SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
SCHEDULE 13D
(Rule 13d-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT
TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO
RULE 13d-2(a)
HORIZON BANCORP, INC.
(Name of Issuer)
COMMON STOCK
($1.00 par value per share)
(Title of class of securities)
44040610-6
(CUSIP NUMBER)
Robert A. Henson
City Holding Company
25 Gatewater Road
Charleston, West Virginia 25313
Telephone No. (304) 769-1102
(Name, address and telephone number of person authorized to
receive notices and communications)
Copy to:
Randall S. Parks, Esquire
Hunton & Williams
Riverfront Plaza, East Tower
951 East Byrd Street
Richmond, Virginia 23219
Telephone No. (804) 788-7375
August 7, 1998
(Date of event which requires filing of this statement)
If the filing person has previously filed a statement
on Schedule 13G to report the acquisition which is the
subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-l(b)(3) or (4),
check the following box [ ].
Page 1 of 13 Pages
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CUSIP NO. 44040610-6 13D Page 2 of 13 Pages
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1 NAME OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
City Holding Company, EIN 55-0619957
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) |_|
(b) |X|
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3 SEC USE ONLY
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4 SOURCE OF FUNDS
WC, BK
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEM 2(d) or 2(e) |_|
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
West Virginia
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NUMBER OF SHARES 7 SOLE VOTING POWER
1,853,262 *
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BENEFICIALLY OWNED 8 SHARED VOTING POWER
-0-
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BY EACH REPORTING 9 SOLE DISPOSITIVE POWER
1,853,262 *
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PERSON WITH 10 SHARED DISPOSITIVE POWER
-0-
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,853,262 *
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
16.60% **
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14 TYPE OF REPORTING PERSON
HC, CO
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</TABLE>
* Beneficial ownership of 1,853,262 shares of common stock reported
herein is being reported solely as a result of the Stock Option Agreement
described in Item 4. The option granted pursuant to the Stock Option Agreement
has not yet become exercisable. City Holding Company expressly disclaims
beneficial ownership of such shares.
** Assumes a total of 11,166,138 shares outstanding, adjusted to
reflect the issuance of the full amount of common stock pursuant to the Stock
Option Agreement.
<PAGE>
Item 1. Security and Issuer.
This statement relates to the Reporting Person's beneficial
ownership of 1,853,262 shares of the Common Stock, $1.00 par value per share
("Common Stock") of Horizon Bancorp, Inc. ("Horizon"). The principal address of
Horizon is One Park Avenue, Beckley, West Virginia 25801.
Item 2. Identity and Background
(a),(f) The Reporting Person is City Holding Company, a West
Virginia corporation registered as a bank holding company
under the Bank Holding Company Act of 1956, as amended ("City
Holding").
(b) The Reporting Person's principal business is banking and
related services, including the servicing of mortgages and the
sale of mortgage-related products. City Holding's banking
divisions are engaged in the business of banking in West
Virginia by receiving and paying deposits; by negotiating
promissory notes, drafts, bills of exchange and other evidence
of debt; by buying and selling exchange; by loaning money
secured by personal or real property, or both; by dealing in
securities and stocks without recourse solely upon order, and
for the accounts of customers, except for purchases of
investment securities for its account under limitations and
restrictions imposed by regulations of the Comptroller of the
Currency; by providing trust services; by supplying credit
card services as a licensee of Visa and MasterCard; by
providing safe deposit box facilities and miscellaneous other
services rendered by a full service bank.
(c) The Reporting Person's principal business address is 25
Gatewater Road, Charleston, West Virginia 25313. The name,
business address and present principal occupation of each
executive officer and director of the Reporting Person are set
forth in Schedule I hereto, which is incorporated herein by
reference. To the best of the Reporting Person's knowledge,
each of the persons listed in Schedule I is a citizen of the
United States of America.
(d),(e) During the last five years, neither the Reporting Person,
nor, to the Reporting Person's best knowledge, any executive
officer or director of the Reporting Person has (a) been
convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors), or (b) been a party to a
civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such proceeding was
or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities
subject to, federal or state securities laws or finding any
violation with respect to such laws.
<PAGE>
1
Item 3. Source and Amount of Funds or Other Consideration.
As more fully described in Item 4, Horizon has granted to City Holding
an option pursuant to which City Holding has the right, upon the occurrence of
certain events (none of which has occurred), to purchase up to 1,853,262 shares
of common stock of Horizon, par value $1.00 ("Horizon Common Stock") (subject to
adjustment in certain circumstances) at a price per share equal to $42.375 (the
"Option"). Certain terms of the Option are summarized in Item 4.
If the Option were exercisable and City Holding were to exercise the
Option on the date hereof, the funds required to purchase the shares of Horizon
Common Stock issuable upon such exercise would be $78,531,977.25. It is
currently anticipated that such funds would be derived from working capital and
borrowed funds. Because City Holding has not exercised its option, City Holding
has not negotiated such a loan, and no terms are available for disclosure.
Item 4. Purpose of Transaction
(a) - (j) City Holding is seeking to acquire the entire equity interest
in Horizon pursuant to an Agreement and Plan of Reorganization. The transactions
reported hereunder are intended to assist in the achievement of that purpose.
The Agreement. City Holding and Horizon have entered into an Agreement
and Plan of Reorganization, dated as of August 7, 1998 (the "Agreement"),
pursuant to which Horizon will merge into City Holding (the "Merger"), with City
Holding as the surviving company. At the effective time of the Merger (the
"Effective Time"), each outstanding share of Horizon Common Stock will be
converted into the right to receive a certain number of shares of common stock
of City Holding ("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 (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 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.
The Merger is subject to various regulatory approvals, the approval of
the shareholders of City Holding and Horizon and the satisfaction of other terms
and conditions set forth in the Agreement, including the approval of the
shareholders of City Holding and Horizonof the Agreement and Merger.
As a result of the Merger, the Horizon Common Stock will be eligible
for termination of registration pursuant to Section 12(g)(4) of the Securities
Exchange Act of 1934 as amended (the "Exchange Act"). In addition, the Horizon
Common Stock will be eligible for delisting from the Nasdaq National Market,
where it has been traded under the symbol "HZWV".
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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. Until the 1999
annual meeting of the Board of Directors, the Chairman of the Board shall be
Phil McLaughlin, Horizon's designee. The Vice Chairmen of the Board shall be
Bernard McGinnis and Samuel M. Bowling. Steven J. Day shall remain as City
Holding's President and Chief Executive Officer.
The Option Agreement. In connection with the Agreement, City Holding
and Horizon entered into a Stock Option Agreement, dated as of August 7, 1998
(the "Option Agreement"). The Option Agreement is designed to enhance the
likelihood that the Merger will be successfully consummated in accordance with
the terms contemplated by the Agreement. Pursuant to the Option Agreement,
Horizon granted City Holding an option to purchase, subject to adjustments in
certain circumstances, up to 1,853,262 fully paid and non-assessable shares of
Horizon Common Stock (the "Option Shares") at a price per share equal to
$42.375. Also in connection with the Agreement, City Holding and Horizon entered
into a Stock Option Agreement substantially identical to the Option Agreement,
which provides for the grant of an option to Horizon to purchase up to 1,334,095
fully paid and nonassessable shares of City Holding Common Stock, par value
$2.50, at a price of $41.25 per share on substantially the same terms as the
Option Agreement.
Subject to applicable law and regulatory restrictions, City Holding may
exercise the Option, in whole or in part, if, but only if, both an Initial
Triggering Event (as defined below) and a Subsequent Triggering Event (as
defined below) have occurred prior to the occurrence of an Exercise Termination
Event (as defined below), provided that written notice of such exercise as
required by the Option Agreement is provided within 90 days following such
Subsequent Triggering Event (or such later period as provided in the Option
Agreement).
As defined in the Option Agreement, "Initial Triggering Event" means
any of the following events or transactions occurring after the date of signing
the Option Agreement:
(i) Horizon or any significant subsidiary of Horizon without
having received City Holding'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
City Holding or any of its subsidiaries (each a "City
Holding Subsidiary") or the board of directors of Horizon
shall have recommended that the shareholders of Horizon
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 Horizon or
any significant subsidiary of Horizon, provided, however,
that in no event shall (i) any merger, consolidation or
share exchange involving only Horizon and one or more of the
subsidiaries of Horizon, or involving only any two or more
of such subsidiaries of Horizon be deemed to be an
Acquisition Transaction, or (ii) any merger, consolidation
or share exchange (A) in which Horizon is the surviving
entity, or (B) as to which the shareholders of Horizon
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 Horizon 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 Horizon;
3
<PAGE>
(ii) The board of directors of Horizon does not recommend
that the shareholders of Horizon approve the Agreement or
publicly withdraws or modifies, or publicly announces its
intention to withdraw or modify, in any manner adverse to
City Holding, its recommendation that its shareholders
approve the Agreement;
(iii) Any person other than City Holding or any City Holding
Subsidiary or any Horizon 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 Horizon Common Stock (the term
"beneficial ownership" for purposes of the Stock Option
Agreement having the meaning assigned thereto in Section
13(d) of the 1934 Act, and the rules and regulations
thereunder);
(iv) Any person other than City Holding or any City Holding
Subsidiary shall have made a bona fide proposal to Horizon
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 Horizon or
its shareholders to engage in an Acquisition Transaction,
Horizon shall have breached any covenant or obligation
contained in the Agreement and such breach (x) would entitle
City Holding to terminate the Agreement and (y) shall not
have been cured prior to the Notice Date (as defined below);
(vi) Any person other than City Holding or any City Holding
Subsidiary, other than in connection with a transaction to
which City Holding 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 Horizon shall have voted and
failed to approve the Agreement and the Merger at a meeting
that 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 City Holding or any City Holding Subsidiary) shall have
made, or disclosed an intention to make, a proposal to
engage in an Acquisition Transaction; or
4
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(viii) Any person other than City Holding or any City
Holding 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.
As defined in the Option Agreement, "Subsequent Triggering Event" means
either of the following events or transactions occurring after the date of
signing the Option Agreement:
(i) The acquisition by any person, other than City Holding
or any City Holding Subsidiary or any Horizon Subsidiary
acting in a fiduciary capacity, of beneficial ownership of
25% or more of the then outstanding Horizon Common Stock; or
(ii) The occurrence of the Initial Triggering Event
described in clause (i) above, except that the percentage
referred to in clause (c) shall be 25%.
As defined in the Option Agreement, "Exercise Termination Event" means
each of the following: (i) the Effective Time of the Merger; (ii) termination of
the Agreement in accordance with the provisions thereof (other than a
termination resulting from a willful breach by Horizon 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 City Holding pursuant to Section 8.1(c)
thereof resulting from a willful breach by Horizon of a provision of the
Agreement.
As provided in the Option Agreement, if City Holding is entitled to and
wishes to exercise the Option, it is obligated to send to the Company 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, regulatory or
administrative agency or commission, domestic or foreign (a "Governmental
Entity"), is required in connection with such purchase, City Holding is
obligated to promptly file the required notice or application for approval and
expeditiously process the same and the period of time that otherwise would run
pursuant to this sentence will run instead 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 will be deemed
to occur on the Notice Date relating thereto.
5
<PAGE>
Certain regulatory approvals may be required before an acquisition of
Horizon Common Stock pursuant to an exercise of the Option could be completed.
Neither of the parties to the Option Agreement may assign any of its
rights or obligations under the Option Agreement or the Option created
thereunder to any other person, without the express written consent of the other
party, except that if a Subsequent Triggering Event shall have occurred prior to
an Exercise Termination Event, City Holding, subject to the express provisions
of the Option Agreement, may assign in whole or in part its rights and
obligations thereunder within 90 days following such Subsequent Triggering Event
(or such later period as may be provided pursuant to the Option Agreement).
In addition, any shares of Horizon Common Stock purchased upon the
exercise of the Option may be resold by City Holding pursuant to registration
rights under the Option Agreement.
In the event of any change in the Horizon 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 Horizon Common Stock purchasable upon exercise of the Option will
be appropriately adjusted. Whenever the number of shares of Horizon Common Stock
purchasable upon exercise of the Option is adjusted as provided in the Option
Agreement, 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
Horizon Common Stock purchasable prior to the adjustment and the denominator of
which shall be equal to the number of shares of Horizon Common Stock purchasable
after the adjustment.
At any time after the occurrence of a Repurchase Event (as defined
below) (i) at the request of the Holder (which term shall mean the holder or
holders of the Option), delivered prior to an Exercise Termination Event (or
such later period as provided in the Option Agreement), Horizon (or any
successor thereto) must 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 the 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 provided in the Option
Agreement), Horizon (or any successor thereto) must repurchase such number of
the Option Shares from the Owner as the Owner designates at a price (the "Option
Share Repurchase Price") equal to the market/offer price multiplied by the
number of Option Shares so designated.
6
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The term "market/offer price" means the highest of (i) the price per
share of Horizon Common Stock at which a tender offer or exchange offer therefor
has been made after the date hereof, (ii) the price per share of Horizon Common
Stock to be paid by any third party pursuant to an agreement with Horizon, (iii)
the highest closing price for shares of Horizon Common Stock within the
six-month period immediately preceding the date the Holder gives notice of the
required repurchase of the 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 Horizon's assets, the sum of the price paid in
such sale for such assets and the current market value of the remaining assets
of Horizon 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 Horizon Common Stock 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
Company, whose determination will be conclusive and binding on all parties.
A "Repurchase Event" will be deemed to have occurred upon the
occurrence of any of the following events or transactions after the date of the
Option Agreement:
(i) acquisition by any person (other than City Holding or
any Holding Subsidiary) of beneficial ownership of
50% or more of then outstanding Horizon Common Stock;
or
(ii) consummation of any Acquisition Transaction, except
that the percentage referred to in clause (c) shall
be 50%.
If, prior to an Exercise Termination Event, Horizon enters into an
agreement (i) to consolidate or merge with any person, other than City Holding
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 City Holding or one of its subsidiaries, to merge into Horizon and Horizon
is the continuing or surviving corporation, but, in connection with such merger,
the then outstanding shares of Horizon Common Stock are 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 Horizon 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 City Holding or one of
its subsidiaries, then, and in each such case, the agreement governing such
transaction must make proper provision so that the Option will, upon the
consummation of any such transaction and upon the terms and conditions set forth
in the Option Agreement, be converted into, or exchanged for, an option (the
"Substitute Option"), at the election of the Holder, of either (x) the Acquiring
Corporation (as defined in the Option Agreement) or (y) any person that controls
the Acquiring Corporation.
7
<PAGE>
Copies of the Agreement and the Option Agreement are filed as exhibits
to this Schedule 13D and are incorporated herein by reference. The foregoing
summary is not intended to be complete and is qualified in its entirety by
reference to such exhibits.
Item 5. Interest in Equity Securities of the Issuer.
(a) City Holding may be deemed to be the beneficial owner of
the Option Shares. As provided in the Option Agreement, City
Holding may exercise the Option only upon the happening of one
or more events, none of which has occurred. See Item 4 hereof.
If the Option were exercised in full, the Option Shares would
represent approximately 16.6% of the currently outstanding
Horizon Common Stock (after giving effect to the issuance of
such Option Shares). City Holding has no right to vote or
dispose of the shares of Horizon Common Stock subject to the
Option unless and until such time as the Option is exercised.
To the best knowledge of City Holding, none of the persons
listed in Schedule I hereto beneficially owns any shares of
Horizon Common Stock.
(b) If City Holding were to exercise the Option, it would have
sole power to vote and, subject to the terms of the Option
Agreement, sole power to direct the disposition of the shares
of Horizon Common Stock covered thereby.
(c) City Holding acquired the Option in connection with the
Agreement.See Item 4 hereof.
To the best knowledge of City Holding, none of the persons
listed in Schedule I hereto has effected any transactions in
Horizon Common Stock during the past 60 days.
(d) Not applicable.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or
Relationships with Respect to the Securities of the
Issuer.
Except as described in Item 4 and Item 5 hereof, neither City Holding
nor, to the best of its knowledge, any of the persons listed on Schedule I
hereto, has any contract, arrangement, understanding or relationship with any
other person with respect to any securities of Horizon, including the transfer
or voting of any of the securities, finder's fees, joint ventures, loan or
option arrangements, puts or calls, guarantees of profits, division of profits
or losses, or the giving or withholding of proxies.
8
<PAGE>
Item 7. Material to be Filed as Exhibits.
The following are attached hereto:
Exhibit 1 Agreement and Plan of Reorganization
between City Holding Company, a West Virginia
corporation, and Horizon Bancorp, Inc., a West
Virginia corporation, dated as of August 7, 1998.
Exhibit 2 Stock Option Agreement between City
Holding Company, a West Virginia corporation, and
Horizon Bancorp, Inc., a West Virginia
corporation, dated as of August 7, 1998.
9
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Date: 8-17-98
By: /s/Robert A. Henson
Name: Robert A. Henson
Title: Chief Financial Officer
10
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
Executive Officers and Directors of City Holding Company
Name Title Principal Occupation or Business Address
Employment
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
<S><C>
Samuel M. Bowling Director and Chairman of President, Dougherty Co., 600 50th Street, S.E.
the Board Inc. Charleston, WV 25304
Dr. D. K. Cales Director Dentist 509 Main Street
Rainelle, WV 25962
Hugh R. Clonch Director President, Clonch P.O. Box 283
Industries, Inc. Dixie, WV 25059
Steven J. Day Director, President and President and Chief 25 Gatewater Road
Chief Executive Officer Executive Officer of City Charleston, WV 25313
National Bank of West
Virginia
Robert D. Fisher Director Partner, Adams, Fisher and P.O. Box 326
Evans Ripley, WV 25271
William M. Frazier Director Chairman of the Board and Frazier & Oxley
Chief Executive Officer, P.O. Box 2808
The Old National Bank of Huntington, WV 25727
Huntington
Jack E. Fruth Director Principal Owner, Fruth RR 1, Box 332
Pharmacies Pt. Pleasant, WV 25550
Jay Goldman Director President, Goldman P.O. Box 3910
Associates Charleston, WV 25339-3910
David E. Haden Director President, RMI, ltd. P.O. Box 1126
Charleston, WV 25324
Carlin K. Harmon Director President and Chief P.O. Box 1125
Executive Officer, First Beckley, WV
State Bank & Trust 25802-1125
<PAGE>
C. Dallas Kayser Director Attorney P.O. Box 210
Pt. Pleasant, WV 25550
Leon K. Oxley Director President, The Old Frazier & Oxley
National Bank of Huntington P.O. Box 2808
Huntington, WV 25727
Mark H. Schaul Director President, Charmar Realty 1551 Hampton Road
Company Charleston, WV 25314
Robert A. Henson Chief Financial Officer 25 Gatewater Road
Charleston, WV 25313
F. Eric Nelson, Jr. Treasurer 25 Gatewater Road
Charleston, WV 25313
Matthew B. Call Executive Vice President 25 Gatewater Road
Charleston, WV 25313
John W. Alderman, III Vice President and Chief 25 Gatewater Road
Legal Officer Charleston, WV 25313
Victoria A. Evans Senior Vice President 25 Gatewater Road
Charleston, WV 25313
Peggy L. Schultz Vice President 25 Gatewater Road
Charleston, WV 25313
Larry L. Dawson Senior Vice President 25 Gatewater Road
Charleston, WV 25313
</TABLE>
<PAGE>
EXHIBIT INDEX
Exhibit 1 Agreement and Plan of Reorganization between City Holding
Company, a West Virginia corporation, and Horizon Bancorp,
Inc., a West Virginia corporation, dated August 7, 1998.
Exhibit 2 Stock Option Agreement between City Holding Company, a West
Virginia corporation, and Horizon Bancorp, Inc., a West
Virginia corporation, dated August 7, 1998.
<PAGE>
Exhibit 1
AGREEMENT AND PLAN OF REORGANIZATION
between
CITY HOLDING COMPANY
and
HORIZON BANCORP, INC.
August 7, 1998
<PAGE>
<TABLE>
TABLE OF CONTENTS
Page
<S> <C>
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.....................................................11
(i) Property..................................................................................11
(j) Additional Schedules Furnished to City Holding............................................11
(k) Agreements in Force and Effect............................................................12
(l) Legal Proceedings; Compliance with Laws...................................................13
(m) Employee Benefit Plans....................................................................13
(n) Insurance.................................................................................16
(o) Loan Portfolio............................................................................16
(p) Absence of Changes........................................................................17
(q) Brokers and Finders.......................................................................17
(r) Subsidiaries; Partnerships and Joint Ventures.............................................17
(s) Reports...................................................................................18
(t) Environmental Matters.....................................................................18
(u) Disclosure................................................................................19
(v) Accounting and Tax Matters................................................................19
(w) Regulatory Approvals......................................................................20
(i)
<PAGE>
(x) Year 2000 Matters.........................................................................20
(y) Interest Rate Risk Management Instruments.................................................20
(z) Recission of Repurchases..................................................................20
3.2. Representations and Warranties of City Holding and City National...................................21
(a) Organization, Standing and Power..........................................................21
(b) Capital Structure.........................................................................21
(c) Authority.................................................................................22
(d) Investments...............................................................................22
(e) Financial Statements......................................................................23
(f) Absence of Undisclosed Liabilities........................................................24
(g) Tax Matters...............................................................................24
(h) Options, Warrants and Related Matters.....................................................25
(i) Property..................................................................................25
(j) Additional Schedules Furnished to Horizon.................................................26
(k) Agreements in Force and Effect............................................................27
(l) Legal Proceedings; Compliance with Laws...................................................27
(m) Employee Benefit Plans....................................................................28
(n) Insurance.................................................................................30
(o) Loan Portfolio............................................................................31
(p) Absence of Changes........................................................................31
(q) Brokers and Finders.......................................................................32
(r) Subsidiaries; Partnerships and Joint Ventures.............................................32
(s) Reports...................................................................................32
(t) Environmental Matters.....................................................................32
(u) Disclosure................................................................................33
(v) Accounting and Tax Matters................................................................33
(w) Regulatory Approvals......................................................................34
(x) Year 2000 Matters.........................................................................34
(y) Interest Rate Risk Management Instruments.................................................34
(z) Recission of Repurchases..................................................................34
ARTICLE IV CONDUCT AND TRANSACTIONS PRIOR TO THE EFFECTIVE
TIME OF THE HOLDING COMPANY MERGER......................................................................35
4.1. Access to Records and Properties of City Holding, City National, Other City
Holding Subsidiaries, Horizon and the Horizon Banks; Confidentiality...........................35
4.2. Registration Statement, Proxy Statement, Shareholder Approval......................................36
4.3. Operation of the Businesses of the Parties.........................................................37
4.4. No Solicitation....................................................................................38
4.5. Dividends..........................................................................................38
4.6. Regulatory Filings; Best Efforts...................................................................39
4.7. Public Announcements...............................................................................39
4.8. Operating Synergies; Conformance to Reserve Policies, Etc..........................................39
4.9. City Holding Rights Agreement......................................................................40
(ii)
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4.10. Agreement as to Efforts to Consummate.............................................................40
4.11. Adverse Changes in Condition......................................................................40
4.12. Nasdaq Listing....................................................................................40
4.13. Delivery and Updating of Schedules................................................................41
4.14. Transactions in City Holding Common Stock.........................................................41
4.15. Standstill Agreements; Confidentiality Agreements.................................................41
4.16. Letters from Accountants..........................................................................42
ARTICLE V MANAGEMENT AND CORPORATE GOVERNANCE....................................................................42
5.1. Board of Directors.................................................................................42
5.2. Management.........................................................................................42
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.........................................................................48
7.1. Closing Date.......................................................................................48
7.2. Filings at Closing.................................................................................48
7.3. Effective Time.....................................................................................48
ARTICLE VIII TERMINATION; SURVIVAL OF REPRESENTATIONS,
WARRANTIES AND COVENANTS; WAIVER AND AMENDMENT..........................................................49
8.1. Termination........................................................................................49
8.2. Effect of Termination..............................................................................50
8.3. Survival of Representations, Warranties and Covenants..............................................50
8.4. Waiver and Amendment...............................................................................51
ARTICLE IX ADDITIONAL COVENANTS..................................................................................51
9.1. Indemnification of Horizon Officers and Directors; Liability Insurance.............................51
9.2. Employee Matters...................................................................................52
ARTICLE X MISCELLANEOUS..........................................................................................53
10.1. Expenses..........................................................................................53
10.2. Entire Agreement..................................................................................53
10.3. Descriptive Headings..............................................................................53
10.4. Notices...........................................................................................54
10.5. Counterparts......................................................................................55
10.6. Governing Law.....................................................................................55
(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
</TABLE>
<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."
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<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
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<PAGE>
Common Stock for which shares of Horizon Common Stock theretofore
represented by the certificate or certificates so surrendered shall
have been exchanged as provided in this Article II. Until so
surrendered, each outstanding certificate which, prior to the Effective
Time of the Holding Company Merger, represented Horizon Common Stock
will be deemed to evidence the right to receive the number of full
shares of City Holding Common Stock into which the shares of Horizon
Common Stock represented thereby may be converted in accordance with
the Exchange Ratio and, after the Effective Time of the Holding Company
Merger will be deemed for all corporate purposes of City Holding to
evidence ownership of the number of full shares of City Holding Common
Stock into which the shares of Horizon Common Stock represented thereby
were converted.
(b) Until outstanding certificates formerly representing
Horizon Common Stock are surrendered, no dividend payable to holders of
record of City Holding Common Stock for any period as of any date
subsequent to the Effective Time of the Holding Company Merger shall be
paid to the holder of such outstanding certificates in respect thereof.
After the Effective Time of the Holding Company Merger, there shall be
no further registry of transfer on the records of Horizon of shares of
Horizon Common Stock. If a certificate representing such shares is
presented to City Holding, it shall be canceled and exchanged for a
certificate representing shares of City Holding Common Stock and cash
representing fractional shares as herein provided. Upon surrender of
certificates of Horizon Common Stock in exchange for City Holding
Common Stock, there shall be paid to the recordholder of the
certificates of City Holding Common Stock issued in exchange therefor
(i) the amount of dividends theretofore paid for such full shares of
City Holding Common Stock as of any date subsequent to the Effective
Time of the Holding Company Merger which have not yet been paid to a
public official pursuant to abandoned property laws and (ii) at the
appropriate payment date the amount of dividends with a record date
after the Effective Time of the Holding Company Merger but prior to
surrender and a payment date subsequent to surrender. No interest shall
be payable on such dividends upon surrender of outstanding
certificates.
(c) At the Effective Time of the Holding Company Merger, each
share of Horizon Common Stock held by City Holding shall be canceled,
retired and cease to exist and each Dissenting Share shall be treated
in accordance with Section 31-1-123 of the West Virginia Code ("WVC").
(d) At the Effective Time of the Holding Company Merger and as
provided in the Holding Company Plan of Merger, outstanding options to
acquire Horizon Common Stock that were granted under Horizon's employee
benefit plans ("Horizon Options," as defined in Section 3.1(j)(1)
hereof), and which are identified on Schedule 2.2(d), shall be
converted, based on the Exchange Ratio, into options to acquire City
Holding Common Stock ("City Holding Options"). The exercise price per
share of City Holding Common
-4-
<PAGE>
Stock under a City Holding Option shall be equal to the exercise price
per share of Horizon Common Stock under the Horizon Option divided by
the Exchange Ratio (rounded up to the nearest cent). The number of
shares of City Holding Common Stock subject to a City Holding Option
shall be equal to the number of shares of Horizon Common Stock subject
to the Horizon Option multiplied by the Exchange Ratio (rounded down to
the nearest whole share). Except as provided in the preceding sentences
regarding the price of, and number of shares of City Holding Common
Stock subject to, the City Holding Option, the terms of the City
Holding Option shall be the same as the terms of the Horizon Option.
2.3. No Fractional Shares.
No certificates or scrip for fractional shares of City Holding
Common Stock will be issued. In lieu thereof, City Holding will pay the value of
such fractional shares in cash on the basis of the Average Closing Price.
2.4. Dissenting Shares.
Notwithstanding anything in this Agreement to the contrary,
shares of Horizon Common Stock which are issued and outstanding immediately
prior to the Effective Time of the Holding Company Merger and which are held by
a shareholder (other than City Holding and its subsidiaries, which waive such
right to dissent) who has the right (to the extent such right is available by
law) to demand and receive payment of the fair value of his shares of Horizon
Common Stock pursuant to Section 31-1-122 of the WVC (the "Dissenting Shares")
shall not be converted into or be exchangeable for the right to receive the
consideration provided in Section 2.1 of this 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
-5-
<PAGE>
interests as trustee, executor, administrator, transfer agent or registrar of
stocks and bonds, guardian of estates, assignee, receiver and committee, and in
every other fiduciary capacity, in the same manner and to the same extent as
such rights, franchises and interests were held or enjoyed by Horizon at the
Effective Time of the Holding Company Merger as provided in Section 31-1-37 of
the WVC.
2.6. Liabilities.
At the Effective Time of the Holding Company Merger, the
Surviving Company shall be liable for all liabilities of Horizon, as provided in
Section 31-1-37 of the WVC. All deposits, debts, liabilities and obligations of
Horizon, accrued, absolute, contingent or otherwise, and whether or not
reflected or reserved against on balance sheets, books of accounts, or records
of Horizon shall be those of the Surviving Company, and shall not be released or
impaired by the Holding Company Merger. All rights of creditors and other
obligees and all liens on property of Horizon shall be preserved unimpaired.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1. Representations and Warranties of Horizon and the Horizon Banks.
Horizon represents and warrants to City Holding as follows
(subject to Section 4.13(a) with respect to the delivery of the Schedules
referred to herein):
(a) Organization, Standing and Power. Horizon is a corporation
duly organized, validly existing and in good standing under the laws of
West Virginia and has all requisite corporate power and authority to
own, lease and operate its properties and to carry on its business as
now being conducted and to perform this Agreement and the Holding
Company Plan of Merger and to effect the transactions contemplated
hereby and thereby, subject to the approval of its shareholders as
contemplated by Section 4.2 and federal and state regulatory approvals
provided for herein. Horizon will deliver to City Holding complete and
correct copies of its Articles of Incorporation and its By-laws as
amended to the date hereof.
Each of the Horizon Banks is a bank duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization and has all requisite corporate power and authority to
own, lease and operate its properties and to carry on its business as
now being conducted and to perform this Agreement and to effect the
transactions contemplated hereby. Each of the Banks' deposits are
insured by the Federal Deposit Insurance Corporation (the "FDIC") to
the maximum extent permitted by law. Horizon
-6-
<PAGE>
will deliver to City Holding complete and correct copies of each of the
Horizon Banks' (i) Charter and (ii) By-laws as amended to the date
hereof.
(b) Capital Structure. The authorized capital stock of Horizon
consists of 20,000,000 shares of Horizon Common Stock, par value $1.00.
On the date hereof, 9,312,876 shares of Horizon Common Stock were
outstanding. All of the outstanding shares of Horizon Common Stock are
validly issued, fully paid and nonassessable.
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
-7-
<PAGE>
or by the Holding Company Plan of Merger. Horizon's Board of Directors
has taken all action necessary to ensure that the Transaction is
exempted from any West Virginia statute that purports to limit or
restrict business combinations or the ability to acquire or vote shares
and any change of control or anti-takeover provisions of Horizon's
Articles or By-laws.
The consummation by the Horizon Banks of the transactions
contemplated hereby, including the Bank Mergers, will not (i) conflict
with or result in a breach of any provision of their respective
charters or by-laws or a default (or give rise to any right of
termination, cancellation or acceleration) under any of the terms,
conditions or provisions of any note, bond, debenture, mortgage,
indenture, license, material agreement or other material instrument or
obligation to which any of the Horizon Banks is a party, or by which
any of them or any of their properties or assets may be bound, or (ii)
violate any order, writ, injunction, decree, statute, rule or
regulation applicable to any of the Horizon Banks or any of their
properties or assets. No consent or approval by any governmental
authority, other than compliance with applicable federal and state
banking laws, the rules of the Nasdaq Stock Market and regulations of
the Federal Reserve Board, the OCC, the FDIC and the WVBOB, is required
in connection with the consummation by the Horizon Banks of the
transactions contemplated hereby.
(d) Investments. All securities owned by Horizon and the
Horizon Banks of record and beneficially are free and clear of all
mortgages, liens, pledges, encumbrances or any other restriction,
whether contractual or statutory, which would materially impair the
ability of Horizon or the Horizon Banks freely to dispose of any such
security at any time, except as noted on Schedule 3.1(d). Any
securities owned of record by Horizon and the Horizon Banks in an
amount equal to 5% or more of the issued and outstanding voting
securities of the issuer thereof have been noted on such Schedule
3.1(d). There are no voting trusts or other agreements or undertakings
of which Horizon or any of the Horizon Banks is a party with respect to
the voting of such securities. With respect to all repurchase
agreements to which Horizon or any of the Horizon Banks is a party, as
an investor, Horizon or the Horizon Banks has a valid, perfected first
lien or security interest in the government securities or other
collateral securing the repurchase agreement, and the value of the
collateral securing each such repurchase agreement equals or exceeds
the amount of the debt secured by such collateral under such agreement.
(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);
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<PAGE>
(ii) Consolidated Statements of Income for each of
the three years ended December 31, 1997, 1996, and 1995
(audited) and for each of the three and six month periods
ended June 30, 1998 and 1997 (unaudited);
(iii) Consolidated Statements of Shareholders' Equity
for each of the three years ended December 31, 1997, 1996 and
1995 (audited) and for each of the three and six month periods
ended June 30, 1998 and 1997 (unaudited); and
(iv) Consolidated Statements of Cash Flows for each
of the three years ended December 31, 1997, 1996 and 1995
(audited) and for each of the three and six month periods
ended June 30, 1998 and 1997 (unaudited).
Such financial statements and the notes thereto have been prepared in
accordance with generally accepted accounting principles ("GAAP")
applied on a consistent basis throughout the periods indicated unless
otherwise noted in the Horizon Financial Statements. Each of such
consolidated statements of financial condition, together with the notes
thereto, presents fairly as of its date the consolidated financial
condition and assets and liabilities of Horizon or the applicable
Horizon Bank. The consolidated income statements, shareholders' equity
and cash flows, together with the notes thereto, present fairly the
results of operations, changes in shareholders' equity and cash flows
of Horizon or the applicable Horizon Bank for the periods indicated in
accordance with GAAP.
Except as disclosed in the Horizon Financial Statements, and
in the case of the Horizon Banks, compliance with and subject to
regulatory requirements of general applicability, there are no
restrictions precluding Horizon or any of the Horizon Banks from paying
dividends when, as and if declared by their respective Boards of
Directors.
(f) Absence of Undisclosed Liabilities. At June 30, 1998,
neither Horizon nor any of its consolidated subsidiaries had any
material obligations or liabilities (contingent or otherwise) of any
nature which were not reflected in the Horizon Financial Statements as
of such dates, or disclosed in the notes thereto, or in the Horizon
periodic reports filed with the Securities and Exchange Commission
("SEC") under the Securities Exchange Act of 1934 (the "1934 Act") as
of such dates, or disclosed in the notes thereto, except for those
which are appropriately disclosed in Schedules specifically referred to
herein or which in the aggregate are immaterial.
(g) Tax Matters. The Horizon Banks and all other subsidiaries
of Horizon are members of the same "affiliated group," as defined in
Section 1504(a)(1) of the Code, as Horizon (collectively, the "Horizon
Group"). Each member of the Horizon Group has filed or caused to be
filed or (in the case of returns or reports not yet due) will file all
tax returns and reports required to have been filed by or for them
before the Effective Time
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of the Holding Company Merger, and all information set forth in such
returns or reports is or (in the case of such returns or reports not
yet due) will be accurate and complete in all material respects. Each
member of the Horizon Group has paid or made adequate provision for, or
(with respect to returns or reports not yet filed) before the Effective
Time of the Holding Company Merger will pay or make adequate provision
for, all taxes, additions to tax, penalties, and interest for all
periods covered by those returns or reports. There are, and at the
Effective Time of the Holding Company Merger will be, no unpaid taxes,
additions to tax, penalties, or interest due and payable by any member
of the Horizon Group that are or could become a lien on any asset, or
otherwise materially adversely affect the business, property or
financial condition, of any member of the Horizon Group except for
taxes and any such related liability (a) incurred in the ordinary
course of business for which adequate provision has been made by any
member of the Horizon Group or (b) being contested in good faith and
disclosed in Schedule 3.1(g). Each member of the Horizon Group has
collected or withheld, or will collect or withhold before the Effective
Time of the Holding Company Merger, all amounts required to be
collected or withheld by it for any taxes, and all such amounts have
been, or before the Effective Time of the Holding Company Merger will
have been, paid to the appropriate governmental agencies or set aside
in appropriate accounts for future payment when due. Each member of the
Horizon Group is in material compliance with, and its records contain
all information and documents (including, without limitation, properly
completed IRS Forms W-9) necessary to 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.
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(h) Options, Warrants and Related Matters. There are no
outstanding unexercised options, warrants, calls, commitments or
agreements of any character to which Horizon or any of the Horizon
Banks is a party or by which it is bound, calling for the issuance of
securities of Horizon or the Horizon Banks or any security representing
the right to purchase or otherwise receive any such security, except
(i) as set forth on Schedule 3.1(h) and (ii) the Horizon Stock Option
Agreement.
(i) Property. Horizon and the Horizon Banks own (or enjoy use
of under capital leases) all property reflected on the Horizon
Financial Statements as of June 30, 1998 as being owned by them (except
property sold or otherwise disposed of in the ordinary course of
business after such date). All material property shown as being owned
is owned free and clear of all mortgages, liens, pledges, charges or
encumbrances of any nature whatsoever, except those referred to in such
Horizon Financial Statements or the notes thereto, liens for current
taxes not yet due and payable, any unfiled mechanics' liens and such
encumbrances and imperfections of title, if any, as are not substantial
in character or amount or otherwise would materially impair Horizon's
consolidated business operations. The leases relating to leased
property are fairly reflected in such Horizon Financial Statements.
Except for Other Real Estate Owned ("OREO"), all property and
assets material to the business or operations of Horizon and the
Horizon Banks are in substantially good operating condition and repair
and such property and assets are adequate for the business and
operations of Horizon and the Horizon Banks as currently conducted.
(j) Additional Schedules Furnished to City Holding. In
addition to any Schedules furnished to City Holding pursuant to other
provisions of this Agreement, Horizon has furnished to City Holding the
following Schedules which are correct and complete as of the date
hereof:
(1) Employees. Schedule 3.1(j)(1) lists as of the
date hereof (A) the names of and current annual salary rates
for all present employees of Horizon and the Horizon Banks who
received, respectively, $75,000 or more in aggregate
compensation, whether in salary or otherwise as reported or
would be reported on Form W-2, during the year ended December
31, 1997, or are presently scheduled to receive salary in
excess of $75,000 during the year ending December 31, 1998,
(B) the number of shares of Horizon Common Stock owned
beneficially by each director of Horizon or the Horizon Banks
as of the date hereof, (C) the names of and the number of
shares of Horizon Common Stock owned by each person known to
Horizon who beneficially owns 5% or more of the outstanding
Horizon Common Stock as of the date hereof, and (D) the names
of, the number of outstanding options of, and the exercise
price of, each agreement to make stock-
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based awards granted to each person under Horizon's incentive
stock option plan (the "Horizon Stock Option Plan") or any
other option granted by Horizon or any the Horizon Banks to
any director, officer, employee, consultant or advisor
(collectively, "Horizon Options") and the exercise price of
each such Horizon Option. Horizon has no stock-based employee
benefit plan or arrangement other than the Horizon Stock
Option Plan, and the Horizon Employee Stock Option Plan.
(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
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breach or default would have a material adverse effect upon the
financial condition, results of operations, or business of Horizon on a
consolidated basis.
(l) Legal Proceedings; Compliance with Laws. Schedule 3.1(l)
describes all legal, administrative, arbitration or other proceedings
or governmental investigations known to Horizon pending or, to the
Knowledge of Horizon, threatened or probable of assertion against
Horizon or any of the Horizon Banks. Except as set forth on Schedule
3.1(l), no such proceeding or investigation, if decided adversely,
would have a material adverse effect on the financial condition,
results of operations, business or prospects of Horizon on a
consolidated basis. Except as set forth in Schedule 3.1(l), Horizon and
the Horizon Banks have complied with any laws, ordinances,
requirements, regulations or orders applicable to their respective
businesses, except where noncompliance would not have a material
adverse effect on the financial condition, results of operations or
business of Horizon on a consolidated basis. Horizon and the Horizon
Banks have all licenses, permits, orders or approvals (collectively,
the "Permits") of any federal, state, local or foreign governmental or
regulatory body that are necessary for the conduct of the respective
businesses of Horizon and the Horizon Banks and the absence of which
would have a material adverse effect on the financial condition,
results of operations or business of Horizon on a consolidated basis;
the Permits are in full force and effect; no material violations are or
have been recorded in respect of any Permits nor has Horizon or any of
the Horizon Banks received written notice of any violations; and no
proceeding is pending or, to the Knowledge of Horizon, threatened to
revoke or limit any Permit. Except as set forth in Schedule 3.1(l),
neither Horizon nor any of the Horizon Banks has entered into any
agreements or written understandings with the OCC, the Federal Reserve
Board, the FDIC, the WVBOB or any other regulatory agency having
authority over it. Neither Horizon nor any of the Horizon Banks is
subject to any judgment, order, writ, injunction or decree which
materially adversely affects, or might reasonably be expected
materially adversely to affect, the financial condition, results of
operations, or business of Horizon on a consolidated basis. "Knowledge
of Horizon," and phrases of similar meaning, shall mean the actual
knowledge, after due inquiry, of Frank S. Harkins, Jr., B. C. McGinnis,
III and Philip L. McLaughlin.
(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
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presently in effect, or have been approved prior to the date
hereof, maintained for the benefit of employees or former
employees of Horizon or the Horizon Banks or the dependents or
beneficiaries of any employee or former employee of Horizon or
the Horizon Banks, whether or not subject to ERISA (the
"Employee Plans"), (B) the most recent actuarial and financial
reports prepared or required to be prepared with respect to
any Employee Plan and (C) the most recent annual reports filed
with any governmental agency, the most recent favorable
determination letter issued by the Internal Revenue Service,
and any open requests for rulings or determination letters,
that pertain to any such qualified Employee Plan. Schedule
3.1(m) identifies each Employee Plan that is intended to be
qualified under Section 401(a) of the Code and each such plan
is qualified.
(2) Neither Horizon, the Horizon Banks nor any
employee pension benefit plan (as defined in Section 3(2) of
ERISA (a "Pension Plan")) maintained or previously maintained
by it, has incurred any material liability to the Pension
Benefit Guaranty Corporation ("PBGC") or to the Internal
Revenue Service with respect to any Pension Plan, deferred
compensation, consultant, severance, thrift, option, bonus and
group insurance contract or any other incentive, welfare and
employee benefit plan and agreement presently in effect, or
approved prior to the date hereof, for the benefit of
employees or former employees of Horizon and the Horizon Banks
or the dependents or beneficiaries of any employee or former
employee of Horizon or any Horizon Bank (the "Horizon Employee
Plans"). There is not currently pending with the PBGC any
filing with respect to any reportable event under Section 4043
of ERISA nor has any reportable event occurred as to which a
filing is required and has not been made.
(3) Full payment has been made (or proper accruals
have been established) of all contributions which are required
for periods prior to the Closing Date, as defined in Section
7.1 hereof, under the terms of each Horizon Employee Plan,
ERISA, or a collective bargaining agreement, no accumulated
funding deficiency (as defined in Section 302 of ERISA or
Section 412 of the Code) whether or not waived, exists with
respect to any Pension Plan (including any Pension Plan
previously maintained by Horizon or the Horizon Banks), and
except as set forth on Schedule 3.1(m), there is no "unfunded
current liability" (as defined in Section 412 of the Code)
with respect to any Horizon Employee Plan or Pension Plan.
(4) No Horizon Employee Plan is a "multiemployer
plan" (as defined in Section 3(37) of ERISA). Neither Horizon
nor any of the Horizon Banks has incurred any material
liability under Section 4201 of ERISA for a complete or
partial withdrawal from a multiemployer plan (as defined in
Section 3(37) of
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ERISA). Neither Horizon nor any of the Horizon Banks has
participated in or agreed to participate in, a multiemployer
plan (as defined in Section 3(37) of ERISA).
(5) All Employee Plans that are "employee benefit
plans," as defined in Section 3(3) of ERISA, that are
maintained by Horizon or any of the Horizon Banks or
previously maintained by Horizon or any of the Horizon Banks
comply and have been administered in compliance in all
material respects with ERISA and all other applicable legal
requirements, including the terms of such plans, collective
bargaining agreements and securities laws. Neither Horizon nor
any of the Horizon Banks has any material liability under any
such plan that is not reflected in the Horizon Financial
Statements or on Schedule 3.1(m) hereto.
(6) Except as set forth on Schedule 3.1(m), no
prohibited transaction has occurred with respect to any
Employee Plan that is an "employee benefit plan" (as defined
in Section 3(3) of ERISA) maintained by Horizon or any of the
Horizon Banks or previously maintained by Horizon or any of
the Horizon Banks that would result, directly or indirectly,
in material liability under ERISA or in the imposition of a
material excise tax under Section 4975 of the Code.
(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.
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(n) Insurance. All policies or binders of fire, liability,
product liability, workmen's compensation, vehicular and other
insurance held by or on behalf of Horizon or any of the Horizon Banks
are described on Schedule 3.1(n) and are valid and enforceable in
accordance with their terms, are in full force and effect, and insure
against risks and liabilities to the extent and in the manner customary
for the industry and are deemed appropriate and sufficient by Horizon
and the Horizon Banks. Neither Horizon nor any of the Horizon Banks is
in default with respect to any provision contained in any such policy
or binder and has not failed to give any notice or present any claim
under any such policy or binder in due and timely fashion. Neither
Horizon nor any of the Horizon Banks has received notice of
cancellation or non-renewal of any such policy or binder. Horizon has
no knowledge of any inaccuracy in any application for such policies or
binders, any failure to pay premiums when due or any similar state of
facts that might form the basis for termination of any such insurance.
Horizon has no knowledge of any state of facts or of the occurrence of
any event that is reasonably likely to form the basis for any material
claim against it not fully covered (except to the extent of any
applicable deductible) by the policies or binders referred to above.
Neither Horizon nor any of the Horizon Banks has received notice from
any of its insurance carriers that any insurance premiums will be
materially increased in the future or that any such insurance coverage
will not be available in the future on substantially the same terms as
now in effect.
(o) Loan Portfolio. Each loan outstanding on the books of
Horizon and the Horizon Banks is in all respects what it purports to
be, was made in the ordinary course of business, was not known to be
uncollectible at the time it was made, accrues interest (except for
loans recorded on the Horizon Banks' books as non-accrual) in
accordance with the terms of the loan, and with respect to loans
originated by the Horizon Banks was made in accordance with the
applicable Horizon Bank's standard loan policies as in effect at the
time the loan was negotiated except for loans to facilitate the sale of
OREO or loans with renegotiated terms and conditions. The records of
the Horizon Banks regarding all loans outstanding and OREO by the
Horizon Banks on their respective books are accurate in all material
respects and the risk classifications for the loans outstanding are, in
the best judgment of the management of Horizon and the applicable
Horizon Bank, appropriate. The reserves for possible loan losses on the
outstanding loans of the Horizon Banks, as reflected in the Horizon
Financial Statements, have been established in accordance with GAAP and
with the requirements of the Federal Reserve Board, the OCC and the
FDIC. In the best judgment of the management of Horizon and the
applicable Horizon Bank such reserves are adequate as of the date
hereof and will be adequate as of the Effective Time of the Holding
Company Merger to absorb all known and anticipated loan losses in the
loan portfolio of the Horizon Banks. Except as identified on Schedule
3.1(o), no loan in excess of $50,000 has been classified by examiners
(regulatory or internal) as "Special Mention", "Substandard",
"Doubtful", "Loss", or words of similar import. Except as disclosed on
Schedule 3.1(j)(4), the OREO
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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' 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).
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(s) Reports. Since January 1, 1995, Horizon and the Horizon
Banks have filed all material reports and statements, together with any
amendments required to be made with respect thereto, that were required
to be filed with (i) the Federal Reserve Board, (ii) the FDIC, (iii)
the OCC, (iv) the SEC, (v) the WVBOB, and (vi) any other governmental
or regulatory authority or agency having jurisdiction over their
operations. Each of such reports and documents, including the financial
statements, exhibits and schedules thereto, filed with the SEC pursuant
to the 1934 Act was in form and substance in compliance in all material
respects with the 1934 Act. No such report or statement, or any
amendments thereto, contains any statement which, at the time and in
light of the circumstances under which it was made, was false or
misleading with respect to any material fact necessary in order to make
the statements contained therein not false or misleading. Horizon is a
reporting company under Section 12(g) or 15(d) of the 1934 Act and the
regulations of the SEC.
(t) Environmental Matters. For purposes of this subsection,
the following terms shall have the indicated meaning:
"Environmental Law" means any federal, state or local law,
statute, ordinance, rule, regulation, code, license, permit,
authorization, approval, consent, order, judgment, decree, injunction
or agreement with any governmental entity relating to (i) the
protection, preservation or restoration of the environment (including,
without limitation, air, water vapor, surface water, groundwater,
drinking water supply, surface soil, subsurface soil, plant and animal
life or any other natural resource), and/or (ii) the use, storage,
recycling, treatment, generation, transportation, processing, handling,
labeling, production, release or disposal of Hazardous Substances. The
term "Environmental Law" includes without limitation (i) the
Comprehensive Environmental Response, Compensation and Liability Act,
as amended, 42 U.S.C. Section 9601, et seq; the Resource Conservation
and Recovery Act, as amended, 42 U.S.C. Section 6901, et seq; the Clean
Air Act, as amended, 42 U.S.C. Section 7401, et seq; the Federal Water
Pollution Control Act, as amended, 33 U.S.C. Section 1251, et seq; the
Toxic Substances Control Act, as amended, 15 U.S.C. Section 9601, et
seq; the Emergency Planning and Community Right to Know Act, 42 U.S.C.
Section 11001, et seq; the Safe Drinking Water Act, 42 U.S.C. Section
300f, et seq; and all comparable state and local laws, and (ii) any
common law (including without limitation common law that may impose
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
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limitation petroleum or any derivative or by-product thereof, asbestos,
radioactive material, and polychlorinated biphenyls.
"Loan Portfolio Properties and Other Properties Owned" means
those properties owned or operated by Horizon or the Horizon Banks or
any of their subsidiaries, including those properties serving as
collateral for any loans made and retained by Horizon or the Horizon
Banks or for which Horizon or the Horizon Banks serves in a trust
relationship for the loans retained in portfolio.
Except as disclosed in Schedule 3.1(t), to the Knowledge of
Horizon:
(i) neither Horizon nor any of the Horizon Banks has
been or is in violation of or liable under any
Environmental Law;
(ii) none of the Loan Portfolio Properties and Other
Properties Owned has been or is in violation of or
liable under any Environmental Law; and
(iii) there are no actions, suits, demands, notices,
claims, investigations or proceedings pending or
threatened relating to the liability of the Loan
Portfolio Properties and Other Properties Owned under
any Environmental Law, including without limitation
any notices, demand letters or requests for
information from any federal or state environmental
agency relating to any such liabilities under or
violations of Environmental Law.
(u) Disclosure. Except to the extent of any subsequent
correction or supplement with respect thereto furnished prior to the
date hereof, no written statement, certificate, schedule, list or other
written information furnished by or on behalf of Horizon at any time to
City Holding, in connection with this Agreement, when considered as a
whole, contains or will contain any untrue statement of a material fact
or omits or will omit to state a material fact necessary in order to
make the statements herein or therein, in light of the circumstances
under which they were made, not misleading. Each document delivered or
to be delivered by Horizon to City Holding is or will be a true and
complete copy of such document, unmodified except by another document
delivered by Horizon.
(v) Accounting and Tax Matters. Neither Horizon nor any of the
Horizon Banks has taken or agreed to take any action nor do any of them
have any knowledge of any fact or circumstance that would prevent the
Holding Company Merger from qualifying as a reorganization within the
meaning of Section 368 of the Code or from being eligible for
"pooling-of-interests" accounting.
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(w) Regulatory Approvals. Neither Horizon nor any of the
Horizon Banks knows of any reason why the approvals, consents and
waivers of governmental authorities referred to in Sections 6.1(f) and
6.2(f) hereof should not be obtained on a timely basis without the
imposition of any condition of the type referred to in Section 6.1(f)
hereof and none of them has taken or agreed to take any action that
would materially impede or delay the receipt of such approvals,
consents and waivers or would be reasonably likely to result in the
imposition of any such condition.
(x) Year 2000 Matters. The computer software operated by
Horizon which is material to the conduct of its business is capable of
providing or is being adapted to provide (pursuant to plans approved by
the Board of Directors, copies of which have been provided to City
Holding, the expense of which has been reserved against or otherwise
provided for), in all material respects, uninterrupted millennium
functionality to record, store, process and present calendar dates
falling on or after January 1, 2000 in substantially the same manner
and with the same functionality as such software records, stores
processes and presents such calendar dates falling on or before
December 31, 1999. None of Horizon or any of the Horizon Banks has
received, or reasonably expects to receive, a "Year 2000 Deficiency
Notification Letter" (as such term is employed in the Federal Reserve
Board's Supervision and Regulation Letter No. SR 98-3(SUP), dated March
4, 1998).
(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.
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3.2. Representations and Warranties of City Holding and City National.
City Holding and City National represent and warrant to
Horizon and the Horizon Banks as follows (subject to Section 4.13(b) with
respect to the provision of the schedules referred to herein):
(a) Organization, Standing and Power. City Holding is a
corporation duly organized, validly existing and in good standing under
the laws of West Virginia and has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its
business as now being conducted and to perform this Agreement and the
Holding Company Plan of Merger and to effect the transactions
contemplated hereby and thereby, subject to the approval of its
shareholders as contemplated by Section 4.2 and federal and state
regulatory approvals provided for herein. City Holding will deliver to
Horizon complete and correct copies of its Articles of Incorporation
and its By-laws as amended to the date hereof.
City National is a national banking association duly
organized, validly existing and in good standing under the laws of the
United States and has all requisite corporate power and authority to
own, lease and operate its properties and carry on its business as now
being conducted and to perform this Agreement and to effect the
transactions contemplated hereby. City National's deposits are insured
by the FDIC to the maximum extent permitted by law. City National will
deliver to Horizon a complete and correct copy of its Charter and
By-laws as amended to the date hereof.
(b) Capital Structure. The authorized capital stock of City
Holding consists of 20,000,000 shares of Common Stock and 500,000
shares of Preferred Stock, of which 6,732,732 shares of Common Stock
and no shares of Preferred Stock were issued and outstanding as of June
30, 1998. All of such issued and outstanding shares of City Holding
Common Stock were validly issued, fully paid and nonassessable at such
date.
The authorized capital stock of City National consists of
131,250 shares of common stock, $5.00 par value, of which 123,701
shares were issued and outstanding as of June 30, 1998, all of which
shares are owned by City Holding free and clear of any liens, claims,
encumbrances, charges or rights of third parties of any kind
whatsoever, except as disclosed on Schedule 3.2(b)(1). All such issued
and outstanding shares of common stock of City National were validly
issued, fully paid and nonassessable at such date.
City Holding knows of no person who beneficially owns 5% or
more of the outstanding City Holding Common Stock as of the date
hereof, except as described on Schedule 3.2(b)(2).
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(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 breach of any provision of its Articles of
Incorporation or Bylaws 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
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or any other restriction, whether contractual or statutory, which would
materially impair the ability of City Holding or City National freely
to dispose of any such security at any time, except as noted on
Schedule 3.2(d). Any securities owned of record by City Holding and
City National in an amount equal to 5% or more of the issued and
outstanding voting securities of the issuer thereof have been noted on
such Schedule 3.2(d). There are no voting trusts or other agreements or
undertakings of which City Holding or City National is a party, as an
investor, with respect to the voting of such securities. With respect
to all repurchase agreements to which City Holding or City National is
a party, City Holding or City National has a valid, perfected first
lien or security interest in the government securities or other
collateral securing the repurchase agreement, and the value of the
collateral securing each such repurchase agreement equals or exceeds
the amount of the debt secured by such collateral under such agreement.
(e) Financial Statements. Schedule 3.2(e) contains copies of
the following consolidated financial statements of City Holding and
City National (the "City Holding Financial Statements"):
(i) Consolidated Balance Sheets as of December 31,
1997 and 1996 (audited), and as of June 30, 1998 and 1997
(unaudited);
(ii) Consolidated Statements of Income for each of
the three years ended December 31, 1997, 1996, and 1995
(audited) and for each of the three and six month periods
ended June 30, 1998 and 1997 (unaudited);
(iii) Consolidated Statements of Changes in
Stockholders' Equity for each of the three years ended
December 31, 1997, 1996 and 1995 (audited) and for each of the
three and six month periods ended June 30, 1998 and 1997
(unaudited); and
(iv) Consolidated Statements of Cash Flows for each
of the three years ended December 31, 1997, 1996 and 1995
(audited) and for each of the three and six month periods
ended June 30, 1998 and 1997 (unaudited).
Such financial statements and the notes thereto have been prepared in
accordance with GAAP applied on a consistent basis throughout the
periods indicated unless otherwise noted in the City Holding Financial
Statements. 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
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results of operations, shareholders' equity and cash flows of City
Holding or City National, as applicable, for the periods indicated, in
accordance with GAAP.
Except as disclosed in the City Holding Financial Statements,
and in the case of City National, compliance with and subject to
regulatory requirements of general applicability, there are no
restrictions precluding City Holding or City National from paying
dividends when, as and if declared by their respective Boards of
Directors.
(f) Absence of Undisclosed Liabilities. At June 30, 1998 and
December 31, 1997, City Holding and its consolidated subsidiaries had
no material obligations or liabilities, (contingent or otherwise) of
any nature which were not reflected in the City Holding Financial
Statements as of such dates, or disclosed in the notes thereto or in
the City Holding periodic reports filed with the SEC under the 1934 Act
as of such dates, or disclosed in the notes thereto, except for those
which are appropriately disclosed in Schedules specifically referred to
herein or which in the aggregate are immaterial.
(g) Tax Matters. Each of City Holding, City National, and all
other subsidiaries of City Holding are members of the same "affiliated
group," as defined in Section 1504(a)(1) of the Code, as City Holding
(collectively, the "City Holding Group"). Each member of the City
Holding Group has filed or caused to be filed or (in the case of
returns or reports not yet due) will file all tax returns and reports
required to have been filed by or for them before the Effective Time of
the Holding Company Merger, and all information set forth in such
returns or reports is or (in the case of such returns or reports not
yet due) will be accurate and complete in all material respects. Each
member of the City Holding Group has paid or made adequate provision
for, or (with respect to returns or reports not yet filed) before the
Effective Time of the Holding Company Merger will pay or make adequate
provision for, all taxes, additions to tax, penalties, and interest for
all periods covered by those returns or reports. There are, and at the
Effective Time of the Holding Company Merger will be, no unpaid taxes,
additions to tax, penalties, or interest due and payable by any member
of the City Holding Group that are or could become a lien on any asset,
or otherwise materially adversely affect the business, property or
financial condition, of any member of the City Holding Group except for
taxes and any such related liability (a) incurred in the ordinary
course of business for which adequate provision has been made by any
member of the City Holding Group or (b) being contested in good faith
and disclosed in Schedule 3.2(g). Each member of the City Holding Group
has collected or withheld, or will collect or withhold before the
Effective Time of the Holding Company Merger, all amounts required to
be collected or withheld by it for any taxes, and all such amounts have
been, or before the Effective Time of the Holding Company Merger will
have been, paid to the appropriate governmental agencies or set aside
in appropriate accounts for future payment when due. Each member of the
City Holding Group is in material compliance with, and its records
contain all
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information and documents (including, without limitation, properly
completed IRS Forms W-9) necessary to comply in all material respects
with, all applicable information reporting and tax withholding
requirements under federal, state, and local laws, rules, and
regulations, and such records identify with specificity all accounts
subject to backup withholding under Section 3406 of the Code. The
consolidated statements of financial condition contained in the City
Holding Financial Statements fully and properly reflect, as of the
dates thereof, the aggregate liabilities of the members of the City
Holding Group for all accrued taxes, additions to tax, penalties and
interest in accordance with GAAP. For periods ending after June 30,
1998, the books and records of each member of the City Holding Group
fully and properly reflect their liability for all accrued taxes,
additions to tax, penalties and interest in accordance with GAAP.
Except as disclosed in Schedule 3.2(g), no member of the City Holding
Group has granted (nor is it subject to) any waiver of the period of
limitations for the assessment of tax for any currently open taxable
period, and no unpaid tax deficiency has been asserted in writing
against or with respect to any member of the City Holding Group by any
taxing authority. No member of the City Holding Group has made or
entered into, or holds any asset subject to, a consent filed pursuant
to Section 341(f) of the Code and the regulations thereunder or a "safe
harbor lease" subject to former Section 168(f)(8) of the Code and the
regulations thereunder. Schedule 3.2(g) describes all tax elections,
consents and agreements affecting any member of the City Holding Group.
To the Knowledge of City Holding, no City Holding shareholder is a
"foreign person" for purposes of Section 1445 of the Code.
(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.
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All property and assets material to the business or operations
of City Holding and City National, other than OREO, are in
substantially good operating condition and repair, and such property
and assets are adequate for the business and operations of City Holding
and City National as currently conducted.
(j) Additional Schedules Furnished to Horizon. In addition to
any Schedules furnished to Horizon pursuant to other provisions of this
Agreement, City Holding has furnished to Horizon the following
Schedules which are correct and complete as of the date hereof:
(1) Employees. Schedule 3.2(j)(1) lists as of the
date hereof (A) the names of and current annual salary rates
for all present employees of City Holding and its subsidiaries
who received, respectively, $75,000 or more in aggregate
compensation, whether in salary or otherwise as reported or
would be reported on Form W-2, during the year ended December
31, 1997, or are presently scheduled to receive salary in
excess of $75,000 during the year ending December 31, 1998,
(B) the number of shares of City Holding Common Stock owned
beneficially by each director of City Holding or City National
as of the date hereof, (C) the names of and the number of
shares of City Holding Common Stock owned by each person known
to City Holding who beneficially owns 5% or more of the
outstanding City Holding Common Stock as of the date hereof,
and (D) the names of, the number of outstanding options of,
and the exercise price of, each agreement to make stock-based
awards granted to each person under City Holding's incentive
stock option plan (the "City Holding Stock Option Plan") or
any other option granted by City Holding or any subsidiary to
any director, officer, employee, consultant or advisor
(collectively, "City Holding Options") and the exercise price
of each such City Holding Option. City Holding has no
stock-based employee benefit plan or arrangement other than
the City Holding Option Agreement, the City Holding Incentive
Plan, the City Holding Stock Incentive Plan, the City Holding
Profit Sharing and 401(k) Plan, and the City Holding
Employees' Stock Ownership Plan.
(2) Certain Contracts. Schedule 3.2(j)(2) lists all
notes, bonds, mortgages, indentures, licenses, lease
agreements and other contracts and obligations to which City
Holding or any of its subsidiaries is an indebted party or a
lessee, licensee or obligee as of the date hereof except for
those entered into by City Holding or its subsidiaries in the
ordinary course of business consistent with prior practice and
that do not involve an amount remaining greater than $100,000.
(3) Employment Contracts and Related Matters.
Except in all cases as set forth on Schedule 3.2(j)(3),
neither City Holding nor any of its subsidiaries is a
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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.
(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,
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results of operations, or business of City Holding on a consolidated
basis; the City Permits are in full force and effect; no material
violations are or have been recorded in respect of any City Permits nor
has City Holding or City National received written notice of any
violations; and no proceeding is pending or, to the Knowledge of City
Holding, threatened to revoke or limit any City Permits. Neither City
Holding nor City National is subject to any judgment, order, writ,
injunction or decree which materially adversely affects, or might
reasonably be expected to materially adversely affect, the financial
condition, results of operations or business of City Holding on a
consolidated basis. Except as set forth in Schedule 3.2(l), neither
City Holding, nor City National, nor any other subsidiary of either has
entered into any agreements or written understandings with the OCC, the
Federal Reserve Board, the FDIC, the WVBOB or any regulatory agency
having authority over it. "Knowledge of City Holding," and phrases of
similar meaning, shall mean the actual knowledge, after due inquiry, of
Steven J. Day, Robert A. Henson and John W. Alderman III.
(m) Employee Benefit Plans.
(1) Schedule 3.2(m) includes a correct and complete
list of, and Horizon has been furnished a true and correct
copy of (or an accurate written description thereof in the
case of oral agreements or arrangements) (A) all qualified
pension and profit-sharing plans, all deferred compensation,
consultant, severance, thrift, option, bonus and group
insurance contracts and all other incentive, welfare and
employee benefit plans, trust, annuity or other funding
agreements, and all other agreements (including oral
agreements) that are presently in effect, or have been
approved prior to the date hereof, maintained for the benefit
of employees or former employees of City Holding or its
subsidiaries or the dependents or beneficiaries of any
employee or former employee of City Holding or its
subsidiaries, whether or not subject to ERISA (the "Employee
Plans"), (B) the most recent actuarial and financial reports
prepared or required to be prepared with respect to any
Employee Plan and (C) the most recent annual reports filed
with any governmental agency, the most recent favorable
determination letter issued by the Internal Revenue Service,
and any open requests for rulings or determination letters,
that pertain to any such qualified Employee Plan. Schedule
3.2(m) identifies each Employee Plan that is intended to be
qualified under Section 401(a) of the Code and each such plan
is qualified.
(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
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agreement presently in effect, or approved prior to the date
hereof, for the benefit of employees or former employees of
City Holding and its subsidiaries or the dependents or
beneficiaries of any employee or former employee of City
Holding or any subsidiary (the "City Holding Employee Plans").
There is not currently pending with the PBGC any filing with
respect to any reportable event under Section 4043 of ERISA
nor has any reportable event occurred as to which a filing is
required and has not been made.
(3) Full payment has been made (or proper accruals
have been established) of all contributions which are required
for periods prior to the Closing Date, as defined in Section
7.1 hereof, under the terms of each City Holding Employee
Plan, ERISA, or a collective bargaining agreement, no
accumulated funding deficiency (as defined in Section 302 of
ERISA or Section 412 of the Code) whether or not waived,
exists with respect to any Pension Plan, (including any
Pension Plan previously maintained by City Holding, City
National or any other subsidiary of either), and except as set
forth in Schedule 3.2(m), there is no "unfunded current
liability" (as defined in Section 412 of the Code) with
respect to any City Holding Employee Plan or Pension Plan.
(4) No City Holding Employee Plan is a "multiemployer
plan" (as defined in Section 3(37) of ERISA). Neither City
Holding nor City National nor any subsidiary of either has
incurred any material liability under Section 4201 of ERISA
for a complete or partial withdrawal from a multiemployer plan
(as defined in Section 3(37) of ERISA). Neither City Holding
nor City National has participated in or agreed to participate
in, a multiemployer plan (as defined in Section 3(37) of
ERISA).
(5) All "employee benefit plans," as defined in
Section 3(3) of ERISA, that are maintained by City Holding,
City National or any subsidiary of either or previously
maintained by City Holding, City National or any subsidiary of
either comply and have been administered in compliance in all
material respects with ERISA and all other applicable legal
requirements, including the terms of such plans, collective
bargaining agreements and securities laws. Neither City
Holding nor any of its subsidiaries has any material liability
under any such plan that is not reflected in the City Holding
Financial Statements or on Schedule 3.2(m) hereto.
(6) Except as set forth on Schedule 3.2(m), no
prohibited transaction has occurred with respect to any
"employee benefit plan" (as defined in Section 3(3) of ERISA)
maintained by City Holding or any of its subsidiaries or
previously maintained by City Holding or any of its
subsidiaries that would result,
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directly or indirectly, in material liability under ERISA or
in the imposition of a material excise tax under Section 4975
of the Code.
(7) Schedule 3.2(m) identifies each City Holding
Employee Plan that is an "employee welfare benefit plan" (as
defined in Section 3(1) of ERISA) and which is funded. The
funding under each such plan does not exceed the limitations
under Section 419A(b) or 419A(c) of the Code. Neither City
Holding nor any of its subsidiaries is subject to taxation on
the income of any such plan or any such plan previously
maintained by City Holding or any of its subsidiaries.
(8) Schedule 3.2(m) identifies the method of funding
(including any individual accounting) for all post-retirement
medical or life insurance benefits for the employees of City
Holding and its subsidiaries. Schedule 3.2(m) also discloses
the funded status of these City Holding Employee Plans.
(9) Schedule 3.2(m) identifies each corporate owned
life insurance policy, including any key man insurance policy
and policy insuring the life of any director or employee of
City Holding and its subsidiaries, and indicates for each such
policy, the face amount of coverage, cash surrender value, if
any, and annual premiums.
(10) No trade or business is, or has ever been,
treated as a single employer with City Holding and its
subsidiaries for employee benefit purposes under ERISA and the
Code.
(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
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carriers that any insurance premiums will be materially increased in
the future or that any such insurance coverage will not be available in
the future on substantially the same terms as now in effect.
(o) Loan Portfolio. Each loan outstanding on the books of City
Holding and City National is in all respects what it purports to be,
was made in the ordinary course of business, was not known to be
uncollectible at the time it was made, accrues interest (except for
loans recorded on such books as non-accrual) in accordance with the
terms of the loan, and with respect to loans originated by City
National was made in accordance with City National's standard loan
policies as in effect at the time the loan was negotiated except for
loans to facilitate the sale of OREO or loans with renegotiated terms
and conditions. The records of City National regarding all loans
outstanding and OREO by City National on its books are accurate in all
material respects and the risk classifications for the loans
outstanding are, in the best judgment of the management of City Holding
and City National, appropriate. The reserves for possible loan losses
on the outstanding loans of City National, as reflected in the City
Holding Financial Statements, have been established in accordance with
GAAP and with the requirements of the OCC, the Federal Reserve Board,
and the FDIC. In the best judgment of the management of City Holding
and City National such reserves are adequate as of the date hereof and
will be adequate as of the Effective Time of the Holding Company Merger
to absorb all known and anticipated loan losses in the loan portfolio
of City National. Except as identified on Schedule 3.2(o), no loan in
excess of $50,000 has been classified by examiners (regulatory or
internal) as "Special Mention", "Substandard", "Doubtful", "Loss", or
words of similar import. Except as disclosed on Schedule 3.2(o), the
OREO included in any nonperforming asset of City National is recorded
at the lower of cost or fair value less estimated costs to sell based
on independent appraisals that comply with the requirements of the
Financial Institutions Reform, Recovery and Enforcement Act of 1989 and
Uniform Standards of Professional Appraisal Practice. Except as
identified on Schedule 3.2(o), to the Knowledge of City Holding and
City National, each loan reflected as an asset on the City Holding
Financial Statements is the legal, valid and binding obligation of the
obligor and any guarantor, subject to bankruptcy, insolvency,
fraudulent conveyance and other laws of general applicability relating
to or affecting creditors' rights and to general principles of equity,
and no defense, offset or counterclaim has been asserted with respect
to any such loan, which if successful would have a material adverse
effect on the financial condition, results of operation or business of
City Holding on a consolidated basis.
(p) Absence of Changes. Except as identified on Schedule
3.2(p), since June 30, 1998 there has not been any material adverse
change in the condition (financial or otherwise), aggregate assets or
liabilities, earnings or business of City Holding, other than changes
resulting from or attributable to (i) changes since such date in laws
or
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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).
(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:
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"Environmental Law" and "Hazardous Substance" shall have the
meanings ascribed to those terms in Section 3.1(t) of this Agreement.
"Loan Portfolio Properties and Other Properties Owned" means
those properties owned or operated by City Holding or any of its
subsidiaries, including those properties serving as collateral for any
loans made and retained by City Holding or City National or for which
City Holding or City National serves in a trust relationship for the
loans retained in portfolio.
Except as disclosed in Schedule 3.2(t), to the Knowledge of
City Holding ,
(i) neither City Holding nor City National has been
or is in violation of or liable under any Environmental Law;
(ii) none of the Loan Portfolio Properties and Other
Properties Owned has been or is in violation of or liable
under any Environmental Law; and
(iii) there are no actions, suits, demands, notices,
claims, investigations or proceedings pending or threatened
relating to the liability of the Loan Portfolio Properties and
Other Properties Owned under any Environmental Law, including
without limitation any notices, demand letters or requests for
information from any federal or state environmental agency
relating to any such liabilities under or violations of
Environmental Law.
(u) Disclosure. Except to the extent of any subsequent
correction or supplement with respect thereto furnished prior to the
date hereof, no written statement, certificate, schedule, list or other
written information furnished by or on behalf of City Holding at any
time to Horizon, in connection with this Agreement, when considered as
a whole, contains or will contain any untrue statement of a material
fact or omits or will omit to state a material fact necessary in order
to make the statements herein or therein, in light of the circumstances
under which they were made, not misleading. Each document delivered or
to be delivered by City Holding to Horizon is or will be a true and
complete copy of such document, unmodified except by another document
delivered by City Holding.
(v) Accounting and Tax Matters. Neither City Holding nor City
National nor any subsidiary of either has taken or agreed to take any
action or has any knowledge of any fact or circumstance that would
prevent the 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.
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(w) Regulatory Approvals. Neither City Holding nor City
National nor any subsidiary of either knows of any reason why the
approvals, consents and waivers of governmental authorities referred to
in Sections 6.1(f) and 6.2(f) hereof should not be obtained on a timely
basis without the imposition of any condition of the type referred to
in Section 6.1(f) hereof and neither of them has taken or agreed to
take any action that would materially impede or delay the receipt of
such approvals, consents and waivers or would be reasonably likely to
result in the imposition of any such condition.
(x) Year 2000 Matters. The computer software operated by City
Holding which is material to the conduct of its business is capable of
providing or is being adapted to provide (pursuant to plans approved by
the Board of Directors, copies of which have been provided to Horizon,
the expense of which has been reserved against or otherwise provided
for), in all material respects, uninterrupted millennium functionality
to record, store, process and present calendar dates falling on or
after January 1, 2000 in substantially the same manner and with the
same functionality as such software records, stores processes and
presents such calendar dates falling on or before December 31, 1999.
Neither City Holding or City National has received, or reasonably
expects to receive, a "Year 2000 Deficiency Notification Letter" (as
such term is employed in the Federal Reserve Board's Supervision and
Regulation Letter No. SR 98-3(SUP), dated March 4, 1998).
(y) Interest Rate Risk Management Instruments. All interest
rate swaps, caps, floors and option agreements and other interest rate
risk management arrangements, whether entered into for the account of
City Holding or any of its subsidiaries, were entered into in the
ordinary course of business and, to the Knowledge of City Holding, in
accordance with prudent banking practices and applicable rules,
regulations and policies of any regulatory authority of competent
jurisdiction and with counterparties believed to be financially
responsible at the time and are legal, valid and binding obligations of
City Holding or one of its subsidiaries enforceable in accordance with
their terms except as enforceability may be limited by laws affecting
insured depository institutions and similar laws affecting the
enforcement of creditors' rights generally and subject to any equitable
principles limiting the right to obtain specific performance. City
Holding and each of City Holding's subsidiaries have duly performed all
of their obligations thereunder to the extent that such obligations to
perform have accrued, and, to the Knowledge of City Holding, there are
no breaches, violations or defaults or allegations or assertions of
such by any party thereunder.
(z) Recission of Repurchases. Except as set forth on Schedule
3.2(z), all share repurchase programs previously authorized by the
Board of Directors of City Holding have either expired or been revoked
by resolution duly adopted on or prior to the date hereof.
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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
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.
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4.2. Registration Statement, Proxy Statement, Shareholder Approval.
Horizon and City Holding will duly call and will hold meetings
of their shareholders as soon as practicable for the purpose of approving the
Holding Company Merger and the related transactions and will comply fully with
the provisions of the 1933 Act and the 1934 Act and the rules and regulations of
the SEC under such acts to the extent applicable, and the Articles of
Incorporation and By-laws of Horizon and City Holding relating to the call and
holding of a meeting of shareholders for such purpose. The Boards of Directors
of Horizon and City Holding will recommend to and actively encourage
shareholders that they vote in favor of the Holding Company Merger, to the
maximum extent permissible in light of their fiduciary duties. City Holding and
Horizon will jointly prepare the proxy statement-prospectus to be used in
connection with such meeting (the "Proxy Statement-Prospectus") and City Holding
will prepare and file with the SEC a Registration Statement on Form S-4 (the
"Registration Statement"), of which such Proxy Statement-Prospectus shall be a
part, and use its best efforts promptly to have the Registration Statement
declared effective. In connection with the foregoing, City Holding will comply
with the requirements of the 1933 Act, the 1934 Act, the Nasdaq Stock Market and
the rules and regulations of the SEC under such acts with respect to the
offering and sale of City Holding Common Stock in connection with the
Transaction and with all applicable state Blue Sky and securities laws. The
notices of such meetings and the Proxy Statement-Prospectus shall not be mailed
to Horizon or City Holding shareholders until the Registration Statement shall
have become effective under the 1933 Act. Horizon covenants that none of the
information supplied by Horizon and City Holding covenants that none of the
information supplied by City Holding in the Proxy Statement-Prospectus will, at
the time of the mailing of the Proxy Statement-Prospectus to Horizon and City
Holding shareholders, contain any untrue statement of a material fact nor will
any such information omit any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
in which they were made, not misleading; and at all times subsequent to the time
of the mailing of the Proxy Statement-Prospectus, up to and including the date
of the meetings of Horizon and City Holding shareholders, as applicable, to
which the Proxy Statement-Prospectus relates, none of such information in the
Proxy Statement-Prospectus, as amended or supplemented, will contain an untrue
statement of a material fact or omit any material fact required to be stated
therein in order to make the statements therein, in light of the circumstances
in which they were made, not misleading.
Horizon, as the sole shareholder of the Horizon Banks, and
City Holding, as the sole shareholder of City National, hereby approve this
Agreement and the transactions contemplated herein.
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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 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
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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 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
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not in excess of that most recently declared prior to June 30, 1998 except that
Horizon and City Holding may increase the dividend amount for the fourth quarter
of 1998, consistent with the relative increase of such dividend for the fourth
quarter of 1997. Horizon and City Holding will coordinate with one another
regarding the declaration and payment of dividends in respect of Horizon Common
Stock and City Holding Common Stock to ensure that no holder of Horizon Common
Stock will receive two dividends, or fail to receive on dividend, for any single
calendar quarter with respect to its shares of Horizon Common Stock, including
shares of City Holding Common Stock such holder may receive in connection with
the Transaction.
4.6. Regulatory Filings; Best Efforts.
City Holding and Horizon shall jointly prepare all regulatory
filings required to consummate the transactions contemplated by this Agreement
and submit the filings for approval with the Federal Reserve Board, the OCC, the
FDIC and the WVBOB as soon as practicable after the date hereof. City Holding
and Horizon shall use their best efforts to obtain approvals of such filings.
4.7. Public Announcements.
Each party will consult with the other before issuing any
press release or otherwise making any public statements with respect to the
Transaction and shall not issue any press release or make any such public
statement prior to such consultations and approval of the other party, which
approval shall not be unreasonably withheld, except as may be required by law.
4.8. Operating Synergies; Conformance to Reserve Policies, Etc..
Between the date hereof and the Effective Time of the Holding
Company Merger, the parties will work with one another to achieve appropriate
operating efficiencies following the Closing Date. Subject to the Horizon Banks'
approval, which will not be unreasonably withheld, City Holding's notification
to the Horizon Banks' customers and City Holding's direct contact with customers
regarding the Bank Mergers will commence following receipt of Federal Reserve
Board and OCC approval but not earlier than 60 days prior to the Closing Date.
At the request of City Holding and upon receipt by Horizon and the Horizon Banks
of written confirmation from City Holding and City National that there are no
conditions to the obligations of City Holding and City National under this
Agreement set forth in Article V which they believe will not be fulfilled so as
to permit them to consummate the Transaction and the other transactions
contemplated hereby, not more than three days before the Effective Time of the
Holding Company Merger Horizon and the Horizon Banks shall establish such
additional accruals, reserves and charge-offs, through appropriate entries in
its accounting books and records, provided such adjustments are in accordance
with GAAP and applicable law and regulation as may be necessary to conform
Horizon's and the Horizon Banks' accounting and credit loss
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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.
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.
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4.13. Delivery and Updating of Schedules.
(a) Horizon shall prepare and deliver to City Holding all of
the Schedules pertaining to Horizon and the Horizon Banks referred to
in Section 3.1 not later than August 14, 1998. Such Schedules shall be
true and correct as of the date delivered or such other date provided
in Article III.
(b) City Holding shall prepare and deliver to Horizon all of
the Schedules pertaining to City Holding and City National referred to
in Section 3.2 not later than August 14, 1998. Such Schedules shall be
true and correct as of the date delivered or such other date provided
in Article III.
(c) Horizon shall notify City Holding, and City Holding shall
notify Horizon, of any changes, additions or events which may cause any
change in or addition to any Schedules delivered by it under this
Agreement, promptly after the occurrence of same and at the Closing
Date by delivery of updates of all Schedules, including future
quarterly and annual financial statements. No notification made
pursuant to this Section 4.13 shall be deemed to cure any breach of any
representation or warranty made in this Agreement or any Schedule
unless City Holding or Horizon, as the case may be, specifically agree
thereto in writing, nor shall any such notification be considered to
constitute or give rise to a waiver by Horizon or the Horizon Banks on
the one hand, or City Holding or City National on the other hand of any
condition set forth in this Agreement.
4.14. Transactions in City Holding Common Stock.
Other than the issuance or acquisition of City Holding Common
Stock pursuant to City Holding employee benefit plans, or the purchase or sale
of City Holding Common Stock by City National in its capacity as trustee under
City Holding employee benefit plans or in any other fiduciary capacity in which
it is directed to sell or purchase City Holding Common Stock, none of City
Holding, City National, Horizon or the Horizon Banks will, directly or
indirectly, purchase, publicly sell or publicly acquire any shares of City
Holding Common Stock, or take any other action intended to manipulate the price
of City Holding Common Stock, during the 10 trading days ending on the 10th day
prior to the Effective Time of the Holding Company Merger.
4.15. Standstill Agreements; Confidentiality Agreements.
During the period from the date of this Agreement through the
Effective Time of the Holding Company Merger, neither Horizon nor City Holding
shall terminate, amend, modify or waive any provision of any confidentiality or
standstill agreement to which it or any of its respective subsidiaries is a
party. During such period, Horizon or City Holding, as the case may be, shall
enforce, to the fullest extent permitted under applicable law, the provisions of
any such
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agreement, including by obtaining injunctions to prevent any breaches of such
agreements and to enforce specifically the terms and provisions thereof in any
court having jurisdiction.
4.16. Letters from Accountants.
City Holding, City National, Horizon and the Horizon Banks
shall use reasonable efforts to cause Ernst & Young, LLP, independent
accountants for City Holding and Horizon, to deliver to City Holding and City
National and Horizon and the Horizon Banks, letters dated within two business
days prior to the date the Registration Statement shall become effective and in
form and substance reasonably satisfactory to the recipient thereof to the
effect that for financial reporting purposes, the Transaction qualifies for
pooling-of-interests accounting treatment under GAAP if consummated in
accordance with this Agreement.
ARTICLE V
MANAGEMENT AND CORPORATE GOVERNANCE
5.1. Board of Directors.
Immediately following the Effective Time of the Holding
Company Merger, the Board of Directors of City Holding shall be comprised of 24
members, 12 to be designated by City Holding and 12 to be designated by Horizon
at least 10 business days prior to the mailing of the Proxy Statement-Prospectus
to the shareholders of City Holding and Horizon. If any director so designated
shall be unwilling or unable to serve as a director of City Holding, a
replacement shall be designated by the remaining persons designated by City
Holding or Horizon, as applicable. Until the 1999 annual meeting of the Board of
Directors, the Chairman of the Board shall be elected by the directors
designated by Horizon.
5.2. Management.
Immediately following the Effective Time of the Holding
Company Merger, the management of City Holding and City National shall be as set
forth on Exhibit E.
ARTICLE VI
CONDITIONS OF MERGER
6.1. Conditions of Obligations of City Holding and City National.
The obligations of City Holding and City National to perform
this Agreement are subject to the satisfaction at or prior to the Effective Time
of the Holding Company Merger of the following conditions unless waived by City
Holding and City National.
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(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.
(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
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Banks (i) in the Holding Company Merger (a) upon the transfer of
Horizon's assets to City Holding in exchange for City Holding Common
Stock and the assumption of Horizon's liabilities or (b) upon the
distribution of such City Holding Common Stock to Horizon shareholders
or (ii) in the Bank Mergers, (a) upon the transfer of the Horizon
Banks' assets to City National in exchange for the assumption of the
Horizon Banks' liabilities and in constructive exchange for City
National common stock (but the Horizon Banks or City National may be
required to include certain amounts in income as a result of the
termination of any bad debt reserve maintained by the Horizon Banks for
federal income tax purposes and other possible required changes in tax
accounting methods) or (b) upon the constructive distribution of such
City National common stock to City Holding.
(f) Regulatory Approvals. All required approvals from federal
and state regulatory authorities having jurisdiction to permit City
Holding and City National to consummate the Transaction and to issue
City Holding Common Stock to Horizon shareholders shall have been
received and shall have contained no conditions deemed in good faith to
be materially disadvantageous by City Holding, in light of the
transaction as a whole, as to make the transition not feasible.
Notwithstanding anything to the contrary in this Agreement, in the
event that divestiture of operations is required by any regulatory
agency that affects the market of Hinton or Summers County, West
Virginia, City Holding agrees not to divest any of the operations
currently comprising Summers, but rather to divest other operations. No
temporary restraining order, preliminary or permanent injunction or
other order by any Federal or state court in the United States which
prevents the consummation of the Transaction shall have been issued and
remain in effect.
(g) Affiliate Letters. Within 60 days of the date hereof, each
shareholder of Horizon who is a Horizon Affiliate shall have executed
and delivered a commitment and undertaking in the form of Exhibit H to
the effect that (1) such shareholder will dispose of the shares of City
Holding Common Stock received by him in connection with the Holding
Company Merger only in accordance with the provisions of paragraph (d)
of Rule 145 under the 1933 Act; (2) such shareholder will not dispose
of any of such shares until City Holding has received, at its expense,
an opinion of counsel acceptable to it that such proposed disposition
will not violate the provisions of paragraph (d) of Rule 145 and any
applicable securities laws which opinion shall be rendered promptly
following counsel's receipt of such shareholder's written notice of its
intent to sell shares of City Holding Common Stock; (3) such
shareholder shall not dispose of any such shares until City Holding has
published results of at least 30 days of the combined operations of
City Holding and Horizon and (4) the certificates representing said
shares may bear a legend referring to the foregoing restrictions.
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(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.
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
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and as of the Effective Time of the Holding Company Merger as though
made on and as of the Effective Time of the Holding Company Merger (or
on the date when made in the case of any representation and warranty
which specifically relates to an earlier date); City Holding and City
National shall have in all material respects performed all obligations
required to be performed by them and satisfied all conditions required
to be satisfied by them under this Agreement prior to the Effective
Time of the Holding Company Merger; and Horizon and the Horizon Banks
shall have received a certificate signed by the Chief Executive Officer
and by the Chief Financial Officer of City Holding and City National,
which may be to their knowledge after due inquiry, to such effects.
(b) Authorization of Transaction. All action necessary to
authorize the execution, delivery and performance of this Agreement by
City Holding and City National and the consummation of the transactions
contemplated herein (including the shareholder action referred to in
Section 4.2) shall have been duly and validly taken by the Boards of
Directors of City Holding and City National and by the shareholders of
City Holding and City National, and City Holding and City National
shall have full power and right to merge with Horizon and the Horizon
Banks, respectively, on the terms provided herein.
(c) Opinion of Counsel. Horizon and the Horizon Banks shall
have received an opinion of Hunton & Williams, counsel to City Holding
and City National, dated the Closing Date and satisfactory in form and
substance to counsel to Horizon and the Horizon Banks, in the form
attached hereto as Exhibit J.
(d) The Registration Statement. The Registration Statement
shall be effective under the 1933 Act and City Holding shall have
received all state securities laws or "blue sky" permits and other
authorizations or there shall be exemptions from registration
requirements necessary to offer and issue the City Holding Common Stock
in connection with the Holding Company Merger, and neither the
Registration Statement nor any such permit, authorization or exemption
shall be subject to a stop order or threatened stop order by the SEC or
any state securities authority.
(e) Tax Opinion. Horizon and the Horizon Banks shall have
received, in form and substance reasonably satisfactory to them, an
opinion of Jackson & Kelly to the effect that, for federal income tax
purposes, each of the Holding Company Merger and the Bank Mergers will
qualify as a "reorganization" under Section 368(a) of the 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
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Banks' assets to City National in exchange for the assumption of the
Horizon Banks' liabilities and in constructive exchange for City
National stock (but the Horizon Banks or City National may be required
to include certain amounts in income as a result of the termination of
any bad-debt reserve maintained by the Horizon Banks for federal income
tax purposes and other possible required changes in tax accounting
methods) or (b) upon the constructive distribution of such City
National stock to City Holding; no taxable gain will be recognized by a
Horizon shareholder on the exchange by such shareholder of shares of
Horizon Common Stock solely for shares of City Holding Common Stock
(including any fractional share interest) in the Holding Company
Merger; a Horizon common shareholder's basis in City Holding Common
Stock (including any fractional share interest) received in the Holding
Company Merger will be the same as the shareholder's basis in the
Horizon Common Stock surrendered in exchange therefor; the holding
period of such City Holding Common Stock (including any fractional
share interest) for a Horizon shareholder will include the holding
period of the Horizon Common Stock surrendered in exchange therefor, if
such Horizon Common Stock is held as a capital asset by the shareholder
at the Effective Time of the Holding Company Merger; and a Horizon
common shareholder who receives cash in lieu of a fractional share of
City Holding Common Stock will recognize gain or loss equal to any
difference between the amount of cash received and the shareholder's
basis in the fractional share interest.
(f) Regulatory Approvals. All required approvals from federal
and state regulatory authorities having jurisdiction to permit Horizon
and the Horizon Banks to consummate the Transaction and to permit City
Holding to issue City Holding Common Stock to Horizon shareholders
shall have been received. No temporary restraining order, preliminary
or permanent injunction or other order by and Federal or state court in
the United States which prevents the consummation of the Transaction
shall have been issued and remain in effect.
(g) Nasdaq Listing. The shares of City Holding Common Stock to
be issued in the Holding Company Merger shall have been approved for
listing, upon notice of issuance, on the Nasdaq Stock Market.
(h) Acceptance by Horizon Counsel. The form and substance of
all legal matters contemplated hereby and of all papers delivered
hereunder shall be reasonably acceptable to counsel for Horizon.
(i) Letters from Accountants. Horizon and the Horizon Banks
shall have received letters from Ernst & Young, LLP, independent
accountants for City Holding and Horizon, dated within two business
days of the Closing Date and in form and substance reasonably
satisfactory to Horizon and the Horizon Banks to the effect that for
financial
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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.
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
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effective (the "Effective Time of the Holding Company Merger") and the Bank
Mergers shall become effective at the times the respective Articles of Merger
filed with the applicable governmental authorities are made effective (the
"Effective Time of the Bank Mergers").
ARTICLE VIII
TERMINATION; SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
COVENANTS; WAIVER AND AMENDMENT
8.1. Termination.
This Agreement shall be terminated, and the Transaction
abandoned, if the shareholders of City Holding or Horizon shall not have given
the approval required by Section 4.2. Notwithstanding such approval by such
shareholders, this Agreement may be terminated at any time prior to the
Effective Time of the Holding Company Merger, by:
(a) The mutual consent of City Holding and Horizon, as
expressed by their respective Boards of Directors;
(b) Either City Holding or Horizon, as expressed by their
respective Boards of Directors, if the Holding Company Merger has not
occurred by March 31, 1999, provided that the failure of the Holding
Company Merger to so occur shall not be due to a willful breach of any
representation, warranty, covenant or agreement by the party seeking to
terminate this Agreement;
(c) By City Holding in writing authorized by its Board of
Directors if Horizon or the Horizon Banks has, or by Horizon in writing
authorized by its Boards of Directors, if City Holding or City National
has, in any material respect, breached (i) any covenant or agreement
contained herein, or (ii) any representation or warranty contained
herein, in any case if such breach has not been cured by the earlier of
30 days after the date on which written notice of such breach is given
to the party committing such breach or the Closing Date; provided, that
it is understood and agreed that either party may terminate this
Agreement on the basis of any such material breach of any
representation or warranty which is not cured within 30 days of written
notice thereof contained herein notwithstanding any qualification
therein relating to the knowledge of the other party;
(d) Either City Holding or Horizon, as expressed by their
respective Boards of Directors, in the event that any of the conditions
precedent to the obligations of such parties to consummate the
Transaction have not been satisfied or fulfilled or waived by the party
entitled to so waive on or before the Closing Date, provided that no
party shall be entitled to terminate this Agreement pursuant to this
subparagraph (d) if the condition precedent or conditions precedent
which provide the basis for termination can reasonably
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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.
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
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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.
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9.2. Employee Matters.
(a) Severance Benefits. City Holding or City National will pay
a severance benefit to each person, other than those persons who have
employment agreements with City Holding or City National, who is an
employee of City Holding, City National, Horizon, the Horizon Banks or
any of their subsidiaries at the Effective Time of the Holding Company
Merger and who is terminated without cause within six months after the
Effective Time of the Holding Company Merger. The amount of such
severance benefit will equal one week, in the case of hourly employees,
and two weeks, in the case of salaried employees, of such employee's
base pay (as in effect immediately before the Effective Time of the
Holding Company Merger) for each full year of service up to 52 weeks
base pay, provided, however, that the severance benefit shall not be
less than three weeks of base pay. Such severance benefit shall be in
lieu of any other severance benefit otherwise to be provided to such
employees.
(b) Employee Benefits for Transferred Employees. All employees
of Horizon or the Horizon Banks immediately prior to the Effective Time
of the Holding Company Merger who are employed by City Holding, City
National or another City Holding subsidiary immediately following the
Effective Time of the Holding Company Merger ("Transferred Employees")
will be covered by City Holding's employee benefit plans as to which
they are eligible based on their length of service, compensation, job
classification, and position, including, where applicable, any
incentive compensation plan. Notwithstanding the foregoing, City
Holding may determine to continue any of the Horizon or the Horizon
Banks benefit plans for Transferred Employees in lieu of offering
participation in City Holding's benefit plans providing similar
benefits (e.g., medical and hospitalization benefits), to terminate any
of the Horizon or the Horizon Banks benefit plans, or to merge any such
benefit plans with City Holding's benefit plans. Except as specifically
provided in this Section 9.2 and as otherwise prohibited by law,
Transferred Employees' service with Horizon or the Horizon Banks which
is recognized by the applicable benefit plan of Horizon or the Horizon
Banks at the Effective Time of the Holding Company Merger shall be
recognized as service with City Holding for purposes of eligibility to
participate and vesting, if applicable (but not for purposes of benefit
accrual) under the corresponding City Holding benefit plan, if any,
subject to applicable break-in-service rules.
(c) Advisory Directors. Following the Effective Time of the
Holding Company Merger, City Holding agrees to appoint members of the
Board of Directors of Raleigh, Summers, Greenbrier, Marlinton and
Twentieth as advisory directors of City National, but this undertaking
shall not create any obligation on City Holding's part to appoint any
particular director as an advisory director for any particular term.
City Holding agrees, for three years from the Effective Time of the
Holding Company Merger,
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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.
(d) 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.
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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
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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.
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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
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Exhibit 2
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of August 7, 1998, between HORIZON
BANCORP, INC., a West Virginia corporation ("Issuer"), and CITY HOLDING COMPANY,
a West Virginia corporation ("Grantee").
WITNESSETH:
WHEREAS, as a condition to, and contemporaneous with the execution of
an Agreement and plan of Reorganization (the "Agreement") whereby Grantee will
merge with Issuer (the "Merger"), and in consideration therefor, the parties are
entering into this Stock Option Agreement pursuant to which Issuer has agreed to
grant Grantee the Option (as hereinafter defined):
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and Agreement set forth herein and in the Agreement, the parties
hereto agree as follows:
1. (a) Issuer hereby grants to Grantee an unconditional, irrevocable
option (the "Option") to purchase, subject to the terms hereof, up to 1,853,262
fully paid and nonassessable shares of common stock, par value $1.00 ("Common
Stock"), of Issuer at a price of $42.375 per share (such price, as adjusted if
applicable, the "Option Price"); provided however that in no event shall the
number of shares of Common Stock for which this Option is exercisable exceed
19.9% of the Issuer's issued and outstanding common shares without giving effect
to any shares subject to or issued pursuant to the Option. The number of shares
of Common Stock that may be received upon the exercise of the Option and the
Option Price are subject to adjustment as herein set forth.
(b) If any additional shares of Common Stock are issued or
otherwise become outstanding after the date of this Stock Option Agreement
(other than pursuant to this Stock Option Agreement), the number of shares of
Common Stock subject to the Option shall be increased so that, after such
issuance such number equals 19.9% of the number of shares of Common Stock then
issued and outstanding without giving effect to any shares subject to or issued
pursuant to the Option. Nothing contained in this Section l(b) or elsewhere in
this Stock Option Agreement shall be deemed to authorize Issuer or Grantee to
breach any provision of the Agreement.
2. (a) The Holder (as hereinafter defined) may exercise the Option, in
whole or part, if, but only if, both an Initial Triggering Event (as hereinafter
defined) and a Subsequent Triggering Event (as hereinafter defined) shall have
occurred prior to the occurrence of an Exercise Termination Event (as
hereinafter defined), provided that the Holder shall have sent the written
notice of such exercise (as provided in subsection (e) of this Section 2) within
90 days following such Subsequent Triggering Event (or such later date as
provided in Section 10). Each of the following shall be an "Exercise Termination
Event": (i) the Effective Time of the Merger; (ii) termination of the Agreement
in accordance with the provisions thereof (other than a termination resulting
from a willful breach by Issuer of a provision of the Agreement) if such
termination occurs prior to the
<PAGE>
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);
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(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.
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(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
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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
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the loss, theft, destruction or mutilation of this Stock Option Agreement, and
(in the case of loss, theft or destruction) of reasonably satisfactory
indemnification, and upon surrender and cancellation of this Stock Option
Agreement, if mutilated, Issuer will execute and deliver a new Stock Option
Agreement of like tenor and date. Any such new Stock Option Agreement executed
and delivered shall constitute an additional contractual obligation on the part
of Issuer, whether or not the Stock Option Agreement so lost, stolen, destroyed
or mutilated shall at any time be enforceable by anyone.
5. In addition to the adjustment in the number of shares of Common
Stock that are purchasable upon exercise of the Option pursuant to Section 1 of
this Stock Option Agreement, the number of shares of Common Stock purchasable
upon the exercise of the Option shall be subject to adjustment from time to time
as provided in this Section 5.
(a) In the event of any change in Common Stock by reason of
stock dividends, split-ups, mergers, recapitalizations, combinations,
subdivisions, conversions, exchanges of shares or the like, the type and number
of shares of Common Stock purchasable upon exercise hereof shall be
appropriately adjusted.
(b) Whenever the number of shares of Common Stock purchasable
upon exercise hereof is adjusted as provided in this Section 5, the Option Price
shall be adjusted by
multiplying the Option Price by a fraction, the numerator of which shall be
equal to the number of shares of Common Stock purchasable prior to the
adjustment and the denominator of which shall be equal to the number of shares
of Common Stock purchasable after the adjustment.
6. Upon the occurrence of a Subsequent Triggering Event that occurs
prior to an Exercise Termination Event, Issuer shall, at the request of Grantee
delivered within 90 days (or such later date as may be provided pursuant to
Section 10) of such Subsequent Triggering Event (whether on its own behalf or on
behalf of any subsequent holder of this Option (or part thereof) or any of the
shares of Common Stock issued pursuant hereto), promptly prepare, file and keep
current a shelf registration statement under the 1933 Act covering any shares
issued and issuable pursuant to this Option and shall use its reasonable best
efforts to cause such registration statement to become effective and remain
current in order to permit the sale or other disposition of any shares of Common
Stock issued upon total or partial exercise of this Option ("Option Shares") in
accordance with any plan of disposition requested by Grantee. Issuer will use
its reasonable best efforts to cause such registration statement first to become
effective and then to remain effective for such period not in excess of 180 days
from 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
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any such Holder in connection with such registration, Issuer shall become a
party to any underwriting agreement relating to the sale of such shares, but
only to the extent of obligating itself in respect of representations,
warranties, indemnities and other Agreements customarily included in such
underwriting Agreements. The foregoing notwithstanding, if, at the time of any
request by Grantee for registration of Option Shares as provided above, Issuer
is in the process of registration with respect to an underwritten public
offering of shares of Common Stock, and if in the good faith judgment of the
managing underwriter or managing underwriters, or, if none, the sole underwriter
or underwriters, of such offering the inclusion of the Holder's Option or Option
Shares would interfere with the successful marketing of the shares of Common
Stock offered by Issuer, the number of Option Shares otherwise to be covered in
the registration statement contemplated hereby may be reduced; provided,
however, that after any such required reduction the number of Option Shares to
be included in such offering for the account of the Holder shall constitute at
least 25% of the total number of shares to be sold by the Holder and Issuer in
the aggregate; provided further, however, that if such reduction occurs, then
the Issuer shall file a registration statement for the balance as promptly as
practical and no reduction shall thereafter occur. Each such Holder shall
provide all information reasonably requested by Issuer for inclusion in any
registration statement to be filed hereunder. Upon receiving any request under
this Section 6 from any Holder, Issuer agrees to send a copy thereof to any
other person known to Issuer to be entitled to registration rights under this
Section 6, in each case by promptly mailing the same, postage prepaid, to the
address of record of the persons entitled to receive such copies.
7. (a) At any time after the occurrence of a Repurchase Event (as
defined below) (i) at the request of the Holder, delivered prior to an Exercise
Termination Event (or such later period as may be provided pursuant to Section
10); Issuer (or any successor thereto) shall repurchase the Option from the
Holder at a price (the "Option Repurchase Price") equal to the amount by which
(A) the market/offer price (as defined below) exceeds (B) the Option Price,
multiplied by the number of shares for which this Option may then be exercised
and (ii) at the request of the owner of Option Shares from time to time (the
"Owner"), delivered prior to an Exercise Termination Event (or such later period
as may be provided pursuant to Section 10), Issuer (or any successor thereto)
shall repurchase such number of the Option Shares from the Owner as the Owner
shall designate at a price (the "Option Share Repurchase Price") equal to the
market/offer price multiplied by the number of Option Shares so designated. The
term "market/offer price" shall mean the highest of (i) the price per share of
Common Stock at which a tender offer or exchange offer therefor has been made
after the date hereof, (ii) the price per share of Common Stock to be paid by
any third party pursuant to an agreement with Issuer, (iii) the highest closing
price for shares of Common Stock within the six-month period immediately
preceding the date the Holder gives notice of the required repurchase of this
Option or the Owner gives notice of the required repurchase of Option Shares, as
the case may be, or (iv) in the event of a sale of all or substantially all of
Issuer's assets, the sum of the price paid in such sale for such assets and the
current market value of the remaining assets of Issuer as determined by a
nationally recognized investment banking firm selected by the Holder or the
Owner, as the case may be, divided by the number of shares of Common Stock of
Issuer outstanding at the time of such sale. In determining the market/offer
price, the value of consideration other than cash shall be determined by a
nationally recognized investment banking firm selected by the Holder or Owner,
as the case may be, and reasonably acceptable to the Issuer, whose determination
shall be conclusive and binding on all parties.
(b) The Holder or the Owner, as the case may be, may exercise
its right to require Issuer to repurchase the Option and any Option Shares
pursuant to this Section 7 by surrendering for such purpose to Issuer, at its
principal office, a copy of this Stock Option Agreement or certificates for
Option Shares, as applicable, accompanied by a written notice or notices stating
that the Holder or the Owner, as the case may be, elects to require Issuer to
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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%.
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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 of Common Stock for which the Option is then
exercisable, divided by the Average Price. The exercise price of the Substitute
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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
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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.
(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.
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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.
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15. If any term, provision, covenant or restriction contained in this
Stock Option Agreement is held by a court or a federal or state regulatory
agency of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms, provisions and covenants and restrictions contained in
this Stock Option Agreement shall remain in full force and effect, and shall in
no way be affected, impaired or invalidated. If for any reason such court or
regulatory agency determines that the Holder is not permitted to acquire, or
Issuer is not permitted to repurchase pursuant to Section 7, the full number of
shares of Common Stock provided in Section 1(a) hereof (as adjusted pursuant to
Sections 1(b) or 5 hereof), it is the express intention of Issuer to allow the
Holder to acquire or to require Issuer to repurchase such lesser number of
shares as may be permissible, without any amendment or modification hereof.
16. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in person, by
cable, telegram, telecopy or telex, or by registered or certified mail (postage
prepaid, return receipt requested) at the respective addresses of the parties
set forth in the Agreement.
17. This Stock Option Agreement shall be governed by and construed in
accordance with the laws of the State of West Virginia, regardless of the laws
that might otherwise govern under applicable principles of conflicts of laws
thereof.
18. This Stock Option Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
19. Except as otherwise expressly provided herein, each of the parties
hereto shall bear and pay all costs and expenses incurred by it or on its behalf
in connection with the transactions contemplated hereunder, including fees and
expenses of its own financial consultants, investment bankers, accountants and
counsel.
20. Except as otherwise expressly provided herein or in the Agreement,
this Stock Option Agreement contains the entire agreement between the parties
with respect to the transactions contemplated hereunder and supersedes all prior
arrangements or understandings with respect thereof, written or oral. The terms
and conditions of this Stock Option Agreement shall inure to the benefit of and
be binding upon the parties hereto and their respective successors and permitted
assigns. Nothing in this Stock Option Agreement, expressed or implied, is
intended to confer upon any party, other than the parties hereto, and their
respective successors except as assigns, any rights, remedies, obligations or
liabilities under or by reason of this Stock Option Agreement, except as
expressly provided herein.
21. Terms used in this Stock Option Agreement and not defined herein
but defined in the Agreement shall have the meanings assigned thereto in the
Agreement.
[signatures follow on separate pages]
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<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Stock Option
Agreement to be executed on its behalf by their officers thereunto duly
authorized, all as of the date first above written.
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
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