-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, T1L07be03DQiA6JaPQXcosH+dO2oNErs6kwww+21LgEotPaTtcBOamRs7ZAc7RKq x2barQ4pVs4OKI4bj3haxQ== 0000950128-98-000992.txt : 19980818 0000950128-98-000992.hdr.sgml : 19980818 ACCESSION NUMBER: 0000950128-98-000992 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19980817 SROS: NASD SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: CITY HOLDING CO CENTRAL INDEX KEY: 0000726854 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 550619957 STATE OF INCORPORATION: WV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: SEC FILE NUMBER: 005-54501 FILM NUMBER: 98693005 BUSINESS ADDRESS: STREET 1: 3601 MACCORKLE AVE SE CITY: CHARLESTON STATE: WV ZIP: 25304 BUSINESS PHONE: 3049256611 MAIL ADDRESS: STREET 1: 3601 MACCORKLE AVE SE CITY: CHARLESTON STATE: WV ZIP: 25301 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: HORIZON BANCORP INC /WV/ CENTRAL INDEX KEY: 0000730025 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 550631939 STATE OF INCORPORATION: WV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: ONE PARK AVE STREET 2: BOX D CITY: BECKLEY STATE: WV ZIP: 25802-2803 BUSINESS PHONE: 3042557000 MAIL ADDRESS: STREET 1: ONE PARK AVE STREET 2: BOX D CITY: BECKLEY STATE: WV ZIP: 25802 FORMER COMPANY: FORMER CONFORMED NAME: RALEIGH BANKSHARES INC DATE OF NAME CHANGE: 19850530 SC 13D 1 CITY HOLDING COMPANY 1 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 PUSUANT TO CITY HOLDING COMPANY -------------------- (Name of Issuer) COMMON STOCK ($2.50 par value per share) ------------------------------ (Title of Class of Securities) 177835-105 ---------- (CUSIP Number) Copies to: Frank S. Harkins, Jr. Chairman of the Board and Charles D. Dunbar Chief Executive Officer Elizabeth Osenton Lord, Esquire Horizon Bancorp, Inc. Jackson & Kelly One Park Avenue 1600 Laidley Tower P.O. Box D P.O. Box 553 Beckley, West Virginia 25802 Charleston, West Virginia 25322 Telephone No. (304) 255-7000 Telephone No. (304) 340-1000 - -------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) 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. [ ] 2 SCHEDULE 13D CUSIP NO. 172853-20-2 - ----------------------------------------------------------------------------- (1) Name of Reporting Person: Horizon Bancorp, Inc., EIN 55-0631939 - ----------------------------------------------------------------------------- (2) Check the Appropriate Box if a Member of a Group (a) [ ] (b) [X] - ----------------------------------------------------------------------------- (3) SEC Use Only - ----------------------------------------------------------------------------- (4) Source of Funds*: WC - ----------------------------------------------------------------------------- (5) Check Box if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(e) [ ] - ----------------------------------------------------------------------------- (6) Citizenship or Place of Organization: West Virginia - ----------------------------------------------------------------------------- Number of (7) Sole Voting Power: 1,334,095* Shares Bene- -------------------------------------------------------- ficially (8) Shared Voting Power: - 0 - Owned by -------------------------------------------------------- Each Report- (9) Sole Dispositive Power: 1,334,095* ing Person -------------------------------------------------------- With (10) Shared Dispositive Power: - 0 - - ----------------------------------------------------------------------------- (11) Aggregate Amount Beneficially Owned by Each Reporting Person: 1,334,095* - ----------------------------------------------------------------------------- (12) Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares* [ ] - ----------------------------------------------------------------------------- (13) Percent of Class Represented by Amount in Row (11): 16.53%** - ----------------------------------------------------------------------------- (14) Type of Reporting Person: HC, CO * Beneficial ownership of 1,334,095 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. Horizon Bancorp, Inc., expressly disclaims beneficial ownership of such shares. ** Assumes a total of 8,066,827 shares outstanding, adjusted to reflect the issuance of the full amount of common stock pursuant to the Stock Option Agreement. 3 Item 1. Security and Issuer. This statement relates to the Reporting Person's beneficial ownership of 1,334,095 shares of the Common Stock, $2.50 par value per share ("City Common Stock") of City Holding Company, a West Virginia corporation ("City Holding"). The principal address of City Holding is 25 Gatewater Road, Cross Lanes, West Virginia 25313. Item 2. Identity and Background (a),(f) The Reporting Person is Horizon Bancorp, Inc., a West Virginia corporation registered as a bank holding company under the Bank Holding Company Act of 1956, as amended ("Horizon"). (b) The Reporting Person's principal business is banking and related services. Horizon's banking subsidiaries 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 providing trust services; by supplying credit card services as a licensee; 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 One Park Avenue, P. O. Box D, Beckley, West Virginia 25802. The name, address and present principal occupation of each executive officer and director of the Reporting Person are set forth in Appendix 1 hereto, which is incorporated herein by reference. To the best of the Reporting Person's knowledge, each of the persons listed in Appendix 1 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. -3- 4 Item 3. Source and Amount of Funds or Other Consideration. As more fully described in Item 4, City Holding has granted to Horizon an option pursuant to which Horizon has the right, upon the occurrence of certain events (none of which has occurred), to purchase up to 1,334,095 shares of common stock of City Holding, par value $2.50 ("City Common Stock") (subject to adjustment in certain circumstances) at a price per share equal to $41.25 (the "Option"). Certain terms of the Option are summarized in Item 4. If the Option were exercisable and Horizon were to exercise the Option on the date hereof, the funds required to purchase the shares of City Common Stock issuable upon such exercise would be $55,031,418.75. It is currently anticipated that such funds would be derived from working capital. 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 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 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 Common Stock, any dividend payable in City Common Stock, or any capital reorganization involving the reclassification of City 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 of the issuance of City Common Stock pursuant to the Agreement. -4- 5 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". 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 Philip 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, City Holding granted Horizon an option to purchase, subject to adjustments in certain circumstances, up to 1,334,095 fully paid and non-assessable shares of City Common Stock (the "Option Shares") at a price per share equal to $41.25. 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 City Holding to purchase up to 1,853,262 fully paid and non-assessable shares of Horizon Common Stock, par value $1.00 at a price of $42.375 per share on substantially the same terms as the Option Agreement. Subject to applicable law and regulatory restrictions, Horizon 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) City Holding or any significant subsidiary of City Holding without having received Horizon'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 Section 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 Horizon or any of its subsidiaries (each a "Horizon Subsidiary") or the board of directors of City Holding shall have recommended that the shareholders of City Holding approve or accept any Acquisition Transaction other than as contemplated by the Agreement. For -5- 6 purposes of the Stock Option Agreement, "Acquisition Transaction" shall mean (a) a merger, consolidation or share exchange involving City Holding or any significant subsidiary of City Holding, provided, however, that in no event shall (i) any merger, consolidation or share exchange involving only City Holding and one or more of the subsidiaries of City Holding, or involving only any two or more of such subsidiaries of City Holding be deemed to be an Acquisition Transaction, or (ii) any merger, consolidation or share exchange (A) in which City Holding is the surviving entity, or (B) as to which the shareholders of City Holding 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 City Holding 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 City Holding; (ii) The board of directors of City Holding does not recommend that the shareholders of City Holding approve the Agreement or publicly withdraws or modifies, or publicly announces its intention to withdraw or modify, in any manner adverse to Horizon, its recommendation that its shareholders approve the Agreement; (iii) Any person other than Horizon or any Horizon Subsidiary or any City Holding 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 City Common Stock (the term "beneficial ownership" for purposes of this Stock Option Agreement having the meaning assigned thereto in Section 13(d) of the 1934 Act, and the rules and regulations thereunder); (iv) Any person other than Horizon or any Horizon Subsidiary shall have made a bona fide proposal to City Holding 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 City Holding or its shareholders to engage in an Acquisition Transaction, City Holding shall have breached any covenant or obligation contained in the Agreement and such breach (x) would entitle Horizon to terminate the Agreement and (y) shall not have been cured prior to the Notice Date (as defined below); -6- 7 (vi) Any person other than Horizon or any Horizon Subsidiary, other than in connection with a transaction to which Horizon has given its prior written consent, shall have filed an application or notice with The Board of Governors of the Federal Reserve System (the "FSB") 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 City Holding 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 Horizon or any Horizon Subsidiary) shall have made, or disclosed an intention to make, a proposal to engage in an Acquisition Transaction; or (viii) Any person other than Horizon or any Horizon 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 Horizon or any Horizon Subsidiary or any City Holding 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) 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 Merger Agreement in accordance with the provisions thereof (other than a termination resulting from a willful breach by City Holding 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 Horizon pursuant to Section 8.1(h) thereof resulting from a willful breach by City Holding of a provision of the Agreement. -7- 8 As provided in the Option Agreement, if Horizon is entitled to and wishes to exercise the Option, it is obligated to send to City Holding 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 Federal Reserve System or any other governmental authority, regulatory or administrative agency or commission, domestic or foreign (a "Governmental Entity"), is required in connection with such purchase, Horizon 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. Certain regulatory approvals may be required before an acquisition of City 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, Horizon, 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 City Common Stock purchased upon the exercise of the Option may be resold by Horizon pursuant to registration rights under the Option Agreement. In the event of any change in the City 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 City Common Stock purchasable upon exercise of the Option will be appropriately adjusted. Whenever the number of shares of City 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 City Common Stock purchasable prior to the adjustment and the denominator of which shall be equal to the number of shares of City 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), City Holding (or any successor thereto) must repurchase the Option from the Holder at 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 -8- 9 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), City Holding (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. The term "market/offer price" means the highest of (i) the price per share of City Common Stock at which a tender offer or exchange offer therefor has been made after the date hereof, (ii) the price per share of City Common Stock to be paid by any third party pursuant to an Agreement with City Holding, (iii) the highest closing price for shares of City 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 City Holding's assets, the sum of the price paid in such sale for such assets and the current market value of the remaining assets of City Holding 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 City Common Stock outstanding at the time of such sale. In determining the market/offer price, the value of consideration other than cash will be determined by a nationally recognized investment banking firm selected by the Holder or Owner, as the case may be, and reasonably acceptable to City Holding, 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 Horizon or any Horizon Subsidiary) of beneficial ownership of 50% or more of the then outstanding City Common Stock; or (ii) the consummation of any Acquisition Transaction, except that the percentage referred to in clause (c) shall be 50%. If, prior to an Exercise Termination Event, City Holding enters into an agreement (i) to consolidate with or merge into any person, other than Horizon 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 Horizon or one of its subsidiaries, to merge into City Holding and City Holding is continuing or surviving the corporation, but, in connection with such merger, the then outstanding shares of City 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 City 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 Horizon 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 -9- 10 (x) the Acquiring Corporation (as defined in the Option Agreement) or (y) any person that controls the Acquiring Corporation. Copies of the Option Agreement and the Merger 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. Purchase of Common Stock. Subject to market conditions and developments with respect to the Merger, Horizon may purchase shares of City Common Stock in the open market or in privately negotiated transactions. Item 5. Interest in Equity Securities of the Issuer. (a) Horizon may be deemed to be the beneficial owner of the Option Shares. As provided in the Option Agreement, Horizon 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 16.53% of the currently outstanding City Common Stock (after giving effect to the issuance of such Option Shares). Horizon has no right to vote or dispose of the shares of City Common Stock subject to the Option unless and until such time as the Option is exercised. To the best knowledge of Horizon, none of the persons listed in Schedule I hereto beneficially owns any shares of City Common Stock. (b) If Horizon 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 City Common Stock covered thereby. (c) Horizon acquired the Option in connection with the Agreement. See Item 4 hereof. To the best knowledge of Horizon, none of the persons listed in Schedule I hereto has effected any transactions in City 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 Horizon 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 City Holding, -10- 11 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. Item 7. Material to be Filed as Exhibits. The following are attached hereto: Exhibit 1 Agreement and Plan or 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. -11- 12 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. Dated: August 17, 1998 By: /s/ FRANK S. HARKINS, JR. --------------- ------------------------------ Frank S. Harkins, Jr. Chairman of the Board and Chief Executive Oficer -12- 13 APPENDIX I DIRECTORS AND EXECUTIVE OFFICERS OF HORIZON BANCORP, INC. The names, addresses and present principal occupations of the directors and executive officers of Horizon Bancorp, Inc., are set forth below. If no business address is given, the director's or officer's business address is P. O. Box D, One Park Avenue, Beckley, West Virginia 25802. The business address of each of the directors of Horizon is also the business address of such director's employer, if any. Directors of Horizon are identified by an asterisk. Unless otherwise indicated, all directors and officers listed below are citizens of the United States.
- --------------------------------------------------------------------------------------------------------------- PRESENT PRINCIPAL NAME OCCUPATION OR EMPLOYMENT ADDRESS - --------------------------------------------------------------------------------------------------------------- John M. Alderson, IV * Retired Claims Agent-State Farm J. M. Alderson Store Insurance Company, Lewisburg, WV; Alderson, WV 24910 Owner-J. M. Alderson Store, Alderson, WV (Retail); Director- Allegheny Bankshares Corporation, Lewisburg, WV (Until 1993); Director-The First National Bank of Alderson, Alderson, WF; Director- Greenbrier Valley National Bank, Lewisburg, WV - --------------------------------------------------------------------------------------------------------------- Jack G. Bazemore * President-Jabo Supply Corporation, Jabo Supply Corporation Huntington, WV; Director-The P. O. Box 238 Twentieth Street Bank, Inc., Huntington, WV 25707-0238 Huntington, WV; Director-Twentieth Bancorp, Inc., Huntington, WV (Until 1996) - --------------------------------------------------------------------------------------------------------------- Joseph M. Blankenship * Director, President and Chief The National Bank of Summers Executive Officer-National Bank of of Hinton Summers of Hinton, Hinton, WV; P. O. Box 220 Assistant Vice President and Branch Hinton, WV 25951 Manager-National Bank of Summers of Hinton, Hinton, WV (Until 1997) - --------------------------------------------------------------------------------------------------------------- Phillip W. Cain * Executive Vice President, Chief First National Bank in Marlinton Executive Officer and Director- P. O. Box 58 First National Bank in Marlinton, Marlinton, WV 24954-0058 Marlinton, WV - ---------------------------------------------------------------------------------------------------------------
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- --------------------------------------------------------------------------------------------------------------- PRESENT PRINCIPAL NAME OCCUPATION OR EMPLOYMENT ADDRESS - --------------------------------------------------------------------------------------------------------------- William C. Dolin * President- Dolin Supply Company, Dolin Supply Company Huntington, WV; President-WD P. O. Box 2467 Investments Company, Huntington, Huntington, WV 25725-2467 WV; President-Safety Supply, Huntington, WV; Partner-Landco, a Limited Partnership; Director-The Twentieth Street Bank, Inc., Huntington, WV; Director-Twentieth Bancorp, Inc., Huntington, WV (Until 1996) - --------------------------------------------------------------------------------------------------------------- W. H. File, III * Partner- File, Payne, Scherer & File, File, Payne, Scherer & File Beckley, WV (Law Firm); Director- P. O. Drawer L Bank of Raleigh, Beckley, WV Beckley, WV 25802 - --------------------------------------------------------------------------------------------------------------- David W. Hambrick * President and Chief Operating Greenbrier Valley National Bank Officer-Allegheny Bankshares P. O. Box 387 Corporation, Lewisburg, WV (Until Lewisburg, WV 24901 1993); Executive Vice President-Greenbrier Valley National Bank, Lewisburg, WV; Director-First National Bank in Marlinton, Marlinton, WV; Executive Vice President-Horizon Bancorp, Inc., Beckley, WV; Chief Financial Officer-Horizon Bancorp, Inc., Beckley, WV (Until 1996) - --------------------------------------------------------------------------------------------------------------- Frank S. Harkins, Jr. * Chairman of the Board and Chief Horizon Bancorp, Inc. Executive Officer-Horizon Bancorp, P. O. Box D Inc.; Director-National Bank of Beckley, WV 25802 Summers of Hinton, Hinton, WV; Director-Greenbrier Valley National Bank, Lewisburg, WV; Director, President and Chief Executive Officer-Bank of Raleigh, Beckley, WV; Director-The Twentieth Street Bank, Inc., Huntington, WV - ---------------------------------------------------------------------------------------------------------------
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- --------------------------------------------------------------------------------------------------------------- PRESENT PRINCIPAL NAME OCCUPATION OR EMPLOYMENT ADDRESS - --------------------------------------------------------------------------------------------------------------- Tracy W. Hylton, II * President-Eller, Inc., Beckley, WV Box 1109 (Surface Mining); President-Nell Jean Beckley, WV 25802-1109 Industries, Inc., Mabscott, WV (Mine Supply); President-Upper Laurel Company, Skelton, WV; President-New Land Leasing Company, Inc., Skelton, WV; President-MIN, Inc., Beckley, WV (Surface Mining); President-Gracie, Inc., Mabscott, WV (Land Leasing); President-Tammie Lynn Coal Company, Inc., Skelton, WV (Surface Mining); Vice President-Nell Jean Enterprises, Beckley, WV (Retail); President-Lightning, Inc., Skelton, WV (Land Leasing); President-Patience, Inc., Skelton, WV (Surface Mining); Member- T & M LLC, Beckley, WV; Member Manager-Harper Hotel LLC, Beckley, WV; Director-Bank of Raleigh, Beckley, WV - --------------------------------------------------------------------------------------------------------------- Robert L. Kosnoski * President-Mountaineer Parts & Mountaineer Parts & Repair, Inc. Repair, Inc., Mt. Hope, WV; Rt. 2, Box 264-D President-Beckley Flying Service, Mt. Hope, WV 25880-9680 Beckley, WV; President-Paint Creek Coal Co., Mt. Hope, WV (Coal Mining); President-BLK, Inc.; Director-Bank of Raleigh, Beckley, WV - --------------------------------------------------------------------------------------------------------------- Thomas E. Lilly * Chairman and Chief Executive Lilly's Crown Jewelers Officer-Lilly's Crown Jewelers Corporation Corporation, Beckley, WV (Retail P. O. Box 1164 Jewelry); Partner-J.T.J. Limited Beckley, WV 25801 Liability Company, Beckley, WV; Director-Bank of Raleigh, Beckley, WV - ---------------------------------------------------------------------------------------------------------------
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- --------------------------------------------------------------------------------------------------------------- PRESENT PRINCIPAL NAME OCCUPATION OR EMPLOYMENT ADDRESS - --------------------------------------------------------------------------------------------------------------- Clarence E. Martin * Executive Vice President-Arthur's P. O. Box 5397 Enterprises, Inc., Huntington, WV; Huntington, WV 25703 Chief Executive Officer and Chief Financial Officer-State Electric Supply, Huntington, WV; Executive Vice President-Service Wire Co., Huntington, WV; Director-The Twentieth Street Bank, Inc., Huntington, WV; Director-Twentieth Bancorp, Inc., Huntington, WV (1994-1996) - --------------------------------------------------------------------------------------------------------------- Carolyn H. McCulloch * Director and Chairman of the Board- 536 Woodlawn Avenue Bank of Raleigh, Beckley, WV; Beckley, WV 25801 - --------------------------------------------------------------------------------------------------------------- B. C. McGinnis, III * President-Twentieth Bancorp, Inc., Twentieth Street Bank Huntington, WV (Director 1983- P. O. Box 5527 1996); President and Director-The Huntington, WV 25703-0527 Twentieth Street Bank, Inc., Huntington, WV; Executive Vice President-Horizon Bancorp, Inc., Beckley, WV - --------------------------------------------------------------------------------------------------------------- Thomas L. McGinnis * Vice President and Director (Until Twentieth Street Bank 1996)-Twentieth Bancorp, Inc., P. O. Box 5527 Huntington, WV; Executive Vice Huntington, WV 25703-0527 President and Director-The Twentieth Street Bank, Inc., Huntington, WV - --------------------------------------------------------------------------------------------------------------- Philip L. McLaughlin * President and Chief Operating Horizon Bancorp, Inc. Officer-Horizon Bancorp, Inc., P. O. Box D Beckley, WV; Director, Chairman of Beckley, WV 25802 the Board and Chief Executive Officer-Allegheny Bankshares Corporation, Lewisburg, WV (Until 1993); Director, President and Chief Executive Officer-Greenbrier Valley National Bank, Lewisburg, WV; Director-First National Bank in Marlinton, Marlinton, WV; Director- Bank of Raleigh, Beckley, WV; Director-The Twentieth Street Bank, Inc., Huntington, WV - ---------------------------------------------------------------------------------------------------------------
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- --------------------------------------------------------------------------------------------------------------- PRESENT PRINCIPAL NAME OCCUPATION OR EMPLOYMENT ADDRESS - --------------------------------------------------------------------------------------------------------------- Harper W. Nelson * Vice President and Secretary- Marlinton Electric Co., Inc., Marlinton, WV (Petroleum); Director- WV Petroleum Marketers Association, Marlinton, WV (Marketer of Petroleum); Director- First National Bank of Marlinton, Marlinton, WV; Director-Allegheny Bankshares Corporation, Lewisburg, WV (Until 1993) - --------------------------------------------------------------------------------------------------------------- Rodney H. Pack * Executive Vice President-Acme Limestone Corporation, Fort Springs, WV (Crushed Limestone Manufacturing) (Until 1994); Vice President, Sales and Administration- Acme Limestone Corporation, Fort Springs, WV; President-Raleigh Ready Mix and Asphalt, Inc., Sprague, WV (Portland Cement Concrete and Asphaltic Supplier) (Until 1994); President-Wolf Creek Corporation, Alderson, WV (Land Development); Director-Greenbrier Valley National Bank, Lewisburg, WV; Director-Allegheny Bankshares Corporation, Lewisburg, WV (Until 1993) - ---------------------------------------------------------------------------------------------------------------
5 18
- --------------------------------------------------------------------------------------------------------------- PRESENT PRINCIPAL NAME OCCUPATION OR EMPLOYMENT ADDRESS - --------------------------------------------------------------------------------------------------------------- E. M. Payne III * Partner- File, Payne, Scherer & File, File, Payne, Scherer & File Beckley, WV (Law Firm); President- P. O. Drawer L Piney Land Company, Beckley, WV Beckley, WV 25802 (Land Development, Coal, Gas and Timber); President-McCreery Coal Land Company, Beckley, WV (Land Development, Coal, Gas and Timber); President-Combahee Investment Corporation, Beckley, WV (Land Management and Development); President-Hilton Head Equity Management Co., Inc., Beckley, WV (Land Management and Development); President-The James T. McCreery Company, Inc., Beckley, WV (Land Development, Coal and Timber); Secretary and Treasurer- Horizon Bancorp, Inc., Beckley, WV; Director-Bank of Raleigh, Beckley, WV - --------------------------------------------------------------------------------------------------------------- R. T. Rogers * President and Chief Executive Officer-R. T. Rogers Oil Co., Hinton, WV (Oil and Fuel Distributor); Director-National Bank of Summers of Hinton, Hinton, WV - --------------------------------------------------------------------------------------------------------------- Sharon H. Rowe * Director of Advertising and Public Relations-The Greenbrier, White Sulphur Springs, WV (Since 1991); Vice President Communications-The Greenbrier Resort Management Company, White Sulphur Springs, WV (Since 1998); Director- Greenbrier Valley National Bank, Lewisburg, WV (Since 1996) - ---------------------------------------------------------------------------------------------------------------
6 19
- --------------------------------------------------------------------------------------------------------------- PRESENT PRINCIPAL NAME OCCUPATION OR EMPLOYMENT ADDRESS - --------------------------------------------------------------------------------------------------------------- James E. Songer * Vice President-Homeseekers L.L.C., Beckley, WV (Real Estate); President- Songer Insurance, Inc., Beckley, WV (Insurance); President-Sunset Memorial Park, Inc. (Perpetual Care) (Until 1997); Director-Bank of Raleigh, Beckley, WV - --------------------------------------------------------------------------------------------------------------- Albert M. Tieche, Jr. * Administrator and Treasurer-Beckley Hospital, Inc., Beckley, WV (Until 1997); President-BHI, Inc., Beckley, WV (Surviving Corporation of Beckley Hospital, Inc.); Vice President, Care Connection, Beckley, WV (Private Duty Home Health Agency); Director-Bank of Raleigh, Beckley, WV - ---------------------------------------------------------------------------------------------------------------
7 20 EXHIBIT INDEX Exhibit 1 Agreement and Plan or Reorganization between City Holding Company, a WestVirginia 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. 21 EXHIBIT 1 AGREEMENT AND PLAN OF REORGANIZATION between CITY HOLDING COMPANY and HORIZON BANCORP, INC. August 7, 1998 22 TABLE OF CONTENTS
PAGE ARTICLE I GENERAL.................................................................................................2 1.1. Holding Company Merger..............................................................................2 1.2. Bank Mergers........................................................................................2 1.3. Taking of Necessary Action..........................................................................2 1.4. Tax Consequences; Accounting Treatment..............................................................2 ARTICLE II EFFECT OF TRANSACTION ON COMMON STOCK, ASSETS, LIABILITIES AND CAPITALIZATION OF CITY HOLDING, CITY NATIONAL, AND HORIZON...........................................3 2.1. Conversion of Stock; Exchange Ratio.................................................................3 2.2. Manner of Exchange..................................................................................3 2.3. No Fractional Shares................................................................................5 2.4. Dissenting Shares...................................................................................5 2.5. Assets..............................................................................................5 2.6. Liabilities.........................................................................................6 ARTICLE III REPRESENTATIONS AND WARRANTIES........................................................................6 3.1. Representations and Warranties of Horizon and the Horizon Banks.....................................6 (a) Organization, Standing and Power...........................................................6 (b) Capital Structure..........................................................................7 (c) Authority..................................................................................7 (d) Investments................................................................................8 (e) Financial Statements.......................................................................8 (f) Absence of Undisclosed Liabilities.........................................................9 (g) Tax Matters................................................................................9 (h) Options, Warrants and Related Matters.....................................................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) 23 (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) 24 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) 25 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 26 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 27 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 28 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 29 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)" (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)" (ii) be accounted for as a "pooling of interests." - 2 - 30 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 - 3 - 31 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 - 32 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 - 33 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. - 6 - 34 Horizon will deliver to City Holding complete and correct copies of each of the Horizon Banks' i)" (i) Charter and ii)" (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)" (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)" (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 - 35 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)" (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)" (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); - 8 - 36 (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 - 9 - 37 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. - 10 - 38 (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)" (i) as set forth on Schedule 3.1(h) and ii)" (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- - 11 - 39 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 - 12 - 40 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 - 13 - 41 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 - 14 - 42 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. - 15 - 43 (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 - 16 - 44 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)" (i) changes since such date in laws or regulations, GAAP or interpretations of either thereof that affect the banking industry generally, ii)" (ii) changes since such date in the general level of interest rates, iii)" (iii) expenses since such date incurred in connection with the transactions contemplated by this Agreement, iv)" (iv) accruals and reserves by Horizon or the Horizon Banks since such date pursuant to the terms of Section 4.8 hereof, or v)" (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). - 17 - 45 (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)" (i) the Federal Reserve Board, ii)" (ii) the FDIC, iii)" (iii) the OCC, iv)" (iv) the SEC, v)" (v) the WVBOB, and vi)" (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)" (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)" (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)" (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)" (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 - 18 - 46 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. - 19 - 47 (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. - 20 - 48 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). - 21 - 49 (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)" (i) conflict with or result in a breach of any provision of its Articles of Incorporation or By-laws or a default (or give rise to any right of termination, cancellation or acceleration) under any of the terms, conditions or provisions of any note, bond, debenture, mortgage, indenture, license, material agreement or other material instrument or obligation to which City Holding is a party, or by which it or any of its properties or assets may be bound or ii)" (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)" (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)" (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 - 22 - 50 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 - 23 - 51 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 - 24 - 52 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)" (i) as set forth on Schedule 3.2(h) and ii)" (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. - 25 - 53 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 - 26 - 54 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, - 27 - 55 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 - 28 - 56 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, - 29 - 57 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 - 30 - 58 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 - 31 - 59 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: - 32 - 60 "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. - 33 - 61 (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. - 34 - 62 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. - 35 - 63 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. - 36 - 64 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 - 37 - 65 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 - 38 - 66 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 - 39 - 67 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. - 40 - 68 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 - 41 - 69 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. - 42 - 70 (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 - 43 - 71 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. - 44 - 72 (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 - 45 - 73 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 - 46 - 74 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 - 47 - 75 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 - 48 - 76 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 - 49 - 77 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 - 50 - 78 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. - 51 - 79 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, - 52 - 80 to maintain deferred compensation plans for directors, with similar benefits, and shall not terminate or reduce any benefits of any person thereunder which have been accrued, funded or vested. (d) Employment Agreements. Immediately following the Effective Time of the Holding Company Merger, City Holding shall enter into employment or consulting agreements, in the forms attached hereto as Exhibit I, with the individuals named on Exhibit I. ARTICLE X MISCELLANEOUS 10.1. Expenses. Each party hereto shall bear and pay the costs and expenses incurred by it relating to the transactions contemplated hereby. 10.2. Entire Agreement. This Agreement contains the entire agreement among City Holding, City National, Horizon and the Horizon Banks with respect to the Transaction and the related transactions and supersedes all prior agreements (including the Letter Agreement), arrangements or understandings with respect thereto. 10.3. Descriptive Headings. Descriptive headings are for convenience only and shall not control or affect the meaning or construction of any provisions of this Agreement. - 53 - 81 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 - 54 - 82 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. - 55 - 83 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 - 56 - 84 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 85 termination resulting from a willful breach by Issuer of a provision of the Agreement) if such termination occurs prior to the occurrence of an Initial Triggering Event; or (iii) the passage of eighteen months after termination of the Agreement if such termination follows the occurrence of an Initial Triggering Event or is a termination by Grantee pursuant to Section 8.1(c) thereof resulting from a willful breach by Issuer of a provision of the Agreement. The term "Holder" shall mean the holder or holders of the Option. (b) The term "Initial Triggering Event" shall mean any of the following events or transactions occurring after the date hereof: (i) Issuer or any significant subsidiary of Issuer without having received Grantee's prior written consent, shall have entered into an agreement to engage in, an Acquisition Transaction (as hereinafter defined) with any person (the term "person" for purposes of this Stock Option Agreement having the meaning assigned thereto in Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934 (the "1934 Act"), and the rules and regulations thereunder) other than Grantee or any of its subsidiaries (each a "Grantee Subsidiary") or the board of directors of Issuer shall have recommended that the shareholders of Issuer approve or accept any Acquisition Transaction other than as contemplated by the Agreement. For purposes of this Stock Option Agreement, "Acquisition Transaction" shall mean (a) a merger, consolidation or share exchange involving Issuer or any significant subsidiary of Issuer, provided, however, that in no event shall (i) any merger, consolidation or share exchange involving only the Issuer and one or more of the subsidiaries of Issuer, or involving only any two or more of such subsidiaries of Issuer be deemed to be an Acquisition Transaction, or (ii) any merger, consolidation or share exchange (A) in which Issuer is the surviving entity, or (B) as to which the shareholders of Issuer immediately prior thereto own in the aggregate at least 40% of the common stock of the surviving corporation or its publicly-held parent corporation immediately following consummation thereof be deemed to be an Acquisition Transaction, (b) a purchase, lease or other acquisition of all or substantially all of the assets of Issuer and its subsidiaries taken as a whole, or (c) a purchase or other acquisition (including by way of merger, consolidation, share exchange or otherwise) of securities representing 20% or more of the voting power of Issuer; (ii) The board of directors of Issuer does not recommend that the shareholders of Issuer approve the Agreement or publicly withdraws or modifies, or publicly announces its intention to withdraw or modify, in any manner adverse to the Grantee, its recommendation that its shareholders approve the Agreement; (iii) Any person other than Grantee or any Grantee Subsidiary or any Issuer Subsidiary acting in a fiduciary capacity shall have acquired beneficial ownership or the right to acquire beneficial ownership of 20% or more of the outstanding shares of Common Stock (the term "beneficial ownership" for purposes of this Stock Option Agreement having the meaning assigned thereto in Section 13(d) of the 1934 Act, and the rules and regulations thereunder); - 2 - 86 (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. - 3 - 87 (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 - 4 - 88 Agreement in the above legend shall be removed by delivery of substitute certificate(s) without such reference if the shares have been sold or transferred in compliance with the provisions of this Stock Option Agreement and under circumstances that do not require the retention of such reference; and (iii) the legend shall be removed in its entirety if the conditions in the preceding clauses (i) and (ii) are both satisfied. In addition, such certificates shall bear any other legend as may be required by law. (i) Upon the giving by the Holder to Issuer of the written notice of exercise of the Option provided for under subsection (e) of this Section 2 and the tender of the applicable purchase price in immediately available funds, the Holder shall be deemed to be the holder of record of the shares of Common Stock issuable upon such exercise, notwithstanding that the stock transfer books of Issuer shall then be closed or that certificates representing such shares of Common Stock shall not then be actually delivered to the Holder. Issuer shall pay all expenses, and any and all United States Federal, state and local taxes and other charges that may be payable in connection with the preparation, issue and delivery of stock certificates under this Section 2 in the name of the Holder or its assignee, transferee or designee. 3. Issuer agrees: (i) that it shall at all times maintain, free from preemptive rights, sufficient authorized but unissued or treasury shares of Common Stock so that the Option may be exercised without additional authorization of Common Stock after giving effect to all other options, warrants, convertible securities and other rights to purchase Common Stock; (ii) that it will not, by charter amendment or through reorganization, consolidation, merger, dissolution or sale of assets, or by any other voluntary act, avoid or seek to avoid the observance or performance of any of the covenants, stipulations or conditions to be observed or performed hereunder by Issuer; (iii) promptly to take all action as may from time to time be required (including (A) complying with all premerger notification, reporting and waiting period requirements specified in 15 U.S.C. Section 18a and regulations promulgated thereunder and (B) in the event, under the Bank Holding Company Act of 1956, as amended, or the Change in Bank Control Act of 1978, as amended, or any state banking law, prior approval of or notice to the FRB or to any other Governmental Entity is necessary before the Option may be exercised, cooperating fully with the Holder in preparing such applications or notices and providing such information to each such Governmental Entity as they may require) in order to permit the Holder to exercise the Option and Issuer duly and effectively to issue shares of Common Stock pursuant hereto; and (iv) promptly to take all action provided herein to protect the rights of the Holder against dilution. 4. This Stock Option Agreement (and the Option granted hereby) are exchangeable, without expense, at the option of the Holder, upon presentation and surrender of this Stock Option Agreement at the principal office of Issuer, for other Agreements providing for Options of different denominations entitling the holder thereof to purchase, on the same terms and subject to the same conditions as are set forth herein, in the aggregate the same number of shares of Common Stock purchasable hereunder. The terms "Stock Option Agreement" and "Option" as used herein include any Stock Option Agreements and related options for which this Stock Option Agreement (and the Option granted hereby) may be exchanged. Upon receipt by Issuer of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Stock - 5 - 89 Option Agreement, and (in the case of loss, theft or destruction) of reasonably satisfactory indemnification, and upon surrender and cancellation of this Stock Option Agreement, if mutilated, Issuer will execute and deliver a new Stock Option Agreement of like tenor and date. Any such new Stock Option Agreement executed and delivered shall constitute an additional contractual obligation on the part of Issuer, whether or not the Stock Option Agreement so lost, stolen, destroyed or mutilated shall at any time be enforceable by anyone. 5. In addition to the adjustment in the number of shares of Common Stock that are purchasable upon exercise of the Option pursuant to Section 1 of this Stock Option Agreement, the number of shares of Common Stock purchasable upon the exercise of the Option shall be subject to adjustment from time to time as provided in this Section 5. (a) In the event of any change in Common Stock by reason of stock dividends, split-ups, mergers, recapitalizations, combinations, subdivisions, conversions, exchanges of shares or the like, the type and number of shares of Common Stock purchasable upon exercise hereof shall be appropriately adjusted. (b) Whenever the number of shares of Common Stock purchasable upon exercise hereof is adjusted as provided in this Section 5, the Option Price shall be adjusted by multiplying the Option Price by a fraction, the numerator of which shall be equal to the number of shares of Common Stock purchasable prior to the adjustment and the denominator of which shall be equal to the number of shares of Common Stock purchasable after the adjustment. 6. Upon the occurrence of a Subsequent Triggering Event that occurs prior to an Exercise Termination Event, Issuer shall, at the request of Grantee delivered within 90 days (or such later date as may be provided pursuant to Section 10) of such Subsequent Triggering Event (whether on its own behalf or on behalf of any subsequent holder of this Option (or part thereof) or any of the shares of Common Stock issued pursuant hereto), promptly prepare, file and keep current a shelf registration statement under the 1933 Act covering any shares issued and issuable pursuant to this Option and shall use its reasonable best efforts to cause such registration statement to become effective and remain current in order to permit the sale or other disposition of any shares of Common Stock issued upon total or partial exercise of this Option ("Option Shares") in accordance with any plan of disposition requested by Grantee. Issuer will use its reasonable best efforts to cause such registration statement first to become effective and then to remain effective for such period not in excess of 180 days from the day such registration statement first becomes effective or such shorter time as may be reasonably necessary to effect such sales or other dispositions. Grantee shall have the right to demand two such registrations. If requested by any such Holder in connection with such registration, Issuer shall become a party to any underwriting agreement relating to the sale of such shares, but only to the extent of obligating itself in respect of representations, warranties, indemnities and other Agreements customarily included in such underwriting Agreements. The foregoing notwithstanding, if, at the time of any request by Grantee for registration of Option Shares as provided above, Issuer is in the process of registration with respect to an underwritten public offering of shares of Common Stock, and if in the good faith judgment of the managing underwriter or managing underwriters, or, if none, the sole underwriter or underwriters, of such offering the inclusion of the Holder's - 6 - 90 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 - 7 - 91 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%. - 8 - 92 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 - 9 - 93 of Common Stock for which the Option is then exercisable, divided by the Average Price. The exercise price of the Substitute Option per share of Substitute Common Stock shall then be equal to the Option Price multiplied by a fraction, the numerator of which shall be the number of shares of Common Stock for which the Option is then exercisable and the denominator of which shall be the number of shares of Substitute Common Stock for which the Substitute Option is exercisable. (e) In no event, pursuant to any of the foregoing paragraphs, shall the Substitute Option be exercisable for a number of shares that is more than 19.9% of the shares of Substitute Common Stock outstanding prior to exercise of the Substitute Option. If the Substitute Option would be exercisable for more than 19.9% of the shares of Substitute Common Stock outstanding prior to exercise but for this clause (e), the issuer of the Substitute Option (the "Substitute Option Issuer") shall make a cash payment to the Holder equal to the excess of (i) the value of the Substitute Option without giving effect to the limitation in this clause (e) over (ii) the value of the Substitute Option after giving effect to the limitation in this clause (e). This difference in value shall be determined by a nationally recognized investment banking firm selected by the Holder or the Owner, as the case may be, and reasonably acceptable to the Issuer. (f) Issuer shall not enter into any transaction described in subsection (a) of this Section 8 unless the Acquiring Corporation and any person that controls the Acquiring Corporation assume in writing all the obligations of Issuer hereunder. 9. (a) At the request of the holder of the Substitute Option (the "Substitute Option Holder"), the Substitute Option Issuer shall repurchase the Substitute Option from the Substitute Option Holder at a price (the "Substitute Option Repurchase Price") equal to the amount by which (i) the Highest Closing Price (as hereinafter defined) exceeds (ii) the exercise price of the Substitute Option, multiplied by the number of shares of Substitute Common Stock for which the Substitute Option may then be exercised, and at the request of the owner (the "Substitute Share Owner") of shares of Substitute Common Stock (the "Substitute Shares"), the Substitute Option issuer shall repurchase the Substitute Shares at a price (the "Substitute Share Repurchase Price") equal to the Highest Closing Price multiplied by the number of Substitute Shares so designated. The term "Highest Closing Price" shall mean the highest closing price for shares of Substitute Common Stock within the six-month period immediately preceding the date the Substitute Option Holder gives notice of the required repurchase of the Substitute Option or the Substitute Share Owner gives notice of the required repurchase of the Substitute Shares, as applicable. (b) The Substitute Option Holder or the Substitute Share Owner, as the case may be, may exercise its respective right to require the Substitute Option Issuer to repurchase the Substitute Option and the Substitute Shares pursuant to this Section 9 by surrendering for such purpose to the Substitute Option Issuer, at its principal office, the agreement for such Substitute Option (or, in the absence of such an agreement, a copy of this Stock Option Agreement) and certificates for Substitute Shares accompanied by a written notice or notices stating that the Substitute Option Holder or the Substitute Share Owner, as the case may be, elects to require the Substitute Option Issuer to repurchase the Substitute Option and/or the Substitute Shares in - 10 - 94 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. - 11 - 95 11. Issuer hereby represents and warrants to Grantee as follows: (a) Issuer has full corporate power and authority to execute and deliver this Stock Option Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Stock Option Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by the Board of Directors of Issuer and no other corporate proceedings on the part of Issuer are necessary to authorize this Stock Option Agreement or to consummate the transactions contemplated hereby. This Stock Option Agreement has been duly and validly executed and delivered by Issuer. (b) Issuer has taken all necessary corporate action to authorize and reserve and to permit it to issue, and at all times from the date hereof through the termination of this Stock Option Agreement in accordance with its terms will have reserved for issuance upon the exercise of the Option, that number of shares of Common Stock equal to the maximum number of shares of Common Stock at any time and from time to time issuable hereunder, and all such shares, upon issuance pursuant hereto, will be duly authorized, validly issued, fully paid, nonassessable, and will be delivered free and clear of all claims, liens, encumbrances and security interests and not subject to any preemptive rights. 12. Neither of the parties hereto may assign any of its rights and obligations under this Stock Option Agreement or the Option created hereunder to any other person, without the express written consent of the other party, except that in the event a Subsequent Triggering Event shall have occurred prior to an Exercise Termination Event, Grantee, subject to the express provisions hereof, may assign in whole or in part its rights and obligations hereunder within 90 days following such Subsequent Triggering Event (or such later period as may be provided pursuant to Section 10). 13. Each of Grantee and Issuer will use its best efforts to make all filings with, and to obtain consents of, all third parties and Governmental Entities necessary to the consummation of the transactions contemplated by this Stock Option Agreement, including without limitation making application to list the shares of Common Stock issuable hereunder on the New York Stock Exchange or such other exchange or market on which the shares of Issuer may be listed upon official notice of issuance and making any necessary applications to the FRB under the Bank Holding Company Act and any other Governmental Entities for approval to acquire the shares issuable hereunder. 14. The parties hereto acknowledge that damages would be an inadequate remedy for a breach of this Stock Option Agreement by either party hereto and that the obligations of the parties shall hereto be enforceable by either party hereto through injunctive or other equitable relief. - 12 - 96 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] - 13 - 97 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 - 14 - -----END PRIVACY-ENHANCED MESSAGE-----