AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 5, 1998
REGISTRATION NO. 333-64205
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
PRE-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
CITY HOLDING COMPANY
(Exact name of registrant as specified in its charter)
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WEST VIRGINIA 6712 55-0619957
<S> <C> <C>
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation) Classification Code Number) Identification No.)
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25 GATEWATER ROAD
CHARLESTON, WEST VIRGINIA 25313
(304) 769-1100
(Address, including zip code, and telephone number, including area code,
Of registrant's principal executive offices)
---------------
STEVEN J. DAY
PRESIDENT AND CHIEF EXECUTIVE OFFICER
25 GATEWATER ROAD
CHARLESTON, WEST VIRGINIA 25313
(304) 769-1100
(Name, address, including zip code, and telephone number,
Including area code, of agent for service)
COPIES TO:
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LATHAN M. EWERS, JR. CHARLES D. DUNBAR
RANDALL S. PARKS ELIZABETH OSENTON LORD
HUNTON & WILLIAMS JACKSON & KELLY
951 EAST BYRD STREET 1600 LAIDLEY TOWER
RICHMOND, VIRGINIA 23219 CHARLESTON, WEST VIRGINIA 25301
</TABLE>
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time 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. [ ]
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 THE 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.
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<PAGE>
[CITY HOLDING COMPANY LOGO] [HORIZON BANK LOGO]
TO SHAREHOLDERS OF CITY HOLDING COMPANY AND HORIZON BANCORP, INC.
The Boards of Directors of Horizon Bancorp, Inc. ("Horizon") and City
Holding Company ("City Holding") have agreed on a merger of our two companies.
Before we can complete this merger, the Agreement must be approved by each
company's shareholders. We are sending you this Joint Proxy
Statement-Prospectus to ask you to vote in favor of the merger.
The purpose of the meetings is to consider and vote upon the Agreement and
Plan of Reorganization, dated as of August 7, 1998, between Horizon and City
Holding and the related Plan of Merger (together, the "Agreement"), pursuant to
which, among other things, Horizon will be merged with and into City Holding
(the "Holding Company Merger") and the separate existence of Horizon shall
cease. In the Holding Company Merger, each share of Common Stock of Horizon,
other than dissenters' shares, will be converted into shares of Common Stock of
City Holding, as described in the accompanying Joint Proxy
Statement-Prospectus.
The Agreement also contemplates that as soon as practicable after the
proposed Holding Company Merger, Bank of Raleigh, National Bank of Summers of
Hinton, Greenbrier Valley National Bank, The First National Bank of Marlinton
and The Twentieth Street Bank, Horizon's bank subsidiaries, will be merged with
and into City National Bank of West Virginia ("City National"), City Holding's
bank subsidiary.
City Holding's shareholders also will vote on a proposal to increase the
number of authorized shares of City Holding Common Stock to 50,000,000 shares
(the "Additional Shares Proposal").
YOUR VOTE IS VERY IMPORTANT. Whether or not you plan to attend your
shareholder meeting, please take the time to vote by completing and mailing the
enclosed proxy card. If you sign, date and mail your proxy card without
indicating how you want to vote, we will vote your proxy in favor of the
Holding Company Merger. If you do not return your card, the effect will be a
vote against the Holding Company Merger.
The dates, times and places of the meetings are:
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For City Holding shareholders: For Horizon shareholders:
December 9, 1998 December 9, 1998
2:00 p.m. Eastern Time 10:00 a.m. Eastern Time
Charleston Marriott Town Center Tamarack
200 Lee Street East Hulett C. Smith Theater
Charleston, West Virginia 25301 One Tamarack Place
Beckley, West Virginia 25801
</TABLE>
This Joint Proxy Statement-Prospectus provides you with detailed
information about the proposed Holding Company Merger. You can also get
information about City Holding and Horizon from documents we have filed with
the Securities and Exchange Commission. We encourage you to read this entire
document carefully.
We are enthusiastic about this merger and the strength and capabilities we
expect from the combined company. We join other members of each company's Board
of Directors in our recommendation that you vote in favor of the merger.
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Steven J. Day Frank S. Harkins, Jr.
PRESIDENT AND CHIEF EXECUTIVE OFFICER CHAIRMAN AND CHIEF EXECUTIVE OFFICER
CITY HOLDING COMPANY HORIZON BANCORP, INC.
</TABLE>
Dated: November 5, 1998
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE SECURITIES TO BE ISSUED UNDER
THIS JOINT PROXY STATEMENT-PROSPECTUS OR DETERMINED IF THIS JOINT PROXY
STATEMENT-PROSPECTUS IS ACCURATE OR ADEQUATE. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE. THESE SECURITIES ARE NOT SAVINGS OR DEPOSIT
ACCOUNTS OR OTHER OBLIGATIONS OF ANY BANK OR NON-BANK SUBSIDIARY OF ANY OF
THE PARTIES, AND THEY ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE BANK INSURANCE FUND OR ANY OTHER GOVERNMENTAL AGENCY.
THIS JOINT PROXY STATEMENT-PROSPECTUS IS DATED NOVEMBER 5, 1998
AND WAS FIRST MAILED TO SHAREHOLDERS ON OR ABOUT NOVEMBER 6, 1998
<PAGE>
WE HAVE NOT AUTHORIZED ANYONE TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ABOUT THE HOLDING COMPANY MERGER OR OUR COMPANIES THAT DIFFERS
FROM, OR ADDS TO, THE INFORMATION IN THIS JOINT PROXY STATEMENT-PROSPECTUS OR
IN OUR DOCUMENTS THAT ARE PUBLICLY FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION. THEREFORE, IF ANYONE DOES GIVE YOU DIFFERENT OR ADDITIONAL
INFORMATION, YOU SHOULD NOT RELY ON IT.
IF YOU ARE IN A JURISDICTION WHERE IT IS UNLAWFUL TO OFFER TO EXCHANGE OR
SELL, OR TO ASK FOR OFFERS TO EXCHANGE OR BUY, THE SECURITIES OFFERED BY THIS
JOINT PROXY STATEMENT-PROSPECTUS OR TO ASK FOR PROXIES, OR IF YOU ARE A PERSON
TO WHOM IT IS UNLAWFUL TO DIRECT SUCH ACTIVITIES, THEN THE OFFER PRESENTED BY
THIS JOINT PROXY STATEMENT-PROSPECTUS DOES NOT EXTEND TO YOU.
THE INFORMATION CONTAINED IN THIS JOINT PROXY STATEMENT-PROSPECTUS SPEAKS
ONLY AS OF ITS DATE UNLESS THE INFORMATION SPECIFICALLY INDICATES THAT ANOTHER
DATE APPLIES.
INFORMATION IN THIS JOINT PROXY STATEMENT-PROSPECTUS ABOUT CITY HOLDING
HAS BEEN SUPPLIED BY CITY HOLDING, AND INFORMATION ABOUT HORIZON HAS BEEN
SUPPLIED BY HORIZON.
A WARNING ABOUT FORWARD-LOOKING STATEMENTS
Each company makes forward-looking statements in this document, and in our
public documents to which we refer, that are subject to risks and
uncertainties. These forward-looking statements include information about
possible or assumed future results of our operations or the performance of the
combined company after the Holding Company Merger. Also, when we use any of the
words "believes," "expects," "anticipates" or similar expressions, we are
making forward-looking statements. Many possible events or factors could affect
the future financial results and performance of each of our companies and the
combined company after the Holding Company Merger. This could cause results or
performance to differ materially from those expressed in our forward-looking
statements. You should consider these risks when you vote on the Holding
Company Merger. These possible events or factors include the following:
1. our revenues after the Holding Company Merger are lower than we expect, our
restructuring charges are higher than we expect, we lose more deposits,
customers or business than we expect, or our operating costs after the
Holding Company Merger are greater than we expect;
2. competition among depository and other financial institutions increases
significantly;
3. we have more trouble obtaining regulatory approvals for the Holding Company
Merger than we expect;
4. we have more trouble integrating our businesses or retaining key personnel
than we expect;
5. our costs savings from the Holding Company Merger are less than we expect,
or we are unable to obtain those cost savings as soon as we expect;
6. changes in the interest rate environment reduce our margins;
7. general economic or business conditions in West Virginia, California or
nationally are worse than we expect;
8. legislative or regulatory changes adversely affect our business;
9. technological changes and systems integration are harder to make or more
expensive than we expect; and
10. adverse changes occur in the securities markets.
<PAGE>
CITY HOLDING COMPANY
----------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER 9, 1998
----------------
City Holding Company ("City Holding") will hold a special meeting of
shareholders at the Charleston Marriott Town Center, 200 Lee Street East,
Charleston, West Virginia 25301, at 2:00 p.m. local time on December 9, 1998,
to vote on:
1. A proposal to approve the Agreement and Plan of Reorganization, dated as
of August 7, 1998, between City Holding and Horizon Bancorp, Inc.
("Horizon"), a related Plan of Merger, and the transactions contemplated
by those documents. These transactions include the merger of Horizon into
City Holding. They also include the issuance of City Holding shares to
Horizon shareholders in connection with the merger of Horizon and City
Holding.
2. A proposal to increase the authorized shares of common stock of City
Holding to fifty million (50,000,000) shares (the "Additional Shares
Proposal").
3. Any other matters that properly come before the special meeting, or any
adjournments or postponements of the special meeting.
Record holders of City Holding common stock, at the close of business on
November 4, 1998, will receive notice of and may vote at the special meeting,
including any adjournments or postponements. The Agreement and Plan of
Reorganization requires approval by the holders of a majority of the
outstanding shares of City Holding common stock. The Additional Shares Proposal
also requires approval by the holders of a majority of the outstanding shares
of City Holding common stock.
Holders of City Holding common stock may exercise dissenters' rights under
Sections 31-1-122 and 31-1-123 of the West Virginia Code. We have attached a
copy of that law as an Appendix to the accompanying Joint Proxy
Statement-Prospectus.
/s/ Steven J. Day
Steven J. Day
PRESIDENT AND CHIEF EXECUTIVE
OFFICER
November 5, 1998
PLEASE MARK, SIGN, DATE AND RETURN YOUR PROXY PROMPTLY, WHETHER OR NOT YOU
PLAN TO ATTEND THE SPECIAL MEETING. YOUR BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE MATTERS THAT YOU WILL VOTE ON AT
THE SPECIAL MEETING. YOUR PROXY MAY BE REVOKED IN THE MANNER DESCRIBED IN THE
ACCOMPANYING JOINT PROXY STATEMENT-PROSPECTUS AT ANY TIME BEFORE IT HAS BEEN
VOTED ON AT THE SPECIAL MEETING.
<PAGE>
HORIZON BANCORP, INC.
----------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER 9, 1998
----------------
Horizon Bancorp, Inc. ("Horizon") will hold a special meeting of
shareholders at Tamarack, Hulett C. Smith Theater, One Tamarack Place, Beckley,
West Virginia 25801, at 10:00 a.m. local time on December 9, 1998, to vote on:
1. A proposal to approve the Agreement and Plan of Reorganization, dated as
of August 7, 1998, between City Holding Company ("City Holding") and
Horizon, a related Plan of Merger and the transactions contemplated by
those documents. These transactions include the merger of Horizon into
City Holding.
2. Any other matters that properly come before the special meeting, or any
adjournments or postponements of the special meeting.
Record holders of Horizon common stock, at the close of business on
November 4, 1998, will receive notice of and may vote at the special meeting,
including any adjournments or postponements. The Agreement and Plan of
Reorganization requires approval by the holders of a majority of the
outstanding shares of Horizon common stock. If there are not enough shares
represented at the Special Meeting for a quorum or votes to approve the
Agreement and Plan of Reorganization, Horizon's Board of Directors may adjourn
the Special Meeting to permit further solicitation.
Holders of Horizon common stock may exercise dissenters' rights under
Sections 31-1-122 and 31-1-123 of the West Virginia Code. We have attached a
copy of that law as an Appendix to the accompanying Joint Proxy
Statement-Prospectus.
/s/ Frank S. Harkins, Jr.
Frank S. Harkins, Jr.
CHAIRMAN OF THE BOARD
AND CHIEF EXECUTIVE OFFICER
November 5, 1998
PLEASE MARK, SIGN, DATE AND RETURN YOUR PROXY PROMPTLY, WHETHER OR NOT YOU
PLAN TO ATTEND THE SPECIAL MEETING.YOUR BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE MATTERS THAT YOU WILL VOTE ON AT
THE SPECIAL MEETING. YOUR PROXY MAY BE REVOKED IN THE MANNER DESCRIBED IN THE
ACCOMPANYING JOINT PROXY STATEMENT-PROSPECTUS AT ANY TIME BEFORE IT HAS BEEN
VOTED ON AT THE SPECIAL MEETING.
<PAGE>
TO FIND ANY ONE OF THE PRINCIPAL SECTIONS IDENTIFIED BELOW, SIMPLY BEND
THE DOCUMENT SLIGHTLY TO EXPOSE THE BLACK TABS AND OPEN THE DOCUMENT TO THE TAB
WHICH CORRESPONDS TO THE TITLE OF THE SECTION YOU WISH TO READ.
TABLE OF CONTENTS
SUMMARY
CITY HOLDING SPECIAL MEETING
HORIZON SPECIAL MEETING
PROPOSAL 1 -- THE HOLDING COMPANY MERGER
BOARD OF DIRECTORS AND MANAGEMENT AFTER THE
HOLDING COMPANY MERGER
PROPOSAL 2 -- APPROVAL OF CHARTER AMENDMENT TO INCREASE
AUTHORIZED COMMON STOCK
COMPARATIVE RIGHTS OF SHAREHOLDERS OF
CITY HOLDING AND HORIZON
UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION
APPENDICES
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TABLE OF CONTENTS
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PAGE
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SUMMARY ............................................................................. 1
The Companies ..................................................................... 1
Proposal 1 -- The Holding Company Merger .......................................... 1
Determination of Exchange Ratio ................................................... 1
Comparative Per Share Market Price Information .................................... 2
Our Reasons for the Holding Company Merger ........................................ 2
Proposal 2 -- Additional Shares Proposal .......................................... 2
The Shareholders' Meetings ........................................................ 2
Our Recommendations to Shareholders ............................................... 2
Record Date; Voting Power ......................................................... 2
Votes Required .................................................................... 3
Exchange of Certificates .......................................................... 3
Conditions to Completion of the Holding Company Merger ............................ 3
Termination of the Agreement ...................................................... 3
Federal Income Tax Consequences ................................................... 4
Accounting Treatment .............................................................. 4
Opinions of Financial Advisors .................................................... 4
Board of Directors and Management of City Holding Following the Holding Company
Merger ........................................................................... 4
Interests of Persons Involved in the Holding Company Merger that are Different from
Yours ............................................................................ 5
Option to Purchase Each Other's Stock ............................................. 5
Dissenters' Rights ................................................................ 5
Regulatory Approvals .............................................................. 6
Recent Developments ............................................................... 7
Unaudited Comparative Per Share and Selected Financial Data ....................... 9
CITY HOLDING SPECIAL MEETING ........................................................ 15
General ........................................................................... 15
Matters to be Considered .......................................................... 15
Proxies ........................................................................... 15
Solicitation of Proxies ........................................................... 15
Record Date and Voting Rights ..................................................... 16
Recommendation of the City Holding Board .......................................... 17
HORIZON SPECIAL MEETING ............................................................. 19
General ........................................................................... 19
Matters to be Considered .......................................................... 19
Proxies ........................................................................... 19
Solicitation of Proxies ........................................................... 19
Record Date and Voting Rights ..................................................... 19
Recommendation of the Horizon Board ............................................... 20
PROPOSAL 1 -- THE HOLDING COMPANY MERGER ............................................ 21
Description of the Holding Company Merger ......................................... 21
Background of the Holding Company Merger .......................................... 21
Reasons of City Holding for the Holding Company Merger ............................ 22
Reasons of Horizon for the Holding Company Merger ................................. 24
Opinion of City Holding's Financial Advisor ....................................... 25
Opinion of Horizon's Financial Advisor ............................................ 29
Effective Time of the Holding Company Merger ...................................... 31
Exchange of Certificates .......................................................... 32
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Conduct of Business Prior to the Holding Company Merger and Other Covenants ... 33
Conditions to the Holding Company Merger ...................................... 34
Termination of the Agreement .................................................. 35
Waiver; Amendment; Expenses ................................................... 36
Material Federal Income Tax Consequences ...................................... 36
Interests of Certain Persons in the Holding Company Merger .................... 37
Accounting Treatment .......................................................... 38
Regulatory Matters ............................................................ 38
Restrictions on Resales by Affiliates ......................................... 40
Rights of Dissenting Shareholders ............................................. 40
BOARD OF DIRECTORS AND MANAGEMENT AFTER THE HOLDING COMPANY
MERGER .......................................................................... 43
Management After the Holding Company Merger ................................... 43
Consolidation of Operations; Anticipated Cost Savings ......................... 43
PRICE RANGE OF COMMON STOCK AND DIVIDENDS ....................................... 45
Market Prices ................................................................. 45
Dividends ..................................................................... 46
PROPOSAL 2 -- APPROVAL OF CHARTER AMENDMENT TO INCREASE
AUTHORIZED COMMON STOCK ......................................................... 47
General ....................................................................... 47
Text of Amendment ............................................................. 47
INFORMATION ABOUT CITY HOLDING .................................................. 48
General ....................................................................... 48
Recent Developments ........................................................... 50
Management and Additional Information ......................................... 50
INFORMATION ABOUT HORIZON ....................................................... 51
General ....................................................................... 52
Management and Additional Information ......................................... 52
SUPERVISION AND REGULATION OF CITY HOLDING AND HORIZON .......................... 52
DESCRIPTION OF CAPITAL STOCK OF CITY HOLDING .................................... 54
Common Stock .................................................................. 54
Preferred Stock ............................................................... 54
Preferred Stock Purchase Rights Plan; Change of Control ....................... 55
Reports to Shareholders ....................................................... 55
Transfer Agent ................................................................ 55
COMPARATIVE RIGHTS OF SHAREHOLDERS OF CITY HOLDING AND HORIZON .................. 56
Capitalization ................................................................ 56
Voting Rights ................................................................. 56
Directors and Classes of Directors ............................................ 56
Anti-Takeover Provisions ...................................................... 57
Preemptive Rights ............................................................. 57
Assessment .................................................................... 57
Conversion; Redemption; Sinking Fund .......................................... 57
Liquidation Rights ............................................................ 57
Dividends and Other Distributions ............................................. 58
Special Meetings of Shareholders .............................................. 58
Indemnification ............................................................... 58
Director Exculpation .......................................................... 59
Dissenters' Rights ............................................................ 59
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ii
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Shareholder Vote Required for Business Combinations ............................ 59
Amendments to Articles of Incorporation ........................................ 59
LEGAL OPINIONS ................................................................... 60
EXPERTS .......................................................................... 60
SHAREHOLDER PROPOSALS ............................................................ 60
OTHER MATTERS .................................................................... 60
WHERE YOU CAN FIND MORE INFORMATION .............................................. 61
INDEX TO FINANCIAL INFORMATION ................................................... 63
APPENDIX A -- Agreement and Plan of Reorganization ............................... A-1
APPENDIX B -- Holding Company Plan of Merger ..................................... B-1
APPENDIX C -- City Holding Option Agreement ...................................... C-1
APPENDIX D -- Horizon Option Agreement ........................................... D-1
APPENDIX E -- Opinion of Wheat First Securities, Inc. ............................ E-1
APPENDIX F -- Opinion of Baxter, Fentriss & Co. .................................. F-1
APPENDIX G -- Sections 31-1-122 and 31-1-123 of the West Virginia Code relating to
Dissenters' Rights ............................................................. G-1
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iii
<PAGE>
SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS JOINT PROXY
STATEMENT-PROSPECTUS. IT DOES NOT CONTAIN ALL OF THE INFORMATION THAT IS
IMPORTANT TO YOU. YOU SHOULD CAREFULLY READ THIS ENTIRE DOCUMENT AND THE OTHER
DOCUMENTS TO WHICH WE REFER. THESE WILL GIVE YOU A MORE COMPLETE DESCRIPTION OF
THE TRANSACTIONS WE ARE PROPOSING. FOR MORE INFORMATION ABOUT THE TWO
COMPANIES, SEE "WHERE YOU CAN FIND MORE INFORMATION" (PAGE 61). EACH ITEM IN
THIS SUMMARY REFERS TO THE PAGES WHERE THAT SUBJECT IS DISCUSSED MORE FULLY.
THE COMPANIES (PAGES 48 AND 51)
CITY HOLDING COMPANY
25 Gatewater Road
Charleston, West Virginia 25313
(304) 769-1100
City Holding is a registered bank holding company, chartered under the
laws of the State of West Virginia, and headquartered in Charleston, West
Virginia. Through its lead bank subsidiary, City National, City Holding
provides a wide variety of retail and commercial banking products and services
to individuals and small- and medium-sized businesses through 43 banking
offices in the State of West Virginia. In addition to City National, City
Holding operates Del Amo Savings Bank, FSB ("Del Amo"), a federally-chartered
savings bank headquartered in Torrance, California. Del Amo operates three
locations in Southern California and complements City Holding's mortgage loan
origination businesses located in Irvine and Costa Mesa, California. At June
30, 1998, City Holding had total consolidated assets of approximately $1.5
billion, total consolidated deposits of approximately $1.1 billion, and total
consolidated shareholders' equity of approximately $126 million. Shares of the
common stock of City Holding are listed on the Nasdaq National Market under the
trading symbol "CHCO."
HORIZON BANCORP, INC.
One Park Avenue
Beckley, West Virginia 25801
(304) 255-7000
Horizon is a multi-bank holding company headquartered in Beckley, West
Virginia. Its banking subsidiaries are Bank of Raleigh, First National Bank in
Marlinton, Greenbrier Valley National Bank, National Bank of Summers of Hinton,
and The Twentieth Street Bank. Horizon's subsidiaries engage in commercial
banking activities which provide financial and trust services to individuals
and commercial customers primarily in Cabell, Fayette, Greenbrier, Lincoln,
Pocahontas, Raleigh, Summers and Wayne Counties of West Virginia. At June 30,
1998, Horizon had total consolidated assets of approximately $1.04 billion,
total consolidated deposits of approximately $862 million, and total
consolidated shareholders' equity of approximately $116 million. Shares of the
common stock of Horizon are listed on the Nasdaq National Market under the
symbol "HZWV."
PROPOSAL 1 -- THE HOLDING COMPANY MERGER (PAGE 21)
The Agreement and Plan of Reorganization (the "Agreement") is the
document that governs the merger of City Holding with Horizon. Whenever we talk
about City Holding shareholders approving the Agreement, we also mean the
Holding Company Plan of Merger. We encourage you to read the Agreement and the
Holding Company Plan of Merger, which are attached as Appendices A and B.
The Agreement provides for the following transactions:
1. The merger of Horizon into City Holding, with City Holding as the surviving
company (the "Holding Company Merger"), and accordingly holders of shares
of the common stock of Horizon ("Horizon Common Stock") will receive
common stock of City Holding ("City Holding Common Stock") in exchange for
Horizon Common Stock.
2. The subsequent merger of Bank of Raleigh, National Bank of Summers of
Hinton, Greenbrier Valley National Bank, The First National Bank in
Marlinton, and The Twentieth Street Bank (collectively, the "Horizon
Banks," all of which are wholly-owned by Horizon), into City National (the
"Bank Mergers"). The Holding Company Merger and the Bank Mergers are
referred to herein collectively as the "Transaction."
DETERMINATION OF EXCHANGE RATIO (PAGE 21)
In the Holding Company Merger each share of Horizon Common Stock (other
than shares held by City Holding and other than Dissenting Shares) shall be
converted into the number of shares of City
<PAGE>
Holding Common Stock determined by dividing $45.00 by the average of the
closing price of City Holding Common Stock on the Nasdaq National Market for
each of the 10 trading days ending on the 10th day prior to the day of the
Effective Time of the Holding Company Merger (the "Average Closing Price"),
rounded to the nearest one one-thousandth (the "Exchange Ratio"). However, if
the Average Closing Price is $44.50 or greater, the Exchange Ratio shall be
1.011, and if the Average Closing Price is $40.50 or less, the Exchange Ratio
shall be 1.111.
COMPARATIVE PER SHARE MARKET PRICE
INFORMATION (PAGE 45)
Shares of City Holding and Horizon trade on the Nasdaq National Market.
On August 6, 1998, the last trading day before we signed the Agreement, City
Holding Common Stock closed at $41.25 per share and Horizon Common Stock closed
at $42.375 per share. On November 3, 1998, City Holding Common Stock closed at
$36 per share and Horizon Common Stock closed at $39.1875 per share.
OUR REASONS FOR THE HOLDING COMPANY MERGER (PAGES 22 AND 24)
City Holding and Horizon believe that the Holding Company Merger is fair
to and in the best interests of both City Holding and Horizon. After the
Holding Company Merger, City Holding will be the third largest financial
services company in deposit market share in the State of West Virginia. The
Holding Company Merger will effectively implement and accelerate City Holding's
strategy for providing long-term shareholder value by enabling City Holding to
leverage on the technological and human infrastructure and geographic and
product diversification that has been created by City Holding over the past
several years. Furthermore, the combined company would be less susceptible to
fluctuations in earnings due to changes in economic conditions that affect
mortgage banking operations.
PROPOSAL 2 -- ADDITIONAL SHARES PROPOSAL (PAGE 47)
The City Holding Board has recommended an amendment of City Holding's
Articles of Incorporation, in the form below, to increase the authorized Common
Stock, $2.50 par value, from 20,000,000 shares to 50,000,000 shares (the
"Additional Shares Proposal"). The Additional Shares Proposal does not pertain
to Horizon shareholders, and Horizon shareholders will not vote on this
proposal. Adoption of the Additional Shares Proposal to increase the authorized
Common Stock from 20,000,000 shares to 50,000,000 shares requires the
affirmative vote of an absolute majority of outstanding shares of City Holding
Common Stock.
THE SHAREHOLDERS' MEETINGS (PAGES 15 AND 19)
CITY HOLDING SHAREHOLDERS. We will hold the City Holding special meeting
at the Charleston Marriott Town Center, 200 Lee Street East, Charleston, West
Virginia 25301, at 2:00 p.m., on December 9, 1998. At this meeting, we will ask
City Holding shareholders to approve the Agreement. We will also ask
shareholders to approve the Additional Shares Proposal.
HORIZON SHAREHOLDERS. We will hold the Horizon special meeting at
Tamarack, Hulett C. Smith Theater, One Tamarack Place, Beckley, West Virginia
25801, at 10:00 a.m., on December 9, 1998. At this meeting, we will ask Horizon
shareholders to approve the Agreement.
OUR RECOMMENDATIONS TO SHAREHOLDERS (PAGES 17 AND 20)
CITY HOLDING SHAREHOLDERS. The City Holding Board of Directors (the
"City Holding Board") believes that the Holding Company Merger and the
Additional Shares Proposal are fair to you and in your best interests, and
unanimously recommends that you vote "FOR" the Agreement and the Additional
Shares Proposal.
HORIZON SHAREHOLDERS. The Horizon Board of Directors (the "Horizon
Board") believes that the Holding Company Merger is fair to you and recommends
that you vote "FOR" the Agreement.
RECORD DATE; VOTING POWER (PAGES 16 AND 19)
CITY HOLDING SHAREHOLDERS. You may vote at the City Holding special
meeting if you owned City Holding shares as of the close of business on
November 4, 1998. You will have one vote for each share of City Holding Common
Stock you owned on November 4, 1998.
HORIZON SHAREHOLDERS. You may vote at the Horizon special meeting if you
owned Horizon
2
<PAGE>
shares as of the close of business on November 4, 1998. You will have one vote
for each share of Horizon Common Stock you owned on November 4, 1998.
VOTES REQUIRED (PAGES 16 AND 20)
CITY HOLDING SHAREHOLDERS. To approve the Holding Company Merger, City
Holding shareholders holding a majority of votes of the outstanding shares of
City Holding Common Stock, must vote for the Agreement. To be approved,
shareholders holding an absolute majority of the outstanding shares of City
Holding Common Stock must vote for the Additional Shares Proposal.
All together, the directors and executive officers of City Holding can
cast less than 11.87% of the votes entitled to be cast at the City Holding
special meeting. We expect that they will vote all of their shares in favor of
the matters to be voted on at the City Holding special meeting.
HORIZON SHAREHOLDERS. To approve the Holding Company Merger, Horizon
shareholders holding a majority of the outstanding shares of Horizon Common
Stock must vote for the Agreement.
All together, the directors and executive officers of Horizon can cast
less than 11.25% of the votes entitled to be cast at the Horizon special
meeting. We expect that they will vote all of their shares for the Agreement.
EXCHANGE OF CERTIFICATES (PAGE 32)
If you are a City Holding shareholder, you do not have to exchange your
stock certificates in connection with the merger with Horizon. Your existing
certificates will continue to represent the same number of shares of the
combined company as you held before the Holding Company Merger.
If you are a holder of Horizon stock certificates, you will need to
exchange them for new certificates. If you do not have stock certificates but
hold Horizon shares in the form of a book entry with Horizon's transfer agent
(such as shares issued under Horizon's dividend reinvestment plan), those
shares will automatically be exchanged for new certificates as well. These new
certificates will represent shares of the combined company. Shortly after we
complete the Holding Company Merger, we will send Horizon shareholders detailed
instructions on how to exchange their shares. Please do not send us any stock
certificates until you receive these instructions.
CONDITIONS TO COMPLETION OF THE HOLDING COMPANY MERGER (PAGE 34)
The completion of the Holding Company Merger depends on meeting a number
of conditions, including the following:
1. City Holding shareholders and Horizon shareholders must approve the
Agreement;
2. we must receive all required regulatory approvals and any waiting periods
required by law must have passed;
3. there must be no governmental order blocking completion of the Holding
Company Merger, and no proceedings by a government body trying to block
the Holding Company Merger;
4. we must receive a legal opinion confirming the tax-free nature of the
Transaction;
5. the Nasdaq National Market must approve for listing the shares that City
Holding will issue in the Holding Company Merger; and
6. we must receive a letter from City Holding's and Horizon's independent
public accountants stating that the Holding Company Merger will qualify
for "pooling of interests" accounting treatment.
Unless prohibited by law, either City Holding or Horizon could elect to
waive a condition that has not been satisfied and complete the Holding Company
Merger anyway. We cannot be certain whether or when any of these conditions
will be satisfied, or waived where permissible, or that we will complete the
Holding Company Merger.
TERMINATION OF THE AGREEMENT (PAGE 35)
The Boards of Directors of the two companies can mutually agree at any
time to terminate the Agreement before completing the Holding Company Merger,
even if the shareholders of both our companies have already voted to approve
it.
Either company can also terminate the Agreement:
1. if any governmental body whose approval is necessary to complete the Holding
Company Merger, including the Board of Governors of the Federal Reserve
System, makes a final decision not to approve the Holding Company Merger;
3
<PAGE>
2. if we do not complete the Holding Company Merger by March 31, 1999;
3. if the City Holding shareholders or the Horizon shareholders do not approve
the Agreement; or
4. if the other company violates, in a material way, any of its
representations, warranties or obligations under the Agreement.
Generally, the company seeking to terminate cannot itself be in
violation of the Agreement so as to allow the other party to terminate the
Agreement.
FEDERAL INCOME TAX CONSEQUENCES (PAGE 36)
We expect that the two companies and their shareholders will not
recognize any gain or loss for U.S. federal income tax purposes in the Holding
Company Merger, except in connection with any cash that Horizon shareholders
receive instead of fractional shares. Both companies have received a legal
opinion that this will be the case. These legal opinions are filed as exhibits
to the Registration Statement of which this Joint Proxy Statement-Prospectus
forms a part. Either company has the right not to complete the Holding Company
Merger if it does not receive a confirming legal opinion at the time of the
Holding Company Merger. The opinions will not bind the Internal Revenue
Service, which could take a different view.
This tax treatment will not apply to any shareholder who exercises
dissenters' rights under West Virginia law. Determining the particular tax
consequences of the Holding Company Merger to you can be complicated. You
should consult your own tax advisor for a full understanding of the Holding
Company Merger's tax consequences.
ACCOUNTING TREATMENT (PAGE 38)
We expect the Holding Company Merger to qualify as a "pooling of
interests," which means that, for accounting and financial reporting purposes,
we will treat our companies as if they had always been one company. Either
company has the right not to complete the Holding Company Merger if it does not
receive a letter from its independent certified public accountants that the
Holding Company Merger will qualify as a "pooling of interests."
OPINIONS OF FINANCIAL ADVISORS (PAGES 25
AND 29)
CITY HOLDING SHAREHOLDERS. In deciding to approve the Holding Company
Merger, the City Holding Board of Directors considered the opinion of Wheat
First Securities, Inc. ("Wheat First") that, as of the date of the opinion, the
Exchange Ratio was fair from a financial point of view to City Holding
shareholders. We have attached as Appendix E the written opinion of Wheat First
dated the date of this Joint Proxy Statement-Prospectus. You should read it
carefully to understand the assumptions made, matters considered and
limitations of the review undertaken by Wheat First in providing its opinion.
HORIZON SHAREHOLDERS. In deciding to approve the Holding Company Merger,
the Horizon Board of Directors considered the opinion of its financial advisor,
Baxter, Fentriss & Co. ("Baxter Fentriss"), that, as of the date of the
opinion, the Exchange Ratio was fair from a financial point of view to Horizon
shareholders. We have attached as Appendix F the written opinion of Baxter
Fentriss. You should read it carefully to understand the assumptions made,
matters considered and limitations of the review undertaken by Baxter Fentriss
in providing its opinion.
BOARD OF DIRECTORS AND MANAGEMENT OF CITY HOLDING FOLLOWING THE HOLDING COMPANY
MERGER (PAGE 43)
BOARD OF DIRECTORS. As of the Effective Time of the Holding Company
Merger, the City Holding Board (the "New Board") will initially be comprised of
24 directors, 12 to be designated by City Holding and 12 to be designated by
Horizon. The 12 City Holding designees to the New Board are Samuel M. Bowling,
Dr. D. K. Cales, Hugh R. Clonch, Jay Goldman, Robert D. Fisher, William M.
Frazier, David E. Haden, Carlin K. Harmon, C. Dallas Kayser, Leon K. Oxley,
Mark H. Schaul and Steven J. Day. The 12 Horizon designees to the New Board are
Philip W. Cain, William C. Dolin, David W. Hambrick, Frank S. Harkins, Jr.,
Tracy W. Hylton, II, B. C. McGinnis III, Thomas L. McGinnis, Philip L.
McLaughlin, E. M. Payne III, R.T. Rogers, James E. Songer and Albert M. Tieche,
Jr. City Holding's designees to the New Board currently serve on the City
Holding Board. Horizon's designees to the New Board currently serve on the
Horizon Board. The directors of the
4
<PAGE>
New Board will be divided into three classes, with one class to be elected each
year to a three year term.
MANAGEMENT. Mr. Day will continue as City Holding's President and Chief
Executive Officer after the Holding Company Merger. Mr. McLaughlin, who is
President and Chief Operating Officer of Horizon, will be Chairman of the Board
of Directors of City Holding after the Holding Company Merger. Messrs. B. C.
McGinnis III and Bowling will both serve as Vice Chairmen of the Board of
Directors of City Holding after the Holding Company Merger. Other senior
executives of City Holding will continue with City Holding in senior executive
positions after the Holding Company Merger. We expect that other senior
executives of Horizon will continue with City Holding in senior executive
positions after the Holding Company Merger.
INTERESTS OF PERSONS INVOLVED IN THE HOLDING COMPANY MERGER THAT ARE DIFFERENT
FROM YOURS (PAGE 37)
Certain executive officers and directors of City Holding and Horizon
have interests in the Agreement that are different from your interests. The
initial Board of Directors of the combined company will be made up of directors
of City Holding and Horizon. The initial executive officers of the combined
company, some of whom will have employment agreements with the combined
company, are currently executive officers of City Holding and Horizon. In
addition, the Holding Company Merger would have been treated as a "change in
control" under City Holding's change in control agreement that it has in place
with Steven J. Day. This means that Mr. Day could have received certain
payments under his existing change in control agreement if he left his position
after the Holding Company Merger. However, Mr. Day has agreed to waive the
"change in control" provisions of his employment agreement for purposes of the
Holding Company Merger. Horizon does not have any change in control agreements
with its senior management that the Holding Company Merger would trigger.
However, City Holding will honor the employment and indemnification
arrangements and benefit obligations which apply also to the officers and
directors of both companies. The City Holding and Horizon Boards of Directors
were aware of these interests and took them into account in approving the
Agreement.
OPTION TO PURCHASE EACH OTHER'S STOCK (PAGE 33)
In connection with the Agreement, each of City Holding and Horizon
granted a stock option that allows the other company to purchase up to 19.9% of
its common stock. The exercise price of each option is set at the granting
company's closing stock price on the last trading day before the date of the
Agreement. The exercise price for City Holding's option to buy Horizon Common
Stock is $42.375 per share. The exercise price for Horizon's option to buy City
Holding Common Stock is $41.25 per share.
Either company can exercise the option only if specific events take
place. These events generally relate to a competing transaction involving a
merger, business combination or other acquisition of the other company or its
stock or assets. As of the date of this Joint Proxy Statement-Prospectus, we do
not believe any event of that kind has occurred. The options could have the
effect of discouraging other companies that might want to combine with either
of the companies. We have attached the option agreements as Appendices C and D.
DISSENTERS' RIGHTS (PAGE 40)
CITY HOLDING SHAREHOLDERS. West Virginia law permits holders of City
Holding Common Stock to dissent from the Holding Company Merger and to demand
and receive payment of the fair value of his shares of City Holding Common
Stock. To do this, the holders of City Holding Common Stock must follow certain
procedures, including filing notices with us and, if they are entitled to vote,
either ABSTAINING OR VOTING AGAINST the Holding Company Merger. If you hold
shares of City Holding Common Stock and you dissent from the Holding Company
Merger and follow the required formalities, your shares will not convert into
the right to receive shares of City Holding Common Stock. Instead, your only
right will be to receive the appraised value of your shares in cash.
HORIZON SHAREHOLDERS. West Virginia law permits holders of Horizon
Common Stock to dissent from the Holding Company Merger and to demand and
receive payment of the fair value of his shares of Horizon Common Stock. To do
this, the holders of Horizon Common Stock must follow certain procedures,
including filing notices with us and, if they are entitled to vote, either
ABSTAINING OR VOTING AGAINST the Holding Company Merger. If
5
<PAGE>
you hold shares of Horizon Common Stock and you dissent from the Holding
Company Merger and follow the required formalities, your shares will not
convert into the right to receive shares of City Holding Common Stock. Instead,
your only right will be to receive the appraised value of your shares in cash.
REGULATORY APPROVALS (PAGE 38)
We cannot complete the Holding Company Merger unless we obtain the
approval of the Board of Governors of the Federal Reserve System (the "Federal
Reserve Board"). The U.S. Department of Justice is able to provide input into
the approval process of the Federal Reserve Board. Federal law requires us to
wait for no less than 15 days and up to 30 days before completing the Holding
Company Merger once the Federal Reserve Board approves it. On October 1, 1998,
we filed the application to the Federal Reserve Board seeking approval of the
Holding Company Merger.
In addition, the Transaction is subject to the approval of or notice to
various state and federal regulators, including the Office of the Comptroller
of the Currency (the "OCC"), and the West Virginia Board of Banking and
Financial Institutions (the "WVBOB"). We have filed or shortly will file all of
the required notices with these regulatory authorities.
While we do not know of any reason why we should not obtain the
regulatory approvals in a timely manner, we cannot be certain when or if we
will obtain them.
6
<PAGE>
RECENT DEVELOPMENTS
On October 21, 1998, City Holding reported its preliminary unaudited
financial results for the third quarter ended September 30, 1998, and on
October 30, 1998, Horizon reported its preliminary unaudited financial results
for the third quarter ended September 30, 1998. Selected results for both
companies follow:
<TABLE>
<CAPTION>
FOR THE
THREE MONTHS ENDED FOR THE NINE MONTHS
SEPTEMBER 30, ENDED SEPTEMBER 30,
--------------------------- ---------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Interest income
City Holding ..................... $ 28,749 $ 24,823 $ 83,475 $ 70,875
Horizon .......................... 20,921 19,516 61,949 55,992
Interest expense
City Holding ..................... 14,461 11,502 40,719 32,084
Horizon .......................... 8,823 7,850 26,794 22,475
Net interest income
City Holding ..................... 14,288 13,321 42,756 38,791
Horizon .......................... 12,098 11,666 35,155 33,517
Provision for loan losses .........
City Holding ..................... 846 393 2,047 1,221
Horizon .......................... 1,103 409 2,369 1,509
Non-interest income
City Holding ..................... 17,909 6,490 49,905 16,389
Horizon .......................... 1,661 1,520 4,999 4,282
Non-interest expense
City Holding ..................... 26,227 14,156 75,428 39,348
Horizon .......................... 8,381 7,342 22,346 20,421
Net income
City Holding ..................... 3,760 3,485 10,172 9,489
Horizon .......................... 2,815 3,527 10,139 10,281
Diluted earnings per share
City Holding ..................... 0.56 0.57 1.52 1.56
Horizon .......................... 0.31 0.38 1.10 1.11
</TABLE>
City Holding's net income for the three months ended September 30, 1998
increased to $3.76 million compared to $3.48 million, an increase of 7.9%,
reported for the three months ended September 30, 1997. City Holding's earnings
per common share for the third quarter of 1998 were $0.56, compared to $0.57
for the third quarter of 1997.
For the nine months ended September 30, 1998, City Holding reported net
income of $10.17 million, compared to $9.49 million reported for the nine
months ended September 30, 1997, an increase of 7.2%. City Holding's earnings
per common share for the nine months ended September 30, 1998 were $1.52
compared to $1.56 during the same period in 1997.
Horizon's net income for the three months ended September 30, 1998
decreased to $2.82 million compared to $3.53 million, a decrease of 20.2%,
reported for the three months ended September 30, 1997. Horizon's diluted
earnings per common share for the third quarter of 1998 were $0.31, compared to
$0.38 for the third quarter of 1997.
Horizon's earnings decreased in the third quarter of 1998 primarily due to
an increase in the provision for loan losses. During the third quarter of 1998,
Horizon experienced a significant deterioration in certain segments of its
indirect lending portfolio. In response, Horizon withdrew from the respective
markets and tightened underwriting standards in remaining markets. As a result
of these conditions, Horizon experienced an increase in the volume of
repossessions, an increase in losses on indirect lending, and an increase in
costs associated with the
7
<PAGE>
collection efforts in these areas. Accordingly, Horizon increased its provision
for loan losses to $1.1 million after considering the portion of its allowance
for loan losses allocated to indirect lending. Horizon's reserve for loan
losses remains adequate to absorb the possible losses at September 30, 1998.
For the nine months ended September 30, 1998, Horizon reported net income
of $10.14 million, compared to $10.28 million reported for the nine months
ended September 30, 1997, a decrease of 1.4%. Horizon's diluted earnings per
common share for the nine months ended September 30, 1998 were $1.10 compared
to $1.11 during the same period in 1997.
The foregoing information for the quarters ended September 30, 1998 and
1997, and the prior nine months ended September 30, 1998, is unaudited and
includes all adjustments, consisting only of normal recurring adjustments,
which City Holding and Horizon consider necessary for a fair presentation in
accordance with generally accepted accounting principles.
8
<PAGE>
UNAUDITED COMPARATIVE PER SHARE AND
SELECTED FINANCIAL DATA
The following tables show summary historical financial data for each of
our companies and also show similar information reflecting the merger of our
two companies (which we refer to as "pro forma" information). In presenting the
comparative pro forma information for certain time periods, we assumed that our
companies had been merged throughout those periods. The following tables show
information about our companies' income per share, dividends per share and book
value per share, and similar pro forma information.
We also assumed that we will treat our companies as if they had always been
combined for accounting and financial reporting purposes (a method known as
"pooling of interests" accounting). We computed the information listed as "pro
forma equivalent" for Horizon by multiplying the pro forma amounts by the
Exchange Ratio of 1.111. We present this information to reflect the fact that
Horizon shareholders will receive more than one share of common stock of the
combined company for each share of Horizon Common Stock they own before the
Holding Company Merger. We expect that we will incur reorganization and
restructuring expenses as a result of combining our companies. The unaudited pro
forma earnings and dividends per share data do not reflect any anticipated
reorganization and restructuring expenses resulting from the merger of our
companies.
We also anticipate that the Holding Company Merger will provide the
combined company with certain financial benefits that include reduced operating
expenses and opportunities to earn more revenue. However, we do not reflect any
of these anticipated cost savings or benefits in the pro forma information.
Therefore, the pro forma information, while helpful in illustrating the
financial characteristics of the combined company under one set of assumptions,
does not attempt to predict or suggest future results. The pro forma information
also does not attempt to show how the combined company would actually have
performed had the companies been combined throughout these periods. All
adjustments, consisting of only normal recurring adjustments, necessary for a
fair statement of results of the unaudited historical interim periods have been
included.
On March 31, 1998, City Holding sold $30,000,000 of Corporation-obligated
Manditorily Redeemable Capital Securities of a subsidiary trust that holds only
subordinated debentures of City Holding ("Trust Preferred Securities"). On
October 27, 1998, City Holding sold $57,500,000 of Trust Preferred Securities
through a different subsidiary trust that holds only subordinated debentures of
City Holding. Pro forma balance sheet amounts are presented for the most recent
interim period and year end period as if both issues of Trust Preferred
Securities were outstanding on June 30, 1998 and December 31, 1997. Pro forma
income statement amounts, assuming that the Trust Preferred Securities had been
outstanding during all periods presented herein and City Holding had incurred
the expense of and realized the income from the proceeds of such securities,
would not be materially different from those presented herein.
We based the information in the following tables on the historical
financial information of our companies that we have presented in our prior
filings with the Securities and Exchange Commission (the "Commission"). When
you read the summary financial information we provide in the following tables,
you should also read the historical financial information and the more detailed
financial information we provide in this document, which you can find beginning
at page 63, as well as the historical financial information in the other
documents to which we refer. See "Where You Can Find More Information" on page
61. City Holding's and Horizon's audited historical financial statements were
audited by Ernst & Young LLP, independent auditors.
9
<PAGE>
The following unaudited comparative per share data is derived from the
historical financial statements of City Holding and Horizon.
UNAUDITED EQUIVALENT PER SHARE DATA
(SHARES IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
----------------------- ---------------------------------
1998 1997 1997 1996 1995
---------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Earnings per common share (basic)
City Holding
Historical .................................. .97 .99 2.03 1.81 1.55
Pro forma combined for the merger ........... .82 .78 1.60 1.34 1.26
Horizon
Historical .................................. .80 .73 1.49 1.20 1.23
Pro forma equivalent for the merger ......... .91 .87 1.78 1.49 1.40
Earnings per common share (diluted)
City Holding
Historical .................................. .96 .99 2.02 1.81 1.55
Pro forma combined for the merger ........... .81 .78 1.60 1.34 1.26
Horizon .......................................
Historical .................................. .80 .73 1.49 1.20 1.23
Pro forma equivalent for the merger ......... .90 .87 1.78 1.49 1.40
Cash dividends per common share ................
City Holding
Historical .................................. .38 .36 .73 .63 .56
Pro forma combined for the merger ........... .38 .36 .73 .63 .56
Horizon
Historical .................................. .38 .34 .75 .62 .53
Pro forma equivalent for the merger ......... .42 .40 .81 .70 .62
Stockholders' equity per common share
(period-end)
City Holding
Historical .................................. 18.73 14.41 16.56 14.21 13.09
Pro forma combined for the merger ........... 14.34 12.19 13.24 11.86 11.52
Horizon
Historical .................................. 12.66 12.08 12.38 11.76 11.23
Pro forma equivalent for the merger ......... 15.93 13.54 14.70 13.18 12.80
</TABLE>
10
<PAGE>
SELECTED PRO FORMA FINANCIAL DATA
OF CITY HOLDING AND HORIZON COMBINED
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
------------------------------ ------------------------------------------
1998 1997 1997 1996 1995
---------------- ------------- -------------- -------------- ------------
(UNAUDITED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
<S> <C> <C> <C> <C> <C>
Income statement:
Interest income ............................ $ 95,754 $ 83,002 $ 173,166 $ 159,708 $ 145,743
Interest expense ........................... 44,229 35,307 76,012 68,334 61,180
Net interest income ........................ 51,525 47,695 97,154 91,374 84,563
Provision for credit losses ................ 2,467 1,928 4,064 5,012 3,609
(Loss) gain on sales of investment
securities ............................... (6) (25) 8 8 (129)
Noninterest income ......................... 35,341 12,686 32,605 16,465 11,472
Noninterest expense ........................ 63,167 38,645 84,899 70,066 61,908
Income before income taxes ................. 21,226 19,783 40,804 32,769 30,389
Income tax expense ......................... 7,490 7,025 14,513 11,488 10,189
Net income ................................. 13,736 12,758 26,291 21,281 20,200
Per common share:
Earnings ................................... 0.82 0.78 1.60 1.34 1.26
Diluted earnings ........................... 0.81 0.78 1.60 1.34 1.26
Cash dividends ............................. 0.38 0.36 0.73 0.63 0.56
Stockholders' equity (period-end) .......... 14.34 12.19 13.24 11.86 11.52
Balance sheet (period-end):
Total assets ............................... 2,542,007 2,102,385 2,298,422 1,995,878 1,983,871
Total loans, net of unearned
income ................................... 1,689,188 1,425,559 1,508,601 1,331,966 1,277,331
Loans held for sale ........................ 194,959 110,342 146,988 92,472 122,222
Total deposits ............................. 1,993,215 1,702,442 1,779,805 1,626,666 1,602,996
Long-term debt ............................. 29,767 39,400 0 34,250 20,000
Total stockholders' equity ................. 242,020 199,365 220,277 188,784 177,522
Average basic common shares
outstanding (in thousands) ............... 16,760 16,382 16,428 15,914 15,972
Average diluted common shares
outstanding (in thousands) ............... 16,866 16,413 16,474 15,928 15,975
Performance ratios:
Return on average assets ................... 1.14% 1.22% 1.21% 1.05% 1.08%
Return on average stockholders'
equity ................................... 11.95 13.05 12.88 11.70 12.00
Risk-based capital ratios:
Tier 1 ..................................... 13.91 12.97 16.36 13.22 12.51
Total ...................................... 15.14 14.09 18.09 14.36 13.55
Leverage capital ratio ..................... 11.49 9.11 12.03 8.90 8.95
Total equity to total assets ................ 9.52 9.48 9.63 9.46 8.95
Dividend payout ratio ....................... 39.08 36.36 35.96 34.81 36.47
Average equity to assets .................... 9.52 9.36 9.36 9.00 8.98
Asset quality ratios:
Allowance for credit losses as a
percentage of total loans
(period end) ............................. 1.09 1.31 1.21 1.27 1.18
Allowance for credit losses as a
percentage of nonperforming loans
(period-end) ............................. 105.14 142.89 136.96 142.67 126.94
Net charge-offs as a percentage of
average total loans ...................... 0.19 0.04 0.23 0.25 0.26
Nonperforming assets as a percentage
of total loans, and other real estate
owned (period-end) ....................... 1.19 0.91 1.00 1.00 1.05
</TABLE>
11
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA OF CITY HOLDING
<TABLE>
<CAPTION>
SIX MONTHS ENDED
(UNAUDITED)
---------------------------
JUNE 30, JUNE 30,
1998 1997
------------- -------------
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE
INFORMATION)
<S> <C> <C>
Income statement:
Interest income ............................ $ 54,726 $ 46,052
Interest expense ........................... 26,258 20,582
Net interest income ........................ 28,468 25,470
Provision for credit losses ................ 1,201 828
Gain (loss) on sales of investment
securities ............................... 16 11
Noninterest income ......................... 31,980 9,888
Noninterest expense ........................ 49,201 25,192
Income before income taxes ................. 10,062 9,349
Income tax expense ......................... 3,650 3,345
Net income ................................. 6,412 6,004
Per common share:
Earnings ................................... .97 .99
Diluted earnings ........................... .96 .99
Cash dividends ............................. .38 .36
Stockholders' equity (period-end) .......... 18.73 14.41
Balance sheet (period-end):
Total assets ............................... 1,501,500 1,147,684
Total loans, net of unearned
income ................................... 929,272 760,403
Loans held for sale ........................ 194,959 110,342
Total deposits ............................. 1,131,709 901,087
Long-term debt ............................. 81,295 39,400
Total stockholders' equity ................. 126,108 87,483
Average basic common shares issued
(in thousands) ............................. 6,589 6,069
Average diluted common shares
outstanding (in thousands) ................. 6,640 6,080
Performance ratios:
Return on average assets ................... 0.94% 1.05%
Return on average stockholders'
equity ................................... 11.13 14.10
Risk-based capital ratios:
Tier 1 ..................................... 9.37 10.17
Total ...................................... 10.05 11.17
Leverage capital ratio ..................... 8.55 6.75
Total equity to total assets ................ 8.40 7.62
Dividend payout ratio ....................... 39.18 36.36
Average equity to assets .................... 8.40 7.42
Asset quality ratios:
Allowance for credit losses as a
percentage of total loans
(period end) ............................. 0.93 1.03
Allowance for credit losses as a
percentage of nonperforming loans
(period end) ............................. 117.81 132.15
Net charge-offs as a percentage of
average total loans ...................... 0.12 0.08
Nonperforming assets as a percentage
of total loans and other real estate
owned (period end) ....................... 0.79 0.78
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------
1997 1996 1995 1994 1993
------------- ------------- ------------- ----------- -------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
<S> <C> <C> <C> <C> <C>
Income statement:
Interest income ............................ $ 96,796 $ 86,069 $ 75,125 $ 62,762 $ 55,301
Interest expense ........................... 44,691 39,064 33,580 25,168 22,425
Net interest income ........................ 52,105 47,005 41,545 37,594 32,876
Provision for credit losses ................ 1,662 1,678 1,104 1,040 1,434
Gain (loss) on sales of investment
securities ............................... 26 87 2 (729) 673
Noninterest income ......................... 26,690 11,036 6,344 5,978 3,189
Noninterest expense ........................ 57,670 40,982 33,887 30,116 24,292
Income before income taxes ................. 19,489 15,468 12,900 11,687 11,012
Income tax expense ......................... 7,025 5,338 4,182 3,546 3,367
Net income ................................. 12,464 10,130 8,718 8,141 7,645
Per common share:
Earnings ................................... 2.03 1.81 1.55 1.44 1.35
Diluted earnings ........................... 2.02 1.81 1.55 1.44 1.35
Cash dividends ............................. .73 .63 .56 .49 .46
Stockholders' equity (period-end) .......... 16.56 14.21 13.09 11.66 11.56
Balance sheet (period-end):
Total assets ............................... 1,266,143 1,048,810 1,040,969 895,785 816,225
Total loans, net of unearned
income ................................... 780,362 697,982 656,761 554,286 468,633
Loans held for sale ........................ 134,990 92,472 122,222 30,227 0
Total deposits ............................. 938,498 828,670 797,415 746,805 709,958
Long-term debt ............................. 68,400 34,250 20,000 6,875 5,875
Total stockholders' equity ................. 106,255 79,373 73,139 66,299 65,605
Average basic common shares issued
(in thousands) ............................. 6,147 5,586 5,642 5,676 5,663
Average diluted common shares
outstanding (in thousands) ................. 6,166 5,587 5,642 5,676 5,663
Performance ratios:
Return on average assets ................... 1.03% 0.94% 0.91% 0.94% 1.03%
Return on average stockholders'
equity ................................... 13.50 13.31 12.55 12.03 12.04
Risk-based capital ratios:
Tier 1 ..................................... 9.16 10.20 8.87 11.03 11.39
Total ...................................... 10.00 11.23 9.75 12.19 12.64
Leverage capital ratio ..................... 6.49 6.58 6.45 6.83 6.66
Total equity to total assets ................ 8.39 7.57 7.03 7.40 8.04
Dividend payout ratio ....................... 35.96 34.81 36.47 33.91 34.36
Average equity to assets .................... 7.61 7.05 7.26 7.82 8.58
Asset quality ratios:
Allowance for credit losses as a
percentage of total loans
(period end) ............................. 0.98 1.04 1.00 1.17 1.32
Allowance for credit losses as a
percentage of nonperforming loans
(period end) ............................. 129.02 156.82 160.66 150.77 185.62
Net charge-offs as a percentage of
average total loans ...................... 0.20 0.14 0.17 0.15 0.15
Nonperforming assets as a percentage
of total loans and other real estate
owned (period end) ....................... 0.76 0.66 0.62 0.77 0.71
</TABLE>
12
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA OF HORIZON
<TABLE>
<CAPTION>
SIX MONTHS ENDED
(UNAUDITED)
-------------------------
JUNE 30, JUNE 30,
1998 1997
------------- -----------
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE
INFORMATION)
<S> <C> <C>
Income statement:
Interest income .......................... $ 41,028 $ 36,950
Interest expense ......................... 17,971 14,725
Net interest income ...................... 23,057 22,225
Provision for credit losses .............. 1,266 1,100
(Loss) gain on sales of investment
securities ............................. (22) (36)
Noninterest income ....................... 3,361 2,798
Noninterest expense ...................... 13,966 13,453
Income before income taxes ............... 11,164 10,434
Income tax expense ....................... 3,840 3,680
Net income ............................... 7,324 6,754
Per common share:
Earnings ................................. 0.80 0.73
Diluted earnings ......................... 0.80 0.73
Cash dividends ........................... 0.38 0.34
Shareholders' equity (period-end) ........ 12.69 12.08
Balance sheet (period-end):
Total assets ............................. 1,040,507 954,701
Total loans, net of unearned
income ................................. 759,916 665,156
Total deposits ........................... 861,506 801,355
Long-term debt ........................... 5,972 0
Total shareholders' equity ............... 115,912 111,882
Average basic common shares
outstanding (in thousands) ............... 9,155 9,283
Average diluted common shares
outstanding (in thousands) ............... 9,204 9,301
Performance ratios:
Return on average assets ................. 1.40 1.44
Return on average common
shareholders' equity ................... 12.77 12.24
Risk-based capital ratios:
Tier 1 ................................... 15.83 16.20
Total .................................... 14.63 17.34
Leverage capital ratio ................... 10.34 11.83
Total equity to total assets .............. 11.14 11.72
Dividend payout ratio ..................... 47.50 46.58
Average equity to assets .................. 10.98 11.73
Asset quality ratios:
Allowance for credit losses as a
percentage of total loans
(period end) ........................... 1.29 1.62
Allowance for credit losses as a
percentage of nonperforming loans
(period end) ........................... 95.98 139.96
Net charge-offs as a percentage of
average total loans .................... 0.27 0
Nonperforming assets as a percentage
of total loans and other real estate
owned (period end) ..................... 1.42 1.16
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------
1997 1996 1995 1994 1993
------------- ----------- ----------- ----------- -------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
<S> <C> <C> <C> <C> <C>
Income statement:
Interest income .......................... $ 76,370 $ 73,639 $ 70,618 $ 62,231 $ 61,029
Interest expense ......................... 31,321 29,270 27,600 21,689 23,189
Net interest income ...................... 45,049 44,369 43,018 40,542 37,840
Provision for credit losses .............. 2,402 3,334 2,505 2,264 2,337
(Loss) gain on sales of investment
securities ............................. (18) (79) (131) (533) 87
Noninterest income ....................... 5,915 5,429 5,128 4,410 4,089
Noninterest expense ...................... 27,229 29,084 28,021 27,161 25,838
Income before income taxes ............... 21,315 17,301 17,489 14,974 13,841
Income tax expense ....................... 7,488 6,150 6,007 4,849 4,345
Net income ............................... 13,827 11,151 11,482 10,125 9,496
Per common share:
Earnings ................................. 1.49 1.20 1.23 1.09 1.02
Diluted earnings ......................... 1.49 1.20 1.23 1.09 1.02
Cash dividends ........................... 0.75 0.62 0.53 0.49 0.47
Shareholders' equity (period-end) ........ 12.38 11.76 11.23 9.98 9.56
Balance sheet (period-end):
Total assets ............................. 1,020,281 947,068 942,902 882,606 864,017
Total loans, net of unearned
income ................................. 728,239 633,984 620,570 582,206 531,026
Total deposits ........................... 841,307 797,996 805,581 762,619 748,798
Long-term debt ........................... 7,102 0 0 0 0
Total shareholders' equity ............... 114,022 109,411 104,383 92,892 88,943
Average basic common shares
outstanding (in thousands) ............... 9,254 9,296 9,298 9,306 9,306
Average diluted common shares
outstanding (in thousands) ............... 9,278 9,308 9,301 9,306 9,306
Performance ratios:
Return on average assets ................. 1.43 1.18 1.25 1.16 1.11
Return on average common
shareholders' equity ................... 12.37 10.54 11.61 11.14 11.05
Risk-based capital ratios:
Tier 1 ................................... 15.20 16.50 17.20 16.84 17.36
Total .................................... 16.40 17.80 18.50 17.96 18.49
Leverage capital ratio ................... 11.10 11.40 11.10 10.73 10.19
Total equity to total assets .............. 11.18 11.55 11.07 10.52 10.29
Dividend payout ratio ..................... 50.34 51.67 43.09 44.95 46.08
Average equity to assets .................. 11.56 11.23 10.78 10.44 10.06
Asset quality ratios:
Allowance for credit losses as a
percentage of total loans
(period end) ........................... 1.44 1.52 1.37 1.40 1.37
Allowance for credit losses as a
percentage of nonperforming loans
(period end) ........................... 143.40 133.54 109.27 138.75 75.93
Net charge-offs as a percentage of
average total loans .................... 0.27 0.36 0.36 0.26 0.28
Nonperforming assets as a percentage
of total loans and other real estate
owned (period end) ..................... 1.09 1.20 1.35 1.20 2.01
</TABLE>
13
<PAGE>
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<PAGE>
CITY HOLDING SPECIAL MEETING
GENERAL
This Joint Proxy Statement-Prospectus is being mailed by City Holding
Company, a West Virginia corporation ("CITY HOLDING") on or about November 6,
1998, to holders of record at the close of business on the City Holding Record
Date (as defined below) (the "CITY HOLDING SHAREHOLDERS") of the common stock,
par value $2.50 per share, of City Holding ("CITY HOLDING COMMON STOCK") and is
accompanied by the Notice of Special Meeting of City Holding Shareholders (the
"CITY HOLDING SPECIAL MEETING") and a form of proxy solicited by the City
Holding Board for use at the City Holding Special Meeting to be held on
December 9, 1998 at 2:00 p.m., local time, at the Charleston Marriott Town
Center, 200 Lee Street East, Charleston, West Virginia 25301, and at any
adjournments or postponements thereof.
MATTERS TO BE CONSIDERED
At the City Holding Special Meeting, City Holding Shareholders will be
asked to consider and vote upon a proposal to approve the Agreement and Plan of
Reorganization, dated as of August 7, 1998 (the "AGREEMENT"), between City
Holding and Horizon, the related Plan of Merger (the "HOLDING COMPANY PLAN OF
MERGER"), and the transactions contemplated by those documents. These
transactions will include, among other things, (a) the merger (the "HOLDING
COMPANY MERGER") of Horizon with and into City Holding, (b) the merger (the
"BANK MERGERS," and together with the Holding Company Merger, the
"TRANSACTION") of Bank of Raleigh, a West Virginia bank ("RALEIGH"), National
Bank of Summers of Hinton, a national banking association ("SUMMERS"),
Greenbrier Valley National Bank, a national banking association ("GREENBRIER"),
The First National Bank in Marlinton, a national banking association
("MARLINTON") and The Twentieth Street Bank, a West Virginia bank ("TWENTIETH")
(collectively, the "HORIZON BANKS," all of which are wholly-owned by Horizon)
with and into City National, and (c) the issuance of shares of City Holding to
shareholders of Horizon. See "Comparative Rights of Shareholders of City
Holding and Horizon." The City Holding Shareholders will also be asked to vote
upon a proposal to increase the number of authorized shares of City Holding
Common Stock to 50,000,000 shares (the "ADDITIONAL SHARES PROPOSAL"). The City
Holding Shareholders may also be asked to vote upon a proposal to adjourn or
postpone the City Holding Special Meeting, which adjournment or postponement
could be used for the purpose, among others, of allowing additional time for
the soliciting of additional votes to approve the Transaction.
PROXIES
If you are a City Holding Shareholder, you may use the accompanying form
of proxy if you are unable to attend the City Holding Special Meeting in person
or wish to have your shares voted by proxy even if you do attend the City
Holding Special Meeting. You may revoke any proxy given by you pursuant to this
solicitation at any time before it is exercised either by submitting to
Victoria A. Evans, Senior Vice President -- Shareholder Services, at City
Holding, prior to or at the City Holding Special Meeting, a written notice of
revocation or a properly executed proxy of a later date or by attending the
City Holding Special Meeting and electing to vote in person; however, your
attendance at the City Holding Special Meeting will not in and of itself
constitute a revocation of a proxy. You should address any written notice of
revocation and other communications with respect to the revocation of City
Holding proxies to City Holding Company, 25 Gatewater Road, Charleston, West
Virginia 25313, Attention: Victoria A. Evans, Senior Vice President --
Shareholder Services.
All shares represented by valid proxies received pursuant to this
solicitation, and not revoked before they are exercised, will be voted in the
manner specified therein. If you do not specify how your proxy is to be voted,
it will be voted in favor of the approval of the Holding Company Merger and the
Additional Shares Proposal.
SOLICITATION OF PROXIES
The entire cost of soliciting the proxies from the City Holding
Shareholders will be borne by City Holding, except that Horizon has agreed to
pay one-half of the printing costs. In addition to the solicitation of the
proxies by mail, City Holding will request banks, brokers and other record
holders to send proxies and proxy
15
<PAGE>
material to the beneficial owners of the stock and secure their voting
instructions, if necessary. City Holding will reimburse such record holders for
their reasonable expenses in so doing. City Holding has also made arrangements
with D.F. King & Co., Inc. to assist it in soliciting proxies from banks,
brokers and nominees and has agreed to pay $5,000.00, plus expenses, for such
services. Directors, officers and employees of City Holding, who will not be
specially compensated, may also solicit proxies from City Holding Shareholders,
either personally or by telephone, telegram, facsimile or mail.
RECORD DATE AND VOTING RIGHTS
RECORD DATE. The City Holding Board has fixed November 4, 1998 as the
record date for the determination of the City Holding Shareholders entitled to
receive notice of and to vote at the City Holding Special Meeting (the "CITY
HOLDING RECORD DATE"). Accordingly, only City Holding Shareholders of record at
the close of business on the City Holding Record Date will be entitled to
notice of and to vote at the City Holding Special Meeting. At the close of
business on the City Holding Record Date, there were approximately 6,660,717
shares of City Holding Common Stock entitled to vote at the City Holding
Special Meeting.
QUORUM REQUIREMENT. The presence, in person or by proxy, of shares of City
Holding Common Stock representing a majority of the total voting power of such
shares entitled to vote on the City Holding Record Date is necessary to
constitute a quorum at the City Holding Special Meeting.
VOTING RIGHTS. Each share of City Holding Common Stock outstanding on the
City Holding Record Date entitles its holder to one vote as to (i) the proposal
to adopt the Agreement and the transactions contemplated thereby; (ii) the
Additional Shares Proposal; and (iii) any other proposal that may properly come
before the City Holding Special Meeting.
VOTES REQUIRED. Under the West Virginia Code (the "WVC") and the Articles
of Incorporation of City Holding (the "CITY HOLDING ARTICLES"), the affirmative
vote of a majority of the votes entitled to be cast at the City Holding Special
Meeting is required to approve the Transaction and the Additional Shares
Proposal.
ABSTENTIONS AND BROKER NON-VOTES. In accordance with West Virginia law,
City Holding intends to count shares of City Holding Common Stock present in
person at the City Holding Special Meeting but not voting, and shares of City
Holding Common Stock for which it has received proxies but with respect to
which holders of such shares have abstained, as present at the City Holding
Special Meeting for purposes of determining the presence or absence of a quorum
for the transaction of business. In addition, under applicable Nasdaq National
Market ("NASDAQ") rules, brokers who hold shares of City Holding Common Stock
in "street" name for customers who are the beneficial owners of such shares are
prohibited from giving a proxy to vote shares held for such customers with
matters to be considered and voted upon at the City Holding Special Meeting
without specific instructions from such customers. Shares of City Holding
Common Stock represented by proxies returned by a broker holding such shares in
nominee or "street" name will be counted for purposes of determining whether a
quorum exists, even if such shares are not voted in matters where discretionary
voting by the broker is not allowed ("BROKER NON-VOTES"). Abstentions from
voting and broker non-votes will not be deemed to have been cast either "for"
or "against" the Holding Company Merger or the Additional Shares Proposal at
the City Holding Special Meeting.
BECAUSE APPROVAL OF THE AGREEMENT AND THE ADDITIONAL SHARES PROPOSAL
REQUIRES THE AFFIRMATIVE VOTE OF A MAJORITY OF THE VOTES ENTITLED TO BE CAST AT
THE CITY HOLDING SPECIAL MEETING, ABSTENTIONS AND BROKER NON-VOTES WILL HAVE
THE SAME EFFECT AS NEGATIVE VOTES. ACCORDINGLY, THE CITY HOLDING BOARD URGES
CITY HOLDING SHAREHOLDERS TO COMPLETE, DATE AND SIGN THE ACCOMPANYING PROXY AND
RETURN IT PROMPTLY IN THE ENCLOSED, POSTAGE-PAID ENVELOPE.
As of the City Holding Record Date, approximately 790,762 shares of City
Holding Common Stock, or approximately 11.87% of the shares entitled to vote at
the City Holding Special Meeting, were beneficially owned by directors and
executive officers of City Holding. It is currently expected that each such
director and executive officer of City Holding will vote the shares of City
Holding Common Stock beneficially owned by him or her
16
<PAGE>
for approval of the Transaction.
Additional information with respect to beneficial ownership of City
Holding Common Stock by persons and entities owning more than 5% of the
outstanding shares of City Holding Common Stock and more detailed information
with respect to beneficial ownership of City Holding Common Stock by directors
and executive officers of City Holding is incorporated by reference from the
City Holding Annual Report on Form 10-K for the year ended December 31, 1997.
See "Where You Can Find More Information."
RECOMMENDATION OF THE CITY HOLDING BOARD
The City Holding Board has, by the unanimous vote of all directors
present, approved the Transaction. The City Holding Board believes that the
Agreement and the transactions contemplated thereby are fair to and in the best
interests of City Holding and the City Holding Shareholders, and unanimously
recommends that the City Holding Shareholders vote "FOR" approval of the
Transaction and the Additional Shares Proposal. See "The Holding Company Merger
- -- Reasons of City Holding for the Holding Company Merger."
17
<PAGE>
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<PAGE>
HORIZON SPECIAL MEETING
GENERAL
Horizon is mailing this Joint Proxy Statement-Prospectus on or about
November 6, 1998, to the holders of record at the close of business on the
Horizon Record Date (as defined below) (the "HORIZON SHAREHOLDERS") of the
common stock, par value $1.00 per share, of Horizon ("HORIZON COMMON STOCK")
and is accompanied by the Notice of Special Meeting and a form of proxy
solicited by the Horizon Board for use at the Special Meeting of Horizon
Shareholders (the "HORIZON SPECIAL MEETING," and together with the City Holding
Special Meeting, the "MEETINGS") to be held on December 9, 1998, at 10:00 a.m.,
local time, at Tamarack, Hulett C. Smith Theater, One Tamarack Place, Beckley,
West Virginia 25801, and at any adjournments or postponements thereof.
MATTERS TO BE CONSIDERED
At the Horizon Special Meeting, Horizon Shareholders will be asked to
consider and vote upon a proposal to approve the Agreement and the transactions
contemplated thereby. The Horizon Shareholders may also be asked to vote upon a
proposal to adjourn or postpone the Horizon Special Meeting, which adjournment
or postponement could be used for the purpose, among others, of allowing
additional time for the soliciting of additional votes to approve the
Agreement.
PROXIES
If you are a Horizon Shareholder, you may use the accompanying proxy if
you are unable to attend the Horizon Special Meeting in person or wish to have
your shares voted by proxy even if you do attend the Horizon Special Meeting.
You may revoke any proxy given by you pursuant to this solicitation at any time
before it is exercised either by submitting to the Corporate Secretary of
Horizon, prior to or at the Horizon Special Meeting, a written notice of
revocation or a properly executed proxy of a later date or by attending the
Horizon Special Meeting and electing to vote in person; however, your
attendance at the Horizon Special Meeting will not in and of itself constitute
a revocation of a proxy. You should address any written notice of revocation
and other communications with respect to the revocation of Horizon proxies to
Horizon Bancorp, Inc., One Park Avenue, Beckley, West Virginia 25802-2803,
Attention: Corporate Secretary.
All shares represented by valid proxies received pursuant to this
solicitation, and not revoked before they are exercised, will be voted in the
manner specified therein. If you do not specify how your proxy is to be voted,
it will be voted in favor of adoption of the Agreement.
SOLICITATION OF PROXIES
The entire cost of soliciting the proxies from the Horizon Shareholders
will be borne by Horizon except that City Holding has agreed to pay one-half of
the printing costs. In addition to the solicitation of the proxies by mail,
Horizon will request banks, brokers and other record holders to send proxies
and proxy material to the beneficial owners of the stock and secure their
voting instructions, if necessary. Horizon will reimburse such record holders
for their reasonable expenses in so doing. Horizon has also made arrangements
with D.F. King & Co., Inc. to assist it in soliciting proxies from banks,
brokers and nominees and has agreed to pay $5,000.00, plus expenses, for such
services. Directors, officers and employees of Horizon, who will not be
specially compensated, may also solicit proxies from Horizon Shareholders,
either personally or by telephone, telegram, facsimile or mail.
RECORD DATE AND VOTING RIGHTS
RECORD DATE. The Horizon Board has fixed November 4, 1998, as the record
date for the determination of the Horizon Shareholders entitled to receive
notice of and to vote at the Horizon Special Meeting (the "HORIZON RECORD
DATE"). Accordingly, only Horizon Shareholders of record at the close of
business on the Horizon Record Date will be entitled to notice of and to vote
at the Horizon Special Meeting. At the close of business
19
<PAGE>
on the Horizon Record Date, there were approximately 9,149,775 shares of Horizon
Common Stock entitled to vote at the Horizon Special Meeting.
QUORUM REQUIREMENT. The presence, in person or by proxy, of shares of
Horizon Common Stock representing a majority of the total voting power of such
shares entitled to vote on the Horizon Record Date is necessary to constitute a
quorum at the Horizon Special Meeting.
VOTING RIGHTS. Each share of Horizon Common Stock outstanding on the
Horizon Record Date entitles its holder to one vote as to (i) the proposal to
adopt the Agreement and the transactions contemplated thereby and (ii) any
other proposal that may properly come before the Horizon Special Meeting.
VOTE REQUIRED. Under the WVC and the Articles of Incorporation of Horizon
(the "HORIZON ARTICLES"), the affirmative vote of a majority of the votes
entitled to be cast at the Horizon Special Meeting is required to approve the
Agreement and the transactions contemplated thereby.
ABSTENTIONS AND BROKER NON-VOTES. In accordance with West Virginia law,
Horizon intends to count shares of Horizon Common Stock present in person at
the Horizon Special Meeting but not voting, and shares of Horizon Common Stock
for which it has received proxies but with respect to which holders of such
shares have abstained, as present at the Horizon Special Meeting for purposes
of determining the presence or absence of a quorum for the transaction of
business. In addition, under applicable Nasdaq rules, brokers who hold shares
of Horizon Common Stock in "street" name for customers who are the beneficial
owners of such shares are prohibited from giving a proxy to vote shares held
for such customers with respect to the matters to be considered and voted upon
at the Horizon Special Meeting without specific instructions from such
customers. Shares of Horizon Common Stock represented by proxies returned by a
broker holding such shares in nominee or "street" name will be counted for
purposes of determining whether a quorum exists, even if such shares are broker
non-votes. Abstentions from voting and broker non-votes will not be deemed to
have been cast either "for" or "against" the Agreement at the Horizon Special
Meeting.
BECAUSE ADOPTION OF THE AGREEMENT REQUIRES THE AFFIRMATIVE VOTE OF A
MAJORITY OF OUTSTANDING SHARES OF HORIZON COMMON STOCK, ABSTENTIONS AND BROKER
NON-VOTES WILL HAVE THE SAME EFFECT AS NEGATIVE VOTES. ACCORDINGLY, THE HORIZON
BOARD URGES HORIZON SHAREHOLDERS TO COMPLETE, DATE AND SIGN THE ACCOMPANYING
PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED, POSTAGE-PAID ENVELOPE.
As of the Horizon Record Date, approximately 1,029,886 shares of Horizon
Common Stock, or approximately 11.25% of the shares entitled to vote at the
Horizon Special Meeting, were beneficially owned by directors and executive
officers of Horizon. It is currently expected that each such director and
executive officer of Horizon will vote the shares of Horizon Common Stock
beneficially owned by him or her for approval of the Agreement and the
transactions contemplated thereby.
Additional information with respect to beneficial ownership of Horizon
Common Stock by persons and entities owning more than 5% of the outstanding
shares of Horizon Common Stock and more detailed information with respect to
beneficial ownership of Horizon Common Stock by directors and executive
officers of Horizon is incorporated by reference to the Horizon Annual Report
on Form 10-K for the year ended December 31, 1997. See "Where You Can Find More
Information."
RECOMMENDATION OF THE HORIZON BOARD
The Horizon Board has, by the unanimous vote of all directors present,
approved the Agreement and the transactions contemplated thereby. The Horizon
Board believes that the Agreement and the transactions contemplated thereby are
fair to and in the best interests of Horizon and the Horizon Shareholders, and
recommends that the Horizon Shareholders vote "FOR" approval of the Agreement
and the transactions contemplated thereby. See "The Holding Company Merger --
Reasons of Horizon for the Holding Company Merger."
20
<PAGE>
PROPOSAL 1 -- THE HOLDING COMPANY MERGER
THE FOLLOWING SUMMARY OF THE MATERIAL TERMS AND PROVISIONS OF THE
AGREEMENT IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE AGREEMENT AND THE
HOLDING COMPANY PLAN OF MERGER, WHICH ARE INCORPORATED HEREIN BY REFERENCE AND,
WITH THE EXCEPTION OF CERTAIN EXHIBITS TO THE AGREEMENT, ARE ATTACHED AS
APPENDICES A AND B, RESPECTIVELY, TO THIS JOINT PROXY STATEMENT-PROSPECTUS.
DESCRIPTION OF THE HOLDING COMPANY MERGER
At the date and time when the Holding Company Merger becomes effective
(the "EFFECTIVE TIME OF THE HOLDING COMPANY MERGER"), Horizon will merge with
and into City Holding pursuant to the Agreement and the Holding Company Plan of
Merger and thereafter, shortly after the time when the Holding Company Merger
becomes effective, the Horizon Banks will merge with and into City National
pursuant to the Agreement. Subject to the satisfaction or waiver of certain
conditions set forth in the Agreement and described more fully in " --
Conditions to the Holding Company Merger," the Holding Company Merger will
become effective upon the filing of the articles of merger in the office of the
Secretary of State of West Virginia, in accordance with Section 31-1-37 of the
WVC.
CONVERSION OF STOCK; EXCHANGE RATIO. Each share of Horizon Common Stock
which is issued and outstanding at the Effective Time of the Holding Company
Merger (other than shares held directly by City Holding, which shall be
canceled without payment therefore, and Dissenting Shares) shall, and without
any action by the holder thereof, be converted into the number of shares of
City Holding Common Stock determined by dividing $45.00 by the average of the
closing price of City Holding Common Stock on the Nasdaq National Market for
each of the 10 trading days ending on the 10th day prior to the day of the
Effective Time of the Holding Company Merger (the "AVERAGE CLOSING PRICE"),
rounded to the nearest one one-thousandth (the "EXCHANGE RATIO"). However, if
the Average Closing Price is $44.50 or greater, the Exchange Ratio shall be
1.011, and if the Average Closing Price is $40.50 or less, the Exchange Ratio
shall be 1.111. The Exchange Ratio was arrived at through arm's-length
negotiations between City Holding and Horizon. See " -- Background of the
Holding Company Merger."
CONVERSION OF OPTIONS. At the Effective Time of the Holding Company Merger
and as provided in the Holding Company Plan of Merger, each outstanding option
to acquire Horizon Common Stock that was granted under Horizon's employee
benefit plans ("HORIZON OPTIONS") shall be converted, based on the Exchange
Ratio, into options to acquire City Holding Common Stock ("CITY HOLDING
OPTIONS"). The exercise price per share of City Holding Common Stock under a
City Holding Option shall be equal to the exercise price per share of Horizon
Common Stock under the Horizon Option divided by the Exchange Ratio (rounded up
to the nearest cent). The number of shares of City Holding Common Stock subject
to a City Holding Option shall be equal to the number of shares of Horizon
Common Stock subject to the Horizon Option multiplied by the Exchange Ratio
(rounded down to the nearest whole share). Except as provided in the preceding
sentences regarding the pricing of, and number of shares of City Holding Common
Stock subject to, the City Holding Option, the terms of the City Holding Option
shall be the same as the terms of the Horizon Option.
BACKGROUND OF THE HOLDING COMPANY MERGER
In April, 1998, the Horizon Board undertook a study of Horizon's future
and the strategic options available to Horizon. The Board employed Baxter
Fentriss to explore and review Horizon's strategic position in the financial
services industry and to explore any strategic alternatives. With assistance
from Baxter Fentriss, the Horizon Board reviewed the economic and competitive
conditions in Horizon's market areas and recognized that Horizon's long-term
viability depended upon identifying growth opportunities. The Horizon Board and
management also recognized that because of Horizon's substantial market share
in its market area, growth opportunities could be maximized by affiliating with
another banking organization such as City Holding.
On April 30, 1998, Horizon directed Baxter Fentriss to act as agent and
financial advisor to assist in identifying financial institutions that it
believed would be interested in a business combination with Horizon. Baxter
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Fentriss initiated confidential discussions with numerous financial
institutions to solicit preliminary indications of interest in either acquiring
or selling to Horizon.
City Holding was one of the financial institutions contacted by Baxter
Fentriss. City Holding carefully reviewed the material prepared by Baxter
Fentriss and determined that a potential transaction with Horizon was worthy of
pursuit. With assistance from Wheat First, City Holding's senior management
then proceeded to prepare various financial analyses regarding a potential
transaction with Horizon. City Holding's senior management presented this
information to the City Holding Board's Executive Committee on June 8, 1998.
City Holding's Executive Committee instructed management to proceed with a
potential transaction. On June 25, 1998, City Holding presented a preliminary
indication of interest to Baxter Fentriss.
On June 30, 1998, Baxter Fentriss representatives met with the Horizon
Board and submitted a presentation outlining the results of their confidential
discussions and identifying certain institutions for a potential acquisition
transaction. At that meeting, the Board instructed Baxter Fentriss
representatives to contact the principal officers of certain of these
institutions to invite them to appear before the Horizon Board to make
presentations concerning any acquisition proposals. Baxter Fentriss contacted
City Holding shortly after the June 30, 1998 Horizon Board meeting and invited
City Holding's senior management to present their proposal to the Horizon Board
on July 8, 1998.
On July 8, 1998, the Horizon Board met and heard informational
presentations from City Holding and certain other bank holding companies. All
of these presentations contemplated a merger of Horizon with and into the
particular institution. The Horizon Board again met on July 15, 1998, and heard
an additional presentation by another financial institution.
On July 17, 1998, the Horizon Board convened another meeting, and at that
meeting, representatives of Baxter Fentriss summarized the various proposals.
Horizon's senior management identified two of the potential institutions (one
of which was City Holding) as favorable acquisition candidates and outlined the
reasons for that belief. The Horizon Board decided to delay further
consideration of the matter to allow Horizon's senior management to meet with
or contact individuals connected with banks that had been acquired by these
institutions and to allow senior management to continue to review the other
indications of interest Horizon had received. Additionally, representatives of
Baxter Fentriss were instructed to use this time for further review.
On July 21, 1998, representatives of Horizon's senior management and Board
of Directors met with representatives from City Holding's senior management and
Board of Directors at City Holding's offices to generally review potential
merger issues and discuss the merits of the potential combined company.
On July 31, 1998, the Horizon Board convened and met with Baxter Fentriss
and Horizon's legal counsel to discuss and review senior management's
recommendation and directed senior management to attempt to negotiate a
definitive merger agreement with City Holding. City Holding's Executive
Committee also met on July 31, 1998 and heard presentations from both Wheat
First and Hunton & Williams regarding the Holding Company Merger. City
Holding's Executive Committee authorized senior management to proceed with
negotiation of a definitive merger agreement with Horizon.
On August 7, 1998, the Horizon Board met with Baxter Fentriss and legal
counsel and reviewed the proposed Agreement with City Holding. On the basis of
the independent judgment of the members of the Horizon Board, the Board
concluded that the terms of the transaction were in the best interests of
Horizon and its shareholders and approved the Agreement. The City Holding Board
also met on August 7, 1998. In this meeting, the City Holding Board: (i)
received presentations from Wheat First and Hunton & Williams about the Holding
Company Merger; (ii) reviewed the proposed agreement with Horizon; (iii)
concluded that the terms of the transaction were in the best interests of City
Holding and its shareholders; and (iv) approved the Agreement.
REASONS OF CITY HOLDING FOR THE HOLDING COMPANY MERGER
The City Holding Board believes that the Holding Company Merger is in the
best interest of City Holding and the City Holding Shareholders. Accordingly,
the City Holding Board has unanimously approved and adopted the Agreement and
recommends approval of the Agreement by the City Holding Shareholders. In
reaching its
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decision, the City Holding Board consulted with City Holding's senior
management, City Holding's legal counsel (Hunton & Williams), City Holding's
financial advisor (Wheat First) and considered a number of other factors. These
factors, which were not assigned any relative or specific weight in reaching
the above conclusion, include:
i) The City Holding Board's belief that Horizon is a high quality
franchise with a respected and capable management team having a comparable
philosophy regarding the successful operation of a community banking
franchise.
ii) The results of City Holding's preliminary due diligence review of
Horizon.
iii) The City Holding Board's belief that the Holding Company Merger
will effectively implement and accelerate City Holding's strategy for
providing long-term shareholder value by enabling City Holding to leverage
on the technological and human infrastructure and geographic and product
diversification that has been created by City Holding over the past several
years.
iv) The City Holding Board's assessment of the current and future
economic and competitive environment in the financial services industry,
including supporting the necessary investments in improved technology, the
benefits of operational scale and the continued consolidation in the
industry. This acquisition will make City Holding the third largest
financial services company in deposit market share in the State of West
Virginia.
v) The City Holding Board's belief that combining with an in-market
company would provide City Holding with an opportunity for significant cost
savings from both its own franchise and from Horizon.
vi) The City Holding Board's assessment that the combined company would
be less susceptible to fluctuations in earnings due to changes in economic
conditions that affect mortgage banking operations.
vii) The oral presentation of Wheat First to the City Holding Board on
July 31, 1998 and the opinion of Wheat First (including the assumptions and
financial information and projections relied upon by Wheat First in
arriving at such an opinion), rendered on August 7, 1998, that, as of such
date, the exchange ratio was fair to City Holding from a financial point of
view.
viii) The City Holding Board's expectation that the Holding Company
Merger would constitute a tax-free "reorganization" under Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "CODE").
ix) The City Holding Board's expectation that the Holding Company Merger
would be accounted for as a "pooling of interests" for accounting and
financial reporting purposes.
x) The City Holding Board's review of certain financial information
about the Holding Company Merger, City Holding and Horizon. This
information included valuation analyses, pro-forma analyses, corporate
financial data and comparable merger and acquisition transactions as
presented by City Holding's financial advisors and senior management, as
well as anticipated cost savings, operating efficiencies and revenue
enhancement opportunities available to the combined company as a result of
the Holding Company Merger. The City Holding Board also considered the fact
that Horizon has a much larger relative capital base that can be utilized
to lower the amount of future City Holding capital offerings.
xi) The likelihood of the Holding Company Merger being approved by the
appropriate regulatory authorities.
The City Holding Board also discussed certain other factors in connection
with the Holding Company Merger. These included, among others, the potential
difficulties of integrating Horizon's operations into City Holding's; the
significant costs involved in connection with completing the Holding Company
Merger; the substantial time and effort of City Holding management required to
implement the Holding Company Merger, integrate the business of Horizon into
City Holding, and manage the increased size of the combined business; the risk
that the anticipated benefits of the Holding Company Merger might not be fully
realized; the fact that the City Holding Stock Option Agreement, which Horizon
required as an inducement to enter into the Agreement,
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might discourage third parties from offering to acquire City Holding during the
pendency of the Holding Company Merger; and the dilution of current City
Holding Shareholders' ownership of City Holding. The City Holding Board
believes that the benefits and advantages of the Holding Company Merger
outweigh these factors.
The foregoing discussion of the information and factors considered by the
City Holding Board is not intended to be exhaustive but is believed to include
all material factors considered by the City Holding Board. In reaching its
determination to approve and adopt the Agreement and the transactions
contemplated thereby, the City Holding Board did not assign any relative or
specific weights to the foregoing factors, and individual directors may have
given differing weights to different factors.
THE CITY HOLDING BOARD BELIEVES THAT THE AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED THEREBY ARE FAIR TO AND IN THE BEST INTERESTS OF CITY HOLDING AND
THE CITY HOLDING SHAREHOLDERS AND UNANIMOUSLY RECOMMENDS THAT THE CITY HOLDING
SHAREHOLDERS VOTE FOR APPROVAL AND ADOPTION OF THE AGREEMENT.
REASONS OF HORIZON FOR THE HOLDING COMPANY MERGER
In reaching its conclusion to approve the Agreement, the Horizon Board
considered a number of factors and did not assign any relative or specific
weights to the factors considered. Among other things, the Horizon Board
considered: (i) the merger consideration in relation to the book value, assets
and earnings of Horizon and City Holding; (ii) information concerning the
financial condition, results of operations and prospects of Horizon and City
Holding, including return on assets and return on equity; (iii) the financial
terms of other recent business combinations in the banking industry; and (iv)
the opinion of Baxter Fentriss as to the fairness of the Exchange Ratio to the
Horizon Shareholders from a financial point of view. The Horizon Board believes
that the terms of the Agreement, which are the product of arm's-length
negotiations between Horizon and City Holding, are in the best interests of
Horizon and its shareholders. In the course of reaching its determination, the
Horizon Board consulted (i) with legal counsel with respect to its legal
duties, the terms of the Agreement and the issues related thereto; (ii) with
its financial advisor with respect to the financial aspects and fairness of the
transaction; and (iii) with senior management regarding, among other things,
retention of Horizon employees and customer service.
In reaching its determination to approve the Agreement, the Horizon Board:
(a) Analyzed information with respect to the financial condition,
results of operations, businesses and prospects of Horizon and City
Holding;
(b) Considered the oral opinion (which was subsequently confirmed in
writing) of Baxter Fentriss that, as of August 7, 1998, the Exchange Ratio
was fair to the Horizon Shareholders from a financial point of view (See "
-- Opinion of Horizon's Financial Advisor");
(c) Considered the other terms of the Agreement, including the tax-free
nature of the transaction;
(d) Considered the detailed financial analyses and other information
with respect to Horizon and City Holding discussed by Baxter Fentriss, as
well as the Horizon Board's own knowledge of Horizon, City Holding, and
their respective businesses; and
(e) Considered the value of Horizon Common Stock continuing as a
stand-alone entity compared to the effect of Horizon combining with City
Holding in light of the current economic and financial environment,
including other possible strategic alternatives, the results of the
contacts and discussions between Horizon and Baxter Fentriss and various
third parties, and the belief of the Horizon Board and management that the
Holding Company Merger offered the best transaction available to Horizon
and its shareholders.
In addition, the Horizon Board recognized that the combination with City
Holding would: (i) allow the combined company to remain a West Virginia
headquartered bank with assets exceeding $2.5 billion and to become the third
largest bank holding company headquartered in West Virginia; (ii) provide
Horizon Shareholders with approximately 58% ownership in the combined company;
(iii) provide Board seats for 12 directors which would result in 50% of the new
combined Board; (iv) increase book value from $12.46 to $14.47 for Horizon
Shareholders; (v) allow for the existing Horizon banks to retain their own
names and local boards until the Bank Mergers, which will occur as soon as
practicable after the Holding Company Merger; (vi) provide
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opportunities for career path changes and advancement for some employees; (vii)
bring new products and services to the marketplace currently served by Horizon
banks; and (viii) create a combined company that may in the future be in a
position to affiliate with a larger financial institution if the Board believed
that such an affiliation would be in the best interests of the combined
company's shareholders. There are, however, no current plans in this regard.
Upon completion of the Holding Company Merger, former shareholders of
Horizon will have equity ownership in a substantial bank holding company. If
the Holding Company Merger had been completed on June 30, 1998, Horizon
Shareholders would have received 57.86% of the 15,978,000 shares of City
Holding Common Stock that would have been outstanding. Based upon financial
data as of June 30, 1998, on a pro forma consolidated basis, 40.93% of assets,
43.22% of deposits, 53.32% of net income and 47.89% of shareholders' equity
will be attributable to Horizon. If the Holding Company Merger had been
completed on June 30, 1998, City Holding would have had approximately $2.5
billion in assets, approximately $2.0 billion in total deposits, and
approximately $1.7 billion in total loans.
The foregoing discussion of the information and factors considered by the
Horizon Board is not intended to be exhaustive, but constitutes the material
factors the Horizon Board considered. In reaching its determination to approve
and recommend the Agreement, the Horizon Board did not assign any specific or
relative weights to the foregoing factors, and individual directors may have
weighed factors differently. After deliberating with respect to the Holding
Company Merger and other transactions contemplated by the Agreement,
considering, among other things, the matters discussed above and the opinion of
Baxter Fentriss referred to above, the Horizon Board approved and adopted the
Agreement, and the transactions contemplated thereby as being in the best
interests of Horizon and its shareholders.
BASED ON THE FOREGOING, AND ON THE OPINION OF BAXTER FENTRISS REFERRED TO
ABOVE, THE HORIZON BOARD RECOMMENDS THAT HORIZON SHAREHOLDERS VOTE "FOR"
ADOPTION OF THE AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING
THE HOLDING COMPANY MERGER.
OPINION OF CITY HOLDING'S FINANCIAL ADVISOR
City Holding retained Wheat First to render its opinion to the City
Holding Board as to the fairness, from a financial point of view, of the
Exchange Ratio to the holders of City Holding Common Stock. Wheat First is a
nationally recognized investment banking firm regularly engaged in the
valuation of businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, competitive biddings, secondary
distributions of listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes. The City Holding Board
selected Wheat First to render its opinion in connection with the Holding
Company Merger on the basis of such firm's expertise. Wheat First regularly
publishes research reports regarding the financial services industry and the
businesses and securities of publicly owned companies in that industry,
including City Holding. In the ordinary course of its business, Wheat First and
its affiliates may actively trade in the equity securities of City Holding or
Horizon for its account and the accounts of its customers, and therefore may
from time to time hold long or short positions in such securities.
Representatives of Wheat First participated by teleconference in the
meeting of the City Holding Board on August 7, 1998, at which the Agreement was
considered and approved. At the meeting, Wheat First issued an oral opinion
that, as of such date, the Exchange Ratio was fair, from a financial point of
view, to the holders of City Holding Common Stock. A written opinion dated as
of the date of this Joint Proxy Statement-Prospectus has been delivered to the
City Holding Board to the effect that, as of such date, the Exchange Ratio is
fair, from a financial point of view, to the holders of City Holding Common
Stock.
THE FULL TEXT OF WHEAT FIRST'S WRITTEN OPINION, DATED AS OF THE DATE OF
THIS JOINT PROXY STATEMENT-PROSPECTUS, WHICH SETS FORTH CERTAIN ASSUMPTIONS
MADE, MATTERS CONSIDERED AND LIMITATIONS ON REVIEW UNDERTAKEN IS ATTACHED AS
APPENDIX E TO THIS JOINT PROXY STATEMENT-PROSPECTUS, IS INCORPORATED HEREIN BY
REFERENCE, AND SHOULD BE READ IN ITS ENTIRETY IN CONNECTION WITH THIS JOINT
PROXY STATEMENT-PROSPECTUS. THE SUMMARY OF THE OPINION OF WHEAT FIRST SET FORTH
IN THIS JOINT PROXY STATEMENT-PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE OPINION. NO LIMITATIONS WERE IMPOSED BY THE CITY HOLDING BOARD
UPON WHEAT FIRST WITH RESPECT TO THE INVESTIGATIONS MADE OR PROCEDURES FOLLOWED
BY IT IN RENDERING THE CITY
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HOLDING FAIRNESS OPINION. WHEAT FIRST'S OPINION HAS BEEN FURNISHED TO THE CITY
HOLDING BOARD FOR ITS BENEFIT AND USE. WHEAT FIRST'S OPINION IS DIRECTED ONLY
TO THE FAIRNESS, FROM A FINANCIAL POINT OF VIEW, OF THE EXCHANGE RATIO TO THE
HOLDERS OF CITY HOLDING COMMON STOCK AND DOES NOT CONSTITUTE A RECOMMENDATION
TO ANY SHAREHOLDER OF CITY HOLDING AS TO HOW SUCH SHAREHOLDER SHOULD VOTE ON
THE HOLDING COMPANY MERGER.
In arriving at its oral opinion dated as of August 7, 1998, Wheat First
reviewed certain publicly available business and financial information relating
to City Holding and Horizon and certain other information provided to it,
including the following: (i) City Holding's Annual Reports to Stockholders,
Annual Reports on Form 10-K and related financial information for the three
fiscal years ended December 31, 1997; (ii) City Holding's Quarterly Report on
Form 10-Q and related financial information for the quarterly period ended
March 31, 1998, and certain financial information released by the management of
City Holding for the quarterly period ended June 30, 1998; (iii) Horizon's
Annual Reports to Stockholders, Annual Reports on Form 10-K and related
financial information for the three fiscal years ended December 31, 1997; (iv)
Horizon's Quarterly Report on Form 10-Q and related financial information for
the quarterly period ended March 31, 1998, and certain financial information
released by the management of Horizon for the quarterly period ended June 30,
1998; (v) certain publicly available information with respect to historical
market prices and trading activities for City Holding Common Stock and Horizon
Common Stock and for certain publicly traded financial institutions which Wheat
First deemed relevant; (vi) certain publicly available information with respect
to banking companies and the financial terms of certain other mergers and
acquisitions which Wheat First deemed relevant; (vii) the Agreement; (viii)
certain estimates of the cost savings, revenue enhancements and divestitures
projected by City Holding and Horizon for the combined company; (ix) other
financial information concerning the businesses and operations of City Holding
and Horizon, including certain audited financial information and certain
internal financial analyses and forecasts for City Holding and Horizon prepared
by senior managements of these companies; and (x) such financial studies,
analyses, inquiries and other matters as Wheat First deemed necessary. In
addition, Wheat First conferred with members of the senior managements of City
Holding and Horizon to discuss the business and prospects of each company, but
conditioned its August 7, 1998 opinion on the completion of its full due
diligence, which it subsequently completed.
In connection with its review, Wheat First relied upon and assumed the
accuracy and completeness of all of the foregoing information provided to it or
publicly available, including representations and warranties of City Holding
and Horizon included in the Agreement, and Wheat First has not assumed any
responsibility for independent verification of such information. Wheat First
relied upon the managements of City Holding and Horizon as to the
reasonableness and achievability of their financial and operational forecasts
and projections, and the assumptions and bases therefor, provided to Wheat
First, and assumed that such forecasts and projections reflect the best
currently available estimates and judgments of such management and that such
forecasts and projections will be realized in the amounts and in the time
periods currently estimated by such managements. Wheat First also assumed,
without independent verification, that the aggregate allowances for loan losses
and other contingencies for City Holding and Horizon are adequate to cover such
losses. Wheat First did not review any individual credit files of City Holding
and Horizon, nor did it make an independent evaluation or appraisal of the
assets or liabilities of City Holding and Horizon. Wheat First also assumed
that the Holding Company Merger will be consummated in accordance with the
terms and conditions of the Agreement in due course without unnecessary delay.
Additionally, Wheat First considered certain financial and stock market
data of City Holding and Horizon and compared that data with similar data for
certain publicly-held financial institutions and considered the financial terms
of certain other comparable transactions that recently have been announced or
effected, as further discussed below.
In connection with rendering its opinion, Wheat First performed a variety
of financial analyses. The preparation of a fairness opinion involves various
determinations as to the most appropriate and relevant methods of financial
analysis and the application of those methods to the particular circumstances
and, therefore, such an opinion is not readily susceptible to partial analysis
or summary description. Moreover, the evaluation of the fairness, from a
financial point of view, of the Exchange Ratio to holders of City Holding
Common Stock was to some extent a subjective one based on the experience and
judgment of Wheat First and not merely the result
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of mathematical analysis of financial data. Accordingly, notwithstanding the
separate factors summarized below, Wheat First believes that its analyses must
be considered as a whole and that selecting portions of its analyses and of the
factors considered by it, without considering all analyses and factors, could
create an incomplete view of the evaluation process underlying its opinion. The
ranges of valuations resulting from any particular analysis described below
should not be taken to be Wheat First's view of the actual value of City
Holding or Horizon.
In performing its analyses, Wheat First made numerous assumptions with
respect to industry performance, business and economic conditions and other
matters, many of which are beyond the control of City Holding or Horizon. The
analyses performed by Wheat First are not necessarily indicative of actual
values or future results, which may be significantly more or less favorable
than suggested by such analyses. Additionally, analyses relating to the values
of businesses do not purport to be appraisals or to reflect the prices at which
businesses actually may be sold. In rendering its opinion, Wheat First assumed
that, in the course of obtaining the necessary regulatory approvals for the
Holding Company Merger, no conditions will be imposed that will have a material
adverse effect on the contemplated benefits of the Holding Company Merger, on a
pro forma basis, to City Holding.
Wheat First's opinion is just one of the many factors taken into
consideration by the City Holding Board in determining to approve the
Agreement. Wheat First's opinion does not address the relative merits of the
Holding Company Merger as compared to any alternative business strategies that
might exist for City Holding, nor does it address the effect of any other
business combination in which City Holding might engage.
The following is a summary of the analyses performed by Wheat First in
connection with its oral opinion delivered to the City Holding Board on August
7, 1998:
ANALYSIS OF SELECTED TRANSACTIONS. Wheat First performed an analysis of
premiums paid in thirteen selected transactions (the "SELECTED TRANSACTIONS").
Wheat First compiled the Selected Transactions by researching acquisitions of
banks or bank holding companies headquartered in the District of Columbia,
Kentucky, Maryland, North Carolina, Ohio, Pennsylvania, South Carolina,
Tennessee, Virginia or West Virginia which were announced between June 30, 1997
and August 1, 1998, which had deal values between $100 million and $1 billion.
Wheat First compared valuation multiples for the Selected Transactions to the
multiples implied by the Exchange Ratio offered to Horizon in the Holding
Company Merger. The Selected Transactions included the following pending and
completed transactions: National Penn Bancshares, Inc./Elverson National Bank;
Citizens Bancshares, Inc./ Ohio Bank; First Commonwealth Financial
Corporation/Southwest National Corporation; First American Corporation/
Pioneer Bancshares, Inc.; Star Banc Corporation/TransFinancial, Inc.;
Mercantile Bancorporation, Inc./CBT Corporation; BB&T Corp./Franklin
Bancorporation, Inc.; Citizens Bancshares, Inc./Century Financial Corporation;
Union Planters Corporation/Peoples First Corporation; FirstMerit
Corporation/CoBancorp, Inc.; WesBanco, Inc./ Commercial BancShares,
Incorporated; United Bankshares, Inc./George Mason Bankshares, Inc.; and Fulton
Financial Corporation/Keystone Heritage Group, Inc.
Based on the market value of City Holding Common Stock on August 6, 1998,
and financial data for Horizon as of June 30, 1998, the analysis of the implied
value based on the Exchange Ratio offered by City Holding to Horizon yielded
the following values: (i) price to book value of 358.3% compared to an average
of 321.6%, a minimum of 230.4%, and a maximum of 433.8% for the Selected
Transactions; (ii) price to latest twelve months earnings per share of 29.0x
compared to an average of 25.9x, a minimum of 20.3x, and a maximum of 31.3x for
the Selected Transactions; (iii) price to latest quarter earnings per share
annualized of 28.1x compared to an average of 25.1x, a minimum of 16.9x, and a
maximum of 30.4x for the Selected Transactions; and (iv) premium to market
price of 6.2% compared to an average of 29.9%, a minimum of 3.3%, and a maximum
of 68.1% for the Selected Transactions.
The following comparisons were based on financial data as of and for the
twelve-month reporting period ended June 30, 1998, for Horizon and the
twelve-month reporting period prior to the announcement of each transaction for
each acquiree in the Selected Transactions. Horizon had: (i) net interest
margin of 4.90% compared to an average of 4.54%, a minimum of 4.28%, and a
maximum of 4.81% for the Selected Transaction acquirees; (ii) efficiency ratio
of 55.54% compared to an average of 61.68%, a minimum of 51.63%, and a maximum
of 68.53% for the Selected Transaction acquirees; (iii) return on average
assets before extraordinary items of 1.44% compared to an average of 1.17%, a
minimum of 0.98%, and a maximum of 1.29% for the
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Selected Transaction acquirees; and (iv) return on average equity before
extraordinary items of 12.64% compared to an average of 12.99%, a minimum of
9.64%, and a maximum of 17.06% for the Selected Transaction acquirees.
DISCOUNTED DIVIDENDS ANALYSIS. Using discounted dividends analysis, Wheat
First estimated the present value of the future stream of dividends that
Horizon could produce over the next five years, assuming the company performed
in accordance with the earnings forecasts of management, maintained consistent
capital ratios at the bank level, and that assumed levels of expense savings
and revenue enhancements were achieved. Wheat First then estimated the terminal
values for Horizon at the end of the period by applying multiples ranging from
18 times to 22 times earnings projected in year five. The dividend streams and
terminal values were then discounted to present values using different discount
rates (ranging from 15% to 17%) chosen to reflect different assumptions
regarding the required rates of return to holders or prospective buyers of City
Holding Common Stock. This discounted dividend analysis indicated reference
ranges of between $41.40 and $53.11 per share for Horizon Common Stock. These
values compare to the implied consideration based on the Exchange Ratio offered
by City Holding to Horizon in the Holding Company Merger of $45.00 based on the
market value of City Holding Common Stock on August 6, 1998.
IMPACT ANALYSIS. Wheat First estimated the potential impact of the
transaction to City Holding's book value and 1999 estimated earnings per share
assuming that the Holding Company Merger qualifies as a pooling-of-interests
for accounting and financial reporting purposes. Utilizing financial data as of
June 30, 1998 for both City Holding and Horizon, and assuming certain
adjustments to the equity of Horizon, Wheat First noted that the Holding
Company Merger could result in 26.7% dilution to City Holding's book value per
share if the Exchange Ratio were 1.011:1 and 30.7% if the Exchange Ratio were
1.111:1. Wheat First also noted that, assuming certain fully phased-in expense
savings and revenue enhancements (based on projections by Wheat First and City
Holding management), the Holding Company Merger could result in 5.4% accretion
to City Holding's 1999 estimated earnings per share if the exchange ratio were
1.011:1 and 0.3% dilution to City Holding's 1999 estimated earnings per share
if the exchange ratio were 1.111:1.
No company or transaction used as a comparison in the above analysis is
identical to City Holding, Horizon or the Holding Company Merger. Accordingly,
an analysis of the results of the foregoing necessarily involves complex
considerations and judgments concerning differences in financial and operating
characteristics of the companies and other factors that could affect the public
trading value of the companies used for comparison in the above analysis.
In connection with its written opinion as of the date hereof, Wheat First
confirmed the appropriateness of its reliance on the analyses used to render
its August 7, 1998, opinion by performing procedures to update certain of such
analyses and by reviewing the assumptions on which such analyses were based and
the factors considered in connection therewith.
Wheat First's written opinion in Appendix E, dated as of the date of this
Joint Proxy Statement-Prospectus is based solely upon the information available
to Wheat First and the economic, market and other circumstances as they existed
as of such date. Events occurring after that date could materially affect the
assumptions and conclusions contained in Wheat First's opinion. Wheat First has
not undertaken to reaffirm or revise its opinion or otherwise comment on any
events occurring after the date of its opinion.
As compensation for Wheat First's services, City Holding has agreed to pay
Wheat First total fees equal to $2,000,000, payable as follows: $50,000 upon
the execution of a definitive acquisition agreement, $50,000 on the mailing
date of this Joint Proxy Statement-Prospectus and $1,900,000 upon the date of
closing of the Holding Company Merger. City Holding has agreed also to
reimburse Wheat First for its out-of-pocket expenses incurred in connection
with the activities contemplated by its engagement, regardless of whether the
Holding Company Merger is consummated. City Holding has further agreed to
indemnify Wheat First against certain liabilities, including certain
liabilities under federal securities laws. The payment of the above fees is not
contingent upon Wheat First rendering a favorable opinion with respect to the
Holding Company Merger.
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OPINION OF HORIZON'S FINANCIAL ADVISOR
Baxter Fentriss has acted as financial advisor to Horizon in connection
with the Holding Company Merger. Baxter Fentriss delivered to Horizon its
opinion dated August 7, 1998, that on the basis of matters referred to herein,
the consideration received by shareholders of Horizon Common Stock, is fair
from a financial point of view. In rendering its opinion Baxter Fentriss
consulted with the management of Horizon and City Holding, reviewed the
Agreement and certain publicly-available information on the parties and
reviewed certain additional materials made available by the management of the
respective banks.
In addition, Baxter Fentriss discussed with the management of Horizon and
City Holding their respective businesses and outlook. Baxter Fentriss was
involved in the negotiations between Horizon and City Holding. No limitations
were imposed by the Horizon Board upon Baxter Fentriss with respect to the
investigation made or procedures followed by it in rendering its opinion. The
full text of Baxter Fentriss' written opinion is attached as Appendix F to this
Joint Proxy Statement-Prospectus and should be read in its entirety with
respect to the procedures followed, assumptions made, matters considered and
qualifications and limitations on the review undertaken by Baxter Fentriss in
connection therewith.
Baxter Fentriss' opinion is directed to the Horizon Board, and is directed
only to the fairness, from a financial point of view, to the consideration to
be received by shareholders of Horizon Common Stock. It does not address
Horizon's underlying business decision to effect the proposed merger, nor does
it constitute a recommendation to any Horizon Shareholder as to how such
shareholder should vote with respect to the Holding Company Merger at the
Horizon Special Meeting or as to any other matter.
Baxter Fentriss' opinion was one of many factors taken into consideration
by the Horizon Board in making its determination to approve the Holding Company
Merger, and the receipt of Baxter Fentriss' opinion is a condition precedent to
Horizon's consummating the Holding Company Merger. The opinion of Baxter
Fentriss does not address the relative merits of the Holding Company Merger as
compared to any alternative business strategies that might exist for Horizon or
the effect of any other business combination in which Horizon might engage.
Baxter Fentriss, as part of its investment banking business, is
continually engaged in the valuation of financial institutions and their
securities in connection with mergers and acquisitions and valuations for
estate, corporate and other purposes. Baxter Fentriss is a nationally
recognized advisor to firms in the financial services industry on mergers and
acquisitions. Horizon selected Baxter Fentriss as its financial advisor because
Baxter Fentriss is an investment banking firm focusing on transactions
involving community banks and thrifts and because of the firm's extensive
experience and expertise in transactions similar to the Holding Company Merger.
Baxter Fentriss is not affiliated with Horizon or City Holding.
In connection with rendering its opinion to the Horizon Board, Baxter
Fentriss performed a variety of financial analyses. In conducting its analyses
and arriving at its opinion as expressed herein, Baxter Fentriss considered
such financial and other factors as it deemed appropriate under the
circumstances including, among others, the following: (i) the historical and
current financial condition and results of operations of Horizon and City
Holding including interest income, interest expense, interest sensitivity,
noninterest income, noninterest expense, earnings, book value, returns on
assets and equity, and possible tax consequences resulting from the
transactions; (ii) the business prospects of Horizon and City Holding; (iii)
the economies of Horizon and City Holding's respective market areas; and (iv)
the nature and terms of certain other merger transactions that it believed to
be relevant. Baxter Fentriss also considered its assessment of general
economic, market, financial and regulatory conditions and trends, as well as
its knowledge of the financial institutions industry, its experience in
connection with similar transactions, its knowledge of securities valuation
generally, and its knowledge of merger transactions in West Virginia and
throughout the United States.
In connection with rendering its opinion, Baxter Fentriss reviewed (i) the
Agreement; (ii) drafts of this Joint Proxy Statement-Prospectus; (iii) the
Annual Reports to shareholders of Horizon for the three years ended December
31, 1995, 1996 and 1997, as well as certain current interim reports to
shareholders and regulatory agencies; (iv) the Annual Reports to shareholders
of City Holding for the three years ended December 31, 1995, 1996 and 1997, as
well as certain current interim reports to shareholders and regulatory
agencies; (v) pro-forma
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combined unaudited condensed balance sheets and statements of income as of June
30, 1998; and (vi) certain additional financial and operating information with
respect to the business, operations and prospects of Horizon and City Holding
as it deemed appropriate. Baxter Fentriss also (a) held discussions with
members of the senior management of Horizon and City Holding regarding the
historical and current business operation, financial condition and future
prospects of their respective companies; (b) reviewed the historical market
prices and trading activity for the common stock of Horizon and City Holding,
as applicable, and compared them with those of certain publicly traded
companies that it deemed to be relevant; (c) compared the results of operations
of Horizon and City Holding with those of certain banking companies that it
deemed to be relevant; (d) analyzed the pro-forma financial impact of the
Holding Company Merger and City Holding; and (e) conducted such other studies,
analyses, inquiries and examinations as Baxter Fentriss deemed appropriate.
The preparation of a fairness opinion involves various determinations as
to the most appropriate and relevant methods of financial analysis and the
application of those methods to the particular circumstances and, therefore,
such an opinion is not readily susceptible to partial analysis or summary
description. Moreover, the evaluation of fairness, from a financial point of
view, of the consideration provided to the holders of Horizon Common Stock was
to some extent a subjective one based on the experience and judgment of Baxter
Fentriss and not merely the result of mathematical analysis of financial data.
Accordingly, notwithstanding the separate factors as summarized below, Baxter
Fentriss believes that its analyses must be considered as a whole and that
selecting portions of its analyses and of the factors considered by it, without
considering all analyses and factors, could create an incomplete view of the
evaluation process underlying its opinion. The ranges of valuations resulting
from any particular analysis described below should not be taken to be Baxter
Fentriss' view of the actual value of Horizon or City Holding.
In performing its analyses, Baxter Fentriss made numerous assumptions with
respect to industry performance, business and economic conditions and other
matters, many of which are beyond the control of Horizon or City Holding. The
analyses performed by Baxter Fentriss are not necessarily indicative of the
actual values or future results, which may be significantly more or less
favorable than suggested by such analyses. Additionally, analyses relating to
the values of businesses do not purport to be appraisals or to reflect the
prices at which businesses may actually be sold. In rendering its opinion,
Baxter Fentriss assumed that, in the course of obtaining the necessary
regulatory approvals for the Holding Company Merger, no conditions will be
imposed that will have a material adverse effect on the contemplated benefits
of the Holding Company Merger, on a pro-forma basis, to City Holding.
The following is a summary of selected analyses performed by Baxter
Fentriss in connection with its opinion.
1. COMPARATIVE ANALYSIS. Baxter Fentriss analyzed and compared the price
to earnings multiple, price to book multiple and premium to deposits of the
offer with 17 merger transactions (at announcement) in West Virginia over the
last four years. The average pricing multiples for the comparables were price
to earnings of 22.05x, price to book of 2.03x and premium on deposits of
15.33%. Using the $45.00 price for which City Holding agreed to pay for each
share of Horizon, the respective multiples for the Holding Company Merger are
28.07x, 3.55x and 34.26%. Baxter Fentriss also compared the pricing statistics
for the Holding Company Merger to 22 other comparable transactions in the
Midwest and Southeast. The average pricing multiples for these comparable
transactions were price to earnings of 22.07x, price to book of 2.83x and
premium on deposits of 24.67%.
2. PRO FORMA ANALYSIS. Baxter Fentriss evaluated the earnings, book value
and market value of City Holding Common Stock and considered the pro-forma
earnings, book value and potential long range impact that the Holding Company
Merger would have on the market value of City Holding Common Stock. Based on
this analysis, Baxter Fentriss concluded the transaction should have a positive
long-term impact on City Holding.
3. DISCOUNTED CASH FLOW ANALYSIS. Baxter Fentriss performed a discounted
cash flow analysis to determine hypothetical present values for a share of
Horizon Common Stock as a five and ten year investment. Under this analysis,
Baxter Fentriss considered various scenarios for the performance of Horizon
Common Stock using a range of growth rates from eight percent (8%) to fourteen
percent (14%) for Horizon's earnings and dividends. A range of terminal values
from fourteen to twenty-six was also used in the analysis as well as a range of
discount rates from 12% to 15%. These ranges of growth rates, discount rates,
and terminal values were chosen
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based upon what Baxter Fentriss in its judgment, considered to be appropriate
taking into account, among other things, Horizon's past and current
performance, the general level of inflation, rates of return for fixed income
and equity securities in the marketplace generally and for companies of similar
risk profiles. In nearly all of the scenarios considered, the present value of
Horizon Common Stock was calculated at less than the value of City Holding's
offer. Thus, Baxter Fentriss' discounted cash flow analysis indicated that
Horizon Shareholders would be in a better financial position of receiving the
consideration rather than continuing to hold Horizon Common Stock.
4. ORGANIZATIONAL COMMITMENTS. Baxter Fentriss also considered the
significant organizational commitments made to Horizon in the merger with City
Holding. Horizon will staff 50% of the Board of Directors of the combined
company. Horizon will also provide the positions of Chairman and Vice Chairman
on the resulting Board.
5. RESULTING OWNERSHIP. Baxter Fentriss also compared ownership received
in the resultant merger, versus the relative equity contributed by both Horizon
and City Holding. Using June 30, 1998 financial data, Horizon contributed
47.55% of the total equity of the resultant company and received 59.59% of the
market value of the resultant company.
Using publicly available information on Horizon and City Holding and
applying the capital guidelines of banking regulators, Baxter Fentriss'
analysis indicated that the Holding Company Merger would not dilute the capital
and earnings capacity of City Holding and would, therefore, likely not be
opposed by the banking regulatory agencies from a capital perspective.
Furthermore, Baxter Fentriss considered the likely market overlap and the
Federal Reserve guidelines with regard to market concentration and concluded
that possible antitrust issues exist in the Beckley and Greenbrier markets as
defined by the Federal Reserve. Although some divestiture may be required as a
result of the market overlap, it should not have a significant long term
detrimental effect to the operations of City Holding.
Baxter Fentriss has relied, without any independent verification, upon the
accuracy and completeness of all financial and other information reviewed.
Baxter Fentriss has assumed that all estimates, including those as to possible
economies of scale, were reasonably prepared by management, and reflect their
best current judgments. Baxter Fentriss did not make an independent appraisal
of the assets or liabilities of either Horizon or City Holding, and has not
been furnished such an appraisal.
No company or transaction used as a comparison in the above analysis is
identical to Horizon, City Holding or the Holding Company Merger. Accordingly,
an analysis of the results of the foregoing necessarily involves complex
considerations and judgments concerning differences in financial and operating
characteristics of the companies and other factors that could affect the public
trading value of the companies used for comparison in the above analysis.
On November 5, 1998, Baxter Fentriss updated its opinion which states that
as of such date the consideration Horizon Shareholders receive in the Holding
Company Merger is fair from a financial point of view.
Baxter Fentriss will be paid (i) a merger fee, equal to approximately 0.5%
of the aggregate consideration received by Horizon and (ii) reasonable
out-of-pocket expenses for its services. Horizon has agreed to indemnify Baxter
Fentriss against certain liabilities, including certain liabilities under
federal securities laws.
EFFECTIVE TIME OF THE HOLDING COMPANY MERGER
Unless another date or place is agreed to in writing by the parties, the
closing of the transactions contemplated in the Agreement shall take place at
the offices of City Holding, 25 Gatewater Road, Charleston, West Virginia, at
10:00 o'clock A.M., local time, on such date as City Holding and Horizon shall
agree upon; provided, that such date shall not be earlier than 10 days after
the receipt of the last required regulatory approval, and shall not be later
than 60 days after the receipt of such approval and, in no event, shall be
later than March 31, 1999 (the "CLOSING DATE"). The parties agree to use their
best efforts to make the Holding Company Merger effective on or before December
31, 1998.
At the Effective Time of the Holding Company Merger, Horizon Shareholders
will cease to be Horizon Shareholders, and will have no rights as Horizon
Shareholders, other than the right to receive (i) the number of
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shares of City Holding Common Stock and cash in lieu of fractional shares, if
any, to which they may be entitled and (ii) any dividend or other distribution
with respect to such Horizon Common Stock with a record date occurring after
the Effective Time of the Holding Company Merger but prior to surrender and a
payment date subsequent to surrender. After the Effective Time of the Holding
Company Merger, there will be no transfers on the stock transfer books of
Horizon or of shares of Horizon Common Stock.
EXCHANGE OF CERTIFICATES
At or prior to the Effective Time of the Holding Company Merger, City
Holding will deposit, or will cause to be deposited, with SunTrust Bank,
Atlanta (the "EXCHANGE AGENT") certificates representing the shares of City
Holding Common Stock ("CITY HOLDING CERTIFICATES"), and an estimated amount of
cash to be paid in lieu of fractional shares to which a holder of record of
shares formerly representing Horizon Common Stock would otherwise be entitled
based on the Exchange Ratio (such cash and City Holding Certificates, together
with any dividends or distributions with respect thereto (without any interest
thereon), are referred to as the "EXCHANGE FUND").
As promptly as practicable after the Effective Time of the Holding Company
Merger, City Holding will send or cause to be sent to each holder of record of
certificates formerly representing Horizon Common Stock ("HORIZON
CERTIFICATES") transmittal materials for use in exchanging such Horizon
Shareholder's Horizon Certificates for the consideration due in respect
thereof. After the Effective Time of the Holding Company Merger, a Horizon
Shareholder's shares of Horizon Common Stock will become the right to receive
(i) City Holding Certificates into which such Horizon Shareholder's shares of
Horizon Common Stock are converted and (ii) a check in respect of any
fractional share interests or dividends or distributions that such person will
be entitled to receive. The City Holding Certificates and any checks will be
delivered to such Horizon Shareholder upon delivery to the Exchange Agent of
Horizon Certificates (or indemnity reasonably satisfactory to City Holding and
the Exchange Agent, if any of such Horizon Certificates are lost, stolen or
destroyed) owned by such Horizon Shareholder. No interest will be paid on any
such cash to be paid upon such delivery.
HORIZON SHAREHOLDERS SHOULD NOT SEND IN THEIR HORIZON CERTIFICATES UNTIL
THEY RECEIVE THE TRANSMITTAL MATERIALS FROM THE EXCHANGE AGENT.
No fractional shares of City Holding Common Stock and no certificates or
scrip therefor, or other evidence of ownership thereof, will be issued in the
Holding Company Merger; instead, City Holding will pay to each Horizon
Shareholder who would otherwise be entitled to a fractional share of City
Holding Common Stock (after taking into account all Horizon shares owned by
such Horizon Shareholder) the value of such fractional shares in cash to be
paid in lieu of fractional shares (without interest) on the basis of the
Average Closing Price.
Notwithstanding the foregoing, neither the Exchange Agent nor any party to
the Agreement will be liable to any holder of Horizon Common Stock (or, if
after the Effective Time of the Holding Company Merger, former Horizon
Shareholder) for any amount delivered in good faith to a public official
pursuant to applicable abandoned property, escheat or similar laws.
Until outstanding certificates formerly representing Horizon Common Stock
are surrendered, no dividend payable to holders of record of City Holding
Common Stock for any period as of any date subsequent to the Effective Time of
the Holding Company Merger shall be paid to the holder of such outstanding
certificates in respect thereof. After the Effective Time of the Holding
Company Merger, there shall be no further registry of transfer on the records
of Horizon of shares of Horizon Common Stock. If a certificate representing
such shares is presented to City Holding, it shall be canceled and exchanged
for a certificate representing shares of City Holding Common Stock and cash
representing fractional shares as herein provided. Upon surrender of
certificates of Horizon Common Stock in exchange for City Holding Common Stock,
there shall be paid to the recordholder of the certificates of City Holding
Common Stock issued in exchange therefor (i) the amount of dividends
theretofore paid for such full shares of City Holding Common Stock as of any
date subsequent to the Effective Time of the Holding Company Merger which have
not yet been paid to a public official pursuant to abandoned property laws and
(ii) at the appropriate payment date the amount of dividends with a record date
after the Effective Time of the Holding Company Merger but prior to surrender
and a payment date subsequent to surrender. No interest shall be payable on
such dividends upon surrender of outstanding certificates.
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CITY HOLDING SHAREHOLDERS SHOULD NOT SEND IN THEIR CITY HOLDING STOCK
CERTIFICATES.
CONDUCT OF BUSINESS PRIOR TO THE HOLDING COMPANY MERGER AND OTHER COVENANTS
Prior to the Effective Time of the Holding Company Merger, except as
expressly contemplated by the Agreement, (a) without the prior written consent
of City Holding, Horizon and the Horizon Banks will not and (b) without the
prior written consent of Horizon, City Holding and City National will not (i)
make any change in the salaries, bonuses or title of any executive officer,
subject to bonus or compensation plans already adopted by the Board of
Directors or the Compensation Committee thereof prior to the date of the
Agreement; (ii) make any change in the title, salaries or bonuses of any other
employee, other than those permitted by current employment policies in the
ordinary course of business, any of which changes shall be reported promptly to
the other parties; (iii) enter into any bonus, incentive compensation, deferred
compensation, profit sharing, thrift, retirement, pension, group insurance or
other benefit plan or any employment or consulting agreement or increase
benefits under existing plans subject to bonus plans already adopted by the
Board of Directors or the Compensation Committee thereof prior to the date of
the Agreement; (iv) create or otherwise become liable with respect to any
indebtedness for money borrowed or purchase money indebtedness except in the
ordinary course of business; (v) amend its Articles of Incorporation, Charter
or By-laws, except that City Holding shall amend its Articles of Incorporation
immediately preceding the Effective Time of the Holding Company Merger to
authorize the issuance of up to 100,000,000 shares of City Holding Common
Stock, par value $2.50 per share, and up to 5,000,000 shares of City Holding
Preferred Stock, par value $25.00 per share; (vi) issue or contract to issue
any shares of capital stock or securities exchangeable for or convertible into
capital stock except (t) up to 94,800 shares of Horizon Common Stock issuable
to senior executive officers pursuant to Horizon Options outstanding as of June
30, 1998, (u) up to 1,853,262 shares of Horizon Common Stock pursuant to the
Horizon Option Agreement; (v) shares of or options to purchase Horizon Common
Stock pursuant to the Horizon 401(k) Plan, the Horizon Employee Stock Option
Plan, the Horizon Incentive Stock Option Plan and the Horizon Dividend
Reinvestment Plan; (w) up to 30,000 options to purchase shares of Horizon
Common Stock issuable pursuant to Horizon's Incentive Stock Option Plan; (x) up
to 285,671 shares of City Holding Common Stock issuable pursuant to City
Holding Options outstanding as of June 30, 1998; (y) up to 1,334,095 shares of
City Holding Common Stock pursuant to the City Holding Option Agreement; or (z)
shares of City Holding Common Stock issuable pursuant to City Holding's
dividend reinvestment plan, 401(k) plan, and Employee Stock Ownership Plan;
(vii) except as set forth on Schedule 4.3 to the Agreement, repurchase any
shares of Horizon or City Holding capital stock; (viii) enter into or assume
any material contract or obligation, except in the ordinary course of business;
(ix) other than as provided in (a) below with respect to the work-out of
nonperforming assets, waive, release, compromise or assign any right or claim
involving $75,000 or more; (x) propose or take any other action which would
make any representation or warranty of such party in Article III of the
Agreement untrue; (xi) introduce any new products or services or change the
rate of interest on any deposit instrument to above-market interest rates;
(xii) make any change in policies respecting extensions of credit or loan
charge-offs; (xiii) change reserve requirement policies; (xiv) change
securities portfolio policies; (xv) acquire a policy or enter into any new
agreement, amendment or endorsement or make any changes relating to insurance
coverage, including coverage for its directors and officers, which would result
in an additional payment obligation of $50,000 or more; (xvi) propose or take
any action with respect to the closing of any branches; (xvii) amend the terms
of any outstanding stock option or similar agreements; (xviii) amend the terms
of the written severance or employment agreements;(xix) make any change in any
tax election or accounting method or system of internal accounting controls,
except as may be appropriate to conform to any change in regulatory accounting
requirements or generally accepted accounting principles ("GAAP"); (xx) declare
any cash dividends except for regular quarterly cash dividends not in excess of
that most recently declared prior to June 30, 1998 except that Horizon and City
Holding may increase the dividend amount for the fourth quarter of 1998,
consistent with the relative increase of such dividend for the fourth quarter
of 1997; or (xxi) terminate, amend, modify or waive any provision of any
confidentiality or standstill agreement to which it or any of its respective
subsidiaries is a party. Horizon, the Horizon Banks, City Holding and City
National further agree that, between the date of the Agreement and
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the Effective Time of the Holding Company Merger, they will consult and
cooperate with one another regarding (a) loan portfolio management, including
management and work-out of nonperforming assets, and credit review and approval
procedures and (b) securities portfolio and funds management, including
management of interest rate risk.
The Agreement also contains certain other agreements relating to the
conduct of the parties prior to the Effective Time of the Holding Company
Merger, including those requiring the parties to (i) use their reasonable best
efforts in good faith to take the necessary actions to effect the Transaction;
(ii) take all actions necessary to obtain all necessary shareholder approvals;
(iii) cooperate in the preparation of the Registration Statement (as defined
herein) and this Joint Proxy Statement-Prospectus; (iv) cooperate in preparing,
filing and obtaining all necessary regulatory approvals; (v) refrain from
issuing press releases regarding the Transaction without the other party's
prior approval (except as otherwise required by applicable law, regulation or
Nasdaq rules); (vi) provide the other party with reasonable access to
information regarding such party (provided, however, that any such
investigation shall be conducted in such manner as not to interfere
unreasonably with the operation of the respective business of the other) under
the condition that no such confidential information be shared with any third
party except as required by applicable law; (vii) refrain from soliciting or
encouraging any alternative business combination transactions; (viii) work with
one another to achieve operating efficiencies following the Closing Date (as
defined in the Agreement); (ix) give written notice promptly to the other
concerning any event or circumstance which would cause or constitute a breach
or warranty of any of the representations, warranties or covenants of such
party contained in the Agreement; (x) prepare and deliver to each other all of
the Schedules referred to in the Agreement not later than August 14, 1998 and
shall notify the other party of any changes, additions or events which may
cause any change in or addition to any Schedules delivered by it; (xi) file
with the Nasdaq Stock Market an additional listing application for the shares
of City Holding Common Stock to be issued in the Holding Company Merger; and
(xii) use reasonable efforts to cause Ernst & Young LLP, independent
accountants for City Holding and Horizon to deliver to City Holding and City
National and Horizon and the Horizon Banks, letters to the effect that for
financial reporting purposes, the Transaction qualifies for pooling-of-interests
accounting treatment.
After the Effective Time of the Holding Company Merger, City Holding has
agreed to provide indemnification to the officers, directors and employees of
Horizon and the Horizon Banks and the subsidiaries thereof for events occurring
prior to or subsequent to the Effective Time of the Holding Company Merger as
if they had been directors, employees or officers of City Holding prior to the
Effective Time of the Holding Company Merger, to the extent permitted under the
WVC and the Articles of Incorporation and Bylaws of City Holding as in effect
as of the date of the Agreement. Such indemnification shall continue for ten
years after the Effective Time of the Holding Company Merger, provided that any
right to indemnification in respect of any claim asserted or made within such
ten year period shall continue until final disposition of such claim. City
Holding will provide officers and directors liability insurance coverage to all
directors and officers of Horizon and the Horizon Banks and their subsidiaries,
whether or not they become part of the City Holding organization after the
Effective Time of the Holding Company Merger, to the same extent provided to
City Holding's officers and directors, provided that coverage will not extend
to acts as to which notice has been given prior to the Effective Time of the
Holding Company Merger.
CONDITIONS TO THE HOLDING COMPANY MERGER
The obligation of each of the parties to consummate the Transaction is
conditioned upon the satisfaction at or prior to the Effective Time of the
Holding Company Merger of each of the following: (i) approval of the Agreement
and the transactions contemplated by the Agreement by the requisite vote of the
shareholders of Horizon and the Horizon Banks and the shareholders of City
Holding and City National; (ii) the receipt of all regulatory approvals
required to consummate the transactions contemplated by the Agreement; (iii) no
temporary restraining order, preliminary or permanent injunction or other order
by any Federal or state court in the United States which prevents the
consummation of the Transaction shall have been issued and remain in effect;
(iv) the representations and warranties of each party contained in the
Agreement will be true and correct at the time of the Agreement and at the
Effective Time of the Holding Company Merger; (v) no stop order suspending the
effectiveness of the Registration Statement will have been issued and no
proceedings for that purpose will have
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been initiated or threatened by the Commission or any other regulatory
authority; (vi) the receipt of a written tax opinion from counsel satisfactory
to each of the parties hereto to the effect described under " -- Material
Federal Income Tax Consequences;" (vii) the shares of City Holding Common Stock
to be issued in the Holding Company Merger will have been approved for listing
on the Nasdaq Stock Market, subject to official notice of issuance; (viii) the
receipt of opinions from Ernst & Young LLP, to the effect that the Transaction
will qualify for "pooling of interests" accounting treatment; (ix) the
Registration Statement having been declared effective and all required state
securities permits and confirmations as to registration exemptions having been
received; (x) the delivery by City Holding and City National and Horizon and
the Horizon Banks, each to the other, of opinions of their respective counsel
and certificates executed by their respective chief executive officers and
chief financial officers as to compliance with the Agreement; (xi) the receipt
by City Holding and Horizon of opinions of their respective financial advisors
to the effect that the Exchange Ratio is fair, from a financial point of view,
to the respective shareholders of City Holding and Horizon; and (xii)
dissenters' rights pursuant to Section 31-1-123 of the WVC not having been
exercised by the holders of more than 9% in the aggregate of the outstanding
shares of City Holding Common Stock.
No assurance can be provided as to if or when the regulatory approvals
necessary to consummate the Transaction will be obtained or whether all of the
other conditions precedent to the Transaction will be satisfied or waived by
the party permitted to do so.
TERMINATION OF THE AGREEMENT
The Agreement may be terminated, and the Transaction may be abandoned at
any time prior to the Effective Time of the Holding Company Merger, by:
(i) the mutual consent of City Holding and Horizon, as expressed by
their respective Boards of Directors;
(ii) either City Holding or Horizon, as expressed by their respective
Boards of Directors if the Holding Company Merger has not occurred by March
31, 1999, provided that the failure of the Holding Company Merger to so
occur shall not be due to a willful breach of any representation, warranty,
covenant or agreement by the party seeking to terminate the Agreement;
(iii) City Holding in writing authorized by its Board of Directors if
Horizon or the Horizon Banks has, or by Horizon in writing authorized by
its Boards of Directors, if City Holding or City National has, in any
material respect, breached (a) any covenant or agreement contained in the
Agreement, or (b) any representation or warranty contained herein, in any
case if such breach has not been cured by the earlier of 30 days after the
date on which written notice of such breach is given to the party
committing such breach or the Closing Date; PROVIDED, that it is understood
and agreed that either party may terminate the Agreement on the basis of
any such material breach of any representation or warranty which is not
cured within 30 days of written notice thereof contained therein
notwithstanding any qualification therein relating to the knowledge of the
other party;
(iv) either City Holding or Horizon, as expressed by their respective
Boards of Directors, in the event that any of the conditions precedent to
the obligations of such parties to consummate the Transaction have not been
satisfied or fulfilled or waived by the party entitled to so waive on or
before the Closing Date, provided that no party shall be entitled to
terminate the Agreement pursuant to this subparagraph (iv) if the condition
precedent or conditions precedent which provide the basis for termination
can reasonably be and are satisfied within a reasonable period of time, in
which case, the Closing Date shall be appropriately postponed;
(v) City Holding or Horizon if the Federal Reserve Board, the OCC, the
FDIC or the WVBOB deny approval of the Transaction and the time period for
all appeals or requests for reconsideration has run;
(vi) either Horizon or City Holding, if any required stockholder
approval is not obtained at the City Holding Special Meeting or the Horizon
Special Meeting; or
(vii) either Horizon or City Holding, if the Board of Directors of the
other party, acting in accordance with the second sentence of Section 4.2
of the Agreement, shall have withdrawn, modified or changed in
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a manner adverse to the terminating party its approval or recommendation of
the Agreement and the transactions contemplated thereby.
In the event of termination of the Agreement pursuant to its terms and the
abandonment of the Transaction, no party to the Agreement will have any
liability or further obligation to any other party except (i) for the breach of
certain representations, warranties and covenants that survive termination and
(ii) that termination will not relieve a breaching party from liability for any
willful breach of the Agreement giving rise to such termination.
WAIVER; AMENDMENT; EXPENSES
Prior to the Effective Time of the Holding Company Merger, and subject to
compliance with applicable law, any term or provision of the Agreement may be
(i) waived in writing at any time by the party which is, or whose shareholders
are, entitled to the benefits thereof, or (ii) amended or supplemented by
written instructions duly executed by all parties thereto at any time whether
before or after the City Holding Special Meeting and the Horizon Special
Meeting, excepting statutory requirements and requisite approvals of
shareholders and regulatory authorities, provided that any such amendment or
waiver executed after shareholders of City Holding or Horizon have approved the
Agreement and the Holding Company Plan of Merger shall not modify either the
amount or form of the consideration to be received by such shareholders for
their shares of Horizon Common Stock or otherwise materially adversely affect
such shareholders without their approval.
Each party to the Agreement will bear all expenses incurred by it in
connection with the Agreement and the transactions contemplated thereby, except
that printing expenses will be shared equally between City Holding and Horizon.
City Holding has agreed to pay for all Commission registration fees.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material U.S. federal income tax
consequences of the Holding Company Merger to holders of City Holding Common
Stock and Horizon Common Stock. This summary is based on current law, which is
subject to change at any time, possibly with retroactive effect. This summary
is not a complete description of all tax consequences of the Holding Company
Merger and, in particular, may not address U.S. federal income tax
considerations applicable to Horizon Shareholders subject to special treatment
under U.S. federal income tax law. In addition, this summary does not address
tax consequences of the Holding Company Merger under applicable foreign, state
or local laws. HOLDERS OF HORIZON COMMON STOCK AND SHAREHOLDERS EXERCISING
DISSENTERS' RIGHTS ARE URGED TO CONSULT THEIR TAX ADVISORS REGARDING THE
PARTICULAR TAX CONSEQUENCES OF THE HOLDING COMPANY MERGER TO THEM.
OPINIONS OF COUNSEL. City Holding has received the opinion of Hunton &
Williams, and Horizon has received the opinion of Jackson & Kelly, to the
effect that, for federal income tax purposes, (i) none of City Holding,
Horizon, City National, or the Horizon Banks will recognize any taxable gain or
loss upon consummation of the Holding Company Merger or the Bank Mergers, and
(ii) the Holding Company Merger will result in the tax consequences summarized
below for Horizon Shareholders and City Holding Shareholders who do not
exercise dissenters' rights. Receipt of substantially the same opinions of
counsel by City Holding and Horizon as of the Closing Date is a condition to
consummation of the Holding Company Merger. The opinions of counsel are based
on, and the opinions to be given as of the Closing Date will be based on,
certain customary assumptions and representations. Counsel's opinions represent
only counsel's best legal judgment and are not binding on the Internal Revenue
Service or any court.
HORIZON SHAREHOLDERS. A Horizon Shareholder who receives solely City
Holding Common Stock in exchange for shares of Horizon Common Stock will not
recognize any gain or loss on the exchange. If a Horizon Shareholder receives
City Holding Common Stock and cash in lieu of a fractional share of City
Holding Common Stock, the shareholder will recognize taxable gain or loss
solely with respect to such fractional share as if it had been received and
then sold for the cash. A non-dissenting Horizon Shareholder will have an
aggregate tax basis in the shares of City Holding Common Stock (including any
fractional share interest) received in the Holding Company Merger equal to the
aggregate tax basis in the shares of Horizon Common Stock exchanged. A Horizon
Shareholder's holding period for shares of City Holding Common Stock (including
any fractional share
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<PAGE>
interest) received in the Holding Company Merger will include the holding
period for the shares of Horizon Common Stock exchanged if they are held as a
capital asset at the Effective Time of the Holding Company Merger.
If a Horizon Shareholder exercises dissenter's rights, receipt of cash for
shares of Horizon Common Stock generally will be taxable as a sale of those
shares. However, if a Horizon Shareholder exercises dissenter's rights for less
than all of the shareholder's Horizon Common Stock, the entire amount of cash
received could be taxable to the extent that (1) the cash plus the fair market
value of City Holding Common Stock the shareholder receives for non-Dissenting
Shares exceeds (2) the tax basis of the shareholder's Horizon Common Stock. A
Horizon Shareholder considering the exercise of dissenter's rights should
consult a tax advisor about the tax consequences of exercising such rights.
CITY HOLDING SHAREHOLDERS. Except for any City Holding Shareholders who
exercise dissenter's rights, the consummation of the Holding Company Merger
will not result in any tax consequences to City Holding Shareholders. If a City
Holding Shareholder exercises dissenter's rights, receipt of cash for shares of
City Holding Common Stock generally will be taxable as a sale of those shares.
However, under certain circumstances, the entire amount of the cash received by
a dissenting City Holding Shareholder could be taxable as a dividend. A City
Holding Shareholder considering the exercise of dissenter's rights should
consult a tax advisor about the tax consequences of exercising such rights.
INTERESTS OF CERTAIN PERSONS IN THE HOLDING COMPANY MERGER
GENERAL. In connection with their approval of the Agreement and the
transactions contemplated thereby, the City Holding Board and the Horizon Board
considered the proposed post-merger participation by certain members of City
Holding and Horizon management and of the City Holding Board and the Horizon
Board in the management of City Holding or on its Board of Directors. Each
Board concluded that it was in the best interests of the shareholders to assure
that City Holding or Horizon, as the case may be, have the continued dedication
of certain key members of executive management pending the completion of the
Holding Company Merger and that City Holding have continuity of management
after the Holding Company Merger. Therefore, each Board approved the employment
agreements with key members of City Holding and Horizon management that are
described below.
The Boards also considered the interests of officers and directors of City
Holding, Horizon or their respective subsidiaries under existing employment
agreements and severance and benefit plans. In addition, the Agreement contains
provisions relating to the indemnification of such directors and officers and
directors' and officers' liability insurance.
BOARD COMPOSITION AND RELATED MATTERS POST-MERGER. At the Effective Time
of the Holding Company Merger, the Board of Directors of City Holding (the "NEW
BOARD") will be increased to 24 directors. Twelve seats on the New Board will
be filled by certain current directors of City Holding, and, as provided in the
Agreement, 12 directors will be elected by the City Holding directors from
among the current directors of Horizon designated by Horizon to serve on the
New Board. The 12 City Holding members of the New Board are Samuel M. Bowling,
Dr. D. K. Cales, Hugh R. Clonch, Jay Goldman, Robert D. Fisher, William M.
Frazier, David E. Haden, Carlin K. Harmon, C. Dallas Kayser, Leon K. Oxley,
Mark H. Schaul and Steven J. Day. The 12 Horizon designees to the New Board are
Philip W. Cain, William C. Dolin, David W. Hambrick, Frank S. Harkins, Jr.,
Tracy W. Hylton, II, B. C. McGinnis III, Thomas L. McGinnis, Philip L.
McLaughlin, E. M. Payne III, R.T. Rogers, James E. Songer and Albert M. Tieche,
Jr. The directors of New Board will be divided into three classes, with one
class to be elected each year to a three year term. See "Board of Directors and
Management after the Holding Company Merger."
Additionally, City Holding will appoint members of the Board of Directors
of Raleigh, Summers, Greenbrier, Marlinton & Twentieth as advisory directors
for City National. For three years from the Effective Time of the Holding
Company Merger, City Holding will maintain deferred compensation plans for
those directors and will not terminate or reduce any benefits which have been
accrued, funded or vested.
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EMPLOYMENT AGREEMENTS WITH CITY HOLDING. In connection with the execution
of the Agreement, employment agreements (the "EMPLOYMENT AGREEMENTS") will be
entered into with each of Steven J. Day, Robert A. Henson, Matthew B. Call,
Frank S. Harkins, Jr., Philip L. McLaughlin and B. C. McGinnis III (the
"EXECUTIVES"). Messrs. Day, McLaughlin and McGinnis' Employment Agreements are
for a term of five years each commencing at the Effective Time of the Holding
Company Merger and terminating on the fifth anniversary thereof; Messrs. Henson
and Call's Employment Agreements are for a term of three years each commencing
at the Effective Time of the Holding Company Merger and terminating on the
third anniversary thereof; and Mr. Harkins' Employment Agreement is for a term
of employment expiring May 31, 1999 and a subsequent five year term of
consulting (the "EMPLOYMENT PERIOD"). During the Employment Period, Mr. Day
will serve as President and Chief Executive Officer and will receive an annual
base salary of $240,000; Mr. Henson will serve as Chief Financial Officer and
will receive an annual base salary of $150,000; Mr. Call will serve as
Executive Vice President and will receive an annual base salary of $150,000;
Mr. McLaughlin will serve as Chairman of the Board of Directors and will
receive an annual base salary of $180,000; Mr. McGinnis will serve as Vice
Chairman of the Board of Directors and will receive an annual base salary of
$170,000; and Mr. Harkins will serve as Business Retention Officer until May
31, 1999, and thereafter will serve a five-year term as a consultant. He will
receive an annual base salary of $200,000.
The Holding Company Merger would have been treated as a "change in
control" under City Holding's change in control agreement that it has in place
with Steven J. Day, which means that Mr. Day could have received certain
payments under his existing change in control agreement if he left his position
after the Holding Company Merger. However, Mr. Day has agreed to waive the
"change in control" provisions of his employment agreement for purposes of the
Holding Company Merger. Horizon does not have any change in control agreements
with its senior management that would be triggered by the Holding Company
Merger. However, City Holding will honor the employment and indemnification
arrangements and benefit obligations which apply also to the officers and
directors of both companies. The City Holding and Horizon Boards of Directors
were aware of these interests and took them into account in approving the
Agreement.
STOCK-BASED RIGHTS. The Agreement provides that at the Effective Time of
the Holding Company Merger each outstanding and unexercised stock option to
purchase shares of Horizon Common Stock granted under Horizon's incentive stock
option plan (the "HORIZON STOCK OPTION PLAN") or any other option granted by
Horizon or any of the Horizon banks to any director, officer, employee,
consultant or advisor (collectively, "HORIZON OPTIONS") will cease to represent
the right to acquire shares of Horizon Common Stock and will be converted into
and become a right with respect to City Holding Common Stock, adjusted for the
Exchange Ratio. The number of unvested stock options to acquire shares of
Horizon Common Stock held by Messrs. Harkins, McLaughlin and McGinnis that will
become vested and fully exercisable as a result of the Holding Company Merger
is 20,500, 19,800, and 3,500, respectively.
ACCOUNTING TREATMENT
It is intended that the Transaction will be accounted for as a "pooling of
interests" under GAAP and the receipt by each party of an opinion of its
independent certified public accountants that the Transaction will qualify for
such accounting treatment is a condition to the parties' obligations to
consummate the Transaction. The unaudited pro forma financial information
included in this Joint Proxy Statement-Prospectus reflects the Transaction
using the "pooling of interests" method of accounting. See "Unaudited
Comparative Per Share and Selected Financial Data."
REGULATORY MATTERS
FEDERAL RESERVE BOARD. The Holding Company Merger is subject to prior
approval by the Federal Reserve Board under the Bank Holding Company Act of
1956, as amended (the "BHCA"). The BHCA requires the Federal Reserve Board,
when approving a transaction such as the Holding Company Merger, to take into
consideration the financial and managerial resources (including the competence,
experience and integrity of the officers, directors and principal shareholders)
and future prospects of the existing and proposed institutions and the
convenience and needs of the communities to be served. In considering financial
resources and future prospects, the
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<PAGE>
Federal Reserve Board will, among other things, evaluate the adequacy of the
capital levels of the parties to a proposed transaction.
The BHCA prohibits the Federal Reserve Board from approving a merger if it
would result in a monopoly or be in furtherance of any combination or
conspiracy to monopolize or to attempt to monopolize the business of banking in
any part of the United States, or if its effect in any section of the country
would be substantially to lessen competition or to tend to create a monopoly,
or if it would in any other manner result in a restraint of trade, unless the
Federal Reserve Board finds that the anti-competitive effects of a merger are
clearly outweighed in the public interest by the probable effect of the
transaction in meeting the convenience and needs of the communities to be
served. In addition, under the Community Reinvestment Act of 1977, as amended,
the Federal Reserve Board must take into account the record of performance of
the existing depository institutions in meeting the credit needs of the entire
community, including low- and moderate-income neighborhoods, served by such
institutions.
The Holding Company Merger generally may not be consummated until 30 days
(which may be shortened to 15 days with the consent of the U.S. Department of
Justice (the "DOJ")) following the date of Federal Reserve Board approval,
during which time the DOJ may challenge the Holding Company Merger on antitrust
grounds. The commencement of an antitrust action by the DOJ would stay the
effectiveness of the Federal Reserve Board's approval unless a court
specifically ordered otherwise. City Holding and Horizon expect that a small
level of divestitures may be required in connection with antitrust review by
the DOJ and the Federal Reserve Board. Other than the foregoing, City Holding
and Horizon believe that the Holding Company Merger does not raise substantial
antitrust or other significant regulatory concerns and that any divestitures
that may be required in order to consummate the Holding Company Merger will not
be material to the financial condition or results of operations of City Holding
after the Effective Time of the Holding Company Merger.
OFFICE OF THE COMPTROLLER OF THE CURRENCY. The Bank Mergers are subject to
the approval of the OCC under the National Bank Act. In evaluating an
application for a business combination in which the surviving institution is a
national bank, the OCC considers the following factors: (1) competition; (2)
financial and managerial resources and future prospects; (3) convenience and
needs of the community; and (4) community reinvestment.
WEST VIRGINIA BOARD OF BANKING & FINANCIAL INSTITUTIONS. The Holding
Company Merger is also subject to approval by the WVBOB under the West Virginia
banking statutes. The WVBOB must consider whether (i) the Holding Company
Merger would result in a monopoly, or would be in furtherance of any
combination or conspiracy to monopolize or to attempt to monopolize the
business of banking in any section of West Virginia; (ii) the Holding Company
Merger would have the effect in any section of West Virginia of substantially
lessening competition, or would tend to create a monopoly or in any other
manner would be in restraint of trade, unless the anti-competitive effects of
the proposed Holding Company Merger are clearly outweighed in the public
interest by the probable effect of the Holding Company Merger in meeting the
convenience and needs of the communities to be served; or (iii) the Holding
Company Merger would be contrary to the best interests of the shareholders or
customers of Horizon and its subsidiary banks.
OTHER AUTHORITIES. The Holding Company Merger may be subject to the
approval of or notice to certain other state and foreign regulatory
authorities.
STATUS OF REGULATORY APPROVALS AND OTHER INFORMATION. City Holding and
Horizon have filed (or will promptly file) all applications and notices and
have taken (or will promptly take) other appropriate action with respect to any
requisite approvals or other action of any governmental authority. The
Agreement provides that the obligation of each of City Holding and Horizon to
consummate the Transaction is conditioned upon the receipt of all requisite
regulatory approvals, including the approvals of the Federal Reserve Board and
certain state and foreign regulatory authorities. There can be no assurance
that any governmental agency will approve or take any required action with
respect to the Transaction, and, if approvals are received or action is taken,
there can be no assurance as to the date of such approvals or action, that such
approvals or action will not be conditioned upon matters that would cause the
parties to mutually consent to abandon the Transaction or that no action will
be brought challenging such approvals or action, including a challenge by the
DOJ or, if such a challenge is made, the result thereof. To date, applications
or notifications have been filed with the Federal Reserve Board and the WVBOB,
among others. All of the foregoing domestic applications are pending at this
time.
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<PAGE>
City Holding and Horizon are not aware of any governmental approvals or
actions that may be required for consummation of the Holding Company Merger
other than as described above. Should any other approval or action be required,
City Holding and Horizon currently contemplate that such approval or action
would be sought.
THE HOLDING COMPANY MERGER CANNOT PROCEED IN THE ABSENCE OF THE REQUISITE
REGULATORY APPROVALS. THERE CAN BE NO ASSURANCE THAT THE REGULATORY APPROVALS
WILL BE OBTAINED OR AS TO THE DATES OF ANY SUCH APPROVALS. SEE " -- CONDITIONS
TO THE HOLDING COMPANY MERGER." THERE CAN LIKEWISE BE NO ASSURANCE THAT THE DOJ
OR OTHER GOVERNMENTAL AUTHORITIES WILL NOT CHALLENGE THE HOLDING COMPANY
MERGER, OR, IF SUCH A CHALLENGE IS MADE, AS TO THE RESULT THEREOF.
See " -- Effective Time of the Holding Company Merger," " -- Conditions to
the Holding Company Merger" and " -- Termination of the Agreement."
RESTRICTIONS ON RESALES BY AFFILIATES
The shares of City Holding Company Common Stock issuable to Horizon
Shareholders upon consummation of the Holding Company Merger have been
registered under the Securities Act. Such securities may be traded freely
without restriction by those shareholders who are not deemed to be "affiliates"
(as defined in the rules promulgated under the Securities Act) of City Holding
or Horizon.
Shares of City Holding Common Stock received by those Horizon Shareholders
who are deemed to be affiliates of Horizon at the time of the Meetings may be
resold without registration under the Securities Act only as permitted by Rule
145 under the Securities Act or as otherwise permitted thereunder. Shares of
City Holding Common Stock received by persons who are deemed to be "affiliates"
of City Holding after the Holding Company Merger may be sold by them only in
transactions permitted under the provisions of Rule 144 under the Securities
Act, or as otherwise permitted under the Securities Act.
Commission guidelines regarding qualifying for the "pooling of interests"
method of accounting also limit sales of shares of the acquiring and acquired
company by affiliates of either company in a business combination. Commission
guidelines also indicate that the "pooling of interests" method of accounting
generally will not be challenged on the basis of sales by affiliates of the
acquiring or acquired company if such affiliates do not dispose of any of the
shares of the corporation they own, or shares of a corporation they receive in
connection with a merger, during the period beginning 30 days before the merger
is consummated and ending when financial results covering at least 30 days of
post-merger operations of the combined companies have been published.
Each of City Holding and Horizon has agreed to use its reasonable best
efforts to cause each person who is an "affiliate" (for purposes of Rule 145
under the Securities Act and for purposes of qualifying the Holding Company
Merger for "pooling of interests" accounting treatment) of such party to
deliver to the other party a written agreement intended to ensure compliance
with the Securities Act (in the case of Horizon affiliates) and to preserve the
ability of the Holding Company Merger to be accounted for as a "pooling of
interests."
RIGHTS OF DISSENTING SHAREHOLDERS
Under Section 31-1-122 of the WVC, any shareholder of a West Virginia
corporation is permitted to dissent from, and obtain the value of, his or her
shares in the event of certain corporate actions.
The following is a summary of the dissenters' rights under Section
31-1-123 of the WVC. Anyone who intends to dissent from the Holding Company
Merger should carefully review the text and comply with the requirements of
Section 31-1-123 of the WVC (attached as Appendix G to this Joint Proxy
Statement- Prospectus), as well as consult with an attorney. FAILURE TO COMPLY
WITH THE PROCEDURES PRESCRIBED BY APPLICABLE LAW WILL RESULT IN THE LOSS OF
DISSENTERS' RIGHTS. No further notice of the events giving rise to dissenters'
rights or any steps associated therewith will be furnished to Dissenters (as
defined below) and no notice of approval of the Holding Company Merger will be
given to a Dissenter.
The Transaction gives rise to shareholder dissenters' rights which may be
summarized as follows:
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<PAGE>
(i) Any shareholder intending to dissent (a "DISSENTER") must file with
City Holding or Horizon, prior to or at the Horizon Special Meeting or the
City Holding Special Meeting, a written objection to such proposed
corporate action.
(ii) If the Holding Company Merger is then approved and the Dissenter
did not vote in favor of it, the Dissenter may, within ten days after the
date on which the vote was taken, make written demand on City Holding for
payment of the fair value of the Dissenter's shares. If the Holding Company
Merger is completed, City Holding shall pay to the Dissenter the fair value
of the Dissenter's shares upon surrender of the certificate or certificates
representing such shares. Fair value shall be determined as of the day
prior to the date on which the vote was taken, excluding any appreciation
or depreciation in anticipation of the Holding Company Merger. If the
Dissenter does not make written demand within the ten-day period, he or she
shall not be able to exercise dissenter's rights under the WVC. Any
Dissenter making such demand shall thereafter be entitled only to the
aforementioned payment.
(iii) Within ten days after the Holding Company Merger, City Holding
shall give written notice thereof to the Dissenters who have made written
demand as provided in paragraph (ii), and shall make a written offer to
each Dissenter to pay for such shares at a specified price deemed by such
corporation to be fair value thereof. Such notice and offer shall be
accompanied by certain financial statements.
(iv) If within thirty days after the Holding Company Merger the fair
value of such shares is agreed upon between City Holding and the Dissenter,
City Holding shall pay the agreed-upon amount within ninety days after the
Holding Company Merger upon surrender of the certificate or certificates
representing such shares. Upon payment of the agreed-upon amount, Dissenter
shall cease to have any interest in such shares.
(v) If within such period of thirty days, City Holding and the Dissenter
do not agree upon a fair price, then City Holding shall within thirty days
after receipt of written demand from the Dissenter, which written demand
must be given within sixty days after the Holding Company Merger, file a
complaint in a court of general civil jurisdiction requesting that the fair
value of such shares be found and determined, or City Holding may file such
complaint at any time within such sixty-day period. Such complaint shall be
filed in any court of general civil jurisdiction in Kanawha County. If City
Holding shall fail to institute such proceedings, the Dissenter may do so
in the name of City Holding. Other Dissenters may be made parties to this
same action. All Dissenters who are parties to the proceeding shall be
entitled to judgment against City Holding for the amount of the fair value
of their shares. The judgment shall be payable only upon and concurrently
with the surrender to City Holding of the certificate or certificates
representing such shares. Upon payment of the judgment, the Dissenter shall
cease to have any interest in such shares. The court may, if it so elects,
appoint appraisers to receive evidence and recommend a decision on the
question of fair value.
(vi) Within twenty days after demanding payment for his or her shares,
each Dissenter shall submit his or her stock certificate to City Holding
for notation thereon that such demand has been made. A Dissenter's failure
to do so shall, at the option of the corporation, terminate his or her
dissenter's rights unless a court of general civil jurisdiction, for good
and sufficient cause shown, shall otherwise direct. If such shares are
transferred, each new certificate shall bear similar notation and the name
of the original Dissenter. The transferee shall acquire no rights in City
Holding other than those which the original Dissenter had after making
demand for payment of the fair value.
Dissenter may withdraw a demand for payment only with the consent of City
Holding or Horizon as the case may be. The right of a shareholder to be paid
the fair value of his or her shares will cease and his or her status as a
shareholder will be restored if (i) the demand for payment is withdrawn with
the consent of City Holding or Horizon; (ii) the Holding Company Merger is
abandoned or rescinded; (iii) the shareholders revoke the authority to effect
the Holding Company Merger; (iv) no demand or petition for determination of the
fair value by a court of general civil jurisdiction has been made or filed
within the time provided under paragraph (v); or (v) a court of general civil
jurisdiction determines that the shareholder is not entitled to obtain relief
as a dissenting shareholder.
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<PAGE>
BOARD OF DIRECTORS AND MANAGEMENT
AFTER THE HOLDING COMPANY MERGER
At the Effective Time of the Holding Company Merger, the Board of
Directors of the New Board will be increased to 24 directors. Twelve seats on
the New Board will be filled by certain current directors of City Holding, and,
as provided in the Agreement, 12 directors will be elected by the City Holding
directors from among the current directors of Horizon designated by Horizon to
serve on the New Board. The 12 City Holding members of the New Board are Samuel
M. Bowling, Dr. D. K. Cales, Hugh R. Clonch, Jay Goldman, Robert D. Fisher,
William M. Frazier, David E. Haden, Carlin K. Harmon, C. Dallas Kayser, Leon K.
Oxley, Mark H. Schaul and Steven J. Day. The 12 Horizon designees to the New
Board are Philip W. Cain, William C. Dolin, David W. Hambrick, Frank S.
Harkins, Jr., Tracy W. Hylton, II, B. C. McGinnis III, Thomas L. McGinnis,
Philip L. McLaughlin, E. M. Payne III, R.T. Rogers, James E. Songer and Albert
M. Tieche, Jr. The directors of the New Board will be divided into three
classes, with one class to be elected each year to a three year term.
MANAGEMENT AFTER THE HOLDING COMPANY MERGER
City Holding and Horizon have agreed that Mr. Day will be President and
Chief Executive Officer and Mr. McLaughlin will be Chairman of the Board of
Directors of City Holding after the Effective Time of the Holding Company
Merger. In addition, Messrs. B. C. McGinnis III and Bowling will serve as Vice
Chairmen of the Board of Directors of City Holding after the Effective Time of
the Holding Company Merger.
CONSOLIDATION OF OPERATIONS; ANTICIPATED COST SAVINGS
Although no assurance can be given either that any specific level of cost
savings will be achieved or as to the timing thereof, City Holding and Horizon
currently expect to achieve savings in operating costs by consolidating certain
operations and eliminating redundant expenses. Such savings are expected to be
realized over time as such consolidation is completed.
Delivery systems optimization is maximizing the efficiency of the branch
network by sale of overlapping facilities and increasing usage of alternative
delivery channels such as electronic commerce. Corporate overhead cost savings
are expected to result from combining staff areas such as finance, accounting,
and human resources, and consolidating marketing and risk management staff
areas. The pay scale for these positions is typically higher than the average
position. Business line consolidations generate savings from combining
businesses where economies of scale can be gained. These areas include treasury
management, credit card, and asset management. Infrastructure leverage is
obtained in the transaction processing and technology units. Savings are
generated by running the combined volumes through the existing infrastructure
while downsizing the overlapping facilities. Examples include check processing,
wire transfer, Automated Clearing House, transportation networks, data
processing, systems support and telecommunications. Vendor leverage savings are
generated by working with suppliers to obtain a lower per unit cost resulting
from increased volume of the combined entities. Specific areas are checks,
ATMs, record storage and real estate management services.
Substantial expense savings are expected to be realized from the
Transaction as a result of consolidation of the consumer and commercial banking
businesses, corporate operations, and the consolidation of other duplicative
operations of City Holding and Horizon.
The extent to which such expense savings will be achieved is dependent
upon various factors, a number of which are beyond the control of City Holding
and Horizon, including regulatory requirements attendant to the consummation of
the Transaction, the general regulatory environment, economic conditions, and
unanticipated changes in business conditions and inflation, and no assurances
can be given with respect to the ultimate level and composition of expense
savings to be realized or that such savings will be realized in the time frame
currently anticipated. These amounts have not been included in any of the
unaudited pro forma financial information included in this Joint Proxy
Statement-Prospectus.
In connection with the Transaction, City Holding expects to incur pre-tax
merger and restructuring items of between $15 and $20 million, which will
include charges to align Horizon's major business processes with those
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<PAGE>
of City Holding, severance expenses, conversion and related costs and occupancy
and equipment expenses (primarily lease exit costs and the elimination of
duplicate facilities and other capitalized assets), exit costs related to
contract terminations and other Transaction costs (including legal, accounting
and investment banking fees). This amount represents management's best
estimates based on available information at this time.
For additional information regarding management and operations of City
Holding, see "Information About City Holding" and "Information About Horizon."
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PRICE RANGE OF COMMON STOCK AND DIVIDENDS
MARKET PRICES
City Holding Common Stock is listed on the Nasdaq National Market under
the trading symbol "CHCO." As of October 29, 1998, City Holding Common Stock
was held of record by approximately 2,236 persons. The following table sets
forth the high and low closing market prices of the City Holding Common Stock
as reported on the Nasdaq Composite Transactions List for the periods
indicated.
Horizon Common Stock is listed on the Nasdaq National Market under the
symbol "HZWV." As of October 29, 1998, Horizon Common Stock was held of record
by approximately 2,555 registered shareholders. The following table sets forth
the high and low closing market prices of the Horizon Common Stock as reported
on the Nasdaq Composite Transactions List for the periods indicated.
<TABLE>
<CAPTION>
CITY HOLDING HORIZON
MARKET PRICES MARKET PRICES
--------------------------- -------------------------
HIGH LOW HIGH LOW
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1995:
First Quarter ..................................... $ 24.79 $ 21.90 $ 15.50 $ 14.00
Second Quarter .................................... 23.97 21.49 15.50 14.00
Third Quarter ..................................... 22.93 20.66 17.50 15.25
Fourth Quarter .................................... 22.73 20.45 20.75 17.25
YEAR ENDED DECEMBER 31, 1996:
First Quarter ..................................... 24.09 20.91 22.13 19.50
Second Quarter .................................... 23.18 20.45 21.50 19.50
Third Quarter ..................................... 22.73 19.77 21.25 19.25
Fourth Quarter .................................... 26.25 20.91 20.75 19.25
YEAR ENDED DECEMBER 31, 1997:
First Quarter ..................................... 34.75 25.75 24.50 19.50
Second Quarter .................................... 34.50 30.00 26.75 23.52
Third Quarter ..................................... 43.25 32.25 34.25 25.25
Fourth Quarter .................................... 42.38 40.00 33.25 27.00
YEAR ENDED DECEMBER 31, 1998:
First Quarter ..................................... 51.00 41.50 31.88 28.50
Second Quarter .................................... 48.00 41.00 45.25 29.25
Third Quarter ..................................... 44.88 34.25 44.75 36.00
Fourth Quarter (through November 3, 1998) ......... 37.13 32.00 39.25 34.13
</TABLE>
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DIVIDENDS
The following table sets forth dividends declared per share of City
Holding Common Stock and Horizon Common Stock, respectively, for the periods
indicated. The ability of either City Holding or Horizon to pay dividends to
its respective shareholders is subject to certain restrictions. See
"Supervision and Regulation of City Holding and Horizon."
<TABLE>
<CAPTION>
CITY HOLDING HORIZON
DIVIDENDS DIVIDENDS
-------------- ----------
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1995:
First Quarter ..................................... $ 0.132 $ 0.25
Second Quarter .................................... 0.132 0.25
Third Quarter ..................................... 0.141 0.25
Fourth Quarter .................................... 0.155 0.30
YEAR ENDED DECEMBER 31, 1996:
First Quarter ..................................... 0.155 0.15
Second Quarter .................................... 0.155 0.15
Third Quarter ..................................... 0.155 0.15
Fourth Quarter .................................... 0.170 0.17
YEAR ENDED DECEMBER 31, 1997:
First Quarter ..................................... 0.180 0.17
Second Quarter .................................... 0.180 0.17
Third Quarter ..................................... 0.180 0.17
Fourth Quarter .................................... 0.190 0.24
YEAR ENDED DECEMBER 31, 1998:
First Quarter ..................................... 0.190 0.19
Second Quarter .................................... 0.190 0.19
Third Quarter ..................................... 0.190 0.19
Fourth Quarter (through November 2, 1998) ......... -- 0.21
</TABLE>
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PROPOSAL 2 -- APPROVAL OF CHARTER AMENDMENT TO
INCREASE AUTHORIZED COMMON STOCK
GENERAL
The City Holding Board has recommended to City Holding's shareholders an
amendment of City Holding's Articles of Incorporation, in the form below, to
increase the authorized Common Stock, $2.50 par value, from 20,000,000 shares to
50,000,000 shares (the "ADDITIONAL SHARES PROPOSAL"). As of the City Holding
Record Date, City Holding had 6,660,717 shares of Common Stock outstanding.
Horizon shareholders are not being asked to vote on the Additional Shares
Proposal.
Adoption of the Additional Shares Proposal to increase the authorized
Common Stock from 20,000,000 shares to 50,000,000 shares requires the
affirmative vote of an absolute majority of outstanding shares of City Holding
Common Stock.
If authorized, additional Common Stock will be available for possible
future financings of, or acquisitions by, City Holding and for general
corporate purposes without any legal requirement that further shareholder
authorization for the issuance be obtained. City Holding has no present plans
for the issuance of any Common Stock other than the proposed issuance of up to
10,500,000 shares of Common Stock in the Holding Company Merger. The Additional
Shares Proposal is completely separate and independent from the proposal to
approve the Holding Company Merger, and both proposals are listed separately on
the attached proxy card for City Holding shareholders. The consummation of the
Holding Company Merger is not contingent upon approval of the Additional Shares
Proposal. No increase in authorized Preferred Stock of City Holding, none of
which is outstanding, is being sought.
City Holding shareholders should be aware that the issuance of any
additional shares of Common Stock could cause a dilution of voting rights and
net income and net book value per share of Common Stock. City Holding, however,
would receive consideration for any additional shares of Common Stock issued,
thereby reducing or eliminating the economic effect to each stockholder of such
dilution.
TEXT OF AMENDMENT
The proposed amendment of City Holding's Articles of Incorporation
consists of revising the first sentence of Article VI to read as follows
(change underlined):
VI. The Company shall have the authority to issue 500,000 shares of
preferred stock of a par value of $25 per share and 50,000,000 shares of
common stock at a par value of $2.50 per share.
The remainder of Article VI shall be unchanged.
THE CITY HOLDING BOARD RECOMMENDS A VOTE "FOR" APPROVAL OF THE ADDITIONAL
SHARES PROPOSAL.
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INFORMATION ABOUT CITY HOLDING
GENERAL
City Holding is a registered bank holding company, chartered under the
laws of the State of West Virginia, and headquartered in Charleston, West
Virginia. At June 30, 1998, City Holding had total consolidated assets of
approximately $1.5 billion, total consolidated deposits of approximately $1.1
billion, and total consolidated shareholders' equity of approximately $126
million.
Through its lead bank subsidiary, City National, City Holding provides a
wide variety of retail and commercial banking products and services to
individuals and small- and medium-sized businesses through 43 banking offices
in the State of West Virginia. In addition to City National, City Holding
operates Del Amo, a federally-chartered savings bank headquartered in Torrance,
California. Del Amo operates three locations in Southern California and
complements City Holding's mortgage loan origination businesses located in
Irvine and Costa Mesa, California.
City Holding has experienced significant growth through acquisitions,
having acquired 11 depository and five non-depository institutions since 1985,
adding approximately $700 million in assets and 29 branch offices to City
Holding's franchise. In addition, City Holding has started six DE NOVO
operations, including one depository institution. While the strategy of City
Holding is to permit its various banking operations to be responsive to the
markets in which they operate, City Holding has consolidated all back-office
functions, including portions of the credit underwriting, investment portfolio
management, and loan review functions. To promote responsiveness to customer
requests and operational efficiency, City Holding has emphasized the use of
technology, including check imaging.
City Holding maintains a diverse loan portfolio which consists of
commercial, real estate, and consumer loans to customers in its markets. At
June 30, 1998, City Holding had non-performing loans, consisting of non-accrual,
past-due, and restructured credits of $7.4 million, or 0.79% of gross loans.
Net charge-offs through June 30, 1998 were 0.12% of average loans. The
allowance for loan losses at June 30, 1998, was 0.93% of gross loans and
117.81% of non-performing loans. Additionally, City Holding's net charge-offs
to average loans ratio has averaged 0.19% over the five years ended December
31, 1997. For the six months ended June 30, 1998, City Holding's return on
average assets and return on average equity were 0.94% and 11.13%,
respectively.
Recognizing the increasing competition in the financial services industry,
City Holding's management has embarked upon a strategy to increase non-interest
income and diversify the markets in which it operates. In 1993, City Holding
organized City Financial Corporation ("CITY FINANCIAL"), a full-service
securities brokerage and investment advisory company. City Financial operates
an office in Charleston, West Virginia, from which it offers brokerage and
investment advisory services to customers of City Holding and others throughout
West Virginia.
After approximately two years of providing warehouse funding to an
independent third party financial institution that participated in a FHA Title
I loan securitization conduit, in August 1996 City Holding formed City Mortgage
Services ("CMS"), a division of City National. CMS, with offices in Costa Mesa,
California and Cross Lanes, West Virginia, was created as a specialty loan
servicing division focusing on servicing niche loan products such as sub-prime
mortgage, non-conforming mortgage, home improvement, home equity, and other
similar products. During the fall of 1996, CMS began servicing FHA Title I
loans that were securitized by the third party financial institution to which
City Holding had previously provided warehouse funding. In December 1996, City
Holding acquired certain assets and assumed certain liabilities of a California
FHA Title I loan servicing company and, as a result, acquired the right to
service, through CMS, a number of securitized loan pools approximating $600
million in unpaid principal balances. In October 1997, City Holding acquired an
originator of high loan-to-value, predominately junior lien, mortgage loans,
located in Irvine, California, with an experienced team of junior lien mortgage
originators. Soon thereafter, City Holding formed two additional retail
origination platforms, one located in Southern California and the other located
in Charleston, West Virginia. In addition to these three separate retail
origination platforms, City Holding maintains a wholesale division in
California which focuses on acquiring high loan-to-value mortgage loans from a
network of correspondent lenders.
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In August 1998, City Holding opened a fourth retail origination office and
expanded its loan servicing division with facilities located in Dallas, Texas.
Currently, these divisions are focusing on generating high loan-to-value
products, primarily 125% loan-to-value products through direct mail and
telemarketing solicitation nationwide. At June 30, 1998, City Holding's
portfolio of junior lien mortgages aggregated approximately $178 million, of
which $164 million would be classified as 125% loan-to-value products. The
typical 125% loan-to-value product customer has an average FICO score of
approximately 680, and is generally utilizing the loan product to consolidate
high-rate credit card or other debt or for college tuition, home improvements,
or vacations. It is City Holding's intention to sell the various loan products
generated by these divisions through a combination of loan securitizations and
whole loan sales, where, in the case of loan securitizations, City Holding
would retain the servicing rights. Through June 30, 1998, City Holding had
completed three transactions involving the securitization of approximately $183
million of high loan-to-value loans. City Holding plans to securitize a portion
of its junior lien mortgage loan portfolio every quarter.
City Holding's strategy is to develop these loan origination divisions
into marketing platforms, that through the use of technology and direct mail
and telemarketing solicitations, permit City Holding to access additional
geographic markets and efficiently deliver a variety of financial service
products.
In addition to these mortgage origination and servicing divisions, City
Holding also operates an escrow services division, a direct mail/marketing
division and an internet service provider and web site development division.
City Holding has also sought to expand the range of insurance products and
services that it provides through the acquisition of an insurance agency
located in Charleston, West Virginia, in December 1997, and one additional
agency in the first quarter of 1998.
On June 29, 1998, City Holding (through City National) completed a
strategic investment in Mego Mortgage Corporation ("MEGO"), a specialty
financial services company located in Atlanta, Georgia, that originates and
purchases conventional home improvement, high loan-to-value debt consolidation,
and other similar loans. Concurrent with this investment, CMS acquired the right
to service approximately $536 million of consumer mortgage loans previously
serviced by Mego and the exclusive right to service up to an additional $1
billion of mortgage loans originated or acquired by Mego in the future.
City Holding expects to take advantage of the consolidation of the
financial services industry by further developing its franchise through the
acquisition of financial institutions and other entities engaged in lines of
business permissible for banks and bank holding companies. City Holding
believes that as the competitive environment becomes increasingly challenging
to smaller financial institutions, City Holding can offer community banking
organizations an attractive alternative, by providing the technology, product
variety, and efficiencies and services of a larger banking organization, while
managing such institutions in a manner that allows them to remain responsive to
the markets in which they operate. In addition to acquiring community banking
organizations, City Holding also has interest in supplementing the Del Amo
acquisition through related acquisitions in California to further support City
Holding's mortgage operations in California. Additionally, City Holding is
interested in acquiring mortgage operations, including whole operations or
portfolios of mortgage servicing rights and mortgage loans, and in acquiring
technology-related firms. However, City Holding remains firmly and primarily
committed to its commercial banking operations and expects to increase its
commercial banking presence in West Virginia significantly through its merger
with Horizon.
City Holding continues to evaluate business combination opportunities and
as a result, business combination discussions and, in some cases, negotiations
take place and future business combinations involving cash, debt, or equity
securities can be expected. Any future business combination or series of
business combinations that City Holding may undertake may be material, in terms
of assets acquired or liabilities assumed, to City Holding's financial
condition.
City Holding was organized under the laws of the State of West Virginia on
March 12, 1982. City Holding's principal executive offices are located at 25
Gatewater Road, Charleston, West Virginia 25313, and its telephone number at
such address is (304) 769-1100.
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RECENT DEVELOPMENTS
TRUST PREFERRED SECURITIES. On October 27, 1998 City Holding issued
$57,500,000 of 9.125% Corporation-obligated Manditorily Redeemable Capital
Securities through a subsidiary trust that holds only subordinated debentures
of City Holding ("TRUST PREFERRED SECURITIES"). City Holding will fully,
irrevocably and unconditionally guarantee all the subsidiary trust's
obligations under the Trust Preferred Securities. Approximately 21% or $12
million of the proceeds from the Trust Preferred Securities will immediately
qualify as Tier 1 or core capital, with the remaining 79% afforded Tier 2
capital treatment under the risk-based capital guidelines of the Federal
Reserve Board. However, it is anticipated that upon the consummation of the
merger with Horizon, the remaining $45.5 million will qualify as Tier 1 capital.
MANAGEMENT AND ADDITIONAL INFORMATION
Certain information relating to executive compensation, various benefit
plans (including stock option plans), voting securities and the principal
holders thereof, certain relationships and related transactions and other
related matters as to City Holding is incorporated by reference or set forth in
the City Holding Annual Report on Form 10-K for the year ended December 31,
1997, and is incorporated herein by reference. City Holding Shareholders or
Horizon Shareholders desiring copies of such documents may contact City Holding
at its address or telephone number indicated under "Where You Can Find More
Information."
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INFORMATION ABOUT HORIZON
GENERAL
Horizon was incorporated in 1982 under the laws of the State of West
Virginia as a one-bank holding company known as Raleigh Bankshares, Inc.
("RALEIGH BANKSHARES"). On January 3, 1984, the Bank of Raleigh ("RALEIGH")
became a wholly-owned subsidiary of Raleigh Bankshares. After 1984, the Board
of Directors determined that the name, "Raleigh Bankshares," may have had a
constraining effect upon expansion activities. The shareholders approved an
amendment on April 16, 1985, to change Raleigh Bankshares' name to "Horizon
Bancorp, Inc."
Banking operations are Horizon's primary business and major source of
revenue. Horizon derives its revenues primarily from dividends paid by its
subsidiary banks. The principal role of Horizon is to supervise and coordinate
the activities of the subsidiary banks. Horizon has five operating
subsidiaries, Bank of Raleigh ("RALEIGH"), National Bank of Summers of Hinton
("SUMMERS"), Greenbrier Valley National Bank ("GREENBRIER"), The First National
Bank in Marlinton ("MARLINTON"), and The Twentieth Street Bank ("TWENTIETH" or
"TWENTIETH STREET BANK"). Summers was acquired by Horizon on June 1, 1985,
through a consolidation between Summers and NBS National Bank, a wholly-owned
subsidiary of Horizon. Greenbrier and Marlinton were acquired by Horizon on
March 31, 1993, through a merger between Allegheny Bankshares Corporation and
Horizon. Twentieth was acquired by Horizon on August 30, 1996, through a merger
between Twentieth Bancorp, Inc. and Horizon.
Raleigh was originally chartered in 1899 as a state banking corporation
with the name "Bank of Raleigh." It has conducted banking operations in
Beckley, West Virginia, continuously since that time. In 1957, Beckley
Industrial Savings and Loan Company merged into Raleigh, with Raleigh surviving
the merger. Crossroads National Bank, Bradley, West Virginia, merged with and
into Raleigh during 1988, and Crossroads' former office is operated as a branch
of Raleigh. During 1997, Beckley Bancorp, Inc. was merged with and into
Raleigh, with one of its two former branches still in operation as a branch of
Raleigh. Marlinton was incorporated in 1902 as a national banking association
under the laws of the United States.
Summers was incorporated in 1895 as a state banking corporation under the
laws of the State of West Virginia with the name "The Bank of Summers." Summers
opened for business in 1895 and operated as a state bank under the laws of the
State of West Virginia from that date until 1906, when the Bank obtained a
national charter and assumed its present name, "National Bank of Summers of
Hinton."
Greenbrier was incorporated in 1901 as a national banking association with
the name of "First National Bank of Alderson." An Agreement to Consolidate and
Plan of Reorganization dated February 12, 1985, as amended by Amendment dated
October 24, 1985, among Allegheny Bankshares Corporation, Greenbrier Valley
Bank and First National Bank of Alderson was entered into whereby Greenbrier
Valley Bank was consolidated with First National Bank of Alderson and the title
of Greenbrier Valley National Bank.
Twentieth was originally incorporated on September 11, 1905, as a state
bank under the laws of West Virginia, and has operated as such since that time.
In 1983, the Bank became a wholly-owned subsidiary of Twentieth Bancorp, Inc.,
which was a one-bank holding company, Twentieth's Milton branch was originally
a separate corporation (Bank of Milton) incorporated on September 7, 1904, as a
state bank under the laws of West Virginia, and operated as such until being
acquired by Twentieth on June 30, 1985. Twentieth's West Hamlin branch was
originally a separate corporation (First National Bank of West Hamlin)
incorporated on October 24, 1964, as a national bank. The First National Bank
of West Hamlin was acquired by Twentieth Bancorp, Inc., on December 31, 1984.
It continued to operate as a national bank until January 1, 1990, when its
operations became branches of Twentieth.
During 1995, Horizon, through two of its subsidiary banks, purchased
certain assets and assumed certain liabilities of a regional banking company.
Greenbrier acquired the regional branch office at Fairlea, Greenbrier County,
on March 31, 1995. Raleigh acquired regional branch offices located at Beaver
and Sophia, Raleigh County, and at Oak Hill in Fayette County on May 12, 1995.
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MANAGEMENT AND ADDITIONAL INFORMATION
Certain information relating to executive compensation, various benefit
plans (including stock option plans), voting securities and the principal
holders thereof, certain relationships and related transactions and other
related matters as to Horizon is set forth in the Horizon Annual Report on Form
10-K for the year ended December 31, 1997, and is incorporated herein by
reference. Shareholders of Horizon or City Holding desiring copies of such
documents may contact Horizon at its address or telephone number indicated
under "Where You Can Find More Information."
SUPERVISION AND REGULATION OF CITY HOLDING AND HORIZON
GENERAL. As registered bank holding companies, City Holding and Horizon
are subject to the supervision of, and to regular inspection by, the Federal
Reserve Board. The bank subsidiaries of both City Holding and Horizon are
organized as national banking associations, which are subject to regulation,
supervision and examination by the Office of the Comptroller of Currency (the
"OCC"), or as state chartered banks, which are subject to regulation,
supervision and examination by the relevant state regulators. These banks are
also subject to regulation by the Federal Reserve Board and the Federal Deposit
Insurance Corporation (the "FDIC"), and other U.S. federal regulatory agencies.
City Holding also owns Del Amo, a federal savings bank subject to supervision,
regulation and examination by the Office of Thrift Supervision (the "OTS"). In
addition to banking laws, regulations and regulatory agencies, City Holding and
Horizon and their subsidiaries and affiliates are subject to various other laws
and regulations and supervision and examination by other regulatory agencies,
all of which, directly or indirectly, affect the operations and management of
City Holding and Horizon and their ability to make distributions. The following
discussion summarizes certain aspects of those laws and regulations that affect
City Holding and Horizon.
The activities of City Holding and Horizon and those of companies that
each controls or in which either holds more than 5% of the voting stock are
limited to banking, managing or controlling banks, furnishing services to or
performing services for their subsidiaries or any other activity that the
Federal Reserve Board determines to be so closely related to banking or
managing or controlling banks as to be a proper incident thereto. In making
such determinations, the Federal Reserve Board is required to consider whether
the performance of such activities by a bank holding company or its
subsidiaries can reasonably be expected to produce benefits to the public such
as greater convenience, increased competition or gains in efficiency that
outweigh possible adverse effects, such as undue concentration of resources,
decreased or unfair competition, conflicts of interest or unsound banking
practices. Generally, bank holding companies, such as City Holding and Horizon,
are required to obtain prior approval of the Federal Reserve Board to engage in
any new activity or to acquire more than 5% of any class of voting stock of any
company.
Proposals to change the laws and regulations governing the banking
industry are frequently introduced in the U.S. Congress, in the state
legislatures and before the various bank regulatory agencies. The likelihood
and timing of any such proposals or bills being enacted and the impact they
might have on City Holding, Horizon and their subsidiaries cannot be determined
at this time.
CAPITAL AND OPERATIONAL REQUIREMENTS. The Federal Reserve Board, the OCC,
the OTS and the FDIC have issued substantially similar risk-based and leverage
capital guidelines applicable to U.S. banking organizations. In addition, those
regulatory agencies may from time to time require that a banking organization
maintain capital above the minimum levels, whether because of its financial
condition or actual or anticipated growth. The Federal Reserve Board risk-based
guidelines define a two-tier capital framework. "Tier 1 Capital" consists of
common and qualifying preferred shareholders' equity, less certain intangibles
and other adjustments. "Tier 2 Capital" consists of subordinated and other
qualifying debt, and the allowance for credit losses up to 1.25% of
risk-weighted assets. The sum of Tier 1 capital and Tier 2 capital less
investments in unconsolidated subsidiaries represents qualifying "total
capital," at least 50% of which must consist of Tier 1 capital. Risk-based
capital ratios are calculated by dividing Tier 1 capital and total capital by
risk-weighted assets. Assets and off-balance sheet exposures are assigned to
one of four categories of risk weights, based primarily on relative credit
risk.
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The minimum Tier 1 capital ratio is 4% and the minimum total capital ratio is
8%. City Holding's Tier 1 capital and total risk-based capital ratios under
these guidelines at June 30, 1998 were 9.37% and 10.05%, respectively, and
Horizon's were 15.83% and 14.63%, respectively.
The "Leverage Ratio" is determined by dividing Tier 1 capital by adjusted
average total assets. Although the stated minimum ratio is 3%, most banking
organizations are required to maintain ratios of at least 100 to 200 basis
points above 3%. City Holding's and Horizon's leverage ratios at June 30, 1998
were 8.55% and 10.34%, respectively.
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA"), among other things, identifies five capital categories for insured
depository institutions (well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized and critically
undercapitalized) and requires the respective U.S. federal regulatory agencies
to implement systems for "prompt corrective action" for insured depository
institutions that do not meet minimum capital requirements within such
categories. FDICIA imposes progressively more restrictive constraints on
operations, management and capital distributions, depending on the category in
which an institution is classified. Failure to meet the capital guidelines
could also subject a banking institution to capital raising requirements. An
"undercapitalized" bank must develop a capital restoration plan and its parent
holding company must guarantee that bank's compliance with the plan. The
liability of the parent holding company under any such guarantee is limited to
the lesser of 5% of the bank's assets at the time it became undercapitalized or
the amount needed to comply with the plan. Furthermore, in the event of the
bankruptcy of the parent holding company, such guarantee would take priority
over the parent's general unsecured creditors. In addition, FDICIA requires the
various regulatory agencies to prescribe certain non-capital standards for
safety and soundness related generally to operations and management, asset
quality and executive compensation and permits regulatory action against a
financial institution that does not meet such standards.
The various regulatory agencies have adopted substantially similar
regulations that define the five capital categories identified by FDICIA, using
the total risk-based capital, Tier 1 risk-based capital and leverage capital
ratios as the relevant capital measures. Such regulations establish various
degrees of corrective action to be taken when an institution is considered
undercapitalized. Under the regulations, a "well capitalized" institution must
have a Tier 1 capital ratio of at least 6%, a total capital ratio of at least
10% and a leverage ratio of a least 5% and not be subject to a capital
directive order. An "adequately capitalized" institution must have a Tier 1
capital ratio of at least 4%, a total capital ratio of at least 8% and a
leverage ratio of at least 4%, or 3% in some cases. Under these guidelines,
each of the banking subsidiaries of City Holding and Horizon is considered
"well capitalized."
Banking agencies have also adopted regulations which mandate that
regulators take into consideration concentrations of credit risk and risks from
non-traditional activities, as well as an institution's ability to manage those
risks, when determining the adequacy of an institution's capital. That
evaluation will be made as a part of the institution's regular safety and
soundness examination. Banking agencies also have adopted final regulations
requiring regulators to consider interest rate risk (when the interest rate
sensitivity of an institution's assets does not match the sensitivity of its
liabilities or its off-balance sheet position) in the determination of a bank's
capital adequacy. Concurrently, banking agencies have proposed a methodology
for evaluating interest rate risk. After gaining experience with the proposed
measurement process, those banking agencies intend to propose further
regulations to establish an explicit risk-based capital charge for interest
rate risk.
DISTRIBUTIONS. City Holding and Horizon both derive funds for cash
distributions to their respective shareholders from a variety of sources,
including cash and temporary investments. The primary source of such funds,
however, has historically been dividends received from their banking
subsidiaries. Each of their banking subsidiaries is subject to various general
regulatory policies and requirements relating to the payment of dividends,
including requirements to maintain capital above regulatory minimums. The
appropriate U.S. federal regulatory authority is authorized to determine under
certain circumstances relating to the financial condition of the bank or bank
holding company that the payment of dividends would be an unsafe or unsound
practice and to prohibit payment thereof.
In addition to the foregoing, the ability of City Holding, Horizon and
their respective banking subsidiaries to pay dividends may be affected by the
various minimum capital requirements and the capital and non-capital standards
established under FDICIA, as described above. The right of City Holding,
Horizon, their respective
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shareholders and their respective creditors to participate in any distribution
of the assets or earnings of their respective subsidiaries is further subject
to the prior claims of creditors of the respective subsidiaries.
"SOURCE OF STRENGTH" POLICY. According to Federal Reserve Board policy,
bank holding companies are expected to act as a source of financial strength to
each subsidiary bank and to commit resources to support each such subsidiary.
This support may be required at times when a bank holding company may not be
able to provide such support. Similarly, under the cross-guarantee provisions
of the Federal Deposit Insurance Act, in the event of a loss suffered or
anticipated by the FDIC -- either as a result of default of a banking or thrift
subsidiary of a bank holding company such as City Holding or Horizon or related
to FDIC assistance provided to a subsidiary in danger of default -- the other
banking subsidiaries of such bank holding company may be assessed for the
FDIC's loss, subject to certain exceptions.
DESCRIPTION OF CAPITAL STOCK OF CITY HOLDING
City Holding's Articles of Incorporation authorize 20,000,000 shares of
Common Stock, par value $2.50, and 500,000 shares of Preferred Stock, par value
$25, including a series of 100,000 shares of Junior Participating Cumulative
Preferred Stock, Series A. As of the City Holding Record Date, 6,660,717
shares of Common Stock and no shares of Preferred Stock were outstanding and
entitled to vote. As of October 29, 1998, City Holding had 2,236 shareholders of
record.
Authority is given in the Articles of Incorporation to the Board of
Directors to issue shares of City Holding's Common Stock and Preferred Stock
from time to time for such consideration as the Board may deem advisable.
The characteristics of City Holding's capital stock are summarized below.
COMMON STOCK
DIVIDEND RIGHTS. Common shareholders are entitled to dividends to the
extent funds are legally available and the City Holding Board declares payment.
City Holding's ability to pay dividends is largely contingent upon the
abilities of City National to pay dividends, and is subject to various
statutory limits. See "Supervision and Regulation of City Holding and Horizon."
VOTING RIGHTS AND CUMULATIVE VOTING. In all elections of directors, each
holder of City Holding Common Stock has the right to cast one vote for each
share of stock owned by him or her and entitled to vote for as many persons as
there are directors to be elected, or he or she may cumulate such votes and
give one candidate as many votes as the number of directors to be elected
multiplied by the number his or her shares of stock shall equal; or he or she
may distribute such votes on the same principle among as many candidates and in
such manner as he or she desires. On any other question to be determined by a
vote of shares at any meeting of shareholders, each shareholder is entitled to
one vote for each share of stock owned by him or her and entitled to vote.
LIQUIDATION RIGHTS. Upon liquidation, after payment to all creditors and
holders of Preferred Stock, the remaining assets of City Holding would be
distributed to the holders of City Holding Common Stock pro rata.
PREEMPTIVE RIGHTS. Holders of City Holding Common Stock have no preemptive
rights with respect to future issues of Common Stock.
CALLS AND ASSESSMENTS. All City Holding Common Stock outstanding is fully
paid and nonassessable.
PREFERRED STOCK
The City Holding Board has the authority, without any vote or action by
the shareholders, to issue Preferred Stock in one or more series and to fix the
designations, preferences, rights, qualifications, limitations and restrictions
thereof, including the voting rights, dividend rights, dividend rate,
conversion rights, terms of redemption (including sinking fund provisions),
redemption price or prices, liquidation preferences and the number of shares
constituting any series. Issuance of Preferred Stock by the City Holding Board
could be utilized to render more difficult, or discourage, an attempt to gain
control of City Holding. There are no shares of Preferred Stock outstanding,
and there are no agreements or understandings for the designation of any series
of Preferred Stock or the issuance of shares, except pursuant to the Preferred
Stock Purchase Rights Plan summarized below.
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PREFERRED STOCK PURCHASE RIGHTS PLAN; CHANGE OF CONTROL
Pursuant to a Preferred Stock Purchase Rights Plan and a related Amended
and Restated Rights Agreement between City Holding and SunTrust Bank, Atlanta,
as Rights Agent, each outstanding share of City Holding Common Stock carries
with it one Preferred Stock Purchase Right (a "RIGHT"). In general, the number
of Rights outstanding will equal the number of shares of City Holding Common
Stock outstanding from time to time. The Rights will expire on April 9, 2001,
unless previously exercised or redeemed at the option of the City Holding
Board. Each share of City Holding Common Stock offered hereby has one Right
attached.
Generally, under the terms of the Rights Plan, the Rights will be
exercisable only if a person or group acquires 10% or more of City Holding
Common Stock or announces a tender offer, the consummation of which would
result in ownership by a person or group of 10% or more of City Holding Common
Stock. Each Right will entitle its holder to buy one one-thousandth of a share
of Junior Participating Cumulative Preferred Stock, Series A, par value $25, at
an exercise price of $53, subject to adjustment. If a person or group acquires
20% or more of the outstanding City Holding Common Stock, each Right will
entitle its holder (other than such person or members of such group) to
purchase, at the then-current exercise price, City Holding Common Stock having
a market value equal to twice the exercise price. If City Holding is acquired
in a merger or other business combination or if 50% or more of City Holding's
assets or earning power is sold or transferred, each Right will entitle its
holder to purchase, at the then-current exercise price, common stock of the
acquiror having a value equal to twice the exercise price.
City Holding's Articles of Incorporation provide that the Board of
Directors consist of three classes with staggered terms for directors. City
Holding has also adopted a by-law requiring advance notice from a shareholder
to nominate a director. The effect of these measures and the Rights Plan could
be to render more difficult or to discourage an attempt to gain control of City
Holding by means of a merger, tender offer, proxy contest or otherwise, even if
supported by holders of a majority of the voting securities of City Holding,
and thereby protect the current management.
REPORTS TO SHAREHOLDERS
City Holding furnishes its shareholders with annual reports, including
audited financial statements, and with three quarterly reports.
TRANSFER AGENT
The transfer agent for City Holding Common Stock is SunTrust Bank,
Atlanta.
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COMPARATIVE RIGHTS OF SHAREHOLDERS
OF CITY HOLDING AND HORIZON
City Holding and Horizon are both West Virginia corporations subject to
the provisions of the WVC. Horizon Shareholders, whose rights are currently
governed by the Articles of Incorporation of Horizon (the "HORIZON ARTICLES"),
the Bylaws of Horizon (the "HORIZON BYLAWS") and the WVC, will, upon
consummation of the Holding Company Merger, become shareholders of City
Holding, and their rights will be governed by the City Holding Articles of
Incorporation, the Bylaws of City Holding (the "CITY HOLDING BYLAWS"), and the
WVC.
Set forth below are the material differences between the rights of Horizon
Shareholders under the Horizon Articles of Incorporation, the Horizon Bylaws
and the WVC, and the rights of City Holding Shareholders under the City Holding
Articles of Incorporation, the City Holding Bylaws and the WVC. The description
set forth below summarizes the material differences which may affect the rights
of shareholders of Horizon and City Holding but does not purport to be a
complete statement of all such differences, and is qualified in its entirety by
reference to the relevant provisions of the laws and documents discussed below.
CAPITALIZATION
CITY HOLDING. City Holding's authorized capital is described under
"Description of Capital Stock of City Holding."
HORIZON. Horizon is authorized to issue 20,000,000 shares of Horizon
Common Stock, $1.00 par value of which approximately 9,149,775 shares were
issued and outstanding as of the Horizon Record Date.
VOTING RIGHTS
CITY HOLDING. In all elections of directors, each holder of City Holding
Common Stock has the right to cast one vote for each share of stock owned by
him or her and is entitled to vote for as many persons as there are directors
to be elected, or he or she may cumulate such votes and give one candidate as
many votes as the number of directors to be elected multiplied by the number
his or her shares of stock shall equal; or he or she may distribute such votes
on the same principle among as many candidates and in such manner as he or she
desires. On any other issue to be determined at any meeting of shareholders,
each shareholder is entitled to one vote for each share of stock owned by him
or her. The vote of a majority of shares represented at a meeting and entitled
to vote is required to approve most actions requiring shareholder approval,
except that amendments to the Articles of Incorporation and certain fundamental
actions such as mergers, consolidations and sales of substantially all assets
outside the ordinary course of business must be approved by vote of a majority
of shares entitled to vote thereon.
HORIZON. In all elections of directors, each holder of Horizon Common
Stock has the right to cast one vote for each share of stock owned by him or
her and is entitled to vote for as many persons as there are directors to be
elected, or he or she may cumulate such votes and give one candidate as many
votes as the number of directors to be elected multiplied by the number his or
her shares of stock shall equal; or he or she may distribute such votes on the
same principle among as many candidates and in such manner as he or she
desires. On any other issue to be determined at any meeting of shareholders,
each shareholder is entitled to one vote for each share of stock owned by him
or her. The vote of a majority of shares represented at a meeting and entitled
to vote is required to approve actions requiring shareholder approval.
DIRECTORS AND CLASSES OF DIRECTORS
CITY HOLDING. The City Holding Board presently comprises 17 members. The
City Holding Board is classified into three classes, with one class to be
elected each year to a three-year term. Any director may be removed, with or
without cause, only by the affirmative vote of the holders of a majority of the
outstanding common stock.
56
<PAGE>
HORIZON. The Horizon Board presently comprises 23 members. The Horizon
Board is elected without classification at each regular annual meeting. Each
Director holds office until the next regular annual meeting of the
shareholders, until his or her successor is elected and qualified, or until he
or she is removed by a vote of the shareholders.
ANTI-TAKEOVER PROVISIONS
CITY HOLDING. The City Holding Board has adopted a Rights Plan and the
City Holding Articles provide that the City Holding Board consists of three
classes with staggered terms for members of the City Holding Board. City
Holding has also adopted a by-law requiring advance notice from a shareholder
to nominate a director.
City Holding has not adopted other conventional anti-takeover provisions
such as, for example, a fair-price charter amendment, a super-majority vote
charter amendment, or an anti-greenmail charter amendment, and has no current
plans to submit to its shareholders further proposals with a possible
"anti-takeover" effect. In addition, West Virginia law does not contain any
provisions protecting a West Virginia corporation against hostile takeovers,
such as a fair price statute or a control share acquisition statute.
HORIZON. Horizon has adopted a bylaw requiring advance notice from a
shareholder to nominate a director. Horizon has also adopted a bylaw requiring
a supermajority vote of the Board of Directors for any material corporate
action, including merger, consolidation or sale of all or substantially all the
assets of Horizon.
However, Horizon has not adopted other conventional anti-takeover
provisions such as, for example, a fair-price charter amendment, a
super-majority vote charter amendment, or an anti-greenmail charter amendment,
and has no current plans to submit to its shareholders further proposals with a
possible "anti-takeover" effect. In addition, West Virginia law does not
contain any provisions protecting a West Virginia corporation against hostile
takeovers, such as a fair price statute or a control share acquisition statute.
PREEMPTIVE RIGHTS
CITY HOLDING. The City Holding Shareholders do not have preemptive rights.
Thus, if additional shares of City Holding Common Stock were issued, holders of
such stock, to the extent that they did not participate in such additional
issuance of shares, would own proportionately smaller interests in a larger
amount of outstanding capital stock.
HORIZON. The Horizon Shareholders do not have preemptive rights. Thus, if
additional shares of Horizon Common Stock were issued, holders of such stock,
to the extent that they did not participate in such additional issuance of
shares, would own proportionately smaller interests in a larger amount of
outstanding capital stock.
ASSESSMENT
CITY HOLDING. All outstanding shares of City Holding Common Stock are, and
those to be issued pursuant to the Agreement will be, fully paid and
nonassessable.
HORIZON. All outstanding shares of Horizon Common Stock are fully paid and
nonassessable.
CONVERSION; REDEMPTION; SINKING FUND
CITY HOLDING. City Holding Common Stock is not convertible, redeemable or
entitled to any sinking fund.
HORIZON. Horizon Common Stock is not convertible, redeemable or entitled
to any sinking fund.
LIQUIDATION RIGHTS
CITY HOLDING. Upon liquidation, after payment to all creditors and holders
of Preferred Stock, the remaining assets of City Holding would be distributed
to the holders of City Holding Common Stock pro rata.
HORIZON. Upon liquidation, after payment to all creditors, the remaining
assets of Horizon would be distributed to the holders of Horizon Common Stock
pro rata.
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<PAGE>
DIVIDENDS AND OTHER DISTRIBUTIONS
CITY HOLDING. Holders of City Holding Common Stock are entitled to
dividends to the extent funds are legally available and the City Holding Board
declares payment. City Holding's ability to pay dividends is largely contingent
upon the abilities of its subsidiaries to pay dividends and is subject to
various statutory limits.
HORIZON. Holders of Horizon Common Stock are entitled to dividends to the
extent funds are legally available and the Horizon Board declares payment.
Horizon's ability to pay dividends is largely contingent upon the abilities of
its subsidiaries to pay dividends and is subject to various statutory limits.
SPECIAL MEETINGS OF SHAREHOLDERS
CITY HOLDING. The City Holding Bylaws provide that special meetings of the
shareholders may be called at any time by the City Holding Board or by the
President and Secretary, or by any three or more shareholders holding together
at least 10% of the capital stock of City Holding.
HORIZON. The Horizon Bylaws provide that special meetings of the
shareholders may be called at any time by the Chairman of the Horizon Board,
the president and by and at the request of the holders of not less than 10% of
the capital stock of Horizon.
INDEMNIFICATION
CITY HOLDING. Section 31-1-9 of the WVC provides in part that each West
Virginia corporation shall have power to indemnify any director, officer,
employee or agent or former director, officer, employee or agent against
expenses actually and reasonably incurred by him or her in connection with the
defense of any claim, action, suit or proceeding against him or her by reason
of being or having been such director, officer, employee or agent other than an
action by or in the right of the corporation if he or she acted in good faith
and in a manner he or she reasonably believed to be in or not opposed to the
best interest of the corporation. With respect to an action by or in the right
of the corporation, the director, officer, employee or agent or former
director, officer, employee or agent may be indemnified if he or she acted in
good faith and in a manner he or she reasonably believed to be in or not
opposed to the best interest of the corporation, except in relation to matters
as to which he or she shall be finally adjudged in such action, suit or
proceeding against him or her by reason of being or having been such director,
officer, employee or agent to be liable for negligence or misconduct in the
performance of duty; and to make any other or further indemnity to any such
persons that may be authorized by the articles of incorporation or any by-law
approved by the shareholders or any resolution adopted, before or after the
event, by the shareholders. The City Holding Bylaws contain provisions pursuant
to the foregoing section of the WVC indemnifying the directors, officers,
employees and agents of City Holding in certain cases against expenses and
liabilities under judgments and reimbursements of amounts paid in settlement.
City Holding has purchased directors and officers' liability insurance
policies. Within the limits of their coverage, the policies insure (i) the
directors and officers of City Holding against certain losses, to the extent
such losses are not indemnified by City Holding, and (ii) City Holding, to the
extent it indemnifies such directors and officers for losses as permitted under
the laws of West Virginia.
HORIZON. Section 31-1-9 of the WVC provides in part that each West
Virginia corporation shall have power to indemnify any director, officer,
employee or agent or former director, officer, employee or agent against
expenses actually and reasonably incurred by him or her in connection with the
defense of any claim, action, suit or proceeding against him or her by reason
of being or having been such director, officer, employee or agent other than an
action by or in the right of the corporation if he or she acted in good faith
and in a manner he or she reasonably believed to be in or not opposed to the
best interest of the corporation. With respect to an action by or in the right
of the corporation, the director, officer, employee or agent or former
director, officer, employee or agent may be indemnified if he or she acted in
good faith and in a manner he or she reasonably believed to be in or not
opposed to the best interest of the corporation, except in relation to matters
as to which he or she shall be finally adjudged in such action, suit or
proceeding against him or her by reason of being or having been such director,
officer, employee or agent to be liable for negligence or misconduct in the
performance of duty;
58
<PAGE>
and to make any other or further indemnity to any such persons that may be
authorized by the articles of incorporation or any bylaw approved by the
shareholders or any resolution adopted, before or after the event, by the
shareholders. The Horizon Bylaws contain provisions pursuant to the foregoing
section of the WVC indemnifying the directors, officers, employees and agents
of Horizon in certain cases against expenses and liabilities under judgments
and reimbursements of amounts paid in settlement. The Horizon Bylaws make
further indemnity for a director, officer, employee or agent of any company
which is merged or consolidated with Horizon in accordance with the terms and
conditions of the merged or consolidated company's bylaws or articles of
incorporation providing for indemnification.
Horizon has purchased directors and officers' liability insurance
policies. Within the limits of their coverage, the policies insure (i) the
directors and officers of Horizon against certain losses, to the extent such
losses are not indemnified by Horizon, and (ii) Horizon, to the extent it
indemnifies such directors and officers for losses as permitted under the laws
of West Virginia.
DIRECTOR EXCULPATION
CITY HOLDING. The WVC does not provide for limitation of directors'
monetary liability or director exculpation.
HORIZON. The WVC does not provide for limitation of directors' monetary
liability or director exculpation.
DISSENTERS' RIGHTS
CITY HOLDING. The WVC permits shareholders of a West Virginia corporation
to dissent from, and obtain payment of the "fair value" of their shares in
connection with, any plan of merger or consolidation to which the corporation
is a party and any sale or exchange of all or substantially all of the property
and assets of the corporation not made in the usual and regular course of its
business.
HORIZON. The WVC permits shareholders of a West Virginia corporation to
dissent from, and obtain payment of the "fair value" of their shares in
connection with, any plan of merger or consolidation to which the corporation
is a party and any sale or exchange of all or substantially all of the property
and assets of the corporation not made in the usual and regular course of its
business.
SHAREHOLDER VOTE REQUIRED FOR BUSINESS COMBINATIONS
CITY HOLDING. The WVC provides that, unless a corporation's governance
documents provide otherwise, certain business combinations (including mergers)
require the approval of a majority of the outstanding shares of the corporation
entitled to vote on the subject transaction. The City Holding Articles and the
City Holding Bylaws do not require a greater vote.
HORIZON. The WVC provides that, unless a corporation's governance
documents provide otherwise, certain business combinations (including mergers)
require the approval of a majority of the outstanding shares of the corporation
entitled to vote on the subject transaction. The Horizon Articles and the
Horizon Bylaws do not require a greater vote.
AMENDMENTS TO ARTICLES OF INCORPORATION
CITY HOLDING. Under the WVC, a corporation may amend its articles of
incorporation upon the submission of a proposed amendment to shareholders by
the board of directors and the subsequent receipt of the affirmative vote of
the holders of a majority of the shares entitled to vote thereon, unless a
corporation's governance documents provide otherwise. The City Holding Articles
and the City Holding Bylaws do not require a greater vote.
HORIZON. Under the WVC, a corporation may amend its articles of
incorporation upon the submission of a proposed amendment to shareholders by
the board of directors and the subsequent receipt of the affirmative vote of
the holders of a majority of the shares entitled to vote thereon, unless a
corporation's governance documents provide otherwise. The Horizon Articles and
the Horizon Bylaws do not require a greater vote.
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<PAGE>
LEGAL OPINIONS
The legality of the City Holding Common Stock to be issued in connection
with the Holding Company Merger will be passed upon by Hunton & Williams.
Hunton & Williams, counsel for City Holding, and Jackson & Kelly, counsel
for Horizon, will deliver opinions to Horizon and City Holding, respectively,
concerning certain federal income tax consequences of the Holding Company
Merger. See "The Holding Company Merger -- Material Federal Income Tax
Consequences."
EXPERTS
The consolidated financial statements of City Holding at December 31, 1997
and 1996, and for each of the three years in the period ended December 31, 1997
incorporated by reference in this Joint Proxy Statement-Prospectus, which is
referred to and made a part of this Joint Proxy Statement-Prospectus and
Registration Statement, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon incorporated by reference
elsewhere herein, and are included in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
The consolidated financial statements of Horizon at December 31, 1997 and
1996, and for each of the three years in the period ended December 31, 1997
incorporated by reference in this Joint Proxy Statement-Prospectus, which is
referred to and made a part of this Joint Proxy Statement-Prospectus and
Registration Statement, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon incorporated by reference
elsewhere herein which, as to 1995, is based in part on the report of Diamond,
Leftwich, Goheen & Dunn, independent auditors. The financial statements
referred to above are included in reliance upon such report given upon the
authority of such firms as experts in accounting and auditing.
Representatives of Ernst & Young LLP are expected to be present at both
the City Holding Special Meeting, and the Horizon Special Meeting. In each
case, such representatives will have the opportunity to make a statement if
they desire to do so and are expected to be available to respond to appropriate
questions.
SHAREHOLDER PROPOSALS
Shareholders of City Holding who intend to present proposals for
consideration at the 1999 Annual Meeting of the City Holding Shareholders are
hereby advised that any such proposals must be received by the Secretary of
City Holding no later than the close of business on December 31, 1998, if such
proposal is to be considered for inclusion in the 1999 proxy materials of City
Holding.
Horizon will hold a 1999 Annual Meeting of Horizon Shareholders only if
the Holding Company Merger is not consummated before the time of such meeting.
In the event that such a meeting is held, any proposals of Horizon Shareholders
intended to be presented at the 1999 Annual Meeting of Horizon Shareholders
must have been received by the Secretary of Horizon no later than December 28,
1998 in order to be considered for inclusion in the 1999 proxy materials of
Horizon.
OTHER MATTERS
As of the date of this Joint Proxy Statement-Prospectus, the Horizon Board
and the City Holding Board know of no matters that will be presented for
consideration at the Meetings other than as described in this Joint Proxy
Statement-Prospectus. If any other matters shall properly come before either
the City Holding Special Meeting or the Horizon Special Meeting or any
adjournments or postponements thereof and be voted upon, the enclosed proxies
will be deemed to confer discretionary authority on the individuals named as
proxies therein to vote the shares represented by such proxies as to any such
matters. The persons named as proxies intend to vote or not to vote in
accordance with the recommendation of the respective managements of Horizon and
City Holding.
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WHERE YOU CAN FIND MORE INFORMATION
City Holding and Horizon file annual, quarterly and special reports, proxy
statements and other information with the Commission. You may read and copy any
reports, statements or other information that the companies file with the
Commission at the Commission's public reference rooms in Washington, D.C., New
York, New York and Chicago, Illinois. Please call the Commission at
1-800-SEC-0330 for further information on the public reference rooms. These
Commission filings are also available to the public from commercial document
retrieval services and at the Internet world wide web site maintained by the
Commission at "http://www.sec.gov." Reports, proxy statements and other
information should also be available for inspection at the offices of the
Nasdaq Stock Market, which is located at 1735 K Street, N.W., Washington, D.C.
20006.
City Holding filed a Registration Statement on Form S-4 (the "REGISTRATION
STATEMENT") on September 24, 1998 to register with the Commission the City
Holding Common Stock to be issued to Horizon Shareholders in the Holding
Company Merger. This Joint Proxy Statement-Prospectus is a part of that
Registration Statement and constitutes a prospectus of City Holding. As allowed
by Commission rules, this Joint Proxy Statement-Prospectus does not contain all
the information you can find in City Holding's Registration Statement or the
exhibits to that Registration Statement.
The Commission allows Horizon and City Holding to "incorporate by
reference" information into this Joint Proxy Statement-Prospectus, which means
that the companies can disclose important information to you by referring you
to another document filed separately with the Commission. The information
incorporated by reference is considered part of this Joint Proxy
Statement-Prospectus, except for any information superseded by information
contained directly in this Joint Proxy Statement-Prospectus or in later filed
documents incorporated by reference in this Joint Proxy Statement-Prospectus.
This Joint Proxy Statement-Prospectus incorporates by reference the
documents set forth below that Horizon and City Holding have previously filed
with the Commission. These documents contain important information about
Horizon and City Holding and their finances. Some of these filings have been
amended by later filings, which are also listed.
<TABLE>
<CAPTION>
HORIZON COMMISSION FILINGS (FILE NO. 0-11672) PERIOD/AS OF DATE
- ----------------------------------------------- ------------------------------------------------
<S> <C>
Annual Report on Form 10-K Year ended December 31, 1997
Quarterly Reports on Form 10-Q Quarters ended March 31, 1998 and June 30, 1998
</TABLE>
<TABLE>
<CAPTION>
CITY HOLDING COMMISSION FILINGS (FILE NO. 0-1173) PERIOD/AS OF DATE
- --------------------------------------------------- ------------------------------------------------
<S> <C>
Annual Report on Form 10-K Year ended December 31, 1997
Quarterly Reports on Form 10-Q Quarters ended March 31, 1998 and June 30, 1998
Current Report on Form 8-K September 14, 1998
</TABLE>
Horizon and City Holding also incorporate by reference additional
documents that may be filed with the Commission between the date of this Joint
Proxy Statement-Prospectus and the consummation of the Holding Company Merger
or the termination of the Agreement. These include periodic reports, such as
Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports
on Form 8-K, as well as proxy statements. Specifically, City Holding
incorporates by reference the description of City Holding Common Stock in City
Holding's registration statement on Form 8A filed under the Exchange Act with
respect to City Holding Common Stock, including all amendments and reports
filed for the purpose of updating such description.
City Holding has supplied all information contained or incorporated by
reference in this Joint Proxy Statement-Prospectus relating to City Holding,
and Horizon has supplied all such information relating to Horizon.
As noted in "The Holding Company Merger -- Exchange of Certificates"
section of this Joint Proxy Statement-Prospectus, Horizon Shareholders should
not send in their Horizon certificates until they receive the transmittal
materials from the exchange agent. Registered Horizon Shareholders who have
further questions about their share certificates or the exchange of their
Horizon Common Stock for City Holding Common Stock should call the stock
transfer agent at 1-800-568-3476.
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If you are a shareholder, we may have sent you some of the documents
incorporated by reference, but you can obtain any of them through the
companies, the Commission or the Commission's Internet web site as described
above. Documents incorporated by reference are available from the companies
without charge, excluding all exhibits, except that if the companies have
specifically incorporated by reference an exhibit in this Joint Proxy
Statement-Prospectus, the exhibit will also be available without charge.
Shareholders may obtain documents incorporated by reference in this Joint Proxy
Statement-Prospectus by requesting them in writing or by telephone from the
appropriate company at the following addresses:
<TABLE>
<S> <C>
City Holding Company Horizon Bancorp, Inc.
25 Gatewater Road One Park Avenue
Charleston, West Virginia 25313 Beckley, West Virginia 25801
Attn.: Chief Financial Officer Attn.: Corporate Secretary
Telephone: (304) 769-1100 Telephone: (304) 255-7307
</TABLE>
You should rely only on the information contained or incorporated by
reference in this Joint Proxy Statement-Prospectus. We have not authorized
anyone to provide you with information that is different from what is contained
in this Joint Proxy Statement-Prospectus. This Joint Proxy Statement-Prospectus
is dated November 5, 1998. You should not assume that the information contained
in this Joint Proxy Statement-Prospectus is accurate as of any date other than
that date. Neither the mailing of this Joint Proxy Statement-Prospectus to
shareholders nor the issuance of City Holding Common Stock in the Holding
Company Merger creates any implication to the contrary.
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<PAGE>
INDEX TO FINANCIAL INFORMATION
<TABLE>
<CAPTION>
<S> <C>
Pro Forma Balance Sheet -- City Holding Company
and Horizon Bancorp, Inc. as of June 30, 1998 ........................... 66
Pro Forma Balance Sheet -- City Holding Company
and Horizon Bancorp, Inc. as of June 30, 1997 ........................... 67
Pro Forma Balance Sheet -- City Holding Company
and Horizon Bancorp, Inc. as of December 31, 1997 ....................... 68
Pro Forma Balance Sheet -- City Holding Company
and Horizon Bancorp, Inc. as of December 31, 1996 ....................... 69
Pro Forma Statement of Income -- City Holding Company
and Horizon Bancorp, Inc. for the six months ended June 30, 1998 ........ 70
Pro Forma Statement of Income -- City Holding Company
and Horizon Bancorp, Inc. for the six months ended June 30, 1997 ........ 71
Pro Forma Statement of Income -- City Holding Company
and Horizon Bancorp, Inc. for the year ended December 31, 1997 .......... 72
Pro Forma Statement of Income -- City Holding Company
and Horizon Bancorp, Inc. for the year ended December 31, 1996 .......... 73
Pro Forma Statement of Income -- City Holding Company
and Horizon Bancorp, Inc. for the year ended December 31, 1995 .......... 74
</TABLE>
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(This Page Intentionally Left Blank)
<PAGE>
UNAUDITED PRO FORMA CONDENSED
FINANCIAL INFORMATION
The following Unaudited Pro Forma Condensed Balance Sheets as of June 30,
1998 and 1997, and as of December 31, 1997 and 1996, combine the historical
consolidated balance sheets of City Holding and Horizon as if the Holding
Company Merger had been effective on December 31, 1996. City Holding's
historical financial statements are incorporated by reference from its Annual
Report on Form 10-K for each of the three years in the period ended December
31, 1997, as filed with the Commission on March 16, 1998. In addition, City
Holding's historical interim financial statements for the six months ended June
30, 1998 are incorporated by reference from its Form 10-Q, as filed with the
Commission on August 14, 1998. Horizon's historical financial statements are
incorporated by reference from City Holding's current report on Form 8-K, as
filed with the Commission on September 14, 1998. The unaudited pro forma
condensed financial information should be read in conjunction with the
historical financial statements of City Holding and Horizon.
The Unaudited Pro Forma Condensed Statements of Income for the six months
ended June 30, 1998 and 1997 and the years ended December 31, 1997, 1996 and
1995 present the combined results of operations of City Holding and Horizon as
if the Holding Company Merger had been effective during all periods presented.
On March 31, 1998, City Holding sold $30,000,000 of Corporation-obligated
Manditorily Redeemable Capital Securities of a subsidiary trust that holds only
subordinated debentures of City Holding ("Trust Preferred Securities"). On
October 27, 1998, City Holding sold $57,500,000 of Trust Preferred Securities
through a different subsidiary trust that holds only subordinated debentures of
City Holding. Pro forma balance sheet amounts are presented for the most recent
interim period and year end period as if both issues of Trust Preferred
Securities were outstanding on June 30, 1998 and December 31, 1997. Pro forma
income statement amounts, assuming that the Trust Preferred Securities had been
outstanding during all periods presented herein and City Holding had incurred
the expense of and realized the income from the proceeds of such securities,
would not be materially different from those presented herein.
The unaudited pro forma condensed financial information reflect the
application of the pooling of interests method of accounting for the Holding
Company Merger. Under this method of accounting, the recorded assets,
liabilities, shareholders' equity, income and expenses of City Holding and
Horizon are combined and reflected at their historical amounts.
City Holding expects to achieve certain benefits from the Holding Company
Merger in the form of operating cost savings that may be significant. The pro
forma earnings, which do not reflect any direct costs or potential savings that
are expected to result from the consolidation of operations of City Holding and
Horizon, may not be indicative of the results of future operations. No
assurance can be given with respect to the ultimate level of expense savings.
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CITY HOLDING COMPANY AND HORIZON BANCORP, INC
PRO FORMA BALANCE SHEET
<TABLE>
<CAPTION>
AS OF JUNE 30, 1998
-------------------------------------------------------------------------------
PRO FORMA
CITY HOLDING HORIZON BANCORP ADJUSTMENTS AND PRO FORMA
AS REPORTED AS REPORTED ELIMINATIONS COMBINED
-------------- ----------------- ------------------------------ ---------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and due from bank ................ $ 62,111 $ 25,721 $ $ $ 87,832
Federal funds sold .................... 570 12,265 12,835
---------- ----------- ---------- --------- -----------
Cash and cash equivalents ............. 62,681 37,986 100,667
Securities available for sale ......... 166,994 168,593 335,587
Investment securities ................. 40,430 40,430
Loans:
Gross loans ........................... 936,161 764,244 1,700,405
Unearned income ....................... (6,889) (4,328) (11,217)
Allowance for loan losses ............. (8,680) (9,784) (18,464)
---------- ----------- ---------- --------- -----------
Net loans ............................. 920,592 750,132 1,670,724
Loans held for sale ................... 194,959 0 194,959
Bank premises and equipment ........... 50,371 16,732 67,103
Accrued interest receivable ........... 10,292 9,305 19,597
Other assets .......................... 95,611 17,329 112,940
---------- ----------- ---------- --------- -----------
Total assets .......................... $ 1,501,500 $ 1,040,507 $ $ $ 2,542,007
============= =========== ========== ========= ===========
LIABILITIES
Deposits:
Non-interest bearing .................. $ 174,707 $ 120,301 $ $ $ 295,008
Interest bearing ...................... 957,002 741,205 1,698,207
---------- ----------- ---------- --------- -----------
Total deposits ........................ 1,131,709 861,506 1,993,215
Short-term borrowings ................. 111,974 43,704 155,678
Long-term debt ........................ 81,295 5,972 (57,500)2 29,767
Corporation-obligated mandatorily
redeemable capital securities of
subsidiary trust holding solely
subordinated debentures of City
Holding Company ("Trust
Preferred Securities") ............... 30,000 0 57,500 2 87,500
Other liabilities ..................... 20,414 13,413 33,827
---------- ----------- ---------- --------- -----------
Total liabilities ..................... 1,375,392 924,595 2,299,987
STOCKHOLDERS' EQUITY
Common stock .......................... 16,874 9,312 25,864 1 (9,312)1 42,738
Capital surplus ....................... 63,734 19,814 (30,916)1 9,312 1 61,944
Retained earnings ..................... 44,280 90,616 134,896
Cost of common stock in
treasury ............................. (591) (5,052) 5,052 1 (591)
Accumulated other comprehensive
income ............................... 1,811 1,222 3,033
---------- ----------- ---------- --------- -----------
Total stockholders' equity ............ 126,108 115,912 242,020
---------- ----------- ---------- --------- -----------
Total liabilities and stockholders'
equity ............................... $ 1,501,500 $ 1,040,507 $ $ $ 2,542,007
============== =========== =========== ========== ===========
</TABLE>
- ----------
1 The adjustment is to present the pro forma effect to Stockholders' Equity of
City Holding and Horizon combined based on an exchange ratio of 1.111.
2 The adjustment is to present the pro forma balance sheet effect of the
$57,500,000 issuance of Trust Preferred Securities by City Holding on
October 27, 1998, as if these securities had been outstanding at June 30,
1998.
67
<PAGE>
CITY HOLDING COMPANY AND HORIZON BANCORP, INC
PRO FORMA BALANCE SHEET
<TABLE>
<CAPTION>
AS OF JUNE 30, 1997
------------------------------------------------------------------------------
PRO FORMA
CITY HOLDING HORIZON BANCORP ADJUSTMENTS AND PRO FORMA
AS REPORTED AS REPORTED ELIMINATIONS COMBINED
-------------- ----------------- ------------------------------ --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and due from bank ......................... $ 45,011 $ 35,990 $ $ $ 81,001
Federal funds sold ............................. 532 980 1,512
---------- --------- ---------- ---------- ------------
Cash and cash equivalents ...................... 45,543 36,970 82,513
Securities available for sale .................. 182,393 184,062 366,455
Investment securities .......................... 41,898 41,898
Loans:
Gross loans .................................... 768,553 671,307 1,439,860
Unearned income ................................ (8,150) (6,151) (14,301)
Allowance for loan losses ...................... (7,864) (10,756) (18,620)
---------- --------- ---------- ---------- ------------
Net loans ...................................... 752,539 654,400 1,406,939
Loans held for sale ............................ 110,342 0 110,342
Bank premises and equipment .................... 30,848 16,627 47,475
Accrued interest receivable .................... 8,317 8,615 16,932
Other assets ................................... 17,702 12,129 29,831
---------- --------- ---------- ---------- ------------
Total assets ................................... $ 1,147,684 $ 954,701 $ $ $ 2,102,385
============= ========== ========== ========= =============
LIABILITIES
Deposits:
Non-interest bearing ........................... 138,037 121,503 259,540
Interest bearing ............................... 763,050 679,852 1,442,902
---------- --------- ---------- ---------- ------------
Total deposits ................................. 901,087 801,355 1,702,442
Short-term borrowings .......................... 101,832 28,659 130,491
Long-term debt ................................. 39,400 0 39,400
Other liabilities .............................. 17,882 12,805 30,687
---------- --------- ---------- ---------- ------------
Total liabilities .............................. 1,060,201 842,819 1,903,020
STOCKHOLDERS' EQUITY
Common stock ................................... 15,207 9,309 25,856 1 (9,309)1 41,063
Capital surplus ................................ 35,795 19,768 (26,950)1 9,309 1 37,922
Retained earnings .............................. 36,214 83,474 119,688
Cost of common stock in treasury ............... (310) (1,094) 1,094 1 (310)
Accumulated other comprehensive income ......... 577 425 1,002
---------- --------- ---------- ---------- ------------
Total stockholders' equity ..................... 87,483 111,882 199,365
---------- --------- ---------- ---------- ------------
Total liabilities and stockholders' equity ..... $ 1,147,684 $ 954,701 $ $ $ 2,102,385
============= ========== ============ ========== =============
</TABLE>
- ----------
1 The adjustment is to present the pro forma effect to Stockholders' Equity of
City Holding and Horizon combined based on an exchange ratio of 1.111.
68
<PAGE>
CITY HOLDING COMPANY AND HORIZON BANCORP, INC
PRO FORMA BALANCE SHEET
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997
------------------------------------------------------------------------------
PRO FORMA
CITY HOLDING HORIZON BANCORP ADJUSTMENTS AND PRO FORMA
AS REPORTED AS REPORTED ELIMINATIONS COMBINED
-------------- ----------------- ------------------------------ --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and due from bank .................. $ 47,207 $ 31,262 $ $ $ 78,469
Federal funds sold ...................... 40,028 14,035 54,063
---------- ----------- ---------- --------- ---------
Cash and cash equivalents ............... 87,235 45,297 132,532
Securities available for sale ........... 162,912 173,864 336,776
Investment securities ................... 41,554 41,554
Loans:
Gross loans ............................. 787,716 734,145 1,521,861
Unearned income ......................... (7,354) (5,906) (13,260)
Allowance for loan losses ............... (7,673) (10,517) (18,190)
---------- ----------- ---------- --------- ---------
Net loans ............................... 772,689 717,722 1,490,411
Loans held for sale ..................... 134,990 0 11,998 2 146,988
Bank premises and equipment ............. 36,635 17,123 53,758
Accrued interest receivable ............. 8,677 8,876 17,553
Other assets ............................ 63,005 15,845 78,850
---------- ----------- ---------- --------- ---------
Total assets ............................ $ 1,266,143 $ 1,020,281 $ 11,998 $ $ 2,298,422
=========== ============== ========== ========= ==========
LIABILITIES
Deposits:
Non-interest bearing .................... $ 136,842 $ 113,415 $ $ $ 250,257
Interest bearing ........................ 801,656 727,892 1,529,548
---------- ----------- ---------- --------- ---------
Total deposits .......................... 938,498 841,307 1,779,805
Short-term borrowings ................... 130,191 42,642 172,833
Long-term debt .......................... 68,400 7,102 (75,502)2 0
Corporation-obligated mandatorily
redeemable capital securities of
subsidiary trust holding solely
subordinated debentures of
City Holding Company
("Trust Preferred Securities") ......... 87,500 2 87,500
Other liabilities ....................... 22,799 15,208 38,007
---------- ----------- ---------- --------- ---------
Total liabilities ....................... 1,159,888 906,259 11,998 2,078,145
STOCKHOLDERS' EQUITY
Common stock ............................ 16,067 9,310 25,859 1 (9,310)1 41,926
Capital surplus ......................... 48,769 19,784 (28,797)1 9,310 1 49,066
Retained earnings ....................... 40,374 86,768 127,142
Cost of common stock in
treasury ............................... (310) (2,938) 2,938 1 (310)
Accumulated other comprehensive
income ................................. 1,355 1,098 2,453
---------- ----------- ---------- --------- ---------
Total stockholders' equity .............. 106,255 114,022 220,277
---------- ----------- ---------- --------- ---------
Total liabilities and stockholders'
equity ................................. $ 1,266,143 $ 1,020,281 $ 11,998 $ $2,298,422
============= ============== ============ =========== ==========
</TABLE>
- ----------
1 The adjustment is to present the pro forma effect to Stockholders' Equity of
City Holding and Horizon combined based on an exchange ratio of 1.111.
2 The adjustment is to present the pro forma balance sheet effect of the
$30,000,000 and $57,500,000 issuances of Trust Preferred Securities by City
Holding on March 31, 1998 and October 27, 1998, respectively, as if these
securities had been outstanding at December 31, 1997.
69
<PAGE>
CITY HOLDING COMPANY AND HORIZON BANCORP, INC.
PRO FORMA BALANCE SHEET
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1996
------------------------------------------------------------------------------
PRO FORMA
CITY HOLDING HORIZON BANCORP ADJUSTMENTS AND PRO FORMA
AS REPORTED AS REPORTED ELIMINATIONS COMBINED
-------------- ----------------- ------------------------------ --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and due from bank ......................... $ 47,351 $ 36,503 $ $ $ 83,854
Federal funds sold ............................. 413 2,455 2,868
---------- --------- ---------- ---------- ----------
Cash and cash equivalents ...................... 47,764 38,958 86,722
Securities available for sale .................. 122,944 205,923 328,867
Investment securities .......................... 40,978 42,741 83,719
Loans:
Gross loans .................................... 704,775 640,352 1,345,127
Unearned income ................................ (6,793) (6,368) (13,161)
Allowance for loan losses ...................... (7,281) (9,607) (16,888)
---------- --------- ---------- ---------- ----------
Net loans ...................................... 690,701 624,377 1,315,078
Loans held for sale ............................ 92,472 0 92,472
Bank premises and equipment .................... 30,025 16,580 46,605
Accrued interest receivable .................... 7,510 7,940 15,450
Other assets ................................... 16,416 10,549 26,965
---------- --------- ---------- ---------- ----------
Total assets ................................... $ 1,048,810 $ 947,068 $ $ $ 1,995,878
=========== ========== ========== ========= =============
LIABILITIES
Deposits:
Non-interest bearing ........................... $ 118,976 $ 119,831 $ $ $ 238,807
Interest bearing ............................... 709,694 678,165 1,387,859
---------- --------- ---------- ---------- ----------
Total deposits ................................. 828,670 797,996 1,626,666
Short-term borrowings .......................... 90,298 29,154 119,452
Long-term debt ................................. 34,250 0 34,250
Other liabilities .............................. 16,219 10,507 26,726
---------- --------- ---------- ---------- ----------
Total liabilities .............................. 969,437 837,657 1,807,094
STOCKHOLDERS' EQUITY
Common stock ................................... 13,998 9,308 25,853 1 (9,308)1 39,851
Capital surplus ................................ 35,426 19,757 (26,028)1 9,308 1 38,463
Retained earnings .............................. 30,246 79,876 110,122
Cost of common stock in treasury ............... (300) (175) 175 1 (300)
Accumulated other comprehensive income ......... 3 645 648
---------- --------- ---------- ---------- ----------
Total stockholders' equity ..................... 79,373 109,411 188,784
---------- --------- ---------- ---------- ----------
Total liabilities and stockholders' equity ..... $ 1,048,810 $ 947,068 $ $ $ 1,995,878
=========== ========== ============ =========== =============
</TABLE>
- ----------
1 The adjustment is to present the pro forma effect to Stockholders' Equity of
City Holding and Horizon combined based on an exchange ratio of 1.111.
70
<PAGE>
CITY HOLDING COMPANY AND HORIZON BANCORP, INC
PRO FORMA STATEMENT OF INCOME
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30, 1998
--------------------------------------------------
CITY HOLDING HORIZON BANCORP PRO FORMA
AS REPORTED AS REPORTED COMBINED
-------------- ----------------- -------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans ............................ $ 48,982 $ 33,936 $ 82,918
Interest on investment securities:
Taxable ............................................... 4,133 4,804 8,937
Tax-exempt ............................................ 828 1,581 2,409
Other interest income ................................. 783 707 1,490
--------- -------- --------
Total interest income ............................... 54,726 41,028 95,754
INTEREST EXPENSE
Interest on deposits .................................. 19,374 16,885 36,259
Interest on short-term borrowings ..................... 3,475 1,086 4,561
Interest on long-term debt ............................ 3,409 0 3,409
--------- -------- --------
Total interest expense .............................. 26,258 17,971 44,229
--------- -------- --------
Net interest income ................................... 28,468 23,057 51,525
Provision for possible loan losses .................... 1,201 1,266 2,467
--------- -------- --------
NET INTEREST INCOME AFTER PROVISION FOR
POSSIBLE LOAN LOSSES ................................. 27,267 21,791 49,058
OTHER INCOME
Investment securities gains ........................... 16 (22) (6)
Service charges ....................................... 2,392 2,149 4,541
Mortgage loan servicing fees .......................... 8,009 0 8,009
Net origination fees on junior lien mortgages ......... 6,217 0 6,217
Gain on sale of loans ................................. 7,333 0 7,333
Other income .......................................... 8,029 1,212 9,241
--------- -------- --------
Total other income .................................. 31,996 3,339 35,335
OTHER EXPENSES
Salaries and employee benefits ........................ 19,402 6,470 25,872
Occupancy, excluding depreciation ..................... 2,644 853 3,497
Depreciation .......................................... 3,661 1,364 5,025
Advertising ........................................... 9,119 162 9,281
Other expenses ........................................ 14,375 5,117 19,492
--------- -------- --------
Total other expenses ................................ 49,201 13,966 63,167
--------- -------- --------
INCOME BEFORE INCOME TAXES ............................ 10,062 11,164 21,226
Income taxes .......................................... 3,650 3,840 7,490
--------- -------- --------
NET INCOME ............................................ $ 6,412 $ 7,324 $13,736
========= ======== ========
Basic earnings per common share ....................... $ 0.97 $ 0.80 $ 0.82
Diluted earnings per common share ..................... $ 0.96 $ 0.80 $ 0.81
Average common shares outstanding:
Basic ................................................ 6,589 10,171 16,760
Diluted .............................................. 6,640 10,226 16,866
</TABLE>
71
<PAGE>
CITY HOLDING COMPANY AND HORIZON BANCORP, INC.
PRO FORMA STATEMENT OF INCOME
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30, 1997
--------------------------------------------------
CITY HOLDING HORIZON BANCORP PRO FORMA
AS REPORTED AS REPORTED COMBINED
-------------- ----------------- -------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans ................. $ 40,563 $ 29,525 $70,088
Interest on investment securities:
Taxable ................................... 4,456 5,696 10,152
Tax-exempt ................................ 974 1,615 2,589
Other interest income ...................... 59 114 173
--------- -------- --------
Total Interest Income .................... 46,052 36,950 83,002
INTEREST EXPENSE
Interest on deposits ....................... 15,851 14,248 30,099
Interest on short-term borrowings .......... 3,479 477 3,956
Interest on long-term debt ................. 1,252 0 1,252
--------- -------- --------
Total Interest Income .................... 20,582 14,725 35,307
--------- -------- --------
NET INTEREST INCOME ........................ 25,470 22,225 47,695
PROVISION FOR POSSIBLE LOAN LOSSES ......... 828 1,100 1,928
--------- -------- --------
NET INTEREST INCOME AFTER PROVISION FOR
POSSIBLE LOAN LOSSES ...................... 24,642 21,125 45,767
OTHER INCOME
Investment securities gains ................ 11 (36) (25)
Service charges ............................ 2,086 1,864 3,950
Mortgage loan servicing fees ............... 5,352 0 5,352
Gain on sale of loans ...................... 993 0 993
Other income ............................... 1,457 934 2,391
--------- -------- --------
Total Other Income ....................... 9,899 2,762 12,661
OTHER EXPENSES
Salaries and employee benefits ............. 13,991 6,304 20,295
Occupancy, excluding depreciation .......... 1,753 925 2,678
Depreciation ............................... 2,253 1,128 3,381
Advertising ................................ 724 294 1,018
Other expenses ............................. 6,471 4,802 11,273
--------- -------- --------
Total Other Expenses ..................... 25,192 13,453 38,645
--------- -------- --------
INCOME BEFORE INCOME TAXES ................. 9,349 10,434 19,783
Income taxes ............................... 3,345 3,680 7,025
--------- -------- --------
NET INCOME ................................. $ 6,004 $ 6,754 $12,758
========= ======== ========
Basic earnings per common share ............ $ 0.99 $ 0.73 $ 0.78
Diluted earnings per common share .......... $ 0.99 $ 0.73 $ 0.78
Average common shares outstanding:
Basic ..................................... 6,069 10,313 16,382
Diluted ................................... 6,080 10,333 16,413
</TABLE>
72
<PAGE>
CITY HOLDING COMPANY AND HORIZON BANCORP, INC.
PRO FORMA STATEMENT OF INCOME
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1997
---------------------------------------------------
CITY HOLDING HORIZON BANCORP PRO FORMA
AS REPORTED AS REPORTED COMBINED
-------------- ----------------- --------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans ................... $ 85,844 $ 61,916 $ 147,760
Interest on investment securities:
Taxable ..................................... 9,005 10,835 19,840
Tax-exempt .................................. 1,877 3,200 5,077
Other interest income ........................ 70 419 489
--------- -------- ----------
Total Interest Income ...................... 96,796 76,370 173,166
INTEREST EXPENSE
Interest on deposits ......................... 33,117 29,969 63,086
Interest on short-term borrowings ............ 8,546 1,352 9,898
Interest on long-term debt ................... 3,028 3,028
--------- ----------
Total Interest Expense ..................... 44,691 31,321 76,012
--------- -------- ----------
NET INTEREST INCOME .......................... 52,105 45,049 97,154
PROVISION FOR POSSIBLE LOAN LOSSES ........... 1,662 2,402 4,064
--------- -------- ----------
NET INTEREST INCOME AFTER PROVISION FOR
POSSIBLE LOAN LOSSES ........................ 50,443 42,647 93,090
OTHER INCOME
Investment securities gains (losses) ......... 26 (18) 8
Service charges .............................. 4,307 3,938 8,245
Mortgage loan servicing fees ................. 11,933 0 11,933
Gain on sale of loans ........................ 4,392 0 4,392
Other income ................................. 6,058 1,977 8,035
--------- -------- ----------
Total Other Income ......................... 26,716 5,897 32,613
OTHER EXPENSES
Salaries and employee benefits ............... 28,747 12,845 41,592
Occupancy, excluding depreciation ............ 3,914 2,436 6,350
Depreciation ................................. 4,837 1,760 6,597
Advertising .................................. 4,402 533 4,935
Other expenses ............................... 15,770 9,655 25,425
--------- -------- ----------
Total Other Expense ........................ 57,670 27,229 84,899
--------- -------- ----------
INCOME BEFORE INCOME TAXES ................... 19,489 21,315 40,804
Income taxes ................................. 7,025 7,488 14,513
--------- -------- ----------
NET INCOME ................................... $ 12,464 $13,827 $ 26,291
========= ======== ==========
Basic earnings per common share .............. $ 2.03 $ 1.49 $ 1.60
Diluted earnings per common share ............ $ 2.02 $ 1.49 $ 1.60
Average common shares outstanding:
Basic ....................................... 6,147 10,281 16,428
Diluted ..................................... 6,166 10,308 16,474
</TABLE>
73
<PAGE>
CITY HOLDING COMPANY AND HORIZON BANCORP, INC.
PRO FORMA STATEMENT OF INCOME
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1996
---------------------------------------------------
CITY HOLDING HORIZON BANCORP PRO FORMA
AS REPORTED AS REPORTED COMBINED
-------------- ----------------- --------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans ................... $ 75,888 $ 57,577 $ 133,465
Interest on investment securities:
Taxable ..................................... 8,139 12,579 20,718
Tax-exempt .................................. 2,012 2,673 4,685
Other interest income ........................ 30 810 840
--------- -------- ----------
Total Interest Income ...................... 86,069 73,639 159,708
INTEREST EXPENSE
Interest on deposits ......................... 29,238 28,424 57,662
Interest on short-term borrowings ............ 8,138 846 8,984
Interest on long-term debt ................... 1,688 0 1,688
--------- -------- ----------
Total Interesnt Expense .................... 39,064 29,270 68,334
--------- -------- ----------
NET INTEREST INCOME .......................... 47,005 44,369 91,374
PROVISION FOR POSSIBLE LOAN LOSSES ........... 1,678 3,334 5,012
--------- -------- ----------
NET INTEREST INCOME AFTER PROVISION FOR
POSSIBLE LOAN LOSSES ........................ 45,327 41,035 86,362
OTHER INCOME
Investment securities gains (losses) ......... 87 (79) 8
Service charges .............................. 3,700 3,432 7,132
Mortgage loan servicing fees ................. 2,958 0 2,958
Gain on sale of loans ........................ 1,260 0 1,260
Other income ................................. 3,118 1,997 5,115
--------- -------- ----------
Total Other Income ......................... 11,123 5,350 16,473
OTHER EXPENSES
Salaries and employee benefits ............... 21,593 12,878 34,471
Occupancy, excluding depreciation ............ 2,736 2,099 4,835
Depreciation ................................. 3,466 1,525 4,991
Advertising .................................. 914 585 1,499
Other expenses ............................... 12,273 11,997 24,270
--------- -------- ----------
Total Other Expenses ....................... 40,982 29,084 70,066
--------- -------- ----------
INCOME BEFORE INCOME TAXES ................... 15,468 17,301 32,769
Income taxes ................................. 5,338 6,150 11,488
--------- -------- ----------
NET INCOME ................................... $ 10,130 $11,151 $ 21,281
========= ======== ==========
Basic earnings per common share .............. $ 1.81 $ 1.20 $ 1.34
Diluted earnings per common share ............ $ 1.81 $ 1.20 $ 1.34
Average common shares outstanding:
Basic ....................................... 5,586 10,328 15,914
Diluted ..................................... 5,587 10,341 15,928
</TABLE>
74
<PAGE>
CITY HOLDING COMPANY AND HORIZON BANCORP, INC.
PRO FORMA STATEMENT OF INCOME
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1995
---------------------------------------------------
CITY HOLDING HORIZON BANCORP PRO FORMA
AS REPORTED AS REPORTED COMBINED
-------------- ----------------- --------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans ................... $ 61,124 $54,921 $ 116,045
Interest on investment securities:
Taxable ..................................... 11,612 12,185 23,797
Tax-exempt .................................. 2,300 2,355 4,655
Other interest income ........................ 89 1,157 1,246
--------- -------- ---------
Total Interest Income ...................... 75,125 70,618 145,743
INTEREST EXPENSE
Interest on deposits ......................... 27,149 26,869 54,018
Interest on short-term borrowings ............ 5,675 731 6,406
Interest on long-term debt ................... 756 0 756
--------- -------- ---------
Total Interest Expense ..................... 33,580 27,600 61,180
--------- -------- ---------
NET INTEREST INCOME .......................... 41,545 43,018 84,563
PROVISION FOR POSSIBLE LOAN LOSSES ........... 1,104 2,505 3,609
--------- -------- ---------
NET INTEREST INCOME AFTER PROVISION FOR
POSSIBLE LOAN LOSSES ........................ 40,441 40,513 80,954
OTHER INCOME
Investment securities gains (losses) ......... 2 (131) (129)
Service charges .............................. 3,347 3,256 6,603
Mortgage loan servicing fees ................. 350 0 350
Gain on sale of loans ........................ 581 0 581
Other income ................................. 2,066 1,872 3,938
--------- -------- ---------
Total Other Income ......................... 6,346 4,997 11,343
OTHER EXPENSES
Salaries and employee benefits ............... 17,815 12,567 30,382
Occupancy, excluding depreciation ............ 2,555 2,180 4,735
Depreciation ................................. 2,534 1,642 4,176
Advertising .................................. 889 758 1,647
Other expenses ............................... 10,094 10,874 20,968
--------- -------- ---------
Total Other Expenses ....................... 33,887 28,021 61,908
INCOME BEFORE INCOME TAXES ................... 12,900 17,489 30,389
Income taxes ................................. 4,182 6,007 10,189
--------- -------- ---------
NET INCOME ................................... $ 8,718 $11,482 $ 20,200
========= ======== =========
Basic earnings per common share .............. $ 1.55 $ 1.23 $ 1.26
Diluted earnings per common share ............ $ 1.55 $ 1.23 $ 1.26
Average common shares outstanding:
Basic ....................................... 5,642 10,330 15,972
Diluted ..................................... 5,642 10,333 15,975
</TABLE>
75
<PAGE>
APPENDIX A
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF REORGANIZATION
BETWEEN
CITY HOLDING COMPANY
AND
HORIZON BANCORP, INC.
AUGUST 7, 1998
- --------------------------------------------------------------------------------
A-1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C> <C>
ARTICLE I GENERAL ................................................................. 8
1.1. Holding Company Merger .................................................. 8
1.2. Bank Mergers ............................................................ 9
1.3. Taking of Necessary Action .............................................. 9
1.4. Tax Consequences; Accounting Treatment .................................. 9
ARTICLE II EFFECT OF TRANSACTION ON COMMON STOCK, ASSETS, LIABILITIES
AND CAPITALIZATION OF CITY HOLDING, CITY NATIONAL, AND
HORIZON ................................................................. 9
2.1. Conversion of Stock; Exchange Ratio ..................................... 9
2.2. Manner of Exchange ...................................................... 9
2.3. No Fractional Shares .................................................... 10
2.4. Dissenting Shares ....................................................... 10
2.5. Assets .................................................................. 11
2.6. Liabilities ............................................................. 11
ARTICLE III REPRESENTATIONS AND WARRANTIES .......................................... 11
3.1. Representations and Warranties of Horizon and the Horizon Banks ......... 11
(a) Organization, Standing and Power .................................... 11
(b) Capital Structure ................................................... 11
(c) Authority ........................................................... 12
(d) Investments ......................................................... 12
(e) Financial Statements ................................................ 13
(f) Absence of Undisclosed Liabilities .................................. 13
(g) Tax Matters ......................................................... 13
(h) Options, Warrants and Related Matters ............................... 14
(i) Property ............................................................ 14
(j) Additional Schedules Furnished to City Holding ...................... 14
(k) Agreements in Force and Effect ...................................... 15
(l) Legal Proceedings; Compliance with Laws ............................. 15
(m) Employee Benefit Plans .............................................. 16
(n) Insurance ........................................................... 17
(o) Loan Portfolio ...................................................... 17
(p) Absence of Changes .................................................. 18
(q) Brokers and Finders ................................................. 18
(r) Subsidiaries; Partnerships and Joint Ventures ....................... 18
(s) Reports ............................................................. 18
(t) Environmental Matters ............................................... 18
(u) Disclosure .......................................................... 19
(v) Accounting and Tax Matters .......................................... 19
(w) Regulatory Approvals ................................................ 19
(x) Year 2000 Matters ................................................... 19
(y) Interest Rate Risk Management Instruments ........................... 20
(z) Recission of Repurchases ............................................ 20
3.2. Representations and Warranties of City Holding and City National ........ 20
(a) Organization, Standing and Power .................................... 20
(b) Capital Structure ................................................... 20
(c) Authority ........................................................... 20
(d) Investments ......................................................... 21
(e) Financial Statements ................................................ 21
(f) Absence of Undisclosed Liabilities .................................. 22
(g) Tax Matters ......................................................... 22
</TABLE>
A-2
<PAGE>
<TABLE>
<CAPTION>
PAGE
-----
<S> <C> <C>
(h) Options, Warrants and Related Matters .................................... 23
(i) Property ................................................................. 23
(j) Additional Schedules Furnished to Horizon ................................ 23
(k) Agreements in Force and Effect ........................................... 24
(l) Legal Proceedings; Compliance with Laws .................................. 24
(m) Employee Benefit Plans ................................................... 24
(n) Insurance ................................................................ 26
(o) Loan Portfolio ........................................................... 26
(p) Absence of Changes ....................................................... 26
(q) Brokers and Finders ...................................................... 26
(r) Subsidiaries; Partnerships and Joint Ventures ............................ 27
(s) Reports .................................................................. 27
(t) Environmental Matters .................................................... 27
(u) Disclosure ............................................................... 27
(v) Accounting and Tax Matters ............................................... 27
(w) Regulatory Approvals ..................................................... 28
(x) Year 2000 Matters ........................................................ 28
(y) Interest Rate Risk Management Instruments ................................ 28
(z) Recission of Repurchases ................................................. 28
ARTICLE IV CONDUCT AND TRANSACTIONS PRIOR TO THE EFFECTIVE TIME OF
THE HOLDING COMPANY MERGER ................................................... 28
4.1. Access to Records and Properties of City Holding, City National, Other City
Holding Subsidiaries, Horizon and the Horizon Banks; Confidentiality ......... 28
4.2. Registration Statement, Proxy Statement, Shareholder Approval ................ 29
4.3. Operation of the Businesses of the Parties ................................... 29
4.4. No Solicitation .............................................................. 30
4.5. Dividends .................................................................... 31
4.6. Regulatory Filings; Best Efforts ............................................. 31
4.7. Public Announcements ......................................................... 31
4.8. Operating Synergies; Conformance to Reserve Policies, Etc .................... 31
4.9. City Holding Rights Agreement ................................................ 31
4.10. Agreement as to Efforts to Consummate ........................................ 32
4.11. Adverse Changes in Condition ................................................. 32
4.12. Nasdaq Listing ............................................................... 32
4.13. Delivery and Updating of Schedules ........................................... 32
4.14. Transactions in City Holding Common Stock .................................... 32
4.15. Standstill Agreements; Confidentiality Agreements ............................ 32
4.16. Letters from Accountants ..................................................... 33
ARTICLE V MANAGEMENT AND CORPORATE GOVERNANCE .......................................... 33
5.1. Board of Directors ........................................................... 33
5.2. Management ................................................................... 33
ARTICLE VI CONDITIONS OF MERGER ......................................................... 33
6.1. Conditions of Obligations of City Holding and City National .................. 33
6.2. Conditions of Obligations of Horizon and the Horizon Banks ................... 35
ARTICLE VII CLOSING DATE; EFFECTIVE TIME ................................................. 36
7.1. Closing Date ................................................................. 36
7.2. Filings at Closing ........................................................... 37
7.3. Effective Time ............................................................... 37
ARTICLE VIII TERMINATION; SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
COVENANTS; WAIVER AND AMENDMENT .............................................. 37
8.1. Termination .................................................................. 37
8.2. Effect of Termination ........................................................ 38
</TABLE>
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<TABLE>
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<S> <C> <C>
8.3. Survival of Representations, Warranties and Covenants ................. 38
8.4. Waiver and Amendment .................................................. 38
ARTICLE IX ADDITIONAL COVENANTS .................................................. 38
9.1. Indemnification of Horizon Officers and Directors; Liability Insurance 38
9.2. Employee Matters ...................................................... 39
ARTICLE X MISCELLANEOUS ......................................................... 40
10.1. Expenses .............................................................. 40
10.2. Entire Agreement ...................................................... 40
10.3. Descriptive Headings .................................................. 40
10.4. Notices ............................................................... 40
10.5. Counterparts .......................................................... 41
10.6. Governing Law ......................................................... 41
</TABLE>
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INDEX TO EXHIBITS
<TABLE>
<S> <C>
A Holding Company Plan of Merger
B [RESERVED]
C City Holding Option Agreement
D Horizon Option Agreement
E Management of City Holding and City National following the Effective Time of the
Holding Company Merger
F [RESERVED]
G Opinion of Jackson & Kelly, counsel to Horizon and the Horizon Banks
H Form of Affiliate's Undertaking
I Forms of Employment Agreements
J Opinion of Hunton & Williams, counsel to City Holding and City National
</TABLE>
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INDEX TO SCHEDULES TO BE PROVIDED BY HORIZON
<TABLE>
<S> <C>
2.2(d) Horizon Options
3.1(b)(1) Horizon Banks Outstanding Capital Stock
3.1(b)(2) Horizon Common Stock Beneficial Ownership
3.1(d) Securities Owned by Horizon
3.1(e) Horizon Financial Statements
3.1(g) Horizon Group Taxes Being Contested, Etc.
3.1(h) Horizon and Horizon Banks Options, Warrants and Related Matters
3.1(j)(1) Horizon and Horizon Banks Salary Rates, Horizon Common Stock Held by Directors
of Horizon or the Horizon Banks, Options and Restricted Stock Awards
3.1(j)(2) Notes, Bonds, Mortgages, Indentures, Licenses, Lease Agreements and Other Contracts
of Horizon or the Horizon Banks
3.1(j)(3) Employment Contracts and Related Matters of Horizon and the Horizon Banks
3.1(j)(4) Real Estate Owned or Leased by Horizon and the Horizon Banks
3.1(j)(5) Affiliates of Horizon and the Horizon Banks
3.1(1) Legal Proceedings of Horizon or the Horizon Banks
3.1(m) Employee Benefit Plans of Horizon and the Horizon Banks
3.1(n) Insurance of Horizon or the Horizon Banks
3.1(o) Horizon and the Horizon Banks Loans
3.1(p) Certain Changes
3.1(r) Horizon Subsidiaries and Joint Ventures
3.1(t) Environmental Changes
3.1(z) Horizon Share Repurchase Programs
4.3 Horizon Share Repurchases
</TABLE>
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INDEX TO SCHEDULES TO BE PROVIDED BY CITY HOLDING
<TABLE>
<S> <C>
3.2(b)(1) City Holding Outstanding Capital Stock
3.2(b)(2) City Holding Common Stock Beneficial Ownership
3.2(d) Securities Owned by City Holding and City National
3.2(e) City Holding Financial Statements
3.2(g) City Holding Group Taxes Being Contested, Etc.
3.2(h) City Holding and City National Options, Warrants and Related Matters
3.2(j)(1) City Holding Salary Rates, City Holding Common Stock Held by Directors of City
Holding or City National, Options and Restricted Stock Awards
3.2(j)(2) Notes, Bonds, Mortgages, Indentures, Licenses, Lease Agreements and Other Contracts
of City Holding
3.2(j)(3) Employment Contracts and Related Matters of City Holding
3.2(j)(4) Real Estate Owned or Leased by City Holding
3.2(j)(5) Affiliates of City Holding
3.2(l) Legal Proceedings of City Holding or City National
3.2(m) Employee Benefit Plans of City Holding
3.2(n) Insurance of City Holding
3.2(o) City Holding and City National Loans
3.2(p) Certain Changes
3.2(r) City Holding and City National Subsidiaries and Joint Ventures
3.2(t) Environmental Changes
3.2(z) City Holding Share Repurchase Programs
4.3 City Holding Share Repurchases
</TABLE>
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<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (the "Agreement") dated as of
August 7, 1998 between CITY HOLDING COMPANY, a West Virginia corporation ("City
Holding") and HORIZON BANCORP, INC. a West Virginia corporation ("Horizon")
recites and provides:
A. The boards of directors of City Holding and Horizon deem it advisable
and in furtherance of their long-term business strategies to combine their
business operations through the merger of Horizon into City Holding, with City
Holding as the surviving company (the "Holding Company Merger"), pursuant to
this Agreement and the Plan of Merger attached as EXHIBIT A (the "Holding
Company Plan of Merger") whereby the holders of shares of the common stock of
Horizon ("Horizon Common Stock") will receive common stock of City Holding
("City Holding Common Stock") in exchange therefor.
B. The boards of directors of City Holding and Horizon deem it advisable
that, as soon as possible after the Holding Company Merger, City Holding and
Horizon shall cause Bank of Raleigh, a West Virginia bank ("Raleigh"), National
Bank of Summers of Hinton, a national banking association ("Summers"),
Greenbrier Valley National Bank, a national banking association ("Greenbrier"),
The First National Bank in Marlinton, a national banking association
("Marlinton") and The Twentieth Street Bank, a West Virginia bank ("Twentieth")
(collectively, the "Horizon Banks", all of which are wholly-owned by Horizon),
to be merged into City National Bank of West Virginia, a national banking
association wholly-owned by City Holding ("City National") (the "Bank
Mergers"). The Holding Company Merger and the Bank Mergers are referred to
herein collectively as the "Transaction."
C. To effectuate the foregoing, the parties desire to adopt this Agreement
and the Holding Company Plan of Merger, which shall represent a plan of
reorganization in accordance with the provisions of Section 368(a) of the
United States Internal Revenue Code, as amended (the "Code").
D. As a condition to, and contemporaneously with, the execution of this
Agreement, the parties have entered into a stock option agreement, with City
Holding as Issuer and Horizon as grantee (the "City Holding Option Agreement")
in the form attached hereto as EXHIBIT C.
E. As a condition to, and contemporaneously with, the execution of this
Agreement, the parties have entered into a stock option agreement, with Horizon
as Issuer and City Holding as grantee (the "Horizon Option Agreement") in the
form attached hereto as EXHIBIT D.
F. For accounting purposes, the parties intend that the Transaction shall
be accounted for as a "pooling of interests."
NOW, THEREFORE, in consideration of the mutual benefits to be derived from
this Agreement, and of the representations, warranties, conditions and promises
herein contained, City Holding and Horizon hereby adopt this Agreement whereby
at the "Effective Time of the Holding Company Merger" (as defined in ARTICLE
VII hereof) Horizon shall be merged with City Holding in accordance with the
Holding Company Plan of Merger. As soon as possible after the Holding Company
Merger, the Horizon Banks will merge directly into City National. The
outstanding shares of Horizon Common Stock shall be converted into shares of
City Holding Common Stock as provided in this Agreement on the basis, terms and
conditions contained herein and in the Holding Company Plan of Merger.
In connection therewith, the parties hereto agree as follows:
ARTICLE I
GENERAL
1.1. HOLDING COMPANY MERGER.
Subject to the provisions of this Agreement and the Holding Company Plan
of Merger, at the Effective Time of the Holding Company Merger, Horizon shall
be merged with and into City Holding (the "Surviving Company"), the separate
existence of Horizon shall cease, the outstanding shares of Horizon Common
Stock, other
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than Dissenting Shares (as defined in Section 2.4) and shares held directly by
City Holding, shall be converted into the right to receive shares of City
Holding Common Stock.
1.2. BANK MERGERS.
As soon as possible following the Effective Time of the Holding Company
Merger, City Holding shall cause the Horizon Banks to merge into City National.
1.3. TAKING OF NECESSARY ACTION.
In case at any time after the Effective Time of the Holding Company Merger
any further action is necessary or desirable to carry out the purposes of this
Agreement and to vest City Holding with full title to all properties, assets,
rights, approvals, immunities and franchises of Horizon, the officers and
directors of City Holding and Horizon shall take all such necessary action.
1.4. TAX CONSEQUENCES; ACCOUNTING TREATMENT.
The parties intend that each of the Holding Company Merger and the Bank
Mergers shall (i) constitute a reorganization within the meaning of Section
368(a) of the Code and that this Agreement shall constitute a "plan of
reorganization" for the purposes of Section 368 of the Code, and (ii) be
accounted for as a "pooling of interests."
ARTICLE II
EFFECT OF TRANSACTION ON COMMON STOCK, ASSETS, LIABILITIES AND CAPITALIZATION
OF CITY HOLDING, CITY NATIONAL, AND HORIZON
2.1. CONVERSION OF STOCK; EXCHANGE RATIO.
At the Effective Time of the Holding Company Merger:
(a) CONVERSION OF STOCK. Each share of Horizon Common Stock which is
issued and outstanding at the Effective Time of the Holding Company Merger
(other than shares held directly by City Holding, which shall be canceled
without payment therefore, and Dissenting Shares) shall, and without any action
by the holder thereof, be converted into the number of shares of City Holding
Common Stock determined in accordance with SECTION 2.1(B). All such shares
shall be validly issued, fully paid and nonassessable.
(b) EXCHANGE RATIO. Each share of Horizon Common Stock (other than shares
held directly by City Holding and shares to be exchanged for cash) shall be
converted into the number of shares of City Holding Common Stock determined by
dividing $45.00 per share of Horizon Common Stock (the "Common Stock Price Per
Share") by the average closing price of City Holding Common Stock as reported
on the Nasdaq National Market for each of the 10 trading days ending on the
10th day prior to the day of the Effective Time of the Holding Company Merger
(the "Average Closing Price"), such quotient to be rounded to the nearest one
one-thousandth (the "Exchange Ratio"), provided, that if the Average Closing
Price is $44.50 or greater, then the Exchange Ratio shall be 1.011 and if the
Average Closing Price is $40.50 or less, then the Exchange Ratio shall be
1.111.
The Exchange Ratio at the Effective Time of the Holding Company Merger
shall be adjusted to reflect any consolidation, split-up, other subdivisions or
combinations of City Holding Common Stock, any dividend payable in City Holding
Common Stock, or any capital reorganization involving the reclassification of
City Holding Common Stock subsequent to the date of this Agreement.
2.2. MANNER OF EXCHANGE.
(a) After the Effective Time of the Holding Company Merger, each holder of
a certificate for theretofore outstanding shares of Horizon Common Stock, upon
surrender of such certificate to SunTrust Bank, Atlanta (which shall act as
exchange agent), and a Letter of Transmittal, which shall be mailed to each
holder of a certificate for theretofore outstanding shares of Horizon Common
Stock by City National promptly following the
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Effective Time of the Holding Company Merger, shall be entitled to receive in
exchange therefor a certificate or certificates representing the number of full
shares of City Holding Common Stock for which shares of Horizon Common Stock
theretofore represented by the certificate or certificates so surrendered shall
have been exchanged as provided in this ARTICLE II. Until so surrendered, each
outstanding certificate which, prior to the Effective Time of the Holding
Company Merger, represented Horizon Common Stock will be deemed to evidence the
right to receive the number of full shares of City Holding Common Stock into
which the shares of Horizon Common Stock represented thereby may be converted
in accordance with the Exchange Ratio and, after the Effective Time of the
Holding Company Merger will be deemed for all corporate purposes of City
Holding to evidence ownership of the number of full shares of City Holding
Common Stock into which the shares of Horizon Common Stock represented thereby
were converted.
(b) Until outstanding certificates formerly representing Horizon Common
Stock are surrendered, no dividend payable to holders of record of City Holding
Common Stock for any period as of any date subsequent to the Effective Time of
the Holding Company Merger shall be paid to the holder of such outstanding
certificates in respect thereof. After the Effective Time of the Holding
Company Merger, there shall be no further registry of transfer on the records
of Horizon of shares of Horizon Common Stock. If a certificate representing
such shares is presented to City Holding, it shall be canceled and exchanged
for a certificate representing shares of City Holding Common Stock and cash
representing fractional shares as herein provided. Upon surrender of
certificates of Horizon Common Stock in exchange for City Holding Common Stock,
there shall be paid to the recordholder of the certificates of City Holding
Common Stock issued in exchange therefor (i) the amount of dividends
theretofore paid for such full shares of City Holding Common Stock as of any
date subsequent to the Effective Time of the Holding Company Merger which have
not yet been paid to a public official pursuant to abandoned property laws and
(ii) at the appropriate payment date the amount of dividends with a record date
after the Effective Time of the Holding Company Merger but prior to surrender
and a payment date subsequent to surrender. No interest shall be payable on
such dividends upon surrender of outstanding certificates.
(c) At the Effective Time of the Holding Company Merger, each share of
Horizon Common Stock held by City Holding shall be canceled, retired and cease
to exist and each Dissenting Share shall be treated in accordance with Section
31-1-123 of the West Virginia Code ("WVC").
(d) At the Effective Time of the Holding Company Merger and as provided in
the Holding Company Plan of Merger, outstanding options to acquire Horizon
Common Stock that were granted under Horizon's employee benefit plans ("Horizon
Options," as defined in SECTION 3.1(J)(1) hereof), and which are identified on
SCHEDULE 2.2(D), shall be converted, based on the Exchange Ratio, into options
to acquire City Holding Common Stock ("City Holding Options"). The exercise
price per share of City Holding Common Stock under a City Holding Option shall
be equal to the exercise price per share of Horizon Common Stock under the
Horizon Option divided by the Exchange Ratio (rounded up to the nearest cent).
The number of shares of City Holding Common Stock subject to a City Holding
Option shall be equal to the number of shares of Horizon Common Stock subject
to the Horizon Option multiplied by the Exchange Ratio (rounded down to the
nearest whole share). Except as provided in the preceding sentences regarding
the price of, and number of shares of City Holding Common Stock subject to, the
City Holding Option, the terms of the City Holding Option shall be the same as
the terms of the Horizon Option.
2.3. NO FRACTIONAL SHARES.
No certificates or scrip for fractional shares of City Holding Common
Stock will be issued. In lieu thereof, City Holding will pay the value of such
fractional shares in cash on the basis of the Average Closing Price.
2.4. DISSENTING SHARES.
Notwithstanding anything in this Agreement to the contrary, shares of
Horizon Common Stock which are issued and outstanding immediately prior to the
Effective Time of the Holding Company Merger and which are held by a
shareholder (other than City Holding and its subsidiaries, which waive such
right to dissent) who has the right (to the extent such right is available by
law) to demand and receive payment of the fair value of his shares of Horizon
Common Stock pursuant to Section 31-1-122 of the WVC (the "Dissenting Shares")
shall not be converted into or be exchangeable for the right to receive the
consideration provided in SECTION 2.1 of this
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Agreement, unless and until such holder shall fail to perfect his or her right
to dissent or shall have effectively withdrawn or lost such right under the
WVC, as the case may be. If such holder shall have so failed to perfect his
right to dissent or shall have effectively withdrawn or lost such right, each
of his shares of Horizon Common Stock shall thereupon be deemed to have been
converted into, at the Effective Time of the Holding Company Merger, the right
to receive shares of City Holding Common Stock as provided in SECTION 2.1 of
this Agreement.
2.5. ASSETS.
At the Effective Time of the Holding Company Merger, the corporate
existence of Horizon shall be merged into and continued in City Holding as the
Surviving Company. All rights, franchises and interests of Horizon and of the
Horizon Banks in and to any type of property and choses in action shall be
transferred to and vested in the Surviving Company by virtue of the Holding
Company Merger. The Surviving Company, without any order or other action on the
part of any court or otherwise, shall hold and enjoy all rights of property,
franchises and interests, including appointments, designations and nominations,
and all other rights and interests as trustee, executor, administrator,
transfer agent or registrar of stocks and bonds, guardian of estates, assignee,
receiver and committee, and in every other fiduciary capacity, in the same
manner and to the same extent as such rights, franchises and interests were
held or enjoyed by Horizon at the Effective Time of the Holding Company Merger
as provided in Section 31-1-37 of the WVC.
2.6. LIABILITIES.
At the Effective Time of the Holding Company Merger, the Surviving Company
shall be liable for all liabilities of Horizon, as provided in Section 31-1-37
of the WVC. All deposits, debts, liabilities and obligations of Horizon,
accrued, absolute, contingent or otherwise, and whether or not reflected or
reserved against on balance sheets, books of accounts, or records of Horizon
shall be those of the Surviving Company, and shall not be released or impaired
by the Holding Company Merger. All rights of creditors and other obligees and
all liens on property of Horizon shall be preserved unimpaired.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1. REPRESENTATIONS AND WARRANTIES OF HORIZON AND THE HORIZON BANKS.
Horizon represents and warrants to City Holding as follows (subject to
SECTION 4.13(A) with respect to the delivery of the Schedules referred to
herein):
(a) ORGANIZATION, STANDING AND POWER. Horizon is a corporation duly
organized, validly existing and in good standing under the laws of West
Virginia and has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now being conducted and
to perform this Agreement and the Holding Company Plan of Merger and to effect
the transactions contemplated hereby and thereby, subject to the approval of
its shareholders as contemplated by SECTION 4.2 and federal and state
regulatory approvals provided for herein. Horizon will deliver to City Holding
complete and correct copies of its Articles of Incorporation and its By-laws as
amended to the date hereof.
Each of the Horizon Banks is a bank duly organized, validly existing and
in good standing under the laws of its jurisdiction of organization and has all
requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted and to perform
this Agreement and to effect the transactions contemplated hereby. Each of the
Banks' deposits are insured by the Federal Deposit Insurance Corporation (the
"FDIC") to the maximum extent permitted by law. Horizon will deliver to City
Holding complete and correct copies of each of the Horizon Banks' (i) Charter
and (ii) By-laws as amended to the date hereof.
(b) CAPITAL STRUCTURE. The authorized capital stock of Horizon consists of
20,000,000 shares of Horizon Common Stock, par value $1.00. On the date hereof,
9,312,876 shares of Horizon Common Stock were outstanding. All of the
outstanding shares of Horizon Common Stock are validly issued, fully paid and
nonassessable.
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The authorized capital stock of each of the Horizon Banks and the title
and number of each class of such capital stock outstanding on the date hereof
is set forth on SCHEDULE 3.1(B)(1). All of such outstanding shares of capital
stock are validly issued, fully paid and nonassessable. Horizon owns all of the
issued and outstanding capital stock of the Horizon Banks free and clear of any
liens, claims, encumbrances, charges or rights of third parties of any kind
whatsoever.
Horizon knows of no person who beneficially owns 5% or more of the
outstanding Horizon Common Stock as of the date hereof, except as disclosed on
SCHEDULE 3.1(B)(2).
(c) AUTHORITY. Subject to the approval of this Agreement and the Holding
Company Plan of Merger by the shareholders of Horizon as contemplated by
SECTION 4.2, the execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby and by the Holding Company Plan of
Merger have been duly and validly authorized by all necessary action on the
part of Horizon, and this Agreement is a valid and binding obligation of
Horizon, enforceable in accordance with its terms. The execution and delivery
of this Agreement, the consummation of the transactions contemplated hereby and
by the Holding Company Plan of Merger and compliance by Horizon with any of the
provisions hereof or thereof will not (i) conflict with or result in a breach
of any provision of its Articles of Incorporation or By-laws or a default (or
give rise to any right of termination, cancellation or acceleration) under any
of the terms, conditions or provisions of any note, bond, debenture, mortgage,
indenture, license, material agreement or other material instrument or
obligation to which Horizon is a party, or by which it or any of its properties
or assets may be bound, or (ii) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to Horizon or any of its properties or
assets. No consent or approval by any governmental authority, other than
compliance with applicable federal and state securities and banking laws, the
rules of the Nasdaq Stock Market and regulations of the Board of Governors of
the Federal Reserve System (the "Federal Reserve Board"), the Office of the
Comptroller of the Currency (the "OCC"), the FDIC, and the West Virginia Board
of Banking and Financial Institutions ("WVBOB"), is required in connection with
the execution and delivery by Horizon of this Agreement or the consummation by
Horizon of the transactions contemplated hereby or by the Holding Company Plan
of Merger. Horizon's Board of Directors has taken all action necessary to
ensure that the Transaction is exempted from any West Virginia statute that
purports to limit or restrict business combinations or the ability to acquire
or vote shares and any change of control or anti-takeover provisions of
Horizon's Articles or By-laws.
The consummation by the Horizon Banks of the transactions contemplated
hereby, including the Bank Mergers, will not (i) conflict with or result in a
breach of any provision of their respective charters or by-laws or a default
(or give rise to any right of termination, cancellation or acceleration) under
any of the terms, conditions or provisions of any note, bond, debenture,
mortgage, indenture, license, material agreement or other material instrument
or obligation to which any of the Horizon Banks is a party, or by which any of
them or any of their properties or assets may be bound, or (ii) violate any
order, writ, injunction, decree, statute, rule or regulation applicable to any
of the Horizon Banks or any of their properties or assets. No consent or
approval by any governmental authority, other than compliance with applicable
federal and state banking laws, the rules of the Nasdaq Stock Market and
regulations of the Federal Reserve Board, the OCC, the FDIC and the WVBOB, is
required in connection with the consummation by the Horizon Banks of the
transactions contemplated hereby.
(d) INVESTMENTS. All securities owned by Horizon and the Horizon Banks of
record and beneficially are free and clear of all mortgages, liens, pledges,
encumbrances or any other restriction, whether contractual or statutory, which
would materially impair the ability of Horizon or the Horizon Banks freely to
dispose of any such security at any time, except as noted on SCHEDULE 3.1(D).
Any securities owned of record by Horizon and the Horizon Banks in an amount
equal to 5% or more of the issued and outstanding voting securities of the
issuer thereof have been noted on such SCHEDULE 3.1(D). There are no voting
trusts or other agreements or undertakings of which Horizon or any of the
Horizon Banks is a party with respect to the voting of such securities. With
respect to all repurchase agreements to which Horizon or any of the Horizon
Banks is a party, as an investor, Horizon or the Horizon Banks has a valid,
perfected first lien or security interest in the government securities or other
collateral securing the repurchase agreement, and the value of the collateral
securing each such repurchase agreement equals or exceeds the amount of the
debt secured by such collateral under such agreement.
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(e) FINANCIAL STATEMENTS. SCHEDULE 3.1(E) contains copies of the following
consolidated financial statements of Horizon and each of the Horizon Banks (the
"Horizon Financial Statements"):
(i) Consolidated Balance Sheets as of December 31, 1997 and 1996
(audited), and as of June 30, 1998 and 1997 (unaudited);
(ii) Consolidated Statements of Income for each of the three years ended
December 31, 1997, 1996, and 1995 (audited) and for each of the three and
six month periods ended June 30, 1998 and 1997 (unaudited);
(iii) Consolidated Statements of Shareholders' Equity for each of the
three years ended December 31, 1997, 1996 and 1995 (audited) and for each
of the three and six month periods ended June 30, 1998 and 1997
(unaudited); and
(iv) Consolidated Statements of Cash Flows for each of the three years
ended December 31, 1997, 1996 and 1995 (audited) and for each of the three
and six month periods ended June 30, 1998 and 1997 (unaudited).
Such financial statements and the notes thereto have been prepared in
accordance with generally accepted accounting principles ("GAAP") applied on a
consistent basis throughout the periods indicated unless otherwise noted in the
Horizon Financial Statements. Each of such consolidated statements of financial
condition, together with the notes thereto, presents fairly as of its date the
consolidated financial condition and assets and liabilities of Horizon or the
applicable Horizon Bank. The consolidated income statements, shareholders'
equity and cash flows, together with the notes thereto, present fairly the
results of operations, changes in shareholders' equity and cash flows of
Horizon or the applicable Horizon Bank for the periods indicated in accordance
with GAAP.
Except as disclosed in the Horizon Financial Statements, and in the case
of the Horizon Banks, compliance with and subject to regulatory requirements of
general applicability, there are no restrictions precluding Horizon or any of
the Horizon Banks from paying dividends when, as and if declared by their
respective Boards of Directors.
(f) ABSENCE OF UNDISCLOSED LIABILITIES. At June 30, 1998, neither Horizon
nor any of its consolidated subsidiaries had any material obligations or
liabilities (contingent or otherwise) of any nature which were not reflected in
the Horizon Financial Statements as of such dates, or disclosed in the notes
thereto, or in the Horizon periodic reports filed with the Securities and
Exchange Commission ("SEC") under the Securities Exchange Act of 1934 (the
"1934 Act") as of such dates, or disclosed in the notes thereto, except for
those which are appropriately disclosed in Schedules specifically referred to
herein or which in the aggregate are immaterial.
(g) TAX MATTERS. The Horizon Banks and all other subsidiaries of Horizon
are members of the same "affiliated group," as defined in Section 1504(a)(1) of
the Code, as Horizon (collectively, the "Horizon Group"). Each member of the
Horizon Group has filed or caused to be filed or (in the case of returns or
reports not yet due) will file all tax returns and reports required to have
been filed by or for them before the Effective Time of the Holding Company
Merger, and all information set forth in such returns or reports is or (in the
case of such returns or reports not yet due) will be accurate and complete in
all material respects. Each member of the Horizon Group has paid or made
adequate provision for, or (with respect to returns or reports not yet filed)
before the Effective Time of the Holding Company Merger will pay or make
adequate provision for, all taxes, additions to tax, penalties, and interest
for all periods covered by those returns or reports. There are, and at the
Effective Time of the Holding Company Merger will be, no unpaid taxes,
additions to tax, penalties, or interest due and payable by any member of the
Horizon Group that are or could become a lien on any asset, or otherwise
materially adversely affect the business, property or financial condition, of
any member of the Horizon Group except for taxes and any such related liability
(a) incurred in the ordinary course of business for which adequate provision
has been made by any member of the Horizon Group or (b) being contested in good
faith and disclosed in SCHEDULE 3.1(G). Each member of the Horizon Group has
collected or withheld, or will collect or withhold before the Effective Time of
the Holding Company Merger, all amounts required to be collected or withheld by
it for any taxes, and all such amounts have been, or before the Effective Time
of the Holding Company Merger will have been, paid to the appropriate
governmental agencies or set aside in appropriate accounts for future payment
when due. Each member of the Horizon Group is in material compliance with, and
its records contain all information and documents (including, without
limitation, properly completed IRS Forms W-9) necessary to
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comply in all material respects with, all applicable information reporting and
tax withholding requirements under federal, state, and local laws, rules, and
regulations, and such records identify with specificity all accounts subject to
backup withholding under Section 3406 of the Code. The consolidated statements
of financial condition contained in the Horizon Financial Statements fully and
properly reflect, as of the dates thereof, the aggregate liabilities of the
members of the Horizon Group for all accrued taxes, additions to tax, penalties
and interest in accordance with GAAP. For periods ending after June 30, 1998,
the books and records of each member of the Horizon Group fully and properly
reflect their liability for all accrued taxes, additions to tax, penalties and
interest in accordance with GAAP. Except as disclosed in SCHEDULE 3.1(G), no
member of the Horizon Group has granted (nor is it subject to) any waiver of
the period of limitations for the assessment of tax for any currently open
taxable period, and no unpaid tax deficiency has been asserted in writing
against or with respect to any member of the Horizon Group by any taxing
authority. No member of the Horizon Group has made or entered into, or holds
any asset subject to, a consent filed pursuant to Section 341(f) of the Code
and the regulations thereunder or a "safe harbor lease" subject to former
Section 168(f)(8) of the Code and the regulations thereunder. SCHEDULE 3.1(G)
describes all tax elections, consents and agreements affecting any member of
the Horizon Group. To the Knowledge of Horizon, no Horizon shareholder is a
"foreign person" for purposes of Section 1445 of the Code.
(h) OPTIONS, WARRANTS AND RELATED MATTERS. There are no outstanding
unexercised options, warrants, calls, commitments or agreements of any
character to which Horizon or any of the Horizon Banks is a party or by which
it is bound, calling for the issuance of securities of Horizon or the Horizon
Banks or any security representing the right to purchase or otherwise receive
any such security, except (i) as set forth on SCHEDULE 3.1(H) and (ii) the
Horizon Stock Option Agreement.
(i) PROPERTY. Horizon and the Horizon Banks own (or enjoy use of under
capital leases) all property reflected on the Horizon Financial Statements as
of June 30, 1998 as being owned by them (except property sold or otherwise
disposed of in the ordinary course of business after such date). All material
property shown as being owned is owned free and clear of all mortgages, liens,
pledges, charges or encumbrances of any nature whatsoever, except those
referred to in such Horizon Financial Statements or the notes thereto, liens
for current taxes not yet due and payable, any unfiled mechanics' liens and
such encumbrances and imperfections of title, if any, as are not substantial in
character or amount or otherwise would materially impair Horizon's consolidated
business operations. The leases relating to leased property are fairly
reflected in such Horizon Financial Statements.
Except for Other Real Estate Owned ("OREO"), all property and assets
material to the business or operations of Horizon and the Horizon Banks are in
substantially good operating condition and repair and such property and assets
are adequate for the business and operations of Horizon and the Horizon Banks
as currently conducted.
(j) ADDITIONAL SCHEDULES FURNISHED TO CITY HOLDING. In addition to any
Schedules furnished to City Holding pursuant to other provisions of this
Agreement, Horizon has furnished to City Holding the following Schedules which
are correct and complete as of the date hereof:
(1) EMPLOYEES. SCHEDULE 3.1(J)(1) lists as of the date hereof (A) the
names of and current annual salary rates for all present employees of
Horizon and the Horizon Banks who received, respectively, $75,000 or more
in aggregate compensation, whether in salary or otherwise as reported or
would be reported on Form W-2, during the year ended December 31, 1997, or
are presently scheduled to receive salary in excess of $75,000 during the
year ending December 31, 1998, (B) the number of shares of Horizon Common
Stock owned beneficially by each director of Horizon or the Horizon Banks
as of the date hereof, (C) the names of and the number of shares of Horizon
Common Stock owned by each person known to Horizon who beneficially owns 5%
or more of the outstanding Horizon Common Stock as of the date hereof, and
(D) the names of, the number of outstanding options of, and the exercise
price of, each agreement to make stock-based awards granted to each person
under Horizon's incentive stock option plan (the "Horizon Stock Option
Plan") or any other option granted by Horizon or any the Horizon Banks to
any director, officer, employee, consultant or advisor (collectively,
"Horizon Options") and the exercise price of each such Horizon Option.
Horizon has no stock-based employee benefit plan or arrangement other than
the Horizon Stock Option Plan, and the Horizon Employee Stock Option Plan.
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(2) CERTAIN CONTRACTS. SCHEDULE 3.1(J)(2) lists all notes, bonds,
mortgages, indentures, licenses, lease agreements and other contracts and
obligations to which Horizon or any of the Horizon Banks is an indebted
party or a lessee, licensee or obligee as of the date hereof except for
those entered into by Horizon or the Horizon Banks in the ordinary course
of its business consistent with its prior practice and that do not involve
an amount remaining greater than $100,000.
(3) EMPLOYMENT CONTRACTS AND RELATED MATTERS. Except in all cases as set
forth on SCHEDULE 3.1(J)(3), neither Horizon nor any of the Horizon Banks
is a party to any employment contract not terminable at the option of
Horizon or the Horizon Banks without liability. Except in all cases as set
forth on SCHEDULE 3.1(J)(3), neither Horizon nor any of the Horizon Banks
is a party to (A) any retirement, profit sharing or pension plan or thrift
plan or agreement or employee benefit plan (as defined in Section 3 of the
Employee Retirement Income Security Act of 1974 ("ERISA")), (B) any
management or consulting agreement not terminable at the option of Horizon
or the Horizon Banks without liability or (C) any union or labor agreement.
(4) REAL ESTATE. SCHEDULE 3.1(J)(4) describes, as of the date hereof,
all interests in real property owned, leased or otherwise claimed by
Horizon and the Horizon Banks, including OREO.
(5) AFFILIATES. SCHEDULE 3.1(J)(5) sets forth the names and number of
shares of Horizon Common Stock owned as of the date hereof beneficially or
of record by any persons Horizon considers to be affiliates of Horizon
("Horizon Affiliates") as that term is defined for purposes of Rule 145
under the Securities Act of 1933 (the "1933 Act").
(k) AGREEMENTS IN FORCE AND EFFECT. All material contracts, agreements,
plans, leases, policies and licenses referred to in any Schedule of Horizon or
the Horizon Banks referred to herein are valid and in full force and effect,
and neither Horizon nor any of the Horizon Banks has breached any provision of,
nor is in default in any respect under the terms of, any such contract,
agreement, lease, policy or license, the effect of which breach or default
would have a material adverse effect upon the financial condition, results of
operations, or business of Horizon on a consolidated basis.
(l) LEGAL PROCEEDINGS; COMPLIANCE WITH LAWS. SCHEDULE 3.1(L) describes all
legal, administrative, arbitration or other proceedings or governmental
investigations known to Horizon pending or, to the Knowledge of Horizon,
threatened or probable of assertion against Horizon or any of the Horizon
Banks. Except as set forth on SCHEDULE 3.1(L), no such proceeding or
investigation, if decided adversely, would have a material adverse effect on
the financial condition, results of operations, business or prospects of
Horizon on a consolidated basis. Except as set forth in SCHEDULE 3.1(L),
Horizon and the Horizon Banks have complied with any laws, ordinances,
requirements, regulations or orders applicable to their respective businesses,
except where noncompliance would not have a material adverse effect on the
financial condition, results of operations or business of Horizon on a
consolidated basis. Horizon and the Horizon Banks have all licenses, permits,
orders or approvals (collectively, the "Permits") of any federal, state, local
or foreign governmental or regulatory body that are necessary for the conduct
of the respective businesses of Horizon and the Horizon Banks and the absence
of which would have a material adverse effect on the financial condition,
results of operations or business of Horizon on a consolidated basis; the
Permits are in full force and effect; no material violations are or have been
recorded in respect of any Permits nor has Horizon or any of the Horizon Banks
received written notice of any violations; and no proceeding is pending or, to
the Knowledge of Horizon, threatened to revoke or limit any Permit. Except as
set forth in SCHEDULE 3.1(L), neither Horizon nor any of the Horizon Banks has
entered into any agreements or written understandings with the OCC, the Federal
Reserve Board, the FDIC, the WVBOB or any other regulatory agency having
authority over it. Neither Horizon nor any of the Horizon Banks is subject to
any judgment, order, writ, injunction or decree which materially adversely
affects, or might reasonably be expected materially adversely to affect, the
financial condition, results of operations, or business of Horizon on a
consolidated basis. "Knowledge of Horizon," and phrases of similar meaning,
shall mean the actual knowledge, after due inquiry, of Frank S. Harkins, Jr.,
B. C. McGinnis, III and Philip L. McLaughlin.
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(m) EMPLOYEE BENEFIT PLANS.
(1) SCHEDULE 3.1(M) includes a correct and complete list of, and City
Holding has been furnished a true and correct copy of (or an accurate
written description thereof in the case of oral agreements or arrangements)
(A) all qualified pension and profit-sharing plans, all deferred
compensation, consultant, severance, thrift, option, bonus and group
insurance contracts and all other incentive, welfare and employee benefit
plans, trust, annuity or other funding agreements, and all other agreements
(including oral agreements) that are presently in effect, or have been
approved prior to the date hereof, maintained for the benefit of employees
or former employees of Horizon or the Horizon Banks or the dependents or
beneficiaries of any employee or former employee of Horizon or the Horizon
Banks, whether or not subject to ERISA (the "Employee Plans"), (B) the most
recent actuarial and financial reports prepared or required to be prepared
with respect to any Employee Plan and (C) the most recent annual reports
filed with any governmental agency, the most recent favorable determination
letter issued by the Internal Revenue Service, and any open requests for
rulings or determination letters, that pertain to any such qualified
Employee Plan. SCHEDULE 3.1(M) identifies each Employee Plan that is
intended to be qualified under Section 401(a) of the Code and each such
plan is qualified.
(2) Neither Horizon, the Horizon Banks nor any employee pension benefit
plan (as defined in Section 3(2) of ERISA (a "Pension Plan")) maintained or
previously maintained by it, has incurred any material liability to the
Pension Benefit Guaranty Corporation ("PBGC") or to the Internal Revenue
Service with respect to any Pension Plan, deferred compensation,
consultant, severance, thrift, option, bonus and group insurance contract
or any other incentive, welfare and employee benefit plan and agreement
presently in effect, or approved prior to the date hereof, for the benefit
of employees or former employees of Horizon and the Horizon Banks or the
dependents or beneficiaries of any employee or former employee of Horizon
or any Horizon Bank (the "Horizon Employee Plans"). There is not currently
pending with the PBGC any filing with respect to any reportable event under
Section 4043 of ERISA nor has any reportable event occurred as to which a
filing is required and has not been made.
(3) Full payment has been made (or proper accruals have been
established) of all contributions which are required for periods prior to
the Closing Date, as defined in SECTION 7.1 hereof, under the terms of each
Horizon Employee Plan, ERISA, or a collective bargaining agreement, no
accumulated funding deficiency (as defined in Section 302 of ERISA or
Section 412 of the Code) whether or not waived, exists with respect to any
Pension Plan (including any Pension Plan previously maintained by Horizon
or the Horizon Banks), and except as set forth on SCHEDULE 3.1(M), there is
no "unfunded current liability" (as defined in Section 412 of the Code)
with respect to any Horizon Employee Plan or Pension Plan.
(4) No Horizon Employee Plan is a "multiemployer plan" (as defined in
Section 3(37) of ERISA). Neither Horizon nor any of the Horizon Banks has
incurred any material liability under Section 4201 of ERISA for a complete
or partial withdrawal from a multiemployer plan (as defined in Section
3(37) of ERISA). Neither Horizon nor any of the Horizon Banks has
participated in or agreed to participate in, a multiemployer plan (as
defined in Section 3(37) of ERISA).
(5) All Employee Plans that are "employee benefit plans," as defined in
Section 3(3) of ERISA, that are maintained by Horizon or any of the Horizon
Banks or previously maintained by Horizon or any of the Horizon Banks
comply and have been administered in compliance in all material respects
with ERISA and all other applicable legal requirements, including the terms
of such plans, collective bargaining agreements and securities laws.
Neither Horizon nor any of the Horizon Banks has any material liability
under any such plan that is not reflected in the Horizon Financial
Statements or on SCHEDULE 3.1(M) hereto.
(6) Except as set forth on SCHEDULE 3.1(M), no prohibited transaction
has occurred with respect to any Employee Plan that is an "employee benefit
plan" (as defined in Section 3(3) of ERISA) maintained by Horizon or any of
the Horizon Banks or previously maintained by Horizon or any of the Horizon
Banks that would result, directly or indirectly, in material liability
under ERISA or in the imposition of a material excise tax under Section
4975 of the Code.
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(7) SCHEDULE 3.1(M) identifies each Horizon Employee Plan that is an
"employee welfare benefit plan" (as defined in Section 3(1) of ERISA) and
which is funded. The funding under each such plan does not exceed the
limitations under Section 419A(b) or 419A(c) of the Code. Neither Horizon
nor any of the Horizon Banks is subject to taxation on the income of any
such plan or any such plan previously maintained by Horizon or any of the
Horizon Banks.
(8) SCHEDULE 3.1(M) identifies the method of funding (including any
individual accounting) for all post-retirement medical or life insurance
benefits for the employees of Horizon and the Horizon Banks. SCHEDULE
3.1(M) also discloses the funded status of these Horizon Employee Plans.
(9) SCHEDULE 3.1(M) identifies each corporate owned life insurance
policy, including any key man insurance policy and policy insuring the life
of any director or employee of Horizon or the Horizon Banks, and indicates
for each such policy, the face amount of coverage, cash surrender value, if
any, and annual premiums.
(10) No trade or business is, or has ever been, treated as a single
employer with Horizon or any of the Horizon Banks for employee benefit
purposes under ERISA and the Code.
(n) INSURANCE. All policies or binders of fire, liability, product
liability, workmen's compensation, vehicular and other insurance held by or on
behalf of Horizon or any of the Horizon Banks are described on SCHEDULE 3.1(N)
and are valid and enforceable in accordance with their terms, are in full force
and effect, and insure against risks and liabilities to the extent and in the
manner customary for the industry and are deemed appropriate and sufficient by
Horizon and the Horizon Banks. Neither Horizon nor any of the Horizon Banks is
in default with respect to any provision contained in any such policy or binder
and has not failed to give any notice or present any claim under any such
policy or binder in due and timely fashion. Neither Horizon nor any of the
Horizon Banks has received notice of cancellation or non-renewal of any such
policy or binder. Horizon has no knowledge of any inaccuracy in any application
for such policies or binders, any failure to pay premiums when due or any
similar state of facts that might form the basis for termination of any such
insurance. Horizon has no knowledge of any state of facts or of the occurrence
of any event that is reasonably likely to form the basis for any material claim
against it not fully covered (except to the extent of any applicable
deductible) by the policies or binders referred to above. Neither Horizon nor
any of the Horizon Banks has received notice from any of its insurance carriers
that any insurance premiums will be materially increased in the future or that
any such insurance coverage will not be available in the future on
substantially the same terms as now in effect.
(o) LOAN PORTFOLIO. Each loan outstanding on the books of Horizon and the
Horizon Banks is in all respects what it purports to be, was made in the
ordinary course of business, was not known to be uncollectible at the time it
was made, accrues interest (except for loans recorded on the Horizon Banks'
books as non-accrual) in accordance with the terms of the loan, and with
respect to loans originated by the Horizon Banks was made in accordance with
the applicable Horizon Bank's standard loan policies as in effect at the time
the loan was negotiated except for loans to facilitate the sale of OREO or
loans with renegotiated terms and conditions. The records of the Horizon Banks
regarding all loans outstanding and OREO by the Horizon Banks on their
respective books are accurate in all material respects and the risk
classifications for the loans outstanding are, in the best judgment of the
management of Horizon and the applicable Horizon Bank, appropriate. The
reserves for possible loan losses on the outstanding loans of the Horizon
Banks, as reflected in the Horizon Financial Statements, have been established
in accordance with GAAP and with the requirements of the Federal Reserve Board,
the OCC and the FDIC. In the best judgment of the management of Horizon and the
applicable Horizon Bank such reserves are adequate as of the date hereof and
will be adequate as of the Effective Time of the Holding Company Merger to
absorb all known and anticipated loan losses in the loan portfolio of the
Horizon Banks. Except as identified on SCHEDULE 3.1(O), no loan in excess of
$50,000 has been classified by examiners (regulatory or internal) as "Special
Mention", "Substandard", "Doubtful", "Loss", or words of similar import. Except
as disclosed on SCHEDULE 3.1(J)(4), the OREO included in any nonperforming
asset of the Horizon Banks is recorded at the lower of cost or fair value less
estimated costs to sell based on independent appraisals that comply with the
requirements of the Financial Institutions Reform, Recovery and Enforcement Act
of 1989 and Uniform Standards of Professional Appraisal Practice. Except as
identified on SCHEDULE 3.1(O), to the Knowledge of Horizon and the applicable
Horizon Banks, each loan reflected as an asset on the Horizon Financial
Statements is
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the legal, valid and binding obligation of the obligor and any guarantor,
subject to bankruptcy, insolvency, fraudulent conveyance and other laws of
general applicability relating to or affecting creditors' rights and to general
principles of equity, and no defense, offset or counterclaim has been asserted
with respect to any such loan, which if successful would have a material
adverse effect on the financial condition, results of operation or business of
Horizon on a consolidated basis.
(p) ABSENCE OF CHANGES. Except as identified on SCHEDULE 3.1(P), since
June 30, 1998, there has not been any material adverse change in the condition
(financial or otherwise), aggregate assets or liabilities, earnings or business
of Horizon, other than changes resulting from or attributable to (i) changes
since such date in laws or regulations, GAAP or interpretations of either
thereof that affect the banking industry generally, (ii) changes since such
date in the general level of interest rates, (iii) expenses since such date
incurred in connection with the transactions contemplated by this Agreement,
(iv) accruals and reserves by Horizon or the Horizon Banks since such date
pursuant to the terms of SECTION 4.8 hereof, or (v) any other accruals,
reserves or expenses incurred by Horizon or the Horizon Banks since such date
with City Holding's prior written consent. Since June 30, 1998, the business of
Horizon has been conducted only in the ordinary course.
(q) BROKERS AND FINDERS. Neither Horizon, the Horizon Banks nor any of
their officers, directors or employees have employed any broker or finder or
incurred any liability for any brokerage fees, commissions or finders' fees in
connection with the transactions contemplated herein, except for the engagement
of Baxter, Fentriss & Co., whose total compensation for its engagement shall
not exceed one half of one percent (.5%) of the aggregate consideration of the
Holding Company Merger, plus out-of-pocket expenses, as set forth in the
engagement letter of Baxter, Fentriss & Co., dated as of May 1, 1998.
(r) SUBSIDIARIES; PARTNERSHIPS AND JOINT VENTURES. Horizon has no
subsidiaries, direct or indirect, other than the Horizon Banks. Horizon owns,
directly or indirectly, all of the issued and outstanding capital stock of its
subsidiaries free and clear of any liens, claims, encumbrances, charges or
rights of third parties of any kind whatsoever and is not a party to any joint
venture agreement or partnership except as set forth in SCHEDULE 3.1(R).
(s) REPORTS. Since January 1, 1995, Horizon and the Horizon Banks have
filed all material reports and statements, together with any amendments
required to be made with respect thereto, that were required to be filed with
(i) the Federal Reserve Board, (ii) the FDIC, (iii) the OCC, (iv) the SEC, (v)
the WVBOB, and (vi) any other governmental or regulatory authority or agency
having jurisdiction over their operations. Each of such reports and documents,
including the financial statements, exhibits and schedules thereto, filed with
the SEC pursuant to the 1934 Act was in form and substance in compliance in all
material respects with the 1934 Act. No such report or statement, or any
amendments thereto, contains any statement which, at the time and in light of
the circumstances under which it was made, was false or misleading with respect
to any material fact necessary in order to make the statements contained
therein not false or misleading. Horizon is a reporting company under Section
12(g) or 15(d) of the 1934 Act and the regulations of the SEC.
(t) ENVIRONMENTAL MATTERS. For purposes of this subsection, the following
terms shall have the indicated meaning:
"Environmental Law" means any federal, state or local law, statute,
ordinance, rule, regulation, code, license, permit, authorization, approval,
consent, order, judgment, decree, injunction or agreement with any governmental
entity relating to (i) the protection, preservation or restoration of the
environment (including, without limitation, air, water vapor, surface water,
groundwater, drinking water supply, surface soil, subsurface soil, plant and
animal life or any other natural resource), and/or (ii) the use, storage,
recycling, treatment, generation, transportation, processing, handling,
labeling, production, release or disposal of Hazardous Substances. The term
"Environmental Law" includes without limitation (i) the Comprehensive
Environmental Response, Compensation and Liability Act, as amended, 42 U.S.C.
Section 9601, ET SEQ; the Resource Conservation and Recovery Act, as amended,
42 U.S.C. Section 6901, ET SEQ; the Clean Air Act, as amended, 42 U.S.C.
Section 7401, ET SEQ; the Federal Water Pollution Control Act, as amended, 33
U.S.C. Section 1251, ET SEQ; the Toxic Substances Control Act, as amended, 15
U.S.C. Section 9601, ET SEQ; the Emergency Planning and Community Right to Know
Act, 42 U.S.C. Section 11001, ET SEQ; the Safe Drinking Water Act, 42 U.S.C.
Section 300f, ET SEQ; and all comparable state and local laws, and (ii) any
common law (including without limitation common law that may impose
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strict liability) that may impose liability or obligations for injuries or
damages due to, or threatened as a result of, the presence of or exposure to
any Hazardous Substance.
"Hazardous Substance" means any substance presently listed, defined,
designated or classified as hazardous, toxic, radioactive or dangerous, or
otherwise regulated, under any Environmental Law, whether by type or by
quantity, including any material containing any such substance as a component.
Hazardous Substances include without limitation petroleum or any derivative or
by-product thereof, asbestos, radioactive material, and polychlorinated
biphenyls.
"Loan Portfolio Properties and Other Properties Owned" means those
properties owned or operated by Horizon or the Horizon Banks or any of their
subsidiaries, including those properties serving as collateral for any loans
made and retained by Horizon or the Horizon Banks or for which Horizon or the
Horizon Banks serves in a trust relationship for the loans retained in
portfolio.
Except as disclosed in SCHEDULE 3.1(T), to the Knowledge of Horizon:
(i) neither Horizon nor any of the Horizon Banks has been or is in
violation of or liable under any Environmental Law;
(ii) none of the Loan Portfolio Properties and Other Properties Owned
has been or is in violation of or liable under any Environmental Law; and
(iii) there are no actions, suits, demands, notices, claims,
investigations or proceedings pending or threatened relating to the
liability of the Loan Portfolio Properties and Other Properties Owned under
any Environmental Law, including without limitation any notices, demand
letters or requests for information from any federal or state environmental
agency relating to any such liabilities under or violations of
Environmental Law.
(u) DISCLOSURE. Except to the extent of any subsequent correction or
supplement with respect thereto furnished prior to the date hereof, no written
statement, certificate, schedule, list or other written information furnished
by or on behalf of Horizon at any time to City Holding, in connection with this
Agreement, when considered as a whole, contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
necessary in order to make the statements herein or therein, in light of the
circumstances under which they were made, not misleading. Each document
delivered or to be delivered by Horizon to City Holding is or will be a true
and complete copy of such document, unmodified except by another document
delivered by Horizon.
(v) ACCOUNTING AND TAX MATTERS. Neither Horizon nor any of the Horizon
Banks has taken or agreed to take any action nor do any of them have any
knowledge of any fact or circumstance that would prevent the Holding Company
Merger from qualifying as a reorganization within the meaning of Section 368 of
the Code or from being eligible for "pooling-of-interests" accounting.
(w) REGULATORY APPROVALS. Neither Horizon nor any of the Horizon Banks
knows of any reason why the approvals, consents and waivers of governmental
authorities referred to in SECTIONS 6.1(F) and 6.2(F) hereof should not be
obtained on a timely basis without the imposition of any condition of the type
referred to in Section 6.1(f) hereof and none of them has taken or agreed to
take any action that would materially impede or delay the receipt of such
approvals, consents and waivers or would be reasonably likely to result in the
imposition of any such condition.
(x) YEAR 2000 MATTERS. The computer software operated by Horizon which is
material to the conduct of its business is capable of providing or is being
adapted to provide (pursuant to plans approved by the Board of Directors,
copies of which have been provided to City Holding, the expense of which has
been reserved against or otherwise provided for), in all material respects,
uninterrupted millennium functionality to record, store, process and present
calendar dates falling on or after January 1, 2000 in substantially the same
manner and with the same functionality as such software records, stores
processes and presents such calendar dates falling on or before December 31,
1999. None of Horizon or any of the Horizon Banks has received, or reasonably
expects to receive, a "Year 2000 Deficiency Notification Letter" (as such term
is employed in the Federal Reserve Board's Supervision and Regulation Letter
No. SR 98-3(SUP), dated March 4, 1998).
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(y) INTEREST RATE RISK MANAGEMENT INSTRUMENTS. All interest rate swaps,
caps, floors and option agreements and other interest rate risk management
arrangements, whether entered into for the account of Horizon or any of its
subsidiaries, were entered into in the ordinary course of business and, to the
Knowledge of Horizon, in accordance with prudent banking practices and
applicable rules, regulations and policies of any regulatory authority of
competent jurisdiction and with counterparties believed to be financially
responsible at the time and are legal, valid and binding obligations of Horizon
or one of its subsidiaries enforceable in accordance with their terms except as
enforceability may be limited by laws affecting insured depository institutions
and similar laws affecting the enforcement of creditors' rights generally and
subject to any equitable principles limiting the right to obtain specific
performance. Horizon and each of Horizon's subsidiaries have duly performed all
of their obligations thereunder to the extent that such obligations to perform
have accrued, and, to the Knowledge of Horizon, there are no breaches,
violations or defaults or allegations or assertions of such by any party
thereunder.
(z) RECISSION OF REPURCHASES. Except as set forth on SCHEDULE 3.1(Z), all
share repurchase programs previously authorized by the Board of Directors of
Horizon have either expired or been revoked by resolution duly adopted on or
prior to the date hereof.
3.2. REPRESENTATIONS AND WARRANTIES OF CITY HOLDING AND CITY NATIONAL.
City Holding and City National represent and warrant to Horizon and the
Horizon Banks as follows (subject to SECTION 4.13(B) with respect to the
provision of the schedules referred to herein):
(a) ORGANIZATION, STANDING AND POWER. City Holding is a corporation duly
organized, validly existing and in good standing under the laws of West
Virginia and has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now being conducted and
to perform this Agreement and the Holding Company Plan of Merger and to effect
the transactions contemplated hereby and thereby, subject to the approval of
its shareholders as contemplated by SECTION 4.2 and federal and state
regulatory approvals provided for herein. City Holding will deliver to Horizon
complete and correct copies of its Articles of Incorporation and its By-laws as
amended to the date hereof.
City National is a national banking association duly organized, validly
existing and in good standing under the laws of the United States and has all
requisite corporate power and authority to own, lease and operate its
properties and carry on its business as now being conducted and to perform this
Agreement and to effect the transactions contemplated hereby. City National's
deposits are insured by the FDIC to the maximum extent permitted by law. City
National will deliver to Horizon a complete and correct copy of its Charter and
By-laws as amended to the date hereof.
(b) CAPITAL STRUCTURE. The authorized capital stock of City Holding
consists of 20,000,000 shares of Common Stock and 500,000 shares of Preferred
Stock, of which 6,732,732 shares of Common Stock and no shares of Preferred
Stock were issued and outstanding as of June 30, 1998. All of such issued and
outstanding shares of City Holding Common Stock were validly issued, fully paid
and nonassessable at such date.
The authorized capital stock of City National consists of 131,250 shares
of common stock, $5.00 par value, of which 123,701 shares were issued and
outstanding as of June 30, 1998, all of which shares are owned by City Holding
free and clear of any liens, claims, encumbrances, charges or rights of third
parties of any kind whatsoever, except as disclosed on SCHEDULE 3.2(B)(1). All
such issued and outstanding shares of common stock of City National were
validly issued, fully paid and nonassessable at such date.
City Holding knows of no person who beneficially owns 5% or more of the
outstanding City Holding Common Stock as of the date hereof, except as
described on SCHEDULE 3.2(B)(2).
(c) AUTHORITY. Subject to the approval of this Agreement and the Holding
Company Plan of Merger by the shareholders of City Holding as contemplated by
SECTION 4.2, the execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby and by the Holding Company Plan of
Merger have been duly and validly authorized by all necessary action on the
part of City Holding; and this Agreement is a valid and binding obligation of
City Holding, enforceable in accordance with its terms. The execution and
delivery of this Agreement, the consummation of the transactions contemplated
hereby and by the Holding Company
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Plan of Merger and compliance by City Holding with any of the provisions hereof
or thereof will not (i) conflict with or result in a breach of any provision of
its Articles of Incorporation or By-laws or a default (or give rise to any
right of termination, cancellation or acceleration) under any of the terms,
conditions or provisions of any note, bond, debenture, mortgage, indenture,
license, material agreement or other material instrument or obligation to which
City Holding is a party, or by which it or any of its properties or assets may
be bound or (ii) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to City Holding or any of its properties or assets. No
consent or approval by any governmental authority, other than compliance with
applicable federal and state securities and banking laws, the rules of the
Nasdaq Stock Market and regulations of the Federal Reserve Board, the OCC, the
FDIC and the WVBOB is required in connection with the execution and delivery by
City Holding of this Agreement or the consummation by City Holding of the
transactions contemplated hereby or by the Holding Company Plan of Merger. City
Holding's Board of Directors has taken all action necessary to ensure that the
Transaction is exempted from any West Virginia statute that purports to limit
or restrict business combinations or the ability to acquire or vote shares and
any change of control or anti-takeover provisions of City Holding's Articles or
By-laws.
The consummation of the transactions contemplated hereby, including the
Bank Mergers, and compliance by City National with any of the provisions hereof
will not (i) conflict with or result in a breach of any provision of its
Articles of Incorporation or By-laws or a default (or give rise to any right of
termination, cancellation or acceleration) under any of the terms, conditions
or provisions of any note, bond, debenture, mortgage, indenture, license,
material agreement or other material instrument or obligation to which City
National is a party, or by which it or any of its properties or assets may be
bound, or (ii) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to City National or any of its properties or assets. No
consent or approval by any government authority, other than compliance with
applicable federal and state securities and banking laws, and regulations of
the OCC, the FDIC, and the WVBOB, is required in connection with the
consummation by City National of the transactions contemplated hereby.
(d) INVESTMENTS. All securities owned by City Holding and City National of
record and beneficially are free and clear of all mortgages, liens, pledges,
encumbrances or any other restriction, whether contractual or statutory, which
would materially impair the ability of City Holding or City National freely to
dispose of any such security at any time, except as noted on SCHEDULE 3.2(D).
Any securities owned of record by City Holding and City National in an amount
equal to 5% or more of the issued and outstanding voting securities of the
issuer thereof have been noted on such SCHEDULE 3.2(D). There are no voting
trusts or other agreements or undertakings of which City Holding or City
National is a party, as an investor, with respect to the voting of such
securities. With respect to all repurchase agreements to which City Holding or
City National is a party, City Holding or City National has a valid, perfected
first lien or security interest in the government securities or other
collateral securing the repurchase agreement, and the value of the collateral
securing each such repurchase agreement equals or exceeds the amount of the
debt secured by such collateral under such agreement.
(e) FINANCIAL STATEMENTS. SCHEDULE 3.2(E) contains copies of the following
consolidated financial statements of City Holding and City National (the "City
Holding Financial Statements"):
(i) Consolidated Balance Sheets as of December 31, 1997 and 1996
(audited), and as of June 30, 1998 and 1997 (unaudited);
(ii) Consolidated Statements of Income for each of the three years ended
December 31, 1997, 1996, and 1995 (audited) and for each of the three and
six month periods ended June 30, 1998 and 1997 (unaudited);
(iii) Consolidated Statements of Changes in Stockholders' Equity for
each of the three years ended December 31, 1997, 1996 and 1995 (audited)
and for each of the three and six month periods ended June 30, 1998 and
1997 (unaudited); and
(iv) Consolidated Statements of Cash Flows for each of the three years
ended December 31, 1997, 1996 and 1995 (audited) and for each of the three
and six month periods ended June 30, 1998 and 1997 (unaudited).
Such financial statements and the notes thereto have been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
indicated unless otherwise noted in the City Holding Financial Statements.
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Each of such consolidated balance sheets, together with the notes thereto,
presents fairly as of its date the consolidated financial condition and assets
and liabilities of City Holding and City National, as applicable. The
consolidated income statements, statements of changes in shareholders' equity
and statements of cash flows, together with the notes thereto, present fairly
the results of operations, shareholders' equity and cash flows of City Holding
or City National, as applicable, for the periods indicated, in accordance with
GAAP.
Except as disclosed in the City Holding Financial Statements, and in the
case of City National, compliance with and subject to regulatory requirements
of general applicability, there are no restrictions precluding City Holding or
City National from paying dividends when, as and if declared by their
respective Boards of Directors.
(f) ABSENCE OF UNDISCLOSED LIABILITIES. At June 30, 1998 and December 31,
1997, City Holding and its consolidated subsidiaries had no material
obligations or liabilities, (contingent or otherwise) of any nature which were
not reflected in the City Holding Financial Statements as of such dates, or
disclosed in the notes thereto or in the City Holding periodic reports filed
with the SEC under the 1934 Act as of such dates, or disclosed in the notes
thereto, except for those which are appropriately disclosed in Schedules
specifically referred to herein or which in the aggregate are immaterial.
(g) TAX MATTERS. Each of City Holding, City National, and all other
subsidiaries of City Holding are members of the same "affiliated group," as
defined in Section 1504(a)(1) of the Code, as City Holding (collectively, the
"City Holding Group"). Each member of the City Holding Group has filed or
caused to be filed or (in the case of returns or reports not yet due) will file
all tax returns and reports required to have been filed by or for them before
the Effective Time of the Holding Company Merger, and all information set forth
in such returns or reports is or (in the case of such returns or reports not
yet due) will be accurate and complete in all material respects. Each member of
the City Holding Group has paid or made adequate provision for, or (with
respect to returns or reports not yet filed) before the Effective Time of the
Holding Company Merger will pay or make adequate provision for, all taxes,
additions to tax, penalties, and interest for all periods covered by those
returns or reports. There are, and at the Effective Time of the Holding Company
Merger will be, no unpaid taxes, additions to tax, penalties, or interest due
and payable by any member of the City Holding Group that are or could become a
lien on any asset, or otherwise materially adversely affect the business,
property or financial condition, of any member of the City Holding Group except
for taxes and any such related liability (a) incurred in the ordinary course of
business for which adequate provision has been made by any member of the City
Holding Group or (b) being contested in good faith and disclosed in SCHEDULE
3.2(G). Each member of the City Holding Group has collected or withheld, or
will collect or withhold before the Effective Time of the Holding Company
Merger, all amounts required to be collected or withheld by it for any taxes,
and all such amounts have been, or before the Effective Time of the Holding
Company Merger will have been, paid to the appropriate governmental agencies or
set aside in appropriate accounts for future payment when due. Each member of
the City Holding Group is in material compliance with, and its records contain
all information and documents (including, without limitation, properly
completed IRS Forms W-9) necessary to comply in all material respects with, all
applicable information reporting and tax withholding requirements under
federal, state, and local laws, rules, and regulations, and such records
identify with specificity all accounts subject to backup withholding under
Section 3406 of the Code. The consolidated statements of financial condition
contained in the City Holding Financial Statements fully and properly reflect,
as of the dates thereof, the aggregate liabilities of the members of the City
Holding Group for all accrued taxes, additions to tax, penalties and interest
in accordance with GAAP. For periods ending after June 30, 1998, the books and
records of each member of the City Holding Group fully and properly reflect
their liability for all accrued taxes, additions to tax, penalties and interest
in accordance with GAAP. Except as disclosed in SCHEDULE 3.2(G), no member of
the City Holding Group has granted (nor is it subject to) any waiver of the
period of limitations for the assessment of tax for any currently open taxable
period, and no unpaid tax deficiency has been asserted in writing against or
with respect to any member of the City Holding Group by any taxing authority.
No member of the City Holding Group has made or entered into, or holds any
asset subject to, a consent filed pursuant to Section 341(f) of the Code and
the regulations thereunder or a "safe harbor lease" subject to former Section
168(f)(8) of the Code and the regulations thereunder. SCHEDULE 3.2(G) describes
all tax elections, consents and agreements affecting any member of the City
Holding Group. To the Knowledge of City Holding, no City Holding shareholder is
a "foreign person" for purposes of Section 1445 of the Code.
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(h) OPTIONS, WARRANTS AND RELATED MATTERS. There are no outstanding
unexercised options, warrants, calls, commitments or agreements of any
character to which City Holding or City National is a party or by which it is
bound, calling for the issuance of securities of City Holding or City National
or any security representing the right to purchase or otherwise receive any
such security, except (i) as set forth on SCHEDULE 3.2(H) and (ii) the City
Holding Option Agreement.
(i) PROPERTY. City Holding and City National own (or enjoy use of under
capital leases) all property reflected on the City Holding Financial Statements
as of June 30, 1998 as being owned by them (except property sold or otherwise
disposed of in the ordinary course of business after such date). All material
property shown as being owned is owned free and clear of all mortgages, liens,
pledges, charges or encumbrances of any nature whatsoever, except those
referred to in such City Holding Financial Statements or the notes thereto,
liens for current taxes not yet due and payable, any unfiled mechanics' liens
and such encumbrances and imperfections of title, if any, as are not
substantial in character or amount or otherwise would materially impair City
Holding's consolidated business operations. The leases relating to leased
property are fairly reflected in such City Holding Financial Statements.
All property and assets material to the business or operations of City
Holding and City National, other than OREO, are in substantially good operating
condition and repair, and such property and assets are adequate for the
business and operations of City Holding and City National as currently
conducted.
(j) ADDITIONAL SCHEDULES FURNISHED TO HORIZON. In addition to any
Schedules furnished to Horizon pursuant to other provisions of this Agreement,
City Holding has furnished to Horizon the following Schedules which are correct
and complete as of the date hereof:
(1) EMPLOYEES. SCHEDULE 3.2(J)(1) lists as of the date hereof (A) the
names of and current annual salary rates for all present employees of City
Holding and its subsidiaries who received, respectively, $75,000 or more in
aggregate compensation, whether in salary or otherwise as reported or would
be reported on Form W-2, during the year ended December 31, 1997, or are
presently scheduled to receive salary in excess of $75,000 during the year
ending December 31, 1998, (B) the number of shares of City Holding Common
Stock owned beneficially by each director of City Holding or City National
as of the date hereof, (C) the names of and the number of shares of City
Holding Common Stock owned by each person known to City Holding who
beneficially owns 5% or more of the outstanding City Holding Common Stock
as of the date hereof, and (D) the names of, the number of outstanding
options of, and the exercise price of, each agreement to make stock-based
awards granted to each person under City Holding's incentive stock option
plan (the "City Holding Stock Option Plan") or any other option granted by
City Holding or any subsidiary to any director, officer, employee,
consultant or advisor (collectively, "City Holding Options") and the
exercise price of each such City Holding Option. City Holding has no
stock-based employee benefit plan or arrangement other than the City
Holding Option Agreement, the City Holding Incentive Plan, the City Holding
Stock Incentive Plan, the City Holding Profit Sharing and 401(k) Plan, and
the City Holding Employees' Stock Ownership Plan.
(2) CERTAIN CONTRACTS. SCHEDULE 3.2(J)(2) lists all notes, bonds,
mortgages, indentures, licenses, lease agreements and other contracts and
obligations to which City Holding or any of its subsidiaries is an indebted
party or a lessee, licensee or obligee as of the date hereof except for
those entered into by City Holding or its subsidiaries in the ordinary
course of business consistent with prior practice and that do not involve
an amount remaining greater than $100,000.
(3) EMPLOYMENT CONTRACTS AND RELATED MATTERS. Except in all cases as set
forth on SCHEDULE 3.2(J)(3), neither City Holding nor any of its
subsidiaries is a party to any employment contract not terminable at the
option of such party without liability. Except in all cases as set forth on
Schedule 3.2(j)(3), neither City Holding nor any of its subsidiaries is a
party to (A) any retirement, profit sharing or pension plan or thrift plan
or agreement or employee benefit plan (as defined in Section 3 of ERISA),
(B) any management or consulting agreement not terminable at the option of
such party without liability or (C) any union or labor agreement.
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(4) REAL ESTATE. SCHEDULE 3.2(J)(4) describes, as of the date hereof,
all interests in real property owned, leased or otherwise claimed by City
Holding and its subsidiaries, including OREO.
(5) AFFILIATES. SCHEDULE 3.2(J)(5) sets forth the names and number of
shares of City Holding Common Stock owned as of the date hereof
beneficially or of record by any persons City Holding considers to be
affiliates of City Holding ("City Holding Affiliates") as that term is
defined for purposes of Rule 145 under the 1933 Act.
(k) AGREEMENTS IN FORCE AND EFFECT. All material contracts, agreements,
plans, leases, policies and licenses referred to in any Schedule of City
Holding referred to herein are valid and in full force and effect; and neither
City Holding nor City National have breached any provision of, or are in
default in any respect under the terms of, any such contract, agreement, lease,
policy or license, the effect of which breach or default would have a material
adverse effect upon the financial condition, results of operations or business
of City Holding and its subsidiaries taken as a whole.
(l) LEGAL PROCEEDINGS; COMPLIANCE WITH LAWS. SCHEDULE 3.2(L) describes all
legal, administrative, arbitration or other proceedings or governmental
investigations known to City Holding pending, or, to the Knowledge of City
Holding, threatened or probable of assertion against City Holding or City
National. Except as set forth on Schedule 3.2(l), no such proceeding or
investigation, if decided adversely, would have a material adverse effect on
the financial condition, results of operations, business or prospects of City
Holding on a consolidated basis. Except as set forth in SCHEDULE 3.2(L), City
Holding and City National have complied with any laws, ordinances,
requirements, regulations or orders applicable to their respective businesses,
except where noncompliance would not have a material adverse effect on the
financial condition, results of operations or business of City Holding on a
consolidated basis. City Holding and City National have all licenses, permits,
orders or approvals (collectively, the "City Permits") of any federal, state,
local or foreign governmental or regulatory body that are necessary for the
conduct of the respective businesses of City Holding and City National and the
absence of which would have a material adverse effect on the financial
condition, results of operations, or business of City Holding on a consolidated
basis; the City Permits are in full force and effect; no material violations
are or have been recorded in respect of any City Permits nor has City Holding
or City National received written notice of any violations; and no proceeding
is pending or, to the Knowledge of City Holding, threatened to revoke or limit
any City Permits. Neither City Holding nor City National is subject to any
judgment, order, writ, injunction or decree which materially adversely affects,
or might reasonably be expected to materially adversely affect, the financial
condition, results of operations or business of City Holding on a consolidated
basis. Except as set forth in SCHEDULE 3.2(L), neither City Holding, nor City
National, nor any other subsidiary of either has entered into any agreements or
written understandings with the OCC, the Federal Reserve Board, the FDIC, the
WVBOB or any regulatory agency having authority over it. "Knowledge of City
Holding," and phrases of similar meaning, shall mean the actual knowledge,
after due inquiry, of Steven J. Day, Robert A. Henson and John W. Alderman III.
(m) EMPLOYEE BENEFIT PLANS.
(1) SCHEDULE 3.2(M) includes a correct and complete list of, and Horizon
has been furnished a true and correct copy of (or an accurate written
description thereof in the case of oral agreements or arrangements) (A) all
qualified pension and profit-sharing plans, all deferred compensation,
consultant, severance, thrift, option, bonus and group insurance contracts
and all other incentive, welfare and employee benefit plans, trust, annuity
or other funding agreements, and all other agreements (including oral
agreements) that are presently in effect, or have been approved prior to
the date hereof, maintained for the benefit of employees or former
employees of City Holding or its subsidiaries or the dependents or
beneficiaries of any employee or former employee of City Holding or its
subsidiaries, whether or not subject to ERISA (the "Employee Plans"), (B)
the most recent actuarial and financial reports prepared or required to be
prepared with respect to any Employee Plan and (C) the most recent annual
reports filed with any governmental agency, the most recent favorable
determination letter issued by the Internal Revenue Service, and any open
requests for rulings or determination letters, that pertain to any such
qualified Employee Plan. SCHEDULE 3.2(M) identifies each Employee Plan that
is intended to be qualified under Section 401(a) of the Code and each such
plan is qualified.
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(2) Neither City Holding nor any of its subsidiaries, nor any Pension
Plan maintained or previously maintained by it, has incurred any material
liability to the PBGC or to the Internal Revenue Service with respect to
any Pension Plan, deferred compensation, consultant, severance, thrift,
option, bonus and group insurance contract or any other incentive, welfare
and employee benefit plan and agreement presently in effect, or approved
prior to the date hereof, for the benefit of employees or former employees
of City Holding and its subsidiaries or the dependents or beneficiaries of
any employee or former employee of City Holding or any subsidiary (the
"City Holding Employee Plans"). There is not currently pending with the
PBGC any filing with respect to any reportable event under Section 4043 of
ERISA nor has any reportable event occurred as to which a filing is
required and has not been made.
(3) Full payment has been made (or proper accruals have been
established) of all contributions which are required for periods prior to
the Closing Date, as defined in SECTION 7.1 hereof, under the terms of each
City Holding Employee Plan, ERISA, or a collective bargaining agreement, no
accumulated funding deficiency (as defined in Section 302 of ERISA or
Section 412 of the Code) whether or not waived, exists with respect to any
Pension Plan, (including any Pension Plan previously maintained by City
Holding, City National or any other subsidiary of either), and except as
set forth in SCHEDULE 3.2(M), there is no "unfunded current liability" (as
defined in Section 412 of the Code) with respect to any City Holding
Employee Plan or Pension Plan.
(4) No City Holding Employee Plan is a "multiemployer plan" (as defined
in Section 3(37) of ERISA). Neither City Holding nor City National nor any
subsidiary of either has incurred any material liability under Section 4201
of ERISA for a complete or partial withdrawal from a multiemployer plan (as
defined in Section 3(37) of ERISA). Neither City Holding nor City National
has participated in or agreed to participate in, a multiemployer plan (as
defined in Section 3(37) of ERISA).
(5) All "employee benefit plans," as defined in Section 3(3) of ERISA,
that are maintained by City Holding, City National or any subsidiary of
either or previously maintained by City Holding, City National or any
subsidiary of either comply and have been administered in compliance in all
material respects with ERISA and all other applicable legal requirements,
including the terms of such plans, collective bargaining agreements and
securities laws. Neither City Holding nor any of its subsidiaries has any
material liability under any such plan that is not reflected in the City
Holding Financial Statements or on SCHEDULE 3.2(M) hereto.
(6) Except as set forth on SCHEDULE 3.2(M), no prohibited transaction
has occurred with respect to any "employee benefit plan" (as defined in
Section 3(3) of ERISA) maintained by City Holding or any of its
subsidiaries or previously maintained by City Holding or any of its
subsidiaries that would result, directly or indirectly, in material
liability under ERISA or in the imposition of a material excise tax under
Section 4975 of the Code.
(7) SCHEDULE 3.2(M) identifies each City Holding Employee Plan that is
an "employee welfare benefit plan" (as defined in Section 3(1) of ERISA)
and which is funded. The funding under each such plan does not exceed the
limitations under Section 419A(b) or 419A(c) of the Code. Neither City
Holding nor any of its subsidiaries is subject to taxation on the income of
any such plan or any such plan previously maintained by City Holding or any
of its subsidiaries.
(8) SCHEDULE 3.2(M) identifies the method of funding (including any
individual accounting) for all post-retirement medical or life insurance
benefits for the employees of City Holding and its subsidiaries. SCHEDULE
3.2(M) also discloses the funded status of these City Holding Employee
Plans.
(9) SCHEDULE 3.2(M) identifies each corporate owned life insurance
policy, including any key man insurance policy and policy insuring the life
of any director or employee of City Holding and its subsidiaries, and
indicates for each such policy, the face amount of coverage, cash surrender
value, if any, and annual premiums.
(10) No trade or business is, or has ever been, treated as a single
employer with City Holding and its subsidiaries for employee benefit
purposes under ERISA and the Code.
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(n) INSURANCE. All policies or binders of fire, liability, product
liability, workmen's compensation, vehicular and other insurance held by or on
behalf of City Holding or any of its subsidiaries are described on SCHEDULE
3.2(N) and are valid and enforceable in accordance with their terms, are in
full force and effect, and insure against risks and liabilities to the extent
and in the manner customary for the industry and are deemed appropriate and
sufficient by City Holding or any of its subsidiaries. Neither City Holding nor
any of its subsidiaries is in default with respect to any provision contained
in any such policy or binder and has not failed to give any notice or present
any claim under any such policy or binder in due and timely fashion. Neither
City Holding nor any of its subsidiaries has received notice of cancellation or
non-renewal of any such policy or binder. City Holding has no knowledge of any
inaccuracy in any application for such policies or binders, any failure to pay
premiums when due or any similar state of facts that might form the basis for
termination of any such insurance. City Holding has no knowledge of any state
of facts or of the occurrence of any event that is reasonably likely to form
the basis for any material claim against it not fully covered (except to the
extent of any applicable deductible) by the policies or binders referred to
above. Neither City Holding nor any of its subsidiaries has received notice
from any of its insurance carriers that any insurance premiums will be
materially increased in the future or that any such insurance coverage will not
be available in the future on substantially the same terms as now in effect.
(o) LOAN PORTFOLIO. Each loan outstanding on the books of City Holding and
City National is in all respects what it purports to be, was made in the
ordinary course of business, was not known to be uncollectible at the time it
was made, accrues interest (except for loans recorded on such books as
non-accrual) in accordance with the terms of the loan, and with respect to
loans originated by City National was made in accordance with City National's
standard loan policies as in effect at the time the loan was negotiated except
for loans to facilitate the sale of OREO or loans with renegotiated terms and
conditions. The records of City National regarding all loans outstanding and
OREO by City National on its books are accurate in all material respects and
the risk classifications for the loans outstanding are, in the best judgment of
the management of City Holding and City National, appropriate. The reserves for
possible loan losses on the outstanding loans of City National, as reflected in
the City Holding Financial Statements, have been established in accordance with
GAAP and with the requirements of the OCC, the Federal Reserve Board, and the
FDIC. In the best judgment of the management of City Holding and City National
such reserves are adequate as of the date hereof and will be adequate as of the
Effective Time of the Holding Company Merger to absorb all known and
anticipated loan losses in the loan portfolio of City National. Except as
identified on SCHEDULE 3.2(O), no loan in excess of $50,000 has been classified
by examiners (regulatory or internal) as "Special Mention", "Substandard",
"Doubtful", "Loss", or words of similar import. Except as disclosed on SCHEDULE
3.2(O), the OREO included in any nonperforming asset of City National is
recorded at the lower of cost or fair value less estimated costs to sell based
on independent appraisals that comply with the requirements of the Financial
Institutions Reform, Recovery and Enforcement Act of 1989 and Uniform Standards
of Professional Appraisal Practice. Except as identified on SCHEDULE 3.2(O), to
the Knowledge of City Holding and City National, each loan reflected as an
asset on the City Holding Financial Statements is the legal, valid and binding
obligation of the obligor and any guarantor, subject to bankruptcy, insolvency,
fraudulent conveyance and other laws of general applicability relating to or
affecting creditors' rights and to general principles of equity, and no
defense, offset or counterclaim has been asserted with respect to any such
loan, which if successful would have a material adverse effect on the financial
condition, results of operation or business of City Holding on a consolidated
basis.
(p) ABSENCE OF CHANGES. Except as identified on Schedule 3.2(p), since
June 30, 1998 there has not been any material adverse change in the condition
(financial or otherwise), aggregate assets or liabilities, earnings or business
of City Holding, other than changes resulting from or attributable to (i)
changes since such date in laws or regulations, GAAP or interpretations of
either thereof that affect the banking or savings and loan industries
generally, (ii) changes since such date in the general level of interest rates,
(iii) expenses since such date incurred in connection with the transactions
contemplated by this Agreement, or (iv) any other accruals, reserves or
expenses incurred by City Holding or its subsidiaries since such date with
Horizon's prior written consent. Since June 30, 1998, the business of City
Holding has been conducted only in the ordinary course.
(q) BROKERS AND FINDERS. Neither City Holding, City National nor any of
their respective officers, directors or employees has employed any broker or
finder or incurred any liability for any brokerage fees, commissions
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or finders' fees in connection with the transactions contemplated herein,
except for the engagement of Wheat First Securities, Inc., whose total
compensation for its engagement shall not exceed $2,000,000.
(r) SUBSIDIARIES; PARTNERSHIPS AND JOINT VENTURES. City Holding's only
subsidiaries, direct or indirect, are set forth in SCHEDULE 3.2(R). Such
corporations are duly organized, validly existing and in good standing under
the laws of their jurisdiction of incorporation and have all requisite
corporate power and authority to own, lease and operate their properties and to
carry on their business as now being conducted in all material respects. City
Holding owns, directly or indirectly, all of the issued and outstanding capital
stock of its subsidiaries free and clear of any liens, claims, encumbrances,
charges or rights of third parties of any kind whatsoever and is not a party to
any joint venture agreement or partnership except as set forth in SCHEDULE
3.2(R).
(s) REPORTS. Since January 1, 1995, City Holding and City National have
filed all material reports and statements, together with any amendments
required to be made with respect thereto, that were required to be filed with
(i) the Federal Reserve Board, (ii) the FDIC, (iii) the OCC, (iv) the WVBOB,
(v) the SEC and (vi) any other governmental or regulatory authority or agency
having jurisdiction over their operations. Each of such reports and documents,
including the financial statements, exhibits and schedules thereto, filed with
the SEC pursuant to the 1934 Act was in form and substance in compliance in all
material respects with the 1934 Act. No such report or statement, or any
amendments thereto, contains any statement which, at the time and in light of
the circumstances under which it was made, was false or misleading with respect
to any material fact necessary in order to make the statements contained
therein not false or misleading. City Holding is a reporting company under
Section 12(g) or 15(d) of the 1934 Act and the regulations of the SEC.
(t) ENVIRONMENTAL MATTERS. For purposes of this subsection, the following
terms shall have the indicated meaning:
"Environmental Law" and "Hazardous Substance" shall have the meanings
ascribed to those terms in SECTION 3.1(T) of this Agreement.
"Loan Portfolio Properties and Other Properties Owned" means those
properties owned or operated by City Holding or any of its subsidiaries,
including those properties serving as collateral for any loans made and
retained by City Holding or City National or for which City Holding or City
National serves in a trust relationship for the loans retained in portfolio.
Except as disclosed in SCHEDULE 3.2(T), to the Knowledge of City Holding,
(i) neither City Holding nor City National has been or is in violation
of or liable under any Environmental Law;
(ii) none of the Loan Portfolio Properties and Other Properties Owned
has been or is in violation of or liable under any Environmental Law; and
(iii) there are no actions, suits, demands, notices, claims,
investigations or proceedings pending or threatened relating to the
liability of the Loan Portfolio Properties and Other Properties Owned under
any Environmental Law, including without limitation any notices, demand
letters or requests for information from any federal or state environmental
agency relating to any such liabilities under or violations of
Environmental Law.
(u) DISCLOSURE. Except to the extent of any subsequent correction or
supplement with respect thereto furnished prior to the date hereof, no written
statement, certificate, schedule, list or other written information furnished
by or on behalf of City Holding at any time to Horizon, in connection with this
Agreement, when considered as a whole, contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
necessary in order to make the statements herein or therein, in light of the
circumstances under which they were made, not misleading. Each document
delivered or to be delivered by City Holding to Horizon is or will be a true
and complete copy of such document, unmodified except by another document
delivered by City Holding.
(v) ACCOUNTING AND TAX MATTERS. Neither City Holding nor City National nor
any subsidiary of either has taken or agreed to take any action or has any
knowledge of any fact or circumstance that would prevent the
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Holding Company Merger from qualifying as a reorganization within the meaning
of Section 368 of the Code, or from being eligible for "pooling-of-interests"
accounting.
(w) REGULATORY APPROVALS. Neither City Holding nor City National nor any
subsidiary of either knows of any reason why the approvals, consents and
waivers of governmental authorities referred to in SECTIONS 6.1(F) AND 6.2(F)
hereof should not be obtained on a timely basis without the imposition of any
condition of the type referred to in SECTION 6.1(F) hereof and neither of them
has taken or agreed to take any action that would materially impede or delay
the receipt of such approvals, consents and waivers or would be reasonably
likely to result in the imposition of any such condition.
(x) YEAR 2000 MATTERS. The computer software operated by City Holding
which is material to the conduct of its business is capable of providing or is
being adapted to provide (pursuant to plans approved by the Board of Directors,
copies of which have been provided to Horizon, the expense of which has been
reserved against or otherwise provided for), in all material respects,
uninterrupted millennium functionality to record, store, process and present
calendar dates falling on or after January 1, 2000 in substantially the same
manner and with the same functionality as such software records, stores
processes and presents such calendar dates falling on or before December 31,
1999. Neither City Holding or City National has received, or reasonably expects
to receive, a "Year 2000 Deficiency Notification Letter" (as such term is
employed in the Federal Reserve Board's Supervision and Regulation Letter No.
SR 98-3(SUP), dated March 4, 1998).
(y) INTEREST RATE RISK MANAGEMENT INSTRUMENTS. All interest rate swaps,
caps, floors and option agreements and other interest rate risk management
arrangements, whether entered into for the account of City Holding or any of
its subsidiaries, were entered into in the ordinary course of business and, to
the Knowledge of City Holding, in accordance with prudent banking practices and
applicable rules, regulations and policies of any regulatory authority of
competent jurisdiction and with counterparties believed to be financially
responsible at the time and are legal, valid and binding obligations of City
Holding or one of its subsidiaries enforceable in accordance with their terms
except as enforceability may be limited by laws affecting insured depository
institutions and similar laws affecting the enforcement of creditors' rights
generally and subject to any equitable principles limiting the right to obtain
specific performance. City Holding and each of City Holding's subsidiaries have
duly performed all of their obligations thereunder to the extent that such
obligations to perform have accrued, and, to the Knowledge of City Holding,
there are no breaches, violations or defaults or allegations or assertions of
such by any party thereunder.
(z) RECISSION OF REPURCHASES. Except as set forth on SCHEDULE 3.2(Z), all
share repurchase programs previously authorized by the Board of Directors of
City Holding have either expired or been revoked by resolution duly adopted on
or prior to the date hereof.
ARTICLE IV
CONDUCT AND TRANSACTIONS PRIOR TO
THE EFFECTIVE TIME OF THE HOLDING COMPANY MERGER
4.1. ACCESS TO RECORDS AND PROPERTIES OF CITY HOLDING, CITY NATIONAL, OTHER
CITY HOLDING SUBSIDIARIES, HORIZON AND THE HORIZON BANKS; CONFIDENTIALITY.
Between the date of this Agreement and the Effective Time of the Holding
Company Merger, each of City Holding and City National and the subsidiaries of
each on the one hand, and each of Horizon and the Horizon Banks on the other,
agree to give to the other reasonable access to all the premises and books and
records (including tax returns filed and those in preparation) of it and its
subsidiaries and to cause its officers to furnish the other with such financial
and operating data and other information with respect to the business and
properties as the other shall from time to time request for the purposes of
verifying the representations and warranties set forth herein, preparing the
Registration Statement (as defined in SECTION 4.2) and applicable regulatory
filings (as set forth in SECTION 4.6), to facilitate the parties in performing
their due diligence reviews of the affairs of one another, and otherwise as
reasonably requested in connection with the Transaction and the parties'
various regulatory reporting obligations, PROVIDED, HOWEVER, that any such
investigation shall be conducted in such manner as not to interfere
unreasonably with the operation of the respective business of the other. City
Holding
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and Horizon shall each maintain the confidentiality of all confidential
information furnished to it by the other party hereto concerning the business,
operations, and financial condition of the party furnishing such information,
and shall not use any such information except in furtherance of the
Transaction. If this Agreement is terminated, each party hereto shall promptly
return all documents and copies of, and all workpapers containing, confidential
information received from the other party hereto. The obligations of
confidentiality under this SECTION 4.1 shall survive any such termination of
this Agreement and shall remain in effect, except to the extent that (a) one
party shall have directly or indirectly acquired the assets and business of the
other party; (b) as to any particular confidential information with respect to
one party, such information (i) shall become generally available to the public
other than as a result of an unauthorized disclosure by the other party or (ii)
was available to the other party on a nonconfidential basis prior to its
disclosure by the first party; (c) disclosure by any party is required by
subpoena or order of a court of competent jurisdiction or by order of a
regulatory authority of competent jurisdiction; or (d) disclosure is required
by the SEC or bank or other regulatory authorities in connection with the
transactions contemplated by this Agreement, provided that the disclosing party
has, prior to such disclosure, advised the other party of the circumstances
necessitating such disclosure and have reached mutually agreeable arrangements
relating to such disclosure.
4.2. REGISTRATION STATEMENT, PROXY STATEMENT, SHAREHOLDER APPROVAL.
Horizon and City Holding will duly call and will hold meetings of their
shareholders as soon as practicable for the purpose of approving the Holding
Company Merger and the related transactions and will comply fully with the
provisions of the 1933 Act and the 1934 Act and the rules and regulations of
the SEC under such acts to the extent applicable, and the Articles of
Incorporation and By-laws of Horizon and City Holding relating to the call and
holding of a meeting of shareholders for such purpose. The Boards of Directors
of Horizon and City Holding will recommend to and actively encourage
shareholders that they vote in favor of the Holding Company Merger, to the
maximum extent permissible in light of their fiduciary duties. City Holding and
Horizon will jointly prepare the proxy statement-prospectus to be used in
connection with such meeting (the "Proxy Statement-Prospectus") and City
Holding will prepare and file with the SEC a Registration Statement on Form S-4
(the "Registration Statement"), of which such Proxy Statement-Prospectus shall
be a part, and use its best efforts promptly to have the Registration Statement
declared effective. In connection with the foregoing, City Holding will comply
with the requirements of the 1933 Act, the 1934 Act, the Nasdaq Stock Market
and the rules and regulations of the SEC under such acts with respect to the
offering and sale of City Holding Common Stock in connection with the
Transaction and with all applicable state Blue Sky and securities laws. The
notices of such meetings and the Proxy Statement-Prospectus shall not be mailed
to Horizon or City Holding shareholders until the Registration Statement shall
have become effective under the 1933 Act. Horizon covenants that none of the
information supplied by Horizon and City Holding covenants that none of the
information supplied by City Holding in the Proxy Statement-Prospectus will, at
the time of the mailing of the Proxy Statement-Prospectus to Horizon and City
Holding shareholders, contain any untrue statement of a material fact nor will
any such information omit any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances in which they were made, not misleading; and at all times
subsequent to the time of the mailing of the Proxy Statement-Prospectus, up to
and including the date of the meetings of Horizon and City Holding
shareholders, as applicable, to which the Proxy Statement-Prospectus relates,
none of such information in the Proxy Statement-Prospectus, as amended or
supplemented, will contain an untrue statement of a material fact or omit any
material fact required to be stated therein in order to make the statements
therein, in light of the circumstances in which they were made, not misleading.
Horizon, as the sole shareholder of the Horizon Banks, and City Holding,
as the sole shareholder of City National, hereby approve this Agreement and the
transactions contemplated herein.
4.3. OPERATION OF THE BUSINESSES OF THE PARTIES.
Each of Horizon, the Horizon Banks, City Holding and City National agrees
that from June 30, 1998 to the Effective Time of the Holding Company Merger,
they and their subsidiaries have operated, and they and their subsidiaries will
operate, their respective businesses substantially as presently operated and
only in the ordinary course and in general conformity with applicable laws and
regulations, and, consistent with such operation, they will use their best
efforts to preserve intact its present business organizations and its
relationships with persons having business dealings with it. Without limiting
the generality of the foregoing, Horizon, the Horizon Banks,
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City Holding and City National agree that they will not, without the prior
written consent of Horizon or City Holding, as applicable, (i) make any change
in the salaries, bonuses or title of any executive officer, subject to bonus or
compensation plans already adopted by the Board of Directors or the
Compensation Committee thereof prior to the date of this Agreement; (ii) make
any change in the title, salaries or bonuses of any other employee, other than
those permitted by current employment policies in the ordinary course of
business, any of which changes shall be reported promptly to the other parties;
(iii) enter into any bonus, incentive compensation, deferred compensation,
profit sharing, thrift, retirement, pension, group insurance or other benefit
plan or any employment or consulting agreement or increase benefits under
existing plans subject to bonus plans already adopted by the Board of Directors
or the Compensation Committee thereof prior to the date of this Agreement; (iv)
create or otherwise become liable with respect to any indebtedness for money
borrowed or purchase money indebtedness except in the ordinary course of
business; (v) amend its Articles of Incorporation, Charter or By-laws, except
that City Holding shall amend its Articles of Incorporation immediately
preceding the Effective Time of the Holding Company Merger to authorize the
issuance of up to 100,000,000 shares of City Holding Common Stock, par value
$2.50 per share, and up to 5,000,000 shares of City Holding Preferred Stock,
par value $25.00 per share; (vi) issue or contract to issue any shares of
capital stock or securities exchangeable for or convertible into capital stock
except (t) up to 94,800 shares of Horizon Common Stock issuable to senior
executive officers pursuant to Horizon Options outstanding as of June 30, 1998,
(u) up to 1,853,262 shares of Horizon Common Stock pursuant to the Horizon
Option Agreement; (v) shares of or options to purchase Horizon Common Stock
pursuant to the Horizon 401(k) Plan, the Horizon Employee Stock Option Plan,
the Horizon Incentive Stock Option Plan and the Horizon Dividend Reinvestment
Plan; (w) up to 30,000 options to purchase shares of Horizon Common Stock
issuable pursuant to Horizon's Incentive Stock Option Plan; (x) up to 285,671
shares of City Holding Common Stock issuable pursuant to City Holding Options
outstanding as of June 30, 1998; (y) up to 1,334,095 shares of City Holding
Common Stock pursuant to the City Holding Option Agreement; or (z) shares of
City Holding Common Stock issuable pursuant to City Holding's dividend
reinvestment plan, 401(k) plan, and Employee Stock Ownership Plan; (vii) except
as set forth on SCHEDULE 4.3, repurchase any shares of Horizon or City Holding
capital stock; (viii) enter into or assume any material contract or obligation,
except in the ordinary course of business; (ix) other than as provided in (a)
below with respect to the work-out of nonperforming assets, waive, release,
compromise or assign any right or claim involving $75,000 or more; (x) propose
or take any other action which would make any representation or warranty of
such party in ARTICLE III hereof untrue; (xi) introduce any new products or
services or change the rate of interest on any deposit instrument to
above-market interest rates; (xii) make any change in policies respecting
extensions of credit or loan charge-offs; (xiii) change reserve requirement
policies; (xiv) change securities portfolio policies; (xv) acquire a policy or
enter into any new agreement, amendment or endorsement or make any changes
relating to insurance coverage, including coverage for its directors and
officers, which would result in an additional payment obligation of $50,000 or
more; (xvi) propose or take any action with respect to the closing of any
branches; (xvii) amend the terms of any outstanding stock option or similar
agreements; (xviii) amend the terms of the written severance or employment
agreements; or (xix) make any change in any tax election or accounting method
or system of internal accounting controls, except as may be appropriate to
conform to any change in regulatory accounting requirements or GAAP. Horizon,
the Horizon Banks, City Holding and City National further agree that, between
the date of this Agreement and the Effective Time of the Holding Company
Merger, they will consult and cooperate with one another regarding (a) loan
portfolio management, including management and work-out of nonperforming
assets, and credit review and approval procedures and (b) securities portfolio
and funds management, including management of interest rate risk.
4.4. NO SOLICITATION.
Unless and until this Agreement shall have been terminated pursuant to its
terms, neither Horizon, the Horizon Banks, City Holding or City National nor
any of their executive officers, directors, representatives, agents or
affiliates shall, directly or indirectly, encourage, solicit or initiate
discussions or negotiations (with any person other than a party to this
Agreement) concerning any merger, sale of substantial assets, tender offer,
sale of shares of stock or similar transaction involving such party or
disclose, directly or indirectly, any information not customarily disclosed to
the public concerning such party, afford to any other person access to the
properties, books or records of such party (unless required by the provisions
of SECTION 31-1-105 of the WVC) or otherwise assist any person preparing to
make or who has made such an offer, or enter into any agreement with any third
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party providing for a business combination transaction, equity investment or
sale of significant amount of assets. Horizon, the Horizon Banks, City Holding
and City National will promptly communicate to one another the terms of any
proposal which any of them may receive in respect to any of the foregoing
transactions.
4.5. DIVIDENDS.
Horizon and City Holding agree that since June 30, 1998 they have not, and
prior to the Effective Time of the Holding Company Merger they will not,
declare any cash dividends without the prior written consent of the other
party, except for regular quarterly cash dividends not in excess of that most
recently declared prior to June 30, 1998 except that Horizon and City Holding
may increase the dividend amount for the fourth quarter of 1998, consistent
with the relative increase of such dividend for the fourth quarter of 1997.
Horizon and City Holding will coordinate with one another regarding the
declaration and payment of dividends in respect of Horizon Common Stock and
City Holding Common Stock to ensure that no holder of Horizon Common Stock will
receive two dividends, or fail to receive on dividend, for any single calendar
quarter with respect to its shares of Horizon Common Stock, including shares of
City Holding Common Stock such holder may receive in connection with the
Transaction.
4.6. REGULATORY FILINGS; BEST EFFORTS.
City Holding and Horizon shall jointly prepare all regulatory filings
required to consummate the transactions contemplated by this Agreement and
submit the filings for approval with the Federal Reserve Board, the OCC, the
FDIC and the WVBOB as soon as practicable after the date hereof. City Holding
and Horizon shall use their best efforts to obtain approvals of such filings.
4.7. PUBLIC ANNOUNCEMENTS.
Each party will consult with the other before issuing any press release or
otherwise making any public statements with respect to the Transaction and
shall not issue any press release or make any such public statement prior to
such consultations and approval of the other party, which approval shall not be
unreasonably withheld, except as may be required by law.
4.8. OPERATING SYNERGIES; CONFORMANCE TO RESERVE POLICIES, ETC.
Between the date hereof and the Effective Time of the Holding Company
Merger, the parties will work with one another to achieve appropriate operating
efficiencies following the Closing Date. Subject to the Horizon Banks'
approval, which will not be unreasonably withheld, City Holding's notification
to the Horizon Banks' customers and City Holding's direct contact with
customers regarding the Bank Mergers will commence following receipt of Federal
Reserve Board and OCC approval but not earlier than 60 days prior to the
Closing Date. At the request of City Holding and upon receipt by Horizon and
the Horizon Banks of written confirmation from City Holding and City National
that there are no conditions to the obligations of City Holding and City
National under this Agreement set forth in ARTICLE V which they believe will
not be fulfilled so as to permit them to consummate the Transaction and the
other transactions contemplated hereby, not more than three days before the
Effective Time of the Holding Company Merger Horizon and the Horizon Banks
shall establish such additional accruals, reserves and charge-offs, through
appropriate entries in its accounting books and records, provided such
adjustments are in accordance with GAAP and applicable law and regulation as
may be necessary to conform Horizon's and the Horizon Banks' accounting and
credit loss reserve practices and methods to those of City Holding and City
National (as such practices and methods are to be applied from and after the
Effective Time of the Holding Company Merger). Any such accruals, reserves and
charge-offs shall not be deemed to cause any representation and warranty of
Horizon and the Horizon Banks to be untrue or inaccurate as of the Effective
Time of the Holding Company Merger.
4.9. CITY HOLDING RIGHTS AGREEMENT.
City Holding agrees that any rights issued pursuant to the Rights
Agreement, dated as of May 7, 1991, shall be issued with respect to each share
of City Holding Common Stock issued pursuant to the terms hereof and the
Holding Company Plan of Merger, regardless whether there has occurred a
Distribution Date under the terms of such Rights Agreement prior to the
occurrence of the Effective Time of the Holding Company Merger.
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4.10. AGREEMENT AS TO EFFORTS TO CONSUMMATE.
Subject to the other terms and conditions of this Agreement, each of City
Holding, City National, Horizon and the Horizon Banks agrees to use all
reasonable efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective, as soon as practicable
after the date of this Agreement, the transactions contemplated by this
Agreement, including, without limitation, using reasonable effort to lift or
rescind any injunction or restraining order or other order adversely affecting
the ability of the parties to consummate the transactions contemplated herein.
Each of City Holding, City National, Horizon and the Horizon Banks shall use
its best efforts to obtain consents of all third parties and governmental
bodies necessary or desirable for the consummation of the transactions
contemplated by this Agreement.
4.11. ADVERSE CHANGES IN CONDITION.
City Holding, City National, Horizon and the Horizon Banks each agrees to
give written notice promptly to the other concerning any event or circumstance
which would cause or constitute a breach of any of the representations,
warranties or covenants of such party contained herein. Each of City Holding,
City National, Horizon and the Horizon Banks shall use its best efforts to
prevent or promptly to remedy the same.
4.12. NASDAQ LISTING.
City Holding will file with the Nasdaq Stock Market an additional listing
application for the shares of City Holding Common Stock to be issued in the
Holding Company Merger and shall use its best efforts to cause such shares to
be approved for listing on the Nasdaq Stock Market prior to the Effective Time
of the Holding Company Merger.
4.13. DELIVERY AND UPDATING OF SCHEDULES.
(a) Horizon shall prepare and deliver to City Holding all of the Schedules
pertaining to Horizon and the Horizon Banks referred to in SECTION 3.1 not
later than August 14, 1998. Such Schedules shall be true and correct as of the
date delivered or such other date provided in ARTICLE III.
(b) City Holding shall prepare and deliver to Horizon all of the Schedules
pertaining to City Holding and City National referred to in SECTION 3.2 not
later than August 14, 1998. Such Schedules shall be true and correct as of the
date delivered or such other date provided in ARTICLE III.
(c) Horizon shall notify City Holding, and City Holding shall notify
Horizon, of any changes, additions or events which may cause any change in or
addition to any Schedules delivered by it under this Agreement, promptly after
the occurrence of same and at the Closing Date by delivery of updates of all
Schedules, including future quarterly and annual financial statements. No
notification made pursuant to this SECTION 4.13 shall be deemed to cure any
breach of any representation or warranty made in this Agreement or any Schedule
unless City Holding or Horizon, as the case may be, specifically agree thereto
in writing, nor shall any such notification be considered to constitute or give
rise to a waiver by Horizon or the Horizon Banks on the one hand, or City
Holding or City National on the other hand of any condition set forth in this
Agreement.
4.14. TRANSACTIONS IN CITY HOLDING COMMON STOCK.
Other than the issuance or acquisition of City Holding Common Stock
pursuant to City Holding employee benefit plans, or the purchase or sale of
City Holding Common Stock by City National in its capacity as trustee under
City Holding employee benefit plans or in any other fiduciary capacity in which
it is directed to sell or purchase City Holding Common Stock, none of City
Holding, City National, Horizon or the Horizon Banks will, directly or
indirectly, purchase, publicly sell or publicly acquire any shares of City
Holding Common Stock, or take any other action intended to manipulate the price
of City Holding Common Stock, during the 10 trading days ending on the 10th day
prior to the Effective Time of the Holding Company Merger.
4.15. STANDSTILL AGREEMENTS; CONFIDENTIALITY AGREEMENTS.
During the period from the date of this Agreement through the Effective
Time of the Holding Company Merger, neither Horizon nor City Holding shall
terminate, amend, modify or waive any provision of any confidentiality or
standstill agreement to which it or any of its respective subsidiaries is a
party. During such period,
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Horizon or City Holding, as the case may be, shall enforce, to the fullest
extent permitted under applicable law, the provisions of any such agreement,
including by obtaining injunctions to prevent any breaches of such agreements
and to enforce specifically the terms and provisions thereof in any court
having jurisdiction.
4.16. LETTERS FROM ACCOUNTANTS.
City Holding, City National, Horizon and the Horizon Banks shall use
reasonable efforts to cause Ernst & Young, LLP, independent accountants for
City Holding and Horizon, to deliver to City Holding and City National and
Horizon and the Horizon Banks, letters dated within two business days prior to
the date the Registration Statement shall become effective and in form and
substance reasonably satisfactory to the recipient thereof to the effect that
for financial reporting purposes, the Transaction qualifies for
pooling-of-interests accounting treatment under GAAP if consummated in
accordance with this Agreement.
ARTICLE V
MANAGEMENT AND CORPORATE GOVERNANCE
5.1. BOARD OF DIRECTORS.
Immediately following the Effective Time of the Holding Company Merger,
the Board of Directors of City Holding shall be comprised of 24 members, 12 to
be designated by City Holding and 12 to be designated by Horizon at least 10
business days prior to the mailing of the Proxy Statement-Prospectus to the
shareholders of City Holding and Horizon. If any director so designated shall
be unwilling or unable to serve as a director of City Holding, a replacement
shall be designated by the remaining persons designated by City Holding or
Horizon, as applicable. Until the 1999 annual meeting of the Board of
Directors, the Chairman of the Board shall be elected by the directors
designated by Horizon.
5.2. MANAGEMENT.
Immediately following the Effective Time of the Holding Company Merger,
the management of City Holding and City National shall be as set forth on
EXHIBIT E.
ARTICLE VI
CONDITIONS OF MERGER
6.1. CONDITIONS OF OBLIGATIONS OF CITY HOLDING AND CITY NATIONAL.
The obligations of City Holding and City National to perform this
Agreement are subject to the satisfaction at or prior to the Effective Time of
the Holding Company Merger of the following conditions unless waived by City
Holding and City National.
(a) REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. The
representations and warranties of Horizon and the Horizon Banks set forth in
SECTION 3.L hereof shall be true and correct in all material respects as of the
date of this Agreement and as of the Effective Time of the Holding Company
Merger as though made on and as of the Effective Time of the Holding Company
Merger (or on the date when made in the case of any representation and warranty
which specifically relates to an earlier date); Horizon and the Horizon Banks
shall have in all material respects performed all obligations required to be
performed by them and satisfied all conditions required to be satisfied by them
under this Agreement prior to the Effective Time of the Holding Company Merger;
and City Holding and City National shall have received a certificate signed by
the Chief Executive Officer and by the Chief Financial Officer of Horizon and
each of the Horizon Banks, which may be to their knowledge after due inquiry,
to such effects.
(b) AUTHORIZATION OF TRANSACTION. All action necessary to authorize the
execution, delivery and performance of this Agreement by Horizon and the
Horizon Banks and the consummation of the transactions contemplated herein
(including the shareholder action referred to in SECTION 4.2) shall have been
duly and validly taken by the Boards of Directors of Horizon and the Horizon
Banks and by the shareholders of Horizon and the Horizon
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Banks, and Horizon and the Horizon Banks shall have full power and right to
merge into City Holding and City National, respectively, on the terms provided
herein.
(c) OPINION OF COUNSEL. City Holding and City National shall have received
an opinion of Jackson & Kelly, counsel to Horizon and the Horizon Banks, dated
the Closing Date and satisfactory in form and substance to counsel to City
Holding and City National, in the form attached hereto as EXHIBIT G.
(d) THE REGISTRATION STATEMENT. The Registration Statement shall be
effective under the 1933 Act and City Holding shall have received all state
securities laws or "blue sky" permits and other authorizations or there shall
be exemptions from registration requirements necessary to offer and issue the
City Holding Common Stock in connection with the Holding Company Merger, and
neither the Registration Statement nor any such permit, authorization or
exemption shall be subject to a stop order or threatened stop order by the SEC
or any state securities authority.
(e) TAX OPINION. City Holding and City National shall have received, in
form and substance satisfactory to them, an opinion of Hunton & Williams to the
effect that, for federal income tax purposes, each of the Holding Company
Merger and the Bank Mergers will qualify as a "reorganization" under Section
368(a) of the Code, and no taxable gain will be recognized by City Holding,
City National, Horizon or the Horizon Banks (i) in the Holding Company Merger
(a) upon the transfer of Horizon's assets to City Holding in exchange for City
Holding Common Stock and the assumption of Horizon's liabilities or (b) upon
the distribution of such City Holding Common Stock to Horizon shareholders or
(ii) in the Bank Mergers, (a) upon the transfer of the Horizon Banks' assets to
City National in exchange for the assumption of the Horizon Banks' liabilities
and in constructive exchange for City National common stock (but the Horizon
Banks or City National may be required to include certain amounts in income as
a result of the termination of any bad debt reserve maintained by the Horizon
Banks for federal income tax purposes and other possible required changes in
tax accounting methods) or (b) upon the constructive distribution of such City
National common stock to City Holding.
(f) REGULATORY APPROVALS. All required approvals from federal and state
regulatory authorities having jurisdiction to permit City Holding and City
National to consummate the Transaction and to issue City Holding Common Stock
to Horizon shareholders shall have been received and shall have contained no
conditions deemed in good faith to be materially disadvantageous by City
Holding, in light of the transaction as a whole, as to make the transition not
feasible. Notwithstanding anything to the contrary in this Agreement, in the
event that divestiture of operations is required by any regulatory agency that
affects the market of Hinton or Summers County, West Virginia, City Holding
agrees not to divest any of the operations currently comprising Summers, but
rather to divest other operations. No temporary restraining order, preliminary
or permanent injunction or other order by any Federal or state court in the
United States which prevents the consummation of the Transaction shall have
been issued and remain in effect.
(g) AFFILIATE LETTERS. Within 60 days of the date hereof, each shareholder
of Horizon who is a Horizon Affiliate shall have executed and delivered a
commitment and undertaking in the form of EXHIBIT H to the effect that (1) such
shareholder will dispose of the shares of City Holding Common Stock received by
him in connection with the Holding Company Merger only in accordance with the
provisions of paragraph (d) of Rule 145 under the 1933 Act; (2) such
shareholder will not dispose of any of such shares until City Holding has
received, at its expense, an opinion of counsel acceptable to it that such
proposed disposition will not violate the provisions of paragraph (d) of Rule
145 and any applicable securities laws which opinion shall be rendered promptly
following counsel's receipt of such shareholder's written notice of its intent
to sell shares of City Holding Common Stock; (3) such shareholder shall not
dispose of any such shares until City Holding has published results of at least
30 days of the combined operations of City Holding and Horizon and (4) the
certificates representing said shares may bear a legend referring to the
foregoing restrictions.
(h) NASDAQ LISTING. The shares of City Holding Common Stock to be issued
in the Holding Company Merger shall have been approved for listing, upon notice
of issuance, on the Nasdaq Stock Market.
(i) ACCEPTANCE BY CITY HOLDING AND CITY NATIONAL COUNSEL. The form and
substance of all legal matters contemplated hereby and of all papers delivered
hereunder shall be reasonably acceptable to counsel for City Holding and City
National.
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(j) LETTERS FROM ACCOUNTANTS. City Holding and City National shall have
received letters from Ernst & Young, LLP, independent accountants for City
Holding and Horizon, dated within two business days prior to the Closing Date
and in form and substance reasonably satisfactory to City Holding and City
National to the effect that for financial reporting purposes, the Transaction
qualifies for pooling-of-interests accounting treatment under GAAP if
consummated in accordance with this Agreement.
(k) DISSENTING SHARES. The total amount of cash paid or payable by City
Holding for Dissenting Shares, fractional shares of Horizon Common Stock and
any shares of City Holding Common Stock with respect to which the holder has
exercised dissenters' rights shall not exceed 9% of the aggregate value of the
shares of City Holding Common Stock and cash exchanged for the shares of
Horizon Common Stock in the Holding Company Merger.
(l) FAIRNESS OPINION. Unless waived by City Holding, City Holding shall
have received an opinion, dated within five business days of the date on which
the Proxy Statement-Prospectus for this transaction is mailed to City Holding
Shareholders from Wheat First Securities, Inc. that as of such date the
Exchange Ratio is fair, from a financial point of view, to the holders of City
Holding Common Stock.
(m) EMPLOYMENT AGREEMENT. Steven J. Day shall have waived the application
to any transaction contemplated by or discussed in this Agreement or the
Holding Company Plan of Merger of the "change of control" provisions of any
employment or severance agreement between him and City Holding.
6.2. CONDITIONS OF OBLIGATIONS OF HORIZON AND THE HORIZON BANKS.
The obligations of Horizon and the Horizon Banks to perform this Agreement
are subject to the satisfaction at or prior to the Effective Time of the
Holding Company Merger of the following conditions unless waived by Horizon and
the Horizon Banks:
(a) REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. The
representations and warranties of City Holding and City National set forth in
SECTION 3.2 hereof shall be true and correct in all material respects as of the
date of this Agreement and as of the Effective Time of the Holding Company
Merger as though made on and as of the Effective Time of the Holding Company
Merger (or on the date when made in the case of any representation and warranty
which specifically relates to an earlier date); City Holding and City National
shall have in all material respects performed all obligations required to be
performed by them and satisfied all conditions required to be satisfied by them
under this Agreement prior to the Effective Time of the Holding Company Merger;
and Horizon and the Horizon Banks shall have received a certificate signed by
the Chief Executive Officer and by the Chief Financial Officer of City Holding
and City National, which may be to their knowledge after due inquiry, to such
effects.
(b) AUTHORIZATION OF TRANSACTION. All action necessary to authorize the
execution, delivery and performance of this Agreement by City Holding and City
National and the consummation of the transactions contemplated herein
(including the shareholder action referred to in SECTION 4.2) shall have been
duly and validly taken by the Boards of Directors of City Holding and City
National and by the shareholders of City Holding and City National, and City
Holding and City National shall have full power and right to merge with Horizon
and the Horizon Banks, respectively, on the terms provided herein.
(c) OPINION OF COUNSEL. Horizon and the Horizon Banks shall have received
an opinion of Hunton & Williams, counsel to City Holding and City National,
dated the Closing Date and satisfactory in form and substance to counsel to
Horizon and the Horizon Banks, in the form attached hereto as EXHIBIT J.
(d) THE REGISTRATION STATEMENT. The Registration Statement shall be
effective under the 1933 Act and City Holding shall have received all state
securities laws or "blue sky" permits and other authorizations or there shall
be exemptions from registration requirements necessary to offer and issue the
City Holding Common Stock in connection with the Holding Company Merger, and
neither the Registration Statement nor any such permit, authorization or
exemption shall be subject to a stop order or threatened stop order by the SEC
or any state securities authority.
(e) TAX OPINION. Horizon and the Horizon Banks shall have received, in
form and substance reasonably satisfactory to them, an opinion of Jackson &
Kelly to the effect that, for federal income tax purposes, each of the Holding
Company Merger and the Bank Mergers will qualify as a "reorganization" under
Section 368(a) of the
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Code; no taxable gain will be recognized by City Holding, City National,
Horizon or the Horizon Banks (i) in the Holding Company Merger (a) upon the
transfer of Horizon's assets to City Holding in exchange for City Holding
Common Stock and the assumption of Horizon's liabilities or (b) upon the
distribution of such City Holding Common Stock to Horizon shareholders or (ii)
in the Bank Mergers, (a) upon the transfer of the Horizon Banks' assets to City
National in exchange for the assumption of the Horizon Banks' liabilities and
in constructive exchange for City National stock (but the Horizon Banks or City
National may be required to include certain amounts in income as a result of
the termination of any bad-debt reserve maintained by the Horizon Banks for
federal income tax purposes and other possible required changes in tax
accounting methods) or (b) upon the constructive distribution of such City
National stock to City Holding; no taxable gain will be recognized by a Horizon
shareholder on the exchange by such shareholder of shares of Horizon Common
Stock solely for shares of City Holding Common Stock (including any fractional
share interest) in the Holding Company Merger; a Horizon common shareholder's
basis in City Holding Common Stock (including any fractional share interest)
received in the Holding Company Merger will be the same as the shareholder's
basis in the Horizon Common Stock surrendered in exchange therefor; the holding
period of such City Holding Common Stock (including any fractional share
interest) for a Horizon shareholder will include the holding period of the
Horizon Common Stock surrendered in exchange therefor, if such Horizon Common
Stock is held as a capital asset by the shareholder at the Effective Time of
the Holding Company Merger; and a Horizon common shareholder who receives cash
in lieu of a fractional share of City Holding Common Stock will recognize gain
or loss equal to any difference between the amount of cash received and the
shareholder's basis in the fractional share interest.
(f) REGULATORY APPROVALS. All required approvals from federal and state
regulatory authorities having jurisdiction to permit Horizon and the Horizon
Banks to consummate the Transaction and to permit City Holding to issue City
Holding Common Stock to Horizon shareholders shall have been received. No
temporary restraining order, preliminary or permanent injunction or other order
by and Federal or state court in the United States which prevents the
consummation of the Transaction shall have been issued and remain in effect.
(g) NASDAQ LISTING. The shares of City Holding Common Stock to be issued
in the Holding Company Merger shall have been approved for listing, upon notice
of issuance, on the Nasdaq Stock Market.
(h) ACCEPTANCE BY HORIZON COUNSEL. The form and substance of all legal
matters contemplated hereby and of all papers delivered hereunder shall be
reasonably acceptable to counsel for Horizon.
(i) LETTERS FROM ACCOUNTANTS. Horizon and the Horizon Banks shall have
received letters from Ernst & Young, LLP, independent accountants for City
Holding and Horizon, dated within two business days of the Closing Date and in
form and substance reasonably satisfactory to Horizon and the Horizon Banks to
the effect that for financial reporting purposes, the Transaction qualifies for
pooling-of-interests accounting treatment under GAAP if consummated in
accordance with this Agreement.
(j) FAIRNESS OPINION. Unless waived by Horizon, the Horizon Board shall
have received an opinion, dated within five business days of the date on which
the Proxy Statement-Prospectus for this transaction is mailed to Horizon
shareholders from Baxter, Fentriss & Co. that as of such date the consideration
to be received by the holders of Horizon Common Stock in the Holding Company
Merger is fair from a financial point of view.
(k) EMPLOYMENT AGREEMENT. Steven J. Day shall have waived the application
to any transaction contemplated by or discussed in this Agreement or the
Holding Company Plan of Merger of the "change of control" provisions of any
employment or severance agreement between him and City Holding.
ARTICLE VII
CLOSING DATE; EFFECTIVE TIME
7.1. CLOSING DATE.
Unless another date or place is agreed to in writing by the parties, the
closing of the transactions contemplated in this Agreement shall take place at
the offices of City Holding, 25 Gatewater Road, Charleston, West Virginia, at
10:00 o'clock A.M., local time, on such date as City Holding and Horizon shall
agree upon; provided, that such date shall not be earlier than 10 days after
the receipt of the last required regulatory approval, and shall
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not be later than 60 days after the receipt of such approval and, in no event,
shall be later than March 31, 1999 (the "Closing Date"). The parties agree to
use their best efforts to make the Holding Company Merger effective on or
before December 31, 1998.
7.2. FILINGS AT CLOSING.
Subject to the provisions of ARTICLE V, at the Closing Date, City Holding
shall cause Articles of Merger relating to the Holding Company Plan of Merger
to be filed in accordance with the WVC and City Holding, City National, Horizon
and the Horizon Banks shall take any and all lawful actions to cause the
Holding Company Merger to become effective.
7.3. EFFECTIVE TIME.
Subject to the terms and conditions set forth herein, including receipt of
all required regulatory approvals, the Holding Company Merger shall become
effective at the time Articles of Merger filed with the Secretary of State of
the State of West Virginia are made effective (the "Effective Time of the
Holding Company Merger") and the Bank Mergers shall become effective at the
times the respective Articles of Merger filed with the applicable governmental
authorities are made effective (the "Effective Time of the Bank Mergers").
ARTICLE VIII
TERMINATION; SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
COVENANTS; WAIVER AND AMENDMENT
8.1. TERMINATION.
This Agreement shall be terminated, and the Transaction abandoned, if the
shareholders of City Holding or Horizon shall not have given the approval
required by SECTION 4.2. Notwithstanding such approval by such shareholders,
this Agreement may be terminated at any time prior to the Effective Time of the
Holding Company Merger, by:
(a) The mutual consent of City Holding and Horizon, as expressed by their
respective Boards of Directors;
(b) Either City Holding or Horizon, as expressed by their respective
Boards of Directors, if the Holding Company Merger has not occurred by March
31, 1999, provided that the failure of the Holding Company Merger to so occur
shall not be due to a willful breach of any representation, warranty, covenant
or agreement by the party seeking to terminate this Agreement;
(c) By City Holding in writing authorized by its Board of Directors if
Horizon or the Horizon Banks has, or by Horizon in writing authorized by its
Boards of Directors, if City Holding or City National has, in any material
respect, breached (i) any covenant or agreement contained herein, or (ii) any
representation or warranty contained herein, in any case if such breach has not
been cured by the earlier of 30 days after the date on which written notice of
such breach is given to the party committing such breach or the Closing Date;
PROVIDED, that it is understood and agreed that either party may terminate this
Agreement on the basis of any such material breach of any representation or
warranty which is not cured within 30 days of written notice thereof contained
herein notwithstanding any qualification therein relating to the knowledge of
the other party;
(d) Either City Holding or Horizon, as expressed by their respective
Boards of Directors, in the event that any of the conditions precedent to the
obligations of such parties to consummate the Transaction have not been
satisfied or fulfilled or waived by the party entitled to so waive on or before
the Closing Date, provided that no party shall be entitled to terminate this
Agreement pursuant to this subparagraph (d) if the condition precedent or
conditions precedent which provide the basis for termination can reasonably be
and are satisfied within a reasonable period of time, in which case, the
Closing Date shall be appropriately postponed;
(e) City Holding or Horizon if the Federal Reserve Board, the OCC, the
FDIC or the WVBOB deny approval of the Transaction and the time period for all
appeals or requests for reconsideration has run;
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(f) City Holding, if Horizon fails to deliver to City Holding as required
by SECTION 4.13(A) the Schedules relating to Horizon and the Horizon Banks or
if City Holding notifies Horizon not later than 5:00 p.m., Charleston, West
Virginia time, on August 21, 1998, that the results of its due diligence review
of the affairs of Horizon and the Horizon Banks, including its review of such
Schedules and as more generally provided for in SECTION 4.1, have been, in its
sole judgment, unsatisfactory;
(g) Horizon, if City Holding fails to deliver to Horizon as required by
SECTION 4.13(B) the Schedules relating to City Holding and City National or if
Horizon notifies City Holding not later than 5:00 p.m., Charleston, West
Virginia time, on August 21, 1998, that the results of its due diligence review
of the affairs of City Holding and City National, including its review of such
Schedules and as more generally provided for in SECTION 4.1, have been, in its
sole judgment, unsatisfactory;
(h) Either Horizon or City Holding, if any stockholder approval required
by Section 4.2 herein is not obtained; or
(i) Either Horizon or City Holding, if the Board of Directors of the other
party, acting in accordance with the second sentence of SECTION 4.2, shall have
withdrawn, modified or changed in a manner adverse to the terminating party its
approval or recommendation of this Agreement and the transactions contemplated
hereby.
8.2. EFFECT OF TERMINATION.
In the event of the termination and abandonment of this Agreement and the
Transaction pursuant to SECTION 8.1, this Agreement, other than the provisions
of SECTIONS 4.1 (last three sentences) and 10.1, shall become void and have no
effect, without any liability on the part of any party or its directors,
officers or shareholders, provided that nothing contained in this SECTION 8.2
shall relieve any party from liability for any willful breach of this
Agreement.
8.3. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.
The respective representations and warranties, obligations, covenants and
agreements (except for those contained in SECTIONS 1.2, 1.3, 2.1, 2.2, 2.3,
2.4, 2.5, 2.6, ARTICLE V, 7.2, 7.3, 8.1, 8.2, 8.3, 8.4, 9.1, 9.2, 10.2, 10.3,
10.4 AND 10.6 which shall survive the effectiveness of the Transaction) of City
Holding, City National, Horizon and the Horizon Banks contained herein shall
expire with, and be terminated and extinguished by, the effectiveness of the
Transaction and shall not survive the Effective Time of the Holding Company
Merger.
8.4. WAIVER AND AMENDMENT.
Any term or provision of this Agreement may be waived in writing at any
time by the party which is, or whose shareholders are, entitled to the benefits
thereof and this Agreement may be amended or supplemented by written
instructions duly executed by all parties hereto at any time, whether before or
after the meetings of City Holding and Horizon shareholders referred to in
SECTION 4.2 hereof, excepting statutory requirements and requisite approvals of
shareholders and regulatory authorities, provided that any such amendment or
waiver executed after shareholders of City Holding or Horizon have approved
this Agreement and the Holding Company Plan of Merger shall not modify either
the amount or form of the consideration to be received by such shareholders for
their shares of Horizon Common Stock or otherwise materially adversely affect
such shareholders without their approval.
ARTICLE IX
ADDITIONAL COVENANTS
9.1. INDEMNIFICATION OF HORIZON OFFICERS AND DIRECTORS; LIABILITY INSURANCE.
After the Effective Time of the Holding Company Merger, City Holding
acknowledges its obligation to provide, and agrees to provide, indemnification
to the directors, employees and officers of Horizon and the Horizon Banks and
the subsidiaries thereof for events occurring prior to or subsequent to the
Effective Time of the Holding Company Merger as if they had been directors,
employees or officers of City Holding prior to the Effective Time of the
Holding Company Merger, to the extent permitted under the WVC and the Articles
of
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<PAGE>
Incorporation and Bylaws of City Holding as in effect as of the date of this
Agreement. Such indemnification shall continue for ten years after the
Effective Time of the Holding Company Merger, provided that any right to
indemnification in respect of any claim asserted or made within such ten year
period shall continue until final disposition of such claim. City Holding will
provide officers and directors liability insurance coverage to all directors
and officers of Horizon and the Horizon Banks and their subsidiaries, whether
or not they become part of the City Holding organization after the Effective
Time of the Holding Company Merger, to the same extent provided to City
Holding's officers and directors, provided that coverage will not extend to
acts as to which notice has been given prior to the Effective Time of the
Holding Company Merger. The right to indemnification and insurance provided in
this Section 9.1 is intended to be for the benefit of directors, employees and
officers of Horizon and the Horizon Banks and the subsidiaries thereof and as
such may be personally enforced by them at law or in equity.
9.2. EMPLOYEE MATTERS.
(a) SEVERANCE BENEFITS. City Holding or City National will pay a severance
benefit to each person, other than those persons who have employment agreements
with City Holding or City National, who is an employee of City Holding, City
National, Horizon, the Horizon Banks or any of their subsidiaries at the
Effective Time of the Holding Company Merger and who is terminated without
cause within six months after the Effective Time of the Holding Company Merger.
The amount of such severance benefit will equal one week, in the case of hourly
employees, and two weeks, in the case of salaried employees, of such employee's
base pay (as in effect immediately before the Effective Time of the Holding
Company Merger) for each full year of service up to 52 weeks base pay,
PROVIDED, HOWEVER, that the severance benefit shall not be less than three
weeks of base pay. Such severance benefit shall be in lieu of any other
severance benefit otherwise to be provided to such employees.
(b) EMPLOYEE BENEFITS FOR TRANSFERRED EMPLOYEES. All employees of Horizon
or the Horizon Banks immediately prior to the Effective Time of the Holding
Company Merger who are employed by City Holding, City National or another City
Holding subsidiary immediately following the Effective Time of the Holding
Company Merger ("Transferred Employees") will be covered by City Holding's
employee benefit plans as to which they are eligible based on their length of
service, compensation, job classification, and position, including, where
applicable, any incentive compensation plan. Notwithstanding the foregoing,
City Holding may determine to continue any of the Horizon or the Horizon Banks
benefit plans for Transferred Employees in lieu of offering participation in
City Holding's benefit plans providing similar benefits (e.g., medical and
hospitalization benefits), to terminate any of the Horizon or the Horizon Banks
benefit plans, or to merge any such benefit plans with City Holding's benefit
plans. Except as specifically provided in this SECTION 9.2 and as otherwise
prohibited by law, Transferred Employees' service with Horizon or the Horizon
Banks which is recognized by the applicable benefit plan of Horizon or the
Horizon Banks at the Effective Time of the Holding Company Merger shall be
recognized as service with City Holding for purposes of eligibility to
participate and vesting, if applicable (but not for purposes of benefit
accrual) under the corresponding City Holding benefit plan, if any, subject to
applicable break-in-service rules.
(c) ADVISORY DIRECTORS. Following the Effective Time of the Holding
Company Merger, City Holding agrees to appoint members of the Board of
Directors of Raleigh, Summers, Greenbrier, Marlinton and Twentieth as advisory
directors of City National, but this undertaking shall not create any
obligation on City Holding's part to appoint any particular director as an
advisory director for any particular term. City Holding agrees, for three years
from the Effective Time of the Holding Company Merger, to maintain deferred
compensation plans for directors, with similar benefits, and shall not
terminate or reduce any benefits of any person thereunder which have been
accrued, funded or vested.
(d) EMPLOYMENT AGREEMENTS. Immediately following the Effective Time of the
Holding Company Merger, City Holding shall enter into employment or consulting
agreements, in the forms attached hereto as EXHIBIT I, with the individuals
named on EXHIBIT I.
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ARTICLE X
MISCELLANEOUS
10.1. EXPENSES.
Each party hereto shall bear and pay the costs and expenses incurred by it
relating to the transactions contemplated hereby.
10.2. ENTIRE AGREEMENT.
This Agreement contains the entire agreement among City Holding, City
National, Horizon and the Horizon Banks with respect to the Transaction and the
related transactions and supersedes all prior agreements (including the Letter
Agreement), arrangements or understandings with respect thereto.
10.3. DESCRIPTIVE HEADINGS.
Descriptive headings are for convenience only and shall not control or
affect the meaning or construction of any provisions of this Agreement.
10.4. NOTICES.
All notices or other communications which are required or permitted
hereunder shall be in writing and sufficient if delivered personally or sent by
registered or certified mail, postage prepaid, addressed as follows:
If to City Holding or City National:
City Holding Company
25 Gatewater Road
Charleston, West Virginia 25313
Attention: Robert A. Henson
Chief Financial Officer
Copy to:
Lathan M. Ewers, Jr.
Randall S. Parks
Hunton & Williams
951 East Byrd Street
Richmond, Virginia 23219
If to Horizon or the Horizon Banks:
Horizon Bancorp, Inc.
One Park Avenue
Beckley, West Virginia 25801
Attention: Frank S. Harkins, Jr. Chairman
Copy to:
Louis S. Southworth, II
Charles D. Dunbar
Jackson & Kelly
1600 Laidley Tower (Zip: 25301)
P.O. Box 553
Charleston, West Virginia 25322
E. M. Payne, III
File, Payne, Scherer & File
P.O. Drawer L
130 Main Street
Beckley, West Virginia 25801
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10.5. COUNTERPARTS.
This Agreement may be executed in any number of counterparts, and each
such counterpart hereof shall be deemed to be an original instrument, but all
such counterparts together shall constitute but one agreement.
10.6. GOVERNING LAW.
Except as may otherwise be required by the laws of the United States, this
Agreement shall be governed by and construed in accordance with the laws of
West Virginia.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed on its behalf and its corporate seal to be hereunto affixed and
attested by its officers thereunto duly authorized, all as of the day and year
first above written. CITY HOLDING COMPANY HORIZON BANCORP, INC.
By: /s/ ROBERT A. HENSON By: /s/ FRANK S. HARKINS, JR.
---------------------------------- --------------------------------
Name: Robert A. Henson Name: Frank S. Harkins, Jr.
Title: Chief Financial Officer Title: Chairman of the Board
and CEO
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APPENDIX B
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PLAN OF MERGER
OF
HORIZON BANCORP, INC.
INTO
CITY HOLDING COMPANY
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<PAGE>
SECTION 1. Horizon Bancorp, Inc., a West Virginia corporation ("Horizon")
shall, at the time that the Articles of Merger are made effective by the West
Virginia Division of Banking (the "Effective Time of the Holding Company
Merger"), be merged (the "Merger") into City Holding Company ("City Holding"),
with the result that City Holding shall be the surviving corporation (the
"Surviving Corporation").
SECTION 2. CONVERSION OF STOCK. At the Effective Time of the Holding
Company Merger:
(i) Each share of Horizon Common Stock ("Horizon Common Stock") issued
and outstanding at the Effective Time of the Holding Company Merger, other
than Dissenting Shares (as hereinafter defined) and shares held directly by
City Holding, and which, under the terms of SECTION 3 of this Plan of
Merger, is to be converted into and exchangeable for Common Stock of City
Holding ("City Holding Common Stock"), shall be converted into the number
of shares of City Holding Common Stock determined by dividing $45.00 per
share of Horizon Common Stock (the "Common Stock Price Per Share") by the
average closing price of City Holding Common Stock as reported on the
Nasdaq National Market for each of the 10 trading days ending on the 10th
day prior to the day of the Effective Time of the Holding Company Merger
(the "Average Closing Price"), such quotient to be rounded to the nearest
one-one thousandth (the "Exchange Ratio"), provided that if the Average
Closing Price is $44.50 or greater, then the Exchange Ratio shall be 1.011
and if the Average Closing Price is $40.50 or less, then the Exchange Ratio
shall be 1.111. The Exchange Ratio at the Effective Time of the Holding
Company Merger shall be adjusted to reflect any consolidation, split-up,
other subdivisions or combinations of City Holding Common Stock, any
dividend payable in City Holding Common Stock, or any capital
reorganization involving the reclassification of City Holding Common Stock
subsequent to the date of the Agreement (defined below).
(ii) Each share of Horizon Common Stock issued and outstanding at the
Effective Time of the Holding Company Merger and held by City Holding shall
be canceled.
(iii) Each share of City Holding Common Stock outstanding at the
Effective Time of the Holding Company Merger shall continue unchanged as an
outstanding share of Common Stock of the Surviving Corporation.
(iv) At the Effective Time of the Holding Company Merger, Horizon's
transfer books shall be closed and no further transfer of Horizon Common
Stock shall be permitted.
SECTION 3. MANNER OF CONVERSION OF HORIZON COMMON STOCK. The manner in
which outstanding shares of Horizon Common Stock shall be converted into City
Holding Common Stock, as specified in Section 2 hereof, after the Effective
Time of the Holding Company Merger, shall be as follows:
(i) Each share of Horizon Common Stock, other than shares held by City
Holding and any Dissenting Shares, shall be exchanged for shares of City
Holding Common Stock as determined by the Exchange Ratio.
(ii) No fractional shares of City Holding Common Stock shall be issued,
but instead the value of fractional shares shall be paid in cash (less all
applicable withholding taxes), as determined in accordance with Section 2.3
of the Agreement.
(iii) Certificates for shares of Horizon Common Stock shall be submitted
for exchange for City Holding Common Stock accompanied by a Letter of
Transmittal to be furnished promptly following the Effective Time of the
Holding Company Merger to Horizon's shareholders of record as of the
Effective Time of the Holding Company Merger. Until so surrendered, each
outstanding certificate which, prior to the Effective Time of the Holding
Company Merger, represented Horizon Common Stock, shall be deemed to
evidence only the right to receive shares of City Holding Common Stock as
determined by the Exchange Ratio. Until such outstanding shares formerly
representing Horizon Common Stock are so surrendered, no dividend payable
to holders of record of City Holding Common Stock for any period as of any
date subsequent to the Effective Time of the Holding Company Merger shall
be paid to the holder of such outstanding certificates in respect thereof.
Upon such surrender, dividends accrued or declared on City Holding Common
Stock shall be paid in accordance with Section 2.2 of the Agreement and
Plan of Reorganization dated as of August 7 1998, among City Holding
Company and Horizon Bancorp, Inc. (the "Agreement").
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<PAGE>
SECTION 4. HORIZON OPTIONS. At the Effective Time of the Holding Company
Merger, each outstanding option to acquire Horizon Common Stock that was
granted under Horizon's employee benefit plans (the "Horizon Options," as
defined in Section 3.1(j)(1) of the Agreement and identified on Schedule C
thereto), shall be converted, based on the Exchange Ratio, into options to
acquire City Holding Common Stock ("City Holding Options"). The exercise price
per share of City Holding Common Stock under a City Holding Option shall be
equal to the exercise price per share of Horizon Common Stock under the Horizon
Option divided by the Exchange Ratio (rounded up to the nearest cent). The
number of shares of City Holding Common Stock subject to a City Holding Option
shall be equal to the number of shares of Horizon Common Stock subject to the
Horizon Option multiplied by the Exchange Ratio (rounded down to the nearest
whole share). Except as provided in this Section 4, the terms of the City
Holding Option shall be the same as the terms of the Horizon Option.
SECTION 5. DISSENTING SHARES. Notwithstanding anything in this Plan of
Merger to the contrary, shares of Horizon Common Stock which are issued and
outstanding immediately prior to the Effective Time of the Holding Company
Merger and which are held by a shareholder (other than City Holding and its
subsidiaries, which waive such right to dissent) who has the right (to the
extent such right is available by law) to demand and receive payment of the
fair value of his shares of Horizon Common Stock pursuant to Section 31-1-122
of the West Virginia Code (the "Dissenting Shares") shall not be converted into
or be exchangeable for the right to receive the consideration provided in
SECTION 2 of this Plan of Merger, unless and until such holder shall fail to
perfect his right to dissent or shall have effectively withdrawn or lost such
right under the West Virginia Code, as the case may be. If such holder shall
have so failed to perfect his right to dissent or shall have effectively
withdrawn or lost such right, his shares of Horizon Common Stock shall
thereupon be deemed to have been converted into, at the Effective Time of the
Holding Company Merger, the right to receive shares of City Holding Common
Stock as provided in SECTION 2 hereof.
SECTION 6. CONDITIONS TO MERGER. Consummation of the Merger is subject to
the following conditions:
(i) The approving vote of the holders of the requisite majority of the
outstanding shares of Horizon Common Stock entitled to vote.
(ii) The approval of the Merger by the Board of Governors of the Federal
Reserve System and the West Virginia Division of Banking.
(iii) The satisfaction of the conditions contained in the Agreement or
the waiver of such conditions by the party for whose benefit they were
imposed.
SECTION 7. EFFECT OF THE MERGER. The Merger, upon the Effective Time of
the Holding Company Merger, shall have the effect provided by Section 31-1-37
of the West Virginia Code.
SECTION 8. AMENDMENT. The Boards of Directors of City Holding and Horizon
reserve the right to amend this Plan of Merger at any time prior to the
Effective Time of the Holding Company Merger, provided, however, that any such
amendment made subsequent to the submission of this Plan of Merger to the
shareholders of City Holding or Horizon, may not modify either the amount or
form of the consideration to be received by such shareholders for their shares
of Horizon Common Stock or otherwise materially adversely affect such
shareholders without their approval.
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APPENDIX C
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STOCK OPTION AGREEMENT
DATED AS OF AUGUST 7, 1998
BETWEEN
CITY HOLDING COMPANY,
AS ISSUER,
AND HORIZON BANCORP, INC.,
AS GRANTEE
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<PAGE>
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of August 7, 1998, between CITY HOLDING
COMPANY, a West Virginia corporation ("Issuer"), and HORIZON BANCORP, INC., a
West Virginia corporation ("Grantee").
WITNESSETH:
WHEREAS, as a condition to, and contemporaneous with the execution of an
Agreement and plan of Reorganization (together as used in this Stock Option
Agreement, the "Agreement") whereby Issuer will merge with Grantee (the
"Merger"), and in consideration therefor, the parties are entering into this
Stock Option Agreement pursuant to which Issuer has agreed to grant Grantee the
Option (as hereinafter defined):
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and Agreement set forth herein and in the Agreement, the parties hereto agree
as follows:
1. (a) Issuer hereby grants to Grantee an unconditional, irrevocable
option (the "Option") to purchase, subject to the terms hereof, up to 1,334,095
fully paid and nonassessable shares of common stock, par value $2.50 ("Common
Stock"), of Issuer at a price of $41.25 per share (such price, as adjusted if
applicable, the "Option Price"); PROVIDED HOWEVER that in no event shall the
number of shares of Common Stock for which this Option is exercisable exceed
19.9% of the Issuer's issued and outstanding common shares without giving
effect to any shares subject to or issued pursuant to the Option. The number of
shares of Common Stock that may be received upon the exercise of the Option and
the Option Price are subject to adjustment as herein set forth.
(b) If any additional shares of Common Stock are issued or otherwise
become outstanding after the date of this Stock Option Agreement (other than
pursuant to this Stock Option Agreement), the number of shares of Common Stock
subject to the Option shall be increased so that, after such issuance such
number equals 19.9% of the number of shares of Common Stock then issued and
outstanding without giving effect to any shares subject to or issued pursuant
to the Option. Nothing contained in this Section l(b) or elsewhere in this
Stock Option Agreement shall be deemed to authorize Issuer or Grantee to breach
any provision of the Agreement.
2. (a) The Holder (as hereinafter defined) may exercise the Option, in
whole or part, if, but only if, both an Initial Triggering Event (as
hereinafter defined) and a Subsequent Triggering Event (as hereinafter defined)
shall have occurred prior to the occurrence of an Exercise Termination Event
(as hereinafter defined), PROVIDED that the Holder shall have sent the written
notice of such exercise (as provided in subsection (e) of this Section 2)
within 90 days following such Subsequent Triggering Event (or such later date
as provided in Section 10). Each of the following shall be an "Exercise
Termination Event": (i) the Effective Time of the Merger; (ii) termination of
the Agreement in accordance with the provisions thereof (other than a
termination resulting from a willful breach by Issuer of a provision of the
Agreement) if such termination occurs prior to the occurrence of an Initial
Triggering Event; or (iii) the passage of eighteen months after termination of
the Agreement if such termination follows the occurrence of an Initial
Triggering Event or is a termination by Grantee pursuant to Section 8.1(c)
thereof resulting from a willful breach by Issuer of a provision of the
Agreement. The term "Holder" shall mean the holder or holders of the Option.
(b) The term "Initial Triggering Event" shall mean any of the following
events or transactions occurring after the date hereof:
(i) Issuer or any significant subsidiary of Issuer without having
received Grantee's prior written consent, shall have entered into an
agreement to engage in, an Acquisition Transaction (as hereinafter defined)
with any person (the term "person" for purposes of this Stock Option
Agreement having the meaning assigned thereto in Sections 3(a)(9) and
13(d)(3) of the Securities Exchange Act of 1934 (the "1934 Act"), and the
rules and regulations thereunder) other than Grantee or any of its
subsidiaries (each a "Grantee Subsidiary") or the board of directors of
Issuer shall have recommended that the shareholders of Issuer approve or
accept any Acquisition Transaction other than as contemplated by the
Agreement. For purposes of this Stock Option Agreement, "Acquisition
Transaction" shall mean (a) a merger, consolidation or share exchange
involving Issuer or any significant subsidiary of Issuer, provided,
however, that in no event shall
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(i) any merger, consolidation or share exchange involving only the Issuer
and one or more of the subsidiaries of Issuer, or involving only any two or
more of such subsidiaries of Issuer be deemed to be an Acquisition
Transaction, or (ii) any merger, consolidation or share exchange (A) in
which Issuer is the surviving entity, or (B) as to which the shareholders
of Issuer immediately prior thereto own in the aggregate at least 40% of
the common stock of the surviving corporation or its publicly-held parent
corporation immediately following consummation thereof be deemed to be an
Acquisition Transaction, (b) a purchase, lease or other acquisition of all
or substantially all of the assets of Issuer and its subsidiaries taken as
a whole, or (c) a purchase or other acquisition (including by way of
merger, consolidation, share exchange or otherwise) of securities
representing 20% or more of the voting power of Issuer;
(ii) The board of directors of Issuer does not recommend that the
shareholders of Issuer approve the Agreement or publicly withdraws or
modifies, or publicly announces its intention to withdraw or modify, in any
manner adverse to the Grantee, its recommendation that its shareholders
approve the Agreement;
(iii) Any person other than Grantee or any Grantee Subsidiary or any
Issuer Subsidiary acting in a fiduciary capacity shall have acquired
beneficial ownership or the right to acquire beneficial ownership of 20% or
more of the outstanding shares of Common Stock (the term "beneficial
ownership" for purposes of this Stock Option Agreement having the meaning
assigned thereto in Section 13(d) of the 1934 Act, and the rules and
regulations thereunder);
(iv) Any person other than Grantee or any Grantee Subsidiary shall have
made a bona fide proposal to Issuer or its shareholders by public
announcement or written communication that is or becomes the subject of
public disclosure to engage in an Acquisition Transaction;
(v) After a proposal is made by a third party to Issuer or its
shareholders to engage in an Acquisition Transaction, Issuer shall have
breached any covenant or obligation contained in the Agreement and such
breach (x) would entitle Grantee to terminate the Agreement and (y) shall
not have been cured prior to the Notice Date (as defined below);
(vi) Any person other than Grantee or any Grantee Subsidiary, other than
in connection with a transaction to which Grantee has given its prior
written consent, shall have filed an application or notice with The Board
of Governors of the Federal Reserve System (the "FRB") or any other federal
or state bank regulatory authority, which application or notice has been
accepted for processing, for approval to engage in an Acquisition
Transaction;
(vii) The shareholders of Issuer shall have voted and failed to approve
the Agreement and the Merger at a meeting which has been held for that
purpose or any adjournment or postponement thereof, or such meeting shall
not have been held in violation of the Agreement or shall have been
canceled prior to termination of the Agreement if, prior to such meeting
(or if such meeting shall not have been held or shall have been canceled,
prior to such termination), it shall have been publicly announced that any
person (other than Grantee or any Grantee Subsidiary) shall have made, or
disclosed an intention to make, a proposal to engage in an Acquisition
Transaction; or
(viii) Any person other than Grantee or any Grantee Subsidiary shall
have filed with the SEC a registration statement or tender offer materials
with respect to a potential exchange or tender offer that would constitute
an Acquisition Transaction;
(c) The term "Subsequent Triggering Event" shall mean either of the
following events or transactions occurring after the date hereof:
(i) The acquisition by any person, other than Grantee or any Grantee
Subsidiary or any Issuer Subsidiary acting in a fiduciary capacity, of
beneficial ownership of 25% or more of the then outstanding Common Stock;
or
(ii) The occurrence of the Initial Triggering Event described in clause
(i) of subsection 2(b), except that the percentage referred to in clause
(c) shall be 25%.
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(d) Issuer shall notify Grantee promptly in writing of the occurrence of
any Initial Triggering Event or Subsequent Triggering Event (together, a
"Triggering Event"), it being understood that the giving of such notice by
Issuer shall not be a condition to the right of the Holder to exercise the
Option.
(e) If the Holder is entitled to and wishes to exercise the Option, it
shall send to Issuer a written notice (the date of which being herein referred
to as the "Notice Date") specifying (i) the total number of shares it will
purchase pursuant to such exercise and (ii) a place and date not earlier than
three business days nor later than 60 business days from the Notice Date for
the closing of such purchase (the "Closing Date"); provided that if prior
notification to or approval of the FRB or any other governmental authority or
regulatory or administrative agency or commission, domestic or foreign (a
"Governmental Entity"), is required in connection with such purchase, the
Holder shall promptly file the required notice or application for approval and
shall expeditiously process the same and the period of time that otherwise
would run pursuant to this sentence shall run from the later of (x) the date on
which any required notification periods have expired or been terminated and (y)
the date on which such approvals have been obtained and any requisite waiting
period or periods shall have passed. Any exercise of the Option shall be deemed
to occur on the Notice Date relating thereto.
(f) At the closing referred to in subsection (e) of this Section 2, the
Holder shall pay to Issuer the aggregate purchase price for the shares of
Common Stock purchased pursuant to the exercise of the Option in immediately
available funds by wire transfer to a bank account designated by Issuer,
PROVIDED that failure or refusal of Issuer to designate such a bank account
shall not preclude the Holder from exercising the Option.
(g) At such closing, simultaneously with the delivery of immediately
available funds as provided in subsection (f) of this Section 2, Issuer shall
deliver to the Holder a certificate or certificates representing the number of
shares of Common Stock purchased by the Holder and, if the Option should be
exercised in part only, a new Option evidencing the rights of the Holder
thereof to purchase the balance of the shares purchasable hereunder, and the
Holder shall deliver to Issuer a copy of this Stock Option Agreement and a
letter agreeing that the Holder will not offer to sell or otherwise dispose of
such shares in violation of applicable law or the provisions of this Stock
Option Agreement.
(h) Certificates for Common Stock delivered at a closing hereunder may be
endorsed with a restrictive legend that shall read substantially as follows:
"The transfer of the shares represented by this certificate is subject to
certain provisions of an agreement between the registered holder hereof
and Issuer and to resale restrictions arising under the Securities Act of
1933, as amended. A copy of such agreement is on file at the principal
office of Issuer and will be provided to the holder hereof without charge
upon receipt by Issuer of a written request therefor."
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act of 1933, as amended (the "1933 Act"), in the above legend
shall be removed by delivery of substitute certificate(s) without such
reference if the Holder shall have delivered to Issuer a copy of a letter from
the staff of the Securities and Exchange Commission (the "SEC"), or an opinion
of counsel, in form and substance satisfactory to Issuer, to the effect that
such legend is not required for purposes of the 1933 Act; (ii) the reference to
the provisions of this Stock Option Agreement in the above legend shall be
removed by delivery of substitute certificate(s) without such reference if the
shares have been sold or transferred in compliance with the provisions of this
Stock Option Agreement and under circumstances that do not require the
retention of such reference; and (iii) the legend shall be removed in its
entirety if the conditions in the preceding clauses (i) and (ii) are both
satisfied. In addition, such certificates shall bear any other legend as may be
required by law.
(i) Upon the giving by the Holder to Issuer of the written notice of
exercise of the Option provided for under subsection (e) of this Section 2 and
the tender of the applicable purchase price in immediately available funds, the
Holder shall be deemed to be the holder of record of the shares of Common Stock
issuable upon such exercise, notwithstanding that the stock transfer books of
Issuer shall then be closed or that certificates representing such shares of
Common Stock shall not then be actually delivered to the Holder. Issuer shall
pay all expenses, and any and all United States Federal, state and local taxes
and other charges that may be payable in connection with the preparation, issue
and delivery of stock certificates under this Section 2 in the name of the
Holder or its assignee, transferee or designee.
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3. Issuer agrees: (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Common Stock so that the Option may be exercised without additional
authorization of Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Common Stock;
(ii) that it will not, by charter amendment or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any other voluntary
act, avoid or seek to avoid the observance or performance of any of the
covenants, stipulations or conditions to be observed or performed hereunder by
Issuer; (iii) promptly to take all action as may from time to time be required
(including (A) complying with all premerger notification, reporting and waiting
period requirements specified in 15 U.S.C. Section 18a and regulations
promulgated thereunder and (B) in the event, under the Bank Holding Company Act
of 1956, as amended, or the Change in Bank Control Act of 1978, as amended, or
any state banking law, prior approval of or notice to the FRB or to any other
Governmental Entity is necessary before the Option may be exercised,
cooperating fully with the Holder in preparing such applications or notices and
providing such information to each such Governmental Entity as they may
require) in order to permit the Holder to exercise the Option and Issuer duly
and effectively to issue shares of Common Stock pursuant hereto; and (iv)
promptly to take all action provided herein to protect the rights of the Holder
against dilution.
4. This Stock Option Agreement (and the Option granted hereby) are
exchangeable, without expense, at the option of the Holder, upon presentation
and surrender of this Stock Option Agreement at the principal office of Issuer,
for other Agreements providing for Options of different denominations entitling
the holder thereof to purchase, on the same terms and subject to the same
conditions as are set forth herein, in the aggregate the same number of shares
of Common Stock purchasable hereunder. The terms "Stock Option Agreement" and
"Option" as used herein include any Stock Option Agreements and related options
for which this Stock Option Agreement (and the Option granted hereby) may be
exchanged. Upon receipt by Issuer of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Stock Option Agreement, and
(in the case of loss, theft or destruction) of reasonably satisfactory
indemnification, and upon surrender and cancellation of this Stock Option
Agreement, if mutilated, Issuer will execute and deliver a new Stock Option
Agreement of like tenor and date. Any such new Stock Option Agreement executed
and delivered shall constitute an additional contractual obligation on the part
of Issuer, whether or not the Stock Option Agreement so lost, stolen, destroyed
or mutilated shall at any time be enforceable by anyone.
5. In addition to the adjustment in the number of shares of Common Stock
that are purchasable upon exercise of the Option pursuant to Section 1 of this
Stock Option Agreement, the number of shares of Common Stock purchasable upon
the exercise of the Option shall be subject to adjustment from time to time as
provided in this Section 5.
(a) In the event of any change in Common Stock by reason of stock
dividends, split-ups, mergers, recapitalizations, combinations, subdivisions,
conversions, exchanges of shares or the like, the type and number of shares of
Common Stock purchasable upon exercise hereof shall be appropriately adjusted.
(b) Whenever the number of shares of Common Stock purchasable upon
exercise hereof is adjusted as provided in this Section 5, the Option Price
shall be adjusted by multiplying the Option Price by a fraction, the numerator
of which shall be equal to the number of shares of Common Stock purchasable
prior to the adjustment and the denominator of which shall be equal to the
number of shares of Common Stock purchasable after the adjustment.
6. Upon the occurrence of a Subsequent Triggering Event that occurs prior
to an Exercise Termination Event, Issuer shall, at the request of Grantee
delivered within 90 days (or such later date as may be provided pursuant to
Section 10) of such Subsequent Triggering Event (whether on its own behalf or
on behalf of any subsequent holder of this Option (or part thereof) or any of
the shares of Common Stock issued pursuant hereto), promptly prepare, file and
keep current a shelf registration statement under the 1933 Act covering any
shares issued and issuable pursuant to this Option and shall use its reasonable
best efforts to cause such registration statement to become effective and
remain current in order to permit the sale or other disposition of any shares
of Common Stock issued upon total or partial exercise of this Option ("Option
Shares") in accordance with any plan of disposition requested by Grantee.
Issuer will use its reasonable best efforts to cause such registration
statement first to become effective and then to remain effective for such
period not in excess of 180 days from
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the day such registration statement first becomes effective or such shorter
time as may be reasonably necessary to effect such sales or other dispositions.
Grantee shall have the right to demand two such registrations. If requested by
any such Holder in connection with such registration, Issuer shall become a
party to any underwriting agreement relating to the sale of such shares, but
only to the extent of obligating itself in respect of representations,
warranties, indemnities and other Agreements customarily included in such
underwriting Agreements. The foregoing notwithstanding, if, at the time of any
request by Grantee for registration of Option Shares as provided above, Issuer
is in the process of registration with respect to an underwritten public
offering of shares of Common Stock, and if in the good faith judgment of the
managing underwriter or managing underwriters, or, if none, the sole
underwriter or underwriters, of such offering the inclusion of the Holder's
Option or Option Shares would interfere with the successful marketing of the
shares of Common Stock offered by Issuer, the number of Option Shares otherwise
to be covered in the registration statement contemplated hereby may be reduced;
PROVIDED, HOWEVER, that after any such required reduction the number of Option
Shares to be included in such offering for the account of the Holder shall
constitute at least 25% of the total number of shares to be sold by the Holder
and Issuer in the aggregate; PROVIDED FURTHER, however, that if such reduction
occurs, then the Issuer shall file a registration statement for the balance as
promptly as practical and no reduction shall thereafter occur. Each such Holder
shall provide all information reasonably requested by Issuer for inclusion in
any registration statement to be filed hereunder. Upon receiving any request
under this Section 6 from any Holder, Issuer agrees to send a copy thereof to
any other person known to Issuer to be entitled to registration rights under
this Section 6, in each case by promptly mailing the same, postage prepaid, to
the address of record of the persons entitled to receive such copies.
7. (a) At any time after the occurrence of a Repurchase Event (as defined
below) (i) at the request of the Holder, delivered prior to an Exercise
Termination Event (or such later period as may be provided pursuant to Section
10); Issuer (or any successor thereto) shall repurchase the Option from the
Holder at a price (the "Option Repurchase Price") equal to the amount by which
(A) the market/offer price (as defined below) exceeds (B) the Option Price,
multiplied by the number of shares for which this Option may then be exercised
and (ii) at the request of the owner of Option Shares from time to time (the
"Owner"), delivered prior to an Exercise Termination Event (or such later
period as may be provided pursuant to Section 10), Issuer (or any successor
thereto) shall repurchase such number of the Option Shares from the Owner as
the Owner shall designate at a price (the "Option Share Repurchase Price")
equal to the market/offer price multiplied by the number of Option Shares so
designated. The term "market/offer price" shall mean the highest of (i) the
price per share of Common Stock at which a tender offer or exchange offer
therefor has been made after the date hereof, (ii) the price per share of
Common Stock to be paid by any third party pursuant to an agreement with
Issuer, (iii) the highest closing price for shares of Common Stock within the
six-month period immediately preceding the date the Holder gives notice of the
required repurchase of this Option or the Owner gives notice of the required
repurchase of Option Shares, as the case may be, or (iv) in the event of a sale
of all or substantially all of Issuer's assets, the sum of the price paid in
such sale for such assets and the current market value of the remaining assets
of Issuer as determined by a nationally recognized investment banking firm
selected by the Holder or the Owner, as the case may be, divided by the number
of shares of Common Stock of Issuer outstanding at the time of such sale. In
determining the market/offer price, the value of consideration other than cash
shall be determined by a nationally recognized investment banking firm selected
by the Holder or Owner, as the case may be, and reasonably acceptable to the
Issuer, whose determination shall be conclusive and binding on all parties.
(b) The Holder or the Owner, as the case may be, may exercise its right to
require Issuer to repurchase the Option and any Option Shares pursuant to this
Section 7 by surrendering for such purpose to Issuer, at its principal office,
a copy of this Stock Option Agreement or certificates for Option Shares, as
applicable, accompanied by a written notice or notices stating that the Holder
or the Owner, as the case may be, elects to require Issuer to repurchase this
Option and/or the Option Shares in accordance with the provisions of this
Section 7. As promptly as practicable, and in any event within five business
days after the surrender of the Option and/or certificates representing Option
Shares and the receipt of such notice or notices relating thereto, Issuer shall
deliver or cause to be delivered to the Holder the Option Repurchase Price
and/or to the Owner the Option Share Repurchase Price therefor or the portion
thereof that Issuer is not then prohibited under applicable law and regulation
from so delivering.
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(c) To the extent that Issuer is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from repurchasing the
Option and/or the Option Shares in full, Issuer shall immediately so notify the
Holder and/or the Owner and thereafter deliver or cause to be delivered, from
time to time, to the Holder and/or the Owner, as appropriate, the portion of
the Option Repurchase Price and the Option Share Repurchase Price,
respectively, that it is no longer prohibited from delivering, within five
business days after the date on which Issuer is no longer so prohibited;
PROVIDED, HOWEVER, that if Issuer at any time after delivery of a notice of
repurchase pursuant to subsection (b) of this Section 7 is prohibited under
applicable law or regulation, or as a consequence of administrative policy,
from delivering to the Holder and/or the Owner, as appropriate, the Option
Repurchase Price and the Option Share Repurchase Price, respectively, in full
(and Issuer hereby undertakes to use its best efforts to obtain all required
regulatory and legal approvals and to file any required notices as promptly as
practicable in order to accomplish such repurchase), the Holder or Owner may
revoke its notice of repurchase of the Option or the Option Shares either in
whole or to the extent of the prohibition, whereupon, in the latter case,
Issuer shall promptly (i) deliver to the Holder and/or the Owner, as
appropriate, that portion of the Option Purchase Price or the Option Share
Repurchase Price that Issuer is not prohibited from delivering; and (ii)
deliver, as appropriate, either (A) to the Holder, a new Stock Option Agreement
evidencing the right of the Holder to purchase that number of shares of Common
Stock obtained by multiplying the number of shares of Common Stock for which
the surrendered Stock Option Agreement was exercisable at the time of delivery
of the notice of repurchase by a fraction, the numerator of which is the Option
Repurchase Price less the portion thereof theretofore delivered to the Holder
and the denominator of which is the Option Repurchase Price, or (B) to the
Owner, a certificate for the Option Shares it is then so prohibited from
repurchasing.
(d) For purposes of this Section 7, a "Repurchase Event" shall be deemed
to have occurred upon the occurrence of any of the following events or
transactions after the date hereof:
(i) the acquisition by any person (other than Grantee or any Grantee
Subsidiary) of beneficial ownership of 50% or more of the then outstanding
Common Stock; or
(ii) the consummation of any Acquisition Transaction described in
Section 2(b) (i) hereof, except that the percentage referred to in clause
(c) shall be 50%.
8. (a) If prior to an Exercise Termination Event, Issuer shall enter into
an agreement (i) to consolidate or merge with any person, other than Grantee or
one of its subsidiaries, and shall not be the continuing or surviving
corporation of such consolidation or merger, (ii) to permit any person, other
than Grantee or one of its subsidiaries, to merge into Issuer and Issuer shall
be the continuing or surviving corporation, but, in connection with such
merger, the then outstanding shares of Common Stock shall be changed into or
exchanged for stock or other securities of any other person or cash or any
other property or the then outstanding shares of Common Stock shall after such
merger represent less than 50% of the outstanding shares and share equivalents
of the merged company, or (iii) to sell or otherwise transfer all or
substantially all of its assets to any person, other than Grantee or one of its
subsidiaries, then, and in each such case, the agreement governing such
transaction shall make proper provision so that the Option shall, upon the
consummation of any such transaction and upon the terms and conditions set
forth herein, be converted into, or exchanged for, an option (the "Substitute
Option"), at the election of the Holder, of either (x) the Acquiring
Corporation (as hereinafter defined) or (y) any person that controls the
Acquiring Corporation.
(b) The following terms have the meanings indicated:
(1) "Acquiring Corporation" shall mean (i) the continuing or surviving
corporation of a consolidation or merger with Issuer (if other than
Issuer), (ii) Issuer in a merger in which Issuer is the continuing or
surviving person, and (iii) the transferee of all or substantially all of
Issuer's assets.
(2) "Substitute Common Stock" shall mean the common stock to be issued
by the issuer of the Substitute Option upon exercise of the Substitute
Option.
(3) "Assigned Value" shall mean the market/offer price, as defined in
Section 7.
(4) "Average Price" shall mean the average closing price of a share of
the Substitute Common Stock for the one year immediately preceding the
consolidation, merger or sale in question, but in no event higher
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than the closing price of the shares of Substitute Common Stock on the day
preceding such consolidation, merger or sale; PROVIDED, that if Issuer is
the issuer of the Substitute Option, the Average Price shall be computed
with respect to a share of common stock issued by the person merging into
Issuer or by any company which controls or is controlled by such person, as
the Holder may elect.
(c) The Substitute Option shall have the same terms as the Option,
provided, that if the terms of the Substitute Option cannot, for legal reasons,
be the same as the Option, such terms shall be as similar as possible and in no
event less advantageous to the Holder. The issuer of the Substitute Option
shall also enter into an agreement with the then Holder or Holders of the
Substitute Option in substantially the same form as this Stock Option
Agreement, which shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of shares
of Substitute Common Stock as is equal to the Assigned Value multiplied by the
number of shares of Common Stock for which the Option is then exercisable,
divided by the Average Price. The exercise price of the Substitute Option per
share of Substitute Common Stock shall then be equal to the Option Price
multiplied by a fraction, the numerator of which shall be the number of shares
of Common Stock for which the Option is then exercisable and the denominator of
which shall be the number of shares of Substitute Common Stock for which the
Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for a number of shares that is more than 19.9%
of the shares of Substitute Common Stock outstanding prior to exercise of the
Substitute Option. If the Substitute Option would be exercisable for more than
19.9% of the shares of Substitute Common Stock outstanding prior to exercise
but for this clause (e), the issuer of the Substitute Option (the "Substitute
Option Issuer") shall make a cash payment to the Holder equal to the excess of
(i) the value of the Substitute Option without giving effect to the limitation
in this clause (e) over (ii) the value of the Substitute Option after giving
effect to the limitation in this clause (e). This difference in value shall be
determined by a nationally recognized investment banking firm selected by the
Holder or the Owner, as the case may be, and reasonably acceptable to the
Issuer.
(f) Issuer shall not enter into any transaction described in subsection
(a) of this Section 8 unless the Acquiring Corporation and any person that
controls the Acquiring Corporation assume in writing all the obligations of
Issuer hereunder.
9. (a) At the request of the holder of the Substitute Option (the
"Substitute Option Holder"), the Substitute Option Issuer shall repurchase the
Substitute Option from the Substitute Option Holder at a price (the "Substitute
Option Repurchase Price") equal to the amount by which (i) the Highest Closing
Price (as hereinafter defined) exceeds (ii) the exercise price of the
Substitute Option, multiplied by the number of shares of Substitute Common
Stock for which the Substitute Option may then be exercised, and at the request
of the owner (the "Substitute Share Owner") of shares of Substitute Common
Stock (the "Substitute Shares"), the Substitute Option issuer shall repurchase
the Substitute Shares at a price (the "Substitute Share Repurchase Price")
equal to the Highest Closing Price multiplied by the number of Substitute
Shares so designated. The term "Highest Closing Price" shall mean the highest
closing price for shares of Substitute Common Stock within the six-month period
immediately preceding the date the Substitute Option Holder gives notice of the
required repurchase of the Substitute Option or the Substitute Share Owner
gives notice of the required repurchase of the Substitute Shares, as
applicable.
(b) The Substitute Option Holder or the Substitute Share Owner, as the
case may be, may exercise its respective right to require the Substitute Option
Issuer to repurchase the Substitute Option and the Substitute Shares pursuant
to this Section 9 by surrendering for such purpose to the Substitute Option
Issuer, at its principal office, the agreement for such Substitute Option (or,
in the absence of such an agreement, a copy of this Stock Option Agreement) and
certificates for Substitute Shares accompanied by a written notice or notices
stating that the Substitute Option Holder or the Substitute Share Owner, as the
case may be, elects to require the Substitute Option Issuer to repurchase the
Substitute Option and/or the Substitute Shares in accordance with the
provisions of this Section 9. As promptly as practicable, and in any event
within five business days after the surrender of the Substitute Option and/or
certificates representing Substitute Shares and the receipt of such notice or
notices relating thereto, the Substitute Option Issuer shall deliver or cause
to be delivered to the Substitute Option Holder the Substitute Option
Repurchase Price and/or to the Substitute Share Owner the Substitute Share
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Repurchase Price therefor or the portion thereof which the Substitute Option
Issuer is not then prohibited under applicable law and regulation from so
delivering.
(c) To the extent that the Substitute Option Issuer is prohibited under
applicable law or regulation, or as a consequence of administrative policy,
from repurchasing the Substitute Option and/or the Substitute Shares in part or
in full, the Substitute Option Issuer shall immediately so notify the
Substitute Option Holder and/or the Substitute Share Owner and thereafter
deliver or caused to be delivered, from time to time, to the Substitute Option
Holder and/or the Substitute Share Owner, as appropriate, the portion of the
Substitute Share Repurchase Price, respectively, which it is no longer
prohibited from delivering, within five business days after the date on which
the Substitute Option Issuer is no longer so prohibited; PROVIDED, HOWEVER,
that if the Substitute Option Issuer is at any time after delivery of a notice
of repurchase pursuant to subsection (b) of this Section 9 prohibited under
applicable law or regulation, or as a consequence of administrative policy,
from delivering to the Substitute Option Holder and/or the Substitute Share
Owner, as appropriate, the Substitute Option Repurchase Price and the
Substitute Share Repurchase Price, respectively, in full (and the Substitute
Option Issuer shall use its best efforts to receive all required regulatory and
legal approvals as promptly as practicable in order to accomplish such
repurchase), the Substitute Option Holder or Substitute Share Owner may revoke
its notice of repurchase of the Substitute Option or the Substitute Shares
either in whole or to the extent of the prohibition, whereupon, in the latter
case, the Substitute Option Issuer shall promptly (i) deliver to the Substitute
Option Holder or Substitute Share Owner, as appropriate, that portion of the
Substitute Option Repurchase Price or the Substitute Share Repurchase Price
that the Substitute Option Issuer is not prohibited from delivering; and (ii)
deliver, as appropriate, either (A) to the Substitute Option Holder, a new
Substitute Option evidencing the right of the Substitute Option Holder to
purchase that number of shares of the Substitute Common Stock obtained by
multiplying the number of shares of the Substitute Common Stock for which the
surrendered Substitute Option was exercisable at the time of delivery of the
notice of repurchase by a fraction, the numerator of which is the Substitute
Option Repurchase Price less the portion thereof theretofore delivered to the
Substitute Option Holder, and the denominator of which is the Substitute Option
Repurchase Price, or (B) to the Substitute Share Owner, a certificate for the
Substitute Option Shares it is then so prohibited from repurchasing.
10. The time periods for exercise of certain rights under Sections 2, 6, 7
and 12 shall be extended: (i) to the extent necessary to obtain all regulatory
approvals for the exercise of such rights, and for the expiration of all
statutory waiting periods; (ii) during the pendency of any temporary
restraining order, injunction or other legal ban to the exercise of such
rights; and (iii) to the extent necessary to avoid liability under Section
16(b) of the 1934 Act by reason of such exercise.
11. Issuer hereby represents and warrants to Grantee as follows:
(a) Issuer has full corporate power and authority to execute and deliver
this Stock Option Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Stock Option Agreement and the
consummation of the transactions contemplated hereby have been duly and
validly authorized by the Board of Directors of Issuer and no other
corporate proceedings on the part of Issuer are necessary to authorize this
Stock Option Agreement or to consummate the transactions contemplated
hereby. This Stock Option Agreement has been duly and validly executed and
delivered by Issuer.
(b) Issuer has taken all necessary corporate action to authorize and
reserve and to permit it to issue, and at all times from the date hereof
through the termination of this Stock Option Agreement in accordance with
its terms will have reserved for issuance upon the exercise of the Option,
that number of shares of Common Stock equal to the maximum number of shares
of Common Stock at any time and from time to time issuable hereunder, and
all such shares, upon issuance pursuant hereto, will be duly authorized,
validly issued, fully paid, nonassessable, and will be delivered free and
clear of all claims, liens, encumbrances and security interests and not
subject to any preemptive rights.
12. Neither of the parties hereto may assign any of its rights and
obligations under this Stock Option Agreement or the Option created hereunder
to any other person, without the express written consent of the other party,
except that in the event a Subsequent Triggering Event shall have occurred
prior to an Exercise Termination
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<PAGE>
Event, Grantee, subject to the express provisions hereof, may assign in whole
or in part its rights and obligations hereunder within 90 days following such
Subsequent Triggering Event (or such later period as may be provided pursuant
to Section 10).
13. Each of Grantee and Issuer will use its best efforts to make all
filings with, and to obtain consents of, all third parties and Governmental
Entities necessary to the consummation of the transactions contemplated by this
Stock Option Agreement, including without limitation making application to list
the shares of Common Stock issuable hereunder on the New York Stock Exchange or
such other exchange or market on which the shares of Issuer may be listed upon
official notice of issuance and making any necessary applications to the FRB
under the Bank Holding Company Act and any other Governmental Entities for
approval to acquire the shares issuable hereunder.
14. The parties hereto acknowledge that damages would be an inadequate
remedy for a breach of this Stock Option Agreement by either party hereto and
that the obligations of the parties shall hereto be enforceable by either party
hereto through injunctive or other equitable relief.
15. If any term, provision, covenant or restriction contained in this
Stock Option Agreement is held by a court or a federal or state regulatory
agency of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms, provisions and covenants and restrictions contained in
this Stock Option Agreement shall remain in full force and effect, and shall in
no way be affected, impaired or invalidated. If for any reason such court or
regulatory agency determines that the Holder is not permitted to acquire, or
Issuer is not permitted to repurchase pursuant to Section 7, the full number of
shares of Common Stock provided in Section 1(a) hereof (as adjusted pursuant to
Sections 1(b) or 5 hereof), it is the express intention of Issuer to allow the
Holder to acquire or to require Issuer to repurchase such lesser number of
shares as may be permissible, without any amendment or modification hereof.
16. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in person, by
cable, telegram, telecopy or telex, or by registered or certified mail (postage
prepaid, return receipt requested) at the respective addresses of the parties
set forth in the Agreement.
17. This Stock Option Agreement shall be governed by and construed in
accordance with the laws of the State of West Virginia, regardless of the laws
that might otherwise govern under applicable principles of conflicts of laws
thereof.
18. This Stock Option Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
19. Except as otherwise expressly provided herein, each of the parties
hereto shall bear and pay all costs and expenses incurred by it or on its
behalf in connection with the transactions contemplated hereunder, including
fees and expenses of its own financial consultants, investment bankers,
accountants and counsel.
20. Except as otherwise expressly provided herein or in the Agreement,
this Stock Option Agreement contains the entire agreement between the parties
with respect to the transactions contemplated hereunder and supersedes all
prior arrangements or understandings with respect thereof, written or oral. The
terms and conditions of this Stock Option Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective successors and
permitted assigns. Nothing in this Stock Option Agreement, expressed or
implied, is intended to confer upon any party, other than the parties hereto,
and their respective successors except as assigns, any rights, remedies,
obligations or liabilities under or by reason of this Stock Option Agreement,
except as expressly provided herein.
21. Terms used in this Stock Option Agreement and not defined herein but
defined in the Agreement shall have the meanings assigned thereto in the
Agreement.
[SIGNATURES FOLLOW ON SEPARATE PAGES]
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<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Stock Option
Agreement to be executed on its behalf by their officers thereunto duly
authorized, all as of the date first above written.
<TABLE>
<S> <C>
CITY HOLDING COMPANY, as Issuer HORIZON BANCORP, INC., as Grantee
By: /s/ ROBERT A. HENSON By: /s/ FRANK S. HARKINS, JR.
------------------------------- -------------------------------
Name: Robert A. Henson Name: Frank S. Harkins, Jr.
Title: Chief Financial Officer Title: Chairman of the Board and CEO
</TABLE>
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<PAGE>
APPENDIX D
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STOCK OPTION AGREEMENT
DATED AS OF AUGUST 7, 1998
BETWEEN
HORIZON BANCORP, INC.
AS ISSUER,
AND CITY HOLDING COMPANY,
AS GRANTEE
- --------------------------------------------------------------------------------
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<PAGE>
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of August 7, 1998, between HORIZON
BANCORP, INC., a West Virginia corporation ("Issuer"), and CITY HOLDING
COMPANY, a West Virginia corporation ("Grantee").
WITNESSETH:
WHEREAS, as a condition to, and contemporaneous with the execution of an
Agreement and Plan of Reorganization (the "Agreement") whereby Grantee will
merge with Issuer (the "Merger"), and in consideration therefor, the parties
are entering into this Stock Option Agreement pursuant to which Issuer has
agreed to grant Grantee the Option (as hereinafter defined):
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and Agreement set forth herein and in the Agreement, the parties hereto agree
as follows:
1. (a) Issuer hereby grants to Grantee an unconditional, irrevocable
option (the "Option") to purchase, subject to the terms hereof, up to 1,853,262
fully paid and nonassessable shares of common stock, par value $1.00 ("Common
Stock"), of Issuer at a price of $42.375 per share (such price, as adjusted if
applicable, the "Option Price"); PROVIDED HOWEVER that in no event shall the
number of shares of Common Stock for which this Option is exercisable exceed
19.9% of the Issuer's issued and outstanding common shares without giving
effect to any shares subject to or issued pursuant to the Option. The number of
shares of Common Stock that may be received upon the exercise of the Option and
the Option Price are subject to adjustment as herein set forth.
(b) If any additional shares of Common Stock are issued or otherwise
become outstanding after the date of this Stock Option Agreement (other than
pursuant to this Stock Option Agreement), the number of shares of Common Stock
subject to the Option shall be increased so that, after such issuance such
number equals 19.9% of the number of shares of Common Stock then issued and
outstanding without giving effect to any shares subject to or issued pursuant
to the Option. Nothing contained in this Section l(b) or elsewhere in this
Stock Option Agreement shall be deemed to authorize Issuer or Grantee to breach
any provision of the Agreement.
2. (a) The Holder (as hereinafter defined) may exercise the Option, in
whole or part, if, but only if, both an Initial Triggering Event (as
hereinafter defined) and a Subsequent Triggering Event (as hereinafter defined)
shall have occurred prior to the occurrence of an Exercise Termination Event
(as hereinafter defined), PROVIDED that the Holder shall have sent the written
notice of such exercise (as provided in subsection (e) of this Section 2)
within 90 days following such Subsequent Triggering Event (or such later date
as provided in Section 10). Each of the following shall be an "Exercise
Termination Event": (i) the Effective Time of the Merger; (ii) termination of
the Agreement in accordance with the provisions thereof (other than a
termination resulting from a willful breach by Issuer of a provision of the
Agreement) if such termination occurs prior to the occurrence of an Initial
Triggering Event; or (iii) the passage of eighteen months after termination of
the Agreement if such termination follows the occurrence of an Initial
Triggering Event or is a termination by Grantee pursuant to Section 8.1(c)
thereof resulting from a willful breach by Issuer of a provision of the
Agreement. The term "Holder" shall mean the holder or holders of the Option.
(b) The term "Initial Triggering Event" shall mean any of the following
events or transactions occurring after the date hereof:
(i) Issuer or any significant subsidiary of Issuer without having
received Grantee's prior written consent, shall have entered into an
agreement to engage in, an Acquisition Transaction (as hereinafter defined)
with any person (the term "person" for purposes of this Stock Option
Agreement having the meaning assigned thereto in Sections 3(a)(9) and
13(d)(3) of the Securities Exchange Act of 1934 (the "1934 Act"), and the
rules and regulations thereunder) other than Grantee or any of its
subsidiaries (each a "Grantee Subsidiary") or the board of directors of
Issuer shall have recommended that the shareholders of Issuer approve or
accept any Acquisition Transaction other than as contemplated by the
Agreement. For purposes of this Stock Option Agreement, "Acquisition
Transaction" shall mean (a) a merger, consolidation or share exchange
involving Issuer or any significant subsidiary of Issuer, provided,
however, that in no event shall
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<PAGE>
(i) any merger, consolidation or share exchange involving only the Issuer
and one or more of the subsidiaries of Issuer, or involving only any two or
more of such subsidiaries of Issuer be deemed to be an Acquisition
Transaction, or (ii) any merger, consolidation or share exchange (A) in
which Issuer is the surviving entity, or (B) as to which the shareholders
of Issuer immediately prior thereto own in the aggregate at least 40% of
the common stock of the surviving corporation or its publicly-held parent
corporation immediately following consummation thereof be deemed to be an
Acquisition Transaction, (b) a purchase, lease or other acquisition of all
or substantially all of the assets of Issuer and its subsidiaries taken as
a whole, or (c) a purchase or other acquisition (including by way of
merger, consolidation, share exchange or otherwise) of securities
representing 20% or more of the voting power of Issuer;
(ii) The board of directors of Issuer does not recommend that the
shareholders of Issuer approve the Agreement or publicly withdraws or
modifies, or publicly announces its intention to withdraw or modify, in any
manner adverse to the Grantee, its recommendation that its shareholders
approve the Agreement;
(iii) Any person other than Grantee or any Grantee Subsidiary or any
Issuer Subsidiary acting in a fiduciary capacity shall have acquired
beneficial ownership or the right to acquire beneficial ownership of 20% or
more of the outstanding shares of Common Stock (the term "beneficial
ownership" for purposes of this Stock Option Agreement having the meaning
assigned thereto in Section 13(d) of the 1934 Act, and the rules and
regulations thereunder);
(iv) Any person other than Grantee or any Grantee Subsidiary shall have
made a BONA FIDE proposal to Issuer or its shareholders by public
announcement or written communication that is or becomes the subject of
public disclosure to engage in an Acquisition Transaction;
(v) After a proposal is made by a third party to Issuer or its
shareholders to engage in an Acquisition Transaction, Issuer shall have
breached any covenant or obligation contained in the Agreement and such
breach (x) would entitle Grantee to terminate the Agreement and (y) shall
not have been cured prior to the Notice Date (as defined below);
(vi) Any person other than Grantee or any Grantee Subsidiary, other than
in connection with a transaction to which Grantee has given its prior
written consent, shall have filed an application or notice with The Board
of Governors of the Federal Reserve System (the "FRB") or any other federal
or state bank regulatory authority, which application or notice has been
accepted for processing, for approval to engage in an Acquisition
Transaction;
(vii) The shareholders of Issuer shall have voted and failed to approve
the Agreement and the Merger at a meeting which has been held for that
purpose or any adjournment or postponement thereof, or such meeting shall
not have been held in violation of the Agreement or shall have been
canceled prior to termination of the Agreement if, prior to such meeting
(or if such meeting shall not have been held or shall have been canceled,
prior to such termination), it shall have been publicly announced that any
person (other than Grantee or any Grantee Subsidiary) shall have made, or
disclosed an intention to make, a proposal to engage in an Acquisition
Transaction; or
(viii) Any person other than Grantee or any Grantee Subsidiary shall
have filed with the SEC a registration statement or tender offer materials
with respect to a potential exchange or tender offer that would constitute
an Acquisition Transaction;
(c) The term "Subsequent Triggering Event" shall mean either of the
following events or transactions occurring after the date hereof:
(i) The acquisition by any person, other than Grantee or any Grantee
Subsidiary or any Issuer Subsidiary acting in a fiduciary capacity, of
beneficial ownership of 25% or more of the then outstanding Common Stock;
or
(ii) The occurrence of the Initial Triggering Event described in clause
(i) of subsection 2(b), except that the percentage referred to in clause
(c) shall be 25%.
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<PAGE>
(d) Issuer shall notify Grantee promptly in writing of the occurrence of
any Initial Triggering Event or Subsequent Triggering Event (together, a
"Triggering Event"), it being understood that the giving of such notice by
Issuer shall not be a condition to the right of the Holder to exercise the
Option.
(e) If the Holder is entitled to and wishes to exercise the Option, it
shall send to Issuer a written notice (the date of which being herein referred
to as the "Notice Date") specifying (i) the total number of shares it will
purchase pursuant to such exercise and (ii) a place and date not earlier than
three business days nor later than 60 business days from the Notice Date for
the closing of such purchase (the "Closing Date"); provided that if prior
notification to or approval of the FRB or any other governmental authority or
regulatory or administrative agency or commission, domestic or foreign (a
"Governmental Entity"), is required in connection with such purchase, the
Holder shall promptly file the required notice or application for approval and
shall expeditiously process the same and the period of time that otherwise
would run pursuant to this sentence shall run from the later of (x) the date on
which any required notification periods have expired or been terminated and (y)
the date on which such approvals have been obtained and any requisite waiting
period or periods shall have passed. Any exercise of the Option shall be deemed
to occur on the Notice Date relating thereto.
(f) At the closing referred to in subsection (e) of this Section 2, the
Holder shall pay to Issuer the aggregate purchase price for the shares of
Common Stock purchased pursuant to the exercise of the Option in immediately
available funds by wire transfer to a bank account designated by Issuer,
PROVIDED that failure or refusal of Issuer to designate such a bank account
shall not preclude the Holder from exercising the Option.
(g) At such closing, simultaneously with the delivery of immediately
available funds as provided in subsection (f) of this Section 2, Issuer shall
deliver to the Holder a certificate or certificates representing the number of
shares of Common Stock purchased by the Holder and, if the Option should be
exercised in part only, a new Option evidencing the rights of the Holder
thereof to purchase the balance of the shares purchasable hereunder, and the
Holder shall deliver to Issuer a copy of this Stock Option Agreement and a
letter agreeing that the Holder will not offer to sell or otherwise dispose of
such shares in violation of applicable law or the provisions of this Stock
Option Agreement.
(h) Certificates for Common Stock delivered at a closing hereunder may be
endorsed with a restrictive legend that shall read substantially as follows:
"The transfer of the shares represented by this certificate is subject
to certain provisions of an agreement between the registered holder
hereof and Issuer and to resale restrictions arising under the
Securities Act of 1933, as amended. A copy of such agreement is on file
at the principal office of Issuer and will be provided to the holder
hereof without charge upon receipt by Issuer of a written request
therefor."
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act of 1933, as amended (the "1933 Act"), in the above legend
shall be removed by delivery of substitute certificate(s) without such
reference if the Holder shall have delivered to Issuer a copy of a letter from
the staff of the Securities and Exchange Commission (the "SEC"), or an opinion
of counsel, in form and substance satisfactory to Issuer, to the effect that
such legend is not required for purposes of the 1933 Act; (ii) the reference to
the provisions of this Stock Option Agreement in the above legend shall be
removed by delivery of substitute certificate(s) without such reference if the
shares have been sold or transferred in compliance with the provisions of this
Stock Option Agreement and under circumstances that do not require the
retention of such reference; and (iii) the legend shall be removed in its
entirety if the conditions in the preceding clauses (i) and (ii) are both
satisfied. In addition, such certificates shall bear any other legend as may be
required by law.
(i) Upon the giving by the Holder to Issuer of the written notice of
exercise of the Option provided for under subsection (e) of this Section 2 and
the tender of the applicable purchase price in immediately available funds, the
Holder shall be deemed to be the holder of record of the shares of Common Stock
issuable upon such exercise, notwithstanding that the stock transfer books of
Issuer shall then be closed or that certificates representing such shares of
Common Stock shall not then be actually delivered to the Holder. Issuer shall
pay all expenses, and any and all United States Federal, state and local taxes
and other charges that may be payable in
D-4
<PAGE>
connection with the preparation, issue and delivery of stock certificates under
this Section 2 in the name of the Holder or its assignee, transferee or
designee.
3. Issuer agrees: (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Common Stock so that the Option may be exercised without additional
authorization of Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Common Stock;
(ii) that it will not, by charter amendment or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any other voluntary
act, avoid or seek to avoid the observance or performance of any of the
covenants, stipulations or conditions to be observed or performed hereunder by
Issuer; (iii) promptly to take all action as may from time to time be required
(including (A) complying with all premerger notification, reporting and waiting
period requirements specified in 15 U.S.C. Section 18a and regulations
promulgated thereunder and (B) in the event, under the Bank Holding Company Act
of 1956, as amended, or the Change in Bank Control Act of 1978, as amended, or
any state banking law, prior approval of or notice to the FRB or to any other
Governmental Entity is necessary before the Option may be exercised,
cooperating fully with the Holder in preparing such applications or notices and
providing such information to each such Governmental Entity as they may
require) in order to permit the Holder to exercise the Option and Issuer duly
and effectively to issue shares of Common Stock pursuant hereto; and (iv)
promptly to take all action provided herein to protect the rights of the Holder
against dilution.
4. This Stock Option Agreement (and the Option granted hereby) are
exchangeable, without expense, at the option of the Holder, upon presentation
and surrender of this Stock Option Agreement at the principal office of Issuer,
for other Agreements providing for Options of different denominations entitling
the holder thereof to purchase, on the same terms and subject to the same
conditions as are set forth herein, in the aggregate the same number of shares
of Common Stock purchasable hereunder. The terms "Stock Option Agreement" and
"Option" as used herein include any Stock Option Agreements and related options
for which this Stock Option Agreement (and the Option granted hereby) may be
exchanged. Upon receipt by Issuer of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Stock Option Agreement, and
(in the case of loss, theft or destruction) of reasonably satisfactory
indemnification, and upon surrender and cancellation of this Stock Option
Agreement, if mutilated, Issuer will execute and deliver a new Stock Option
Agreement of like tenor and date. Any such new Stock Option Agreement executed
and delivered shall constitute an additional contractual obligation on the part
of Issuer, whether or not the Stock Option Agreement so lost, stolen, destroyed
or mutilated shall at any time be enforceable by anyone.
5. In addition to the adjustment in the number of shares of Common Stock
that are purchasable upon exercise of the Option pursuant to Section 1 of this
Stock Option Agreement, the number of shares of Common Stock purchasable upon
the exercise of the Option shall be subject to adjustment from time to time as
provided in this Section 5.
(a) In the event of any change in Common Stock by reason of stock
dividends, split-ups, mergers, recapitalizations, combinations, subdivisions,
conversions, exchanges of shares or the like, the type and number of shares of
Common Stock purchasable upon exercise hereof shall be appropriately adjusted.
(b) Whenever the number of shares of Common Stock purchasable upon
exercise hereof is adjusted as provided in this Section 5, the Option Price
shall be adjusted by multiplying the Option Price by a fraction, the numerator
of which shall be equal to the number of shares of Common Stock purchasable
prior to the adjustment and the denominator of which shall be equal to the
number of shares of Common Stock purchasable after the adjustment.
6. Upon the occurrence of a Subsequent Triggering Event that occurs prior
to an Exercise Termination Event, Issuer shall, at the request of Grantee
delivered within 90 days (or such later date as may be provided pursuant to
Section 10) of such Subsequent Triggering Event (whether on its own behalf or
on behalf of any subsequent holder of this Option (or part thereof) or any of
the shares of Common Stock issued pursuant hereto), promptly prepare, file and
keep current a shelf registration statement under the 1933 Act covering any
shares issued and issuable pursuant to this Option and shall use its reasonable
best efforts to cause such registration statement to become effective and
remain current in order to permit the sale or other disposition of any shares
of Common Stock issued upon total or partial exercise of this Option ("Option
Shares") in accordance with any
D-5
<PAGE>
plan of disposition requested by Grantee. Issuer will use its reasonable best
efforts to cause such registration statement first to become effective and then
to remain effective for such period not in excess of 180 days from the day such
registration statement first becomes effective or such shorter time as may be
reasonably necessary to effect such sales or other dispositions. Grantee shall
have the right to demand two such registrations. If requested by any such
Holder in connection with such registration, Issuer shall become a party to any
underwriting agreement relating to the sale of such shares, but only to the
extent of obligating itself in respect of representations, warranties,
indemnities and other Agreements customarily included in such underwriting
Agreements. The foregoing notwithstanding, if, at the time of any request by
Grantee for registration of Option Shares as provided above, Issuer is in the
process of registration with respect to an underwritten public offering of
shares of Common Stock, and if in the good faith judgment of the managing
underwriter or managing underwriters, or, if none, the sole underwriter or
underwriters, of such offering the inclusion of the Holder's Option or Option
Shares would interfere with the successful marketing of the shares of Common
Stock offered by Issuer, the number of Option Shares otherwise to be covered in
the registration statement contemplated hereby may be reduced; PROVIDED,
HOWEVER, that after any such required reduction the number of Option Shares to
be included in such offering for the account of the Holder shall constitute at
least 25% of the total number of shares to be sold by the Holder and Issuer in
the aggregate; PROVIDED FURTHER, however, that if such reduction occurs, then
the Issuer shall file a registration statement for the balance as promptly as
practical and no reduction shall thereafter occur. Each such Holder shall
provide all information reasonably requested by Issuer for inclusion in any
registration statement to be filed hereunder. Upon receiving any request under
this Section 6 from any Holder, Issuer agrees to send a copy thereof to any
other person known to Issuer to be entitled to registration rights under this
Section 6, in each case by promptly mailing the same, postage prepaid, to the
address of record of the persons entitled to receive such copies.
7. (a) At any time after the occurrence of a Repurchase Event (as defined
below) (i) at the request of the Holder, delivered prior to an Exercise
Termination Event (or such later period as may be provided pursuant to Section
10); Issuer (or any successor thereto) shall repurchase the Option from the
Holder at a price (the "Option Repurchase Price") equal to the amount by which
(A) the market/offer price (as defined below) exceeds (B) the Option Price,
multiplied by the number of shares for which this Option may then be exercised
and (ii) at the request of the owner of Option Shares from time to time (the
"Owner"), delivered prior to an Exercise Termination Event (or such later
period as may be provided pursuant to Section 10), Issuer (or any successor
thereto) shall repurchase such number of the Option Shares from the Owner as
the Owner shall designate at a price (the "Option Share Repurchase Price")
equal to the market/offer price multiplied by the number of Option Shares so
designated. The term "market/offer price" shall mean the highest of (i) the
price per share of Common Stock at which a tender offer or exchange offer
therefor has been made after the date hereof, (ii) the price per share of
Common Stock to be paid by any third party pursuant to an agreement with
Issuer, (iii) the highest closing price for shares of Common Stock within the
six-month period immediately preceding the date the Holder gives notice of the
required repurchase of this Option or the Owner gives notice of the required
repurchase of Option Shares, as the case may be, or (iv) in the event of a sale
of all or substantially all of Issuer's assets, the sum of the price paid in
such sale for such assets and the current market value of the remaining assets
of Issuer as determined by a nationally recognized investment banking firm
selected by the Holder or the Owner, as the case may be, divided by the number
of shares of Common Stock of Issuer outstanding at the time of such sale. In
determining the market/offer price, the value of consideration other than cash
shall be determined by a nationally recognized investment banking firm selected
by the Holder or Owner, as the case may be, and reasonably acceptable to the
Issuer, whose determination shall be conclusive and binding on all parties.
(b) The Holder or the Owner, as the case may be, may exercise its right to
require Issuer to repurchase the Option and any Option Shares pursuant to this
Section 7 by surrendering for such purpose to Issuer, at its principal office,
a copy of this Stock Option Agreement or certificates for Option Shares, as
applicable, accompanied by a written notice or notices stating that the Holder
or the Owner, as the case may be, elects to require Issuer to repurchase this
Option and/or the Option Shares in accordance with the provisions of this
Section 7. As promptly as practicable, and in any event within five business
days after the surrender of the Option and/or certificates representing Option
Shares and the receipt of such notice or notices relating thereto, Issuer shall
deliver or cause to be delivered to the Holder the Option Repurchase Price
and/or to the Owner the Option Share
D-6
<PAGE>
Repurchase Price therefor or the portion thereof that Issuer is not then
prohibited under applicable law and regulation from so delivering.
(c) To the extent that Issuer is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from repurchasing the
Option and/or the Option Shares in full, Issuer shall immediately so notify the
Holder and/or the Owner and thereafter deliver or cause to be delivered, from
time to time, to the Holder and/or the Owner, as appropriate, the portion of
the Option Repurchase Price and the Option Share Repurchase Price,
respectively, that it is no longer prohibited from delivering, within five
business days after the date on which Issuer is no longer so prohibited;
PROVIDED, HOWEVER, that if Issuer at any time after delivery of a notice of
repurchase pursuant to subsection (b) of this Section 7 is prohibited under
applicable law or regulation, or as a consequence of administrative policy,
from delivering to the Holder and/or the Owner, as appropriate, the Option
Repurchase Price and the Option Share Repurchase Price, respectively, in full
(and Issuer hereby undertakes to use its best efforts to obtain all required
regulatory and legal approvals and to file any required notices as promptly as
practicable in order to accomplish such repurchase), the Holder or Owner may
revoke its notice of repurchase of the Option or the Option Shares either in
whole or to the extent of the prohibition, whereupon, in the latter case,
Issuer shall promptly (i) deliver to the Holder and/or the Owner, as
appropriate, that portion of the Option Purchase Price or the Option Share
Repurchase Price that Issuer is not prohibited from delivering; and (ii)
deliver, as appropriate, either (A) to the Holder, a new Stock Option Agreement
evidencing the right of the Holder to purchase that number of shares of Common
Stock obtained by multiplying the number of shares of Common Stock for which
the surrendered Stock Option Agreement was exercisable at the time of delivery
of the notice of repurchase by a fraction, the numerator of which is the Option
Repurchase Price less the portion thereof theretofore delivered to the Holder
and the denominator of which is the Option Repurchase Price, or (B) to the
Owner, a certificate for the Option Shares it is then so prohibited from
repurchasing.
(d) For purposes of this Section 7, a "Repurchase Event" shall be deemed
to have occurred upon the occurrence of any of the following events or
transactions after the date hereof:
(i) the acquisition by any person (other than Grantee or any Grantee
Subsidiary) of beneficial ownership of 50% or more of the then outstanding
Common Stock; or
(ii) the consummation of any Acquisition Transaction described in
Section 2(b) (i) hereof, except that the percentage referred to in clause
(c) shall be 50%.
8. (a) If prior to an Exercise Termination Event, Issuer shall enter into
an agreement (i) to consolidate or merge with any person, other than Grantee or
one of its subsidiaries, and shall not be the continuing or surviving
corporation of such consolidation or merger, (ii) to permit any person, other
than Grantee or one of its subsidiaries, to merge into Issuer and Issuer shall
be the continuing or surviving corporation, but, in connection with such
merger, the then outstanding shares of Common Stock shall be changed into or
exchanged for stock or other securities of any other person or cash or any
other property or the then outstanding shares of Common Stock shall after such
merger represent less than 50% of the outstanding shares and share equivalents
of the merged company, or (iii) to sell or otherwise transfer all or
substantially all of its assets to any person, other than Grantee or one of its
subsidiaries, then, and in each such case, the agreement governing such
transaction shall make proper provision so that the Option shall, upon the
consummation of any such transaction and upon the terms and conditions set
forth herein, be converted into, or exchanged for, an option (the "Substitute
Option"), at the election of the Holder, of either (x) the Acquiring
Corporation (as hereinafter defined) or (y) any person that controls the
Acquiring Corporation.
(b) The following terms have the meanings indicated:
(1) "Acquiring Corporation" shall mean (i) the continuing or surviving
corporation of a consolidation or merger with Issuer (if other than
Issuer), (ii) Issuer in a merger in which Issuer is the continuing or
surviving person, and (iii) the transferee of all or substantially all of
Issuer's assets.
(2) "Substitute Common Stock" shall mean the common stock to be issued
by the issuer of the Substitute Option upon exercise of the Substitute
Option.
(3) "Assigned Value" shall mean the market/offer price, as defined in
Section 7.
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(4) "Average Price" shall mean the average closing price of a share of
the Substitute Common Stock for the one year immediately preceding the
consolidation, merger or sale in question, but in no event higher than the
closing price of the shares of Substitute Common Stock on the day preceding
such consolidation, merger or sale; PROVIDED, that if Issuer is the issuer
of the Substitute Option, the Average Price shall be computed with respect
to a share of common stock issued by the person merging into Issuer or by
any company which controls or is controlled by such person, as the Holder
may elect.
(c) The Substitute Option shall have the same terms as the Option,
provided, that if the terms of the Substitute Option cannot, for legal reasons,
be the same as the Option, such terms shall be as similar as possible and in no
event less advantageous to the Holder. The issuer of the Substitute Option
shall also enter into an agreement with the then Holder or Holders of the
Substitute Option in substantially the same form as this Stock Option
Agreement, which shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of shares
of Substitute Common Stock as is equal to the Assigned Value multiplied by the
number of shares of Common Stock for which the Option is then exercisable,
divided by the Average Price. The exercise price of the Substitute Option per
share of Substitute Common Stock shall then be equal to the Option Price
multiplied by a fraction, the numerator of which shall be the number of shares
of Common Stock for which the Option is then exercisable and the denominator of
which shall be the number of shares of Substitute Common Stock for which the
Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for a number of shares that is more than 19.9%
of the shares of Substitute Common Stock outstanding prior to exercise of the
Substitute Option. If the Substitute Option would be exercisable for more than
19.9% of the shares of Substitute Common Stock outstanding prior to exercise
but for this clause (e), the issuer of the Substitute Option (the "Substitute
Option Issuer") shall make a cash payment to the Holder equal to the excess of
(i) the value of the Substitute Option without giving effect to the limitation
in this clause (e) over (ii) the value of the Substitute Option after giving
effect to the limitation in this clause (e). This difference in value shall be
determined by a nationally recognized investment banking firm selected by the
Holder or the Owner, as the case may be, and reasonably acceptable to the
Issuer.
(f) Issuer shall not enter into any transaction described in subsection
(a) of this Section 8 unless the Acquiring Corporation and any person that
controls the Acquiring Corporation assume in writing all the obligations of
Issuer hereunder.
9. (a) At the request of the holder of the Substitute Option (the
"Substitute Option Holder"), the Substitute Option Issuer shall repurchase the
Substitute Option from the Substitute Option Holder at a price (the "Substitute
Option Repurchase Price") equal to the amount by which (i) the Highest Closing
Price (as hereinafter defined) exceeds (ii) the exercise price of the
Substitute Option, multiplied by the number of shares of Substitute Common
Stock for which the Substitute Option may then be exercised, and at the request
of the owner (the "Substitute Share Owner") of shares of Substitute Common
Stock (the "Substitute Shares"), the Substitute Option issuer shall repurchase
the Substitute Shares at a price (the "Substitute Share Repurchase Price")
equal to the Highest Closing Price multiplied by the number of Substitute
Shares so designated. The term "Highest Closing Price" shall mean the highest
closing price for shares of Substitute Common Stock within the six-month period
immediately preceding the date the Substitute Option Holder gives notice of the
required repurchase of the Substitute Option or the Substitute Share Owner
gives notice of the required repurchase of the Substitute Shares, as
applicable.
(b) The Substitute Option Holder or the Substitute Share Owner, as the
case may be, may exercise its respective right to require the Substitute Option
Issuer to repurchase the Substitute Option and the Substitute Shares pursuant
to this Section 9 by surrendering for such purpose to the Substitute Option
Issuer, at its principal office, the agreement for such Substitute Option (or,
in the absence of such an agreement, a copy of this Stock Option Agreement) and
certificates for Substitute Shares accompanied by a written notice or notices
stating that the Substitute Option Holder or the Substitute Share Owner, as the
case may be, elects to require the Substitute Option Issuer to repurchase the
Substitute Option and/or the Substitute Shares in accordance with the
provisions of this Section 9. As promptly as practicable, and in any event
within five business days after the surrender of the Substitute Option and/or
certificates representing Substitute Shares and the receipt of such notice
D-8
<PAGE>
or notices relating thereto, the Substitute Option Issuer shall deliver or
cause to be delivered to the Substitute Option Holder the Substitute Option
Repurchase Price and/or to the Substitute Share Owner the Substitute Share
Repurchase Price therefor or the portion thereof which the Substitute Option
Issuer is not then prohibited under applicable law and regulation from so
delivering.
(c) To the extent that the Substitute Option Issuer is prohibited under
applicable law or regulation, or as a consequence of administrative policy,
from repurchasing the Substitute Option and/or the Substitute Shares in part or
in full, the Substitute Option Issuer shall immediately so notify the
Substitute Option Holder and/or the Substitute Share Owner and thereafter
deliver or caused to be delivered, from time to time, to the Substitute Option
Holder and/or the Substitute Share Owner, as appropriate, the portion of the
Substitute Share Repurchase Price, respectively, which it is no longer
prohibited from delivering, within five business days after the date on which
the Substitute Option Issuer is no longer so prohibited; PROVIDED, HOWEVER,
that if the Substitute Option Issuer is at any time after delivery of a notice
of repurchase pursuant to subsection (b) of this Section 9 prohibited under
applicable law or regulation, or as a consequence of administrative policy,
from delivering to the Substitute Option Holder and/or the Substitute Share
Owner, as appropriate, the Substitute Option Repurchase Price and the
Substitute Share Repurchase Price, respectively, in full (and the Substitute
Option Issuer shall use its best efforts to receive all required regulatory and
legal approvals as promptly as practicable in order to accomplish such
repurchase), the Substitute Option Holder or Substitute Share Owner may revoke
its notice of repurchase of the Substitute Option or the Substitute Shares
either in whole or to the extent of the prohibition, whereupon, in the latter
case, the Substitute Option Issuer shall promptly (i) deliver to the Substitute
Option Holder or Substitute Share Owner, as appropriate, that portion of the
Substitute Option Repurchase Price or the Substitute Share Repurchase Price
that the Substitute Option Issuer is not prohibited from delivering; and (ii)
deliver, as appropriate, either (A) to the Substitute Option Holder, a new
Substitute Option evidencing the right of the Substitute Option Holder to
purchase that number of shares of the Substitute Common Stock obtained by
multiplying the number of shares of the Substitute Common Stock for which the
surrendered Substitute Option was exercisable at the time of delivery of the
notice of repurchase by a fraction, the numerator of which is the Substitute
Option Repurchase Price less the portion thereof theretofore delivered to the
Substitute Option Holder, and the denominator of which is the Substitute Option
Repurchase Price, or (B) to the Substitute Share Owner, a certificate for the
Substitute Option Shares it is then so prohibited from repurchasing.
10. The time periods for exercise of certain rights under Sections 2, 6, 7
and 12 shall be extended: (i) to the extent necessary to obtain all regulatory
approvals for the exercise of such rights, and for the expiration of all
statutory waiting periods; (ii) during the pendency of any temporary
restraining order, injunction or other legal ban to the exercise of such
rights; and (iii) to the extent necessary to avoid liability under Section
16(b) of the 1934 Act by reason of such exercise.
11. Issuer hereby represents and warrants to Grantee as follows:
(a) Issuer has full corporate power and authority to execute and deliver
this Stock Option Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Stock Option Agreement and the
consummation of the transactions contemplated hereby have been duly and
validly authorized by the Board of Directors of Issuer and no other
corporate proceedings on the part of Issuer are necessary to authorize this
Stock Option Agreement or to consummate the transactions contemplated
hereby. This Stock Option Agreement has been duly and validly executed and
delivered by Issuer.
(b) Issuer has taken all necessary corporate action to authorize and
reserve and to permit it to issue, and at all times from the date hereof
through the termination of this Stock Option Agreement in accordance with
its terms will have reserved for issuance upon the exercise of the Option,
that number of shares of Common Stock equal to the maximum number of shares
of Common Stock at any time and from time to time issuable hereunder, and
all such shares, upon issuance pursuant hereto, will be duly authorized,
validly issued, fully paid, nonassessable, and will be delivered free and
clear of all claims, liens, encumbrances and security interests and not
subject to any preemptive rights.
12. Neither of the parties hereto may assign any of its rights and
obligations under this Stock Option Agreement or the Option created hereunder
to any other person, without the express written consent of the other party,
except that in the event a Subsequent Triggering Event shall have occurred
prior to an Exercise Termination
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<PAGE>
Event, Grantee, subject to the express provisions hereof, may assign in whole
or in part its rights and obligations hereunder within 90 days following such
Subsequent Triggering Event (or such later period as may be provided pursuant
to Section 10).
13. Each of Grantee and Issuer will use its best efforts to make all
filings with, and to obtain consents of, all third parties and Governmental
Entities necessary to the consummation of the transactions contemplated by this
Stock Option Agreement, including without limitation making application to list
the shares of Common Stock issuable hereunder on the New York Stock Exchange or
such other exchange or market on which the shares of Issuer may be listed upon
official notice of issuance and making any necessary applications to the FRB
under the Bank Holding Company Act and any other Governmental Entities for
approval to acquire the shares issuable hereunder.
14. The parties hereto acknowledge that damages would be an inadequate
remedy for a breach of this Stock Option Agreement by either party hereto and
that the obligations of the parties shall hereto be enforceable by either party
hereto through injunctive or other equitable relief.
15. If any term, provision, covenant or restriction contained in this
Stock Option Agreement is held by a court or a federal or state regulatory
agency of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms, provisions and covenants and restrictions contained in
this Stock Option Agreement shall remain in full force and effect, and shall in
no way be affected, impaired or invalidated. If for any reason such court or
regulatory agency determines that the Holder is not permitted to acquire, or
Issuer is not permitted to repurchase pursuant to Section 7, the full number of
shares of Common Stock provided in Section 1(a) hereof (as adjusted pursuant to
Sections 1(b) or 5 hereof), it is the express intention of Issuer to allow the
Holder to acquire or to require Issuer to repurchase such lesser number of
shares as may be permissible, without any amendment or modification hereof.
16. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in person, by
cable, telegram, telecopy or telex, or by registered or certified mail (postage
prepaid, return receipt requested) at the respective addresses of the parties
set forth in the Agreement.
17. This Stock Option Agreement shall be governed by and construed in
accordance with the laws of the State of West Virginia, regardless of the laws
that might otherwise govern under applicable principles of conflicts of laws
thereof.
18. This Stock Option Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
19. Except as otherwise expressly provided herein, each of the parties
hereto shall bear and pay all costs and expenses incurred by it or on its
behalf in connection with the transactions contemplated hereunder, including
fees and expenses of its own financial consultants, investment bankers,
accountants and counsel.
20. Except as otherwise expressly provided herein or in the Agreement,
this Stock Option Agreement contains the entire agreement between the parties
with respect to the transactions contemplated hereunder and supersedes all
prior arrangements or understandings with respect thereof, written or oral. The
terms and conditions of this Stock Option Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective successors and
permitted assigns. Nothing in this Stock Option Agreement, expressed or
implied, is intended to confer upon any party, other than the parties hereto,
and their respective successors except as assigns, any rights, remedies,
obligations or liabilities under or by reason of this Stock Option Agreement,
except as expressly provided herein.
21. Terms used in this Stock Option Agreement and not defined herein but
defined in the Agreement shall have the meanings assigned thereto in the
Agreement.
[SIGNATURES FOLLOW ON SEPARATE PAGES]
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<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Stock Option
Agreement to be executed on its behalf by their officers thereunto duly
authorized, all as of the date first above written.
<TABLE>
<S> <C>
HORIZON BANCORP, INC., as Issuer CITY HOLDING COMPANY, as Grantee
By: /s/ FRANK S. HARKINS, JR. By: /s/ ROBERT A. HENSON
------------------------------- -------------------------------
Name: Frank S. Harkins, Jr. Name: Robert A. Henson
Title: Chairman of the Board and CEO Title: Chief Financial Officer
</TABLE>
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<PAGE>
APPENDIX E
WHEAT FIRST UNION LETTERHEAD
[WHEAT FIRST UNION LOGO]
November 5, 1998
Board of Directors
City Holding Company
25 Gatewater Road
Cross Lanes, West Virginia 25313
Members of the Board:
City Holding Company ("City Holding") and Horizon Bancorp, Inc.
("Horizon") have entered into an Agreement and Plan of Merger, dated as of
August 7, 1998 (the "Agreement"), pursuant to which Horizon will combine with
City Holding by means of the merger (the "Merger") of Horizon with and into
City Holding. Upon consummation of the Merger, all of the issued and
outstanding shares of the $1.00 par value common stock of Horizon ("Horizon
Stock") will be converted into $45.00 of the shares of the $2.50 par value
common stock of City Holding ("City Holding Stock"), as adjusted in accordance
with the terms of the Agreement (the "Exchange Ratio"). The terms of the Merger
are more fully set forth in the Agreement.
Wheat First Securities, Inc. ("Wheat First") as part of its investment
banking business, is regularly engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and valuations for estate, corporate
and other purposes. In the ordinary course of our business as a broker-dealer,
we may, from time to time, have a long or short position in, and buy or sell,
debt or equity securities of City Holding or Horizon for our own account or for
the accounts of our customers. Wheat First will receive a fee from City Holding
for its services, which include the rendering of this opinion.
You have asked us whether, in our opinion, the Exchange Ratio is fair,
from a financial point of view, to the holders of City Holding Stock. We
understand that the Merger is conditioned upon the occurrence of a number of
contingencies as set forth in the Agreement.
In arriving at the opinion set forth below, we have conducted discussions
with members of senior management of City Holding and Horizon concerning their
businesses and prospects and have reviewed and relied upon certain publicly
available business and financial information and certain other information
prepared or provided to us in connection with the Merger, including, among
other things, the following:
(1) City Holding's Annual Reports to Stockholders, Annual Reports on
Form 10-K and related financial information for the three fiscal years
ended December 31, 1997;
(2) City Holding's Quarterly Reports on Form 10-Q and related financial
information for the periods ended June 30, 1998, and March 31, 1998, and
certain information released by the management of City Holding for the
period ended September 30, 1998;
(3) City Holding's Registration Statement on Form S-4 dated
September 24, 1998;
(4) Horizon's Annual Reports to Stockholders, Annual Reports on Form
10-K and related financial information for the three fiscal years ended
December 31, 1997;
(5) Horizon's Quarterly Reports on Form 10-Q and related financial
information for the periods ended June 30, 1998, and March 31, 1998, and
certain information released by the management of Horizon for the period
ended September 30, 1998;
(6) Certain publicly available information with respect to historical
market prices and trading activities for City Holding Stock and Horizon
Stock and for certain publicly traded financial institutions which Wheat
First deemed relevant;
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<PAGE>
(7) Certain publicly available information with respect to banking
companies and the financial terms of certain other mergers and
acquisitions which Wheat First deemed relevant;
(8) The Agreement;
(9) Certain estimates of the cost savings, revenue enhancements and
divestitures projected by City Holding and Horizon for the combined
company;
(10) Other financial information concerning the businesses and
operations of City Holding and Horizon, and certain internal financial
analyses and forecasts for City Holding and Horizon prepared by the senior
managements of these companies; and
(11) Such financial studies, analyses, inquiries and other matters as we
deemed necessary.
In preparing our opinion, as contemplated under the terms of our
engagement, we have relied on and assumed the accuracy and completeness of all
information provided to us or publicly available, including the representations
and warranties of City Holding and Horizon included in the Agreement, and we
have not assumed any responsibility for the accuracy, completeness or
reasonableness of, or any obligation to verify, the same or to conduct any
appraisal of assets or liabilities. We have relied upon the managements of City
Holding and Horizon as to the reasonableness and achievability of their
financial and operational forecasts and projections, including the estimates of
cost savings and revenue enhancements expected to result from the Merger, and
the assumptions and bases therefor, provided to us, and, with your consent, we
have assumed that such forecasts and projections reflect the best currently
available estimates and judgments of such managements, and that such forecasts
and projections will be realized in the amounts and in the time periods
currently estimated by such managements. We also assumed, without independent
verification, that the aggregate allowances for loan losses and other
contingencies for City Holding and Horizon are adequate to cover such losses.
Wheat First did not review any individual credit files of City Holding and
Horizon, nor did it make an independent evaluation or appraisal of the assets
or liabilities of City Holding and Horizon. We also assumed that, in the course
of obtaining the necessary regulatory approvals for the Merger, no conditions
will be imposed that will have a material adverse effect on the contemplated
benefits of the Merger, on a pro forma basis, to City Holding.
Our opinion is necessarily based upon market, economic and other
conditions as they exist and can be evaluated on the date hereof and the
information made available to us through the date hereof. Events occurring
after that date could materially affect the assumptions and conclusions
contained in our opinion. We have not undertaken to reaffirm or revise this
opinion or otherwise comment on any events occurring after the date hereof.
Wheat First's opinion is directed only to the fairness, from a financial point
of view, of the Exchange Ratio to the holders of City Holding Stock and does
not address any other aspect of the Merger, nor does it constitute a
recommendation to any shareholder of City Holding as to how such shareholder
should vote with respect to the Merger, and it is understood that this letter
is solely for the information of the Board of Directors of City Holding. Wheat
First's opinion does not address the relative merits of the Merger as compared
to any alternative business strategies that might exist for City Holding, nor
does it address the effect of any other business combination in which City
Holding might engage.
It is understood that this opinion may be included in its entirety in the
Joint Proxy Statement/Prospectus. This opinion may not, however, be summarized,
excerpted from or otherwise publicly referred to without our prior written
consent.
On the basis of and subject to the foregoing, we are of the opinion that
as of the date hereof the Exchange Ratio is fair, from a financial point of
view, to the holders of City Holding Stock.
Very truly yours,
/s/ WHEAT FIRST SECURITIES, INC.
WHEAT FIRST SECURITIES, INC.
E-2
<PAGE>
APPENDIX F
[BAXTER FENTRISS AND COMPANY LOGO]
9100 ARBORETUM PARKWAY SUITE 280 RICHMOND, VIRGINIA 23236
(804) 323-7540 FAX (804) 323-7457
August 7, 1998
The Board of Directors
Horizon Bancorp, Inc.
1 Park Avenue
Beckley, WV 25802
Dear Members of the Board:
Horizon Bancorp, Inc., Beckley, West Virginia ("Horizon") and City Holding
Company, Charleston, West Virginia, ("City") have entered into an agreement
providing for the merger of Horizon with and into City ("Merger"). The terms of
the Merger are set forth in the Agreement and Plan of Reorganization
("Agreement") dated August 7, 1998.
The terms of the Merger provide that, with the possible exception of those
shares as to which dissenter's rights may be perfected, each share of Horizon
common stock will be exchanged for $45.00 of City Holding Company common stock,
subject to certain adjustments.
You have asked our opinion as to whether the proposed transaction pursuant
to the terms of the Merger is fair to the respective shareholders of Horizon
from a financial point of view.
In rendering our opinion, we have evaluated the consolidated financial
statements of Horizon and City available to us from published sources. In
addition, we have, among other things: (a) to the extent deemed relevant,
analyzed selected public information of certain other financial institutions
and compared City from a financial point of view to the other financial
institutions; (b) compared the terms of the Merger with the terms of certain
other comparable transactions to the extent information concerning such
acquisitions was publicly available; (c) reviewed the drafts of the Agreement
and Plan of Reorganization and related documents; (d) reviewed the historical
market price of the common stock of Horizon and City; and (e) made such other
analyses and examinations as we deemed necessary. We also met with various
senior officers of Horizon and City to discuss the foregoing as well as other
matters that may be relevant.
We have not independently verified the financial and other information
concerning Horizon and City, or other data which we have considered in our
review, nor have we conducted on site due diligence of City Holding Company. We
have assumed the accuracy and completeness of all such information; however, we
have no reason to believe that such information is not accurate and complete.
Our conclusion is rendered on the basis of securities market conditions
prevailing as of the date hereof and on the conditions and prospects, financial
and otherwise, of Horizon and City as they exist and are known to us as of June
30, 1998.
We have acted as financial advisor to Horizon in connection with the
Merger and will receive from Horizon a fee for our services, a significant of
which is contingent upon the consummation of the Merger.
It is understood that this opinion may be included in its entirety in any
communication by Horizon or the Board of Directors to the stockholders of
Horizon. The opinion may not, however, be summarized, excerpted from or
otherwise publicly referred to without our prior written consent.
F-1
<PAGE>
Based on the foregoing, and subject to the limitations described above, we
are of the opinion that the consideration is fair to the shareholders of
Horizon from a financial point of view.
Sincerely,
/s/ Baxter Fentriss and Company
Baxter Fentriss and Company
F-2
<PAGE>
APPENDIX G
31-1-122. RIGHT OF SHAREHOLDERS TO DISSENT.
Any shareholder of a corporation shall have the right to dissent from any
of the following corporate actions:
(a) Any plan of merger or consolidation to which the corporation is a
party; or
(b) Any sale or exchange of all or substantially all of the property and
assets of the corporation not made in the usual and regular course of its
business, including a sale in dissolution, but not including a sale pursuant to
an order of a court having jurisdiction in the premises or a sale for cash on
terms requiring that all or substantially all of the net proceeds of sale be
distributed to the shareholders in accordance with their respective interests
within one year after the date of sale.
A shareholder may dissent as to less than all of the shares registered in
his name. In that event, his rights shall be determined as if the shares as to
which he has dissented and his other shares were registered in the names of
different shareholders.
31-1-123. RIGHTS OF DISSENTING SHAREHOLDERS; PROCEDURE FOR PURCHASING OF
DISSENTING SHAREHOLDERS' SHARES; CIVIL ACTION FOR DETERMINING VALUE OF SHARES;
PROCEDURE FOR TRANSFERRING OF SUCH SHARES TO CORPORATION AND PAYMENT THEREFOR.
(a) Any shareholder electing to exercise his right to dissent, pursuant to
section one hundred twenty-two [ss. 31-1-122] of this article, shall file with
the corporation, prior to or at the meeting of shareholders at which such
proposed corporate action is submitted to a vote, a written objection to such
proposed corporate action. If such proposed corporate action be approved by the
required vote and such shareholder shall not have voted in favor thereof, such
shareholder may, within ten days after the date on which the vote was taken or
if a corporation is to be merged without a vote of its shareholders into
another corporation, any of its shareholders may, within fifteen days after the
plan of such merger shall have been mailed to such shareholders, make written
demand on the corporation, or, in the case of a merger or consolidation, on the
surviving or new corporation, domestic or foreign, for payment of the fair
value of such shareholder's shares, and, if such proposed corporate action is
effected, such corporation shall pay to such shareholder, upon surrender of the
certificate or certificates representing such shares, the fair value thereof as
of the day prior to the date on which the vote was taken approving the proposed
corporate action, excluding any appreciation or depreciation in anticipation of
such corporate action. Any shareholder failing to make demand within the
ten-day period shall be bound by the terms of the proposed corporate action.
Any shareholder making such demand shall thereafter be entitled only to payment
as in this section provided and shall not be entitled to vote or to exercise
any other rights of a shareholder.
(b) No such demand may be withdrawn unless the corporation shall consent
thereto. If, however, such demand shall be withdrawn upon consent, or if the
proposed corporate action shall be abandoned or rescinded or the shareholders
shall revoke the authority to effect such action, or if, in the case of a
merger, on the date of the filing of the articles of merger the surviving
corporation, is the owner of all the outstanding shares of the other
corporations, domestic and foreign, that are parties to the merger, or if no
demand or petition for the determination of fair value by a court of general
civil jurisdiction have been made or filed within the time provided in
subsection (e) of this section, or if a court of general civil jurisdiction
shall determine that such shareholder is not entitled to the relief provided by
this section, then the right of such shareholder to be paid the fair value of
his shares shall cease and his status as a shareholder shall be restored,
without prejudice to any corporate proceedings which may have been taken during
the interim.
(c) Within ten days after such corporate action is effected, the
corporation, or, in the case of a merger or consolidation, the surviving or new
corporation, domestic or foreign, shall give written notice thereof to each
dissenting shareholder who has made demand as herein provided, and shall make a
written offer to each shareholder to pay for such shares at a specified price
deemed by such corporation to be fair value thereof. Such notice and offer
shall be accompanied by a balance sheet of the corporation the shares of which
the dissenting shareholder holds, as of the latest available date and not more
than twelve months prior to the making of such
G-1
<PAGE>
offer, and a profit and loss statement of such corporation for the twelve
months' period ended on the date of such balance sheet.
(d) If within thirty days after the date on which such corporate action is
effected the fair value of such shares is agreed upon between any such
dissenting shareholder and the corporation, payment therefor shall be made
within ninety days after the date on which such corporate action was effected,
upon surrender of the certificate or certificates representing such shares.
Upon payment of the agreed value the dissenting shareholder shall cease to have
any interest in such shares.
(e) If within such period of thirty days, a dissenting shareholder and the
corporation do not so agree, then the corporation shall within thirty days
after receipt of written demand from any dissenting shareholder, which written
demand must be given within sixty days after the date on which such corporate
action was effected, file a complaint in a court of general civil jurisdiction
requesting that the fair value of such shares be found and determined, or the
corporation may file such complaint at any time within such sixty-day period at
its own election. Such complaint shall be filed in any court of general civil
jurisdiction in the county in which the principal office of the corporation is
situated, or, if there be no such office in this State, in the county in which
any dissenting shareholder resides or is found or in which the property of such
corporation, or any part of it, may be. If the corporation shall fail to
institute such proceedings, any dissenting shareholder may do so in the name of
the corporation. All dissenting shareholders wherever residing, may be made
parties to the proceedings as an action against their shares quasi in rem. A
copy of the complaint shall be served on each dissenting shareholder who is a
resident of this State in the same manner as in other civil actions. Dissenting
shareholders who are nonresidents of this State shall be served a copy of the
complaint by registered or certified mail, return receipt requested. In
addition, service upon such nonresident shareholders shall be made by
publication, as provided in Rule 4(e)(2) of the West Virginia Rules of Civil
Procedure. All shareholders who are parties to the proceeding shall be entitled
to judgment against the corporation for the amount of the fair value of their
shares. The court may, if it so elects, appoint one or more persons as
appraisers to receive evidence and recommend a decision on the question of fair
value. The appraisers shall have such power and authority as shall be specified
in the order of their appointment or any subsequent appointment. The judgment
shall be payable only upon and concurrently with the surrender to the
corporation of the certificate or certificates representing such shares. Upon
payment of the judgment, the dissenting shareholder shall cease to have any
interest in such shares.
The judgment shall include an allowance for interest at such rate as the
court may find to be fair and equitable in all the circumstances, from the date
on which the vote was taken on the proposed corporate action to the date of
payment.
The costs and expenses of any such proceeding shall be determined by the
court and shall be assessed against the corporation, but all or any part of
such costs and expenses may be apportioned and assessed as the court may deem
equitable against any or all of the dissenting shareholders who are parties to
the proceeding to whom the corporation shall have made an offer to pay for the
shares if the court shall find that the action of such shareholders in failing
to accept such offer was arbitrary or vexatious or not in good faith. Such
expenses shall include reasonable compensation for and reasonable expenses of
the appraisers, but shall exclude the fees and expenses of counsel for and
experts employed by any party; but if the fair value of the shares as
determined materially exceeds the amount which the corporation offered to pay
therefor, or if no offer was made, the court in its discretion may award to any
shareholder who is a party to the proceeding such sum as the court may
determine to be reasonable compensation to any expert or experts employed by
the shareholder in the proceeding. Any party to the proceeding may appeal any
judgment or ruling of the court as in other civil cases.
(f) Within twenty days after demanding payment for his shares, each
shareholder demanding payment shall submit the certificate or certificates
representing his shares to the corporation for notation thereon that such
demand has been made. His failure to do so shall, at the option of the
corporation, terminate his rights under this section unless a court of general
civil jurisdiction, for good and sufficient cause shown, shall otherwise
direct. If shares represented by a certificate on which notation has been so
made shall be transferred, each new certificate issued therefor shall bear
similar notation, together with the name of the original dissenting holder of
such shares, and a transferee of such shares shall acquire by such transfer no
rights in the corporation other than those which the original dissenting
shareholder had after making demand for payment of the fair value thereof.
G-2
<PAGE>
(g) Shares acquired by a corporation pursuant to payment of the agreed
value therefor or to payment of the judgment entered therefor, as in this
section provided, may be held and disposed of by such corporation as in the
case of other treasury shares, except that, in the case of a merger or
consolidation, they may be held and disposed of as the plan of merger or
consolidation may otherwise provide.
G-3
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 31-1-9 of the West Virginia Corporation Act provides in part that
each West Virginia corporation shall have power to indemnify any director,
officer, employee or agent or former director, officer, employee or agent
against expenses actually and reasonably incurred by him in connection with the
defense of any claim, action, suit or proceeding against him by reason of being
or having been such director, officer, employee or agent other than an action
by or in the right of the corporation if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interest of the
corporation. With respect to an action by or in the right of the corporation,
the director, officer, employee or agent or former director, officer, employee
or agent may be indemnified if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interest of the
corporation, except in relation to matters as to which he shall be finally
adjudged in such action, suit or proceeding against him by reason of being or
having been such director, officer, employee or agent to be liable for
negligence or misconduct in the performance of duty; and to make any other or
further indemnity to any such persons that may be authorized by the articles of
incorporation or any by-law made by the stockholders or any resolution adopted,
before or after the event, by the stockholders. The By-laws of City Holding
contain provisions pursuant to the foregoing section of the West Virginia
Corporation Act indemnifying the directors, officers, employees and agents of
City Holding in certain cases against expenses and liabilities under judgments
and reimbursements of amounts paid in settlement.
City Holding has purchased directors and officers' liability insurance
policies. Within the limits of their coverage, the policies insure (l) the
directors and officers of City Holding against certain losses, to the extent
such losses are not indemnified by City Holding, and (2) City Holding, to the
extent it indemnifies such directors and officers for losses as permitted under
the laws of West Virginia.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The following exhibits are filed herewith or incorporated herein by
reference.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- -------- ----------------------------------------------------------------------------------------------------
<S> <C>
2.1 Agreement and Plan of Reorganization by and between City Holding Company and Horizon Bancorp, Inc.,
dated as of August 7, 1998. (Included as Appendix A to the accompanying Joint Proxy Statement-
Prospectus.)
2.2 Holding Company Plan of Merger by and between City Holding Company and Horizon Bancorp, Inc.
(Included as Appendix B to the accompanying Joint Proxy Statement-Prospectus.)
5.1 Opinion of Hunton & Williams as to the validity of the shares of City Holding Common Stock.*
8.1 Opinion of Hunton & Williams as to certain tax matters.*
8.2 Opinion of Jackson & Kelly as to certain tax matters.*
10.1 Form of Employment Agreement, by and between City Holding Company and Steven J. Day.*
10.2 Form of Employment Agreement, by and between City Holding Company and Robert A. Henson.*
10.3 Form of Employment Agreement, by and between City Holding Company and Matthew B. Call.*
10.4 Form of Employment Agreement, by and between City Holding Company and Phil McLaughlin.*
10.5 Form of Employment Agreement, by and between City Holding Company and Bernard McGinnis.*
10.6 Form of Employment and Consulting Agreement, by and between City Holding Company and Frank S.
Harkins, Jr.*
23.1 Consent of Baxter, Fentriss & Co.*
23.2 Consent of Wheat First Securities, Inc.*
23.3 Consent of Hunton & Williams. (Included in Exhibit 5.1 to this Registration Statement.)
23.4 Consent of Jackson & Kelly. (Included in Exhibit 8.2 to this Registration Statement.)
23.5 Consent of Ernst & Young LLP.
23.6 Consent of Ernst & Young LLP.
23.7 Consent of Diamond, Leftwich, Goheen & Dunn
24.1 Power of Attorney*
99.1 Stock Option Agreement, dated as of August 7, 1998, by and between City Holding Company (as issuer)
and Horizon Bancorp, Inc. (as grantee). (Included as Appendix C to the accompanying Joint Proxy
Statement-Prospectus.)
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- --------------------------------------------------------------------------------------------------------
<S> <C>
99.2 Stock Option Agreement, dated as of August 7, 1998, by and between Horizon Bancorp, Inc. (as issuer)
and City Holding Company (as grantee). (Included as Appendix D to the accompanying Joint Proxy
Statement-Prospectus.)
99.3 Notice of Special Meeting of Shareholders of City Holding Company. (Included in the accompanying Joint
Proxy Statement-Prospectus.)
99.4 Chief Executive Officer's Letter to Shareholders of City Holding Company. (Included in the accompanying
Joint Proxy Statement-Prospectus.)
99.5 Notice of Special Meeting of Shareholders of Horizon Bancorp, Inc. (Included in the accompanying Joint
Proxy Statement-Prospectus.)
99.6 Chairman's Letter to Shareholders of Horizon Bancorp, Inc. (Included in the accompanying Joint Proxy
Statement-Prospectus.)
99.7 Form of Proxy for Special Meeting of Shareholders of City Holding Company.*
99.8 Form of Proxy for Special Meeting of Shareholders of Horizon Bancorp, Inc.*
</TABLE>
- ---------
* Previously filed.
ITEM 22. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change in such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, 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.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) 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.
(c) 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.
(d) The registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (c) immediately preceding, or (ii) that purports to meet
the requirements of Sections 10(a)(3) of the Securities Act and is used in
connection with an offering of securities subject to Rule 415, will be filed as
a part of an amendment to the registration statement and will not be used until
such amendment is effective, and that, for purposes of determining any
liability under the Securities Act, 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.
II-2
<PAGE>
(e) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(f) The undersigned registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus pursuant
to Item 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.
(g) 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.
II-3
<PAGE>
SIGNATURE OF REGISTRANT
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 Charleston, State of
West Virginia, on November 5, 1998.
CITY HOLDING COMPANY
(Registrant)
By: /s/ STEVEN J. DAY
-------------------------------------
STEVEN J. DAY
PRESIDENT/DIRECTOR
(PRINCIPAL EXECUTIVE OFFICER)
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons on behalf
of the Registrant and in the capacities indicated on November 5, 1998.
<TABLE>
<S> <C>
/S/ ROBERT A, HENSON* Chief Financial Officer
---------------------------------- (Principal Financial Officer)
ROBERT A. HENSON
/S/ MICHAEL D. DEAN* Senior Vice President -- Finance
---------------------------------- (Principal Accounting Officer)
MICHAEL D. DEAN
/S/ SAMUEL M. BOWLING* Director
----------------------------------
SAMUEL M. BOWLING
/S/ C. SCOTT BRIERS* Director
----------------------------------
C. SCOTT BRIERS
/S/ D. K. CALES* Director
----------------------------------
DR. D. K. CALES
/S/ STEVEN J. DAY Director/President
----------------------------------
STEVEN J. DAY
/S/ ROBERT D. FISHER* Director
----------------------------------
ROBERT D. FISHER
/S/ JACK E. FRUTH* Director
----------------------------------
JACK E. FRUTH
/S/ JAY GOLDMAN* Director
----------------------------------
JAY GOLDMAN
/S/ CARLIN K. HARMON* Director/Executive Vice President
----------------------------------
CARLIN K. HARMON
/S/ C. DALLAS KAYSER* Director
----------------------------------
C. DALLAS KAYSER
/S/ BOB F. RICHMOND* Director
----------------------------------
BOB F. RICHMOND
</TABLE>
II-4
<PAGE>
<TABLE>
<S> <C>
/S/ ROBERT A, HENSON* Chief Financial Officer
---------------------------------- (Principal Financial Officer)
ROBERT A. HENSON
/S/ OTIS L. O'CONNOR* Director
----------------------------------
OTIS L. O'CONNOR
/S/ VAN R. THORN* Director
----------------------------------
VAN R. THORN
/S/ HUGH R. CLONCH* Director
----------------------------------
HUGH R. CLONCH
Director
----------------------------------
MARK H. SCHAUL
Director
----------------------------------
WILLIAM M. FRAZIER
Director
----------------------------------
LEON K. OXLEY
/S/ DAVID E. HADEN* Director
----------------------------------
DAVID E. HADEN
By: /S/ STEVEN J. DAY
-------------------------------
STEVEN J. DAY
ATTORNEY-IN-FACT
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- -------- --------------------------------------------------------------------------------------------------------
<S> <C>
2.1 Agreement and Plan of Reorganization by and between City Holding Company and Horizon Bancorp, Inc.,
dated as of August 7, 1998. (Included as Appendix A to the accompanying Joint Proxy Statement-
Prospectus.)
2.2 Holding Company Plan of Merger by and between City Holding Company and Horizon Bancorp, Inc.
(Included as Appendix B to the accompanying Joint Proxy Statement-Prospectus.)
5.1 Opinion of Hunton & Williams as to the validity of the shares of City Holding Common Stock.*
8.1 Opinion of Hunton & Williams as to certain tax matters.*
8.2 Opinion of Jackson & Kelly as to certain tax matters.*
10.1 Form of Employment Agreement, by and between City Holding Company and Steven J. Day.*
10.2 Form of Employment Agreement, by and between City Holding Company and Robert A. Henson.*
10.3 Form of Employment Agreement, by and between City Holding Company and Matthew B. Call.*
10.4 Form of Employment Agreement, by and between City Holding Company and Phil McLaughlin.*
10.5 Form of Employment Agreement, by and between City Holding Company and Bernard McGinnis.*
10.6 Form of Employment and Consulting Agreement, by and between City Holding Company and Frank S.
Harkins, Jr.*
23.1 Consent of Baxter, Fentriss & Co.*
23.2 Consent of Wheat First Securities, Inc.*
23.3 Consent of Hunton & Williams. (Included in Exhibit 5.1 to this Registration Statement.)
23.4 Consent of Jackson & Kelly. (Included in Exhibit 8.2 to this Registration Statement.)
23.5 Consent of Ernst & Young LLP.
23.6 Consent of Ernst & Young LLP.
23.7 Consent of Diamond, Leftwich, Goheen & Dunn
24.1 Power of Attorney*
99.1 Stock Option Agreement, dated as of August 7, 1998, by and between City Holding Company (as issuer)
and Horizon Bancorp, Inc. (as grantee). (Included as Appendix C to the accompanying Joint Proxy
Statement-Prospectus.)
99.2 Stock Option Agreement, dated as of August 7, 1998, by and between Horizon Bancorp, Inc. (as issuer)
and City Holding Company (as grantee). (Included as Appendix D to the accompanying Joint Proxy
Statement-Prospectus.)
99.3 Notice of Special Meeting of Shareholders of City Holding Company. (Included in the accompanying Joint
Proxy Statement-Prospectus.)
99.4 Chief Executive Officer's Letter to Shareholders of City Holding Company. (Included in the accompanying
Joint Proxy Statement-Prospectus.)
99.5 Notice of Special Meeting of Shareholders of Horizon Bancorp, Inc. (Included in the accompanying Joint
Proxy Statement-Prospectus.)
99.6 Chairman's Letter to Shareholders of Horizon Bancorp, Inc. (Included in the accompanying Joint Proxy
Statement-Prospectus.)
99.7 Form of Proxy for Special Meeting of Shareholders of City Holding Company.*
99.8 Form of Proxy for Special Meeting of Shareholders of Horizon Bancorp, Inc.*
</TABLE>
- ---------
* Previously filed.
II-6
EXHIBIT 23.5
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4 No. 333-64205) and related Prospectus of City
Holding Company for the registration of 10,500,000 shares of its common stock
and to the incorporation by reference therein of our report dated January 30,
1998, with respect to the consolidated financial statements of City Holding
Company incorporated by reference in its Annual Report (Form 10-K) for the year
ended December 31, 1997, filed with the Securities and Exchange Commission.
Charleston, West Virginia /s/ ERNST & YOUNG LLP
November 2, 1998
EXHIBIT 23.6
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4 No. 333-64205) and related Prospectus of City
Holding Company for the registration of 10,500,000 shares of its common stock
and to the incorporation by reference therein of our report dated February 13,
1998, with respect to the consolidated financial statements of Horizon Bancorp,
Inc. incorporated by reference in its Annual Report (Form 10-K) for the year
ended December 31, 1997, filed with the Securities and Exchange Commission.
Charleston, West Virginia /s/ ERNST & YOUNG LLP
November 2, 1998
EXHIBIT 23.7
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4 No. 333-64205) and related Prospectus of City
Holding Company for the registration of 10,500,000 shares of its common stock
and to the use of our report dated February 12, 1996, with respect to the
consolidated financial statements of Twentieth Bancorp, Inc. and Subsidiary
incorporated by reference in Horizon Bancorp, Inc.'s Annual Report (Form 10-K)
for the year ended December 31, 1997, filed with the Securities and Exchange
Commission
Huntington, West Virginia /s/ DIAMOND, LEFTWICH, GOHEEN & DUNN
November 2, 1998
