COMPENSATION FOR CARDINAL NAMED EXECUTIVE OFFICERS
As required by
Section 14A of the Securities Exchange Act of 1934, as amended, or the Exchange Act, Cardinal is providing its shareholders with the opportunity to approve, in a non-binding advisory vote, certain compensation that may become payable to its
named executive officers in connection with the merger, which is based on or related to the merger and the agreements and understandings concerning such compensation, by voting on the following resolution:
RESOLVED, that the compensation that may be paid to the named executive officers of Cardinal in connection with or as a result of
the merger, as disclosed in the section entitled The Merger Interests of Certain Cardinal Directors and Executive Officers in the Merger Certain Compensation for Cardinal Named Executive Officers, and
the related table and narrative, is hereby APPROVED.
Approval of the Cardinal Merger-Related Compensation Proposal is
not a condition to completion of the merger. The vote on this proposal is a vote separate and apart from the vote on the Cardinal Merger Proposal. Because this proposal is advisory in nature only, a vote for or against approval will not be binding
on either Cardinal or United Bankshares.
The compensation that is subject to this proposal is a contractual obligation of
Cardinal and/or Cardinal Bank and of United Bankshares and United Bank as the successors thereto. If the merger is approved and completed, such compensation may be paid, subject only to the conditions applicable thereto, even if shareholders fail to
approve this proposal. If the merger is not completed, the Cardinal board of directors will consider the results of the vote in making future executive compensation decisions.
Required Vote
Approval of the Cardinal
Merger-Related Compensation Proposal requires the affirmative vote of a majority of the votes cast by shareholders on the proposal, assuming a quorum is present. Abstentions will be counted toward a quorum at the Cardinal special meeting, but will
have no effect on the vote on this proposal.
If you return a properly executed proxy card but do not indicate instructions on
your proxy card, your shares of Cardinal common stock represented by such proxy card will be voted FOR approval of the Cardinal Merger-Related Compensation Proposal.
Recommendation of the Cardinal Board of Directors
The Cardinal board of directors unanimously recommends that Cardinal shareholders vote FOR approval of the Cardinal
Merger-Related Compensation Proposal.
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PROPOSAL NO. 3
APPROVAL OF THE ADJOURNMENT, POSTPONEMENT OR CONTINUANCE OF THE
SPECIAL MEETING, IF NECESSARY TO PERMIT FURTHER SOLICITATION OF PROXIES
If at the Cardinal special meeting the number of shares of Cardinal common stock present in person or represented by proxy and voting in
favor of the Cardinal Merger Proposal is insufficient to approve such proposal, management may move to adjourn, postpone or continue the special meeting on one or more occasions in order to enable Cardinal to continue to solicit additional proxies
in favor of such proposal; however, the special meeting may not be adjourned, postponed or continued to a date later than August 5, 2017. In that event, you will be asked to vote only upon the Cardinal Adjournment Proposal, may be asked to vote on
the Cardinal Merger-Related Compensation Proposal and will not be asked to vote on the Cardinal Merger Proposal at the special meeting.
In this proposal, Cardinal is asking the Cardinal shareholders to authorize the holder of any proxy solicited by its board of directors to grant to the Cardinal board of directors the authority to
adjourn, postpone or continue the special meeting and any later adjournments. If the Cardinal shareholders approve this proposal, Cardinal could adjourn, postpone or continue the special meeting, and any adjourned session of the special meeting on
one or more occasions, to use the additional time to solicit proxies in favor of the Cardinal Merger Proposal, including the solicitation of proxies from the shareholders that have previously voted against such proposal. Among other effects,
approval of the Cardinal Adjournment Proposal could mean that, even if proxies representing a sufficient number of votes against the approval of the Cardinal Merger Proposal have been received, Cardinal could adjourn, postpone or continue the
special meeting without a further shareholder vote on such proposal and seek to convince the holders of those shares to change their votes to vote in favor of such proposal.
Generally, if the special meeting is adjourned, no notice of the adjourned meeting is required to be given to shareholders, other than an announcement at the special meeting of the place, date and time to
which the meeting is adjourned.
Required Vote
Approval of the Cardinal Adjournment Proposal requires the affirmative vote of a majority of the votes cast by shareholders on the
proposal, assuming a quorum is present. Abstentions will be counted toward a quorum at the Cardinal special meeting, but will have no effect on the vote on this proposal.
Recommendation of the Cardinal Board of Directors
The Cardinal board of directors believes that if the number of shares of its common stock present in person or represented by proxy at the
Cardinal special meeting and voting in favor of the approval of the Cardinal Merger Proposal is insufficient to approve such proposal, it is in the best interests of the Cardinal shareholders to enable the board of directors, for a limited period of
time, to continue to seek to obtain a sufficient number of additional votes to approve such proposal. The Cardinal board of directors unanimously recommends that shareholders vote FOR the approval of the Cardinal Adjournment Proposal.
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THE MERGER
The following summary describes certain aspects of the merger, including all the terms of the merger agreement that the respective
managements of Cardinal and United Bankshares believe are material. This summary does not purport to be complete and may not contain all of the information about the merger agreement that is important to you. The merger agreement is attached to this
prospectus and joint proxy statement as Appendix A and is incorporated by reference in this prospectus and joint proxy statement. You are urged to read the merger agreement carefully and in its entirety, as it is the legal document governing the
merger.
Background of the Merger
The board of directors and senior management of Cardinal have periodically explored and discussed strategic options available to Cardinal
for maintaining its competitiveness and increasing shareholder value. These discussions have included, among other things, remaining independent as well as exploring the merger and acquisition environment for financial institutions and a potential
business combination involving Cardinal. Several times during 2014 and 2015, Bernard H. Clineburg, then Chairman and Chief Executive Officer of Cardinal, was contacted by representatives of larger financial institutions, including United Bankshares,
to inquire about Cardinals interest in a merger transaction. Mr. Clineburg informed the Cardinal board of directors of these preliminary inquiries, but such discussions did not result in any proposals that the board could recommend to
Cardinals shareholders.
During its November and December 2015 regular meetings, the Cardinal board of directors
continued its evaluation of the companys business, performance and prospects and considered Cardinals strategic options, including potential strategic transactions or supporting ongoing organic growth through a capital raise. The board
reviewed and discussed information that senior management presented to the board in these meetings. Upon review and discussion at the December 2015 meeting, the Cardinal board authorized senior management to obtain further information regarding
merger and acquisition activity in the financial services industry, in general, and potential pricing information with respect to Cardinal in the event the company was interested in a sale transaction.
On March 1, 2016, at the invitation of Mr. Clineburg, representatives of Sandler ONeill, a financial advisory firm, met with
Messrs. Clineburg and Bergstrom, and Alice P. Frazier, Executive Vice President and Chief Operating Officer of Cardinal, to discuss recent merger and acquisition activity. The parties engaged in a high level conversation about the merger environment
in the banking industry and Sandler ONeill provided preliminary views on financial institutions they believed would be potential merger partners if Cardinal was interested in pursuing a business combination. Although Sandler ONeill had
not been formally engaged to advise Cardinal in connection with a potential strategic transaction, Sandler ONeill had previously advised the board of directors and senior management of Cardinal in a variety of contexts.
On March 8, 2016, Messrs. Clineburg and Bergstrom, and Ms. Frazier had a telephone conference with representatives of Sandler
ONeill to further discuss the universe of financial institutions that could potentially be interested in pursuing a merger transaction with Cardinal.
On April 5, 2016, the executive committee of Cardinals board of directors, consisting of Mr. Clineburg (chairman), William G. Buck, Sidney O. Dewberry and Michael A. Garcia, met with representatives
of Sandler ONeill, who provided information on the current market conditions in the banking industry, recent merger and acquisition activity, a preliminary valuation range of Cardinals franchise position and an analysis of various
strategic alternatives. Sandler ONeills presentation included a list of potential acquirers that they believed would be interested in entering or expanding in the Washington, D.C. market by a merger transaction with Cardinal. Important
considerations in a potential merger were discussed, including the type of merger consideration to be received by shareholders, dividend yields, customer and community impact, regulatory approval process and whether a capital raise by a potential
partner would be a concern for Cardinal. Sandler
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ONeill representatives also presented certain implied pricing expectations that were based on the recent, publicly available financial information of Cardinal. The representatives of
Cardinal and Sandler ONeill also reviewed other business considerations, the process that could culminate in the marketing of Cardinal for sale or another strategic business combination, if the Cardinal board of directors decided to pursue a
potential merger and what information would be provided to potential merger partners. After this review and discussion, the Cardinal executive committee authorized Sandler ONeill to proceed in continuing to identify potential merger partners
and to coordinate with Cardinals senior management in preparing a confidential information memorandum and establishing an electronic data room containing extensive information about Cardinal.
On April 8, 2016, the Cardinal board of directors took action by unanimous written consent to approve the engagement of Sandler
ONeill to act as Cardinals financial advisor in connection with a potential business combination, which engagement was formally entered into on April 18, 2016.
On April 28, 2016, the Cardinal board of directors held its annual organizational meeting following Cardinals annual meeting of shareholders. No discussion of a potential transaction was discussed
at the board meeting.
During late April and the first half of May 2016, Cardinals senior management and representatives
of Sandler ONeill held various in-person and telephonic meetings to determine a list of potential merger partners, merger criteria and the process and possible timeline for a transaction, and to prepare a confidential information memorandum
with respect to Cardinals business, operations and market area. Cardinal also populated an electronic data room with documents containing substantial information about Cardinal.
On May 17, 2016, representatives of Sandler ONeill began contacting the companies on the approved potential merger partner list,
including United Bankshares. Interested parties who executed a nondisclosure agreement were provided the confidential information memorandum and granted access to the electronic data room. United Bankshares was among those parties and executed a
nondisclosure agreement on May 23, 2016. In total, 18 potential merger partners were contacted, of which three received nondisclosure agreements; only United signed such agreement, received the confidential information memorandum and was
granted access to Cardinals electronic data room.
On May 23, 2016, Richard M. Adams, Chairman and Chief Executive
Officer of United Bankshares, Mr. Clineburg, Mr. Buck, Cardinals Lead Independent Director and representatives of Sandler ONeill held an in-person meeting. At this meeting, Mr. Adams expressed strong interest in pursuing a
potential acquisition of Cardinal. Mr. Adams discussed specific transaction terms, including the form of acquisition and a specific acquisition price, and indicated that United Bankshares would be willing to offer 0.70 shares of United
Bankshares common stock for each share of Cardinal common stock. The parties discussed such initial proposal, and the operations of United Bankshares and Cardinal, and the Cardinal representatives requested that the United Bankshares proposal be
increased to 0.71 shares of United Bankshares common stock for each share of Cardinal common stock. Mr. Adams agreed to adjust United Bankshares proposal accordingly. The value of United Bankshares proposal, based on the closing
price of its common stock on May 23, 2016, was $27.32 for each share of Cardinal common stock. The per share closing price of Cardinals common stock on May 23, 2016 was $21.76. Mr. Adams indicated that such proposal was
preliminary, and that it was subject to United Bankshares further due diligence on Cardinal, approval from the United Bankshares board of directors and a preliminary discussion between United and appropriate bank regulators.
On May 25, 2016, the Cardinal board of directors held a special telephonic meeting. During the meeting, representatives of Sandler
ONeill informed the board that the marketing process to seek indications of interest in a business combination had commenced. Sandler ONeill provided information on the number of financial institutions it had contacted so far and the
levels of interest it received on behalf of Cardinal. Mr. Clineburg apprised the board of the in-person meeting with Mr. Adams on May 23 and the preliminary merger consideration proposed by Mr. Adams. During the meeting, members of the Cardinal
board asked questions of Sandler ONeill with respect to the marketing process, and Sandler ONeill responded accordingly. The Cardinal
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directors and representatives of Sandler ONeill discussed, in general, the proposed merger consideration offered by United Bankshares and the approximate aggregate consideration value to
Cardinals shareholders of such offer. The Cardinal board, senior management and Sandler ONeill also further explored the strategic options available to Cardinal. After an in-depth discussion on United Bankshares offer and other
initial indications of interest and strategic options, the Cardinal board instructed Sandler ONeill to continue with the marketing process.
During late May-early June 2016, representatives of Sandler ONeill continued to contact financial institutions to seek their interest in a business combination with Cardinal. At the end of the
marketing process, there was one interested party other than United Bankshares that could have made an offer to Cardinal that, from a financial point of view, was in the range of what the Cardinal board was willing to accept. However, such party
declined to make an offer because it was involved in another merger transaction.
On June 15, 2016, at a regular Cardinal
board of directors meeting, representatives of Sandler ONeill delivered a presentation to the board that contained an updated summary of the potential merger partners contacted and the responses received from such parties. Sandler ONeill
noted that, based on the responses it received, there was a limited number of potential merger partners. The reasons provided by financial institutions that declined to further investigate a transaction with Cardinal included pricing (unlikely that
Cardinals pricing expectations would be met), geography (too far from core market), timing (other mergers pending, being reviewed or digested), size of transaction (too large) and uncertain regulatory approval (without conditions). During and
after Sandler ONeills review, the Cardinal board of directors engaged in a comprehensive discussion regarding the results of the marketing process and the information provided by Sandler ONeill, and considered the strategic
objectives of Cardinal. After such deliberation, the Cardinal board determined to postpone, for a period of 30 days, any decision with respect to the marketing process in order to allow United Bankshares to move forward and pursue preliminary
discussions with appropriate bank regulatory agencies concerning a potential merger with Cardinal.
In early July 2016, Mr.
Adams informed a representative of Sandler ONeill and Mr. Clineburg that United Bankshares was willing to move forward with a transaction with Cardinal at the exchange ratio discussed in May 2016 (0.71 shares of United Bankshares common
stock), subject to United Bankshares further due diligence on Cardinal.
On July 20, 2016, the Cardinal board of
directors held a regularly scheduled meeting at which United Bankshares interest in a merger transaction was discussed. Representatives of Sandler ONeill were present at the meeting and discussed the current bank merger and acquisition
environment. The Sandler ONeill representatives provided a preliminary analysis regarding Cardinal, United Bankshares and a merger transaction based on publicly available information on the parties and the proposed 0.71 exchange ratio of
shares of United Bankshares common stock for shares of Cardinal common stock. Sandler ONeill noted that the value of United Bankshares offer, based on the closing price of its common stock on July 15, 2016, was $27.84 for each share of
Cardinal common stock. The per share closing price of Cardinals common stock on July 15, 2016 was $22.98. Sandler ONeill stated that the offer from United Bankshares included a built-in assumption that it would raise capital in
connection with the completion of the potential merger with Cardinal. Based on this new information and discussions between the parties, Sandler ONeills presentation included assumptions that United Bankshares would issue approximately
$200 million of non-cumulative perpetual preferred stock with a dividend of 6.50% at or around the time of the closing of the merger. Sandler ONeill thereafter provided the Cardinal board with financial and other information on merger
transactions in the banking industry that involved the acquirer conducting a capital offering between announcement and closing of the merger.
At the July 20 meeting, representatives of Sandler ONeill presented the Cardinal board with information on the pricing metrics of transactions announced since January 2014 involving other
banking institutions in the Mid-Atlantic and Southeast regions and nationally, and the board considered such information. Sandler ONeill also noted that the overlap of retail banking offices and the cost savings associated with a combination
with United Bankshares would most likely allow it to pay a higher premium for Cardinal than any out of market buyer.
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Cardinals board of directors discussed the potential benefits of a merger with United Bankshares, and engaged in a thorough discussion on the potential combination with United Bankshares,
especially the preliminary merger consideration offered and the results of the marketing process recently undertaken by Cardinals senior management as assisted by Sandler ONeill. The Cardinal board of directors also considered, in
general, the impact of the proposed transaction on Cardinals management, employees and community. The board reviewed the financial performance, stock performance, market position, growth prospects and other matters concerning United
Bankshares. After a lengthy discussion, the Cardinal board of directors determined that a merger with United Bankshares would provide substantial long-term benefits to Cardinals shareholders. The Cardinal board of directors then authorized
senior management and Sandler ONeill to proceed with the negotiation of a definitive merger agreement and related documents with United Bankshares. After the Cardinal board meeting Mr. Clineburg contacted Mr. Adams to inform him that the
Cardinal board had determined to move forward in merger discussions with United Bankshares.
On July 22, 2016, Sandler
ONeill provided an initial draft of the merger agreement to LeClairRyan, A Professional Corporation, Cardinals legal counsel, that Sandler ONeill had received from United Bankshares and Bowles Rice LLP, or Bowles Rice, legal
counsel to United Bankshares. As directed by Cardinal senior management, Sandler ONeill and LeClairRyan were to review and provide comments only on the provisions relating to Cardinals ability to pay dividends while the merger was
pending, the regulatory approval closing condition in light of United Bankshares intent to raise capital in connection with the potential merger and a possible termination fee provision relating to such closing condition. Over the next two
weeks, United Bankshares and Cardinal, with the assistance of their respective legal and financial advisors, negotiated and came to an understanding with respect to such provisions. During such period and continuing during the negotiations of the
merger agreement, Cardinal updated its electronic data room, and United Bankshares, Cardinal and their representatives conducted extensive due diligence on each bank utilizing publicly available information as well as confidential information the
parties made available to each other.
On August 4, 2016, Cardinal requested that LeClairRyan review the draft merger agreement
and related documents in their entirety, including a support agreement that provided, among other things, for each director of Cardinal to vote his or her shares of Cardinal common stock in favor of the merger at any meeting of the Cardinal
shareholders held to consider and vote on the merger. Over the next week, LeClairRyan reviewed and discussed the merger agreement with Cardinals senior management and Sandler ONeill.
On August 10, 2016, LeClairRyan delivered comments on the draft merger agreement and related documents to Bowles Rice. From
August 10 through August 17, 2016, United Bankshares, Cardinal and their respective financial advisors and legal counsel continued to negotiate the terms of the definitive merger agreement and related documents. Throughout this period, United
Bankshares, Cardinal and their senior management teams conducted due diligence on their respective proposed merger partners and held management interviews. In addition, United Bankshares and Cardinal and their respective financial advisors and legal
counsel continued to discuss various matters related to the proposed combination of United Bankshares and Cardinal.
On August
14, 2016, the board of directors of Cardinal held a special meeting with senior management and its financial and legal advisors. Management reviewed for the Cardinal board of directors the progress of its negotiations with United Bankshares and
reported on the status of its due diligence investigation of United Bankshares. At that meeting, representatives of LeClairRyan discussed with the Cardinal board of directors the legal standards applicable to its decisions and actions with respect
to its consideration of the proposed merger, and reviewed in detail the legal terms of the proposed merger agreement and related transaction documents. Sandler ONeill reviewed with the Cardinal board of directors the structure and other terms
of the proposed transaction and financial information regarding United Bankshares, Cardinal and the transaction, information regarding peer companies and comparable transactions and other relevant analyses. Sandler ONeill advised the
directors, informally, that it would be able to provide an opinion that the exchange ratio to be received by Cardinals shareholders was fair from a financial point of view. LeClairRyan and Sandler ONeill responded to questions from the
board regarding the proposed merger, the draft merger agreement and related documents, and the financial and other information provided by Sandler ONeill. After review and thorough discussion among
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members of the Cardinal board of directors, including consideration of the factors described under Cardinals Reasons for the Merger; Recommendation of the Cardinal Board of
Directors, the Cardinal board determined to hold a meeting on August 17 to further consider the merger.
On August
17, 2016, the Cardinal board of directors held a regular meeting at which updates on the merger negotiations were provided by Cardinal senior management. LeClairRyan briefed the Cardinal board on its discussions with United Bankshares legal
counsel and the changes to the merger agreement and related documents from the draft merger agreement and related documents previously reviewed on August 14. Sandler ONeill again provided information on the terms of the proposed transaction
and financial information regarding United Bankshares, Cardinal and the transaction, information regarding peer companies and comparable transactions and other relevant analyses. The Cardinal board engaged in a lengthy discussion on the proposed
merger and the terms of the merger agreement and related documents. Cardinal board members presented questions to Cardinals senior management, LeClairRyan and Sandler ONeill regarding the proposed merger and the merger agreement, and
senior management and Cardinals financial and legal advisors responded to the inquiries. In connection with the deliberations by the Cardinal board, Sandler ONeill rendered to the board its oral opinion (subsequently confirmed in
writing), as described under the Opinion of Cardinals Financial Advisor, that as of the date of its opinion, the exchange ratio in the merger was fair to the holders of Cardinal common stock from a financial point of
view. After reviewing Sandler ONeills opinion and further discussion of the terms of the merger, the Cardinal board determined that the proposed merger with United Bankshares and the related transactions as reflected in the merger
agreement presented at the meeting were in the best interest of Cardinal and its shareholders. The board voted unanimously to adopt and approve the merger agreement and related transactions and documents, and to recommend approval of the merger
agreement to the shareholders of Cardinal.
On August 17, 2016, the United Bankshares board of directors held a meeting that
was attended by representatives of KBW, United Bankshares financial advisor for the proposed transaction, and Bowles Rice LLP, counsel to United Bankshares. During this meeting, the United Bankshares board of directors evaluated the fairness
of the proposed transaction with Cardinal to the United Bankshares shareholders from a financial point of view. The United Bankshares board of directors discussed the contemplated amendment to the United Bankshares articles of incorporation and
United Bankshares potential issuance of approximately $200,000,000 in non-cumulative perpetual preferred stock, each in connection with the consummation of the proposed transaction. At this meeting, KBW reviewed the financial aspects of the
proposed merger and rendered to the United Bankshares board of directors an opinion to the effect that, as of that date and subject to the procedures followed, assumptions made, matters considered, and qualifications and limitations on the
review undertaken by KBW as set forth in such opinion, the exchange ratio in the proposed merger was fair, from a financial point of view, to United Bankshares. A representative from Bowles Rice advised the United Bankshares board of directors
regarding the directors fiduciary duties and the terms of the proposed transaction and merger agreement. After detailed discussion and careful deliberation of the proposed terms of the merger agreement and the various presentations of its
financial and legal advisors, and taking into consideration the matters discussed during the meeting of the United Bankshares board of directors, including the factors described under United Bankshares Reasons for the Merger;
Recommendation of the United Bankshares Board of Directors, the United Bankshares board of directors unanimously approved the proposed acquisition of Cardinal and approved signing the merger agreement.
On the evening of August 17, 2016, United Bankshares and Cardinal executed the definitive merger agreement. United Bankshares and
Cardinal issued a joint press release publicly announcing the transaction prior to the opening of the financial markets on August 18, 2016.
Cardinals Reasons for the Merger; Recommendation of the Cardinal Board of Directors
In reaching its decision to approve the merger and the merger agreement and to recommend its approval to Cardinal shareholders, the
Cardinal board of directors consulted with executive management, Sandler ONeill, its financial advisor, and LeClairRyan, its legal counsel. The Cardinal board of directors carefully considered the
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terms of the merger agreement and the value of the merger consideration to be received by Cardinal shareholders and ultimately determined that it was in the best interest of Cardinal and its
shareholders for Cardinal to enter into the merger agreement with United Bankshares. The Cardinal board of directors believes that partnering with United Bankshares will maximize the long-term value of shareholders investment in Cardinal, and
that the merger will provide the combined company with additional resources necessary to compete more effectively in Northern Virginia and the Washington, D.C. metropolitan area. In addition, the Cardinal board of directors believes that the
customers and communities served by Cardinal will benefit from the combined companys enhanced abilities to meet their banking needs.
In reaching its unanimous decision to approve the merger and the merger agreement and to recommend that Cardinal shareholders vote for approval of the merger agreement, the Cardinal board of directors
considered many factors, including, without limitation, the following:
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The value of the United Bankshares common stock consideration being offered to Cardinal shareholders in relation to the market value, book value per
share, tangible book value per share, earnings per share and projected earnings per share of Cardinal and United Bankshares;
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The fact that the merger consideration represented 2.24 times Cardinals tangible book value per share at June 30, 2016;
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The consideration offered by United Bankshares equals or exceeds the value which could be expected to be offered by other likely
acquirers;
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The expected future receipt by Cardinal shareholders of significant dividends after completion of the merger as United Bankshares shareholders, based
on United Bankshares current and forecasted dividend yield and its 42-year history of dividend increases;
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Comparative pro forma analyses of Cardinal, United Bankshares and the combined entity, and the earnings per share, dividends and capital levels of each
entity;
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United Bankshares asset size, capital position and financial performance in recent periods, which make United Bankshares an attractive merger
partner and would give the combined company approximately $20 billion in assets;
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The current and prospective environment in which Cardinal operates, including national, regional and local economic conditions, the competitive
environment for financial institutions, the increased regulatory burdens on financial institutions; and the uncertainties in the regulatory climate going forward;
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The feasibility of, and the results that could be expected to be obtained if, Cardinal continued to operate independently, including Cardinals
ability to compete with much larger regionally-based banks and the potential need to eventually raise additional capital that could be dilutive to existing Cardinal shareholders;
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The potential volatility of Cardinals earnings and share price resulting from the mortgage operations conducted by Cardinal;
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The anticipated future earnings growth of Cardinal compared to the potential future earnings growth of United Bankshares and the combined entity;
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The anticipated future trading value of Cardinal common stock compared to the value of the common stock consideration offered by United Bankshares and
the potential future trading value of United Bankshares common stock;
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The common stock consideration offered by United Bankshares, including the opportunity for Cardinal shareholders to receive shares of United Bankshares
common stock on a tax-free basis for their shares of Cardinal common stock;
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The greater market capitalization and trading liquidity of United Bankshares common stock in the event Cardinal shareholders desired to sell the shares
of United Bankshares common stock to be received by them upon completion of the merger;
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The process conducted by Sandler ONeill, Cardinals financial advisor, to assist the Cardinal board of directors in structuring the proposed
merger with United Bankshares;
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The presentation of analyses by Sandler ONeill, Cardinals financial advisor, as to the fairness, from a financial point of view, of the
exchange ratio in the merger to the holders of Cardinal common stock. In this regard, the Cardinal board of directors received from Sandler ONeill a written opinion dated August 17, 2016 that, as of such date, the exchange ratio in the merger
was fair to Cardinal shareholders from a financial point of view;
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The analyses presented by LeClairRyan, Cardinals outside legal counsel, as to the structure of the merger, the merger agreement, duties of the
Cardinal board of directors under applicable law, and the process that Cardinal (including its board of directors) employed in considering all potential strategic transactions including the merger with United Bankshares;
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The ability to terminate the merger agreement if (i) the average closing price of United Bankshares common stock declines by more than 20% from the
closing price immediately prior to the public announcement of entry into the merger agreement, and (ii) United Bankshares common stock underperforms the NASDAQ Bank Index (IBIX) by more than 15%, all as calculated pursuant to the merger agreement;
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The reverse break-up fee of $13.5 million payable to Cardinal if United Bankshares does not satisfy any condition to approval of a governmental
authority requiring United Bankshares to raise or obtain capital in accordance with the terms required by the applicable governmental authority;
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The scale, scope, strength and diversity of operations, product lines and delivery systems that could be achieved by combining Cardinal with United
Bankshares;
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The additional products offered by United Bankshares to its customers, the ability of the combined company to provide comprehensive financial services
to its customers, and the potential for operating synergies and cross-marketing of products and services across the combined company;
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The potential value of an expansion of the United Bankshares branch network adding Cardinal branch locations in Virginia, Maryland and Washington, D.C.
to United Bankshares existing branch network in Virginia, West Virginia, Maryland, Pennsylvania, Ohio and Washington, D.C.;
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The shared community banking philosophies of Cardinal and United Bankshares, and each entitys commitment to community service and support of
community-based non-profit organizations and causes;
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The fact that Cardinal directors and executive officers have interests in the merger that are different from, or in addition to, those of other
Cardinal shareholders;
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The likelihood of successful integration and operation of the combined company;
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The likelihood of obtaining the governmental approvals needed to complete the transaction;
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The potential cost-saving opportunities resulting from the merger;
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The effects of the merger on Cardinal employees, including the prospects for continued employment and the severance and other benefits agreed to be
provided to Cardinal employees; and
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The review by the Cardinal board of directors with its legal and financial advisors of the structure of the merger and the financial and other terms of
the merger, including the exchange ratio and the condition that the merger must qualify as a transaction that will permit Cardinal shareholders to receive United Bankshares shares in exchange for their Cardinal shares on a tax-free basis for federal
income tax purposes.
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The Cardinal board of directors also considered a number of potential risks and
uncertainties associated with the merger in connection with its deliberation of the proposed transaction, including, without limitation, the following:
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The challenges of integrating Cardinals businesses, operations and employees with those of United Bankshares;
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The need to obtain approval by shareholders of Cardinal and United Bankshares, as well as governmental approvals in order to complete the transaction;
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The risks associated with the operations of the combined company including the ability to achieve the anticipated cost savings;
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The risks associated with entry into the merger agreement and conduct of Cardinals business before the merger is completed, and the impact that
provisions of the merger agreement relating to reimbursement of expenses and payment of a termination fee by Cardinal may have on Cardinal receiving superior acquisition offers; and
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That the fixed exchange ratio, by its nature, would not adjust upwards to compensate for declines in United Bankshares stock price prior to the
completion of the merger, meaning that Cardinal shareholders would not be protected against decreases in United Bankshares stock price prior to the completion of the merger.
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The Cardinal board of directors also considered the structural protections included in the merger agreement, such as the ability of
Cardinal to terminate the merger agreement if, without limitation:
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United Bankshares breaches the representation that, since December 31, 2015, no event has occurred or circumstance arisen that is reasonably likely to
have a material adverse effect with respect to United Bankshares, which breach cannot be or has not been cured within 30 days after written notice of the breach to United Bankshares;
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The average closing price of United Bankshares common stock declines by more than 20% from the closing price immediately prior to the public
announcement of entry into the merger agreement, and United Bankshares common stock underperforms the NASDAQ Bank Index by more than 15%, all as calculated pursuant to the merger agreement;
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United Bankshares materially breaches any of its covenants or agreements under the merger agreement, which material breach cannot be or has not been
cured within 30 days after written notice of the breach to United Bankshares; or
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Any required approval of any government authority is denied by final nonappealable action of such government authority, or the shareholders of United
Bankshares or Cardinal do not approve the merger at the United Bankshares special meeting or the Cardinal special meeting, respectively.
|
In addition, the Cardinal board of directors discussed the reverse break-up fee of $13.5 million payable to Cardinal if United Bankshares does not satisfy any condition to approval of a governmental
authority requiring United Bankshares to raise or obtain capital in accordance with the terms required by the applicable governmental authority. This break-up fee is subject to Cardinals representations, warranties and covenants being true as
of the effective time and certain conditions to the closing being satisfied by Cardinal.
The Cardinal board of directors also
noted that it could terminate the merger agreement in order to concurrently enter into an agreement with respect to an unsolicited acquisition proposal that was received from a buyer other than United Bankshares and considered by Cardinal in
compliance with the non-solicitation provisions of the merger agreement and that would, if consummated, result in a transaction that is more favorable to Cardinal shareholders than the merger. This termination right is conditioned on Cardinal
providing notice of the unsolicited acquisition proposal to United Bankshares, United Bankshares not making a revised offer to Cardinal that is at least as favorable as the unsolicited acquisition proposal and Cardinal paying a $36.0 million
67
break-up fee to United Bankshares. The amount of this potential fee was negotiated at arms-length and was deemed by the Cardinal board of directors to be reasonable based upon the break-up
fees paid in comparable transactions and the fact that multiple institutions had already been given an opportunity to bid prior to the merger agreement being approved.
The foregoing discussion of the information and factors considered by the Cardinal board of directors is not intended to be exhaustive, but includes the material factors considered by the board of
directors. In view of the wide variety and complexity of factors considered in connection with its evaluation of the merger, the Cardinal board of directors did not find it practicable to, and did not attempt to, quantify, rank or otherwise assign
relative weights to the specific factors considered in reaching its determination and recommendation. In addition, individual directors may have given different weights to different factors. The Cardinal board of directors did not undertake to make
any specific determination as to whether any factor, or any particular aspect of any factor, supported or did not support its ultimate determination. The Cardinal board of directors based its recommendation on the totality of the information
presented. The Cardinal board of directors evaluated the factors described above, including asking questions of Cardinals legal and financial advisors. The Cardinal board of directors relied on the experience and expertise of its legal
advisors regarding the structure of the merger and the terms of the merger agreement and on the experience and expertise of its financial advisor for quantitative analysis of the financial terms of the merger.
For the reasons set forth above, the Cardinal board of directors unanimously determined that the merger agreement and the transactions
contemplated by the merger agreement, are advisable and in the best interests of Cardinal and its shareholders, and unanimously adopted and approved the merger agreement and the transactions contemplated by it. The Cardinal board of directors
unanimously recommends that the Cardinal shareholders vote FOR the approval of the Cardinal Merger Proposal.
United Bankshares Reasons for the Merger; Recommendation of the United Bankshares Board of Directors
The United
Bankshares board of directors considers the strategic direction of United Bankshares, including an evaluation of strategic growth opportunities, on a regular basis. This consideration includes periodic discussions with United Bankshares management
with respect to business combination opportunities. In its evaluation of potential acquisition targets, the United Bankshares board of directors considers numerous factors, including among other things the strength of the fit between the target and
United Bankshares existing business, the accretive or dilutive impact of the acquisition on United Bankshares earnings per share and other measures of profitability, the projected strength of the combined enterprise, the expected pro
forma effects of the transaction on the balance sheet of the combined enterprise, and the impacts of the transaction on United Bankshares shareholders, employees, customers and other stakeholders.
In reaching its decision to adopt and approve the merger agreement, the merger, the issuance of United Bankshares common stock in
connection with the merger and the other transactions contemplated by the merger agreement, and to recommend that its shareholders approve the merger agreement, the United Bankshares board of directors evaluated the merger agreement, the merger, the
issuance of United Bankshares common stock and the other transactions in consultation with United Bankshares management, as well as United Bankshares financial and legal advisors, and considered a number of factors, including the following
material factors:
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United Bankshares, Cardinals and the combined entitys business, operations, financial condition, risk profile, asset quality,
earnings and prospects. In reviewing these factors, the United Bankshares board of directors considered its view that Cardinals business and operations complement those of United Bankshares and that the merger would result in a combined
company with a more diversified revenue stream and an attractive funding base;
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The combined entity will be the leading independent community bank operating throughout the most attractive markets in Northern Virginia and
Washington, D.C.
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68
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|
|
Cardinals familiarity with the Northern Virginia and Washington, D.C. markets;
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|
The boards understanding of the current and prospective environment in which United Bankshares and Cardinal operate, including national and local
economic conditions, the competitive environment for financial institutions generally and the likely effect of these factors on United Bankshares both with and without the proposed transaction;
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|
Managements expectation regarding cost synergies, accretion, tangible book value dilution and internal rate of return;
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Its review and discussions with United Bankshares management concerning the due diligence examination of Cardinal;
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|
Sensitivity of the proposed transactions economic returns to a variety of factors, including changes to the amount of cost synergies,
Cardinals pro forma earnings, Cardinals rates of growth and estimated mark-to-market of the associated loan portfolio;
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|
The market for alternative merger or acquisition transactions in the banking industry and the likelihood and timing of other material strategic
transactions;
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|
The complementary nature of the cultures and product mix of the two companies, including the fact that each company utilizes the same service provider
for its data processing platform, which management believes should facilitate integration and implementation of the transaction;
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|
Managements expectation that the strong capital position maintained by each separate company prior to the completion of the merger and the
additional $200 million of non-cumulative perpetual preferred stock that United anticipates raising in connection with the merger will contribute to a strong capital position for the combined entity upon completion of the merger;
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The opinion, dated August 17, 2016, of KBW to the United Bankshares board of directors as to the fairness, from a financial point of view and as of the
date of the opinion, to United Bankshares of the exchange ratio in the proposed merger, as more fully described below under Opinion of United Bankshares Financial Advisor;
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The terms of the merger agreement, including the fixed exchange ratio, tax treatment and mutual deal protection and termination fee provisions, which
it reviewed with its outside legal and financial advisors;
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The potential risks associated with and managements recent experience in achieving anticipated cost synergies and savings and successfully
integrating Cardinals business, operations and workforce with those of Cardinal;
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The nature and amount of payments to be received by Cardinal management in connection with the merger and the merger-related costs and restructuring
charges that will be incurred in connection with the merger;
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The impact on treatment of Uniteds trust preferred securities as Tier 2 capital as a result of Uniteds assets exceeding $15 billion
following the merger;
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The potential risk of diverting management attention and resources from the operation of United Bankshares business and towards the completion of
the merger; and
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The regulatory and other approvals required in connection with the merger.
|
The foregoing discussion of the information and factors considered by the United Bankshares board of directors is not intended to be
exhaustive, but includes the material factors considered by the United Bankshares board of directors. In reaching its decision to approve the merger agreement, the merger, the issuance of United Bankshares common stock to Cardinal shareholders in
connection with the merger, and the other transactions contemplated by the merger agreement, the United Bankshares board of directors did not quantify or assign any
69
relative weights to the factors considered, and individual directors may have given different weights to different factors. The United Bankshares board of directors considered all these factors
as a whole, including discussions with, and questioning of, United Bankshares management and United Bankshares financial and legal advisors, and overall considered the factors to be favorable to, and to support, its determination.
For the reasons set forth above, the United Bankshares board of directors unanimously determined that the merger agreement and the
transactions contemplated by the merger agreement, are advisable and in the best interests of United Bankshares and its shareholders, and unanimously adopted and approved the merger agreement and the transactions contemplated by it. The United
Bankshares board of directors unanimously recommends that the United Bankshares shareholders vote FOR the approval of the United Bankshares Merger Proposal and vote FOR the approval of the United Bankshares Stock Issuance
Proposal.
Opinion of Cardinals Financial Advisor
By letter dated April 5, 2016, Cardinal retained Sandler ONeill, to act as financial advisor to Cardinals board of directors
in connection with Cardinals consideration of a possible business combination. Sandler ONeill is a nationally recognized investment banking firm whose principal business specialty is financial institutions. In the ordinary course of its
investment banking business, Sandler ONeill is regularly engaged in the valuation of financial institutions and their securities in connection with mergers and acquisitions and other corporate transactions.
Sandler ONeill acted as financial advisor in connection with the proposed transaction and participated in certain of the
negotiations leading to the execution of the merger agreement. At the August 14, 2016 meeting at which Cardinals board of directors considered and discussed the terms of the merger agreement and the merger, Sandler ONeill delivered to
Cardinals board of directors its oral opinion, which was subsequently confirmed in writing on August 17, 2016, to the effect that, as of such date, the exchange ratio was fair to the holders of Cardinal common stock from a financial point of
view
. The full text of Sandler ONeills opinion is attached as Appendix B to this prospectus and joint proxy statement. The opinion outlines the procedures followed, assumptions made, matters considered and qualifications and
limitations on the review undertaken by Sandler ONeill in rendering its opinion. The description of the opinion set forth below is qualified in its entirety by reference to the full text of the opinion. Holders of Cardinal common stock are
urged to read the entire opinion carefully in connection with their consideration of the proposed merger.
Sandler ONeills opinion speaks only as of the date of the opinion. The opinion was directed to Cardinals board of
directors in connection with its consideration of the merger and is directed only to the fairness, from a financial point of view, of the exchange ratio to the holders of Cardinal common stock. Sandler ONeills opinion does not constitute
a recommendation to any shareholder of Cardinal as to how such shareholder should vote at any meeting of shareholders called to consider and vote upon the merger or any other matter. It does not address the underlying business decision of Cardinal
to engage in the merger, the relative merits of the merger as compared to any other alternative business strategies that might exist for Cardinal or the effect of any other transaction in which Cardinal might engage.
Sandler ONeill did not
express any opinion as to the fairness of the amount or nature of the compensation to be received in the merger by any of Cardinals or United Bankshares officers, directors or employees, or class of such persons, if any, relative to the
compensation to be received in the merger by any other shareholder, including the merger consideration to be received by Cardinals common shareholders. Sandler ONeills opinion was approved by Sandler ONeills fairness
opinion committee.
In connection with rendering its opinion, Sandler ONeill reviewed, among other things:
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a draft of the merger agreement, dated August 16, 2016;
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|
certain publicly available financial statements and other historical financial information of Cardinal that Sandler ONeill deemed relevant;
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70
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|
|
certain publicly available financial statements and other historical financial information of United Bankshares that Sandler ONeill deemed
relevant;
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|
publicly available consensus mean and median analyst earnings per share estimates for Cardinal for the years ending December 31, 2016 and December 31,
2017 as well as an estimated long-term earnings per share growth rate for the years thereafter, as provided by the senior management of Cardinal;
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|
publicly available consensus mean and median analyst earnings per share estimates for United Bankshares for the years ending December 31, 2016 and
December 31, 2017 as well as an estimated long-term earnings per share growth rate for the years thereafter, as provided by the senior management of United Bankshares;
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the pro forma financial impact of the Merger on United Bankshares based on certain assumptions relating to transaction costs, purchase accounting
adjustments, expected cost savings, a core deposit intangible asset, a provision expense and United Bankshares issuance of a certain amount of perpetual preferred stock, as provided by the senior management of United Bankshares;
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the publicly reported historical price and trading activity for Cardinal common stock and United Bankshares common stock, including a comparison of
certain stock market information for Cardinal common stock and United Bankshares common stock and certain stock indices, as well as publicly available information for certain other similar companies, the securities of which are publicly traded;
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a comparison of certain financial information for Cardinal and United Bankshares with similar institutions for which information is publicly available;
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the financial terms of certain recent business combinations in the bank and thrift industry (on a nationwide basis), to the extent publicly available;
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|
the current market environment generally and in the banking sector in particular; and
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such other information, financial studies, analyses and investigations and financial, economic and market criteria as Sandler ONeill considered
relevant.
|
Sandler ONeill also discussed with certain members of senior management of Cardinal the
business, financial condition, results of operations and prospects of Cardinal and held similar discussions with the senior management of United Bankshares regarding the business, financial condition, results of operations and prospects of United
Bankshares.
In performing its review, Sandler ONeill relied upon the accuracy and completeness of all of the financial
and other information that was available to it from public sources, that was provided to it by Cardinal and United Bankshares, or their respective representatives, or that was otherwise reviewed by it, and Sandler ONeill assumed such accuracy
and completeness for purposes of preparing its opinion. Sandler ONeill further relied on the assurances of the management of Cardinal and United Bankshares that they were not aware of any facts or circumstances that would make any of such
information inaccurate or misleading. Sandler ONeill was not asked to and did not undertake an independent verification of any such information and Sandler ONeill did not assume any responsibility or liability for the accuracy or
completeness thereof. Sandler ONeill did not make an independent evaluation or appraisal of the specific assets, the collateral securing assets or the liabilities (contingent or otherwise) of Cardinal or United Bankshares, or any of their
respective subsidiaries, nor were they furnished with any such evaluations or appraisals. Sandler ONeill rendered no opinion or evaluation on the collectability of any assets or the future performance of any loans of Cardinal or United
Bankshares. Sandler ONeill did not make an independent evaluation of the adequacy of the allowance for loan losses of Cardinal, United Bankshares or the combined entity after the merger and Sandler ONeill did not review any individual
credit files relating to Cardinal or United Bankshares. Sandler ONeill assumed, with Cardinals consent, that the respective allowances for loan losses for both Cardinal and United Bankshares were adequate to cover such losses and would
be adequate on a pro forma basis for the combined entity.
71
In preparing its analyses, Sandler ONeill used publicly available consensus mean
analyst earnings per share estimates for Cardinal for the years ending December 31, 2016 and December 31, 2017 as well as an estimated long-term earnings per share growth rate for the years thereafter, as provided by the senior management of
Cardinal. In addition, Sandler ONeill used publicly available consensus mean analyst earnings per share estimates for United Bankshares for the years ending December 31, 2016 and December 31, 2017 as well as an estimated long-term earnings per
share growth rate for the years thereafter, as provided by the senior management of United Bankshares. Sandler ONeill also received and used in its pro forma analyses certain assumptions relating to transaction costs, purchase accounting
adjustments, expected cost savings, a core deposit intangible asset, a provision expense and United Bankshares issuance of a certain amount of perpetual preferred stock, as provided by the senior management of United Bankshares. With respect
to the foregoing information, the respective senior managements of Cardinal and United Bankshares confirmed to Sandler ONeill that those estimates and judgments reflected the best currently available estimates and judgments of those respective
managements of the future financial performance of Cardinal and United Bankshares, respectively, and Sandler ONeill assumed that such performance would be achieved. Sandler ONeill expressed no opinion as to such information or the
assumptions on which such information was based. Sandler ONeill assumed that there had been no material change in the respective assets, financial condition, results of operations, business or prospects of Cardinal or United Bankshares since
the date of the most recent financial data made available to Sandler ONeill. Sandler ONeill also assumed in all respects material to its analysis that Cardinal and United Bankshares would remain as going concerns for all periods relevant
to its analyses.
Sandler ONeill also assumed, with Cardinals consent, that (i) each of the parties to the merger
agreement would comply in all material respects with all material terms of the merger agreement and all related agreements, that all of the representations and warranties contained in such agreements were true and correct in all material respects,
that each of the parties to such agreements would perform in all material respects all of the covenants required to be performed by such party under the agreements and that the conditions precedent in such agreements were not and would not be
waived, (ii) in the course of obtaining the necessary regulatory or third party approvals, consents and releases with respect to the merger, no delay, limitation, restriction or condition would be imposed that would have an adverse effect on
Cardinal, United Bankshares or the merger or any related transaction, (iii) the merger would be consummated without Cardinals rights under Section 9.01(i) of the merger agreement having been triggered, and (iv) the merger and any related
transaction would be consummated in accordance with the terms of the merger agreement without any waiver, modification or amendment of any material term, condition or agreement thereof and in compliance with all applicable laws and other
requirements. Finally, with Cardinals consent, Sandler ONeill relied upon the advice that Cardinal received from its legal, accounting and tax advisors as to all legal, accounting and tax matters relating to the merger and the other
transactions contemplated by the merger agreement.
Sandler ONeills analyses and the views expressed in its
opinion were necessarily based on financial, economic, regulatory, market and other conditions as in effect on, and the information made available to Sandler ONeill as of the date of its opinion. Events occurring after that date could
materially affect Sandler ONeills views and Sandler ONeill did not undertake to update, revise, reaffirm or withdraw its opinion or otherwise comment upon events occurring after the date of its opinion. Sandler ONeill
expressed no opinion as to the trading values of Cardinal common stock or United Bankshares common stock at any time or what the value of United Bankshares common stock would be once it is actually received by the holders of Cardinal common stock.
In rendering its opinion, Sandler ONeill performed a variety of financial analyses. The summary below is not a complete
description of the analyses underlying Sandler ONeills opinion or the presentation made by Sandler ONeill to Cardinals board of directors, but is a summary of all material analyses performed and presented by Sandler
ONeill. The summary includes information presented in tabular format.
In order to fully understand the financial analyses, these tables must be read together with the accompanying text. The tables alone do not constitute a complete
description of the financial analyses.
The preparation of a fairness opinion is a complex process involving subjective judgments as to the most appropriate and relevant methods of
72
financial analysis and the application of those methods to the particular circumstances. The process, therefore, is not necessarily susceptible to a partial analysis or summary description.
Sandler ONeill believes that its analyses must be considered as a whole and that selecting portions of the factors and analyses to be considered without considering all factors and analyses, or attempting to ascribe relative weights to some or
all such factors and analyses, could create an incomplete view of the evaluation process underlying its opinion. Also, no company included in Sandler ONeills comparative analyses described below is identical to Cardinal or United
Bankshares and no transaction is identical to the merger. Accordingly, an analysis of comparable companies or transactions involves complex considerations and judgments concerning differences in financial and operating characteristics of the
companies and other factors that could affect the public trading values or merger transaction values, as the case may be, of Cardinal and United Bankshares and the companies to which they are being compared. In arriving at its opinion, Sandler
ONeill did not attribute any particular weight to any analysis or factor that it considered. Rather, Sandler ONeill made qualitative judgments as to the significance and relevance of each analysis and factor.
Sandler ONeill did not form an opinion as to whether any individual analysis or factor (positive or negative) considered in isolation supported or failed to support its opinion, rather, Sandler ONeill made its determination as to
the fairness of the exchange ratio on the basis of its experience and professional judgment after considering the results of all its analyses taken as a whole.
In performing its analyses, Sandler ONeill also made numerous assumptions with respect to industry performance, business and economic conditions and various other matters, many of which cannot be
predicted and are beyond the control of Cardinal, United Bankshares and Sandler ONeill. The analyses performed by Sandler ONeill are not necessarily indicative of actual values or future results, both of which may be significantly more
or less favorable than suggested by such analyses. Sandler ONeill prepared its analyses solely for purposes of rendering its opinion and provided such analyses to Cardinals board of directors at its August 14, 2016 meeting. Estimates on
the values of companies do not purport to be appraisals or necessarily reflect the prices at which companies or their securities may actually be sold. Such estimates are inherently subject to uncertainty and actual values may be materially
different. Accordingly, Sandler ONeills analyses do not necessarily reflect the value of Cardinal common stock or the prices at which Cardinal common stock or United Bankshares common stock may be sold at any time. The analyses of
Sandler ONeill and its opinion were among a number of factors taken into consideration by Cardinals board of directors in making its determination to approve the merger agreement and the analyses described below should not be viewed as
determinative of the decision of Cardinals board of directors or management with respect to the fairness of the merger.
Summary of Proposed Merger Consideration and Implied Transaction Metrics.
Sandler ONeill reviewed the financial terms
of the proposed transaction. Using United Bankshares August 12, 2016 closing stock price of $38.40, and based upon Cardinals 32,459,179 shares of common stock outstanding and 1,015,904 options to acquire shares of common stock
outstanding with a weighted average strike price of $15.06, Sandler ONeill calculated an aggregate implied transaction value of approximately $897 million, or a transaction price per share of $27.26. Based upon financial information for
Cardinal as or for the last twelve months (LTM) ended June 30, 2016, unless otherwise noted, Sandler ONeill calculated the following implied transaction metrics:
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Transaction Price / LTM Net Income:
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19.2x
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Transaction Price / 2016 Mean Analyst Estimates Earnings Per Share:
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17.8x
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Transaction Price / 2017 Mean Analyst Estimates Earnings Per Share:
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17.3x
|
|
Transaction Price / Tangible Book Value Per Share:
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220.2
|
%
|
Tangible Book Premium/Core Deposits¹:
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18.9
|
%
|
Market Premium as of August 12, 2016:
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|
6.0
|
%
|
Market Premium as of July 25, 2016²:
|
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14.5
|
%
|
Market Premium as of July 12, 2016 (One Month Prior)
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20.6
|
%
|
(1)
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Tangible book premium to core deposits calculated as (deal value tangible equity) / (core deposits); Core Deposits defined as total deposits less jumbo
CDs (>$100,000).
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73
(2)
|
Represents the closing price of Cardinal common stock on the trading day prior to the July 26, 2016 MergerMarket.com article that first announced rumors of a possible
sale of Cardinal
|
Stock Trading History.
Sandler ONeill reviewed the history of the publicly
reported trading prices of Cardinal common stock and United Bankshares common stock for both the year-to-date and the three-year period ended August 12, 2016. Sandler ONeill then compared the relationship between the movements in the
prices of Cardinal and United Bankshares common stock, respectively, to movements in their respective peer groups (as described below) as well as certain stock indices.
Cardinal Year-to-Date Stock Performance
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Beginning
January 1, 2016
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Ending
August 12, 2016
|
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Cardinal
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|
100
|
%
|
|
|
113.1
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%
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Cardinal Peer Group
|
|
|
100
|
%
|
|
|
107.3
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%
|
NASDAQ U.S. Bank Index
|
|
|
100
|
%
|
|
|
101.0
|
%
|
S&P 500 Index
|
|
|
100
|
%
|
|
|
106.9
|
%
|
Cardinal Three-Year Stock Performance
|
|
|
|
|
|
|
|
|
|
|
Beginning
August 12, 2013
|
|
|
Ending
August 12, 2016
|
|
Cardinal
|
|
|
100
|
%
|
|
|
151.8
|
%
|
Cardinal Peer Group
|
|
|
100
|
%
|
|
|
144.8
|
%
|
NASDAQ U.S. Bank Index
|
|
|
100
|
%
|
|
|
121.0
|
%
|
S&P 500 Index
|
|
|
100
|
%
|
|
|
129.3
|
%
|
United Bankshares Year-to-Date Stock Performance
|
|
|
|
|
|
|
|
|
|
|
Beginning
January 1, 2016
|
|
|
Ending
August 12, 2016
|
|
United Bankshares
|
|
|
100
|
%
|
|
|
103.8
|
%
|
United Bankshares Peer Group
|
|
|
100
|
%
|
|
|
104.1
|
%
|
NASDAQ U.S. Bank Index
|
|
|
100
|
%
|
|
|
101.0
|
%
|
S&P 500 Index
|
|
|
100
|
%
|
|
|
106.9
|
%
|
United Bankshares Three-Year Stock Performance
|
|
|
|
|
|
|
|
|
|
|
Beginning
August 12, 2013
|
|
|
Ending
August 12, 2016
|
|
United Bankshares
|
|
|
100
|
%
|
|
|
133.4
|
%
|
United Bankshares Peer Group
|
|
|
100
|
%
|
|
|
127.3
|
%
|
NASDAQ U.S. Bank Index
|
|
|
100
|
%
|
|
|
121.0
|
%
|
S&P 500 Index
|
|
|
100
|
%
|
|
|
129.3
|
%
|
74
Comparable Company Analyses.
Sandler ONeill used publicly available
information to compare selected financial information for Cardinal with a group of financial institutions selected by Sandler ONeill or the Cardinal Peer Group. The Cardinal Peer Group consisted of publicly-traded holding companies, banks and
thrifts headquartered in Delaware, Washington DC, Maryland and Virginia with total assets between $2.0 billion and $10.0 billion, excluding announced merger targets, The Bancorp, Inc., and Xenith Bankshares, Inc. The Cardinal Peer Group consisted of
the following companies:
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|
|
Union Bankshares Corporation
|
|
TowneBank
|
Eagle Bancorp, Inc.
|
|
WSFS Financial Corporation
|
Carter Bank & Trust
|
|
Sandy Spring Bancorp, Inc.
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Burke & Herbert Bank & Trust
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|
First Community Bancshares, Inc.
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The analysis compared financial information for Cardinal with the corresponding publicly available data
for the Cardinal Peer Group as of or for the twelve months ended June 30, 2016 (unless otherwise noted), with pricing data as of August 12, 2016. The table below sets forth the data for Cardinal and the high, low, median and mean data for the
Cardinal Peer Group.
Cardinal Comparable Company Analysis
|
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|
|
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|
|
|
|
|
|
|
|
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|
|
|
|
|
|
Cardinal
|
|
|
Cardinal
Peer
Group
Median
|
|
|
Cardinal
Peer
Group
Mean
|
|
|
Cardinal
Peer
Group
High
|
|
|
Cardinal
Peer
Group
Low
|
|
Total assets (in millions)
|
|
$
|
4,197
|
|
|
$
|
5,370
|
|
|
$
|
5,409
|
|
|
$
|
8,101
|
|
|
$
|
2,495
|
|
Loans/Deposits
|
|
|
97.3
|
%
|
|
|
97.1
|
%
|
|
|
89.6
|
%
|
|
|
104.6
|
%
|
|
|
60.3
|
%
|
Non-performing assets¹/Total assets
|
|
|
0.01
|
%
|
|
|
0.75
|
%
|
|
|
1.24
|
%
|
|
|
4.30
|
%
|
|
|
0.45
|
%
|
Tangible common equity/Tangible assets
|
|
|
9.65
|
%
|
|
|
9.57
|
%
|
|
|
9.66
|
%
|
|
|
11.89
|
%
|
|
|
7.76
|
%
|
Leverage ratio
|
|
|
10.38
|
%
|
|
|
10.28
|
%
|
|
|
10.43
|
%
|
|
|
12.36
|
%
|
|
|
7.71
|
%
|
Total risk-based capital ratio
|
|
|
11.86
|
%
|
|
|
12.76
|
%
|
|
|
13.43
|
%
|
|
|
16.82
|
%
|
|
|
11.79
|
%
|
Commercial real estate/Total risk-based capital
|
|
|
384.7
|
%
|
|
|
273.3
|
%
|
|
|
288.0
|
%
|
|
|
393.2
|
%
|
|
|
206.8
|
%
|
LTM Return on average assets
|
|
|
1.20
|
%
|
|
|
0.99
|
%
|
|
|
1.05
|
%
|
|
|
1.52
|
%
|
|
|
0.74
|
%
|
LTM Return on average equity
|
|
|
11.28
|
%
|
|
|
8.62
|
%
|
|
|
8.85
|
%
|
|
|
11.87
|
%
|
|
|
6.97
|
%
|
LTM Net interest margin
|
|
|
3.32
|
%
|
|
|
3.68
|
%
|
|
|
3.59
|
%
|
|
|
4.34
|
%
|
|
|
2.24
|
%
|
LTM Efficiency ratio
|
|
|
57.7
|
%
|
|
|
61.5
|
%
|
|
|
58.2
|
%
|
|
|
64.7
|
%
|
|
|
40.5
|
%
|
Price/Tangible book value
|
|
|
208
|
%
|
|
|
174
|
%
|
|
|
171
|
%
|
|
|
251
|
%
|
|
|
93
|
%
|
Price/LTM Earnings per share
|
|
|
18.1
|
x
|
|
|
16.7
|
x
|
|
|
16.3
|
x
|
|
|
22.1
|
x
|
|
|
9.5
|
x
|
Price/Median Analyst 2016E Earnings per share²
|
|
|
16.6
|
x
|
|
|
16.1
|
x
|
|
|
16.5
|
x
|
|
|
18.3
|
x
|
|
|
15.8
|
x
|
Current Dividend Yield
|
|
|
1.9
|
%
|
|
|
2.8
|
%
|
|
|
2.3
|
%
|
|
|
3.7
|
%
|
|
|
0.0
|
%
|
LTM Dividend ratio
|
|
|
32.4
|
%
|
|
|
42.3
|
%
|
|
|
33.4
|
%
|
|
|
50.5
|
%
|
|
|
0.0
|
%
|
Market value (in millions)
|
|
$
|
835
|
|
|
$
|
904
|
|
|
$
|
907
|
|
|
$
|
1,710
|
|
|
$
|
348
|
|
(1)
|
Nonperforming assets defined as nonaccrual loans and leases, renegotiated loans and leases, and real estate owned.
|
(2)
|
Based on analyst earnings per share estimates as reported by FactSet.
|
Note: Financial data for the institutions in the Cardinal Peer Group is not pro forma for any publicly announced and pending transactions. Commercial real estate/Total risk-based capital for Eagle
Bancorp, Inc. and Price/Tangible book value, Price/LTM EPS, and LTM Dividend ratio for Burke & Herbert Bank & Trust are as of or for the twelve months ending March 31, 2016.
Sandler ONeill used publicly available information to perform a similar analysis for United Bankshares and a group of financial
institutions as selected by Sandler ONeill or the United Bankshares Peer Group. The United
75
Bankshares Peer Group consisted of holding companies, banks and thrifts whose securities are traded on the NYSE or NASDAQ with total assets between $12.0 billion and $20.0 billion headquartered
in the U.S., excluding announced merger targets and Puerto Rican institutions. The United Bankshares Peer Group consisted of the following companies:
|
|
|
UMB Financial Corporation
|
|
First Hawaiian, Inc.
|
Fulton Financial Corporation
|
|
Western Alliance Bancorporation
|
MB Financial, Inc.
|
|
Bank of Hawaii Corporation
|
Washington Federal, Inc.
|
|
Old National Bancorp
|
BancorpSouth, Inc.
|
|
Flagstar Bancorp, Inc.
|
Cathay General Bancorp
|
|
Hilltop Holdings, Inc.
|
Sterling Bancorp
|
|
Trustmark Corporation
|
Bank of the Ozarks, Inc.
|
|
|
The analysis compared financial information for United Bankshares with the corresponding publicly
available data for the United Bankshares Peer Group as of or for the twelve months ended June 30, 2016 (unless otherwise noted) with pricing data as of August 12, 2016. The table below sets forth the data for United Bankshares and the high, low,
median and mean data for the United Bankshares Peer Group.
United Bankshares Comparable Company Analysis
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United
Bankshares
|
|
|
United
Bankshares
Peer
Group
Median
|
|
|
United
Bankshares
Peer
Group
Mean
|
|
|
United
Bankshares
Peer
Group
High
|
|
|
United
Bankshares
Peer
Group
Low
|
|
Total assets (in millions)
|
|
$
|
14,338
|
|
|
$
|
14,420
|
|
|
$
|
15,197
|
|
|
$
|
19,734
|
|
|
$
|
12,280
|
|
Loans/Deposits
|
|
|
101.0
|
%
|
|
|
87.8
|
%
|
|
|
84.2
|
%
|
|
|
100.4
|
%
|
|
|
61.1
|
%
|
Non-performing assets¹/Total assets
|
|
|
0.99
|
%
|
|
|
0.85
|
%
|
|
|
0.84
|
%
|
|
|
2.20
|
%
|
|
|
0.21
|
%
|
Tangible common equity/Tangible assets
|
|
|
8.33
|
%
|
|
|
8.97
|
%
|
|
|
9.37
|
%
|
|
|
11.67
|
%
|
|
|
7.11
|
%
|
Leverage ratio
|
|
|
11.48
|
%
|
|
|
9.93
|
%
|
|
|
10.21
|
%
|
|
|
13.26
|
%
|
|
|
7.29
|
%
|
Total risk-based capital ratio
|
|
|
12.63
|
%
|
|
|
13.45
|
%
|
|
|
14.40
|
%
|
|
|
20.19
|
%
|
|
|
11.71
|
%
|
Commercial real estate/Total risk-based capital
|
|
|
341.6
|
%
|
|
|
169.4
|
%
|
|
|
184.2
|
%
|
|
|
410.3
|
%
|
|
|
49.0
|
%
|
LTM Return on average assets
|
|
|
1.08
|
%
|
|
|
1.10
|
%
|
|
|
1.13
|
%
|
|
|
2.01
|
%
|
|
|
0.66
|
%
|
LTM Return on average equity
|
|
|
7.72
|
%
|
|
|
8.27
|
%
|
|
|
9.35
|
%
|
|
|
15.36
|
%
|
|
|
6.51
|
%
|
LTM Net interest margin
|
|
|
3.58
|
%
|
|
|
3.58
|
%
|
|
|
3.51
|
%
|
|
|
4.94
|
%
|
|
|
2.68
|
%
|
LTM Efficiency ratio
|
|
|
48.3
|
%
|
|
|
64.0
|
%
|
|
|
59.9
|
%
|
|
|
82.6
|
%
|
|
|
33.4
|
%
|
Price/Tangible book value
|
|
|
262
|
%
|
|
|
166
|
%
|
|
|
187
|
%
|
|
|
263
|
%
|
|
|
117
|
%
|
Price/LTM Earnings per share
|
|
|
20.0
|
x
|
|
|
16.5
|
x
|
|
|
16.5
|
x
|
|
|
22.3
|
x
|
|
|
11.8
|
x
|
Price/Median Analyst 2016E Earnings per share²
|
|
|
19.2
|
x
|
|
|
15.4
|
x
|
|
|
15.2
|
x
|
|
|
18.4
|
x
|
|
|
11.7
|
x
|
Current Dividend Yield
|
|
|
3.4
|
%
|
|
|
2.0
|
%
|
|
|
1.8
|
%
|
|
|
3.8
|
%
|
|
|
0.0
|
%
|
LTM Dividend ratio
|
|
|
68.2
|
%
|
|
|
32.9
|
%
|
|
|
28.0
|
%
|
|
|
59.4
|
%
|
|
|
0.0
|
%
|
Market value (in millions)
|
|
$
|
2,933
|
|
|
$
|
2,386
|
|
|
$
|
2,621
|
|
|
$
|
4,515
|
|
|
$
|
1,551
|
|
(1)
|
Nonperforming assets defined as nonaccrual loans and leases, renegotiated loans and leases, and real estate owned.
|
(2)
|
Based on analyst earnings per share estimates as reported by FactSet.
|
Note: Financial data for the institutions in the United Bankshares Peer Group is not pro forma for any publicly announced and pending transactions. Commercial real estate/total risk-based capital for
Fulton Financial Corporation, Western Alliance Bancorporation, MB Financial, Inc., Washington Federal, Inc., BancorpSouth, Inc., and Hilltop Holdings Inc. is as of March 31, 2016. ROAA, ROAE, Net interest margin, and Efficiency ratio for First
Hawaiian, Inc. is for the three months ending June 30, 2016 annualized.
76
Analysis of Selected Merger Transactions
.
Sandler ONeill reviewed
a group of selected merger and acquisition transactions or the Precedent Transactions. The Precedent Transactions group consisted of nationwide holding company, bank and thrift transactions with disclosed deal value and target total assets between
$2.0 billion and $10.0 billion announced between January 1, 2014 and August 12, 2016, excluding mergers of equals transactions and transactions where less than 100% of the stock was acquired. The Precedent Transactions group was composed of the
following transactions:
|
|
|
Buyer
|
|
Target
|
F.N.B. Corp.
|
|
Yadkin Financial Corporation
|
First Midwest Bancorp, Inc.
|
|
Standard Bancshares Inc.
|
Peoples United Financial Inc.
|
|
Suffolk Bancorp
|
Old National Bancorp
|
|
Anchor BanCorp Wisconsin Inc.
|
Capital Bank Financial Corp.
|
|
CommunityOne Bancorp
|
MB Financial Inc.
|
|
American Chartered Bancorp Inc.
|
Bank of the Ozarks Inc.
|
|
Community & Southern Holdings Inc.
|
Yadkin Financial Corporation
|
|
NewBridge Bancorp
|
BB&T Corp.
|
|
National Penn Bancshares Inc.
|
F.N.B. Corp.
|
|
Metro Bancorp Inc.
|
PacWest Bancorp
|
|
Square 1 Financial Inc.
|
Sterling Bancorp
|
|
Hudson Valley Holding Corp.
|
Banner Corp.
|
|
Starbuck Bancshares Inc.
|
First Citizens BancShares Inc.
|
|
First Citizens Bancorp
|
Using the latest publicly available information prior to the announcement of the relevant transaction,
Sandler ONeill reviewed the following transaction metrics: transaction price to last-twelve-months earnings per share, transaction price to estimated earnings per share, transaction price to tangible book value per share, tangible book premium
to core deposits, 1-day market premium, and 1-month market premium. Sandler ONeill compared the indicated transaction multiples for the merger to the high, low, mean and median multiples of the Precedent Transactions group.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cardinal/
United
Bankshares
|
|
|
Precedent
Transactions
Median
|
|
|
Precedent
Transactions
Mean
|
|
|
Precedent
Transactions
High
|
|
|
Precedent
Transactions
Low
|
|
Transaction price/LTM earnings per share:
|
|
|
19.2
|
x
|
|
|
21.4
|
x
|
|
|
20.6
|
x
|
|
|
47.4
|
x
|
|
|
2.1
|
x
|
Transaction price/Estimated earnings per share:
|
|
|
17.8
|
x
|
|
|
21.1
|
x
|
|
|
24.7
|
x
|
|
|
44.0
|
x
|
|
|
16.8
|
x
|
Transaction price/Tangible book value per share:
|
|
|
220
|
%
|
|
|
192
|
%
|
|
|
182
|
%
|
|
|
263
|
%
|
|
|
118
|
%
|
Core deposit premium:
|
|
|
18.9
|
%
|
|
|
10.3
|
%
|
|
|
10.8
|
%
|
|
|
19.8
|
%
|
|
|
1.5
|
%
|
1-day market premium:
|
|
|
6.0%/14.5
|
%¹
|
|
|
18.3
|
%
|
|
|
20.1
|
%
|
|
|
42.8
|
%
|
|
|
(0.7
|
%)
|
1-month market premium:
|
|
|
20.6
|
%
|
|
|
19.9
|
%
|
|
|
23.1
|
%
|
|
|
45.8
|
%
|
|
|
6.6
|
%
|
(1)
|
Represents the one day market premium and the premium to the closing price of Cardinal common stock on the trading day prior to the July 26, 2016 MergerMarket.com
article that first announced rumors of a possible sale of Cardinal, respectively.
|
Net Present Value
Analyses.
Sandler ONeill performed an analysis that estimated the net present value per share of Cardinal common stock assuming Cardinal performed in accordance with publicly available consensus mean analyst earnings per share
estimates for the years ending December 31, 2016 and December 31, 2017 and an estimated earnings per share growth rate for the years thereafter, as provided by the senior management of Cardinal, as well as a projected dividend growth rate, as
discussed with and confirmed by senior management of Cardinal. To approximate the terminal value of a share of Cardinal common stock at December 31, 2020, Sandler ONeill applied price to 2020 earnings multiples ranging from 12.0x to 20.0x and
multiples of December 31,
77
2020 tangible book value ranging from 160% to 235%. The terminal values were then discounted to present values using different discount rates ranging from 6.7% to 11.7%, which were chosen to
reflect different assumptions regarding required rates of return of holders or prospective buyers of Cardinal common stock As illustrated in the following tables, the analysis indicated an imputed range of values per share of Cardinal common
stock of $15.78 to $31.09 when applying multiples of earnings and $18.78 to $33.08 when applying multiples of tangible book value.
Earnings Per Share Multiples
|
|
|
|
|
|
|
|
|
|
|
Discount
Rate
|
|
12.0x
|
|
14.0x
|
|
16.0x
|
|
18.0x
|
|
20.0x
|
6.7%
|
|
$19.44
|
|
$22.35
|
|
$25.26
|
|
$28.18
|
|
$31.09
|
7.7%
|
|
$18.63
|
|
$21.41
|
|
$24.20
|
|
$26.99
|
|
$29.78
|
8.7%
|
|
$17.86
|
|
$20.53
|
|
$23.19
|
|
$25.86
|
|
$28.53
|
9.7%
|
|
$17.13
|
|
$19.68
|
|
$22.24
|
|
$24.79
|
|
$27.35
|
10.7%
|
|
$16.44
|
|
$18.88
|
|
$21.33
|
|
$23.78
|
|
$26.22
|
11.7%
|
|
$15.78
|
|
$18.12
|
|
$20.47
|
|
$22.81
|
|
$25.16
|
Tangible Book Value Multiples
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount
Rate
|
|
160%
|
|
175%
|
|
190%
|
|
205%
|
|
220%
|
|
235%
|
6.7%
|
|
$23.17
|
|
$25.15
|
|
$27.13
|
|
$29.12
|
|
$31.10
|
|
$33.08
|
7.7%
|
|
$22.20
|
|
$24.09
|
|
$25.99
|
|
$27.89
|
|
$29.79
|
|
$31.68
|
8.7%
|
|
$21.27
|
|
$23.09
|
|
$24.91
|
|
$26.72
|
|
$28.54
|
|
$30.36
|
9.7%
|
|
$20.40
|
|
$22.14
|
|
$23.88
|
|
$25.62
|
|
$27.36
|
|
$29.10
|
10.7%
|
|
$19.57
|
|
$21.24
|
|
$22.90
|
|
$24.57
|
|
$26.23
|
|
$27.90
|
11.7%
|
|
$18.78
|
|
$20.38
|
|
$21.97
|
|
$23.57
|
|
$25.17
|
|
$26.76
|
Sandler ONeill also considered and discussed with the Cardinal board of directors how this analysis
would be affected by changes in the underlying assumptions, including variations with respect to net income. To illustrate this impact, Sandler ONeill performed a similar analysis assuming Cardinals net income varied from 25% above
estimates to 25% below estimates. This analysis resulted in the following range of per share values for Cardinal common stock, applying the price to 2020 earnings multiples range of 12.0x to 20.0x referred to above and a discount rate of 9.24%.
Earnings Per Share Multiples
|
|
|
|
|
|
|
|
|
|
|
Annual Budget
Variance
|
|
12.0x
|
|
14.0x
|
|
16.0x
|
|
18.0x
|
|
20.0x
|
(25.0%)
|
|
$13.57
|
|
$15.53
|
|
$17.49
|
|
$19.45
|
|
$21.40
|
(20.0%)
|
|
$14.35
|
|
$16.44
|
|
$18.53
|
|
$20.62
|
|
$22.71
|
(15.0%)
|
|
$15.14
|
|
$17.36
|
|
$19.58
|
|
$21.80
|
|
$24.01
|
(10.0%)
|
|
$15.92
|
|
$18.27
|
|
$20.62
|
|
$22.97
|
|
$25.32
|
(5.0%)
|
|
$16.70
|
|
$19.18
|
|
$21.67
|
|
$24.15
|
|
$26.63
|
0.0%
|
|
$17.49
|
|
$20.10
|
|
$22.71
|
|
$25.32
|
|
$27.93
|
5.0%
|
|
$18.27
|
|
$21.01
|
|
$23.75
|
|
$26.50
|
|
$29.24
|
10.0%
|
|
$19.05
|
|
$21.93
|
|
$24.80
|
|
$27.67
|
|
$30.54
|
15.0%
|
|
$19.84
|
|
$22.84
|
|
$25.84
|
|
$28.84
|
|
$31.85
|
20.0%
|
|
$20.62
|
|
$23.75
|
|
$26.89
|
|
$30.02
|
|
$33.15
|
25.0%
|
|
$21.40
|
|
$24.67
|
|
$27.93
|
|
$31.19
|
|
$34.46
|
78
Sandler ONeill also performed an analysis that estimated the net present value per
share of United Bankshares common stock assuming that United Bankshares performed in accordance with publicly available consensus mean analyst earnings per share estimates for United Bankshares for the years ending December 31, 2016 and December 31,
2017 as well as an estimated earnings per share growth rate and estimated dividends for the years thereafter, as provided by the senior management of United Bankshares. To approximate the terminal value of United Bankshares common stock at December
31, 2020, Sandler ONeill applied price to 2020 earnings multiples ranging from 12.0x to 20.0x and multiples of December 31, 2020 tangible book value ranging from 160% to 260%. The terminal values were then discounted to present values
using different discount rates ranging from 7.4% to 12.4% which were chosen to reflect different assumptions regarding required rates of return of holders or prospective buyers of United Bankshares common stock. As illustrated in the following
tables, the analysis indicated an imputed range of values per share of United Bankshares common stock of $20.24 to $38.39 when applying earnings multiples and $21.10 to $39.29 when applying multiples of tangible book value.
Earnings Per Share Multiples
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Discount
Rate
|
|
12.0x
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|
14.0x
|
|
16.0x
|
|
18.0x
|
|
20.0x
|
7.4%
|
|
$24.97
|
|
$28.33
|
|
$31.68
|
|
$35.04
|
|
$38.39
|
8.4%
|
|
$23.92
|
|
$27.13
|
|
$30.33
|
|
$33.53
|
|
$36.73
|
9.4%
|
|
$22.93
|
|
$25.99
|
|
$29.05
|
|
$32.11
|
|
$35.17
|
10.4%
|
|
$21.98
|
|
$24.91
|
|
$27.83
|
|
$30.75
|
|
$33.68
|
11.4%
|
|
$21.09
|
|
$23.88
|
|
$26.68
|
|
$29.47
|
|
$32.27
|
12.4%
|
|
$20.24
|
|
$22.91
|
|
$25.59
|
|
$28.26
|
|
$30.93
|
Tangible Book Value Multiples
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount
Rate
|
|
160%
|
|
180%
|
|
200%
|
|
220%
|
|
240%
|
|
260%
|
7.4%
|
|
$26.05
|
|
$28.70
|
|
$31.35
|
|
$33.99
|
|
$36.64
|
|
$39.29
|
8.4%
|
|
$24.95
|
|
$27.48
|
|
$30.01
|
|
$32.54
|
|
$35.06
|
|
$37.59
|
9.4%
|
|
$23.91
|
|
$26.33
|
|
$28.74
|
|
$31.16
|
|
$33.57
|
|
$35.98
|
10.4%
|
|
$22.93
|
|
$25.23
|
|
$27.54
|
|
$29.85
|
|
$32.15
|
|
$34.46
|
11.4%
|
|
$21.99
|
|
$24.20
|
|
$26.40
|
|
$28.61
|
|
$30.81
|
|
$33.02
|
12.4%
|
|
$21.10
|
|
$23.21
|
|
$25.32
|
|
$27.43
|
|
$29.54
|
|
$31.65
|
Sandler ONeill also considered and discussed with the Cardinal board of directors how this analysis
would be affected by changes in the underlying assumptions, including variations with respect to net income. To illustrate this impact, Sandler ONeill performed a similar analysis assuming United Bankshares net income varied from 25%
above estimates to 25% below estimates. This analysis resulted in the following range of per share values for United Bankshares common stock, applying the price to 2020 earnings multiples range of 12.0x to 20.0x referred to above and a discount rate
of 9.90%.
79
Earnings Per Share Multiples
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|
|
|
|
|
|
|
|
|
|
Annual
Budget
Variance
|
|
12.0x
|
|
14.0x
|
|
16.0x
|
|
18.0x
|
|
20.0x
|
(25.0%)
|
|
$17.96
|
|
$20.21
|
|
$22.45
|
|
$24.69
|
|
$26.94
|
(20.0%)
|
|
$18.86
|
|
$21.25
|
|
$23.65
|
|
$26.04
|
|
$28.43
|
(15.0%)
|
|
$19.76
|
|
$22.30
|
|
$24.84
|
|
$27.38
|
|
$29.93
|
(10.0%)
|
|
$20.66
|
|
$23.35
|
|
$26.04
|
|
$28.73
|
|
$31.42
|
(5.0%)
|
|
$21.55
|
|
$24.39
|
|
$27.23
|
|
$30.08
|
|
$32.92
|
0.0%
|
|
$22.45
|
|
$25.44
|
|
$28.43
|
|
$31.42
|
|
$34.41
|
5.0%
|
|
$23.35
|
|
$26.49
|
|
$29.63
|
|
$32.77
|
|
$35.91
|
10.0%
|
|
$24.24
|
|
$27.53
|
|
$30.82
|
|
$34.11
|
|
$37.40
|
15.0%
|
|
$25.14
|
|
$28.58
|
|
$32.02
|
|
$35.46
|
|
$38.90
|
20.0%
|
|
$26.04
|
|
$29.63
|
|
$33.22
|
|
$36.80
|
|
$40.39
|
25.0%
|
|
$26.94
|
|
$30.67
|
|
$34.41
|
|
$38.15
|
|
$41.89
|
In connection with its analyses, Sandler ONeill considered and discussed with the Cardinal board of
directors how the present value analyses would be affected by changes in the underlying assumptions. Sandler ONeill noted that the net present value analysis is a widely used valuation methodology, but the results of such methodology are
highly dependent upon the numerous assumptions that must be made, and the results thereof are not necessarily indicative of actual values or future results.
Pro Forma Merger Analysis.
Sandler ONeill analyzed certain potential pro forma effects of the merger, assuming the merger closes at the end of the first calendar quarter of 2017, all
outstanding shares of Cardinal common stock are converted into United Bankshares common stock at the exchange ratio, and all outstanding Cardinal options are converted into United Bankshares options on the same terms. In performing this analysis,
Sandler ONeill utilized the following information: (i) publicly available consensus mean analyst earnings per share estimates for Cardinal for the years ending December 31, 2016 and December 31, 2017 as well as an estimated long-term earnings
per share growth rate for the years thereafter, as provided by the senior management of Cardinal; (ii) publicly available consensus mean analyst earnings per share estimates for United Bankshares for the years ending December 31, 2016 and December
31, 2017 as well as an estimated long-term earnings per share growth rate for the years thereafter, as provided by the senior management of United Bankshares; and (iii) certain assumptions relating to transaction costs, purchase accounting
adjustments, expected cost savings, a core deposit intangible asset, a provision expense and United Bankshares issuance of a certain amount of perpetual preferred stock, as provided by the senior management of United Bankshares. The analysis
indicated that the merger could be accretive to United Bankshares earnings per share (excluding one-time transaction costs and expenses) in 2017 and accretive to United Bankshares estimated tangible book value per share at close.
In connection with this analysis, Sandler ONeill considered and discussed with the Cardinal board of directors how the
analysis would be affected by changes in the underlying assumptions, including the impact of final purchase accounting adjustments determined at the closing of the transaction, and noted that the actual results achieved by the combined company may
vary from projected results and the variations may be material.
Sandler ONeills Relationship.
Sandler ONeill has acted as financial advisor to Cardinal in connection with the merger and will receive a fee for such services in an amount equal to 0.75% of the aggregate purchase price, or approximately $6,840,000, which fee shall
be due and payable in immediately available funds on the day of closing of the merger. Sandler ONeill also received a $500,000 fee upon rendering its fairness opinion to the Cardinal Board of Directors, which opinion fee will be credited in
full towards the fee becoming due and payable to Sandler ONeill on the day of closing of the merger. Cardinal has also agreed to reimburse Sandler ONeill for its reasonable out-of-pocket expenses incurred in connection with its
engagement, including the reasonable fees and disbursements of its legal counsel. Cardinal has also agreed to indemnify Sandler ONeill
80
and its affiliates and their respective partners, directors, officers, employees and agents against certain expenses and liabilities, including liabilities under applicable federal or state law.
In the two years preceding the date of Sandler ONeills opinion, Sandler ONeill has provided certain
investment banking services to United Bankshares and has received customary compensation for such services. Most recently, Sandler ONeill acted as financial advisor to United Bankshares in connection with its acquisition of Bank of Georgetown,
which transaction closed on June 3, 2016 and for which Sandler ONeill received a fee in an amount equal to $350,000. Sandler ONeill has advised the Cardinal board of directors that it may provide, and receive customary compensation for,
investment banking services to United Bankshares in the future, including during the pendency of the merger. In addition, in the ordinary course of Sandler ONeills business as a broker-dealer, Sandler ONeill may purchase securities
from and sell securities to Cardinal and United Bankshares and its affiliates. Sandler ONeill may also actively trade the equity and debt securities of Cardinal and United Bankshares or its affiliates for its own account and for the accounts
of its customers.
Opinion of United Bankshares Financial Advisor
United Bankshares engaged Keefe, Bruyette & Woods, Inc., or KBW, to render financial advisory and investment banking services to
United Bankshares, including an opinion to the United Bankshares board of directors as to the fairness, from a financial point of view, to United Bankshares of the exchange ratio in the proposed merger. United Bankshares selected KBW because KBW is
a nationally recognized investment banking firm with substantial experience in transactions similar to the merger. As part of its investment banking business, KBW is continually engaged in the valuation of financial services businesses and their
securities in connection with mergers and acquisitions.
As part of its engagement, representatives of KBW attended the
meeting of the United Bankshares board held on August 17, 2016 at which the United Bankshares board of directors evaluated the proposed merger. At this meeting, KBW reviewed the financial aspects of the proposed merger and rendered an opinion to the
effect that, as of such date and subject to the procedures followed, assumptions made, matters considered, and qualifications and limitations on the review undertaken by KBW as set forth in such opinion, the exchange ratio in the proposed merger was
fair, from a financial point of view, to United Bankshares. The United Bankshares board of directors approved the merger agreement at this meeting.
The description of the opinion set forth herein is qualified in its entirety by reference to the full text of the opinion, which is attached as Appendix C to this document and is incorporated herein by
reference, and describes the procedures followed, assumptions made, matters considered, and qualifications and limitations on the review undertaken by KBW in preparing the opinion.
KBWs opinion speaks only as of the date of the opinion. The opinion was for the information of, and was directed to, the United
Bankshares board of directors (in its capacity as such) in connection with its consideration of the financial terms of the merger. The opinion addressed only the fairness, from a financial point of view, of the exchange ratio in the merger to United
Bankshares. It did not address the underlying business decision of United Bankshares to engage in the merger or enter into the merger agreement or constitute a recommendation to the United Bankshares board of directors in connection with the merger,
and it does not constitute a recommendation to any holder of United Bankshares common stock or any shareholder of any other entity as to how to vote in connection with the merger or any other matter, nor does it constitute a recommendation as to
whether or not any such shareholder should enter into a voting, shareholders, affiliates or other agreement with respect to the Merger or exercise any dissenters or appraisal rights that may be available to such shareholder.
KBWs opinion was reviewed and approved by KBWs Fairness Opinion Committee in conformity with its policies and
procedures established under the requirements of Rule 5150 of the Financial Industry Regulatory Authority.
81
In connection with the opinion, KBW reviewed, analyzed and relied upon material bearing upon
the financial and operating condition of United Bankshares and Cardinal and bearing upon the merger, including, among other things:
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a draft of the merger agreement, dated August 14, 2016 (the most recent draft then made available to KBW);
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the audited financial statements and the Annual Reports on Form 10-K for the three fiscal years ended December 31, 2015 of United Bankshares;
|
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the unaudited quarterly financial statements and Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, 2016 and June 30, 2016 of
United Bankshares;
|
|
|
|
the audited financial statements and the Annual Reports on Form 10-K for the three fiscal years ended December 31, 2015 of Cardinal;
|
|
|
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the unaudited quarterly financial statements and Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, 2016 and June 30, 2016 of
Cardinal;
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certain regulatory filings of United Bankshares and Cardinal and their respective subsidiaries, including the quarterly reports on Form FR Y-9C and the
quarterly call reports required to be filed with respect to each quarter during the three year period ended June 30, 2016;
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certain other interim reports and other communications of United Bankshares and Cardinal to their respective shareholders; and
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other financial information concerning the businesses and operations of United Bankshares and Cardinal furnished to KBW by United Bankshares and
Cardinal or which KBW was otherwise directed to use for purposes of its analysis.
|
KBWs consideration
of financial information and other factors that it deemed appropriate under the circumstances or relevant to its analyses included, among others, the following:
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|
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the historical and current financial position and results of operations of United Bankshares and Cardinal;
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the assets and liabilities of United Bankshares and Cardinal;
|
|
|
|
the nature and terms of certain other merger transactions and business combinations in the banking industry;
|
|
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|
a comparison of certain financial and stock market information of United Bankshares and Cardinal with similar information for certain other companies
the securities of which were publicly traded;
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publicly-available consensus street estimates of Cardinal for 2016 and 2017, as well as assumed Cardinal long term growth rates provided to
KBW by United Bankshares management, all of which information was discussed with KBW by United Bankshares management and Cardinal management and used and relied upon by KBW at the direction of United Bankshares management with the consent of the
United Bankshares board of directors;
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publicly available consensus street estimates of United Bankshares for 2016 and 2017, as well as assumed United Bankshares long term growth
rates provided to KBW by United Bankshares management, all of which information was discussed with KBW by such management and used and relied upon by KBW at the direction of such management and with the consent of the United Bankshares board of
directors; and
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estimates regarding certain pro forma financial effects of the merger on United Bankshares (including, without limitation, the potential cost savings
and related expenses expected to result or be derived from the merger) that were prepared by United Bankshares management, provided to and discussed with KBW by such management, and used and relied upon at the direction of such management with the
consent of the United Bankshares board of directors.
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82
KBW also performed such other studies and analyses as it considered appropriate and took
into account its assessment of general economic, market and financial conditions and its experience in other transactions, as well as its experience in securities valuation and knowledge of the banking industry generally. KBW also participated in
discussions that were held with the respective managements of United Bankshares and Cardinal regarding the past and current business operations, regulatory relations, financial condition and future prospects of their respective companies and such
other matters that KBW deemed relevant to its inquiry.
In conducting its review and arriving at its opinion, KBW relied upon
and assumed the accuracy and completeness of all of the financial and other information that was provided to it or publicly available and did not independently verify the accuracy or completeness of any such information or assume any responsibility
or liability for such verification, accuracy or completeness. KBW relied upon the management of United Bankshares as to the reasonableness and achievability of the publicly available consensus street estimates and long term growth rates
of United Bankshares and Cardinal referred to above that were provided to or otherwise discussed with KBW by such management, and that in each case KBW was directed by such management to use. KBW further relied upon such management as to the
reasonableness and achievability of the estimates regarding certain pro forma financial effects of the merger on United Bankshares (and the assumptions and bases therefor) that were prepared by, and provided to and discussed with KBW by, such
management and that KBW was directed by such management to use. KBW assumed, at the direction of United Bankshares, that all of the foregoing information was reasonably prepared on bases reflecting, or in the case of the United Bankshares and
Cardinal publicly available street estimates referred to above were consistent with, the best currently available estimates and judgments of United Bankshares management, and that the forecasts, projections and estimates reflected in
such information would be realized in the amounts and in the time periods estimated.
It is understood that the assumed long
term growth rates and estimates referred to above that were provided to KBW by United Bankshares were not prepared with the expectation of public disclosure, that all such assumed long term growth rates and estimates, together with the publicly
available consensus street estimates of United Bankshares and Cardinal referred to above, were based on numerous variables and assumptions that are inherently uncertain, including, without limitation, factors related to general economic
and competitive conditions and that, accordingly, actual results could vary significantly from those set forth in such information. KBW assumed, based on discussions with the respective managements of United Bankshares and Cardinal and with the
consent of the United Bankshares board of directors, that all such information provided a reasonable basis upon which KBW could form its opinion and KBW expressed no view as to any such information or the assumptions or bases therefor. KBW relied on
all such information without independent verification or analysis and did not in any respect assume any responsibility or liability for the accuracy or completeness thereof.
KBW assumed that there were no material changes in the assets, liabilities, financial condition, results of operations, business or prospects of either United Bankshares or Cardinal since the date of the
last financial statements of each such entity that were made available to KBW. KBW is not an expert in the independent verification of the adequacy of allowances for loan and lease losses and KBW assumed, without independent verification and with
United Bankshares consent, that the aggregate allowances for loan and lease losses for United Bankshares and Cardinal are adequate to cover such losses. In rendering its opinion, KBW did not make or obtain any evaluations or appraisals or
physical inspection of the property, assets or liabilities (contingent or otherwise) of United Bankshares or Cardinal, the collateral securing any of such assets or liabilities, or the collectability of any such assets, nor did KBW examine any
individual loan or credit files, nor did it evaluate the solvency, financial capability or fair value of United Bankshares or Cardinal under any state or federal laws, including those relating to bankruptcy, insolvency or other matters. Estimates of
values of companies and assets do not purport to be appraisals or necessarily reflect the prices at which companies or assets may actually be sold. Because such estimates are inherently subject to uncertainty, KBW assumed no responsibility or
liability for their accuracy.
83
KBW assumed, in all respects material to its analyses:
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the merger and any related transaction would be completed substantially in accordance with the terms set forth in the merger agreement (the final terms
of which KBW assumed would not differ in any respect material to its analyses from the latest draft version of the merger agreement that had been reviewed by KBW (except as was otherwise described to KBW by representatives of United Bankshares))
with no adjustments to the exchange ratio;
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that any related transactions (including the bank subsidiary merger and United Bankshares potential issuance of approximately $200,000,000 in
non-cumulative perpetual preferred stock) would be completed substantially in accordance with the terms set forth in the merger agreement or as otherwise described to KBW by representatives of United Bankshares;
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the representations and warranties of each party in the merger agreement and in all related documents and instruments referred to in the merger
agreement were true and correct;
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each party to the merger agreement or any of the related documents would perform all of the covenants and agreements required to be performed by such
party under such documents;
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that there are no factors that would delay or subject to any adverse conditions, any necessary regulatory or governmental approval for the merger and
any related transactions (including the bank subsidiary merger and United Bankshares potential issuance of approximately $200,000,000 in non-cumulative perpetual preferred stock) and that all conditions to the completion of the merger and any
related transaction would be satisfied without any waivers or modifications to the merger agreement or any related documents; and
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in the course of obtaining the necessary regulatory, contractual, or other consents or approvals for the merger and any related transactions
(including the bank subsidiary merger and United Bankshares potential issuance of approximately $200,000,000 in non-cumulative perpetual preferred stock), no restrictions, including any divestiture requirements, termination or other
payments or amendments or modifications, would be imposed that would have a material adverse effect on the future results of operations or financial condition of United Bankshares, Cardinal or the pro forma entity or the contemplated benefits of the
merger, including the cost savings and related expenses expected to result or be derived from the merger.
|
KBW assumed that the merger would be consummated in a manner that complied with the applicable provisions of the Securities Act, the
Exchange Act and all other applicable federal and state statutes, rules and regulations. KBW was further advised by representatives of United Bankshares that United Bankshares relied upon advice from its advisors (other than KBW) or other
appropriate sources as to all legal, financial reporting, tax, accounting and regulatory matters with respect to United Bankshares, Cardinal, UBV, the merger and any related transaction (including the bank subsidiary merger and United
Bankshares potential issuance of approximately $200,000,000 in non-cumulative perpetual preferred stock), and the merger agreement. KBW did not provide advice with respect to any such matters. At the direction of United Bankshares and with the
consent of the United Bankshares board of directors, KBW assumed, for purposes of certain of its analyses and KBWs opinion, the completion of United Bankshares potential issuance of approximately $200,000,000 in non-cumulative perpetual
preferred stock as described to KBW by representatives of United Bankshares.
KBWs opinion addressed only the fairness,
from a financial point of view, as of the date of such opinion, of the exchange ratio in the merger to United Bankshares. KBW expressed no view or opinion as to any other terms or aspects of the merger or any terms or aspects of any related
transaction (including the bank subsidiary merger and United Bankshares potential issuance of approximately $200,000,000 in non-cumulative perpetual preferred stock), including without limitation, the form or structure of the merger or any
related transaction, the treatment of outstanding trust preferred securities of Cardinal in the merger, any consequences of the merger or any related transaction to United Bankshares, its shareholders, creditors or otherwise, or any terms, aspects
or implications of any employment, consulting, voting, support, stockholder or other agreements, arrangements or understandings contemplated or entered into in connection with the merger, any related transaction, or otherwise. KBWs
84
opinion was necessarily based upon conditions as they existed and could be evaluated on the date of such opinion and the information made available to KBW through such date. Developments
subsequent to the date of KBWs opinion may have affected, and may affect, the conclusion reached in KBWs opinion and KBW did not and does not have an obligation to update, revise or reaffirm its opinion. KBWs opinion did not
address, and KBW expressed no view or opinion with respect to:
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the underlying business decision of United Bankshares to engage in the merger or enter into the merger agreement;
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the relative merits of the merger as compared to any strategic alternatives that are, have been or may be available to or contemplated by United
Bankshares or the United Bankshares board of directors;
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the fairness of the amount or nature of any compensation to any of United Bankshares officers, directors or employees, or any class of such
persons, relative to any compensation to the holders of United Bankshares common stock or relative to the exchange ratio;
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the effect of the merger or any related transaction on, or the fairness of the consideration to be received by, holders of any class of securities of
United Bankshares or Cardinal or any other party to any transaction contemplated by the merger agreement;
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any adjustment (as provided in the merger agreement (except as has been otherwise described to KBW by representatives of United Bankshares)) to the
exchange ratio assumed for purposes of KBWs opinion;
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the actual value of United Bankshares common stock to be issued in the merger;
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the prices, trading range or volume at which United Bankshares common stock or Cardinal common stock might trade following the public announcement of
the merger;
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|
the prices, trading range or volume at which United Bankshares common stock might trade following the consummation of the merger;
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any advice or opinions provided by any other advisor to any of the parties to the merger or any other transaction contemplated by the merger agreement;
or
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any legal, regulatory, accounting, tax or similar matters relating to United Bankshares, Cardinal, any of their respective shareholders, UBV, or
relating to or arising out of or as a consequence of the merger or any other related transaction (including the bank subsidiary merger and United Bankshares potential issuance of approximately $200,000,000 in non-cumulative perpetual preferred
stock), including whether or not the merger would qualify as a
tax-free
reorganization for United Bankshares States federal income tax purposes.
|
In performing its analyses, KBW made numerous assumptions with respect to industry performance, general business, economic, market and
financial conditions and other matters, which are beyond the control of KBW, United Bankshares and Cardinal. Any estimates contained in the analyses performed by KBW are not necessarily indicative of actual values or future results, which may be
significantly more or less favorable than suggested by these analyses. Additionally, estimates of the value of businesses or securities do not purport to be appraisals or to reflect the prices at which such businesses or securities might actually be
sold. Accordingly, these analyses and estimates are inherently subject to substantial uncertainty. In addition, the KBW opinion was among several factors taken into consideration by the United Bankshares board of directors in making its
determination to approve the merger agreement and the merger. Consequently, the analyses described below should not be viewed as determinative of the decision of the United Bankshares board of directors with respect to the fairness of the exchange
ratio. The type and amount of consideration payable in the merger were determined through negotiation between United Bankshares and Cardinal and the decision to enter into the merger agreement was solely that of the United Bankshares board of
directors.
The following is a summary of the material financial analyses presented by KBW to the United Bankshares board of
directors in connection with its opinion. The summary is not a complete description of the financial analyses underlying the opinion or the presentation made by KBW to the United Bankshares board of directors,
85
but summarizes the material analyses performed and presented in connection with such opinion. The financial analyses summarized below include information presented in tabular format. The tables
alone do not constitute a complete description of the financial analyses. The preparation of a fairness opinion is a complex analytic process involving various determinations as to appropriate and relevant methods of financial analysis and the
application of those methods to the particular circumstances. Therefore, a fairness opinion is not readily susceptible to partial analysis or summary description. In arriving at its opinion, KBW did not attribute any particular weight to any
analysis or factor that it considered, but rather made qualitative judgments as to the significance and relevance of each analysis and factor. Accordingly, KBW believes that its analyses and the summary of its analyses must be considered as a whole
and that selecting portions of its analyses and factors or focusing on the information presented below in tabular format, without considering all analyses and factors or the full narrative description of the financial analyses, including the
methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of the process underlying its analyses and opinion.
For purposes of the financial analyses described below, KBW utilized an implied transaction value for the proposed merger of $911.6 million, or $27.69 per outstanding share of Cardinal common stock, based
on the exchange ratio in the proposed merger and the closing price of United Bankshares common stock on August 16, 2016. In addition to the financial analyses described below, KBW reviewed with the United Bankshares board of directors for
informational purposes, among other things, the implied transaction multiple for the proposed merger of 17.5x Cardinals estimated 2017 earnings per share, or EPS, taken from consensus street estimates for Cardinal and based on the
implied transaction value for the proposed merger of $27.69 per outstanding share of Cardinal common stock.
Cardinal
Selected Companies Analysis
.
Using publicly available information, KBW compared the financial performance, financial condition and market performance of Cardinal to 19 major exchange-traded banks and bank holding companies, referred
to as the Cardinal selected companies, headquartered in Maryland, Pennsylvania, Virginia, West Virginia, Delaware and Washington, D.C. with total assets between $2.0 billion and $10.0 billion. Merger targets were excluded from the Cardinal selected
companies.
The Cardinal selected companies were as follows:
|
|
|
Customers Bancorp, Inc.
|
|
Sandy Spring Bancorp, Inc.
|
Northwest Bancshares, Inc.
|
|
Bancorp, Inc.
|
WesBanco, Inc.
Union Bankshares Corporation
|
|
City Holding Company
TriState Capital Holdings, Inc.
|
TowneBank
First Commonwealth Financial Corporation
S&T Bancorp, Inc.
Eagle Bancorp, Inc.
WSFS Financial Corporation
Beneficial Bancorp, Inc.
|
|
Univest Corporation of Pennsylvania
Bryn Mawr Bank Corporation
First Community Bancshares, Inc.
CNB Financial Corporation
Xenith Bankshares,
Inc.
|
To perform this analysis, KBW used profitability data and other financial information for, as of, or, in
the case of latest 12 months, or LTM, information, through, the fiscal quarter ended June 30, 2016 (which was the most recent completed quarter (MRQ) available) and market price information as of August 16, 2016. KBW also used 2016
and 2017 EPS estimates taken from consensus street estimates for Cardinal and the Cardinal selected companies. Certain financial data prepared by KBW, as referenced in the tables presented below, may not correspond to the data presented
in Cardinals historical financial statements, or the data prepared by Sandler ONeill + Partners, L.P. presented under the section The Merger Opinion of Cardinals Financial Advisor, as a result of
the different periods, assumptions and methods used by KBW to compute the financial data presented.
86
KBWs analysis showed the following concerning the financial performance of Cardinal
and the Cardinal selected companies:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cardinal Selected Companies
|
|
|
|
Cardinal
|
|
|
25th
Percentile
|
|
|
Mean
|
|
|
Median
|
|
|
75th
Percentile
|
|
MRQ Core Return on Average Assets (%)
(1)
|
|
|
1.40
|
|
|
|
0.83
|
|
|
|
0.95
|
|
|
|
0.97
|
|
|
|
1.13
|
|
MRQ Core Return on Average Equity (%)
(1)
|
|
|
13.02
|
|
|
|
6.67
|
|
|
|
8.14
|
|
|
|
8.29
|
|
|
|
10.54
|
|
MRQ Net Interest Margin (%)
|
|
|
3.33
|
|
|
|
3.26
|
|
|
|
3.45
|
|
|
|
3.49
|
|
|
|
3.82
|
|
MRQ Fee Income / Revenue Ratio (%)
(2)
|
|
|
34.9
|
|
|
|
20.3
|
|
|
|
27.2
|
|
|
|
24.7
|
|
|
|
35.0
|
|
MRQ Efficiency Ratio (%)
|
|
|
53.4
|
|
|
|
63.8
|
|
|
|
62.5
|
|
|
|
60.8
|
|
|
|
56.7
|
|
(1)
|
Core income excludes extraordinary items, nonrecurring items, gain/loss on sale of securities and amortization of intangibles.
|
(2)
|
Excludes gain/loss on sale of securities.
|
KBWs analysis also showed the following concerning the financial condition of Cardinal and the Cardinal selected companies:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cardinal Selected Companies
|
|
|
Cardinal
|
|
|
25th
Percentile
|
|
|
Mean
|
|
|
Median
|
|
|
75th
Percentile
|
|
Tangible Common Equity / Tangible Assets (%)
|
|
|
9.65
|
|
|
|
8.28
|
|
|
|
9.32
|
|
|
|
8.75
|
|
|
|
9.71
|
|
Total Risk Based Capital Ratio (%)
|
|
|
11.86
|
|
|
|
12.43
|
|
|
|
13.74
|
|
|
|
12.77
|
|
|
|
14.45
|
|
Loans / Deposits (%)
|
|
|
97.3
|
|
|
|
91.5
|
|
|
|
94.3
|
|
|
|
97.5
|
|
|
|
102.5
|
|
Loan Loss Reserve / Gross Loans (%)
|
|
|
0.91
|
|
|
|
0.66
|
|
|
|
0.87
|
|
|
|
0.84
|
|
|
|
1.10
|
|
Nonperforming Assets / Loans + OREO (%)
|
|
|
0.01
|
|
|
|
1.52
|
|
|
|
1.28
|
|
|
|
0.89
|
|
|
|
0.67
|
|
MRQ Net Charge-Offs / Average Loans (%)
|
|
|
(0.02
|
)
|
|
|
0.19
|
|
|
|
0.11
|
|
|
|
0.11
|
|
|
|
0.03
|
|
In addition, KBWs analysis showed the following concerning the market performance of Cardinal and
the Cardinal selected companies (excluding the impact of the LTM EPS multiples of three of the Cardinal selected companies and the 2016 estimated EPS multiples of two of the Cardinal selected companies, which multiples were not considered to be
meaningful because they were greater than 30.0x or negative):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cardinal Selected Companies
|
|
|
Cardinal
|
|
|
25th
Percentile
|
|
|
Mean
|
|
|
Median
|
|
|
75th
Percentile
|
|
One Year Stock Price Change (%)
|
|
|
9.2
|
|
|
|
4.3
|
|
|
|
8.7
|
|
|
|
11.5
|
|
|
|
16.3
|
|
One Year Total Return (%)
|
|
|
11.6
|
|
|
|
5.8
|
|
|
|
11.1
|
|
|
|
14.6
|
|
|
|
18.0
|
|
Year-to-date (YTD) Stock Price Change (%)
|
|
|
13.3
|
|
|
|
4.8
|
|
|
|
6.1
|
|
|
|
7.5
|
|
|
|
11.9
|
|
Stock Price / Book Value per Share (x)
|
|
|
1.91
|
|
|
|
1.18
|
|
|
|
1.31
|
|
|
|
1.24
|
|
|
|
1.37
|
|
Stock Price / Tangible Book Value per Share (x)
|
|
|
2.08
|
|
|
|
1.53
|
|
|
|
1.69
|
|
|
|
1.74
|
|
|
|
1.86
|
|
Stock Price / LTM EPS (x)
|
|
|
18.2
|
|
|
|
13.7
|
|
|
|
16.3
|
|
|
|
16.5
|
|
|
|
18.2
|
|
Stock Price / 2016 EPS (x)
|
|
|
16.9
|
|
|
|
13.7
|
|
|
|
15.0
|
|
|
|
15.4
|
|
|
|
16.3
|
|
Stock Price / 2017 EPS (x)
|
|
|
16.4
|
|
|
|
12.5
|
|
|
|
14.1
|
|
|
|
13.5
|
|
|
|
15.0
|
|
Dividend Yield (%)
|
|
|
1.9
|
|
|
|
0.3
|
|
|
|
2.1
|
|
|
|
2.7
|
|
|
|
3.1
|
|
2016 Dividend Payout (%)
|
|
|
31.4
|
|
|
|
5.4
|
|
|
|
34.1
|
|
|
|
41.7
|
|
|
|
48.7
|
|
No company used as a comparison in the above selected companies analysis is identical to Cardinal.
Accordingly, an analysis of these results is not mathematical. Rather, it involves complex considerations and judgments concerning differences in financial and operating characteristics of the companies involved.
87
United Bankshares Selected Companies Analysis
.
Using publicly available
information, KBW compared the financial performance, financial condition and market performance of United Bankshares to 18 major exchange-traded U.S. banks and bank holding companies, referred to as the United Bankshares selected companies, with
total assets between $10.0 billion and $20.0 billion. Merger targets were excluded from the United Bankshares selected companies.
The United Bankshares selected companies were as follows:
|
|
|
UMB Financial Corporation
|
|
Cathay General Bancorp
|
Fulton Financial Corporation
|
|
Hilltop Holdings Inc.
|
Western Alliance Bancorporation
MB Financial, Inc.
|
|
Sterling Bancorp
Trustmark Corporation
|
Bank of Hawaii Corporation
Washington Federal, Inc.
Old National Bancorp
BancorpSouth, Inc.
Flagstar Bancorp, Inc.
|
|
Bank of the Ozarks, Inc.
International Bancshares Corporation
Great Western Bancorp, Inc.
First Midwest Bancorp, Inc.
Banc of California, Inc.
|
To perform this analysis, KBW used profitability data and other financial information for, as of, or, in
the case of LTM information, through, the fiscal quarter ended June 30, 2016 and market price information as of August 16, 2016. KBW also used 2016 and 2017 EPS estimates taken from consensus street estimates for United Bankshares
and, to the extent available, the United Bankshares selected companies. Certain financial data prepared by KBW, as referenced in the tables presented below, may not correspond to the data presented in United Bankshares historical financial
statements, or the data prepared by Sandler ONeill + Partners, L.P. presented under the section The Merger Opinion of Cardinals Financial Advisor, as a result of the different periods, assumptions and
methods used by KBW to compute the financial data presented.
KBWs analysis showed the following concerning the
financial performance of United Bankshares and the United Bankshares selected companies:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United Selected Companies
|
|
|
|
United
|
|
|
25th
Percentile
|
|
|
Mean
|
|
|
Median
|
|
|
75th
Percentile
|
|
MRQ Core Return on Average Assets (%)
(1)
|
|
|
1.10
|
|
|
|
0.97
|
|
|
|
1.11
|
|
|
|
1.08
|
|
|
|
1.17
|
|
MRQ Core Return on Average Equity (%)
(1)
|
|
|
7.69
|
|
|
|
7.63
|
|
|
|
9.38
|
|
|
|
8.58
|
|
|
|
11.00
|
|
MRQ Net Interest Margin (%)
|
|
|
3.63
|
|
|
|
3.23
|
|
|
|
3.53
|
|
|
|
3.54
|
|
|
|
3.76
|
|
MRQ Fee Income / Revenue Ratio (%)
(2)
|
|
|
14.7
|
|
|
|
14.3
|
|
|
|
30.4
|
|
|
|
30.5
|
|
|
|
37.3
|
|
MRQ Efficiency Ratio (%)
|
|
|
46.6
|
|
|
|
68.4
|
|
|
|
60.8
|
|
|
|
63.6
|
|
|
|
50.7
|
|
(1)
|
Core income excludes extraordinary items, nonrecurring items, gain/loss on sale of securities and amortization of intangibles.
|
(2)
|
Excludes gain/loss on sale of securities.
|
88
KBWs analysis also showed the following concerning the financial condition of United
Bankshares and the United Bankshares selected companies:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United Selected Companies
|
|
|
|
United
|
|
|
25th
Percentile
|
|
|
Mean
|
|
|
Median
|
|
|
75th
Percentile
|
|
Tangible Common Equity / Tangible Assets (%)
|
|
|
8.33
|
|
|
|
8.30
|
|
|
|
9.31
|
|
|
|
8.94
|
|
|
|
10.44
|
|
Total Risk Based Capital Ratio (%)
|
|
|
12.63
|
|
|
|
12.54
|
|
|
|
14.35
|
|
|
|
13.28
|
|
|
|
14.96
|
|
Loans / Deposits (%)
|
|
|
101.0
|
|
|
|
79.3
|
|
|
|
85.1
|
|
|
|
88.4
|
|
|
|
92.8
|
|
Loan Loss Reserve / Gross Loans (%)
|
|
|
0.69
|
|
|
|
0.72
|
|
|
|
0.97
|
|
|
|
1.02
|
|
|
|
1.16
|
|
Nonperforming Assets / Loans + OREO (%)
|
|
|
1.36
|
|
|
|
1.53
|
|
|
|
1.30
|
|
|
|
1.24
|
|
|
|
0.84
|
|
MRQ Net Charge-Offs / Average Loans (%)
|
|
|
0.44
|
|
|
|
0.22
|
|
|
|
0.20
|
|
|
|
0.09
|
|
|
|
0.03
|
|
In addition, KBWs analysis showed the following concerning the market performance of United
Bankshares and, to the extent publicly available, the United Bankshares selected companies:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United Selected Companies
|
|
|
|
United
|
|
|
25th
Percentile
|
|
|
Mean
|
|
|
Median
|
|
|
75th
Percentile
|
|
One Year Stock Price Change (%)
|
|
|
(2.3
|
)
|
|
|
2.8
|
|
|
|
10.9
|
|
|
|
6.2
|
|
|
|
14.6
|
|
One Year Total Return (%)
|
|
|
1.2
|
|
|
|
4.2
|
|
|
|
13.2
|
|
|
|
8.9
|
|
|
|
17.3
|
|
Year-to-date (YTD) Stock Price Change (%)
|
|
|
5.4
|
|
|
|
1.8
|
|
|
|
10.2
|
|
|
|
8.7
|
|
|
|
16.3
|
|
Stock Price / Book Value per Share (x)
|
|
|
1.48
|
|
|
|
1.17
|
|
|
|
1.43
|
|
|
|
1.26
|
|
|
|
1.43
|
|
Stock Price / Tangible Book Value per Share (x)
|
|
|
2.66
|
|
|
|
1.55
|
|
|
|
1.84
|
|
|
|
1.71
|
|
|
|
2.23
|
|
Stock Price / LTM EPS (x)
|
|
|
20.3
|
|
|
|
15.1
|
|
|
|
16.5
|
|
|
|
16.4
|
|
|
|
17.9
|
|
Stock Price / 2016 EPS (x)
|
|
|
19.6
|
|
|
|
14.1
|
|
|
|
15.2
|
|
|
|
15.3
|
|
|
|
16.0
|
|
Stock Price / 2017 EPS (x)
|
|
|
18.3
|
|
|
|
12.7
|
|
|
|
13.8
|
|
|
|
13.6
|
|
|
|
15.0
|
|
Dividend Yield (%)
|
|
|
3.4
|
|
|
|
1.7
|
|
|
|
1.9
|
|
|
|
2.0
|
|
|
|
2.3
|
|
2016 Dividend Payout (%)
|
|
|
66.4
|
|
|
|
25.5
|
|
|
|
29.4
|
|
|
|
31.7
|
|
|
|
33.0
|
|
No company used as a comparison in the above selected companies analysis is identical to United
Bankshares. Accordingly, an analysis of these results is not mathematical. Rather, it involves complex considerations and judgments concerning differences in financial and operating characteristics of the companies involved.
89
Select Transactions Analysis.
KBW reviewed publicly available information
related to 17 selected U.S. bank transactions, referred to as the Group 1 selected transactions, announced since January 1, 2013, with announced deal values greater than $500 million. Transactions where the acquired company was a mutual holding
company, transactions with non-bank buyers, mergers of equals and terminated transactions were excluded from the selected transactions. The selected transactions were as follows:
|
|
|
Acquiror
|
|
Acquired Company
|
F.N.B. Corporation
|
|
Yadkin Financial Corporation
|
Canadian Imperial Bank of Commerce
|
|
PrivateBancorp, Inc.
|
Huntington Bancshares Incorporated
|
|
FirstMerit Corporation
|
KeyCorp
|
|
First Niagara Financial Group, Inc.
|
New York Community Bancorp, Inc.
Bank of the Ozarks, Inc.
BB&T Corporation
PacWest Bancorp
Royal Bank of Canada
BB&T Corporation
Banner Corporation
Sterling Bancorp
First Citizens BancShares, Inc.
Umpqua Holdings
Corporation
PacWest Bancorp
MB Financial, Inc.
Banco de Credito e Inversiones SA
|
|
Astoria Financial Corporation
Community & Southern Holdings, Inc.
National
Penn Bancshares, Inc.
Square 1 Financial, Inc.
City National Corporation
Susquehanna Bancshares, Inc.
Starbuck Bancshares, Inc.
Hudson Valley Holding
Corp.
First Citizens Bancorporation, Inc.
Sterling Financial Corporation
CapitalSource Inc.
Taylor Capital Group, Inc.
CM Florida Holdings,
Inc.
|
For each Group 1 selected transaction, KBW derived the following implied transaction statistics, in each
case based on the transaction consideration value paid for the acquired company and using financial data based on the acquired companys then latest publicly available financial statements and, to the extent publicly available, forward year EPS
consensus street estimates prior to the announcement of the respective transaction:
|
|
|
Price per common share to tangible book value per share of the acquired company (in the case of selected transactions involving a private acquired
company, this transaction statistic was calculated as total transaction consideration divided by total tangible common equity);
|
|
|
|
Tangible equity premium to core deposits (total deposits less time deposits greater than $100,000) of the acquired company, referred to as core deposit
premium;
|
|
|
|
Price per common share to LTM EPS of the acquired company (in the case of selected transactions involving a private acquired company, this transaction
statistic was calculated as total transaction consideration divided by LTM net income); and
|
|
|
|
Price per common share to estimated EPS of the acquired company in the 13 Group 1 selected transactions in which consensus street estimates
for the acquired company were then available.
|
KBW also reviewed the price per common share paid for the
acquired company for the 15 Group 1 selected transactions in which the acquired company was publicly traded as a premium/discount to the closing price of the acquired company one day prior to the announcement of the acquisition (expressed as a
percentage and referred to as the one-day market premium). The above transaction statistics for the Group 1 selected transactions were compared with the corresponding transaction statistics for the proposed merger based on the implied transaction
value for the proposed merger of $911.6 million and using historical financial information for Cardinal as of or for the 12 months ended June 30, 2016 and 2016 EPS consensus street estimates for Cardinal.
90
The results of the analysis are set forth in the following table (excluding the impact of
the LTM EPS multiple for one of the Group 1 selected transactions, which multiple was not considered to be meaningful because it was greater than 75.0x):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United /
Cardinal
Merger
|
|
|
Group 1 Selected Transactions
|
|
|
|
25th
Percentile
|
|
|
Mean
|
|
|
Median
|
|
|
75th
Percentile
|
|
Transaction Price to
|
|
|
|
|
|
Price to Tangible Book Value (x)
|
|
|
2.24
|
|
|
|
1.68
|
|
|
|
1.89
|
|
|
|
1.82
|
|
|
|
2.19
|
|
Core Deposit Premium (%)
|
|
|
19.5
|
|
|
|
7.8
|
|
|
|
13.1
|
|
|
|
12.3
|
|
|
|
17.2
|
|
Price to LTM EPS (x)
|
|
|
19.5
|
|
|
|
15.1
|
|
|
|
20.6
|
|
|
|
19.2
|
|
|
|
22.9
|
|
Price to Estimated EPS (x)
|
|
|
18.1
|
|
|
|
17.4
|
|
|
|
21.2
|
|
|
|
19.1
|
|
|
|
21.1
|
|
One Day Market Premium (%)
|
|
|
7.4
|
|
|
|
11.8
|
|
|
|
22.2
|
|
|
|
20.1
|
|
|
|
32.9
|
|
KBW then reviewed publicly available information related to 9 selected U.S. bank transactions, referred
to as the Group 2 selected transactions, announced since January 1, 2013 with announced deal values greater than $250 million, and the acquired companys return on average assets greater than 1.00% and the acquired companys non-performing
assets / total assets less than 1.50%. Transactions with non-bank buyers, mergers of equals and terminated transactions were excluded from the selected transactions. The selected transactions were as follows:
|
|
|
Acquiror
|
|
Acquired Company
|
Canadian Imperial Bank of Commerce
South State Corporation
MB Financial, Inc.
BB&T Corporation
Western Alliance Bancorporation
PacWest Bancorp
ViewPoint Financial Group,
Inc.
Prosperity Bancshares, Inc.
Banco de Credito e Inversiones SA
|
|
PrivateBancorp, Inc.
Southeastern Bank Financial Corporation
American
Chartered Bancorp, Inc.
National Penn Bancshares, Inc.
Bridge Capital Holdings
Square 1 Financial, Inc.
LegacyTexas Group, Inc.
FVNB Corp.
CM Florida Holdings, Inc.
|
For each Group 2 selected transaction, KBW derived the following implied transaction statistics, in each
case based on the transaction consideration value paid for the acquired company and using financial data based on the acquired companys then latest publicly available financial statements and, to the extent publicly available, forward year EPS
consensus street estimates prior to the announcement of the respective transaction:
|
|
|
Price per common share to tangible book value per share of the acquired company (in the case of selected transactions involving a private acquired
company, this transaction statistic was calculated as total transaction consideration divided by total tangible common equity);
|
|
|
|
Price per common share to LTM EPS of the acquired company (in the case of selected transactions involving a private acquired company, this transaction
statistic was calculated as total transaction consideration divided by LTM net income); and
|
|
|
|
Price per common share to estimated EPS of the acquired company in the four Group 2 selected transactions in which consensus street
estimates for the acquired company were then available.
|
KBW also reviewed the one-day market premiums
for the six Group 2 selected transactions in which the acquired company was publicly traded. The above transaction statistics for the Group 2 selected transactions were compared with the corresponding transaction statistics for the proposed merger
based on the implied transaction value for the proposed merger of $911.6 million and using historical financial information for Cardinal as of or for the 12 months ended June 30, 2016 and 2016 EPS consensus street estimates for Cardinal.
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The results of the analysis are set forth in the following table:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United /
Cardinal
Merger
|
|
|
Group 2 Selected Transactions
|
|
|
|
|
25th
Percentile
|
|
|
Mean
|
|
|
Median
|
|
|
75th
Percentile
|
|
Transaction Price to
|
|
|
|
|
|
Price to Tangible Book Value (x)
|
|
|
2.24
|
|
|
|
2.19
|
|
|
|
2.25
|
|
|
|
2.22
|
|
|
|
2.39
|
|
Core Deposit Premium (%)
|
|
|
19.5
|
|
|
|
13.2
|
|
|
|
14.7
|
|
|
|
14.7
|
|
|
|
15.6
|
|
Price to LTM EPS (x)
|
|
|
19.5
|
|
|
|
16.7
|
|
|
|
18.2
|
|
|
|
17.7
|
|
|
|
19.4
|
|
Price to Estimated EPS (x)
|
|
|
18.1
|
|
|
|
18.1
|
|
|
|
19.2
|
|
|
|
19.0
|
|
|
|
20.1
|
|
One Day Market Premium (%)
|
|
|
7.4
|
|
|
|
18.4
|
|
|
|
25.1
|
|
|
|
24.9
|
|
|
|
37.5
|
|
No company or transaction used as a comparison in the above selected transactions analysis is identical
to Cardinal or the proposed merger. Accordingly, an analysis of these results is not mathematical. Rather, it involves complex considerations and judgments concerning differences in financial and operating characteristics of the companies involved.
Relative Contribution Analysis
.
KBW analyzed the relative standalone contribution of United Bankshares
and Cardinal to various pro forma balance sheet and income statement items of the combined entity. This analysis did not include purchase accounting adjustments or cost savings. To perform this analysis, KBW used (i) balance sheet data for United
Bankshares and Cardinal as of June 30, 2016, and (ii) estimated earnings data for United Bankshares and Cardinal taken from consensus street estimates for United Bankshares and Cardinal. The results of KBWs analysis are set forth
in the following table, which also compares the results of KBWs analysis with the implied pro forma ownership percentages of United Bankshares and Cardinal shareholders in the combined company based on the exchange ratio in the merger:
|
|
|
|
|
|
|
|
|
|
|
United
as a % of
Total
|
|
|
Cardinal
as a % of
Total
|
|
Ownership
|
|
|
|
|
|
|
|
|
Ownership at 100% Stock
|
|
|
77.0
|
%
|
|
|
23.0
|
%
|
Balance Sheet
|
|
|
|
|
|
|
|
|
Assets
|
|
|
77
|
%
|
|
|
23
|
%
|
Gross Loans
|
|
|
77
|
%
|
|
|
23
|
%
|
Deposits
|
|
|
76
|
%
|
|
|
24
|
%
|
Tangible Common Equity
|
|
|
74
|
%
|
|
|
26
|
%
|
Income Statement
|
|
|
|
|
|
|
|
|
2016 Est. GAAP Net Income
|
|
|
74
|
%
|
|
|
26
|
%
|
2017 Est. GAAP Net Income
|
|
|
76
|
%
|
|
|
24
|
%
|
Pro Forma Financial Impact Analysis.
KBW performed a pro forma financial impact analysis
that combined projected income statement and balance sheet information of United Bankshares and Cardinal. Using closing balance sheet estimates as of June 30, 2017 for United Bankshares and Cardinal provided by United Bankshares management, EPS
consensus street estimates for United Bankshares and Cardinal and pro forma assumptions (including, without limitation, the cost savings and related expenses expected to result from the merger, certain accounting adjustments assumed with
respect thereto and assumptions relating to United Bankshares potential issuance of approximately $200,000,000 in non-cumulative perpetual preferred stock) provided by United Bankshares management, KBW analyzed the estimated financial impact
of the merger on certain projected financial results. This analysis indicated that the merger could be accretive to United Bankshares 2017 and 2018 estimated EPS both including and excluding United Bankshares potential issuance of
approximately $200,000,000 in non-cumulative perpetual preferred stock and could also be accretive to United Bankshares estimated tangible book value per share as of June 30, 2017. Furthermore, the analysis indicated that, pro forma for the
merger and United Bankshares potential issuance of approximately $200,000,000 in non-cumulative perpetual preferred stock, United Bankshares tangible common equity to tangible assets ratio and
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Total Risk-Based Capital Ratio could be higher, while United Bankshares leverage ratio, Common Equity Tier 1 Ratio, and Tier 1
Risk-Based
Capital Ratio as of June 30, 2017 could be lower. For all of the above analysis, the actual results achieved by United Bankshares following the merger may vary from the projected results, and the variations may be material.
Discounted Cash Flow Analysis.
KBW performed a discounted cash flow analysis to estimate a range for the implied equity
value of Cardinal, taking into account the cost savings and related expenses expected to result from the merger as well as certain accounting adjustments assumed with respect thereto. In this analysis, KBW used EPS consensus street
estimates of Cardinal for 2016 and 2017, assumed long term growth rates provided by United Bankshares management, and estimated cost savings and related expenses and accounting adjustments provided by United Bankshares management. KBW assumed
discount rates ranging from 9.0% to 13.0%. The ranges of values were derived by adding (i) the present value of the estimated excess cash flows that Cardinal could generate over the
five-year
period
from 2017 to 2021 and (ii) the present value of Cardinals implied terminal value at the end of such period, in each case applying estimated cost savings and related expenses and accounting adjustments. KBW assumed that Cardinal would
maintain a tangible common equity to tangible assets ratio of 8.50% and would retain sufficient earnings to maintain that level. In calculating the terminal value of Cardinal, KBW applied a range of 12.0x to 18.0x estimated 2022 earnings. This
discounted cash flow analysis resulted in a range of implied values per share of Cardinal common stock, taking into account the cost savings and related expenses expected to result from the merger as well as certain accounting adjustments assumed
with respect thereto, of $24.52 per share to $38.25 per share.
The discounted cash flow analysis is a widely used valuation
methodology, but the results of such methodology are highly dependent on the assumptions that must be made, including asset and earnings growth rates, terminal values, dividend payout rates, and discount rates. The analysis did not purport to be
indicative of the actual values or expected values of Cardinal.
Miscellaneous.
KBW acted as financial advisor
to United Bankshares in connection with the proposed merger and did not act as an advisor to or agent of any other person. As part of its investment banking business, KBW is continually engaged in the valuation of bank and bank holding company
securities in connection with acquisitions, negotiated underwritings, secondary distributions of listed and unlisted securities, private placements and valuations for various other purposes. As specialists in the securities of banking companies, KBW
has experience in, and knowledge of, the valuation of banking enterprises. In the ordinary course of their
broker-dealer
businesses, KBW and its affiliates may from time to time purchase securities from, and
sell securities to, United Bankshares and Cardinal and their respective affiliates, and as market makers in securities, KBW and its affiliates may from time to time have a long or short position in, and buy or sell, debt or equity securities of
United Bankshares or Cardinal for its and their own accounts and for the accounts of its and their respective customers and clients.
Pursuant to the KBW engagement agreement, United Bankshares agreed to pay KBW a non-refundable cash fee of $1,500,000, $300,000 of which became payable concurrently with the rendering of KBWs
opinion and the balance of which is contingent upon the consummation of the merger. United Bankshares also agreed to reimburse KBW for reasonable out-of-pocket expenses and disbursements incurred in connection with its engagement and to indemnify
KBW against certain liabilities relating to or arising out of KBWs engagement or KBWs role in connection therewith. Other than in connection with the present engagement, KBW has not provided investment banking and financial advisory
services to United Bankshares during the two years preceding the date of its opinion. In the two years preceding the date of its opinion, KBW did not provide investment banking and financial advisory services to Cardinal. KBW may in the future
provide investment banking and financial advisory services to United Bankshares or Cardinal and receive compensation for such services.
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Certain Unaudited Prospective Financial Information
United Bankshares and Cardinal do not as a matter of course make public projections as to future performance, revenues, earnings or other
financial results due to, among other reasons, the inherent uncertainty of the underlying assumptions and estimates. However, United Bankshares and Cardinal are including in this prospectus and joint proxy statement certain unaudited prospective
financial information that each of United Bankshares and Cardinal made available to the other party in connection with the other partys evaluation of the merger and to Sandler ONeill, in its capacity as Cardinals financial advisor,
and that United Bankshares made available to KBW, in its capacity as United Bankshares financial advisor. The inclusion of this information should not be regarded as an indication that any of United Bankshares, Cardinal, KBW, Sandler
ONeill, their respective representatives or any other recipient of this information considered, or now considers, it to be necessarily predictive of actual future results or that it should be construed as financial guidance, and it should not
be relied on as such.
The following unaudited financial information was prepared solely for internal use and is subjective in
many respects. The unaudited prospective financial information reflects numerous estimates and assumptions made with respect to business, economic, market, competition, regulatory and financial conditions and matters specific to United
Bankshares and Cardinals respective businesses, all of which are difficult to predict and many of which are beyond United Bankshares and Cardinals control. The unaudited prospective financial information reflects both
assumptions as to certain business decisions that are subject to change and, in many respects, subjective judgment, and thus is susceptible to multiple interpretations and periodic revisions based on actual experience and business developments.
Neither United Bankshares nor Cardinal can give any assurance that the unaudited prospective financial information and the underlying estimates and assumptions will be realized. In addition, since the unaudited prospective financial information
covers multiple years, such information by its nature becomes less predictive with each successive year. Actual results may differ materially from those set forth below, and important factors that may affect actual results and cause the unaudited
prospective financial information to be inaccurate include, but are not limited to, risks and uncertainties relating to United Bankshares and Cardinals respective businesses, industry performance, general business and economic
conditions, customer requirements, competition and adverse changes in applicable laws, regulations or rules. For other factors that could cause actual results to differ, please see the sections entitled Cautionary Statement Regarding
Forward-Looking Statements and Risk Factors beginning on page 28 and page 20, respectively, of this prospectus and joint proxy statement and in United Bankshares and Cardinals respective Annual Reports on Form
10-K for the fiscal year ended December 31, 2015, and the other reports filed by each of United Bankshares and Cardinal with the SEC.
The unaudited prospective financial information was not prepared with a view toward public disclosure, nor was it prepared with a view toward compliance with GAAP, published guidelines of the SEC or the
guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information. In addition, the unaudited prospective financial information requires significant estimates and
assumptions that make it inherently less comparable to the similarly titled GAAP measures in United Bankshares or Cardinals historical GAAP financial statements. Neither United Bankshares nor Cardinals independent registered
public accounting firm, nor any other independent accountants, have compiled, examined or performed any procedures with respect to the unaudited prospective financial information contained herein, nor have they expressed any opinion or any other
form of assurance on such information or its achievability. The independent registered public accountant reports included in this prospectus and joint proxy statement relate to historical financial information of each of United Bankshares and
Cardinal. They do not extend to the unaudited prospective financial information and should not be read to do so.
Furthermore,
the unaudited prospective financial information does not take into account any circumstances or events occurring after the date it was prepared. Neither United Bankshares nor Cardinal can give any assurance that, had the unaudited prospective
financial information been prepared as of the date of this prospectus and joint proxy statement, similar estimates and assumptions would be used. United Bankshares and Cardinal each do not intend to, and disclaim any obligation to, make publicly
available any update or other
94
revision to the unaudited prospective financial information to reflect circumstances existing since their preparation or to reflect the occurrence of unanticipated events, even in the event that
any or all of the underlying assumptions are shown to be in error, or to reflect changes in general economic or industry conditions. The unaudited prospective financial information does not take into account the possible financial and other effects
on either United Bankshares or Cardinal, as applicable, of the merger and does not attempt to predict or suggest future results of the combined company. The unaudited prospective financial information of Cardinal and United Bankshares does not give
effect to the impact of negotiating or executing the merger agreement, the expenses that may be incurred in connection with consummating the merger, the potential synergies that may be achieved by the combined company as a result of the merger, the
effect of any business or strategic decision or action that has been or will be taken as a result of the merger agreement having been executed, or the effect on either United Bankshares or Cardinal, as applicable, of any business or strategic
decisions or actions that would likely have been taken if the merger agreement had not been executed, but which were instead altered, accelerated, postponed or not taken in anticipation of the merger. Further, the unaudited prospective financial
information does not take into account the effect on either United Bankshares or Cardinal, as applicable, of any possible failure of the merger to occur. None of United Bankshares, Cardinal, KBW, Sandler ONeill or their respective affiliates,
officers, directors, advisors or other representatives has made, makes or is authorized in the future to make any representation to any shareholder of United Bankshares or Cardinal or other person regarding United Bankshares or Cardinals
ultimate performance compared to the information contained in the unaudited prospective financial information or that the projected results will be achieved.
The inclusion of the unaudited prospective financial information herein should not be deemed an admission or representation by United Bankshares or Cardinal that such information is viewed as material
information of United Bankshares or Cardinal, respectively, particularly in light of the inherent risks and uncertainties associated with such information.
In light of the foregoing, and considering that the United Bankshares special meeting and the Cardinal special meeting will be held several months after the unaudited prospective financial information was
prepared, as well as the uncertainties inherent in any forecasted information, United Bankshares shareholders and Cardinal shareholders are cautioned not to place unwarranted reliance on such information, and all United Bankshares shareholders and
Cardinal shareholders are urged to review United Bankshares most recent SEC filings for a description of United Bankshares reported financial results and Cardinals most recent SEC filings for a description of Cardinals
reported financial results. See Where You Can Find More Information on page 141 of this prospectus and joint proxy statement.
Certain Unaudited Prospective Financial Information of Cardinal
Cardinal provided Sandler ONeill with an estimated long-term earnings per share growth rate of 8% per year for Cardinal for years 2018 through 2020.
United Bankshares provided KBW with an assumed long-term earnings per share growth rate of 4.0% per year for Cardinal for years 2018
through 2020.
Certain Unaudited Prospective Financial Information of United Bankshares
United Bankshares provided Cardinal, KBW and Sandler ONeill with an assumed long-term earnings per share growth rate of 4.0% per
year for United Bankshares for years 2018 through 2020.
Certain Unaudited Prospective Pro Forma Financial Information
The following unaudited pro forma financial information reflecting the effect of the merger was provided by senior management of United
Bankshares to KBW and Sandler ONeill and was reviewed by Cardinal:
|
|
|
Cost savings equal to 25% of Cardinals projected non-interest expense for 2016;
|
|
|
|
Approximately $32 million in one-time after-tax merger costs;
|
95
|
|
|
Purchase accounting adjustments of a credit mark on loans equal to approximately $33 million (Cardinals second quarter 2016 allowance for loan
losses); and
|
|
|
|
Core deposit intangibles of 1.25%, amortized sum-of-years digits method over 10 years.
|
United Bankshares Capital Raise Through Issuance of Common Stock
In connection with the merger, United Bankshares contemplated raising additional capital by issuing approximately $200 million in
non-cumulative perpetual preferred stock, common stock or some combination thereof. Based upon its assessment of the equity markets, United Bankshares initially anticipated that it would issue non-cumulative perpetual preferred stock. However, to
take advantage of changed capital market conditions, on December 21, 2016, United Bankshares issued 4,330,000 shares of common stock, resulting in approximately $200 million in net proceeds. For the anticipated pro forma impact of the common stock
issuance see, Unaudited Pro Forma Condensed Combined Financial Information on page 33.
United
Bankshares Board of Directors Following Completion of the Merger
Upon completion of the merger, the number of directors
constituting the United Bankshares board of directors will be increased by one, and Bernard H. Clineburg, Executive Chairman of the Cardinal board of directors, will be appointed as a director.
Public Trading Markets
United Bankshares common stock trades on Nasdaq under the symbol UBSI. Cardinal common stock trades on Nasdaq under the symbol CFNL. Upon completion of the merger, Cardinal common
stock will be delisted from Nasdaq and deregistered under the Exchange Act. The newly issued United Bankshares common stock issuable pursuant to the merger agreement will be listed on Nasdaq.
Dissenters or Appraisal Rights
Cardinal Shareholders
Do Not Have Appraisal Rights in the Merger
In general, dissenters appraisal rights are statutory rights that, if
applicable under law, enable shareholders to dissent from an extraordinary transaction, such as a merger, and to demand that the corporation pay the fair value for their shares as determined by a court in a judicial proceeding instead of receiving
the consideration offered to shareholders in connection with the extraordinary transaction.
Section 13.1-730 of the
Virginia Stock Corporation Act provides that shareholders of a Virginia corporation such as Cardinal have the right, in some circumstances, to dissent from certain corporate action and to instead demand payment of the fair value of their shares.
However, shareholders do not have dissenters rights with respect to shares of any class of stock that listed on the New York Stock Exchange or listed on Nasdaq on the record date fixed to determine the shareholders entitled to receive notice
of the meeting of shareholders to act upon the corporate action requiring appraisal rights.
Cardinal common stock is listed
on Nasdaq; therefore, holders of Cardinal common stock will not be entitled to dissenters appraisal rights in the merger with respect to their shares of Cardinal common stock.
United Bankshares Shareholders Do Not Have Appraisal Rights in the Merger
Dissenters appraisal rights are statutory rights that, if applicable under law, enable shareholders to dissent from an extraordinary
transaction, such as a merger, and to demand that the corporation pay the fair value for their shares as determined by a court in a judicial proceeding instead of receiving the consideration offered to shareholders in connection with the
extraordinary transaction.
Under the West Virginia Business Corporation Act, shareholders are not entitled to relief as
dissenting shareholders if the shares of the corporation for which the dissenting shareholder would otherwise be entitled to relief are listed on the New York Stock Exchange or the American Stock Exchange or designated as a national
96
market system security on an interdealer quotation system by the National Association of Securities Dealers, Inc., like Nasdaq, as of the record date fixed to determine the shareholders entitled
to receive notice of the meeting of shareholders to act upon the merger.
Because United Bankshares common stock is listed on
Nasdaq, an interdealer quotation system, and because the proposed merger and the issuance of shares of United Bankshares common stock otherwise satisfy the foregoing requirements, holders of United Bankshares common stock will not be entitled to
dissenters appraisal rights in the merger with respect to their shares of United Bankshares common stock. Additionally, holders of United Bankshares common stock will not be entitled to dissenters appraisal rights with respect to the
amendment to the United Bankshares articles of incorporation.
Interests of Certain Cardinal Directors and
Executive Officers in the Merger
In considering the recommendations of the Cardinal board of directors that Cardinal
shareholders vote in favor of the Cardinal Merger Proposal, Cardinal shareholders should be aware that Cardinal directors and executive officers may have interests in the merger that differ from, or are in addition to, their interests as
shareholders of Cardinal. The Cardinal board of directors was aware of these interests and took them into account in its decision to approve and adopt the merger agreement and the transactions contemplated by the merger agreement, including the
merger.
Service as a Director of United Bankshares and United Bank
Under the merger agreement, one individual from Cardinal, Bernard H. Clineburg, who currently serves as the Executive Chairman of the
Cardinal board of directors, will join the United Bankshares board of directors at the effective time of the merger. In addition, the merger agreement provides for the appointment of two individuals from Cardinal, each of whom is expected to be a
current director of Cardinal Bank, to be appointed to the board of directors of United Bank following completion of the merger of United Bank and Cardinal Bank. As directors of United Bankshares or United Bank, these former Cardinal and Cardinal
Bank directors will be eligible to receive the same cash compensation paid to other members of the United Bankshares or United Bank boards of directors, respectively. United Bankshares is required to nominate Mr. Clineburg for election as a director
at the next annual meeting of United Bankshares immediately following the effective time of the merger and to solicit proxies for Mr. Clineburg in the same manner as it does for all other members of United Bankshares slate of directors in
connection with such meeting. United Bank is not required by the merger agreement to re-nominate the former Cardinal and Cardinal Bank directors at future United Bank shareholder meetings.
Options to Acquire Cardinal Common Stock
As of the record date for the
Cardinal special meeting, the Cardinal and Cardinal Bank directors and executive officers owned, in the aggregate, options to purchase 397,090 shares of Cardinal common stock granted under a Cardinal equity compensation plan. Under the merger
agreement, at the effective time of the merger each such stock option that is outstanding and not yet exercised immediately prior to the merger, whether vested or unvested, will vest pursuant to the terms thereof and will be converted into an option
to acquire, on the same terms and conditions as were applicable under such stock option, the number of shares of United Bankshares common stock equal to (a) the number of shares of Cardinal common stock subject to such stock option multiplied
by (b) 0.71. Such product shall be rounded down to the nearest whole number. The exercise price per share (rounded up to the next whole cent) of each United Bankshares stock option issued for the Cardinal stock option shall equal (y) the
exercise price per share of shares of Cardinal common stock that were purchasable pursuant to such Cardinal stock option divided by (z) 0.71.
Each Cardinal stock option that is intended to be an incentive stock option (as defined in Section 422 of the Code) shall be adjusted in accordance with the requirements of
Section 424 of the Code. At or prior to the effective time of the merger, Cardinal must use its reasonable best efforts to obtain any necessary consents from
97
optionees with respect to the Cardinal equity compensation plans to permit replacement of the outstanding Cardinal stock options by United Bankshares and to permit United Bankshares to assume the
Cardinal equity compensation plans. Cardinal must take all action necessary to amend the Cardinal equity compensation plans to eliminate automatic grants or awards thereunder following the effective time. At the effective time of the merger, United
Bankshares shall assume the Cardinal equity compensation plans; but that assumption shall only be with respect to the United Bankshares granted replacement options pursuant to the merger agreement and, United Bankshares shall have no obligation to
make any additional grants or awards under the Cardinal equity compensation plans.
As of December 31, 2016, shares underlying
options that will vest at the effective time of the merger held by the Cardinal named executive officers were as follows: Mr. Clineburg 21,671 shares; Mr. Bergstrom 8,669 shares; Ms. Frazier 6,669 shares; Mr. Reynolds
4,835 shares; and Mr. Wendel 4,168 shares.
Restricted Shares of Cardinal Common Stock
As of the record date for the Cardinal special meeting, the Cardinal and Cardinal Bank directors and executive officers owned, in the
aggregate, 61,339 restricted shares of Cardinal common stock granted under a Cardinal equity compensation plan. At the effective time of the merger, all of such restricted shares owned by executive officers of Cardinal and Cardinal Bank that are
outstanding immediately prior to the merger will vest under the terms of the restricted stock agreements pursuant to which these restricted shares were granted and will be freely transferable. Shares of restricted stock that are outstanding
immediately prior to the effective time of the merger will be converted into shares of United Bankshares common stock at the effective time of the merger in accordance with the exchange ratio, whether or not such shares are vested.
Employment Agreements with Cardinal Executive Officers
Certain Cardinal directors and executive officers have employment and severance agreements that provide such directors or executive officers with severance benefits if their employment is terminated in
connection with the merger. The aggregate compensation that certain Cardinal directors and named executive officers may receive as a result of the merger is as follows: Bernard H. Clineburg, $11,379,115; Christopher W.
Bergstrom $5,312,282; Alice P. Frazier $1,772,476; F. Kevin Reynolds $1,124,716 and Mark A. Wendel $356,594.
Cardinal currently has employment agreements with each of Messrs. Clineburg, Bergstrom, Reynolds and Ms. Frazier. Mr. Wendel has no written employment agreement with Cardinal or any affiliate.
Bernard H. Clineburg
Mr. Clineburgs employment agreement with Cardinal contains a gross-up for excise taxes that may apply under Section 4999 of the
Code.
Assuming the merger closes in 2017, the 280G limit for Mr. Clineburg (after which excise taxes under Section 4999 would
apply, and Mr. Clineburg would be entitled to an additional payment sufficient to reimburse him for such excise taxes, and a further amount equal to the excise, employment and income taxes payable by Mr. Clineburg respecting such additional
payment), is $8,812,182.
It is anticipated that United will terminate Mr. Clineburgs employment without cause, as
defined in his employment agreement, or accept Mr. Clineburgs resignation, effective immediately following the effective time of the merger. Under Mr. Clineburgs existing employment agreement with Cardinal, he is entitled to receive a
lump sum payment on such termination or resignation, within one year after a change-in-control of Cardinal, of 2.99 times his average compensation (including, without limitation, annual salary, bonuses, stock options, directors fees and
retainers) over the most recent five calendar year period of his employment with Cardinal, which we refer to as the Clineburg Severance Payment, which is estimated at $8,879,167. Mr. Clineburg is also entitled, at the effective time of the merger,
to an increase in the vested amount of his Supplemental Executive Retirement Plan, or SERP, of $1.8 million.
98
While the parties have agreed to use reasonable best efforts to resolve any excess
parachute payment, at this time, it is not currently anticipated that the amount that Mr. Clineburg may receive would constitute an excess parachute payment. As noted above, if any amount that Mr. Clineburg may receive exceeds the
280G limit, then Mr. Clineburg is entitled to an additional payment for the excise taxes under Section 4999 of the Code payable with respect to an excess parachute payment, along with a further additional payment equal to the excise, employment and
income taxes payable by Clineburg respecting such additional payment. In such event, United Bankshares and its affiliates, individually and as successor by merger to Cardinal, will not be able to deduct the excess parachute payment or the
gross up and payment for excise, employment and income taxes thereon as reasonable compensation or a business expense on its consolidated returns.
On December 21, 2016, Cardinal and Mr. Clineburg signed an amendment to his employment agreement to extend the period of the covenant not to compete set forth in the employment agreement between Cardinal
and Mr. Clineburg from a period of one year to a period of two years and to provide that on or before March 15, 2017, Cardinal will transfer ownership of Mr. Clineburgs current company-owned automobile to Mr. Clineburg with appropriate
tax treatment.
On August 25, 2016, Cardinal entered into a split dollar life insurance agreement with Mr. Clineburg that
provides that in the event of his death prior to the effective time of the merger, the difference between (i) the death benefit under Cardinals existing bank owned life insurance, or BOLI, policy covering the life of Mr. Clineburg and
(ii) the cash surrender value of such policy, shall be paid to Mr. Clineburgs designee. The value of this additional death benefit is estimated at $2,325,559 as of December 31, 2016. In addition, upon the effective time of the merger, United
Bankshares shall make an irrevocable contribution to a rabbi trust with a mutually-agreed upon independent bank of an amount that is sufficient to pay the Clineburg Severance Payment. Additionally, Cardinal paid the 2016 annual bonus for Mr.
Clineburg in December 2016 rather than early 2017 in the amount of $1,125,000.
United intends to assume the obligations of Mr.
Clineburgs employment agreement with Cardinal and to pay the amounts described above with respect to his termination of employment without cause or resignation, as the case may be, at the effective time of the merger.
Christopher W. Bergstrom
On December 22, 2016, Cardinal and Mr. Bergstrom signed an amendment to his employment agreement with Cardinal as follows: (i) to require
a one-time payment, which we refer to as the Bergstrom 2016 Change in Control payment, which was then paid by Cardinal to Mr. Bergstrom in December 2016 in the amount of $1,350,000, with a waiver effective upon receipt of the 2016 Change in Control
payment by Mr. Bergstrom of the right to assert good reason (as defined in his employment agreement with Cardinal) termination, based upon the changes to employment terms and conditions described below with respect to his anticipated employment with
United Bank effective at the effective time of the merger; (ii) to specify that (A) the term average compensation as used in certain sections of his employment agreement with Cardinal with respect to calculation of severance pay under
certain circumstances thereunder shall not include the Bergstrom 2016 Change in Control payment and (B) any payment to which Mr. Bergstrom may be entitled in the event of certain terminations as set forth in certain sections of his employment
agreement with Cardinal shall be reduced by the amount of the Bergstrom 2016 Change in Control Payment; and (iii) to provide that the Mr. Bergstroms employment agreement with Cardinal shall terminate effective upon the effective date of an
employment agreement entered into between United Bank and Mr. Bergstrom, the terms of which are described below.
The December
22, 2016 amendment to Mr. Bergstroms employment agreement with Cardinal provides that at the effective time of the merger, Cardinal will pay Mr. Bergstrom a lump sum payment of $1,190,500, which we refer to as the Bergstrom 2017 Change in
Control payment, provided that he remains employed with Cardinal through such date, subject to accelerated vesting and payment protections upon termination of Mr. Bergstrom by Cardinal without cause or upon resignation by Mr. Bergstrom for good
reason (as such terms are defined in his employment agreement with Cardinal) prior to the effective time of the merger.
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There is no agreement between Cardinal and Mr. Bergstrom to pay a gross-up for excise taxes
that may apply under Section 4999 of the Code and no amount he may receive is subject to reduction in the event that it would constitute an excess parachute payment, although, as discussed below, Mr. Bergstrom has entered into a new
employment agreement with United Bank, to be effective at the effective time of the merger and under the new employment agreement with United Bank, certain amounts he may receive under such employment agreement will be subject to reduction in the
event that, when compared to the amounts being paid in full, the reduced amounts (reduced to one dollar less than the maximum amount that may be paid without causing any of the amounts to be subject to the excise tax under Section 4999 of the Code),
results in the receipt by Mr. Bergstrom, of a greater net after-tax amount than if he received the payments and paid tax on them, including the excise tax, without any such reduction.
Assuming the merger closes in 2017, the 280G limit for Mr. Bergstrom, after which excise taxes under Section 4999 of the Code would apply
(unless a reduction applies, in the event that Mr. Bergstrom enters into an employment agreement with United Bank, providing for a reduction if such reduction results in a larger net after-tax payment for Mr. Bergstrom) is $3,552,342.
If Mr. Bergstrom had not signed the above-described waiver and amendment of his employment agreement with Cardinal, and United Bankshares
were to have assumed his employment agreement with Cardinal at the effective time of the merger, Mr. Bergstrom would have been entitled, in the event of termination of his employment without cause or his resignation for good reason, each as defined
in his employment agreement with Cardinal, within twelve months after the effective date of the merger, to receive a payment of 2.99 times his average compensation (including, without limitation, annual salary, bonuses, stock options,
directors fees and retainers) over the most recent five calendar year period of his employment with Cardinal, which payment is estimated at $3,540,502.
On August 26, 2016, the Cardinal board of directors adopted a new SERP that provides Mr. Bergstrom with an immediately vested benefit of $7,500 per month commencing at age 60 for 15 years. Additionally,
Cardinal paid the 2016 annual bonus for Mr. Bergstrom in December 2016 rather than early 2017, in the amount of $1,400,000.
Alice P.
Frazier
On December 20, 2016, Cardinal and Ms. Frazier signed an amendment to Ms. Fraziers employment agreement with
Cardinal, and they intend to take any further actions required, all to ensure that any payment that may be payable to Ms. Frazier under her employment agreement complies with, or is exempt from, Section 409A of the Code of 1986, as amended, or Code
Section 409A, including without limitation, correcting any document failures in accordance with the IRS Notice 2010-6, as amended by IRS Notice 2010-80.
The amendment to Ms. Fraziers employment agreement with Cardinal also provides that on or before March 15, 2017, Cardinal will also transfer ownership of Ms. Fraziers current company-owned
automobile to Ms. Frazier with appropriate tax treatment. Additionally, Cardinal paid the 2016 annual bonus for Ms. Frazier in December 2016 rather than early 2017, in the amount of $650,000.
The amount that Ms. Frazier may receive is subject to reduction in the event it would constitute an excess parachute payment
based on Section 280G of the Code. In that event, Ms. Fraziers payments would be reduced to the largest amount that Ms. Frazier could receive without being subject to such excise taxes. Assuming the merger closes in 2017, the 280G limit,
after which excise taxes under Section 4999 of the Code would apply in the case of Ms. Frazier, but for the cut-back provision of her employment agreement with Cardinal, is estimated at $2,137,552.
On August 26, 2016, the Cardinal board of directors adopted a new SERP for Ms. Frazier in substantially the same form as the Cardinal
SERPs for Mr. Bergstrom, and the new SERP provides Ms. Frazier with an immediately vested benefit of $1,500 per month commencing at age 65 for 10 years.
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United Bank will assume the employment agreement, amended with respect to Code Section 409A
compliance as described above, between Cardinal and Ms. Frazier at the effective time of the merger. It is anticipated that Ms. Frazier will continue employment with United Bank for several months, and upon her termination without cause within
twelve months after the effective time of the merger, United Bank will be obligated to pay severance to Ms. Frazier, if she timely signs an appropriate release, in amount equal to (i) her base salary for the remainder of the 12-month period from and
after the effective date of the merger, plus two times her base salary for a period of twelve months, less required and authorized withholdings and deductions, on regular payroll dates, and (ii) if Ms. Frazier is participating in United Banks
group health insurance plans on the effective date of termination of her employment, and she timely elects and remains eligible for continued coverage under COBRA, or, if applicable, state insurance laws, United Bank is obligated to pay that portion
of Ms. Fraziers COBRA premiums that United Bank was paying prior to the effective date of termination for the severance period, as defined in Ms. Fraziers employment agreement with Cardinal, which period is equal to 12 months less the
number of months following the effective time of the merger during which she is employed by United Bank, or for the continuation period for which she is eligible, whichever is shorter, provided that United Banks COBRA premium payment
obligation will end immediately if Ms. Frazier obtains health care insurance from any other source during the severance period. The estimated amount of Ms. Fraziers payments, including but not limited to, the value of the continued COBRA
premiums, if any, upon termination of her employment without cause within twelve months after the effective time of the merger, is $1,212,227, subject to reduction in the event that it exceeds the 280G threshold for imposition of excise tax under
Section 4999 of the Code, and such threshold, as stated above is estimated at $2,137,552.
F. Kevin Reynolds
Cardinal paid the 2016 annual bonus for Mr. Reynolds in December 2016 rather than early 2017, in the amount of $800,000. On August 26,
2016, the Cardinal board of directors adopted a new SERP providing for payment of $3,000 per month for 10 years beginning at age 65, fully accrued and vested at inception with full survivorship benefits. Funding for the SERP was placed into a
third-party rabbi trust and the SERP has additional terms and conditions that are similar to the Cardinal SERPs for Mr. Bergstrom. In the case of Mr. Reynolds, there is no agreement to pay a gross-up for excise taxes that may apply under Section
4999 of the Code and no amount he may receive is subject to reduction in the event that it would constitute an excess parachute payment. For Mr. Reynolds, the 280G limit, after which excise taxes under Section 4999 of the Code would
apply, is estimated at $1,805,742.
Mark A. Wendel
Cardinal paid the 2016 annual bonus for Mr. Wendel in December 2016 rather than early 2017, in the amount of $200,000. United Bank does not intend to continue the employment of Mr. Wendel after the
effective time of the merger. Since Mr. Wendels employment will be involuntarily terminated without cause by United Bank within six months after the effective time of the merger, he will be entitled to receive two weeks of base pay (at the
rate in effect on the termination date) for each year of service at Cardinal or its subsidiaries (with credit for partial years of service) with a minimum payment equal to four weeks of base pay and a maximum payment equal to 26 weeks of base pay
and United Bankshares will provide reasonable outplacement services by an outplacement company selected by United Bankshares for a period of six months following termination, and the estimated value of such severance payment and outplacement
services for Mr. Wendel is $110,000. For Mr. Wendel, the 280G limit, after which excise taxes under Section 4999 of the Code would apply, is estimated at $1,063,391.
Certain Compensation for Cardinal Named Executive Officers
The following
table sets forth the information required by Item 402(t) of Regulation S-K promulgated by the SEC, regarding certain merger-related compensation that the Cardinal named executive officers may be entitled to receive pursuant to their existing
agreements with Cardinal. The amounts are calculated assuming that the effective date of the merger and a qualifying termination of employment occurred on December 31, 2016. The
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merger-related compensation payable to the Cardinal named executive officers is subject to a non-binding advisory vote of the Cardinal shareholders, as described under Proposal No. 2
Advisory (Non-Binding) Vote on Certain Merger-Related Compensation for Cardinal Named Executive Officers beginning on page 58.
Golden Parachute Compensation
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Name
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Cash
(1)
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Equity
(2)
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Pension/
NQDC
(3)
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Perquisites/
Benefits
(4)
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Tax
Reimbursement
(5)
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Other
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Total
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Bernard H. Clineburg
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$
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8,879,167
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$
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841,769
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$
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1,558,179
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$
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100,000
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$
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$
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$
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11,379,115
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Mark A. Wendel
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110,000
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132,200
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114,394
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356,594
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Christopher W. Bergstrom
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3,540,502
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522,856
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1,226,470
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22,454
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5,312,282
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Alice P. Frazier
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1,185,000
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218,744
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273,339
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45,393
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1,722,476
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F. Kevin Reynolds
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487,500
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198,433
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|
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422,453
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|
|
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16,330
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|
|
|
|
|
|
|
|
|
|
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1,124,716
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(1)
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For Mr. Clineburg, represents a double-trigger (i.e., the amounts are triggered by the occurrence of a change in control and payment is conditioned upon the
executives qualifying termination of employment in connection with a change in control) lump sum cash severance payment equal to 2.99 times his average total compensation during each of the past five years that is payable within 30 days after
the date of termination assuming Mr. Clineburg is terminated without cause by United Bankshares or Mr. Clineburg voluntarily terminates his employment for any reason within one year after the merger. For Mr. Wendel, represents a double-trigger lump
sum cash severance payment equal to two weeks of base pay for each of his 11 years of service at Cardinal (with credit for partial years of service) assuming Mr. Wendel is terminated without cause by United Bankshares within six months after the
merger, and the value of reasonable outplacement services to be provided by United Bankshares. Mr. Wendel does not have an employment agreement with Cardinal and will receive severance pursuant to the merger agreement like all other employees of
Cardinal that do not have employment agreements and are involuntarily terminated by United Bankshares within six months after the merger. For Mr. Bergstrom, represents a double-trigger lump sum cash severance payment equal to 2.99 times his average
total compensation during each of the past five years that is payable within 30 days after the date of termination assuming Mr. Bergstrom is terminated without cause by United Bankshares or Mr. Bergstrom voluntarily terminates his employment for
good reason within one year after the merger. For Ms. Frazier, represents a double-trigger cash severance payment equal to 12 months of base salary that is payable within 30 days after Ms. Frazier delivers a customary release of claims to United
Bankshares, plus monthly payments equal to two times her base salary for a period of 12 months after such date, assuming Ms. Frazier is not employed by United Bankshares following the merger. For Mr. Reynolds, represents a double-trigger lump sum
cash severance payment equal to 18 months of base salary that is payable within 30 days after the date of termination assuming Mr. Reynolds is terminated without cause by United Bankshares or Mr. Reynolds voluntarily terminates his employment for
any reason within one year after the merger. In most cases, payment of each cash severance payment will be delayed for six months following the executives termination date to comply with the requirements of Section 409A of the Code. Any
terminations must meet the separation from service standards of Section 409A of the Code. Any payments required to be delayed will be paid at the end of the six-month period in one lump sum. Any payments due after the end of the
six-month period will be paid at the normal payment date provided under the employment agreements. For Messrs. Clineburg, Bergstrom and Reynolds, and Ms. Frazier, any delayed payments will accrue interest at
The Wall Street Journal
Prime Rate
in effect on the applicable date of termination, which accrued interest is not reflected in these amounts.
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(2)
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Represents single-trigger acceleration of outstanding restricted stock and option awards that are unvested at the time of the merger. The amounts
related to the accelerated vesting of the restricted stock awards are expressed as an aggregate dollar value which represents $26.34 (the average closing market price of Cardinal common stock over the first five business days following the first
public announcement of the merger) for each unvested share of common stock for which vesting will be accelerated. The aggregate dollar value of the acceleration of unvested restricted stock awards in connection with the merger for each executive is
as follows: Mr. Clineburg $702,515, Mr. Wendel $105,394, Mr. Bergstrom $465,410,
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Ms. Frazier $175,622 and Mr. Reynolds $166,850. The amounts related to the accelerated vesting of option awards are expressed as an aggregate dollar value which represents the
difference between $26.34 and the exercise price for each stock option. The aggregate dollar value of the acceleration of unvested option awards in connection with the merger for each executive is as follows: Mr. Clineburg $139,254, Mr.
Wendel $26,805, Mr. Bergstrom $57,446, Ms. Frazier $43,122 and Mr. Reynolds $31,582. Importantly, these values are different from, and significantly higher than, the valuation of unvested equity grants for purposes of
Section 280G of the Code, which valuation is determined as of the date of the change in control and is based on several factors, including the stocks fair market value and the length of time until the unvested equity grants would otherwise
have vested, assuming no change in control.
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(3)
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For Mr. Clineburg, represents the estimated present value of a single-trigger increase in the vested amount of his SERP of $10,000 per month for a period of 180 months
commencing on the month following the date of the merger. For Mr. Wendel, represents single-trigger acceleration of vesting of his unvested account balance under Cardinals Executive Deferred Income Plan. For Messrs. Bergstrom and Reynolds, and
Ms. Frazier, represents (i) single-trigger acceleration of vesting of their respective unvested account balances under Cardinals Executive Deferred Income Plan, and (ii) the estimated present value of the benefit under their respective SERP
agreements with Cardinal that were entered into in connection with the merger. Mr. Clineburg is currently fully vested in the account balance maintained for him under Cardinals Executive Deferred Income Plan.
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(4)
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For Mr. Clineburg, represents the estimated value of his company-owned vehicle which will be transferred to him by Cardinal on or before March 15, 2017. Under Mr.
Clineburgs Split Dollar Agreement with Cardinal, in the event of his death prior to the effective time of the merger, Mr. Clineburgs designated beneficiaries will be entitled to the difference between (i) the death benefit under
Cardinals existing BOLI policy covering the life of Mr. Clineburg, and (ii) the cash surrender value of such policy, the value of which death benefit was approximately $2,325,559 as of December 31, 2016. The value of this death benefit is
not reflected in the above amount. For Mr. Bergstrom, represents a double-trigger health care continuance benefit to which he would be entitled if, within one year after the merger, his employment is terminated without cause by United Bankshares or
he terminates his employment for good reason, or the Health Care Continuance Benefit. For Ms. Frazier, represents (i) a double-trigger Health Care Continuance Benefit to which she would be entitled if she is not employed by United Bankshares
following the merger, and (ii) the estimated value of her company-owned vehicle which will be transferred to her by Cardinal on or before March 15, 2017. For Mr. Reynolds, represents a double-trigger Health Care Continuance Benefit to which he
would be entitled if, within one year after the merger, his employment is terminated without cause by United Bankshares or he voluntarily terminates his employment for any reason. The Health Care Continuance Benefit generally requires the
continuation of coverage under any of Cardinals group health and dental plans or COBRA coverage with Cardinal (or its successor) paying that portion of the COBRA premiums that it was paying prior to the merger. For Messrs. Bergstrom and
Reynolds, the Health Care Continuance Benefit will continue for a period of 24 months and 18 months, respectively, after the date of termination. For Ms. Frazier, the Health Care Continuance Benefit will continue for a period of 12 months after the
date of termination, provided that it will cease sooner if and when she has obtained comparable health coverage from a subsequent employer. The aggregate dollar value of the Health Care Continuance Benefit was estimated by assuming a 20% increase in
then-current premium costs on January 1 of each calendar year during the applicable Health Care Continuance Benefit period.
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(5)
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The Cardinal named executive officers are not expected to receive tax reimbursements in connection with the merger. Pursuant to his employment agreement with Cardinal,
in the event that the change in control payments and benefits received or to be received by Mr. Clineburg would constitute an excess parachute payment under Section 280G of the Code, Mr. Clineburg would be entitled to an additional
payment for the excise taxes under Section 4999 of the Code payable with respect to such excess parachute payment, along with a further additional payment equal to the excise, employment and income taxes payable by Mr. Clineburg with respect to
such additional payment. Mr. Clineburgs change in control benefits are not expected to constitute an excess parachute payment under Section 280G of the Code.
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103
Pursuant to her employment agreement with Cardinal, if the payments or benefits received or
to be received by Ms. Frazier in connection with the merger would constitute an excess parachute payment under Section 280G of the Code, thereby causing her to be subject to an excise tax under Section 4999 of the Code, then the total
benefits paid to her will be reduced to the extent necessary to avoid imposition of any such excise taxes.
Please see
Employment Agreements with Cardinal Executive Officers for additional information regarding the terms, conditions and limitations on the merger related compensation to which the Cardinal named executed are entitled pursuant to
their agreements with Cardinal.
Employment and Engagement with United Bank Following the Merger
Mr. Bergstrom has signed a new employment agreement with United Bank, which will be effective on the effective date of the merger, to
be employed as the President of United Bank. Mr. Bergstroms new employment agreement with United Bank has a one-year term, an initial annual base salary of $350,000, participation in all benefit plans (including bonus and equity plans) in the
same manner as similar situated employees, and that United Bank will pay monthly dues for Mr. Bergstroms current country club memberships, Evergreen and Farmington, while he is employed with United Bank, and that Mr. Bergstrom may continue,
while employed with United Bank, to drive his current company-owned automobile, and that if its useful life ends while he is still employed with United Bank, he may turn it in to United Bank and thereafter, for the remainder of his employment, have
use of another company-owned car under United Banks policy for use of company cars as then in effect. United Banks policy for Mr. Bergstroms use of his company vehicle shall include gas, taxes, maintenance, repairs, insurance, and
EZ Pass fees and charges. In addition, if Mr. Bergstrom terminates employment within the first three years after the effective time of the merger, United Bank shall pay an amount equal to the full monthly cost (including COBRA administrative fees,
if applicable) of his medical and dental coverage under the current or any successor health plan provided by United or United Bank to its employees, with Mr. Bergstrom eligible to elect any, then available, health plan option for Mr. Bergstrom and
his family for 24 months.
In addition, Mr. Bergstroms new employment agreement with United Bank grants Mr. Bergstrom an
unvested, unsecured right to payment of a retention bonus, which we refer to as the Bergstrom Retention Bonus, in the amount of $1,000,000, to vest ratably and be paid in twelve equal monthly installments during 12 months of continued employment
following the effective time of the merger, with the remaining installments to vest and be paid in a lump sum sooner upon termination during the 12 months after the effective time of Mr. Bergstrom by United Bank without cause or due to disability,
or upon resignation during such 12 month period by Mr. Bergstrom for good reason. Any remaining unvested installments of the Bergstrom Retention Bonus are forfeited if Mr. Bergstrom is terminated for cause or if he resigns without good reason prior
to 12 months of continued employment with United Bank from and after the effective time of the merger. The definitions of cause and good reason under the new employment agreement between Mr. Bergstrom and United Bank are substantially identical to
the definitions of cause and good reason under Mr. Bergstroms existing employment agreement with Cardinal. United Bank shall, upon the effective time of the merger, make an irrevocable contribution to a rabbi trust with a mutually agreed-upon
independent bank of an amount that is sufficient to pay the monthly installments of the Bergstrom Retention Bonus.
Under the
employment agreement between Mr. Bergstrom and United Bank, United Bank will pay premiums on a term life insurance policy, insuring Mr. Bergstrom in the amount of the Bergstrom Retention Bonus, and payable to a beneficiary of his choice for a
coverage period commensurate with the vesting period for the Bergstrom Retention Bonus, or the period during which Mr. Bergstrom remains employed with United Bank, whichever is shorter. Mr. Bergstroms W-2s will reflect appropriate imputed
income.
Mr. Bergstroms employment agreement with United Bank will also provide that in the event it is determined that
any payment, benefit, vesting or distribution to or for the benefit of Mr. Bergstrom would be subject to the excise tax imposed by §4999 of the Code, or any comparable successor provisions, or the excise tax, then the payments shall be either
be (i) provided to Mr. Bergstrom in full or (ii) provided to Mr. Bergstrom
104
as to such lesser extent which would result in no portion of such payments being subject to an excise tax, whichever of the foregoing amounts, when taking into account applicable income and
employment taxes, the excise tax, and any other applicable taxes, results in the receipt by Mr. Bergstrom on an after-tax basis, of the greatest amount, notwithstanding that all or some portion of such payments may be subject to such excise tax.
Mr. Bergstrom is subject under his employment agreement with United Bank to customary post-employment non-compete and
non-solicitation covenants for a period of 12 months beginning after separation from service during the 12 month term of his employment agreement from United Bank for any reason or no reason. The geographic area of the non-compete restriction shall
be limited to 25 miles from Mr. Bergstroms office at the effective time of the merger.
Cardinal and United Bankshares
have agreed that the Bergstrom 2016 Change in Control payment, the Bergstrom 2017 Change in Control payment, and the Bergstrom Retention Bonus described above are intended, in the aggregate, to approximate, and not exceed, the amount that Mr.
Bergstrom would be entitled to receive in connection with a termination of his employment without cause or for good reason following a change in control under his employment agreement with Cardinal, prior to its amendment as described above.
It is currently anticipated that Mr. Reynolds will also be employed by United Bank at his current location following the
effective time of the merger, as the Director of Sales and Regional President, directly reporting to Mr. Bergstrom. United Bank and Mr. Reynolds are currently negotiating a new employment agreement, the terms of which have not yet been
finalized, to replace Mr. Reynolds existing employment agreement with Cardinal at the effective time of the merger. Although the terms of Mr. Reynolds employment with United Bank have not been finalized, the agreement is
expected to include an initial annual base salary of $300,000, participation by Mr. Reynolds in the standard cash and equity incentive programs for similarly situated executive officers of United Bank, as well as participation in all benefit plans
(including bonus and equity plans) in the same manner as similar situated employees. United Bank will pay the monthly dues for Mr. Reynolds current country club memberships, Westwood and Kinloch, while employed with United Bank. Mr. Reynolds
may continue, while employed with United Bank, to drive his current company-owned automobile, and if its useful life ends while he is still employed with United Bank, he may turn it in to United Bank and for the remainder of his employment he will
have the use of another company-owned car under United Banks policy for use of company cars as then in effect. United Banks policy for Mr. Reynolds use of his company-owned car includes gas, taxes, maintenance, repairs, insurance
and his EZ Pass. Vacation time is to be in accordance with United Banks policies in place for similarly situated executive officers of United Bank. It is anticipated that Mr. Reynolds will have administrative support consistent with his
current administrative support. United Bank will fully support Mr. Reynolds involvement in outside business and civic organizations.
Under the anticipated new employment agreement with United Bank, Mr. Reynolds will receive a payment, on the effective date of the merger of 1.5 times his annual salary, and such payment is estimated to
be $615,000.
Also, under the anticipated new employment agreement between Mr. Reynolds and United Bank, if
Mr. Reynolds employment is terminated without cause or he voluntarily resigns within three years after the effective date of the merger, he is entitled to continued group health and dental insurance benefits for himself and his family for
a period of 12 months after the date of termination or resignation. If a change of control of United Bank occurs during such three-year period and his employment is terminated without cause or he voluntarily resigns within 12 months after such
change of control, he is entitled to continued group health and dental insurance benefits for a period of 12 months after the date of termination or resignation. In the event that Mr. Reynolds does not agree to a new employment agreement with United
Bank, and United Bankshares were to assume the obligations of his employment agreement with Cardinal, in the event of termination of Mr. Reynolds employment by United Bankshares or its affiliates within 12 months after the effective time of
the merger, without cause as defined in Mr. Reynolds employment agreement with Cardinal, or by voluntary resignation of Mr. Reynolds between 10 and 12 months after the effective time of the merger, United Bankshares or an affiliate would be
obligated to make a payment to Mr. Reynolds equal to 1.5 times his annual salary (such payment is estimated to be $615,000) and to provide continued health and dental insurance benefits to Mr. Reynolds and his family for a period of 18 months.
105
Cardinal Retirement Benefits
Qualified Retirement Plan
The parties also anticipate termination of the
Cardinal qualified retirement plan, effective on or immediately before the effective time of the merger, and upon such termination, the accounts of all participants, including Messrs. Clineburg, Bergstrom, Reynolds and Wendel and Ms. Frazier, will
vest 100%.
Deferred Income Plan
Each of Messrs. Clineburg, Bergstrom, Reynolds and Wendel and Ms. Frazier is a participant in the Cardinal non-qualified Executive Deferred Income Plan, or the Cardinal deferred income plan, which
provides that matching contributions vest 100% at a change of control. The amounts set forth below are calculated assuming that the effective date of the merger occurred on December 31, 2016.
Mr. Clineburg is fully vested in the account balance maintained for him under the Cardinal deferred income plan. As Mr. Clineburg has
elected change of control as the distribution event for these deferrals, he will receive a payment of $2,598,365 from such plan at the effective time of the merger, although this amount is not considered as part of any parachute payment
for purposes of Section 280G of the Code, as it is previously vested in full and the distribution is not an acceleration of the previously elected time and form of payment.
Mr. Bergstrom has $126,470 in matching contributions that are not 100% vested, which will instead vest 100% at the effective time of the merger. The estimated value of the accelerated vesting is $126,470.
Mr. Bergstrom elected change of control as the distribution event for these deferrals, and he will receive a payment of $2,264,921 from this plan at the effective time of the merger, although only the accelerated vesting of the matching
contributions is considered as part of any parachute payment for purposes of Section 280G of the Code, as the distribution on change of control previously vested in full and the distribution is not an acceleration of the previously
elected time and form of payment.
Ms. Frazier has $152,339 in matching contributions that are not 100% vested, which will
instead vest 100% at the effective time of the merger. The estimated value of the accelerated vesting is $152,339. Ms. Frazier elected change of control as the distribution event for these deferrals, and she will receive a payment of $972,956 from
this plan at the effective time of the merger, although only the accelerated vesting of the matching contributions is considered as part of any parachute payment for purposes of Section 280G of the Code, as the distribution on change of
control previously vested in full and the distribution is not an acceleration of the previously elected time and form of payment.
Mr. Reynolds has $136,453 in matching contributions that are not 100% vested, which will vest 100% at the effective time of the merger. The estimated value of the accelerated vesting is $136,453. Mr.
Reynolds elected change of control as the distribution event for a portion these deferrals, and he will receive a payment of $373,253 from this plan at the effective time of the merger and the remaining $1,207,213 of his plan accounts will be held,
invested and distributed over certain periods as elected by Mr. Reynolds, although only the accelerated vesting of the matching contributions is considered as part of any parachute payment for purposes of Section 280G of the Code, as the
distribution on change of control previously vested in full and the distribution is not an acceleration of the previously elected time and form of payment.
Mr. Wendel has $114,394 in matching contributions that are not 100% vested, which will vest 100% at the effective time of the merger. The estimated value of the accelerated vesting is $114,394. Mr. Wendel
elected change of control as the distribution event for these deferrals, and he will receive a payment of $650,530 from this plan at the effective time of the merger, although only the accelerated vesting of the matching contributions is considered
as part of any parachute payment for purposes of Section 280G of the Code, as the distribution on change of control previously vested in full and the distribution is not an acceleration of the previously elected time and form of payment.
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The members of the Cardinal board of directors knew about these additional interests and
considered them when they approved the merger agreement and the merger.
Accounting Treatment of the Merger
The merger will be accounted for using acquisition accounting, in accordance with U.S. generally accepted accounting
principles, for accounting and financial reporting purposes. Under acquisition accounting, the assets (including identifiable intangible assets) and liabilities (including executory contracts and other commitments) of Cardinal as of the effective
time of the merger will be recorded at their respective fair values and added to those of United Bankshares. Any excess of purchase price over the fair values is recorded as goodwill. Consolidated financial statements of United Bankshares issued
after the merger would reflect these fair values and would not be restated retroactively to reflect the historical consolidated financial position or results of operations of Cardinal.
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THE MERGER AGREEMENT
The following is a summary of the material provisions of the merger agreement. The following description of the merger agreement is
subject to, and qualified in its entirety by reference to, the merger agreement, which is attached to this prospectus and joint proxy statement as Appendix A and is incorporated by reference into this document. This summary may not contain all of
the information about the merger agreement that may be important to you. You are urged to read the merger agreement carefully and in its entirety, as it is the legal document governing the merger.
Terms of the Merger
Each of the United Bankshares board of directors and the Cardinal board of directors has approved the merger agreement, which provides for the merger of Cardinal with and into UBV, a direct wholly-owned
subsidiary of United Bankshares. UBV will be the surviving entity in the merger.
Each share of Cardinal common stock issued
and outstanding immediately prior to the completion of the merger (other than shares held by United Bankshares and its subsidiaries, in each case except for shares held by them in a fiduciary capacity or as a result of debts previously contracted)
will be converted into the right to receive 0.71 shares of United Bankshares common stock, which is referred to herein as the exchange ratio. If the number of shares of common stock of United Bankshares or Cardinal changes before the merger is
completed because of a reclassification, recapitalization, stock dividend, stock split, reverse stock split or similar event, then a proportionate adjustment will be made to the exchange ratio.
The UBV articles of organization and the UBV operating agreement as in effect immediately prior to the completion of the merger will be
the articles of organization and operating agreement of the surviving entity.
After the effective time of the merger and as
part of the same overall transaction, Cardinal Bank, the wholly-owned subsidiary of Cardinal, for no additional consideration and pursuant to the bank merger agreement, attached as an exhibit to the merger agreement, will merge with and into United
Bank, a Virginia banking corporation, and a wholly-owned subsidiary of UBV, or the bank merger. As a result of the bank merger, the separate existence of Cardinal Bank will cease and the corporate existence of United Bank, as the merged bank, shall
continue unaffected and unimpaired by the bank merger and the merged bank shall be deemed to be the same business and corporate entity as each of Cardinal Bank and United Bank.
Treatment of Cardinal Stock Options
Under the
merger agreement, each stock option to buy Cardinal common stock granted under a Cardinal equity compensation plan that is outstanding and not yet exercised immediately prior to the merger, whether vested or unvested, will vest pursuant to the terms
thereof and will be converted into an option to acquire, on the same terms and conditions as were applicable under such stock option, the number of shares of United Bankshares common stock equal to (a) the number of shares of Cardinal common
stock subject to such stock option multiplied by (b) 0.71. Such product will be rounded down to the nearest whole number. The exercise price per share (rounded up to the next whole cent) of each United Bankshares stock option issued for a
Cardinal stock option will equal (y) the exercise price per share of shares of Cardinal common stock that were purchasable pursuant to such Cardinal stock option divided by (z) 0.71.
Each Cardinal stock option that is intended to be an incentive stock option (as defined in Section 422 of the Code) will
be adjusted in accordance with the requirements of Section 424 of the Code and all Cardinal stock options will be adjusted in a manner that maintains the options exemption from Section 409A of the Code. At or prior to the effective
time of the merger, Cardinal must use its reasonable best efforts to obtain any necessary consents from optionees with respect to the Cardinal equity compensation plans to permit replacement of the outstanding Cardinal stock options by United
Bankshares and to permit United Bankshares to assume the
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Cardinal equity compensation plans. Cardinal must take all action necessary to amend the Cardinal equity compensation plans to eliminate automatic grants or awards thereunder following the
effective time. At the effective time of the merger, United Bankshares will assume the Cardinal equity compensation plans, but such assumption will only be with respect to the United Bankshares replacement options granted pursuant to the merger
agreement and United Bankshares will have no obligation to make any additional grants or awards under the Cardinal equity compensation plans.
Restricted Stock
Under the merger agreement, each restricted stock award under a Cardinal equity compensation plan that is unvested or contingent and outstanding immediately prior to the merger will fully vest and be
converted into the right to receive, without interest, the merger consideration and the shares of Cardinal common stock subject to such stock award will be treated in the same manner as all other shares of Cardinal common stock for such purposes.
Conditions of the Merger
The respective obligations of United Bankshares and Cardinal to consummate the merger are subject to the satisfaction of certain mutual conditions, including the following:
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The shareholders of Cardinal approve the merger agreement and the transactions contemplated thereby, described in this prospectus and joint proxy
statement, at the meeting of shareholders for Cardinal;
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The shareholders of United Bankshares approve the issuance of the merger consideration, the amendment to the United Bankshares articles of
incorporation and the merger agreement and the transactions contemplated thereby, described in this prospectus and joint proxy statement, at the meeting of shareholders for United Bankshares;
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All regulatory approvals required by law to consummate the transactions contemplated by the merger agreement are obtained from the Federal Reserve, the
Virginia Bureau of Financial Institutions and the other appropriate federal and/or state regulatory agencies without unreasonable conditions, all waiting periods after such approvals required by law or regulation expire and no such approvals will
contain any conditions or requirements applicable either before or after the effective time of the merger that United Bankshares reasonably determines in good faith would have a material adverse effect on United Bankshares and its subsidiaries as a
whole, taking into account the consummation of the merger with Cardinal;
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The registration statement (of which this prospectus and joint proxy statement is a part) registering shares of United Bankshares common stock to be
issued in the merger is declared effective and not subject to a stop order and no proceedings suspending the effectiveness of the registration statement shall have been initiated or threatened by the SEC;
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The absence of any statute, rule, regulation, judgment, decree, injunction or other order being enacted, issued, promulgated, enforced or entered by a
governmental authority effectively prohibiting consummation of the merger;
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Authorization for the listing on Nasdaq of the shares of United Bankshares common stock to be issued in the merger, subject to official notice of
issuance; and
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All supplemental and amended documents required to be executed by United Bankshares to assume Cardinals obligations with respect to certain trust
preferred securities shall have been executed and delivered by United Bankshares.
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In addition to the mutual conditions described above, United Bankshares obligation to
consummate the merger is subject to the satisfaction, unless waived, of the following other conditions:
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The representations and warranties of Cardinal made in the merger agreement are true and correct as of the date of the merger agreement and as of the
effective time of the merger and United Bankshares receives a certificate of the chief executive officer and the chief financial officer of Cardinal to that effect;
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Cardinal performs in all material respects all obligations required to be performed by it under the merger agreement at or prior to the effective time
of the merger and delivers to United Bankshares a certificate of its chief executive officer and chief financial to that effect; and
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United Bankshares shall have received an opinion of Bowles Rice LLP, counsel to United Bankshares, dated as of the effective time of the merger, that
the merger will be treated as a reorganization under Section 368 of the Code.
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In addition
to the mutual conditions described above, Cardinals obligation to complete the merger is subject to the satisfaction, unless waived, of the following other conditions:
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The representations and warranties of United Bankshares made in the merger agreement are true and correct as of the date of the merger agreement and as
of the effective time of the merger and Cardinal receives a certificate of the chief executive officer and chief financial officer of United Bankshares to that effect;
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United Bankshares performs in all material respects all obligations required to be performed by it under the merger agreement at or prior to the
effective time of the merger and delivers to Cardinal a certificate of its chief executive officer and chief financial officer to that effect; and
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Cardinal shall have received an opinion of LeClairRyan, counsel to Cardinal, dated as of the effective time of the merger, that the merger will be
treated as a reorganization under Section 368 of the Code.
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Representations
and Warranties
The merger agreement contains representations and warranties by United Bankshares and Cardinal. These
representations and warranties are qualified by items previously disclosed and a materiality standard, which means that neither United Bankshares nor Cardinal is in breach of a representation or warranty unless the existence of any fact, event or
circumstance, individually, or taken together with other facts, events or circumstances has had or is reasonably likely to have a material adverse effect on United Bankshares or Cardinal. These include, among other things, representations and
warranties by United Bankshares and Cardinal to each other as to:
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Organization and good standing of each entity and its subsidiaries;
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Each entitys capital structure;
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Each entitys (including UBV) power and authority relative to the execution and delivery of, and performance of its obligations under, the merger
agreement;
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Absence of material adverse changes since December 31, 2015;
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Consents and approvals required;
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Accuracy of documents, including financial statements and other reports, filed by each entity with the SEC;
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Absence of defaults under material contracts and agreements;
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Absence of environmental problems;
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Absence of conflicts between each entitys obligations under the merger agreement and its charter documents and contracts to which it is a party
or by which it is bound;
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Litigation and related matters;
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Taxes and tax regulatory matters;
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Compliance with applicable laws, the Sarbanes-Oxley Act and accounting controls;
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Absence of brokerage commissioners, except as disclosed for financial advisors;
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Employee benefit matters;
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Risk management instruments in effect for each entity;
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The taking of all actions necessary to exempt the merger agreement from any takeover laws;
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Books and records being fully and accurately maintained and fairly presenting events and transactions;
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Opinions of the parties respective financial advisors;
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Allowance for loan and lease losses; and
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Marketable title to assets.
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No representation or warranty contained in the merger agreement shall be deemed untrue or incorrect, and no party hereto shall be deemed to have breached a representation or warranty, as a consequence of
the existence of any fact, event or circumstance unless such fact, circumstance or event, individually or taken together with all other facts, events or circumstances inconsistent with any representation or warranty contained in the merger agreement
has had or is reasonably likely to have a material adverse effect.
For the purposes of the merger agreement, a
material adverse effect means any event, change, effect, development, state of facts, condition, circumstances or occurrence that, individually or in the aggregate, (i) is material and adverse to the financial position, results of
operations or business of United Bankshares and its subsidiaries taken as a whole or Cardinal and its subsidiaries taken as a whole, respectively, or (ii) would materially impair the ability of either United Bankshares or Cardinal to perform
its obligations under the merger agreement or otherwise materially threaten or materially impede the consummation of the merger and the other transactions contemplated by the merger agreement; provided, that the impact of the following items shall
not be deemed to be a material adverse effect:
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Changes in tax, banking and similar laws of general applicability or interpretations thereof by courts or governmental authorities except to the extent
that such changes have a disproportionate impact on United Bankshares or Cardinal, as the case may be, relative to the overall effects on the banking industry;
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Changes in U.S. generally accepted accounting principles or regulatory accounting requirements applicable to banks and their holding companies
generally, except to the extent that such changes have a disproportionate impact on United Bankshares or Cardinal, as the case may be, relative to the overall effects on the banking industry;
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Changes in economic conditions affecting financial institutions generally, including changes in market interest rates, credit availability and
liquidity, and price levels or trading volumes in securities markets except to the extent that such changes have a disproportionate impact on United Bankshares or Cardinal, as the case may be, relative to the overall effects on the banking industry;
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Any modifications or changes to valuation policies and practices in connection with the merger in accordance with U.S. generally accepted accounting
principles;
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Actions and omissions of United Bankshares or Cardinal taken with the prior written consent of the other in contemplation of the transactions
contemplated by the merger agreement;
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Any outbreak or escalation of hostilities or war (whether or not declared) or any act of terrorism, or any earthquakes, hurricanes, tornados or other
natural disasters;
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Failure of United Bankshares or Cardinal to meet any internal financial forecasts or any earnings projections (whether made by United Bankshares or
Cardinal or any other person);
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The public disclosure of the merger agreement and the impact thereof on relationships with customers or employees; or
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The effects of compliance with the merger agreement on the operating performance of the parties, including, expenses incurred by the parties in
consummating the transactions contemplated by the merger agreement.
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Waiver and Amendment
Prior to the effective time of the merger, any provision of the merger agreement may be waived by the party benefiting by
the provision or amended or modified by an agreement in writing between the parties, except that, after the Cardinal special meeting, the merger agreement may not be amended if it would violate the Virginia Stock Corporation Act.
Indemnification; Directors and Officers Insurance
United Bankshares has agreed to indemnify the directors, officers and employees of Cardinal and its subsidiaries for a period of six years
from the effective time of the merger to the fullest extent that Cardinal or any of its subsidiaries is permitted or required to indemnify (and advance expenses to) its directors and officers under the laws of the Commonwealth of Virginia, the
articles of incorporation and bylaws of Cardinal and/or any of its subsidiaries and any indemnification agreements in effect between Cardinal and/or any of its subsidiaries and any director, officer or employee thereof. Additionally, United
Bankshares has agreed to maintain in effect (i) the current provisions of the articles of incorporation and bylaws of Cardinal and/or its subsidiaries and (ii) any indemnification agreements in place with any directors, officers or
employees of Cardinal and/or its subsidiaries, for a period of six years following the effective time of the merger.
United
Bankshares has also agreed for a period of six years from the effective time of the merger to use its reasonable best efforts to cause the directors and officers of Cardinal to be covered by a directors and officers liability insurance
policy maintained by United Bankshares with respect to claims against such officers and directors arising from facts or events that occurred prior to the effective time of the merger. United Bankshares is not required to expend, on an annual basis,
more than 200% of the current amount expended by Cardinal to maintain or procure such directors and officers liability insurance coverage.
Acquisition Proposals
Cardinal has agreed that it will not, and that it will cause its officers, directors, agents, advisors, and affiliates not to solicit or encourage inquiries or proposals with respect to, engage in any
negotiations concerning, or provide any confidential information to, or have any discussions with any person relating to any proposal to acquire the stock or assets of Cardinal or other business combination transactions with Cardinal, unless the
Cardinal board of directors concludes in good faith, after consultation with and based upon the advice of outside counsel, that the failure to take such actions in response to a written unsolicited acquisition proposal, would be reasonably likely to
constitute a breach of its fiduciary duties to shareholders under applicable law. In such a case and upon the receipt of a confidentiality agreement, Cardinal would be permitted to provide non-public information to, and negotiate with, the person or
entity who made the written unsolicited acquisition proposal. Additionally, Cardinal must promptly inform United Bankshares of all relevant details of any inquires or contacts
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by third parties relating to the possible disposition of the business or capital stock of Cardinal, or any merger, change of control or other business combination involving Cardinal. If Cardinal,
by a majority vote of members of the board of directors of Cardinal, terminates the merger agreement in order to concurrently enter into an agreement with respect to an unsolicited competing acquisition proposal received and considered by Cardinal
(i) that, if consummated, would be more favorable to Cardinals shareholders from a financial point of view than the merger with United Bankshares, (ii) is fully financed or reasonably capable of being fully financed and (iii) is reasonably
likely to receive all required governmental approvals, provided that United Bankshares does not make a counteroffer that is at least as favorable to the other proposal, it is obligated to pay to United Bankshares the termination fee equal to
$36,000,000. See Effect of Termination; Termination Fees on page 118.
Effective Time
The merger will be consummated and become effective upon the issuance of a certificate of merger by the Virginia State
Corporation Commission (or on such other date as may be specified in the articles of merger to be filed with the Virginia State Corporation Commission). Provided that the conditions set forth in the merger agreement have been satisfied or
waived, other than those conditions that by their nature are to be satisfied at the effective time of the merger, United Bankshares and Cardinal shall cause the effective date of the merger to occur on the date on which Cardinals data
processing systems are fully integrated with United Bankshares data processing systems; provided, that if such date shall not have occurred by May 31, 2017, then the parties shall cause the effective date of the merger to occur on the sooner
of (i) five business days thereafter if all of the conditions of the merger have been satisfied or waived as of such date or (ii) five business days following the satisfaction or waiver of the conditions set forth in the merger agreement; and
provided, further, that, if Cardinal has declared a dividend in any quarter, to be paid in such quarter in which all conditions set forth in the merger agreement have been satisfied or waived, then the effective date shall be the day immediately
after the record date for the dividend declared by United Bankshares in such quarter (or, at the election of United Bankshares, on the last business day of the month in which such day occurs), unless another date is agreed to by Cardinal and United
Bankshares in writing.
Regulatory Approvals
The merger and the other transactions contemplated by the merger agreement require the approval of the Federal Reserve and the Virginia
Bureau of Financial Institutions. As a bank holding company, United Bankshares is subject to regulation under the BHCA. Cardinal is a Virginia corporation, a member bank of the Federal Reserve System, and is subject to the Virginia banking and
finance statutes in Title 6.2 of the Code of Virginia. United Bankshares, Cardinal, UBV, Cardinal Bank and United Bank have filed all required applications seeking approval of the merger with the Federal Reserve and the Virginia Bureau of Financial
Institutions.
Under the BHCA, the Federal Reserve is required to examine the financial and managerial resources and future
prospects of the combined organization and analyze the capital structure and soundness of the resulting entity. The Federal Reserve has the authority to deny an application if it concludes that the combined organization would have inadequate
capital. In addition, the Federal Reserve can withhold approval of the merger if, among other things, it determines that the effect of the merger would be to substantially lessen competition in the relevant market. Further, the Federal Reserve must
consider whether the combined organization meets the requirements of the Community Reinvestment Act of 1977 by assessing the involved entities records of meeting the credit needs of the local communities in which they operate, consistent with
the safe and sound operation of such institutions. The Virginia Bureau of Financial Institutions will review the merger under similar standards.
In addition, a period of 15 to 30 days must expire following approval by the Federal Reserve before completion of the merger is allowed, within which period the United States Department of Justice may
file objections to the merger under the federal antitrust laws.
The merger cannot be consummated prior to receipt of all
required approvals. There can be no assurance that required regulatory approvals for the merger will be obtained and, if the merger is approved, as to the date of
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such approvals or whether the approvals will contain any unacceptable conditions. There can likewise be no assurance that the United States Department of Justice will not challenge the merger
during the waiting period set aside for such challenges after receipt of approval from the Federal Reserve.
Under the merger
agreement, United Bankshares is not required to agree to any condition or take any action if such agreement or the taking of such action is reasonably likely to result in any conditions or requirements applicable either before or after the effective
time of the merger that the United Bankshares board of directors reasonably determines in good faith would have a material adverse effect on United Bankshares and its subsidiaries taken as a whole taking into account the consummation of the merger
in making such determination, which we refer to as a materially burdensome regulatory condition. If the merger is not consummated by August 31, 2017 or the necessary governmental approvals are not obtained, solely because United Bankshares does not
satisfy a condition to approval of a governmental authority requiring it to raise or obtain capital, then United Bankshares may be required to pay Cardinal a termination fee of $13,500,000 if certain other conditions are satisfied. See
Effect of Termination; Termination Fees on page 118.
United Bankshares and Cardinal are not aware of
any governmental approvals or actions that may be required for consummation of the merger other than as described above. Should any other approval or action be required, it is presently contemplated that such approval or action would be sought.
There can be no assurance that any necessary regulatory approvals or actions will be timely received or taken, that no action will be brought challenging such approval or action or, if such a challenge is brought, as to the result thereof, or that
any such approval or action will not be conditioned in a manner that would cause the parties to abandon the merger.
The
approval of any application merely implies the satisfaction of regulatory criteria for approval, which does not include review of the merger from the standpoint of the adequacy of the cash consideration or the exchange ratio for converting Cardinal
common stock to United Bankshares common stock. Furthermore, regulatory approvals do not constitute an endorsement or recommendation of the merger.
As of the date of this prospectus and joint proxy statement, no regulatory approvals have been received. While United Bankshares and Cardinal do not know of any reason why necessary regulatory approval
would not be obtained in a timely manner, they cannot be certain when or if they will receive them, or if obtained, whether they will contain terms, conditions or restrictions not currently contemplated that will be detrimental to the combined
company after completion of the merger.
Conduct of Business Pending the Merger
The merger agreement contains reciprocal forbearances made by Cardinal and United Bankshares to each other. Cardinal and United Bankshares
have agreed that, until the effective time of the merger, neither of them nor any of their subsidiaries, without the prior written consent of, or as previously disclosed to, the other, will:
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Conduct business other than in the ordinary and usual course or fail to use reasonable efforts to preserve intact its business organizations and assets
and maintain its rights, franchises and existing relations with customers, suppliers, employees and business associates, or take any action reasonably likely to have an adverse effect upon its ability to perform any of its material obligations under
the merger agreement;
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Implement or adopt any change in its accounting principles, practices or methods, other than as may be required by U.S. generally accepted accounting
principles or its regulatory authorities;
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Except as required by applicable law or regulation, implement or adopt any material change in its interest rate or other risk management policies,
practices or procedures, fail to materially follow existing policies or practices with respect to managing exposure to interest rate and other risk, or fail to use commercially reasonable means to avoid any material increase in its aggregate
exposure to interest rate risk; or
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Take any action that would, or is reasonably likely to, prevent or impede the merger from qualifying as a reorganization within the meaning of
Section 368 of the Code, or knowingly take any action that is
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intended or is reasonably likely to result in any of the conditions to the merger not being satisfied, or a material violation of any provision of the merger agreement except, in each case, as
may be required by applicable law or regulation.
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Cardinal has also agreed that, prior to the effective
time, without the prior written consent of, or as previously disclosed to, United Bankshares, it will not and will cause each of its subsidiaries not to:
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Other than pursuant to rights previously disclosed and outstanding on the date of the merger agreement, issue, sell or otherwise permit to become
outstanding, or authorize the creation of, any additional shares of Cardinal common stock or any rights to purchase Cardinal common stock, enter into any agreement with respect to the foregoing, or permit any additional shares of Cardinal common
stock to become subject to new grants of employee or director stock options, other rights or similar stock based employee rights (other than equity compensation awards and issuances of Cardinal common stock, rights, employee or director stock
options or similar equity compensation awards under a Cardinal equity compensation plan in the ordinary course of business consistent with past practice);
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Except as previously disclosed, make, declare, pay or set aside for payment any dividend (other than cash dividends at a rate not to exceed $0.12 per
share on Cardinal common stock and dividends from wholly-owned subsidiaries to Cardinal, or another wholly-owned subsidiary of Cardinal) on or in respect of, or declare or make any distribution on, any shares of Cardinal stock or directly or
indirectly adjust, split, combine, redeem, reclassify, purchase or otherwise acquire, any shares of its capital stock;
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Enter into or amend or renew any employment, consulting, compensation, severance or similar agreements or arrangements with any director, officer or
employee of Cardinal or its subsidiaries, except as previously disclosed, or grant any salary or wage increase or increase any employee benefit, except for normal individual increases in compensation to employees in the ordinary course of business
consistent with past practices, individual cash bonus awards for 2016 performance in accordance with Cardinals short-term and long-term incentive plans in the ordinary course of business consistent with past practice and for the retention
bonus pool equal to $1,250,000 in the aggregate that Cardinal and United Bankshares have agreed to establish for the purpose of retaining certain employees of Cardinal before and after the effective time of the merger;
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Enter into, establish, adopt or amend (except as may be required by applicable law or to satisfy previously disclosed contractual obligations existing
as of the date of the merger agreement) any pension, retirement, stock option, stock purchase, savings, profit sharing, deferred compensation, consulting, bonus, group insurance or other employee benefit, incentive or welfare contract, plan or
arrangement, or any trust agreement (or similar arrangement) related thereto, in respect of any director, officer or employee of Cardinal or its subsidiaries, or take any action to accelerate the vesting or exercisability of stock options,
restricted stock or other compensation or benefits payable thereunder;
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Sell, transfer, mortgage, encumber or otherwise dispose of or discontinue any of its assets, deposits, business or properties except in the ordinary
course of business and in a transaction that is not material to it and its subsidiaries taken as a whole;
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Except in the ordinary course of business, acquire (other than by way of foreclosures or acquisitions of control in a bona fide fiduciary capacity or
in satisfaction of debts previously contracted in good faith, in each case in the ordinary and usual course of business consistent with past practice) all or any portion of the assets, business, deposits or properties of any other entity;
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Amend Cardinals articles of incorporation or bylaws or the articles of incorporation or bylaws (or similar governing documents) of any of
Cardinals subsidiaries;
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Except in the ordinary course of business consistent with past practice, enter into or terminate any material contract or amend or modify in any
material respect any of its existing material contracts in a manner that is material to Cardinal and its subsidiaries taken as a whole;
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Except in the ordinary course of business consistent with past practice, settle any claim, action or proceeding, except for any claim, action or
proceeding that does not involve precedent for other
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material claims, actions or proceedings and that involve solely money damages in an amount, individually or in the aggregate for all such settlements, that is not material to Cardinal and its
subsidiaries taken as whole;
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Incur any indebtedness for borrowed money other than in the ordinary course of business;
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Organize or approve the organization of any subsidiaries; or
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Agree or commit to do any of the foregoing.
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United Bankshares has agreed that, prior to the effective time, without the prior written consent of, or as previously disclosed to, Cardinal, it will not and will cause each of its subsidiaries not to:
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Make, declare, pay or set aside for payment any extraordinary dividend, other than in connection with the United Bankshares stock repurchase program,
provided that the foregoing restriction does not restrict United Bankshares from making, declaring or paying its regular quarterly cash dividends and dividends from wholly-owned subsidiaries to United Bankshares or another wholly-owned subsidiary of
United Bankshares (which, for the avoidance of doubt, will continue to be paid);
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Enter into any agreement, arrangement or understanding with respect to the merger, acquisition, consolidation, share exchange or similar business
combination involving United Bankshares and/or a United Bankshares subsidiary, where the effect of such agreement, arrangement or understanding, or the consummation or effectuation thereof, would be reasonably likely to or does result in the
termination of the merger agreement, materially delay or jeopardize the receipt of the approval of any governmental authority or the filing of an application therefor, or cause the anticipated tax treatment of the transactions contemplated in the
merger agreement to be unavailable; provided, however, that nothing in such covenant shall prohibit any such transaction that by its terms contemplates the consummation of the merger in accordance with the provisions of the merger agreement and that
treats holders of Cardinal common stock, upon completion of the merger and their receipt of United Bankshares stock, in the same manner as the holders of United Bankshares stock;
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Amend the United Bankshares articles of incorporation or bylaws in a manner that would materially and adversely affect the benefits of the merger to
the shareholders of Cardinal; or
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Agree or commit to do any of the foregoing.
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Termination of the Merger Agreement
Cardinal
and United Bankshares may mutually agree to terminate the merger agreement at any time upon a vote by a majority of the board of directors of each of Cardinal and United Bankshares.
Either Cardinal or United Bankshares may terminate the merger agreement if the merger is not complete by August 31, 2017, unless the
failure of the merger to be consummated arises out of or results from the knowing action or inaction of the party seeking to terminate.
United Bankshares may terminate the merger agreement if any of the following occurs:
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Cardinal materially breaches any of its representations or obligations under the merger agreement and does not cure the breach within 30 days of
written notice of the breach;
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(i) Final action has been taken by any governmental authority whose approval is required for consummation of the merger and the other transactions
contemplated by the merger agreement, which final action has become nonappealable and does not approve the merger agreement or the transactions contemplated by the merger agreement, or such governmental authority has approved of the merger agreement
or the transactions contemplated by the merger agreement with a materially burdensome regulatory condition, (ii) any governmental authority whose approval or nonobjection is required in connection with the merger agreement or the transactions
contemplated by the merger agreement has stated that it will not issue the required approval or nonobjection, (iii) the shareholders of United
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Bankshares do not approve the merger agreement, the issuance of United Bankshares common stock or the United Bankshares articles amendment or (iv) the Cardinal shareholders do not approve the
merger agreement;
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As of August 31, 2017, (i) the continued accuracy of Cardinals representations and warranties in the merger agreement cannot be confirmed by
Cardinal, (ii) the performance in all material respects of all of its obligations in the merger agreement cannot be confirmed by Cardinal, or (iii) the binding, written agreements with certain key employees of Cardinal concerning employment
with United Bankshares after the effective time of the merger have not been executed and delivered or one of the key employees has taken any action on or before the effective time of the merger to materially breach or to cancel or terminate any such
agreement (provided that such failure is not a result of United Bankshares failure to perform, in any material respect, any of its covenants or agreements contained in the merger agreement or the breach by United Bankshares of any of its
material representations or warranties contained in the merger agreement); or
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The Cardinal board of directors fails to recommend approval of the merger agreement, withdraws its recommendation or modifies its recommendation in a
manner adverse to United Bankshares.
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Cardinal may terminate the merger agreement if any of the following
occurs:
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United Bankshares materially breaches any of its representations or obligations under the merger agreement and does not cure the breach within 30 days
of written notice of the breach;
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(i) Final action has been taken by any governmental authority whose approval is required for consummation of the merger and the other transactions
contemplated by the merger agreement, which final action has become nonappealable and does not approve the merger agreement or the transactions contemplated by the merger agreement, or such governmental authority has approved of the merger agreement
or the transactions contemplated by the merger agreement with a materially burdensome regulatory condition, (ii) any governmental authority whose approval or nonobjection is required in connection with the merger agreement or the transactions
contemplated by the merger agreement has stated that it will not issue the required approval or nonobjection, (iii) the shareholders of United Bankshares do not approve the merger agreement, the issuance of United Bankshares common stock or the
United Bankshares articles amendment or (iv) the Cardinal shareholders do not approve the merger agreement;
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As of August 31, 2017, United Bankshares is not able to confirm, (i) the continued accuracy of its representations and warranties in the merger
agreement or (ii) the performance in all material respects of all of its obligations in the merger agreement (provided that such failure is not a result of Cardinals failure to perform, in any material respect, any of its covenants or
agreements contained in the merger agreement or the breach by Cardinal of any of its material representations or warranties contained in the merger agreement);
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The United Bankshares board of directors fails to recommend approval of the merger agreement and the issuance of United Bankshares common stock in
connection with the merger to the United Bankshares shareholders, withdraws its recommendation or modifies its recommendation in a manner adverse to Cardinal; or
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The price of United Bankshares common stock declines by more than 20% from $38.91 and underperforms an index of banking companies by more than 15% over
a designated measurement period unless United Bankshares agrees to increase the number of shares of United Bankshares common stock to be issued to holders of Cardinal common stock who are to receive shares of United Bankshares common stock in the
merger to an amount that equals the economic value of the merger consideration to be received by Cardinal shareholders as of the date the merger agreement was executed.
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Additionally, Cardinal may terminate the merger agreement in order to enter into an agreement with respect to an unsolicited acquisition
proposal that if consummated would result in a transaction more favorable to
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Cardinal shareholders from a financial point of view than the merger, that is fully financed or reasonably capable of being fully financed, is reasonably likely to receive all required approvals
of governmental authorities on a timely basis and otherwise reasonably capable of being completed on the terms proposed, provided that United Bankshares does not make a counteroffer that the Cardinal board of directors determines is at least as
favorable to the other proposal and Cardinal pays the termination fee described below.
Effect of Termination;
Termination Fees
If the merger agreement is validly terminated, the merger agreement will become void without any
liability on the part of any party except that provisions relating to expenses and the termination fee will continue in effect and termination will not relieve a breaching party from liability for any willful breach of the merger agreement.
Cardinal has agreed to pay a termination fee to United Bankshares equal to $36,000,000 if:
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Cardinal terminates the merger agreement in order to concurrently enter into an agreement with respect to an unsolicited acquisition proposal that has
been received and is (i) more favorable to its shareholders from a financial point of view than the merger with United Bankshares, (ii) fully financed or reasonably capable of being fully financed, (iii) reasonably likely to receive all required
governmental approvals on a timely basis and (iv) otherwise reasonably capable of being completed on the terms proposed, provided United Bankshares does not make a counteroffer that the Cardinal board of directors determines is at least as favorable
to the unsolicited acquisition proposal; or
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United Bankshares terminates the merger agreement because the Cardinal board of directors fails to recommend, withdraws, modifies or changes its
recommendation of the merger in a manner adverse in any respect to the interests of United Bankshares and within 12 months after the date of termination of the merger agreement, Cardinal enters into an agreement with respect to another acquisition
proposal or consummates another acquisition proposal.
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United Bankshares has agreed to pay a termination fee
to Cardinal equal to $13,500,000 if either United Bankshares or Cardinal terminates the merger agreement because (a) the merger did not close prior to August 31, 2017 or (b) the necessary governmental approvals were not or cannot be obtained or
could be obtained only with a materially burdensome regulatory condition, but only if (i) the delay in the closing of the merger or the action or statement by a governmental authority giving rise to the termination of the merger agreement, as
applicable, arises solely because United Bankshares does not satisfy the condition to approval of a governmental authority requiring it to raise or obtain capital, in accordance with the terms required by the applicable governmental authority, (ii)
the following conditions have been or are reasonably likely to be satisfied: (A) the Cardinal shareholders have approved of the merger; (B) no injunction prohibiting the consummation of the merger has been enacted or issued (other than any action
arising out of the failure to obtain the applicable governmental approval); and (C) the representations and warranties of Cardinal are true and correct and Cardinals obligations prior to the closing of the merger are materially performed,
(iii) Cardinal has not breached its obligations to assist in the preparation of this prospectus and joint proxy statement, and (iv) United Bankshares does not otherwise have a right to terminate the merger agreement as a result of an uncured
material breach by Cardinal or failure by Cardinal to perform all conditions precedent to United Bankshares obligation to close the merger.
Surrender of Stock Certificates
Computershare Limited will act as exchange agent in the merger and in that role will process the exchange of Cardinal stock certificates for United Bankshares common stock. The exchange agent, or United
Bankshares and Cardinal if the exchange agent declines to do so, will also be making any computations required by the merger agreement, and all such computations will be conclusive and binding on the holders of Cardinal common stock in the absence
of manifest error.
In any event, do not forward your Cardinal stock certificates with your proxy card.
After the
effective time of the merger, each certificate formerly representing Cardinal common stock, until so surrendered and exchanged, will evidence only the right to receive the number of whole shares of United
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Bankshares common stock that the holder is entitled to receive in the merger, any cash payment in lieu of a fractional share of United Bankshares common stock and any dividend or other
distribution with respect to United Bankshares common stock with a record date occurring after the effective time of the merger. The holder of such unexchanged certificate will not be entitled to receive any dividends or distributions payable by
United Bankshares until the certificate has been exchanged. Subject to applicable laws, following surrender of such certificates, such dividends and distributions, together with any cash payment in lieu of a fractional share of United Bankshares
common stock, will be paid without interest.
After the completion of the merger, there will be no further transfers of
Cardinal common stock. Cardinal stock certificates presented for transfer after the completion of the merger will be canceled and exchanged for the merger consideration.
If your Cardinal stock certificates have been either lost, stolen or destroyed, you will have to prove your ownership of these certificates and that they were lost, stolen or destroyed before you receive
any consideration for your shares. Upon request, our exchange agent, Computershare Limited, will send you instructions on how to provide evidence of ownership.
No Fractional Shares
Each holder of shares of
common stock exchanged pursuant to the merger who would otherwise have been entitled to receive a fraction of a share of United Bankshares common stock shall receive, in lieu thereof, cash (without interest) in an amount equal to the product of
(i) such fractional part of a share of United Bankshares common stock multiplied by (ii) the average of the daily closing prices for United Bankshares common stock for the 20 consecutive full trading days on which shares of United
Bankshares common stock are actually traded on Nasdaq ending on the tenth trading day prior to the date of completion of the merger. A Cardinal shareholder whose direct shareholdings are represented by multiple Cardinal stock certificates will have
all shares associated with those stock certificates aggregated for purposes of calculating whole shares and cash in lieu of fractional shares to be received upon completion of the merger.
Assumption of Cardinal Trust Preferred Securities
At the effective time of the merger, United Bankshares will expressly assume all of Cardinals obligations under the debentures
issued by Cardinal to Cardinal Statutory Trust I and UFBC Capital Trust I and any trust preferred securities issued by Cardinal that are intended to be qualified trust preferred securities (as defined in applicable regulatory capital
guidelines) or that are eligible for such treatment as grandfathered trust preferred securities. In connection therewith, to the extent applicable, as of the effective time of the merger, United Bankshares will be substituted for Cardinal on such
indentures, the subordinated debentures and trust preferred securities and will have executed any and all documents, instruments and agreements, including any supplemental indentures, guarantees or declarations of trust required by the
aforementioned indentures, the subordinated debentures or the trust preferred securities issued by Cardinal Statutory Trust I and UFBC Capital Trust I, or as may reasonably be requested by the trustees thereunder, and thereafter shall perform all of
Cardinals obligations with respect to the subordinated debentures and the trust preferred securities issued by Cardinal Statutory Trust I and UFBC Capital Trust I.
Dissenters or Appraisal Rights
Shareholders will not have any dissenters or appraisal rights in connection with the merger and the other matters described in this
prospectus and joint proxy statement.
Accounting Treatment
The merger will be accounted for using acquisition accounting, in accordance with U.S. generally accepted accounting principles. As such,
the assets and liabilities of Cardinal, as of the completion of the merger, will be recorded at their fair values as well as any identifiable intangible assets. Any remaining excess purchase price will be allocated to goodwill, will not be amortized
and will be evaluated for impairment annually. Consolidated
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financial statements of United Bankshares issued after the consummation of the merger will reflect such values. In addition, costs incurred in connection with the business combination will be
expensed as incurred unless related to the equity issuance. The operating results of Cardinal will be included in United Bankshares consolidated financial statements from the date the merger is consummated and afterwards.
Management and Operations after the Merger
Bernard H. Clineburg will join the United Bankshares board of directors at the effective time of the merger. In addition, the merger agreement provides for the appointment of two individuals from Cardinal
to the board of directors of United Bank. See The Merger Interests of Certain Cardinal Directors and Executive Officers in the Merger beginning on page 97.
The remaining current directors and senior officers of United Bankshares are expected to continue in their current positions. Information
about the current United Bankshares directors and executive officers can be found in the documents listed under Where You Can Find More Information beginning on page 141.
Resales of United Bankshares Common Stock
The
shares of United Bankshares common stock to be issued to shareholders of Cardinal under the merger agreement have been registered under the Securities Act of 1933 and, except for those restricted shares that will not experience accelerated vesting
in the merger, may be freely traded without restriction by holders, including holders who were affiliates of Cardinal on the date of the special meeting (except for such holders who become affiliates of United Bankshares as of the effective time of
the merger via their appointment to the board of directors of United Bankshares or otherwise). All directors and executive officers of Cardinal are considered affiliates of Cardinal for this purpose.
Litigation Relating to the Merger
On December 20, 2016, Henry Kwong, individually and purportedly on behalf of all other Cardinal shareholders, filed a putative class action complaint in the U.S. District Court for the Eastern District of
Virginia, Alexandria Division (Case No. 1:16-cv-01582-TSE-MSN), challenging the merger. On January 11, 2017, a separate putative class action complaint was filed by Kyle Miller, individually and purportedly on behalf of all other Cardinal
shareholders, in the same court (Case No. 1:17-cv-00044-TSE-MSN). By Order dated January 27, 2017, these actions were consolidated for all purposes and merged. The plaintiffs generally claim that Cardinal and the Cardinal directors and United
Bankshares violated federal securities laws by filing with the SEC a materially false and misleading prospectus and joint proxy statement. Mr. Miller also alleges in his complaint that the Cardinal directors breached their fiduciary duties by
failing to disclose to the Cardinal shareholders all material information necessary to make an informed decision when voting on the transaction. The complaints seek, among other things, an order enjoining United Bankshares and the Cardinal
Defendants from proceeding with or consummating the merger, as well as other equitable relief or money damages in the event that the transaction is completed. United Bankshares and Cardinal believe that the claims are without merit and intend to
defend vigorously against the allegations in the complaints.
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MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
General
The following discussion and legal conclusions contained herein constitute and represent the opinion of Bowles Rice LLP, counsel to United Bankshares, and LeClairRyan, A Professional Corporation, counsel
to Cardinal, as to the material U.S. federal income tax consequences of the merger to U.S. holders of Cardinal common stock who exchange such stock for shares of United Bankshares common stock pursuant to the merger. This discussion is
based upon the Code, existing and proposed Treasury Regulations, administrative pronouncements and judicial decisions, all as currently in effect as of the date hereof, and all of which are subject to change, possibly with retroactive effect. Such a
change could affect the continuing validity of this summary. No assurance can be given that the Internal Revenue Service, or the IRS, would not assert, or that a court would not sustain, a position contrary to any of the tax consequences set forth
below.
For purposes of this summary, a U.S. holder is a beneficial owner of Cardinal common stock that for U.S.
federal income tax purposes is: (1) a citizen or resident of the United States; (2) a corporation, or an entity treated as a corporation, created or organized in or under the laws of the United States or any state or political subdivision
thereof; (3) a trust (A) if (i) the administration thereof is subject to the primary supervision of a court within the United States, and (ii) one or more United States persons have the authority to control all substantial
decisions of such trust or (B) that has a valid election in effect under applicable Treasury Regulations to be treated as a United States person; or (4) an estate that is subject to U.S. federal income tax on its income regardless of the
source.
If a partnership (including for this purpose any entity treated as a partnership for U.S. federal income tax
purposes) holds Cardinal common stock, the tax treatment of a partner generally will depend on the status of the partner and the activities of the partnership. If you are a partner of a partnership holding Cardinal common stock, you should consult
your tax advisor.
The following summary addresses only those U.S. Holders that hold their Cardinal common stock as a capital
asset within the meaning of Section 1221 of the Code. It does not address all the tax consequences that may be relevant to particular shareholders in light of their individual circumstances or to shareholders that are subject to special rules,
including, without limitation: financial institutions; tax-exempt organizations; S corporations, partnerships or other pass-through entities (or an investor in an S corporation, partnership or other pass-through entity); insurance companies;
mutual funds; dealers in stocks or securities, or foreign currencies; non-U.S. holders; a trader in securities who elects the mark-to-market method of accounting for the securities; persons that hold shares as a hedge against currency risk, a
straddle or a constructive sale or conversion transaction; holders who acquired their shares pursuant to the exercise of employee stock options or otherwise as compensation or through a tax-qualified retirement plan; and holders of Cardinal stock
options, stock warrants or debt instruments. In addition, the discussion does not address any alternative minimum tax or any state, local or foreign tax consequences of the merger, nor does it address any tax consequences arising under the unearned
income Medicare contribution tax pursuant to the Health Care and Education Reconciliation Act of 2010.
The
Merger
Cardinal and United Bankshares have structured the merger to qualify as a reorganization within the meaning of
Section 368(a) of the Code. Consummation of the merger is conditioned upon United Bankshares receiving an opinion from Bowles Rice LLP and upon Cardinal receiving an opinion from LeClairRyan, A Professional Corporation, both to the effect that,
based upon facts, representations and assumptions set forth in such opinions, the merger constitutes a reorganization within the meaning of Section 368(a) of the Code. The issuance of the opinions is conditioned on, among other things, such tax
counsels receipt of representation letters from each of Cardinal or United Bankshares, in each case in form and substance reasonably satisfactory to such
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counsel, and on customary factual assumptions. Neither of these opinions of counsel is binding on the IRS or the courts and no ruling has been, or will be, sought from the IRS as to the U.S.
federal income tax consequences of the merger. Accordingly, each Cardinal shareholder should consult its own tax advisor with respect to the particular tax consequences of the merger to such holder.
Consequences to Cardinal and United Bankshares
Each of Cardinal and United Bankshares will be a party to the merger within the meaning of Section 368(b) of the Code, and neither Cardinal nor United Bankshares will recognize any gain or loss as a
result of the merger.
Consequences to Shareholders
Exchange of Cardinal Common Stock for United Bankshares Common Stock.
U.S. holders of Cardinal common stock that exchange all of
their Cardinal common stock solely for United Bankshares common stock will not recognize income, gain or loss for U.S. federal income tax purposes, except, as discussed below, with respect to cash received in lieu of fractional shares of United
Bankshares common stock.
Cash in Lieu of Fractional Shares.
U.S. holders of Cardinal common stock that receive cash in
lieu of fractional shares of United Bankshares common stock in the merger generally will be treated as if the fractional shares of United Bankshares common stock had been distributed to them as part of the merger, and then redeemed by United
Bankshares in exchange for the cash actually distributed in lieu of the fractional shares, with the redemption generally qualifying as an exchange under Section 302 of the Code. Consequently, those holders generally will recognize
capital gain or loss with respect to the cash payments they receive in lieu of fractional shares measured by the difference between the amount of cash received and the tax basis allocated to the fractional shares, and will be long-term capital gain
or loss if, as of the effective date of the merger, the holding period of such shares is greater than one year. The deductibility of capital losses is subject to limitations.
Basis in United Bankshares Common Stock.
Each U.S. holders aggregate tax basis in United Bankshares common stock received in the merger will be equal to the U.S. holders aggregate
adjusted tax basis in the Cardinal common stock exchanged in the merger, decreased by the amount of any tax basis allocable to any fractional share interest for which cash is received (described above). The holding period of United Bankshares common
stock received by a U.S. holder in the merger will include the holding period of the Cardinal common stock exchanged in the merger if the Cardinal common stock exchanged is held as a capital asset at the time of the merger. If a U.S. holder acquired
different blocks of Cardinal common stock at different times or at different prices, the United Bankshares common stock such holder receives will be allocated pro rata to each block of Cardinal common stock, and the basis and holding period of each
block of United Bankshares common stock such holder receives will be determined on a block-for-block basis depending on the basis and holding period of the blocks of Cardinal common stock exchanged for such block of United Bankshares common stock.
Backup Withholding and Reporting Requirements
U.S. holders of Cardinal common stock, other than certain exempt recipients, may be subject to backup withholding at a rate of 28% with
respect to any cash payment received in the merger in lieu of fractional shares. However, backup withholding will not apply to any U.S. holder that either (a) furnishes to United Bankshares a correct taxpayer identification number and certifies
that it is not subject to backup withholding and United Bankshares and its exchange agent have not received notice to the contrary or (b) otherwise proves to United Bankshares and its exchange agent that the U.S. holder is exempt from backup
withholding.
In addition, U.S. holders of Cardinal common stock are required to retain permanent records and make such
records available to any authorized IRS officers and employees. The records should include the number of shares of Cardinal stock exchanged, the number of shares of United Bankshares stock received, the fair market value and tax basis of Cardinal
shares exchanged and the U.S. holders tax basis in the United Bankshares common stock received.
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If a U.S. holder of Cardinal common stock that exchanges such stock for United Bankshares
common stock is a significant holder with respect to Cardinal, the U.S. holder is required to include a statement with respect to the exchange on or with the federal income tax return of the U.S. holder for the year of the exchange. A
U.S. holder of Cardinal common stock will be treated as a significant holder in Cardinal if the U.S. holders ownership interest in Cardinal is five percent (5%) or more of Cardinals issued and outstanding common stock or if the U.S.
holders basis in the shares of Cardinal stock exchanged is one million dollars ($1,000,000) or more. The statement must be prepared in accordance with Treasury Regulation Section 1.368-3 and must be entitled STATEMENT PURSUANT TO
§1.368-3 BY [INSERT NAME AND TAXPAYER IDENTIFICATION NUMBER (IF ANY) OF TAXPAYER], A SIGNIFICANT HOLDER. The statement must include the names and employer identification numbers of Cardinal and United Bankshares, the date of the merger,
and the fair market value and tax basis of Cardinal shares exchanged (determined immediately before the merger).
The
discussion of material U.S. federal income tax consequences set forth above does not purport to be a complete analysis or listing of all potential tax effects that may apply to a holder of Cardinal common stock. We strongly encourage shareholders of
Cardinal to consult their tax advisors to determine the particular tax consequences to them of the merger, including the application and effect of federal, state, local, foreign and other tax laws.
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INFORMATION ABOUT UNITED BANKSHARES AND CARDINAL
United Bankshares
United Bankshares is a West Virginia corporation registered as a bank holding company pursuant to the BHCA. United Bankshares was incorporated on March 26, 1982, organized on September 9, 1982,
and began conducting business on May 1, 1984 with the acquisition of three wholly-owned subsidiaries. Since its formation in 1982, United Bankshares has acquired twenty-nine banking institutions. United Bankshares has two banking subsidiaries
doing business under the name of United Bank, one operating under the laws of Virginia referred to as United Bank and the other operating under the laws of West Virginia referred to as UBI. United Bankshares banking subsidiaries
offer a full range of commercial and retail banking services and products. United Bankshares also owns nonbank subsidiaries that engage in other community banking services such as asset management, real property title insurance, investment banking,
financial planning and brokerage services.
As a bank holding company registered under the BHCA, United Bankshares
present business is community banking. As of September 30, 2016, United Bankshares consolidated assets approximated $14.34 billion and total shareholders equity approximated $2.03 billion. At September 30, 2016, United
Bankshares loan portfolio, net of unearned income, was $10.44 billion and its deposits were $10.58 billion.
The
principal executive offices of United Bankshares are located in Charleston, West Virginia at 300 United Centre, 500 Virginia Street, East. The telephone number for United Bankshares principal executive offices is (304) 424-8800. United
Bankshares operates 128 full service offices 73 located throughout the Shenandoah Valley region of Virginia and the Northern Virginia, Maryland and Washington, D.C. metropolitan areas, 50 throughout West Virginia, 4 in southwestern
Pennsylvania and 1 in southeastern Ohio.
For more information regarding United Bankshares, please see United Bankshares
Annual Report on Form 10-K for the year ended December 31, 2015, its quarterly report on Form 10-Q for the quarter ended September 30, 2016 and its proxy statement for its 2016 Annual Meeting of shareholders, each of which are incorporated
into this prospectus and joint proxy statement by reference.
United Bank
United Bank is a Virginia banking corporation that was incorporated on June 5, 1984. United Bank offers a full range of commercial
and retail banking services and products.
United Banks present business is community banking. As of September 30,
2016, United Banks consolidated assets approximated $8.87 billion and total shareholders equity approximated $1.64 billion. At September 30, 2016, United Banks loan portfolio, net of unearned income, was $5.44 billion and its
deposits were $5.98 billion.
The headquarters and executive officers of United Bank are located at 11185 Fairfax Boulevard,
Fairfax, VA 22030. United Bank operates 71 full service offices throughout the Shenandoah Valley Region of Virginia and the Northern Virginia, Maryland and Washington, D.C. areas.
For more information regarding United Bank, please see United Bankshares Annual Report on Form 10-K for the year ended
December 31, 2015, its quarterly report on Form 10-Q for the quarter ended September 30, 2016 and its proxy statement for its 2016 Annual Meeting of shareholders, each of which are incorporated into this prospectus and joint proxy
statement by reference.
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Cardinal
Cardinal Financial Corporation, a financial holding company, was organized on December 10, 1997 as a Virginia corporation. Cardinals
activities consist of investment in its wholly-owned subsidiaries. The principal operating subsidiary of Cardinal is Cardinal Bank, a Virginia state-chartered bank with 29 banking offices located in Northern Virginia, Maryland and the greater
Washington, D.C. metropolitan area, and its subsidiary George Mason Mortgage, LLC, a mortgage banking company based in Fairfax, Virginia. In addition to Cardinal Bank, Cardinal has one nonbank subsidiary, Cardinal Wealth Services, Inc., a wealth
management services subsidiary.
As of September 30, 2016, Cardinals consolidated assets approximated $4.22 billion and
total shareholders equity approximated $451.8 million. At September 30, 2016, Cardinals loan receivable portfolio, net of allowances for loan losses was approximately $3.20 billion and its deposits totaled approximately $3.22 billion.
Cardinals and Cardinal Banks executive offices and main branch are located at 8270 Greensboro Drive, Suite 500,
McLean, Virginia 22102, and its telephone number is (703) 584-3400. Cardinal Bank currently has 28 additional full service branch offices throughout Northern Virginia, Maryland and the greater Washington, D.C. metropolitan area, an investment
services office in Vienna, Virginia and 16 residential mortgage lending offices in Virginia, Maryland and the District of Columbia.
For more information regarding Cardinal, please see Cardinals Annual Report on Form 10-K for the year ended December 31, 2015, its quarterly report on Form 10-Q for the quarter ended September 30,
2016, and its proxy statement for its 2016 Annual Meeting of Shareholders, all of which are incorporated into this prospectus and joint proxy statement by reference.
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DESCRIPTION OF UNITED BANKSHARES CAPITAL STOCK
General
The authorized capital stock of United Bankshares consists of 100,000,000 shares of common stock, par value $2.50 per share, and 50,000,000 shares of preferred stock, par value of $1.00 per share. United
Bankshares has 81,045,385 shares of common stock issued (including 28,274 shares held as treasury shares) and no shares of preferred stock issued, each as of February 1, 2017. The outstanding shares are held by approximately 6,577 shareholders of
record, as well as 61,603 shareholders in street name as of February 1, 2017. All outstanding shares of United Bankshares common stock are fully paid and nonassessable. The unissued portion of United Bankshares authorized common stock (subject
to registration approval by the SEC) and the treasury shares are available for issuance as the board of directors of United Bankshares determines advisable.
On May 18, 2016, United Bankshares shareholders approved the 2016 Long-Term Incentive Plan, or the 2016 LTI Plan. The 2016 LTI Plan became effective as of May 18, 2016. An award granted under the
2016 LTI Plan may consist of any non-qualified stock options or incentive stock options, stock appreciation rights, or SARs, restricted stock, restricted stock units, performance units or other-stock-based award. These awards all relate to the
common stock of United Bankshares. The maximum number of shares of United Bankshares common stock which may be issued under the 2016 LTI Plan is 1,700,000. The 2016 LTI Plan will be administered by a board committee appointed by the United
Bankshares board of directors. Unless otherwise determined by the United Bankshares board of directors, the Compensation Committee of the Board, or the Compensation Committee, shall administer the 2016 LTI Plan. Any and all shares may be issued in
respect of any of the types of Awards, provided that (1) the aggregate number of shares that may be issued in respect of restricted stock awards, and restricted stock unit awards which are settled in shares is 500,000, and (2) the aggregate number
of shares that may be issued pursuant to stock options is 1,200,000. The shares to be offered under the 2016 LTI Plan may be authorized and unissued shares or treasury shares. The maximum number of options and SARs, in the aggregate, which may be
awarded to any individual key employee during any calendar year is 100,000. The maximum number of stock options and SARs, in the aggregate, which may be awarded to any non-employee director during any calendar year is 10,000. The maximum number
of shares of restricted stock or shares subject to a restricted stock units award that may be granted during any calendar year is 50,000 shares to any individual key employee and 5,000 shares to any individual non-employee director. Subject to
certain change in control provisions, the 2016 LTI Plan provides that awards of restricted stock and restricted stock units will vest as the Compensation Committee determines in the award agreement, provided that no awards will vest sooner than 1/3
per year over the first three anniversaries of the award. Awards granted to executive officers of United typically will have performance based vesting conditions. A Form S-8 was filed on July 29, 2016 with the Securities and Exchange Commission to
register all the shares which were available for the 2016 LTI Plan.
The 2016 LTI Plan replaces the 2011 Long-Term Incentive
Plan, or the 2011 LTI Plan, which expired during the second quarter of 2016. A total of 967,285 stock options and 289,637 restricted shares of common stock were granted under the 2011 LTI Plan. Compensation expense of $720 and $2,050
related to the nonvested awards under the 2011 LTI Plan and the 2006 Stock Option Plan was incurred for the third quarter and first nine months of 2016, respectively, as compared to the compensation expense of $756 and $2,144 related to the
nonvested awards under the 2006 Stock Option Plan incurred for the third quarter and first nine months of 2015, respectively.
United Bankshares currently has options outstanding from various option plans other than the 2016 LTI Plan, or the Prior Plans; however,
no shares of United Bankshares common stock are available for grants under the Prior Plans as these plans have expired. Awards outstanding under the Prior Plans will remain in effect in accordance with their respective terms. The maximum term for
options granted under the plans is ten years. As of September 30, 2016, the number of shares of United Bankshares common stock underlying option awards issued under Prior Plans that remain in effect are 1,683,477 shares.
126
In May 2006, the United Bankshares board of directors approved a stock repurchase plan,
whereby United Bankshares could buy up to 1,700,000 shares of its common stock in the open market. As of September 30, 2016, United Bankshares had repurchased 1,377,800 shares under the repurchase plan.
Common Stock
Voting Rights
. United Bankshares has only one class of stock issued and outstanding and all voting rights are vested in the holders of United Bankshares common stock. On all matters subject to a
vote of shareholders, the shareholders of United Bankshares will be entitled to one vote for each share of common stock owned. United Bankshares does not have a classified board of directors. Shareholders of United Bankshares have cumulative voting
rights with regard to election of directors. At the present time, no senior securities of United Bankshares are outstanding, nor does the board of directors presently contemplate issuing senior securities.
Dividend Rights
. The shareholders of United Bankshares are entitled to receive dividends when and as declared by its board of
directors. Dividends have been paid quarterly. Dividends were $0.99 for the first nine months of 2016, $1.29 per share in 2015, $1.28 per share in 2014 and $1.25 per share in 2013. The payment of dividends is subject to the restrictions set forth in
the West Virginia Business Corporation Act and the limitations imposed by the Federal Reserve.
Payment of dividends by United
Bankshares is dependent upon receipt of dividends from its banking subsidiaries. Payment of dividends by United Bankshares state member banking subsidiaries is regulated by the West Virginia Business Corporation Act and the limitations imposed
by the Federal Reserve and generally, the prior approval of the Federal Reserve is required if the total dividends declared by a state member bank in any calendar year exceeds its net profits, as defined, for that year combined with its retained net
profits for the preceding two years. Additionally, prior approval of the Federal Reserve is required when a state member bank has deficit retained earnings but has sufficient current years net income, as defined, plus the retained net profits
of the two preceding years. The Federal Reserve may prohibit dividends if it deems the payment to be an unsafe or unsound banking practice. The Federal Reserve has issued guidelines for dividend payments by state member banks emphasizing that proper
dividend size depends on the banks earnings and capital.
Liquidation Rights
. Upon any liquidation, dissolution
or winding up of its affairs, the holders of United Bankshares common stock are entitled to receive pro rata all of the assets of United Bankshares for distribution to shareholders. There are no redemption or sinking fund provisions applicable to
the common stock.
Assessment and Redemption
. Shares of United Bankshares common stock presently outstanding are
validly issued, fully paid and nonassessable. There is no provision for any voluntary redemption of United Bankshares common stock.
Transfer Agent and Registrar
. The transfer agent and registrar for United Bankshares common stock is Computershare Limited.
Preferred Stock
On December 23, 2008, the
shareholders of United Bankshares authorized the issuance of preferred stock up to 50,000,000 shares with a par value of $1.00 per share. The authorized preferred stock may be issued by the United Bankshares board of directors in one or more series,
from time to time, with each such series to consist of such number of shares and to have such voting powers, full or limited, or no voting powers, and such designations, preferences and relative, participating, optional or other special rights, and
the qualifications, limitations or restrictions thereof, as shall be stated in the resolution or resolutions providing for the issuance of such series adopted by the United Bankshares board of directors. Currently, no shares of preferred stock have
been issued.
127
The authorization of preferred stock will not have an immediate effect on the holders of
United Bankshares common stock. The actual effect of the issuance of any shares of preferred stock upon the rights of the holders of common stock cannot be stated until the United Bankshares board of directors determines the specific rights of any
shares of preferred stock. However, the effects might include, among other things, restricting dividends on common stock, diluting the voting power of common stock, reducing the market price of common stock or impairing the liquidation rights of the
common stock without further action by the shareholders. Holders of the common stock will not have preemptive rights with respect to the preferred stock.
Preemptive Rights
No holder of any share of the
capital stock of United Bankshares has any preemptive right to subscribe to an additional issue of its capital stock or to any security convertible into such stock.
Certain Provisions of the Bylaws
Indemnification and
Limitations on Liability of Officers and Directors
As permitted by the West Virginia Business Corporation Act, the United
Bankshares articles of incorporation contain provisions that indemnify its directors and officers to the fullest extent permitted by West Virginia law. These provisions do not limit or eliminate the rights of United Bankshares or any shareholder to
seek an injunction or any other non-monetary relief in the event of a breach of a directors or officers fiduciary duty. In addition, these provisions apply only to claims against a director or officer arising out of his or her role as a
director or officer and do not relieve a director or officer from liability if he or she engaged in willful misconduct or a knowing violation of the criminal law or any federal or state securities law.
In addition, the United Bankshares articles of incorporation provide for the indemnification of both directors and officers for expenses
that they incur in connection with the defense or settlement of claims asserted against them in their capacities as directors and officers. This right of indemnification extends to judgments or penalties assessed against them. United Bankshares has
limited its exposure to liability for indemnification of directors and officers by purchasing directors and officers liability insurance coverage.
The rights of indemnification provided in the United Bankshares articles of incorporation are not exclusive of any other rights that may be available under any insurance or other agreement, by vote of
shareholders or disinterested directors or otherwise.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers or persons controlling United Bankshares pursuant to the foregoing provisions, United Bankshares has been informed that in the opinion of the SEC such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable.
Shares Eligible for Future Sale
All of the shares that will be exchanged for shares of United Bankshares common stock upon consummation of the merger will be freely
tradable without restriction or registration under the Securities Act.
United Bankshares cannot predict the effect, if any,
that future sales of shares of its common stock, or the availability of shares for future sales, will have on the market price prevailing from time to time. Sales of substantial amounts of shares of United Bankshares common stock, or the perception
that such sales could occur, could adversely affect the prevailing market price of the shares.
128
COMPARATIVE RIGHTS OF SHAREHOLDERS
The rights of United Bankshares shareholders are governed by the West Virginia Business Corporation Act. The rights of Cardinal
shareholders are governed by the Virginia Stock Corporation Act. The rights of shareholders under both corporations are also governed by their respective articles of incorporation and bylaws. Following the merger, the rights of Cardinal shareholders
that receive United Bankshares common stock will be governed by the articles and bylaws of United Bankshares. This summary does not purport to be a complete discussion of, and is qualified in its entirety by reference to, Cardinals articles of
incorporation and bylaws, United Bankshares articles of incorporation and bylaws, Virginia law and West Virginia law.
Authorized Capital Stock
United Bankshares
100,000,000 shares of common stock, $2.50 par value per share and 50,000,000 shares of preferred stock, $1.00 par value per share.
Cardinal
50,000,000 shares of common stock, $1.00 par value per share and 1,000,000 shares of preferred stock, $1.00 par value per share.
Preemptive Rights
United Bankshares
The United Bankshares articles of incorporation provide that shareholders do not have preemptive rights to purchase, subscribe for, or take any part of any stock, whether unissued or treasury shares, or
any part of the notes, debentures, bonds or other securities issued, optioned or sold by United Bankshares.
Cardinal
The articles of incorporation of Cardinal provide that shareholders do not have preemptive rights to subscribe to or purchase any shares of any class of stock of Cardinal, any securities or obligations of
Cardinal convertible into stock of Cardinal, or any options, warrants or rights to purchase any such shares or securities of Cardinal.
Size of Board of
Directors
United Bankshares
United Bankshares bylaws provide that the board of directors shall consist of at least 5 and no more than 35 directors, provided that the number may be increased or decreased from time to time by an
amendment to the bylaws, but no decrease shall have the effect of shortening the term of any incumbent director. The United Bankshares board of directors currently consists of 11 individuals, and immediately following the merger will consist of 12
individuals, all of whom are elected annually.
Cardinal
Cardinals bylaws provide that the board of directors shall be fixed at 11 directors.
129
Cumulative Voting for Directors
Cumulative voting entitles each shareholder to cast an aggregate number of votes equal to the number of voting shares held, multiplied by
the number of directors to be elected. Each shareholder may cast all of his or her votes for one nominee or distribute them among two or more nominees, thus permitting holders of less than a majority of the outstanding shares of voting stock to
achieve board representation. Where cumulative voting is not permitted, holders of all outstanding shares of voting stock of a corporation elect the entire board of directors of the corporation.
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|
|
United Bankshares
|
|
Cardinal
|
|
|
United Bankshares shareholders are allowed to cumulate their votes in the election of directors. Each share of United Bankshares stock may be voted for as many individuals as there
are directors to be elected. Directors are elected by a plurality of the votes cast by the holders entitled to vote at the meeting.
|
|
Cardinal shareholders are not allowed to cumulate their votes in the election of directors. Directors are elected by a plurality of the votes cast by the holders entitled to vote at
the meeting.
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Classes of Directors
|
|
|
United Bankshares
|
|
Cardinal
|
|
|
United Bankshares only has one class of directors.
|
|
Cardinal has three classes of directors, with directors serving staggered three-year terms.
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Qualifications of Directors
|
|
|
United Bankshares
|
|
Cardinal
|
|
|
United Bankshares has retirement provisions based on age and minimum requirements for stock ownership for outside directors in its Corporate Governance Policy.
|
|
Cardinals bylaws state that, except for individuals who were on the board of directors on April 24, 2004 or as waived by the board of directors, no person 70 years of age or
older is eligible to stand for election to the board of directors.
|
Filling Vacancies on the Board
|
|
|
United Bankshares
|
|
Cardinal
|
|
|
United Bankshares bylaws provide that each vacancy existing on the board of directors and any directorship to be filled by reason of an increase in the number of directors,
unless the articles of incorporation or bylaws provide that a vacancy shall be filled in some other manner, may be filled by the affirmative vote of a majority of the remaining directors at an annual, regular or special meeting of the board of
directors. Any directorship to be filled by the board of directors by reason of a vacancy or an increase in the number of directors may be filled for a term of office continuing only until the next election of directors by the
shareholders.
|
|
Cardinals articles of incorporation and bylaws provide that when any vacancy occurs among the directors due to an increase in the number of directorships by not more than two,
or death, resignation, retirement, disqualification, removal from office, or other cause, the vacancy will be filled by the affirmative vote of a majority of the directors remaining in office, whether or not a quorum. Any directorship to be filled
by the board of directors will be filled for a term of office continuing for the term of the director for whom such director has been chosen to succeed or, if none, until the expiration of the term of the class assigned to the additional
directorship so created.
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130
Removal of Directors
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|
|
United Bankshares
|
|
Cardinal
|
|
|
Under West Virginia law any member of the board may be removed, with or without cause, by the affirmative vote of a majority of all the votes entitled to be cast for the election of
directors; provided, however, that a director may not be removed if the number of votes sufficient to elect the director under cumulative voting is voted against the directors removal.
|
|
Cardinals articles of incorporation provide that any member or the entire board of directors may be removed at any time, but only
for cause, by the affirmative vote of the holders of more than two-thirds of each class of voting stock of Cardinal at a special meeting called for such purpose.
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
OF
UNITED BANKSHARES
The following table sets forth certain information as of February 1, 2017, concerning the number and percentage of shares of United Bankshares common stock beneficially owned by each of United
Bankshares directors and named executive officers and by United Bankshares directors and executive officers as a group. In addition, the table includes information with respect to persons known to United Bankshares who own or may be
deemed to own more than 5% of United Bankshares common stock as of February 1, 2017. Beneficial ownership includes shares, if any, held in the name of the spouse, minor children or other relatives of the individual living in such persons home,
as well as shares, if any, held in the name of another person under an arrangement whereby the director, or executive officer can vest title in himself or herself at once or at some future time. Except as otherwise indicated, all shares are owned
directly, the named person possesses sole voting and sole investment power with respect to all such shares, and none of such shares are pledged as security.
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|
|
|
|
|
|
|
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|
Number of
Shares
Beneficially
Owned
(1)
|
|
|
Percentage
of Class
Beneficially
Owned
|
|
5% Shareholders:
|
|
|
|
|
|
|
|
|
BlackRock, Inc.
55 East 52
nd
Street, New York, NY 10055
|
|
|
12,143,669
|
(2)
|
|
|
14.98
|
%
|
The Vanguard Group
100 Vanguard Blvd., Malvern, PA 19355
|
|
|
6,791,277
|
(3)
|
|
|
8.38
|
%
|
State Street Corporation
One Lincoln Street, Boston, MA 02111
|
|
|
6,113,493
|
(4)
|
|
|
7.54
|
%
|
|
|
|
Directors:
|
|
|
|
|
|
|
|
|
Richard M. Adams
|
|
|
915,715
|
|
|
|
1.13
|
%
|
Robert G. Astorg
|
|
|
40,964
|
|
|
|
*
|
|
Peter A. Converse
|
|
|
601,361
|
|
|
|
*
|
|
Lawrence K. Doll
|
|
|
14,747
|
|
|
|
*
|
|
Michael P. Fitzgerald
|
|
|
266,481
|
|
|
|
*
|
|
Theodore J. Georgelas
|
|
|
47,379
|
|
|
|
*
|
|
J. Paul McNamara
|
|
|
68,674
|
|
|
|
*
|
|
Mark R. Nesselroad
|
|
|
76,182
|
|
|
|
*
|
|
Mary K. Weddle
|
|
|
8,787
|
|
|
|
*
|
|
Gary G. White
|
|
|
18,903
|
|
|
|
*
|
|
P. Clinton Winter, Jr.
|
|
|
505,292
|
|
|
|
*
|
|
|
|
|
Named Executive Officers:
|
|
|
|
|
|
|
|
|
Richard M. Adams, Chief Executive Officer
|
|
|
915,715
|
|
|
|
1.13
|
%
|
Richard M. Adams, Jr.
|
|
|
139,840
|
|
|
|
0.17
|
%
|
Craige L. Smith
|
|
|
63,673
|
|
|
|
0.08
|
%
|
James J. Consagra, Jr.
|
|
|
112,063
|
|
|
|
0.14
|
%
|
W. Mark Tatterson
|
|
|
57,463
|
|
|
|
0.07
|
%
|
|
|
|
Directors and Executive Officers as a group (17 persons):
|
|
|
4,668,003
|
|
|
|
5.72
|
%
|
*
|
Indicates the director owns less than 1% of United Bankshares issued and outstanding shares.
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(1)
|
Includes stock held by United Banks (WV) Trust Department which shares beneficial ownership as described in this footnote. The following directors each exercise
voting authority over the number of shares indicated as follows: Ms. Weddle, 7,787 shares and Mr. Winter, 16,877 shares. United Banks (WV) Board of Directors exercises voting authority over 1,796,201 shares held by United Banks (WV)
Trust
|
|
Department. All of these shares are included in the 4,668,003 shares held by all directors and executive
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136
|
officers as a group. Also includes shares pledged as collateral as follows: Mr. Astorg, 19,400 shares; Mr. Converse, 190,000 shares; Mr. Georgelas, 43,528 shares; and Mr. Winter, 112,412 shares.
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(2)
|
BlackRock, Inc. (BlackRock) is a global investment management firm that serves institutional and retail clients, including pension funds, foundations, endowments,
official institutions, insurance companies, subadvisory relationships, high net worth individuals, family offices and private banks. BlackRock beneficially owns 12,143,669 or 14.98% of Uniteds common stock. BlackRock holds sole dispositive
authority for the 12,143,669 shares and sole voting authority over 11,988,528 shares. BlackRocks address and holdings are based solely on a Schedule 13G filing with the Securities and Exchange Commission dated January 11, 2017 made by
BlackRock setting forth information as of December 31, 2016. The Percentage of Class Beneficially owned is based on United Bankshares outstanding shares as of February 1, 2017.
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(3)
|
The Vanguard Group (Vanguard) is one of the worlds largest investment management companies, serving individual investors, institutions, employer-sponsored
retirement plans, and financial professionals. Vanguard beneficially owns 6,791,277 or 8.38% of Uniteds common stock. Of these beneficially-owned shares, Vanguard holds sole voting authority over 84,401 shares, shared voting authority over
6,904 shares, sole dispositive authority over 6,703,910 shares, and shared dispositive authority over 87,367 shares. Vanguards address and holdings are based solely on a Schedule 13G filing with the Securities and Exchange Commission dated
February 9, 2017 made by Vanguard setting forth information as of December 31, 2016. The Percentage of Class Beneficially owned is based on United Bankshares outstanding shares as of February 1, 2017.
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(4)
|
State Street Corporation (State Street) is a global financial services provider that offers a flexible suite of services that spans the investment spectrum, including
investment management, research and trading, and investment servicing. State Street beneficially owns 6,113,493 or 7.54% of Uniteds common stock. State Street holds shared voting and dispositive authority for these shares. State Streets
address and holdings are based solely on a Schedule 13G filing with the Securities and Exchange Commission dated February 6, 2017 made by State Street setting forth information as of December 31, 2016. The Percentage of Class Beneficially owned is
based on United Bankshares outstanding shares as of February 1, 2017.
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137
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
OF CARDINAL
The following table sets forth certain information as of February 1, 2017, concerning the number and
percentage of shares of Cardinal common stock beneficially owned by each of Cardinals directors and named executive officers and by Cardinals directors and executive officers as a group. In addition, the table includes information with
respect to persons known to Cardinal who own or may be deemed to own more than 5% of Cardinal common stock. Beneficial ownership includes shares, if any, held in the name of the spouse, minor children or other relatives of the individual living in
such persons home, as well as shares, if any, held in the name of another person under an arrangement whereby the director, or executive officer can vest title in himself or herself at once or at some future time. Except as otherwise
indicated, the named person possesses sole voting and sole investment power with respect to all such shares, and none of such shares are pledged as security.
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|
|
|
|
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|
|
|
|
|
|
|
Name
(1)
|
|
Common
Stock
Beneficially
Owned
(2)
(3)
|
|
|
Exercisable Options
Included in
Common Stock
Beneficially Owned
(4)
|
|
|
Percentage
of
Class
(5)
|
|
B. G. Beck
|
|
|
165,644
|
|
|
|
26,350
|
|
|
|
*
|
|
William G. Buck
|
|
|
211,250
|
|
|
|
10,000
|
|
|
|
*
|
|
Bernard H. Clineburg
|
|
|
370,629
|
|
|
|
20,003
|
|
|
|
1.12
|
%
|
Sidney O. Dewberry
|
|
|
179,950
|
|
|
|
26,350
|
|
|
|
*
|
|
Michael A. Garcia
|
|
|
80,418
|
|
|
|
26,350
|
|
|
|
*
|
|
J. Hamilton Lambert
|
|
|
123,839
|
|
|
|
10,000
|
|
|
|
*
|
|
Barbara B. Lang
|
|
|
17,724
|
|
|
|
15,000
|
|
|
|
*
|
|
William J. Nassetta
|
|
|
12,894
|
|
|
|
10,000
|
|
|
|
*
|
|
William E. Peterson
|
|
|
99,669
|
|
|
|
26,350
|
|
|
|
*
|
|
Alice M. Starr
|
|
|
102,730
|
|
|
|
26,350
|
|
|
|
*
|
|
Steven M. Wiltse
|
|
|
26,250
|
|
|
|
20,000
|
|
|
|
*
|
|
|
|
|
|
Named Executive Officers
|
|
|
|
|
|
|
|
|
|
|
|
|
Christopher W. Bergstrom
|
|
|
56,321
|
|
|
|
7,001
|
|
|
|
*
|
|
Alice P. Frazier
|
|
|
116,204
|
|
|
|
91,332
|
|
|
|
*
|
|
F. Kevin Reynolds
|
|
|
108,497
|
|
|
|
47,832
|
|
|
|
*
|
|
Mark A. Wendel
|
|
|
54,939
|
|
|
|
29,166
|
|
|
|
*
|
|
Current Directors and Executive Officers as a Group (15 persons)
|
|
|
1,726,958
|
|
|
|
392,084
|
|
|
|
5.16
|
%
|
*
|
Percentage of ownership is less than one percent of the outstanding shares of Cardinal common stock.
|
(1)
|
The business address of each named person is c/o Cardinal Financial Corporation, 8270 Greensboro Drive, Suite 500, McLean, Virginia 22102.
|
(2)
|
The number of shares of Cardinal common stock shown in the table includes 71,034 shares held for certain directors and executive officers in Cardinals 401(k) plan
as of February 1, 2017.
|
(3)
|
Certain of Cardinals directors and named executive officers participate in the companys deferred income plans. As of February 1, 2017, the number of shares
of Cardinal common stock deemed to be owned by certain directors and executive officers in such plans total 528,468 and is not included in this column. The number of estimated shares in the deferred income plans for each director and named executive
officer is as follows: Beck, 49,539 shares; Buck, 76,425 shares; Clineburg, 59,665 shares; Dewberry, 53,850 shares; Garcia, 66,131 shares; Lambert, 62,310 shares; Lang, 10,862 shares; Nassetta, 23,100 shares; Peterson, 18,534 shares; Starr, 44,090
shares; Wiltse, 21,365 shares; Bergstrom, 11,603 shares; Frazier, 11,697 shares; Reynolds, 12,241 shares; and Wendel, 7,056 shares. Amounts are solely estimates for presentation purposes, as shares of Cardinal common stock are only payable upon a
distribution from the deferral plans.
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(4)
|
The number of shares of Cardinal common stock shown in this column includes shares that Cardinal directors and executive officers have the right to acquire, or will
obtain the right to acquire, through the exercise of stock options within 60 days following February 1, 2017.
|
138
(5)
|
The number of Cardinal common shares outstanding used to calculate percentage of beneficial ownership as of February 1, 2017 was 33,072,769.
|
Security Ownership of Certain Beneficial Owners
The following table sets forth information regarding the number of shares of Cardinal common stock beneficially owned by all persons known by Cardinal who own five percent or more of its outstanding
shares of common stock.
|
|
|
|
|
|
|
Name
|
|
Address
|
|
Common Stock
Beneficially
Owned
|
|
Percentage of
Class
(1)
|
BlackRock, Inc.
(2)
|
|
55 East
52
nd
Street
New York, NY 10055
|
|
3,793,774
|
|
11.47%
|
Dimensional Fund Advisors LP
(3)
|
|
Building One
6300 Bee Cave
Road
Austin, Texas 78746
|
|
1,690,115
|
|
5.11%
|
(1)
|
The number of shares of Cardinal common stock outstanding used to calculate percentage of beneficial ownership as of February 1, 2017 is 33,072,769.
|
(2)
|
In a Schedule 13G/A filed with the Securities and Exchange Commission on January 12, 2017, BlackRock, Inc. reported beneficial ownership of 3,793,774
shares of Cardinal common stock, with sole voting power over 3,168,426 shares of Cardinal common stock and sole dispositive power with respect to 3,709,256 shares of Cardinal common stock, all as of December 31, 2016.
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(3)
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In a Schedule 13G filed with the Securities and Exchange Commission on February 9, 2017, Dimensional Fund Advisors LP reported beneficial ownership of 1,690,115 shares
of Cardinal common stock, with sole voting power over 1,592,051 shares of Cardinal common stock and sole dispositive power with respect to 1,690,115 shares of Cardinal common stock, all as of December 31, 2016.
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139
LEGAL MATTERS
LeClairRyan, A Professional Corporation, and Bowles Rice LLP will opine as to the qualification of the merger as a merger and the tax
treatment of the consideration paid in connection with the merger under the Code. Bowles Rice LLP will opine as to the legality of the common stock of United Bankshares offered by this prospectus and joint proxy statement.
EXPERTS
The consolidated financial statements of United Bankshares appearing in United Bankshares Annual Report (Form 10-K) for the year ended December 31, 2015, and the effectiveness of United
Bankshares internal control over financial reporting as of December 31, 2015, have been audited by Ernst & Young LLP, independent registered public accounting firm, as set forth in their reports thereon, included therein, and
incorporated herein by reference. Such consolidated financial statements and United Bankshares managements assessment of the effectiveness of internal controls over financial reporting as of December 31, 2015 are incorporated herein by
reference in reliance upon such reports given on the authority of such firm as experts in accounting and auditing.
The
consolidated financial statements of Cardinal appearing in Cardinals Annual Report on Form 10-K for the year ended December 31, 2015, and the effectiveness of Cardinals internal control over financial reporting as of
December 31, 2015 have been audited by KPMG LLP, independent registered public accounting firm, as set forth in their reports thereon, included therein, and incorporated herein by reference. Such consolidated financial statements and Cardinal
managements assessment of the effectiveness of internal controls over financial reporting as of December 31, 2015 are incorporated herein by reference in reliance upon such reports given on the authority of such firm as experts in
accounting and auditing.
The audit report on the effectiveness of internal control over financial reporting as of December
31, 2015, expresses an opinion that Cardinal did not maintain effective internal control over financial reporting as of December 31, 2015 because of the effect of a material weakness on the achievement of the objectives of the control criteria and
contains an explanatory paragraph that states that management identified deficiencies in the operating effectiveness of certain controls relating to the process of estimating the allowance for loan losses that in aggregate were determined to be a
material weakness.
CARDINAL ANNUAL MEETING SHAREHOLDER PROPOSALS
If the merger is completed, Cardinal will not have public shareholders and there will be no public participation in any future meeting of
shareholders. However, if the merger is not completed or if Cardinal is otherwise required to do so under applicable law, Cardinal will hold a 2017 annual meeting of shareholders. Any shareholder nominations or proposals for other business intended
to be presented at Cardinals next annual meeting must be submitted to Cardinal as set forth below.
Any shareholder
proposal intended for inclusion in Cardinals proxy statement and proxy card relating to its 2017 annual meeting of shareholders must have been submitted in writing to the Corporate Secretary of Cardinal at 8270 Greensboro Drive, Suite 500,
McLean Virginia 22102 no later than November 24, 2016, pursuant to the proxy solicitation regulations of the SEC. Nothing in this paragraph shall be deemed to require Cardinal to include in its proxy statement and proxy card for such meeting any
shareholder proposal that does not meet the requirements of the SEC in effect at the time. Any such proposal will be subject to Rule 14a-8 under the Securities Exchange Act of 1934, as amended.
Cardinals bylaws also prescribe the procedures that a shareholder must follow to nominate directors or to bring other business
before shareholders meetings. Under the bylaws, notice of a proposed nomination or a
140
shareholder proposal meeting certain specified requirements must be received by Cardinal not less than 60 nor more than 90 days prior to any meeting of shareholders called for the election of
directors, provided in each case that, if fewer than 70 days notice of the meeting is given to shareholders, such written notice shall be received not later than the close of the 10
th
day following the day on which notice of the meeting was mailed to shareholders. The date on which the 2017 annual
meeting of shareholders of Cardinal would be expected to be held is April 21, 2017. Accordingly, Cardinal must receive any notice of nomination or other business no later than February 20, 2017 and no earlier than January 21, 2017.
UNITED BANKSHARES ANNUAL MEETING SHAREHOLDER PROPOSALS
Presently, the next annual meeting of United Bankshares shareholders is scheduled for May 25, 2017. Under the SEC rules, any
shareholder proposals to be presented at the 2017 annual meeting must be received at the principal office of United Bankshares no later than December 5, 2016 for inclusion in the proxy statement and form of proxy relating to the 2017 annual
meeting of shareholders. If the scheduled date for the 2017 annual meeting of shareholders is changed by more than 30 days, shareholders will be informed of the new meeting date and the revised date by which shareholder proposals must be received.
We strongly encourage any shareholder interested in submitting a proposal to consult knowledgeable counsel with regard to the detailed requirements of applicable securities laws. Submitting a proposal does not guarantee that United Bankshares will
include it in its proxy statement.
In order to be considered for possible action by shareholders at the 2017 annual meeting,
shareholder proposals not included in United Bankshares proxy statement must be submitted to the principal office of United Bankshares by February 18, 2017, which is 45 calendar days before the one year anniversary of the date United
Bankshares released the previous years annual proxy statement to its shareholders. If notice is not provided by February 18, 2017, the proposal will be considered untimely and, if presented at the 2017 annual meeting, the persons named in
United Bankshares proxy for the 2017 annual meeting will be able to exercise discretionary authority to vote on any such proposal to the extent authorized by Rule 14a-4(c) under the Securities Exchange Act of 1934, as amended. All shareholder
proposals must comply with Rule 14a-8 under the Securities Exchange Act of 1934, as amended, as well as United Bankshares Restated Bylaws.
WHERE YOU CAN FIND MORE INFORMATION
United
Bankshares filed with the SEC under the Securities Act the registration statement on Form S-4 to register the shares of United Bankshares common stock to be issued to Cardinal shareholders in connection with the merger. The registration statement,
including the exhibits and schedules thereto, contains additional relevant information about United Bankshares and its common stock. The rules and regulations of the SEC allow United Bankshares to omit certain information included in the
registration statement from this prospectus and joint proxy statement. This prospectus and joint proxy statement is part of the registration statement and is a prospectus of United Bankshares in addition to being Cardinals and United
Bankshares prospectus and joint proxy statement for each of their special meetings.
Both United Bankshares (File No.
0-13322) and Cardinal (File No. 0-24557) file reports, proxy statements and other information with the SEC under the Securities Exchange Act of 1934. You may read and copy this information at the Public Reference Room of the SEC at 100 F Street,
N.E., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet web site that contains reports, proxy statements and other information
about issuers, like United Bankshares and Cardinal, that file electronically with the SEC. The address of that site is http://www.sec.gov. United Bankshares and Cardinal also post its SEC filings on its web site. The website addresses are
www.ubsi-wv.com and www.cardinalbank.com, respectively. Information contained on the United Bankshares website or the Cardinal website is not incorporated by reference into this prospectus and joint proxy
141
statement, and you should not consider information contained in its website as part of this prospectus and joint proxy statement. You can also inspect reports, proxy statements and other
information that United Bankshares and Cardinal have filed with the SEC at the National Association of Securities Dealers, Inc., 1735 K Street, Washington, D.C. 20096.
The SEC allows United Bankshares and Cardinal to incorporate by reference information into this prospectus and joint proxy statement. This means that we can disclose important information to
you by referring you to another document filed separately by United Bankshares and Cardinal with the SEC. The information incorporated by reference is considered to be a part of this prospectus and joint proxy statement, except for any information
that is superseded by information that is included directly in this prospectus and joint proxy statement.
This prospectus and
joint proxy statement incorporates by reference the documents listed below that United Bankshares has previously filed with the SEC:
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Annual Report on Form 10-K
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Year ended December 31, 2015.
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Quarterly Reports on Form 10-Q
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Filed on May 9, 2016, August 9, 2016 and November 9, 2016.
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Current Reports on Form 8-K
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Filed on April 27, 2016, May 24, 2016, June 6, 2016, August 18, 2016, October 31, 2016 and December 21, 2016.
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The description of United Bankshares common stock set forth in United Bankshares
registration statement on Form 8-A filed pursuant to Section 12 of the Exchange Act and any amendment or report filed for the purpose of updating those descriptions
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Filed on May 1, 1984.
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This prospectus and joint proxy statement incorporates by reference the documents listed below that
Cardinal has previously filed with the SEC:
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Annual Report on Form 10-K
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Year ended December 31, 2015.
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Quarterly Reports on Form 10-Q
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Filed on May 6, 2016, August 5, 2016 and November 7, 2016.
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Current Reports on Form 8-K
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Filed on January 26, 2016, February 11, 2016, April 4, 2016, May 2, 2016, July 21, 2016, August 18, 2016, August 30, 2016, October 20, 2016, December 22, 2016 and January 26,
2017.
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United Bankshares and Cardinal also incorporate by reference additional documents that may be filed under
Sections 13(a) and 15(d) of the Securities Exchange Act with the SEC between the date of this prospectus and joint proxy statement and the date of Cardinals and United Bankshares special meeting of shareholders or the termination of the
merger agreement. These include periodic reports such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.
142
You can obtain additional copies of the documents incorporated by reference in this
prospectus and joint proxy statement free of charge by requesting them in writing or by telephone from the following address:
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United Bankshares, Inc.
514 Market Street
Parkersburg, West Virginia 26102
Attention: Jennie Singer
Telephone: (304) 424-8800
Georgeson LLC
1290 Avenue of the Americas
9th Floor
New
York, New York 10104
Telephone: (800) 509-0984
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Cardinal Financial Corporation
8270 Greensboro Drive, Suite 500
McLean, Virginia 22207
Attention: Jennifer L. Deacon
Telephone: (703) 584-3400
InvestorCom, Inc.
65 Locust Avenue, Suite 302
New Canaan, Connecticut 06840
Telephone: (877) 972-0090
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If you would like to request any documents, please do so by Thursday, March 30, 2017, in order to
receive them before the shareholder meeting.
Neither United Bankshares nor Cardinal has authorized anyone to give any
information or make any representation about the merger or the companies that is different from, or in addition to, that contained in this prospectus and joint proxy statement or in any of the materials that we have incorporated into this prospectus
and joint proxy statement. Therefore, if anyone does give you information of this sort, you should not rely on it. Information in this prospectus and joint proxy statement about United Bankshares has been supplied by United Bankshares and
information about Cardinal has been supplied by Cardinal. The information contained in this prospectus and joint proxy statement speaks only as of the date of this prospectus and joint proxy statement unless the information specifically indicates
that another date applies.
The representations, warranties and covenants described in this document and included in the
merger agreement were made only for purposes of the merger agreement and as of specific dates, are solely for the benefit of United Bankshares and Cardinal, may be subject to limitations, qualifications or exceptions agreed upon by the parties,
including those included in confidential disclosures made for the purposes of, among other things, allocating contractual risk between United Bankshares and Cardinal rather than establishing matters as facts, and may be subject to standards of
materiality that differ from those standards relevant to investors. You should not rely on the representations, warranties or covenants or any description thereof as characterizations of the actual state of facts or condition of United Bankshares,
Cardinal or any of their respective subsidiaries or affiliates. Moreover, information concerning the subject matter of the representations, warranties and covenants may change after the date of the merger agreement, which subsequent information may
or may not be fully reflected in public disclosures by United Bankshares or Cardinal. The representations and warranties and other provisions of the merger agreement should not be read alone, but instead should be read only in conjunction with the
information provided elsewhere in this prospectus and joint proxy statement and in the documents incorporated by reference into this prospectus and joint proxy statement. See Where You Can Find More Information on page 141.
143
Appendix A
AGREEMENT AND PLAN OF REORGANIZATION
dated as of August 17, 2016
by and among
UNITED BANKSHARES, INC.,
UBV HOLDING COMPANY, LLC
and
CARDINAL FINANCIAL CORPORATION
Table of Contents
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Page
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ARTICLE I Certain Definitions
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A-1
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1.01 Certain Definitions
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A-1
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ARTICLE II The Merger
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A-7
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2.01 The Merger
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A-7
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2.02 Effective Date and Effective Time
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A-7
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2.03 Tax Consequences
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A-8
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ARTICLE III The Bank Merger
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A-8
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3.01 The Bank Merger
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A-8
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3.02 Effective Date and Effective Time
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A-8
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ARTICLE IV Consideration; Exchange Procedures
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A-8
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4.01 Merger Consideration
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A-8
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4.02 Rights as Stockholders; Stock Transfers
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A-9
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4.03 Fractional Shares
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A-9
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4.04 Exchange Procedures
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A-9
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4.05 Anti-Dilution Provisions
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A-10
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4.06 Equity-Based Awards
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A-10
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4.07 Withholding Rights
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A-11
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ARTICLE V Actions Pending the Effective Time
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A-11
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5.01 Forbearances of Cardinal
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A-11
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5.02 Forbearances of United
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A-13
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ARTICLE VI Representations and Warranties
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A-14
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6.01 Disclosure Schedules
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A-14
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6.02 Standard
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A-14
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6.03 Representations and Warranties of Cardinal
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A-14
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6.04 Representations and Warranties of United
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A-23
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ARTICLE VII Covenants
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A-32
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7.01 Reasonable Best Efforts
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A-32
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7.02 Stockholder Approvals
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A-32
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7.03 Registration Statement
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A-33
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7.04 Access; Information
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A-33
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7.05 Acquisition Proposals
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A-34
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7.06 Takeover Laws
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A-35
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7.07 Exemption from Liability Under Section 16(b)
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A-35
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7.08 Regulatory Applications
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A-35
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7.09 Indemnification
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A-36
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7.10 Benefit Plans
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A-37
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7.11 Notification of Certain Matters
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A-38
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7.12 Directors
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A-39
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7.13 Compliance with Laws
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A-39
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7.14 Operating Functions
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A-39
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7.15 Assumption of TRUPs
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A-39
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ARTICLE VIII Conditions to Consummation of the Merger
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A-39
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8.01 Conditions to Each Partys Obligation to Effect the Merger
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A-39
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8.02 Conditions to Obligation of Cardinal
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A-40
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8.03 Conditions to Obligation of United
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A-40
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A-i
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Page
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ARTICLE IX Termination
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A-41
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9.01 Termination
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A-41
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9.02 Effect of Termination and Abandonment
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A-43
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9.03 Fees and Expenses
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A-43
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ARTICLE X Miscellaneous
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A-44
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10.01 Survival
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A-44
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10.02 Waiver; Amendment
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A-44
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10.03 Assignment
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A-45
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10.04 Counterparts
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A-45
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10.05 Governing Law
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A-45
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10.06 Expenses
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A-45
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10.07 Notices
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A-45
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10.08 Entire Understanding; No Third Party Beneficiaries
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A-46
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10.09 Severability
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A-46
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10.10 Disclosures
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A-46
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10.11 Interpretation; Effect
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A-46
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10.12 Publicity
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A-47
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Exhibit A Plan of Merger merging Cardinal with and into Merger Sub
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Exhibit B Bank Merger Agreement
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Exhibit C Plan of Merger merging Cardinal Bank with and into United Bank
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Exhibit D Form of Cardinal Support Agreement
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A-ii
THIS AGREEMENT AND PLAN OF REORGANIZATION
, dated as of August 17, 2016 (this
Agreement
), by and among CARDINAL FINANCIAL CORPORATION (
Cardinal
), UNITED BANKSHARES, INC. (
United
) and UBV HOLDING COMPANY, LLC (
Merger Sub
).
RECITALS
A.
Cardinal
. Cardinal is a Virginia corporation, having its principal place of business in McLean, Virginia.
B.
United
. United is a West Virginia corporation, having its principal place of business in Charleston, West Virginia.
C.
Merger Sub
. Merger Sub is a Virginia limited liability company, having its principal place of business in Fairfax,
Virginia.
D.
Intentions of the Parties
. It is the intention of the parties to this Agreement that the business
combination contemplated hereby be treated as a reorganization under Section 368 of the Internal Revenue Code of 1986, as amended (the
Code
), and this Agreement is intended to be adopted as a plan of
reorganization for purposes of Sections 354 and 361 of the Code.
E.
Board Action
. The respective Boards of
Directors of each of United and Cardinal have determined that it is in the best interests of their respective companies and their stockholders to consummate the strategic business combination transaction provided for herein.
F.
Support Agreements
. Each of the directors of Cardinal and Cardinal Bank in office and who owns shares of Cardinal Common Stock
as of the date of this Agreement has, concurrently with the execution of this Agreement, entered into a Support Agreement in substantially the form attached hereto as Exhibit D.
NOW, THEREFORE,
in consideration of the premises and of the mutual covenants, representations, warranties and agreements contained
herein the parties agree as follows:
ARTICLE I
Certain Definitions
1.01 Certain Definitions.
The following terms
are used in this Agreement with the meanings set forth below:
Acquisition Agreement
has the meaning set
forth in Section 9.03(a).
Acquisition Proposal
means any tender or exchange offer, proposal for a
merger, consolidation or other business combination involving Cardinal or any of its Significant Subsidiaries or any proposal or offer to acquire equity interests representing 24.99% or more of the voting power of, or at least 24.99% of the assets
or deposits of, Cardinal or any of its Significant Subsidiaries, other than the transactions contemplated by this Agreement.
Agreement
has the meaning set forth in the preamble to this Agreement.
ALLL
has the meaning set forth in Section 6.03(w).
Average Closing Price
has the meaning set forth in Section 4.03.
A-1
Bank Merger
has the meaning set forth in Section 3.01(a).
Bank Merger Agreement
means the Agreement and Plan of Merger of Cardinal Bank with and into United Bank,
attached as
Exhibit B
.
Bank Merger Effective Date
has the meaning set forth in Section 3.02.
Book-Entry Shares
has the meaning set forth in Section 4.04.
Cardinal
has the meaning set forth in the preamble to this Agreement.
Cardinal Bank
means Cardinal Bank, a commercial bank chartered under the laws of the Commonwealth of Virginia and a
wholly owned direct subsidiary of Cardinal.
Cardinal Board
means the Board of Directors of Cardinal.
Cardinal Bylaws
means the Bylaws of Cardinal, as amended.
Cardinal Certificate
means the Articles of Incorporation of Cardinal, as amended.
Cardinal Common Stock
means the common stock, par value $1.00 per share, of Cardinal.
Cardinal Fee
has the meaning set forth in Section 9.03(a).
Cardinal Loans
means any written loan, loan agreement, note or borrowing arrangement (including leases, credit
enhancements, guarantees and interest bearing assets) to which Cardinal Bank is party as a creditor.
Cardinal
Meeting
has the meaning set forth in Section 7.02(a).
Cardinal Series A Preferred Stock
has
the meaning set forth in Section 6.03(b).
Cardinal Series B Preferred Stock
has the meaning set forth in
Section 6.03(b).
Cardinal Stock Award
has the meaning set forth in Section 4.06(b).
Cardinal Stock Option
has the meaning set forth in Section 4.06(a).
Cardinal Stock Plans
has the meaning set forth in Section 4.06(a).
Cardinals SEC Documents
has the meaning set forth in Section 6.03(g)(i).
Code
has the meaning set forth in the recitals.
Community Reinvestment Act
has the meaning set forth in Section 6.03(j)(vi).
Compensation and Benefit Plans
has the meaning set forth in Section 6.03(m)(i).
Confidentiality Agreement
has the meaning set forth in Section 7.04(d).
Consultants
has the meaning set forth in Section 6.03(m).
Costs
has the meaning set forth in Section 7.09(a).
A-2
Deferred Compensation Plan
has the meaning set forth in Section
6.03(m)(xi).
Determination Date
has the meaning set forth in Section 9.01(i).
Determination Date Average Closing Price
has the meaning set forth in Section 9.01(i).
Directors
has the meaning set forth in Section 6.03(m)(i).
Disclosure Schedule
has the meaning set forth in Section 6.01.
DOL
means the United States Department of Labor.
Effective Date
has the meaning set forth in Section 2.02.
Effective Time
has the meaning set forth in Section 2.02.
Employees
has the meaning set forth in Section 6.03(m)(i).
Environmental Laws
means all applicable local, state and federal environmental, health and safety laws and
regulations, including, without limitation, the Resource Conservation and Recovery Act, the Comprehensive Environmental Response, Compensation, and Liability Act, the Clean Water Act, the Federal Clean Air Act, and the Occupational Safety and Health
Act, each as amended, regulations promulgated thereunder, and state counterparts.
ERISA
means the Employee
Retirement Income Security Act of 1974, as amended.
ERISA Affiliate
has the meaning set forth in
Section 6.03(m)(iii).
Exchange Act
means the Securities Exchange Act of 1934, as amended, and the
rules and regulations thereunder.
Exchange Agent
means Computershare Limited.
Exchange Fund
has the meaning set forth in Section 4.04(a).
Exchange Ratio
has the meaning set forth in Section 4.01(a).
Federal Reserve Board
means the Board of Governors of the Federal Reserve System.
Fee
has the meaning set forth in Section 9.03(b).
FDIA
has the meaning set forth in Section 6.03(j)(vi).
Final Index Price
has the meaning set forth in 9.01(i).
GAAP
means United States generally accepted accounting principles as in effect from time to time, consistently
applied.
Governmental Authority
means any court, administrative agency or commission or other federal,
state or local governmental authority or instrumentality.
IRS
has the meaning set forth in
Section 6.03(m)(ii).
A-3
Indemnified Party
has the meaning set forth in Section 7.09(a).
Index Group
has the meaning set forth in Section 9.01(i).
Index Price
has the meaning set forth in Section 9.01(i).
Index Ratio
has the meaning set forth in Section 9.01(i)(ii)
Insurance Amount
has the meaning set forth in Section 7.09(c).
law
means any code, law (including common law), ordinance, regulation, reporting or licensing requirement, rule, or
statute applicable to a Person, its assets, liabilities or business, including those promulgated, interpreted or enforced by any Governmental Authority.
Lien
means any charge, mortgage, pledge, security interest, restriction, claim, lien, or encumbrance.
Material Adverse Effect
means, with respect to United or Cardinal, any event, change, effect, development, state of facts, condition, circumstances or occurrence that, individually or
in the aggregate, (i) is material and adverse to the financial position, results of operations or business of United and its Subsidiaries taken as a whole or Cardinal and its Subsidiaries taken as a whole, respectively, or (ii) would
materially impair the ability of either United or Cardinal to perform its respective obligations under this Agreement or otherwise materially threaten or materially impede the consummation of the Merger and the other transactions contemplated by
this Agreement;
provided
, that Material Adverse Effect shall not include the impact of (a) changes in tax, banking and similar laws of general applicability or interpretations thereof by courts or Governmental Authorities except to the
extent that such changes have a disproportionate impact on United or Cardinal, as the case may be, relative to the overall effects on the banking industry, (b) changes in GAAP or regulatory accounting requirements applicable to banks and their
holding companies generally, except to the extent that such changes have a disproportionate impact on United or Cardinal, as the case may be, relative to the overall effects on the banking industry, (c) changes in economic conditions affecting
financial institutions generally, including changes in market interest rates, credit availability and liquidity, and price levels or trading volumes in securities markets except to the extent that such changes have a disproportionate impact on
United or Cardinal, as the case may be, relative to the overall effects on the banking industry, (d) any modifications or changes to valuation policies and practices in connection with the Merger in accordance with GAAP, (e) actions and
omissions of United or Cardinal taken with the prior written consent of the other in contemplation of the transactions contemplated hereby, (f) any outbreak or escalation of hostilities or war (whether or not declared) or any act of terrorism,
or any earthquakes, hurricanes, tornados or other natural disasters, (g) failure of United or Cardinal to meet any internal financial forecasts or any earnings projections (whether made by United or Cardinal or any other Person), (h) the
public disclosure of this Agreement and the impact thereof on relationships with customers or employees, or (i) the effects of compliance with this Agreement on the operating performance of the parties, including, expenses incurred by the
parties in consummating the transactions contemplated by this Agreement.
Material Burdensome Regulatory
Condition
has the meaning set forth in Section 7.08(a).
Merger
has the meaning set forth in
Section 2.01(a).
Merger Consideration
has the meaning set forth in Section 4.01(a).
Merger Sub
has the meaning set forth in the preamble to this Agreement. Merger Sub is treated as a disregarded
entity for income tax purposes.
NASDAQ
means as The NASDAQ Stock Market, Inc.s Global Select Market.
Old Certificates
has the meaning set forth in Section 4.04(a).
A-4
PBGC
means the Pension Benefit Guaranty Corporation.
Pension Plan
has the meaning set forth in Section 6.03(m)(ii).
Permitted Liens
has the meaning set forth in Section 6.03(x).
Person
means any individual, bank, corporation, limited liability company, partnership, association, joint-stock
company, business trust or unincorporated organization.
Plan of Merger
means the Plan of Merger in the
form hereof attached as
Exhibit A
.
Previously Disclosed
by a party shall mean information set forth
in its Disclosure Schedule or in its SEC Documents.
Proxy Statement
has the meaning set forth in
Section 7.03(a).
Registration Statement
has the meaning set forth in Section 7.03(a).
Regulatory Authority
and
Regulatory Authorities
each has the meaning set forth in
Section 6.03(i)(i).
Regulatory Communication
has the meaning set forth in Section 7.08(a).
Replacement Option
has the meaning set forth in Section 4.06.
Rights
means, with respect to any Person, securities, agreements, plans (including any employee stock purchase plans,
dividend reinvestment plans or other equity plans) or obligations convertible into or exercisable or exchangeable for, or giving any Person any right to subscribe for or acquire, or any options, calls or commitments relating to, or any stock
appreciation right or other instrument the value of which is determined in whole or in part by reference to the market price or value of, shares of capital stock of such Person.
SEC
means the Securities and Exchange Commission.
SEC Documents
means any registration statement, prospectus, report, schedule and definitive proxy statement and other
documents filed with or furnished to the SEC by United or Cardinal or any of their Subsidiaries pursuant to the Securities Act or Exchange Act.
Securities Act
means the Securities Act of 1933, as amended, and the rules and regulations thereunder.
SERP
has the meaning set forth in Section 6.03(m)(xi).
Starting Date
has the meaning set forth in Section 9.01(i).
Starting Price
has the meaning set forth in Section 9.01(i).
Subsidiary
and
Significant Subsidiary
have the meanings ascribed to them in Rule 1-02
Section 210.1-(2)(w) of Regulation S-X of the SEC.
Superior Proposal
has the meaning set forth
in Section 9.01(h).
Surviving Entity
has the meaning set forth in Section 2.01(a).
Takeover Laws
has the meaning set forth in Section 6.03(o).
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Tax
and
Taxes
means all federal, state, local or
foreign taxes, charges, fees, levies or other assessments, however denominated, including, without limitation, all net income, gross income, gains, gross receipts, sales, use, ad valorem, goods and services, capital, production, transfer, franchise,
windfall profits, license, withholding, payroll, employment, disability, employer health, excise, estimated, severance, stamp, occupation, property, environmental, unemployment or other taxes, custom duties, fees, assessments or charges of any kind
whatsoever, together with any interest and any penalties, additions to tax or additional amounts imposed by any Governmental Authority.
Tax Returns
means any return, amended return or other report (including elections, declarations, disclosures, schedules, estimates and information returns) required to be filed with
respect to any Tax.
United
has the meaning set forth in the preamble to this Agreement.
United Bank
means United Bank, a commercial bank chartered under the laws of the Commonwealth of Virginia.
United Board
means the Board of Directors of United.
United Book-Entry Shares
has the meaning set forth in Section 4.04(a).
United Bylaws
means the Bylaws of United, as amended.
United Certificate
means the Articles of Incorporation, as amended, of United.
United Certificate Amendment
has the meaning set forth in Section 6.04(e).
United Common Stock
means the common stock, par value $2.50 per share, of United.
United Compensation and Benefit Plans
has the meaning set forth in Section 6.04(l)(i).
United Consultants
has the meaning set forth in Section 6.04(l)(i).
United Directors
has the meaning set forth in Section 6.04(l)(i).
United Employees
has the meaning set forth in Section 6.04(l)(i).
United ERISA Affiliate
has the meaning set forth in Section 6.04(l)(iii).
United ERISA Affiliate Plan
has the meaning set forth in Section 6.04(l)(iii).
United Fee
has the meaning set forth in Section 9.03(b).
United Loans
means any written loan, loan agreement, note or borrowing arrangement (including leases, credit
enhancements, guarantees and interest bearing assets) to which United Bank or United Bank, Inc. is party as a creditor.
United Meeting
has the meaning set forth in Section 7.02(b).
United Pension Plan
has the meaning set forth in Section 6.04(l)(ii).
United Preferred Stock
has the meaning set forth in Section 6.04(b).
United Ratio
has the meaning set forth in Section 9.01(i)(i).
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Uniteds SEC Documents
has the meaning set forth in
Section 6.04(g).
VBFI
means the Virginia Bureau of Financial Institutions.
VLLCA
means the Virginia Limited Liability Company Act, as amended.
VSCA
means the Virginia Stock Corporation Act, as amended.
VSCC
means the State Corporation Commission of the Commonwealth of Virginia.
WVBCA
means the West Virginia Business Corporation Act, as amended.
ARTICLE II
The Merger
2.01
The Merger.
(a) Subject to the terms and conditions
hereinafter set forth, including the Plan of Merger substantially in the form attached as
Exhibit A
, at the Effective Time, Cardinal shall merge with and into Merger Sub (the
Merger
), the separate corporate existence of
Cardinal shall cease and Merger Sub shall survive and continue to exist as a Virginia limited liability company (Merger Sub, as the surviving entity in the Merger, sometimes being referred to herein as the
Surviving Entity
).
United may at any time prior to the Effective Time change the method of effecting the combination with Cardinal (including, without limitation, the provisions of this Article II) if and to the extent it deems such change to be necessary, appropriate
or desirable;
provided
, that no such change shall (i) alter or change the amount or kind of Merger Consideration, (ii) adversely affect the tax-free treatment of the Merger to Cardinals stockholders as a result of receiving the Merger
Consideration or (iii) materially impede or delay consummation of the transactions contemplated by this Agreement; and
provided
,
further
, that United shall provide Cardinal prior written notice of such change and the reasons therefor.
(b) Subject to the satisfaction or waiver of the conditions set forth in Article VIII, the Merger shall become effective upon
(i) the filing with the VSCC of articles of merger in accordance with Section 13.1-720 of the VSCA and Section 13.1-1070 of the VLLCA, and the issuance by the VSCC of a certificate of merger relating to the Merger or (ii) effective upon such later
date and time as may be set forth in such articles of merger. The Merger shall have the effects prescribed in the VSCA and the VLLCA.
(c) The articles of organization and the operating agreement of Merger Sub, each as in effect immediately prior to the Effective Time, shall be the articles of organization and operating agreement of the
Surviving Entity until thereafter amended in accordance with applicable law.
2.02
Effective Date and Effective
Time.
Provided that the conditions set forth in Article VIII shall have been satisfied or waived in accordance with the terms of this Agreement, other than those conditions that by their nature are to be satisfied at the closing of the
Merger, the parties shall cause the effective date of the Merger (the
Effective Date
) to occur on the date on which Cardinals data processing systems are fully integrated with Uniteds data processing systems;
provided
, that if such date shall not have occurred by May 31, 2017, then the parties shall cause the Effective Date of the Merger to occur on the sooner of (i) five business days thereafter if all of the conditions set forth in Article VIII
have been satisfied or waived as of such date or (ii) five business days following the satisfaction or waiver of the conditions set forth in Article VIII; and
provided
,
further
, that, if Cardinal has declared a dividend in any quarter,
to be paid in such quarter in which all conditions set forth in Article VIII have been satisfied or waived, then the Effective Date shall be the day immediately after the record date for the dividend declared by United in such quarter (or, at the
election of United, on the last business day of the month in which such day occurs), unless another date is agreed to by Cardinal and United in writing. The time on the Effective Date when the Merger shall become effective is referred to as the
Effective Time
.
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2.03
Tax Consequences
.
It is intended that the
Merger shall constitute a reorganization within the meaning of Section 368(a) of the Code, and that this Agreement shall constitute a plan of reorganization for purposes of Sections 354 and 361 of the Code.
ARTICLE III
The Bank Merger
3.01
The Bank Merger.
(a) After the Effective Time, Cardinal Bank, the wholly owned subsidiary of Cardinal, shall merge with and into United Bank, a wholly
owned subsidiary of Merger Sub (and a direct wholly owned subsidiary of United for income tax purposes) (the
Bank Merger
), pursuant to the terms and conditions of the Bank Merger Agreement including the Plan of Merger
substantially in the form attached as
Exhibit C
, the separate existence of Cardinal Bank shall cease and United Bank shall survive and continue to exist as a banking corporation chartered under the laws of the Commonwealth of Virginia. United
may at any time prior to the Effective Time, change the method of effecting the combination with Cardinal Bank (including, without limitation, the provisions of this Article III) if and to the extent it deems such changes necessary, appropriate or
desirable;
provided
,
however
, that no such change shall (i) alter or change the amount or kind of Merger Consideration, (ii) adversely affect the ability of the Merger to qualify as a reorganization within the
meaning of Section 368(a) of the Code to Cardinals stockholders as a result of receiving the Merger Consideration or (iii) materially impede or delay consummation of the transactions contemplated by this Agreement; and
provided
,
further
, that United shall provide Cardinal with seven days prior written notice of such change and the reasons therefor.
(b) Subject to the satisfaction or waiver of the conditions set forth in Article VIII, the Bank Merger shall become effective upon the filing with the VSCC articles of merger in accordance with Section
13.1-720 of the VSCA, and the issuance by the VSCC of a certificate of merger relating to the Bank Merger, or such later date and time as may be set forth in such articles of merger. The Bank Merger shall have the effects prescribed in the
VSCA.
3.02
Effective Date and Effective Time
.
Subject to the satisfaction or waiver of the
conditions set forth in Article VIII, it being agreed that any required consents, approvals, and authorizations from any Governmental Authorities to effect the Bank Merger shall not be a condition to the consummation of the Merger, the parties shall
use reasonable efforts to cause the effective date of the Bank Merger (the
Bank Merger Effective Date
) to occur as soon as reasonably practicable after the Effective Date or such later date to which the parties may agree in
writing.
ARTICLE IV
Consideration; Exchange Procedures
4.01
Merger
Consideration
.
Subject to the provisions of this Agreement, at the Effective Time, automatically by virtue of the Merger and without any action on the part of any Person:
(a)
Merger Consideration
. Each holder of a share of Cardinal Common Stock (other than United and its Subsidiaries, in each case
except for shares held by them in a fiduciary capacity or as a result of debts previously contracted) shall receive in respect thereof, subject to the limitations set forth in this Agreement, 0.71 shares (
Exchange Ratio
) of United
Common Stock (the
Merger Consideration
).
(b)
Outstanding United Stock
. Each share of United Common
Stock issued and outstanding immediately prior to the Effective Time shall remain issued and outstanding and unaffected by the Merger.
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(c)
Merger Sub Equity Interests
. Each equity interest of Merger Sub outstanding
immediately prior to the Effective Time shall remain outstanding and unaffected by the Merger, and no consideration shall be issued in exchange therefor.
4.02
Rights as Stockholders; Stock Transfers.
At the Effective Time, holders of Cardinal Common Stock shall cease to be, and shall have no rights as, stockholders of Cardinal, other
than to receive the Merger Consideration (if so provided in Section 4.01(a)) and any dividend or other distribution with respect to such Cardinal Common Stock with a record date occurring prior to the Effective Time and the consideration provided
under this Article IV. After the Effective Time, there shall be no transfers on the stock transfer books of Cardinal or the Surviving Entity of shares of Cardinal Common Stock.
4.03
Fractional Shares.
Notwithstanding any other provision hereof, no fractional shares of United Common Stock and
no certificates or scrip therefore, or other evidence of ownership thereof, will be issued in the Merger; instead, United shall pay to each holder of Cardinal Common Stock who would otherwise be entitled to a fractional share of United Common Stock
(after taking into account all Old Certificates registered in the name of such holder or Book-Entry Shares held by such holder) an amount in cash (without interest) determined by multiplying such fraction by the average of the daily closing prices
for the shares of United Common Stock for the 20 consecutive full trading days on which such shares are actually traded on the NASDAQ (as reported by
The Wall Street Journal
or, if not reported thereby, any other authoritative source) ending
at the close of trading on the tenth trading day immediately preceding the Effective Date (such average, the
Average Closing Price
).
4.04
Exchange Procedures.
(a) At or prior to the Effective
Time, United shall deposit, or shall cause to be deposited, with the Exchange Agent, for the benefit of the holders of certificates formerly representing shares of Cardinal Common Stock (
Old Certificates
) and holders of
non-certificated shares of Cardinal Common Stock (
Book-Entry Shares
), for exchange in accordance with this Article IV, (i) non-certificated shares of United Common Stock (collectively,
United Book-Entry
Shares
) and (ii) an amount of cash necessary for payments required by Section 4.03 (the
Exchange Fund
). The Exchange Fund will be distributed in accordance with the Exchange Agents normal and customary
procedures established in connection with merger transactions.
(b) As soon as practicable after the Effective Time, and in no
event later than five business days thereafter, the Exchange Agent shall mail to each holder of record of one or more Old Certificates or Book-Entry Shares a letter of transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Old Certificates or Book-Entry Shares shall pass, only upon delivery of the Old Certificates or Book-Entry Shares to the Exchange Agent) and instructions for use in effecting the surrender of the Old Certificates or Book-Entry
Shares in exchange for United Book-Entry Shares, if any, that the holders of the Old Certificates or Book-Entry Shares are entitled to receive pursuant to Article IV, any cash in lieu of fractional shares into which the shares of Cardinal Common
Stock represented by the Old Certificates or Book-Entry Shares shall have been converted pursuant to this Agreement. Upon proper surrender of an Old Certificate or Book-Entry Shares for exchange and cancellation to the Exchange Agent, together with
such properly completed letter of transmittal, duly executed, the holder of such Old Certificates or Book-Entry Shares shall be entitled to receive in exchange therefor (i) a New Certificate representing that number of whole shares of United
Common Stock that such holder has the right to receive pursuant to Article IV, if any, and (ii) a check representing the amount of any cash in lieu of fractional shares which such holder has the right to receive in respect of the Old
Certificates or Book-Entry Shares surrendered pursuant to the provisions of this Article IV, and the Old Certificates or Book-Entry Shares so surrendered shall forthwith be cancelled.
(c) Neither the Exchange Agent, if any, nor any party hereto shall be liable to any former holder of Cardinal Common Stock for any amount
properly delivered to a public official pursuant to applicable abandoned property, escheat or similar laws.
(d) No dividends
or other distributions with respect to United Common Stock with a record date occurring after the Effective Time shall be paid to the holder of any unsurrendered Old Certificate or Book-Entry
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Shares representing shares of Cardinal Common Stock converted in the Merger into the right to receive shares of such United Common Stock until the holder thereof shall be entitled to receive
United Book-Entry Shares in exchange therefore in accordance with the procedures set forth in this Section 4.04. After becoming so entitled in accordance with this Section 4.04, the record holder thereof also shall be entitled to receive
any such dividends or other distributions by the Exchange Agent, without any interest thereon, which theretofore had become payable with respect to shares of United Common Stock such holder had the right to receive upon surrender of the Old
Certificates or Book-Entry Shares.
(e) Any portion of the Exchange Fund that remains unclaimed by the stockholders of
Cardinal on the business day after the one-year anniversary of the Effective Date shall be paid to United. Any stockholders of Cardinal who have not theretofore complied with this Article IV shall thereafter look only to United for payment of the
Merger Consideration, cash in lieu of any fractional shares and unpaid dividends and distributions on United Common Stock deliverable in respect of each share of Cardinal Common Stock such stockholder holds as determined pursuant to this Agreement,
in each case, without any interest thereon.
4.05
Anti-Dilution Provisions.
In the event United changes
(or establishes a record date for changing) the number of shares of United Common Stock issued and outstanding prior to the Effective Date as a result of a stock split, reverse stock split, stock dividend, reorganization, recapitalization or similar
transaction with respect to the outstanding United Common Stock and the record date therefor shall be prior to the Effective Date, or shall establish a record date prior to the Effective Date with respect to any dividend or other distribution in
respect of the United Common Stock other than a cash dividend consistent with past practice, the Exchange Ratio shall be proportionately adjusted to provide the holders of Cardinal Common Stock the same economic effect as contemplated by this
Agreement prior to such event.
4.06
Equity-Based Awards.
(a) At the Effective Time, each outstanding option (each, a
Cardinal Stock Option
) to purchase shares of Cardinal
Common Stock, whether vested or unvested, under any and all plans of Cardinal under which stock options have been granted (collectively, the
Cardinal Stock Plans
) shall vest pursuant to the terms thereof shall be converted into an
option (each, a
Replacement Option
) to acquire, on the same terms and conditions as were applicable under such Cardinal Stock Option, the number of shares of United Common Stock equal to (a) the number of shares of Cardinal Common
Stock subject to the Cardinal Stock Option
multiplied
by (b) the Exchange Ratio. Such product shall be rounded down to the nearest whole number. The exercise price per share (rounded up to the next whole cent) of each Replacement Option
shall equal (y) the exercise price per share of shares of Cardinal Common Stock that were purchasable pursuant to such Cardinal Stock Option
divided
by (z) the Exchange Ratio. Notwithstanding the foregoing, each Cardinal Stock Option that is
intended to be an incentive stock option (as defined in Section 422 of the Code) shall be adjusted in accordance with the requirements of Section 424 of the Code and all other options shall be adjusted in a manner that maintains the
options exemption from Section 409A of the Code. At or prior to the Effective Time, Cardinal shall use its reasonable best efforts to obtain any necessary consents from optionees with respect to the Cardinal Stock Plans to permit replacement of the
outstanding Cardinal Stock Options by United pursuant to this Section and to permit United to assume the Cardinal Stock Plans. Cardinal shall further take all action necessary to amend the Cardinal Stock Plans to eliminate automatic grants or
awards thereunder following the Effective Time. At the Effective Time, United shall assume the Cardinal Stock Plans;
provided
that such assumption shall only be with respect to the Replacement Options and shall have no obligation to make any
additional grants or awards under the Cardinal Stock Plans other than those grants or awards that have been made or accrued prior to the Effective Time. United shall file a post-effective amendment to the Registration Statement or an effective
registration statement on Form S-8 (or other applicable form) with respect to the shares of United Common Stock subject to such Replacement Options, shall distribute a prospectus relating to such Form S-8, if applicable, and shall use reasonable
commercial efforts to maintain the effectiveness of the Registration Statement or registration statement on Form S-8 for so long as such Replacement Options remain outstanding.
(b) At the Effective Time, each restricted stock award granted under a Cardinal Stock Plan (each, a
Cardinal Stock
Award
) that is unvested or contingent and outstanding immediately prior to the Effective Time
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shall fully vest and shall be converted into the right to receive, without interest, the Merger Consideration payable pursuant to Section 4.01, and the shares of Cardinal Common Stock subject to
such Cardinal Stock Award will be treated in the same manner as all other shares of Cardinal Common Stock for such purposes.
4.07
Withholding Rights
. United or the Exchange Agent, as the case may be, will be entitled to deduct and withhold
from the consideration otherwise payable pursuant to this Agreement to any Person such amounts, if any, as it is required to deduct and withhold with respect to the making of such payment under the Code or any provision of state, local or foreign
Tax law. To the extent that amounts are so withheld and remitted to the appropriate Governmental Authority by or on behalf of United or the Exchange Agent, as the case may be, such amounts withheld will be treated for all purposes of this Agreement
as having been paid to such Person in respect of which such deduction and withholding was made by United or the Exchange Agent, as the case may be.
ARTICLE V
Actions Pending the Effective Time
5.01
Forbearances of Cardinal.
From the date hereof until the Effective Time, except as expressly contemplated by
this Agreement or Previously Disclosed, without the prior written consent of United (which consent shall not be unreasonably withheld, delayed or conditioned), Cardinal will not, and will cause each of its Subsidiaries not to:
(a)
Ordinary Course.
Conduct the business of Cardinal and its Subsidiaries other than in the ordinary and usual course, fail to use
reasonable efforts to preserve intact their business organizations and assets and maintain their rights, franchises and existing relations with customers, suppliers, employees and business associates, make any individual capital expenditure in
excess of $200,000 or take any action reasonably likely to have an adverse effect upon Cardinals ability to perform any of its material obligations under this Agreement.
(b)
Capital Stock.
Other than pursuant to Rights Previously Disclosed and outstanding on the date hereof, (i) issue, sell or otherwise permit to become outstanding, or authorize the creation
of, any additional shares of Cardinal Common Stock or any Rights, (ii) enter into any agreement with respect to the foregoing, or (iii) permit any additional shares of Cardinal Common Stock to become subject to new grants of employee or
director stock options, other Rights or similar stock-based employee rights;
provided
that none of the foregoing shall restrict Cardinal from making equity compensation awards and issuing shares of Cardinal Common Stock, rights, employee or
director stock options, or similar equity compensation awards under the Cardinal Stock Plans in the ordinary course of business consistent with past practice; and
provided
,
further
, that any such awards will not exceed the amounts set
forth in Section 5.01(b) of Cardinals Disclosure Schedule.
(c)
Dividends, Etc.
Except as Previously Disclosed
(i) make, declare, pay or set aside for payment any dividend (other than quarterly cash dividends at a rate not to exceed $0.12 per share on Cardinal Common Stock and dividends from wholly-owned Subsidiaries to Cardinal or another wholly-owned
Subsidiary of Cardinal) on or in respect of, or declare or make any distribution on any shares of Cardinal Common Stock or (ii) directly or indirectly adjust, split, combine, redeem, reclassify, purchase or otherwise acquire, any shares of its
capital stock;
provided
that none of the foregoing shall restrict Cardinal from acquiring shares of its capital stock pursuant to the surrender of any such shares in payment of an exercise price or in satisfaction of a Tax withholding
obligation, or pursuant to similar transactions, in connection with (x) the exercise of Cardinal Stock Options and other Rights Previously Disclosed, and (y) vesting of restricted shares of Cardinal Common Stock.
(d)
Compensation; Employment Agreements; Etc.
(i) Enter into or amend or renew any employment, consulting, compensation,
severance or similar agreements or arrangements with any director, officer or employee of Cardinal or its Subsidiaries, except as Previously Disclosed, or (ii) grant any salary or wage increase or increase any employee benefit, except (A)
Cardinal may award normal individual increases in compensation to
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employees in the ordinary course of business consistent with past practice, (B) Cardinal may make individual cash bonus awards for 2016 performance in accordance with Cardinals short term
and long term incentive plans in the ordinary course of business consistent with past practice, and (C) Cardinal will establish a retention bonus pool equal to $1,250,000 in the aggregate that will be dedicated to certain employees of Cardinal
designated by officers of Cardinal, after consultation with United, for purposes of retaining such employees prior to and after the Effective Time;
provided
that, with respect to executive officers of Cardinal and Cardinal Bank, any increase
in compensation contemplated by Section 5.01(d)(ii)(A) and any individual cash bonus awards contemplated by Section 5.01(d)(ii)(B) will not exceed the amounts set forth in Sections 5.01(d)(ii)(A) and 5.01(d)(ii)(B), respectively, of Cardinals
Disclosure Schedule.
(e)
Benefit Plans.
Enter into, establish, adopt or amend (except (i) as may be required by
applicable law or (ii) to satisfy Previously Disclosed contractual obligations existing as of the date hereof) any pension, retirement, stock option, stock purchase, savings, profit sharing, deferred compensation, consulting, bonus, group
insurance or other employee benefit, incentive or welfare contract, plan or arrangement, or any trust agreement (or similar arrangement) related thereto, in respect of any director, officer or employee of Cardinal or its Subsidiaries, or take any
action to accelerate the vesting or exercisability of stock options, restricted stock or other compensation or benefits payable thereunder.
(f)
Dispositions. S
ell, transfer, mortgage, encumber or otherwise dispose of or discontinue any of its assets, deposits, business or properties except in the ordinary course of business and in a
transaction that is not material to it and its Subsidiaries taken as a whole.
(g)
Acquisitions.
Except in the ordinary
course of its business, acquire (other than by way of foreclosures or acquisitions of control in a bona fide fiduciary capacity or in satisfaction of debts previously contracted in good faith, in each case in the ordinary and usual course of
business consistent with past practice) all or any portion of, the assets, business, deposits or properties of any other entity.
(h)
Governing Documents.
Amend the Cardinal Certificate, Cardinal Bylaws or the articles of incorporation or bylaws (or similar governing documents) of any of Cardinals Subsidiaries.
(i)
Accounting Methods.
Implement or adopt any change in its accounting principles, practices or methods, other than
as may be required by GAAP or its Regulatory Authorities.
(j)
Contracts.
Except in the ordinary course of business
consistent with past practice, enter into or terminate any material contract (as defined in Section 6.03(k)) or amend or modify any of its existing material contracts in a manner that is material to Cardinal and its Subsidiaries taken as a
whole.
(k)
Claims.
Except in the ordinary course of business consistent with past practice, settle any claim, action
or proceeding, except for any claim, action or proceeding that does not involve precedent for other material claims, actions or proceedings and that involve solely money damages in an amount, individually or in the aggregate for all such
settlements, that is not material to Cardinal and its Subsidiaries, taken as a whole.
(l)
Adverse Actions.
(i) Take any action that would, or is reasonably likely to, prevent or impede the Merger from qualifying as a reorganization within the meaning of Section 368 of the Code; or (ii) knowingly take any action that is
intended or is reasonably likely to result in (1) any of the conditions to the Merger set forth in Article VIII not being satisfied or (2) a material violation of any provision of this Agreement except, in each case, as may be required by
applicable law or regulation.
(m)
Risk Management.
Except as required by applicable law or regulation, or by formal or
informal agreements entered into with Regulatory Authorities, (i) implement or adopt any material change in its interest rate and other risk management policies, procedures or practices, (ii) fail to materially follow its existing policies
or practices with respect to managing its exposure to interest rate and other risk, or (iii) fail to use commercially reasonable means to avoid any material increase in its aggregate exposure to interest rate risk.
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(n)
Indebtedness.
Incur any indebtedness for borrowed money other than in the
ordinary course of business.
(o)
Subsidiaries
. Organize or approve the organization of any Subsidiaries.
(p)
Commitments.
Agree or commit to do any of the foregoing.
5.02
Forbearances of United.
From the date hereof until the Effective Time, except as expressly contemplated by this
Agreement or Previously Disclosed, without the prior written consent of Cardinal (which consent shall not be unreasonably withheld, delayed or conditioned), United will not, and will cause each of its Subsidiaries not to:
(a)
Ordinary Course
. Conduct the business of United and its Subsidiaries other than in the ordinary and usual course or fail to use
reasonable efforts to preserve intact their business organizations and assets and maintain their rights, franchises and existing relations with customers, suppliers, employees and business associates, or take any action reasonably likely to have an
adverse effect upon Uniteds ability to perform any of its material obligations under this Agreement.
(b)
Risk
Management.
Except as required by applicable law or regulation, (i) implement or adopt any material change in its interest rate and other risk management policies, procedures or practices, (ii) fail to materially follow its existing
policies or practices with respect to managing its exposure to interest rate and other risk, or (iii) fail to use commercially reasonable means to avoid any material increase in its aggregate exposure to interest rate risk.
(c)
Accounting Methods.
Implement or adopt any change in its accounting principles, practices or methods, other than as may be
required by GAAP or its Regulatory Authorities.
(d)
Dividends.
Make, declare, pay or set aside for payment any
extraordinary dividend, other than in connection with the United Stock Repurchase Program;
provided
that the foregoing restriction shall not restrict United from making, declaring or paying its regular quarterly cash dividends and dividends
from wholly-owned Subsidiaries to United or another wholly-owned Subsidiary of United (which, for the avoidance of doubt, will continue to be paid).
(e)
Adverse Actions.
(i) Take any action that would, or is reasonably likely to, prevent or impede the Merger from qualifying as a reorganization within the meaning of
Section 368 of the Code; or (ii) knowingly take any action that is intended or is reasonably likely to result in (1) any of the conditions to the Merger set forth in Article VIII not being satisfied or (2) a material violation of
any provision of this Agreement except, in each case, as may be required by applicable law or regulation.
(f)
Transactions
Involving United
. Enter into any agreement, arrangement or understanding with respect to the merger, acquisition, consolidation, share exchange or similar business combination involving United and/or a United Subsidiary, where the effect of such
agreement, arrangement or understanding, or the consummation or effectuation thereof, would be reasonably likely to or does result in the termination of this Agreement, materially delay or jeopardize the receipt of the approval of any Regulatory
Authority or the filing of an application therefor, or cause the anticipated tax treatment of the transactions contemplated hereby to be unavailable;
provided
, that nothing herein shall prohibit any such transaction that by its terms
contemplates the consummation of the Merger in accordance with the provisions of this Agreement and which treats holders of Cardinal Common Stock, upon completion of the Merger and their receipt of United Common Stock, in the same manner as the
holders of United Common Stock.
(g)
Governing Documents
. Amend its articles of incorporation or bylaws in a manner
that would materially and adversely affect the benefits of the Merger to the stockholders of Cardinal.
(h)
Commitments.
Agree or commit to do any of the foregoing.
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ARTICLE VI
Representations and Warranties
6.01
Disclosure Schedules.
On or prior to the date hereof, United has delivered to Cardinal a schedule and Cardinal has delivered to United a schedule (respectively, its
Disclosure Schedule
) setting forth, among other things, items the disclosure of
which is necessary or appropriate either in response to an express disclosure requirement contained in a provision hereof or as an exception to one or more representations or warranties contained in Section 6.03 or 6.04 or to one or more of its
covenants contained in Article V;
provided
, that (a) no such item is required to be set forth in a Disclosure Schedule as an exception to a representation or warranty if its absence would not be reasonably likely to result in the related
representation or warranty being deemed untrue or incorrect under the standard set forth in Section 6.02, and (b) the mere inclusion of an item in a Disclosure Schedule as an exception to a representation or warranty shall not be deemed an
admission by a party that such item represents a material exception or fact, event or circumstance or that such item is reasonably likely to result in a Material Adverse Effect on the party making the representation. All of Cardinals and
Uniteds representations, warranties and covenants contained in this Agreement are qualified by reference to its respective Disclosure Schedule and none thereof shall be deemed to be untrue or breached as a result of effects arising solely from
actions taken in compliance with a written request of the other party.
6.02
Standard.
No representation
or warranty of Cardinal or United contained in Section 6.03 or 6.04 shall be deemed untrue or incorrect, and no party hereto shall be deemed to have breached a representation or warranty, as a consequence of the existence of any fact, event or
circumstance unless such fact, circumstance or event, individually or taken together with all other facts, events or circumstances inconsistent with any representation or warranty contained in Section 6.03 or 6.04 has had or is reasonably
likely to have a Material Adverse Effect on the party making the representation. For purposes of this Agreement, knowledge shall mean (i) with respect to United, actual knowledge of Richard M. Adams, Richard M. Adams, Jr., James J.
Consagra, Jr., Craige L. Smith, W. Mark Tatterson, Douglas Ernest and Darren Williams, and (ii) with respect to Cardinal, actual knowledge of Bernard H. Clineburg, Christopher W. Bergstrom, Alice P. Frazier and F. Kevin Reynolds.
6.03
Representations and Warranties of Cardinal.
Subject to Sections 6.01 and 6.02 and except as Previously
Disclosed, Cardinal hereby represents and warrants to United:
(a)
Organization and Standing
. Cardinal is a corporation
duly organized, validly existing and in good standing under the laws of the Commonwealth of Virginia. Cardinal is duly qualified to do business and is in good standing in the states of the United States and any foreign jurisdictions where its
ownership or leasing of property or assets or the conduct of its business requires it to be so qualified.
(b)
Capitalization
. As of the date hereof, the authorized capital stock of Cardinal consists of (i) 50,000,000 shares of Cardinal Common Stock, of which as of August 1, 2016, 32,460,013 shares are outstanding, and (ii) 10,000,000 shares of
preferred stock, of which 1,376,772 shares have been designated as 7.25% Cumulative Convertible Preferred Stock, Series A (
Cardinal Series A Preferred Stock
), and 41,238 shares have been designated as Fixed Rate Cumulative
Perpetual Preferred Stock, Series B (
Cardinal Series B Preferred Stock
). No shares of preferred stock of Cardinal are outstanding as of the date hereof. As of the date hereof, except pursuant to the terms of options and stock
issued pursuant to the Cardinal Stock Plans, Cardinal does not have and is not bound by any outstanding subscriptions, options, warrants, calls, commitments or agreements of any character calling for the purchase or issuance of any shares of
Cardinal Common Stock, Cardinal Series A Preferred Stock, Cardinal Series B Preferred Stock or any other equity securities of Cardinal or any of its Subsidiaries or any securities representing the right to purchase or otherwise receive any shares of
Cardinal Common Stock, Cardinal Series A Preferred Stock, Cardinal Series B Preferred Stock or other equity securities of Cardinal or any of its Subsidiaries. As of the date hereof, Cardinal has 983,804 shares of Cardinal Common Stock that are
issuable and reserved for issuance upon the exercise of Cardinal Stock Options, and 108,738 shares of Cardinal Common Stock are subject to unvested Cardinal Stock Awards. The outstanding shares of Cardinal Common Stock have been duly authorized and
are validly issued and outstanding, fully paid and nonassessable, and subject to no preemptive rights (and were not issued in violation of any preemptive rights).
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(c)
Subsidiaries
. Cardinal has Previously Disclosed a list of all of its Subsidiaries
together with the jurisdiction of organization of each such Subsidiary. Except as Previously Disclosed, (A) Cardinal owns, directly or indirectly, all the issued and outstanding equity securities of each of its Subsidiaries, or, in the case of
Cardinal Statutory Trust I and UFBC Capital Trust I, all of the outstanding common securities, (B) no equity securities of any of its Subsidiaries are or may become required to be issued (other than to it or its wholly-owned Subsidiaries) by
reason of any Right or otherwise, (C) there are no contracts, commitments, understandings or arrangements by which any of such Subsidiaries is or may be bound to sell or otherwise transfer any equity securities of any such Subsidiaries (other
than to it or its wholly-owned Subsidiaries), (D) there are no contracts, commitments, understandings, or arrangements relating to its rights to vote or to dispose of such securities and (E) all the equity securities of each Subsidiary
held by Cardinal or its Subsidiaries are fully paid and nonassessable and are owned by Cardinal or its Subsidiaries free and clear of any Liens.
(i) Cardinal has Previously Disclosed a list of all equity securities, or similar interests of any Person or any interest in a partnership or joint venture of any kind, other than its Subsidiaries, that
it beneficially owns, directly or indirectly, as of the date hereof.
(ii) Each of Cardinals Subsidiaries has been duly
organized and is validly existing in good standing under the laws of the jurisdiction of its organization, and is duly qualified to do business and in good standing in the jurisdictions where its ownership or leasing of property or the conduct of
its business requires it to be so qualified.
(d)
Corporate Power
. Each of Cardinal and its Subsidiaries has the
corporate power and authority to carry on its business as it is now being conducted and to own all its properties and assets; and Cardinal has the corporate power and authority to execute, deliver and perform its obligations under this Agreement
and, subject to receipt of required approvals by the stockholders of Cardinal, to consummate the transactions contemplated hereby.
(e)
Corporate Authority
. Subject to receipt of the requisite approval of this Agreement (including the Merger and Plan of Merger) by the holders of a majority of the outstanding shares of Cardinal
Common Stock entitled to vote thereon (which is the only vote of Cardinal stockholders required thereon), the execution and delivery of this Agreement and the transactions contemplated hereby have been authorized by all necessary corporate action of
Cardinal and the Cardinal Board. Assuming due authorization, execution and delivery by United, this Agreement is a valid and legally binding obligation of Cardinal, enforceable in accordance with its terms (except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and similar laws of general applicability relating to or affecting creditors rights or by general equity principles).
(f)
Consents and Approvals; No Defaults
.
(i) No consents or approvals of, or filings or registrations with, any Governmental Authority or with any third party are required to be made or obtained by Cardinal or any of its Subsidiaries in
connection with the execution, delivery or performance by Cardinal of this Agreement or to consummate the Merger except for (A) filings of applications or notices with federal and state banking and insurance authorities and the approvals or
consents of any federal or state banking and insurance authorities, including, the VBFI and the Federal Reserve Board, (B) the filing of articles of merger with the VSCC pursuant to the VSCA and the VLLCA and the issuance of certificates of
merger in connection with the Merger and the Bank Merger, and (C) the filing of the Proxy Statement with the SEC. As of the date hereof, Cardinal is not aware of any reason why the approvals set forth in Section 8.01(b) will not be
received without the imposition of a condition, restriction or requirement of the type described in Section 8.01(b).
(ii) Subject to receipt of the regulatory approvals or consents referred to in the preceding paragraph, and expiration of related
waiting periods, the execution, delivery and performance of this Agreement
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and the consummation of the transactions contemplated hereby do not and will not (A) constitute a breach or violation of, or a default under, or give rise to any Lien, any acceleration of
remedies or any right of termination under, any law, rule or regulation or any judgment, decree, order, governmental permit or license, or any agreement, indenture or instrument of Cardinal or of any of its Subsidiaries or to which Cardinal or any
of its Subsidiaries or properties is subject or bound, (B) constitute a breach or violation of, or a default under, the Cardinal Certificate or the Cardinal Bylaws, or (C) require any consent or approval under any such law, rule,
regulation, judgment, decree, order, governmental permit or license, agreement, indenture or instrument.
(g)
Financial
Reports and SEC Documents; Absence of Certain Changes or Events
.
(i) Cardinals Annual Report on Form 10-K for each
of the fiscal years ended December 31, 2013, 2014 and 2015 and all other reports, registration statements, definitive proxy statements or information statements filed or to be filed by it or any of its Subsidiaries subsequent to
December 31, 2015, under the Securities Act or under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act in the form filed or to be filed (collectively
Cardinals
SEC Documents
), as of the date filed,
(A) as to form complied or will comply in all material respects with the applicable requirements under the Securities Act or the Exchange Act, as the case may be, and (B) did not and will not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; and each of the balance sheets or statements of condition of
Cardinal contained in or incorporated by reference into any of Cardinals SEC Documents (including the related notes and schedules thereto) fairly presents, or will fairly present, the financial position of Cardinal and its Subsidiaries as of
its date, and each of the statements of income or results of operations and changes in stockholders equity and cash flows or equivalent statements of Cardinal in any of Cardinals SEC Documents (including any related notes and schedules
thereto) fairly presents, or will fairly present, the results of operations, changes in stockholders equity and cash flows, as the case may be, of Cardinal and its Subsidiaries for the periods to which they relate, in each case in accordance
with GAAP during the periods involved, except in each case as may be noted therein, and subject to normal year-end audit adjustments in the case of unaudited statements.
(ii) Section 6.03(g)(ii) of Cardinals Disclosure Schedule lists, and upon request, Cardinal has delivered to United, copies of the documentation creating or governing all securitization
transactions and off-balance sheet arrangements (as defined in Item 303(a)(4)(ii) of Regulation S-K) effected by Cardinal or its Subsidiaries, since December 31, 2015. KPMG LLP, which has expressed its opinion with respect to
the audited financial statements of Cardinal and its Subsidiaries (including the related notes) included in Cardinals SEC Documents is and has been throughout the periods covered by such financial statements an independent registered public
accounting firm (as defined in Section 2(a)(12) of the Sarbanes-Oxley Act of 2002).
(iii) Cardinal has on a timely
basis filed all forms, reports and documents required to be filed by it with the SEC since December 31, 2012. Except to the extent available in full without redaction on the SECs web site through the Electronic Data Gathering, Analysis
and Retrieval System (EDGAR) two days prior to the date of this Agreement, Cardinal has made available to United copies in the form filed with the SEC of (A) its Annual Reports on Form 10-K for each fiscal year of the Company beginning after
December 31, 2012, (B) its Quarterly Reports on Form 10-Q for each of the first three fiscal quarters in each of the fiscal years of Cardinal referred to in clause (A) above, (C) all proxy statements relating to Cardinals
meetings of stockholders (whether annual or special) held, and all information statements relating to stockholder consents since the beginning of the first fiscal year referred to in clause (A) above, (D) all certifications and statements
required by (x) the SECs Order dated June 27, 2002, pursuant to Section 21(a)(1) of the Exchange Act (File No. 4-460), (y) Rule 13a-14 or
15d-14
under the Exchange Act or
(z) 18 U.S.C. §1350 (Section 906 of the Sarbanes-Oxley Act of 2002) with respect to any report referred to above, (E) all other forms, reports, registration statements and other documents (other than preliminary materials if the
corresponding definitive materials have been made available to United pursuant to this Section 6.03(g)), filed by Cardinal with the SEC since the beginning of the first fiscal year referred above, and (F) all comment letters received by
Cardinal from the staff of the SEC since December 31, 2014 and all responses to such comment letters by or on behalf of Cardinal.
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(iv) Cardinal maintains disclosure controls and procedures required by Rule 13a-15 or
15d-15 under the Exchange Act; such controls and procedures are effective to ensure that all material information concerning Cardinal and its Subsidiaries is made known on a timely basis to the individuals responsible for the preparation of
Cardinals filings with the SEC and other public disclosure documents. Cardinal maintains internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act and as of December 31, 2015, such internal control over
financial reporting was effective in providing reasonable assurance to Cardinals management and its board of directors regarding the preparation and fair presentation of published financial statements in accordance with GAAP. To
Cardinals knowledge, each director and executive officer of Cardinal has filed with the SEC on a timely basis all statements required by Section 16(a) of the Exchange Act and the rules and regulations thereunder since December 31,
2015. As used in this Section 6.03(g), the term file shall be broadly construed to include any manner in which a document or information is furnished, supplied or otherwise made available to the SEC.
(v) Since December 31, 2015, Cardinal and its Subsidiaries have not incurred any liability other than in the ordinary course of
business consistent with past practice or for legal, accounting, and financial advisory fees and out-of-pocket expenses in connection with the transactions contemplated by this Agreement.
(vi) Since December 31, 2015, (A) Cardinal and its Subsidiaries have conducted their respective businesses in the ordinary and
usual course consistent with past practice (excluding matters related to this Agreement and the transactions contemplated hereby) and (B) no event has occurred or circumstance arisen that, individually or taken together with all other facts,
circumstances and events (described in any paragraph of Section 6.03 or otherwise), is reasonably likely to have a Material Adverse Effect with respect to Cardinal.
(h)
Litigation
. Except as Previously Disclosed, no litigation, claim or other proceeding before any Governmental Authority is pending against Cardinal or any of its Subsidiaries and, to
Cardinals knowledge, no such litigation, claim or other proceeding has been threatened.
(i)
Regulatory Matters
.
(i) Neither Cardinal nor any of its Subsidiaries or properties is a party to or is subject to any order, decree, agreement,
memorandum of understanding or similar arrangement with, or a commitment letter or similar submission to, or extraordinary supervisory letter from, any federal or state governmental agency or authority charged with the supervision or regulation of
financial institutions (or their holding companies) or issuers of securities or engaged in the insurance of deposits (including, without limitation, the VSCC, the Federal Reserve Board and the Federal Deposit Insurance Corporation) or the
supervision or regulation of it or any of its Subsidiaries (collectively, the
Regulatory Authorities
, and each individually, a
Regulatory Authority
).
(ii) Neither Cardinal nor any of its Subsidiaries has been advised by any Regulatory Authority that such Regulatory Authority is
contemplating issuing or requesting (or is considering the appropriateness of issuing or requesting) any such order, decree, agreement, memorandum of understanding, commitment letter, supervisory letter or similar submission.
(iii) Cardinal is a bank holding company duly registered under the Bank Holding Company Act of 1956, as amended, and has elected to
become a financial holding company as defined by the Gramm-Leach-Bliley Act of 1999.
(j)
Compliance with Laws
.
(i) Each of Cardinal and its Subsidiaries is in compliance with all applicable federal, state, local and foreign statutes,
laws, regulations, ordinances, rules, judgments, orders or decrees applicable thereto or to the employees conducting such businesses, including, without limitation, the Equal Credit Opportunity Act, the Fair Housing Act, the Community Reinvestment
Act, the Home Mortgage Disclosure Act, Fair Credit Reporting Act, the Truth in Lending Act and Regulation Z, the Home Mortgage Disclosure Act, the Fair Debt Collection
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Practices Act, the Electronic Fund Transfer Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Bank Secrecy Act, any regulations promulgated by the Consumer Financial
Protection Bureau, the Foreign Corrupt Practices Act, Title III of the USA Patriot Act, the Interagency Policy Statement on Retail Sales of Nondeposit Investment Products, the SAFE Mortgage Licensing Act of 2008, the Real Estate Settlement
Procedures Act and Regulation X, and any other law relating to bank secrecy, discriminatory or abusive or deceptive lending or any other product or service, financing or leasing practices, money laundering prevention, Sections 23A and 23B of the
Federal Reserve Act, and all agency requirements relating to the origination, sale and servicing of mortgage and consumer loans.
(ii) Each of Cardinal and its Subsidiaries has all permits, licenses, authorizations, orders and approvals of, and has made all filings, applications and registrations with, all Governmental Authorities
that are required in order to permit them to own or lease their properties and to conduct their businesses as presently conducted; all such permits, licenses, certificates of authority, orders and approvals are in full force and effect and, to
Cardinals knowledge, no suspension or cancellation of any of them is threatened.
(iii) Neither Cardinal nor any of its
Subsidiaries has received, since December 31, 2006, no notification or communication from any Governmental Authority (A) asserting that Cardinal or any of its Subsidiaries is not in compliance with any of the statutes, regulations, or
ordinances which such Governmental Authority enforces or (B) threatening to revoke any license, franchise, permit, or governmental authorization (nor, to Cardinals knowledge, do any grounds for any of the foregoing exist).
(iv) Since January 1, 2014, is in compliance with the privacy provisions of the Gramm-Leach-Bliley Act, and all other applicable
laws relating to consumer privacy.
(v) Neither Cardinal nor any of its directors, officers or employees, nor, to the
knowledge of Cardinal, any agent or other Person acting on behalf of Cardinal is currently subject to any sanctions administered by Office of Foreign Assets Control.
(vi) Cardinal Bank is an insured depositary institution as defined in the Federal Deposit Insurance Act (
FDIA
) and applicable regulations thereunder, is in compliance in all
respects with the applicable provisions of the Community Reinvestment Act of 1977 (the
Community Reinvestment Act
) and the regulations promulgated thereunder and has received a Community Reinvestment Act rating of
satisfactory in its most recently completed exam, and Cardinal has no knowledge of the existence of any fact or circumstance or set of facts or circumstances that could reasonably be expected to result in Cardinal Bank having its current
rating lowered.
(vii) At the Effective Time, the assumption by United of Cardinals obligations under Section 7.09
would be in compliance with Section 13(k) of the Exchange Act.
(k)
Material Contracts; Defaults
. Except for this
Agreement and as Previously Disclosed, neither Cardinal nor any of its Subsidiaries is a party to, bound by or subject to any agreement, contract, arrangement, commitment or understanding (whether written or oral) (i) that is a material
contract within the meaning of Item 601(b)(10) of the SECs Regulation S-K or (ii) that restricts or limits in any way the conduct of business by it or any of its Subsidiaries (including without limitation a non-compete or
similar provision). Neither Cardinal nor any of its Subsidiaries is in default under any contract, agreement, commitment, arrangement, lease, insurance policy or other instrument to which it is a party, by which its respective assets, business, or
operations may be bound or affected, or under which it or its respective assets, business, or operations receive benefits, and there has not occurred any event that, with the lapse of time or the giving of notice or both, would constitute such a
default.
(l)
No Brokers
. No action has been taken by Cardinal that would give rise to any valid claim against any
party hereto for a brokerage commission, finders fee or other like payment with respect to the transactions contemplated by this Agreement, excluding a Previously Disclosed fee to be paid to Sandler ONeill & Partners, L.P.
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(m)
Employee Benefit Plans
.
(i) On Section 6.03(m)(i) of Cardinals Disclosure Schedule, Cardinal has set forth a complete and accurate list of all existing
bonus, incentive, deferred compensation, pension, retirement, profit-sharing, thrift, savings, employee stock ownership, stock bonus, stock purchase, restricted stock, stock option, severance, welfare and fringe benefit plans, survivor life
insurance, split dollar or other life insurance benefit plan, employment or severance agreements and all similar practices, policies and arrangements in which any current or former employee (the
Employees
), current or former
consultant (the
Consultants
) or current or former director (the
Directors
) of Cardinal or any of its Subsidiaries participates or to which any such Employees, Consultants or Directors are a party (the
Compensation and Benefit Plans
). Except as required by the terms of this Agreement or as Previously Disclosed on Section 6.03(m)(i) of Cardinals Disclosure Schedule, neither Cardinal nor any of its Subsidiaries has any
commitment to create any additional Compensation and Benefit Plan or to modify or change any existing Compensation and Benefit Plan.
(ii) Each Compensation and Benefit Plan has been operated and administered in all material respects in accordance with its terms and with applicable law, including, but not limited to, ERISA, the Code,
the Securities Act, the Exchange Act, the Age Discrimination in Employment Act, or any regulations or rules promulgated thereunder, and all filings, disclosures and notices required by ERISA, the Code, the Securities Act, the Exchange Act, the Age
Discrimination in Employment Act and any other applicable law have been timely made. Each Compensation and Benefit Plan that is an employee pension benefit plan within the meaning of Section 3(2) of ERISA (a
Pension
Plan
) and that is intended to be qualified under Section 401(a) of the Code has received a favorable determination letter or has applied for a favorable determination letter in compliance with the Code (including a determination that
the related trust under such Compensation and Benefit Plan is exempt from tax under Section 501(a) of the Code) from the Internal Revenue Service (
IRS
) or the Compensation and Benefit Plan uses a prototype or volume submitter
plan that is the subject of an IRS opinion or advisory letter, and Cardinal is not aware of any circumstances that could adversely affect such qualification or that are likely to result in the revocation of any existing favorable determination
letter or in not receiving a favorable determination letter. There is no material pending or, to the knowledge of Cardinal, threatened legal action, suit or claim relating to the Compensation and Benefit Plans other than routine claims for benefits.
Neither Cardinal nor any of its Subsidiaries has engaged in a transaction, or omitted to take any action, with respect to any Compensation and Benefit Plan that would reasonably be expected to subject Cardinal or any of its Subsidiaries to a
material tax or penalty imposed by either Section 4975 of the Code or Section 502 of ERISA, assuming for purposes of Section 4975 of the Code that the taxable period of any such transaction expired as of the date hereof.
(iii) No Compensation and Benefit Plans currently maintained, or maintained within the last six years, by Cardinal or any of its
Subsidiaries or any entity (an
ERISA Affiliate
) that is considered one employer with Cardinal under Section 4001(a)(14) of ERISA or Section 414(b) or (c) of the Code is or was subject to Title IV of ERISA or is or
was a multiemployer plan under Subtitle E of Title IV of ERISA. To the knowledge of Cardinal, there is no pending investigation or enforcement action by the PBGC, the DOL or IRS or any other governmental agency with respect to any Compensation and
Benefit Plan.
(iv) All contributions required to be made under the terms of any Compensation and Benefit Plan or any
employee benefit arrangements under any collective bargaining agreement to which Cardinal or any of its Subsidiaries is a party have been timely made or have been reflected on Cardinals financial statements. None of Cardinal, any of its
Subsidiaries or any ERISA Affiliate (x) has provided, or would reasonably be expected to be required to provide, security to any Pension Plan pursuant to Section 401(a)(29) of the Code, and (y) has taken any action, or omitted to take
any action, that has resulted, or would reasonably be expected to result, in the imposition of a lien under Section 412(n) of the Code or pursuant to ERISA.
(v) Neither Cardinal nor any of its Subsidiaries has any obligations to provide retiree health and life insurance, retiree long-term care insurance or retiree death or other benefits under any
Compensation and Benefit Plan, other than benefits mandated by Section 4980B of the Code, and each such Compensation and
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Benefit Plan may be amended or terminated without incurring liability thereunder, and there has been no communication to Employees by Cardinal or any of its Subsidiaries that would reasonably be
expected to promise or guarantee such Employees retiree health or life insurance or retiree death or other benefits on a permanent basis.
(vi) Cardinal and its Subsidiaries do not maintain any Compensation and Benefit Plans covering foreign Employees.
(vii) With respect to each Compensation and Benefit Plan, if applicable, Cardinal has provided or made available to United, true and complete copies of existing: (A) Compensation and Benefit Plan
documents and amendments thereto; (B) trust instruments and insurance contracts; (C) two most recent Forms 5500 filed with the IRS; (D) most recent actuarial report and financial statement; (E) the most recent summary plan
description; (F) forms filed with the PBGC (other than for minimum payments); (G) most recent determination or opinion letter issued by the IRS; (H) any Form 5310 or Form 5330 filed with the IRS; and (I) most recent
nondiscrimination tests performed under ERISA and the Code (including 401(k) and 401(m) tests).
(viii) Except as set forth
on Section 6.03(m)(viii) of Cardinals Disclosure Schedule, the consummation of the transactions contemplated by this Agreement would not, directly or indirectly (including, without limitation, as a result of any termination of employment prior
to or following the Effective Time) reasonably be expected to (A) entitle any Employee, Consultant or Director to any payment (including severance pay or similar compensation) or any increase in compensation, (B) result in the vesting or
acceleration of any benefits under any Compensation and Benefit Plan other than the Cardinal Stock Plans and except as otherwise provided for in this Agreement or (C) result in any material increase in benefits payable under any Compensation
and Benefit Plan.
(ix) Neither Cardinal nor any of its Subsidiaries maintains any compensation plans, programs or
arrangements the payments under which would not reasonably be expected to be deductible as a result of the limitations under Section 162(m) of the Code and the regulations issued thereunder.
(x) Except as set forth on Section 6.03(m)(x) of Cardinals Disclosure Schedule, as a result, directly or indirectly, of the
transactions contemplated by this Agreement (including, without limitation, as a result of any termination of employment prior to or following the Effective Time), neither United nor Cardinal, or any of their respective Subsidiaries will be
obligated to make a payment to an Employee of Cardinal or any of its Subsidiaries that would be characterized as an excess parachute payment to an individual who is a disqualified individual (as such terms are defined in
Section 280G of the Code), without regard to whether such payment is reasonable compensation for personal services performed or to be performed in the future.
(xi) As of the Effective Date, there are no supplemental employment retirement plans (each, a
SERP
) or non-qualified deferred compensation plans (
Deferred Compensation
Plans
) between Cardinal and any of its employees that have assets through a grantor trust or trusts of which Cardinal is the grantor within the meaning of subpart E, part I, subchapter J, chapter 1, subtitle A of the Code that are subject
to claims of creditors, and except as set forth on Section 6.03(m)(xi) of Cardinals Disclosure Schedule, no such grantor trusts are required to be established on or after the Effective Time by the successor to Cardinal or any of its
subsidiaries as a result, directly or indirectly, of the transactions contemplated by this Agreement (including, without limitation, as a result of any termination of employment prior to or following the Effective Time), and each Deferred
Compensation Plan that is a SERP or non-qualified deferred compensation plan of Cardinal is listed on Section 6.03(m)(xi) of Cardinals Disclosure Schedule.
(xii) Except as set forth on Section 6.03(m)(xii) of Cardinals Disclosure Schedule, neither Cardinal nor any of its Subsidiaries has made any agreement, taken any action, or omitted to take any
action, with respect to or as part of any Compensation and Benefit Plan that is an operational failure under Section 409A of the Code or that would reasonably be expected to subject Cardinal or any of its Subsidiaries to any obligation
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to report any amount or withhold any amount as includable in income and subject to tax, interest or any penalty by any service provider to Cardinal or any of its Subsidiaries under
Section 409A of the Code or to pay any reimbursement or other payment to any service provider, as defined under Section 409A of the Code, respecting any such tax, interest or penalty under Section 409A of the Code, and if any
correction procedure authorized under any IRS guidance with respect to Section 409A is necessary or available on or before the Effective Time to prevent any such Section 409A document or operational failure, Cardinal agrees to so correct prior to
the Effective Time. As a result, directly or indirectly, of the transactions contemplated by this Agreement (including, without limitation, as a result of any termination of employment prior to or following the Effective Time), neither Cardinal nor
any of its Subsidiaries will be obligated to report any amount or withhold any amount as includable in income and subject to tax, interest or any penalty by any service provider (as defined under Section 409A of the Code) to Cardinal or any of
its Subsidiaries under Section 409A of the Code or to pay any reimbursement or other payment to any service provider (as defined under Section 409A of the Code) respecting any such Tax, interest or penalty under Section 409A of the
Code and no provision of any of the Compensation and Benefit Plans, or any actions taken or omitted thereunder, violate Section 409A of the Code.
(n)
Labor Matters
. Neither Cardinal nor any of its Subsidiaries is a party to or is bound by any collective bargaining agreement, contract or other agreement or understanding with a labor union or
labor organization, nor is Cardinal or any of its Subsidiaries the subject of a proceeding asserting that it or any such Subsidiary has committed an unfair labor practice (within the meaning of the National Labor Relations Act) or seeking to compel
Cardinal or any such Subsidiary to bargain with any labor organization as to wages or conditions of employment, nor is there any strike or other labor dispute involving it or any of its Subsidiaries pending or, to Cardinals knowledge,
threatened, nor is Cardinal aware of any activity involving its or any of its Subsidiaries employees seeking to certify a collective bargaining unit or engaging in other organizational activity.
(o)
Takeover Laws
. Cardinal has taken all action required to be taken by it in order to exempt this Agreement and the transactions
contemplated hereby from, and this Agreement and the transactions contemplated hereby are exempt from, the requirements of any moratorium, control share, fair price, affiliate transaction,
business combination or other antitakeover laws and regulations of any state applicable to Cardinal, including Article 14.1 of the VSCA (collectively,
Takeover Laws
).
(p)
Environmental Matters
. To Cardinals knowledge, neither the conduct nor operation of Cardinal or its Subsidiaries nor any
condition of any property presently or previously owned, leased or operated by any of them (including, without limitation, in a fiduciary or agency capacity), or on which any of them holds a Lien, violates or violated Environmental Laws and to
Cardinals knowledge, no condition has existed or event has occurred with respect to any of them or any such property that, with notice or the passage of time, or both, is reasonably likely to result in liability under Environmental Laws. To
Cardinals knowledge, neither Cardinal nor any of its Subsidiaries has received any notice from any person or entity that Cardinal or its Subsidiaries or the operation or condition of any property ever owned, leased, operated, or held as
collateral or in a fiduciary capacity by any of them are or were in violation of or otherwise are alleged to have liability under any Environmental Law, including, but not limited to, responsibility (or potential responsibility) for the cleanup or
other remediation of any pollutants, contaminants or hazardous or toxic wastes, substances or materials at, on, beneath, or originating from any such property.
(q)
Tax Matters
.
(i) All Tax Returns that are required to be filed by or
with respect to Cardinal and its Subsidiaries have been timely filed (taking into account all applicable extensions), and all Taxes shown to be due on such Tax Returns have been paid in full, other than Taxes that are being contested in good
faith, which have not been finally determined, and have been adequately reserved against in accordance with GAAP on Cardinals consolidated financial statements as of December 31, 2015. All assessments for Taxes of Cardinal or any of its
Subsidiaries due with respect to completed and settled examinations or any concluded litigations have been fully paid. There are no disputes, audits, examinations or proceedings pending, or claims asserted, for Taxes upon
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Cardinal or any of its Subsidiaries. Neither Cardinal nor any of its Subsidiaries has granted any extension or waiver of the limitation period for the assessment or collection of Tax that
remains in effect. Neither Cardinal nor any of its Subsidiaries has any liability with respect to income, franchise or similar Taxes that accrued on or before December 31, 2015 in excess of the amounts accrued with respect thereto that are reflected
in the consolidated financial statements of Cardinal as of December 31, 2015. As of the date hereof, neither Cardinal nor any of its Subsidiaries has any knowledge of any conditions that exist that might prevent or impede the Merger from qualifying
as a reorganization within the meaning of Section 368(a) of the Code.
(ii) Cardinal is not and has not been
a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code during the applicable period specified in Section 897(c)(1)(A) of the Code.
(r)
Risk Management Instruments
. Neither Cardinal nor any of its Subsidiaries are parties to any interest rate swaps, caps,
floors, option agreements, futures and forward contracts and other similar risk management arrangements, whether entered into for Cardinals own account, or for the account of one or more of Cardinals Subsidiaries or their customers.
(s)
Books and Records
. The books and records of Cardinal and its Subsidiaries have been fully, properly and accurately
maintained in all material respects, and there are no material inaccuracies or discrepancies of any kind contained or reflected therein and they fairly reflect the substance of events and transactions included therein.
(t)
Insurance
. Cardinal Previously Disclosed a list of all of the insurance policies, binders, or bonds maintained by Cardinal or
its Subsidiaries. Cardinal and its Subsidiaries are insured with insurers believed to be reputable against such risks and in such amounts as the management of Cardinal reasonably has determined to be prudent in accordance with industry practices.
All such insurance policies are in full force and effect; Cardinal and its Subsidiaries are not in material default thereunder; and all claims thereunder have been filed in due and timely fashion.
(u)
Opinion of Financial Advisor
. The board of directors of Cardinal has received the opinion (which, if initially rendered
verbally, has been or will be confirmed by a written opinion, dated the same date) of Sandler ONeill & Partners, L.P., to the effect that, as of the date of such opinion, and based upon and subject to factors, assumptions and limitations
set forth therein, the Exchange Ratio in the Merger is fair, from a financial point of view, to the holders of Cardinal Common Stock. Such opinion has not been amended or rescinded as of the date of this Agreement.
(v)
Loan Matters
.
(i) Each Cardinal Loan currently outstanding (A) is evidenced by notes, agreements or other evidences of indebtedness that are true, genuine and what they purport to be, (B) to the extent secured, has
been secured by valid liens that have been perfected and (C) to the knowledge of Cardinal, is a legal, valid and binding obligation of the obligor named therein, enforceable in accordance with its terms (except in all cases as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, receivership, conservatorship, moratorium or similar laws affecting the enforcement of creditors rights generally and except that the availability of the equitable remedy of
specific performance or injunctive relief is subject to the discretion of the court before which any proceeding may be brought). The notes or other credit or security documents with respect to each such outstanding Cardinal Loan were executed and
delivered in compliance in all respects with all applicable laws at the time of origination or purchase by Cardinal and are complete and correct in all respects.
(ii) Each outstanding Cardinal Loan was solicited and originated, and is and has been administered and, where applicable, serviced, and the relevant Cardinal Loan files are being maintained, in all
respects in accordance with the relevant notes or other credit or security documents, Cardinals written underwriting standards and with all applicable requirements of applicable laws.
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(iii) None of the contracts pursuant to which Cardinal has sold Cardinal Loans or pools of
Cardinal Loans or participations in Cardinal Loans or pools of Cardinal Loans contains any obligation to repurchase such Cardinal Loans or interests therein solely on account of a payment default by the obligor on any such Cardinal Loan.
(iv) (A) Section 6.03(v)(iv) of Cardinals Disclosure Schedule sets forth a list of all Cardinal Loans as of the date hereof by
Cardinal to any directors, executive officers and principal stockholders (as such terms are defined in Regulation O of the Federal Reserve Board (12 C.F.R. Part 215)) of Cardinal, and (B) there are no employee, officer, director or other affiliate
Cardinal Loans on which the borrower is paying a rate other than that reflected in the note or other relevant credit or security agreement or on which the borrower is paying a rate which was not in compliance with Regulation O.
(w)
Allowance for Loan and Lease Losses
. The allowance for loan and lease losses (
ALLL
) reflected in the most
recent Cardinal financial statements was in compliance with Cardinals existing methodology for determining the adequacy of its ALLL and in compliance in all material respects with the standards established by the applicable Regulatory
Authority, the Financial Accounting Standards Board and GAAP.
(x)
Assets
. Cardinal or its Subsidiaries has good and
marketable title to those assets reflected in the most recent Cardinal financial statements as being owned by Cardinal or acquired after the date thereof (except assets sold or otherwise disposed of since the date thereof in the ordinary course of
business), free and clear of all liens, except (a) statutory liens securing payments not yet due, (b) liens for real property Taxes not yet due and payable, (c) easements, rights of way, and other similar encumbrances that do not
materially affect the use of the properties or assets subject thereto or affected thereby or otherwise materially impair business operations at such properties, and (d) such imperfections or irregularities of title or liens as do not materially
affect the use of the properties or assets subject thereto or affected thereby or otherwise materially impair business operations at such properties (collectively,
Permitted Liens
). Cardinal is the lessee of all leasehold estates
reflected in the latest Cardinal financial statements, free and clear of all liens of any nature whatsoever, except for Permitted Liens, and is in possession of the properties purported to be leased thereunder, and each such lease is valid without
default thereunder by the lessee or, to the knowledge of Cardinal, the lessor. There are no pending or, to the knowledge of Cardinal, threatened condemnation or eminent domain proceedings against any real property that is owned or leased by
Cardinal. Cardinal owns or leases all properties as are necessary to its operations now conducted.
6.04
Representations and Warranties of United.
Subject to Sections 6.01 and 6.02 and except as Previously Disclosed, United hereby represents and warrants to Cardinal:
(a)
Organization and Standing
. United is a corporation duly organized, validly existing and in good standing under the laws of the
State of West Virginia. United is duly qualified to do business and is in good standing in the states of the United States and foreign jurisdictions where its ownership or leasing of property or assets or the conduct of its business requires it to
be so qualified.
(b)
Capitalization
.
(i) As of the date hereof, the authorized capital stock of United consists of (A) 100,000,000 shares of United Common Stock, of which as July 31, 2016, 76,379,927 shares were outstanding, and
(B) 50,000,000 shares of preferred stock with par value of $1.00 per share (
United Preferred Stock
), as of the date hereof, none of which are outstanding. As of the date hereof, except as set forth in its Disclosure Schedule,
United does not have and is not bound by any outstanding subscriptions, options, warrants, calls, commitments or agreements of any character calling for the purchase or issuance of any shares of United Common Stock, United Preferred Stock or any
other equity securities of United or any of its Subsidiaries or any securities representing the right to purchase or otherwise receive any shares of United Common Stock, United Preferred Stock or other equity securities of United or any of its
Subsidiaries. As of the date hereof, United had 3,038,784 shares of United Common Stock, which are issuable and reserved for issuance upon exercise of United Stock Options. The outstanding shares of United Common Stock have been duly authorized and
are validly issued and outstanding, fully paid and nonassessable, and subject to no preemptive rights (and were not issued in violation of any preemptive rights).
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(ii) Upon the approval of the United Certificate Amendment, the shares of United Common
Stock to be issued in exchange for shares of Cardinal Common Stock in the Merger, when issued in accordance with the terms of this Agreement, will be duly authorized, validly issued, fully paid and nonassessable, with no personal liability attaching
to the ownership thereof, subject to no preemptive rights and authorized for trading on the NASDAQ.
(c)
Subsidiaries
.
Each of Uniteds Subsidiaries has been duly organized and is validly existing in good standing under the laws of the jurisdiction of its organization, and is duly qualified to do business and is in good standing in the jurisdictions where its
ownership or leasing of property or the conduct of its business requires it to be so qualified and it owns, directly or indirectly, all the issued and outstanding equity securities of each of its Significant Subsidiaries. United has Previously
Disclosed a list of all of its Subsidiaries, together with the jurisdiction of organization of each Subsidiary.
(d)
Corporate Power
. Each of United and its Subsidiaries has the corporate power and authority to carry on its business as it is now being conducted and to own all its properties and assets; and United has the corporate power and authority to
execute, deliver and perform its obligations under this Agreement and, subject to receipt of approval of this Agreement (including the Merger and the Plan of Merger) and the United Certificate Amendment by the stockholders of United, to consummate
the transactions contemplated hereby.
(e)
Corporate Authority
. Subject to receipt by United of the requisite
stockholder approvals (i) to amend the United Certificate to increase the number of authorized shares of United Common Stock (the
United Certificate Amendment
) and (ii) required by (A) NASDAQ Listing Rule 5635 with respect to
issuing the Merger Consideration and (B) Sections 31D-6-621 and 31D-11-1104 of the WVBCA with respect to issuing the Merger Consideration and approving the Merger, such approvals constituting the affirmative vote of a majority of the votes cast if a
quorum is present (which are the only votes of United stockholders required thereon), the execution and delivery of this Agreement and the transactions contemplated hereby have been authorized by all necessary corporate action of United and the
United Board. Assuming due authorization, execution and delivery by Cardinal, this Agreement is a valid and legally binding obligation of United, enforceable in accordance with its terms (except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and similar laws of general applicability relating to or affecting creditors rights or by general equity principles).
(f)
Consents and Approvals; No Defaults
.
(i) No consents or approvals of, or filings or registrations with, any Governmental Authority or with any third party are required to be made or obtained by United or any of its Subsidiaries in connection
with the execution, delivery or performance by United of this Agreement or to consummate the Merger except for: (A) filings of applications and notices with the federal and state banking and insurance authorities and the approvals or consents
of any federal or state banking and insurance authorities, including, the West Virginia Division of Financial Institutions, the VBFI and the Federal Reserve Board; (B) filings with the NASDAQ regarding the United Common Stock to be issued in
the Merger; (C) the filing with and declaration of effectiveness of the Registration Statement by the SEC; (D) the filing of the Proxy Statement with the SEC; (E) the filing of the United Certificate Amendment with the West Virginia
Secretary of State pursuant to the WVBCA; (F) the filing of articles of merger with the VSCC pursuant to the VSCA and the VLLCA and the issuance of certificates of merger in connection with the Merger and the Bank Merger; (G) such filings as
are required to be made or approvals as are required to be obtained under the securities or Blue Sky laws of various states in connection with the issuance of United Stock in the Merger; and (H) receipt of the approvals set forth in
Section 8.01(b). As of the date hereof, United is not aware of any reason why the approvals set forth in Section 8.01(b) will not be received without the imposition of a condition, restriction or requirement of the type described in
Section 8.01(b).
(ii) Subject to the satisfaction of the requirements referred to in the preceding paragraph and
expiration of the related waiting periods, the execution, delivery and performance of this Agreement and the
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consummation of the transactions contemplated hereby do not and will not (A) constitute a breach or violation of, or a default under, or give rise to any Lien, any acceleration of remedies
or any right of termination under, any law, rule or regulation or any judgment, decree, order, governmental permit or license, or agreement, indenture or instrument of United or of any of its Subsidiaries or to which United or any of its
Subsidiaries or properties is subject or bound, (B) constitute a breach or violation of, or a default under, the articles of incorporation or bylaws (or similar governing documents) of United or any of its Subsidiaries, or (C) require any
consent or approval under any such law, rule, regulation, judgment, decree, order, governmental permit or license, agreement, indenture or instrument.
(g)
Financial Reports and SEC Documents; Absence of Certain Changes or Events
.
(i) Uniteds Annual Report on Form 10-K for each of the fiscal years ended December 31, 2013, 2014 and 2015 and all other reports, registration statements, definitive proxy statements or
information statements filed or to be filed by it or any of its Subsidiaries subsequent to December 31, 2015, under the Securities Act or under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act in the form filed or to be filed
(collectively
Uniteds SEC Documents
), as of the date filed, (A) as to form complied or will comply in all material respects with the applicable requirements under the Securities Act or the Exchange Act, as the case may
be, and (B) did not and will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were
made, not misleading; and each of the balance sheets or statements of condition of United contained in or incorporated by reference into any of Uniteds SEC Documents (including the related notes and schedules thereto) fairly presents, or will
fairly present, the financial position of United and its Subsidiaries as of its date, and each of the statements of income or results of operations and changes in stockholders equity and cash flows or equivalent statements of United in any of
Uniteds SEC Documents (including any related notes and schedules thereto) fairly presents, or will fairly present, the results of operations, changes in stockholders equity and cash flows, as the case may be, of United and its
Subsidiaries for the periods to which they relate, in each case in accordance with GAAP during the periods involved, except in each case as may be noted therein, and subject to normal year-end audit adjustments in the case of unaudited statements.
(ii) Section 6.04(g)(ii) of Uniteds Disclosure Schedule lists, and upon request, United has delivered to
Cardinal, copies of the documentation creating or governing all securitization transactions and off-balance sheet arrangements (as defined in Item 303(a)(4)(ii) of Regulation S-K) effected by United or its Subsidiaries, since
December 31, 2015. Ernst & Young LLP, which has expressed its opinion with respect to the audited financial statements of United and its Subsidiaries (including the related notes) included in Uniteds SEC Documents is and has been
throughout the periods covered by such financial statements an independent registered public accounting firm (as defined in Section 2(a)(12) of the Sarbanes-Oxley Act of 2002).
(iii) United has on a timely basis filed all forms, reports and documents required to be filed by it with the SEC since
December 31, 2012. Except to the extent available in full without redaction on the SECs web site through the Electronic Data Gathering, Analysis and Retrieval System (EDGAR) two days prior to the date of this Agreement, United has made
available to Cardinal copies in the form filed with the SEC of (A) its Annual Reports on Form 10-K for each fiscal year of the Company beginning after December 31, 2012, (B) its Quarterly Reports on Form 10-Q for each of the first
three fiscal quarters in each of the fiscal years of United referred to in clause (A) above, (C) all proxy statements relating to Uniteds meetings of stockholders (whether annual or special) held, and all information statements
relating to stockholder consents since the beginning of the first fiscal year referred to in clause (A) above, (D) all certifications and statements required by (x) the SECs Order dated June 27, 2002, pursuant to
Section 21(a)(1) of the Exchange Act (File No. 4-460), (y) Rule 13a-14 or 15d-14 under the Exchange Act or (z) 18 U.S.C. §1350 (Section 906 of the Sarbanes-Oxley Act of 2002) with respect to any report referred to above,
(E) all other forms, reports, registration statements and other documents (other than preliminary materials if the corresponding definitive materials have been made available to Cardinal pursuant to this Section 6.04(g), filed by United
with the SEC since the beginning of the first fiscal year referred above, and (F) all comment letters received by United from the staff of the SEC since December 31, 2014 and all responses to such comment letters by or on behalf of United.
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(iv) United maintains disclosure controls and procedures required by Rule 13a-15 or 15d-15
under the Exchange Act; such controls and procedures are effective to ensure that all material information concerning United and its Subsidiaries is made known on a timely basis to the individuals responsible for the preparation of Uniteds
filings with the SEC and other public disclosure documents. United maintains internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act and as of December 31, 2015, such internal control over financial
reporting was effective in providing reasonable assurance to Uniteds management and its board of directors regarding the preparation and fair presentation of published financial statements in accordance with GAAP. To Uniteds knowledge,
each director and executive officer of United has filed with the SEC on a timely basis all statements required by Section 16(a) of the Exchange Act and the rules and regulations thereunder since December 31, 2015. As used in this
Section 6.04(g), the term file shall be broadly construed to include any manner in which a document or information is furnished, supplied or otherwise made available to the SEC.
(v) Since December 31, 2015, United and its Subsidiaries have not incurred any liability other than in the ordinary course of
business consistent with past practice or for legal, accounting, and financial advisory fees and out-of-pocket expenses in connection with the transactions contemplated by this Agreement.
(vi) Since December 31, 2015, (A) United and its Subsidiaries have conducted their respective businesses in the ordinary and
usual course consistent with past practice (excluding matters related to this Agreement and the transactions contemplated hereby) and (B) no event has occurred or circumstance arisen that, individually or taken together with all other facts,
circumstances and events (described in any subsection of Section 6.04 or otherwise), is reasonably likely to have a Material Adverse Effect with respect to United.
(h)
Litigation
. No litigation, claim or other proceeding before any Governmental Authority is pending against United or any of its Subsidiaries and, to Uniteds knowledge, no such litigation,
claim or other proceeding has been threatened.
(i)
Regulatory Matters
. Neither United nor any of its Subsidiaries or
properties is a party to or is subject to any order, decree, agreement, memorandum of understanding or similar arrangement with, or a commitment letter or similar submission to, or extraordinary supervisory letter from, any Regulatory Authority.
(i) Neither United nor any of its Subsidiaries has been advised by any Regulatory Authority that such Regulatory Authority
is contemplating issuing or requesting (or is considering the appropriateness of issuing or requesting) any such order, decree, agreement, memorandum of understanding, commitment letter, supervisory letter or similar submission.
(ii) United is a bank holding company duly registered under the Bank Holding Company Act of 1956, as amended. United is not a
financial holding company as defined by the Gramm-Leach-Bliley Act of 1999.
(j)
Compliance with Laws
.
(i) Each of United and its Subsidiaries is in compliance with all applicable federal, state, local and foreign statutes, laws,
regulations, ordinances, rules, judgments, orders or decrees applicable thereto or to the employees conducting such businesses, including, without limitation, the Equal Credit Opportunity Act, the Fair Housing Act, the Community Reinvestment Act,
the Home Mortgage Disclosure Act, Fair Credit Reporting Act, the Truth in Lending Act and Regulation Z, the Home Mortgage Disclosure Act, the Fair Debt Collection Practices Act, the Electronic Fund Transfer Act, the Dodd-Frank Wall Street Reform and
Consumer Protection Act, the Bank Secrecy Act, any regulations promulgated by the Consumer Financial Protection Bureau, the Foreign Corrupt Practices Act, Title III of the USA Patriot Act, the Interagency Policy Statement on Retail Sales of
Nondeposit Investment Products, the SAFE Mortgage Licensing Act of 2008, the Real Estate Settlement Procedures Act and Regulation X, and any other law relating to bank secrecy, discriminatory or abusive or
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deceptive lending or any other product or service, financing or leasing practices, money laundering prevention, Sections 23A and 23B of the Federal Reserve Act, and all agency requirements
relating to the origination, sale and servicing of mortgage and consumer loans.
(ii) Each of United and its Subsidiaries has
all permits, licenses, authorizations, orders and approvals of, and has made all filings, applications and registrations with, all Governmental Authorities that are required in order to permit them to own or lease their properties and to conduct
their businesses as presently conducted; all such permits, licenses, certificates of authority, orders and approvals are in full force and effect and, to Uniteds knowledge, no suspension or cancellation of any of them is threatened.
(iii) Neither United nor any of its Subsidiaries has received, since December 31, 2006, no notification or
communication from any Governmental Authority (A) asserting that United or any of its Subsidiaries is not in compliance with any of the statutes, regulations, or ordinances which such Governmental Authority enforces or (B) threatening to
revoke any license, franchise, permit, or governmental authorization (nor, to Uniteds knowledge, do any grounds for any of the foregoing exist).
(iv) Since January 1, 2014, is in compliance with the privacy provisions of the Gramm-Leach-Bliley Act, and all other applicable laws relating to consumer privacy.
(v) Neither United nor any of its directors, officers or employees, nor, to the knowledge of United, any agent or other Person acting on
behalf of United is currently subject to any sanctions administered by Office of Foreign Assets Control.
(vi) United Bank is
an insured depositary institution as defined in the FDIA and applicable regulations thereunder, is in compliance in all respects with the applicable provisions of the Community Reinvestment Act and the regulations promulgated thereunder
and has received a Community Reinvestment Act rating of satisfactory in its most recently completed exam, and United has no knowledge of the existence of any fact or circumstance or set of facts or circumstances that could reasonably be
expected to result in United Bank having its current rating lowered.
(k)
Material Contracts; Defaults
. Except for this
Agreement, neither United nor any of its Subsidiaries is a party to, bound by or subject to any agreement, contract, arrangement, commitment or understanding (whether written or oral) (i) that is a material contract within the
meaning of Item 601(b)(10) of the SECs Regulation S-K or (ii) that restricts or limits in any way the conduct of business by it or any of its Subsidiaries (including without limitation a non-compete or similar provision). Neither
United nor any of its Subsidiaries is in default under any contract, agreement, commitment, arrangement, lease, insurance policy or other instrument to which it is a party, by which its respective assets, business, or operations may be bound or
affected, or under which it or its respective assets, business, or operations receive benefits, and there has not occurred any event that, with the lapse of time or the giving of notice or both, would constitute such a default.
(l)
Employee Benefit Plans
.
(i) United has Previously Disclosed a complete and accurate list of all existing bonus, incentive, deferred compensation, pension, retirement, profit-sharing, thrift, savings, employee stock ownership,
stock bonus, stock purchase, restricted stock, stock option, severance, welfare and fringe benefit plans, employment or severance agreements and all similar practices, policies and arrangements in which any current or former employee (the
United Employees
), current or former consultant (the
United Consultants
) or current or former director (the
United Directors
) of United or any of its Subsidiaries participates or to which any
United Employees, United Consultants or United Directors are a party (the
United Compensation and Benefit Plans
).
(ii) Each United Compensation and Benefit Plan has been operated and administered in all material respects in accordance with its terms and with applicable law, including, but not limited to, ERISA, the
Code, the Securities Act, the Exchange Act, the Age Discrimination in Employment Act, or any regulations or rules promulgated thereunder, and all filings, disclosures and notices required by ERISA, the Code, the Securities
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Act, the Exchange Act, the Age Discrimination in Employment Act and any other applicable law have been timely made. Each Compensation and Benefit Plan which is an employee pension benefit
plan within the meaning of Section 3(2) of ERISA (a
United Pension Plan
) and which is intended to be qualified under Section 401(a) of the Code has received a favorable determination letter (including a
determination that the related trust under such United Compensation and Benefit Plan is exempt from tax under Section 501(a) of the Code) from the IRS or the Compensation and Benefit Plan uses a prototype or volume submitter plan that is the
subject of an IRS opinion or advisory letter, and United is not aware of any circumstances that could adversely affect such qualification or which are likely to result in the revocation of any existing favorable determination letter or in not
receiving a favorable determination letter. There is no material pending or, to the knowledge of United, threatened legal action, suit or claim relating to the United Compensation and Benefit Plans other than routine claims for benefits. Neither
United nor any of its Subsidiaries has engaged in a transaction, or omitted to take any action, with respect to any United Compensation and Benefit Plan that would reasonably be expected to subject United or any of its Subsidiaries to a tax or
penalty imposed by either Section 4975 of the Code or Section 502 of ERISA, assuming for purposes of Section 4975 of the Code that the taxable period of any such transaction expired as of the date hereof.
(iii) No liability (other than for payment of premiums to the PBGC which have been made or will be made on a timely basis) under Title
IV of ERISA has been or is expected to be incurred by United or any of its Subsidiaries with respect to any ongoing, frozen or terminated single-employer plan, within the meaning of Section 4001(a)(15) of ERISA, currently or
formerly maintained by any of them, or any single-employer plan of any entity (a
United ERISA Affiliate
) which is considered one employer with United under Section 4001(a)(14) of ERISA or Section 414(b) or (c) of
the Code (a
United ERISA Affiliate Plan
). None of United, any of its Subsidiaries or any United ERISA Affiliate has contributed, or has been obligated to contribute, to a multiemployer plan under Subtitle E of Title IV of ERISA at
any time since September 26, 1980. No notice of a reportable event, within the meaning of Section 4043 of ERISA for which the 30-day reporting requirement has not been waived, has been required to be filed for any United
Compensation and Benefit Plan or by any United ERISA Affiliate Plan within the 12-month period ending on the date hereof, and no such notice will be required to be filed as a result of the transactions contemplated by this Agreement. The PBGC has
not instituted proceedings to terminate any Pension Plan or United ERISA Affiliate Plan and, to Uniteds knowledge, no condition exists that presents a material risk that such proceedings will be instituted. To the knowledge of United, there is
no pending investigation or enforcement action by the PBGC, the DOL or IRS or any other governmental agency with respect to any United Compensation and Benefit Plan. Under each United Pension Plan and United ERISA Affiliate Plan, as of the date of
the most recent actuarial valuation performed prior to the date of this Agreement, the actuarially determined present value of all benefit liabilities, within the meaning of Section 4001(a)(16) of ERISA (as determined on the basis
of the actuarial assumptions contained in such actuarial valuation of such United Pension Plan or United ERISA Affiliate Plan), did not exceed the then current value of the assets of such United Pension Plan or United ERISA Affiliate Plan and since
such date there has been neither an adverse change in the financial condition of such United Pension Plan or United ERISA Affiliate Plan nor any amendment or other change to such Pension Plan or ERISA Affiliate Plan that would increase the amount of
benefits thereunder which reasonably could be expected to change such result.
(iv) All contributions required to be made
under the terms of any United Compensation and Benefit Plan or United ERISA Affiliate Plan or any employee benefit arrangements under any collective bargaining agreement to which United or any of its Subsidiaries is a party have been timely made or
have been reflected on Uniteds financial statements. Neither any United Pension Plan nor any United ERISA Affiliate Plan has an accumulated funding deficiency (whether or not waived) within the meaning of Section 412 of the
Code or Section 302 of ERISA and all required payments to the PBGC with respect to each United Pension Plan or United ERISA Affiliate Plan have been made on or before their due dates. None of United, any of its Subsidiaries or any United ERISA
Affiliate (x) has provided, or would reasonably be expected to be required to provide, security to any United Pension Plan or to any United ERISA Affiliate Plan pursuant to Section 401(a)(29) of the Code, and (y) has taken any action,
or omitted to take any action, that has resulted, or would reasonably be expected to result, in the imposition of a lien under Section 412(n) of the Code or pursuant to ERISA.
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(v) Neither United nor any of its Subsidiaries has any obligations to provide retiree
health and life insurance, retiree long-term care insurance, retiree death or other benefits, other than a program to offer to remit premiums and provide some administrative tasks with respect to retiree health and life insurance paid by retirees
under any United Compensation and Benefit Plan, other than benefits mandated by Section 4980B of the Code, and each such United Compensation and Benefit Plan may be amended or terminated without incurring liability thereunder and there has been
no communication to Employees by United or any of its Subsidiaries that would reasonably be expected to promise or guarantee such Employees retiree health or life insurance, retiree death or other benefits on a permanent basis.
(vi) United and its Subsidiaries do not maintain any United Compensation and Benefit Plans covering foreign Employees.
(vii) The consummation of the transactions contemplated by this Agreement would not, directly or indirectly (including, without
limitation, as a result of any termination of employment prior to or following the Effective Time) reasonably be expected to (A) entitle any United Employee, United Consultant or United Director to any payment (including severance pay or
similar compensation) or any increase in compensation, (B) result in the vesting or acceleration of any benefits under any United Compensation and Benefit Plan or (C) result in any material increase in benefits payable under any United
Compensation and Benefit Plan.
(viii) Except for compensation paid to Richard M. Adams, neither United nor any of its
Subsidiaries maintains any compensation plans, programs or arrangements the payments under which would not reasonably be expected to be deductible as a result of the limitations under Section 162(m) of the Code and the regulations issued
thereunder.
(ix) As a result, directly or indirectly, of the transactions contemplated by this Agreement (including, without
limitation, as a result of any termination of employment prior to or following the Effective Time), neither United nor Cardinal, or any of their respective Subsidiaries will be obligated to make a payment with respect to any person who is an
employee, before the Effective Time, of United or any of its Subsidiaries, that would be characterized as an excess parachute payment to an individual who is a disqualified individual (as such terms are defined in
Section 280G of the Code), without regard to whether such payment is reasonable compensation for personal services performed or to be performed in the future.
(x) Neither United nor any of its Subsidiaries has made any agreement, taken any action, or omitted to take any action, with respect to or as part of any United Compensation and Benefit Plan that is an
operational failure under Section 409A of the Code or that would reasonably be expected to subject United or any of its Subsidiaries to any obligation to report any amount or withhold any amount as includable in income and subject to tax,
interest or any penalty by any service provider to United or any of its Subsidiaries under Section 409A of the Code or to pay any reimbursement or other payment to any service provider, as defined under Section 409A of the Code, respecting
any such tax, interest or penalty under Section 409A of the Code.
(m)
No Brokers
. No action has been taken by
United that would give rise to any valid claim against any party hereto for a brokerage commission, finders fee or other like payment with respect to the transactions contemplated by this Agreement, excluding a Previously Disclosed fee to
Keefe, Bruyette & Woods, Inc.
(n)
Labor Matters
. Neither United nor any of its Subsidiaries is a party to or is
bound by any collective bargaining agreement, contract or other agreement or understanding with a labor union or labor organization, nor is United or any of its Subsidiaries the subject of a proceeding asserting that it or any such Subsidiary has
committed an unfair labor practice (within the meaning of the National Labor Relations Act) or seeking to compel United or any such Subsidiary to bargain with any labor organization as to wages or conditions of employment, nor is there any strike or
other labor dispute involving it or any of its Subsidiaries pending or, to Uniteds knowledge, threatened, nor is United aware of any activity involving its or any of its Subsidiaries employees seeking to certify a collective bargaining
unit or engaging in other organizational activity.
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(o)
Takeover Laws
. United has taken all action required to be taken by it in order to
exempt this Agreement and the transactions contemplated hereby from, and this Agreement and the transactions contemplated hereby are exempt from, the requirements of any Takeover Laws applicable to United.
(p)
Environmental Matters
. To Uniteds knowledge, neither the conduct nor operation of United or its Subsidiaries nor any
condition of any property presently or previously owned, leased or operated by any of them (including, without limitation, in a fiduciary or agency capacity), or on which any of them holds a Lien, violates or violated Environmental Laws and to
Uniteds knowledge no condition has existed or event has occurred with respect to any of them or any such property that, with notice or the passage of time, or both, is reasonably likely to result in liability under Environmental Laws. To
Uniteds knowledge, neither United nor any of its Subsidiaries has received any notice from any person or entity that United or its Subsidiaries or the operation or condition of any property ever owned, leased, operated or held as collateral or
in a fiduciary capacity by any of them are or were in violation of or otherwise are alleged to have liability under any Environmental Law, including, but not limited to, responsibility (or potential responsibility) for the cleanup or other
remediation of any pollutants, contaminants, or hazardous or toxic wastes, substances or materials at, on, beneath or originating from any such property.
(q)
Tax Matters
. All Tax Returns that are required to be filed by or with respect to United and its Subsidiaries have been timely filed (taking into account all applicable extensions), and all
Taxes shown to be due on such Tax Returns have been paid in full, other than Taxes that are being contested in good faith, which have not been finally determined, and have been adequately reserved against in accordance with GAAP on Uniteds
consolidated financial statements as of December 31, 2015. All assessments for Taxes of United or any of its Subsidiaries due with respect to completed and settled examinations or any concluded litigations have been fully paid. There are no
disputes, audits, examinations or proceedings pending, or claims asserted, for Taxes upon United or any of its Subsidiaries. Neither United nor any of its Subsidiaries has granted any extension or waiver of the limitation period for the
assessment or collection of Tax that remains in effect. Neither United nor any of its Subsidiaries has any liability with respect to income, franchise or similar Taxes that accrued on or before December 31, 2015 in excess of the amounts
accrued with respect thereto that are reflected in the consolidated financial statements of United as of December 31, 2015. As of the date hereof, neither United nor any of its Subsidiaries has any knowledge of any conditions that exist that
might prevent or impede the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code.
(r)
Risk Management Instruments
. Neither United nor any of its Subsidiaries are parties to any interest rate swaps, caps, floors, option agreements, futures and forward contracts and other similar
risk management arrangements, whether entered into for Uniteds own account, or for the account of one or more of Uniteds Subsidiaries or their customers.
(s)
Books and Records
. The books and records of United and its Subsidiaries have been fully, properly and accurately maintained in all material respects, and there are no material inaccuracies or
discrepancies of any kind contained or reflected therein, and they fairly reflect the substance of events and transactions included therein.
(t)
Insurance
. United Previously Disclosed a list of all of the insurance policies, binders, or bonds maintained by United or its Subsidiaries. United and its Subsidiaries are insured with insurers
believed to be reputable against such risks and in such amounts as the management of United reasonably has determined to be prudent in accordance with industry practices. All such insurance policies are in full force and effect; United and its
Subsidiaries are not in material default thereunder; and all claims thereunder have been filed in due and timely fashion.
(u)
Opinion of Financial Advisor
. The board of directors of United has received the opinion (which, if initially rendered verbally, has been or will be confirmed by a written opinion, dated the same date) of Keefe, Bruyette & Woods, Inc., to
the effect that, as of the date of such opinion, and based upon and subject to
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factors, assumptions and limitations set forth therein, the Exchange Ratio to be paid to the holders of Cardinal Common Stock is fair, from a financial point of view, to United. Such opinion
has not been amended or rescinded as of the date of this Agreement.
(v)
Loan Matters
.
(i) Each United Loan currently outstanding (A) is evidenced by notes, agreements or other evidences of indebtedness that are true,
genuine and what they purport to be, (B) to the extent secured, has been secured by valid liens that have been perfected and (C) to the knowledge of United, is a legal, valid and binding obligation of the obligor named therein, enforceable in
accordance with its terms (except in all cases as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, receivership, conservatorship, moratorium or similar laws affecting the enforcement of creditors rights
generally and except that the availability of the equitable remedy of specific performance or injunctive relief is subject to the discretion of the court before which any proceeding may be brought). The notes or other credit or security documents
with respect to each such outstanding United Loan were executed and delivered in compliance in all respects with all applicable laws at the time of origination or purchase by United and are complete and correct in all respects.
(ii) Each outstanding United Loan was solicited and originated, and is and has been administered and, where applicable, serviced, and
the relevant United Loan files are being maintained, in all respects in accordance with the relevant notes or other credit or security documents, Uniteds written underwriting standards and with all applicable requirements of applicable laws.
(w)
Allowance for Loan and Lease Losses
. The ALLL reflected in the most recent United financial statements was in
compliance with Uniteds existing methodology for determining the adequacy of its ALLL and in compliance in all material respects with the standards established by the applicable Regulatory Authority, the Financial Accounting Standards Board
and GAAP.
(x)
Assets
. United or its Subsidiaries has good and marketable title to those assets reflected in the most
recent United financial statements as being owned by United or acquired after the date thereof (except assets sold or otherwise disposed of since the date thereof in the ordinary course of business), free and clear of all liens, except Permitted
Liens. United is the lessee of all leasehold estates reflected in the latest United financial statements, free and clear of all liens of any nature whatsoever, except for Permitted Liens, and is in possession of the properties purported to be leased
thereunder, and each such lease is valid without default thereunder by the lessee or, to the knowledge of United, the lessor. There are no pending or, to the knowledge of United, threatened condemnation or eminent domain proceedings against any real
property that is owned or leased by United. United owns or leases all properties as are necessary to its operations now conducted.
(y)
Representations and Warranties of United with Respect to Merger Sub
.
(i) O
rganization, Standing and Authority
. Merger Sub is duly organized and validly existing in good standing under the laws
of the state of its organization, and is duly qualified to do business and in good standing in the jurisdictions where its ownership or leasing of property or the conduct of its business requires it to be so qualified. Merger Sub is a bank
holding company duly registered under the Bank Holding Company Act of 1956, as amended.
(ii)
Power
. Merger Sub
has the power and authority to execute, deliver and perform its obligations under this Agreement and to consummate the transactions contemplated hereby.
(iii)
Authority
. This Agreement and the transactions contemplated hereby have been authorized by all requisite action on the part of Merger Sub and its respective subsidiaries or
members. This Agreement is a
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valid and legally binding agreement of Merger Sub enforceable in accordance with its terms (except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer and similar laws of general applicability relating to or affecting creditors rights or by general equity principles).
ARTICLE VII
Covenants
7.01
Reasonable Best Efforts.
Subject to the terms and conditions of this Agreement, each of Cardinal and United
agrees to use its reasonable best efforts in good faith to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper or desirable, or advisable under applicable laws, so as to permit consummation of the
Merger as promptly as practicable and otherwise to enable consummation of the transactions contemplated hereby and shall cooperate fully with the other party hereto to that end. Each of Cardinal and United hereby agrees to use its reasonable
best efforts in good faith to implement the employment and other benefit arrangements set forth on Section 7.01 of Cardinals Disclosure Schedule as soon as practicable following the execution of this Agreement.
7.02
Stockholder Approvals.
(a) Cardinal agrees to take, in accordance with applicable law and the Cardinal Certificate and the Cardinal Bylaws, all action necessary to convene an appropriate meeting of its stockholders to consider
and vote upon the approval of this Agreement and any other matters required to be approved by Cardinals stockholders for consummation of the Merger (including any adjournment or postponement, the
Cardinal Meeting
), as
promptly as practicable after the Registration Statement is declared effective. The Cardinal Board will recommend that the Cardinal stockholders approve and adopt the Agreement and the transactions contemplated hereby, provided that the Cardinal
Board may fail to make such recommendation, or withdraw, modify or change any such recommendation, if the Cardinal Board, after having consulted with and considered the advice of outside counsel, has determined that the making of such
recommendation, or the failure to withdraw, modify or change such recommendation, would be reasonably likely to constitute a breach of the fiduciary duties of the members of the Cardinal Board under applicable law.
(b) United agrees to take, in accordance with applicable law and the United Certificate and the United Bylaws, all action necessary to
convene an appropriate meeting of its stockholders to consider and vote upon (i) the United Certificate Amendment and (ii) the issuance of the Merger Consideration pursuant to NASDAQ Listing Rule 5635 and pursuant to Sections 31D-6-621 and
31D-11-1104 of the WVBCA, with respect to issuing the Merger Consideration and approving the Merger, and any other matters required to be approved by Uniteds stockholders for consummation of the Merger and the transactions contemplated by the
Agreement (including any adjournment or postponement, the
United Meeting
), as promptly as practicable after the Registration Statement is declared effective. The United Board will recommend that the United stockholders approve (i)
the United Certificate Amendment and (ii) the issuance of the Merger Consideration and, as necessary, the transactions contemplated by the Agreement, provided that the United Board may fail to make such a recommendation, or withdraw, modify or
change any such recommendation, if the United Board, after having consulted with and considered the advice of outside counsel, has determined that the making of such recommendation, or the failure to withdraw, modify or change such recommendation,
would be reasonably likely to constitute a breach of the fiduciary duties of the members of the United Board under applicable law.
(c) Cardinal and United shall use their reasonable best efforts to hold their respective stockholder meetings on the same date and as close in time to the Effective Date as reasonably practicable.
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7.03
Registration Statement.
(a) United agrees to prepare a registration statement on Form S-4 (the
Registration Statement
) to be filed by United
with the SEC in connection with the issuance of United Common Stock in the Merger (including the prospectus of United and proxy solicitation materials of United and Cardinal constituting a part thereof (the
Proxy Statement
) and
all related documents). Cardinal and United agree to cooperate, and to cause their respective Subsidiaries, as applicable, to cooperate, with the other and its counsel and its accountants in the preparation of the Registration Statement and the
Proxy Statement. United agrees to file the Registration Statement (including the Proxy Statement in preliminary form) with the SEC as promptly as reasonably practicable and in any event within 120 days from the date of this Agreement. Each of
Cardinal and United agrees to use all reasonable efforts to cause the Registration Statement to be declared effective under the Securities Act as promptly as reasonably practicable after filing thereof. United also agrees to use all reasonable
efforts to obtain, prior to the effective date of the Registration Statement, all necessary state securities law or Blue Sky permits and approvals required to carry out the transactions contemplated by this Agreement. Each of United and
Cardinal agrees to furnish to the other party all information concerning itself, its Subsidiaries, officers, directors and stockholders and such other matters as may be reasonably necessary or advisable or as may be reasonably requested in
connection with the Registration Statement, Proxy Statement or any other statement, filing, notice or application made by or on behalf of United, Cardinal or their respective Subsidiaries, as applicable, to any Governmental Authority in connection
with the Merger and the other transactions contemplated by this Agreement. Cardinal shall have the right to review and consult with United and approve the form of, and any characterization of such information included in, the Registration Statement
prior to its being filed with the SEC.
(b) Each of Cardinal and United agrees, as to itself and its Subsidiaries and
affiliates, as applicable, that none of the information supplied or to be supplied by it for inclusion or incorporation by reference in (i) the Registration Statement will, at the time the Registration Statement and each amendment or supplement
thereto, if any, becomes effective under the Securities Act, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and
(ii) the Proxy Statement and any amendment or supplement thereto will, at the date of mailing to stockholders and at the time of the Cardinal Meeting, as the case may be, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements therein not misleading or any statement which, in the light of the circumstances under which such statement is made, will be false or misleading with respect to any
material fact, or which will omit to state any material fact necessary in order to make the statements therein not false or misleading or necessary to correct any statement in any earlier statement in the Proxy Statement or any amendment or
supplement thereto. Each of Cardinal and United further agrees that if it shall become aware prior to the date of the Cardinal Meeting or United Meeting, as the case may be, of any information furnished by it that would cause any of the statements
in the Proxy Statement to be false or misleading with respect to any material fact, or to omit to state any material fact necessary to make the statements therein not false or misleading, to promptly inform the other party thereof and to take the
necessary steps to correct the Proxy Statement.
(c) United agrees to advise Cardinal, promptly after United receives notice
thereof, of the time when the Registration Statement has become effective or any supplement or amendment has been filed, of the issuance of any stop order or the suspension of the qualification of United Stock for offering or sale in any
jurisdiction, of the initiation or threat of any proceeding for any such purpose, or of any request by the SEC for the amendment or supplement of the Registration Statement or for additional information.
7.04
Access; Information.
(a) Each of Cardinal and United agrees that upon reasonable notice and subject to applicable laws relating to the exchange of information, it shall afford the other party and the other partys
officers, employees, counsel, accountants and other authorized representatives, such access during normal business hours throughout the period prior to the Effective Time to the books, records (including, without limitation, Tax Returns and work
papers of independent auditors), properties, personnel and to such other information as any party may reasonably
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request and, during such period, it shall furnish promptly to such other party (i) a copy of each material report, schedule and other document filed by it pursuant to the requirements of
federal or state securities laws, and (ii) all other information concerning the business, properties and personnel of it as the other may reasonably request. Neither United or its Subsidiaries nor Cardinal or its Subsidiaries shall be required
to provide access to or to disclose information where such access or disclosure would jeopardize the attorney-client privilege of United, Cardinal or their respective Subsidiaries, as the case may be, or contravene any applicable law or regulation
or binding contract, agreement or arrangement entered into prior to the date of this Agreement; and in any such event, the parties will make appropriate substitute disclosure arrangements.
(b) Each of Cardinal and United agrees that it will not, and will cause its representatives not to, use any information obtained pursuant
to this Section 7.04 (as well as any other information obtained prior to the date hereof in connection with the entering into of this Agreement) for any purpose unrelated to the consummation of the Merger and the other transactions contemplated
by this Agreement. Subject to the requirements of law, each party will keep confidential, and will cause its representatives to keep confidential, all information and documents obtained pursuant to this Section 7.04 (as well as any other
information obtained prior to the date hereof in connection with the entering into of this Agreement) unless such information (i) was already known to such party, (ii) becomes available to such party from other sources not known by such
party to be bound by a confidentiality obligation, (iii) is disclosed with the prior written approval of the party to which such information pertains or (iv) is or becomes readily ascertainable from published information or trade sources.
In the event that this Agreement is terminated or the transactions contemplated by this Agreement shall otherwise fail to be consummated, each party shall promptly cause all copies of documents or extracts thereof containing information and data as
to another party hereto to be returned to the party that furnished the same. No investigation by either party of the business and affairs of the other shall affect or be deemed to modify or waive any representation, warranty, covenant or agreement
in this Agreement, or the conditions to either partys obligation to consummate the transactions contemplated by this Agreement.
(c) During the period from the date of this Agreement to the Effective Time, each party shall promptly furnish the other with copies of all monthly and other interim financial statements produced in the
ordinary course of business as the same shall become available.
(d) The provisions of this Section 7.04 are in addition to,
and not in lieu of, those certain confidentiality agreements dated May 23, 2016 and August 10, 2016, between United and Cardinal (the
Confidentiality Agreement
), the terms of which are specifically confirmed.
7.05
Acquisition Proposals.
Cardinal agrees that it shall not, and shall cause its Subsidiaries and its officers,
directors, agents, advisors and affiliates not to, solicit or encourage inquiries or proposals with respect to, or engage in any negotiations concerning, or provide any confidential information to, or have any discussions with any person relating
to, any Acquisition Proposal. It shall immediately cease and cause to be terminated any activities, discussions or negotiations conducted prior to the date of this Agreement with any parties other than United with respect to any of the foregoing and
shall use its reasonable best efforts to enforce any confidentiality or similar agreement relating to an Acquisition Proposal. Cardinal will inform United promptly of all relevant details of any inquiries or contacts by third parties relating to the
possible disposition of the business or the capital stock of Cardinal or any merger, change or control or other business combination involving Cardinal. Notwithstanding the foregoing, nothing contained in this Section 7.05 shall prohibit
Cardinal, prior to the Cardinal Meeting and subject to compliance with the other terms of this Section 7.05, from furnishing nonpublic information to, or entering into discussions or negotiations with, any Person that makes an unsolicited, bona fide
written Acquisition Proposal with respect to Cardinal or any of its Significant Subsidiaries (that did not result from a breach of this Section 7.05), if, and only to the extent that (i) the Cardinal Board concludes in good faith, after consultation
with and based upon the advice of outside legal counsel, that the failure to take such actions would be reasonably likely to constitute a breach of its fiduciary duties to its shareholders under applicable law, (ii) before taking such actions,
Cardinal receives from such Person an executed confidentiality agreement providing for reasonable protection of confidential information, which confidentiality agreement shall not
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provide such person or entity with any exclusive right to negotiate with Cardinal and shall contain terms and conditions no less favorable to Cardinal with respect to confidentiality than the
Confidentiality Agreement, and (iii) the Cardinal Board concludes in good faith, after consultation with its outside legal counsel and financial advisors, that the Acquisition Proposal constitutes or is reasonably likely to result in a Superior
Proposal. Cardinal shall promptly notify United in writing of Cardinals receipt of any such Acquisition Proposal or inquiry, the material terms and conditions thereof, the identity of the person making such Acquisition Proposal or inquiry, and
will keep United apprised of any related developments, discussions and negotiations on a current basis. Cardinal agrees that any violation of the restrictions set forth in this Section 7.05 by any representative of Cardinal shall be deemed a breach
of this Section 7.05 by Cardinal.
7.06
Takeover Laws.
No party hereto shall take any action that would
cause the transactions contemplated by this Agreement to be subject to requirements imposed by any Takeover Law and each of them shall take all necessary steps within its control to exempt (or ensure the continued exemption of) the transactions
contemplated by this Agreement from any applicable Takeover Law, as now or hereafter in effect.
7.07
Exemption
from Liability Under Section
16(b).
United and Cardinal agree that, in order to most effectively compensate and retain certain directors and officers of Cardinal in connection with the Merger, both prior to
and after the Effective Time, it is desirable that the directors and officers of Cardinal not be subject to a risk of liability under Section 16(b) of the Exchange Act, and for that compensatory and retentive purposes agree to the provisions of
this Section 7.07. The United Board, or a committee of Non-Employee Directors (as such term is defined for purposes of Rule 16b-3(d) under the Exchange Act) thereof, shall promptly, and in any event prior to the Effective
Time, take all such steps as may be necessary or appropriate to cause any dispositions of Cardinal Common Stock, Cardinal Stock Awards, Cardinal Stock Options or acquisitions (and any subsequent dispositions) of United Common Stock or
Replacement Options by the directors and officers of Cardinal, who, immediately following the Merger, will be directors and officers of United subject to the reporting requirements of Section 16(a) of the Exchange Act, in each case pursuant to the
transactions contemplated by this Agreement, to be exempt from liability pursuant to Section 16(b) under the Exchange Act to the fullest extent permitted by applicable law.
7.08
Regulatory Applications.
(a) United and Cardinal and their respective Subsidiaries and affiliates, as applicable, (a) shall cooperate and use their respective reasonable best efforts to prepare all documentation, to effect all
filings and to obtain all permits, consents, approvals and authorizations of all third parties and Governmental Authorities necessary to consummate the transactions contemplated by this Agreement and (b) covenant and agree that none of the
information supplied or to be supplied by such party and any of its Subsidiaries and affiliates, as applicable, for inclusion in any filings with Governmental Authorities will, at the respective time such filing is made be false or misleading with
respect to any material fact, or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they are made not misleading. Each Party shall use its reasonable efforts to resolve objections, if
any, which may be asserted with respect to the Merger under any applicable law, regulation or decree, including agreeing to divest any assets, deposits, lines of business or branches; provided, that United shall not be required to agree to any
condition or take any action if such agreements or the taking of such action is reasonably likely to result in any conditions or requirements applicable either before or after the Effective Time that the United Board reasonably determines in good
faith would have a Material Adverse Effect on United and its Subsidiaries taken as a whole taking into account the consummation of the Merger in making such determination (a
Materially Burdensome Regulatory Condition
). Each of
United and Cardinal shall have the right to review in advance, and to the extent practicable each will consult with the other, in each case subject to applicable laws relating to the exchange of information, with respect to, all material written
information submitted to any third party or any Governmental Authority in connection with the transactions contemplated by this Agreement. In exercising the foregoing right, each of the parties hereto agrees to act reasonably and as promptly as
practicable and, in any event, United shall make all necessary filings and provide any necessary notices within 120 days of the date of this Agreement. Each party hereto agrees that it will
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consult with the other party hereto with respect to the obtaining of all material permits, consents, approvals and authorizations of all third parties and Governmental Authorities necessary or
advisable to consummate the transactions contemplated by this Agreement and each party will keep the other party apprised of the status of material matters relating to completion of the transactions contemplated hereby, including advising the other
party upon receiving any communication from a Governmental Authority the consent or approval of which is required for the consummation of the Merger and the other transactions contemplated by this Agreement that causes such party to believe that
there is a reasonable likelihood that any required consent or approval from a Governmental Authority will not be obtained or that the receipt of such consent or approval may be materially delayed (a
Regulatory Communication
). Upon
the receipt of a Regulatory Communication, without limiting the scope of the foregoing paragraphs, United shall, to the extent permitted by applicable law (i) promptly advise Cardinal of the receipt of any substantive communication from a
Governmental Authority with respect to the transactions contemplated hereby, (ii) provide Cardinal with a reasonable opportunity to participate in the preparation of any response thereto and the preparation of any other substantive submission or
communication to any Governmental Authority with respect to the transactions contemplated hereby and to review any such response, submission or communication prior to the filing or submission thereof, and (iii) provide Cardinal with the opportunity
to participate in any meetings or substantive telephone conversations that United or its Subsidiaries or their respective representatives may have from time to time with any Governmental Authority with respect to the transactions contemplated by
this Agreement.
(b) Each party agrees, upon request, to furnish the other party with all information concerning itself, its
Subsidiaries, directors, officers and stockholders and such other matters as may be reasonably necessary or advisable in connection with any filing, notice or application made by or on behalf of such other party or any of its Subsidiaries to any
third party or Governmental Authority.
7.09
Indemnification.
(a) Following the Effective Date and for a period of six years thereafter, United shall indemnify, defend and hold harmless the present
directors, officers and employees of Cardinal and its Subsidiaries (each, an
Indemnified Party
) against all costs or expenses (including reasonable attorneys fees), judgments, fines, losses, claims, damages or liabilities
(collectively,
Costs
) incurred in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of actions or omissions occurring at or prior to the
Effective Time (including the transactions contemplated by this Agreement), whether asserted or claimed prior to, at or after the Effective Time to the fullest extent that Cardinal is permitted or required to indemnify (and advance expenses to) its
directors and officers under the laws of the Commonwealth of Virginia, the Cardinal Certificate, the Cardinal Bylaws and any agreement as in effect on the date hereof;
provided
that any determination required to be made with respect to
whether an officers, directors or employees conduct complies with the standards set forth under Virginia law, the Cardinal Certificate, the Cardinal Bylaws and any agreement shall be made by independent counsel (which shall not be
counsel that provides material services to United) selected by United and reasonably acceptable to such officer or director. United shall comply with any indemnification agreements between Cardinal or its Subsidiaries on the one hand, and their
respective directors and officers on the other hand;
provided
,
however
, that each of Cardinal and its Subsidiaries, as applicable, agrees to exercise its reasonable best efforts to obtain amendments to each indemnification agreement
applicable to it prior to the Effective Date so that terms of any such agreement aligns with the time periods set forth in this Section 7.09.
(b) For a period of six years from and after the Effective Time, United shall (i) maintain in effect (A) the current provisions regarding indemnification of and the advancement of expenses to
Indemnified Parties contained in the Cardinal Certificate and Cardinal Bylaws (or comparable organizational documents) of each of Cardinal and its Subsidiaries and (B) any indemnification agreements of Cardinal and its Subsidiaries with or for
the benefit of any Indemnified Parties existing on the date hereof, and (ii) indemnify the Indemnified Parties to the fullest extent permitted by applicable law. For purposes of the foregoing: (i) in the event any claim is asserted within
the six year period during which Cardinal and its Subsidiaries, (A) all such rights in respect of any such
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claim shall continue until disposition thereof and (B) the Indemnified Party shall be entitled to advancement of expenses within five business days following receipt of any such claim
involving such Indemnified Party; and (ii) any determination required to be made with respect to whether an Indemnified Partys conduct complies with the standards set forth under VSCA, the Cardinal Certificate or Cardinal Bylaws or any
such agreement, as the case may be, for purposes of the allowance of indemnification or advancement of expenses, shall be made by independent legal counsel selected by such Indemnified Party and reasonably acceptable to United. The fees and expenses
of such independent legal counsel shall be paid for by United.
(c) For a period of six years from the Effective Time, United
shall use its reasonable best efforts to provide that portion of directors and officers liability insurance that serves to reimburse the present and former officers and directors of Cardinal or any of its Subsidiaries (determined as of
the Effective Time) (as opposed to Cardinal) with respect to claims against such directors and officers arising from facts or events which occurred before the Effective Time, which insurance shall contain at least the same coverage and amounts, and
contain terms and conditions no less advantageous, as that coverage currently provided by Cardinal;
provided
, that in no event shall United be required to expend, on an annual basis, more than 200% of the current annual amount expended by
Cardinal (the
Insurance Amount
) to maintain or procure such directors and officers insurance coverage;
provided
,
further
, that if United is unable to maintain or obtain the insurance called for by this
Section 7.09(c), United shall use its reasonable best efforts to obtain as much comparable insurance as is available for the Insurance Amount;
provided
,
further
, that officers and directors of Cardinal or any Subsidiary may be
required to make application and provide customary representations and warranties to Uniteds insurance carrier for the purpose of obtaining such insurance.
(d) Any Indemnified Party wishing to claim indemnification under Section 7.09(a), upon learning of any claim, action, suit, proceeding or investigation described above, shall promptly notify United
thereof;
provided
that the failure so to notify shall not affect the obligations of United under Section 7.09(a) unless and to the extent that United is actually prejudiced as a result of such failure.
(e) If United or any of its successors or assigns shall consolidate with or merge into any other entity and shall not be the continuing
or surviving entity of such consolidation or merger or shall transfer all or substantially all of its assets to any entity, then and in each case, proper provision shall be made so that the successors and assigns of United shall assume the
obligations set forth in this Section 7.09.
(f) The provisions of this Section 7.09, (i) shall survive the
Effective Time and are intended to be for the benefit of, and shall be enforceable by, each Indemnified Party and his or her heirs and representatives, and (ii) are in addition to, and not in substitution for, any other rights to
indemnification or contribution that any such person may have by agreement or otherwise.
7.10
Benefit Plans.
(a) At and following the Effective Time (i) United shall provide employees of Cardinal and its Subsidiaries with
employee benefit plans substantially similar to those provided to similarly situated employees of United, except with respect to the United Pension Plan, (ii) United shall cause any and all pre-existing condition limitations (to the extent such
limitations did not apply to a pre-existing condition under the Compensation and Benefit Plans) and eligibility waiting periods under group health plans to be waived with respect to such employees and their eligible dependents, and (iii) all
employees of Cardinal and its Subsidiaries shall receive credit for years of service with Cardinal, its Subsidiaries and their predecessors prior to the Effective Time for purposes of eligibility and vesting (but not for purposes of benefit accrual
other than accrual for vacation;
provided
, that, in accordance with Uniteds policies, no vacation or paid time off shall thereafter be carried over into a subsequent calendar year except that employees who are retained by United shall
be permitted to carry over vacation until the end of 2018 and employees who are not retained by United shall be paid for unused vacation) under Uniteds benefit plans, except with respect to the United Pension Plan. All employees of Cardinal
and its Subsidiaries and their eligible dependents will receive credit for co-payments, deductibles and out-of-pocket maximums satisfied by such employees and dependents under the Compensation and Benefit
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Plans. Except as provided in this Agreement, United shall maintain Cardinals and its Subsidiaries existing employee benefit plans until such time as United has provided similar plans
to employees of Cardinal and its Subsidiaries as contemplated in the preceding sentence. Employees of Cardinal and its Subsidiaries shall not be entitled to accrual of benefits or allocation of contributions under Uniteds benefit plans based
on years of service with Cardinal, its Subsidiaries and their predecessors prior to the Effective Date, except with respect to any vacation accrual.
(b) Except for employees of Cardinal and its Subsidiaries with individual agreements that provide for payment of severance under certain circumstances (who will be paid severance only in accordance with
such agreements and shall not have a right to employer-paid outplacement services), United agrees that each employee of Cardinal and its Subsidiaries who is involuntarily terminated by United or any of its Subsidiaries (other than for cause) on or
within the time period set forth on Section 7.10(b) of Cardinals Disclosure Schedule, shall receive (i) a severance payment equal to the amounts set forth on Section 7.10(b) of Cardinals Disclosure Schedule, but only if such employee
does not have rights to a severance payment under an employment agreement, in which case no severance payment shall be made to such employee hereunder, and (ii) outplacement services through the date that is set forth on Section 7.10(b) of
Cardinals Disclosure Schedule by an outplacement agency selected by United.
(c) Cardinal shall cause its 401(k) plan to
be fully vested and terminated effective immediately prior to or upon the Effective Time, in accordance with applicable law and regulations, and Cardinal shall pursue, in Uniteds sole discretion, the receipt of a favorable determination letter
from the IRS relating to such termination. Each employee of Cardinal and its Subsidiaries that is a participant in Cardinals 401(k) plan, and that becomes an eligible employee of United or its Subsidiaries following the Effective Time,
shall be eligible to participate in Uniteds 401(k) plan as soon as administratively practical, in accordance with the terms and conditions of Uniteds 401(k) plan, after the Effective Time, and, account balances under Cardinals
terminated 401(k) plan will be eligible for distribution or rollover, in accordance with the terms and conditions of the United 401(k) plan and applicable law and regulation, including direct rollover of cash and, provided that Cardinals
terminated 401(k) plan was validly amended prior to termination to provide for (A) roll out of promissory notes, (B) a period of time during which plan termination does not cause immediate loan default, (C) in-kind distribution of promissory notes,
and (D) such other plan provisions as are required for rollout of promissory notes, direct rollover of promissory notes to Uniteds 401(k) plan, for each such employee in his or her discretion. Any other former employee of Cardinal or its
Subsidiaries that is employed by United or its Subsidiaries after the Effective Time shall be eligible to be a participant in Uniteds 401(k) plan upon complying with eligibility requirements. For purposes of administering Uniteds
401(k) plan, service with Cardinal and its Subsidiaries shall be deemed to be service with United for participation and vesting purposes, but not for purposes of benefit accrual. United shall take all required actions to assume as of the
Effective Time all obligations under Cardinals Executive Deferred Income Plan, the George Mason Mortgage, LLC Executive Deferred Income Plan and Cardinals Non-Employee Directors Deferral Plan; provided, that United shall be under no
obligation to permit further contributions to such plans after the Effective Time.
(d) Each of United, Cardinal and the key
employees of Cardinal, as the case may be, will enter into agreements concerning their employment with United and related matters after the Effective Time in accordance with the terms and conditions set forth in Section 7.10(d) of the Cardinal
Disclosure Schedule. At and following the Effective Time, United shall honor, and United shall be obligated to perform, or shall cause its Subsidiaries to honor and perform, in accordance with their terms and applicable law, the contractual
rights of Employees, Consultants and Directors of Cardinal and its Subsidiaries existing as of the Effective Time.
7.11
Notification of Certain Matters.
Each of Cardinal and United shall give prompt notice to the other of any fact, event or circumstance known to it that (i) is reasonably likely, individually or taken together with all other
facts, events and circumstances known to it, to result in any Material Adverse Effect with respect to it or (ii) would cause or constitute a material breach of any of its representations, warranties, covenants or agreements contained herein.
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7.12
Directors.
(a) United shall take all appropriate action so that as of the Effective Time the number of directors constituting the United Board shall
be increased by one and Bernard H. Clineburg shall be appointed as a director of United. United will nominate Bernard H. Clineburg for election as a director at the annual meeting of United immediately following the Effective Time and solicit
proxies for Bernard H. Clineburg in the same manner as it does for all other members of Uniteds slate of directors in connection with such meeting.
(b) United shall take all appropriate action so that as of the Effective Time the number of directors constituting the board of directors of United Bank shall be increased by two and two individuals from
Cardinal shall be appointed to the board of directors of United Bank. The individuals chosen by Cardinal to serve as directors of United Bank shall be subject to the consent of the United Board, which shall not be unreasonably withheld.
7.13
Compliance with Laws
.
Each of Cardinal and its Subsidiaries shall comply in all material
respects with all applicable federal, state, local and foreign statutes, laws, regulations, ordinances, rules, judgments, orders or decrees applicable thereto or to employees conducting such businesses.
7.14
Operating Functions.
Cardinal shall cooperate with United and Merger Sub in connection with planning for the
efficient and orderly combination of the parties and the operation of United and Merger Sub (including the former operations of Cardinal) after the Merger, and in preparing for the consolidation of appropriate operating functions to be effective on
the Effective Time or such later date as United may decide. Notwithstanding the foregoing, (a) neither United nor Merger Sub shall under any circumstance be permitted to exercise control of Cardinal prior to the Effective Time, (b) Cardinal
shall not be under any obligation to act in a manner that could reasonably be deemed to constitute anti-competitive behavior under federal or state antitrust laws and (c) Cardinal shall not be required to agree to any material obligation that is not
contingent upon the consummation of the Merger.
7.15
Assumption of TRUPs.
United acknowledges that
Cardinal Statutory Trust I and UFBC Capital Trust I hold subordinated debentures issued by Cardinal and has issued preferred securities which are intended to be qualified trust preferred securities as defined in applicable regulatory
capital guidelines, or which are eligible for such treatment as grandfathered trust preferred securities. United agrees that at the Effective Time, it shall expressly assume all of Cardinals obligations under the indentures relating to such
subordinated debentures (including, without limitation, being substituted for Cardinal) and execute any and all documents, instruments and agreements, including any supplemental indentures, guarantees, or declarations of trust required by said
indentures, the subordinated debentures or the trust preferred securities issued by Cardinal Statutory Trust I and UFBC Capital Trust I, or as may reasonably be requested by the trustees thereunder, and thereafter shall perform all of
Cardinals obligations with respect to the subordinated debentures and the trust preferred securities issued by Cardinal Statutory Trust I and UFBC Capital Trust I (the
TRUPs Assumption
).
ARTICLE VIII
Conditions to Consummation of the Merger
8.01
Conditions to
Each Partys Obligation to Effect the Merger.
The respective obligation of each of United and Cardinal to consummate the Merger is subject to the fulfillment or written waiver by United and Cardinal prior to the Effective Time of each
of the following conditions:
(a)
Stockholder Approval
. This Agreement and any other matters required to be approved by
Cardinals stockholders for consummation of the Merger shall have been duly approved by the requisite vote of the stockholders of Cardinal, and the United Certificate Amendment, this Agreement and any other matters required to be approved by
Uniteds stockholders for the consummation of the Merger (including the issuance of the Merger Consideration) shall have been duly approved by the requisite vote of the stockholders of United.
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(b)
Regulatory Approvals
. All regulatory approvals required to consummate the
transactions contemplated hereby shall have been obtained and shall remain in full force and effect and all statutory waiting periods in respect thereof shall have expired and no such approvals shall contain any Materially Burdensome Regulatory
Condition.
(c)
No Injunction
. No Governmental Authority of competent jurisdiction shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, judgment, decree, injunction or other order (whether temporary, preliminary or permanent) that is in effect and prohibits consummation of the transactions contemplated by this
Agreement.
(d)
Registration Statement
. The Registration Statement shall have become effective under the Securities Act
and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC.
(e)
Listing
. The shares of United Common Stock to be issued in the Merger shall have been approved for listing on the NASDAQ,
subject to official notice of issuance.
(f)
TRUPs Assumption
. United shall have executed and delivered, subject
to the effectiveness of the Merger, all supplemental and amended documents required to be executed by United to effect the TRUPs Assumption.
8.02
Conditions to Obligation of Cardinal.
The obligation of Cardinal to consummate the Merger is also subject to the fulfillment or written waiver by Cardinal prior to the Effective
Time of each of the following conditions:
(a)
Representations and Warranties
. The representations and warranties of
United set forth in this Agreement shall be true and correct, subject to the standard set forth in Section 6.02, as of the date of this Agreement and as of the Effective Date as though made on and as of the Effective Date (except that
representations and warranties that by their terms speak as of the date of this Agreement or some other date shall be true and correct as of such date), and Cardinal shall have received a certificate, dated the Effective Date, signed on behalf of
United by the Chief Executive Officer and the Chief Financial Officer of United to such effect.
(b)
Performance of
Obligations of United
. United shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Effective Time, and Cardinal shall have received a certificate, dated the
Effective Date, signed on behalf of United by the Chief Executive Officer and the Chief Financial Officer of United to such effect.
(c)
Opinion of Cardinals Counsel
. Cardinal shall have received an opinion of LeClairRyan, counsel to Cardinal, in form and substance reasonably satisfactory to Cardinal, dated the Effective
Date, to the effect that, on the basis of facts, representations and assumptions set forth in such opinion, the Merger will be treated as a reorganization within the meaning of Section 368 of the Code. In rendering its opinion,
LeClairRyan may require and rely upon representations contained in letters from Cardinal, United, officers and employees of Cardinal or United, and others, reasonably satisfactory in form and substance to it.
8.03
Conditions to Obligation of United.
The obligation of United to consummate the Merger is also subject to the
fulfillment or written waiver by United prior to the Effective Time of each of the following conditions:
(a)
Representations and Warranties
. The representations and warranties of Cardinal set forth in this Agreement shall be true and correct, subject to the standard set forth in Section 6.02, as of the date of this Agreement and as of the
Effective Date as though made on and as of the Effective Date (except that representations and warranties that by their terms speak as of the date of this Agreement or some other date shall be true and correct as of such date) and United shall have
received a certificate, dated the Effective Date, signed on behalf of Cardinal by the Chief Executive Officer and the Chief Financial Officer of Cardinal to such effect.
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(b)
Performance of Obligations of Cardinal
. Cardinal shall have performed in all
material respects all obligations required to be performed by it under this Agreement at or prior to the Effective Time, and United shall have received a certificate, dated the Effective Date, signed on behalf of Cardinal by the Chief Executive
Officer and the Chief Financial Officer of Cardinal to such effect.
(c)
Opinion of Uniteds Counsel
. United shall
have received an opinion of Bowles Rice LLP, counsel to United, in form and substance reasonably satisfactory to United, dated the Effective Date, to the effect that, on the basis of facts, representations and assumptions set forth in such
opinion, the Merger will be treated as a reorganization under Section 368 of the Code. In rendering its opinion, Bowles Rice LLP may require and rely upon representations contained in letters from United, Cardinal, officers and
employees of United or Cardinal, and others, reasonably satisfactory in form and substance to it.
(d)
Agreements with
Certain Key Employees of Cardinal
. The agreements with certain key employees of Cardinal concerning their employment with United and related matters after the Effective Time as set forth on Section 7.10(d) of Cardinals Disclosure Schedule
have been memorialized in binding, written agreements entered into by the key employees and none of the key employees has taken any action on or before the Effective Time to materially breach or to cancel or terminate any such agreements.
ARTICLE IX
Termination
9.01
Termination.
This Agreement may be
terminated, and the Merger may be abandoned:
(a)
Mutual Consent
. At any time prior to the Effective Time, by the mutual
consent of United and Cardinal, if the board of directors of each so determines by vote of a majority of the members of its entire board of directors.
(b)
Breach
. At any time prior to the Effective Time, by United or Cardinal (
provided
that the party seeking termination is not then in material breach of any representation, warranty,
covenant or other agreement contained herein), if its board of directors so determines by vote of a majority of the members of its entire board of directors, in the event of either: (i) a breach by the other party of any representation or
warranty contained herein (subject to the standard set forth in Section 6.02), which breach cannot be or has not been cured within 30 days after the giving of written notice to the breaching party of such breach; or (ii) a material breach
by the other party of any of the covenants or agreements contained herein, which material breach cannot be or has not been cured within 30 days after the giving of written notice to the breaching party of such breach.
(c)
Delay
. At any time prior to the Effective Time, by United or Cardinal, if its board of directors so determines by vote of a
majority of the members of such partys entire board of directors, in the event that the Merger is not consummated by August 31, 2017, except to the extent that the failure of the Merger then to be consummated arises out of or results from the
knowing action or inaction of the party seeking to terminate pursuant to this Section 9.01(c).
(d)
Failure of United
Conditions.
By United in the event that any of the conditions precedent to the obligations of United to consummate the Merger contained in Sections 8.03(a), 8.03(b) and 8.03(d) cannot be satisfied or fulfilled by the date specified in Section
9.01(c) (
provided
that the failure of such condition to be satisfied or fulfilled is not a result of Uniteds failure to perform, in any material respect, any of its covenants or agreements contained in this Agreement or the breach by
United of any of its material representations or warranties contained in this Agreement).
(e)
Failure of Cardinal
Conditions.
By Cardinal in the event that any of the conditions precedent to the obligations of Cardinal to consummate the Merger contained in Sections 8.02(a) or 8.02(b) cannot be satisfied or
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fulfilled by the date specified in Section 9.01(c) (
provided
that the failure of such condition to be satisfied or fulfilled is not a result of Cardinals breach of Section 7.02, 7.03
or 7.05, Cardinals failure to perform, in any material respect, any of its covenants or agreements contained in this Agreement or the breach by Cardinal of any of its material representations or warranties contained in this Agreement).
(f)
No Approval
. By Cardinal or United, if its board of directors so determines by a vote of a majority of the members
of its entire board of directors, in the event (i) (A) final action has been taken by any Governmental Authority whose approval is required for consummation of the Merger and the other transactions contemplated by this Agreement, which final
action has become nonappealable and does not approve this Agreement or the transactions contemplated hereby, or such Governmental Authority has approved of this Agreement or the transactions contemplated hereby with a Materially Burdensome
Regulatory Condition, or (B) any Governmental Authority whose approval or nonobjection is required in connection with this Agreement and the transactions contemplated hereby has stated that it will not issue the required approval or
nonobjection, or (ii) any stockholder approval required by Section 8.01(a) herein is not obtained at the Cardinal Meeting or the United Meeting.
(g)
Failure to Recommend, Etc
.
(i) At any time prior to the Cardinal
Meeting, by United if the Cardinal Board shall have failed to make its recommendation referred to in Section 7.02, withdrawn such recommendation or modified or changed such recommendation in a manner adverse in any respect to the interests of
United.
(ii) At any time prior to the United Meeting, by Cardinal if the United Board shall have failed to make its
recommendation referred to in Section 7.02, withdrawn such recommendation or modified or changed such recommendation in a manner adverse in any respect to the interests of Cardinal.
(h)
Superior Proposal
. By Cardinal, if the Cardinal Board so determines by a vote of the majority of the members of its entire
board, at any time prior to the Cardinal Meeting, in order to concurrently enter into an agreement with respect to an Acquisition Proposal that was received and considered by Cardinal in compliance with Section 7.05 and (i) that would, if
consummated, result in a transaction that is more favorable to Cardinals stockholders from a financial point of view than the Merger and (ii) is fully financed or reasonably capable of being fully financed and reasonably likely to receive all
required approvals of Governmental Authorities on a timely basis and otherwise reasonably capable of being completed on the terms proposed (a
Superior Proposal
)
;
provided
, that (i) this Agreement may be
terminated by Cardinal pursuant to this Section 9.01(h) only after the fifth business day following Uniteds receipt of written notice from Cardinal advising United that Cardinal is prepared to enter into an agreement with respect to a
Superior Proposal and only if, during such five business day period, United does not make an offer to Cardinal that the Cardinal Board determines in good faith, after consultation with its financial and legal advisors, is at least as favorable as
the Superior Proposal and (ii) Cardinal pays the Fee specified in Section 9.03.
(i)
Decline in United Common
Stock Price
. By Cardinal, if the Cardinal Board so determines by a vote of the majority of the members of the entire Cardinal Board, at any time during the five-day period commencing with the Determination Date, if both of the following
conditions are satisfied:
(i) The number obtained by dividing the Determination Date Average Closing Price by the Starting
Price (as defined below) (the
United Ratio
) shall be less than 0.80; and
(ii) (x) the United Ratio
shall be less than (y) the number obtained by dividing the Final Index Price by the Index Price on the Starting Date (each as defined below) and subtracting 0.15 from the quotient in this clause (ii) (y) (such number in this clause
(ii) (y) being referred to herein as, the
Index Ratio
);
subject, however, to the following three
sentences. If Cardinal elects to exercise its termination right pursuant to this Section 9.01(i), it shall give written notice to United (
provided
that such notice of election to
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terminate may be withdrawn at any time within the aforementioned five-day period). During the five-day period commencing with its receipt of such notice, United shall have the option to increase
the consideration to be received by the holders of Cardinal Common Stock hereunder, by adjusting the Exchange Ratio (calculated to the nearest one one-thousandth) to equal the lesser of (x) a number (rounded to the nearest one one-thousandth)
obtained by dividing (A) the product of the Starting Price, 0.80 and the Exchange Ratio (as then in effect) by (B) the Determination Date Average Closing Price and (y) a number (rounded to the nearest one one-thousandth) obtained by
dividing (A) the product of the Index Ratio and the Exchange Ratio (as then in effect) by (B) the United Ratio. If United so elects within such five-day period, it shall give prompt written notice to Cardinal of such election and the
revised Exchange Ratio, whereupon no termination shall have occurred pursuant to this Section 9.01(i) and this Agreement shall remain in effect in accordance with its terms (except as the Exchange Ratio shall have been so modified).
For purposes of this Section 9.01(i), the following terms shall have the meanings indicated:
Determination Date
shall mean the latest of (i) the date on which the last approval, consent or waiver of any
Governmental Authority required to permit the consummation of the transactions contemplated by this Agreement is received and all statutory waiting periods in respect thereof shall have expired; (ii) the latest date on which the stockholder
approvals of both Cardinal and United set forth in Section 7.02 are received; or (iii) the date scheduled to integrate Cardinals data processing systems with Uniteds data processing systems, so long as all conditions set forth in Article
VIII have been satisfied (which date shall be identified by the parties in writing as soon as practicable after the date hereof).
Determination Date Average Closing Price
means the average of the per share closing prices of a share of United Common Stock on the NASDAQ Global Select Market (as reported in
The
Wall Street Journal
, or if not reported therein, in another authoritative source) during the 20 consecutive full trading days ending on the trading day prior to the Determination Date.
Final Index Price
shall mean the average of the Index Prices for the 20 consecutive full trading days ending on the
trading day prior to the Determination Date.
Index Group
shall mean the NASDAQ Bank Index (IBIX).
Index Price
shall mean the closing price on such date of the Index Group.
Starting Date
shall mean the last trading day immediately preceding the date of the first public announcement of entry
into this Agreement.
Starting Price
shall mean the closing price of a share of United Common Stock on the
NASDAQ (as reported in
The Wall Street Journal,
or if not reported therein, in another authoritative source) on the Starting Date.
9.02
Effect of Termination and Abandonment.
In the event of termination of this Agreement and the abandonment of the Merger pursuant to this Article IX, no party to this Agreement
shall have any liability or further obligation to any other party hereunder except (i) as set forth in Section 9.03, (ii) that termination will not relieve a breaching party from liability for any willful breach of this Agreement
giving rise to such termination, and (iii) Sections 7.03(b), 7.04(b), 9.02, 9.03, 10.05, 10.06, 10.07, 10.08, 10.09 and 10.10 shall survive any termination of this Agreement.
9.03
Fees and Expenses
.
(a) In the event that, (i) this Agreement shall be terminated by Cardinal pursuant to Section 9.01(h), then Cardinal shall pay United promptly (but in no event later than two business days after
the date of termination of this Agreement by Cardinal) a fee of $36,000,000 (the
Cardinal Fee
), which amount shall be payable in immediately available funds or (ii) this Agreement is terminated by United pursuant to
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Section 9.01(g)(i), and prior to that date that is 12 months after such termination, Cardinal or any of its Subsidiaries enters into any Acquisition Agreement or any Acquisition Proposal is
consummated (regardless of whether such Acquisition Proposal is consummated before or after termination of this Agreement), then Cardinal shall pay United the Cardinal Fee on the earlier of such date of execution or consummation, which amount shall
be payable in immediately available funds. For the purposes of this Section,
Acquisition Agreement
shall mean any letter of intent, memorandum of understanding, agreement in principle, acquisition agreement, merger agreement, or
other similar agreement constituting or related to, or which is intended to or would be reasonably likely to lead to, any Acquisition Proposal. For purposes of the foregoing, the term
Acquisition Proposal
shall have the meaning
set forth in the definition of
Acquisition Proposal
in Section 1.01 except that the references to 24.99% shall be deemed to be references to 50.01%. In no event shall Cardinal be required to pay
the Cardinal Fee on more than one occasion.
(b) In the event that this Agreement shall be terminated by United or Cardinal
pursuant to Sections 9.01(c) or 9.01(f)(i), but only if (i) (A) the delay in the Effective Time giving rise to the termination right under Section 9.01(c), or (B) the action or statement by a Governmental Authority giving rise to the termination
right under Section 9.01(f)(i), as applicable, arises solely because United does not satisfy the condition to approval of a Governmental Authority requiring it to raise or obtain capital, in accordance with the terms required by the applicable
Governmental Authority, (ii) the following conditions set forth in Article VIII have been or are reasonably likely to be satisfied: Sections 8.01(a) (but only with respect to the vote of stockholders of Cardinal), 8.01(c) (excluding for this
purpose, any rule, regulation, judgment, order, decree or other order of a Governmental Authority with respect to an approval contemplated under Section 8.01(b)), 8.03(a) and 8.03(b), (iii) Cardinal has not breached its obligations under Section
7.03, and (iv) United does not otherwise have a right to terminate the Agreement pursuant to Sections 9.01(b) or 9.01(d), then United shall pay Cardinal promptly (but in no event later than two business days after the date of termination of this
Agreement) a fee of $13,500,000 (the
United Fee
, together with the Cardinal Fee, the
Fees
, and each individually, a
Fee
), which amount shall be payable in immediately available funds.
(c) The agreements contained in paragraphs (a) and (b) of this Section 9.03 shall be deemed an integral part of the
transactions contemplated by this Agreement, and without such agreements the parties would not have entered into this Agreement. A Fee payable pursuant to paragraphs (a) and (b) of this Section 9.03 shall be the sole and exclusive remedy of
United and Cardinal, respectively, in the event such Fee is payable as specified therein. In the event that Cardinal or United, as applicable, shall fail to pay a Fee when due, then such party shall pay such Fee plus the costs and expenses actually
incurred by the other party (including, without limitation, fees and expenses of counsel) in connection with the collection of such Fee under the enforcement of this Section 9.03, together with interest on such unpaid Fee and costs and
expenses, commencing on the date that such Fee became due, at a rate equal to the rate of interest publicly announced by Citibank, N.A., from time to time, in the City of New York, as such banks Base Rate plus 2.00%.
ARTICLE X
Miscellaneous
10.01
Survival.
No representations, warranties, agreements and covenants contained in this Agreement shall survive the Effective Time (other than Sections 2.02(b), 7.09, 7.10, and
this Article X and those other covenants and agreements contained in this Agreement that by their terms apply or are to be performed in whole or in part after the Effective Time, all of which shall survive the Effective Time).
10.02
Waiver; Amendment.
Prior to the Effective Time, any provision of this Agreement may be (i) waived by the
party benefited by the provision, or (ii) amended or modified at any time, by an agreement in writing between the parties hereto executed in the same manner as this Agreement, except that after the Cardinal Meeting, this Agreement may not be
amended if it would violate the VSCA.
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10.03
Assignment.
This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns, but shall not be assigned by any party without the prior written consent of the other parties.
10.04
Counterparts.
This Agreement may be executed in one or more counterparts, each of which shall be deemed to constitute an original, but all of which together shall constitute one
and the same instrument. This Agreement and any signed agreement or instrument entered into in connection with this Agreement, and any amendments or waivers hereto or thereto, to the extent signed and delivered by means of a facsimile machine or by
e-mail delivery of a .pdf format data file, shall be treated in all manner and respects as an original agreement or instrument and shall be considered to have the same binding legal effect as if it were the original signed version
thereof delivered in person. No party hereto or to any such agreement or instrument shall raise the use of a facsimile machine or e-mail delivery of a .pdf format data file to deliver a signature to this Agreement or any amendment or
waiver hereto or any agreement or instrument entered into in connection with this Agreement or the fact that any signature or agreement or instrument was transmitted or communicated through the use of a facsimile machine or e-mail delivery of a
.pdf format data file as a defense to the formation of a contract and each party hereto forever waives any such defense.
10.05
Governing Law.
This Agreement shall be governed by, and interpreted in accordance with, the laws of the Commonwealth of Virginia applicable to contracts made and to be performed
entirely within such State (except to the extent that mandatory provisions of federal law are applicable). The parties hereby consent and submit to the exclusive jurisdiction and venue of any state or federal court located in the Commonwealth of
Virginia.
10.06
Expenses
.
Subject to the obligations of Cardinal set forth in Section 9.03,
each party hereto will bear all expenses incurred by it in connection with this Agreement and the transactions contemplated hereby, except that printing expenses shall be shared equally between Cardinal and United.
10.07
Notices.
All notices, requests and other communications hereunder to a party shall be in writing and shall be
deemed given if personally delivered, telecopied (with confirmation) or mailed by registered or certified mail (return receipt requested) to such party at its address set forth below or such other address as such party may specify by notice to the
parties hereto.
If to Cardinal, to:
Cardinal Financial Corporation
8270 Greensboro Drive, Suite 500
McLean, Virginia 22207
Attention: Bernard H. Clineburg
Christopher W. Bergstrom
With a copy to:
LeClairRyan, A Professional Corporation
919 East Main Street, 24
th
Floor
Richmond, Virginia 23219
Facsimile: (804) 783-7621
Attention: Scott H. Richter, Esq.
If to United, to:
United Bankshares, Inc.
514 Market Street
Parkersburg, West Virginia 26101
Attention: Richard M. Adams
W. Mark Tatterson
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With a copy to:
Bowles Rice LLP
600 Quarrier Street
Charleston, West Virginia 25301
Facsimile: (304) 343-3058
Attention: Sandra M. Murphy, Esq.
If to Merger Sub, to:
UBV Holding Company, LLC
11185 Main Street
Fairfax, Virginia 22030
Attention: Richard M. Adams
W. Mark Tatterson
With a copy to:
Bowles Rice LLP
600 Quarrier Street
Charleston, West Virginia 25301
Facsimile: (304) 343-3058
Attention: Sandra M. Murphy, Esq.
10.08
Entire Understanding; No Third Party Beneficiaries
.
This Agreement (including the Disclosure Schedules
attached hereto and incorporated herein) and the Confidentiality Agreement represent the entire understanding of the parties hereto with reference to the transactions contemplated hereby and this Agreement supersedes any and all other oral or
written agreements heretofore made. Except for Section 7.09, which shall inure to the benefit of the Persons referred to in such Sections, nothing in this Agreement expressed or implied, is intended to confer upon any person, other than the
parties hereto or their respective successors, any rights, remedies, obligations or liabilities under or by reason of this Agreement.
10.09
Severability.
The provisions of this Agreement will be deemed severable, and the invalidity or unenforceability of any provision will not affect the validity or enforceability
of the other provisions hereof. If any provision of this Agreement, or the application thereof to any party or Person or any circumstance, is found by a court or other Governmental Authority of competent jurisdiction to be invalid or unenforceable,
(a) a suitable and equitable provision will be substituted therefor in order to carry out, so far as may be valid and enforceable, the intent and purpose of such invalid or unenforceable provision, and (b) the remainder of this Agreement
and the application of such provision to other parties, Persons or circumstances will not be affected by such invalidity or unenforceability, nor will such invalidity or unenforceability affect the validity or enforceability of such provision, or
the application thereof, in any other jurisdiction.
10.10
Disclosures.
Any disclosure made in any
document delivered pursuant to this Agreement or referred to or described in writing in any Section of this Agreement or any schedule attached hereto shall be deemed to be disclosure for purposes of any other Section to which the relevance of such
item is reasonably apparent.
10.11
Interpretation; Effect.
When a reference is made in this Agreement to
Sections, Exhibits or Disclosure Schedules, such reference shall be to a Section of, or Exhibit or Disclosure Schedule to, this Agreement unless otherwise indicated. The Disclosure Schedules as well as all other schedules and exhibits to this
Agreement shall be deemed to be part of this Agreement and included in any reference to this Agreement. The table of contents and headings contained in this Agreement are for reference purposes only and are not part of this Agreement. Whenever the
words include, includes or including are used in this Agreement, they
A-46
shall be deemed to be followed by the words without limitation. The words hereby, herein, hereof, hereunder and similar terms refer to
this Agreement as a whole and not any specific Section. Any pronoun used herein shall refer to any gender, either masculine, feminine or neuter, as the context requires. No provision of this Agreement shall be construed to require Cardinal, United
or any of their respective Subsidiaries, affiliates or directors to take any action which would violate applicable law (whether statutory or common law), rule or regulation. The parties hereto acknowledge that each party hereto has reviewed, and has
had an opportunity to have its counsel review, this Agreement and that any rule of construction to the effect that any ambiguities are to be resolved against the drafting party, or any similar rule operating against the drafter of an agreement,
shall not be applicable to the construction or interpretation of this Agreement. No party to this Agreement shall be considered the draftsman.
10.12
Publicity.
United and Cardinal each shall consult with the other prior to issuing any press releases, filing any material pursuant to SEC Rules 165 or 425, or otherwise making
public announcements with respect to the Merger and the other transactions contemplated hereby, and prior to making any filings with respect to any third party and/or any Governmental Authority with respect thereto, except as may be required by law
or by obligations pursuant to any listing agreement with, or rules of, the NASDAQ or in connection with the regulatory application process, in which case the party required to make the release or announcement shall consult with the other to the
extent practicable. The parties agree that the initial press release to be issued with respect to the transactions contemplated by this Agreement shall be in the form heretofore agreed to by the parties.
[Signature page follows this page.]
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IN WITNESS WHEREOF
, the parties hereto have caused this Agreement to be executed in
counterparts by their duly authorized officers, all as of the day and year first above written.
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CARDINAL FINANCIAL CORPORATION
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By:
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/s/ Christopher W. Bergstrom
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Christopher W. Bergstrom
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Title:
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President and Chief Executive Officer
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UNITED BANKSHARES, INC.
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By:
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/s/ Richard M. Adams
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Richard M. Adams
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Title:
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Chairman of the Board and Chief Executive Officer
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UBV HOLDING COMPANY, LLC
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By:
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/s/ Richard M. Adams
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Richard M. Adams
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Title:
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President
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Signature Page to the Agreement and Plan of Reorganization
A-48
Exhibit A
PLAN OF MERGER
merging
CARDINAL FINANCIAL CORPORATION,
a Virginia bank holding company
with and into
UBV HOLDING COMPANY, LLC,
a Virginia bank holding company
1.
Merger
. Cardinal Financial
Corporation (
Cardinal
), a Virginia bank holding company incorporated pursuant to the Virginia Stock Corporation Act (the
VSCA
), shall upon the Effective Time (as defined in Section 2.a) be merged (the
Merger
) with and into UBV Holding Company, LLC (
UBV
), a Virginia bank holding company organized pursuant to the Virginia Limited Liability Company Act (
VLLCA
), a disregarded entity for income
tax purposes and a wholly-owned subsidiary of United Bankshares, Inc. (
United
), a West Virginia bank holding company incorporated pursuant to the West Virginia Business Corporation Act, in accordance with the applicable provisions
of the VSCA and the VLLCA. As a result of the Merger, the separate corporate existence of Cardinal shall cease and UBV shall continue as the surviving entity (the
Surviving Entity
) following the Merger. The existence of
UBV, with all its rights, privileges, immunities, powers and franchises, shall continue unaffected and unimpaired by the Merger.
2.
Effective Time; Effects of the Merger
.
a. The Merger shall become
effective at the latest of: (i) the issuance by the Virginia State Corporation Commission (the
SCC
) of a certificate of merger relating to the Merger; and (ii) the time set forth in articles of merger relating to the
Merger to be filed with the SCC; such time referred to herein as the
Effective Time
.
b. At the Effective
Time, the Merger shall have the effects set forth in Section 13.1-721 of the VSCA and Section 13.1-1070 of the VLLCA. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time the separate corporate existence
of Cardinal shall cease and all of the properties, rights, powers, privileges, franchises, patents, trademarks, licenses, registrations and other assets of every kind and description of Cardinal shall be vested in, and all debts, liabilities and
obligations of Cardinal shall be the obligation of, UBV as the Surviving Entity, all without further act or deed, in accordance with the applicable provisions of the VSCA and the VLLCA.
3.
Articles of Organization
. The articles of organization, as amended, of UBV in effect at the Effective Time shall be the
articles of incorporation of the Surviving Entity, until the same shall thereafter be altered, amended or repealed as provided therein or by applicable law.
4.
Operating Agreement
. The operating agreement, as amended, of UBV in effect at the Effective Time shall be the operating agreement of the Surviving Entity, until the same shall thereafter be
altered, amended or repealed as provided therein or by applicable law.
5.
Board of Directors; Officers
. From and
after the Effective Time, the directors of UBV immediately prior to the Effective Time shall be the directors of the Surviving Entity until their successors are duly appointed or elected. From and after the Effective Time, the officers and managers
of UBV immediately prior to the Effective Time shall be the officers of the Surviving Entity until their successors are duly appointed or elected.
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6.
Manner and Basis of Converting Securities
. At the Effective Time, by virtue
of the Merger and without any action on the part of United, UBV, Cardinal or any holder of any shares of capital stock of United, UBV or Cardinal:
a.
Cardinal Common Stock
.
i. At the Effective Time, each holder of a share
of common stock, $1.00 par value per share, of Cardinal (
Cardinal Common Stock
) (excluding shares of Cardinal Common Stock held by United, UBV or any United or UBV Subsidiary, in each case other than in a fiduciary capacity or as
a results of debts previously contracted, which shares shall (i) not be exchanged for shares of United Common Stock and (ii) be canceled and extinguished for no consideration, and shall be marked canceled in merger as of the Effective
Time) outstanding immediately prior to the Effective Time shall automatically be converted into and exchangeable for the right to receive 0.71 (the
Exchange Ratio
) shares of common stock, $2.50 par value per share, of United
(
United Common Stock
, and together with cash in lieu of fractional shares as provided in Section 6.b below, collectively, the
Merger Consideration
).
ii. Effective as of the Effective Time, each share of Cardinal Common Stock issued and outstanding immediately prior to the Effective
Time (other than Excluded Shares, as defined in Section 6.f) shall no longer be outstanding and shall automatically be canceled and retired and cease to exist, and each holder of certificates that immediately prior to the Effective Time evidenced
shares of Cardinal Common Stock (each, a
Cardinal Certificate
), and each holder of non-certificated shares of Cardinal Common Stock (
Cardinal Book-Entry Shares
) shall cease to have any rights with respect
thereto, except the right to receive the Merger Consideration therefor upon surrender of such Cardinal Certificate or Cardinal Book-Entry Shares in accordance with Section 7.
b.
No Fractional Shares
. No fractional shares of United Common Stock shall be issued in respect of shares of Cardinal Common Stock that are to be converted in the Merger into the right to
receive shares of United Common Stock. Holders of Cardinal Common Stock entitled to fractional shares shall be entitled to receive in lieu of any fractional share of United Common Stock to which such holder would otherwise have been entitled
pursuant to Sections 6.a and 7 an amount in cash (without interest) (the
Cash Consideration
), rounded to the nearest whole cent (with one-half cent being rounded upwards), equal to the product obtained by
multiplying
(i) the fractional share of United Common Stock to which such holder would otherwise be entitled (after taking into account all shares of Cardinal Common Stock held by such holder immediately prior to the Effective Time)
by
(ii) the average of the daily closing prices for United Common Stock for the 20 consecutive full trading days on which such shares are actually traded on the NASDAQ (as reported by
The Wall Street Journal
or, if not reported thereby, any
other authoritative source) ending at the close of trading on the tenth trading day immediately preceding the Effective Date.
c.
Adjustment for Certain Transactions in United Common Stock
. If, on or after the date of the Agreement and Plan of
Reorganization, by and between United and Cardinal, dated as of August 17, 2016 (the
Merger Agreement
), and prior to the Effective Time, United changes (or establishes a record date for changing) the number of shares of United
Common Stock issued and outstanding as a result of a stock split, reverse stock split, stock dividend, reorganization, recapitalization or similar transaction with respect to the then outstanding United Common Stock, or establishes a record date
prior to the Effective Date with respect to any dividend or distribution in respect of United Common Stock other than a cash dividend consistent with past practice, the Exchange Ratio shall be proportionately adjusted to provide holders of Cardinal
Common Stock the same economic effect as contemplated by the Merger Agreement prior to such action.
d.
United Common Stock
and UBV Equity Interests
. Each share of United Common Stock and each equity interest of UBV outstanding immediately prior to the Effective Time shall be unchanged, and shall continue to represent an issued and outstanding share of United
Common Stock and an outstanding equity interest of UBV, respectively.
e.
Cardinal Common Stock Held by United and
UBV
. All shares of Cardinal Common Stock owned directly or indirectly by United, UBV or any of Uniteds or UBVs respective wholly owned subsidiaries (other
A-A-2
than shares held in a fiduciary capacity or as a result of debts previously contracted) shall be cancelled and retired and shall not represent capital stock of the Surviving Entity and shall not
be exchanged for the Merger Consideration; such cancelled and retired shares are referred to herein as, the
Excluded Shares
.
f.
Cardinal Equity-Based Awards
.
(i) At the Effective Time, each
outstanding option (each, a
Cardinal Stock Option
) to purchase shares of Cardinal Common Stock, whether vested or unvested, under any and all plans of Cardinal under which stock options have been granted (collectively, the
Cardinal Stock Plans
) shall vest pursuant to the terms thereof and shall be converted an option (each, a
Replacement Option
) to acquire, on the same terms and conditions as were applicable under such Cardinal
Stock Option, the number of shares of United Common Stock equal to (a) the number of shares of Cardinal Common Stock subject to the Cardinal Stock Option
multiplied
by (b) the Exchange Ratio. Such product shall be rounded down to the
nearest whole number. The exercise price per share (rounded up to the next whole cent) of each Replacement Option shall equal (y) the exercise price per share of shares of Cardinal Common Stock that were purchasable pursuant to such Cardinal Stock
Option
divided
by (z) the Exchange Ratio. Notwithstanding the foregoing, each Cardinal Stock Option that is intended to be an incentive stock option (as defined in Section 422 of the Code) shall be adjusted in accordance with the
requirements of Section 424 of the Code and all other options shall be adjusted in a manner that maintains the options exemption from Section 409A of the Code. At or prior to the Effective Time, Cardinal shall use its reasonable best efforts to
obtain any necessary consents from optionees with respect to the Cardinal Stock Plans to permit replacement of the outstanding Cardinal Stock Options by United pursuant to this Section and to permit United to assume the Cardinal Stock
Plans. Cardinal shall further take all action necessary to amend the Cardinal Stock Plans to eliminate automatic grants or awards thereunder following the Effective Time. At the Effective Time, United shall assume the Cardinal Stock Plans;
provided
that such assumption shall only be with respect to the Replacement Options and shall have no obligation to make any additional grants or awards under the Cardinal Stock Plans other than those grants or awards that have been made or
accrued prior to the Effective Time. United shall file a post-effective amendment to the Registration Statement or an effective registration statement on Form S-8 (or other applicable form) with respect to the shares of United Common Stock
subject to such Replacement Options, shall distribute a prospectus relating to such Form S-8, if applicable, and shall use reasonable commercial efforts to maintain the effectiveness of the Registration Statement or registration statement on Form
S-8 for so long as such Replacement Options remain outstanding.
(ii) At the Effective Time, each restricted stock award
granted under a Cardinal Stock Plan (each, a
Cardinal Stock Award
) that is unvested or contingent and outstanding immediately prior to the Effective Time shall fully vest and shall be converted into the right to receive, without
interest, the Merger Consideration payable pursuant to Section 6(a), and the shares of Cardinal Common Stock subject to such Cardinal Stock Award will be treated in the same manner as all other shares of Cardinal Common Stock for such purposes.
7.
Cardinal Common Stock Exchange Procedures
.
a.
Exchange Agent; Merger Consideration
. United shall appoint its transfer agent, Computershare Limited, or, with the written consent of Cardinal, which shall not be unreasonably withheld,
another agent independent of and unaffiliated with United, UBV or Cardinal (the
Exchange Agent
), for the purpose of exchanging Cardinal Certificates and Cardinal Book-Entry Shares for the Merger Consideration. At or prior to the
Effective Time, United shall deposit, or cause to be deposited, with the Exchange Agent, for the benefit of the holders of Cardinal Common Stock and for exchange in accordance with this Plan of Merger, or shall duly authorize and direct issuance by
the Exchange Agent in accordance with this Section 7 of, (i) certificates, or, at Uniteds option, evidence of shares in book-entry form, representing the shares of United Common Stock, and (ii) an amount of cash necessary to pay the Cash
Consideration.
b.
Surrender of Cardinal Certificates and Cardinal Book-Entry Shares
. United shall cause the
Exchange Agent, not later than five Business Days after the Effective Time, to mail to each holder of one or more Cardinal Certificates or of Cardinal Book-Entry Shares a form letter of transmittal for return to the Exchange Agent containing
instructions for use in effecting the surrender of the Cardinal Certificates and Cardinal Book-Entry Shares in exchange for the Merger Consideration into which the Cardinal Common Stock represented by such Cardinal Certificates and Cardinal
Book-Entry Shares shall have been converted as a result of the Merger.
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The letter of transmittal shall specify that delivery shall be effected, and risk of loss and title to the Cardinal Certificates and Cardinal Book-Entry Shares shall pass, only upon delivery
of the Cardinal Certificates and Cardinal Book-Entry Shares to the Exchange Agent. Upon proper surrender of a Cardinal Certificate or Cardinal Book-Entry Shares for exchange and cancellation to the Exchange Agent or compliance with the provisions of
Section 7.e, together with a properly completed letter of transmittal, duly executed, the holder of such Cardinal Certificate or Cardinal Book-Entry Shares shall be entitled to receive in exchange therefor the Merger Consideration and the Cardinal
Certificate and/or Cardinal Book-Entry Shares so surrendered shall be cancelled. Any portion of the Merger Consideration that remains unclaimed by the holders of Cardinal Common Stock on the business day after the one-year anniversary of
the Effective Date shall be paid to United. Any holders of Cardinal Common Stock who have not theretofor complied with this Section 7.b. shall thereafter look only to United for payment of the Merger Consideration, cash in lieu of fractional
shares and unpaid dividends and distributions on United Common Stock deliverable in respect of each share of Cardinal Common Stock such stockholder holds as determined pursuant to the Merger Agreement, in each case, without any interest
thereon. Subject to all applicable laws of escheat, such amounts shall be paid to such former shareholder of Cardinal, without interest, upon proper surrender of his, her or its Certificates or delivery of an affidavit of loss as described in
Section 7.e.
c.
Rounding of Cash in Lieu of Fractional Shares
. All dollar amounts payable to any shareholder as a
result of the payment of cash in lieu of fractional shares pursuant to Section 6.b will be rounded to the nearest whole cent (with one-half cent being rounded upward), based on the aggregate amount payable for all shares registered in such
shareholders name. No interest will be paid or accrued on any cash payable in lieu of fractional shares or any unpaid dividends and distributions, if any, payable to holders of Certificates.
d.
Automatic Conversion of Cardinal Certificates and Cardinal Book-Entry Shares
. Following the Effective Time, Cardinal
Certificates and Cardinal Book-Entry Shares that formerly represented shares of Cardinal Common Stock that are to be converted into the United Common Stock shall be deemed for all purposes to represent the number of whole shares of United Common
Stock into which they have been converted, except that until exchanged in accordance with the provisions of this Section 7, the holders of such shares shall not be entitled to receive dividends or other distributions or payments in respect of United
Common Stock.
e.
Lost Cardinal Certificates; Failure to Surrender Cardinal Certificates
. If any Certificates
shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming such Cardinal Certificate to be lost, stolen or destroyed and, if required by United, the posting by such person of a bond, in such
reasonable amount as United may direct, as indemnity against any claim that may be made against it with respect to such Cardinal Certificate, the Exchange Agent will issue, in exchange for such lost, stolen or destroyed Cardinal Certificate, the
Merger Consideration to be paid in respect of the shares of Cardinal Common Stock represented by such Cardinal Certificate.
8.
Amendment
. Subject to the terms of the Merger Agreement, this Plan of Merger may be amended by the Managers of UBV and the
Board of Directors Cardinal at any time prior to the Effective Time;
provided
,
however
, that any amendment made subsequent to the approval of this Plan of Merger by the sole member of UBV, and the shareholders of United and Cardinal
shall not:
a. alter or change the amount or kind of shares or other securities, eligible interests, obligations, rights to
acquire shares, other securities or eligible interests, cash or other property or rights to be received under this Plan of Merger by the Cardinal shareholders;
b. alter or change any of the other terms or conditions of this Plan of Merger if the change would adversely Cardinal shareholders in any material respect; or
c. alter or change any term of the articles of incorporation of Cardinal, as amended, or the articles of organization of UBV, as amended.
9.
Abandonment
. At any time prior to the Effective Time, the Merger may be abandoned, subject to the terms of the
Merger Agreement, without further shareholder action in the manner determined by the Boards of Directors of United and Cardinal and the Managers of UBV. Written notice of such abandonment shall be filed with the SCC prior to the Effective Time.
A-A-4
Exhibit B
AGREEMENT AND PLAN OF MERGER
of
CARDINAL BANK
with and into
UNITED BANK
THIS AGREEMENT AND PLAN OF MERGER by and between Cardinal Bank (
Cardinal Bank
) and United Bank (
United
Bank
) is dated as of (this
Bank Merger Agreement
).
WHEREAS, Cardinal Bank is a Virginia chartered commercial bank organized and existing under the Code of Virginia (the
Virginia
Code
) with its principal office at 8270 Greensboro Drive, Suite 500, McLean, Virginia 22102, with an authorized capitalization of 1,000,000 shares of common stock, $5.00 par value per share (
Cardinal Bank Capital Stock
),
of which 800,000 shares of Cardinal Bank Capital Stock are outstanding; and
WHEREAS, United Bank is a Virginia chartered
commercial bank organized and existing under the Virginia Code with its principal office at 11185 Fairfax Boulevard, Fairfax, Virginia 22030, with an authorized capitalization of 200,000 shares of common stock, par value $10.00 per share
(
United Bank Capital Stock
), of which 200,000 shares are outstanding; and
WHEREAS, Cardinal Bank is a
wholly owned subsidiary of Cardinal Financial Corporation, a Virginia corporation and financial holding company having its headquarters at 8270 Greensboro Drive, Suite 500, McLean, Virginia 22102 (
Cardinal
); and
WHEREAS, United Bank is a wholly owned subsidiary of UBV Holding Company, LLC, a Virginia limited liability company and holding company
(and a disregarded entity for income tax purposes) having its headquarters at 11185 Fairfax Boulevard, Fairfax, Virginia 22030 (
UBV
) and is a direct wholly owned subsidiary of United (as defined below) for income tax purposes; and
WHEREAS, UBV is a wholly owned subsidiary of United Bankshares, Inc. a West Virginia corporation and registered bank
holding company having its headquarters at 300 United Center, 500 Virginia Street, East, Charleston, West Virginia 25301 (
United
); and
WHEREAS, prior to the entry into this Bank Merger Agreement, United and Cardinal entered into an Agreement and Plan of Reorganization dated as of August 17, 2016 (as such agreement may hereafter be
amended or supplemented from time to time, the Reorganization Agreement) pursuant to which United has agreed to acquire Cardinal by means of the merger of Cardinal with and into UBV with UBV surviving such merger (the
Merger
); and
WHEREAS, it is contemplated pursuant to the Reorganization Agreement that, after the Merger,
Cardinal Bank will be merged with and into United Bank, with United Bank surviving the merger (the
Bank Merger
); and
WHEREAS, each of the Boards of Directors of Cardinal Bank and United Bank has determined that the Bank Merger would be in the best interests of its respective bank, has approved the Bank Merger and has
authorized its respective bank to enter into this Bank Merger Agreement; and
WHEREAS, the parties hereto intend that the Bank
Merger shall qualify as a tax-free reorganization under Section 368(a) of the Internal Revenue Code of 1986, as amended (the
Code
), and this Bank Merger Agreement is intended to be adopted as a plan of reorganization
for purposes of Sections 354 and 361 of the Code;
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NOW, THEREFORE, in consideration of the premises and the mutual agreements contained herein,
the parties do hereby agree as follows:
ARTICLE I
At the Effective Time (as defined in Section 4.1), subject to the terms and conditions of this Bank Merger Agreement, Cardinal Bank shall
be merged with and into United Bank, and United Bank shall be the surviving institution resulting from the Bank Merger (the
Merged Bank
), pursuant to Section 6.2-822 of the Code of Virginia. The Bank Merger shall have the effect
provided in Section 6.2-822.C of the Code of Virginia.
ARTICLE II
The name of the Merged Bank in the Bank Merger shall be United Bank.
ARTICLE III
The business of the Merged Bank shall be that of a Virginia chartered commercial bank. The business shall be conducted by the Merged Bank at its principal office, which shall be located at the principal
office of United Bank at 11185 Fairfax Boulevard, Fairfax, Virginia 22030, at all duly authorized and operating branches of United Bank and Cardinal Bank as of the Effective Time (as hereinafter defined), together with the principal office of
Cardinal Bank, which shall be operated as a branch of the Merged Bank, and at all other offices and facilities of United Bank and Cardinal Bank established as of the Effective Time.
ARTICLE IV
Section 4.1
At the time the Bank Merger becomes effective (the
Effective Time
), the separate existence of Cardinal Bank shall cease and the corporate existence of United Bank, as
the Merged Bank, shall continue unaffected and unimpaired by the Bank Merger; and the Merged Bank shall be deemed to be the same business and corporate entity as each of Cardinal Bank and United Bank. At the Effective Time, by virtue of the Bank
Merger and without any further act, deed, conveyance or other transfer, all of the property, rights, powers and franchises of Cardinal Bank and United Bank shall vest in United Bank as the Merged Bank, and the Merged Bank shall be subject to and be
deemed to have assumed all of the debts, liabilities, obligations and duties of Cardinal Bank and United Bank, and to have succeeded to all of the relationships, fiduciary or otherwise, of Cardinal Bank and United Bank as fully and to the same
extent as if such property, rights, powers, franchises, debts, liabilities, obligations, duties and relationships had been originally acquired, incurred or entered into by the Merged Bank;
provided
,
however
, that the Merged Bank shall
not, through the Bank Merger, acquire power to engage in any business or to exercise any right, privilege or franchise that is not conferred on the Merged Bank by the Virginia Code or applicable regulations.
Section 4.2
The Merged Bank, upon the consummation of the Bank Merger and without any order or other action on the part of any
court or otherwise, shall hold and enjoy all rights of property, franchises and interests, including appointments, designations and nominations, and all other rights and interests as agent, trustee, executor, administrator, registrar of stocks and
bonds, guardian of estates, conservator, assignee, receiver and committee of estates of incompetents, bailee or depository of personal property, and in every other fiduciary and/or custodial capacity, in the same manner and to the same extent as
such rights, franchises and interests were held or enjoyed by each of Cardinal Bank and United Bank immediately prior to the Effective Time.
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ARTICLE V
Section 5.1
At the Effective Time, (i) all of the shares of Cardinal Bank Capital Stock validly issued and outstanding immediately prior to the Effective Time shall, by virtue of the Bank Merger
and without any action on the part of the holder thereof, be canceled and retired, and no cash, new shares of common stock, or other property shall be delivered in exchange therefor, and (ii) the shares of United Bank Capital Stock issued and
outstanding immediately prior to the Effective Time shall, at the Effective Time, continue to be issued and outstanding.
Section 5.2
At and after the Effective Time, certificates evidencing shares of Cardinal Bank Capital Stock shall thereafter not
evidence any interest in Cardinal Bank or the Merged Bank.
Section 5.3
The stock transfer book of Cardinal Bank shall
be closed as of the Effective Time and, thereafter, no transfer of any shares of Cardinal Bank Capital Stock shall be recorded therein.
ARTICLE VI
Section 6.1
Upon the Effective Time, the Board of
Directors of the Merged Bank shall be comprised of those persons serving as directors of United Bank immediately prior to the Effective Time. Each such director shall hold office until the next annual meeting of the shareholder of the Merged Bank at
which directors are elected, unless sooner removed, resigned, disqualified or deceased, and until his or her successor has been elected and qualified.
Section 6.2
The officers of United Bank serving immediately prior to the Effective Time shall serve as the officers of the Merged Bank, as the successor institution, until their successors are duly
appointed by the Board of Directors of the Merged Bank.
ARTICLE VII
From and after the Effective Time, (i) the Articles of Incorporation, as amended, of the Merged Bank shall be the Articles of
Incorporation of United Bank in effect immediately prior to the Effective Time and shall thereafter continue in full force and effect until further altered, amended or repealed in accordance with law, and (ii) the Bylaws, as amended, of the Merged
Bank shall be the Bylaws of United Bank in effect immediately prior to the Effective Time and shall thereafter continue in full force and effect until further altered, amended or repealed in accordance with law.
ARTICLE VIII
This Bank Merger Agreement may be amended by a subsequent writing signed by all of the parties hereto, except that no provision in Article IX may be amended or waived at any time pursuant to its terms.
This Bank Merger Agreement may be terminated by mutual consent of Cardinal Bank and United Bank at any time prior to the Effective Time. In addition, this Bank Merger Agreement will terminate, and be of no further force or effect, upon the
termination of the Reorganization Agreement without any action by either party hereto.
ARTICLE IX
Section 9.1
This Bank Merger Agreement and the Bank Merger shall be adopted and approved by the written consent of the sole holder
of all of the outstanding shares of Cardinal Bank Capital Stock and by the written consent of the sole holder of all of the outstanding shares of United Bank Capital Stock.
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Section 9.2
The Effective Time shall be the later of: (i) the issuance by the
Virginia State Corporation Commission (the
SCC
) of a certificate of merger relating to the Bank Merger; and (ii) the time set forth in articles of merger relating to the Bank Merger filed with the SCC;
provided
,
however
, that in no event shall the Effective Time be earlier than, or at the same time as, the effective time of the Merger.
Section 9.3
Notwithstanding any provision of this Bank Merger Agreement to the contrary, it shall be a condition to the consummation of the Bank Merger and the parties obligations to
consummate the Bank Merger that, (i) immediately prior to the Effective Time, the Merger shall have been consummated and UBV shall be the sole holder of all of the issued and outstanding shares of Cardinal Bank Capital Stock and all of the issued
and outstanding shares of United Bank Capital Stock, either directly or indirectly, and (ii) all required regulatory approvals shall have been obtained and any waiting periods shall have expired.
Section 9.4
Each of the parties hereto agrees to use reasonable best efforts to take, or cause to be taken, all action and to do,
or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by this Bank Merger Agreement, subject to and in accordance with the applicable
provisions of the Reorganization Agreement.
ARTICLE X
Any notice or other communication required or permitted under this Bank Merger Agreement shall be effective only if it is in writing and
delivered personally or sent by registered or certified mail, postage prepaid, addressed as follows:
if to Cardinal Bank:
Christopher W. Bergstrom, President and Chief Executive Officer
Cardinal Bank
8270 Greensboro Drive, Suite 500
McLean, Virginia
Fax: (703) 584-3414
E-mail: chris.bergstrom@cardinalbank.com
Copy to:
Scott H. Richter, Esq
LeClairRyan, A Professional Corporation
919 East Main Street, 24
th
Floor
Richmond, Virginia 23219
Fax: (804) 783-7621
E-mail: Scott.Richter@leclairryan.com
if to United Bank:
James J. Consagra, Jr., President and Chief Executive Officer
United Bank
1118 Fairfax Boulevard
Fairfax, Virginia 22030
Fax (703) 442-7190
E-mail: james.consagra@bankwithunited.com
Copy to:
Sandra M. Murphy
Bowles Rice LLP
600 Quarrier Street
Charleston, West Virginia 25301
Fax (304) 343-3058
E-mail: smurphy@bowlesrice.com
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or to such other address as such party may designate by notice to the others and shall be deemed to have
been given upon receipt.
ARTICLE XI
From time to time as and when reasonably requested by the Merged Bank and to the extent permitted by law and at the expense of the Merged Bank, the officers and directors of Cardinal Bank and United Bank
last in office shall execute and deliver such assignments, deeds and other instruments and shall take or cause to be taken such further or other action as shall be necessary in order to vest or perfect in or to confirm of record or otherwise to the
Merged Bank title to, and possession of, all of the property, rights, power and franchises of Cardinal Bank and United Bank, including, without limitation, all rights and interests of Cardinal Bank and United Bank in any fiduciary and/or custodial
capacity, and otherwise to carry out the purposes of this Bank Merger Agreement, and the proper officers and directors of the Merged Bank, as the receiving and surviving entity, are fully authorized to take any and all such action in the name of
Cardinal Bank and United Bank or otherwise.
ARTICLE XII
This Bank Merger Agreement is binding upon and is for the benefit of Cardinal Bank and United Bank and their respective successors and
permitted assigns;
provided
,
however
, that neither this Bank Merger Agreement nor any rights or obligations hereunder may be assigned by any party hereto to any other person without the prior consent in writing of each other party
hereto. This Bank Merger Agreement is not made for the benefit of any person, firm, corporation or association not a party hereto and no other person, firm, corporation or association shall acquire or have any right under or by virtue of this Bank
Merger Agreement.
ARTICLE XIII
This Bank Merger Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Virginia, except to the extent federal law may be applicable.
ARTICLE XIV
This Bank Merger Agreement shall constitute a plan of reorganization for the Bank Merger within the meaning of Section 368(a) of the Code.
ARTICLE XV
This Bank Merger Agreement may be executed in several counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
[Remainder of page intentionally left blank]
A-B-5
IN WITNESS WHEREOF, Cardinal Bank and United Bank have each caused this Agreement and Plan
of Merger to be executed as of the date first above written.
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CARDINAL BANK
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By:
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|
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Christopher W. Bergstrom
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Title:
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President and Chief Executive Officer
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UNITED BANK
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By:
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James J. Consagra, Jr.
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Title:
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President & Chief Executive Officer
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Signature Page to the Agreement and Plan of Merger
A-B-6
Exhibit C
PLAN OF MERGER
merging
CARDINAL BANK,
a Virginia chartered commercial bank
with and into
UNITED BANK,
a Virginia chartered commercial bank
1.
Merger
. Cardinal Bank
(
Cardinal Bank
), a Virginia chartered commercial bank, shall upon the Effective Time (as defined in Section 2.a below) be merged (the
Bank Merger
) with and into United Bank (
United Bank
), a
Virginia chartered commercial bank, in accordance with the applicable provisions of the Virginia Stock Corporation Act (the
VSCA
) and Title 6.2 of the Code of Virginia. As a result of the Bank Merger, the separate corporate
existence of Cardinal Bank shall cease and United Bank shall continue as the surviving corporation (the
Successor Institution
) following the Bank Merger. The corporate existence of United Bank shall continue unaffected and
unimpaired by the Bank Merger.
2.
Effective Time; Effects of the Merger
.
a. The Bank Merger shall become effective at the later of (i) the time and date designated by United Bank to the Virginia Bureau of
Financial Institutions as the time and date on which the Bank Merger shall be effective and (ii) the time and date on which the Virginia Bureau of Financial Institutions orders the Bank Merger to be effective;
provided
,
however
, that
in no event shall the Effective Time be earlier than, or at the same time as, the effective time of the merger (the
Merger
) of Cardinal Financial Corporation, the parent company of Cardinal Bank (
Cardinal
), with
and into UBV Holding Company, LLC, the parent company of United Bank (
UBV
), and wholly-owned subsidiary of United Bankshares, Inc. (
UBSI
); such time referred to herein as the
Effective Time
.
b. The business of the Successor Institution shall be that of a Virginia chartered commercial bank. The business shall
be conducted by the Successor Institution at its principal office, which shall be located at the principal office of United Bank at 1118 Main Street, Fairfax, Virginia 22030; at all duly authorized and operating branches of United Bank and Cardinal
Bank as of the Effective Time, together with the principal office of Cardinal Bank, which shall be operated as a branch of the Successor Institution; and at all other offices and facilities of United Bank and Cardinal Bank established as of the
Effective Time.
c. At the Effective Time, the Bank Merger shall have the effects set forth in Section 13.1-721 of the
VSCA. At the Effective Time, the separate existence of Cardinal Bank shall cease and the corporate existence of United Bank, as the Successor Institution, shall continue unaffected and unimpaired by the Bank Merger; and the Successor
Institution shall be deemed to be the same business and corporate entity as each of Cardinal Bank and United Bank. At the Effective Time, by virtue of the Bank Merger and without any further act, deed, conveyance or other transfer, all of the
property, rights, powers and franchises of Cardinal Bank and United Bank shall vest in United Bank as the Successor Institution, and the Successor Institution shall be subject to and be deemed to have assumed all of the debts, liabilities,
obligations and duties of Cardinal Bank and United Bank, and to have succeeded to all of the relationships, fiduciary or otherwise, of Cardinal Bank and United Bank as fully and to the same extent as if such property, rights, powers, franchises,
debts, liabilities, obligations, duties and relationships had been originally acquired, incurred or entered into by the Successor Institution;
provided
,
however
, that the Successor Institution shall not, through the Bank Merger,
acquire power to engage in any business or to exercise any right, privilege or franchise which is not conferred on the Successor Institution by the Code of Virginia or applicable regulations.
A-C-1
d. The Successor Institution, upon the consummation of the Bank Merger and without any order
or other action on the part of any court or otherwise, shall hold and enjoy all rights of property, franchises and interests, including appointments, designations and nominations, and all other rights and interests as agent, trustee, executor,
administrator, registrar of stocks and bonds, guardian of estates, conservator, assignee, receiver and committee of estates of incompetents, bailee or depository of personal property, and in every other fiduciary and/or custodial capacity, in the
same manner and to the same extent as such rights, franchises and interests were held or enjoyed by each of Cardinal Bank and United Bank immediately prior to the Effective Time.
e. The name of the Successor Institution in the Bank Merger shall be United Bank.
3.
Manner and Basis of Converting Securities
.
a. At the Effective Time, (i) all of the shares of the capital stock of Cardinal Bank validly issued and outstanding immediately prior to the Effective Time shall, by virtue of the Bank Merger and without
any action on the part of the holder thereof, be canceled and retired, and no cash, new shares of common stock, or other property shall be delivered in exchange therefor, and (ii) the shares of the capital stock of United Bank issued and outstanding
immediately prior to the Effective Time shall, at the Effective Time, continue to be issued and outstanding.
b. At and after
the Effective Time, certificates evidencing shares of capital stock of Cardinal Bank shall thereafter not evidence any interest in Cardinal Bank or the Successor Institution.
c. The stock transfer book of Cardinal Bank shall be closed as of the Effective Time and, thereafter, no transfer of any shares of capital stock of Cardinal Bank shall be recorded therein.
d. Any outstanding options or other rights to acquire shares of capital stock of Cardinal Bank outstanding as of the Effective time shall
be canceled at the Effective Time.
4.
Board of Directors
. Upon the Effective Time, the Board of Directors of the
Successor Institution shall be comprised of those persons serving as directors of United Bank immediately prior to the Effective Time. Each such Director shall hold office until the next annual meeting of the shareholder of the Successor Institution
at which directors are elected, unless sooner removed, resigned, disqualified or deceased, and until their successors have been elected and qualified.
5.
Officers
. Upon the Effective Time, the officers of the Successor Institution shall be comprised of those persons serving as officers of United Bank immediately prior to the Effective Time. Each
such officer shall hold office until his or her successor has been duly appointed by the Board of Directors of the Successor Institution.
6.
Articles of Incorporation
. From and after the Effective Time, the Articles of Incorporation of the Successor Institution shall be the Articles of Incorporation of United Bank in effect
immediately prior to the Effective Time and shall thereafter continue in full force and effect until further altered, amended or repealed in accordance with law.
7.
Bylaws
. From and after the Effective Time, the Bylaws of the Successor Institution shall be the Bylaws of United Bank in effect immediately prior to the Effective Time and shall thereafter
continue in full force and effect until further altered, amended or repealed in accordance with law.
8.
Amendment
. Subject to the terms of the Agreement and Plan of Merger by and between United Bank and Cardinal Bank, dated
(the
Bank Merger Agreement
), this Plan of Merger may be amended by the Boards of Directors of United Bank and
Cardinal Bank at any time prior to the Effective Time;
provided
,
however
, that any amendment made subsequent to the approval of this Plan of Merger by the shareholder of Cardinal Bank and the shareholder of United Bank shall not:
a. alter or change the amount or kind of shares or other securities, eligible interests, obligations, rights to acquire
shares, other securities or eligible interests, cash or other property or rights to be received under this Plan of Merger by such shareholders;
A-C-2
b. alter or change any of the other terms or conditions of this Plan of Merger if the change
would adversely affect such shareholders in any material respect; or
c. alter or change any term of the Articles of
Incorporation of Cardinal Bank or United Bank.
9.
Condition Precedent; Termination
. It shall be a condition to
the consummation of the Bank Merger and the parties obligations to consummate the Bank Merger that, (i) immediately prior to the Effective Time, the Merger shall have been consummated and UBV shall be the sole holder of all of the issued and
outstanding shares of capital stock of Cardinal Bank and all of the issued and outstanding shares of capital stock of United Bank, either directly or indirectly, and (ii) all required regulatory approvals shall have been obtained and any waiting
periods shall have expired. This Plan of Merger may be terminated by mutual consent of Cardinal Bank and United Bank at any time prior to the Effective Time. In addition, this Plan of Merger will terminate, and be of no further force or
effect, upon the termination of the Reorganization Agreement without any action by either party hereto.
10.
Abandonment
. At any time prior to the Effective Time, the Bank Merger may be abandoned, subject to regulatory approval and to the terms of the Bank Merger Agreement, without further shareholder action in the manner determined by the
Boards of Directors of United Bank and Cardinal Bank. Written notice of such abandonment shall be filed with the Virginia State Corporation Commission prior to the Effective Time.
11.
Defined Term
. As used in this Plan of Merger, the
Reorganization Agreement
means the Agreement and
Plan of Reorganization by and between Cardinal and UBSI, dated August 17, 2016, pursuant to which Cardinal will be merged with and into UBV, with UBV surviving such merger.
A-C-3
Exhibit D
Form of Cardinal Support Agreement
SUPPORT AGREEMENT
This Support Agreement, made as of this 17th day of August, 2016, between United Bankshares, Inc., a West Virginia corporation
(
United
), and the stockholder of Cardinal Financial Corporation, a Virginia corporation (
Cardinal
), identified on the signature page hereto in such Stockholders capacity as a stockholder of Cardinal (the
Stockholder
).
WHEREAS, United and Cardinal have entered into an Agreement and Plan of Reorganization dated
as of the date hereof (the
Reorganization Agreement
) pursuant to which all of the outstanding shares of Cardinal Common Stock will be exchanged for shares of United Common Stock in accordance with the terms of the Reorganization
Agreement; and
WHEREAS, as of the date hereof, Stockholder owns or possesses the sole right to vote or direct the voting of,
the number of shares of Cardinal Common Stock and the number of shares of restricted stock of Cardinal set forth on the signature page hereto (the
Covered Shares
); and
WHEREAS, Stockholder owns or possesses the sole power to dispose of or to direct the disposition of, the Covered Shares; and
WHEREAS, as of the date hereof, Stockholder has the right to acquire pursuant to the exercise of Cardinal Stock Options issued and
outstanding pursuant to the Cardinal Stock Plans, the number of shares of Cardinal Common Stock set forth on the signature page hereto; and
WHEREAS, as a material inducement for United to enter into the Reorganization Agreement and consummate the transactions contemplated thereby, Stockholder has agreed to enter into this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the covenants and agreements set forth herein and in the Reorganization
Agreement, and intending to be legally bound hereby, the parties agree as follows:
1.
Representations and Warranties of
Stockholder.
Stockholder represents and warrants that: (a) Stockholder is now, and at all times until the Effective Date of the Merger will be, the sole owner, of record or beneficially, or possesses and will possess the sole right to vote or
direct the voting of all of the Covered Shares, and possesses or will possess the sole power to dispose of or direct the disposition of all of Covered Shares; (b) Stockholder has, and through the Effective Date will continue to have, the sole right
and power to vote and/or dispose of, or to direct the voting or disposition of, all of the Covered Shares; (c) Stockholder has full right, power and authority to enter into, deliver and perform this Agreement; and (d) this Agreement has been duly
executed and delivered by Stockholder.
2.
Covenants of Stockholder.
(a) Stockholder agrees to cause the Covered Shares
to be present at the Cardinal Meeting and at such meeting shall vote, or cause to be voted, the Covered Shares in favor of the Reorganization Agreement and the transactions contemplated thereby, until this Agreement terminates as provided in Section
2(d), unless: (i) United is in material default with respect to a material covenant, representation, warranty or agreement made by it in the Reorganization Agreement; or (ii) in accordance with Section 7.02(a) of the Reorganization Agreement, the
Cardinal Board has failed to make, withdrawn, modified or otherwise changed its recommendation to Cardinal stockholders.
(b)
Stockholder agrees that until the termination of this Agreement as provided in Section 2(d), that Stockholder shall not, without the prior written consent of United, directly or indirectly tender or permit the tender into any tender or exchange
offer, or sell, transfer, hypothecate, grant a security interest in or otherwise dispose of or encumber any of the Covered Shares, or any options to acquire Cardinal Common Stock issued and outstanding pursuant to the Cardinal Stock Plans;
provided
that this restriction shall not apply to shares that are hypothecated or as to which a security interest already has been granted as of the date hereof. Notwithstanding the foregoing, in the case of any transfer by operation of law
subsequent to the date hereof, this Agreement shall be binding upon and inure to the transferee.
A-D-1
(c) Stockholder agrees not to, without the prior written consent of United, sell on NASDAQ,
submit an offer to sell on NASDAQ, or otherwise directly or indirectly sell, transfer or dispose of (other than by an exercise), any Covered Shares or any options, warrants, rights or other securities convertible into or exchangeable for shares of
Cardinal Common Stock prior to the Effective Time of the Merger.
(d) This Agreement shall terminate upon the earlier to occur
of: (a) the termination of the Reorganization Agreement by either Cardinal or United or (b) the Effective Date of the Merger.
3.
Additional Shares and Options.
Notwithstanding anything to the contrary contained herein, this Agreement shall apply to all
shares of Cardinal Common Stock that Stockholder currently has the sole right and power to vote and/or dispose of, or to direct the voting or disposition of, and all such shares of Cardinal Common Stock as to which Stockholder may hereafter acquire
the sole right and power to vote and/or dispose of, or to direct the voting or disposition of, and all Cardinal Stock Options that Stockholder may currently own or hereafter acquire.
4.
Governing Law.
This Agreement shall be governed in all respects by the law of the Commonwealth of Virginia, without regard to
the conflict of laws principles thereof.
5.
Assignment; Successors.
This Agreement may not be assigned by Stockholder
without the prior written consent of United. The provisions of this Agreement shall be binding upon and, shall inure to the benefit of the parties hereto and their respective successors, assigns, heirs and personal representatives.
6.
Scope of Agreement.
The parties hereto acknowledge and agree that this Agreement shall not confer upon United any right or
ability to acquire the shares of Cardinal Common Stock other than in connection with the Merger. The parties hereto acknowledge and agree that this Agreement does not constitute an agreement or understanding of Stockholder in his/her capacity as a
director or officer of Cardinal, but only in his/her capacity as a holder of shares of Cardinal Common Stock or of Cardinal Stock Options. The term Covered Shares shall not include any securities owned or possessed by Stockholder as
a trustee or fiduciary other than those owned or possessed by Stockholder a trustee or fiduciary of a trust for which Stockholder or any member of the Stockholders immediate family is a beneficiary (which for the avoidance of doubt, shall be
included as Covered Shares), and this Agreement is not in any way intended to affect the exercise by Stockholder of his or her fiduciary responsibility in respect of any such securities.
7.
Severability.
Any invalidity, illegality or unenforceability of any provision of this Agreement in any jurisdiction shall not
invalidate or render illegal or unenforceable the remaining provisions hereof in such jurisdiction and shall not invalidate or render illegal or unenforceable such provision in any other jurisdiction.
8.
Amendment, Waiver.
This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties
hereto which expressly states its intention to amend this Agreement. No provision of this Agreement may be waived, except by an instrument in writing, executed by the waiving party, expressly indicating an intention to effect a waiver. No failure or
delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or
privilege.
9.
Defined Terms.
Capitalized terms used and not defined herein and defined in the Reorganization Agreement
shall have the meaning ascribed to them in the Reorganization Agreement.
10.
Counterparts.
This Agreement may be
executed in one or more counterparts, each of which shall be an original, and all of which together shall constitute one and the same instrument.
[Remainder of page intentionally blank]
A-D-2
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the
day first above written.
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|
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UNITED BANKSHARES, INC.
|
|
|
By:
|
|
|
|
|
|
Name:
|
|
Richard M. Adams
|
Title:
|
|
Chairman of the Board and Chief
|
|
|
Executive Officer
|
|
STOCKHOLDER
|
|
|
Name:
|
|
|
Shares as to which
Stockholder has sole:
Voting
Power:
Dispositive
Power:
Restricted shares held by
Stockholder:
Options held by
Stockholder:
[Signature Page to Support Agreement]
A-D-3
List of Disclosure Schedules
to the
Agreement
and Plan of Reorganization
dated August 17, 2016
among
United Bankshares, Inc., UBV Holding Company LLC and Cardinal Financial
Corporation
United Disclosure Schedule
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|
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Section 5.02(a)
|
|
Ordinary Course
|
Section 5.02(g)
|
|
Governing Documents
|
Section 6.04(b)(i)
|
|
Outstanding Options
|
Section 6.04(f)(ii)
|
|
Regulatory Approvals
|
Section 6.04(g)(ii)
|
|
Financial Reports and SEC Documents
|
Section 6.04(l)
|
|
Employee Benefit Plans
|
Section 6.04(m)
|
|
Broker Fee
|
Section 6.04(t)
|
|
Insurance
|
Cardinal Disclosure Schedule
|
|
|
|
|
Section 5.01(b)
|
|
Capital Stock
|
Section 5.01(c)
|
|
Dividends, Etc.
|
Section 5.01(d)
|
|
Compensation; Employment Agreements; Etc.
|
Section 5.01(e)
|
|
Benefit Plans
|
Section 5.01(j)
|
|
Contracts
|
Section 6.03(c)
|
|
Subsidiaries
|
Section 6.03(g)
|
|
Financial Reports and SEC Documents; Absence of Certain Changes or Events
|
Section 6.03(h)
|
|
Litigation
|
Section 6.03(k)
|
|
Material Contracts; Defaults
|
Section 6.03(l)
|
|
Broker Fee
|
Section 6.03(m)
|
|
Employee Benefit Plans
|
Section 6.03(t)
|
|
Insurance
|
Section 6.03(v)(iv)
|
|
Loan Matters
|
Section 7.01
|
|
Reasonable Best Efforts
|
Section 7.10(b)
|
|
Benefit Plans
|
Section 7.10(d)
|
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Benefit Plans
|
Appendix B
August 17, 2016
Board of
Directors
Cardinal Financial Corporation
8270 Greensboro Drive, Suite 500
McLean, VA 22102
Ladies and Gentlemen:
Cardinal
Financial Corporation (Cardinal), United Bankshares, Inc. (United) and UBV Holding Company, LLC (Merger Sub), a wholly owned subsidiary of United, intend to enter into an agreement and plan of reorganization (the
Agreement) pursuant to which Cardinal will merge with and into Merger Sub with Merger Sub as the surviving entity (the Merger). Pursuant to the terms of the Agreement, upon the Effective Time of the Merger, each share of
common stock, par value $1.00 per share, of Cardinal (Cardinal Common Stock) issued and outstanding immediately prior to the Effective Time, except for those shares as specified in the Agreement, shall be converted into the right to
receive 0.71 shares (the Exchange Ratio) of common stock, $2.50 par value, of United (United Common Stock). The other terms and conditions of the Merger are more fully set forth in the Agreement, and capitalized terms used
herein without definition shall have the meanings assigned to them in the Agreement. You have requested our opinion as to the fairness, from a financial point of view, of the Exchange Ratio to the holders of Cardinal Common Stock.
Sandler ONeill & Partners, L.P., as part of its investment banking business, is regularly engaged in the valuation of financial
institutions and their securities in connection with mergers and acquisitions and other corporate transactions. In connection with this opinion, we have reviewed, among other things: (i) a draft of the Agreement, dated August 16, 2016; (ii) certain
publicly available financial statements and other historical financial information of Cardinal that we deemed relevant; (iii) certain publicly available financial statements and other historical financial information of United that we deemed
relevant; (iv) publicly available consensus mean and median analyst earnings per share estimates for Cardinal for the years ending December 31, 2016 and December 31, 2017 as well as an estimated long-term earnings per share growth rate for the years
thereafter, as provided by the senior management of Cardinal; (v) publicly available consensus mean and median analyst earnings per share estimates for United for the years ending December 31, 2016 and December 31, 2017 as well as an estimated
long-term earnings per share growth rate for the years thereafter, as provided by the senior management of United; (vi) the pro forma financial impact of the Merger on United based on certain assumptions relating to transaction costs, purchase
accounting adjustments, expected cost savings, a core deposit intangible asset, a provision expense and Uniteds issuance of a certain amount of perpetual preferred stock, as provided by the senior management of United; (vii) the publicly
reported historical price and trading activity for Cardinal Common Stock and United Common Stock, including a comparison of certain stock market information for Cardinal Common Stock and United Common Stock and certain stock indices, as well as
publicly available information for certain other similar companies, the securities of which are publicly traded; (viii) a comparison of certain financial information for Cardinal and United with similar institutions for which information is publicly
available; (ix) the financial terms of certain recent business combinations in the bank and thrift industry (on a nationwide basis), to the extent publicly available; (x) the current market environment generally and in the banking sector in
particular; and (xi) such other information, financial studies, analyses and investigations and financial, economic and market criteria as we considered relevant. We also discussed with certain members of senior management of Cardinal the
business, financial condition, results of operations and prospects of Cardinal and held similar discussions with the senior management of United regarding the business, financial condition, results of operations and prospects of United.
In performing our review, we have relied upon the accuracy and completeness of all of the financial and other information that was
available to us from public sources, that was provided to us by Cardinal and United, or their respective representatives, or that was otherwise reviewed by us and have assumed such accuracy and
B-1
completeness for purposes of preparing this letter. We have further relied on the assurances of the management of Cardinal and United that they are not aware of any facts or circumstances
that would make any of such information inaccurate or misleading. We have not been asked to and have not undertaken an independent verification of any of such information and we do not assume any responsibility or liability for the accuracy or
completeness thereof. We did not make an independent evaluation or appraisal of the specific assets, the collateral securing assets or the liabilities (contingent or otherwise) of Cardinal or United, or any of their respective subsidiaries, nor
have we been furnished with any such evaluations or appraisals. We render no opinion or evaluation on the collectability of any assets or the future performance of any loans of Cardinal or United. We did not make an independent evaluation
of the adequacy of the allowance for loan losses of Cardinal, United or the combined entity after the Merger and we have not reviewed any individual credit files relating to Cardinal or United. We have assumed, with your consent, that the
respective allowances for loan losses for both Cardinal and United are adequate to cover such losses and will be adequate on a pro forma basis for the combined entity.
In preparing its analyses, Sandler ONeill used publicly available consensus mean analyst earnings per share estimates for Cardinal for the years ending December 31, 2016 and December 31, 2017 as
well as an estimated long-term earnings per share growth rate for the years thereafter, as provided by the senior management of Cardinal. In addition, Sandler ONeill used publicly available consensus mean analyst earnings per share estimates
for United for the years ending December 31, 2016 and December 31, 2017 as well as an estimated long-term earnings per share growth rate for the years thereafter, as provided by the senior management of United. Sandler ONeill also received and
used in its pro forma analyses certain assumptions relating to transaction costs, purchase accounting adjustments, expected cost savings, a core deposit intangible asset, a provision expense and Uniteds issuance of a certain amount of
perpetual preferred stock, as provided by the senior management of United. With respect to the foregoing information, the respective senior managements of Cardinal and United confirmed to us that those estimates and judgments reflected the best
currently available estimates and judgments of those respective managements of the future financial performance of Cardinal and United, respectively, and we assumed that such performance would be achieved. We express no opinion as to such
information or the assumptions on which such information is based. We have also assumed that there has been no material change in the respective assets, financial condition, results of operations, business or prospects of Cardinal or United
since the date of the most recent financial data made available to us. We have also assumed in all respects material to our analysis that Cardinal and United would remain as going concerns for all periods relevant to our analyses.
We have also assumed, with your consent, that (i) each of the parties to the Agreement will comply in all material respects with all
material terms of the Agreement and all related agreements, that all of the representations and warranties contained in such agreements are true and correct in all material respects, that each of the parties to such agreements will perform in all
material respects all of the covenants required to be performed by such party under the agreements and that the conditions precedent in such agreements are not and will not be waived, (ii) in the course of obtaining the necessary regulatory or third
party approvals, consents and releases with respect to the Merger, no delay, limitation, restriction or condition will be imposed that would have an adverse effect on Cardinal, United or the Merger or any related transaction, (iii) the Merger will
be consummated without Cardinals rights under Section 9.01(i) of the Agreement having been triggered, and (iv) the Merger and any related transaction will be consummated in accordance with the terms of the Agreement without any waiver,
modification or amendment of any material term, condition or agreement thereof and in compliance with all applicable laws and other requirements. Finally, with your consent, we have relied upon the advice that Cardinal has received from its legal,
accounting and tax advisors as to all legal, accounting and tax matters relating to the Merger and the other transactions contemplated by the Agreement.
Our analyses and the views expressed herein are necessarily based on financial, economic, regulatory, market and other conditions as in effect on, and the information made available to us as of, the date
hereof. Events occurring after the date hereof could materially affect our views. We have not undertaken to update, revise, reaffirm or withdraw this letter or otherwise comment upon events occurring after the date
B-2
hereof. We express no opinion as to the trading values of Cardinal Common Stock or United Common Stock at any time or what the value of United Common Stock will be once it is actually
received by the holders of Cardinal Common Stock.
We have acted as Cardinals financial advisor in connection with the
Merger and will receive a fee for our services, which fee is contingent upon the consummation of the Merger. We also will receive a fee for rendering this opinion, which opinion fee will be credited in full towards the transaction fee which
will become payable to Sandler ONeill on the day of closing of the Merger. Cardinal has also agreed to indemnify us against certain liabilities arising out of our engagement and to reimburse us for certain of our out-of-pocket expenses
incurred in connection with our engagement. As we have previously advised you, in the two years preceding the date of this opinion we have provided certain investment banking services to United and have received customary compensation for such
services and may provide, and receive compensation for, such services in the future. In addition, in the ordinary course of our business as a broker-dealer, we may purchase securities from and sell securities to Cardinal and United and their
respective affiliates. We may also actively trade the equity and debt securities of Cardinal and United or their respective affiliates for our own account and for the accounts of our customers.
This letter is directed to the Board of Directors of Cardinal in connection with its consideration of the Merger and does not constitute
a recommendation to any shareholder of Cardinal as to how such shareholder should vote at any meeting of shareholders called to consider and vote upon the Merger. Our opinion is directed only to the fairness, from a financial point of view, of the
Exchange Ratio to the holders of Cardinal Common Stock and does not address the underlying business decision of Cardinal to engage in the Merger, the relative merits of the Merger as compared to any other alternative business strategies that might
exist for Cardinal or the effect of any other transaction in which Cardinal might engage. We do not express any opinion as to amount or nature of the compensation to be received in the Merger by any Cardinal or United officer, director, or employee,
or class of such persons, if any, relative to the compensation to be received in the Merger by any other shareholder. This Opinion has been approved by Sandler ONeills fairness opinion committee. This opinion shall not be reproduced
without Sandler ONeills prior written consent;
provided
, however, Sandler ONeill will provide its consent for the opinion to be included in regulatory filings to be completed in connection with the Merger.
Based upon and subject to the foregoing, it is our opinion that, as of the date hereof, the Exchange Ratio is fair to the holders of
Cardinal Common Stock from a financial point of view.
Very truly yours,
/s/ Sandler ONeill & Partners, L.P.
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Appendix C
August 17, 2016
The Board of
Directors
United Bankshares, Inc.
300 United Center
500 Virginia Center, East
Charleston, WV 25301
Members of
the Board:
You have requested the opinion of Keefe, Bruyette & Woods, Inc. (KBW or we) as
investment bankers as to the fairness, from a financial point of view, to United Bankshares, Inc. (United) of the Exchange Ratio (as defined below) in the proposed merger (the Merger) of Cardinal Financial Corporation
(Cardinal) with and into UBV Holding Company, LLC (Merger Sub), with Merger Sub as the surviving entity in the Merger, pursuant to the Agreement and Plan of Reorganization (the Agreement) to be entered into by and
among United, Cardinal and Merger Sub. Pursuant to the Agreement and subject to the terms, conditions and limitations set forth therein, at the Effective Time (as defined in the Agreement), by virtue of the Merger and without any action on the part
of United or Cardinal or any other person, each holder of a share of common stock, par value $1.00 per share, of Cardinal ( Cardinal Common Stock) then issued and outstanding (other than shares held by United and its subsidiaries (except
in each case for shares held by them in a fiduciary capacity or as a result of debts previously contracted)) shall receive in respect thereof 0.71 of a share of common stock, par value $2.50 per share, of United (United Common Stock).
The ratio of 0.71 of a share of United Common Stock for one share of Cardinal Common Stock is referred to herein as the Exchange Ratio. The terms and conditions of the Merger are more fully set forth in the Agreement.
In addition, as more fully described in the Agreement, after the Effective Time, Cardinal Bank, a wholly-owned subsidiary of Cardinal,
shall merge with and into United Bank, a wholly owned-subsidiary of Merger Sub (United Bank), with United Bank as the surviving entity, pursuant to a separate agreement and plan of merger (such transaction, the Bank Merger).
Further, as more fully described to us by representatives of United, at or prior to the time of closing of the Merger, United expects to complete an offering of preferred stock of United for gross proceeds to United of approximately $200.00 million
(the United Preferred Offering). At the direction of United and with the consent of the Board (as defined below) we have assumed, for purposes of certain of our analyses and this opinion, the completion of United Preferred Offering as
described to us by representatives of United.
KBW has acted as financial advisor to United and not as an advisor to or agent
of any other person. As part of our investment banking business, we are continually engaged in the valuation of bank and bank holding company securities in connection with acquisitions, negotiated underwritings, secondary distributions of listed and
unlisted securities, private placements and valuations for various other purposes. As specialists in the securities of banking companies, we have experience in, and knowledge of, the valuation of banking enterprises. In the ordinary course of their
broker-dealer businesses, KBW and its affiliates may from time to time purchase securities from, and sell securities to, United and Cardinal and their respective affiliates, and as market makers in securities, KBW and its affiliates may from time to
time have a long or short position in, and buy or sell, debt or equity securities of United or Cardinal for its and their own accounts and for the accounts of its and their respective customers and clients. We have acted exclusively for the board of
directors of United (the Board) in rendering this opinion and will receive a fee from United for our services. A portion of our fee is payable upon the rendering of this opinion, and a significant portion is contingent upon the
successful completion of the Merger. In addition, United has agreed to indemnify us for certain liabilities arising out of our engagement.
Other than in connection with the present engagement, KBW has not provided investment banking and financial advisory services to United during the past two years. During the past two years, KBW has not
provided investment banking and financial advisory services to Cardinal. We may in the future provide investment banking and financial advisory services to United or Cardinal and receive compensation for such services. KBW
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expects to serve as co-lead book running manager underwriter, co-lead initial purchaser or co-lead placement agent, as the case may be, in connection with the United Preferred Offering.
In connection with this opinion, we have reviewed, analyzed and relied upon material bearing upon the financial and operating
condition of United and Cardinal and bearing upon the Merger, including among other things, the following: (i) a draft of the Agreement dated August 14, 2016 (the most recent draft made available to us); (ii) the audited financial statements and the
Annual Reports on Form 10-K for the three fiscal years ended December 31, 2015 of United; (iii) the unaudited quarterly financial statements and Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, 2016 and June 30, 2016 of United;
(iv) the audited financial statements and the Annual Reports on Form 10-K for the three fiscal years ended December 31, 2015 of Cardinal; (v) the unaudited quarterly financial statements and Quarterly Reports on Form 10-Q for the fiscal quarters
ended March 31, 2016 and June 30, 2016 of Cardinal; (vi) certain regulatory filings of United and Cardinal and their respective subsidiaries, including the quarterly reports on Form FR Y-9C and the quarterly call reports required to be filed with
respect to each quarter during the three year period ended June 30, 2016; (vii) certain other interim reports and other communications of United and Cardinal to their respective stockholders; and (viii) other financial information concerning the
businesses and operations of United and Cardinal furnished to us by United and Cardinal or which we were otherwise directed to use for purposes of our analysis. Our consideration of financial information and other factors that we deemed appropriate
under the circumstances or relevant to our analyses included, among others, the following: (i) the historical and current financial position and results of operations of United and Cardinal; (ii) the assets and liabilities of United and Cardinal;
(iii) the nature and terms of certain other merger transactions and business combinations in the banking industry; (iv) a comparison of certain financial and stock market information of United and Cardinal with similar information for certain other
companies the securities of which are publicly traded; (v) publicly-available consensus street estimates of Cardinal for 2016 and 2017, as well as assumed Cardinal long term growth rates provided to us by United management, all of which
information was discussed with us by United management and Cardinal management and used and relied upon by us at the direction of United management with the consent of the Board; (vi) publicly-available consensus street estimates of
United for 2016 and 2017, as well as assumed United long term growth rates provided to us by United management, all of which information was discussed with us by such management and used and relied upon by us at the direction of such management and
with the consent of the Board; and (vii) estimates regarding certain pro forma financial effects of the Merger on United (including, without limitation, the potential cost savings and related expenses expected to result or be derived from the
Merger) that were prepared by United management, provided to and discussed with us by such management, and used and relied upon at the direction of such management with the consent of the Board. We have also performed such other studies and analyses
as we considered appropriate and have taken into account our assessment of general economic, market and financial conditions and our experience in other transactions, as well as our experience in securities valuation and knowledge of the banking
industry generally. We have also participated in discussions that were held with the respective managements of United and Cardinal regarding the past and current business operations, regulatory relations, financial condition and future prospects of
their respective companies and such other matters as we have deemed relevant to our inquiry.
In conducting our review and
arriving at our opinion, we have relied upon and assumed the accuracy and completeness of all of the financial and other information provided to us or publicly available and we have not independently verified the accuracy or completeness of any such
information or assumed any responsibility or liability for such verification, accuracy or completeness. We have relied upon the management of United as to the reasonableness and achievability of the publicly available consensus street
estimates and long term growth rates of United and Cardinal referred to above that were provided to or otherwise discussed with us by such management, and that in each case we were directed by such management to use. We have further relied
upon such management as to the reasonableness and achievability of the estimates regarding certain pro forma financial effects of the Merger on United (and the assumptions and bases therefor) that were prepared by, and provided to and discussed with
us by, such management and that we were directed by such management to use. We have assumed, at the direction of United, that all of the foregoing information was reasonably prepared on bases reflecting, or in the case of the United and Cardinal
publicly available street estimates referred to above
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are consistent with, the best currently available estimates and judgments of United management, and that the forecasts, projections and estimates reflected in such information will be realized in
the amounts and in the time periods currently estimated.
It is understood that the assumed long term growth rates and
estimates referred to above that were provided to us by United were not prepared with the expectation of public disclosure, that all such assumed long term growth rates and estimates, together with the publicly available consensus street
estimates of United and Cardinal referred to above, are based on numerous variables and assumptions that are inherently uncertain, including, without limitation, factors related to general economic and competitive conditions and that,
accordingly, actual results could vary significantly from those set forth in such information. We have assumed, based on discussions with the respective managements of United and Cardinal and with the consent of the Board, that all such information
provides a reasonable basis upon which we could form our opinion and we express no view as to any such information or the assumptions or bases therefor. We have relied on all such information without independent verification or analysis and do not
in any respect assume any responsibility or liability for the accuracy or completeness thereof.
We also have assumed that
there have been no material changes in the assets, liabilities, financial condition, results of operations, business or prospects of either United or Cardinal since the date of the last financial statements of each such entity that were made
available to us. We are not experts in the independent verification of the adequacy of allowances for loan and lease losses and we have assumed, without independent verification and with your consent, that the aggregate allowances for loan and lease
losses for United and Cardinal are adequate to cover such losses. In rendering our opinion, we have not made or obtained any evaluations or appraisals or physical inspection of the property, assets or liabilities (contingent or otherwise) of
United or Cardinal, the collateral securing any of such assets or liabilities, or the collectability of any such assets, nor have we examined any individual loan or credit files, nor did we evaluate the solvency, financial capability or fair value
of United or Cardinal under any state or federal laws, including those relating to bankruptcy, insolvency or other matters. Estimates of values of companies and assets do not purport to be appraisals or necessarily reflect the prices at which
companies or assets may actually be sold. Because such estimates are inherently subject to uncertainty, we assume no responsibility or liability for their accuracy.
We have assumed, in all respects material to our analyses, the following: (i) that the Merger will be completed substantially in accordance with the terms set forth in the Agreement (the final terms of
which we have assumed will not differ in any respect material to our analyses from the draft version reviewed by us (except as has been otherwise described to us by representatives of United)) with no adjustments to the Exchange Ratio; (ii) that any
related transactions (including the Bank Merger and the United Preferred Offering) will be completed substantially in accordance with the terms set forth in the Agreement or as otherwise described to us by representatives of United; (iii) that the
representations and warranties of each party in the Agreement and in all related documents and instruments referred to in the Agreement are true and correct; (iv) that each party to the Agreement or any of the related documents will perform all of
the covenants and agreements required to be performed by such party under such documents; (v) that there are no factors that would delay or subject to any adverse conditions, any necessary regulatory or governmental approval for the Merger and any
related transactions (including the Bank Merger and the United Preferred Offering) and that all conditions to the completion of the Merger and any related transaction will be satisfied without any waivers or modifications to the Agreement or any
related documents; and (vi) that in the course of obtaining the necessary regulatory, contractual, or other consents or approvals for the Merger and any related transactions (including the Bank Merger and the United Preferred Offering), no
restrictions, including any divestiture requirements, termination or other payments or amendments or modifications, will be imposed that will have a material adverse effect on the future results of operations or financial condition of United,
Cardinal or the pro forma entity or the contemplated benefits of the Merger, including the cost savings and related expenses expected to result or be derived from the Merger. We have assumed that the Merger will be consummated in a manner that
complies with the applicable provisions of the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and all other applicable federal and state statutes, rules and regulations. We have further been advised by
representatives
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of United that United has relied upon advice from its advisors (other than KBW) or other appropriate sources as to all legal, financial reporting, tax, accounting and regulatory matters with
respect to United, Cardinal, Merger Sub, the Merger and any related transaction (including the Bank Merger and the United Preferred Offering), and the Agreement. KBW has not provided advice with respect to any such matters.
This opinion addresses only the fairness, from a financial point of view, as of the date hereof, of the Exchange Ratio in the Merger to
United. We express no view or opinion as to any other terms or aspects of the Merger or any terms or aspects of any related transaction (including the Bank Merger and the United Preferred Offering), including without limitation, the form or
structure of the Merger or any related transaction, the treatment of outstanding trust preferred securities of Cardinal in the Merger, any consequences of the Merger or any related transaction to United, its stockholders, creditors or otherwise, or
any terms, aspects or implications of any employment, consulting, voting, support, stockholder or other agreements, arrangements or understandings contemplated or entered into in connection with the Merger, any related transaction, or otherwise. Our
opinion is necessarily based upon conditions as they exist and can be evaluated on the date hereof and the information made available to us through the date hereof. It is understood that subsequent developments may affect the conclusion reached in
this opinion and that KBW does not have an obligation to update, revise or reaffirm this opinion. Our opinion does not address, and we express no view or opinion with respect to, (i) the underlying business decision of United to engage in the Merger
or enter into the Agreement, (ii) the relative merits of the Merger as compared to any strategic alternatives that are, have been or may be available to or contemplated by United or the Board, (iii) the fairness of the amount or nature of any
compensation to any of Uniteds officers, directors or employees, or any class of such persons, relative to any compensation to the holders of United Common Stock or relative to the Exchange Ratio, (iv) the effect of the Merger or any related
transaction on, or the fairness of the consideration to be received by, holders of any class of securities of United or Cardinal or any other party to any transaction contemplated by the Agreement, (v) any adjustment (as provided in the Agreement
(except as has been otherwise described to us by representatives of United)) to the Exchange Ratio assumed for purposes of our opinion, (vi) the actual value of United Common Stock to be issued in the Merger, (vii) the prices, trading range or
volume at which United Common Stock or Cardinal Common Stock may trade following the public announcement of the Merger or the prices, trading range or volume at which United Common Stock may trade following the consummation of the Merger, (viii) any
advice or opinions provided by any other advisor to any of the parties to the Merger or any other transaction contemplated by the Agreement, or (ix) any legal, regulatory, accounting, tax or similar matters relating to United, Cardinal, any of their
respective shareholders, Merger Sub, or relating to or arising out of or as a consequence of the Merger or any other related transaction (including the Bank Merger and the United Preferred Offering), including whether or not the Merger would qualify
as a tax-free reorganization for United States federal income tax purposes.
This opinion is for the information of, and is
directed to, the Board (in its capacity as such) in connection with its consideration of the financial terms of the Merger. This opinion does not constitute a recommendation to the Board as to how it should vote on the Merger or to any holder of
United Common Stock or any shareholder of any other entity as to how to vote in connection with the Merger or any other matter, nor does it constitute a recommendation as to whether or not any such shareholder should enter into a voting,
shareholders, affiliates or other agreement with respect to the Merger or exercise any dissenters or appraisal rights that may be available to such shareholder.
This opinion has been reviewed and approved by our Fairness Opinion Committee in conformity with our policies and procedures established
under the requirements of Rule 5150 of the Financial Industry Regulatory Authority.
Based upon and subject to the foregoing,
it is our opinion that, as of the date hereof, the Exchange Ratio in the Merger is fair, from a financial point of view, to United.
Very truly yours,
/s/ Keefe, Bruyette & Woods, Inc.
Keefe, Bruyette & Woods, Inc.
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Appendix D
PROPOSED AMENDMENT TO ARTICLES OF INCORPORATION
OF UNITED BANKSHARES
ARTICLES OF AMENDMENT
OF ARTICLES OF INCORPORATION
OF UNITED BANKSHARES, INC.
Pursuant to the provisions of Section
31D-10-1006 of the West Virginia Code, United Bankshares, Inc., a West Virginia corporation, adopts and files the following Articles of Amendment to its Articles of Incorporation:
I. The name of the corporation is United Bankshares, Inc.
II. The corporations Articles of Incorporation were filed on March 26, 1982.
III. The following amendment to the Articles of Incorporation was approved by the shareholders of the corporation
on , 2017, to-wit:
Article VI. A. of the Articles of Incorporation shall be and is hereby deleted in its entirety and the following new Article VI. A. shall be and is hereby substituted in lieu thereof:
VI. A. The amount of authorized capital stock of the Corporation is Five Hundred Fifty Million Dollars ($550,000,000.00), which
shall be divided into Two Hundred Million (200,000,000) shares of common stock with the par value of Two Dollars and Fifty Cents ($2.50) per share and Fifty Million (50,000,000) shares of preferred stock with the par value of One Dollar ($1.00) per
share.
As so amended, the Articles of Incorporation, together with this amendment, shall constitute the Articles of
Incorporation of the corporation.
Executed by the undersigned as of the day
of , 2017.
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United Bankshares, Inc.
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By:
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Richard M. Adams
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Its:
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Chairman of the Board and Chief
Executive Officer
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SPECIAL MEETING OF SHAREHOLDERS OF
CARDINAL FINANCIAL CORPORATION
April 7, 2017
GO
GREEN
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e-Consent
makes it easy to go paperless. With
e-Consent,
you
can quickly access your proxy
material, statements and other eligible documents online, while reducing costs, clutter and
paper waste. Enroll today via www.amstock.com to enjoy online access.
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NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIAL
:
The Notice of Meeting, proxy statement and proxy card
are available at www.cardinalbank.com/InvestorRelations/2017SpecialMeeting
Please sign, date and mail
your
proxy card in the
envelope provided as soon
as possible.
Please detach along perforated line and mail in the envelope provided.
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00030030300000000000 8
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040717
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THE BOARD OF DIRECTORS
RECOMMENDS A VOTE FOR PROPOSALS 1, 2 AND 3.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK
YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE
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FOR
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AGAINST
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ABSTAIN
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1
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To approve the Agreement and Plan of Reorganization, dated as of August 17, 2016, by and among United Bankshares,
Inc., its subsidiary UBV Holding Company, LLC and Cardinal Financial Corporation (Cardinal), and related plan of merger, as each may be amended from time to time (the merger agreement).
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2
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To approve, in a non-binding advisory vote, certain compensation that may become payable to Cardinals named executive
officers in connection with the merger.
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3
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To approve the adjournment, postponement or continuance of the special meeting on one or more occasions, if necessary or
appropriate, in order to further solicit additional proxies, in the event that there are not sufficient votes at the time of the special meeting to approve the merger agreement.
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THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE SHAREHOLDER. IF NO
DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR PROPOSALS 1, 2 AND 3.
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PLEASE MARK, SIGN, DATE AND RETURN PROMPTLY.
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To change the address on your account, please check the box at right and indicate
your new address in the address space above. Please note that changes to the registered name(s) on the account may not be submitted via this method.
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Signature of Shareholder
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Date:
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Signature of Shareholder
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Date:
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Note:
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Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When
signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership,
please sign in partnership name by authorized person.
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CARDINAL FINANCIAL CORPORATION