As filed with the Securities and Exchange Commission on September 24, 1998
Registration No. 333-_________
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
CITY HOLDING COMPANY
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C>
WEST VIRGINIA 6712 55-0619957
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation) Classification Code Number) Identification No.)
</TABLE>
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:
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
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. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Proposed Maximum
Title of Each Class Amount to be Maximum Offering Aggregate Offering Amount of
of Securities to be Registered Registered(1) Price Per Unit(2) Price(2) Registration Fee
- ------------------------------ ------------- ---------------- ------------------ ----------------
<S> <C>
Common Stock (2.50 par value 10,500,000 shs. $ 40.125 $ 411,494,623 $ 124,288
Rights to Purchase Junior
Participating Cumulative
Preferred Stock, Series A
(no par value)(3 10,500,000 shs. N/A N/A N/A
</TABLE>
(1) The Registration Statement covers the maximum number of shares of common
stock of the Registrant which are expected to be issued in connection with the
transactions described herein.
(2) Estimated in accordance with Rule 457(f)(2) for the purpose of calculating
the registration fee, with the value of Horizon Bancorp, Inc. Common Stock being
exchanged in the transaction for City Holding Company Common Stock being based
upon the average of the high and low prices for Horizon Bancorp, Inc. Common
Stock on The Nasdaq National Market on September 21, 1998.
(3) The Rights to Purchase Junior Participating Cumulative Preferred Stock,
Series A will be attached to and will trade with shares of Common Stock of the
Registrant.
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.
<PAGE>
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" or the "Transaction") 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:
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 Park
Beckley, West Virginia 25801
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.
Steven J. Day Frank S. Harkins, Jr.
Chief Executive Officer Chairman and Chief Executive Officer
City Holding Company Horizon Bancorp, Inc.
Dated: November __, 1998
<PAGE>
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 __________ __, 1998 AND WAS
FIRST MAILED TO SHAREHOLDERS ON OR ABOUT ________ __, 1998.
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;
<PAGE>
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.
Steven J. Day
Chief Executive Officer
_________ __, 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 Park,
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 31-1-122 of the West Virginia Code. We have attached a
copy of that law as an Appendix to the accompanying Joint Proxy
Statement-Prospectus.
Frank S. Harkins, Jr.
Chairman of the Board,
President
and Chief Executive Officer
__________ __, 1998
PLEASE MARK, SIGN, DATE AND RETURN YOUR PROXY PROMPTLY, WHETHER OR NOT YOU
PLAN TO ATTEND THE SPECIAL MEETING. YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU
VOTE FOR APPROVAL OF THE AGREEMENT AND PLAN OF REORGANIZATION. 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>
TABLE OF CONTENTS
SUMMARY......................................................................1
The Companies..........................................................1
Proposal 1 - The Holding Company Merger................................1
Determination of Exchange Ratio........................................2
Comparative Per Share Market Price Information.........................2
Our Reasons for the Holding Company Merger.............................2
Proposal 2 - Additional Share Proposal.................................2
The Shareholders' Meetings.............................................2
Our Recommendations to Shareholders....................................3
Record Date; Voting Power..............................................3
Votes Required.........................................................3
Exchange of Certificates...............................................3
Conditions to Completion of the Holding Company Merger.................4
Termination of the Agreement...........................................4
Federal Income Tax Consequences........................................5
Accounting Treatment...................................................5
Opinions of Financial Advisors.........................................5
Board of Directors and Management of City Holding Following the
Holding Company Merger.............................................5
Interests of Persons Involved in the Holding Company Merger that
are Different from Yours...........................................6
Option to Purchase Each Other's Stock..................................6
Dissenters' Rights.....................................................6
Regulatory Approvals...................................................7
UNAUDITED COMPARATIVE PER SHARE AND SELECTED FINANCIAL DATA..................8
CITY HOLDING SPECIAL MEETING................................................16
General...............................................................16
Matters to be Considered..............................................16
Proxies...............................................................16
Solicitation of Proxies...............................................17
Record Date and Voting Rights.........................................17
Recommendation of the City Holding Board..............................18
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...................................21
<PAGE>
PROPOSAL 1 - THE HOLDING COMPANY MERGER.....................................22
Description of the Holding Company Merger.............................22
Background of the Holding Company Merger..............................22
Reasons of City Holding for the Holding Company Merger................24
Reasons of Horizon for the Holding Company Merger.....................25
Opinion of City Holding's Financial Advisor...........................26
Opinion of Horizon's Financial Advisor................................30
Effective Time of the Holding Company Merger..........................33
Exchange of Certificates..............................................33
Conduct of Business Prior to the Holding Company Merger and Other
Covenants.........................................................34
Conditions to the Holding Company Merger..............................36
Termination of the Agreement..........................................36
Waiver; Amendment; Expenses...........................................37
Material Federal Income Tax Consequences..............................37
Interests of Certain Persons in the Holding Company Merger............38
Accounting Treatment..................................................40
Regulatory Matters....................................................40
Restrictions on Resales by Affiliates.................................41
Rights of Dissenting Shareholders.....................................42
DIRECTORS AFTER THE HOLDING COMPANY MERGER..................................44
Management After the Holding Company Merger...........................44
Consolidation of Operations; Anticipated Cost Savings.................44
PRICE RANGE OF COMMON STOCK AND DIVIDENDS...................................45
Market Prices.........................................................45
PROPOSAL 2 - APPROVAL OF CHARTER AMENDMENT TO INCREASE AUTHORIZED
COMMON STOCK..........................................................48
General...............................................................48
Text of Amendment.....................................................48
INFORMATION ABOUT CITY HOLDING..............................................49
General...............................................................49
Recent Developments...................................................50
Management and Additional Information.................................51
INFORMATION ABOUT HORIZON...................................................52
General...............................................................52
Management And Additional Information.................................53
SUPERVISION AND REGULATION OF CITY HOLDING..................................54
DESCRIPTION OF CAPITAL STOCK OF CITY HOLDING................................57
Common Stock..........................................................57
Preferred Stock.......................................................57
Preferred Stock Purchase Rights Plan; Change of Control...............58
Reports to Shareholders...............................................58
Transfer Agent........................................................58
<PAGE>
COMPARATIVE RIGHTS OF SHAREHOLDERS..........................................59
Capitalization........................................................59
Voting Rights.........................................................59
Directors and Classes of Directors....................................59
Anti-Takeover Provisions..............................................60
Preemptive Rights.....................................................60
Assessment............................................................60
Conversion; Redemption; Sinking Fund..................................60
Liquidation Rights....................................................61
Dividends and Other Distributions.....................................61
Special Meetings of Shareholders......................................61
Indemnification.......................................................61
Director Exculpation..................................................62
Dissenters' Rights....................................................62
Shareholder Vote Required For Business Combinations...................62
Amendments To Articles Of Incorporation...............................63
LEGAL OPINIONS..............................................................63
EXPERTS.....................................................................63
SHAREHOLDER PROPOSALS.......................................................64
OTHER MATTERS...............................................................64
WHERE YOU CAN FIND MORE INFORMATION.........................................64
INDEX TO FINANCIAL INFORMATION.............................................F-1
APPENDIX A - Agreement and Plan of Reorganization
APPENDIX B - Holding Company Plan of Merger
APPENDIX C - City Holding Option Agreement
APPENDIX D - Horizon Option Agreement
APPENDIX E - Opinion of Wheat First Securities, Inc.
APPENDIX F - Opinion of Baxter, Fentriss & Co.
APPENDIX G - Sections 31-1-122 and 31-1-123 of the West Virginia Code
relating to Dissenters' Rights
<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 __). Each item in this summary
refers to the pages where that subject is discussed more fully.
The Companies (Page __)
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 __)
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 whereby 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.
<PAGE>
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 ___)
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 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__)
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 September 21, 1998, City Holding Common Stock closed at
$40.00 per share and Horizon Common Stock closed at $40.53 per share.
Our Reasons for the Holding Company Merger (Page __)
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 Share Proposal (Page __)
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 (Page __)
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.
<PAGE>
Horizon Shareholders. We will hold the Horizon special meeting at
Tamarack, Hulett C. Smith Theater, One Tamarack Park, 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 __ and __)
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 __ and __)
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 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 __ and __)
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 and
Horizon can cast less than ___% 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 City Holding and
Horizon can cast less than ___% 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 __)
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.
<PAGE>
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 __)
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 __)
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;
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.
<PAGE>
Federal Income Tax Consequences (Page __)
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 __)
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 public accountants that the Holding
Company Merger will qualify as a "pooling of interests."
Opinions of Financial Advisors (Pages __ and __)
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 __)
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., Tracey 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.
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. McGinnis
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.
<PAGE>
Interests of Persons Involved in the Holding Company Merger that are
Different from Yours (Page __)
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 ___)
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 __)
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 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.
<PAGE>
Regulatory Approvals (Page __)
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 _________ ____,
1998, we filed the application to the Federal Reserve Board seeking approval of
the Holding Company Merger.
In addition, the Holding Company Merger 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.
<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.
We base 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 ____, as well as the historical financial information in the other
documents to which we refer. See "Where You Can Find More Information" on page
____. City Holding's and Horizon's audited historical financial statements were
audited by Ernst & Young LLP, independent accountants.
The following unaudited comparative per share data is derived from the
historical financial statements of City Holding and Horizon.
<PAGE>
UNAUDITED EQUIVALENT PER SHARE DATA
(SHARES IN THOUSANDS)
<TABLE>
<CAPTION>
Six Six
Months Months
Ended Ended
June 30, June 30, Year Ended December 31,
1998 1997 1997 1996 1995
--------- ---------- --------- ---------- ---------
<S> <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>
<PAGE>
SELECTED PRO FORMA FINANCIAL DATA
OF CITY HOLDING AND HORIZON COMBINED
<TABLE>
<CAPTION>
Six Six
Months Months
Ended Ended
June 30, June 30, Year Ended December 31,
1998 1997 1997 1996 1995
--------- --------- ---------- ---------- -----------
(Unaudited) (dollars in thousands, except per share information)
<S> <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 2,286,424 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..................... 194,959 110,342 134,990 92,472 122,222
Total deposits.......................... 1,993,215 1,702,442 1,779,805 1,626,666 1,602,996
Long-term debt.......................... 87,267 39,400 75,502 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.................................. 11.37 12.97 11.80 13.22 12.51
Total................................... 12.26 14.09 11.80 14.36 13.55
Leverage capital ratio.................. 9.40 9.11 8.73 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
</TABLE>
<PAGE>
<TABLE>
<S> <C>
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>
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA OF CITY HOLDING
<TABLE>
<CAPTION>
Six Six
Months Months
Ended Ended
June 30, June 30, Year Ended December 31,
1998 1997 1997 1996 1995 1994 1993
--------- --------- ---------- ---------- ----------- ----------- --------
(dollars in thousands, except per share information)
<S> <C>
Income statement:
Interest income....... $ 54,726 $ 46,052 $ 96,796 $ 86,069 $ 75,125 $ 62,762 $ 55,301
Interest expense...... 26,258 20,582 44,691 39,064 33,580 25,168 22,425
Net interest income... 28,468 25,470 52,105 47,005 41,545 37,594 32,876
Provision for credit
losses.................. 1,201 828 1,662 1,678 1,104 1,040 1,434
Gain (loss) on sales of
investment securities 16 11 26 87 2 (729) 673
Noninterest income.... 31,980 9,888 26,690 11,036 6,344 5,978 3,189
Noninterest expense... 49,201 25,192 57,670 40,982 33,887 30,116 24,292
Income before income
taxes................... 10,062 9,349 19,489 15,468 12,900 11,687 11,012
Income tax expense.... 3,650 3,345 7,025 5,338 4,182 3,546 3,367
Net income............ 6,412 6,004 12,464 10,130 8,718 8,141 7,645
Per common share:
Earnings.............. .97 .99 2.03 1.81 1.55 1.44 1.35
Diluted earnings...... .96 .99 2.02 1.81 1.55 1.44 1.35
Cash dividends........ .38 .36 .73 .63 .56 .49 .46
Stockholders' equity
(period-end).......... 18.73 14.41 16.56 14.21 13.09 11.66 11.56
Balance sheet
(period-end):
Total assets.......... 1,501,500 1,147,684 1,266,143 1,048,810 1,040,968 95,785 816,225
Total loans, net of
unearned income...... 929,272 760,403 780,362 697,982 656,761 554,286 468,633
Loans held for sale... 194,959 110,342 134,990 92,472 122,222 30,227 0
Total deposits........ 1,131,709 901,087 938,498 828,670 797,415 746,805 709,958
Long-term debt........ 81,295 39,400 68,400 34,250 20,000 6,875 5,875
Total stockholders'
equity............... 126,108 87,483 106,255 79,373 73,139 66,299 65,605
Average basic common
shares issued (in
thousands)........... 6,589 6,069 6,147 5,586 5,642 5,676 5,663
Average diluted common
shares outstanding (in
thousands)........... 6,640 6,080 6,166 5,587 5,642 5,676 5,663
Performance ratios:
Return on average assets 0.94% 1.05% 1.03% 0.94% 0.91% 0.94% 1.03%
Return on average
stockholders' equity. 11.13 14.10 13.50 13.31 12.55 12.03 12.04
Risk-based capital ratios:
Tier 1................ 9.37 10.17 9.16 10.20 8.87 11.03 11.39
Total................. 10.05 11.17 10.00 11.23 9.75 12.19 12.64
Leverage capital ratio 8.55 6.75 6.49 6.58 6.45 6.83 6.66
Total equity to total
assets.................. 8.40 7.62 8.39 7.57 7.03 7.40 8.04
Dividend payout ratio... 39.18 36.36 35.96 34.81 36.47 33.91 34.36
Average equity to assets.. 8.40 7.42 7.61 7.05 7.26 7.82 8.58
</TABLE>
<TABLE>
<CAPTION>
Six Six
Months Months
Ended Ended
June 30, June 30, Year Ended December 31,
1998 1997 1997 1996 1995 1994 1993
--------- --------- ---------- ---------- ----------- ----------- --------
(dollars in thousands, except per share information)
<S> <C>
Asset quality ratios:
Allowance for credit
losses
as a percentage of
total
loans (period end)... 0.93 1.03 0.98 1.04 1.00 1.17 1.32
Allowance for credit
losses
as a percentage of
nonperforming loans
(period end)......... 117.81 132.15 129.02 156.82 160.66 150.77 185.62
Net charge-offs as a
percentage of average
total loans.......... 0.12 0.08 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)... 0.79 0.78 0.76 0.66 0.62 0.77 0.71
</TABLE>
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA OF HORIZON
<TABLE>
<CAPTION>
Six Months Ended
(Unaudited)
------------------------
June 30, June 30, Year Ended December 31,
1998 1997 1997 1996 1995 1994 1993
------- -------- --------- --------- -------- ------- ------
(dollars in thousands, except per share information)
<S> <C>
Income statement:
Interest income......... $ 41,028 $ 36,950 $ 76,370 $ 73,639 $ 70,618 $ 62,231 $ 61,029
Interest expense........ 17,971 14,725 31,321 29,270 27,600 21,689 23,189
Net interest income..... 23,057 22,225 45,049 44,369 43,018 40,542 37,840
Provision for credit
losses.................... 1,266 1,100 2,402 3,334 2,505 2,264 2,337
(Loss) gain on sales of
investment securities.. (22) (36) (18) (79) (131) (533) 87
Noninterest income...... 3,361 2,798 5,915 5,429 5,128 4,410 4,089
Noninterest expense..... 13,966 13,453 27,229 29,084 28,021 27,161 25,838
Income before income
taxes..................... 11,164 10,434 21,315 17,301 17,489 14,974 13,841
Income tax expense...... 3,840 3,680 7,488 6,150 6,007 4,849 4,345
Net income.............. 7,324 6,754 13,827 11,151 11,482 10,125 9,496
Per common share:
Earnings................ 0.80 0.73 1.49 1.20 1.23 1.09 1.02
Diluted earnings........ 0.80 0.73 1.49 1.20 1.23 1.09 1.02
Cash dividends.......... 0.38 0.34 0.75 0.62 0.53 0.49 0.47
Shareholders' equity
(period-end).............. 12.69 12.08 12.38 11.76 11.23 9.98 9.56
Balance sheet
(period-end):
Total assets............ 1,040,507 954,701 1,020,281 947,068 942,902 882,606 864,017
Total loans, net of
unearned income........ 759,916 665,156 728,239 633,984 620,570 582,206 531,026
Total deposits.......... 861,506 801,355 841,307 797,996 805,581 762,619 748,798
Long-term debt.......... 5,972 0 7,102 0 0 0 0
Total shareholders'
equity.................... 115,912 111,882 114,022 109,411 104,383 92,892 88,943
Average basic common
shares
outstanding (in
thousands)................ 9,155 9,283 9,254 9,296 9,298 9,306 9,306
Average diluted common
shares
outstanding (in
thousands)................ 9,204 9,301 9,278 9,308 9,301 9,306 9,306
Performance ratios:
Return on average assets 1.40 1.44 1.43 1.18 1.25 1.16 1.11
Return on average common
shareholders' equity... 12.77 12.24 12.37 10.54 11.61 11.14 11.05
Risk-based capital ratios:
Tier 1.................. 15.83 16.20 15.20 16.50 17.20 16.84 17.36
Total................... 14.63 17.34 16.40 17.80 18.50 17.96 18.49
Leverage capital ratio.. 10.34 11.83 11.10 11.40 11.10 10.73 10.19
Total equity to total
assets.................... 11.14 11.72 11.18 11.55 11.07 10.52 10.29
Dividend payout ratio..... 47.50 46.58 50.34 51.67 43.09 44.95 46.08
Average equity to assets.. 10.98 11.73 11.56 11.23 10.78 10.44 10.06
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Asset quality ratios:
Allowance for credit
losses as a
percentage of total
loans
(period end).......... 1.29 1.62 1.44 1.52 1.37 1.40 1.37
Allowance for credit
losses as a
percentage of
nonperforming
loans (period end)..... 95.98 139.96 143.40 133.54 109.27 138.75 75.93
Net charge-offs as a
percentage of
average total loans.... 0.27 0 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)................... 1.42 1.16 1.09 1.20 1.35 1.20 2.01
</TABLE>
<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 ___________
___, 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.
<PAGE>
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 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 ____________________ to assist it in soliciting
proxies from banks, brokers and nominees and has agreed to pay $__________, 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 ______ 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.
<PAGE>
As of the City Holding Record Date, approximately _________ shares of City
Holding Common Stock, or approximately ____% 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 for approval of the
Transaction. In addition, as of the City Holding Record Date, directors and
executive officers of Horizon beneficially owned less than ___% of the shares of
City Holding Common Stock entitled to vote at the City Holding Special Meeting.
It is currently expected that each such director and executive officer of
Horizon will vote the shares of City Holding Common Stock he or she is entitled
to vote 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."
<PAGE>
HORIZON SPECIAL MEETING
General
Horizon is mailing this Joint Proxy Statement-Prospectus on or about
__________ ___, 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 Park, 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
____________________ to assist it in soliciting proxies from banks, brokers and
nominees and has agreed to pay $__________, 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.
<PAGE>
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 on the Horizon Record
Date, there were approximately __________ 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 _______ shares of Horizon
Common Stock, or approximately ____% 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. In addition, as of the Horizon Record Date,
directors and executive officers of City Holding beneficially owned less than
___% of the shares of Horizon Common Stock entitled to vote at the Horizon
Special Meeting. It is currently expected that each such director and executive
officer of City Holding will vote the shares of Horizon Common Stock he or she
is entitled to vote 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."
<PAGE>
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."
<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.
<PAGE>
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
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.
<PAGE>
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 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 that (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.
<PAGE>
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 the City Holding Stock Option Agreement, which Horizon
required as an inducement to enter into the Agreement, 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;
<PAGE>
(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 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 in 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.
<PAGE>
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 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.
<PAGE>
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 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 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.
<PAGE>
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.
<PAGE>
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.
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.
<PAGE>
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
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%.
<PAGE>
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 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.
<PAGE>
On _______________, 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 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.
<PAGE>
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.
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 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.
<PAGE>
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.
<PAGE>
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 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;
<PAGE>
(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 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.
<PAGE>
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 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.
<PAGE>
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., Tracey 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 "Management and Operations 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.
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., Phil McLaughlin and Bernard McGinnis (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.
<PAGE>
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 "Comparative Unaudited Per
Share Data," "Selected Financial Data" and "Unaudited Pro Forma Condensed
Financial Information."
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 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.
<PAGE>
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.
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 "-- The Effective Time of the Holding Company," "-- 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.
<PAGE>
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:
(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.
<PAGE>
(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.
<PAGE>
DIRECTORS 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., Tracey 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.
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. McGinnis 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.
<PAGE>
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 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."
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 September 21, 1998, City Holding Common Stock
was held of record by approximately 2,239 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 September 23, 1998, Horizon Common Stock was held of record
by approximately 2,560 persons. 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>
Year Ended December 31, 1995:
First Quarter.................. 24.790 21.490 $31.00 $28.00
Second Quarter................. 23.960 21.490 31.00 28.00
Third Quarter.................. 23.140 20.660 36.00 29.50
Fourth Quarter................. 22.730 20.450 42.00 34.50
Year Ended December 31, 1996:
First Quarter.................. 24.091 20.909 22.13 19.50
Second Quarter................. 23.409 20.000 22.00 19.00
Third Quarter.................. 22.955 19.773 21.25 19.25
Fourth Quarter................. 26.250 21.000 20.75 19.25
Year Ended December 31, 1997:
First Quarter.................. 34.750 25.750 24.50 19.25
Second Quarter................. 34.500 30.000 26.75 23.52
Third Quarter.................. 43.250 32.250 34.50 25.25
Fourth Quarter................. 42.375 39.875 33.25 27.00
Year Ended December 31, 1998:
First Quarter.................. 51.000 41.500 31.875 28.50
Second Quarter................. 48.000 41.000 45.25 29.25
Third Quarter (through September
21, 1998)........................ 53.000 34.250 44.75 36.00
</TABLE>
<PAGE>
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>
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 (through September 21, 1998).... 0.190 0.19
</TABLE>
<PAGE>
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 Record Date,
City Holding had approximately ___________ 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 stockholders 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.
<PAGE>
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. In August 1998, City Holding opened a fourth retail
origination office and expanded its loan servicing division with facilities
located in Dallas, Texas.
<PAGE>
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.
Recent Developments
Mego. On June 29, 1998, City Holding (through City National) completed its
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. As part of an overall recapitalization of Mego
completed by several investors, City Holding invested $10 million to acquire
10,000 shares of Mego Series A Preferred Stock, which are convertible into 6.7
million shares of Mego common stock. City Holding also acquired an option to
purchase an additional 6.7 million shares of Mego common stock at a price of
$1.50 per share. 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.
<PAGE>
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.
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."
<PAGE>
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. Subsequent to 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.
<PAGE>
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."
<PAGE>
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. 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.
<PAGE>
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 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.
<PAGE>
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 June 30, 1998, 6,732,732 shares of Common Stock
and no shares of Preferred Stock were outstanding and entitled to vote. At such
date, City Holding had 2,297 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.
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.
<PAGE>
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.
<PAGE>
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 9,135,909 shares were
issued and outstanding as of September 15, 1998.
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 19 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.
<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 consist 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.
<PAGE>
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.
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.
<PAGE>
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; 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.
<PAGE>
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. Horizon's Articles of
Incorporation and Bylaws do not require a greater vote.
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
accountants, 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
accountants, as set forth in their report thereon incorporated by reference
elsewhere herein which as to 1995 are 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 the
City Holding Special Meeting, and representatives of Ernst & Young LLP are
expected to be present at 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.
<PAGE>
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.
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") 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.
<PAGE>
Horizon Commission Filings
(File No. 0-11672) Period/As of Date
- ---------------------------------------- -------------------------------------
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
City Holding Commission Filings
(File No. 0-1173) Period/As of Date
- ---------------------------------------- -------------------------------------
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
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 "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.
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:
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
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 ________ ___, 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.
<PAGE>
INDEX TO FINANCIAL INFORMATION
Pro Forma Balance Sheet - City Holding Company
and Horizon Bancorp, Inc. as of June 30, 1998...........................F-3
Pro Forma Balance Sheet - City Holding Company
and Horizon Bancorp, Inc. as of June 30, 1997..........................F-4
Pro Forma Balance Sheet - City Holding Company
and Horizon Bancorp, Inc. as of December 31, 1997.......................F-5
Pro Forma Balance Sheet - City Holding Company
and Horizon Bancorp, Inc. as of December 31, 1996.......................F-6
Pro Forma Statement of Income - City Holding Company
and Horizon Bancorp, Inc. for the six months ended June 30, 1998........F-7
Pro Forma Statement of Income - City Holding Company
and Horizon Bancorp, Inc. for the six months ended June 30, 1997.......F-8
Pro Forma Statement of Income - City Holding Company
and Horizon Bancorp, Inc. for the year ended December 31, 1997..........F-9
Pro Forma Statement of Income - City Holding Company
and Horizon Bancorp, Inc. for the year ended December 31, 1996..........F-10
Pro Forma Statement of Income - City Holding Company
and Horizon Bancorp, Inc. for the year ended December 31, 1995..........F-11
<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 at January 1, 1995.
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"). Pro
forma 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.
<PAGE>
Pro Forma Balance Sheet - City Holding Company and Horizon Bancorp, Inc.
As of June 30, 1998 (in thousands)
<TABLE>
<CAPTION>
City Holding Horizon Bancorp Pro forma Pro forma
as Reported as Reported Adjustments and Eliminations Combined
--------------------------------------------------------------------------
<S> <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 87,267
Corporation-obligated
mandatorily
redeemable capital
securities of
subsidiary trust holding
solely
subordinated debentures
of City Holding
Company ("Trust
Preferred Securities") 30,000 0 30,000
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 (9,312) 42,738
Capital surplus 63,734 19,814 (30,916) 9,312 61,944
Retained earnings 44,280 90,616 134,896
Cost of common stock in
treasury (591) (5,052) 5,052 (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>
<PAGE>
Pro Forma Balance Sheet - City Holding Company and Horizon Bancorp, Inc.
As of June 30, 1997 (in thousands)
<TABLE>
<CAPTION>
City Holding Horizon Bancorp Pro forma Pro forma
as Reported as Reported Adjustments and Eliminations Combined
-----------------------------------------------------------------------------
<S> <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 (9,309) 41,063
Capital surplus 35,795 19,768 (26,950) 9,309 37,922
Retained earnings 36,214 83,474 119,688
Cost of common stock in
treasury (310) (1,094) 1,094 (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>
<PAGE>
Pro Forma Balance Sheet - City Holding Company and Horizon Bancorp, Inc.
As of December 31, 1997 (in thousands)
<TABLE>
<CAPTION>
City Holding Horizon Bancorp Pro forma Pro forma
as Reported as Reported Adjustments and Eliminations Combined
-----------------------------------------------------------------------------
<S> <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 0 134,990
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 $ $ $2,286,424
=============================================================================
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
Other liabilities 22,799 15,208 38,007
-----------------------------------------------------------------------------
TOTAL LIABILITIES 1,159,888 906,259 2,066,147
STOCKHOLDERS' EQUITY
Common stock 16,067 9,310 25,859 (9,310) 41,926
Capital surplus 48,769 19,784 (28,797) 9,310 49,066
Retained earnings 40,374 86,768 127,142
Cost of common stock in
treasury (310) (2,938) 2,938 (310)
Accumulated other
comprehensivome 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 $ $ $2,286,424
============================================================================
</TABLE>
<PAGE>
Pro Forma Balance Sheet - City Holding Company and Horizon Bancorp, Inc.
As of December 31, 1996 (in thousands)
<TABLE>
<CAPTION>
City Holding Horizon Bancorp Pro forma Pro forma
as Reported as Reported Adjustments and Eliminations Combined
-----------------------------------------------------------------------------
<S> <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 (9,308) 39,851
Capital surplus 35,426 19,757 (26,028) 9,308 38,463
Retained earnings 30,246 79,876 110,122
Cost of common stock in
treasury (300) (175) 175 (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>
<PAGE>
Pro Forma Statement of Income - City Holding Company and Horizon Bancorp, Inc.
For the Six Months Ended June 30, 1998 (in thousands, except per share data)
<TABLE>
<CAPTION>
City Holding Horizon Bancorp Pro forma
as Reported as Reported Combined
------------------------------------------------------
<S> <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>
<PAGE>
Pro Forma Statement of Income - City Holding Company and Horizon Bancorp, Inc.
For the Six Months Ended June 30, 1997 (in thousands, except per share data)
<TABLE>
<CAPTION>
City Holding Horizon Bancorp Pro forma
as Reported as Reported Combined
------------------------------------------------------
<S> <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 EXPENSE 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>
<PAGE>
Pro Forma Statement of Income - City Holding Company and Horizon Bancorp, Inc.
For the Year Ended December 31, 1997 (in thousands, except per share data)
<TABLE>
<CAPTION>
City Holding Horizon Bancorp Pro forma
as Reported as Reported Combined
------------------------------------------------------
<S> <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 EXPENSES 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>
<PAGE>
Pro Forma Statement of Income - City Holding Company and Horizon Bancorp, Inc.
For the Year Ended December 31, 1996 (in thousands, except per share data)
<TABLE>
<CAPTION>
City Holding Horizon Bancorp Pro forma
as Reported as Reported Combined
------------------------------------------------------
<S> <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 INTEREST 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>
<PAGE>
Pro Forma Statement of Income - City Holding Company and Horizon Bancorp, Inc.
For the Year Ended December 31, 1995 (in thousands, except per share data)
<TABLE>
<CAPTION>
City Holding Horizon Bancorp Pro forma
as Reported as Reported Combined
------------------------------------------------------
<S> <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>
<PAGE>
Appendix A
Agreement and Plan of Reorganization
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION
between
CITY HOLDING COMPANY
and
HORIZON BANCORP, INC.
August 7, 1998
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I GENERAL............................................................2
1.1. Holding Company Merger............................................2
1.2. Bank Mergers......................................................2
1.3. Taking of Necessary Action........................................2
1.4. Tax Consequences; Accounting Treatment............................2
ARTICLE II EFFECT OF TRANSACTION ON COMMON STOCK, ASSETS, LIABILITIES AND
CAPITALIZATION OF CITY HOLDING, CITY NATIONAL, AND HORIZON.............3
2.1. Conversion of Stock; Exchange Ratio...............................3
2.2. Manner of Exchange................................................3
2.3. No Fractional Shares..............................................5
2.4. Dissenting Shares.................................................5
2.5. Assets............................................................5
2.6. Liabilities.......................................................6
ARTICLE III REPRESENTATIONS AND WARRANTIES...................................6
3.1. Representations and Warranties of Horizon and the Horizon Banks...6
(a) Organization, Standing and Power............................6
(b) Capital Structure...........................................7
(c) Authority...................................................7
(d) Investments.................................................8
(e) Financial Statements........................................8
(f) Absence of Undisclosed Liabilities..........................9
(g) Tax Matters.................................................9
(h) Options, Warrants and Related Matters......................10
(i) Property...................................................11
(j) Additional Schedules Furnished to City Holding.............11
(k) Agreements in Force and Effect.............................12
(l) Legal Proceedings; Compliance with Laws....................12
(m) Employee Benefit Plans.....................................13
(n) Insurance..................................................15
(o) Loan Portfolio.............................................16
(p) Absence of Changes.........................................17
(q) Brokers and Finders........................................17
(r) Subsidiaries; Partnerships and Joint Ventures..............17
(s) Reports....................................................17
(t) Environmental Matters......................................18
(u) Disclosure.................................................19
(v) Accounting and Tax Matters.................................19
(w) Regulatory Approvals.......................................19
(i)
<PAGE>
(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..........................................21
(c) Authority..................................................21
(d) Investments................................................22
(e) Financial Statements.......................................23
(f) Absence of Undisclosed Liabilities.........................23
(g) Tax Matters................................................24
(h) Options, Warrants and Related Matters......................25
(i) Property...................................................25
(j) Additional Schedules Furnished to Horizon..................25
(k) Agreements in Force and Effect.............................27
(l) Legal Proceedings; Compliance with Laws....................27
(m) Employee Benefit Plans.....................................27
(n) Insurance..................................................30
(o) Loan Portfolio.............................................30
(p) Absence of Changes.........................................31
(q) Brokers and Finders........................................31
(r) Subsidiaries; Partnerships and Joint Ventures..............31
(s) Reports....................................................32
(t) Environmental Matters......................................32
(u) Disclosure.................................................33
(v) Accounting and Tax Matters.................................33
(w) Regulatory Approvals.......................................33
(x) Year 2000 Matters..........................................33
(y) Interest Rate Risk Management Instruments..................33
(z) Recission of Repurchases...................................34
ARTICLE IV CONDUCT AND TRANSACTIONS PRIOR TO THE EFFECTIVE TIME OF THE
HOLDING COMPANY MERGER................................................34
4.1. Access to Records and Properties of City Holding, City National,
Other City Holding Subsidiaries, Horizon and the Horizon Banks;
Confidentiality.................................................34
4.2. Registration Statement, Proxy Statement, Shareholder Approval....35
4.3. Operation of the Businesses of the Parties.......................36
4.4. No Solicitation..................................................37
4.5. Dividends........................................................38
4.6. Regulatory Filings; Best Efforts.................................38
4.7. Public Announcements.............................................38
4.8. Operating Synergies; Conformance to Reserve Policies, Etc........38
4.9. City Holding Rights Agreement....................................39
4.10. Agreement as to Efforts to Consummate...........................39
(ii)
<PAGE>
4.11. Adverse Changes in Condition....................................39
4.12. Nasdaq Listing..................................................40
4.13. Delivery and Updating of Schedules..............................40
4.14. Transactions in City Holding Common Stock.......................40
4.15. Standstill Agreements; Confidentiality Agreements...............41
4.16. Letters from Accountants........................................41
ARTICLE V MANAGEMENT AND CORPORATE GOVERNANCE...............................41
5.1. Board of Directors...............................................41
5.2. Management.......................................................41
ARTICLE VI CONDITIONS OF MERGER.............................................42
6.1. Conditions of Obligations of City Holding and City National......42
6.2. Conditions of Obligations of Horizon and the Horizon Banks.......45
ARTICLE VII CLOSING DATE; EFFECTIVE TIME....................................47
7.1. Closing Date.....................................................47
7.2. Filings at Closing...............................................47
7.3. Effective Time...................................................48
ARTICLE VIII TERMINATION; SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
COVENANTS; WAIVER AND AMENDMENT.......................................48
8.1. Termination......................................................48
8.2. Effect of Termination............................................49
8.3. Survival of Representations, Warranties and Covenants............50
8.4. Waiver and Amendment.............................................50
ARTICLE IX ADDITIONAL COVENANTS.............................................50
9.1. Indemnification of Horizon Officers and Directors; Liability
Insurance.......................................................50
9.2. Employee Matters.................................................51
ARTICLE X MISCELLANEOUS.....................................................52
10.1. Expenses........................................................52
10.2. Entire Agreement................................................52
10.3. Descriptive Headings............................................52
10.4. Notices.........................................................53
10.5. Counterparts....................................................54
10.6. Governing Law...................................................54
(iii)
<PAGE>
INDEX TO EXHIBITS
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
<PAGE>
INDEX TO SCHEDULES TO BE PROVIDED BY HORIZON
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
<PAGE>
INDEX TO SCHEDULES TO BE PROVIDED BY CITY HOLDING
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
<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
<PAGE>
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 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."
<PAGE>
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 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
<PAGE>
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
<PAGE>
(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 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
<PAGE>
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.
<PAGE>
(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.
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.
<PAGE>
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.
(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);
<PAGE>
(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
<PAGE>
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 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
<PAGE>
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
<PAGE>
than the Horizon Stock Option Plan, and the Horizon Employee Stock
Option Plan.
(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
<PAGE>
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.
(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
<PAGE>
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
<PAGE>
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.
(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
<PAGE>
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 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'
<PAGE>
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
<PAGE>
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 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.
<PAGE>
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
<PAGE>
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).
(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
<PAGE>
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 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
<PAGE>
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.
<PAGE>
(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.
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,
<PAGE>
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
<PAGE>
"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.
(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
<PAGE>
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.
(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.
<PAGE>
(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.
<PAGE>
(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.
(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.
<PAGE>
(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.
<PAGE>
(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.
(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
<PAGE>
$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 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).
<PAGE>
(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.
<PAGE>
(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 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
<PAGE>
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 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
<PAGE>
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
<PAGE>
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, 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
<PAGE>
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 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
<PAGE>
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
<PAGE>
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.
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.
<PAGE>
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.
<PAGE>
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, 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.
<PAGE>
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
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.
<PAGE>
(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
<PAGE>
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.
(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.
<PAGE>
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.
<PAGE>
(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 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.
<PAGE>
(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 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.
<PAGE>
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;
<PAGE>
(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;
(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.
<PAGE>
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
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.
<PAGE>
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
<PAGE>
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.
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.
<PAGE>
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
<PAGE>
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
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.
<PAGE>
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
By: /s/ Robert A. Henson
--------------------------------------
Name: Robert A. Henson
Title: Chief Financial Officer
HORIZON BANCORP, INC.
By: /s/ Frank S. Harkins, Jr.
---------------------------------------
Name: Frank S. Harkins, Jr.
Title: Chairman of the Board and CEO
Appendix B
Holding Company Plan of Merger
<PAGE>
APPENDIX B
PLAN OF MERGER
OF
HORIZON BANCORP, INC.
INTO
CITY HOLDING COMPANY
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.
<PAGE>
(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").
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
<PAGE>
(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.
Appendix C
City Holding Option Agreement
<PAGE>
APPENDIX C
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;
<PAGE>
(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 (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);
<PAGE>
(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%.
(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.
<PAGE>
(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.
<PAGE>
(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.
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
<PAGE>
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 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
<PAGE>
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.
<PAGE>
(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%.
<PAGE>
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 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
<PAGE>
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 Repurchase Price
therefor or the portion thereof which the Substitute Option Issuer is not then
prohibited under applicable law and regulation from so delivering.
<PAGE>
(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.
<PAGE>
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 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.
<PAGE>
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]
<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.
CITY HOLDING COMPANY, as Issuer
By: /s/ Robert A. Henson
------------------------
Name: Robert A. Henson
Title: Chief Financial Officer
HORIZON BANCORP, INC., as Grantee
By: /s/ Frank S. Harkins
------------------------------------
Name: Frank S. Harkins
Title: Chairman and Chief Executive Officer
Appendix D
Horizon Option Agreement
<PAGE>
APPENDIX D
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;
<PAGE>
(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 (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);
<PAGE>
(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%.
(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.
<PAGE>
(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
<PAGE>
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.
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
<PAGE>
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 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
<PAGE>
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
<PAGE>
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.
(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%.
<PAGE>
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 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
<PAGE>
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
<PAGE>
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 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.
<PAGE>
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 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.
<PAGE>
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]
<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.
HORIZON BANCORP, INC., as Issuer
By: /s/ Frank S. Harkins, Jr.
---------------------------
Name: Frank S. Harkins, Jr.
Title: Chairman of the Board and CEO
CITY HOLDING COMPANY, as Grantee
By: /s/ Robert A. Henson
----------------------------
Name: Robert A. Henson
Title: Chief Financial Officer
Appendix E
Opinion of Wheat First Securities, Inc.
<PAGE>
APPENDIX E
_______, 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:
<PAGE>
(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;
(3) 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;
(4) Horizon's Quarterly Reports on Form 10-Q and related financial
information for the periods ended ended June 30, 1998, and March 31,
1998, and certain information made available by the management of
Horizon for the period ended July 31, 1998;
(5) 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;
(6) Certain publicly available information with respect to banking
companies and the financial terms of certain other mergers and
acquisitions which Wheat First deemed relevant;
(7) The Agreement;
(8) Certain estimates of the cost savings, revenue enhancements and
divestitures projected by City Holding and Horizon for the combined
company;
(9) 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
(10) 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.
<PAGE>
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,
WHEAT FIRST SECURITIES, INC.
Appendix F
Opinion of Baxter, Fentriss & Co.
<PAGE>
APPENDIX F
[Baxter Fentriss and Company Letterhead]
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
<PAGE>
BAXTER FENTRISS AND COMPANY
RICHMOND, VIRGINIA
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 portion 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.
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
<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 offer, and a profit and loss statement
of such corporation for the twelve months' period ended on the date of such
balance sheet.
<PAGE>
(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.
<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.
<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.
Exhibit
Number Description
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 (Included on the signature page of the
Registration Statement.)
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.
<PAGE>
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.
<PAGE>
(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.
(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.
<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 September 24, 1998.
CITY HOLDING COMPANY
(Registrant)
By: /s/ Steven J. Day
--------------------
Steven J. Day
President/Director
(Principal Executive Officer)
POWER OF ATTORNEY
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 September 24, 1998. Each of
the directors and/or officers of City Holding Company whose signature appears
below hereby appoints Steven J. Day, Robert A. Henson and Randall S. Parks, and
each of them severally, as his attorney-in-fact to sign in his name and behalf,
in any and all capacities stated below and to file with the Commission, any and
all amendments to this Registration Statement, as appropriate, and generally to
do all such things in their behalf in their capacities as officers and directors
to enable the Registrant to comply with the provisions of the Securities Act of
1933, and all requirements of the Securities and Exchange Commission.
/s/ Robert A, Henson /s/ Michael D. Dean
- ------------------------------------- --------------------------------------
Robert A. Henson Michael D. Dean
Chief Financial Officer Senior Vice President - Finance
(Principal Financial Officer) (Principal Accounting Officer)
/s/ Samuel M. Bowling /s/ C. Scott Briers
- ------------------------------------- -------------------------------------
Samuel M. Bowling C. Scott Briers
Director Director
/s/ D. K. Cales /s/ Steven J. Day
- ------------------------------------- -------------------------------------
Dr. D. K. Cales Steven J. Day
Director Director/President
/s/ Robert D. Fisher /s/ Jack E. Fruth
- ------------------------------------- -------------------------------------
Robert D. Fisher Jack E. Fruth
Director Director
/s/ Jay Goldman /s/ Carlin K. Harmon
- ------------------------------------- -------------------------------------
Jay Goldman Carlin K. Harmon
Director Director/Executive Vice President
<PAGE>
/s/ C. Dallas Kayser /s/ Bob F. Richmond
- ------------------------------------- -------------------------------------
C. Dallas Kayser Bob F. Richmond
Director Director
/s/ Otis L. O'Connor /s/ Van R. Thorn
- ------------------------------------- -------------------------------------
Otis L. O'Connor Van R. Thorn
Director Director/President
/s/ Hugh R. Clonch
- ------------------------------------- -------------------------------------
Mark H. Schaul Hugh R. Clonch
Director Director
- ------------------------------------- -------------------------------------
William M. Frazier Leon K. Oxley
Director Director
/s/ David E. Haden
- -------------------------------------
David E. Haden
Director
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
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 (Included on the signature page of the
Registration Statement.)
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.
EXHIBIT 5.1
[Hunton & Williams Letterhead]
September 24, 1998
Board of Directors
City Holding Company
25 Gatewater Road
Charleston, West Virginia 25313
Re: Registration Statement on Form S-4
Dear Ladies and Gentlemen:
We are acting as counsel for City Holding Company (the "Company") in
connection with the registration under the Securities Act of 1933 of 10,500,000
shares of its Common Stock (the "Common Stock"). The transaction in which the
Common Stock will be issued is described in the Company's Registration Statement
on Form S-4 (the "Registration Statement") filed with the Securities and
Exchange Commission (the "Commission"). In connection with the filing of the
Registration Statement, you have requested our opinion concerning certain
corporate matters.
We are of the opinion that:
1. The Company is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of West Virginia.
2. The Common Stock has been duly authorized and, when the shares have
been issued as described in the Registration Statement, will be
legally issued, fully paid and nonassessable.
We consent to the filing of this opinion with the Commission as an
exhibit to the Registration Statement and to the references to us in the Proxy
Statement/Prospectus included therein. In giving this consent, we do not admit
that we are within the category of persons whose consent is required by Section
7 of the Securities Act of 1933 or the rules and regulations promulgated
thereunder by the Securities and Exchange Commission.
Very truly yours,
/s/ Hunton & Williams
---------------------
[Hunton & Williams Letterhead]
EXHIBIT 8.1
September 24, 1998
City Holding Company
25 Gatewater Road
Charleston, West Virginia 25313
Merger of Horizon Bancorp, Inc.
Into City Holding Company
Certain Federal Income Tax Consequences
Ladies and Gentlemen:
We have acted as counsel to City Holding Company ("City Holding"), a West
Virginia corporation, in connection with the proposed merger of Horizon Bancorp,
Inc. ("Horizon"), a West Virginia corporation, into City Holding (the "Holding
Company Merger"). After the Holding Company Merger, 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"), each currently a wholly-owned subsidiary of Horizon, will merge into
City National Bank of West Virginia, a wholly-owned subsidiary of City Holding
(the "Bank Mergers").
The only class of Horizon stock outstanding is common stock. In the
Holding Company Merger, each outstanding share of Horizon common stock (other
than any shares held by City Holding or dissenters) is to be converted into the
number of shares of City Holding common stock determined by dividing $45.00 by
the average closing price of City Holding common stock for the ten trading days
ending on the tenth day before the effective date of the Holding Company Merger
(the "Effective Date"). However, a share of Horizon common stock will not be
converted into less than 1.011 or more than 1.111 of a share of City Holding
common stock. Any Horizon shareholder who becomes entitled to a fractional share
of City Holding common stock as a result of the Holding Company Merger, after
aggregating all the shareholder's shares of Horizon common stock, will receive
cash from City Holding in lieu of the fractional share. Horizon shareholders and
City Holding shareholders are entitled to exercise dissenter's rights with
respect to the Holding Company Merger.
You have requested our opinion concerning certain federal income tax
consequences of the Holding Company Merger and the Bank Mergers. In giving this
opinion, we have reviewed the Agreement and Plan of Reorganization dated as of
August 7, 1998, between City Holding and Horizon; the Plan of Merger relating to
the Holding Company Merger; the Form S-4 Registration Statement under the
Securities Act of 1933 relating to the Holding Company Merger (the "S-4"); and
such other documents as we have considered necessary. In addition, we have
assumed the following:
1. The fair market value of the City Holding common stock (including
any fractional share interest) received by a Horizon shareholder in exchange for
Horizon common stock will be approximately equal to the fair market value of the
Horizon common stock surrendered in the exchange.
2. None of the compensation received by any shareholder-employee of
Horizon will be separate consideration for, or allocable to, any shares of
Horizon common stock; none of the shares of City Holding common stock received
by any shareholder-employee in the Holding Company Merger will be separate
consideration for, or allocable to, any employment agreement; and the
compensation paid to any shareholder-employee will be for services actually
rendered and will be commensurate with amounts paid to third parties bargaining
<PAGE>
at arm's length for similar services.
3. The payment of cash in lieu of fractional shares of City Holding
common stock is solely for the purpose of avoiding the expense and inconvenience
to City Holding of issuing fractional shares and does not represent separately
bargained-for consideration. The total cash consideration that will be paid in
the Holding Company Merger to Horizon shareholders in lieu of fractional shares
of City Holding common stock will not exceed one percent of the total
consideration issued in the Holding Company Merger to Horizon shareholders in
exchange for their Horizon common stock.
4. No share of Horizon common stock has been or will be (a) redeemed
directly or indirectly by Horizon or (b) acquired directly or indirectly by City
Holding, any subsidiary of City Holding, or any subsidiary of Horizon in
anticipation of the Holding Company Merger.
5. Horizon has not made and will not make any extraordinary
distribution with respect to its stock in anticipation of the Holding Company
Merger.
6. There is no plan or intention for City Holding or any subsidiary
of City Holding to acquire directly or indirectly any of the City Holding common
stock issued in the Holding Company Merger or to make any extraordinary
distribution with respect to such stock.
7. Following the Holding Company Merger, City Holding will continue
the historic business of Horizon or use a significant portion of Horizon's
historic business assets in a business.
8. The liabilities of Horizon that will be assumed by City Holding
and the liabilities, if any, to which the transferred assets of Horizon are
subject were incurred or will be incurred by Horizon in the ordinary course of
business.
9. There is, and on the Effective Date will be, no indebtedness
existing between (a) Horizon or any subsidiary of Horizon and (b) City Holding
or any subsidiary of City Holding.
10. Neither City Holding nor any subsidiary of City Holding (a) has
transferred or will transfer cash or other property to Horizon or any subsidiary
of Horizon in anticipation of the Holding Company Merger or the Bank Mergers or
(b) has made or will make any loan to Horizon or any subsidiary of Horizon in
anticipation of the Holding Company Merger or the Bank Mergers.
11. On the Effective Date, the adjusted income tax basis as well as the
fair market value of the assets of Horizon transferred to City Holding will
exceed the sum of Horizon's liabilities assumed by City Holding plus the amount
of liabilities, if any, to which the transferred assets are subject.
12. City Holding has no plan or intention to sell or otherwise
dispose of any of the assets of Horizon acquired in the Holding Company Merger,
except in the Bank Mergers.
13. City Holding, City National, Horizon, the Horizon Banks, and the
shareholders of Horizon will pay their respective expenses, if any, incurred in
connection with the Holding Company Merger and the Bank Mergers.
14. For each of City Holding, City National, Horizon, and the Horizon
Banks, not more than 25 percent of the fair market value of its adjusted total
assets consists of stock and securities of any one issuer, and not more than 50
percent of the fair market value of its adjusted total assets consists of stock
and securities of five or fewer issuers. For purposes of the preceding sentence,
(a) a corporation's adjusted total assets exclude cash, cash items (including
accounts receivable and cash equivalents), and United States government
securities, (b) a corporation's adjusted total assets exclude stock and
securities issued by any subsidiary at least 50 percent of the voting power or
50 percent of the total fair market value of the stock of which is owned by the
corporation, but the corporation is treated as owning directly a ratable share
(based on the percentage of the fair market value of the subsidiary's stock
owned by the corporation) of the assets owned by any such subsidiary, and (c)
all corporations that are members of the same "controlled group" within the
meaning of section 1563(a) of the Internal Revenue Code (the "Code") are treated
as a single issuer.
<PAGE>
15. At all times during the five-year period ending on the Effective
Date, the fair market value of all of Horizon's United States real property
interests was and will have been less than 50 percent of the total fair market
value of (a) its United States real property interests, (b) its interests in
real property located outside the United States, and (c) its other assets used
or held for use in a trade or business. For purposes of the preceding sentence,
(x) United States real property interests include all interests (other than an
interest solely as a creditor) in real property and associated personal property
(such as movable walls and furnishings) located in the United States or the
Virgin Islands and interests in any corporation (other than a controlled
corporation) owning any United States real property interest, (y) Horizon is
treated as owning its proportionate share (based on the relative fair market
value of its ownership interest to all ownership interests) of the assets owned
by any controlled corporation or any partnership, trust, or estate in which
Horizon is a partner or beneficiary, and (z) any such entity in turn is treated
as owning its proportionate share of the assets owned by any controlled
corporation or any partnership, trust, or estate in which the entity is a
partner or beneficiary. As used in this paragraph, "controlled corporation"
means any corporation at least 50 percent of the fair market value of the stock
of which is owned by Horizon, in the case of a first-tier subsidiary of Horizon,
or by a controlled corporation, in the case of a lower-tier subsidiary.
16. Any shares of City Holding common stock received in exchange for
shares of Horizon common stock that (a) were acquired in connection with the
performance of services, including stock acquired through the exercise of an
option or warrant acquired in connection with the performance of services, and
(b) are subject to a substantial risk of forfeiture within the meaning of
section 83(a) of the Code will be subject to substantially the same risk of
forfeiture after the Holding Company Merger.
17. No outstanding Horizon common stock acquired in connection with
the performance of services was or will have been acquired within six months
before the Effective Date by any person subject to section 16(b) of the
Securities Exchange Act of 1934 other than pursuant to an award (a) granted
under a plan that satisfies the requirements under S.E.C. Rule 16b-3 or (b)
granted more than six months before the Effective Date.
18. Neither Horizon nor any of the Horizon Banks has filed, and none
holds any asset subject to, a consent pursuant to section 341(f) of the Code and
regulations thereunder.
19. Neither Horizon nor any of the Horizon Banks is a party to, and
none holds any asset subject to, a "safe harbor lease" under former section
168(f)(8) of the Code and regulations thereunder.
20. No share of stock of any of the Horizon Banks has been or will be
redeemed in anticipation of the Bank Mergers and none of the Horizon Banks has
made or will make any extraordinary distribution with respect to its stock in
anticipation of the Bank Mergers.
21. City National has no plan or intention to reacquire any of its
outstanding stock or to make any extraordinary distribution with respect to such
stock.
22. City National will continue the historic business of each of the
Horizon Banks or use a significant portion of each of the Horizon Banks'
historic business assets in a business.
23. The liabilities of the Horizon Banks that will be assumed by City
National and the liabilities, if any, to which the transferred assets of the
Horizon Banks are subject were incurred or will be incurred by the Horizon Banks
in the ordinary course of business.
24. For each of the Horizon Banks, on the effective date of each of
the Bank Mergers, the adjusted income tax basis as well as the fair market value
of the assets transferred to City National will exceed the sum of the
liabilities assumed by City National plus the amount of liabilities, if any, to
which the transferred assets are subject.
<PAGE>
25. City National has no plan or intention to sell or otherwise
dispose of any of the assets of the Horizon Banks to be acquired in the Bank
Mergers, except for dispositions made in the ordinary course of business.
26. City Holding has no plan or intention to dispose of any City
National stock.
On the basis of the foregoing, and assuming that (a) with respect to any
nonresident alien or foreign entity that is a shareholder of Horizon, Horizon
will comply with all applicable statement and notification requirements (if any)
of Treasury Regulation ss. 1.897-2(g) & (h) and (b) the Holding Company Merger
and each of the Bank Mergers will be consummated in accordance with the Plan of
Merger therefor, we are of the opinion that (under current law) for federal
income tax purposes:
1. The Holding Company Merger will be a reorganization with the
meaning of section 368(a)(1)(A) of the Code.
2. Horizon will not recognize gain or loss (a) on the transfer of its
assets to City Holding in exchange for City Holding common stock and the
assumption of Horizon's liabilities or (b) on the constructive distribution of
City Holding common stock to City Holding shareholders.
3. City Holding will not recognize gain or loss on the acquisition of
Horizon's assets in exchange for City Holding common stock and the assumption of
Horizon's liabilities.
4. A Horizon shareholder will not recognize gain or loss on the
exchange of his shares of Horizon common stock solely for shares of City Holding
common stock (including any fractional share interest) in the Holding Company
Merger.
5. The aggregate basis of shares of City Holding common stock
(including any fractional share interest) received in the Holding Company Merger
by a Horizon shareholder who does not exercise dissenter's rights with respect
to any shares will be the same as the aggregate basis of the shares of Horizon
common stock exchanged therefor.
6. The holding period for shares of City Holding common stock
(including any fractional share interest) received by a Horizon shareholder in
the Holding Company Merger will include the holding period for the shares of
Horizon common stock exchanged therefor, if such shares of Horizon common stock
are held as a capital asset on the Effective Date.
7. Cash received by a Horizon shareholder in lieu of a fractional
share of City Holding common stock will be treated as having been received as
full payment in exchange for such fractional share pursuant to section 302(a) of
the Code. Accordingly, a Horizon shareholder who receives cash in lieu of a
fractional share will recognize gain or loss equal to the difference between the
amount of cash received and the shareholder's basis in the fractional share
interest.
8. Each of the Bank Mergers will be a reorganization within the
meaning of section 368(a)(1)(A) and section 368(a)(1)(D) of the Code.
9. None of the Horizon Banks will recognize gain or loss (a) on the
transfer of its assets to City National in exchange for the assumption of
liabilities and in constructive exchange for City National stock or (b) on the
constructive distribution of City National stock to City Holding.
10. City National will not recognize gain or loss on the acquisition
of the assets of the Horizon Banks in exchange for the assumption of each of the
Horizon Banks' liabilities and in constructive exchange for City National stock.
<PAGE>
11. City Holding will not recognize gain or loss on the constructive
exchange of shares of stock of the Horizon Banks for shares of City National
stock in the Bank Mergers.
We are also of the opinion that the material federal income tax
consequences of the Holding Company Merger are fairly summarized in the S-4
under the headings "Summary--Federal Income Tax Consequences" and "The Holding
Company Merger--Material Federal Income Tax Consequences." We consent to the use
of this opinion as an exhibit to the S-4 and to the reference to this firm under
such headings. In giving this consent, we do not admit that we are within the
category of persons whose consent is required by section 7 of the Securities Act
of 1933 or the rules and regulations promulgated thereunder by the Securities
and Exchange Commission.
Very truly yours,
/s/ HUNTON & WILLIAMS
-------------------------
EXHIBIT 8.2
[Letterhead of Jackson & Kelly]
September 24, 1998
Horizon Bancorp, Inc.
Post Office Box D
One Park Avenue
Beckley, West Virginia 25801
Ladies and Gentlemen:
We have acted as counsel to Horizon Bancorp, Inc. ("Horizon") in
connection with the Registration Statement on Form S-4 of Horizon filed with the
Securities and Exchange Commission on September 24, 1998 (the "Registration
Statement"), and hereby confirm to you our opinion as set forth under the
heading "Material Federal Income Tax Consequences" in the Prospectus included in
the Registration Statement.
We hereby consent to the filing with the Securities and Exchange
Commission of this letter as an exhibit to the Registration Statement and the
reference to us under the heading "Legal Opinions." In giving such consent, we
do not thereby admit that we are in the category of persons whose consent is
required under Section 7 of the Securities Act of 1933.
Very truly yours,
/s/ Jackson & Kelly
---------------------
Exhibit 10.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") made as of the ______ day of
________, 199_, by and among CITY HOLDING COMPANY, a West Virginia
corporation ("Employer"), and Steven J. Day ("Employee").
WITNESSETH THAT:
WHEREAS, Employee has heretofore been employed and rendered services to
Employer as President and Chief Executive Officer;
WHEREAS, Horizon was merged into Employer on __________ __, 199_, (the
"Merger") pursuant to an Agreement and Plan of Reorganization dated as of August
7, 1998 (the "Reorganization Agreement") between Horizon and Employer;
WHEREAS, Employer considers the continued availability of Employee's
services to be important to the management and conduct of Employer's business
and desire to secure for itself the continued availability of Employee's
services; and
WHEREAS, Employee is willing to make his services available to Employer on
the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the parties hereto agree as follows:
1. Employment. Employee is employed as President and Chief Executive
Officer of Employer. Employee shall have such duties and responsibilities as are
commensurate with such positions. Employee hereby accepts and agrees to such
employment, subject to the general supervision and pursuant to the orders,
advice, and direction of Employer and its Board of Directors. Employee shall
perform such duties as are customarily performed by one holding such positions
in other same or similar businesses or enterprises as that engaged in by
Employer, and shall also additionally render such other services and duties as
may be reasonably assigned to him from time to time by Employer, consistent with
his positions.
2. Term of Employment. The term of this Agreement shall commence from and
after the date hereof, and shall terminate on the day next preceding the fifth
anniversary of the date hereof unless extended as provided herein. On each
<PAGE>
monthly anniversary date starting the first month after the date hereof, this
Agreement will be automatically extended for an additional month; provided,
however, that on any one month anniversary date either Employer or Employee may
serve notice to the other party to fix the term to a definite five year period
from the date of such notice and no further automatic extensions will occur.
Notwithstanding the foregoing, this Agreement will not be extended beyond the
first day of the month coincident with or next following the date on which
Employee attains age sixty-five (65). The term of this Agreement as may be
extended pursuant to this Section 2, or, as may be shortened in accordance with
Section 5 or 6 hereof, is hereinafter referred to as the "Term."
3. Compensation.
a. For all services rendered by Employee to Employer under this
Agreement, Employer shall pay to Employee, for the one-year period beginning on
the date hereof, a minimum annual salary at a rate not less than $240,000,
payable in accordance with the payroll practices of Employer applicable to all
officers.
b. Employee shall participate in such incentive plans of Employer
for which he may become eligible and designated a participant, as such plans may
be modified from time to time.
c. After the first year following the date hereof, any salary
increase payable to Employee shall be determined in accordance with Employer's
annual salary plan, and be based on Employer's performance and the performance
of Employee.
d. Except as otherwise specifically provided herein, for so long as
Employee is employed by Employer, Employee also shall be paid, on the same basis
as other officers of Employer, employee pension and welfare benefits and group
employee benefits such as sick leave, vacation, group disability and health,
life, and accident insurance and similar indirect compensation which Employer
may from time to time extend to its officers; provided that Employee shall
receive term life insurance coverage in an amount not less than $400,000.00
e. If during the Term of the Agreement the Employee becomes eligible
for retirement under Employer's retirement plans and he retires, Employee may
elect to continue receiving the health insurance coverage provided to Employee
prior to retirement at a comparable rate available to other retired employees.
<PAGE>
f. For so long as Employee is employed by Employer, Employer shall
pay Employee's reasonable country club dues and expenses.
g. For so long as Employee is employed by Employer, Employer shall
furnish Employee with an automobile in accordance with the customary practices
of Employer for executives at his level.
h. For so long as Employee is employed by Employer, Employer shall
pay Employee's reasonable civic club dues.
4. Covenants of the Employee.
a. Subject to the limitations provided in Sections 4(b) and 4(d)
(whichever may be applicable), upon termination of Employee's employment prior
to the expiration of the Term, Employee will not directly or indirectly, either
as a principal, agent, employee, employer, stockholder, co-partner or in any
other individual or representative capacity whatsoever, engage in the banking
and financial services business, which includes consumer, savings, commercial
banking and the insurance and trust businesses, or the savings and loan or
mortgage banking business, or any other business in which the Employer or its
Affiliates are engaged, anywhere in the state of West Virginia and in any county
outside of West Virginia contiguous to West Virginia, nor will the Employee
solicit, or assist any other person in so soliciting, any depositors or
customers of Employer or its Affiliates or induce any then or former employee of
Employer or its Affiliates to terminate their employment with Employer or its
Affiliates. The term "Affiliate" as used in this Agreement means a Person that
directly or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, another Person. The term
"Person" as used in this Agreement means any person, partnership, corporation,
group or other entity.
b. If Employee voluntarily terminates his employment with Employer
and its Affiliates, Employee will be subject to the provisions of Section 4(a)
for any period of time during which Employee elects to receive compensation
pursuant to Section 6(e).
c. If Employee's employment is terminated by Employer or its
Affiliates for Just Cause (as defined in Section 6(b) herein), Employee will not
be subject to the provisions of Section 4(a).
d. If Employee's employment is terminated by Employer or its
Affiliates for reasons other than Just Cause (as defined in Section 6(b) herein)
at any time, Employee will be subject to the provisions of Section 4(a) until
the earlier of: (i) the first anniversary of Employee's termination or (ii) the
date as of which Employee elects to forego any further compensation pursuant to
the last sentence of Section 6(c).
<PAGE>
e. Notwithstanding any other provision of this Agreement to the
contrary, if Employee voluntarily terminates his employment with Employer or its
Affiliates in accordance with Section 6(d), Employee will not be subject to
Section 4(a).
f. During the Term of Employee's employment hereunder and
thereafter, and except as required by any court, supervisory authority or
administrative agency or as may be otherwise required by applicable law,
Employee shall not, without the written consent of the Board of Directors of
Employer or a person authorized thereby, disclose to any person, other than an
employee of Employer or an Affiliate thereof or a person to whom disclosure is
reasonably necessary or appropriate in connection with the performance by
Employee of his duties as an employee of Employer or an Affiliate, any
confidential information obtained by him while in the employ of Employer, unless
such information has become a matter of public knowledge at the time of such
disclosure.
g. The covenants contained in this Section 4 shall be construed and
interpreted in any judicial proceeding to permit their enforcement to the
maximum extent permitted by law. Employee agrees that the restraints imposed
herein are necessary for the reasonable and proper protection of Employer and
its Affiliates and that each and every one of the restraints is reasonable in
respect to such matter, length of time and the area. Employee further
acknowledges that damages at law would not be a measurable or adequate remedy
for breach of the covenants contained in this Section 4 and, accordingly,
Employee agrees to submit to the equitable jurisdiction of any court of
competent jurisdiction in connection with any action to enjoin Employee from
violating any such covenants.
5. Disability. If, by reason of physical or mental disability during the
term hereof, Employee is unable to carry out the essential functions of his
employment hereunder for twelve (12) consecutive months, his services hereunder
may be terminated by action of the Board of Directors of Employer determining so
to do upon one month's notice to be given to Employee at any time after the
period of twelve (12) continuous months of disability and while such disability
continues. If, prior to the expiration of the one month period after the giving
of such notice, Employee shall recover from such disability and return to the
full-time active discharge of his duties, then such notice shall be of no
further force and effect and Employee's employment shall continue as if the same
had been uninterrupted. If Employee shall not so recover from his disability and
<PAGE>
return to his duties, then his services shall terminate at the expiration date
of such one month's notice with the same force and effect as if that date had
been the date of termination originally provided for hereunder. During the first
twelve (12) months of the period of Employee's disability, Employee shall
continue to earn all compensation (including bonuses and incentive compensation)
to which Employee would have been entitled as if he had not been disabled, such
compensation to be paid at the time, in the amounts, and in the manner provided
in Section 3(a), inclusive of any compensation received pursuant to any
applicable disability insurance plan of Employer. Thereafter, Employee shall
receive compensation to which he is entitled under any applicable disability
insurance plan. At that time Employee shall also be deemed to have voluntarily
terminated his employment and shall be entitled to receive Termination
Compensation as set forth in Section 6(e). In the event a dispute arises between
Employee and Employer concerning Employee's physical or mental ability to
continue or return to the performance of his duties as aforesaid, Employee shall
submit to examination by a competent physician mutually agreeable to the
parties, and his opinion as to Employee's capability to so perform will be final
and binding. Upon termination of Employee's services by reason of disability,
the Term shall end.
6. Termination.
a. If Employee shall die during the Term, this Agreement and the
employment relationship hereunder will automatically terminate on the date of
death, which date shall be the last date of the Term. Notwithstanding this
Subsection 6(a), if Employee dies while employed by Employer, Employee's estate
shall receive annually 60% of Employee's Termination Compensation until the
earlier to occur of (x) five years from the date of Employee's death, or (y) the
date on which Employee would have reached age 65. Notwithstanding this
Subsection 6(a), if Employee dies while receiving payments under Subsection
6(e), Employee's estate shall receive annually 60% of Employee's Termination
Compensation until the earlier to occur of (i) five years from the date any
payments under Subsection 6(e) commenced, or (ii) the date on which Employee
would have reached age 65.
b. Employer shall have the right to terminate Employee's employment
under this Agreement at any time for Just Cause, which termination shall be
effective immediately. Termination for "Just Cause" shall include termination
for Employee's personal dishonesty, gross incompetence, willful misconduct,
breach of a fiduciary duty involving personal profit, intentional failure to
perform stated duties, willful violation of any law, rule or regulation (other
than traffic violations or similar offenses) or a final cease-and-desist order,
conviction of a felony or of a misdemeanor involving moral turpitude, unethical
business practices in connection with Employer's business, misappropriation of
Employer's assets (determined on a reasonable basis) or those of their
Affiliates, or material breach of any other provision of this Agreement,
provided that Employee has received written notice from Employer of such
material breach and such breach remains uncured thirty days after the delivery
of such notice. In the event Employee's employment under this Agreement is
terminated for Just Cause, Employee shall have no right to receive compensation
or other benefits under this Agreement for any period after such termination.
<PAGE>
c. Employer may terminate Employee's employment other than for "Just
Cause," as described in Subparagraph (b) above, at any time upon written notice
to Employee, which termination shall be effective immediately. In the event
Employer terminates Employee pursuant to this Subparagraph (c), Employee will
receive the highest amount of the annual cash compensation (including cash
bonuses and other cash-based benefits, including for these purposes amounts
earned or payable whether or not deferred) received during any of the preceding
five calendar years ("Termination Compensation") in each year until the end of
the Term, so long as Employee complies with Section 4(a) of the Agreement until
the first anniversary of Employee's termination. Such amounts shall be payable
at the times such amounts would have been paid in accordance with Section 3(a).
In addition, Employee shall continue to receive health insurance coverage from
Employer on the same terms as were in effect prior to Employee's termination,
either under Employer's plans or comparable coverage, for all periods Employee
receives Termination Compensation. Notwithstanding anything in this Agreement to
the contrary, if Employee breaches Section 4(a) of this Agreement prior to the
first anniversary of Employee's termination pursuant to this Section 6(c),
Employee will not be entitled to receive any further compensation or benefits
pursuant to this Section 6(c).
d. In the event of a Change of Control (as defined below) of
Employer at any time after the date hereof, Employee may voluntarily terminate
employment with Employer up until 24 months after the Change of Control for
"Good Reason" and be entitled to receive in a lump sum (i) any compensation due
but not yet paid through the date of termination and (ii) in lieu of any further
salary payments from the date of termination to the end of the Term, an amount
equal to the Termination Compensation times 2.99.
"Good Reason" shall mean the occurrence of any of the following events
without Employee's express written consent:
(a) the assignment to Employee of duties inconsistent with the
position and status of the offices and positions of Employer held
immediately prior to the Change of Control;
<PAGE>
(b) a reduction by Employer in Employee's pay grade or base
salary as then in effect or the exclusion of Employee from participation
in Employer's benefit plans in which he previously participated as in
effect at the date hereof or as the same may be increased from time to
time during the term of this Agreement (or supplanted as a result of the
Merger) or Employer's failure to increase (within 12 months of Employee's
last increase in base salary) Employee's base salary in an amount which at
least equals, on a percentage basis, the average percentage increase in
base salary for all executives entitled to participate in Employer's
executive incentive plans for which Employee was eligible during the
preceding 12 months;
(c) an involuntary relocation of Employee more than 50 miles
from the location where Employee worked immediately prior to the Change of
Control or the breach by Employer of any other material provision of this
Agreement; or
(d) any purported termination of the employment of Employee by
Employer which is not effected in accordance with this Agreement.
A "Change of Control" shall be deemed to have occurred if (i) any person
or group of persons (as defined in Section 13(d) and 14(d) of the Securities
Exchange Act of 1934 together with its affiliates, excluding employee benefit
plans of Employer, is or becomes, directly or indirectly, the "beneficial owner"
(as defined in Rule 13d-3 promulgated under the Securities Exchange Act of 1934)
of securities of Employer representing 20% or more of the combined voting power
of Employer's then outstanding securities; or (ii) during the term of this
Agreement as a result of a tender offer or exchange offer for the purchase of
securities of Employer (other than such an offer by Employer for its own
securities), or as a result of a proxy contest, merger, consolidation or sale of
assets, or as a result of any combination of the foregoing, individuals who at
the beginning of any two-year period during the term of this Agreement
constitute Employer's Board of Directors, plus new directors whose election or
nomination for election by Employer's shareholders is approved by a vote of at
least two-thirds of the directors still in office who were directors at the
beginning of such two-year period, cease for any reason during such two-year
period to constitute at least two-thirds of the members of such Board of
Directors; or (iii) the shareholders of Employer approve a merger or
consolidation of Employer with any other corporation or entity regardless of
which entity is the survivor, other than a merger or consolidation which would
result in the voting securities of Employer outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or being
converted into voting securities of the surviving entity) at least 80% of the
<PAGE>
combined voting power of the voting securities of Employer or such surviving
entity outstanding immediately after such merger or consolidation; or (iv) the
shareholders of Employer approve a plan of complete liquidation or winding-up of
Employer or an agreement for the sale or disposition by Employer of all or
substantially all of Employer's assets; or (v) any event which Employer's Board
of Directors determines should constitute a Change of Control. Notwithstanding
the foregoing, the transactions contemplated by the Reorganization Agreement
shall not be considered a Change of Control.
e. Notwithstanding any other provision of this Agreement to the
contrary, in the event that Employee voluntarily terminates employment with
Employer at any time after the first anniversary of the Merger (other than
pursuant to Section 6(d)), Employee will be entitled to receive annually 60% of
Employee's Termination Compensation, so long as Employee complies with Section
4(a) of this Agreement, until the earlier of (i) five years from the date on
which Employee voluntarily terminates employment with Employer in accordance
with this Subsection 6(e), or (ii) the date on which Employee reaches age 65.
Such Termination Compensation shall be payable at the times such amounts would
have been paid in accordance with Section 3(a). In addition, Employee shall
continue to receive health insurance coverage from Employer on the same terms as
were in effect prior to Employee's termination, either under the Employer's
plans or comparable coverage, for all periods Employee receives Termination
Compensation pursuant to this Section 6(e), so long as Employee complies with
Section 4(a) of the Agreement.
f. In receiving any payments pursuant to this Section 6, Employee
shall not be obligated to seek other employment or take any other action by way
of mitigation of the amounts payable to Employee hereunder and such amounts
shall not be reduced or terminated whether or not Employee obtains other
employment.
g. Notwithstanding anything in this Agreement to the contrary, if
any of the payments provided for under this Agreement (the "Agreement
Payments"), together with any other payments that Employee has the right to
receive (such other payments together with the Agreement Payments are referred
to as the "Total Payments"), would constitute an "excess parachute payment," as
defined in Section 280G(b)(2) of the Internal Revenue Code of 1986, as amended
(the "Code") (an "Excess Parachute Payment"), the Agreement Payments shall be
reduced by the smallest amount necessary so that no portion of such Total
Payments would constitute Excess Parachute Payments. In the event Employer shall
make an Agreement Payment to Employee that would constitute an Excess Parachute
Payment, Employee shall return such payment to Employee (together with interest
at the rate set forth in Section 1274(b)(2)(B) of the Code). To the extent the
application of this Section 6(g) is triggered, the provisions of Section 4(a)
shall not apply.
<PAGE>
7. Other Employment.
Employee shall devote all of his business time, attention, knowledge and
skills solely to the business and interest of Employer and its Affiliates, and
Employer and its Affiliates shall be entitled to all of the benefits, profits
and other emoluments arising from or incident to all work, services and advice
of Employee, and Employee shall not, during the Term hereof, become interested
directly or indirectly, in any manner, as partner, officer, director,
stockholder, advisor, employee or in any other capacity in any other business
similar to Employer's business; provided, however, that nothing herein contained
shall be deemed to prevent or limit the right of Employee to invest in a
business similar to Employer's business if such investment is limited to less
than one percent of the capital stock or other securities of any corporation or
similar organization whose stock or securities are publicly owned or are
regularly traded on any public exchange.
8. Miscellaneous.
a. This Agreement shall be governed by and construed in accordance
with the laws of the State of West Virginia without regard to conflicts of law
principles thereof.
b. This Agreement constitutes the entire Agreement between Employee
and Employer, with respect to the subject matter hereof, and supersedes all
prior agreements with respect thereto. Without limiting the foregoing, Employee
agrees that this Agreement satisfies any rights he may have had under any prior
agreement or understanding with Horizon with respect to his employment by
Horizon.
c. This Agreement may be executed in one or more counterparts, all
of which, taken together, shall constitute one and the same instrument.
<PAGE>
d. Any notice or other communication required or permitted under
this Agreement shall be effective only if it is in writing and delivered in
person or by reliable overnight courier service or deposited in the mails,
postage prepaid, return receipt requested, addressed as follows:
To Employer:
City Holding Company
25 Gatewater Road
Charleston, West Virginia 25313
(304) 769-1100
Attention: Robert A. Henson, Chief Financial Officer
To Employee:
Steven J. Day
City Holding Company
25 Gatewater Road
Charleston, West Virginia 25313
(304) 769-1100
Notices given in person or by overnight courier service shall be deemed given
when delivered to the address required by this Section 8(d), and notices given
by mail shall be deemed given three days after deposit in the mails. Any party
hereto may designate by written notice to the other party in accordance herewith
any other address to which notices addressed to him shall be sent.
e. The provisions of this Agreement shall be deemed severable and
the invalidity or unenforceability of any provision shall not affect the
validity or enforceability of the other provisions hereof. It is understood and
agreed that no failure or delay by Employer or Employee in exercising any right,
power or privilege under this Agreement shall operate as a waiver thereof, nor
shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or privilege
hereunder.
f. In the event any dispute shall arise between Employee and
Employer as to the terms or interpretations of this Agreement, whether
instituted by formal legal proceedings or otherwise, including any action taken
by Employee to enforce the terms of this Agreement or in defending against any
action taken by Employer, Employer shall reimburse Employee for all reasonable
costs and expenses, including reasonable attorneys' fees, arising from such
dispute, proceeding or action, if Employee shall prevail in any action initiated
by Employee or shall have acted reasonably and in good faith in defending
<PAGE>
against any action initiated by Employer. Such reimbursement shall be paid
within 10 days of Employee furnishing to Employer written evidence, which may be
in the form, among other things, of a canceled check or receipt, of any costs or
expenses incurred by Employee. Any such request for reimbursement by Employee
shall be made no more frequently than at 60 day intervals.
SIGNATURE PAGE FOLLOWS
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.
CITY HOLDING COMPANY
By:___________________________
Name: Robert A. Henson
Title: Chief Financial Officer
EMPLOYEE:
______________________________
Steven J. Day
Exhibit 10.2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") made as of the ______ day of
________, 199_, by and among CITY HOLDING COMPANY, a West Virginia
corporation ("Employer"), and Robert A. Henson ("Employee").
WITNESSETH THAT:
WHEREAS, Employee has heretofore been employed and rendered services to
Employer as Chief Financial Officer;
WHEREAS, Horizon was merged into Employer on __________ __, 199_, (the
"Merger") pursuant to an Agreement and Plan of Reorganization dated as of August
7, 1998 (the "Reorganization Agreement") between Horizon and Employer;
WHEREAS, Employer considers the continued availability of Employee's
services to be important to the management and conduct of Employer's business
and desire to secure for itself the continued availability of Employee's
services; and
WHEREAS, Employee is willing to make his services available to Employer on
the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the parties hereto agree as follows:
1. Employment. Employee is employed as Chief Financial Officer of
Employer. Employee shall have such duties and responsibilities as are
commensurate with such positions. Employee hereby accepts and agrees to such
employment, subject to the general supervision and pursuant to the orders,
advice, and direction of Employer and its Board of Directors. Employee shall
perform such duties as are customarily performed by one holding such positions
in other same or similar businesses or enterprises as that engaged in by
Employer, and shall also additionally render such other services and duties as
may be reasonably assigned to him from time to time by Employer, consistent with
his positions.
2. Term of Employment. The term of this Agreement shall commence from and
after the date hereof, and shall terminate on the day next preceding the third
anniversary of the date hereof unless extended as provided herein. On each
<PAGE>
monthly anniversary date starting the first month after the date hereof, this
Agreement will be automatically extended for an additional month; provided,
however, that on any one month anniversary date either Employer or Employee may
serve notice to the other party to fix the term to a definite three year period
from the date of such notice and no further automatic extensions will occur.
Notwithstanding the foregoing, this Agreement will not be extended beyond the
first day of the month coincident with or next following the date on which
Employee attains age sixty-five (65). The term of this Agreement as may be
extended pursuant to this Section 2, or, as may be shortened in accordance with
Section 5 or 6 hereof, is hereinafter referred to as the "Term."
3. Compensation.
a. For all services rendered by Employee to Employer under this
Agreement, Employer shall pay to Employee, for the one-year period beginning on
the date hereof, a minimum annual salary at a rate not less than $150,000,
payable in accordance with the payroll practices of Employer applicable to all
officers.
b. Employee shall participate in such incentive plans of Employer
for which he may become eligible and designated a participant, as such plans may
be modified from time to time.
c. After the first year following the date hereof, any salary
increase payable to Employee shall be determined in accordance with Employer's
annual salary plan, and be based on Employer's performance and the performance
of Employee.
d. Except as otherwise specifically provided herein, for so long as
Employee is employed by Employer, Employee also shall be paid, on the same basis
as other officers of Employer, employee pension and welfare benefits and group
employee benefits such as sick leave, vacation, group disability and health,
life, and accident insurance and similar indirect compensation which Employer
may from time to time extend to its officers; provided that Employee shall
receive term life insurance coverage in an amount not less than $400,000.00
e. If during the Term of the Agreement the Employee becomes eligible
for retirement under Employer's retirement plans and he retires, Employee may
elect to continue receiving the health insurance coverage provided to Employee
prior to retirement at a comparable rate available to other retired employees.
f. For so long as Employee is employed by Employer, Employer shall
pay Employee's reasonable country club dues and expenses.
<PAGE>
g. For so long as Employee is employed by Employer, Employer shall
furnish Employee with an automobile in accordance with the customary practices
of Employer for executives at his level.
h. For so long as Employee is employed by Employer, Employer shall
pay Employee's reasonable civic club dues.
4. Covenants of the Employee.
a. Subject to the limitations provided in Sections 4(b) and 4(d)
(whichever may be applicable), upon termination of Employee's employment prior
to the expiration of the Term, Employee will not directly or indirectly, either
as a principal, agent, employee, employer, stockholder, co-partner or in any
other individual or representative capacity whatsoever, engage in the banking
and financial services business, which includes consumer, savings, commercial
banking and the insurance and trust businesses, or the savings and loan or
mortgage banking business, or any other business in which the Employer or its
Affiliates are engaged, anywhere in the state of West Virginia and in any county
outside of West Virginia contiguous to West Virginia, nor will the Employee
solicit, or assist any other person in so soliciting, any depositors or
customers of Employer or its Affiliates or induce any then or former employee of
Employer or its Affiliates to terminate their employment with Employer or its
Affiliates. The term "Affiliate" as used in this Agreement means a Person that
directly or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, another Person. The term
"Person" as used in this Agreement means any person, partnership, corporation,
group or other entity.
b. If Employee voluntarily terminates his employment with Employer
and its Affiliates, Employee will be subject to the provisions of Section 4(a)
for any period of time during which Employee elects to receive compensation
pursuant to Section 6(e).
c. If Employee's employment is terminated by Employer or its
Affiliates for Just Cause (as defined in Section 6(b) herein), Employee will not
be subject to the provisions of Section 4(a).
d. If Employee's employment is terminated by Employer or its
Affiliates for reasons other than Just Cause (as defined in Section 6(b) herein)
at any time, Employee will be subject to the provisions of Section 4(a) until
the earlier of: (i) the first anniversary of Employee's termination or (ii) the
date as of which Employee elects to forego any further compensation pursuant to
the last sentence of Section 6(c).
<PAGE>
e. Notwithstanding any other provision of this Agreement to the
contrary, if Employee voluntarily terminates his employment with Employer or its
Affiliates in accordance with Section 6(d), Employee will not be subject to
Section 4(a).
f. During the Term of Employee's employment hereunder and
thereafter, and except as required by any court, supervisory authority or
administrative agency or as may be otherwise required by applicable law,
Employee shall not, without the written consent of the Board of Directors of
Employer or a person authorized thereby, disclose to any person, other than an
employee of Employer or an Affiliate thereof or a person to whom disclosure is
reasonably necessary or appropriate in connection with the performance by
Employee of his duties as an employee of Employer or an Affiliate, any
confidential information obtained by him while in the employ of Employer, unless
such information has become a matter of public knowledge at the time of such
disclosure.
g. The covenants contained in this Section 4 shall be construed and
interpreted in any judicial proceeding to permit their enforcement to the
maximum extent permitted by law. Employee agrees that the restraints imposed
herein are necessary for the reasonable and proper protection of Employer and
its Affiliates and that each and every one of the restraints is reasonable in
respect to such matter, length of time and the area. Employee further
acknowledges that damages at law would not be a measurable or adequate remedy
for breach of the covenants contained in this Section 4 and, accordingly,
Employee agrees to submit to the equitable jurisdiction of any court of
competent jurisdiction in connection with any action to enjoin Employee from
violating any such covenants.
5. Disability. If, by reason of physical or mental disability during the
term hereof, Employee is unable to carry out the essential functions of his
employment hereunder for twelve (12) consecutive months, his services hereunder
may be terminated by action of the Board of Directors of Employer determining so
to do upon one month's notice to be given to Employee at any time after the
period of twelve (12) continuous months of disability and while such disability
continues. If, prior to the expiration of the one month period after the giving
of such notice, Employee shall recover from such disability and return to the
full-time active discharge of his duties, then such notice shall be of no
further force and effect and Employee's employment shall continue as if the same
had been uninterrupted. If Employee shall not so recover from his disability and
return to his duties, then his services shall terminate at the expiration date
<PAGE>
of such one month's notice with the same force and effect as if that date had
been the date of termination originally provided for hereunder. During the first
twelve (12) months of the period of Employee's disability, Employee shall
continue to earn all compensation (including bonuses and incentive compensation)
to which Employee would have been entitled as if he had not been disabled, such
compensation to be paid at the time, in the amounts, and in the manner provided
in Section 3(a), inclusive of any compensation received pursuant to any
applicable disability insurance plan of Employer. Thereafter, Employee shall
receive compensation to which he is entitled under any applicable disability
insurance plan. At that time Employee shall also be deemed to have voluntarily
terminated his employment and shall be entitled to receive Termination
Compensation as set forth in Section 6(e). In the event a dispute arises between
Employee and Employer concerning Employee's physical or mental ability to
continue or return to the performance of his duties as aforesaid, Employee shall
submit to examination by a competent physician mutually agreeable to the
parties, and his opinion as to Employee's capability to so perform will be final
and binding. Upon termination of Employee's services by reason of disability,
the Term shall end.
6. Termination.
a. If Employee shall die during the Term, this Agreement and the
employment relationship hereunder will automatically terminate on the date of
death, which date shall be the last date of the Term. Notwithstanding this
Subsection 6(a), if Employee dies while employed by Employer, Employee's estate
shall receive annually 60% of Employee's Termination Compensation until the
earlier to occur of (x) five years from the date of Employee's death, or (y) the
date on which Employee would have reached age 65. Notwithstanding this
Subsection 6(a), if Employee dies while receiving payments under Subsection
6(e), Employee's estate shall receive annually 60% of Employee's Termination
Compensation until the earlier to occur of (i) five years from the date any
payments under Subsection 6(e) commenced, or (ii) the date on which Employee
would have reached age 65.
b. Employer shall have the right to terminate Employee's employment
under this Agreement at any time for Just Cause, which termination shall be
effective immediately. Termination for "Just Cause" shall include termination
for Employee's personal dishonesty, gross incompetence, willful misconduct,
breach of a fiduciary duty involving personal profit, intentional failure to
perform stated duties, willful violation of any law, rule or regulation (other
than traffic violations or similar offenses) or a final cease-and-desist order,
conviction of a felony or of a misdemeanor involving moral turpitude, unethical
business practices in connection with Employer's business, misappropriation of
Employer's assets (determined on a reasonable basis) or those of their
Affiliates, or material breach of any other provision of this Agreement,
provided that Employee has received written notice from Employer of such
material breach and such breach remains uncured thirty days after the delivery
of such notice. In the event Employee's employment under this Agreement is
terminated for Just Cause, Employee shall have no right to receive compensation
or other benefits under this Agreement for any period after such termination.
<PAGE>
c. Employer may terminate Employee's employment other than for "Just
Cause," as described in Subparagraph (b) above, at any time upon written notice
to Employee, which termination shall be effective immediately. In the event
Employer terminates Employee pursuant to this Subparagraph (c), Employee will
receive the highest amount of the annual cash compensation (including cash
bonuses and other cash-based benefits, including for these purposes amounts
earned or payable whether or not deferred) received during any of the preceding
five calendar years ("Termination Compensation") in each year until the end of
the Term, so long as Employee complies with Section 4(a) of the Agreement until
the first anniversary of Employee's termination. Such amounts shall be payable
at the times such amounts would have been paid in accordance with Section 3(a).
In addition, Employee shall continue to receive health insurance coverage from
Employer on the same terms as were in effect prior to Employee's termination,
either under Employer's plans or comparable coverage, for all periods Employee
receives Termination Compensation. Notwithstanding anything in this Agreement to
the contrary, if Employee breaches Section 4(a) of this Agreement prior to the
first anniversary of Employee's termination pursuant to this Section 6(c),
Employee will not be entitled to receive any further compensation or benefits
pursuant to this Section 6(c).
d. In the event of a Change of Control (as defined below) of
Employer at any time after the date hereof, Employee may voluntarily terminate
employment with Employer up until 24 months after the Change of Control for
"Good Reason" and be entitled to receive in a lump sum (i) any compensation due
but not yet paid through the date of termination and (ii) in lieu of any further
salary payments from the date of termination to the end of the Term, an amount
equal to the Termination Compensation times 2.99.
"Good Reason" shall mean the occurrence of any of the following events
without Employee's express written consent:
(a) the assignment to Employee of duties inconsistent with the
position and status of the offices and positions of Employer held
immediately prior to the Change of Control;
<PAGE>
(b) a reduction by Employer in Employee's pay grade or base
salary as then in effect or the exclusion of Employee from participation
in Employer's benefit plans in which he previously participated as in
effect at the date hereof or as the same may be increased from time to
time during the term of this Agreement (or supplanted as a result of the
Merger) or Employer's failure to increase (within 12 months of Employee's
last increase in base salary) Employee's base salary in an amount which at
least equals, on a percentage basis, the average percentage increase in
base salary for all executives entitled to participate in Employer's
executive incentive plans for which Employee was eligible during the
preceding 12 months;
(c) an involuntary relocation of Employee more than 50 miles
from the location where Employee worked immediately prior to the Change of
Control or the breach by Employer of any other material provision of this
Agreement; or
(d) any purported termination of the employment of Employee by
Employer which is not effected in accordance with this Agreement.
A "Change of Control" shall be deemed to have occurred if (i) any person
or group of persons (as defined in Section 13(d) and 14(d) of the Securities
Exchange Act of 1934 together with its affiliates, excluding employee benefit
plans of Employer, is or becomes, directly or indirectly, the "beneficial owner"
(as defined in Rule 13d-3 promulgated under the Securities Exchange Act of 1934)
of securities of Employer representing 20% or more of the combined voting power
of Employer's then outstanding securities; or (ii) during the term of this
Agreement as a result of a tender offer or exchange offer for the purchase of
securities of Employer (other than such an offer by Employer for its own
securities), or as a result of a proxy contest, merger, consolidation or sale of
assets, or as a result of any combination of the foregoing, individuals who at
the beginning of any two-year period during the term of this Agreement
constitute Employer's Board of Directors, plus new directors whose election or
nomination for election by Employer's shareholders is approved by a vote of at
least two-thirds of the directors still in office who were directors at the
beginning of such two-year period, cease for any reason during such two-year
period to constitute at least two-thirds of the members of such Board of
Directors; or (iii) the shareholders of Employer approve a merger or
consolidation of Employer with any other corporation or entity regardless of
which entity is the survivor, other than a merger or consolidation which would
result in the voting securities of Employer outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or being
converted into voting securities of the surviving entity) at least 80% of the
<PAGE>
combined voting power of the voting securities of Employer or such surviving
entity outstanding immediately after such merger or consolidation; or (iv) the
shareholders of Employer approve a plan of complete liquidation or winding-up of
Employer or an agreement for the sale or disposition by Employer of all or
substantially all of Employer's assets; or (v) any event which Employer's Board
of Directors determines should constitute a Change of Control. Notwithstanding
the foregoing, the transactions contemplated by the Reorganization Agreement
shall not be considered a Change of Control.
e. Notwithstanding any other provision of this Agreement to the
contrary, in the event that Employee voluntarily terminates employment with
Employer at any time after the first anniversary of the Merger (other than
pursuant to Section 6(d)), Employee will be entitled to receive annually 60% of
Employee's Termination Compensation, so long as Employee complies with Section
4(a) of this Agreement, until the earlier of (i) five years from the date on
which Employee voluntarily terminates employment with Employer in accordance
with this Subsection 6(e), or (ii) the date on which Employee reaches age 65.
Such Termination Compensation shall be payable at the times such amounts would
have been paid in accordance with Section 3(a). In addition, Employee shall
continue to receive health insurance coverage from Employer on the same terms as
were in effect prior to Employee's termination, either under the Employer's
plans or comparable coverage, for all periods Employee receives Termination
Compensation pursuant to this Section 6(e), so long as Employee complies with
Section 4(a) of the Agreement.
f. In receiving any payments pursuant to this Section 6, Employee
shall not be obligated to seek other employment or take any other action by way
of mitigation of the amounts payable to Employee hereunder and such amounts
shall not be reduced or terminated whether or not Employee obtains other
employment.
g. Notwithstanding anything in this Agreement to the contrary, if
any of the payments provided for under this Agreement (the "Agreement
Payments"), together with any other payments that Employee has the right to
receive (such other payments together with the Agreement Payments are referred
to as the "Total Payments"), would constitute an "excess parachute payment," as
defined in Section 280G(b)(2) of the Internal Revenue Code of 1986, as amended
(the "Code") (an "Excess Parachute Payment"), the Agreement Payments shall be
reduced by the smallest amount necessary so that no portion of such Total
Payments would constitute Excess Parachute Payments. In the event Employer shall
make an Agreement Payment to Employee that would constitute an Excess Parachute
Payment, Employee shall return such payment to Employee (together with interest
at the rate set forth in Section 1274(b)(2)(B) of the Code). To the extent the
application of this Section 6(g) is triggered, the provisions of Section 4(a)
shall not apply.
<PAGE>
7. Other Employment.
Employee shall devote all of his business time, attention, knowledge and
skills solely to the business and interest of Employer and its Affiliates, and
Employer and its Affiliates shall be entitled to all of the benefits, profits
and other emoluments arising from or incident to all work, services and advice
of Employee, and Employee shall not, during the Term hereof, become interested
directly or indirectly, in any manner, as partner, officer, director,
stockholder, advisor, employee or in any other capacity in any other business
similar to Employer's business; provided, however, that nothing herein contained
shall be deemed to prevent or limit the right of Employee to invest in a
business similar to Employer's business if such investment is limited to less
than one percent of the capital stock or other securities of any corporation or
similar organization whose stock or securities are publicly owned or are
regularly traded on any public exchange.
8. Miscellaneous.
a. This Agreement shall be governed by and construed in accordance
with the laws of the State of West Virginia without regard to conflicts of law
principles thereof.
b. This Agreement constitutes the entire Agreement between Employee
and Employer, with respect to the subject matter hereof, and supersedes all
prior agreements with respect thereto. Without limiting the foregoing, Employee
agrees that this Agreement satisfies any rights he may have had under any prior
agreement or understanding with Horizon with respect to his employment by
Horizon.
c. This Agreement may be executed in one or more counterparts, all
of which, taken together, shall constitute one and the same instrument.
<PAGE>
d. Any notice or other communication required or permitted under
this Agreement shall be effective only if it is in writing and delivered in
person or by reliable overnight courier service or deposited in the mails,
postage prepaid, return receipt requested, addressed as follows:
To Employer:
City Holding Company
25 Gatewater Road
Charleston, West Virginia 25313
(304) 769-1100
Attention: Steven J. Day, President & Chief Executive Officer
To Employee:
Robert A. Henson
City Holding Company
25 Gatewater Road
Charleston, West Virginia 25313
(304) 769-1100
Notices given in person or by overnight courier service shall be deemed given
when delivered to the address required by this Section 8(d), and notices given
by mail shall be deemed given three days after deposit in the mails. Any party
hereto may designate by written notice to the other party in accordance herewith
any other address to which notices addressed to him shall be sent.
e. The provisions of this Agreement shall be deemed severable and
the invalidity or unenforceability of any provision shall not affect the
validity or enforceability of the other provisions hereof. It is understood and
agreed that no failure or delay by Employer or Employee in exercising any right,
power or privilege under this Agreement shall operate as a waiver thereof, nor
shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or privilege
hereunder.
f. In the event any dispute shall arise between Employee and
Employer as to the terms or interpretations of this Agreement, whether
instituted by formal legal proceedings or otherwise, including any action taken
by Employee to enforce the terms of this Agreement or in defending against any
action taken by Employer, Employer shall reimburse Employee for all reasonable
costs and expenses, including reasonable attorneys' fees, arising from such
dispute, proceeding or action, if Employee shall prevail in any action initiated
by Employee or shall have acted reasonably and in good faith in defending
<PAGE>
against any action initiated by Employer. Such reimbursement shall be paid
within 10 days of Employee furnishing to Employer written evidence, which may be
in the form, among other things, of a canceled check or receipt, of any costs or
expenses incurred by Employee. Any such request for reimbursement by Employee
shall be made no more frequently than at 60 day intervals.
SIGNATURE PAGE FOLLOWS
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.
CITY HOLDING COMPANY
By:___________________________
Name: Steven J. Day
Title: President & Chief Executive Officer
EMPLOYEE:
______________________________
Robert A. Henson
Exhibit 10.3
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") made as of the ______ day of
________, 199_, by and among CITY HOLDING COMPANY, a West Virginia
corporation ("Employer"), and Matthew B. Call ("Employee").
WITNESSETH THAT:
WHEREAS, Employee has heretofore been employed and rendered services to
Employer as Executive Vice President;
WHEREAS, Horizon was merged into Employer on __________ __, 199_, (the
"Merger") pursuant to an Agreement and Plan of Reorganization dated as of August
7, 1998 (the "Reorganization Agreement") between Horizon and Employer;
WHEREAS, Employer considers the continued availability of Employee's
services to be important to the management and conduct of Employer's business
and desire to secure for itself the continued availability of Employee's
services; and
WHEREAS, Employee is willing to make his services available to Employer on
the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the parties hereto agree as follows:
1. Employment. Employee is employed as Executive Vice President of
Employer. Employee shall have such duties and responsibilities as are
commensurate with such positions. Employee hereby accepts and agrees to such
employment, subject to the general supervision and pursuant to the orders,
advice, and direction of Employer and its Board of Directors. Employee shall
perform such duties as are customarily performed by one holding such positions
in other same or similar businesses or enterprises as that engaged in by
Employer, and shall also additionally render such other services and duties as
may be reasonably assigned to him from time to time by Employer, consistent with
his positions.
2. Term of Employment. The term of this Agreement shall commence from and
after the date hereof, and shall terminate on the day next preceding the third
anniversary of the date hereof unless extended as provided herein. On each
monthly anniversary date starting the first month after the date hereof, this
Agreement will be automatically extended for an additional month; provided,
however, that on any one month anniversary date either Employer or Employee may
serve notice to the other party to fix the term to a definite three year period
from the date of such notice and no further automatic extensions will occur.
Notwithstanding the foregoing, this Agreement will not be extended beyond the
first day of the month coincident with or next following the date on which
Employee attains age sixty-five (65). The term of this Agreement as may be
extended pursuant to this Section 2, or, as may be shortened in accordance with
Section 5 or 6 hereof, is hereinafter referred to as the "Term."
<PAGE>
3. Compensation.
a. For all services rendered by Employee to Employer under this
Agreement, Employer shall pay to Employee, for the one-year period beginning on
the date hereof, a minimum annual salary at a rate not less than $150,000,
payable in accordance with the payroll practices of Employer applicable to all
officers.
b. Employee shall participate in such incentive plans of Employer
for which he may become eligible and designated a participant, as such plans may
be modified from time to time.
c. After the first year following the date hereof, any salary
increase payable to Employee shall be determined in accordance with Employer's
annual salary plan, and be based on Employer's performance and the performance
of Employee.
d. Except as otherwise specifically provided herein, for so long as
Employee is employed by Employer, Employee also shall be paid, on the same basis
as other officers of Employer, employee pension and welfare benefits and group
employee benefits such as sick leave, vacation, group disability and health,
life, and accident insurance and similar indirect compensation which Employer
may from time to time extend to its officers; provided that Employee shall
receive term life insurance coverage in an amount not less than $400,000.00
e. If during the Term of the Agreement the Employee becomes eligible
for retirement under Employer's retirement plans and he retires, Employee may
elect to continue receiving the health insurance coverage provided to Employee
prior to retirement at a comparable rate available to other retired employees.
f. For so long as Employee is employed by Employer, Employer shall
pay Employee's reasonable country club dues and expenses.
<PAGE>
g. For so long as Employee is employed by Employer, Employer shall
furnish Employee with an automobile in accordance with the customary practices
of Employer for executives at his level.
h. For so long as Employee is employed by Employer, Employer shall
pay Employee's reasonable civic club dues.
4. Covenants of the Employee.
a. Subject to the limitations provided in Sections 4(b) and 4(d)
(whichever may be applicable), upon termination of Employee's employment prior
to the expiration of the Term, Employee will not directly or indirectly, either
as a principal, agent, employee, employer, stockholder, co-partner or in any
other individual or representative capacity whatsoever, engage in the banking
and financial services business, which includes consumer, savings, commercial
banking and the insurance and trust businesses, or the savings and loan or
mortgage banking business, or any other business in which the Employer or its
Affiliates are engaged, anywhere in the state of West Virginia and in any county
outside of West Virginia contiguous to West Virginia, nor will the Employee
solicit, or assist any other person in so soliciting, any depositors or
customers of Employer or its Affiliates or induce any then or former employee of
Employer or its Affiliates to terminate their employment with Employer or its
Affiliates. The term "Affiliate" as used in this Agreement means a Person that
directly or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, another Person. The term
"Person" as used in this Agreement means any person, partnership, corporation,
group or other entity.
b. If Employee voluntarily terminates his employment with Employer
and its Affiliates, Employee will be subject to the provisions of Section 4(a)
for any period of time during which Employee elects to receive compensation
pursuant to Section 6(e).
c. If Employee's employment is terminated by Employer or its
Affiliates for Just Cause (as defined in Section 6(b) herein), Employee will not
be subject to the provisions of Section 4(a).
d. If Employee's employment is terminated by Employer or its
Affiliates for reasons other than Just Cause (as defined in Section 6(b) herein)
at any time, Employee will be subject to the provisions of Section 4(a) until
the earlier of: (i) the first anniversary of Employee's termination or (ii) the
date as of which Employee elects to forego any further compensation pursuant to
the last sentence of Section 6(c).
<PAGE>
e. Notwithstanding any other provision of this Agreement to the
contrary, if Employee voluntarily terminates his employment with Employer or its
Affiliates in accordance with Section 6(d), Employee will not be subject to
Section 4(a).
f. During the Term of Employee's employment hereunder and
thereafter, and except as required by any court, supervisory authority or
administrative agency or as may be otherwise required by applicable law,
Employee shall not, without the written consent of the Board of Directors of
Employer or a person authorized thereby, disclose to any person, other than an
employee of Employer or an Affiliate thereof or a person to whom disclosure is
reasonably necessary or appropriate in connection with the performance by
Employee of his duties as an employee of Employer or an Affiliate, any
confidential information obtained by him while in the employ of Employer, unless
such information has become a matter of public knowledge at the time of such
disclosure.
g. The covenants contained in this Section 4 shall be construed and
interpreted in any judicial proceeding to permit their enforcement to the
maximum extent permitted by law. Employee agrees that the restraints imposed
herein are necessary for the reasonable and proper protection of Employer and
its Affiliates and that each and every one of the restraints is reasonable in
respect to such matter, length of time and the area. Employee further
acknowledges that damages at law would not be a measurable or adequate remedy
for breach of the covenants contained in this Section 4 and, accordingly,
Employee agrees to submit to the equitable jurisdiction of any court of
competent jurisdiction in connection with any action to enjoin Employee from
violating any such covenants.
5. Disability. If, by reason of physical or mental disability during the
term hereof, Employee is unable to carry out the essential functions of his
employment hereunder for twelve (12) consecutive months, his services hereunder
may be terminated by action of the Board of Directors of Employer determining so
to do upon one month's notice to be given to Employee at any time after the
period of twelve (12) continuous months of disability and while such disability
continues. If, prior to the expiration of the one month period after the giving
of such notice, Employee shall recover from such disability and return to the
full-time active discharge of his duties, then such notice shall be of no
further force and effect and Employee's employment shall continue as if the same
had been uninterrupted. If Employee shall not so recover from his disability and
return to his duties, then his services shall terminate at the expiration date
of such one month's notice with the same force and effect as if that date had
been the date of termination originally provided for hereunder. During the first
twelve (12) months of the period of Employee's disability, Employee shall
continue to earn all compensation (including bonuses and incentive compensation)
to which Employee would have been entitled as if he had not been disabled, such
compensation to be paid at the time, in the amounts, and in the manner provided
in Section 3(a), inclusive of any compensation received pursuant to any
applicable disability insurance plan of Employer. Thereafter, Employee shall
receive compensation to which he is entitled under any applicable disability
insurance plan. At that time Employee shall also be deemed to have voluntarily
terminated his employment and shall be entitled to receive Termination
Compensation as set forth in Section 6(e). In the event a dispute arises between
Employee and Employer concerning Employee's physical or mental ability to
continue or return to the performance of his duties as aforesaid, Employee shall
submit to examination by a competent physician mutually agreeable to the
parties, and his opinion as to Employee's capability to so perform will be final
and binding. Upon termination of Employee's services by reason of disability,
the Term shall end.
<PAGE>
6. Termination.
a. If Employee shall die during the Term, this Agreement and the
employment relationship hereunder will automatically terminate on the date of
death, which date shall be the last date of the Term. Notwithstanding this
Subsection 6(a), if Employee dies while employed by Employer, Employee's estate
shall receive annually 60% of Employee's Termination Compensation until the
earlier to occur of (x) five years from the date of Employee's death, or (y) the
date on which Employee would have reached age 65. Notwithstanding this
Subsection 6(a), if Employee dies while receiving payments under Subsection
6(e), Employee's estate shall receive annually 60% of Employee's Termination
Compensation until the earlier to occur of (i) five years from the date any
payments under Subsection 6(e) commenced, or (ii) the date on which Employee
would have reached age 65.
b. Employer shall have the right to terminate Employee's employment
under this Agreement at any time for Just Cause, which termination shall be
effective immediately. Termination for "Just Cause" shall include termination
for Employee's personal dishonesty, gross incompetence, willful misconduct,
breach of a fiduciary duty involving personal profit, intentional failure to
perform stated duties, willful violation of any law, rule or regulation (other
than traffic violations or similar offenses) or a final cease-and-desist order,
conviction of a felony or of a misdemeanor involving moral turpitude, unethical
business practices in connection with Employer's business, misappropriation of
Employer's assets (determined on a reasonable basis) or those of their
Affiliates, or material breach of any other provision of this Agreement,
provided that Employee has received written notice from Employer of such
material breach and such breach remains uncured thirty days after the delivery
of such notice. In the event Employee's employment under this Agreement is
terminated for Just Cause, Employee shall have no right to receive compensation
or other benefits under this Agreement for any period after such termination.
<PAGE>
c. Employer may terminate Employee's employment other than for "Just
Cause," as described in Subparagraph (b) above, at any time upon written notice
to Employee, which termination shall be effective immediately. In the event
Employer terminates Employee pursuant to this Subparagraph (c), Employee will
receive the highest amount of the annual cash compensation (including cash
bonuses and other cash-based benefits, including for these purposes amounts
earned or payable whether or not deferred) received during any of the preceding
five calendar years ("Termination Compensation") in each year until the end of
the Term, so long as Employee complies with Section 4(a) of the Agreement until
the first anniversary of Employee's termination. Such amounts shall be payable
at the times such amounts would have been paid in accordance with Section 3(a).
In addition, Employee shall continue to receive health insurance coverage from
Employer on the same terms as were in effect prior to Employee's termination,
either under Employer's plans or comparable coverage, for all periods Employee
receives Termination Compensation. Notwithstanding anything in this Agreement to
the contrary, if Employee breaches Section 4(a) of this Agreement prior to the
first anniversary of Employee's termination pursuant to this Section 6(c),
Employee will not be entitled to receive any further compensation or benefits
pursuant to this Section 6(c).
d. In the event of a Change of Control (as defined below) of
Employer at any time after the date hereof, Employee may voluntarily terminate
employment with Employer up until 24 months after the Change of Control for
"Good Reason" and be entitled to receive in a lump sum (i) any compensation due
but not yet paid through the date of termination and (ii) in lieu of any further
salary payments from the date of termination to the end of the Term, an amount
equal to the Termination Compensation times 2.99.
"Good Reason" shall mean the occurrence of any of the following events
without Employee's express written consent:
(a) the assignment to Employee of duties inconsistent with the
position and status of the offices and positions of Employer held
immediately prior to the Change of Control;
<PAGE>
(b) a reduction by Employer in Employee's pay grade or base
salary as then in effect or the exclusion of Employee from participation
in Employer's benefit plans in which he previously participated as in
effect at the date hereof or as the same may be increased from time to
time during the term of this Agreement (or supplanted as a result of the
Merger) or Employer's failure to increase (within 12 months of Employee's
last increase in base salary) Employee's base salary in an amount which at
least equals, on a percentage basis, the average percentage increase in
base salary for all executives entitled to participate in Employer's
executive incentive plans for which Employee was eligible during the
preceding 12 months;
(c) an involuntary relocation of Employee more than 50 miles
from the location where Employee worked immediately prior to the Change of
Control or the breach by Employer of any other material provision of this
Agreement; or
(d) any purported termination of the employment of Employee by
Employer which is not effected in accordance with this Agreement.
A "Change of Control" shall be deemed to have occurred if (i) any person
or group of persons (as defined in Section 13(d) and 14(d) of the Securities
Exchange Act of 1934 together with its affiliates, excluding employee benefit
plans of Employer, is or becomes, directly or indirectly, the "beneficial owner"
(as defined in Rule 13d-3 promulgated under the Securities Exchange Act of 1934)
of securities of Employer representing 20% or more of the combined voting power
of Employer's then outstanding securities; or (ii) during the term of this
Agreement as a result of a tender offer or exchange offer for the purchase of
securities of Employer (other than such an offer by Employer for its own
securities), or as a result of a proxy contest, merger, consolidation or sale of
assets, or as a result of any combination of the foregoing, individuals who at
the beginning of any two-year period during the term of this Agreement
constitute Employer's Board of Directors, plus new directors whose election or
nomination for election by Employer's shareholders is approved by a vote of at
least two-thirds of the directors still in office who were directors at the
beginning of such two-year period, cease for any reason during such two-year
period to constitute at least two-thirds of the members of such Board of
Directors; or (iii) the shareholders of Employer approve a merger or
consolidation of Employer with any other corporation or entity regardless of
which entity is the survivor, other than a merger or consolidation which would
result in the voting securities of Employer outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or being
converted into voting securities of the surviving entity) at least 80% of the
combined voting power of the voting securities of Employer or such surviving
entity outstanding immediately after such merger or consolidation; or (iv) the
shareholders of Employer approve a plan of complete liquidation or winding-up of
Employer or an agreement for the sale or disposition by Employer of all or
substantially all of Employer's assets; or (v) any event which Employer's Board
of Directors determines should constitute a Change of Control. Notwithstanding
the foregoing, the transactions contemplated by the Reorganization Agreement
shall not be considered a Change of Control.
<PAGE>
e. Notwithstanding any other provision of this Agreement to the
contrary, in the event that Employee voluntarily terminates employment with
Employer at any time after the first anniversary of the Merger (other than
pursuant to Section 6(d)), Employee will be entitled to receive annually 60% of
Employee's Termination Compensation, so long as Employee complies with Section
4(a) of this Agreement, until the earlier of (i) five years from the date on
which Employee voluntarily terminates employment with Employer in accordance
with this Subsection 6(e), or (ii) the date on which Employee reaches age 65.
Such Termination Compensation shall be payable at the times such amounts would
have been paid in accordance with Section 3(a). In addition, Employee shall
continue to receive health insurance coverage from Employer on the same terms as
were in effect prior to Employee's termination, either under the Employer's
plans or comparable coverage, for all periods Employee receives Termination
Compensation pursuant to this Section 6(e), so long as Employee complies with
Section 4(a) of the Agreement.
f. In receiving any payments pursuant to this Section 6, Employee
shall not be obligated to seek other employment or take any other action by way
of mitigation of the amounts payable to Employee hereunder and such amounts
shall not be reduced or terminated whether or not Employee obtains other
employment.
g. Notwithstanding anything in this Agreement to the contrary, if
any of the payments provided for under this Agreement (the "Agreement
Payments"), together with any other payments that Employee has the right to
receive (such other payments together with the Agreement Payments are referred
to as the "Total Payments"), would constitute an "excess parachute payment," as
defined in Section 280G(b)(2) of the Internal Revenue Code of 1986, as amended
(the "Code") (an "Excess Parachute Payment"), the Agreement Payments shall be
reduced by the smallest amount necessary so that no portion of such Total
Payments would constitute Excess Parachute Payments. In the event Employer shall
make an Agreement Payment to Employee that would constitute an Excess Parachute
Payment, Employee shall return such payment to Employee (together with interest
at the rate set forth in Section 1274(b)(2)(B) of the Code). To the extent the
application of this Section 6(g) is triggered, the provisions of Section 4(a)
shall not apply.
<PAGE>
7. Other Employment.
Employee shall devote all of his business time, attention, knowledge and
skills solely to the business and interest of Employer and its Affiliates, and
Employer and its Affiliates shall be entitled to all of the benefits, profits
and other emoluments arising from or incident to all work, services and advice
of Employee, and Employee shall not, during the Term hereof, become interested
directly or indirectly, in any manner, as partner, officer, director,
stockholder, advisor, employee or in any other capacity in any other business
similar to Employer's business; provided, however, that nothing herein contained
shall be deemed to prevent or limit the right of Employee to invest in a
business similar to Employer's business if such investment is limited to less
than one percent of the capital stock or other securities of any corporation or
similar organization whose stock or securities are publicly owned or are
regularly traded on any public exchange.
8. Miscellaneous.
a. This Agreement shall be governed by and construed in accordance
with the laws of the State of West Virginia without regard to conflicts of law
principles thereof.
b. This Agreement constitutes the entire Agreement between Employee
and Employer, with respect to the subject matter hereof, and supersedes all
prior agreements with respect thereto. Without limiting the foregoing, Employee
agrees that this Agreement satisfies any rights he may have had under any prior
agreement or understanding with Horizon with respect to his employment by
Horizon.
c. This Agreement may be executed in one or more counterparts, all
of which, taken together, shall constitute one and the same instrument.
<PAGE>
d. Any notice or other communication required or permitted under
this Agreement shall be effective only if it is in writing and delivered in
person or by reliable overnight courier service or deposited in the mails,
postage prepaid, return receipt requested, addressed as follows:
To Employer:
City Holding Company
25 Gatewater Road
Charleston, West Virginia 25313
(304) 769-1100
Attention: Robert A. Henson, Chief Financial Officer
To Employee:
Matthew B. Call
City Holding Company
25 Gatewater Road
Charleston, West Virginia 25313
(304) 769-1100
Notices given in person or by overnight courier service shall be deemed given
when delivered to the address required by this Section 8(d), and notices given
by mail shall be deemed given three days after deposit in the mails. Any party
hereto may designate by written notice to the other party in accordance herewith
any other address to which notices addressed to him shall be sent.
e. The provisions of this Agreement shall be deemed severable and
the invalidity or unenforceability of any provision shall not affect the
validity or enforceability of the other provisions hereof. It is understood and
agreed that no failure or delay by Employer or Employee in exercising any right,
power or privilege under this Agreement shall operate as a waiver thereof, nor
shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or privilege
hereunder.
f. In the event any dispute shall arise between Employee and
Employer as to the terms or interpretations of this Agreement, whether
instituted by formal legal proceedings or otherwise, including any action taken
by Employee to enforce the terms of this Agreement or in defending against any
action taken by Employer, Employer shall reimburse Employee for all reasonable
costs and expenses, including reasonable attorneys' fees, arising from such
dispute, proceeding or action, if Employee shall prevail in any action initiated
by Employee or shall have acted reasonably and in good faith in defending
against any action initiated by Employer. Such reimbursement shall be paid
within 10 days of Employee furnishing to Employer written evidence, which may be
in the form, among other things, of a canceled check or receipt, of any costs or
expenses incurred by Employee. Any such request for reimbursement by Employee
shall be made no more frequently than at 60 day intervals.
SIGNATURE PAGE FOLLOWS
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.
CITY HOLDING COMPANY
By:___________________________
Name: Robert A. Henson
Title: Chief Financial Officer
EMPLOYEE:
______________________________
Matthew B. Call
Exhibit 10.4
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") made as of the ______ day of
________, 199_, by and among CITY HOLDING COMPANY, a West Virginia corporation
("Employer"), and Philip L. McLaughlin ("Employee").
WITNESSETH THAT:
WHEREAS, Employee has heretofore been employed and rendered services to
Horizon Bancorp, Inc. ("Horizon"), as President and Chief Operating Officer;
WHEREAS, Horizon was merged into Employer on __________ __, 199_, (the
"Merger") pursuant to an Agreement and Plan of Reorganization dated as of August
7, 1998 (the "Reorganization Agreement") between Horizon and Employer;
WHEREAS, Employer considers the continued availability of Employee's
services to be important to the management and conduct of Employer's business
and desire to secure for itself the continued availability of Employee's
services; and
WHEREAS, Employee is willing to make his services available to Employer on
the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the parties hereto agree as follows:
1. Employment. Employee is employed as Chairman of the Board of Directors
of Employer. Employee shall have such duties and responsibilities as are
commensurate with such positions. Employee hereby accepts and agrees to such
employment, subject to the general supervision and pursuant to the orders,
advice, and direction of Employer and its Board of Directors. Employee shall
perform such duties as are customarily performed by one holding such positions
in other same or similar businesses or enterprises as that engaged in by
Employer, and shall also additionally render such other services and duties as
may be reasonably assigned to him from time to time by Employer, consistent with
his positions.
2. Term of Employment. The term of this Agreement shall commence from and
after the date hereof, and shall terminate on the day next preceding the fifth
anniversary of the date hereof unless extended as provided herein. On each
monthly anniversary date starting the first month after the date hereof, this
Agreement will be automatically extended for an additional month; provided,
however, that on any one month anniversary date either Employer or Employee may
serve notice to the other party to fix the term to a definite five year period
from the date of such notice and no further automatic extensions will occur.
Notwithstanding the foregoing, this Agreement will not be extended beyond the
first day of the month coincident with or next following the date on which
Employee attains age sixty-five (65). The term of this Agreement as may be
extended pursuant to this Section 2, or, as may be shortened in accordance with
Section 5 or 6 hereof, is hereinafter referred to as the "Term."
<PAGE>
3. Compensation.
a. For all services rendered by Employee to Employer under this
Agreement, Employer shall pay to Employee, for the one-year period beginning on
the date hereof, a minimum annual salary at a rate not less than $180,000,
payable in accordance with the payroll practices of Employer applicable to all
officers.
b. Employee shall participate in such incentive plans of Employer
for which he may become eligible and designated a participant, as such plans may
be modified from time to time.
c. After the first year following the date hereof, any salary
increase payable to Employee shall be determined in accordance with Employer's
annual salary plan, and be based on Employer's performance and the performance
of Employee.
d. Except as otherwise specifically provided herein, for so long as
Employee is employed by Employer, Employee also shall be paid, on the same basis
as other officers of Employer, employee pension and welfare benefits and group
employee benefits such as sick leave, vacation, group disability and health,
life, and accident insurance and similar indirect compensation which Employer
may from time to time extend to its officers; provided that Employee shall
receive term life insurance coverage in an amount not less than $400,000.00
e. If during the Term of the Agreement the Employee becomes eligible
for retirement under Employer's retirement plans and he retires, Employee may
elect to continue receiving the health insurance coverage provided to Employee
prior to retirement at a comparable rate available to other retired employees.
f. For so long as Employee is employed by Employer, Employer shall
pay Employee's reasonable country club dues and expenses.
<PAGE>
g. For so long as Employee is employed by Employer, Employer shall
furnish Employee with an automobile in accordance with the customary practices
of Employer for executives at his level.
h. For so long as Employee is employed by Employer, Employer shall
pay Employee's reasonable civic club dues.
4. Covenants of the Employee.
a. Subject to the limitations provided in Sections 4(b) and 4(d)
(whichever may be applicable), upon termination of Employee's employment prior
to the expiration of the Term, Employee will not directly or indirectly, either
as a principal, agent, employee, employer, stockholder, co-partner or in any
other individual or representative capacity whatsoever, engage in the banking
and financial services business, which includes consumer, savings, commercial
banking and the insurance and trust businesses, or the savings and loan or
mortgage banking business, or any other business in which the Employer or its
Affiliates are engaged, anywhere in the state of West Virginia and in any county
outside of West Virginia contiguous to West Virginia, nor will the Employee
solicit, or assist any other person in so soliciting, any depositors or
customers of Employer or its Affiliates or induce any then or former employee of
Employer or its Affiliates to terminate their employment with Employer or its
Affiliates. The term "Affiliate" as used in this Agreement means a Person that
directly or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, another Person. The term
"Person" as used in this Agreement means any person, partnership, corporation,
group or other entity.
b. If Employee voluntarily terminates his employment with Employer
and its Affiliates, Employee will be subject to the provisions of Section 4(a)
for any period of time during which Employee elects to receive compensation
pursuant to Section 6(e).
c. If Employee's employment is terminated by Employer or its
Affiliates for Just Cause (as defined in Section 6(b) herein), Employee will not
be subject to the provisions of Section 4(a).
d. If Employee's employment is terminated by Employer or its
Affiliates for reasons other than Just Cause (as defined in Section 6(b) herein)
at any time, Employee will be subject to the provisions of Section 4(a) until
the earlier of: (i) the first anniversary of Employee's termination or (ii) the
date as of which Employee elects to forego any further compensation pursuant to
the last sentence of Section 6(c).
<PAGE>
e. Notwithstanding any other provision of this Agreement to the
contrary, if Employee voluntarily terminates his employment with Employer or its
Affiliates in accordance with Section 6(d), Employee will not be subject to
Section 4(a).
f. During the Term of Employee's employment hereunder and
thereafter, and except as required by any court, supervisory authority or
administrative agency or as may be otherwise required by applicable law,
Employee shall not, without the written consent of the Board of Directors of
Employer or a person authorized thereby, disclose to any person, other than an
employee of Employer or an Affiliate thereof or a person to whom disclosure is
reasonably necessary or appropriate in connection with the performance by
Employee of his duties as an employee of Employer or an Affiliate, any
confidential information obtained by him while in the employ of Employer, unless
such information has become a matter of public knowledge at the time of such
disclosure.
g. The covenants contained in this Section 4 shall be construed and
interpreted in any judicial proceeding to permit their enforcement to the
maximum extent permitted by law. Employee agrees that the restraints imposed
herein are necessary for the reasonable and proper protection of Employer and
its Affiliates and that each and every one of the restraints is reasonable in
respect to such matter, length of time and the area. Employee further
acknowledges that damages at law would not be a measurable or adequate remedy
for breach of the covenants contained in this Section 4 and, accordingly,
Employee agrees to submit to the equitable jurisdiction of any court of
competent jurisdiction in connection with any action to enjoin Employee from
violating any such covenants.
5. Disability. If, by reason of physical or mental disability during the
term hereof, Employee is unable to carry out the essential functions of his
employment hereunder for twelve (12) consecutive months, his services hereunder
may be terminated by action of the Board of Directors of Employer determining so
to do upon one month's notice to be given to Employee at any time after the
period of twelve (12) continuous months of disability and while such disability
continues. If, prior to the expiration of the one month period after the giving
of such notice, Employee shall recover from such disability and return to the
full-time active discharge of his duties, then such notice shall be of no
further force and effect and Employee's employment shall continue as if the same
had been uninterrupted. If Employee shall not so recover from his disability and
return to his duties, then his services shall terminate at the expiration date
of such one month's notice with the same force and effect as if that date had
been the date of termination originally provided for hereunder. During the first
twelve (12) months of the period of Employee's disability, Employee shall
continue to earn all compensation (including bonuses and incentive compensation)
to which Employee would have been entitled as if he had not been disabled, such
compensation to be paid at the time, in the amounts, and in the manner provided
in Section 3(a), inclusive of any compensation received pursuant to any
applicable disability insurance plan of Employer. Thereafter, Employee shall
receive compensation to which he is entitled under any applicable disability
insurance plan. At that time Employee shall also be deemed to have voluntarily
terminated his employment and shall be entitled to receive Termination
Compensation as set forth in Section 6(e). In the event a dispute arises between
Employee and Employer concerning Employee's physical or mental ability to
continue or return to the performance of his duties as aforesaid, Employee shall
submit to examination by a competent physician mutually agreeable to the
parties, and his opinion as to Employee's capability to so perform will be final
and binding. Upon termination of Employee's services by reason of disability,
the Term shall end.
<PAGE>
6. Termination.
a. If Employee shall die during the Term, this Agreement and the
employment relationship hereunder will automatically terminate on the date of
death, which date shall be the last date of the Term. Notwithstanding this
Subsection 6(a), if Employee dies while employed by Employer, Employee's estate
shall receive annually 60% of Employee's Termination Compensation until the
earlier to occur of (x) five years from the date of Employee's death, or (y) the
date on which Employee would have reached age 65. Notwithstanding this
Subsection 6(a), if Employee dies while receiving payments under Subsection
6(e), Employee's estate shall receive annually 60% of Employee's Termination
Compensation until the earlier to occur of (i) five years from the date any
payments under Subsection 6(e) commenced, or (ii) the date on which Employee
would have reached age 65.
b. Employer shall have the right to terminate Employee's employment
under this Agreement at any time for Just Cause, which termination shall be
effective immediately. Termination for "Just Cause" shall include termination
for Employee's personal dishonesty, gross incompetence, willful misconduct,
breach of a fiduciary duty involving personal profit, intentional failure to
perform stated duties, willful violation of any law, rule or regulation (other
than traffic violations or similar offenses) or a final cease-and-desist order,
conviction of a felony or of a misdemeanor involving moral turpitude, unethical
business practices in connection with Employer's business, misappropriation of
Employer's assets (determined on a reasonable basis) or those of their
Affiliates, or material breach of any other provision of this Agreement,
provided that Employee has received written notice from Employer of such
material breach and such breach remains uncured thirty days after the delivery
of such notice. In the event Employee's employment under this Agreement is
terminated for Just Cause, Employee shall have no right to receive compensation
or other benefits under this Agreement for any period after such termination.
<PAGE>
c. Employer may terminate Employee's employment other than for "Just
Cause," as described in Subparagraph (b) above, at any time upon written notice
to Employee, which termination shall be effective immediately. In the event
Employer terminates Employee pursuant to this Subparagraph (c), Employee will
receive the highest amount of the annual cash compensation (including cash
bonuses and other cash-based benefits, including for these purposes amounts
earned or payable whether or not deferred) received during any of the preceding
five calendar years ("Termination Compensation") in each year until the end of
the Term, so long as Employee complies with Section 4(a) of the Agreement until
the first anniversary of Employee's termination. Such amounts shall be payable
at the times such amounts would have been paid in accordance with Section 3(a).
In addition, Employee shall continue to receive health insurance coverage from
Employer on the same terms as were in effect prior to Employee's termination,
either under Employer's plans or comparable coverage, for all periods Employee
receives Termination Compensation. Notwithstanding anything in this Agreement to
the contrary, if Employee breaches Section 4(a) of this Agreement prior to the
first anniversary of Employee's termination pursuant to this Section 6(c),
Employee will not be entitled to receive any further compensation or benefits
pursuant to this Section 6(c).
d. In the event of a Change of Control (as defined below) of
Employer at any time after the date hereof, Employee may voluntarily terminate
employment with Employer up until 24 months after the Change of Control for
"Good Reason" and be entitled to receive in a lump sum (i) any compensation due
but not yet paid through the date of termination and (ii) in lieu of any further
salary payments from the date of termination to the end of the Term, an amount
equal to the Termination Compensation times 2.99.
"Good Reason" shall mean the occurrence of any of the following events
without Employee's express written consent:
(a) the assignment to Employee of duties inconsistent with the
position and status of the offices and positions of Employer held
immediately prior to the Change of Control;
<PAGE>
(b) a reduction by Employer in Employee's pay grade or base
salary as then in effect or the exclusion of Employee from participation
in Employer's benefit plans in which he previously participated as in
effect at the date hereof or as the same may be increased from time to
time during the term of this Agreement (or supplanted as a result of the
Merger) or Employer's failure to increase (within 12 months of Employee's
last increase in base salary) Employee's base salary in an amount which at
least equals, on a percentage basis, the average percentage increase in
base salary for all executives entitled to participate in Employer's
executive incentive plans for which Employee was eligible during the
preceding 12 months;
(c) an involuntary relocation of Employee more than 50 miles
from the location where Employee worked immediately prior to the Change of
Control or the breach by Employer of any other material provision of this
Agreement; or
(d) any purported termination of the employment of Employee by
Employer which is not effected in accordance with this Agreement.
A "Change of Control" shall be deemed to have occurred if (i) any person
or group of persons (as defined in Section 13(d) and 14(d) of the Securities
Exchange Act of 1934 together with its affiliates, excluding employee benefit
plans of Employer, is or becomes, directly or indirectly, the "beneficial owner"
(as defined in Rule 13d-3 promulgated under the Securities Exchange Act of 1934)
of securities of Employer representing 20% or more of the combined voting power
of Employer's then outstanding securities; or (ii) during the term of this
Agreement as a result of a tender offer or exchange offer for the purchase of
securities of Employer (other than such an offer by Employer for its own
securities), or as a result of a proxy contest, merger, consolidation or sale of
assets, or as a result of any combination of the foregoing, individuals who at
the beginning of any two-year period during the term of this Agreement
constitute Employer's Board of Directors, plus new directors whose election or
nomination for election by Employer's shareholders is approved by a vote of at
least two-thirds of the directors still in office who were directors at the
beginning of such two-year period, cease for any reason during such two-year
period to constitute at least two-thirds of the members of such Board of
Directors; or (iii) the shareholders of Employer approve a merger or
consolidation of Employer with any other corporation or entity regardless of
which entity is the survivor, other than a merger or consolidation which would
result in the voting securities of Employer outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or being
converted into voting securities of the surviving entity) at least 80% of the
combined voting power of the voting securities of Employer or such surviving
entity outstanding immediately after such merger or consolidation; or (iv) the
shareholders of Employer approve a plan of complete liquidation or winding-up of
Employer or an agreement for the sale or disposition by Employer of all or
substantially all of Employer's assets; or (v) any event which Employer's Board
of Directors determines should constitute a Change of Control. Notwithstanding
the foregoing, the transactions contemplated by the Reorganization Agreement
shall not be considered a Change of Control.
<PAGE>
e. Notwithstanding any other provision of this Agreement to the
contrary, in the event that Employee voluntarily terminates employment with
Employer at any time after the first anniversary of the Merger (other than
pursuant to Section 6(d)), Employee will be entitled to receive annually 60% of
Employee's Termination Compensation, so long as Employee complies with Section
4(a) of this Agreement, until the earlier of (i) five years from the date on
which Employee voluntarily terminates employment with Employer in accordance
with this Subsection 6(e), or (ii) the date on which Employee reaches age 65.
Such Termination Compensation shall be payable at the times such amounts would
have been paid in accordance with Section 3(a). In addition, Employee shall
continue to receive health insurance coverage from Employer on the same terms as
were in effect prior to Employee's termination, either under the Employer's
plans or comparable coverage, for all periods Employee receives Termination
Compensation pursuant to this Section 6(e), so long as Employee complies with
Section 4(a) of the Agreement.
f. In receiving any payments pursuant to this Section 6, Employee
shall not be obligated to seek other employment or take any other action by way
of mitigation of the amounts payable to Employee hereunder and such amounts
shall not be reduced or terminated whether or not Employee obtains other
employment.
g. Notwithstanding anything in this Agreement to the contrary, if
any of the payments provided for under this Agreement (the "Agreement
Payments"), together with any other payments that Employee has the right to
receive (such other payments together with the Agreement Payments are referred
to as the "Total Payments"), would constitute an "excess parachute payment," as
defined in Section 280G(b)(2) of the Internal Revenue Code of 1986, as amended
(the "Code") (an "Excess Parachute Payment"), the Agreement Payments shall be
reduced by the smallest amount necessary so that no portion of such Total
Payments would constitute Excess Parachute Payments. In the event Employer shall
make an Agreement Payment to Employee that would constitute an Excess Parachute
Payment, Employee shall return such payment to Employee (together with interest
at the rate set forth in Section 1274(b)(2)(B) of the Code). To the extent the
application of this Section 6(g) is triggered, the provisions of Section 4(a)
shall not apply.
<PAGE>
7. Other Employment.
Employee shall devote all of his business time, attention, knowledge and
skills solely to the business and interest of Employer and its Affiliates, and
Employer and its Affiliates shall be entitled to all of the benefits, profits
and other emoluments arising from or incident to all work, services and advice
of Employee, and Employee shall not, during the Term hereof, become interested
directly or indirectly, in any manner, as partner, officer, director,
stockholder, advisor, employee or in any other capacity in any other business
similar to Employer's business; provided, however, that nothing herein contained
shall be deemed to prevent or limit the right of Employee to invest in a
business similar to Employer's business if such investment is limited to less
than one percent of the capital stock or other securities of any corporation or
similar organization whose stock or securities are publicly owned or are
regularly traded on any public exchange.
8. Miscellaneous.
a. This Agreement shall be governed by and construed in accordance
with the laws of the State of West Virginia without regard to conflicts of law
principles thereof.
b. This Agreement constitutes the entire Agreement between Employee
and Employer, with respect to the subject matter hereof, and supersedes all
prior agreements with respect thereto. Without limiting the foregoing, Employee
agrees that this Agreement satisfies any rights he may have had under any prior
agreement or understanding with Horizon with respect to his employment by
Horizon.
c. This Agreement may be executed in one or more counterparts, all
of which, taken together, shall constitute one and the same instrument.
<PAGE>
d. Any notice or other communication required or permitted under
this Agreement shall be effective only if it is in writing and delivered in
person or by reliable overnight courier service or deposited in the mails,
postage prepaid, return receipt requested, addressed as follows:
To Employer:
City Holding Company
25 Gatewater Road
Charleston, West Virginia 25313
(304) 769-1100
Attention: Robert A. Henson, Chief Financial Officer
To Employee:
Philip L. McLaughlin
600 South Court Street
Lewisburg, West Virginia 24901
Notices given in person or by overnight courier service shall be deemed given
when delivered to the address required by this Section 8(d), and notices given
by mail shall be deemed given three days after deposit in the mails. Any party
hereto may designate by written notice to the other party in accordance herewith
any other address to which notices addressed to him shall be sent.
e. The provisions of this Agreement shall be deemed severable and
the invalidity or unenforceability of any provision shall not affect the
validity or enforceability of the other provisions hereof. It is understood and
agreed that no failure or delay by Employer or Employee in exercising any right,
power or privilege under this Agreement shall operate as a waiver thereof, nor
shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or privilege
hereunder.
f. In the event any dispute shall arise between Employee and
Employer as to the terms or interpretations of this Agreement, whether
instituted by formal legal proceedings or otherwise, including any action taken
by Employee to enforce the terms of this Agreement or in defending against any
action taken by Employer, Employer shall reimburse Employee for all reasonable
costs and expenses, including reasonable attorneys' fees, arising from such
dispute, proceeding or action, if Employee shall prevail in any action initiated
by Employee or shall have acted reasonably and in good faith in defending
against any action initiated by Employer. Such reimbursement shall be paid
within 10 days of Employee furnishing to Employer written evidence, which may be
in the form, among other things, of a canceled check or receipt, of any costs or
expenses incurred by Employee. Any such request for reimbursement by Employee
shall be made no more frequently than at 60 day intervals.
SIGNATURE PAGE FOLLOWS
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.
CITY HOLDING COMPANY
By:___________________________
Name: Robert A. Henson
Title: Chief Financial Officer
EMPLOYEE:
------------------------------
Philip L. McLaughlin
Exhibit 10.5
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") made as of the ______ day of
________, 199_, by and among CITY HOLDING COMPANY, a West Virginia corporation
("Employer"), and Bernard C. McGinnis, III ("Employee").
WITNESSETH THAT:
WHEREAS, Employee has heretofore been employed and rendered services to
Horizon Bancorp, Inc. ("Horizon"), as Executive Vice President;
WHEREAS, Horizon was merged into Employer on __________ __, 199_, (the
"Merger") pursuant to an Agreement and Plan of Reorganization dated as of August
7, 1998 (the "Reorganization Agreement") between Horizon and Employer;
WHEREAS, Employer considers the continued availability of Employee's
services to be important to the management and conduct of Employer's business
and desire to secure for itself the continued availability of Employee's
services; and
WHEREAS, Employee is willing to make his services available to Employer on
the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the parties hereto agree as follows:
1. Employment. Employee is employed as Vice Chairman of the Board of
Directors of Employer. Employee shall have such duties and responsibilities as
are commensurate with such positions. Employee hereby accepts and agrees to such
employment, subject to the general supervision and pursuant to the orders,
advice, and direction of Employer and its Board of Directors. Employee shall
perform such duties as are customarily performed by one holding such positions
in other same or similar businesses or enterprises as that engaged in by
Employer, and shall also additionally render such other services and duties as
may be reasonably assigned to him from time to time by Employer, consistent with
his positions.
2. Term of Employment. The term of this Agreement shall commence from and
after the date hereof, and shall terminate on the day next preceding the fifth
anniversary of the date hereof unless extended as provided herein. On each
<PAGE>
monthly anniversary date starting the first month after the date hereof, this
Agreement will be automatically extended for an additional month; provided,
however, that on any one month anniversary date either Employer or Employee may
serve notice to the other party to fix the term to a definite five year period
from the date of such notice and no further automatic extensions will occur.
Notwithstanding the foregoing, this Agreement will not be extended beyond the
first day of the month coincident with or next following the date on which
Employee attains age sixty-five (65). The term of this Agreement as may be
extended pursuant to this Section 2, or, as may be shortened in accordance with
Section 5 or 6 hereof, is hereinafter referred to as the "Term."
3. Compensation.
a. For all services rendered by Employee to Employer under this
Agreement, Employer shall pay to Employee, for the one-year period beginning on
the date hereof, a minimum annual salary at a rate not less than $170,000,
payable in accordance with the payroll practices of Employer applicable to all
officers.
b. Employee shall participate in such incentive plans of Employer
for which he may become eligible and designated a participant, as such plans may
be modified from time to time.
c. After the first year following the date hereof, any salary
increase payable to Employee shall be determined in accordance with Employer's
annual salary plan, and be based on Employer's performance and the performance
of Employee.
d. Except as otherwise specifically provided herein, for so long as
Employee is employed by Employer, Employee also shall be paid, on the same basis
as other officers of Employer, employee pension and welfare benefits and group
employee benefits such as sick leave, vacation, group disability and health,
life, and accident insurance and similar indirect compensation which Employer
may from time to time extend to its officers; provided that Employee shall
receive term life insurance coverage in an amount not less than $400,000.00
e. If during the Term of the Agreement the Employee becomes eligible
for retirement under Employer's retirement plans and he retires, Employee may
elect to continue receiving the health insurance coverage provided to Employee
prior to retirement at a comparable rate available to other retired employees.
<PAGE>
f. For so long as Employee is employed by Employer, Employer shall
pay Employee's reasonable country club dues and expenses.
g. For so long as Employee is employed by Employer, Employer shall
furnish Employee with an automobile in accordance with the customary practices
of Employer for executives at his level.
h. For so long as Employee is employed by Employer, Employer shall
pay Employee's reasonable civic club dues.
4. Covenants of the Employee.
a. Subject to the limitations provided in Sections 4(b) and 4(d)
(whichever may be applicable), upon termination of Employee's employment prior
to the expiration of the Term, Employee will not directly or indirectly, either
as a principal, agent, employee, employer, stockholder, co-partner or in any
other individual or representative capacity whatsoever, engage in the banking
and financial services business, which includes consumer, savings, commercial
banking and the insurance and trust businesses, or the savings and loan or
mortgage banking business, or any other business in which the Employer or its
Affiliates are engaged, anywhere in the state of West Virginia and in any county
outside of West Virginia contiguous to West Virginia, nor will the Employee
solicit, or assist any other person in so soliciting, any depositors or
customers of Employer or its Affiliates or induce any then or former employee of
Employer or its Affiliates to terminate their employment with Employer or its
Affiliates. The term "Affiliate" as used in this Agreement means a Person that
directly or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, another Person. The term
"Person" as used in this Agreement means any person, partnership, corporation,
group or other entity.
b. If Employee voluntarily terminates his employment with Employer
and its Affiliates, Employee will be subject to the provisions of Section 4(a)
for any period of time during which Employee elects to receive compensation
pursuant to Section 6(e).
c. If Employee's employment is terminated by Employer or its
Affiliates for Just Cause (as defined in Section 6(b) herein), Employee will not
be subject to the provisions of Section 4(a).
d. If Employee's employment is terminated by Employer or its
Affiliates for reasons other than Just Cause (as defined in Section 6(b) herein)
at any time, Employee will be subject to the provisions of Section 4(a) until
the earlier of: (i) the first anniversary of Employee's termination or (ii) the
date as of which Employee elects to forego any further compensation pursuant to
the last sentence of Section 6(c).
<PAGE>
e. Notwithstanding any other provision of this Agreement to the
contrary, if Employee voluntarily terminates his employment with Employer or its
Affiliates in accordance with Section 6(d), Employee will not be subject to
Section 4(a).
f. During the Term of Employee's employment hereunder and
thereafter, and except as required by any court, supervisory authority or
administrative agency or as may be otherwise required by applicable law,
Employee shall not, without the written consent of the Board of Directors of
Employer or a person authorized thereby, disclose to any person, other than an
employee of Employer or an Affiliate thereof or a person to whom disclosure is
reasonably necessary or appropriate in connection with the performance by
Employee of his duties as an employee of Employer or an Affiliate, any
confidential information obtained by him while in the employ of Employer, unless
such information has become a matter of public knowledge at the time of such
disclosure.
g. The covenants contained in this Section 4 shall be construed and
interpreted in any judicial proceeding to permit their enforcement to the
maximum extent permitted by law. Employee agrees that the restraints imposed
herein are necessary for the reasonable and proper protection of Employer and
its Affiliates and that each and every one of the restraints is reasonable in
respect to such matter, length of time and the area. Employee further
acknowledges that damages at law would not be a measurable or adequate remedy
for breach of the covenants contained in this Section 4 and, accordingly,
Employee agrees to submit to the equitable jurisdiction of any court of
competent jurisdiction in connection with any action to enjoin Employee from
violating any such covenants.
5. Disability. If, by reason of physical or mental disability during the
term hereof, Employee is unable to carry out the essential functions of his
employment hereunder for twelve (12) consecutive months, his services hereunder
may be terminated by action of the Board of Directors of Employer determining so
to do upon one month's notice to be given to Employee at any time after the
period of twelve (12) continuous months of disability and while such disability
continues. If, prior to the expiration of the one month period after the giving
of such notice, Employee shall recover from such disability and return to the
full-time active discharge of his duties, then such notice shall be of no
further force and effect and Employee's employment shall continue as if the same
had been uninterrupted. If Employee shall not so recover from his disability and
<PAGE>
return to his duties, then his services shall terminate at the expiration date
of such one month's notice with the same force and effect as if that date had
been the date of termination originally provided for hereunder. During the first
twelve (12) months of the period of Employee's disability, Employee shall
continue to earn all compensation (including bonuses and incentive compensation)
to which Employee would have been entitled as if he had not been disabled, such
compensation to be paid at the time, in the amounts, and in the manner provided
in Section 3(a), inclusive of any compensation received pursuant to any
applicable disability insurance plan of Employer. Thereafter, Employee shall
receive compensation to which he is entitled under any applicable disability
insurance plan. At that time Employee shall also be deemed to have voluntarily
terminated his employment and shall be entitled to receive Termination
Compensation as set forth in Section 6(e). In the event a dispute arises between
Employee and Employer concerning Employee's physical or mental ability to
continue or return to the performance of his duties as aforesaid, Employee shall
submit to examination by a competent physician mutually agreeable to the
parties, and his opinion as to Employee's capability to so perform will be final
and binding. Upon termination of Employee's services by reason of disability,
the Term shall end.
6. Termination.
a. If Employee shall die during the Term, this Agreement and the
employment relationship hereunder will automatically terminate on the date of
death, which date shall be the last date of the Term. Notwithstanding this
Subsection 6(a), if Employee dies while employed by Employer, Employee's estate
shall receive annually 60% of Employee's Termination Compensation until the
earlier to occur of (x) five years from the date of Employee's death, or (y) the
date on which Employee would have reached age 65. Notwithstanding this
Subsection 6(a), if Employee dies while receiving payments under Subsection
6(e), Employee's estate shall receive annually 60% of Employee's Termination
Compensation until the earlier to occur of (i) five years from the date any
payments under Subsection 6(e) commenced, or (ii) the date on which Employee
would have reached age 65.
b. Employer shall have the right to terminate Employee's employment
under this Agreement at any time for Just Cause, which termination shall be
effective immediately. Termination for "Just Cause" shall include termination
for Employee's personal dishonesty, gross incompetence, willful misconduct,
breach of a fiduciary duty involving personal profit, intentional failure to
perform stated duties, willful violation of any law, rule or regulation (other
than traffic violations or similar offenses) or a final cease-and-desist order,
conviction of a felony or of a misdemeanor involving moral turpitude, unethical
business practices in connection with Employer's business, misappropriation of
Employer's assets (determined on a reasonable basis) or those of their
Affiliates, or material breach of any other provision of this Agreement,
provided that Employee has received written notice from Employer of such
material breach and such breach remains uncured thirty days after the delivery
of such notice. In the event Employee's employment under this Agreement is
terminated for Just Cause, Employee shall have no right to receive compensation
or other benefits under this Agreement for any period after such termination.
<PAGE>
c. Employer may terminate Employee's employment other than for "Just
Cause," as described in Subparagraph (b) above, at any time upon written notice
to Employee, which termination shall be effective immediately. In the event
Employer terminates Employee pursuant to this Subparagraph (c), Employee will
receive the highest amount of the annual cash compensation (including cash
bonuses and other cash-based benefits, including for these purposes amounts
earned or payable whether or not deferred) received during any of the preceding
five calendar years ("Termination Compensation") in each year until the end of
the Term, so long as Employee complies with Section 4(a) of the Agreement until
the first anniversary of Employee's termination. Such amounts shall be payable
at the times such amounts would have been paid in accordance with Section 3(a).
In addition, Employee shall continue to receive health insurance coverage from
Employer on the same terms as were in effect prior to Employee's termination,
either under Employer's plans or comparable coverage, for all periods Employee
receives Termination Compensation. Notwithstanding anything in this Agreement to
the contrary, if Employee breaches Section 4(a) of this Agreement prior to the
first anniversary of Employee's termination pursuant to this Section 6(c),
Employee will not be entitled to receive any further compensation or benefits
pursuant to this Section 6(c).
d. In the event of a Change of Control (as defined below) of
Employer at any time after the date hereof, Employee may voluntarily terminate
employment with Employer up until 24 months after the Change of Control for
"Good Reason" and be entitled to receive in a lump sum (i) any compensation due
but not yet paid through the date of termination and (ii) in lieu of any further
salary payments from the date of termination to the end of the Term, an amount
equal to the Termination Compensation times 2.99.
"Good Reason" shall mean the occurrence of any of the following events
without Employee's express written consent:
(a) the assignment to Employee of duties inconsistent with the
position and status of the offices and positions of Employer held
immediately prior to the Change of Control;
<PAGE>
(b) a reduction by Employer in Employee's pay grade or base
salary as then in effect or the exclusion of Employee from participation
in Employer's benefit plans in which he previously participated as in
effect at the date hereof or as the same may be increased from time to
time during the term of this Agreement (or supplanted as a result of the
Merger) or Employer's failure to increase (within 12 months of Employee's
last increase in base salary) Employee's base salary in an amount which at
least equals, on a percentage basis, the average percentage increase in
base salary for all executives entitled to participate in Employer's
executive incentive plans for which Employee was eligible during the
preceding 12 months;
(c) an involuntary relocation of Employee more than 50 miles
from the location where Employee worked immediately prior to the Change of
Control or the breach by Employer of any other material provision of this
Agreement; or
(d) any purported termination of the employment of Employee by
Employer which is not effected in accordance with this Agreement.
A "Change of Control" shall be deemed to have occurred if (i) any person
or group of persons (as defined in Section 13(d) and 14(d) of the Securities
Exchange Act of 1934 together with its affiliates, excluding employee benefit
plans of Employer, is or becomes, directly or indirectly, the "beneficial owner"
(as defined in Rule 13d-3 promulgated under the Securities Exchange Act of 1934)
of securities of Employer representing 20% or more of the combined voting power
of Employer's then outstanding securities; or (ii) during the term of this
Agreement as a result of a tender offer or exchange offer for the purchase of
securities of Employer (other than such an offer by Employer for its own
securities), or as a result of a proxy contest, merger, consolidation or sale of
assets, or as a result of any combination of the foregoing, individuals who at
the beginning of any two-year period during the term of this Agreement
constitute Employer's Board of Directors, plus new directors whose election or
nomination for election by Employer's shareholders is approved by a vote of at
least two-thirds of the directors still in office who were directors at the
beginning of such two-year period, cease for any reason during such two-year
period to constitute at least two-thirds of the members of such Board of
Directors; or (iii) the shareholders of Employer approve a merger or
consolidation of Employer with any other corporation or entity regardless of
which entity is the survivor, other than a merger or consolidation which would
result in the voting securities of Employer outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or being
<PAGE>
converted into voting securities of the surviving entity) at least 80% of the
combined voting power of the voting securities of Employer or such surviving
entity outstanding immediately after such merger or consolidation; or (iv) the
shareholders of Employer approve a plan of complete liquidation or winding-up of
Employer or an agreement for the sale or disposition by Employer of all or
substantially all of Employer's assets; or (v) any event which Employer's Board
of Directors determines should constitute a Change of Control. Notwithstanding
the foregoing, the transactions contemplated by the Reorganization Agreement
shall not be considered a Change of Control.
e. Notwithstanding any other provision of this Agreement to the
contrary, in the event that Employee voluntarily terminates employment with
Employer at any time after the first anniversary of the Merger (other than
pursuant to Section 6(d)), Employee will be entitled to receive annually 60% of
Employee's Termination Compensation, so long as Employee complies with Section
4(a) of this Agreement, until the earlier of (i) five years from the date on
which Employee voluntarily terminates employment with Employer in accordance
with this Subsection 6(e), or (ii) the date on which Employee reaches age 65.
Such Termination Compensation shall be payable at the times such amounts would
have been paid in accordance with Section 3(a). In addition, Employee shall
continue to receive health insurance coverage from Employer on the same terms as
were in effect prior to Employee's termination, either under the Employer's
plans or comparable coverage, for all periods Employee receives Termination
Compensation pursuant to this Section 6(e), so long as Employee complies with
Section 4(a) of the Agreement.
f. In receiving any payments pursuant to this Section 6, Employee
shall not be obligated to seek other employment or take any other action by way
of mitigation of the amounts payable to Employee hereunder and such amounts
shall not be reduced or terminated whether or not Employee obtains other
employment.
g. Notwithstanding anything in this Agreement to the contrary, if
any of the payments provided for under this Agreement (the "Agreement
Payments"), together with any other payments that Employee has the right to
receive (such other payments together with the Agreement Payments are referred
to as the "Total Payments"), would constitute an "excess parachute payment," as
defined in Section 280G(b)(2) of the Internal Revenue Code of 1986, as amended
(the "Code") (an "Excess Parachute Payment"), the Agreement Payments shall be
reduced by the smallest amount necessary so that no portion of such Total
Payments would constitute Excess Parachute Payments. In the event Employer shall
make an Agreement Payment to Employee that would constitute an Excess Parachute
Payment, Employee shall return such payment to Employee (together with interest
at the rate set forth in Section 1274(b)(2)(B) of the Code). To the extent the
application of this Section 6(g) is triggered, the provisions of Section 4(a)
shall not apply.
<PAGE>
7. Other Employment.
Employee shall devote all of his business time, attention, knowledge and
skills solely to the business and interest of Employer and its Affiliates, and
Employer and its Affiliates shall be entitled to all of the benefits, profits
and other emoluments arising from or incident to all work, services and advice
of Employee, and Employee shall not, during the Term hereof, become interested
directly or indirectly, in any manner, as partner, officer, director,
stockholder, advisor, employee or in any other capacity in any other business
similar to Employer's business; provided, however, that nothing herein contained
shall be deemed to prevent or limit the right of Employee to invest in a
business similar to Employer's business if such investment is limited to less
than one percent of the capital stock or other securities of any corporation or
similar organization whose stock or securities are publicly owned or are
regularly traded on any public exchange.
8. Miscellaneous.
a. This Agreement shall be governed by and construed in accordance
with the laws of the State of West Virginia without regard to conflicts of law
principles thereof.
b. This Agreement constitutes the entire Agreement between Employee
and Employer, with respect to the subject matter hereof, and supersedes all
prior agreements with respect thereto. Without limiting the foregoing, Employee
agrees that this Agreement satisfies any rights he may have had under any prior
agreement or understanding with Horizon with respect to his employment by
Horizon.
c. This Agreement may be executed in one or more counterparts, all
of which, taken together, shall constitute one and the same instrument.
<PAGE>
d. Any notice or other communication required or permitted under
this Agreement shall be effective only if it is in writing and delivered in
person or by reliable overnight courier service or deposited in the mails,
postage prepaid, return receipt requested, addressed as follows:
To Employer:
City Holding Company
25 Gatewater Road
Charleston, West Virginia 25313
(304) 769-1100
Attention: Robert A. Henson, Chief Financial Officer
To Employee:
Bernard C. McGinnis, III
34 Pinecrest Drive
Huntington, West Virginia 25705
Notices given in person or by overnight courier service shall be deemed given
when delivered to the address required by this Section 8(d), and notices given
by mail shall be deemed given three days after deposit in the mails. Any party
hereto may designate by written notice to the other party in accordance herewith
any other address to which notices addressed to him shall be sent.
e. The provisions of this Agreement shall be deemed severable and
the invalidity or unenforceability of any provision shall not affect the
validity or enforceability of the other provisions hereof. It is understood and
agreed that no failure or delay by Employer or Employee in exercising any right,
power or privilege under this Agreement shall operate as a waiver thereof, nor
shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or privilege
hereunder.
f. In the event any dispute shall arise between Employee and
Employer as to the terms or interpretations of this Agreement, whether
instituted by formal legal proceedings or otherwise, including any action taken
by Employee to enforce the terms of this Agreement or in defending against any
action taken by Employer, Employer shall reimburse Employee for all reasonable
costs and expenses, including reasonable attorneys' fees, arising from such
dispute, proceeding or action, if Employee shall prevail in any action initiated
by Employee or shall have acted reasonably and in good faith in defending
against any action initiated by Employer. Such reimbursement shall be paid
within 10 days of Employee furnishing to Employer written evidence, which may be
in the form, among other things, of a canceled check or receipt, of any costs or
expenses incurred by Employee. Any such request for reimbursement by Employee
shall be made no more frequently than at 60 day intervals.
SIGNATURE PAGE FOLLOWS
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.
CITY HOLDING COMPANY
By:___________________________
Name: Robert A. Henson
Title: Chief Financial Officer
EMPLOYEE:
______________________________
Bernard C. McGinnis, III
Exhibit 10.6
EMPLOYMENT AND CONSULTING AGREEMENT
THIS EMPLOYMENT AND CONSULTING AGREEMENT ("Agreement") made as of the
______ day of ________, 199_, by and among CITY HOLDING COMPANY, a West
Virginia corporation ("City Holding") and FRANK S. HARKINS, JR. ("Harkins").
WITNESSETH THAT:
WHEREAS, Harkins has heretofore been employed and rendered services to
Horizon Bancorp, Inc. ("Horizon"), as Chairman of the Board and CEO;
WHEREAS, Horizon was merged into City Holding on __________ __, 199_, (the
"Merger") pursuant to an Agreement and Plan of Reorganization dated as of August
7, 1998 (the "Reorganization Agreement") between Horizon and City Holding;
WHEREAS, City Holding considers the continued availability of Harkins'
services to be important to the management and conduct of City Holding's
business and desire to secure for itself the continued availability of Harkins'
services; and
WHEREAS, Harkins is willing to make his services available to City Holding
on the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the parties hereto agree as follows:
1. Employment and Consulting. (a) Harkins is employed solely as a business
retention officer of City Holding through May 31, 1999. In such position,
Harkins shall encourage the retention of Horizon customers and engage in other
transition responsibilities as delegated by the executive management of City
Holding. Harkins shall also perform such duties as are customarily performed by
one holding such position in other same or similar businesses or enterprises as
that engaged in by City Holding, and shall also additionally render such other
services and duties as may be reasonably assigned to him from time to time by
City Holding, consistent with his position.
<PAGE>
(b) Commencing on June 1, 1999 and continuing for five years
thereafter, Harkins' employment with City Holding shall cease and he shall
become a consultant to City Holding. As a consultant, he shall perform such
functions as City Holding reasonably may request upon reasonable notice,
including, but not limited to, advising and consulting with City Holding as to
public relations and marketing matters and attending business and social
functions (including golf and other outings) in furtherance of City Holding's
business objectives, consistent with his prior positions.
(c) Harkins hereby accepts and agrees to the employment and
consulting arrangements described above, subject to the general supervision and
pursuant to the orders, advice, and direction of City Holding, its President and
its Board of Directors.
2. Term of Agreement The term of this Agreement shall commence from and
after the date hereof, and shall terminate on May 31, 2004. The term of this
Agreement, as may be shortened in accordance with Section 5 or 6 hereof, is
hereinafter referred to as the "Term."
3. Compensation.
a. For all services rendered by Harkins to City Holding under this
Agreement, City Holding shall pay to Harkins an annual salary or consulting fee,
as applicable, of $200,000, payable in accordance with the payroll practices of
City Holding applicable to all officers.
b. Except as otherwise specifically provided herein, for so long as
Harkins is employed by City Holding, Harkins also shall be entitled to receive,
on the same basis as other officers of City Holding, employee pension and
welfare benefits and group employee benefits such as sick leave, vacation, group
disability and health, life, and accident insurance and similar indirect
compensation which City Holding may from time to time extend to its officers.
c. City Holding shall, through the Term, provide Harkins with health
insurance, and City Holding shall, through the Term, provide Harkins with term
life insurance coverage in an amount not less than $250,000.00
d. City Holding shall pay, through the Term, Harkins' country club
dues (but not other club charges) at the Black Knight Country Club.
<PAGE>
e. City Holding shall, through the Term, furnish Harkins with an
automobile in accordance with the customary practices of City Holding for
executives at his level.
f. After Harkins becomes a consultant and for so long as he remains
on City Holding's Board of Directors, Harkins shall be paid director's fees
payable in accordance with the practices of City Holding applicable to all
directors.
4. Covenants of Harkins.
a. Subject to the limitations provided in Sections 4(b) and 4(d)
(whichever may be applicable), upon termination of this Agreement prior to the
expiration of the Term, Harkins will not directly or indirectly, either as a
principal, agent, employee, employer, stockholder, co-partner or in any other
individual or representative capacity whatsoever, engage in the banking and
financial services business, which includes consumer, savings, commercial
banking and the insurance and trust businesses, or the savings and loan or
mortgage banking business, or any other business in which City Holding or its
Affiliates are engaged, anywhere in the state of West Virginia and in any county
outside of West Virginia contiguous to West Virginia, nor will Harkins solicit,
or assist any other person in so soliciting, any depositors or customers of City
Holding or its Affiliates or induce any then or former employee of City Holding
or its Affiliates to terminate their employment with City Holding or its
Affiliates. The term "Affiliate" as used in this Agreement means a Person that
directly or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, another Person. The term
"Person" as used in this Agreement means any person, partnership, corporation,
group or other entity.
b. If Harkins voluntarily terminates his employment or consultancy
at any time prior to the first anniversary of the effective date of the Merger,
Harkins will be subject to the provisions of Section 4(a) until the later of the
first anniversary of the Merger or the first anniversary of the termination. If
Harkins voluntarily terminates his consultancy at any time after the first
anniversary of the Merger, Harkins will not be subject to the provisions of
Section 4(a).
c. If Harkins' employment or consultancy is terminated for Just
Cause (as defined in Section 6(b) herein), Harkins will not be subject to the
provisions of Section 4(a).
<PAGE>
d. If Harkins' employment or consultancy for reasons other than Just
Cause (as defined in Section 6(b) herein) at any time, Harkins will be subject
to the provisions of Section 4(a) until the earlier of: (i) the first
anniversary of Harkins' termination or (ii) the date as of which Harkins elects
to forego any further compensation pursuant to the last sentence of Section
6(c).
f. During the Term and thereafter, and except as required by any
court, supervisory authority or administrative agency or as may be otherwise
required by applicable law, Harkins shall not, without the written consent of
the Board of Directors of City Holding, or a person authorized thereby, disclose
to any person, other than an employee of City Holding or an Affiliate thereof or
a person to whom disclosure is reasonably necessary or appropriate in connection
with the performance by Harkins of his duties hereunder, any confidential
information obtained by him while in the employ of City Holding, unless such
information has become a matter of public knowledge at the time of such
disclosure.
g. The covenants contained in this Section 4 shall be construed and
interpreted in any judicial proceeding to permit their enforcement to the
maximum extent permitted by law. Harkins agrees that the restraints imposed
herein are necessary for the reasonable and proper protection of City Holding
and its Affiliates and that each and every one of the restraints is reasonable
in respect to such matter, length of time and the area. Harkins further
acknowledges that damages at law would not be a measurable or adequate remedy
for breach of the covenants contained in this Section 4 and, accordingly,
Harkins agrees to submit to the equitable jurisdiction of any court of competent
jurisdiction in connection with any action to enjoin Harkins from violating any
such covenants.
5. Disability. If, by reason of physical or mental disability during the
term hereof, Harkins is unable to carry out the essential functions of his
employment or consultancy hereunder for twelve (12) consecutive months, his
services hereunder may be terminated by action of the Board of Directors of City
Holding, City Holding determining so to do upon one month's notice to be given
to Harkins at any time after the period of twelve (12) continuous months of
disability and while such disability continues. If, prior to the expiration of
the one month period after the giving of such notice, Harkins shall recover from
such disability and return to the full-time active discharge of his duties, then
such notice shall be of no further force and effect and Harkins' employment
shall continue as if the same had been uninterrupted. If Harkins shall not so
recover from his disability and return to his duties, then his services shall
terminate at the expiration date of such one month's notice with the same force
and effect as if that date had been the date of termination originally provided
for hereunder. During the first twelve (12) months of the period of Harkins'
disability, Harkins shall continue to earn all compensation (including bonuses
and incentive compensation) to which Harkins would have been entitled as if he
had not been disabled, such compensation to be paid at the time, in the amounts,
<PAGE>
and in the manner provided in Section 3(a), inclusive of any compensation
received pursuant to any applicable disability insurance plan of City Holding.
Thereafter, Harkins shall receive compensation to which he is entitled under any
applicable disability insurance plan. In the event a dispute arises between
Harkins and City Holding concerning Harkins' physical or mental ability to
continue or return to the performance of his duties as aforesaid, Harkins shall
submit to examination by a competent physician mutually agreeable to the
parties, and his opinion as to Harkins' capability to so perform will be final
and binding. Upon termination of Harkins' services by reason of disability, the
Term shall end.
6. Termination.
a. If Harkins shall die during the Term, this Agreement and the
employment relationship hereunder will automatically terminate on the date of
death, which date shall be the last date of the Term.
b. City Holding shall have the right to terminate Harkins'
employment or consultancy under this Agreement at any time for Just Cause, which
termination shall be effective immediately. Termination for "Just Cause" shall
include termination for Harkins' personal dishonesty, gross incompetence,
willful misconduct, breach of a fiduciary duty involving personal profit,
intentional failure to perform stated duties, willful violation of any law, rule
or regulation (other than traffic violations or similar offenses) or a final
cease-and-desist order, conviction of a felony or of a misdemeanor involving
moral turpitude, unethical business practices in connection with City Holding's
business, misappropriation of City Holding's assets (determined on a reasonable
basis) or those of its Affiliates, or material breach of any other provision of
this Agreement, provided that Harkins has received written notice from City
Holding of such material breach and such breach remains uncured thirty days
after the delivery of such notice. In the event Harkins' employment or
consultancy under this Agreement is terminated for Just Cause, Harkins shall
have no right to receive compensation or other benefits under this Agreement for
any period after such termination.
c. City Holding may terminate Harkins' employment or consultancy
other than for "Just Cause," as described in Subparagraph (b) above, at any time
upon written notice to Harkins, which termination shall be effective
immediately. In the event City Holding terminates Harkins pursuant to this
Subparagraph (c), Harkins will receive the cash compensation specified in
Section 3(a) of this Agreement in each year until the end of the Term, so long
as Harkins complies with Section 4(a) of the Agreement until the first
anniversary of Harkins' termination. Such amounts shall be payable at the times
such amounts would have been paid in accordance with Section 3(a). In addition,
Harkins shall continue to receive health insurance coverage from City Holding on
the same terms as were in effect prior to Harkins' termination, either under
City Holding's plan, as applicable, or comparable coverage, for all periods
Harkins receives Termination Compensation. Notwithstanding anything in this
Agreement to the contrary, if Harkins breaches Section 4(a) of this Agreement
prior to the first anniversary of Harkins' termination pursuant to this Section
6(c), Harkins will not be entitled to receive any further compensation or
benefits pursuant to this Section 6(c).
<PAGE>
d. In receiving any payments pursuant to this Section 6, Harkins
shall not be obligated to seek other employment or take any other action by way
of mitigation of the amounts payable to Harkins hereunder and such amounts shall
not be reduced or terminated whether or not Harkins obtains other employment.
7. Other Employment.
During the Term, Harkins shall devote all of his business time, attention,
knowledge and skills solely to the business and interests of City Holding and
its Affiliates, and City Holding and its Affiliates shall be entitled to all of
the benefits, profits and other emoluments arising from or incident to all work,
services and advice of Harkins, and Harkins shall not, during the Term hereof,
become interested directly or indirectly, in any manner, as partner, officer,
director, stockholder, advisor, Harkins or in any other capacity in any other
business similar to City Holding's business; provided, however, that nothing
herein contained shall be deemed to prevent or limit the right of Harkins to
invest in a business similar to City Holding's business if such investment is
limited to less than one percent of the capital stock or other securities of any
corporation or similar organization whose stock or securities are publicly owned
or are regularly traded on any public exchange.
8. Miscellaneous.
a. This Agreement shall be governed by and construed in accordance
with the laws of the State of West Virginia without regard to conflicts of law
principles thereof.
b. This Agreement constitutes the entire Agreement between Harkins
and City Holding, with respect to the subject matter hereof, and supersedes all
prior agreements with respect thereto. Without limiting the foregoing, Harkins
agrees that this Agreement satisfies any rights he may have had under any prior
agreement or understanding with Horizon with respect to his employment by
Horizon.
<PAGE>
c. This Agreement may be executed in one or more counterparts, all
of which, taken together, shall constitute one and the same instrument.
d. Any notice or other communication required or permitted under
this Agreement shall be effective only if it is in writing and delivered in
person or by reliable overnight courier service or deposited in the mails,
postage prepaid, return receipt requested, addressed as follows:
To City Holding:
City Holding Company
25 Gatewater Road
Charleston, West Virginia 25313
Attention: Robert A. Henson, Chief Financial Officer
To Harkins:
Frank S. Harkins, Jr.
235 Crystal Avenue
Beckley, West Virginia 25801
Notices given in person or by overnight courier service shall be deemed given
when delivered to the address required by this Section 8(d), and notices given
by mail shall be deemed given three days after deposit in the mails. Any party
hereto may designate by written notice to the other party in accordance herewith
any other address to which notices addressed to him shall be sent.
e. The provisions of this Agreement shall be deemed severable and
the invalidity or unenforceability of any provision shall not affect the
validity or enforceability of the other provisions hereof. It is understood and
agreed that no failure or delay in exercising any right, power or privilege
under this Agreement shall operate as a waiver thereof, nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege hereunder.
f. In the event any dispute shall arise between Harkins and City
Holding as to the terms or interpretations of this Agreement, whether instituted
by formal legal proceedings or otherwise, including any action taken by Harkins
to enforce the terms of this Agreement or in defending against any action taken
by City Holding, City Holding shall reimburse Harkins for all reasonable costs
<PAGE>
and expenses, including reasonable attorneys' fees, arising from such dispute,
proceeding or action, if Harkins shall prevail in any action initiated by
Harkins or shall have acted reasonably and in good faith in defending against
any action initiated by City Holding. Such reimbursement shall be paid within 10
days of Harkins furnishing written evidence, which may be in the form, among
other things, of a canceled check or receipt, of any costs or expenses incurred
by Harkins. Any such request for reimbursement by Harkins shall be made no more
frequently than at 60 day intervals.
SIGNATURE PAGE FOLLOWS
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.
CITY HOLDING COMPANY
By:___________________________
Name:
Title:
FRANK S. HARKINS, JR.:
______________________________
EXHIBIT 23.1
[Letterhead of Baxter Fentriss and Company]
CONSENT OF FINANCIAL ADVISORS
We consent to the inclusion of our Fairness Opinion issued to Horizon
Bancorp, Inc. in this registration statement on Form S-4. We also consent to
the reference to our firm under the caption "Experts."
Baxter Fentriss and Company
/s/ Baxter Fentriss and Company
Richmond, Virginia
September 24, 1998
EXHIBIT 23.2
CONSENT OF FINANCIAL ADVISOR
We hereby consent to the use in this Registration Statement on Form S-4
of the form of our letter to be issued to the Board of Directors of City Holding
Company, included as Appendix E to the Joint Proxy Statement that is a part of
this Registration Statement, and to the references to such letter and to our
firm in such Joint Proxy Statement/Prospectus. In giving such consent we do not
thereby admit that we come within the category of persons whose consent is
required under Section 7 of the Securities Act of 1933 or the rules and
regulations of the Securities and Exchange Commission thereunder.
/s/ WHEAT FIRST SECURITIES, INC.
--------------------------------
Richmond, Virginia
Date: September 24, 1998
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- ) 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
September 24, 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- ) 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
September 24, 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- ) 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
September 23, 1998 ------------------------------------
EXHIBIT 99.7
PROXY
CITY HOLDING COMPANY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
SPECIAL MEETING OF SHAREHOLDERS
December 9, 1998
The undersigned shareholder of City Holding Company hereby appoints Harold
L. Toothman and Dan W. Mooney or either of them acting by majority or acting
singly in the absence of the other, attorneys and proxies, with full power of
substitution, to represent the undersigned and vote all of the shares of Common
Stock of City Holding Company which the undersigned is entitled to vote at the
Special Meeting of Shareholders to be held at the Charleston Marriott Town
Center, 200 Lee Street East, Charleston, West Virginia 25301, on December 9,
1998, at 2:00 p.m. (local time) or any adjournment(s) thereof. In the absence of
instructions from me, my proxies will vote in accordance with the Directors'
recommendations on the reverse side of this card. My proxies may vote according
to their discretion on any other matter which may properly come before the
meeting. I revoke any proxy previously given and acknowledge that I may revoke
this proxy prior to its exercise.
YOUR VOTE IS IMPORTANT. PLEASE SIGN AND DATE THE OTHER SIDE OF THIS
CARD AND RETURN PROMPTLY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
THIS PROXY IS CONTINUED ON THE REVERSE SIDE.
FOLD AND DETACH HERE.
<PAGE>
Please mark /X/ your votes as indicated in this example.
The Board of Directors recommends a vote FOR Items 1 and 2.
1. Approval of the Agreement and Plan of Reorganization, dated as of
August 7, 1998, between City Holding Company and Horizon Bancorp, Inc.
and the related Plan of Merger and the transactions contemplated by
those documents.
/ / FOR / / AGAINST / / ABSTAIN
2. Approval of the proposal to increase the number of authorized shares of
common stock of City Holding to fifty million (50,000,000) shares.
/ / FOR / / AGAINST / / ABSTAIN
I PLAN TO ATTEND THE SPECIAL MEETING: / / YES / / NO
The undersigned hereby authorizes the proxies to vote in their
discretion on any other business which may properly be brought before the
meeting or any adjournment thereof.
Your vote is important to us. Whether or not you expect to attend the
Special Meeting, please complete, sign and return the attached proxy card
promptly in the accompanying envelope. The envelope requires no postage if
mailed in the United States.
Signature_______________________Signature_______________________Date____________
NOTE: Please sign exactly as name(s) appear(s) hereon. If acting as an executor,
administrator, trustee, custodian, guardian, etc., you should so indicate in
signing. If the shareholder is a corporation, please sign the full corporate
name, by duly authorized officer. If shares are held jointly, each shareholder
named should sign. Date and promptly return this card in the envelope provided.
FOLD AND DETACH HERE
Exhibit 99.8
PROXY
HORIZON BANCORP, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
SPECIAL MEETING OF SHAREHOLDERS
December 9, 1998
The undersigned shareholder of Horizon Bancorp, Inc. hereby appoints
William C. Dolin, William H. File, III and R. T. Rogers or any of them acting by
majority or acting singly in the absence of the others, attorneys and proxies,
with full power of substitution, to represent the undersigned and vote all of
the shares of Common Stock of Horizon Bancorp, Inc. which the undersigned is
entitled to vote at the Special Meeting of Shareholders to be held at Tamarack,
Hulett C. Smith Theater, One Tamarack Park, in Beckley, West Virginia 25801, on
December 9, 1998, at 10:00 a.m. (local time) or any adjournment(s) thereof. In
the absence of instructions from me, my proxies will vote in accordance with the
Directors' recommendations on the reverse side of this card. My proxies may vote
according to their discretion on any other matter which may properly come before
the meeting. I revoke any proxy previously given and acknowledge that I may
revoke this proxy prior to its exercise.
YOUR VOTE IS IMPORTANT. PLEASE SIGN AND DATE THE OTHER SIDE OF THIS
CARD AND RETURN PROMPTLY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
THIS PROXY IS CONTINUED ON THE REVERSE SIDE.
FOLD AND DETACH HERE.
<PAGE>
Please mark /X/ your votes as indicated in this example.
The Board of Directors recommends a vote FOR Item 1.
1.Approval of the Agreement and Plan of Reorganization, dated as of
August 7, 1998, between City Holding Company and Horizon Bancorp, Inc.
and the related Plan of Merger and the transactions contemplated by
those documents.
/ / FOR / / AGAINST / / ABSTAIN
I PLAN TO ATTEND THE SPECIAL MEETING: / / YES / / NO
The undersigned hereby authorizes the proxies to vote in their
discretion on any other business which may properly be brought before the
meeting or any adjournment thereof.
Your vote is important to us. Whether or not you expect to attend the
Special Meeting, please complete, sign and return the attached proxy card
promptly in the accompanying envelope. The envelope requires no postage if
mailed in the United States.
Signature_______________________Signature_______________________Date____________
NOTE: Please sign exactly as name(s) appear(s) hereon. If acting as an executor,
administrator, trustee, custodian, guardian, etc., you should so indicate in
signing. If the shareholder is a corporation, please sign the full corporate
name, by duly authorized officer. If shares are held jointly, each shareholder
named should sign. Date and promptly return this card in the envelope provided.
FOLD AND DETACH HERE
