyer's
principal banking subsidiary, to appoint one (1) of the
current directors of Seller to such board at the first meeting
of such board held after the Effective Time. Such appointee
shall hold such position for at least one year after the
effective date of such appointment unless such person earlier
resigns or is removed for cause.
(b) Buyer shall cause Acquisition Sub to (i) create an advisory
board for CBank or its successor after the Effective Time,
(ii) appoint each then current director of Seller to such
advisory board, (iii) maintain such advisory board as so
composed for at least one year after the Effective Time, and
(iv) provide such advisory board members with compensation
equal, on an annual basis, to that received by them in the
fiscal year ended December 31, 2003.
56
ARTICLE SEVEN
FURTHER OBLIGATIONS OF THE PARTIES
7.01. SELLER STOCK OPTIONS
(a) As soon as practicable following the date of this Agreement,
the Board of Directors of Seller (or, if appropriate, any
committee administering Seller Stock Option Plans) and the
Board of Directors of Buyer shall adopt such resolutions or
take such other actions (if any), including, without
limitation, the approval of Seller's stockholders pursuant to
the Proxy Statement, as may be required to effect the
following:
(i) Each Seller Stock Option outstanding immediately
prior to the Effective Time that is exercisable for a
Seller Share at an exercise price less than $35.00
shall, upon the request of the holder thereof, be
deemed exercised on a net exercise basis (i.e., based
on the difference between the $35.00 and the exercise
price per share) and each Seller Share resulting from
such net exercise shall be entitled to receive the
Per Share Cash Consideration pursuant to the
provisions of Section 2.01; provided, that such
shares shall not be deemed outstanding for purposes
of calculation of the Total Cash Amount pursuant to
Article Two;
(ii) Each Seller Share subject to a Restricted Stock Award
outstanding immediately prior to the Effective Time
shall, be deemed outstanding for purposes of
calculating the number of Outstanding Shares entitled
to receive the Merger Consideration pursuant to the
provisions of Article Two;
(iii) Each Seller Stock Option outstanding immediately
prior to the Effective Time as to which the holder
thereof has not made the election permitted pursuant
to Section 7.01(a)(i) shall be amended and converted
into an option to purchase a number of Buyer Shares
(rounded to the nearest whole share) (an "ADJUSTED
OPTION") equal to (i) the number of Seller Shares
subject to such Seller Stock Option immediately prior
to the Effective Time multiplied by (ii) the Exchange
Ratio; and the per share exercise price for the Buyer
Shares issuable upon the exercise of such Adjusted
Option shall be equal to (i) the exercise price per
share of the Seller Shares at which such Seller Stock
Option was exercisable immediately prior to the
Effective Time divided by (ii) the Exchange Ratio
(rounded to the nearest whole cent); provided,
however, that in the case of any Seller Stock Option
to which Section 421 of the Code applies by reason of
its qualification under Section 422 of the Code, the
conversion formula shall be adjusted, if necessary,
to comply with Section 424(a) of the Code. Except as
otherwise provided herein, the Adjusted Options shall
be subject to the same terms and conditions
(including expiration date, vesting and
57
exercise provisions) as were applicable to the
corresponding Seller Stock Options immediately prior
to the Effective Time;
(iv) make such other changes to Seller Stock Plans as
Buyer and Seller may agree are appropriate to give
effect to the Merger and the provisions of this
Section 7.01; and
(v) Seller's Employee Stock Ownership Plan (the "SELLER
ESOP") shall be terminated as of the Effective Time.
To the extent permitted by applicable law and
consistent with fiduciary duties owed by the trustees
of the Seller ESOP, promptly after the Effective
Time, the trustees of the Seller ESOP shall sell a
sufficient number of shares of Buyer Shares received
with respect to the Seller Shares held, unallocated,
in the suspense account in the Seller ESOP such that
the proceeds of such sale shall equal or exceed the
then outstanding ESOP indebtedness and shall apply
the proceeds from such sale to the payment of the
ESOP indebtedness. Any remaining shares of Buyer
Shares and cash held in the suspense account after
the repayment of the ESOP indebtedness shall be
allocated to the ESOP participants in accordance with
the terms of the Seller ESOP and applicable laws and
regulations. In connection with the termination of
the Seller ESOP, the Buyer shall promptly apply to
the IRS for a favorable determination letter on the
tax-qualified status of the Seller ESOP on
termination and any amendments made to the Seller
ESOP in connection with its termination or otherwise,
if such amendments have not previously received a
favorable determination letter from the IRS with
respect to their qualification under Code Section
401(a). Any amendments to the Seller ESOP requested
by the IRS prior to the Effective Time shall be
adopted by Seller and any amendments requested by the
IRS after the Effective Time shall be adopted by
Buyer if upon advice of legal counsel to Buyer that
such amendments are appropriate. Any and all
distributions from the Seller ESOP after its
termination shall be made consistent with the
aforementioned determination letter from the IRS. The
account balances of participants in the Seller ESOP
will be distributed as soon as practicable after the
later of (a) the Effective Time and (b) the receipt
of a favorable determination letter for termination
of the Seller ESOP from the IRS or, if earlier, the
receipt of an opinion of counsel reasonably
acceptable to Buyer that such distribution may be
made in accordance with applicable law. Prior to the
Effective Time, Seller shall make contributions to,
and payments on the loan of, the Seller ESOP
consistent with past practices on regularly scheduled
payment dates.
(b) The adjustments provided herein with respect to any Seller
Stock Options that are "incentive stock options" as defined in
Section 422 of the Code
58
shall be and are intended to be effected in a manner which is
consistent with Sections 422 and 424(a) of the Code and all
regulations promulgated thereunder.
(c) At the Effective Time, Buyer shall assume the Seller Stock
Plans, with the result that all obligations of Seller under
Seller Stock Plans with respect to the Adjusted Options shall
be obligations of Buyer following the Effective Time.
(d) On or prior to the date that is thirty (30) days after the
Effective Time, Buyer shall prepare and file with the SEC a
registration statement on Form S-8 (or another appropriate
form) registering a number of shares of Buyer Shares equal to
at least the number of shares subject to the Adjusted Options.
Such registration statement shall be kept effective (and the
current status of the prospectus or prospectuses required
thereby shall be maintained) as long as any Adjusted Options
may remain outstanding.
(e) Except as otherwise specifically provided by this Section 7.01
and except to the extent required under the respective terms
of Seller Stock Options as in effect on the date of this
Agreement, all restrictions or limitations on transfer with
respect to Seller Stock Options awarded under Seller Stock
Plans or any other plan, program or arrangement of Seller or
any of its subsidiaries, to the extent that such restrictions
or limitations shall not have already lapsed, and all other
terms thereof, shall remain in full force and effect with
respect to such options after giving effect to the Merger and
the assumption by Buyer as set forth above.
(f) In addition to any method of exercise permitted under the
applicable Seller Stock Option, a holder of an Adjusted Option
may exercise such Adjusted Option in whole or in part in
accordance with its terms by delivering a properly executed
notice of exercise to Buyer, together with the consideration
therefor and the federal withholding tax information, if any,
required in accordance with the related Seller Stock Plan.
7.02. NECESSARY FURTHER ACTION
Each of Seller, Acquisition Sub and Buyer agrees to use its best
efforts to take, or cause to be taken, all necessary actions and execute all
additional documents, agreements and instruments required to consummate the
transactions contemplated in this Agreement.
7.03. COOPERATIVE ACTION
Subject to the terms and conditions of this Agreement, each of Seller,
Acquisition Sub and Buyer agrees to use its best efforts to take, or cause to be
taken, all further actions and execute all additional documents, agreements and
instruments which may be reasonably required, in the opinion of counsel for
Seller and counsel for Buyer and Acquisition Sub, to satisfy all legal
requirements of the States of West Virginia and Delaware and the United States,
59
so that this Agreement and the transactions contemplated hereby will become
effective as promptly as practicable.
7.04. SATISFACTION OF CONDITIONS
Each of Buyer, Acquisition Sub and Seller shall use its best efforts to
satisfy all of the conditions to this Agreement and to cause the consummation of
the transactions described in this Agreement, including making all applications,
notices and filings with Governmental Authorities and Regulatory Authorities and
taking all steps to secure promptly all consents, rulings and approvals of
Governmental Authorities and Regulatory Authorities which are necessary for the
performance by each party of each of its obligations under this Agreement and
the transactions contemplated hereby.
7.05. PRESS RELEASES
None of Buyer, Acquisition Sub and Seller shall make any press release
or other public announcement concerning the transactions contemplated by this
Agreement without the consent of the other parties hereto as to the form and
contents of such press release or public announcement, except to the extent that
such press release or public announcement may be required by law or Nasdaq rules
to be made before such consent can be obtained.
7.06. REGISTRATION STATEMENTS; PROXY STATEMENT; SHAREHOLDERS'
MEETING
(a) As promptly as reasonably practical following the date hereof,
Seller shall prepare, in consultation with Buyer and with
Buyer's cooperation, and cause to be filed with the SEC,
mutually acceptable proxy material which shall constitute the
proxy statement/prospectus relating to the matters to be
submitted to the Seller stockholders at the Seller's
Stockholders Meeting (such proxy statement/prospectus and all
amendments or supplements thereto, the "PROXY
STATEMENT/PROSPECTUS"), and Buyer shall and file with the SEC
a registration statement on Form S-4 with respect to the
issuance of Buyer Shares in the Merger (such registration
statement and all amendments or supplements thereto, the
"REGISTRATION STATEMENT"). Each of Seller and Buyer agrees to
use all commercially reasonable efforts to cause the
Registration Statement including the Proxy
Statement/Prospectus to be declared effective under the
Securities Act as promptly as reasonably practicable after the
filing thereof. Buyer also agrees to use all reasonable
efforts to obtain, prior to the effective date of the
Registration Statement, all necessary state securities law or
"Blue Sky" permits and approvals required to carry out the
transactions contemplated by this Agreement. Seller agrees to
promptly furnish to Buyer all information concerning Seller,
the Seller Subsidiaries and the Officers, Directors and
shareholders of Seller and the Seller Subsidiaries as Buyer
reasonably may request in connection with the foregoing. Each
of Seller and Buyer shall promptly notify the other upon the
receipt of any comments from the SEC or its staff or any
request from the SEC or its staff for amendments or
supplements to the Registration Statement or the Proxy
Statement/Prospectus and shall promptly provide the other with
60
copies of all correspondence between it and its
representatives, on the one hand, and the SEC and its staff,
on the other hand. Notwithstanding the foregoing, prior to
filing the Registration Statement (or any amendment or
supplement thereto) or filing or mailing the Proxy Statement/
Prospectus (or any amendment or supplement thereto) or
responding to any comments of the SEC with respect thereto,
each of Seller and Buyer, as the case may be, (i) shall
provide the other party with a reasonable opportunity to
review and comment on such document or response, (ii) shall
include in such document or response all comments reasonably
proposed by such other party, and (iii) shall not file or mail
such document or respond to the SEC prior to receiving such
other's approval, which approval shall not be withheld,
conditioned or delayed unreasonably.
(b) Each of Seller and Buyer agrees, as to itself and its
Subsidiaries, that none of the information supplied or to be
supplied by it for inclusion or incorporation by reference in
(i) the Registration Statement will, at the time the
Registration Statement and each amendment or supplement
thereto, if any, is filed with the SEC and at the time the
Registration Statement becomes effective under the Securities
Act, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or
necessary to make the statements therein in light of the
circumstances under which they were made, not misleading, and
(ii) the Proxy Statement/Prospectus and any amendment or
supplement thereto will, as of the date such Seller Proxy
Statement is mailed to shareholders of Seller and up to and
including the date of the meeting of Seller's shareholders to
which such Seller Proxy Statement relates, contain any untrue
statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the
statements therein in light of the circumstances under where
they were made not misleading.
(c) Each of Seller and Buyer agrees, if it shall become aware
prior to the Effective Time of any information furnished by it
that would cause any of the statements in the Registration
Statement and the Proxy Statement/Prospectus to be false or
misleading with respect to any material fact, or to omit to
state any material fact necessary to make the statements
therein not false or misleading, to promptly inform the other
party thereof and to take the necessary steps to correct the
Registration Statement and the Proxy Statement/Prospectus.
(d) Buyer agrees to advise Seller, promptly after Buyer receives
notice thereof, of the time when the Registration Statement
has become effective or any supplement or amendment has been
filed, of the issuance of any stop order or the suspension of
the qualification of Buyer Shares for offering or sale in any
jurisdiction, of the initiation or threat of any proceeding
for any such purpose, or of any request by the SEC for the
amendment or supplement of the Registration Statement or for
additional information.
61
(e) Seller shall, as promptly as practicable following the date of
this Agreement, establish a record date (which will be as
promptly as reasonably practicable following the date of this
Agreement) for, duly call, give notice of, convene and hold a
meeting of its stockholders (the "SELLER MEETING") for the
purpose of adopting this Agreement and approving the
transactions contemplated hereby, regardless of whether the
Board of Directors of Seller determines at any time that this
Agreement or the Merger is no longer advisable or recommends
that the stockholders of Seller reject this Agreement or the
Merger. Seller shall cause the Seller Meeting to be held as
promptly as practicable following the effectiveness of the
Registration Statement, and in any event not later than 30
days after the effectiveness of the Registration Statement.
Seller shall, through its Board of Directors, recommend to its
stockholders that they adopt this Agreement, and shall include
such recommendation in the Proxy Statement/Prospectus, in each
case subject to its fiduciary duties as provided in Section
5.03. Without limiting the generality of the foregoing, Seller
agrees that its obligations pursuant to this Section shall not
be affected by the commencement, public proposal, public
disclosure or communication to Seller or any other person of
any Takeover Proposal.
7.07. REGULATORY APPLICATIONS
Buyer, Acquisition Sub and Seller and their respective Subsidiaries
shall cooperate and use their respective best efforts to prepare all
documentation, to timely effect all filings and to obtain all permits, consents,
approvals and authorizations of all third parties and Governmental and
Regulatory Authorities, including, without limitation, those required to be
filed pursuant to the HSR Act and the BHC Act, as well as pre-merger
notification forms required by the merger notification or control laws and
regulations of any applicable jurisdiction, as agreed to by the parties, in any
event which are necessary to consummate the transactions contemplated by this
Agreement. Each of Buyer and Seller shall have the right to review in advance,
and to the extent practicable, each will consult with the other, in each case
subject to applicable laws relating to the exchange of information, with respect
to, and shall be provided in advance so as to reasonably exercise its right to
review in advance, all material written information submitted to any third party
or any Governmental or Regulatory Authority in connection with the transactions
contemplated by this Agreement. In exercising the foregoing right, each of the
parties hereto agrees to act reasonably and as promptly as practicable. Each
party hereto agrees that it will consult with the other party hereto with
respect to the obtaining of all material permits, consents, approvals and
authorizations of all third parties and Governmental and Regulatory Authorities
necessary or advisable to consummate the transactions contemplated by this
Agreement and each party will keep the other apprised of the status of material
matters relating to completion of the transactions contemplated hereby. Each
party agrees, upon request, to furnish the other party with all information
concerning itself, its Subsidiaries, directors, officers and shareholders and
such other matters as may be reasonably necessary or advisable in connection
with any filing, notice or application made by or on behalf of such other party
or of its Subsidiaries to any third party or Governmental or Regulatory
Authority.
62
7.08. COORDINATION OF DIVIDENDS
After the date of this Agreement, Seller shall coordinate with Buyer
the payment of any dividends authorized under Section 5.01(b)(iv) and the record
date and payment dates relating thereto, it being the intention of the parties
hereto that the holders of Seller Shares (who will become holders of Buyer
Shares following the Closing) shall not receive two dividends, or fail to
receive one dividend, from Seller and/or Buyer for any single calendar quarter.
ARTICLE EIGHT
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PARTIES
8.01. CONDITIONS TO THE OBLIGATIONS OF BUYER AND ACQUISITION SUB
The obligations of Buyer and Acquisition Sub under this Agreement shall
be subject to the satisfaction, or written waiver by Buyer prior to the Closing
Date, of each of the following conditions precedent:
(a) The representations and warranties of Seller set forth in this
Agreement shall be true and correct in all material respects
as of the date of this Agreement and as of the Closing Date as
though such representations and warranties were also made as
of the Closing Date, except that those representations and
warranties which by their terms speak as of a specific date
shall be true and correct as of such date; and Buyer and
Acquisition Sub shall have received a certificate, dated the
Closing Date, signed on behalf of Seller by its chief
executive officer and chief financial officer of Seller to
such effect.
(b) Seller shall have performed in all material respects all of
its covenants and obligations under this Agreement to be
performed by it on or prior to the Closing Date, including
those relating to the Closing, and Buyer and Acquisition Sub
shall have received a certificate, dated the Closing Date,
signed on behalf of Seller by its chief executive officer and
chief financial officer of Seller to such effect.
(c) In the aggregate, an amount of less than ten percent (10%) of
the number of Buyer Shares to be issued in the Merger shall be
(i) subject to purchase as fractional shares, and (ii)
proposed to be issued to Seller's shareholders who have
perfected their appraisal rights under Section 262 of the DGCL
in connection with the transactions contemplated by this
Agreement.
(d) Buyer shall have received the written opinion of Kirkpatrick &
Lockhart ("K&L"), tax counsel to Buyer ("K&L"), dated the
Closing Date, to the effect that, on the basis of facts,
representations and assumptions set forth in such opinion, the
Merger will be treated for Federal income tax purposes as a
reorganization within the meaning of Section 368(a)(1)(A) of
the Code. In rendering its opinion, K&L will require and rely
upon
63
customary representations contained in letters from Buyer and
Seller that counsel to Buyer reasonably deems relevant.
(e) Buyer shall have received the written opinion of Katten Muchin
Zavis Rosenman, counsel to Seller ("KMZR"), dated the Closing
Date, in substantially the form of Exhibit B hereto.
8.02. CONDITIONS TO THE OBLIGATIONS OF SELLER
The obligations of Seller under this Agreement shall be subject to
satisfaction, or written waiver by Seller prior to the Closing Date, of each of
the following conditions precedent:
(a) The representations and warranties of Buyer and Acquisition
Sub set forth in this Agreement shall be true and correct in
all material respects as of the date of this Agreement and as
of the Closing Date as though such representations and
warranties were also made as of the Closing Date, except that
representations and warranties which by their terms speak as
of a specific date shall be true and correct as of such date;
and Seller shall have received a certificate, dated the
Closing Date, signed on behalf of Buyer and Acquisition Sub by
Buyer's chief executive officer and chief financial officer to
such effect.
(b) Buyer shall have performed in all material respects all of its
covenants and obligations under this Agreement to be performed
by it on or prior to the Closing Date, including those related
to the Closing, and Seller shall have received a certificate,
dated the Closing Date, signed on behalf of Buyer and
Acquisition Sub by Buyer's chief executive officer and chief
financial officer to such effect.
(c) Seller shall have received the written opinion of KMZR to
Seller, dated the Closing Date, to the effect that, on the
basis of facts, representations and assumptions set forth in
such opinion, the Merger will be treated for Federal income
tax purposes as a reorganization within the meaning of Section
368(a)(1)(A) of the Code. In rendering its opinion, KMZR will
require and rely upon customary representations contained in
letters from Buyer and Seller that counsel to Buyer reasonably
deems relevant.
(d) Seller shall have received the written opinion of Phillips,
Gardill, Kaiser & Altmeyer, PLLC, transaction counsel to Buyer
and acquisition Sub, dated the Closing Date, dated the Closing
Date, in substantially the form of Exhibit C hereto.
(e) Buyer shall have obtained the consent or approval of each
person (other than Governmental and Regulatory Authorities)
whose consent or approval shall be required in connection with
the transactions contemplated hereby under any loan or credit
agreement, note, mortgage, indenture, lease, license or other
agreement or instrument, except those for which failure to
obtain such consents and approvals would not, individually
64
or in the aggregate, have a material adverse effect, after the
Effective Time, on the Surviving Corporation.
(f) Seller shall have received from Seller's Financial Advisor an
opinion reasonably acceptable to Seller, dated as of the date
of the first mailing of the Proxy Statement/Prospectus to
Seller's shareholders, to the effect that the consideration to
be received by such shareholders in the Merger is fair, from a
financial point of view.
8.03. MUTUAL CONDITIONS
The obligations of Seller and Buyer under this Agreement shall be
subject to the satisfaction, or written waiver by Buyer and Seller prior to the
Closing Date, of each of the following conditions precedent:
(a) The shareholders of Seller shall have duly adopted this
Agreement by the required vote.
(b) All approvals of Governmental Authorities and Regulatory
Authorities required to consummate the transactions
contemplated by this Agreement shall have been obtained and
shall remain in full force and effect and all statutory
waiting periods in respect thereof shall have expired and no
such approvals or statute, rule or order shall contain any
conditions, restrictions or requirements which would
reasonably be expected to have a material adverse effect after
the Effective Time on the present or prospective consolidated
financial condition, business or operating results of the
Surviving Corporation.
(c) No temporary restraining order, preliminary or permanent
injunction or other order issued by a court of competent
jurisdiction or other legal restraint or prohibition
preventing the consummation of the Merger shall be in effect.
No Governmental or Regulatory Authority of competent
jurisdiction shall have enacted, issued, promulgated,
enforced, deemed applicable or entered any statute, rule,
regulation, judgment, decree, injunction or other order
prohibiting consummation of the transactions contemplated by
this Agreement or making the Merger illegal.
(d) The Registration Statement shall have become effective under
the Securities Act and no stop-order or similar restraining
order suspending the effectiveness of the Registration
Statement shall have been issued and no proceeding for that
purpose shall have been initiated by the SEC.
(e) Buyer shall have received all state securities and "blue sky"
permits and other authorizations and approvals necessary to
consummate the Merger and the transactions contemplated hereby
and no order restraining the ability of Sunday to issue Sunday
Shares pursuant to the Merger shall have been issued and no
proceedings for that purpose shall have been initiated or
threatened by any state securities administrator.
65
(f) The Buyer Shares to be issued in the Merger shall have been
approved for listing on the Buyer Exchange subject to official
notice of issuance.
(g) Each of the parties shall be satisfied with the deductibility
under the provisions of Section 280G of the Code of the
payments to be made to John W. Raisbeck, the President and
Chief Executive Officer of Seller, in connection with the
transactions contemplated hereby.
(h) CBank or its successor shall have entered into Noncompete,
Consulting or Employment Agreements with those senior
executives of Seller and CBank listed in Section 8.03(h) of
the Seller Disclosure Schedule on terms and conditions
mutually satisfactory to Buyer and such individuals.
ARTICLE NINE
CLOSING
9.01. CLOSING
The closing (the "CLOSING") of the transactions contemplated by this
Agreement shall be held at Seller's main office in Springfield, Ohio, commencing
at 9:00 a.m. local time, on (a) the date designated by Buyer, which date shall
not be earlier than the third business day to occur after the last of the
conditions set forth in Article Eight shall have been satisfied or waived in
accordance with the terms of this Agreement (excluding conditions that, by their
terms, cannot be satisfied until the Closing Date) or later than the last
business day of the month in which such third business day occurs; provided, no
such election shall cause the Closing to occur on a date after that specified in
Section 11.01(b)(i) of this Agreement or after the date or dates on which any
Governmental or Regulatory Authority approval or any extension thereof expires,
and provided further, that if Seller has delivered a termination notice pursuant
to the provisions of Section 11.01(d)(iv), the Closing Date shall be the third
business day following delivery of the Top-Up Notice, if any, or (b) such other
date to which the parties agree in writing. The date of the Closing is sometimes
herein called the "CLOSING DATE."
9.02. CLOSING TRANSACTIONS REQUIRED OF BUYER
At the Closing, Buyer shall cause all of the following to be delivered
to Seller:
(a) The certificates of Buyer contemplated by Section 8.02(a) and
(b) of this Agreement.
(b) Copies of resolutions adopted by the directors of Buyer and
Acquisition Sub, approving and adopting this Agreement and
authorizing the consummation of the transactions described
herein, accompanied by a certificate of the secretary or
assistant secretary of Buyer and Acquisition Sub, as
applicable, dated as of the Closing Date, and certifying (i)
the date and manner of adoption of each such resolution; and
(ii) that each such
66
resolution is in full force and effect, without amendment or
repeal, as of the Closing Date.
(c) The opinions of counsel to Buyer and Acquisition Sub
contemplated by Section 8.02 of this Agreement.
9.03. CLOSING TRANSACTIONS REQUIRED OF SELLER
At the Closing, Seller shall cause all of the following to be delivered
to Buyer:
(a) Certificate of merger duly executed by the Surviving
Corporation in accordance with the WVBCA and DGCL and in
appropriate form for filing, respectively, with the
Secretaries of State of West Virginia and Delaware.
(b) The certificates of Seller contemplated by Sections 8.01(a)
and (b) of this Agreement.
(c) Copies of all resolutions adopted by the directors and the
shareholders of Seller approving and adopting this Agreement
and authorizing the consummation of the transactions described
herein, accompanied by a certificate of the secretary or the
assistant secretary of Seller, dated as of the Closing Date,
and certifying (i) the date and manner of the adoption of each
such resolution; and (ii) that each such resolution is in full
force and effect, without amendment or repeal, as of the
Closing Date.
(d) The opinions of KMZR contemplated by Section 8.01(e) of this
Agreement.
ARTICLE TEN
NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS
10.01. NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS
The representations, warranties and covenants of Buyer, Acquisition Sub
and Seller set forth in this Agreement, or in any document delivered pursuant to
the terms hereof or in connection with the transactions contemplated hereby,
shall not survive the Closing and the consummation of the transactions referred
to herein, other than covenants which by their terms are to survive or be
performed after the Effective Time (including, without limitation, those set
forth in Sections 6.02, 6.06, 6.07, 7.05 and 7.06, this Article Ten and Article
Twelve); except that no such representations, warranties or covenants shall be
deemed to be terminated or extinguished so as to deprive the Surviving
Corporation (or any director, officer or controlling person thereof) of any
defense in law or equity which otherwise would be available against the claims
of any person, including, without limitation, any shareholder or former
shareholder of either Seller or Buyer.
67
ARTICLE ELEVEN
TERMINATION
11.01. TERMINATION
This Agreement may be terminated, and the Merger may be abandoned, at
any time prior to the Effective Time, whether prior to or after this Agreement
has been adopted by the shareholders of Seller:
(a) By mutual written agreement of Seller and Buyer duly
authorized by action taken by or on behalf of their respective
Boards of Directors;
(b) By either Seller or Buyer upon written notification to the
non-terminating party by the terminating party:
(i) at any time after December 31, 2004, if the Merger
shall not have been consummated on or prior to such
date and such failure to consummate the Merger is not
caused by a breach of this Agreement by the
terminating party;
(ii) if the shareholders of Seller shall not have adopted
this Agreement by reason of the failure to obtain the
requisite vote upon a vote held at a Seller Meeting,
or any adjournment thereof; or
(iii) if the approval of any Governmental or Regulatory
Authority required for consummation of the Merger and
the other transactions contemplated by this Agreement
shall have been denied by final non-appealable action
of such Governmental or Regulatory Authority.
(c) By Buyer by providing written notice to Seller:
(i) if prior to the Closing Date, any representation and
warranty of Seller shall have become untrue such that
the condition set forth at Section 8.01(a) would not
be satisfied and which breach has not been cured
within ten (10) business days following receipt by
Seller of written notice of breach or is incapable of
being cured during such time period; or
(ii) if Seller shall have failed to comply in any material
respect with any covenant or agreement on the part of
Seller contained in this Agreement required to be
complied with prior to the date of such termination,
which failure to comply shall not have been cured
within ten (10) business days following receipt by
Seller of written notice of such failure to comply or
is incapable of being cured during such time period.
(d) By Seller by providing written notice to Buyer:
68
(i) if prior to the Closing Date, any representation and
warranty of Buyer or Acquisition Sub shall have
become untrue such that the condition set forth at
Section 8.02(a) would not be satisfied and which
breach has not been cured within ten (10) business
days following receipt by Buyer of written notice of
breach or is incapable of being cured during such
time period;
(ii) if Buyer or Acquisition Sub shall have failed to
comply in any material respect with any covenant or
agreement on the part of Buyer or Acquisition Sub
contained in this Agreement required to be complied
with prior to the date of such termination, which
failure to comply shall not have been cured within
ten (10) business days following receipt by Buyer of
written notice of such failure to comply or is
incapable of being cured during such time period;
(iii) by Seller following receipt of a Superior Proposal
subject to compliance with the terms and conditions
of Section 5.03(b);
(iv) if Seller's Financial Advisor shall have refused to
deliver the "bring-down" to its fairness opinion
required to be delivered pursuant to Section 8.02(f);
and
(v) this Agreement may be terminated any time prior to
Closing by the Board of Directors of Seller at any
time during the five-day period following the
Determination Date (as defined below) (the "WALKAWAY
RIGHT"), if:
(1) the Average Closing Price (as defined below)
shall be less than the product of 0.80 and
the Starting Price (as defined below); and
(2) (a) the number obtained by dividing the
Average Closing Price (as defined below) by
the Starting Price (such number being
referred to herein as the "BUYER RATIO")
shall be less than (b) the number obtained
by dividing the Index Price (as defined
below) on the Determination Date by the
Index Price on the Starting Date (as defined
below) and subtracting 0.20 from such
quotient;
subject to the following. If Seller elects to
exercise its termination right pursuant to the
immediately preceding sentence, it shall give prompt
written notice to Buyer; provided that such notice of
election to terminate may be withdrawn by Seller at
any time within the aforementioned five-day period.
During the five-day period commencing with its
receipt of such notice, Buyer shall have the option
of increasing the Exchange Ratio in a manner such
that the conditions set forth in clauses (1) and (2)
above shall be
69
deemed not to exist (the "TOP-UP NOTICE. For purposes
hereof, the condition set forth in clause (1) above
shall be deemed not to exist if the Exchange Ratio
and/or the Per Share Cash Consideration is increased
so that the Per Share Consideration (as defined
below) after such increase is not less than the Per
Share Consideration that would have been in effect if
the condition set forth in clause (1) above did not
exist. For purposes hereof, the condition set forth
in clause (2) above shall be deemed not to exist if
the Exchange Ratio is increased so that the Per Share
Consideration after such increase is not less than
the Per Share Consideration that would have been in
effect if the condition set forth in clause (2) above
did not exist. If Buyer makes this election, within
such five-day period, it shall give prompt written
notice to Seller of such election and the revised
Exchange Ratio, whereupon no termination shall have
occurred pursuant to this Section 11.01(d)(v) and
this Agreement shall remain in effect in accordance
with its terms (except as the Exchange Ratio shall
have been so modified), and any references in this
Agreement to "Exchange Ratio" shall thereafter be
deemed to refer to the Exchange Ratio after giving
effect to any adjustment made pursuant to this
Section 11.01(d)(v). For purposes of this Section
11.01(d)(v), the following terms shall have the
following meanings:
"AVERAGE CLOSING PRICE" means the average of
the last reported sale prices per share of
the Buyer Shares as reported on the Nasdaq
(as reported in The Wall Street Journal or,
if not reported therein, in another mutually
agreed upon authoritative source) for the 20
consecutive trading days ending on the
Determination Date.
"DETERMINATION DATE" shall mean the date on
which the last approval, consent or waiver
of any Governmental Entity required to
permit consummation of the transactions
contemplated by this Agreement is received,
without regard to any requisite waiting
period in respect thereof.
"INDEX PRICE" on a given date means the
closing value of the Nasdaq Bank Index as
reported on Bloomberg.com, or if not
reported therein, in another mutually agreed
upon authoritative source.
"PER SHARE CONSIDERATION" shall mean the sum
of the Exchange Ratio multiplied by the
Average Closing Price.
"STARTING PRICE" shall mean last reported
sale prices per share of Buyer Common Stock
as reported on the Nasdaq (as reported in
The Wall Street Journal or, if not reported
70
therein, in another mutually agreed upon
authoritative source) on the Starting Date.
"STARTING DATE" shall mean the last full
trading day prior to the announcement by
press release of the Merger or, if such
announcement occurs after the close of
trading on any trading day, such trading
day.
If Buyer declares or effects a stock dividend,
reclassification, recapitalization, split-up,
combination, exchange of shares or similar
transaction between the Starting Date and the
Determination Date, the prices for the common stock
of Buyer shall be appropriately adjusted for the
purposes of applying this Section 11.01(d)(v).
11.02. EFFECT OF TERMINATION
(a) If this Agreement is validly terminated by either Seller or
Buyer pursuant to Section 11.01, this Agreement will forthwith
become null and void and there will be no liability or
obligation on the part of either Seller or Buyer, except (i)
that the provisions of Sections 5.03, 7.05, 7.06 and 12.07 and
this Article XI will continue to apply following any such
termination, (ii) that nothing contained herein shall relieve
any party hereto from liability for breach of its
representations, warranties, covenants or agreements contained
in this Agreement and (iii) as provided in paragraph (b)
below.
(b) Seller shall promptly pay to Buyer a termination fee of
$2,500,000 in immediately available federal funds if:
(i) Seller or CBank enters into any agreement in respect
of an Acquisition Proposal prior to the termination
of this Agreement or after the termination of this
Agreement pursuant to Sections 11.01(b)(ii) or
11.01(c) and before the date that is six months after
the date of termination of this Agreement; or
(ii) Seller, CBank or the shareholders of Seller receive
an Acquisition Proposal, the Board of Directors of
Seller withdraws or modifies in any manner materially
adverse to Buyer its recommendation to the
shareholders of Seller and either (A) (1) the
shareholders of Seller do not adopt this Agreement at
the meeting called and held for such purpose in
accordance with this Agreement and (2) at any time
after the date of this Agreement and before the date
of such shareholders' meeting, a Takeover Proposal
shall have been publicly announced or other otherwise
communicated to the Senior management or Board of
Directors of Seller or (B) the shareholders of Seller
fail to meet by December 15, 2004, to vote on the
adoption of this Agreement; or
71
(iii) Seller terminates this Agreement pursuant to the
provisions of Section 11.01(d)(iii) hereof.
ARTICLE TWELVE
MISCELLANEOUS
12.01. NOTICES
All notices, requests, demands and other communications required or
permitted to be given under this Agreement shall be given in writing and shall
be deemed to have been duly given (a) on the date of delivery if delivered by
hand or by telecopy, upon confirmation of receipt, (b) on the first business day
following the date of dispatch if delivered by a recognized next-day courier
service, or (c) on the third business day following the date of mailing if sent
by certified mail, postage prepaid, return receipt requested. All notices
thereunder shall be delivered to the following addresses:
If to Seller, to:
Western Ohio Financial Corporation
28 East Main Street
Springfield, Ohio 45501-0509
Attn: Chief Executive Officer
Facsimile Number: (937) 327-1126
with a copy to:
Katten Muchin Zavis Rosenman
1025 Thomas Jefferson Street N.W.
East Lobby, Suite 700
Washington, D.C. 20007-5201
Attention: Jeffrey W. Werthan
Facsimile Number: (202) 298-7570
If to Buyer, to:
WesBanco, Inc.
1 Bank Plaza
Wheeling, WV 26003
Attn: Chief Executive Officer
Facsimile Number: (304) 234-9450
with a copy to:
Phillips, Gardill, Kaiser & Altmeyer, PLLC
61 Fourteenth Street
Wheeling, WV 26003
Attention: James C. Gardill
Facsimile Number: (304) 232-4918
72
Any party to this Agreement may, by notice given in accordance with this Section
12.01, designate a new address for notices, requests, demands and other
communications to such party.
12.02. COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be a duplicate original, but all of which taken
together shall be deemed to constitute a single instrument.
12.03. ENTIRE AGREEMENT
This Agreement and the related Letter of Confidentiality dated
_________, 2004 as accepted by Seller and Buyer (the "LETTER OF
CONFIDENTIALITY") (a) constitute the entire agreement, and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter of this Agreement and the Letter of
Confidentiality and (b) except for the provisions of Sections 6.02(a), 6.02(b),
6.06, 6.07(b) and 7.01(a) of this Agreement, are not intended to confer upon any
person other than the parties hereto and thereto (and their respective
successors and assigns) any rights or remedies.
12.04. SUCCESSORS AND ASSIGNS
This Agreement shall inure to the benefit of and be binding upon the
respective successors and assigns (including successive, as well as immediate,
successors and assigns) of the parties hereto. This Agreement may not be
assigned by either party hereto without the prior written consent of the other
party.
12.05. CAPTIONS
The captions contained in this Agreement are included only for
convenience of reference and do not define, limit, explain or modify this
Agreement or its interpretation, construction or meaning and are in no way to be
construed as part of this Agreement.
12.06. GOVERNING LAW
This Agreement shall be governed by, and construed in accordance with,
the laws of the State of Delaware without giving effect to principles of
conflicts or choice of laws (except to the extent that mandatory provisions of
Federal law are applicable).
12.07. PAYMENT OF FEES AND EXPENSES
(a) Except as otherwise agreed in writing, each party hereto shall
pay all costs and expenses, including legal and accounting fees, and all
expenses relating to its performance of, and compliance with, its undertakings
herein. All fees to be paid to Governmental and Regulatory Authorities in
connection with the transactions contemplated by this Agreement shall be borne
by Buyer.
(b) Notwithstanding the provisions of subsection (a) above, if
this Agreement is terminated as a result of the failure of the parties to obtain
the approval of the Federal Reserve
73
Board under the BHC Act, then Buyer shall promptly reimburse Seller for Seller's
documented out-of-pocket costs and expenses in connection with this Agreement
and the transactions contemplated hereby.
(c) Each of the parties acknowledges that the agreements contained
in this Section are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, the other party would not enter
into this Agreement; accordingly, if either of the parties fails to pay in a
timely manner the amounts due pursuant to this Section and, in order to obtain
such payment, the other party makes a claim that results in a judgment against
the first party for the amounts set forth in this Section, the first party shall
pay to the other party its costs and expenses (including attorneys' fees and
expenses) in connection with such suit, together with interest on the applicable
amounts at a rate per annum equal to three-month LIBOR (as reported in The Wall
Street Journal (Northeast edition) or, if not reported therein, in another
authoritative source selected by the party to which payment is due) on the date
such payment was required to be made (or if no quotation for three-month LIBOR
is available for such date, on the next preceding date for which such a
quotation is available) plus 200 basis. Payment of the fees or the reimbursement
of expenses described in this Section shall not be in lieu of damages incurred
if of intentional breach of the provisions of this Section.
12.08. AMENDMENT
From time to time and at any time prior to the Effective Time, this
Agreement may be amended only by an agreement in writing executed in the same
manner as this Agreement, after authorization of such action by the Boards of
Directors of the Constituent Corporations; except that after the Seller Meeting,
this Agreement may not be amended if it would violate the DGCL or the federal
securities laws.
12.09. WAIVER
The rights and remedies of the parties to this Agreement are cumulative
and not alternative. Neither the failure nor any delay by any party in
exercising any right, power or privilege under this Agreement or the documents
referred to in this Agreement will operate as a waiver of such right, power or
privilege, and no single or partial exercise of any such right, power or
privilege will preclude any other or further exercise of such right, power or
privilege or the exercise of any other right, power or privilege.
12.10. DISCLOSURE SCHEDULES
If of any inconsistency between the statements in the body of this
Agreement and those in the Seller Disclosure Schedule (other than an exception
expressly set forth as such in the Seller Disclosure Schedule with respect to a
specifically identified representation or warranty), the statements in the body
of this Agreement will control.
12.11. NO THIRD-PARTY RIGHTS
Except as specifically set forth herein, nothing expressed or referred
to in this Agreement will be construed to give any person other than the parties
to this Agreement any legal or equitable right, remedy or claim under or with
respect to this Agreement or any
74
provision of this Agreement. This Agreement and all of its provisions and
conditions are for the sole and exclusive benefit of the parties to this
Agreement and their successors and assigns.
12.12. WAIVER OF JURY TRIAL
Each of the parties hereto irrevocably waives any and all right to
trial by jury in any legal proceeding arising out of or related to this
Agreement or the transactions contemplated hereby.
12.13. SEVERABILITY
If any provision of this Agreement is held invalid or unenforceable by
any court of competent jurisdiction, the other provisions of this Agreement will
remain in full force and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
75
IN WITNESS WHEREOF, this Agreement and Plan of Merger has been executed
on behalf of Buyer, Acquisition Sub and Seller to be effective as of the date
set forth in the first paragraph above.
ATTEST: WESBANCO, INC.
By:/s/ Paul M. Limbert
--------------------------- ----------------------------------
Printed Name: Paul M. Limbert
Title: President and Chief Executive Officer
ATTEST: WOFC, INC.
By: /s/ Paul M. Limbert
--------------------------- ----------------------------------
Printed Name: Paul M. Limbert
Title:
ATTEST: WESTERN OHIO FINANCIAL CORPORATION
By: /s/ John W. Raisbeck
--------------------------- ----------------------------------
Printed Name: John W. Raisbeck
Title: President and Chief Executive Officer
76
EXHIBIT A
________, 200_
WesBanco, Inc.
1 Bank Plaza
Wheeling, WV 26003
Attn: Chief Executive Officer
Gentlemen:
I have been advised that, as of the date hereof, I may be deemed to be
an "affiliate" of Western Ohio Financial Corporation, a Delaware corporation
("WFC"), as the term "affiliate" is (i) defined for purposes of paragraphs (c)
and (d) of Rule 145 of the Rules and Regulations (the "Rules and Regulations")
of the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "Securities Act"), and/or (ii) used in
and for purposes of Accounting Series, Releases 130 and 135, as amended, of the
Commission. Pursuant to the terms of the Agreement and Plan of Merger, dated as
of April 1, 2004 (the "Merger Agreement"), by and between WFC, WesBanco, Inc., a
West Virginia corporation ("Buyer"), and WOFC, Inc., a West Virginia corporation
and a wholly-owned subsidiary of Buyer ("Acquisition Sub"), WFC will be merged
(the "Merger") with and into Acquisition Sub and the name of the surviving
corporation will be __________, a West Virginia corporation (the "Surviving
Corporation").
As used herein, "WFC Common Shares" means the shares of common stock,
$0.01 par value per share, of WFC, and "Buyer Shares" means the common shares,
$2.0833 par value per share, of Buyer.
I represent, warrant and covenant to Buyer that if I receive any Buyer
Shares as a result of the Merger:
A. I shall not make any sale, transfer or other
disposition of any Buyer Shares (including any securities which may be
paid as a dividend or otherwise distributed thereon or received
pursuant to the exercise of stock options) acquired by me in the Merger
in violation of the 1933 Act or the Rules and Regulations.
B. I have carefully read this letter and the Agreement
and discussed their requirements and other applicable limitations upon
my ability to sell, transfer or otherwise dispose of Buyer Shares
(including any securities which may be paid as a dividend or otherwise
distributed thereon or received pursuant to the exercise of stock
options) to the extent I felt necessary, with my counsel or counsel for
WFC.
C. I have been advised that the issuance of Buyer Shares
to me pursuant to the Merger has been or will be registered with the
Commission under the 1933 Act on a Registration Statement on Form S-4.
However, I have also been advised that, because at
the time the Merger will be submitted for a vote of the shareholders of
WFC, I may be deemed to be an affiliate of WFC, the distribution by me
of any Buyer Shares acquired by me in the Merger will not be registered
under the 1933 Act and that I may not sell, transfer or otherwise
dispose of any Buyer Shares (including any securities which may be paid
as a dividend or otherwise distributed thereon or received pursuant to
the exercise of stock options) acquired by me in the Merger unless (i)
such sale, transfer or other disposition has been registered under the
1933 Act, (ii) such sale, transfer or other disposition is made in
conformity with the volume and other limitations of Rule 145
promulgated by the Commission under the 1933 Act, or (iii) in the
opinion of counsel reasonably acceptable to the Surviving Corporation,
such sale, transfer or other disposition is otherwise exempt from
registration under the 1933 Act.
D. I understand that Buyer is under no obligation to
register under the 1933 Act the sale, transfer or other disposition by
me or on my behalf of any Buyer Shares acquired by me in the Merger or
to take any other action necessary in order to make an exemption from
such registration available.
E. I also understand that stop transfer instructions
will be given to Buyer's transfer agent with respect to Buyer Shares
(including any securities which may be paid as a dividend or otherwise
distributed thereon or received pursuant to the exercise of stock
options) and that there will be placed on the certificates for the
Buyer Shares acquired by me in the Merger, or any substitutions
therefor, a legend stating in substance:
"The common shares represented by this certificate were issued
in a transaction to which Rule 145 promulgated under the
Securities Act of 1933 applies. The common shares represented
by this certificate may only be transferred in accordance with
the terms of an agreement dated _________, 2004 between the
registered holder hereof and the issuer of the certificate, a
copy of which agreement will be mailed to the holder hereof
without charge within five days after receipt of written
request therefor."
F. I also understand that unless the transfer by me of
my Buyer Shares has been registered under the 1933 Act or is a sale
made in conformity with the provisions of Rule 145, the Surviving
Corporation reserves the right to put the following legend on the
certificates issued to my transferee:
"The common shares represented by this certificate have not
been registered under the Securities Act of 1933 and were
acquired from a person who received such common shares in a
transaction to which Rule 145 promulgated under the Securities
Act of 1933 applies. The common shares may not be sold,
pledged or otherwise transferred except in accordance with an
exemption from the registration requirements of the Securities
Act of 1933."
It is understood and agreed that the legends set forth in paragraphs E
and F above shall be removed by delivery of substitute certificates without such
legends if the undersigned shall have delivered to the Surviving Corporation a
copy of a letter from the staff of the Commission, or an
2
opinion of counsel in form and substance reasonably satisfactory to the
Surviving Corporation, to the effect that such legends are not required for
purposes of the 1933 Act.
Very truly yours,
______________________________________________
Printed Name:_________________________________
Accepted this ___ day of
________, 2004
WESBANCO, INC.
By:___________________________
Printed Name:_________________
Title:________________________
3
ANNEX B
April 1, 2004
Board of Directors
Western Ohio Financial Corporation
28 East Main Street
Springfield, OH 45502
Board of Directors:
You have requested that Friedman, Billings, Ramsey & Co., Inc. ("FBR")
provide you with its opinion as to the fairness, from a financial point of view,
to the holders of common stock ("Shareholders") of Western Ohio Financial
Corporation ("Western Ohio" or the "Company") of the Consideration (as
hereinafter defined) to be paid pursuant to the Agreement and Plan of Merger by
and between Western Ohio and WesBanco, Inc. ("WesBanco"), dated April 1, 2004
(the "Agreement"), pursuant to which WesBanco will acquire Western Ohio (the
"Merger"). The Agreement provides, among other things, that each issued and
outstanding share of common stock of Western Ohio shall be converted into the
right to receive from WesBanco $35.00 in cash or 1.18 shares of common stock
(the "Consideration"), subject to certain terms and conditions. The Agreement
will be considered at a meeting of the Shareholders of Western Ohio. The terms
of the Merger are more fully set forth in the Agreement.
We have acted as Western Ohio's financial advisor in connection with, and
have participated in certain negotiations leading to, the execution of the
Agreement. In connection with rendering our opinion set forth herein, we have
among other things:
1. Reviewed Western Ohio's Annual Report to Shareholders and Annual Report on
Form 10-K for each of the years ended December 31, 2003, December 31, 2002
and December 31, 2001, including the audited financial statements contained
therein;
2. Reviewed WesBanco's Annual Report to Shareholders and Annual Report on Form
10-K for each of the years ended December 31, 2003, December 31, 2002 and
December 31, 2001, including the audited financial statements contained
therein;
3. Reviewed certain other public and non-public information, primarily
financial in nature, relating to the respective businesses, earnings,
assets and prospects of Western Ohio and WesBanco provided to FBR or
publicly available;
4. Participated in meetings and telephone conferences with members of senior
management of Western Ohio and WesBanco concerning the financial condition,
business, assets, financial forecasts and prospects of the respective
companies, as well as other matters FBR believed relevant to its inquiry;
Board of Directors
Western Ohio Financial Corporation
April 1, 2004
Page 2
5. Reviewed certain stock market information for Western Ohio common stock and
WesBanco common stock and compared it with similar information for certain
companies, the securities of which are publicly traded;
6. Compared the results of operations and financial condition of Western Ohio
and WesBanco with that of certain companies that FBR deemed to be relevant
for purposes of its opinion;
7. Reviewed the financial terms, to the extent publicly available, of certain
acquisition transactions that FBR deemed to be relevant for purposes of its
opinion;
8. Reviewed the Agreement and certain related documents; and
9. Performed such other reviews and analyses as FBR deemed appropriate.
In rendering this opinion, FBR did not assume responsibility for
independently verifying, and did not independently verify, any financial or
other information concerning Western Ohio and/or WesBanco furnished to it by
Western Ohio or WesBanco, or the publicly-available financial and other
information regarding Western Ohio, WesBanco and other financial services
organizations. FBR has assumed that all such information is accurate and
complete and has no reason to believe otherwise. FBR has further relied on the
assurances of management of Western Ohio and WesBanco that they are not aware of
any facts that would make such financial or other information relating to such
entities inaccurate or misleading. With respect to financial forecasts used in
our analysis, we have assumed that such forecasts have been reasonably prepared
by management of Western Ohio and WesBanco, as the case may be, on a basis
reflecting the best currently available estimates and judgments of the
management of Western Ohio and WesBanco as to the future performance of Western
Ohio, WesBanco and Western Ohio and WesBanco combined, as the case may be. FBR
has assumed that there has been no undisclosed material change in Western Ohio's
or WesBanco's assets, financial condition, results of operations, business or
prospects since December 31, 2003. FBR did not undertake an independent
appraisal of the assets or liabilities of Western Ohio or WesBanco. FBR is not
an expert in the evaluation of allowances for loan losses, was not requested to
and did not independently review such allowances, and was not requested to and
did not independently review any individual credit files of Western Ohio or
WesBanco. FBR's conclusions and opinion are necessarily based upon economic,
market and other conditions and the information made available to FBR as of the
date of this opinion. FBR expresses no opinion on matters of a legal,
regulatory, tax or accounting nature related to the Merger.
FBR, as part of its investment banking business, is customarily engaged in
the valuation of businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, secondary distributions of listed and
unlisted securities, private placements and valuations for estate, corporate and
other purposes.
FBR has acted as financial advisor to Western Ohio in connection with the
Merger and will receive a fee for services rendered, a significant portion of
which is contingent upon the consummation of the Merger. In the ordinary course
of FBR's business, it may effect transactions in the securities of Western Ohio
or WesBanco for its own account and/or for the
Board of Directors
Western Ohio Financial Corporation
April 1, 2004
Page 3
accounts of its customers and, accordingly, may at any time hold long or short
positions in such securities. From time to time, principals and/or employees of
FBR may also have positions in such securities. As a part of FBR's investment
banking business, FBR has in the past provided investment banking services to
WesBanco, for which it has received customary fees. In the future, FBR may
solicit business from WesBanco.
This letter is for the information of the Board of Directors of Western
Ohio and may not be relied upon by any other person or used for any other
purpose, reproduced, disseminated, quoted from or referred to without FBR's
prior written consent; provided, however, this letter may be referred to and
reproduced in its entirety in proxy materials sent to the Shareholders in
connection with the solicitation of approval for the Merger.
Based upon and subject to the foregoing, as well as any such other matters
as we consider relevant, it is FBR's opinion, as of the date hereof, that the
Consideration is fair, from a financial point of view, to the Shareholders of
Western Ohio.
Very truly yours,
/s/ FRIEDMAN, BILLINGS, RAMSEY & CO., INC.
ANNEX C
Section 262 of the Delaware General Corporation Law
Appraisal Rights
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to Section 228
of this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of the stockholder's shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record of a nonstock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation; and the
words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or fractions thereof,
solely of stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to Section 251 (other than a merger effected pursuant to
Section 251(g) of this title), Section 252, Section 254, Section 257, Section
258, Section 263 or Section 264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date fixed
to determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the surviving corporation
as provided in subsection (f) of Section 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to
Sections 251, 252, 254, 257, 258, 263 and 264 of this title to accept for
such stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect
thereof;
b. Shares of stock of any other corporation, or depository
receipts in respect thereof, which shares of stock (or depository
receipts in respect thereof) or depository receipts at the effective
date of the merger or consolidation will be either listed on a
national securities exchange or designated as a national market system
security on an interdealer quotation system by the National
Association of Securities Dealers, Inc. or held of record by more than
2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts
and cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a., b. and c. of
this paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under Section 253 of this title is not owned by
the parent corporation immediately prior to the merger, appraisal rights
shall be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsection (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of such
stockholder's shares shall deliver to the corporation, before the taking of
the vote on the merger or consolidation, a written demand for appraisal of
such stockholder's shares. Such demand will be sufficient if it reasonably
informs the corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of such stockholder's
shares. A proxy or vote against the merger or consolidation shall not
constitute such a demand. A stockholder electing to take such action must
do so by a separate written demand as herein provided. Within 10 days after
the effective date of such merger or consolidation, the surviving or
resulting corporation shall notify each stockholder of each constituent
corporation who has complied with this subsection and has not voted in
favor of or consented to the merger or consolidation of the date that the
merger or consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to Section
228 or Section 253 of this title, then either a constituent corporation
before the effective date of the merger or consolidation or the surviving
or resulting corporation within 10 days thereafter shall notify each of the
holders of any class or series of stock of such constituent corporation who
are entitled to appraisal rights of the approval of the merger or
consolidation and that appraisal rights are available for any or all shares
of such class or series of stock of such constituent corporation, and shall
include in such notice a copy of this section. Such notice may, and, if
given on or after the effective date of the merger or consolidation, shall,
also notify such stockholders of the effective date of the merger or
consolidation. Any stockholder entitled to appraisal rights may, within 20
days after the date of mailing of such notice, demand in writing from the
surviving or resulting corporation the appraisal of such holder's shares.
Such demand will be sufficient if it reasonably informs the corporation of
the identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation, either
(i) each such constitutent corporation shall send a second notice before
the effective date of the merger or consolidation notifying each of the
holders of any class or series of stock of such constitutent corporation
that are entitled to appraisal rights of the effective date of the merger
or consolidation or (ii) the surviving or resulting corporation shall send
such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent more
than 20 days following the sending of the first notice, such second notice
need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant secretary or of
the transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of fraud, be
prima facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice, each
constitutent corporation may fix, in advance, a record date that shall be
not more than
10 days prior to the date the notice is given, provided, that if the notice
is given on or after the effective date of the merger or consolidation, the
record date shall be such effective date. If no record date is fixed and
the notice is given prior to the effective date, the record date shall be
the close of business on the day next preceding the day on which the notice
is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw such stockholder's demand for appraisal and to accept the terms offered
upon the merger or consolidation. Within 120 days after the effective date of
the merger or consolidation, any stockholder who has complied with the
requirements of subsections (a) and (d) hereof, upon written request, shall be
entitled to receive from the corporation surviving the merger or resulting from
the consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which demands
for appraisal have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the stockholder within 10 days
after such stockholder's written request for such a statement is received by the
surviving or resulting corporation or within 10 days after expiration of the
period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted
such stockholder's certificates of stock to the Register in Chancery, if such is
required, may participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal rights under this
section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection (d) of
this section shall be entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the effective date of the merger or consolidation); provided, however, that
if no petition for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder shall deliver to the
surviving or resulting corporation a written withdrawal of such stockholder's
demand for an appraisal and an acceptance of the merger or consolidation, either
within 60 days after the effective date of the merger or consolidation as
provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court
of Chancery shall be dismissed as to any stockholder without the approval of the
Court, and such approval may be conditioned upon such terms as the Court deems
just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
WesBanco's Bylaws provide, and West Virginia law permits, 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.
Notwithstanding the general indemnification provisions, WesBanco's Bylaws
prohibit certain indemnification payments to any "institution affiliated party"
as that term is defined in 12 U.S.C. Section 1813(u). 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.
I. Article VI of the Bylaws of WesBanco provides:
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 1. 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.
Section 2. Notwithstanding the provisions of Section 1 of this Article VI,
an "institution-affiliated party" may not receive a "prohibited indemnification
payment," which is defined as any payment or agreement to make a payment by the
corporation to an institution-affiliated party to pay or reimburse such person
for any liability or legal expenses in any administrative proceeding brought by
the appropriate federal banking agency that results in a final order or
settlement in which the institution- affiliated party is assessed a civil money
penalty, is removed or prohibited from banking, or is required to cease an
action or take any affirmative action, including making restitution, with
respect to the corporation.
Section 3. The corporation may purchase commercial insurance to cover
certain costs that the corporation incurs under the indemnification provisions
of Section 1 of this Article VI. Costs that may be covered include legal
expenses and restitution that an individual may be ordered to make to the
corporation. Such insurance may not, however, pay or reimburse an
institution-affiliated party for any final judgment or civil money penalty
assessed against such individual.
Section 4. The corporation may make or agree to make a reasonable
indemnification payment if all of the following conditions are met: (i) the
corporation's board of directors determines in writing that the
institution-affiliated party acted in good faith and the best interests of the
corporation; (ii) the board of directors determines that the payment will not
materially affect the corporation's safety and soundness; (iii) the payment does
not fall within the definition of a prohibited indemnification payment; and (iv)
the institution-affiliated party agrees in writing to reimburse the corporation,
to the extent not covered by permissible insurance, for payments made in the
event that the administrative action results in a final order or settlement in
which the institution-affiliated party is assessed a
II-1
civil money penalty, is removed or prohibited from banking, or is required,
under a final order, to cease an action or take any affirmative action.
II. W. Va. Code Section 31D-8-851 through Section 31D-8-856 provide:
SECTION 31D-8-851. PERMISSIBLE INDEMNIFICATION.
(a) Except as otherwise provided in this section, a corporation may
indemnify an individual who is a party to a proceeding because he or she is
a director against liability incurred in the proceeding if:
(1) (A) He or she conducted himself or herself in good faith; and
(B) He or she reasonably believed: (i) In the case of conduct in
his or her official capacity, that his or her conduct was in the best
interests of the corporation; and (ii) in all other cases, that his or
her conduct was at least not opposed to the best interests of the
corporation; and
(C) In the case of any criminal proceeding, he or she had no
reasonable cause to believe his or her conduct was unlawful; or
(2) He or she engaged in conduct for which broader indemnification has
been made permissible or obligatory under a provision of the articles of
incorporation as authorized by subdivision (5), subsection (b), section two
hundred two, article two of this chapter.
(b) A director's conduct with respect to an employee benefit plan for a
purpose he or she reasonably believed to be in the interests of the participants
in, and the beneficiaries of, the plan is conduct that satisfies the requirement
of subparagraph (ii), paragraph (B), subdivision (1), subsection (a) of this
section.
(c) The termination of a proceeding by judgment, order, settlement or
conviction, or upon a plea of nolo contendere or its equivalent, is not
determinative that the director did not meet the relevant standard of conduct
described in this section.
(d) Unless ordered by a court under subdivision (3), subsection (a),
section eight hundred fifty-four of this article, a corporation may not
indemnify a director:
(1) In connection with a proceeding by or in the right of the
corporation, except for reasonable expenses incurred in connection with the
proceeding if it is determined that the director has met the relevant standard
of conduct under subsection (a) of this section; or
(2) In connection with any proceeding with respect to conduct for
which he or she was adjudged liable on the basis that he or she received a
financial benefit to which he or she was not entitled, whether or not involving
action in his or her official capacity.
SECTION 31D-8-852. MANDATORY INDEMNIFICATION.
A corporation must indemnify a director who was wholly successful, on the
merits or otherwise, in the defense of any proceeding to which he or she was a
party because he or she was a director of the corporation against reasonable
expenses incurred by him or her in connection with the proceeding.
SECTION 31D-8-853. ADVANCE FOR EXPENSES.
(a) A corporation may, before final disposition of a proceeding, advance
funds to pay for or reimburse the reasonable expenses incurred by a director who
is a party to a proceeding because he or she is a director if he or she delivers
to the corporation:
II-2
(1) A written affirmation of his or her good faith belief that he or
she has met the relevant standard of conduct described in section eight hundred
fifty-one of this article or that the proceeding involves conduct for which
liability has been eliminated under a provision of the articles of incorporation
as authorized by subdivision (4), subsection (b), section two hundred two,
article two of this chapter; and
(2) His or her written undertaking to repay any funds advanced if he
or she is not entitled to mandatory indemnification under section eight hundred
fifty-two of this article and it is ultimately determined under section eight
hundred fifty-four or eight hundred fifty-five of this article that he or she
has not met the relevant standard of conduct described in section eight hundred
fifty-one of this article.
(b) The undertaking required by subdivision (2), subsection (a) of this
section must be an unlimited general obligation of the director but need not be
secured and may be accepted without reference to the financial ability of the
director to make repayment.
(c) Authorizations under this section are to be made:
(1) By the board of directors:
(A) If there are two or more disinterested directors, by a
majority vote of all the disinterested directors, a majority of whom
constitute a quorum for this purpose, or by a majority of the members
of a committee of two or more disinterested directors appointed by a
vote; or
(B) If there are fewer than two disinterested directors, by the
vote necessary for action by the board in accordance with subsection
(c), section eight hundred twenty-four of this article in which
authorization directors who do not qualify as disinterested directors
may participate; or
(2) By the shareholders, but shares owned by or voted under the
control of a director who at the time does not qualify as a disinterested
director may not be voted on the authorization; or
(3) By special legal counsel selected in a manner in accordance with
subdivision (2), subsection (b), section eight hundred fifty-five of this
article.
SECTION 31D-8-854. CIRCUIT COURT-ORDERED INDEMNIFICATION AND ADVANCE FOR
EXPENSES.
(a) A director who is a party to a proceeding because he or she is a
director may apply for indemnification or an advance for expenses to the circuit
court conducting the proceeding or to another circuit court of competent
jurisdiction. After receipt of an application and after giving any notice it
considers necessary, the circuit court shall:
(1) Order indemnification if the circuit court determines that the
director is entitled to mandatory indemnification under section eight hundred
fifty-two of this article;
(2) Order indemnification or advance for expenses if the circuit court
determines that the director is entitled to indemnification or advance for
expenses pursuant to a provision authorized by subsection (a), section eight
hundred fifty-eight of this article; or
(3) Order indemnification or advance for expenses if the circuit court
determines, in view of all the relevant circumstances, that it is fair and
reasonable:
(A) To indemnify the director; or
(B) To advance expenses to the director, even if he or she has
not met the relevant standard of conduct set forth in subsection (a),
section eight hundred fifty-one of this article, failed to comply with
II-3
section eight hundred fifty-three of this article or was adjudged
liable in a proceeding referred to in subdivision (1) or (2),
subsection (d), section eight hundred fifty-one of this article, but
if he or she was adjudged so liable his or her indemnification is to
be limited to reasonable expenses incurred in connection with the
proceeding.
(b) If the circuit court determines that the director is entitled to
indemnification under subdivision (1), subsection (a) of this section or to
indemnification or advance for expenses under subdivision (2) of said
subsection, it shall also order the corporation to pay the director's reasonable
expenses incurred in connection with obtaining circuit court-ordered
indemnification or advance for expenses. If the circuit court determines that
the director is entitled to indemnification or advance for expenses under
subdivision (3) of said subsection, it may also order the corporation to pay the
director's reasonable expenses to obtain circuit court-ordered indemnification
or advance for expenses.
SECTION 31D-8-855. DETERMINATION AND AUTHORIZATION OF INDEMNIFICATION.
(a) A corporation may not indemnify a director under section eight hundred
fifty-one of this article unless authorized for a specific proceeding after a
determination has been made that indemnification of the director is permissible
because he or she has met the relevant standard of conduct set forth in section
eight hundred fifty-one of this article.
(b) The determination is to be made:
(1) If there are two or more disinterested directors, by the board of
directors by a majority vote of all the disinterested directors, a majority of
whom constitute a quorum for this purpose, or by a majority of the members of a
committee of two or more disinterested directors appointed by a vote;
(2) By special legal counsel:
(A) Selected in the manner prescribed in subdivision (1) of this
subsection; or
(B) If there are fewer than two disinterested directors, selected
by the board of directors in which selection directors who do not
qualify as disinterested directors may participate; or
(3) By the shareholders, but shares owned by or voted under the
control of a director who at the time does not qualify as a disinterested
director may not be voted on the determination.
(c) Authorization of indemnification is to be made in the same manner as
the determination that indemnification is permissible, except that if there are
fewer than two disinterested directors or if the determination is made by
special legal counsel, authorization of indemnification is to be made by those
entitled under paragraph (B), subdivision (2), subsection (b) of this section to
select special legal counsel.
SECTION 31D-8-856. INDEMNIFICATION OF OFFICERS.
(a) A corporation may indemnify and advance expenses under this part to an
officer of the corporation who is a party to a proceeding because he or she is
an officer of the corporation:
(1) To the same extent as a director; and
(2) If he or she is an officer but not a director, to a further extent
as may be provided by the articles of incorporation, the bylaws, a resolution of
the board of directors or contract except for:
(A) Liability in connection with a proceeding by or in the right
of the corporation other than for reasonable expenses incurred in
connection with the proceeding; or
II-4
(B) Liability arising out of conduct that constitutes:
(i) Receipt by him or her of a financial benefit to which he
or she is not entitled;
(ii) An intentional infliction of harm on the corporation or
the shareholders; or
(iii) An intentional violation of criminal law.
(b) The provisions of subdivision (2), subsection (a) of this section apply
to an officer who is also a director if the basis on which he or she is made a
party to the proceeding is an act or omission solely as an officer.
(c) An officer of a corporation who is not a director is entitled to
mandatory indemnification under section eight hundred fifty-two of this article
and may apply to a court under section eight hundred fifty-four of this article
for indemnification or an advance for expenses in each case to the same extent
to which a director may be entitled to indemnification or advance for expenses
under those provisions.
Certain rules of the Federal Deposit Insurance Corporation limit the
ability of certain depository institutions, their subsidiaries and their
affiliated depository institution holding companies to indemnify affiliated
parties, including institution directors. In general, subject to the ability to
purchase directors' and officers' liability insurance and to advance
professional expenses under certain circumstances, the rules prohibit such
institutions from indemnifying a director for certain costs incurred with regard
to an administrative or enforcement action commenced by any federal banking
agency that results in a final order or settlement pursuant to which the
director is assessed a civil money penalty, removed from office, prohibited from
participating in the affairs of an insured depository institution or required to
cease and desist from or take an affirmative action described in Section 8(b) of
the Federal Deposit Insurance Act (12 U.S.C. $ 1818(b)).
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following exhibits are filed herewith or incorporated herein by
reference as part of this Registration Statement:
EXHIBIT TITLE
------- -----
2.1 Agreement and Plan of Merger dated as of April 1, 2004 by and between
WesBanco, Inc., WOFC, Inc., and Western Ohio Financial Corporation,
(incorporated by reference to Annex A of the proxy
statement/prospectus included in this Registration Statement).
5.1 Opinion of Phillips, Gardill, Kaiser & Altmeyer, PLLC as to the
legality of the shares of common stock registered hereby (filed
herewith).
8.1 Form of Opinion of Kirkpatrick & Lockhart LLP as to certain tax
matters (to be filed by amendment).
8.2 Form of Opinion of Katten Muchin Zavis Rosenman as to certain tax
matters (to be filed by amendment).
10.1 Non-competition and Confidentiality Agreement dated April 1, 2004 by
and between WesBanco Bank, Inc., and Robert P. Brezing (filed
herewith).
10.2 Agreement dated April 1, 2004 by and between WesBanco Bank, Inc.,
WesBanco, Inc. and Robert P. Brezing (filed herewith).
10.3 Non-competition and Confidentiality Agreement dated April 1, 2004
by and between WesBanco Bank, Inc., and Philip R. Teusink (filed
herewith).
10.4 Agreement dated April 1, 2004 by and between WesBanco Bank, Inc.,
WesBanco, Inc. and Philip R. Teusink (filed herewith).
II-5
EXHIBIT TITLE
------- -----
10.5 Non-competition and Confidentiality Agreement dated April 1, 2004
by and between WesBanco Bank, Inc., and William E. Whitmoyer (filed
herewith).
10.6 Agreement dated April 1, 2004 by and between WesBanco Bank, Inc.,
WesBanco, Inc. and William E. Whitmoyer (filed herewith).
10.7 Employment, Consulting and Non-Competition Agreement dated April 1,
2004 by and between WesBanco, Inc. and John W. Raisbeck (filed
herewith).
13.1 Western Ohio Financial Corporation's Annual Report on Form 10-K for
the year ended December 31, 2003 (No. 0-24120), is incorporated
herein by reference.
13.2 Western Ohio Financial Corporation's Quarterly Report on Form 10-Q
for the quarter ended March 31, 2004 (No. 0- 24120), is
incorporated herein by reference.
23.1 Consent of Ernst & Young LLP (filed herewith).
23.2 Consent of Crowe Chizek and Company LLC (filed herewith).
23.3 Consent of Phillips, Gardill, Kaiser & Altmeyer, PLLC (included in
Exhibit 5.1).
23.4 Consent of Kirkpatrick & Lockhart LLP (included in Exhibit 8.1).
23.5 Consent of Katten Muchin Zavis Rosenman (included in Exhibit 8.2).
23.6 Consent of Friedman Billings Ramsey & Co., Inc. (filed herewith).
24.1 Power of Attorney (included on signature page hereto).
99.1 Form of Proxy for Special Meeting of Western Ohio Financial
Corporation Stockholders (filed herewith).
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 (a) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Securities Act of 1933, as amended,
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, as amended, 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, as amended, 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 Securities Act of 1933, as amended, and is, therefore,
II-6
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 Securities Act of 1933, as amended, 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 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.
(g) The undersigned Registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report, to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Exchange Act; and, where
interim financial information required to be presented by Article 3 of
Regulation S-X is not set forth in the prospectus, to deliver, or cause to be
delivered to each person to whom the prospectus is sent or given, the latest
quarterly report that is specifically incorporated by reference in the
prospectus to provide such interim financial information.
II-7
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, State of West
Virginia, on June 4, 2004.
WESBANCO, INC.
By: /s/ Paul M. Limbert
-------------------------------------
Paul M. Limbert
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Paul M. Limbert, his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments to this Registration Statement, and to file the same, with
all exhibits thereto, and other documentation in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent with full power and authority to do and perform each and every act and
thing requisite and necessary to be done in or about the premises, as fully to
all intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
------------------------------------- Director
James E. Altmeyer
/s/ Ray A, Byrd Director June 4, 2004
-------------------------------------
Ray A. Byrd
/s/ R. Peterson Chalfant Director June 4, 2004
-------------------------------------
R. Peterson Chalfant
/s/ John H. Cheffy Director June 4, 2004
-------------------------------------
John H. Cheffy
/s/ Christopher V. Criss Director June 4, 2004
-------------------------------------
Christopher V. Criss
------------------------------------- Director
James D. Entress
II-8
/s/ Abigail M. Feinknopf Director June 4, 2004
-------------------------------------
Abigail M. Feinknopf
/s/ Ernest S. Fragale Director June 4, 2004
-------------------------------------
Ernest S. Fragale
/s/ Edward M. George Director June 4, 2004
-------------------------------------
Edward M. George
/s/ Vaughn L. Kiger Director June 4, 2004
-------------------------------------
Vaughn L. Kiger
/s/ Robert E. Kirkbride Director June 4, 2004
-------------------------------------
Robert E. Kirkbride
/s/ John W. Kepner Director June 4, 2004
-------------------------------------
John W. Kepner
/s/ Paul M. Limbert President, Chief Executive June 4, 2004
------------------------------------- Officer & Director (Principal
Paul M. Limbert Executive Officer)
------------------------------------- Director
Jay T. McCamic
/s/ Joan C. Stamp Director June 4, 2004
-------------------------------------
Joan C. Stamp
/s/ Carter W. Strauss Director June 4, 2004
-------------------------------------
Carter W. Strauss
/s/ Reed J. Tanner Director June 4, 2004
-------------------------------------
Reed J. Tanner
/s/ Robert K. Tebay Director June 4, 2004
-------------------------------------
Robert K. Tebay
/s/ Robert H. Young Executive Vice President & June 4, 2004
------------------------------------- Chief Financial Officer
Robert H. Young (Principal Financial and
Accounting Officer)
II-9
EXHIBIT INDEX
EXHIBIT TITLE
------- -----
2.1 Agreement and Plan of Merger dated as of April 1, 2004 by and between
WesBanco, Inc., WOFC, Inc., and Western Ohio Financial Corporation,
(incorporated by reference to Annex A of the proxy
statement/prospectus included in this Registration Statement).
5.1 Opinion of Phillips, Gardill, Kaiser & Altmeyer, PLLC as to the
legality of the shares of common stock registered hereby (filed
herewith).
8.1 Form of Opinion of Kirkpatrick & Lockhart LLP as to certain tax
matters (to be filed by amendment).
8.2 Form of Opinion of Katten Muchin Zavis Rosenman as to certain tax
matters (to be filed by amendment).
10.1 Non-competition and Confidentiality Agreement dated April 1, 2004 by
and between WesBanco Bank, Inc., and Robert P. Brezing (filed
herewith).
10.2 Agreement dated April 1, 2004 by and between WesBanco Bank, Inc.,
WesBanco, Inc. and Robert P. Brezing (filed herewith).
10.3 Non-competition and Confidentiality Agreement dated April 1, 2004 by
and between WesBanco Bank, Inc., and Philip R. Teusink (filed
herewith).
10.4 Agreement dated April 1, 2004 by and between WesBanco Bank, Inc.,
WesBanco, Inc. and Philip R. Teusink (filed herewith).
10.5 Non-competition and Confidentiality Agreement dated April 1, 2004 by
and between WesBanco Bank, Inc., and William E. Whitmoyer (filed
herewith).
10.6 Agreement dated April 1, 2004 by and between WesBanco Bank, Inc.,
WesBanco, Inc. and William E. Whitmoyer (filed herewith).
10.7 Employment, Consulting and Non-Competition Agreement dated April 1,
2004 by and between WesBanco, Inc. and John W. Raisbeck (filed
herewith).
13.1 Western Ohio Financial Corporation's Annual Report on Form 10-K for
the year ended December 31, 2003 (No. 0-24120), is incorporated herein
by reference.
13.2 Western Ohio Financial Corporation's Quarterly Report on Form 10-Q for
the quarter ended March 31, 2004 (No. 0- 24120), is incorporated
herein by reference.
23.1 Consent of Ernst & Young LLP (filed herewith).
23.2 Consent of Crowe Chizek and Company LLC (filed herewith).
23.3 Consent of Phillips, Gardill, Kaiser & Altmeyer, PLLC (included in
Exhibit 5.1).
23.4 Consent of Kirkpatrick & Lockhart LLP (included in Exhibit 8.1).
23.5 Consent of Katten Muchin Zavis Rosenman (included in Exhibit 8.2).
23.6 Consent of Friedman Billings Ramsey & Co., Inc. (filed herewith).
24.1 Power of Attorney (included on signature page hereto).
99.1 Form of Proxy for Special Meeting of Western Ohio Financial
Corporation Stockholders (filed herewith).