On
May 15, 2017, Sandy Spring entered into the merger agreement with WashingtonFirst. The merger agreement provides for (i) the merger of Merger Sub with and into WashingtonFirst, with WashingtonFirst continuing as the surviving corporation
in the first-step merger and as a wholly-owned subsidiary of Sandy Spring, (ii) immediately following the completion of the first-step merger, WashingtonFirst will merge with and into Sandy Spring, with Sandy Spring continuing as the surviving
corporation in the second-step merger and (iii) immediately following the completion of the integrated mergers, WashingtonFirst Bank will merge with and into Sandy Spring Bank, a wholly owned subsidiary of Sandy Spring, with Sandy Spring Bank
continuing as the surviving bank in the bank merger.
The merger agreement provides that at the effective time of the first-step merger,
each outstanding share of common stock of WashingtonFirst will be converted into the right to receive 0.8713 shares of Sandy Spring common stock, subject to adjustment if the Sandy Spring volume-weighted average price is more than $50.15 or less
than $37.07 per share. Pursuant to the merger agreement, at the effective time of the first-step merger, shares of WashingtonFirst restricted stock that were unvested prior to the first-step merger will vest and convert into the right to receive the
merger consideration. Also under the terms of the merger agreement, all outstanding and unexercised options to purchase shares of WashingtonFirst common stock will be canceled and will be cashed out for an amount equal to the value of the per share
merger consideration less the option exercise price, assuming for purposes of this calculation that all such options were 100% vested as of the effective time.
The unaudited pro forma condensed combined financial information of Sandy Springs financial condition and results of operations,
including per share data, are presented after giving effect to the integrated mergers. The pro forma financial information assumes that the integrated mergers were consummated on January 1, 2016 for purposes of the unaudited pro forma condensed
combined statements of income and on June 30, 2017 for purposes of the pro forma statement of condition and gives effect to the integrated mergers, for purposes of the unaudited pro forma condensed combined statements of income, as if they had been
effective during the entire periods presented. The pro forma financials also give effect to the issuance by Sandy Spring of 11,298,000 shares of common stock on the acquisition date (expected during the fourth quarter of 2017), as if the issuance
had occurred on January 1, 2016.
The Transactions will be accounted for using the acquisition method of accounting; accordingly, the
difference between the purchase price over the estimated fair value of the assets acquired (including identifiable intangible assets) and liabilities assumed will be recorded as goodwill.
The pro forma financial information includes estimated adjustments to record the assets and liabilities of WashingtonFirst at their respective
fair values and represents managements estimates based on currently available information. The pro forma adjustments included herein may be revised as additional information becomes available and as additional analysis is performed. The final
allocation of the purchase price will be determined after the Transactions are completed and after completion of a final analysis to determine the fair values of WashingtonFirsts tangible, and identifiable intangible, assets and liabilities as
of the closing date.
The following pro forma adjustments have been reflected in the unaudited pro forma condensed combined financial information. All adjustments
are based on the current valuations, estimates and assumptions that are subject to change.
Tangible book value per common share is a non-GAAP financial measure. Sandy Springs management believes that such information is
important information to be provided because it can be used, in conjunction with more traditional bank capital ratios, to assess, on a pro forma basis, the combined companies capital adequacy without the effect of accumulated other
comprehensive loss, goodwill and other intangible assets and compare that capital adequacy with the capital adequacy of other banking organizations with significant amounts of goodwill and/or other intangible assets. Book value per common share is
the most directly comparable financial measure calculated in accordance with GAAP. The following table presents, as of the dates set forth below, on a pro forma combined basis, the total stockholders equity and tangible common equity of the
combined companies and presents a reconciliation of the pro forma combined tangible book value per common share compared to the pro forma combined book value per common share:
Estimated cost savings, expected to approximate 39% of WashingtonFirsts annualized pre-tax non-interest expenses, are excluded from the
pro forma analysis. Sandy Springs management currently expects to realize 80% in the first year after acquisition and 100% in the subsequent year. Expenses from the Transactions directly attributable to a business combination have not yet been
expensed in the historical income statements or accrued in the historical balance sheets. Such expenses do not meet the continuing impact criterion because they would not be expenses that the combined entity would expect to incur on an ongoing
basis. As such, pro forma adjustments have not been made to include those expenses in the pro forma income statements and have only been reflected in the pro forma balance sheet as a pro forma adjustment to retained earnings. Pre-tax
Transactions-related costs are estimated to be approximately $25.8 million.
Sandy Spring common stock is listed on the Nasdaq Global Select Market under the symbol SASR and WashingtonFirst common stock is
listed on the Nasdaq Capital Market under the symbol WFBI. The following table sets forth the high and low reported sale prices per share of Sandy Spring common stock and WashingtonFirst common stock, and the cash dividends declared per
share, for the periods indicated:
On May 15, 2017, the last full trading day before the public announcement of the Transactions, the high
and low sales prices of shares of Sandy Spring common stock as reported on the Nasdaq Global Select Market were $42.78 and $42.08, respectively. On August 31, 2017, the last practicable trading day prior to the printing of this joint proxy
statement/prospectus, the high and low sales prices of shares of Sandy Spring common stock as reported on the Nasdaq Global Select Market were $38.84 and $38.23, respectively.
On May 15, 2017, the last full trading day before the public announcement of the Transactions, the high and low sales prices of shares of
WashingtonFirst common stock as reported on the Nasdaq Capital Market were $28.92 and $27.76, respectively. On August 31, 2017, the last practicable trading day prior to the printing of this joint proxy statement/prospectus, the high and low sales
prices of shares of WashingtonFirst common stock as reported on the Nasdaq Capital Market were $34.18 and $33.58, respectively.
As of the
Sandy Spring record date, there were approximately 2,124 registered holders of Sandy Spring common stock and, as of the WashingtonFirst record date, there were approximately 429 registered holders of WashingtonFirst common stock.
Each of the Sandy Spring stockholders and the WashingtonFirst stockholders are advised to obtain current market quotations for Sandy Spring
common stock and WashingtonFirst common stock. The market price of Sandy Spring common stock and WashingtonFirst common stock will fluctuate between the date of this joint proxy statement/prospectus and the date of completion of the Transactions. No
assurance can be given concerning the market price of Sandy Spring common stock or WashingtonFirst common stock before or after the effective date of the first-step merger. Changes in the market price of Sandy Spring common stock prior to the
completion of the Transactions will affect the market value of the stock portion of the merger consideration that WashingtonFirst stockholders will be entitled to receive upon completion of the Transactions.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT OF SANDY SPRING
The following table provides information as of August 31, 2017 with respect to the persons known by Sandy Spring to be the beneficial owners
of more than 5% of its outstanding common stock. A person is considered to beneficially own any shares of Sandy Spring common stock over which he or she has, directly or indirectly, sole or shared voting or investment power.
|
|
|
|
|
|
|
|
|
Name and Address Of Beneficial Owner
|
|
Number of Shares Owned
|
|
|
Percent of Common
Stock Outstanding
(1)
|
|
BlackRock, Inc.
55 East 52
nd
Street
New York, New York 10022
|
|
|
1,839,507
|
(2)
|
|
|
7.61
|
%
|
|
|
|
Dimensional Fund Advisors LP
6300 Bee Cave Road
Austin, Texas 78746
|
|
|
1,690,268
|
(3)
|
|
|
6.99
|
%
|
(1)
|
Percentages with respect to each person have been calculated on the basis of 24,178,652 shares of Sandy Spring common stock, the number of shares of Sandy Spring common stock outstanding and entitled to vote as
of August 31, 2017.
|
(2)
|
According to the Schedule 13G filed by Blackrock, Inc., with the SEC on January 27, 2017, BlackRock, Inc., has sole voting power with respect to 1,786,431 shares and sole dispositive power with respect to 1,839,507
shares.
|
(3)
|
According to the Schedule 13G filed by Dimensional Fund Advisors LP on February 9, 2017, Dimensional Fund Advisors had sole voting power with respect to 1,619,337 shares and sole dispositive power with respect to
1,690,268 shares. These securities are owned by various investment funds, trusts and accounts for which Dimensional Fund Advisors or one of its subsidiaries serves as an adviser or sub-advisor. In its role as investment advisor, sub-advisor or
manager, Dimensional Fund Advisors or its subsidiaries may possess voting and/or investment power over the securities. For the purposes of the reporting requirements of the Exchange Act, Dimensional Fund Advisors is deemed to be a beneficial owner
of such securities; however, Dimensional Fund Advisors disclaims beneficial ownership of such securities.
|
The following
table provides information as of August 31, 2017, about the shares of Sandy Spring common stock that may be considered to be beneficially owned by (i) each director and each named executive officer of Sandy Spring as of such date and
(ii) all Sandy Spring directors and executive officers as a group. This information has been provided by each of the directors and executive officers at Sandy Springs request or derived from statements filed with the SEC. Beneficial
ownership of securities means the possession directly or indirectly, through any formal or informal arrangement, either individually or in a group, of voting or investment power (which includes the power to dispose of, or to direct the disposition
of, such security). Unless otherwise indicated, to Sandy Springs knowledge, the beneficial owner has sole voting and dispositive power over the shares. No individual holds more than 1% of the total outstanding shares of Sandy Spring common
stock. All directors and executive officers as a group own 2.61% of outstanding common stock.
144
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Shares
Owned
(1)
|
|
|
Restricted
Stock
|
|
|
Shares That May
Be Acquired
Within
60 Days by
Exercising
Options
(2)
|
|
|
Total
|
|
Mona Abutaleb
|
|
|
45
|
|
|
|
910
|
|
|
|
|
|
|
|
955
|
|
Ralph F. Boyd, Jr.
|
|
|
2,426
|
|
|
|
1,883
|
|
|
|
|
|
|
|
4,309
|
|
Mark E. Friis
|
|
|
36,405
|
|
|
|
1,883
|
|
|
|
|
|
|
|
38,288
|
|
Susan D. Goff
|
|
|
25,338
|
|
|
|
1,883
|
|
|
|
|
|
|
|
27,221
|
|
Robert E. Henel, Jr.
|
|
|
7,945
|
|
|
|
1,883
|
|
|
|
|
|
|
|
9,828
|
|
Pamela A. Little
|
|
|
18,344
|
|
|
|
1,883
|
|
|
|
|
|
|
|
20,227
|
|
James J. Maiwurm
|
|
|
1,261
|
|
|
|
910
|
|
|
|
|
|
|
|
2,171
|
|
Gary G. Nakamoto
|
|
|
4,614
|
|
|
|
1,883
|
|
|
|
|
|
|
|
6,497
|
|
Robert L. Orndorff
|
|
|
163,770
|
|
|
|
1,883
|
|
|
|
|
|
|
|
165,653
|
|
Craig A. Ruppert
|
|
|
75,005
|
|
|
|
1,883
|
|
|
|
|
|
|
|
76,888
|
|
Dennis A. Starliper
|
|
|
8,210
|
|
|
|
1,883
|
|
|
|
|
|
|
|
10,093
|
|
Daniel J. Schrider
(3)
|
|
|
53,442
|
|
|
|
33,013
|
|
|
|
|
|
|
|
83,745
|
|
Philip J. Mantua
(4)
|
|
|
35,421
|
|
|
|
14,364
|
|
|
|
|
|
|
|
48,573
|
|
Joseph J. OBrien
(5)
|
|
|
28,497
|
|
|
|
15,911
|
|
|
|
|
|
|
|
43,122
|
|
R. Louis Caceres
|
|
|
17,535
|
|
|
|
14,922
|
|
|
|
|
|
|
|
31,245
|
|
Ronald E. Kuykendall
(6)
|
|
|
22,820
|
|
|
|
10,920
|
|
|
|
|
|
|
|
32,856
|
|
All directors and all executive officers as a group (18 persons)
|
|
|
511,054
|
|
|
|
125,593
|
|
|
|
3,213
|
|
|
|
630,880
|
|
|
(1)
|
Only whole shares appear in the table. Fractional shares that may arise from participation in the dividend reinvestment plan are not shown.
|
|
(2)
|
Includes stock options exercisable as of August 31, 2017 and within 60 days thereafter.
|
|
(3)
|
Mr. Schriders shares include 9,181 shares held through employee benefit plans.
|
|
(4)
|
Mr. Mantuas shares include 14,900 shares held through employee benefit plans.
|
|
(5)
|
Mr. OBriens shares include 4,695 shares held through employee benefit plans.
|
|
(6)
|
Mr. Kuykendalls shares include 5,539 shares held through employee benefit plans.
|
145
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT OF WASHINGTONFIRST
The following table provides information as of August 31, 2017 with respect to the persons known by WashingtonFirst to be the beneficial
owners of more than 5% of its outstanding common stock. A person is considered to beneficially own any shares of WashingtonFirst common stock over which he or she has, directly or indirectly, sole or shared voting or investment power.
|
|
|
|
|
|
|
|
|
Name and Address Of Beneficial Owner
|
|
Number of Shares Owned
|
|
|
Percent of Common
Stock Outstanding
(1)
|
|
Endicott Opportunity Partners III, L.P.
570 Lexington Avenue, 37th Floor
New York, New York 10022
|
|
|
1,199,032
|
(2)
|
|
|
9.59
|
%
|
|
|
|
T. Rowe Price Group Inc.
100 E. Pratt Street
Baltimore, Maryland 21202
|
|
|
889,850
|
(3)
|
|
|
7.12
|
%
|
(1)
|
Percentages with respect to each person have been calculated on the basis of 12,509,766 shares of WashingtonFirst common stock, the number of shares of WashingtonFirst common stock outstanding and entitled to vote as of
August 31, 2017.
|
(2)
|
Based on a Schedule 13D filed with the SEC on May 25, 2017. Excludes 132,747 shares of WashingtonFirst non-voting common stock.
|
(3)
|
Based on a Schedule 13G filed with the SEC on February 7, 2017.
|
The following table
provides information as of August 31, 2017, about the shares of WashingtonFirst common stock that may be considered to be beneficially owned by (i) each director and each named executive officer of WashingtonFirst as of such date and
(ii) all WashingtonFirst directors and executive officers as a group. This information has been provided by each of the directors and executive officers at WashingtonFirsts request or derived from statements filed with the SEC. Beneficial
ownership of securities means the possession directly or indirectly, through any formal or informal arrangement, either individually or in a group, of voting or investment power (which includes the power to dispose of, or to direct the disposition
of, such security). Unless otherwise indicated, to WashingtonFirsts knowledge, the beneficial owner has sole voting and dispositive power over the shares.
146
|
|
|
|
|
|
|
|
|
Name
|
|
Number of
Shares
Beneficially
Owned
|
|
|
Percentage
Beneficially
Owned
(1)
|
|
Shaza L. Andersen
(2)
|
|
|
274,653
|
|
|
|
2.17
|
%
|
Charles E. Andrews
(3)
|
|
|
6,695
|
|
|
|
|
*
|
Joseph S. Bracewell
(4)
|
|
|
398,375
|
|
|
|
3.19
|
%
|
George W. Connors, IV
(5)
|
|
|
127,372
|
|
|
|
1.02
|
%
|
Josephine S. Cooper
(6)
|
|
|
35,596
|
|
|
|
|
*
|
Stephen M. Cumbie
|
|
|
48,434
|
|
|
|
|
*
|
Hon. John H. Dalton
(7)
|
|
|
87,361
|
|
|
|
|
*
|
Richard D. Horn
(8)
|
|
|
84,478
|
|
|
|
|
*
|
Matthew R. Johnson
(9)
|
|
|
96,382
|
|
|
|
|
*
|
Juan A. Mencia
(10)
|
|
|
117,558
|
|
|
|
|
*
|
Obiora Menkiti
|
|
|
|
|
|
|
|
*
|
Caren D. Merrick
(11)
|
|
|
5,888
|
|
|
|
|
*
|
Larry D. Meyers
(12)
|
|
|
51,146
|
|
|
|
|
*
|
Mark C. Michael
(13)
|
|
|
118,681
|
|
|
|
|
*
|
Madhu K. Mohan, MD
(14)
|
|
|
305,184
|
|
|
|
2.44
|
%
|
Ken Morrisette
(15)
|
|
|
116,168
|
|
|
|
|
*
|
James P. Muldoon
(16)
|
|
|
163,923
|
|
|
|
1.31
|
%
|
William C. Oldaker
(17)
|
|
|
182,070
|
|
|
|
1.46
|
%
|
Jon M. Peterson
|
|
|
19,884
|
|
|
|
|
*
|
Randall S. Peyton, MD
(18)
|
|
|
31,268
|
|
|
|
|
*
|
Michael J. Rebibo
(19)
|
|
|
192,373
|
|
|
|
1.54
|
%
|
Hon. Joe R. Reeder
|
|
|
68,163
|
|
|
|
|
*
|
William G. Reilly
(20)
|
|
|
77,392
|
|
|
|
|
*
|
Gail R. Steckler
(21)
|
|
|
51,873
|
|
|
|
|
*
|
Gen. (Ret.) Johnnie E. Wilson
(22)
|
|
|
36,390
|
|
|
|
|
*
|
All directors and all executive officers as a group (25 persons)
|
|
|
2,697,307
|
|
|
|
21.13
|
%
|
*
|
Represents beneficial ownership of less than one percent.
|
(1)
|
Percentages with respect to each person have been calculated on the basis of 12,509,766 shares of WashingtonFirst common stock, the number of shares of WashingtonFirst common stock outstanding and entitled to vote as of
August 31, 2017.
|
(2)
|
Includes 5,000 shares owned jointly with Marc Andersen, Ms. Andersens husband, 120 shares owned by Kaitlin Andersen, Ms. Andersens daughter, 120 shares owned by Daniel Andersen,
Ms. Andersens son, and 163,521 shares issuable upon exercise of options that are exercisable within 60 days.
|
(3)
|
Includes 1,575 shares owned jointly with Jean Andrews, Mr. Andrews wife.
|
(4)
|
Includes 31,426 shares owned by the Donley Family Trust for which Mr. Bracewells wife, Peggy Bracewell, serves as Trustee, 4,058 shares owned by the JSB Irrevocable Trust for which Mr. Bracewells
wife, Peggy Bracewell, serves as Trustee, and 25,000 shares owned by the Peggy D. Bracewell Revocable Trust for which Mr. Bracewells wife, Peggy Bracewell, serves as Trustee.
|
(5)
|
Includes 54,611 shares issuable upon exercise of options that are exercisable within 60 days.
|
(6)
|
Includes 32,472 shares owned by the Josephine S. Cooper Living Trust, for which Ms. Cooper serves as Trustee, and 2,430 shares issuable upon exercise of options that are exercisable within 60 days.
|
(7)
|
Includes 60,022 shares owned by the John H. Dalton Family Trust dtd 12/20/2012 for which Mr. Dalton serves as Trustee.
|
147
(8)
|
Includes 43,096 shares owned jointly with Robin Horn, Mr. Horns wife, 1,050 shares owned by Griffin Horn, Mr. Horns son, 1,050 shares owned by Tess Horn, Mr. Horns daughter, and 2,520
shares issuable upon exercise of options that are exercisable within 60 days.
|
(9)
|
Includes 68,530 shares owned jointly with Themis Johnson, Mr. Johnsons wife, and 26,828 shares issuable upon exercise of options that are exercisable within 60 days.
|
(10)
|
Includes 37,469 shares owned jointly with Lauren E. Mencia, Mr. Mencias wife, 21,000 shares owned by Yankee Investments, LLC and 2,430 shares issuable upon exercise of options that are exercisable within 60
days.
|
(11)
|
Includes 5,580 shares owned jointly with Phillip Merrick, Ms. Merricks husband.
|
(12)
|
Includes 9,095 shares owned jointly with Kris Meyers, Mr. Meyers wife, 39,621 shares owned by the Meyers and Associates Profit Sharing Plan, and 2,430 shares issuable upon exercise of options that are
exercisable within 60 days.
|
(13)
|
Includes 2,084 shares owned by Occasions Caterers Inc., for which Mr. Michael serves as President.
|
(14)
|
Includes 29,993 shares held by Mangal Katikineni, IRA, Dr. Mohans wife, 5,660 shares owned by Nisha Katikineni Trust, 11,019 shares owned by Sheela Katikineni Trust, and 213,244 shares owned by the MMK Family
Trust for which Dr. Mohan serves as Trustee.
|
(15)
|
Includes 102,102 shares owned by Interstate Group Holdings, Inc., for which Mr. Morrissette serves as a director and Vice President.
|
(16)
|
Includes 10,029 shares owned by METCOR Ltd., an information technology consulting and training company owned by Mr. Muldoon, 75,159 shares owned by METCOR Profit Sharing Plan, 3,158 shares owned by Linda Kessler,
Mr. Muldoons wife, and 2,430 shares issuable upon exercise of options that are exercisable within 60 days.
|
(17)
|
Includes 28,163 shares owned by Judith Thedford IRA, Mr. Oldakers wife.
|
(18)
|
Includes 9,787 shares jointly owned with Pamela Peyton, Dr. Peytons wife, 54 shares owned by Carilynn Peyton, Dr. Peytons daughter and 54 shares owned by Frances Peyton, Dr. Peytons
daughter.
|
(19)
|
Includes 128,940 shares jointly owned with Cynthia Rebibo, Mr. Rebibos wife and 14,888 shares owned by Cynthia Rebibo, Mr. Rebibos wife.
|
(20)
|
Includes 63,019 shares owned jointly with Jacqueline Reilly, Mr. Reillys wife, and 2,430 shares issuable upon exercise of options that are exercisable within 60 days.
|
(21)
|
Includes 6,812 shares owned by Steve A. Steckler, Ms. Stecklers husband, 5,452 shares owned by Hannah Steckler, Ms. Stecklers daughter, 2,681 shares owned by Jackson Valeriy Steckler Trust for
which Ms. Steckler is Trustee, and 2,681 shares owned by the Anna Burka Steckler Trust for which Ms. Steckler is Trustee.
|
(22)
|
Includes 27,213 shares owned jointly with Helen Wilson, General Wilsons wife.
|
148
LEGAL MATTERS
The validity of the Sandy Spring common stock to be issued in connection with the first-step merger will be passed upon for Sandy Spring by
Kilpatrick Townsend & Stockton LLP (Washington, D.C.). Certain U.S. federal income tax consequences relating to the integrated mergers will be passed upon for Sandy Spring by Kilpatrick Townsend & Stockton LLP (Washington, D.C.)
and for WashingtonFirst by Troutman Sanders LLP (Richmond, Virginia).
EXPERTS
Sandy Spring
Ernst & Young LLP, independent registered public accounting firm, has audited the consolidated financial statements of Sandy Spring,
included in Sandy Springs Annual Report on Form 10-K for the year ended December 31, 2016, and the effectiveness of internal control over financial reporting of Sandy Spring as of December 31, 2016, as set forth in their reports, which are
incorporated by reference in this prospectus and elsewhere in the registration statement. Sandy Springs financial statements are incorporated by reference in reliance on Ernst & Young LLPs reports, given on their authority as experts
in accounting and auditing.
WashingtonFirst
The consolidated financial statements of WashingtonFirst as of December 31, 2016 and 2015, and for each of the years in the three-year
period ended December 31, 2016, and managements assessment of the effectiveness of internal control over financial reporting as of December 31, 2016, have been incorporated by reference herein in reliance upon the reports of BDO USA,
LLP, independent registered public accounting firm, incorporated by reference herein, and upon the authority of said firm as experts in accounting and auditing.
DEADLINES FOR SUBMITTING STOCKHOLDER PROPOSALS
Sandy Spring
Sandy Spring held its 2017
annual meeting of stockholders on May 3, 2017 and began mailing its proxy statement for such meeting on or about March 22, 2017.
From time to time, individual stockholders of Sandy Spring may wish to submit proposals that they believe should be voted upon by the
stockholders. The SEC has adopted regulations that govern the inclusion of such proposals in Sandy Springs annual proxy materials. Stockholder proposals intended to be presented at the 2018 annual meeting of stockholders may be eligible for
inclusion in the proxy materials for that annual meeting if received at Sandy Springs executive offices not later than November 22, 2017 unless the date of the 2018 annual meeting is more than 30 days from May 3, 2018, in which case
the deadline is a reasonable time before Sandy Spring begins to print and mail proxy materials. Any such proposals shall be subject to the requirements of the proxy rules adopted under the Exchange Act.
In addition, Sandy Springs bylaws require that to be properly brought before an annual meeting, stockholder proposals for new business
must be delivered to or mailed and received by the secretary not less than thirty nor more than ninety days prior to the date of the meeting; provided, however, that if less than forty-five days notice of the date of the meeting is given to
stockholders, such notice by a stockholder must be received not later than the fifteenth day following the date on which notice of the date of the meeting was mailed to stockholders or two days before the date of the meeting, whichever is earlier.
Each such notice given by a stockholder must set forth certain information specified in the bylaws concerning the stockholder and the business proposed to be brought before the meeting.
149
Stockholders also may nominate candidates for election as a director, provided that such
nominations are made in writing and received at Sandy Springs executive offices not later than December 22, 2017. The nomination should be sent to the attention of Ronald E. Kuykendall, General Counsel and Secretary, at Sandy Spring
Bancorp, Inc., 17801 Georgia Avenue, Olney, Maryland 20832, and must include, concerning the director nominee, the following information: full name, age, date of birth, educational background and business experience, including positions held for at
least the preceding five years, home and office addresses and telephone numbers, and a signed representation to timely provide all information requested by Sandy Spring for preparation of its disclosures regarding the solicitation of proxies for
election of directors. The name of each such candidate for director must be placed in nomination at the annual meeting by a stockholder present in person. The nominee must also be present in person at the annual meeting. A vote for a person who has
not been duly nominated pursuant to these requirements will be deemed to be void.
WashingtonFirst
WashingtonFirst held its 2017 annual meeting of stockholders on April 26, 2017 and began mailing its proxy statement for such meeting on
or about March 14, 2017. WashingtonFirst will not hold a 2018 annual meeting of stockholders if the first-step merger is completed. However, if the first-step merger is not completed for any reason, WashingtonFirst will hold an annual meeting
of its stockholders in 2018.
In order for stockholder proposals submitted pursuant to Rule 14a-8 of the Exchange Act to be presented at
WashingtonFirsts 2018 annual meeting of stockholders and included in the WashingtonFirst proxy statement and form of proxy relating to such meeting, such proposals must be submitted to the President and Chief Executive Officer of
WashingtonFirst at WashingtonFirsts principal executive offices no later than November 14, 2017. Stockholder proposals should be submitted to WashingtonFirst Bankshares, Inc., 11921 Freedom Drive, Suite 250, Reston, Virginia 20190,
Attention: Corporate Secretary.
In addition, WashingtonFirsts bylaws provide that only such business which is properly brought
before a stockholder meeting will be conducted. For business to be properly brought before a meeting or nominations of persons for election to the Board to be properly made at a meeting by a stockholder, notice must be received by the Secretary of
WashingtonFirst at WashingtonFirsts offices not less than 120 days prior to the first anniversary date of the initial notice given to stockholders of record on the record date for WashingtonFirsts previous annual meeting. Such notice to
WashingtonFirst must also provide certain information set forth in the bylaws. A copy of the WashingtonFirst bylaws may be obtained upon written request to the Secretary of the WashingtonFirst.
WHERE YOU CAN FIND MORE INFORMATION
Sandy Spring is filing with the SEC this registration statement under the Securities Act of 1933, as amended, to register the issuance of the
shares of Sandy Spring common stock to be issued in connection with the first-step merger. This joint proxy statement/prospectus is a part of that registration statement and constitutes the prospectus of Sandy Spring in addition to being a proxy
statement for Sandy Spring stockholders and WashingtonFirst stockholders. The registration statement, including this joint proxy statement/prospectus and the attached annexes and exhibits, contains additional relevant information about Sandy Spring,
including information about Sandy Springs common stock.
Sandy Spring and WashingtonFirst also file reports, proxy statements and
other information with the SEC under the Exchange Act. You may read and copy this information at the Public Reference Room of the SEC at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. You may obtain information on the operation of the
SECs Public Reference Room by calling the SEC at 1-800-SEC-0330. You may also obtain copies of this information by mail from the Public Reference Section of the SEC, 100 F Street, N.E., Washington, D.C. 20549, at prescribed rates, or
from commercial document retrieval services.
150
The SEC also maintains an Internet website that contains reports, proxy statements and other
information about issuers, such as Sandy Spring and WashingtonFirst, who file electronically with the SEC. The address of the site is http://www.sec.gov. The reports, proxy statements and other information filed by Sandy Spring with the SEC are also
available at Sandy Springs website at www.sandyspringbank.com under the tab Investor Relations, and then under the heading SEC Filings. The reports, proxy statements and other information filed by WashingtonFirst with
the SEC are available at WashingtonFirsts website at www.wfbi.com under the tab Investor Relations, and then under the heading Documents and Filings. The web addresses of the SEC, Sandy Spring and WashingtonFirst are
included as inactive textual references only. Except as specifically incorporated by reference into this joint proxy statement/prospectus, information on those web sites is not part of this joint proxy statement/prospectus.
The SEC allows Sandy Spring and WashingtonFirst to incorporate by reference information in this joint proxy statement/prospectus. This means
that Sandy Spring and WashingtonFirst can disclose important information to you by referring you to another document filed separately with the SEC. The information incorporated by reference is considered to be a part of this joint proxy
statement/prospectus, except for any information that is superseded by information that is included directly in this joint proxy statement/prospectus.
This joint proxy statement/prospectus incorporates by reference the documents listed below that Sandy Spring and WashingtonFirst previously
filed with the SEC.
|
|
|
Sandy Spring SEC Filings
|
|
Period or Date Filed
|
(SEC File No. 000-19065)
|
|
|
|
|
Annual Report on Form 10-K
|
|
Year ended December 31, 2016
|
|
|
Quarterly Reports on Form 10-Q
|
|
Quarters ended March 31, 2017 and June 30, 2017
|
|
|
Current Reports on Form 8-K
|
|
Filed on May 4, 2017, May 16, 2017, May 17, 2017 and July 31, 2017 (other than those portions of the documents deemed to be furnished and not
filed)
|
|
|
Definitive Proxy Statement on Schedule 14A
|
|
Filed March 22, 2017
|
|
|
The description of Sandy Spring common stock set forth in its registration statement on Form 8-A, as amended, filed on November 9, 1999, including any amendment or report filed with the SEC for the purpose of updating that
description
|
|
|
|
|
WashingtonFirst SEC Filings
|
|
Period or Date Filed
|
(SEC File No. 001-35768)
|
|
|
|
|
Annual Report on Form 10-K
|
|
Year ended December 31, 2016
|
|
|
Quarterly Reports on Form 10-Q
|
|
Quarters ended March 31, 2017 and June 30, 2017
|
|
|
Current Reports on Form 8-K
|
|
Filed on February 28, 2017, May 1, 2017, May 9, 2017, May 16, 2017, May
18, 2017 and July 21, 2017 (other than those portions of the documents deemed to be furnished and not filed)
|
151
|
|
|
|
|
Definitive Proxy Statement on Schedule 14A
|
|
Filed March 14, 2017
|
|
|
The description of WashingtonFirst common stock set forth in its registration statement on Form 8-A, as amended, filed on December 20, 2012, including any amendment or report filed with the SEC for the purpose of updating that
description
|
|
|
In addition, Sandy Spring and WashingtonFirst also incorporate by reference additional documents filed with
the SEC under Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act between the date of this joint proxy statement/prospectus and, in the case of Sandy Spring, the Sandy Spring special meeting, and, in the case of WashingtonFirst, the date of the
WashingtonFirst special meeting, provided that Sandy Spring and WashingtonFirst are not incorporating by reference any information furnished to, but not filed with, the SEC.
Except where the context otherwise indicates, Sandy Spring has supplied all information contained or incorporated by reference in this joint
proxy statement/prospectus relating to Sandy Spring, and WashingtonFirst has supplied all information contained or incorporated by reference relating to WashingtonFirst.
Documents incorporated by reference are available from Sandy Spring and WashingtonFirst without charge, excluding any exhibits to those
documents unless the exhibit is specifically incorporated by reference as an exhibit in this joint proxy statement/prospectus. You can obtain documents incorporated by reference in this joint proxy statement/prospectus by requesting them in writing
or by telephone from the appropriate company at the following address and phone number:
|
|
|
Sandy Spring Bancorp, Inc.
17801 Georgia Avenue
Olney,
Maryland 20832
Attn: Investor Relations
Telephone: (800) 399-5919
|
|
WashingtonFirst Bankshares, Inc.
11921 Freedom Drive, Suite 250
Reston, Virginia 20190
Attn:
Investor Relations
Telephone: (703) 840-2410
|
Sandy Spring stockholders and WashingtonFirst stockholders requesting documents must do so by October 11,
2017 to receive them before their respective special meetings. You will not be charged for any of these documents that you request. If you request any incorporated documents from Sandy Spring or WashingtonFirst, then Sandy Spring and
WashingtonFirst, respectively, will mail them to you by first class mail, or another equally prompt means, within one business day after receiving your request.
Neither Sandy Spring nor WashingtonFirst has authorized anyone to give any information or make any representation about the Transactions or
the companies that is different from, or in addition to, that contained in this joint proxy statement/prospectus or in any of the materials that have been incorporated in this joint proxy statement/prospectus. Therefore, if anyone does give you
information of this sort, you should not rely on it. If you are in a jurisdiction where offers to exchange or sell, or solicitations of offers to exchange or purchase, the securities offered by this joint proxy statement/prospectus or the
solicitation of proxies is unlawful, or if you are a person to whom it is unlawful to direct these types of activities, then the offer presented in this joint proxy statement/prospectus does not extend to you. The information contained in this joint
proxy statement/prospectus speaks only as of the date of this joint proxy statement/prospectus unless the information specifically indicates that another date applies.
152
Annex A
Execution Version
AGREEMENT AND PLAN OF MERGER
DATED AS OF MAY 15, 2017
BY AND
AMONG
SANDY SPRING BANCORP, INC.,
TOUCHDOWN ACQUISITION, INC.
AND
WASHINGTONFIRST BANKSHARES, INC.
TABLE OF CONTENTS
|
|
|
|
|
|
|
|
|
|
|
Page Nos.
|
|
Introductory Statement
|
|
|
A-1
|
|
ARTICLE I M
ERGERS
|
|
|
A-1
|
|
1.1
|
|
The Mergers
|
|
|
A-1
|
|
1.2
|
|
Closing
|
|
|
A-2
|
|
1.3
|
|
Effective Time
|
|
|
A-2
|
|
1.4
|
|
Effects of the First-Step Merger
|
|
|
A-2
|
|
1.5
|
|
Conversion of Company Common Stock
|
|
|
A-2
|
|
1.6
|
|
Effect on Outstanding Shares of Parent Common Stock
|
|
|
A-3
|
|
1.7
|
|
Effect on Outstanding Shares of Common Stock of Merger Sub
|
|
|
A-3
|
|
1.8
|
|
Articles of Incorporation of the Surviving Corporation
|
|
|
A-3
|
|
1.9
|
|
Bylaws of Surviving Corporation
|
|
|
A-3
|
|
1.10
|
|
Treatment of Company Equity Awards
|
|
|
A-3
|
|
1.11
|
|
Bank Merger
|
|
|
A-4
|
|
1.12
|
|
Alternative Structure
|
|
|
A-4
|
|
|
|
ARTICLE II E
XCHANGE
P
ROCEDURES
|
|
|
A-4
|
|
2.1
|
|
Exchange Agent
|
|
|
A-4
|
|
2.2
|
|
Exchange Procedures
|
|
|
A-5
|
|
2.3
|
|
Appraisal Rights
|
|
|
A-6
|
|
|
|
ARTICLE III R
EPRESENTATIONS
AND
W
ARRANTIES
OF
T
HE
C
OMPANY
|
|
|
A-7
|
|
3.1
|
|
Organization and Qualification
|
|
|
A-7
|
|
3.2
|
|
Subsidiaries
|
|
|
A-8
|
|
3.3
|
|
Capital Structure
|
|
|
A-9
|
|
3.4
|
|
Authority
|
|
|
A-10
|
|
3.5
|
|
No Violations
|
|
|
A-10
|
|
3.6
|
|
Consents and Approvals
|
|
|
A-10
|
|
3.7
|
|
Governmental Filings
|
|
|
A-11
|
|
3.8
|
|
Securities Filings
|
|
|
A-11
|
|
3.9
|
|
Financial Statements
|
|
|
A-11
|
|
3.10
|
|
Undisclosed Liabilities
|
|
|
A-12
|
|
3.11
|
|
Absence of Certain Changes or Events
|
|
|
A-12
|
|
3.12
|
|
Legal Proceedings
|
|
|
A-12
|
|
3.13
|
|
Absence of Regulatory Actions
|
|
|
A-12
|
|
3.14
|
|
Compliance with Laws
|
|
|
A-13
|
|
3.15
|
|
Taxes
|
|
|
A-14
|
|
3.16
|
|
Agreements
|
|
|
A-15
|
|
3.17
|
|
Intellectual Property
|
|
|
A-17
|
|
3.18
|
|
Labor Matters
|
|
|
A-17
|
|
3.19
|
|
Employee Benefit Plans
|
|
|
A-18
|
|
3.20
|
|
Real Property
|
|
|
A-19
|
|
3.21
|
|
Fairness Opinion
|
|
|
A-20
|
|
3.22
|
|
Fees
|
|
|
A-20
|
|
3.23
|
|
Environmental Matters
|
|
|
A-20
|
|
3.24
|
|
Loan Matters
|
|
|
A-20
|
|
3.25
|
|
Anti-takeover Provisions Inapplicable
|
|
|
A-22
|
|
3.26
|
|
Related Party Transactions
|
|
|
A-22
|
|
3.27
|
|
Insurance
|
|
|
A-22
|
|
3.28
|
|
Investment Securities; Derivatives
|
|
|
A-22
|
|
3.29
|
|
Corporate Documents and Records
|
|
|
A-23
|
|
i
|
|
|
|
|
|
|
3.30
|
|
Company Information
|
|
|
A-23
|
|
3.31
|
|
Internal Controls
|
|
|
A-23
|
|
3.32
|
|
Data Privacy
|
|
|
A-24
|
|
3.33
|
|
Tax Treatment of the Integrated Mergers
|
|
|
A-24
|
|
|
|
ARTICLE IV R
EPRESENTATIONS
AND
W
ARRANTIES
OF
P
ARENT
AND
M
ERGER
S
UB
|
|
|
A-24
|
|
4.1
|
|
Organization and Qualification
|
|
|
A-25
|
|
4.2
|
|
Subsidiaries
|
|
|
A-25
|
|
4.3
|
|
Capital Structure
|
|
|
A-26
|
|
4.4
|
|
Authority
|
|
|
A-26
|
|
4.5
|
|
No Violations
|
|
|
A-27
|
|
4.6
|
|
Consents and Approvals
|
|
|
A-27
|
|
4.7
|
|
Governmental Filings
|
|
|
A-28
|
|
4.8
|
|
Securities Filings
|
|
|
A-28
|
|
4.9
|
|
Financial Statements
|
|
|
A-28
|
|
4.10
|
|
Undisclosed Liabilities
|
|
|
A-28
|
|
4.11
|
|
Absence of Certain Changes or Events
|
|
|
A-28
|
|
4.12
|
|
Legal Proceedings
|
|
|
A-29
|
|
4.13
|
|
Absence of Regulatory Actions
|
|
|
A-29
|
|
4.14
|
|
Compliance with Laws
|
|
|
A-29
|
|
4.15
|
|
Taxes
|
|
|
A-30
|
|
4.16
|
|
Employee Benefit Plans
|
|
|
A-31
|
|
4.17
|
|
Fairness Opinion
|
|
|
A-32
|
|
4.18
|
|
Fees
|
|
|
A-33
|
|
4.19
|
|
Loan Matters
|
|
|
A-33
|
|
4.20
|
|
Anti-takeover Provisions Inapplicable
|
|
|
A-33
|
|
4.21
|
|
Insurance
|
|
|
A-33
|
|
4.22
|
|
Corporate Documents and Records
|
|
|
A-33
|
|
4.23
|
|
Parent Information
|
|
|
A-33
|
|
4.24
|
|
Internal Controls
|
|
|
A-34
|
|
4.25
|
|
Data Privacy
|
|
|
A-34
|
|
4.26
|
|
Tax Treatment of the Integrated Mergers
|
|
|
A-35
|
|
|
|
ARTICLE V C
OVENANTS
R
ELATING
TO
C
ONDUCT
OF
B
USINESS
|
|
|
A-35
|
|
5.1
|
|
Conduct of Business Prior to the Effective Time
|
|
|
A-35
|
|
5.2
|
|
Forbearances by the Company
|
|
|
A-35
|
|
5.3
|
|
Forbearances by Parent
|
|
|
A-38
|
|
|
|
ARTICLE VI C
OVENANTS
|
|
|
A-39
|
|
6.1
|
|
Acquisition Proposals
|
|
|
A-39
|
|
6.2
|
|
Advice of Changes
|
|
|
A-40
|
|
6.3
|
|
Access to Information
|
|
|
A-40
|
|
6.4
|
|
Applications; Consents
|
|
|
A-41
|
|
6.5
|
|
Antitakeover Provisions
|
|
|
A-41
|
|
6.6
|
|
Additional Agreements
|
|
|
A-42
|
|
6.7
|
|
Publicity
|
|
|
A-42
|
|
6.8
|
|
Stockholder Meetings
|
|
|
A-42
|
|
6.9
|
|
Registration of Parent Common Stock
|
|
|
A-43
|
|
6.10
|
|
Notification of Certain Matters
|
|
|
A-44
|
|
6.11
|
|
Employee Benefit Matters
|
|
|
A-44
|
|
6.12
|
|
Indemnification
|
|
|
A-46
|
|
6.13
|
|
Litigation and Claims
|
|
|
A-47
|
|
6.14
|
|
Dividends
|
|
|
A-47
|
|
ii
|
|
|
|
|
|
|
6.15
|
|
Corporate Governance
|
|
|
A-47
|
|
6.16
|
|
Exemption from Liability Under Section 16(b)
|
|
|
A-47
|
|
6.17
|
|
Trust Preferred Securities and Subordinated Debt
|
|
|
A-48
|
|
|
|
ARTICLE VII C
ONDITIONS
TO
C
ONSUMMATION
|
|
|
A-48
|
|
7.1
|
|
Conditions to Each Partys Obligations
|
|
|
A-48
|
|
7.2
|
|
Conditions to the Obligations of Parent and Merger Sub
|
|
|
A-49
|
|
7.3
|
|
Conditions to the Obligations of the Company
|
|
|
A-50
|
|
|
|
ARTICLE VIII T
ERMINATION
|
|
|
A-50
|
|
8.1
|
|
Termination
|
|
|
A-50
|
|
8.2
|
|
Termination Fee
|
|
|
A-52
|
|
8.3
|
|
Effect of Termination
|
|
|
A-52
|
|
|
|
ARTICLE IX C
ERTAIN
O
THER
M
ATTERS
|
|
|
A-52
|
|
9.1
|
|
Interpretation
|
|
|
A-52
|
|
9.2
|
|
Survival
|
|
|
A-53
|
|
9.3
|
|
Waiver; Amendment
|
|
|
A-53
|
|
9.4
|
|
Counterparts
|
|
|
A-53
|
|
9.5
|
|
Governing Law; Jurisdiction
|
|
|
A-53
|
|
9.6
|
|
Waiver of Jury Trial
|
|
|
A-53
|
|
9.7
|
|
Expenses
|
|
|
A-54
|
|
9.8
|
|
Notices
|
|
|
A-54
|
|
9.9
|
|
Entire Agreement
|
|
|
A-55
|
|
9.10
|
|
Successors and Assigns; Assignment
|
|
|
A-55
|
|
9.11
|
|
Third Party Beneficiaries
|
|
|
A-55
|
|
9.12
|
|
Specific Performance
|
|
|
A-55
|
|
9.13
|
|
Severability
|
|
|
A-55
|
|
9.14
|
|
Delivery by Facsimile or Electronic Transmission
|
|
|
A-55
|
|
EXHIBITS
|
|
|
Exhibit A
|
|
Plan of Merger
|
Exhibit B
|
|
Amended and Restated Articles of Incorporation of the Company
|
Exhibit C
|
|
Plan of Bank Merger
|
Exhibit D
|
|
Form of Article III, Section 3 of Parents Bylaws
|
iii
INDEX OF DEFINED TERMS
|
|
|
|
|
Section
|
Acquisition Proposal
|
|
6.1(b)(i)
|
Additional Cash Payment
|
|
8.l(h)
|
affiliate
|
|
9.1
|
Agreement
|
|
Introduction
|
Articles of Merger
|
|
1.3
|
Bank Merger
|
|
1.11
|
BHC Act
|
|
3.1
|
business day
|
|
9.1
|
Chosen Courts
|
|
9.5(b)
|
Closing
|
|
1.2
|
Closing Date
|
|
1.2
|
Company
|
|
Introduction
|
Company Common Stock
|
|
1.5(a)
|
Company Contract
|
|
3.16(a)
|
Company Data
|
|
3.32
|
Company Directors
|
|
6.15
|
Company Disclosure Schedule
|
|
Article III
|
Company Employee Plans
|
|
3.19(a)
|
Company Equity Awards
|
|
1.10(b)
|
Company ERISA Affiliate
|
|
3.19(a)
|
Company Insiders
|
|
6.16
|
Company Leased Properties
|
|
3.20
|
Company Meeting
|
|
6.8(a)
|
Company Non-Voting Common Stock
|
|
1.5(a)
|
Company Owned Properties
|
|
3.20
|
Company Qualified Plan
|
|
3.19(f)
|
Company Real Property
|
|
3.20
|
Company Regulatory Agreement
|
|
3.13
|
Company Restricted Stock Award
|
|
1.10(b)
|
Company SEC Reports
|
|
3.8
|
Company Stock Option
|
|
1.10(a)
|
Company Stock Plans
|
|
1.10(d)
|
Company Voting Common Stock
|
|
1.5(a)
|
Confidentiality Agreement
|
|
6.3(b)
|
Continuing Employee
|
|
6.11(a)
|
CRA
|
|
3.14(a)
|
Dissenting Shares
|
|
2.3(b)
|
Effective Time
|
|
1.3
|
Enforceability Exceptions
|
|
3.4
|
Environmental Laws
|
|
3.23
|
ERISA
|
|
3.19(a)
|
Equity Award Cash-out Price
|
|
1.10(a)
|
Exchange Act
|
|
3.6
|
Exchange Agent
|
|
2.1
|
Exchange Fund
|
|
2.1
|
Exchange Ratio
|
|
1.5(a)
|
Excluded Shares
|
|
1.5(a)
|
FDIC
|
|
3.2(d)
|
Federal Reserve
|
|
3.1
|
iv
|
|
|
First-Step Merger
|
|
Introductory Statement
|
Form S-4
|
|
3.6
|
GAAP
|
|
3.9
|
Governmental Entity
|
|
3.6
|
Indemnified Party
|
|
6.12(a)
|
Integrated Mergers
|
|
Introductory Statement
|
Intellectual Property
|
|
3.17
|
IRC
|
|
Introductory Statement
|
IRS
|
|
3.15(c)
|
Joint Proxy Statement
|
|
3.6
|
knowledge
|
|
9.1
|
Law
|
|
3.5
|
Letter of Transmittal
|
|
2.2(a)
|
Lien
|
|
3.2(a)
|
Loans
|
|
3.24(a)
|
Maryland Office
|
|
3.6
|
Material Adverse Effect
|
|
3.1
|
Merger
|
|
Introductory Statement
|
Merger Consideration
|
|
1.5(a)
|
Merger Sub
|
|
Introduction
|
MGCL
|
|
1.1(b)
|
Nasdaq
|
|
1.5(a)
|
New Certificates
|
|
2.1
|
Old Certificates
|
|
2.1
|
Parent
|
|
Introduction
|
Parent Average Price
|
|
1.5(a)
|
Parent Common Stock
|
|
1.5(a)
|
Parent Data
|
|
4.25
|
Parent Disclosure Schedule
|
|
Article IV
|
Parent Employee Plans
|
|
4.16(a)
|
Parent ERISA Affiliate
|
|
4.16(a)
|
Parent Meeting
|
|
6.8(a)
|
Parent Qualified Plan
|
|
4.16(f)
|
Parent Regulatory Agreement
|
|
4.13
|
Parent Restricted Stock Awards
|
|
4.3(b)(i)
|
Parent SEC Reports
|
|
4.8
|
Parent Stock Options
|
|
4.3(b)(ii)
|
Parent Stock Plans
|
|
4.3(c)
|
Permitted Encumbrances
|
|
3.20
|
person
|
|
9.1
|
Premium Cap
|
|
6.12(c)
|
Regulatory Agencies
|
|
3.7
|
Representatives
|
|
6.1(a)
|
Requisite Company Vote
|
|
3.4
|
Requisite Parent Vote
|
|
4.4(a)
|
Sarbanes-Oxley Act
|
|
3.31(b)
|
SEC
|
|
3.6
|
Second-Step Merger
|
|
Introductory Statement
|
Securities Act
|
|
3.8
|
Subsidiary
|
|
3.2(a)
|
Superior Proposal
|
|
6.1(b)(ii)
|
v
|
|
|
Surviving Corporation
|
|
1.1(b)
|
Takeover Statutes
|
|
3.25
|
Tax(es)
|
|
3.15(l)
|
Tax Return
|
|
3.15(m)
|
Termination Fee
|
|
8.2(a)
|
Virginia Bureau
|
|
3.6
|
VSCA
|
|
1.1(a)
|
vi
Agreement and Plan of Merger
This is an
Agreement and Plan of Merger
, dated as of May 15, 2017 (
Agreement
), by and among Sandy Spring
Bancorp, Inc., a Maryland corporation (
Parent
), Touchdown Acquisition, Inc., a Virginia corporation and wholly-owned subsidiary of Parent (
Merger Sub
), and WashingtonFirst Bankshares, Inc., a Virginia
corporation (the
Company
).
Introductory Statement
The Board of Directors of each of Parent and the Company have determined that this Agreement and the business combination and related
transactions contemplated hereby are advisable and that it is in the best interests of their respective companies and stockholders to consummate the strategic business combination transaction provided for herein, pursuant to which (i) Merger
Sub will, subject to the terms and conditions set forth herein, merge with and into the Company (the
First-Step Merger
), so that the Company is the surviving corporation in the First-Step Merger and a wholly-owned Subsidiary of
Parent and (ii) immediately thereafter, the Company, as the surviving corporation in the First-Step Merger, will merge (the
Second-Step Merger
and, together with the First-Step Merger, the
Integrated
Mergers
) with and into Parent, with Parent being the surviving corporation.
The parties hereto intend that the Integrated
Mergers shall together be treated as a single integrated transaction that qualifies as a reorganization under the provisions of Section 368(a) of the Internal Revenue Code of 1986, as amended (the
IRC
) and that
this Agreement is intended to be, and is adopted as, a plan of reorganization for purposes of Sections 354, 361 and 368 of the IRC and within the meaning of Treasury regulation section 1.368-2(g).
Parent and the Company each desire to make certain representations, warranties and agreements in connection with the business combination and
related transactions provided for herein and to prescribe various conditions to such transactions.
Concurrently with the execution and
delivery of this Agreement, as a condition and inducement to Parents willingness to enter into this Agreement, certain stockholders of the Company have entered into an agreement pursuant to which each such stockholder has agreed, among other
things, to vote his, her or its shares of Company Common Stock in favor of this Agreement and the transactions contemplated hereby.
Concurrently with the execution and delivery of this Agreement, as a condition and inducement to the Companys willingness to enter into
this Agreement, certain stockholders of Parent have entered into an agreement pursuant to which each such stockholder has agreed, among other things, to vote his or her shares of Parent Common Stock in favor of the issuance of shares of Parent
Common Stock in connection with the First-Step Merger.
In consideration of their mutual promises and obligations hereunder, the parties
hereto adopt and make this Agreement and prescribe the terms and conditions hereof and the manner and basis of carrying it into effect, which shall be as follows:
ARTICLE I
M
ERGERS
1.1 The Mergers
.
(a)
Upon the terms and subject to the conditions set forth in this Agreement, including the Plan of Merger substantially in the form attached as
Exhibit A
, in accordance with the Virginia Stock Corporation Act
A-1
(the
VSCA
), Merger Sub will merge with and into the Company at the Effective Time. The Company shall be the surviving corporation in the First-Step Merger and shall continue
its existence under the laws of the Commonwealth of Virginia. Upon consummation of the First-Step Merger, the separate corporate existence of Merger Sub shall terminate.
(b) Immediately following the Effective Time, subject to the terms and conditions of this Agreement, in accordance with the Maryland General
Corporation Law (the
MGCL
) and the VSCA, the Company, as the surviving corporation in the First-Step Merger, shall merge with and into Parent. Parent shall be the surviving corporation (hereinafter sometimes referred to in such
capacity as the
Surviving Corporation
) in the Second-Step Merger, and shall continue its corporate existence under the laws of the State of Maryland. Upon consummation of the Second-Step Merger, the separate corporate existence of
the Company shall terminate.
1.2 Closing
. Subject to the terms and conditions of this Agreement, the closing of the Integrated
Mergers (the
Closing
) will take place in the offices of Kilpatrick Townsend & Stockton LLP, 607 14
th
Street NW, Washington, DC, or at such other location as is agreed
to by the parties hereto, at a time as agreed to by the parties hereto on the date designated by Parent within seven (7) days following satisfaction or waiver (subject to applicable law) of the conditions to Closing set forth in Article VII
(other than those conditions that by their nature are to be satisfied at the Closing, but subject to the fulfillment or waiver of those conditions), or such later date as the parties may otherwise agree (the
Closing Date
).
1.3 Effective Time
. In connection with the Closing, Merger Sub and the Company shall duly execute and deliver Articles of Merger (the
Articles of Merger
) to the Virginia State Corporation Commission for filing in accordance with Section 13.1-720 of the VSCA. The First-Step Merger shall become effective at such date and time as Parent and the Company agree
and specify in the Articles of Merger (the date and time the First-Step Merger becomes effective being the
Effective Time
).
1.4 Effects of the First-Step Merger
. The First-Step Merger will have the effects set forth in
Section 13.1-721
of the VSCA. Without limiting the generality of the foregoing, and subject thereto, from and after the Effective Time, the Company shall possess all of the properties, rights, privileges,
powers and franchises of Merger Sub and be subject to all of the debts, liabilities and obligations of Merger Sub.
1.5 Conversion of
Company Common Stock
.
(a) At the Effective Time, by virtue of the First-Step Merger, automatically and without any action on the part
of the holder thereof, each share of the common stock, par value $0.01 per share, of the Company (
Company Voting Common Stock
) and each share of the Non-Voting Common Stock, Series A of the Company (
Company Non-Voting
Common Stock
, and, together with the Company Voting Common Stock, the
Company Common Stock
) issued and outstanding at the Effective Time, other than (i) Dissenting Shares and (ii) shares of Company Common Stock
owned or held, other than in a bona fide fiduciary or agency capacity or in satisfaction of a debt previously contracted, by Parent, the Company or a Subsidiary of either (collectively
Excluded Shares
), shall become and be
converted into a number of shares (the
Exchange Ratio
) of the common stock, par value $1.00 per share, of Parent (
Parent Common Stock
) as follows:
(i) if the Parent Average Price is greater than $53.23, the Exchange Ratio shall equal .8210;
(ii) if the Parent Average Price is greater than $50.15 and equal to or less than $53.23, the Exchange Ratio shall equal the quotient of
$43.70 divided by the Parent Average Price;
(iii) if the Parent Average Price is equal to or greater than $37.07 and equal to or less
than $50.15, the Exchange Ratio shall equal .8713;
(iv) if the Parent Average Price is equal to or greater than $34.00 and less than
$37.07, the Exchange Ratio shall be equal to the quotient of $32.30 divided by the Parent Average Price; and
(v) if the Parent Average
Price is less than $34.00, the Exchange Ratio shall equal .9500.
A-2
Parent Average Price
shall mean the volume-weighted average price per share, rounded to the
nearest hundredth of a cent, of Parent Common Stock on the NASDAQ Global Select Market (
Nasdaq
) for the twenty (20) consecutive trading days ending on (and including) the fifth business day immediately preceding the Closing
Date, as reported by Bloomberg Financial Markets, or any successor thereto, through its volume weighted average price function (or, if not reported therein, in another authoritative source mutually selected by Parent and the Company).
The Parent Common Stock to be issued in the First-Step Merger is sometimes referred to herein as the
Merger Consideration
.
(b) Notwithstanding any other provision of this Agreement, no fraction of a share of Parent Common Stock and no certificates or scrip therefor
will be issued in the First-Step Merger; instead, Parent shall pay to each holder of Company Common Stock who would otherwise be entitled to a fraction of a share of Parent Common Stock an amount in cash, rounded to the nearest cent, determined by
multiplying such fraction by the Parent Average Price.
(c) If, between the date of this Agreement and the Effective Time, the outstanding
shares of Parent Common Stock shall have been changed into a different number of shares or into a different class by reason of any stock dividend, subdivision, reclassification, recapitalization, split, combination or exchange of shares, the
Exchange Ratio shall be adjusted appropriately to provide the holders of Company Common Stock the same economic effect as contemplated by this Agreement prior to such event.
(d) As of the Effective Time, each Excluded Share shall be canceled and retired and shall cease to exist, and no exchange or payment shall be
made with respect thereto.
1.6 Effect on Outstanding Shares of Parent Common Stock
. At and after the Effective Time, each share of
Parent Common Stock issued and outstanding immediately prior to the Effective Time shall remain issued and outstanding and shall not be affected by the First-Step Merger.
1.7 Effect on Outstanding Shares of Common Stock of Merger Sub
. At and after the Effective Time, each share of the common stock, par
value $0.01 per share, of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into and become one newly and validly issued, fully paid and nonassessable share of the common stock of the Surviving Corporation.
1.8 Articles of Incorporation of Surviving Corporation
. At the Effective Time, the Articles of Incorporation of the Company, as
the surviving corporation in the First-Step Merger, shall be the Articles of Incorporation of Merger Sub, as in effect immediately prior to the Effective Time and attached hereto as
Exhibit B
, until such Articles of Incorporation are
thereafter amended in accordance with their terms and applicable law.
1.9 Bylaws of Surviving Corporation
. At the Effective Time,
the Bylaws of the Company, as the surviving corporation in the First-Step Merger, shall be the Bylaws of Merger Sub, as in effect immediately prior to the Effective Time, until thereafter amended in accordance with their terms and applicable law.
1.10 Treatment of Company Equity Awards
.
(a) At the Effective Time, each option to purchase shares of Company Common Stock granted by the Company under a Company Stock Plan or assumed
by the Company prior to the date of this Agreement, whether vested or unvested, that is outstanding and unexercised immediately prior to the Effective Time (a
Company Stock Option
) shall, automatically and without any action on
the part of the holder thereof, be cancelled and shall only entitle the holder of such Company Stock Option to receive (without interest), no later than the first payroll period following the Effective Time and in any event no later than thirty
(30) calendar days following the Closing Date, an amount in cash equal to the product of (x) the number of shares of Company Common Stock subject to such Company Stock Option immediately prior to the Effective Time multiplied by
(y) the excess, if
A-3
any, of (A) the Equity Award Cash-out Price over (B) the exercise price per share of Company Common Stock of such Company Stock Option less applicable Taxes required to be withheld with
respect to such payment. For the avoidance of doubt, any Company Stock Option which has an exercise price per share of Company Common Stock that is greater than or equal to the Equity Award Cash-out Price shall be cancelled at the Effective Time for
no consideration or payment. For purposes of this Agreement, the term
Equity Award Cash-out Price
means an amount equal to the product of (x) the Exchange Ratio multiplied by (y) the Parent Average Price.
(b) At the Effective Time, each award in respect of a share of Company Common Stock subject to vesting, repurchase or other lapse restriction
granted under a Company Stock Plan that is outstanding immediately prior to the Effective Time (a
Company Restricted Stock Award
and, together with the Company Stock Options, the
Company Equity Awards
) shall
fully vest and shall be converted into the right to receive, without interest, the Merger Consideration payable pursuant to
Section 1.5
. Parent shall pay or issue the consideration described in this
Section 1.10(b)
within
five (5) business days following the Effective Time. Parent shall be entitled to deduct and withhold, or cause the Exchange Agent to deduct and withhold, from the Merger Consideration payable in respect of the Company Restricted Stock Awards
all such amounts as it is required to deduct and withhold under the IRC or any provisions of state, local, or foreign Tax law.
(c) At or
prior to the Effective Time, the Board of Directors of the Company and/or its compensation committee, as applicable, shall adopt any resolutions and take any actions that are necessary to (i) effectuate the provisions of this
Section 1.10
., including delivering written notice to each holder of a Company Equity Award of the treatment of such award pursuant to this
Section 1.10
and taking reasonable steps to obtain each such holders written
acknowledgement and agreement of the treatment set forth in this
Section 1.10
, in each case not less than 30 days prior to the Closing and (ii) cause the Company Stock Plans to terminate at or prior to the Effective Time. The
Company shall take all actions necessary to ensure that from and after the Effective Time neither Parent nor the Surviving Corporation will be required to deliver shares of Company Common Stock or other capital stock of the Company to any person
pursuant to or in settlement of Company Equity Awards.
(d) For purposes of this Agreement,
Company Stock Plans
means
the WashingtonFirst Bankshares, Inc. 2010 Equity Compensation Plan and the 1
st
Portfolio Holding Corporation 2009 Stock Incentive Plan.
1.11 Bank Merger.
Concurrently with or as soon as reasonably practicable after the execution and delivery of this Agreement, Sandy
Spring Bank, a wholly owned subsidiary of Parent, and WashingtonFirst Bank, a wholly owned subsidiary of the Company, shall enter into the Plan of Bank Merger, in the form attached hereto as
Exhibit C
, pursuant to which WashingtonFirst
Bank will merge with and into Sandy Spring Bank (the
Bank Merger
). The parties intend that the Bank Merger will become effective simultaneously with or immediately following the Effective Time.
1.12 Alternative Structure
. Notwithstanding anything to the contrary contained in this Agreement, prior to the Effective Time, Parent
may specify that the structure of the transactions contemplated by this Agreement be revised and the parties shall enter into such alternative transactions as Parent may reasonably determine to effect the purposes of this Agreement;
provided,
however,
that such revised structure shall not (i) alter or change the amount or kind of the Merger Consideration, (ii) materially impede or delay consummation of the transactions contemplated by this Agreement, or (iii) adversely
limit or impact the qualification of the Integrated Mergers as a reorganization under the provisions of Section 368(a) of the IRC. In the event that Parent elects to make such a revision, the parties agree to execute appropriate documents to
reflect the revised structure.
ARTICLE II
E
XCHANGE
P
ROCEDURES
2.1 Exchange Agent
. At or prior to the Effective Time, Parent shall deposit with a bank or trust company designated by Parent and
reasonably acceptable to the Company (the
Exchange Agent
), for the benefit of the
A-4
holders of certificates, or evidence of shares in book entry form, representing Company Common Stock (
Old
Certificates
), for exchange in accordance with this Article II,
(a) certificates, or at Parents option, evidence of shares in book entry form, representing the Parent Common Stock (
New Certificates
), to be given to the holders of Company Common Stock pursuant to
Section 1.5
and this Article II in exchange for outstanding shares of such Company Common Stock, and (b) to the extent then determinable, any cash payable in lieu of fractional shares pursuant to
Section 1.5(b)
(such New
Certificates and cash being hereinafter referred to as the
Exchange Fund
). The Exchange Agent shall invest any cash included in the Exchange Fund as directed by Parent,
provided
that no such investment or losses thereon
shall affect the amount of Merger Consideration payable to the holders of Old Certificates. Any interest and other income resulting from such investments shall be paid to Parent, or as otherwise directed by Parent.
2.2 Exchange Procedures
.
(a) As promptly as reasonably practicable after the Effective Time, but in no event later than five (5) business days thereafter, Parent
shall cause the Exchange Agent to mail to each holder of record of one or more Old Certificates representing shares of Company Common Stock immediately prior to the Effective Time that have been converted at the Effective Time into the right to
receive the Merger Consideration pursuant to
Article I
, a letter of transmittal (a
Letter of Transmittal
) (which shall specify that delivery shall be effected, and risk of loss and title to the Old Certificates shall pass,
only upon proper delivery of the Old Certificates to the Exchange Agent) and instructions for use in effecting the surrender of the Old Certificates in exchange for the Merger Consideration which such holder shall have become entitled to receive in
accordance with, and subject to,
Section 1.5(a)
, and any cash in lieu of fractional shares which the shares of Company Common Stock represented by such Old Certificate or Old Certificates shall have been converted into the right to
receive pursuant to this Agreement as well as any dividends or distributions to be paid pursuant to
Section 2.2(c)
. From and after the Effective Time, upon proper surrender of an Old Certificate or Old Certificates for exchange and
cancellation to the Exchange Agent, together with such properly completed Letter of Transmittal duly executed, the holder of such Old Certificate or Old Certificates shall be entitled to receive in exchange therefor, as applicable, (i) a New
Certificate representing the Merger Consideration to which such holder of Company Common Stock shall have become entitled to receive in accordance with, and subject to,
Section 1.5(a)
, and (ii) a check representing the amount of
(1) any cash in lieu of fractional shares which such holder has the right to receive in respect of the surrendered Old Certificate or Old Certificates pursuant to
Section 1.5(b)
and (2) any dividends or distributions which the
holder thereof has the right to receive pursuant to
Section 2.2(c)
, and the Old Certificate or Old Certificates so surrendered shall forthwith be cancelled. No interest will be paid or accrued on any cash in lieu of fractional shares
payable to holders of Old Certificates or any dividends payable under
Section 2.2(c)
. Until surrendered as contemplated by this
Section 2.2
, each Old Certificate shall be deemed at any time after the Effective Time to
represent only the right to receive, upon surrender, the Merger Consideration and any cash in lieu of fractional shares or in respect of dividends or distributions as contemplated by this
Section 2.2
.
(b) The Exchange Agent shall not be entitled to vote or exercise any rights of ownership with respect to the shares of Parent Common Stock
held by it from time to time hereunder, except that it shall receive and hold all dividends or other distributions paid or distributed with respect to such shares for the account of the persons entitled thereto. If there is a transfer of ownership
of any shares of Company Common Stock not registered in the transfer records of the Company, the Merger Consideration shall be issued to the transferee thereof if the Old Certificates representing such Company Common Stock are presented to the
Exchange Agent, accompanied by all documents required, in the reasonable judgment of Parent and the Exchange Agent, to evidence and effect such transfer and to evidence that any applicable stock transfer taxes have been paid.
(c) No dividends or other distributions declared or made after the Effective Time with respect to Parent Common Stock issued pursuant to this
Agreement shall be remitted to any person entitled to receive shares of Parent Common Stock hereunder until such person surrenders his or her Old Certificates in accordance with this
Section 2.2
. Subject to the effect of applicable
abandoned property, escheat or similar laws, upon the surrender of
A-5
such persons Old Certificates, such person shall be entitled to receive any dividends or other distributions, without interest thereon, which subsequent to the Effective Time had become
payable but not paid with respect to shares of Parent Common Stock represented by such persons Old Certificates.
(d) The stock
transfer books of the Company shall be closed immediately upon the Effective Time and from and after the Effective Time there shall be no transfers on the stock transfer records of the Company of any shares of Company Common Stock other than to
settle transfers of Company Common Stock that occurred prior to the Effective Time. If, after the Effective Time, Old Certificates are presented for transfer to the Exchange Agent, they shall be canceled and exchanged for the Merger Consideration
deliverable in respect thereof pursuant to this Agreement in accordance with the procedures set forth in this
Section 2.2
.
(e) Any portion of the aggregate amount of cash to be paid pursuant to
Section 1.5
, any dividends or other distributions to be
paid pursuant to this
Section 2.2
or any proceeds from any investments thereof that remains unclaimed by the stockholders of the Company for six (6) months after the Effective Time shall be repaid by the Exchange Agent to Parent
upon the written request of Parent. After such request is made, any stockholders of the Company who have not theretofore complied with this
Section 2.2
shall look only to Parent for the Merger Consideration, any cash in lieu of
fractional shares, and any unpaid dividends and distributions on the Parent Common Stock deliverable in respect of each share of Company Common Stock such stockholder holds, as determined pursuant to this Agreement, in each case without any interest
thereon. Notwithstanding the foregoing, neither the Exchange Agent nor any party to this Agreement (or any affiliate thereof) shall be liable to any former holder of Company Common Stock for any amount delivered to a public official pursuant to
applicable abandoned property, escheat or similar laws.
(f) Parent and the Exchange Agent shall be entitled to rely upon the
Companys stock transfer books to establish the identity of those persons entitled to receive the Merger Consideration, which books shall be conclusive with respect thereto. In the event of a dispute with respect to ownership of stock
represented by any Old Certificate, Parent and the Exchange Agent shall be entitled to deposit any Merger Consideration represented thereby in escrow with an independent third party and thereafter be relieved with respect to any claims thereto.
(g) If any Old Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming such
Old Certificate to be lost, stolen or destroyed and, if required by the Exchange Agent or Parent, the posting by such person of a bond in such amount as the Exchange Agent may direct as indemnity against any claim that may be made against it with
respect to such Old Certificate, the Exchange Agent will issue in exchange for such lost, stolen or destroyed Old Certificate the Merger Consideration deliverable in respect thereof pursuant to this Agreement.
2.3 Appraisal Rights
.
(a) In accordance with Section 13.1-730 of the VSCA, no appraisal rights shall be available to the holders of Company Voting Common
Stock.
(b) Notwithstanding anything in this Agreement to the contrary and unless otherwise provided by applicable law, each share of
Company Non-Voting Common Stock which is issued and outstanding immediately prior to the Effective Time and which is owned by a holder who (i) shall not have voted or caused or permitted any of his, her or its shares to be voted in favor of the
First-Step Merger, and (ii) pursuant to Section 13.1-729
et seq.
of the VSCA, duly and validly exercises and perfects his, her or its appraisal rights with respect to his, her or its shares of Company Non-Voting Common Stock (the
Dissenting Shares
), shall not be converted into the right to receive the Merger Consideration, but, instead, the holder thereof, with respect to such Dissenting Shares, shall be entitled to payment in cash from the Surviving
Corporation of the appraised value of the Dissenting Shares in accordance with the provisions of the VSCA. If any such holder shall have failed to duly and validly exercise or perfect or shall have effectively withdrawn or lost such appraisal
rights, each share of Company Non-Voting Common Stock of such holder as to which appraisal rights were not duly and validly exercised or
A-6
perfected, or were effectively withdrawn or lost, shall not be deemed a Dissenting Share and shall automatically be converted into and shall thereafter be exchangeable only for the right to
receive the Merger Consideration as provided in this Agreement. The Company will provide Parent (i) prompt notice of any written demands received by the Company for appraisal of shares of Company Non-Voting Common Stock, attempted withdrawals
of such demands and any other instruments served on and received by the Company pursuant to Section 13.1-729
et seq
. of the VSCA, and (ii) the opportunity to participate in and direct all negotiations and proceedings with respect to
any demands for appraisal under the VSCA. The Company shall not, except with the prior written consent of Parent, make any payment with respect to any demands for appraisal, settle or offer to settle any such demands, or approve any withdrawal of
any such demands.
ARTICLE III
R
EPRESENTATIONS
AND
W
ARRANTIES
OF
THE
C
OMPANY
Except (i) as disclosed in Company SEC Reports filed after January 1, 2015 and prior to the date hereof (but excluding any
risk factor disclosures contained under the heading Risk Factors, any disclosure of risks included in any forward-looking statements disclaimer or any other statements that are similarly non-specific or cautionary, predictive
or forward-looking in nature) and (ii) as disclosed in disclosure schedule delivered by the Company to Parent and Merger Sub prior to the execution of this Agreement (the
Company Disclosure Schedule
) (which schedule sets
forth, among other things, facts, circumstances and events 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 of the
representations and warranties contained in this Article III, or to one or more of the Companys covenants contained in Articles V or VI (and making specific reference to the Section of this Agreement to which they relate);
provided
,
that (x) no such item is required to be set forth as an exception to a representation or warranty if its absence would not result in the related representation or warranty being deemed untrue or incorrect, (y) the mere inclusion of an item
in the Company Disclosure Schedule as an exception to a representation or warranty shall not be deemed an admission by the Company that such item represents a material exception or fact, circumstance or event or that such item is reasonably likely
to result in a Material Adverse Effect and (z) disclosure in any paragraph of the Company Disclosure Schedule shall apply only to the indicated Section of this Agreement except to the extent that it is reasonably clear on the face of such
disclosure that it is relevant to another paragraph of the Company Disclosure Schedule or another Section of this Agreement), the Company represents and warrants to Parent and Merger Sub as follows:
3.1 Organization and Qualification
. The Company is a corporation duly organized, validly existing and in good standing under the laws
of the Commonwealth of Virginia, is registered with the Board of Governors of the Federal Reserve System (the
Federal Reserve
) as a bank holding company under the Bank Holding Company Act of 1956, as amended (the
BHC
Act
), and has not elected to be treated as a financial holding company under the BHC Act. The Company has all requisite corporate power and authority to own, lease and operate its properties and to conduct the business currently being
conducted by it. The Company is duly qualified or licensed as a foreign corporation to transact business and is in good standing in each jurisdiction in which the character of the properties owned or leased by it or the nature of the business
conducted by it makes such qualification or licensing necessary, except where the failure to be so qualified or licensed and in good standing would not, either individually or in the aggregate, have a Material Adverse Effect on the Company. As used
in this Agreement,
Material Adverse Effect
shall mean an effect, circumstance, occurrence or change which is material and adverse to the business, financial condition or results of operations of the Company or Parent, as the
context may dictate, and its Subsidiaries taken as a whole;
provided
,
however
, that any such effect, circumstance, occurrence or change resulting from any (i) changes in laws, rules or regulations or GAAP or regulatory accounting
requirements or interpretations thereof that apply to financial and/or depository institutions and/or their holding companies generally, (ii) changes in economic conditions affecting financial institutions generally, including but not limited
to, changes in the general level of market interest rates, (iii) actions and omissions of Parent or the Company taken with the prior written consent, or at the request, of the other, (iv) direct effects of compliance with this Agreement on
the operating performance of the parties, including expenses incurred by the parties in investigating, negotiating, documenting, effecting and consummating the transactions contemplated by
A-7
this Agreement, (v) changes in national or international political or social conditions including the engagement by the United States in hostilities, whether or not pursuant to the
declaration of a national emergency or war, or the occurrence of any military or terrorist attack upon or within the United States, and (vi) any failure, in and of itself, by Parent or the Company to meet any internal or published projections,
forecasts, estimates, or predictions in respect of revenues, earnings, or other financial or operating metrics for any period (it being understood that the facts or occurrences giving rise to or contributing to such failure may be deemed to
constitute, or be taken into account in determining whether there has been or would reasonably be expected to become, a Material Adverse Effect, to the extent permitted by this definition and not otherwise excepted by a clause of this proviso) shall
not be considered in determining if a Material Adverse Effect has occurred except, with respect to clauses (i), (ii) and (v), to the extent that the effects of such change disproportionately affect such party and its Subsidiaries as compared to
comparable U.S. banking organizations. The Company engages only in activities (and holds properties only of the types) permitted to bank holding companies by the BHC Act and the rules and regulations promulgated thereunder.
3.2 Subsidiaries
.
(a)
Section 3.2 of the Company Disclosure Schedule sets forth with respect to each of the Companys direct and indirect Subsidiaries its name, its jurisdiction of incorporation, the Companys percentage ownership, the number of shares of
stock or other equity interests owned or controlled by the Company and the name and number of shares held by any other person who owns any stock of the Subsidiary. As used in this Agreement, the word
Subsidiary
when used with
respect to any party, means any corporation, partnership, limited liability company, bank, trust or other organization, whether incorporated or unincorporated, which is (i) consolidated with such party for financial reporting purposes or
(ii) directly or indirectly (through one or more intermediaries) controlled by or owned more than fifty percent (50%) by such party (for the avoidance of doubt, with respect to the Company, the statutory business trusts related to the
trust preferred securities issued or assumed by the Company are Subsidiaries of the Company). The Company owns of record and beneficially all the capital stock or other equity interests of each of its Subsidiaries free and clear of any charge,
mortgage, pledge, security interest, claim, lien or encumbrance (
Lien
). There are no contracts, commitments, agreements or understandings relating to the Companys right to vote or dispose of any equity securities of its
Subsidiaries. The Companys ownership interest in each of its Subsidiaries is in compliance with all applicable laws, rules and regulations relating to equity investments by bank holding companies or Virginia-chartered banks.
(b) Each of the Companys Subsidiaries is duly organized and validly existing under the laws of its jurisdiction of incorporation or
formation, has all requisite power and authority to own, lease and operate its properties and to conduct the business currently being conducted by it and is duly qualified or licensed as a foreign corporation to transact business and is in good
standing in each jurisdiction in which the character of the properties owned or leased by it or the nature of the business conducted by it makes such qualification or licensing necessary, except where the failure to be so qualified or licensed and
in good standing would not, individually or in the aggregate, have a Material Adverse Effect on the Company.
(c) The outstanding shares
of capital stock of each Subsidiary have been validly authorized and are validly issued, fully paid and nonassessable. No shares of capital stock of any Subsidiary of the Company are or may be required to be issued by virtue of any options, warrants
or other rights, no securities exist that are convertible into or exchangeable for shares of such capital stock or any other debt or equity security of any Subsidiary, and there are no contracts, commitments, agreements or understandings of any kind
for the issuance of additional shares of capital stock or other debt or equity security of any Subsidiary or options, warrants or other rights with respect to such securities.
(d) WashingtonFirst Bank is a Virginia-chartered bank. No Subsidiary of the Company other than WashingtonFirst Bank is an insured
depository institution as defined in the Federal Deposit Insurance Act, as amended, and the applicable regulations thereunder. WashingtonFirst Banks deposits are insured by the Federal Deposit Insurance Corporation (the
FDIC
) through the Deposit Insurance Fund to the fullest extent permitted by law.
A-8
3.3 Capital Structure
.
(a) The authorized capital stock of the Company consists of (i) 50,000,000 shares of Company Voting Common Stock, (ii) 10,000,000
shares of non-voting common stock, par value $0.01 per share, of which 2,000,000 shares have been designated Non-Voting Common Stock, Series A, and (iii) 10,000,000 shares of preferred stock, par value $5.00 per share, of which no shares of
preferred stock are issued or outstanding.
(b) As of May 10, 2017, no shares of capital stock or other voting securities of the
Company are issued, reserved for issuance or outstanding, other than:
(i) 12,238,573 shares of Company Voting Common Stock, all of which
are validly issued, fully paid and nonassessable and were issued in full compliance with all applicable laws and not in violation of any preemptive rights, which number includes 16,663 shares of Company Voting Common Stock granted in respect of
outstanding Company Restricted Stock Awards;
(ii) 816,835 shares of Company Non-Voting Common Stock, all of which are validly issued,
fully paid and nonassessable and were issued in full compliance with all applicable laws and not in violation of any preemptive rights; and
(ii) 570,303 shares of Company Common Stock reserved for issuance upon the exercise of outstanding Company Stock Options.
(c) Since May 10, 2017, the Company has not (i) issued, repurchased, redeemed or acquired any Company Common Stock, other shares of
its capital stock, or other voting securities or securities convertible or exchangeable into, or exercisable for, Company Common Stock, or any options, warrants, or other rights of any kind to acquire Company Common Stock, other than the issuance,
repurchase, redemption or acquisition of shares of Company Common Stock in connection with the exercise, vesting or settlement of Company Equity Awards that were outstanding on May 10, 2017 in accordance with their terms (without amendment or
waiver since May 10, 2017) or (ii) issued or awarded any options, restricted shares or any other equity-based awards under any of the Company Stock Plans.
(d) No bonds, debentures, notes or other indebtedness having the right to vote on any matters on which stockholders of the Company may vote
are issued or outstanding. Except as set forth in the Company SEC Reports, as of the date of this Agreement, no trust preferred or subordinated debt securities of the Company or any of its Subsidiaries are issued or outstanding. As of the date of
this Agreement, the Company is not deferring interest payments with respect to any trust preferred securities or related junior subordinated debt securities issued or assumed by it or any of its affiliates.
(e) There are no contractual obligations of the Company or its Subsidiaries pursuant to which the Company or its Subsidiaries could be
required to register shares of capital stock or other securities of the Company or its Subsidiaries under the Securities Act other than the Registration Rights Agreement dated as of December 30, 2014 by and among the Company and certain
stockholders thereof, which shall be terminated and be of no further force or effect as of the Effective Time pursuant to an amendment in full force and effect as of the date hereof that will terminate such Registration Rights Agreement as of the
Effective Time, which amendment has been made available to Parent. As of the date hereof, there are no outstanding securities or instruments that contain any redemption or similar provisions, and there are no outstanding contractual obligations of
the Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire any shares of capital stock of the Company or any of its Subsidiaries.
(f) Other than the Company Equity Awards issued prior to the date of this Agreement, as of the date of this Agreement, neither the Company nor
any of its Subsidiaries has or is bound by any outstanding subscriptions, options, warrants, calls, rights, convertible securities, commitments or agreements of any character
A-9
obligating the Company or any of its Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or sold, any additional shares of capital stock of the Company (including any rights
plan or agreement) or obligating the Company or any of its Subsidiaries to grant, extend or enter into any such subscription, option, warrant, call, right, convertible security, commitment or agreement. Section 3.3(f) of the Company Disclosure
Schedule sets forth a true, correct and complete list of all Company Equity Awards outstanding as of May 10, 2017, specifying, on a holder-by-holder basis, (i) the name of each holder, (ii) the number of shares subject to each such
Company Equity Award, (iii) the grant date of each such Company Equity Award, (iv) the Company Stock Plan under which such Company Equity Award was granted, (v) the exercise price for each such Company Equity Award that is a Company
Stock Option, and (vi) the expiration date of each such Company Equity Award that is a Company Stock Option.
(g) There are no voting
trusts, stockholder agreements, proxies or other agreements in effect pursuant to which the Company or any of its Subsidiaries has a contractual or other obligation with respect to the voting or transfer of the Company Common Stock or other equity
interests of the Company. The Company does not have in effect a poison pill or similar stockholder rights plan (other than any such plan as to which the rights granted thereunder have expired).
3.4 Authority
. The Company has all requisite corporate power and authority to enter into this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated by this Agreement. The execution and delivery of this Agreement and the consummation of the transactions contemplated by this Agreement have been duly authorized by all necessary corporate
actions on the part of the Companys Board of Directors. The Board of Directors of the Company has determined that the Integrated Mergers, on the terms and conditions set forth in this Agreement, are in the best interests of the Company and its
stockholders and has directed that this Agreement and the transactions contemplated hereby be submitted to the Companys stockholders for adoption at a meeting of such stockholders and has adopted a resolution to the foregoing effect. No other
corporate proceedings on the part of the Company are necessary to authorize this Agreement or to consummate the transactions contemplated by this Agreement other than the approval and adoption of this Agreement by the affirmative vote of the holders
of a majority of the outstanding shares of Company Voting Common Stock (the
Requisite Company Vote
). This Agreement has been duly and validly executed and delivered by the Company and constitutes a valid and binding obligation of
the Company, enforceable against the Company in accordance with its terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors rights and remedies generally and to general principles of equity, whether applied in
a court of law or a court of equity (collectively, the
Enforceability Exceptions
).
3.5 No Violations
. The
execution, delivery and performance of this Agreement by the Company do not, and the consummation of the transactions contemplated by this Agreement will not, (i) assuming that the consents, approvals and filings referred to in
Section 3.6
have been obtained and the applicable waiting periods have expired, violate any law, rule or regulation or any judgment, decree, order, governmental permit or license (each, a
Law
) to which the Company or
any of its Subsidiaries (or any of their respective properties) is subject, (ii) violate the Articles of Incorporation or bylaws of the Company or the similar organizational documents of any of its Subsidiaries or (iii) constitute a breach
or violation of, or a default under (or an event which, with due notice or lapse of time or both, would constitute a default under), or result in the termination of, accelerate the performance required by, or result in the creation of any Lien upon
any of the properties or assets of the Company or any of its Subsidiaries under, any of the terms, conditions or provisions of any note, bond, indenture, deed of trust, loan agreement or other agreement, instrument or obligation to which the Company
or any of its Subsidiaries is a party, or to which any of their respective properties or assets may be subject, except (in the case of clause (iii) above) for such breaches, violations, defaults, terminations, accelerations or creations which,
either individually or in the aggregate, would not reasonably be likely to have a Material Adverse Effect on the Company.
3.6 Consents
and Approvals
. Except for (i) the filing of applications, filings and notices, as applicable, with the Federal Reserve under the BHC Act and approval of such applications, filings and notices, (ii) the filing
A-10
of applications, filings and notices, as applicable, with the Federal Reserve in connection with the Bank Merger, including under the Bank Merger Act, and approval of such applications, filings
and notices, (iii) the filing of applications, filings and notices, as applicable, with the Maryland Office of the Commissioner of Financial Regulation (the
Maryland Office
) and the Virginia Bureau of Financial Institutions
(
Virginia Bureau
) in connection with the Bank Merger and approval of such applications, filings and notices, (iv) the filing with the Securities and Exchange Commission (the
SEC
) of a proxy statement in
definitive form relating to the meetings of the Companys and Parents stockholders to be held in connection with this Agreement and the transactions contemplated hereby (including any amendments or supplements thereto, the
Joint Proxy Statement), and of the registration statement on Form S-4 in which the Proxy Statement will be included as a prospectus, to be filed with the SEC by Parent in connection with the transactions contemplated by this
Agreement (including any amendments or supplements thereto, the
Form S-4
) and declaration of effectiveness of the Form S-4, (v) other filings and reports as required pursuant to the Securities Exchange Act of 1934, as amended
(the
Exchange Act
), (vi) the filing of Articles of Merger with the Virginia State Corporation Commission pursuant to the VSCA, (vii) such filings and approvals as are required to be made or obtained under the securities
or Blue Sky laws of various states in connection with the issuance of the shares of Parent Common Stock pursuant to this Agreement and (viii) the filing with the Nasdaq Stock Market of a notification of the listing of the shares of
Parent Common Stock to be issued in the First-Step Merger, no consents or approvals of, or filings or registrations with, any governmental or regulatory authority, agency, court, commission, or other administrative entity (
Governmental
Entity
) or any third party are required to be made or obtained in connection with the execution and delivery by the Company of this Agreement or the consummation by the Company of the First-Step Merger and the other transactions
contemplated by this Agreement, including the Bank Merger. As of the date hereof, the Company has no knowledge of any reason pertaining to the Company why any of the approvals referred to in this
Section 3.6
should not be obtained
without the imposition of any condition or requirement described in
Section 7.1(c)
.
3.7 Governmental Filings
. The Company
and each of its Subsidiaries has timely filed all reports, schedules, registration statements and other documents that it has been required to file since January 1, 2014 with the Federal Reserve, the FDIC, or any state regulatory authority
(collectively,
Regulatory Agencies
) and have paid all fees and assessments due and payable in connection therewith. As of their respective dates, each of such filings complied in all material respects with all laws or regulations
under which it was filed (or was amended so as to be in compliance promptly following discovery of such noncompliance).
3.8 Securities
Filings
. The Company has timely filed with or furnished to the SEC all reports, schedules, registration statements, definitive proxy statements and other documents that it has been required to file under the Securities Act of 1933, as amended
(the
Securities Act
) or the Exchange Act since January 1, 2014 (collectively,
Company SEC Reports
). An accurate and complete copy of each of the Company SEC Reports is publicly available. No such Company
Report, at the time filed or furnished (and, in the case of registration statements and proxy statements, on the dates of effectiveness and the dates of the relevant meetings, respectively) contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they were made, not misleading. As of their respective dates, all of the Company SEC Reports
complied in all material respects with the applicable requirements of the Securities Act or the Exchange Act, as the case may be, and the rules and regulations of the SEC promulgated thereunder. No executive officer of the Company has failed in any
respect to make the certifications required of him or her under Section 302 or 906 of the Sarbanes-Oxley Act. As of the date of this Agreement, there are no outstanding comments from or material unresolved issues raised by the SEC with respect
to any of the Company SEC Reports.
3.9 Financial Statements
. The financial statements of the Company and its Subsidiaries included
(or incorporated by reference) in the Company SEC Reports (including the related notes, where applicable) (i) have been prepared from, and are in accordance with, the books and records of the Company and its Subsidiaries, (ii) fairly
present in all material respects the consolidated results of operations, cash flows, changes in stockholders equity and consolidated financial position of the Company and its Subsidiaries for the respective
A-11
fiscal periods or as of the respective dates therein set forth (subject in the case of unaudited statements to year-end audit adjustments normal in nature and amount), (iii) complied, as of
their respective dates of filing with the SEC, in all material respects with applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto, and (iv) have been prepared in accordance with U.S.
generally accepted accounting principles (
GAAP
) consistently applied during the periods involved, except, in each case, as indicated in such statements or in the notes thereto. The books and records of the Company and its
Subsidiaries have been, and are being, maintained in all material respects in accordance with GAAP and any other legal and accounting requirements and reflect only actual transactions. Since January 1, 2014, no independent public accounting
firm has resigned (or informed the Company that it intends to resign) or been dismissed as independent public accountants of the Company as a result of or in connection with any disagreements with the Company on a matter of accounting principles or
practices, financial statement disclosure or auditing scope or procedure.
3.10 Undisclosed Liabilities
. Neither the Company nor
any of its Subsidiaries has incurred any debt, liability or obligation of any nature whatsoever (whether accrued, contingent, absolute or otherwise and whether due or to become due) other than liabilities reflected on or reserved against in the
consolidated balance sheet of the Company as of March 31, 2017 included in its Quarterly Report on Form 10-Q for the quarter ended March 31, 2017, except for (i) liabilities incurred since March 31, 2017 in the ordinary course of
business consistent with past practice that, either alone or when combined with all similar liabilities, have not had, and would not reasonably be expected to have, a Material Adverse Effect on the Company and (ii) liabilities incurred for
legal, accounting, financial advising fees and out-of-pocket expenses in connection with the transactions contemplated by this Agreement.
3.11 Absence of Certain Changes or Events
.
(a) Since December 31, 2016, the Company and its Subsidiaries have conducted their respective businesses only in the ordinary and usual
course of such businesses consistent with their past practices and there has not been any event or occurrence that has had, or is reasonably expected to have, a Material Adverse Effect on the Company.
(b) Since December 31, 2016, none of the Company or any of its Subsidiaries have taken any action that would be prohibited by clauses
(a)(i), (b)(ii), (c), (d), (i)(iii), (j), (k), (m), (n), or (o) of
Section 5.2
if taken after the date hereof.
3.12
Legal Proceedings
. Except as would not reasonably be likely, either individually or in the aggregate, to have a Material Adverse Effect on the Company, neither the Company nor any of its Subsidiaries is a party to any, and there are no pending
or, to the Companys knowledge, threatened, legal, administrative, arbitral or other proceedings, claims, actions or governmental or regulatory investigations of any nature against the Company or any of its Subsidiaries or any of their current
or former directors or executive officers acting in their capacity as such. There are no judgments, decrees, injunctions, orders or rulings of any Governmental Entity or arbitrator outstanding against the Company or any of its Subsidiaries or the
assets of the Company or any of its Subsidiaries (or that, upon consummation of the First-Step Merger, would apply to Parent or any of its Subsidiaries). Since January 1, 2014, (i) there have been no subpoenas, written demands, or document
requests received by the Company or any of its Subsidiaries from any Governmental Entity and (ii) no Governmental Entity has requested that the Company or any of its Subsidiaries enter into a settlement negotiation or tolling agreement with
respect to any matter related to any such subpoena, written demand, or document request.
3.13 Absence of Regulatory Actions
.
Neither the Company nor any of its Subsidiaries is subject to any cease-and-desist or other order or enforcement action issued by, or is a party to any written agreement, consent agreement or memorandum of understanding with, or is a party to any
commitment letter or similar undertaking to, or is subject to any order or directive by, or has been ordered to pay any civil money penalty by, or has been since January 1, 2014, a recipient of any supervisory letter from, or since
January 1, 2014, has adopted any
A-12
policies, procedures or board resolutions at the request or suggestion of any Governmental Entity, specific to the Company or its Subsidiaries, that, in each of any such cases, currently
restricts in any material respect the conduct of its business or that in any material manner relates to its capital adequacy, its ability to pay dividends, its credit or risk management policies, its management or its business (each, whether or not
set forth in the Company Disclosure Schedule, a
Company Regulatory Agreement
), nor has the Company or any of its Subsidiaries been advised in writing or, to the Companys knowledge, orally, since January 1, 2014, by any
Governmental Entity that it is considering issuing, initiating, ordering, or requesting any such Company Regulatory Agreement. Except for examinations of the Company and its Subsidiaries conducted by a Regulatory Agency in the ordinary course of
business and pursuant to the Company Regulatory Agreements, no Regulatory Agency has initiated or has pending any proceeding or, to the knowledge of the Company, investigation into the business or operations of the Company or any of its Subsidiaries
since January 1, 2014. There is no claim, action, suit, proceeding, investigation or notice of violation (whether civil, criminal or administrative) pending or, to the knowledge of the Company, threatened against any officer or director of the
Company or any of its Subsidiaries in connection with the performance of his or her duties as an officer or director of the Company or any of its Subsidiaries.
3.14 Compliance with Laws
.
(a) The Company and each of its Subsidiaries hold, and have at all times since January 1, 2014 held, all licenses, franchises, permits
and authorizations necessary for the lawful conduct of their respective businesses and ownership of their respective properties, rights and assets under and pursuant to each (and have paid all fees and assessments due and payable in connection
therewith), and, to the knowledge of the Company, no suspension or cancellation of any such necessary license, franchise, permit or authorization is threatened. The Company and each of its Subsidiaries have since January 1, 2014 complied in all
material respects with and are not in material default or violation under any Law applicable to the Company or any of its Subsidiaries, including (to the extent applicable to the Company or its Subsidiaries), all laws related to data protection or
privacy, the USA PATRIOT Act, the Equal Credit Opportunity Act and Regulation B, the Fair Housing Act, the Community Reinvestment Act (the
CRA
), the 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, any regulations promulgated by the Consumer Financial Protection Bureau, the Foreign
Corrupt Practices 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, the Sarbanes-Oxley Act, and all agency
requirements relating to the origination, sale and servicing of mortgage and consumer loans. Neither the Company nor any of its Subsidiaries has been given notice or been charged with any violation of, any Law which, individually or in the
aggregate, would reasonably be expected to have a Material Adverse Effect on the Company.
(b) WashingtonFirst Bank has received a rating
of Satisfactory or better in its most recent examination or interim review with respect to the CRA. The Company does not have knowledge of any facts or circumstances that would cause WashingtonFirst Bank or any other Subsidiary of the
Company to be deemed not to be in satisfactory compliance in any material respect with the CRA, and the regulations promulgated thereunder, or to be assigned a rating for CRA purposes by federal bank regulators of lower than
Satisfactory.
(c) The Board of Directors of WashingtonFirst Bank (or where appropriate of any other Subsidiary of the
Company) has adopted, and WashingtonFirst Bank (or such other Subsidiary of the Company) has implemented, an anti-money laundering program that contains adequate and appropriate customer identification verification procedures that comply with
Section 326 of the USA PATRIOT Act and such anti-money laundering program meets the requirements in all material respects of Section 352 of the USA PATRIOT Act and the regulations thereunder, and WashingtonFirst Bank (or such other
Subsidiary of the Company) has complied in all material respects with any requirements to file reports and other necessary documents as required by the USA PATRIOT Act and the regulations thereunder.
A-13
(d) Each of the Company and its Subsidiaries has properly administered all accounts for which it
acts as a fiduciary, including accounts for which it serves as a trustee, agent, custodian, personal representative, guardian, conservator or investment advisor, in accordance with the terms of the governing documents, applicable state and federal
law and regulation and common law. None of the Company, any of its Subsidiaries, or any director, officer or employee of the Company or of any of its Subsidiaries, has committed any breach of trust or fiduciary duty with respect to any such
fiduciary account, and the accountings for each such fiduciary account are true and correct in all material respects and accurately reflect the assets of such fiduciary account.
3.15 Taxes
.
(a) Each of
the Company and its Subsidiaries has duly and timely filed (taking into account all applicable extensions) all Tax Returns in all jurisdictions in which Tax Returns are required to be filed by it, and all such Tax Returns are true, correct, and
complete in all material respects. Neither the Company nor any of its Subsidiaries is the beneficiary of any extension of time within which to file any material Tax Return. Neither the Company nor any of its Subsidiaries has granted any extension or
waiver of the limitation period applicable to any material Tax that remains in effect.
(b) All Taxes of the Company and its Subsidiaries
(whether or not shown on any Tax Returns) that are due have been fully and timely paid or adequate reserves therefor have been made on the financial statements of the Company and its Subsidiaries included (or incorporated by reference) in the
Company SEC Reports (including the related notes, where applicable).
(c) The federal income Tax Returns of the Company and its
Subsidiaries for all years up to and including 2013 have been examined by the Internal Revenue Service (the
IRS
) or are Tax Returns with respect to which the applicable period for assessment under applicable law, after giving
effect to extensions or waivers, has expired. No deficiency with respect to a material amount of Taxes has been proposed, asserted or assessed against the Company or any of its Subsidiaries. There are no pending or threatened in writing disputes,
claims, audits, examinations, investigations or other proceedings regarding any material Tax of the Company and its Subsidiaries or the assets of the Company and its Subsidiaries for which adequate reserves have not been established. No claim has
been made in writing by any Governmental Entity in a jurisdiction where the Company or any of its Subsidiaries does not file Tax Returns that the Company or such Subsidiary is or may be subject to taxation by that jurisdiction.
(d) The Company has made available to Parent true, correct, and complete copies of any private letter ruling requests, closing agreements or
gain recognition agreements with respect to Taxes requested or executed by the Company or any of its Subsidiaries.
(e) There are no Liens
for material Taxes (except Taxes not yet due and payable) on any of the assets of the Company or any of its Subsidiaries.
(f) Neither the
Company nor any of its Subsidiaries is a party to or is bound by any Tax sharing, allocation or indemnification agreement or arrangement (other than such an agreement or arrangement exclusively between or among the Company and its Subsidiaries).
Neither the Company nor any of its Subsidiaries (A) has been a member of an affiliated group filing a consolidated federal income Tax Return (other than a group the common parent of which was the Company) or (B) has any liability for the
Taxes of any person (other than the Company or any of its Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local or foreign law), as a transferee or successor, by contract or otherwise.
(g) Neither the Company nor any of its Subsidiaries has been, within the two (2) year period ending on the date hereof or otherwise as
part of a plan (or series of related transactions) within the meaning of Section 355(e) of the IRC of which the Integrated Mergers is also a part, a distributing corporation or a controlled corporation
(within the meaning of Section 355(a)(1)(A) of the IRC) in a distribution of stock intended to be governed in whole or in part by Section 355 of the IRC.
A-14
(h) At no time during the past five years has the Company been a United States real property
holding corporation within the meaning of Section 897(c)(2) of the IRC.
(i) Neither the Company nor any of its Subsidiaries will be
required to include any material item of income in, or to exclude any material item of deduction from, taxable income in any taxable period (or portion thereof) ending after the Closing Date as a result of any (i) change in method of
accounting, (ii) closing agreement, (iii) intercompany transaction or excess loss account described in Treasury Regulations under Section 1502 of the IRC (or any similar provision of state, local or foreign law), (iv) installment
sale or open transaction disposition made on or prior to the Closing Date, or (v) prepaid amount received on or prior to the Closing Date outside of the ordinary course of business.
(j) The Company and each of its Subsidiaries has withheld and paid all Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor, creditor, stockholder or other third party, and the Company and each of its Subsidiaries has timely complied with all applicable information reporting requirements under Part III,
Subchapter A of Chapter 61 of the IRC and similar applicable state and local information reporting requirements.
(k) Neither the Company
nor any of its Subsidiaries has engaged in any reportable transaction within the meaning of Treasury Regulation section 1.6011-4(b)(1).
(l) As used in this Agreement, the term
Tax
or
Taxes
means all federal, state, local, and foreign
income, excise, gross receipts, ad valorem, profits, gains, property, capital, sales, transfer, use, license, payroll, employment, social security, severance, unemployment, withholding, duties, excise, windfall profits, intangibles, franchise,
backup withholding, value added, alternative or add-on minimum, estimated and other taxes, charges, fees, levies or like assessments together with all penalties and additions to tax and interest thereon.
(m) As used in this Agreement, the term
Tax Return
means any return, declaration, report, claim for refund, estimate, or
information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof, supplied or required to be supplied to a Governmental Entity.
3.16 Agreements
.
(a)
Except as set forth in Section 3.16(a) of the Company Disclosure Schedule, neither the Company nor any of its Subsidiaries is a party or is bound by any contract, arrangement, commitment or understanding (whether written or oral):
(i) (A) with any executive officer or other key employee of the Company or any of its Subsidiaries the benefits of which are contingent,
or the terms of which are materially altered, upon the occurrence of a transaction involving the Company or any of its Subsidiaries of the nature contemplated by this Agreement; (B) with respect to the employment of any directors, officers,
employees or consultants; or (C) any of the benefits of which will be increased, or the vesting or payment of the benefits of which will be accelerated, by the occurrence of any of the transactions contemplated by this Agreement, or the value
of any of the benefits of which will be calculated on the basis of any of the transactions contemplated by this Agreement (including any stock option plan, phantom stock or stock appreciation rights plan, restricted stock plan or stock purchase
plan);
(ii) that (A) contains a non-compete or client or customer non-solicit requirement or any other provision that
restricts the conduct of, or the manner of conducting, any line of business of the Company or any of its Subsidiaries (or, following the consummation of the transactions contemplated hereby, Parent or any of its Subsidiaries), (B) obligates the
Company or any of its affiliates (or, following the consummation of the transactions contemplated hereby, Parent or any of its Subsidiaries) to conduct business with any third party on an exclusive or preferential basis, or (C) requires
referrals of business or requires the Company or any of its Subsidiaries to make available investment opportunities to any person on a priority or exclusive basis;
A-15
(iii) pursuant to which the Company or any of its Subsidiaries may become obligated to invest in
or contribute capital to any entity;
(iv) that relates to incurrence of indebtedness by the Company or any of its Subsidiaries in excess
of $100,000, other than deposit liabilities, trade payables, Federal Home Loan Bank borrowings and repurchase agreements with customers, in each case entered into in the ordinary course of business;
(v) that grants any right of first refusal, right of first offer or similar right with respect to any assets, rights or properties of
the Company or any of its Subsidiaries;
(vi) that limits the payment of dividends by the Company or any of its Subsidiaries;
(vii) that relates to the involvement of the Company or any Subsidiary in a joint venture, partnership, operating agreement or other
similar agreement or arrangement, or to the formation, creation or operation, management or control of any partnership or joint venture with any third parties;
(viii) that relates to an acquisition, divestiture, merger or similar transaction and that contains representations, covenants,
indemnities or other obligations (including indemnification, earn-out or other contingent obligations) that are still in effect;
(ix) that is a consulting agreement or data processing, software programming or licensing contract involving the payment of more than
$100,000 per annum (other than any such contracts which are terminable by the Company or any of its Subsidiaries on 60 days or less notice without any required payment or other conditions, other than the condition of notice) ;
(x) that provides for indemnification by the Company or any of its Subsidiaries of any person or entity, except for contracts entered
into in the ordinary course of business providing for customary and immaterial indemnification and provisions of the Companys Articles of Incorporation and Bylaws providing for indemnification;
(xi) to which any affiliate, officer, director, employee or consultant of such party or any of its Subsidiaries is a party or
beneficiary (except with respect to loans to, or deposit or asset management accounts of, directors, officers and employees entered into in the ordinary course of business and in accordance with all applicable regulatory requirements with respect to
it);
(xii) that would prevent, materially delay or materially impede the Companys ability to consummate the First-Step Merger, the
Second-Step Merger, the Bank Merger or the other transactions contemplated hereby;
(xiii) that contains a put, call or similar
right pursuant to which the Company or any of its Subsidiaries could be required to purchase or sell, as applicable, any equity interests of any person or assets;
(xiv) that is a lease of real or personal property providing for annual rentals of $50,000 or more;
(xv) that contains a standstill or similar agreement pursuant to which the Company or any of its Subsidiaries has agreed not to acquire
assets or securities of another party or any of its affiliates; or
(xvi) that is not listed above and that is material to the
financial condition, results of operations or business of the Company or any of its Subsidiaries.
Each contract, arrangement, commitment
or understanding of the type described in this
Section 3.16(a)
, whether or not set forth in the Company Disclosure Schedule, is referred to herein as a
Company Contract
,
A-16
and neither the Company nor any of its Subsidiaries knows of, or has received notice of, any violation of the above by any of the other parties thereto which would reasonably be expected to have,
either individually or in the aggregate, a Material Adverse Effect on the Company.
(b) Except as would not reasonably be likely to have,
either individually or in the aggregate, a Material Adverse Effect on the Company, each Company Contract is valid and binding on the Company or one of its Subsidiaries, as applicable, and in full force and effect. The Company and each of its
Subsidiaries has in all material respects performed all obligations required to be performed by it to date under each Company Contract. To the Companys knowledge each third-party counterparty to each Company Contract has in all material
respects performed all obligations required to be performed by it to date under such Company Contract, and no event or condition exists which constitutes or, after notice or lapse of time or both, will constitute, a material default on the part of
the Company or any of its Subsidiaries under any such Company Contract.
3.17 Intellectual Property
. The Company and each of its
Subsidiaries owns or possesses valid and binding licenses and other rights to use (in the manner and the geographic areas in which they are currently used) without payment all patents, copyrights, trade secrets, trade names, service marks and
trademarks material to its business. With respect to each item of Intellectual Property owned by the Company or any of its Subsidiaries, the owner possesses all right, title and interest in and to the item, free and clear of any Lien. With respect
to each item of Intellectual Property that the Company or any of its Subsidiaries is licensed or authorized to use, the license, sublicense or agreement covering such item is legal, valid, binding, enforceable and in full force and effect. Neither
the Company nor any of its Subsidiaries has received any charge, complaint, claim, demand or notice alleging any interference, infringement, misappropriation or violation with or of any intellectual property rights of a third party (including any
claims that the Company or any of its Subsidiaries must license or refrain from using any intellectual property rights of a third party). To the knowledge of the Company, neither the Company nor any of its Subsidiaries has interfered with, infringed
upon, misappropriated or otherwise come into conflict with any intellectual property rights of third parties and no third party has interfered with, infringed upon, misappropriated or otherwise come into conflict with any intellectual property
rights of the Company or any of its Subsidiaries. For purposes of this Agreement,
Intellectual Property
means trademarks, service marks, brand names, internet domain names, logos, symbols, certification marks, trade dress and
other indications of origin, the goodwill associated with the foregoing and registrations in any jurisdiction of, and applications in any jurisdiction to register, the foregoing, including any extension, modification or renewal of any such
registration or application; patents, applications for patents (including divisions, continuations, continuations in part and renewal applications), all improvements thereto, and any renewals, extensions or reissues thereof, in any jurisdiction;
trade secrets; copyrights and registrations or applications for registration of copyrights in any jurisdiction, and any renewals or extensions thereof.
3.18 Labor Matters
. The Company and its Subsidiaries are in material compliance with all applicable Laws respecting employment,
retention of independent contractors, employment practices, terms and conditions of employment, and wages and hours. There are no complaints, lawsuits, arbitrations, administrative proceedings, or other proceedings of any nature pending or, to the
knowledge of the Company, threatened against the Company or any of its Subsidiaries brought by or on behalf of any applicant for employment, any current or former employee, any person alleging to be a current or former employee, any class of the
foregoing, or any Governmental Entity, relating to any such Law, or alleging breach of any express or implied contract of employment, wrongful termination of employment, or alleging any other discriminatory, wrongful or tortious conduct in
connection with the employment relationship. Neither the Company nor any of its Subsidiaries is or has ever been a party to, or is or has ever been bound by, any collective bargaining agreement, contract or other agreement or understanding with a
labor union or labor organization with respect to its employees, nor is the Company or any of its Subsidiaries the subject of any proceeding asserting that it has committed an unfair labor practice or seeking to compel it or any such Subsidiary to
bargain with any labor organization as to wages and conditions of employment nor, to the knowledge of the Company, has any such proceeding been threatened, nor is there any strike, other labor dispute or organizational effort involving the Company
or any of its Subsidiaries pending or, to the knowledge of the Company, threatened.
A-17
3.19 Employee Benefit Plans
.
(a) Section 3.19(a) of the Company Disclosure Schedule lists all Company Employee Plans. For purposes of this Agreement,
Company
Employee Plans
means all employee benefit plans (as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (
ERISA
)), whether or not subject to ERISA, and all bonus, stock option,
stock purchase, restricted stock, stock unit, incentive, deferred compensation, retiree medical or life insurance, supplemental retirement, severance or other benefit plans, programs or arrangements, and all retention, bonus, employment,
termination, severance plans, programs or arrangements or other contracts or agreements to or with respect to which the Company or any Subsidiary or any trade or business of the Company or any of its Subsidiaries, whether or not incorporated, all of
which together with the Company would be deemed a single employer within the meaning of Section 4001 of ERISA (a
Company ERISA Affiliate
), is a party or has any current or future obligation or that are maintained,
contributed to or sponsored by the Company or any of its Subsidiaries or any Company ERISA Affiliate for the benefit of any current or former employee, officer, director or independent contractor of the Company or any of its Subsidiaries or any
Company ERISA Affiliate. There has been no announcement or commitment by the Company or any of its Subsidiaries to create an additional Company Employee Plan, or to amend any Company Employee Plan, except for amendments required by applicable Law or
which do not materially increase the cost of such Company Employee Plan.
(b) The Company has previously delivered or made available to
Parent true and complete copies of each Company Employee Plan along with, where applicable, copies of and the following related documents, to the extent applicable: (i) the most recent copy of any summary plan descriptions, amendments,
modifications or material supplements to any such Company Employee Plan, (ii) the annual report (Form 5500), if any, filed with the IRS for the last two (2) plan years, (iii) the most recently received IRS determination letter, if
any, relating to a Company Employee Plan, and (iv) the most recently prepared actuarial report for each Company Employee Plan (if applicable) for each of the last two (2) years.
(c) Each Company Employee Plan has been established, operated and administered in all material respects in accordance with its terms and the
requirements of all applicable laws, including ERISA and the IRC. Since January 1, 2014, neither Company nor any of its Subsidiaries has taken any action to take corrective action or make a filing under any voluntary correction program of the
IRS, Department of Labor or any other Governmental Entity with respect to any Company Employee Plan, and neither the Company nor any of its Subsidiaries has any knowledge of any plan defect that would qualify for correction under any such program.
(d) There is no pending or, to the knowledge of the Company, threatened litigation, administrative action or proceeding relating to any
Company Employee Plan. All of the Company Employee Plans comply in all material respects with all applicable requirements of ERISA, the IRC and other applicable laws. There has occurred no prohibited transaction (as defined in
Section 406 of ERISA or Section 4975 of the IRC) with respect to the Company Employee Plans that is likely to result in the imposition of any penalties or Taxes upon the Company or any of its Subsidiaries under Section 502(i) of ERISA
or Section 4975 of the IRC.
(e) The Company has never sponsored, implemented or participated in any defined benefit pension plan or
multiple-employer plan that is subject to Title IV of ERISA.
(f) Section 3.19(f) of the Company Disclosure Schedule identifies each
Company Employee Plan that is an employee pension benefit plan (as defined in Section 3(2) of ERISA) and which is intended to be qualified under Section 401(a) of the IRC (a
Company Qualified Plan
). Each
Company Qualified Plan has received a favorable determination letter or a prototype plan or volume submitter plan advisory opinion letter from the IRS for the most recent applicable remedial amendment cycle, and, to the knowledge of the Company,
there are no circumstances likely to result in revocation of any such letter. No Company Qualified Plan is an employee stock ownership plan (as defined in Section 4975(e)(7) of the IRC).
A-18
(g) Each Company Employee Plan that is a nonqualified deferred compensation plan (as
defined in Section 409A(d)(1) of the IRC) and any award thereunder, in each case that is subject to Section 409A of the IRC, has (i) since January 1, 2005, been maintained and operated, in all material respects, in good faith
compliance with Section 409A of the IRC and IRS Notice 2005-1 and (ii) since January 1, 2009, been, in all material respects, in documentary and operational compliance with Section 409A of the IRC. Each Company Employee Plan
which is an employee pension benefit plan within the meaning of Section 3(2) of ERISA that is not qualified under Section 401(a) or 403(a) of the IRC is exempt from Parts 2, 3, and 4 of Title I of ERISA as an unfunded plan that
is maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees, pursuant to Sections 201(2), 301(a)(3), and 401(a)(1) of ERISA and the Company has filed a top
hat registration letter with the Department of Labor for each such plan.
(h) Neither the Company nor any of its Subsidiaries has
any obligations for post-retirement or post-employment benefits under any Company Employee Plan that cannot be amended or terminated upon sixty (60) days notice or less without incurring any liability thereunder, except for coverage
required by Part 6 of Title I of ERISA or Section 4980B of the IRC, or similar state laws, the cost of which is borne by the insured individuals.
(i) All contributions required to be made with respect to any Company Employee Plan by applicable Law or by any plan document or other
contractual undertaking, and all premiums due or payable with respect to insurance policies funding any Company Employee Plan, for any period through the date hereof have been timely made or paid in full, or to the extent not required to be made or
paid on or before the date hereof, have been fully reflected in the financial statements of the Company. Each Company Employee Plan that is an employee welfare benefit plan under Section 3(1) of ERISA either (A) is funded through an
insurance company contract and is not a welfare benefit fund within the meaning of Section 419 of the IRC or (B) is unfunded.
(j) Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (either alone or in
conjunction with any other event) result in, cause or accelerate the vesting, exercisability or delivery of, increase in the amount or value of, any payment, right or other benefit or result in any forgiveness of indebtedness to, any employee,
officer, director or individual independent contractor of the Company or any of its Subsidiaries, or result in any funding of or limitation on the right of the Company or any of its Subsidiaries to amend, merge, terminate or receive a reversion of
assets from any Company Employee Plan or related trust. Without limiting the generality of the foregoing, no amount paid or payable (whether in cash, in property, or in the form of benefits) by the Company or any of its Subsidiaries in connection
with the transactions contemplated hereby (either solely as a result thereof or as a result of such transactions in conjunction with any other event) will be an excess parachute payment within the meaning of Section 280G of the IRC.
(k) No Company Employee Plan provides for the gross-up or reimbursement of Taxes under Section 409A or 4999 of the IRC, or
otherwise. The Company has made available to Parent preliminary copies of Section 280G calculations (whether or not final), which to the best of its knowledge are true, correct and complete, with respect to any disqualified individual who is a
named executive officer of the Company as defined in Item 402 of Regulation S-K promulgated under the Securities Act in connection with the transactions contemplated hereby.
3.20 Real Property
. The Company or a Company Subsidiary (a) has good and marketable title to all the real property reflected in
the latest audited balance sheet included in the Company SEC Reports as being owned by the Company or a Company Subsidiary or acquired after the date thereof (except properties sold or otherwise disposed of since the date thereof in the ordinary
course of business) (the
Company Owned Properties
), free and clear of all material Liens, except (i) statutory Liens securing payments not yet due, (ii) Liens for real property Taxes not yet due and payable,
(iii) easements, rights of way, and other similar encumbrances that do not materially affect the value or use of the properties or assets subject thereto or affected thereby or otherwise
A-19
materially impair business operations at such properties and (iv) such imperfections or irregularities of title or Liens as do not materially affect the value or use of the properties or
assets subject thereto or affected thereby or otherwise materially impair business operations at such properties (collectively,
Permitted Encumbrances
), and (b) is the lessee of all leasehold estates reflected in the latest
audited financial statements included in such Company SEC Reports or acquired after the date thereof (except for leases that have expired by their terms since the date thereof) (the
Company Leased Properties
and, collectively with
the Company Owned Properties, the
Company Real Property
), free and clear of all Liens of any nature whatsoever, except for Permitted Encumbrances, 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 Companys knowledge, the lessor. There are no pending or, to the knowledge of Company, threatened condemnation proceedings against the Company Real Property. Each lease
pursuant to which the Company or any of its Subsidiaries as lessee, leases any Company Leased Property is valid and in full force and effect and neither the Company nor any of its Subsidiaries, nor, to the Companys knowledge, any other party
to any such lease, is in default or in violation of any material provisions of any such lease. To the knowledge of the Company, none of the buildings, structures or other improvements located on any Company Real Property encroaches upon or over any
adjoining parcel or real estate or any easement or right-of-way.
3.21 Fairness Opinion
. The Board of Directors of the Company 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 subject to the
assumptions and qualifications set forth therein, the Exchange Ratio (as set forth in
Section 1.5(a)(iii)
) in the First-Step Merger is fair, from a financial point of view, to the holders of Company Common Stock. Such opinion has not
been amended or rescinded in any material respect as of the date of this Agreement.
3.22 Fees
. Other than for financial advisory
services performed for the Company by Keefe, Bruyette & Woods, Inc., pursuant to a letter agreement, a true and complete copy of which has previously been provided to Parent, neither the Company nor any of its Subsidiaries, nor any of their
respective officers, directors, employees or agents, has employed any broker or finder or incurred any liability for any financial advisory fees, brokerage fees, commissions or finders fees, and no broker or finder has acted directly or
indirectly for the Company or any of its Subsidiaries in connection with this Agreement or the transactions contemplated hereby.
3.23
Environmental Matters
. Except as would not reasonably be likely to have, individually or in the aggregate, a Material Adverse Effect on the Company, the Company and its Subsidiaries are in compliance, and have complied, with any federal, state
or local Law relating to: (i) the protection or restoration of the environment or natural resources, (ii) the handling, storage, use, presence, disposal, release or threatened release of, or exposure to, any hazardous substance, or
(iii) noise, odor, wetlands, indoor air, pollution, contamination or any injury to persons or property from exposure to any hazardous substance (collectively,
Environmental Laws
). There are no legal, administrative, arbitral
or other proceedings, claims, actions, or investigations of any nature pending or, to the knowledge of the Company, threatened, before any court, governmental agency or board or other forum against the Company or any of its Subsidiaries seeking to
impose, or that could reasonably be expected to result in the imposition, on the Company or any of its Subsidiaries of any liability or obligation arising under any Environmental Law and, to the knowledge of the Company, there is no reasonable basis
for any such proceeding, claim, action or investigation. Neither the Company nor any of its Subsidiaries has received any written notice, demand letter, executive or administrative order, directive or request for information from any Governmental
Entity or any third party indicating that it may be in violation of, or liable under, any Environmental Law.
3.24 Loan Matters
.
(a) Neither the Company nor any of its Subsidiaries is a party to any written or oral (i) loan, loan agreement, note or borrowing
arrangement (including leases, credit enhancements, commitments, guarantees and interest-bearing assets) (collectively,
Loans
) in which the Company or any Subsidiary is a creditor which as of
A-20
March 31, 2017, had an outstanding balance of $250,000 or more and under the terms of which the obligor was, as of March 31, 2017, over 90 days or more delinquent in payment of
principal or interest, or (ii) Loans with any director, executive officer or five percent (5%) or greater stockholder of the Company or any of its Subsidiaries, or to the knowledge of the Company, any affiliate of any of the foregoing.
Section 3.24(a) of the Company Disclosure Schedule sets forth a true, correct and complete list of (x) all of the Loans of the Company and its Subsidiaries that, as of March 31, 2017, were classified by the Company as Other
Loans Specially Mentioned, Special Mention, Substandard, Doubtful, Loss, Classified, Criticized, Credit Risk Assets, Concerned Loans, Watch
List or words of similar import, together with the principal amount of and accrued and unpaid interest on each such Loan and the aggregate principal amount of and accrued and unpaid interest on such Loans as of March 31, 2017 and
(y) each asset of the Company or any of its Subsidiaries that, as of March 31, 2017, is classified as Other Real Estate Owned and the book value thereof.
(b) Each Loan of Company and its Subsidiaries (i) is evidenced by notes, agreements or other evidences of indebtedness that are true,
genuine and what they purport to be, (ii) to the extent carried on the books and records of the Company and its Subsidiaries as secured Loans, has been secured by valid charges, mortgages, pledges, security interests, restrictions, claims,
Liens or encumbrances, as applicable, which have been perfected and (iii) is the legal, valid and binding obligation of the obligor named therein, enforceable in accordance with its terms, subject to the Enforceability Exceptions.
(c) Each outstanding Loan of the Company and its Subsidiaries (including Loans held for resale to investors) was solicited and originated, and
is and has been administered and, where applicable, serviced, and the relevant Loan files are being maintained, in all material respects in accordance with the relevant notes or other credit or security documents, the written underwriting standards
of the Company and its Subsidiaries (and, in the case of Loans held for resale to investors, the underwriting standards, if any, of the applicable investors) and with all applicable federal, state and local laws, regulations and rules.
(d) None of the agreements pursuant to which the Company or any of its Subsidiaries has sold Loans or pools of Loans or participations in
Loans or pools of Loans contains any obligation to repurchase such Loans or interests therein solely on account of a payment default by the obligor on any such Loan.
(e) There are no outstanding Loans made by the Company or any of its Subsidiaries to any executive officer or other
insider (as each such term is defined in Regulation O promulgated by the Federal Reserve Board) of the Company or its Subsidiaries, other than Loans that are subject to and that were made and continue to be in compliance with Regulation
O or that are exempt therefrom.
(f) Neither the Company nor any of its Subsidiaries is now nor has it ever been since January 1,
2014, subject to any fine, suspension, settlement or other contract or other administrative agreement or sanction by, or any reduction in any loan purchase commitment from, any Governmental Entity or Regulatory Agency relating to the origination,
sale or servicing of mortgage or consumer Loans.
(g) Since January 1, 2014, the Company and each of its Subsidiaries has complied
with, and all documentation in connection with the origination, processing, underwriting and credit approval of any Loan originated by the Company or any of its Subsidiaries satisfied: (1) all applicable Laws with respect to the origination,
insuring, purchase, sale, pooling, servicing, subservicing, loan modification, loss mitigation or filing of claims in connection with such Loans, including, to the extent applicable, all Laws relating to real estate settlement procedures, consumer
credit protection, truth in lending Laws, usury limitations, fair housing, transfers of servicing, collection practices, equal credit opportunity and adjustable rate mortgages, in each case applicable as of the time of such origination, processing,
underwriting or credit approval; (2) the responsibilities and obligations relating to such Loans set forth in any contract between the Company or any of its Subsidiaries, on the one hand, and any Governmental Entity, loan investor or insurer,
on the other hand; (3) the applicable rules, regulations, guidelines, handbooks and other requirements of any Governmental Entity, loan investor or insurer, in each case applicable as of the time of such origination, processing, underwriting or
credit approval;
A-21
and (4) the terms and provisions of any mortgage or other collateral documents and other loan documents with respect to each such mortgage Loan; in each case applicable as of the time of
such origination, processing, underwriting or credit approval.
(h) Since January 1, 2014, the Company and each of its
Subsidiaries have not engaged in, and, to the knowledge of the Company, no third-party vendors (including outside law firms and other third-party foreclosure services providers used by the Company or by any of its Subsidiaries, as applicable) has
engaged in, directly or indirectly, (1) any foreclosures in violation of any applicable Law, including but not limited to the Servicemembers Civil Relief Act, or in breach of any binding Company Regulatory Agreement or (2) the conduct
referred to as robo-signing or any other similar conduct of approving or notarizing documents relating to Loans that do not comply with any applicable Law.
(i) Since January 1, 2014, the Company has not foreclosed upon, managed or taken a deed or title to, any real estate (other than
single-family residential properties) without complying with all applicable FDIC environmental due diligence standards (including FDIC Bulletin FIL-14-93, and update FIL-98-2006) or foreclosed upon, managed or taken a deed or title to, any such real
estate if the environmental assessment indicates the liabilities under Environmental Laws are likely in excess of the assets value.
3.25 Anti-takeover Provisions Inapplicable
. No moratorium, fair price, business combination,
control share acquisition, interested stockholder, affiliate transactions, or similar provision of any state anti-takeover Law (any such laws,
Takeover Statutes
) is applicable to this Agreement,
the Integrated Mergers or any of the other transactions contemplated by this Agreement under the VSCA or federal law.
3.26 Related
Party Transactions
. Except as disclosed in Section 3.26 of the Company Disclosure Schedule, there are no transactions or series of related transactions, agreements, arrangements or understandings, nor are there any currently proposed
transactions or series of related transactions, between the Company or any of its Subsidiaries, on the one hand, and any current director or executive officer (as defined in Rule 3b-7 under the Exchange Act) of the Company or any of its
Subsidiaries or any person who beneficially owns (as defined in Rules 13d-3 and 13d-5 of the Exchange Act) five percent (5%) or more of the outstanding Company Common Stock (or any of such persons immediate family members or affiliates)
(other than Subsidiaries of the Company) on the other hand, except those of a type available to employees of the Company or its Subsidiaries generally.
3.27 Insurance
. The Company and its Subsidiaries are insured with reputable insurers against such risks and in such amounts as the
management of the Company reasonably has determined to be prudent and consistent with industry practice, and the Company and its Subsidiaries are in compliance in all material respects with their insurance policies and are not in default under any
such policy. Each such policy is outstanding and in full force and effect and, except for policies insuring against potential liabilities of officers, directors and employees of the Company and its Subsidiaries, the Company or the relevant
Subsidiary thereof is the sole beneficiary of such policies, and all premiums and other payments due under any such policy have been paid, and all claims thereunder have been filed in due and timely fashion.
3.28 Investment Securities; Derivatives
.
(a) Except for restrictions that exist for securities that are classified as held to maturity, none of the investment securities
held by the Company or any of its Subsidiaries is subject to any restriction (contractual or statutory) that would materially impair the ability of the entity holding such investment freely to dispose of such investment at any time. Neither the
Company nor any of its Subsidiaries owns securities that (A) are referred to generically as structured notes, high risk mortgage derivatives, capped floating rate notes or capped floating rate mortgage
derivatives or (B) are likely to have changes in value as a result of interest or exchange rate changes that significantly exceed normal changes in value attributable to interest or exchange rate changes.
(b) All interest rate swaps, caps, floors, option agreements, futures and forward contracts and other similar derivative transactions and risk
management arrangements, whether entered into for the account of the
A-22
Company, any of its Subsidiaries or for the account of a customer of the Company or one of its Subsidiaries, were entered into in the ordinary course of business and in accordance with applicable
rules, regulations and policies of any Regulatory Agency and with counterparties believed to be financially responsible at the time and are legal, valid and binding obligations of the Company or one of its Subsidiaries enforceable in accordance with
their terms (except as may be limited by the Enforceability Exceptions), and are in full force and effect. The Company and each of its Subsidiaries have duly performed in all material respects all of their material obligations thereunder to the
extent that such obligations to perform have accrued, and, to the Companys knowledge, there are no material breaches, violations or defaults or allegations or assertions of such by any party thereunder.
3.29 Corporate Documents and Records
. The Company has previously provided a complete and correct copy of the Articles of Incorporation,
bylaws and similar organizational documents of the Company and each of the Companys Subsidiaries, as in effect as of the date of this Agreement. Neither the Company nor any of the Companys Subsidiaries is in violation of its Articles of
Incorporation, bylaws or similar organizational documents. The minute books of the Company and each of the Companys Subsidiaries constitute a complete and correct record of all actions taken by their respective boards of directors (and each
committee thereof) and their stockholders.
3.30 Company Information
. The information regarding the Company and its Subsidiaries to
be supplied by Company to Parent for inclusion in the Form S-4, any filings or approvals under applicable state securities laws, or any filing pursuant to Rule 165 or Rule 425 under the Securities Act or Rule 14a-12 under the Exchange Act will not
contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. The Joint
Proxy Statement (except for such portions thereof that relate only to Parent or any of its Subsidiaries) will comply as to form in all material respects with the provisions of the Exchange Act and the rules and regulations thereunder. The
information supplied, or to be supplied, by the Company for inclusion in applications to Governmental Entities to obtain all permits, consents, approvals and authorizations necessary or advisable to consummate the transactions contemplated by this
Agreement shall be accurate in all material respects.
3.31 Internal Controls
.
(a) The Company and its Subsidiaries have devised and maintain a system of internal accounting controls sufficient to provide reasonable
assurances regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP and to provide reasonable assurances that (i) transactions are executed in accordance with
managements general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain accountability for
assets, and (iii) access to assets is permitted only in accordance with managements general or specific authorization.
(b) The
Company (i) has implemented and maintains disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) to ensure that material information relating to the Company, including its Subsidiaries, is made known to the chief
executive officer and the chief financial officer of the Company by others within those entities as appropriate to allow timely decisions regarding required disclosures and to make the certifications required by the Exchange Act and Sections 302 and
906 of the Sarbanes-Oxley Act of 2002 (the
Sarbanes-Oxley Act
), and (y) has identified and disclosed, based on its most recent evaluation prior to the date hereof, to the Companys outside auditors and the audit
committee of the Companys Board of Directors (i) any significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) which are
reasonably likely to adversely affect the Companys ability to record, process, summarize and report financial information, and (ii) any fraud, whether or not material, that involves management or other employees who have a significant
role in the Companys internal controls over financial reporting. These disclosures were made in writing by management to
A-23
the Companys auditors and audit committee and a copy has previously been made available to Parent. To the knowledge of the Company, there is no reason to believe that the Companys
outside auditors and its chief executive officer and chief financial officer will not be able to give the certifications and attestations required pursuant to the rules and regulations adopted pursuant to Section 404 of the Sarbanes-Oxley Act,
without qualification, when next due.
(c) Since January 1, 2014, (i) neither the Company nor any of its Subsidiaries, nor, to
the knowledge of the Company, any director, officer, auditor, accountant or representative of the Company or any of its Subsidiaries, has received or otherwise had or obtained knowledge of any material complaint, allegation, assertion or claim,
whether written or, to the knowledge of the Company, oral, regarding the accounting or auditing practices, procedures, methodologies or methods (including with respect to loan loss reserves, write-downs, charge-offs and accruals) of the Company or
any of its Subsidiaries or their respective internal accounting controls, including any material complaint, allegation, assertion or claim that the Company or any of its Subsidiaries has engaged in questionable accounting or auditing practices, and
(ii) no attorney representing the Company or any of its Subsidiaries, whether or not employed by the Company or any of its Subsidiaries, has reported evidence of a material violation of securities laws, breach of fiduciary duty or similar
violation by the Company or any of its officers, directors, employees or agents to the Board of Directors of the Company or any committee thereof or to the knowledge of the Company, to any director or officer of the Company.
3.32 Data Privacy
. The Company and its Subsidiaries have in place commercially reasonable data protection and privacy policies and
procedures to protect, safeguard and maintain the confidentiality, integrity and security of (i) their information technology systems and (ii) all information, data and transactions stored or contained therein or transmitted thereby,
including personally identifiable information, financial information, and credit card data (as such information or terms are defined and/or regulated under applicable Laws, policies, agreements, and guidelines of any Governmental Entity or
Regulatory Agency) (the
Company Data
), against any unauthorized or improper use, access, transmittal, interruption, modification or corruption, except where the failure to have in place such policies and procedures has not had and
would not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company. The Company and its Subsidiaries are in compliance with applicable federal and state confidentiality and data security Laws,
policies, agreements, and guidelines of any Governmental Entity or Regulatory Agency including, without limitation, Title V of the Gramm-Leach-Bliley Act of 1999 and regulations promulgated thereunder, as well as the provisions of the information
security program adopted by the Company pursuant to 12 C.F.R. Part 364, and all industry standards applicable to the Company Data, including card association rules and the payment card industry data security standards, except where such failure to
be in compliance has not had and would not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company. Except as has not had and would not, either individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on the Company, there currently are not any, and since January 1, 2014, have not been any, pending or, to the knowledge of the Company, threatened, claims or written complaints with respect to
unauthorized access to or breaches of the security of (i) any of the Companys or its Subsidiaries information technology systems or (ii) Company Data or any other such information collected, maintained or stored by or on behalf
of the Company and its Subsidiaries (or any unlawful acquisition, use, loss, destruction, compromise or disclosure thereof).
3.33 Tax
Treatment of the Integrated Mergers
. The Company has not taken any action, and has no knowledge of any fact or circumstance relating to it, that would prevent the transactions contemplated by this Agreement from qualifying as a reorganization
under Section 368(a) of the IRC.
ARTICLE IV
R
EPRESENTATIONS
AND
W
ARRANTIES
OF
P
ARENT
AND
M
ERGER
S
UB
Except (i) (i) as disclosed in Parent SEC Reports filed after January 1, 2015
and prior to the date hereof (but excluding any risk factor disclosures contained under the heading Risk Factors, any disclosure of risks
A-24
included in any forward-looking statements disclaimer or any other statements that are similarly non-specific or cautionary, predictive or forward-looking in nature) and (ii) as
disclosed in disclosure schedule delivered by Parent to the Company prior to the execution of this Agreement (the
Parent Disclosure Schedule
) (which schedule sets forth, among other things, facts, circumstances and events 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 of the representations and warranties contained in this Article IV, or to one
or more of Parents covenants contained in Articles V or VI (and making specific reference to the Section of this Agreement to which they relate);
provided
, that (x) no such item is required to be set forth as an exception to a
representation or warranty if its absence would not result in the related representation or warranty being deemed untrue or incorrect, (y) the mere inclusion of an item in the Parent Disclosure Schedule as an exception to a representation or
warranty shall not be deemed an admission by Parent that such item represents a material exception or fact, circumstance or event or that such item is reasonably likely to result in a Material Adverse Effect and (z) disclosure in any paragraph
of the Parent Disclosure Schedule shall apply only to the indicated Section of this Agreement except to the extent that it is reasonably clear on the face of such disclosure that it is relevant to another paragraph of the Parent Disclosure Schedule
or another Section of this Agreement), Parent and Merger Sub, jointly and severally, represent and warrant to the Company as follows:
4.1 Organization and Qualification
. Parent is a corporation duly organized, validly existing and in good standing under the laws of the
State of Maryland, is registered with the Federal Reserve as a bank holding company under the BHC Act and has not elected to be treated as a financial holding company under the BHC Act. Parent has all requisite corporate power and authority to own,
lease and operate its properties and to conduct the business currently being conducted by it. Parent is duly qualified or licensed as a foreign corporation to transact business and is in good standing in each jurisdiction in which the character of
the properties owned or leased by it or the nature of the business conducted by it makes such qualification or licensing necessary, except where the failure to be so qualified or licensed and in good standing would not, either individually or in the
aggregate, have a Material Adverse Effect on Parent. Parent engages only in activities (and holds properties only of the types) permitted to bank holding companies by the BHC Act and the rules and regulations promulgated thereunder.
4.2 Subsidiaries
.
(a)
Each of Parents Subsidiaries (including, without limitation, Merger Sub) is duly organized and validly existing under the laws of its jurisdiction of incorporation or formation, has all requisite power and authority to own, lease and operate
its properties and to conduct the business currently being conducted by it and is duly qualified or licensed as a foreign corporation to transact business and is in good standing in each jurisdiction in which the character of the properties owned or
leased by it or the nature of the business conducted by it makes such qualification or licensing necessary, except where the failure to be so qualified or licensed and in good standing would not, individually or in the aggregate, have a Material
Adverse Effect on Parent. Merger Sub was formed solely for the purpose of engaging in the transactions contemplated by this Agreement, and since the date of its formation has not engaged in any activates or conducted its operations other than in
connection with or as contemplated by this Agreement.
(b) The outstanding shares of capital stock of each Subsidiary have been validly
authorized and are validly issued, fully paid and nonassessable. No shares of capital stock of any Subsidiary of Parent are or may be required to be issued by virtue of any options, warrants or other rights, no securities exist that are convertible
into or exchangeable for shares of such capital stock or any other debt or equity security of any Subsidiary, and there are no contracts, commitments, agreements or understandings of any kind for the issuance of additional shares of capital stock or
other debt or equity security of any Subsidiary or options, warrants or other rights with respect to such securities.
(c) Sandy Spring
Bank is a Maryland-chartered trust company with commercial bank powers. No Subsidiary of Parent other than Sandy Spring Bank is an insured depository institution as defined in the Federal
A-25
Deposit Insurance Act, as amended, and the applicable regulations thereunder. Sandy Spring Banks deposits are insured by the FDIC through the Deposit Insurance Fund to the fullest extent
permitted by law.
4.3 Capital Structure
.
(a) The authorized capital stock of Parent consists of 50,000,000 shares of capital stock.
(b) As of May 10, 2017, no shares of capital stock or other voting securities of Parent are issued, reserved for issuance or outstanding,
other than:
(i) 24,150,938 shares of Parent Common Stock, all of which are validly issued, fully paid and nonassessable and were issued
in full compliance with all applicable laws and not in violation of any preemptive rights, which number includes 175,395 shares of Parent Common Stock granted in respect of outstanding awards of restricted Parent common stock (
Parent
Restricted Stock Awards
); and
(ii) 98,216 shares of Parent Common Stock reserved for issuance upon the exercise of outstanding
stock options to purchase shares of Parent Common Stock (
Parent Stock Options
); and
(iii) 15,646 shares of Parent
Common Stock reserved for issuance upon the vesting of outstanding restricted stock performance awards.
(c) Since May 10, 2017,
Parent has not (i) issued, repurchased, redeemed or acquired any Parent Common Stock, other shares of its capital stock, or other voting securities or securities convertible or exchangeable into, or exercisable for, Parent Common Stock, or any
options, warrants, or other rights of any kind to acquire Parent Common Stock, other than the issuance, repurchase, redemption or acquisition of shares of Parent Common Stock in connection with the exercise, vesting or settlement of Parent Stock
Options or Parent Restricted Stock Awards that were outstanding on May 10, 2017 in accordance with their terms (without amendment or waiver since May 10, 2017) or (ii) issued or awarded any options, restricted shares or any other
equity-based awards under any of the Parent Stock Plans. As used herein, the
Parent Stock Plans
shall mean all employee and director equity incentive plans of Parent as in effect as of the date of this Agreement.
(d) No bonds, debentures, notes or other indebtedness having the right to vote on any matters on which stockholders of Parent may vote are
issued or outstanding.
(e) Other than Parent Equity Awards issued prior to the date of this Agreement, as of the date of this Agreement,
neither Parent nor any of its Subsidiaries has or is bound by any outstanding subscriptions, options, warrants, calls, rights, convertible securities, commitments or agreements of any character obligating Parent or any of its Subsidiaries to issue,
deliver or sell, or cause to be issued, delivered or sold, any additional shares of capital stock of Parent (including any rights plan or agreement) or obligating Parent or any of its Subsidiaries to grant, extend or enter into any such
subscription, option, warrant, call, right, convertible security, commitment or agreement.
(f) There are no voting trusts, stockholder
agreements, proxies or other agreements in effect pursuant to which Parent or any of its Subsidiaries has a contractual or other obligation with respect to the voting or transfer of Parent Common Stock or other equity interests of Parent. Parent
does not have in effect a poison pill or similar stockholder rights plan (other than any such plan as to which the rights granted thereunder have expired).
4.4 Authority
.
(a)
Parent has all requisite corporate power and authority to enter into this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated by this Agreement. The execution and delivery of this Agreement and the
consummation of the transactions contemplated by this Agreement have been
A-26
duly authorized by all necessary corporate actions on the part of Parents Board of Directors. The Board of Directors of Parent has determined that the Integrated Mergers, on the terms and
conditions set forth in this Agreement, are in the best interests of Parent and its stockholders and has directed that the issuance of shares of Parent Common Stock in connection with the First-Step Merger be submitted to Parents stockholders
for adoption at a meeting of such stockholders and has adopted a resolution to the foregoing effect. Except for the affirmative vote of a majority of the votes cast by the holders of the shares of Parent Common Stock at the Parent Meeting to approve
the issuance of shares of Parent Common Stock in connection with the First-Step Merger (the
Requisite Parent Vote
), no other corporate proceedings on the part of Parent are necessary to authorize this Agreement or to consummate
the transactions contemplated by this Agreement. This Agreement has been duly and validly executed and delivered by Parent and constitutes a valid and binding obligation of Parent, enforceable against Parent in accordance with its terms, subject to
the Enforceability Exceptions. The shares of Parent Common Stock to be issued in the First-Step Merger have been validly authorized (subject to the attainment of the Requisite Parent Vote), when issued, will be validly issued, fully paid and
nonassessable, and no current or past stockholder of Parent will have any preemptive right or similar rights in respect thereof.
(b)
Merger Sub has all requisite corporate power and authority to enter into this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated by this Agreement. The execution and delivery of this Agreement and the
consummation of the transactions contemplated by this Agreement have been duly and validly approved by the Board of Directors and sole stockholder of Merger Sub, and no other proceedings on the part of Merger Sub are necessary to authorize the
execution and delivery of this Agreement by Merger Sub and the consummation of the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by Merger Sub and constitutes a valid and binding obligation of
Merger Sub, enforceable against Merger Sub in accordance with its terms, subject to the Enforceability Exceptions.
4.5 No
Violations
. The execution, delivery and performance of this Agreement by Parent and Merger Sub do not, and the consummation of the transactions contemplated by this Agreement will not, (i) assuming that the consents, approvals and filings
referred to in
Section 4.6
have been obtained and the applicable waiting periods have expired, violate any Law to which Parent or any of its Subsidiaries (or any of their respective properties) is subject, (ii) violate the Articles
of Incorporation or bylaws of Parent or Merger Sub or (iii) constitute a breach or violation of, or a default under (or an event which, with due notice or lapse of time or both, would constitute a default under), or result in the termination
of, accelerate the performance required by, or result in the creation of any Lien upon any of the properties or assets of Parent or any of its Subsidiaries under, any of the terms, conditions or provisions of any note, bond, indenture, deed of
trust, loan agreement or other agreement, instrument or obligation to which Parent or any of its Subsidiaries is a party, or to which any of their respective properties or assets may be subject, except (in the case of clause (iii) above) for
such breaches, violations, terminations, accelerations or creations which, either individually or in the aggregate, would not reasonably be likely to have a Material Adverse Effect on Parent.
4.6 Consents and Approvals
. Except for (i) the filing of applications, filings and notices, as applicable, with the Federal
Reserve under the BHC Act and approval of such applications, filings and notices, (ii) the filing of applications, filings and notices, as applicable, with the Federal Reserve in connection with the Bank Merger, including under the Bank Merger
Act, and approval of such applications, filings and notices, (iii) the filing of applications, filings and notices, as applicable, with the Maryland Office and the Virginia Bureau in connection with the Bank Merger and approval of such
applications, filings and notices, (iv) the filing with the SEC of the Joint Proxy Statement and the Form S-4 and declaration of effectiveness of the Form S-4, (v) other filings and reports as required pursuant to the Exchange Act,
(vi) the filing of Articles of Merger with the Virginia State Corporation Commission pursuant to the VSCA, (vii) such filings and approvals as are required to be made or
obtained under the securities or Blue Sky laws of
various states in connection with the issuance of the shares of Parent Common Stock pursuant to this Agreement and (viii) the filing with the Nasdaq Stock Market of a notification of the listing of the shares of Parent Common Stock to be issued
in the First-Step Merger, no consents or approvals of, or filings or registrations with, any Governmental Entity or any third party are required to be made or obtained in connection with the execution and delivery by Parent or Merger Sub of this
Agreement
A-27
or the consummation by Parent or Merger Sub of the Integrated Mergers and the other transactions contemplated by this Agreement, including the Bank Merger. As of the date hereof, Parent has
no knowledge of any reason pertaining to Parent why any of the approvals referred to in this
Section 4.6
should not be obtained without the imposition of any condition or requirement described in
Section
7.1(c)
.
4.7 Governmental Filings
. Parent and each of its Subsidiaries has timely filed all reports, schedules,
registration statements and other documents that it has been required to file since January 1, 2014 with the Regulatory Agencies and have paid all fees and assessments due and payable in connection therewith. As of their respective dates, each
of such filings complied in all material respects with all laws or regulations under which it was filed (or was amended so as to be in compliance promptly following discovery of such noncompliance).
4.8 Securities Filings
. Parent has timely filed with or furnished to the SEC all reports, schedules, registration statements,
definitive proxy statements and other documents that it has been required to file under the Securities Act or the Exchange Act since January 1, 2014 (collectively,
Parent SEC Reports
). An accurate and complete copy of each of
the Parent SEC Reports is publicly available. No such Parent Report, at the time filed or furnished (and, in the case of registration statements and proxy statements, on the dates of effectiveness and the dates of the relevant meetings,
respectively) contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they were made, not
misleading. As of their respective dates, all of the Parent SEC Reports complied in all material respects with the applicable requirements of the Securities Act or the Exchange Act, as the case may be, and the rules and regulations of the SEC
promulgated thereunder. No executive officer of Parent has failed in any respect to make the certifications required of him or her under Section 302 or 906 of the Sarbanes-Oxley Act. As of the date of this Agreement, there are no outstanding
comments from or material unresolved issues raised by the SEC with respect to any of the Parent SEC Reports.
4.9 Financial
Statements
. The financial statements of Parent and its Subsidiaries included (or incorporated by reference) in the Parent SEC Reports (including the related notes, where applicable) (i) have been prepared from, and are in accordance with,
the books and records of Parent and its Subsidiaries, (ii) fairly present in all material respects the consolidated results of operations, cash flows, changes in stockholders equity and consolidated financial position of Parent and its
Subsidiaries for the respective fiscal periods or as of the respective dates therein set forth (subject in the case of unaudited statements to year-end audit adjustments normal in nature and amount), (iii) complied, as of their respective dates
of filing with the SEC, in all material respects with applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto, and (iv) have been prepared in accordance with GAAP consistently applied
during the periods involved, except, in each case, as indicated in such statements or in the notes thereto. The books and records of Parent and its Subsidiaries have been, and are being, maintained in all material respects in accordance with GAAP
and any other legal and accounting requirements and reflect only actual transactions. Since January 1, 2014, no independent public accounting firm has resigned (or informed Parent that it intends to resign) or been dismissed as independent
public accountants of Parent as a result of or in connection with any disagreements with Parent on a matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure.
4.10 Undisclosed Liabilities
. Neither Parent nor any of its Subsidiaries has incurred any debt, liability or obligation of any nature
whatsoever (whether accrued, contingent, absolute or otherwise and whether due or to become due) other than liabilities reflected on or reserved against in the consolidated balance sheet of Parent as of March 31, 2017 included in its Quarterly
Report on Form 10-Q for the quarter ended March 31, 2017, except for (i) liabilities incurred since March 31, 2017 in the ordinary course of business consistent with past practice that, either alone or when combined with all similar
liabilities, have not had, and would not reasonably be expected to have, a Material Adverse Effect on Parent and (ii) liabilities incurred for legal, accounting, financial advising fees and out-of-pocket expenses in connection with the
transactions contemplated by this Agreement.
4.11 Absence of Certain Changes or Events
. Since December 31, 2016, Parent and
its Subsidiaries have conducted their respective businesses only in the ordinary and usual course of such businesses consistent with
A-28
their past practices and there has not been any event or occurrence that has had, or is reasonably expected to have, a Material Adverse Effect on Parent.
4.12 Legal Proceedings
. Except as would not reasonably be likely, either individually or in the aggregate, to have a Material Adverse
Effect on Parent, neither Parent nor any of its Subsidiaries is a party to any, and there are no pending or, to Parents knowledge, threatened, legal, administrative, arbitral or other proceedings, claims, actions or governmental or regulatory
investigations of any nature against Parent or any of its Subsidiaries or any of their current or former directors or executive officers acting in their capacity as such.
4.13 Absence of Regulatory Actions
. Neither Parent nor any of its Subsidiaries is subject to any cease-and-desist or other order or
enforcement action issued by, or is a party to any written agreement, consent agreement or memorandum of understanding with, or is a party to any commitment letter or similar undertaking to, or is subject to any order or directive by, or has been
ordered to pay any civil money penalty by, or has been since January 1, 2014, a recipient of any supervisory letter from, or since January 1, 2014, has adopted any policies, procedures or board resolutions at the request or suggestion of
any Governmental Entity, specific to Parent or its Subsidiaries, that, in each of any such cases, currently restricts in any material respect the conduct of its business or that in any material manner relates to its capital adequacy, its ability to
pay dividends, its credit or risk management policies, its management or its business (each, whether or not set forth in the Parent Disclosure Schedule, a
Parent Regulatory Agreement
), nor has Parent or any of its Subsidiaries
been advised in writing or, to Parents knowledge, orally, since January 1, 2014, by any Governmental Entity that it is considering issuing, initiating, ordering, or requesting any such Parent Regulatory Agreement. Except for examinations
of Parent and its Subsidiaries conducted by a Regulatory Agency in the ordinary course of business and pursuant to Parent Regulatory Agreements, no Regulatory Agency has initiated or has pending any proceeding or, to the knowledge of Parent,
investigation into the business or operations of Parent or any of its Subsidiaries since January 1, 2014. There is no claim, action, suit, proceeding, investigation or notice of violation (whether civil, criminal or administrative) pending or,
to the knowledge of Parent, threatened against any officer or director of Parent or any of its Subsidiaries in connection with the performance of his or her duties as an officer or director of Parent or any of its Subsidiaries.
4.14 Compliance with Laws
.
(a) Parent and each of its Subsidiaries hold, and have at all times since January 1, 2014 held, all licenses, franchises, permits and
authorizations necessary for the lawful conduct of their respective businesses and ownership of their respective properties, rights and assets under and pursuant to each (and have paid all fees and assessments due and payable in connection
therewith), and, to the knowledge of Parent, no suspension or cancellation of any such necessary license, franchise, permit or authorization is threatened. Parent and each of its Subsidiaries have since January 1, 2014 complied in all material
respects with and are not in material default or violation under any Law applicable to Parent or any of its Subsidiaries, including (to the extent applicable to Parent or its Subsidiaries), all laws related to data protection or privacy, the USA
PATRIOT Act, the Equal Credit Opportunity Act and Regulation B, the Fair Housing Act, the CRA, the 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, any regulations promulgated by the Consumer Financial Protection Bureau, the Foreign Corrupt Practices 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, the Sarbanes-Oxley Act, and all agency requirements relating to the origination, sale and servicing of mortgage and consumer
loans. Neither Parent nor any of its Subsidiaries has been given notice or been charged with any violation of, any Law which, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect on Parent.
A-29
(b) Sandy Spring Bank has received a rating of Satisfactory or better in its most
recent examination or interim review with respect to the CRA. Parent does not have knowledge of any facts or circumstances that would cause Sandy Spring Bank or any other Subsidiary of Parent to be deemed not to be in satisfactory compliance in any
material respect with the CRA, and the regulations promulgated thereunder, or to be assigned a rating for CRA purposes by federal bank regulators of lower than Satisfactory. To the knowledge of Parent, since January 1, 2014, no
non-public customer information has been disclosed to or accessed by an unauthorized third party in a manner which would cause either Parent or any of its Subsidiaries to undertake any remedial action. The Board of Directors of Sandy Spring Bank (or
where appropriate of any other Subsidiary of Parent) has adopted, and Sandy Spring Bank (or such other Subsidiary of Parent) has implemented, an anti-money laundering program that contains adequate and appropriate customer identification
verification procedures that comply with Section 326 of the USA PATRIOT Act and such anti-money laundering program meets the requirements in all material respects of Section 352 of the USA PATRIOT Act and the regulations thereunder, and
Sandy Spring Bank (or such other Subsidiary of Parent) has complied in all material respects with any requirements to file reports and other necessary documents as required by the USA PATRIOT Act and the regulations thereunder.
4.15 Taxes
.
(a) Each of
Parent and its Subsidiaries has duly and timely filed (taking into account all applicable extensions) all Tax Returns in all jurisdictions in which Tax Returns are required to be filed by it, and all such Tax Returns are true, correct, and complete
in all material respects. Neither Parent nor any of its Subsidiaries is the beneficiary of any extension of time within which to file any material Tax Return. Neither Parent nor any of its Subsidiaries has granted any extension or waiver of the
limitation period applicable to any material Tax that remains in effect.
(b) All Taxes of Parent and its Subsidiaries (whether or not
shown on any Tax Returns) that are due have been fully and timely paid or adequate reserves therefor have been made on the financial statements of Parent and its Subsidiaries included (or incorporated by reference) in the Parent SEC Reports
(including the related notes, where applicable).
(c) The federal income Tax Returns of Parent and its Subsidiaries for all years up to
and including 2013 have been examined by the IRS or are Tax Returns with respect to which the applicable period for assessment under applicable law, after giving effect to extensions or waivers, has expired. No deficiency with respect to a material
amount of Taxes has been proposed, asserted or assessed against Parent or any of its Subsidiaries. There are no pending or threatened in writing disputes, claims, audits, examinations, investigations or other proceedings regarding any material Tax
of Parent and its Subsidiaries or the assets of Parent and its Subsidiaries for which adequate reserves have not been established. No claim has been made in writing by any Governmental Entity in a jurisdiction where Parent or any of its Subsidiaries
does not file Tax Returns that Parent or such Subsidiary is or may be subject to taxation by that jurisdiction.
(d) Parent has made
available to the Company true, correct, and complete copies of any private letter ruling requests, closing agreements or gain recognition agreements with respect to Taxes requested or executed by Parent or any of its Subsidiaries.
(e) There are no Liens for material Taxes (except Taxes not yet due and payable) on any of the assets of Parent or any of its Subsidiaries.
(f) Neither Parent nor any of its Subsidiaries is a party to or is bound by any Tax sharing, allocation or indemnification agreement or
arrangement (other than such an agreement or arrangement exclusively between or among Parent and its Subsidiaries). Neither Parent nor any of its Subsidiaries (A) has been a member of an affiliated group filing a consolidated federal income Tax
Return (other than a group the common parent of which was Parent) or (B) has any liability for the Taxes of any person (other than Parent or any of its Subsidiaries)
A-30
under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local or foreign law), as a transferee or successor, by contract or otherwise.
(g) Neither Parent nor any of its Subsidiaries has been, within the two (2) year period ending on the date hereof or otherwise as part of
a plan (or series of related transactions) within the meaning of Section 355(e) of the IRC of which the Integrated Mergers is also a part, a distributing corporation or a controlled corporation (within the
meaning of Section 355(a)(1)(A) of the IRC) in a distribution of stock intended to be governed in whole or in part by Section 355 of the IRC.
(h) Neither Parent nor any of its Subsidiaries has participated in a listed transaction within the meaning of Treasury Regulations
Section 1.6011-4(b)(2).
(i) At no time during the past five (5) years has Parent been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the IRC.
(j) Neither Parent nor any of its Subsidiaries will be required to
include any material item of income in, or to exclude any material item of deduction from, taxable income in any taxable period (or portion thereof) ending after the Closing Date as a result of any (i) change in method of accounting,
(ii) closing agreement, (iii) intercompany transaction or excess loss account described in Treasury Regulations under Section 1502 of the IRC (or any similar provision of state, local or foreign law), (iv) installment sale or
open transaction disposition made on or prior to the Closing Date, or (v) prepaid amount received on or prior to the Closing Date outside of the ordinary course of business.
(k) Parent and each of its Subsidiaries has withheld and paid all Taxes required to have been withheld and paid in connection with amounts
paid or owing to any employee, independent contractor, creditor, stockholder or other third party, and Parent and each of its Subsidiaries has timely complied with all applicable information reporting requirements under Part III, Subchapter A of
Chapter 61 of the IRC and similar applicable state and local information reporting requirements.
(l) Neither Parent nor any of its
Subsidiaries has engaged in any reportable transaction within the meaning of Treasury Regulation section 1.6011-4(b)(1).
4.16 Employee Benefit Plans
.
(a) For purposes of this Agreement,
Parent Employee Plans
means all employee benefit plans (as defined in Section 3(3)
of ERISA), whether or not subject to ERISA, and all bonus, stock option, stock purchase, restricted stock, stock unit, incentive, deferred compensation, retiree medical or life insurance, supplemental retirement, severance or other benefit plans,
programs or arrangements, and all retention, bonus, employment, termination, severance plans, programs or arrangements or other contracts or agreements to or with respect to which Parent or any Subsidiary or any trade or business of Parent or any of
its Subsidiaries, whether or not incorporated, all of which together with Parent would be deemed a single employer within the meaning of Section 4001 of ERISA (a
Parent ERISA Affiliate
), is a party or has any
current or future obligation or that are maintained, contributed to or sponsored by Parent or any of its Subsidiaries or any Parent ERISA Affiliate for the benefit of any current or former employee, officer, director or independent contractor of
Parent or any of its Subsidiaries or any Parent ERISA Affiliate.
(b) Each Parent Employee Plan has been established, operated and
administered in all material respects in accordance with its terms and the requirements of all applicable laws, including ERISA and the IRC. Since January 1, 2014, neither Parent nor any of its Subsidiaries has taken any action to take
corrective action or make a filing under any voluntary correction program of the IRS, Department of Labor or any other Governmental Entity with respect to any Parent Employee Plan, and neither Parent nor any of its Subsidiaries has any knowledge of
any plan defect that would qualify for correction under any such program.
A-31
(c) There is no pending or, to the knowledge of Parent, threatened litigation, administrative
action or proceeding relating to any Parent Employee Plan. All of Parent Employee Plans comply in all material respects with all applicable requirements of ERISA, the IRC and other applicable laws. There has occurred no prohibited
transaction (as defined in Section 406 of ERISA or Section 4975 of the IRC) with respect to Parent Employee Plans that is likely to result in the imposition of any penalties or Taxes upon Parent or any of its Subsidiaries under
Section 502(i) of ERISA or Section 4975 of the IRC.
(d) Neither the Parent nor any of its Subsidiaries, nor any Parent ERISA
Affiliate has incurred any liability under Title IV of ERISA that has not been satisfied in full, and Parent is not aware of any condition that exists that would, or would be reasonably likely to, result in Parent incurring any such liability.
(e) No Parent Employee Plan or employee plans maintained by any Parent ERISA Affiliate has experienced any reportable events, as
such term is defined under ERISA Section 4043, for which a waiver has not been granted, has had any accumulated funding deficiencies, as such term is defined under ERISA Section 302(a)(2) (prior to amendment by P.L. 109-280) or
IRC Sections 412(a) or 4971 (whether or not waived), nor for years after amendment by P.L. 109-280 any funding shortfalls as defined in IRC Section 430(c).
(f) Each Parent Employee Plan that is an employee pension benefit plan (as defined in Section 3(2) of ERISA) and which is
intended to be qualified under Section 401(a) of the IRC (a
Parent Qualified Plan
) has received a favorable determination letter or a prototype plan or volume submitter plan advisory opinion letter from the IRS for the most
recent applicable remedial amendment cycle, and, to the knowledge of Parent, there are no circumstances likely to result in revocation of any such letter. No Parent Qualified Plan is an employee stock ownership plan (as defined in
Section 4975(e)(7) of the IRC).
(g) Each Parent Employee Plan that is a nonqualified deferred compensation plan (as
defined in Section 409A(d)(1) of the IRC) and any award thereunder, in each case that is subject to Section 409A of the IRC, has (i) since January 1, 2005, been maintained and operated, in all material respects, in good faith
compliance with Section 409A of the IRC and IRS Notice 2005-1 and (ii) since January 1, 2009, been, in all material respects, in documentary and operational compliance with Section 409A of the IRC.
(h) All contributions required to be made with respect to any Parent Employee Plan by applicable Law or by any plan document or other
contractual undertaking, and all premiums due or payable with respect to insurance policies funding any Parent Employee Plan, for any period through the date hereof have been timely made or paid in full, or to the extent not required to be made or
paid on or before the date hereof, have been fully reflected in the financial statements of Parent. Each Parent Employee Plan that is an employee welfare benefit plan under Section 3(1) of ERISA either (A) is funded through an insurance
company contract and is not a welfare benefit fund within the meaning of Section 419 of the IRC or (B) is unfunded.
(i) Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (either alone or in
conjunction with any other event) result in, cause or accelerate the vesting, exercisability or delivery of, increase in the amount or value of, any payment, right or other benefit or result in any forgiveness of indebtedness to, any employee,
officer, director or individual independent contractor of Parent or any of its Subsidiaries, or result in any funding of or limitation on the right of Parent or any of its Subsidiaries to amend, merge, terminate or receive a reversion of assets from
any Parent Employee Plan or related trust.
4.17 Fairness Opinion
. The Board of Directors of Parent 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 subject to the assumptions and
qualifications set forth therein, the Exchange Ratio in the First-Step Merger is fair, from a financial point of view, to Parent. Such opinion has not been amended or rescinded in any material respect as of the date of this Agreement.
A-32
4.18 Fees
. Other than for financial advisory services performed for Parent by The Kafafian
Group, Inc. and Sandler ONeill & Partners, L.P., pursuant to letter agreements, true and complete copies of which have previously been provided to the Company, neither Parent nor any of its Subsidiaries, nor any of their respective
officers, directors, employees or agents, has employed any broker or finder or incurred any liability for any financial advisory fees, brokerage fees, commissions or finders fees, and no broker or finder has acted directly or indirectly for
Parent or any of its Subsidiaries in connection with this Agreement or the transactions contemplated hereby.
4.19 Loan Matters
.
(a) Except as would not reasonably be likely to have, either individually or in the aggregate, a Material Adverse Effect on Parent, each
Loan of Parent and its Subsidiaries (i) is evidenced by notes, agreements or other evidences of indebtedness that are true, genuine and what they purport to be, (ii) to the extent carried on the books and records of Parent and its
Subsidiaries as secured Loans, has been secured by valid charges, mortgages, pledges, security interests, restrictions, claims, Liens or encumbrances, as applicable, which have been perfected and (iii) is the legal, valid and binding obligation
of the obligor named therein, enforceable in accordance with its terms, subject to the Enforceability Exceptions.
(b) Each outstanding
Loan of Parent and its Subsidiaries (including Loans held for resale to investors) was solicited and originated, and is and has been administered and, where applicable, serviced, and the relevant Loan files are being maintained, in all material
respects in accordance with the relevant notes or other credit or security documents, the written underwriting standards of Parent and its Subsidiaries (and, in the case of Loans held for resale to investors, the underwriting standards, if any, of
the applicable investors) and with all applicable federal, state and local laws, regulations and rules.
4.20 Anti-takeover Provisions
Inapplicable
. No Takeover Statute is applicable to this Agreement, the Integrated Mergers or any of the other transactions contemplated by this Agreement under the MGCL.
4.21 Insurance
. Parent and its Subsidiaries are insured with reputable insurers against such risks and in such amounts as the
management of Parent reasonably has determined to be prudent and consistent with industry practice, and Parent and its Subsidiaries are in compliance in all material respects with their insurance policies and are not in default under any such
policy. Each such policy is outstanding and in full force and effect and, except for policies insuring against potential liabilities of officers, directors and employees of Parent and its Subsidiaries, Parent or the relevant Subsidiary thereof is
the sole beneficiary of such policies, and all premiums and other payments due under any such policy have been paid, and all claims thereunder have been filed in due and timely fashion.
4.22 Corporate Documents and Records
. Parent has previously provided a complete and correct copy of the Articles of Incorporation,
bylaws and similar organizational documents of Parent and each of Parents Subsidiaries, as in effect as of the date of this Agreement. Neither Parent nor any of Parents Subsidiaries is in violation of its Articles of Incorporation,
bylaws or similar organizational documents. The minute books of Parent and each of Parents Subsidiaries constitute a complete and correct record of all actions taken by their respective boards of directors (and each committee thereof) and
their stockholders.
4.23 Parent Information
. The information regarding Parent and its Subsidiaries to be supplied by Parent for
inclusion in the Form S-4, any filings or approvals under applicable state securities laws, or any filing pursuant to Rule 165 or Rule 425 under the Securities Act or Rule 14a-12 under the Exchange Act will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. The Joint Proxy Statement (except for such
portions thereof that relate only to the Company or any of its Subsidiaries) will comply as to form in all material respects with the provisions of the Exchange Act and the rules and regulations thereunder. The information supplied, or to be
supplied, by Parent for inclusion in
A-33
applications to Governmental Entities to obtain all permits, consents, approvals and authorizations necessary or advisable to consummate the transactions contemplated by this Agreement shall be
accurate in all material respects.
4.24 Internal Controls
.
(a) Parent and its Subsidiaries have devised and maintain a system of internal accounting controls sufficient to provide reasonable assurances
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP and to provide reasonable assurances that (i) transactions are executed in accordance with
managements general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain accountability for
assets, and (iii) access to assets is permitted only in accordance with managements general or specific authorization.
(b)
Parent (i) has implemented and maintains disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) to ensure that material information relating to Parent, including its Subsidiaries, is made known to the chief
executive officer and the chief financial officer of Parent by others within those entities as appropriate to allow timely decisions regarding required disclosures and to make the certifications required by the Exchange Act and Sections 302 and 906
of the Sarbanes-Oxley Act, and (y) has identified and disclosed, based on its most recent evaluation prior to the date hereof, to Parents outside auditors and the audit committee of Parents Board of Directors (i) any
significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) which are reasonably likely to adversely affect Parents ability to
record, process, summarize and report financial information, and (ii) any fraud, whether or not material, that involves management or other employees who have a significant role in Parents internal controls over financial reporting. These
disclosures were made in writing by management to Parents auditors and audit committee and a copy has previously been made available to Parent. To the knowledge of Parent, there is no reason to believe that Parents outside auditors and
its chief executive officer and chief financial officer will not be able to give the certifications and attestations required pursuant to the rules and regulations adopted pursuant to Section 404 of the Sarbanes-Oxley Act, without
qualification, when next due.
(c) Since January 1, 2014, (i) neither Parent nor any of its Subsidiaries, nor, to the knowledge
of Parent, any director, officer, auditor, accountant or representative of Parent or any of its Subsidiaries, has received or otherwise had or obtained knowledge of any material complaint, allegation, assertion or claim, whether written or, to the
knowledge of Parent, oral, regarding the accounting or auditing practices, procedures, methodologies or methods (including with respect to loan loss reserves, write-downs, charge-offs and accruals) of Parent or any of its Subsidiaries or their
respective internal accounting controls, including any material complaint, allegation, assertion or claim that Parent or any of its Subsidiaries has engaged in questionable accounting or auditing practices, and (ii) no attorney representing
Parent or any of its Subsidiaries, whether or not employed by Parent or any of its Subsidiaries, has reported evidence of a material violation of securities laws, breach of fiduciary duty or similar violation by Parent or any of its officers,
directors, employees or agents to the Board of Directors of Parent or any committee thereof or to the knowledge of Parent, to any director or officer of Parent.
4.25 Data Privacy
. Parent and its Subsidiaries have in place commercially reasonable data protection and privacy policies and
procedures to protect, safeguard and maintain the confidentiality, integrity and security of (i) their information technology systems and (ii) all information, data and transactions stored or contained therein or transmitted thereby,
including personally identifiable information, financial information, and credit card data (as such information or terms are defined and/or regulated under applicable Laws, policies, agreements, and guidelines of any Governmental Entity or
Regulatory Agency) (the
Parent Data
), against any unauthorized or improper use, access, transmittal, interruption, modification or corruption, except where the failure to have in place such policies and procedures has not had and
would not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Parent. Parent and its Subsidiaries are in compliance with
A-34
applicable federal and state confidentiality and data security Laws, policies, agreements, and guidelines of any Governmental Entity or Regulatory Agency including, without limitation, Title V of
the Gramm-Leach-Bliley Act of 1999 and regulations promulgated thereunder, as well as the provisions of the information security program adopted by Parent pursuant to 12 C.F.R. Part 364, and all industry standards applicable to the Parent Data,
including card association rules and the payment card industry data security standards, except where such failure to be in compliance has not had and would not, either individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on Parent. Except as has not had and would not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Parent, there currently are not any, and since January 1, 2014, have not been
any, pending or, to the knowledge of Parent, threatened, claims or written complaints with respect to unauthorized access to or breaches of the security of (i) any of Parents or its Subsidiaries information technology systems or
(ii) Parent Data or any other such information collected, maintained or stored by or on behalf of Parent and its Subsidiaries (or any unlawful acquisition, use, loss, destruction, compromise or disclosure thereof).
4.26 Tax Treatment of the Integrated Mergers
. Parent has not taken any action, and has no knowledge of any fact or circumstance
relating to it, that would prevent the transactions contemplated by this Agreement from qualifying as a reorganization under Section 368(a) of the IRC.
ARTICLE V
C
OVENANTS
R
ELATING
TO
C
ONDUCT
OF
B
USINESS
5.1 Conduct of Business Prior to the Effective Time
. During the period from the date of this Agreement to the Effective Time or earlier
termination of this Agreement, except as expressly contemplated or permitted by this Agreement, required by Law or as consented to in writing by Parent or, in the case of clause (b), the Company, as applicable (such consent not to be unreasonably
withheld), (a) the Company shall, and shall cause its Subsidiaries to, (i) conduct its business in the regular, ordinary and usual course consistent with past practice and in accordance with written policies and procedures and
(ii) use reasonable best efforts to maintain and preserve intact its business organization, employees and advantageous business relationships, and (b) each of the Company and Parent shall, and shall cause their respective Subsidiaries to,
take no action that would reasonably be likely to adversely affect or delay the ability to obtain any necessary approvals of any Regulatory Agency or other Governmental Entity required for the transactions contemplated hereby or to perform its
respective covenants and agreements under this Agreement or to consummate the transactions contemplated hereby on a timely basis.
5.2
Forbearances by the Company
. Except as expressly contemplated or permitted by this Agreement or disclosed in the Company Disclosure Schedule, and except to the extent required by Law or any Governmental Entity during the period from the date of
this Agreement to the Effective Time, the Company shall not, nor shall the Company permit any of its Subsidiaries to, without the prior written consent of Parent, which consent will not be unreasonably withheld:
(a) (i) incur, modify, extend or renegotiate any indebtedness for borrowed money, or assume, guarantee, endorse or otherwise as an
accommodation become responsible for the obligations of any other person, other than in the ordinary course of business consistent with past practice;
(ii) prepay any indebtedness or other similar arrangements so as to cause the Company or any of its Subsidiaries to incur any prepayment
penalty thereunder; or
(iii) purchase any brokered certificates of deposit other than in the ordinary course of business consistent with
past practice with a term not in excess of one year;
A-35
(b) (i) adjust, split, combine or reclassify any capital stock;
(ii) make, declare or pay any dividend, or make any other distribution on its capital stock or trust preferred securities, except
(A) regular quarterly cash dividends by the Company at a rate not in excess of $0.07 per share of Company Common Stock, (B) dividends paid by any of the Subsidiaries of the Company to the Company, and (C) required dividends or
distributions in respect of trust preferred securities;
(iii) grant any stock options, stock appreciation rights, performance shares,
restricted stock units, restricted shares or other equity based awards or interests, or grant any individual, corporation or other entity any right to acquire any shares of its capital stock;
(iv) issue, sell or otherwise permit to become outstanding any additional shares of capital stock or securities convertible or exchangeable
into, or exercisable for, any shares of its capital stock or any options, warrants, or other rights of any kind to acquire any shares of capital stock, except pursuant to the exercise of Company Stock Options or the settlement of Company Equity
Awards in accordance with their terms; or
(v) directly or indirectly redeem, purchase or otherwise acquire any shares of its capital
stock, except the acceptance of shares of Company Common Stock as payment for the exercise price of Company Stock Options or for withholding taxes incurred in connection with the exercise of Company Stock Options or the vesting or settlement of
Company Equity Awards, in each case in accordance with past practice and the terms of the applicable award agreements;
(c) sell,
transfer, mortgage, encumber or otherwise dispose of any of its material properties or assets to any individual, corporation or other entity other than the Company or a Subsidiary of the Company, or cancel, release or assign any indebtedness to any
such person or any claims held by any such person, except in the ordinary course of business consistent with past practice or pursuant to contracts or agreements in force as of the date of this Agreement;
(d) except pursuant to contracts or agreements in force at the date of or permitted by this Agreement, (i) acquire (whether by merger or
consolidation, acquisition of stock or assets or by formation of a joint venture or otherwise) any other person or business or any material assets, deposits or properties of any other person, or (ii) make any equity investment, either by
purchase of stock or securities, contributions to capital, property transfers, or purchase of any property or assets of any other person, or form any new subsidiary;
(e) enter into, renew, amend or terminate any contract or agreement, or make any change in any of its leases or contracts, other than with
respect to those involving aggregate payments of less than, or the provision of goods or services with a market value of less than, $100,000 per annum and other than contracts or agreements covered by
Section 5.1(f)
;
(f) make, renegotiate, renew, increase the amount of, extend the term of, modify or purchase any Loan, or make any commitment in respect of
any of the foregoing, (A) that would require an exception to the Banks formal loan policy as in effect as of the date of this Agreement or that is not in strict compliance with the provisions of such loan policy, except for policy
exceptions taken in the normal course for similarly-sized Loans or (B) other than incident to a reasonable loan restructuring, to any person or any director or officer of, or any owner of a material interest in, such person if such person or
such affiliate is the obligor under any indebtedness to the Company or any of its Subsidiaries that constitutes a nonperforming Loan or against any part of such indebtedness the Company or any of its Subsidiaries has established loss reserves or any
part of which has been charged-off by the Company or any of its Subsidiaries;
(g) enter into any material new line of business or change
in any material respect its lending, investment, underwriting, risk and asset liability management and other banking and operating, securitization and servicing policies (including any change in the maximum ratio or similar limits as a percentage of
its capital exposure applicable with respect to its loan portfolio or any segment thereof), except as required by applicable Law or policies imposed by any Governmental Entity;
A-36
(h) except for Loans made in accordance with Regulation O of the Federal Reserve Board
(12 C.F.R. Part 215), make or increase any Loan, or commit to make or increase any such Loan or extension of credit, to any director or executive officer of the Company or WashingtonFirst Bank, or any entity controlled, directly or
indirectly, by any of the foregoing;
(i) (i) increase the compensation or benefits payable to any current or former employee,
officer, director or consultant, except for merit based or promotion based increases in annual base salary or wage rate for employees (other than directors or executive officers) in the ordinary course of business, consistent with past practice,
that do not exceed, in the aggregate, three percent (3%) of the aggregate cost of all employee annual base salaries and wages in effect on the date hereof;
(ii) pay or award, or commit to pay or award, any bonuses or incentive compensation not required by any existing plan or agreement;
(iii) enter into, adopt, amend or terminate any employee benefit or compensation plan, program, policy or arrangement for the benefit of any
current or former employee, officer, director or consultant (who is a natural person);
(iv) grant or accelerate the vesting of any
equity-based awards or other compensation;
(v) enter into any new, or amend (whether in writing or through the interpretation of) any
existing, employment, severance, change in control, retention, bonus guarantee, or collective bargaining agreement or arrangement;
(vi)
elect to any senior executive office any person who is not a member of its senior executive officer team as of the date of this Agreement or elect to its Board of Directors any person who is not a member of its Board of Directors as of the date of
this Agreement; or
(vii) hire any employee with annual compensation in excess of $100,000, or terminate the employment or services of
any employee in a position of Vice President or above or whose annual compensation is greater than $100,000, other than for cause;
(j)
commence any action or proceeding, other than to enforce any obligation owed to the Company or any of its Subsidiaries and in accordance with past practice, or settle any claim, action or proceeding (i) involving payment by it of money damages
in excess of $50,000 or (ii) which would impose any material restriction on its operations or the operations of any of its Subsidiaries;
(k) amend its Articles of Incorporation or bylaws, or similar governing documents;
(l) increase or decrease the rate of interest paid on time deposits or on certificates of deposit, except in a manner consistent with past
practice;
(m) materially restructure or materially change its investment securities or derivatives portfolio or its interest rate
exposure, through purchases, sales or otherwise, or the manner in which the portfolio is classified or reported, except as may be required by GAAP or applicable Laws or policies imposed by any Governmental Entity or requested by a Governmental
Entity;
(n) make, or commit to make, any capital expenditures other than (i) pursuant to binding commitments existing on the date
hereof, which are described in the Company Disclosure Schedule, (ii) expenditures necessary to maintain existing assets in good repair, and (iii) capital expenditures in the ordinary and usual course of business consistent with past
practice in amounts not exceeding $50,000 in the aggregate;
A-37
(o) establish or commit to the establishment of any new branch or other office facilities or file
any application to relocate or terminate the operation of any banking office;
(p) enter into any futures contract, option, swap
agreement, interest rate cap, interest rate floor, interest rate exchange agreement, or take any other action for purposes of hedging the exposure of its interest-earning assets or interest-bearing liabilities to changes in market rates of interest,
other than in the ordinary course of business;
(q) make, change or rescind any material election concerning Taxes or Tax Returns, file
any amended Tax Return, enter into any closing agreement with respect to Taxes, settle or compromise any material Tax claim or assessment, or surrender any right to claim a refund of Taxes or obtain any Tax ruling;
(r) take any action that is intended or expected to result in any of its representations and warranties set forth in this Agreement being or
becoming untrue in any material respect at any time prior to the Effective Time, or in any of the conditions to the First-Step Merger set forth in Article VI not being satisfied or in a violation of any provision of this Agreement;
(s) implement or adopt any change in its accounting principles, practices or methods, other than as may be required by GAAP or regulatory
guidelines;
(t) take any action that would prevent or impede the Integrated Mergers from qualifying as a reorganization within the
meaning of Section 368(a) of the IRC; or
(u) agree to take, make any commitment to take, or adopt any resolutions of its Board of
Directors in support of, any of the actions prohibited by this
Section 5.2
.
Any request by the Company or response thereto by
Parent shall be made in accordance with the notice provisions of
Section 9.8
and shall note that it is a request pursuant to this
Section 5.2
.
5.3 Forbearances by Parent
. Except as expressly contemplated or permitted by this Agreement or disclosed in Parent Disclosure Schedule,
and except to the extent required by Law or any Governmental Entity, during the period from the date of this Agreement to the Effective Time, Parent shall use commercially reasonable efforts to preserve intact its and its Subsidiaries business
organization, goodwill, relationships with depositors, customers and employees, and maintain its rights and franchises in all material respects, and shall not, nor shall Parent permit any of its Subsidiaries to, without the prior written consent of
the Company:
(a) knowingly take any action that would adversely affect or delay (i) the ability to obtain the necessary approvals of
any Governmental Entity required for the consummation of the transactions contemplated hereby, or (ii) its ability to perform its obligations under this Agreement or to consummate the transactions contemplated hereby;
(b) take any action that is intended to or expected to result in any of its representations and warranties set forth in this Agreement being
or becoming untrue in any material respect at any time prior to the Effective Time, or in any of the conditions to the First-Step Merger set forth in Article VII not being satisfied or in a violation of any provision of this Agreement;
(c) take action that would prevent or impede the Integrated Mergers from qualifying as a reorganization within the meaning of
Section 368(a) of the IRC;
(d) agree to take, make any commitment to take, or adopt any resolutions of its Board of Directors in
support of, any of the actions prohibited by this
Section 5.3
; or
A-38
(e) amend, repeal or modify any provision of its Articles of Incorporation or bylaws in a manner
which would adversely affect any Company stockholder or the transactions contemplated by this Agreement.
ARTICLE VI
C
OVENANTS
6.1 Acquisition Proposals
.
(a) From the date of this Agreement until the earlier to occur of the Closing or the termination of this Agreement in accordance with its
terms, the Company shall not, and shall not authorize or permit any of its Subsidiaries or any of its or its Subsidiaries officers, directors or employees or any investment banker, financial advisor, attorney, accountant or other
representative (collectively,
Representatives
) retained by the Company or any of its Subsidiaries to, directly or indirectly, (i) solicit, initiate or encourage, or take any other action to facilitate, any inquiries,
discussions or the making of any proposal that constitutes or could reasonably be expected to lead to an Acquisition Proposal, (ii) furnish any information or data regarding the Company or any of its Subsidiaries to any person in connection
with or in response to an Acquisition Proposal or an inquiry or indication of interest that would reasonably be expected to lead to an Acquisition Proposal, or (iii) continue or otherwise participate in any discussions or negotiations, or
otherwise communicate in any way with any person (other than Parent, Merger Sub or Representatives of Parent or Merger Sub), regarding an Acquisition Proposal. Without limiting the foregoing, it is understood that any violation of the restrictions
set forth in the preceding sentence by any Representative of the Company or any of its Subsidiaries shall be deemed to be a breach of this
Section 6.1
by the Company. Notwithstanding the foregoing, prior to the date of the Company
Meeting, in the event the Company receives an unsolicited bona fide written Acquisition Proposal that did not result from a breach of this
Section 6.1(a)
, it may, and may permit its Subsidiaries and its and its Subsidiaries
Representatives to, furnish or cause to be furnished nonpublic information or data and participate in such negotiations or discussions to the extent that its Board of Directors concludes in good faith (after receiving the advice of its outside legal
counsel and, with respect to financial matters, its financial advisors) that (1) such Acquisition Proposal constitutes or is reasonably likely to lead to a Superior Proposal and (2) failure to take such actions would be reasonably likely
to result in a violation of its fiduciary duties under applicable Law;
provided
, that, prior to furnishing any nonpublic information permitted to be provided by the prior sentence, the Company shall have provided such information to Parent
and shall have entered into a confidentiality agreement with such third party on terms no more favorable to such person than the Confidentiality Agreement, which confidentiality agreement shall not provide such person with any exclusive right to
negotiate with the Company.
(b) As used in this Agreement,
(i)
Acquisition Proposal
shall mean any proposal or offer with respect to, or third party indication of interest in, any
of the following (other than the transactions contemplated hereunder): (1) any merger, consolidation, share exchange, business combination, or other similar transaction involving the Company or any of its Subsidiaries; (2) any acquisition
or purchase, direct or indirect, of twenty-five percent (25%) or more of the Companys consolidated assets or twenty-five percent (25%) or more of any class of equity securities of the Company or its Subsidiaries whose assets,
individually or in the aggregate, constitute twenty-five percent (25%) or more of the consolidated assets of the Company in a single transaction or series of transactions; (3) any tender offer or exchange offer that, if consummated, would
result in such third party beneficially owning twenty-five percent (25%) or more of any class of equity or voting securities of the Company; and
(ii)
Superior Proposal
shall mean any bona fide written offer or proposal made by a third party to consummate an
Acquisition Proposal that the Companys Board of Directors determines in good faith (after receiving the advice of its outside counsel and, with respect to financial matters, its financial advisors) (1) would, if consummated, result in the
acquisition of all, but not less than all, of the issued and outstanding shares of Company Common Stock or all, or substantially all, of the assets of the Company; (2) would result in a
A-39
transaction that (A) involves consideration to the holders of the shares of Company Common Stock that is more favorable, from a financial point of view, than the consideration to be paid to
the stockholders of the Company pursuant to this Agreement, considering, among other things, the nature of the consideration being offered and any material regulatory approvals or other risks associated with the timing of the proposed transaction
beyond, or in addition to, those specifically contemplated hereby, and which proposal is not conditioned upon obtaining financing and (B) is, in light of the other terms of such proposal, more favorable to the stockholders of the Company than
the Integrated Mergers and the transactions contemplated by this Agreement; and (3) is reasonably likely to be completed on the terms proposed, in each case, taking into account all legal, financial, regulatory and other aspects of the
Acquisition Proposal.
(c) The Company will promptly notify (and in any event within twenty-four (24) hours) Parent of receipt of any
Acquisition Proposal or any inquiry with respect to or that could reasonably be expected to lead to an Acquisition Proposal and the substance thereof, including, in each case, the identity of the person making such Acquisition Proposal or inquiry
and the material terms and conditions thereof, and shall provide to Parent any written materials received by the Company or any of its Subsidiaries in connection therewith. The Company will promptly (and in any event within twenty-four
(24) hours) advise Parent of any developments, discussions or negotiations with respect to any such Acquisition Proposal or inquiry, including any amendments to or revisions of the terms of such Acquisition Proposal or inquiry.
(d) The Company will immediately cease and cause to be terminated any existing activities, discussions or negotiations with any parties
conducted prior to the date of this Agreement with respect to any Acquisition Proposal. The Company shall not release any third party from, or waive any provisions of, any confidentiality agreements or standstill agreement to which the Company or
any of its Subsidiaries is a party and shall use its reasonable best efforts to enforce any existing confidentiality or standstill agreements to which the Company or any of its Subsidiaries is a party in accordance with the terms thereof. Unless
this Agreement has been terminated in accordance with its terms, the Company shall not, and shall cause its Subsidiaries and cause its and their officers, directors, agents, advisors and representatives not to on its behalf, enter into any letter of
intent, memorandum of understanding, agreement in principle, acquisition agreement, merger agreement or other agreement relating to any Acquisition Proposal.
6.2 Advice of Changes
. Prior to the Closing, each party shall promptly advise the other party orally and in writing to the extent that
it has knowledge of (i) any representation or warranty made by it contained in this Agreement becoming untrue or inaccurate in any material respect or (ii) the failure by it to comply in any material respect with or satisfy in any material
respect any covenant, condition or agreement to be complied with or satisfied by it under this Agreement;
provided
,
however
, that no such notification shall affect the representations, warranties, covenants or agreements of the parties
or the conditions to the obligations of the parties under this Agreement.
6.3 Access to Information
.
(a) Upon reasonable notice and subject to applicable Laws relating to the exchange of information, the Company, on the one hand, and Parent
and Merger Sub, on the other hand, shall (and shall cause its Subsidiaries to) afford the other party such reasonable access during normal business hours throughout the period prior to the Effective Time to the books, records (including, without
limitation Tax Returns), contracts, properties, personnel and to such other information relating to itself and its Subsidiaries as the other party may reasonably request;
provided, however,
that no investigation pursuant to this
Section 6.3
shall affect or be deemed to modify any representation or warranty made by any party in this Agreement. No party shall be required to provide access to or to disclose information where such access or disclosure would violate
or prejudice the rights of its customers, jeopardize the attorney-client privilege of the entity in possession or control of such information or contravene any Law, order, judgment, decree, fiduciary duty or binding agreement entered into prior to
the date of this Agreement. The parties will make appropriate and reasonable substitute disclosure arrangements under circumstances in which the restrictions of the preceding sentence apply.
A-40
(b) All information and documents obtained pursuant to this
Section 6.3
be held in
confidence to the extent required by, and in accordance with, the provisions of confidentiality set forth in a letter agreement, dated January 15, 2017 between Parent and the Company (the
Confidentiality Agreement
).
(c) No investigation by either of the parties or their respective representatives shall affect or be deemed to modify or waive the
representations and warranties of the other set forth herein. Nothing contained in this Agreement shall give either party, directly or indirectly, the right to control or direct the operations of the other party prior to the Effective Time. Prior to
the Effective Time, each party shall exercise, consistent with the terms and conditions of this Agreement, complete control and supervision over its and its Subsidiaries respective operations.
(d) From and after the date hereof, Representatives of Parent and the Company shall meet on a regular basis to discuss and plan for the
conversion of the Companys and its Subsidiaries data processing and related electronic informational systems to those used by Parent and its Subsidiaries with the goal of conducting such conversion as soon as reasonably practicable
following the consummation of the Bank Merger.
6.4 Applications; Consents
.
(a) The parties hereto shall cooperate with each other and shall use their reasonable best efforts to prepare and file as soon as reasonably
practicable after the date hereof all necessary applications, notices and filings to obtain all permits, consents, approvals and authorizations of all Governmental Entities that are necessary or advisable to consummate the transactions contemplated
by this Agreement (including, without limitation, the Integrated Mergers and the Bank Merger). The Company and Parent shall furnish each other with all information concerning themselves, their respective Subsidiaries, and their respective
Subsidiaries directors, officers and stockholders and such other matters as may be reasonably necessary or advisable in connection with any application, notice or filing made by or on behalf of Parent, the Company or any of their respective
Subsidiaries to any Governmental Entity in connection with the transactions contemplated by this Agreement. Parent and the Company shall have the right to review in advance, and to the extent practicable each will consult with the other on, all the
information relating to Parent and the Company, as the case may be, and any of their respective Subsidiaries, that appears in any filing made with, or written materials submitted to, any Governmental Entity pursuant to this
Section 6.4(a)
. In exercising the foregoing right, each of the parties hereto shall act reasonably and as promptly as reasonably practicable. Each party will provide the other with copies of any applications and all correspondence
relating thereto prior to filing, other than any portions of material filed in connection therewith that contain competitively sensitive business or other proprietary information filed under a claim of confidentiality. The parties hereto agree that
they will consult with each other with respect to the obtaining of all permits, consents, approvals and authorizations of all third parties and Governmental Entities necessary or advisable to consummate the transactions contemplated by this
Agreement and each party will keep the other apprised of the status of matters relating to completion of the transactions contemplated herein. Each party shall consult with the other in advance of any meeting or conference with any Governmental
Entity in connection with the transactions contemplated by this Agreement and, to the extent permitted by such Governmental Entity, shall give the other party and/or its counsel the opportunity to attend and participate in such meetings and
conferences.
(b) As soon as reasonably practicable after the date hereof, each of the parties hereto shall, and they shall cause their
respective Subsidiaries to, use its reasonable best efforts to obtain any consent, authorization or approval of any third party that is required to be obtained in connection with the transactions contemplated by this Agreement.
6.5 Antitakeover Provisions
. None of the Company, Parent or their respective Boards of Directors shall take any action that would cause
any Takeover Statute to become applicable to this Agreement, the Integrated Mergers, or any of the other transactions contemplated hereby, and each shall take all necessary steps to exempt (or ensure the continued exemption of) the Integrated
Mergers and the other transactions contemplated hereby
A-41
from any applicable Takeover Statute now or hereafter in effect. If any Takeover Statute may become, or may purport to be, applicable to the transactions contemplated hereby, each of Parent and
the Company and the members of their respective Boards of Directors will grant such approvals and take such actions as are necessary so that the transactions contemplated by this Agreement may be consummated as promptly as reasonably practicable on
the terms contemplated hereby and otherwise act to eliminate or minimize the effects of any Takeover Statute on any of the transactions contemplated by this Agreement.
6.6 Additional Agreements
. Subject to the terms and conditions herein provided, each of the parties hereto agrees to use all reasonable
efforts to take promptly, or cause to be taken promptly, all actions and to do promptly, or cause to be done promptly, all things necessary, proper or advisable under applicable Laws to consummate and make effective the transactions contemplated by
this Agreement as soon as reasonably possible, including using efforts to obtain all necessary actions or non-actions, extensions, waivers, consents and approvals from all applicable Governmental Entities, effecting all necessary registrations,
applications and filings (including, without limitation, filings under any applicable state securities laws) and obtaining any required contractual consents and regulatory approvals.
6.7 Publicity
. Parent and the Company shall each use their reasonable best efforts (a) to develop a joint communications plan, and
(b) to ensure that all press releases and other public statements with respect to the transactions contemplated hereby shall be consistent with such joint communications plan. Except in respect of any announcement required by
(i) applicable Law, (ii) a request by a Governmental Entity or (iii) an obligation pursuant to any listing agreement with or rules of any securities exchange, Parent and the Company agree to consult with each other and to obtain the
advance approval of the other party (which approval shall not be unreasonably withheld, conditioned or delayed) before issuing any press release or, to the extent practical, otherwise making any public statement with respect to this Agreement or the
transactions contemplated hereby. The Company agrees that neither it nor any Subsidiary shall issue any communication of a general nature regarding the transactions contemplated by this Agreement to employees (including general communications
relating to benefits and compensation) without prior consultation with Parent and, to the extent relating to post-Closing employment, benefit or compensation information, without the prior consent of Parent or issue any communication of a general
nature to customers without the prior approval of Parent.
6.8 Stockholder Meetings
.
(a) Each of Parent and the Company shall call, give notice of, convene and hold a meeting of its stockholders (the
Parent
Meeting
and the
Company Meeting
, respectively) to be held as soon as reasonably practicable after the Form S-4 is declared effective for the purpose of obtaining the Requisite Company Vote and the Requisite Parent Vote
required in connection with this Agreement and the First-Step Merger and, if so desired and mutually agreed, upon other matters of the type customarily brought before an annual or special meeting of stockholders to approve a merger agreement or
otherwise approve the transactions contemplated hereby, and each shall use its reasonable best efforts to cause such meetings to occur as soon as reasonably practicable and on the same date. The Board of Directors of each of Parent and the Company
shall use its reasonable best efforts to obtain from the stockholders of Parent and the Company, as the case may be, the Requisite Parent Vote, in the case of Parent, and the Requisite Company Vote, in the case of the Company, including by
communicating to its respective stockholders its recommendation (and including such recommendation in the Joint Proxy Statement) that they approve (i) this Agreement and the transactions contemplated hereby, in the case of the Company and
(ii) the issuance of shares of Parent Common Stock in connection with the First-Step Merger, in the case of Parent.
(b) Subject to
Section 8.1
and
Section 8.2
, if the Board of Directors of Parent, after receiving the advice of its outside counsel and, with respect to financial matters, its financial advisors, determines in good faith that it would be
reasonably likely to result in a violation of its fiduciary duties under applicable Law to continue to recommend approval of the issuance of shares of Parent Common Stock in connection with the First-Step Merger, then in submitting such issuance of
shares to its stockholders, the Board of Directors of Parent may (but
A-42
shall not be required to) submit the share issuance to Parents stockholders without recommendation (although the resolutions approving this Agreement as of the date hereof may not be
rescinded or amended), in which event the Board of Directors of Parent may communicate the basis for its lack of a recommendation to Parents stockholders in the Joint Proxy Statement or an appropriate amendment or supplement thereto to the
extent required by Law.
(c) Subject to
Section 8.1
and
Section 8.2
, if the Board of Directors of the Company,
after receiving the advice of its outside counsel and, with respect to financial matters, its financial advisors, determines in good faith that it would be reasonably likely to result in a violation of its fiduciary duties under applicable Law to
continue to recommend this Agreement, then the Board of Directors of the Company may fail to make such recommendation, or withdraw, modify or change any such recommendation (although the resolutions approving this Agreement as of the date hereof may
not be rescinded or amended);
provided
, that the Board of Directors of the Company may not take any actions under this sentence unless (i) it gives Parent at least three (3) business days prior written notice of its intention
to take such action and a reasonable description of the event or circumstances giving rise to its determination to take such action (including, in the event such action is taken by the Board of Directors of the Company in response to an Acquisition
Proposal, the latest material terms and conditions of, and the identity of the third party making, any such Acquisition Proposal, or any amendment or modification thereof, or describe in reasonable detail such other event or circumstances) and
(ii) at the end of such notice period, the Board of Directors of the Company takes into account any amendment or modification to this Agreement proposed by Parent (it being understood that Parent shall not have any obligation to propose any
adjustments, modifications or amendments to the terms and conditions of this Agreement) and after receiving the advice of its outside counsel and, with respect to financial matters, its financial advisors, determines in good faith that it would
nevertheless be reasonably likely to result in a violation of its fiduciary duties under applicable Law to continue to recommend this Agreement. Any material amendment to any Acquisition Proposal will be deemed to be a new Acquisition Proposal for
purposes of this
Section 6.8(c)
and will require a new notice period as referred to in this
Section 6.8(c)
.
(d)
Parent or the Company shall adjourn or postpone the Parent Meeting or the Company Meeting, as the case may be, if, as of the time for which such meeting is originally scheduled there are insufficient shares of Parent Common Stock or Company Common
Stock, as the case may be, represented (either in person or by proxy) to constitute a quorum necessary to conduct the business of such meeting, or if on the date of such meeting the Company or Parent, as applicable, has not received proxies
representing a sufficient number of shares necessary to obtain the Requisite Company Vote or the Requisite Parent Vote.
6.9
Registration of Parent Common Stock
.
(a) As promptly as reasonably practicable following the date hereof, Parent and the Company
shall prepare and file the Joint Proxy Statement with the SEC and Parent shall promptly prepare and file with the SEC the Form S-4, in which the Joint Proxy Statement will be included as a prospectus. The Company will furnish to Parent the
information required to be included in the Form S-4 with respect to the Companys business and affairs and shall have the right to review and consult with Parent and approve the form of, and any characterizations of such information included
in, the Form S-4 prior to its, or any amendment or supplement thereto, being filed with the SEC. Parent and the Company shall each use their reasonable best efforts to have the Form S-4 declared effective by the SEC and to keep the Form S-4
effective as long as is necessary to consummate the First-Step Merger and the transactions contemplated hereby. The Company and Parent will cause the Joint Proxy Statement to be mailed to their respective stockholders as promptly as reasonably
practicable after the Form S-4 is declared effective under the Securities Act. Parent will advise the Company, promptly after it receives notice thereof, of the time when the Form S-4 has become effective, the issuance of any stop order, the
suspension of the qualification of the Parent Common Stock issuable in connection with the First-Step Merger for offering or sale in any jurisdiction, any comments on or correspondence related to the Joint Proxy Statement or the Form S-4 from the
SEC, or any request by the SEC for amendment of the Joint Proxy Statement or the Form S-4. If at any time prior to the Effective Time any information relating to Parent or the
A-43
Company, or any of their respective affiliates, officers or directors, should be discovered by Parent or the Company which should be set forth in an amendment or supplement to any of the Form S-4
or the Joint Proxy Statement so that any of such documents would not include any misstatement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made,
not misleading, the party which discovers such information shall promptly notify the other party hereto and, to the extent required by Law, an appropriate amendment or supplement describing such information shall be promptly filed by Parent with the
SEC and disseminated by the Company and Parent to their respective stockholders.
(b) Parent shall also take any action required to be
taken under any applicable state securities Laws in connection with the First-Step Merger and each of the Company and Parent shall furnish all information concerning it and the holders of Company Common Stock as may be reasonably requested in
connection with any such action.
(c) Prior to the Effective Time, Parent shall notify The Nasdaq Stock Market of the additional shares of
Parent Common Stock to be issued by Parent in exchange for the shares of Company Common Stock.
6.10 Notification of Certain
Matters
. Each party shall give prompt notice to the other of: (i) any event or notice of, or other communication relating to, a default or event that, with notice or lapse of time or both, would become a default, received by it or any of
its Subsidiaries subsequent to the date of this Agreement and prior to the Effective Time, under any contract material to the financial condition, properties, businesses or results of operations of each party and its Subsidiaries taken as a whole to
which each party or any Subsidiary is a party or is subject; and (ii) any event, condition, change or occurrence which individually or in the aggregate has, or which, so far as reasonably can be foreseen at the time of its occurrence, is
reasonably likely to result in a Material Adverse Effect. Each of the Company and Parent shall give prompt notice to the other party of any notice or other communication from any third party alleging that the consent of such third party is or may be
required in connection with any of the transactions contemplated by this Agreement.
6.11 Employee Benefit Matters
.
(a) Following the Effective Time, Parent shall maintain or cause to be maintained employee benefit plans and compensation opportunities for
the benefit of all persons who are employees of the Company and its Subsidiaries immediately prior to the Effective Time and whose employment is not specifically terminated at or prior to the Effective Time (a
Continuing Employee
)
that, in the aggregate are substantially comparable to the employee benefit and compensation opportunities that are generally made available to similarly situated employees of Parent or its Subsidiaries;
provided, however,
in no event shall
any Continuing Employee be eligible to participate in any closed or frozen plan of Parent or its Subsidiaries.
(b) Prior to the Effective
Time, the Company shall adopt resolutions providing that the Companys health and welfare plans as set forth on the Company Disclosure Schedule will be terminated effective immediately prior to the Effective Time (or such later date
as requested by Parent or as may be required to comply with any applicable advance notice or other requirements contained in such plans) and shall arrange for termination of all corresponding insurance policies, service agreements and related
arrangements effective on the same date. Notwithstanding the foregoing, no coverage of any of the Continuing Employees or their dependents shall terminate under any of the Companys health and welfare plans prior to the time such Continuing
Employees or their dependents, as applicable, become eligible to participate in the health plans, programs and benefits common to all employees of Parent and its Subsidiaries and their dependents and, consequently, no Continuing Employee shall
experience a gap in coverage. Continuing Employees who become covered under health plans, programs and benefits of Parent or any of its Subsidiaries shall receive credit for any co-payments and deductibles paid under the Companys health plan
for the plan year in which coverage commences under Parents health plan. Terminated Company employees and qualified beneficiaries will have the right to continued coverage under group health plans of Parent in accordance with the Consolidated
Omnibus Budget Reconciliation Act.
A-44
(c) For purposes of vesting and determination of eligibility to participate under Parents
compensation and benefit plans, programs or policies (other than any plan that is frozen as to participation), each Continuing Employee who is eligible to participate in such plans, programs or policies shall receive credit for service with the
Company;
provided
,
however
, for the avoidance of any doubt, that the foregoing shall not apply to the extent (x) that its application would result in a duplication of benefits with respect to the same period of service or
(y) prohibited under Parents compensation and benefit plans, programs or policies. Continuing Employees shall not receive prior service credit for benefit accrual purposes under any of Parents compensation and benefit plans,
programs or policies, except for Parents paid time off program.
(d) The Company shall take all necessary and appropriate actions to
terminate the Companys 401(k) plan effective as of the day immediately prior to the Effective Time and contingent upon the occurrence of the Closing. Upon termination of the 401(k) plan all participants will be 100% vested in their account
balances. If requested in writing by Parent, the Company will also take all necessary steps to file or cause to be filed all necessary documents with the IRS for a determination letter for termination of the Companys 401(k) plan. The
Company shall, or shall direct the fiduciaries of the Companys 401(k) plan to (to the extent permitted by law), provide Parent and its counsel with a draft of each resolution, amendment, participant communication or other document relating to
the termination of the Companys 401(k) plan at least five (5) business days before such document is adopted, distributed or filed, and no such document shall be adopted, distributed or filed without Parents approval (which shall not
be unreasonably withheld, conditioned or delayed). Parent shall take any and all actions as may be required to permit the Continuing Employees to roll over their account balances (excluding loans) in the Companys 401(k) plan into Parents
401(k) plan.
(e) Parent agrees that each full time Company employee who is involuntarily terminated by Parent (other than for cause as
determined by Parent) within twelve (12) months of the Effective Time and who is not covered by a separate severance, change in control, or employment agreement shall, upon executing an appropriate release in the form reasonably determined by
Parent, receive a severance payment equal to two weeks of base pay (at the rate in effect on the termination date) for each year of service at the Company, with a minimum payment equal to four (4) weeks of base pay for Company employees who
have one (1) full year or less of service as of their date of termination and a maximum equal to twenty-six (26) weeks of base pay. For purposes of calculating the number of years of service, fractional years of service shall be rounded up
or down to the nearest full year, except for purposes of determining eligibility to receive a severance payment. For purposes of calculating base pay, Company employees who are paid on an hourly basis shall be deemed to have a base pay equal to the
employees average weekly compensation over the two months prior to the termination date. For employees whose compensation is determined in whole or in part on the basis of commission income, base pay shall include base salary or
total hourly wages paid plus commissions earned during the most recent twelve (12) months ended as of the date of termination of employment. Any employee of the Company or any of its Subsidiaries who has or is a party to any employment
agreement, severance agreement, change in control agreement or any other agreement or arrangement that provides for any payment that may be triggered by the First-Step Merger or the Bank Merger shall not receive the severance benefits as provided in
this
Section 6.11(e)
but will receive the payment specified in such agreement.
(f) Nothing in this Agreement shall confer
upon any employee, officer, director, independent contractor or consultant of the Company or any of its Subsidiaries or affiliates any right to continue in the employ or service of the Surviving Corporation, the Company, Parent or any Subsidiary or
affiliate thereof, or shall interfere with or restrict in any way the rights of the Surviving Corporation, the Company, Parent or any Subsidiary or affiliate thereof to discharge or terminate the services of any employee, officer, director or
consultant of the Company or any of its Subsidiaries or affiliates at any time for any reason whatsoever, with or without cause. Nothing in this Agreement shall be deemed to (i) establish, amend, or modify any Company Benefit Plan or any other
benefit or employment plan, program, agreement or arrangement, or (ii) alter or limit the ability of the Surviving Corporation or any of its Subsidiaries or affiliates to amend, modify or terminate any particular Company Benefit Plan or any
other benefit or employment plan, program, agreement or arrangement after the Effective Time. Without limiting the generality of the first sentence of
Section 9.11
, nothing in this Agreement, express or
A-45
implied, is intended to or shall confer upon any person, including without limitation any current or former employee, officer, director, independent contractor or consultant (or any spouse or
dependent of such individual) of the Company or any of its Subsidiaries or affiliates, any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.
(g) Effective as of, and contingent upon the occurrence of, the Effective Time, Parent shall assume and honor in accordance with their terms
all employment, severance, change in control and other compensation agreements and arrangements between the Company or any of its Subsidiaries and any of their employees, which are not terminated in connection with the consummation of the
transactions contemplated by this Agreement, and all accrued and vested benefit obligations through the Effective Time which are between the Company or any of its Subsidiaries and any of their current or former directors, officers, employees or
consultants.
6.12 Indemnification.
(a) From and after the Effective Time, Parent shall indemnify and hold harmless each of the current or former directors, officers or employees
of the Company or any of its Subsidiaries (each, an
Indemnified Party
), and any person who becomes an Indemnified Party between the date hereof and the Effective Time, against any costs or expenses (including reasonable
attorneys fees and expenses), judgments, fines, losses, claims, damages or liabilities and amounts paid in settlement incurred in connection with any actual or threatened claim, action, suit, proceeding or investigation, whether civil,
criminal, administrative or investigative, arising out of matters existing or occurring at or prior to the Effective Time, whether asserted or claimed prior to, at or after the Effective Time, based in whole or in part on, or arising in whole or in
part out of, or pertaining to (i) the fact that he or she is or was a director, officer or employee of the Company, any of its Subsidiaries or any of their respective predecessors or was prior to the Effective Time serving at the request of any
such party as a director, officer, employee, trustee or partner of another corporation, partnership, trust, joint venture, employee benefit plan or other entity or (ii) any matters arising in connection with the transactions contemplated by
this Agreement, to the fullest extent such person would have been indemnified or have the right to advancement of expenses pursuant to the Companys Articles of Incorporation and bylaws as in effect on the date of this Agreement and as
permitted by applicable Law, and Parent and the Surviving Corporation shall also advance expenses as incurred to the fullest extent permitted under applicable Law,
provided
that the person to whom expenses are advanced provides a signed
written undertaking to repay such advances if the person is not entitled to mandatory indemnification and it is ultimately determined that such person has not met the relevant standard of conduct.
(b) Any Indemnified Party wishing to claim indemnification under
Section 6.12(a)
, upon learning of any action, suit, proceeding or
investigation described above, shall promptly notify Parent thereof. Any failure to so notify shall not affect the obligations of Parent under
Section 6.12(a)
unless and to the extent that Parent is actually prejudiced as a result of
such failure.
(c) For a period of six (6) years following the Effective Time, Parent shall maintain in effect the Companys
current directors and officers liability insurance covering each person currently covered by the Companys directors and officers liability insurance policy with respect to claims against such persons arising from facts
or events occurring at or prior to the Effective Time;
provided, however
, that in no event shall Parent be required to expend annually pursuant to this
Section 6.12(c)
more than three hundred percent (300%) of the annual
premiums currently paid by the Company for such insurance (the
Premium Cap
) and, if Parent is unable to maintain such policy as a result of this proviso, Parent shall obtain as much comparable insurance as is available by payment
of such amount;
provided further
, that Parent may (i) request the Company to obtain an extended reporting period endorsement under the Companys existing directors and officers liability insurance policy or
(ii) substitute therefor tail policies the material terms of which, including coverage and amount, are no less favorable in any material respect to such persons than the Companys existing insurance policies as of the date
hereof if and to the extent that the same may be obtained for an amount that, in the aggregate, does not exceed the Premium Cap.
A-46
(d) In the event Parent or any of its successors or assigns (i) consolidates with or merges
into any other person or entity and shall not be the continuing or surviving corporation of such consolidation or merger or (ii) liquidates, dissolves, transfers or conveys all or substantially all of its properties and assets to any person or
entity, then, and in each such case, to the extent necessary, proper provision shall be made so that such successor and assign of Parent and its successors and assigns assume the obligations set forth in this
Section 6.12
.
(e) The provisions of this
Section 6.12
are intended to be for the benefit of, and shall be enforceable by, each Indemnified Party
and his or her representatives.
6.13 Litigation and Claims
. Each of Parent and the Company shall promptly notify each other in
writing of any action, arbitration, audit, hearing, investigation, litigation, suit, subpoena or summons issued, commenced, brought, conducted or heard by or before, or otherwise involving, any Governmental Entity or arbitrator pending or, to the
knowledge of Parent or the Company, as applicable, threatened against Parent, the Company or any of their respective Subsidiaries that (a) questions or would reasonably be expected to question the validity of this Agreement, the Plan of Bank
Merger or the other agreements contemplated hereby or thereby or any actions taken or to be taken by Parent, the Company or their respective Subsidiaries with respect hereto or thereto, or (b) seeks to enjoin or otherwise restrain the
transactions contemplated hereby or thereby. The Company shall give Parent the opportunity to participate in the defense or settlement of any stockholder litigation against the Company and/or its directors relating to the transactions contemplated
by this Agreement, and no such settlement shall be agreed to without Parents prior written consent (such consent not to be unreasonably withheld or delayed).
6.14 Dividends
. After the date of this Agreement, each of Parent and the Company shall coordinate with the other the declaration of any
dividends in respect of Parent Common Stock and Company Common Stock and the record dates and payment dates relating thereto, it being the intention of the parties hereto that holders of Company Common Stock shall not receive two dividends, or fail
to receive one dividend, in any quarter with respect to their shares of Company Common Stock and any shares of Parent Common Stock any such holder receives in exchange therefor in the First-Step Merger.
6.15 Corporate Governance
. Effective as of the Effective Time, Parent shall (i) increase the size of its Board of Directors to
fifteen (15) members, (ii) appoint Joseph S. Bracewell, Shaza L. Andersen and two (2) additional current members of the Board of Directors of the Company (the
Company Directors
), to be designated by Parent after
consultation with the Company, to its Board of Directors to serve until the next annual meeting of stockholders and until his or her successor is elected and qualifies and (iii) appoint Joseph S. Bracewell and Shaza L. Andersen to the Executive
Committee of Parents Board of Directors. Effective as of the Effective Time, Parent shall cause Sandy Spring Bank to (i) increase the size of its Board of Directors to fifteen (15) members, and (ii) appoint Joseph S. Bracewell,
Shaza L. Andersen and two (2) additional current members of the Board of Directors of the Company, to be designated by Parent after consultation with the Company, to its Board of Directors to serve until the next annual meeting of stockholders
and until his or her successor is elected and qualifies. The Boards of Directors of Parent and Sandy Spring Bank shall take appropriate actions to permit such nominations and service under, and subject to the terms of, their respective Bylaws. The
Board of Directors of Parent shall take appropriate actions to cause the Company Directors to be nominated to stand for election by Parents stockholders at Parents next annual meeting of stockholders, with Joseph S. Bracewell nominated
as a Class I director with a term expiring at the 2021 annual meeting of stockholders and the other Company Directors nominated to such classes as the Nominating Committee shall determine so that the number of directors in each class is as nearly
equal as possible. Thereafter, Parent will apply its normal governance and nomination procedures to the re-election of incumbent directors. At or prior to the Effective Time, Parent shall cause Article III, Section 3 of its bylaws to be
amended, as of the Effective Time, to read in its entirety as set forth in
Exhibit D
.
6.16 Exemption from Liability
Under Section 16(b)
. Parent and the Company agree that, in order to most effectively compensate and retain Company Insiders (as defined below), both prior to and after the Effective
A-47
Time, it is desirable that Company Insiders not be subject to a risk of liability under Section 16(b) of the Exchange Act to the fullest extent permitted by applicable Law in connection with
the conversion of shares of Company Common Stock and Company Equity Awards in the First-Step Merger, and for that compensatory and retentive purpose agree to the provisions of this
Section 6.16
. Assuming the Company delivers to Parent in
a reasonably timely fashion prior to the Effective Time accurate information regarding those officers and directors of the Company subject to the reporting requirements of Section 16(a) of the Exchange Act (the
Company
Insiders
), the Board of Directors of Parent and of the Company, or a committee of non-employee directors thereof (as such term is defined for purposes of Rule 16b-3(d) under the Exchange Act), shall reasonably promptly thereafter, and in
any event prior to the Effective Time, take all such steps as may be required to cause (in the case of Company) any dispositions of Company Common Stock or Company Equity Awards by the Company Insiders, and (in the case of Parent) any acquisitions
of Parent Common Stock by any Company Insiders who, immediately following the First-Step Merger, will be officers or directors of the Surviving Corporation 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 Rule 16b-3 under the Exchange Act to the fullest extent permitted by applicable Law.
6.17 Trust Preferred Securities and Subordinated Debt
.
(a) At the Effective Time, Parent agrees that it shall expressly assume all of the Companys obligations under the indenture relating to
such subordinated debt securities (including, without limitation, being substituted for the Company) and execute any and all documents, instruments and agreements, including any supplemental indentures, guarantees or declarations of trust required
by said indenture, the subordinated debt securities or the trust preferred securities issued by Alliance Virginia Capital Trust I, or as may reasonably be requested by the trustee thereunder, and shall perform all of the Companys obligations
with respect to the subordinated debt securities and the trust preferred securities issued by Alliance Virginia Capital Trust I.
(b) At
the Effective Time, Parent agrees that it shall expressly assume all of the Companys obligations in connection with the Companys issuance of $25,000,000 principal amount of its 6.00% Fixed-to-Floating Rate Subordinated Notes due 2025
pursuant to the Indenture, dated as of October 5, 2015, between the Company and Wilmington Trust, National Association, as trustee (including, without limitation, being substituted for the Company), and execute any and all documents,
instruments and agreements, including any supplemental indentures, officers certificates, opinions of counsel and declarations of trust required by the Indenture, or as may reasonably be requested by the trustee thereunder, and thereafter
shall perform all of the Companys obligations with respect to said indenture.
ARTICLE VII
C
ONDITIONS
TO
C
ONSUMMATION
7
.1 Conditions to Each Partys Obligations
. The respective obligations of each party to effect the First-Step Merger shall be
subject to the satisfaction of the following conditions:
(a)
Stockholder Approval
. The Requisite Parent Vote and the Requisite
Company Vote shall have been obtained.
(b)
NASDAQ Listing
. The shares of Parent Common Stock that shall be issuable pursuant to
this Agreement shall have been authorized for listing on the NASDAQ, subject to official notice of issuance.
(c)
Regulatory
Approvals
. (i) All approvals, consents or waivers of any Governmental Entity required to permit consummation of the transactions contemplated by this Agreement shall have been obtained and shall remain in full force and effect, and all
statutory waiting periods shall have expired or been terminated and (ii) none of such approvals, consents or waivers shall contain any condition or requirement that would reasonably be expected to materially and adversely impact the economic or
business benefits to Parent of the transactions contemplated by this Agreement.
A-48
(d)
No Injunctions or Restraints; Illegality
. No party hereto shall be subject to any
order, decree or injunction of a court or agency of competent jurisdiction that enjoins or prohibits the consummation of the Integrated Mergers or the Bank Merger and no Governmental Entity shall have instituted any proceeding for the purpose of
enjoining or prohibiting the consummation of the Integrated Mergers, the Bank Merger or any transactions contemplated by this Agreement. No statute, rule or regulation shall have been enacted, entered, promulgated or enforced by any Governmental
Entity which prohibits or makes illegal consummation of the Integrated Mergers.
(e)
Registration Statement; Blue Sky Laws
. The
Form S-4 shall have been declared effective by the SEC and no stop order suspending the effectiveness of the Form S-4 shall have been issued and no proceedings for that purpose shall have been initiated by the SEC and be continuing, and Parent shall
have received all required approvals by state securities or blue sky authorities with respect to the transactions contemplated by this Agreement.
7.2 Conditions to the Obligations of Parent and Merger Sub
. The obligations of Parent and Merger Sub to effect the First-Step Merger
shall be further subject to the satisfaction of the following additional conditions, any one or more of which may be waived by Parent and Merger Sub:
(a)
Representations and Warranties
. The representations and warranties of the Company set forth in
Sections 3.3, 3.11(a)
,
3.22
and
Section 3.25
(in each case after giving effect to the lead in to Article III) shall be true and correct (other than, in the case of
Section 3.3
, such failures to be true and correct as are de minimis) in each
case as of the date of this Agreement and (except to the extent such representations and warranties speak as of an earlier date) as of the Closing Date as though made on and as of the Closing Date, and the representations and warranties of the
Company set forth in
Sections 3.1
,
3.2
, and
3.4
(in each case after giving effect to the lead in to Article III) shall be true and correct in all material respects as of the date of this Agreement and (except to the extent such
representations and warranties speak as of an earlier date) as of the Closing Date as though made on and as of the Closing Date. All other representations and warranties of the Company set forth in this Agreement (read without giving effect to any
qualification as to materiality or Material Adverse Effect set forth in such representations or warranties but, in each case, after giving effect to the lead in to Article III) shall be true and correct in all respects as of the date of this
Agreement and (except to the extent such representations and warranties speak as of an earlier date) as of the Closing Date as though made on and as of the Closing Date,
provided
,
however
, that for purposes of this sentence, such
representations and warranties shall be deemed to be true and correct unless the failure or failures of such representations and warranties to be so true and correct, either individually or in the aggregate, and without giving effect to any
qualification as to materiality or Material Adverse Effect set forth in such representations or warranties, has had or would reasonably be likely to have a Material Adverse Effect on the Company.
(b)
Performance of Obligations
. The Company 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.
(c)
Officers Certificate
. Parent shall have received a
certificate signed by the chief executive officer and the chief financial or principal accounting officer of the Company to the effect that the conditions set forth in
Sections 7.2(a)
and
(b)
have been satisfied.
(d)
No Material Adverse Effect
. Since the date of this Agreement, there shall not have occurred any Material Adverse Effect with
respect to the Company.
(e)
Tax Opinion
. Parent shall have received a written opinion of Kilpatrick Townsend & Stockton
LLP, dated as of the Closing Date, in form and substance customary in transactions of the type contemplated hereby, and reasonably satisfactory to Parent, substantially to the effect that on the basis of the facts, representations and assumptions
set forth or referred to in such opinion which shall be consistent with the state of facts existing at the Effective Time, the Integrated Mergers will be treated for federal income tax purposes as a reorganization within
A-49
the meaning of Section 368(a) of the IRC. Such opinion may be based on, in addition to the review of such matters of fact and law as counsel considers appropriate, representations contained
in certificates of officers of Parent, Merger Sub the Company and others.
7.3 Conditions to the Obligations of the Company
. The
obligations of the Company to effect the First-Step Merger shall be further subject to the satisfaction of the following additional conditions, any one or more of which may be waived by the Company:
(a)
Representations and Warranties
. The representations and warranties of Parent and Merger Sub set forth in
Sections 4.3
,
4.11, 4.18
and
4.20
(in each case after giving effect to the lead in to Article IV) shall be true and correct (other than, in the case of
Section 4.3
, such failures to be true and correct as are de minimis) in each case as
of the date of this Agreement and (except to the extent such representations and warranties speak as of an earlier date) as of the Closing Date as though made on and as of the Closing Date, and the representations and warranties of Parent set forth
in
Sections 4.1
,
4.2
, and
4.4
(in each case after giving effect to the lead in to Article IV) shall be true and correct in all material respects as of the date of this Agreement and (except to the extent such
representations and warranties speak as of an earlier date) as of the Closing Date as though made on and as of the Closing Date. All other representations and warranties of Parent set forth in this Agreement (read without giving effect to any
qualification as to materiality or Material Adverse Effect set forth in such representations or warranties but, in each case, after giving effect to the lead in to Article IV) shall be true and correct in all respects as of the date of this
Agreement and (except to the extent such representations and warranties speak as of an earlier date) as of the Closing Date as though made on and as of the Closing Date,
provided
,
however
, that for purposes of this sentence, such
representations and warranties shall be deemed to be true and correct unless the failure or failures of such representations and warranties to be so true and correct, either individually or in the aggregate, and without giving effect to any
qualification as to materiality or Material Adverse Effect set forth in such representations or warranties, has had or would reasonably be likely to have a Material Adverse Effect on Parent.
(b)
Performance of Obligations
. Parent and Merger Sub 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.
(c)
Officers Certificate
. The Company shall have
received a certificate signed by the chief executive officer and the chief financial or principal accounting officer of Parent and Merger Sub to the effect that the conditions set forth in
Sections 7.3(a)
and
(b)
have been
satisfied.
(d)
Tax Opinion
. The Company shall have received a written opinion of Troutman Sanders LLP, dated as of the Closing
Date, in form and substance customary in transactions of the type contemplated hereby, and reasonably satisfactory to the Company, substantially to the effect that on the basis of the facts, representations and assumptions set forth or referred to
in such opinion which shall be consistent with the state of facts existing at the Effective Time, the Integrated Mergers will be treated for federal income tax purposes as a reorganization within the meaning of Section 368(a) of the IRC. Such
opinion may be based on, in addition to the review of such matters of fact and law as counsel considers appropriate, representations contained in certificates of officers of Parent, Merger Sub, the Company and others.
ARTICLE VIII
T
ERMINATION
8.1 Termination
. This Agreement may be terminated, and the Integrated Mergers abandoned, at any time prior to the Effective Time, by
action taken or authorized by the Board of Directors of the terminating party, either before or after the obtainment of the Requisite Parent Vote or the Requisite Company Vote:
(a) by the mutual written consent of Parent and the Company; or
A-50
(b) by either Parent or the Company, if (i) the Company shall have failed to obtain the
Requisite Company Vote at the duly convened Company Meeting or at any adjournment thereof at which a vote on the adoption of this Agreement was taken or (ii) if Parent shall have failed to obtain the Requisite Parent Vote at the duly convened
Parent Meeting or at any adjournment thereof at which a vote on the issuance of shares of Parent Common Stock in connection with the First-Step Merger was taken; or
(c) by either Parent or the Company, if either (i) any approval, consent or waiver of a Governmental Entity required to permit
consummation of the transactions contemplated by this Agreement shall have been denied and such denial has become final and non-appealable or (ii) any Governmental Entity of competent jurisdiction shall have issued a final, non-appealable order
enjoining or otherwise prohibiting consummation of the transactions contemplated by this Agreement; or
(d) by either Parent or the
Company, in the event that the First-Step Merger is not consummated by the first anniversary of this Agreement, unless the failure to so consummate by such time is due to the failure of the party seeking to terminate this Agreement to perform or
observe the covenants and agreements of such party set forth herein; or
(e) by either Parent or the Company (provided that the party
seeking termination is not then in material breach of any representation, warranty, covenant or other agreement contained herein), in the event of a breach of any covenant or agreement on the part of the other party set forth in this Agreement, or
if any representation or warranty of the other party shall have become untrue, in either case such that the conditions set forth in
Sections 7.2(a)
and
(b)
or
Sections 7.3(a)
and
(b)
, as the case may be, would
not be satisfied and such breach or untrue representation or warranty has not been or cannot be cured within thirty (30) days following written notice to the party committing such breach or making such untrue representation or warranty; or
(f) by the Company, prior to the time the Requisite Parent Vote is obtained, if the Board of Directors of Parent shall have (i) failed to
recommend in the Joint Proxy Statement that the stockholders of Parent approve the issuance of shares of Parent Common Stock in connection with the First-Step Merger, or withdrawn, modified or qualified such recommendation in a manner adverse to the
Company, or resolved to do so, or failed to reaffirm such recommendation within two (2) business days after the Company requests in writing that such action be taken or (ii) breached its obligations under
Section 6.8
in any
material respect; or
(g) by Parent, prior to the time the Requisite Company Vote is obtained, if the Board of Directors of the Company
shall have (i) failed to recommend in the Joint Proxy Statement that the stockholders of the Company adopt this Agreement, or withdrawn, modified or qualified such recommendation in a manner adverse to Parent, or resolved to do so, or failed to
reaffirm such recommendation within two (2) business days after Parent requests in writing that such action be taken, or failed to recommend against acceptance of a tender offer or exchange offer for outstanding Company Common Stock that has
been publicly disclosed (other than by Parent or an affiliate of Parent) within ten (10) business days after the commencement of such tender or exchange offer, in any such case whether or not permitted by the terms hereof, (ii) recommended
or endorsed an Acquisition Proposal, or (iii) breached its obligations under
Sections 6.1
or
6.8
in any material respect; or
(h) by the Company, if the Parent Average Price is less than $34.00,
subject
,
however
, to the following three sentences. If
the Company elects to exercise its termination right pursuant to this
Section 8.1(h)
, it shall promptly (and in any event no later than the last day of the three (3) day period commencing on the fifth business day immediately
preceding the Closing Date) notify Parent in writing of such election. During the three (3) day period commencing with Parents receipt of such notice, Parent shall have the option to (i) increase the Exchange Ratio to equal
$32.30 divided by the Parent Average Price or (ii) pay, as part of the Merger Consideration, an amount in cash, without interest, equal to (x) $32.30 minus (y) the Parent Average Price multiplied by .9500 (the
Additional Cash
Payment
). If within such three (3) day period, Parent delivers written notice to the Company that it intends to proceed with the Integrated Mergers by paying such additional consideration as contemplated by the preceding
sentence, and notifies the Company of the revised Exchange Ratio or Additional Cash Payment,
A-51
then no termination shall be permitted by, or shall have occurred pursuant to, this
Section 8.1(h)
, and this Agreement shall remain in full force and effect in accordance with its
terms (except as the Exchange Ratio shall have been so modified, and any references in this Agreement to the Merger Consideration shall thereafter include any Additional Cash Payment).
8.2 Termination Fee
.
(a) In the event of termination of this Agreement by Parent pursuant to
Section 8.1(g)
, the Company shall pay Parent, by wire
transfer of same day funds, a fee in the amount of $18,500,000 (the
Termination Fee
).
(b) In the event of termination
of this Agreement by the Company pursuant to
Section 8.1(f)
, Parent shall pay the Company, by wire transfer of same day funds, the Termination Fee.
(c) In the event that after the date of this Agreement a bona fide Acquisition Proposal shall have been made known to senior management
or the Board of Directors of the Company or shall have been made directly to its stockholders generally or any person shall have publicly announced (and not withdrawn) an Acquisition Proposal with respect to the Company and
(i) (A) thereafter this Agreement is terminated by either Parent or the Company pursuant to
Section 8.1(b)(i)
or pursuant to
Section 8.1(d)
without the Requisite Company Vote having been obtained or
(B) thereafter this Agreement is terminated by Parent pursuant to
Section 8.1(e)
, and (ii) prior to the date that is twelve (12) months after the date of such termination, the Company enters into a definitive agreement or
consummates a transaction with respect to an Acquisition Proposal (whether or not the same Acquisition Proposal as that referred to above), then the Company shall, on the earlier of the date it enters into such definitive agreement and the
date of consummation of such transaction, pay Parent, by wire transfer of same day funds, the Termination Fee;
provided
, that for purposes of this
Section 8.2(c)
, all references in the definition of Acquisition Proposal to
twenty-five percent (25%) shall instead refer to fifty percent (50%).
(d) The Company and Parent acknowledge that
the agreements contained in this
Section 8.2
are an integral part of the transactions contemplated by this Agreement, and that, without these agreements, the other party would not enter into this Agreement. Accordingly, if the Company or
Parent fails promptly to pay the amount due pursuant to this
Section 8.2
, and, in order to obtain such payment, the other party commences a suit which results in a judgment against the non-paying party for the Termination Fee or any
portion thereof, then such non-paying party shall pay the costs and expenses of the other party (including reasonable attorneys fees and expenses) in connection with such suit. The amounts payable pursuant to
Sections 8.2(a)
,
(b)
and
(c)
constitute liquidated damages and not a penalty and, except in the case of fraud or willful misconduct, shall be the sole remedy of the party receiving such payment in the event of termination of this Agreement on
the bases specified in such sections.
8.3 Effect of Termination
. In the event of termination of this Agreement by either Parent or
the Company as provided in
Section 8.1
, this Agreement shall forthwith become void and have no effect, and there shall be no liability on the part of any party hereto or their respective officers and directors, except that
(i)
Sections 6.3(b) and 8.2
and Article IX, shall survive any termination of this Agreement, and (ii) notwithstanding anything to the contrary contained in this Agreement, no party shall be relieved or released from any liabilities
or damages arising out of its fraud or willful breach of any provision of this Agreement.
ARTICLE IX
C
ERTAIN
O
THER
M
ATTERS
9.1 Interpretation
. The parties have participated jointly in negotiating and drafting this Agreement. In the event that an ambiguity or
a question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provision
of this Agreement. When a reference is made in this Agreement to Sections or Exhibits such reference shall be to a Section of, or Exhibit to, this Agreement unless otherwise
A-52
indicated. The table of contents and headings contained in this Agreement are for ease of reference only and shall not affect the meaning or interpretation of this Agreement. Whenever the words
include, includes or including are used in this Agreement, they shall be deemed followed by the words without limitation. Any singular term in this Agreement shall be deemed to include the plural, and
any plural term the singular. Any reference to gender in this Agreement shall be deemed to include any other gender. As used in this Agreement,
knowledge
means, with respect to the Company and Parent or any Subsidiary, the actual
knowledge of the President, the Chief Executive Officer, the Chief Financial Officer, the Chief Operating Officer, the Chief Credit Officer, the General Counsel or persons performing comparable functions. As used in this Agreement,
(i)
person
means an individual, corporation, limited liability company, partnership, association, trust, unincorporated organization or other entity, (ii) an
affiliate
of a specified person is any
person that directly or indirectly controls, is controlled by, or is under common control with, such specified person. The Company Disclosure Schedule and the Parent Disclosure Schedule, as well as all other schedules and exhibits hereto, shall be
deemed part of this Agreement and included in any reference to this Agreement, and (iii)
business day
means any day other than a Saturday, Sunday or a day on which banks in Maryland or Virginia are authorized or obligated by
Law to close.
9.2 Survival
. Only those agreements and covenants of the parties that are by their terms applicable in whole or in
part after the Effective Time, including
Section 6.12
of this Agreement, shall survive the Effective Time. All other representations, warranties, agreements and covenants shall be deemed to be conditions of the Agreement and shall not
survive the Effective Time.
9.3 Waiver; Amendment
. Prior to the Effective Time, any provision of this Agreement may be:
(i) waived in writing by the party benefited by the provision or (ii) amended or modified at any time (including the structure of the transaction) by an agreement in writing between the parties hereto (which writing shall expressly state
the intent to amend or modify this Agreement) except that, after the vote by the stockholders of the Company, no amendment or modification may be made that would reduce the amount or alter or change the kind of consideration to be received by
holders of Company Common Stock or that would contravene any provision of the VSCA or the applicable state and federal banking Laws.
9.4 Counterparts
. This Agreement may be executed in counterparts each of which shall be deemed to constitute an original, but all of
which together shall constitute one and the same instrument. A facsimile or other electronic copy of a signature page shall be deemed to be an original signature page.
9.5 Governing Law; Jurisdiction
.
(a) This Agreement shall be governed by, and interpreted in accordance with, the laws of the State of Maryland, without regard to conflicts of
laws principles (except that matters relating to the fiduciary duties of the Board of Directors of the Company shall be subject to the laws of the Commonwealth of Virginia).
(b) Each party agrees that it will bring any action or proceeding in respect of any claim arising out of or related to this Agreement or the
transactions contemplated hereby exclusively in any federal or state court of competent jurisdiction located in the State of Maryland (the
Chosen Courts
), and, solely in connection with claims arising under this Agreement or the
transactions that are the subject of this Agreement, (i) irrevocably submits to the exclusive jurisdiction of the Chosen Courts, (ii) waives any objection to laying venue in any such action or proceeding in the Chosen Courts,
(iii) waives any objection that the Chosen Courts are an inconvenient forum or do not have jurisdiction over any party and (iv) agrees that service of process upon such party in any such action or proceeding will be effective if notice is
given in accordance with
Section 9.8
.
9.6 Waiver of Jury Trial
. EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY
CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
A-53
APPLICABLE LAW, ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY SUIT, ACTION OR OTHER PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT: (I) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF ANY
ACTION, SUIT OR PROCEEDING, SEEK TO ENFORCE THE FOREGOING WAIVER, (II) EACH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (III) EACH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (IV) EACH PARTY HAS BEEN INDUCED TO ENTER INTO THIS
AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION 9.6
.
9.7 Expenses
. Each party
hereto will bear all expenses incurred by it in connection with this Agreement and the transactions contemplated hereby;
provided
,
however
, that the costs and expenses of printing and mailing the Joint Proxy Statement shall be borne
proportionately by Parent and the Company based on the number of stockholders of such party.
9.8 Notices
. All notices and other
communications in connection with this Agreement shall be in writing and shall be deemed given if delivered personally, sent via facsimile or by email (with confirmation), mailed by registered or certified mail (return receipt requested) or
commercial overnight delivery service, or delivered by an express courier (with confirmation) to the parties at the following addresses (or at such other address for a party as shall be specified by like notice):
If to Parent or Merger Sub, to:
Sandy Spring Bancorp, Inc.
17801 Georgia Avenue
Olney, Maryland 20832
Attention: Ronald E. Kuykendall,
Secretary and General Counsel
Email: rkuykendall@sandyspringbank.com
With copies, which shall not constitute notice, to:
Kilpatrick Townsend & Stockton LLP
607 14
th
Street, NW, Suite 900
Washington, DC 20005
Attention: Aaron M. Kaslow, Esq.
Email: akaslow@kilpatricktownsend.com
If to the Company, to:
WashingtonFirst Bankshares, Inc.
11921 Freedom Drive, Suite 250
Reston, Virginia 20190
Attention: Shaza Andersen
President and Chief Executive Officer
Email: sandersen@wfbi.com
With copies, which shall not constitute notice, to:
Troutman Sanders LLP
Troutman Sanders Building
1001 Haxall Point
Richmond, Virginia 23219
Attention: Jacob A. Lutz, III, Esq.
Email: jake.lutz@troutmansanders.com
A-54
9.9 Entire Agreement.
This Agreement, together with the documents and instruments referred
to herein, together with the Confidentiality Agreement, represents the entire understanding of the parties hereto with reference to the transactions contemplated hereby and supersedes any and all other oral or written agreements heretofore made.
9.10 Successors and Assigns; Assignment
. This Agreement shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and assigns;
provided
,
however
, that this Agreement may not be assigned by either party hereto without the written consent of the other party.
9.11 Third Party Beneficiaries
. Except as otherwise specifically provided in
Section 6.12
, which is intended to benefit
each Indemnified Party and his or her heir and representatives, this Agreement (including the documents and instruments referred to herein) is not intended to, and does not, confer upon any person other than the parties hereto any rights or remedies
hereunder, including the right to rely upon the representations and warranties set forth herein. The representations and warranties in this Agreement are the product of negotiations among the parties hereto and are for the sole benefit of the
parties. Any inaccuracies in such representations and warranties are subject to waiver by the parties hereto in accordance herewith without notice or liability to any other person. In some instances, the representations and warranties in this
Agreement may represent an allocation among the parties hereto of risks associated with particular matters regardless of the knowledge of any of the parties hereto. Consequently, persons other than the parties may not rely upon the representations
and warranties in this Agreement as characterizations of actual facts or circumstances as of the date of this Agreement or as of any other date.
9.12 Specific Performance
. The parties hereto agree that irreparable damage would occur if any provision of this Agreement were not
performed in accordance with its specific terms or were otherwise breached. Accordingly, the parties shall be entitled to specific performance of the terms hereof, including an injunction or injunctions to prevent breaches of this Agreement or to
enforce specifically the performance of the terms and provisions hereof (including the parties obligation to consummate the First-Step Merger), in addition to any other remedy to which they are entitled at law or in equity. Each of the parties
hereby further waives (a) any defense in any action for specific performance that a remedy at law would be adequate and (b) any requirement under any Law to post security or a bond as a prerequisite to obtaining equitable relief.
9.13 Severability
. Whenever possible, each provision or portion of any provision of this Agreement shall be interpreted in such manner
as to be effective and valid under applicable law, but if any provision or portion of any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable Law in any jurisdiction, such invalidity,
illegality or unenforceability shall not affect any other provision or portion of any provision in such jurisdiction, and this Agreement shall be reformed, construed and enforced in such jurisdiction such that the invalid, illegal or unenforceable
provision or portion thereof shall be interpreted to be only so broad as is enforceable.
9.14 Delivery by Facsimile or Electronic
Transmission
. 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 hereto 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.
A-55
In Witness Whereof
, the parties hereto have caused this Agreement and Plan of Merger to be
executed by their duly authorized officers as of the date first above written.
|
|
|
Sandy Spring Bancorp, Inc.
|
|
|
By:
|
|
/s/ Daniel J. Schrider
|
|
|
Daniel J. Schrider
President and Chief
Executive Officer
|
|
|
|
Touchdown Acquisition, Inc.
|
|
|
By:
|
|
/s/ Daniel J. Schrider
|
|
|
Daniel J. Schrider
President
|
|
|
|
WashingtonFirst Bankshares, Inc.
|
|
|
By:
|
|
/s/ Shaza L. Andersen
|
|
|
Shaza L. Andersen
President and Chief
Executive Officer
|
[
Signature page to Agreement and Plan of Merger
]
A-56
Exhibit A
P
LAN
OF
M
ERGER
Merging
T
OUCHDOWN
A
CQUISITION
, I
NC
.,
a Virginia corporation,
with and into
W
ASHINGTON
F
IRST
B
ANKSHARES
I
NC
.,
a Virginia corporation
1.
The Merger.
Touchdown Acquisition, Inc., a Virginia corporation (the
Merged
Corporation
) and wholly owned subsidiary of Sandy Spring Bancorp, Inc., a Maryland corporation (
Parent
), shall, at the Effective Time (as defined below), be merged (the
Merger
) with and into
WashingtonFirst Bankshares Inc., a Virginia corporation (the
Company
). The parties shall file Articles of Merger (the
Articles of Merger
) meeting the requirements of
Section 13.1-720
of the Virginia Stock Corporation Act (the
VSCA
) with the State Corporation Commission of the Commonwealth of Virginia.
2. Effective Time; Effects of the Merger.
(a)
The Merger shall become effective at the date and time (the
Effective Time
) specified in
the Articles of Merger.
(b)
The Company shall be the surviving corporation (hereinafter sometimes referred
to in such capacity as the
Surviving Corporation
) in the Merger and shall continue its existence under the laws of the Commonwealth of Virginia. Upon consummation of the Merger, the separate corporate existence of the Merged
Corporation shall terminate.
(c)
The Merger will have the effects set forth in
Section 13.1-721
of the VSCA. Without limiting the generality of the foregoing, and subject thereto, from and after the Effective Time, the Company shall possess all of the properties, rights, privileges,
powers and franchises of the Merged Corporation and be subject to all of the debts, liabilities and obligations of the Merged Corporation.
3.
Articles of Incorporation.
At the Effective Time, the Articles of Incorporation of the Company, as the
Surviving Corporation, shall be the Articles of Incorporation of the Merged Corporation, as in effect immediately prior to the Effective Time and attached hereto as
Exhibit 1
, until such Articles of Incorporation are thereafter amended in
accordance with their terms and applicable law.
4.
Bylaws.
At the Effective Time, the Bylaws of the
Company, as the Surviving Corporation, shall be the Bylaws of the Merged Corporation, as in effect immediately prior to the Effective Time, until thereafter amended in accordance with their terms and applicable law.
5. Manner and Basis of Converting Shares of Merged Corporation Common Stock and Company Common Stock.
At the
Effective Time, by virtue of the Merger and without any action on the part of the Company, Parent, the Merged Corporation or any holder of any shares of the common stock or other capital stock of the Company, Parent or the Merged Corporation:
(a)
Merged Corporation Common Stock.
At and after the Effective Time, each share of the common stock, par
value $0.01 per share, of the Merged Corporation issued and outstanding immediately prior to the Effective Time shall be converted into and become one newly and validly issued, fully paid and nonassessable share of the common stock of the Surviving
Corporation.
(b)
Conversion of Company Common Stock.
At the Effective Time, by virtue of the Merger,
automatically and without any action on the part of the holder thereof, each share of the common stock, par value
Exhibit A 1
$0.01 per share, of the Company (
Company Voting Common Stock
) and each share of the
Non-Voting
Common Stock, Series A of the Company
(
Company
Non-Voting
Common Stock
, and, together with the Company Voting Common Stock, the
Company Common Stock
) issued and outstanding at the Effective Time, other than
(i) Dissenting Shares (as defined below) and (ii) shares of Company Common Stock owned or held, other than in a bona fide fiduciary or agency capacity or in satisfaction of a debt previously contracted, by Parent, the Company or a
Subsidiary of either (collectively
Excluded Shares
), shall become and be converted into a number of shares (the
Exchange Ratio
) of the common stock, par value $1.00 per share, of Parent (
Parent Common
Stock
) as follows:
(i) if the Parent Average Price is greater than $53.23, the Exchange Ratio shall
equal .8210;
(ii) if the Parent Average Price is greater than $50.15 and equal to or less than $53.23, the
Exchange Ratio shall equal the quotient of $43.70 divided by the Parent Average Price;
(iii) if the Parent
Average Price is equal to or greater than $37.07 and equal to or less than $50.15, the Exchange Ratio shall equal .8713;
(iv) if the Parent Average Price is equal to or greater than $34.00 and less than $37.07, the Exchange Ratio shall be
equal to the quotient of $32.30 divided by the Parent Average Price; and
(v) if the Parent Average Price is less
than $34.00, the Exchange Ratio shall equal .9500.
Parent Average Price
shall mean the volume-weighted average price per share,
rounded to the nearest hundredth of a cent, of Parent Common Stock on the NASDAQ Global Select Market for the twenty (20) consecutive trading days ending on (and including) the fifth business day immediately preceding the closing of the Merger,
as reported by Bloomberg Financial Markets, or any successor thereto, through its volume weighted average price function (or, if not reported therein, in another authoritative source mutually selected by Parent and the Company). The
Parent Common Stock to be issued in the Merger is sometimes referred to herein as the
Merger Consideration
.
(c)
Parent Capital Stock.
At and after the Effective Time, each share of Parent Common Stock issued and
outstanding immediately prior to the Effective Time shall remain issued and outstanding and shall not be affected by the Merger.
(d)
No Fractional Shares.
No fraction of a share of Parent Common Stock and no certificates or scrip
therefor will be issued in the Merger; instead, Parent shall pay to each holder of Company Common Stock who would otherwise be entitled to a fraction of a share of Parent Common Stock an amount in cash, rounded to the nearest cent, determined by
multiplying such fraction by the Parent Average Price.
(e)
Anti-Dilutive Adjustments.
If, between
the date of the Agreement and Plan of Merger dated as of May 15, 2017 (the
Merger Agreement
) by and among Parent, the Merged Corporation and the Company and the Effective Time, the outstanding shares of Parent Common Stock
shall have been changed into a different number of shares or into a different class by reason of any stock dividend, subdivision, reclassification, recapitalization, split, combination or exchange of shares, the Exchange Ratio shall be adjusted
appropriately to provide the holders of Company Common Stock the same economic effect as contemplated by the Merger Agreement prior to such event.
(f)
Excluded Shares.
As of the Effective Time, each Excluded Share shall be canceled and retired and
shall cease to exist, and no exchange or payment shall be made with respect thereto.
6. Treatment of Company
Equity Awards
(a)
At the Effective Time, each option to purchase shares of Company Common Stock granted
by the Company under a Company Stock Plan (as defined below) or assumed by the Company prior to the date of this
Exhibit A 2
Agreement, whether vested or unvested, that is outstanding and unexercised immediately prior to the Effective Time (a
Company Stock Option
) shall, automatically and without any
action on the part of the holder thereof, be cancelled and shall only entitle the holder of such Company Stock Option to receive (without interest), no later than the first payroll period following the Effective Time and in any event no later than
thirty (30) calendar days following the closing date of the Merger, an amount in cash equal to the product of (x) the number of shares of Company Common Stock subject to such Company Stock Option immediately prior to the Effective Time
multiplied by (y) the excess, if any, of (A) the Equity Award
Cash-out
Price (as defined below) over (B) the exercise price per share of Company Common Stock of such Company Stock Option less
applicable taxes required to be withheld with respect to such payment. For the avoidance of doubt, any Company Stock Option which has an exercise price per share of Company Common Stock that is greater than or equal to the Equity Award
Cash-out
Price shall be cancelled at the Effective Time for no consideration or payment. For purposes of this Agreement, the term
Equity Award
Cash-out
Price
means an amount equal to the product of (x) the Exchange Ratio multiplied by (y) the Parent Average Price.
(b)
At the Effective Time, each award in respect of a share of Company Common Stock subject to vesting,
repurchase or other lapse restriction granted under a Company Stock Plan that is outstanding immediately prior to the Effective Time (a
Company Restricted Stock Award
and, together with the Company Stock Options, the
Company Equity Awards
) shall fully vest and shall be converted into the right to receive, without interest, the Merger Consideration payable pursuant to
Section
5(b)
of this Plan of Merger. Parent shall
pay or issue the consideration described in this
Section
6
within five (5) business days following the Effective Time. Parent shall be entitled to deduct and withhold, or cause the Exchange Agent to deduct and
withhold, from the Merger Consideration payable in respect of the Company Restricted Stock Awards all such amounts as it is required to deduct and withhold under the Internal Revenue Code or any provisions of state, local, or foreign tax law.
(c)
For purposes of this Plan of Merger,
Company Stock Plans
means the WashingtonFirst
Bankshares, Inc. 2010 Equity Compensation Plan and the 1
st
Portfolio Holding Corporation 2009 Stock Incentive Plan.
7. Exchange Procedures.
(a)
Exchange Agent.
At or prior to the Effective Time, Parent shall deposit with a bank or trust company
designated by Parent and reasonably acceptable to the Company (the
Exchange Agent
), for the benefit of the holders of certificates, or evidence of shares in book entry form, representing Company Common Stock (
Old
Certificates
), for exchange in accordance with this
Section
7
, (a) certificates, or at Parents option, evidence of shares in book entry form, representing the Parent Common Stock (
New
Certificates
), to be given to the holders of Company Common Stock pursuant to
Section
5(b)
in exchange for outstanding shares of such Company Common Stock, and (b) to the extent then determinable, any cash
payable in lieu of fractional shares pursuant to
Section
5(d)
(such New Certificates and cash being hereinafter referred to as the
Exchange Fund
). The Exchange Agent shall invest any cash included in the
Exchange Fund as directed by Parent,
provided
that no such investment or losses thereon shall affect the amount of Merger Consideration payable to the holders of Old Certificates. Any interest and other income resulting from such investments
shall be paid to Parent, or as otherwise directed by Parent.
(b) Company Stock Certificate Exchange Procedures.
(i) As promptly as reasonably practicable after the Effective Time, but in no event later than five
(5) business days thereafter, Parent shall cause the Exchange Agent to mail to each holder of record of one or more Old Certificates representing shares of Company Common Stock immediately prior to the Effective Time that have been converted at
the Effective Time into the right to receive the Merger Consideration pursuant to Section 5, a letter of transmittal (a
Letter of Transmittal
) (which shall specify that delivery shall be effected,
Exhibit A 3
and risk of loss and title to the Old Certificates shall pass, only upon proper delivery of the Old Certificates to the Exchange Agent) and instructions for use in effecting the surrender of the
Old Certificates in exchange for the Merger Consideration which such holder shall have become entitled to receive in accordance with, and subject to,
Section
5(b)
, and any cash in lieu of fractional shares which the shares
of Company Common Stock represented by such Old Certificate or Old Certificates shall have been converted into the right to receive pursuant to this Agreement as well as any dividends or distributions to be paid pursuant to
Section
7(b)(iii)
. From and after the Effective Time, upon proper surrender of an Old Certificate or Old Certificates for exchange and cancellation to the Exchange Agent, together with such properly completed Letter of
Transmittal duly executed, the holder of such Old Certificate or Old Certificates shall be entitled to receive in exchange therefor, as applicable, (i) a New Certificate representing the Merger Consideration to which such holder of Company
Common Stock shall have become entitled to receive in accordance with, and subject to,
Section
5(b)
, and (ii) a check representing the amount of (1) any cash in lieu of fractional shares which such holder has the
right to receive in respect of the surrendered Old Certificate or Old Certificates pursuant to
Section
5(b)
and (2) any dividends or distributions which the holder thereof has the right to receive pursuant to
Section
7(b)(iii)
, and the Old Certificate or Old Certificates so surrendered shall forthwith be cancelled. No interest will be paid or accrued on any cash in lieu of fractional shares payable to holders of Old Certificates
or any dividends payable under
Section
7(b)(iii)
. Until surrendered as contemplated by this
Section
7(b)
, each Old Certificate shall be deemed at any time after the Effective Time to represent only
the right to receive, upon surrender, the Merger Consideration and any cash in lieu of fractional shares or in respect of dividends or distributions as contemplated by this
Section
7(b)
.
(ii) The Exchange Agent shall not be entitled to vote or exercise any rights of ownership with respect to the shares
of Parent Common Stock held by it from time to time hereunder, except that it shall receive and hold all dividends or other distributions paid or distributed with respect to such shares for the account of the persons entitled thereto. If there is a
transfer of ownership of any shares of Company Common Stock not registered in the transfer records of the Company, the Merger Consideration shall be issued to the transferee thereof if the Old Certificates representing such Company Common Stock are
presented to the Exchange Agent, accompanied by all documents required, in the reasonable judgment of Parent and the Exchange Agent, to evidence and effect such transfer and to evidence that any applicable stock transfer taxes have been paid.
(iii) No dividends or other distributions declared or made after the Effective Time with respect to Parent Common
Stock issued pursuant to this Agreement shall be remitted to any person entitled to receive shares of Parent Common Stock hereunder until such person surrenders his or her Old Certificates in accordance with this
Section
7(b)
. Subject to the effect of applicable abandoned property, escheat or similar laws, upon the surrender of such persons Old Certificates, such person shall be entitled to receive any dividends or other
distributions, without interest thereon, which subsequent to the Effective Time had become payable but not paid with respect to shares of Parent Common Stock represented by such persons Old Certificates.
(iv) The stock transfer books of the Company shall be closed immediately upon the Effective Time and from and after
the Effective Time there shall be no transfers on the stock transfer records of the Company of any shares of Company Common Stock other than to settle transfers of Company Common Stock that occurred prior to the Effective Time. If, after the
Effective Time, Old Certificates are presented for transfer to the Exchange Agent, they shall be canceled and exchanged for the Merger Consideration deliverable in respect thereof pursuant to this Agreement in accordance with the procedures set
forth in this
Section
7(b)
.
(v) Any portion of the aggregate amount of cash to be paid
pursuant to
Section
5(b)
, any dividends or other distributions to be paid pursuant to this
Section
7(b)
or any proceeds from any investments thereof that remains unclaimed by the stockholders of
the Company for six (6) months after the Effective Time shall be repaid by the Exchange Agent to Parent upon the written request of Parent. After such request is made, any stockholders of the Company who have not theretofore complied with this
Section
7(b)
shall look only to Parent for the Merger Consideration, any cash in lieu of fractional shares, and any unpaid dividends and distributions on the Parent Common Stock deliverable in respect of each share of
Company Common Stock such
Exhibit A 4
stockholder holds, as determined pursuant to this Agreement, in each case without any interest thereon. Notwithstanding the foregoing, neither the Exchange Agent nor any party to this Agreement
(or any affiliate thereof) shall be liable to any former holder of Company Common Stock for any amount delivered to a public official pursuant to applicable abandoned property, escheat or similar laws.
(vi) Parent and the Exchange Agent shall be entitled to rely upon the Companys stock transfer books to establish
the identity of those persons entitled to receive the Merger Consideration, which books shall be conclusive with respect thereto. In the event of a dispute with respect to ownership of stock represented by any Old Certificate, Parent and the
Exchange Agent shall be entitled to deposit any Merger Consideration represented thereby in escrow with an independent third party and thereafter be relieved with respect to any claims thereto.
8.
Appraisal Rights.
In accordance with
Section 13.1-730
of
the VSCA, no appraisal rights shall be available to the holders of Company Voting Common Stock. Each share of Company
Non-Voting
Common Stock which is issued and outstanding immediately prior to the Effective
Time and which is owned by a holder who (i) shall not have voted or caused or permitted any of his, her or its shares to be voted in favor of the Merger, and (ii) pursuant to
Section 13.1-729
et seq.
of the VSCA, duly and validly exercises and perfects his, her or its appraisal rights with respect to his, her or its shares of Company
Non-Voting
Common Stock (the
Dissenting
Shares
), shall not be converted into the right to receive the Merger Consideration, but, instead, the holder thereof, with respect to such Dissenting Shares, shall be entitled to payment in cash from the Surviving Corporation of the
appraised value of the Dissenting Shares in accordance with the provisions of the VSCA. If any such holder shall have failed to duly and validly exercise or perfect or shall have effectively withdrawn or lost such appraisal rights, each share of
Company
Non-Voting
Common Stock of such holder as to which appraisal rights were not duly and validly exercised or perfected, or were effectively withdrawn or lost, shall not be deemed a Dissenting Share and
shall automatically be converted into and shall thereafter be exchangeable only for the right to receive the Merger Consideration as provided in this Plan of Merger.
9.
Amendment.
Prior to the Effective Time, any provision of this Plan of Merger may be amended or
modified at any time by an agreement in writing between the Company, the Merged Company and Parent (which writing shall expressly state the intent to amend or modify this Plan of Merger) except that, after the vote by the stockholders of the
Company, no amendment or modification may be made that would reduce the amount or alter or change the kind of consideration to be received by holders of Company Common Stock or that would contravene any provision of the VSCA or the applicable state
and federal banking laws, rules and regulations.
10.
Abandonment.
At any time prior to the Effective
Time, the Merger may be abandoned, subject to the terms of the Merger Agreement.
Exhibit A 5
Annex B
Execution Copy
VOTING
AGREEMENT
This VOTING AGREEMENT, dated as of May 15, 2017 (this
Agreement
), is by and between
WashingtonFirst Bankshares, Inc., a Virginia corporation (the
Company
), and the undersigned shareholder (the
Shareholder
) of Sandy Spring Bancorp, Inc., a Maryland corporation (
Parent
).
Capitalized terms used herein and not defined shall have the meanings specified in the Merger Agreement (as defined below).
WHEREAS, concurrently with the execution of this Agreement, the Company, Parent and Touchdown Acquisition, Inc., a Virginia corporation
and wholly-owned subsidiary of Parent (
Merger Sub
), are entering into an Agreement and Plan of Merger (the
Merger Agreement
) pursuant to which, among other transactions, (i) Merger Sub will merge with and
into the Company on the terms and conditions set forth therein, with the Company surviving such merger as a wholly-owned subsidiary of Parent (the
First-Step Merger
) and (ii) immediately thereafter, the Company will merge
with and into Parent, with Parent being the surviving corporation and, in connection therewith, each share of the common stock, par value $0.01 per share, of the Company issued and outstanding immediately prior to the Effective Time will, without
any further action on the part of the holder thereof, be automatically converted into the right to receive the Merger Consideration as set forth in the Merger Agreement, subject to the terms and conditions set forth therein;
WHEREAS, as of the date hereof, the Shareholder is the beneficial owner of, has the sole right to dispose of and has the sole right to
vote, the number of shares of common stock, par value $1.00 per share, of Parent (
Parent Common Stock
) set forth below the Shareholders signature on the signature page hereto (such Parent Common Stock, together with any
other capital stock of Parent acquired by the Shareholder after the execution of this Agreement and over which the Shareholder exercises the sole right of disposition and voting, whether acquired directly or indirectly, upon the exercise of options,
conversion of convertible securities or otherwise, and any other securities issued by Parent that are entitled to vote on the approval of the issuance of shares pursuant to the Merger Agreement held or acquired by the Shareholder (whether acquired
heretofore or hereafter), being collectively referred to herein as the
Shares
);
WHEREAS, obtaining the
Requisite Parent Vote is a condition to the consummation of the transactions contemplated by the Merger Agreement; and
WHEREAS, as a
condition and an inducement to the Companys willingness to enter into the Merger Agreement and incur the obligations set forth therein, the Company has required that the Shareholder enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants and agreements set forth herein, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:
Section 1.
Agreement to Vote; Restrictions on Voting and Dispositions
.
(a)
Agreement to Vote Parent Common Stock
. The Shareholder
hereby irrevocably and unconditionally agrees that from the date hereof until the Expiration Time (as defined below), at any meeting (whether annual or special and each adjourned or postponed meeting) of Parents shareholders, however called,
the Shareholder will (x) appear at such meeting or otherwise cause all of the Shareholders Shares to be counted as present thereat for purposes of establishing a quorum and (y) vote or cause to be voted all of such Shares,
(1) in favor of the issuance of shares of Parent Common Stock pursuant to the Merger Agreement, (2) against any agreement, amendment of any agreement (including Parents articles of incorporation and bylaws), or any other action that
is intended or would reasonably be expected to prevent, impede, or interfere with, delay, postpone, or
discourage the transactions contemplated by the Merger Agreement and (3) against any action, agreement, transaction or proposal that would reasonably be expected to result in a breach of any
representation, warranty, covenant, agreement or other obligation of Parent in the Merger Agreement.
(b)
Restrictions on
Transfers
. The Shareholder hereby agrees that, from the date hereof until the earlier of the receipt of the Requisite Parent Vote or the Expiration Time, the Shareholder shall not, and shall not enter into any agreement, arrangement or
understanding to, directly or indirectly, sell, offer to sell, give, pledge, grant a security interest in, encumber, assign, grant any option for the sale of or otherwise transfer or dispose of (each, a
Transfer
) any Shares
(i) other than in connection with bona fide estate planning purposes to his or her affiliates (as defined in the Merger Agreement) or immediate family members;
provided
that as a condition to such Transfer, such affiliate or immediate
family member, as applicable, shall be required to execute an agreement that is identical in form and substance to this Agreement;
provided
,
further
, that the Shareholder shall remain jointly and severally liable for the breaches by
any of his or her affiliates or immediate family members of the terms of such identical agreement, (ii) except in connection with (A) the exercise of outstanding stock options in order to pay the exercise price of such stock options or
satisfy any withholding taxes triggered by such exercise or (B) the withholding or sale of the minimum number of shares necessary to satisfy withholding taxes triggered by the vesting of outstanding restricted stock awards; or (iii) by
will or operation of law, in which case this Agreement shall bind the transferee. Any Transfer in violation of this Section 1(b) shall be null and void. The Shareholder further agrees to authorize and request Parent to notify Parents
transfer agent that there is a stop transfer order with respect to all of the Shares owned by the Shareholder.
(c)
Transfer of Voting
Rights
. The Shareholder hereby agrees that the Shareholder shall not deposit any Shares in a voting trust, grant any proxy or power of attorney or enter into any voting agreement or similar agreement, arrangement or understanding in
contravention of the obligations of the Shareholder under this Agreement with respect to any of the Shares.
(d)
Acquired Shares
.
Any Shares or other voting securities of Parent with respect to which beneficial ownership and the sole rights of disposition and voting are acquired by the Shareholder, including, without limitation, by purchase, as a result of a stock dividend,
stock split, recapitalization, combination, reclassification, exchange or change of such Shares or upon exercise or conversion of any securities of Parent, if any, after the date hereof shall automatically become subject to the terms of this
Agreement.
(e)
No Inconsistent Agreements
. The Shareholder hereby agrees that he or she shall not enter into any agreement,
arrangement or understanding with any person prior to the termination of this Agreement, directly or indirectly, to vote, grant a proxy or power of attorney or give instructions with respect to the voting of the Shareholders Shares in any
manner which is inconsistent with this Agreement.
Section 2.
Representations, Warranties and Covenants of the Shareholder
.
(a)
Representations and Warranties
. The Shareholder represents and warrants to Parent as follows:
(i)
Capacity; Consents
. The Shareholder is an individual and has all requisite capacity, power and authority to enter into and perform
his or her obligations under this Agreement. No filing with, and no permit, authorization, consent or approval of, a Governmental Entity is necessary on the part of the Shareholder for the execution, delivery and performance of this Agreement by the
Shareholder or the consummation by the Shareholder of the transactions contemplated hereby.
(ii)
Due Execution
. This Agreement
has been duly executed and delivered by the Shareholder.
(iii)
Binding Agreement
. Assuming the due authorization, execution and
delivery of this Agreement by the Company, this Agreement constitutes the valid and binding agreement of the Shareholder, enforceable against the Shareholder in accordance with its terms (except in all cases as such enforceability may be limited by
the Enforceability Exceptions).
B-2
(iv)
Non-Contravention
. The execution and delivery of this Agreement by the Shareholder
does not, and the performance by the Shareholder of his or her obligations hereunder and the consummation by the Shareholder of the transactions contemplated hereby will not, violate or conflict with, or constitute a default under, any agreement,
instrument, contract or other obligation or any order, arbitration award, judgment or decree to which the Shareholder is a party or by which the Shareholder or his or her property or assets is bound, or any statute, rule or regulation to which the
Shareholder or his or her property or assets is subject. Except as contemplated by this Agreement, neither the Shareholder nor any of his or her affiliates (1) has entered into any voting agreement or voting trust with respect to any Shares or
entered into any other contract relating to the voting, transfer or disposition of the Shares or (2) has appointed or granted a proxy or power of attorney with respect to any Shares.
(v)
Ownership of Shares
. Except for restrictions in favor of the Company pursuant to this Agreement, the Shareholder beneficially owns
all of the Shareholders Shares free and clear of any proxy or voting restriction, and has sole voting power and sole power of disposition with respect to such Shares with no restrictions on the Shareholders rights of voting or
disposition pertaining thereto, and no person other than the Shareholder has any right to direct or approve the voting or disposition of any of the Shareholders Shares. As of the date hereof, the number of the Shareholders Shares is set
forth below the Shareholders signature on the signature page hereto.
(vi)
Legal Actions
. There is no action, suit,
investigation, complaint or other proceeding pending against the Shareholder or, to the knowledge of the Shareholder, any other person or, to the knowledge of the Shareholder, threatened against the Shareholder or any other person that restricts or
prohibits (or, if successful, would restrict or prohibit) the exercise by the Company of its rights under this Agreement or the performance by any party of its obligations under this Agreement.
(b)
Covenants
. From the date hereof until the Expiration Time:
(i) The Shareholder agrees not to take any action that would make any representation or warranty of the Shareholder contained herein untrue
or incorrect or have the effect of preventing, impeding, delaying, interfering with or adversely affecting the performance by the Shareholder of his or her obligations under this Agreement.
(ii) The Shareholder hereby agrees to promptly notify the Company of the number of shares of Parent Common Stock acquired by the Shareholder
and over which the Shareholder exercises sole rights of disposition and voting, if any, after the date hereof. Any such shares shall be subject to the terms of this Agreement as though owned by the Shareholder on the date hereof and shall be deemed
Shares for all purposes hereof.
(iii) The Shareholder hereby authorizes Parent and the Company to publish and disclose in
any announcement or disclosure required by applicable law and any proxy statement or prospectus filed in connection with the transactions contemplated by the Merger Agreement the Shareholders identity and ownership of the Shares and the nature
of the Shareholders obligation under this Agreement.
Section 3.
Further Assurances
. From time to time, at the request
of the Company and without further consideration, the Shareholder shall execute and deliver such additional documents and take all such further action as may be necessary to consummate and make effective the transactions contemplated by this
Agreement.
Section 4.
Capacity
.
(a) The Shareholder does not make any agreement or understanding herein as a director of Parent. The Shareholder signs this Agreement solely
in the Shareholders capacity as a beneficial owner of the Shares, and nothing herein shall limit or affect any actions taken in the Shareholders capacity as a director of Parent, including complying with or exercising such
Shareholders fiduciary duties as a member of the Board of Directors of Parent.
B-3
(b) The term
Shares
shall not include any securities beneficially owned by
the Shareholder as a trustee or fiduciary, and this Agreement is not in any way intended to affect the exercise by the Shareholder of his or her fiduciary responsibility in respect of any such securities.
Section 5.
Termination
. Other than this Section 5 and Section 6, which shall survive any termination of this Agreement,
this Agreement will terminate upon the earlier of (a) the Effective Time and (b) the date of termination of the Merger Agreement in accordance with its terms (the
Expiration Time
);
provided
that no such
termination shall relieve any party hereto from any liability for any breach of this Agreement occurring prior to such termination.
Section 6.
Miscellaneous
.
(a)
Expenses
. All expenses incurred in connection with this Agreement and the transactions contemplated by this Agreement shall be
paid by the party incurring such expenses.
(b)
Notices
. Any notice required to be given hereunder shall be sufficient if in
writing, and sent by email or facsimile transmission (with confirmation), by reliable overnight delivery service (with proof of service), hand delivery or certified or registered mail (return receipt requested and first-class postage prepaid),
addressed as follows:
(i) If to the Company, to:
WashingtonFirst Bankshares, Inc.
11921 Freedom Drive, Suite 250
Reston, Virginia 20190
Attention: Shaza Andersen
President and Chief Executive Officer
Email: sandersen@wfbi.com
with a copy (which shall not constitute notice) to:
Troutman Sanders LLP
Troutman Sanders Building
1001 Haxall Point
Richmond, Virginia 23219
Attention: Jacob A. Lutz, III, Esq.
Email: jake.lutz@troutmansanders.com
(ii) If to the Shareholder, to the address of the Shareholder set forth below the Shareholders signature on the signature pages hereto.
(c)
Amendments, Waivers, Etc
. This Agreement may not be amended, changed, supplemented, waived or otherwise modified or
terminated except by an instrument in writing signed by each of the parties hereto.
(d)
Successors and Assigns
. No party hereto
may assign any of its rights or delegate any of its obligations under this Agreement without the prior written consent of the other party hereto, except the Company may, without the consent of the Shareholder, assign any of the Companys rights
and delegate any of the Companys obligations under this Agreement to any affiliate of the Company. Subject to the preceding sentence, this Agreement shall be binding upon and shall inure to the benefit of and be enforceable by the parties and
their respective successors and assigns, including without limitation any corporate successor by merger or otherwise. Notwithstanding any Transfer of shares of Parent Common Stock consistent with this Agreement, the transferor shall remain liable
for the performance of all obligations of transferor under this Agreement.
B-4
(e)
Third Party Beneficiaries
. Nothing expressed or referred to in this Agreement will be
construed to give any person, other than the parties to this Agreement and their respective successors and permitted assigns, any legal or equitable right, remedy or claim under or with respect to this Agreement or any provision of this Agreement.
(f)
No Partnership, Agency, or Joint Venture
. This Agreement is intended to create, and creates, a contractual relationship and
is not intended to create, and does not create, any agency, partnership, group (as such term is used in Section 13(d) of the Exchange Act), joint venture or any like relationship between the parties hereto.
(g)
Entire Agreement
. This Agreement embodies the entire agreement and understanding among the parties hereto relating to the subject
matter hereof and supersedes all prior agreements and understandings relating to such subject matter.
(h)
Severability
. If any
term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule or law, or public policy, all other terms and provisions of this Agreement shall nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party hereto. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced,
the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the
extent possible.
(i)
Specific Performance; Remedies Cumulative
. The parties hereto acknowledge that money damages are not an
adequate remedy for breaches of this Agreement, that any breach of this Agreement would cause irreparable harm to the non-breaching party and that any party, in addition to any other rights and remedies which the parties may have hereunder or at law
or in equity, may, in its sole discretion, apply to a court of competent jurisdiction for specific performance or injunction or such other relief as such court may deem just and proper in order to enforce this Agreement or prevent any violation
hereof and, to the extent permitted by applicable law, each party waives any objection to the imposition of such relief. All rights, powers and remedies provided under this Agreement or otherwise available in respect hereof at law or in equity shall
be cumulative and not alternative, and the exercise or beginning of the exercise of any such right, power or remedy by any party shall not preclude the simultaneous or later exercise of any other such rights, powers or remedies by such party.
(j)
No Waiver
. The failure of any party hereto to exercise any right, power or remedy provided under this Agreement or otherwise
available in respect hereof at law or in equity, or to insist upon compliance by any other party hereto with its obligations hereunder, and any custom or practice of the parties at variance with the terms hereof, shall not constitute a waiver by
such party of its right to exercise any such or other right, power or remedy or to demand such compliance.
(k)
Governing Law
.
This Agreement and all disputes or controversies arising out of or relating to this Agreement or the transactions contemplated hereby shall be governed by, and construed in accordance with, the internal laws of the State of Maryland, without regard
to any applicable conflicts of law principles.
(l)
Submission to Jurisdiction
. The parties hereto agree that any suit, action or
proceeding brought by either party to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby shall be brought in any federal or state court located in the State
of Maryland. Each of the parties hereto submits to the jurisdiction of any such court in any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of, or in connection with, this Agreement or the
transactions contemplated hereby, and hereby irrevocably waives the benefit of jurisdiction derived from present or future domicile or otherwise in such action or proceeding. Each party hereto irrevocably waives, to the fullest extent permitted by
law, any objection that it may now or hereafter have to the laying of the
B-5
venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.
(m)
Waiver of Jury Trial
. EACH PARTY HERETO ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY THAT MAY ARISE UNDER THIS AGREEMENT IS LIKELY
TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH PARTY HEREBY KNOWINGLY, INTENTIONALLY AND VOLUNTARILY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION, DIRECTLY OR
INDIRECTLY, ARISING OUT OF, OR RELATING TO, THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR
OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (B) EACH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER AND (C) EACH PARTY HAS BEEN INDUCED TO ENTER INTO
THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
(n)
Drafting and Representation
.
The parties hereto have participated jointly in the negotiation and drafting of this Agreement. No provision of this Agreement will be interpreted for or against any party because that party or its legal representative drafted the provision.
(o)
Name, Captions, Gender
. Section headings of this Agreement are for reference purposes only and are to be given no effect in the
construction or interpretation of this Agreement. Whenever the context may require, any pronoun used herein shall include the corresponding masculine, feminine or neuter forms.
(p)
Counterparts
. This Agreement may be executed by facsimile or other electronic means and in any number of counterparts, each of
which shall be deemed to be an original, but all of which together shall constitute one instrument. Each counterpart may consist of a number of copies each signed by less than all, but together signed by all, the parties hereto.
[
Signature Pages Follow
]
B-6
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Agreement as of the
date and year first written above.
|
|
|
WASHINGTONFIRST BANKSHARES, INC.
|
|
|
By:
|
|
|
|
|
Name:
|
|
|
Title:
|
[
Signature Page to Voting Agreement
]
B-7
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Agreement as of the
date and year first written above.
|
|
|
SHAREHOLDER
|
|
Signature
|
|
Print name
|
|
Number of Shares of Parent Common Stock:
|
|
|
|
Address:
|
|
|
|
|
|
Facsimile:
|
|
|
Email:
|
|
|
[
Signature Page to Voting Agreement
]
B-8
Annex C
Execution Copy
VOTING AGREEMENT
This VOTING AGREEMENT, dated as of May 15, 2017 (this
Agreement
), is by and between Sandy Spring Bancorp, Inc.,
a Maryland corporation (
Parent
), and the undersigned shareholder (the
Shareholder
) of WashingtonFirst Bankshares, Inc., a Virginia corporation (the
Company
). Capitalized terms used herein and
not defined shall have the meanings specified in the Merger Agreement (as defined below).
WHEREAS, concurrently with the
execution of this Agreement, the Company, Parent and Touchdown Acquisition, Inc., a Virginia corporation and wholly-owned subsidiary of Parent (
Merger Sub
), are entering into an Agreement and Plan of Merger (the
Merger
Agreement
) pursuant to which, among other transactions, (i) Merger Sub will merge with and into the Company on the terms and conditions set forth therein, with the Company surviving such merger as a wholly-owned subsidiary of Parent
(the
First-Step Merger
) and (ii) immediately thereafter, the Company will merge with and into Parent, with Parent being the surviving corporation and, in connection therewith, each share of the common stock, par value $0.01
per share, of the Company (
Company Common Stock
) issued and outstanding immediately prior to the Effective Time will, without any further action on the part of the holder thereof, be automatically converted into the right to
receive the Merger Consideration as set forth in the Merger Agreement, subject to the terms and conditions set forth therein;
WHEREAS, as of the date hereof, the Shareholder is the beneficial owner of, has the sole right to dispose of and has the sole right to
vote, the number of shares of Company Common Stock set forth below the Shareholders signature on the signature page hereto (such Company Common Stock, together with any other capital stock of the Company acquired by the Shareholder after the
execution of this Agreement and over which the Shareholder exercises the sole right of disposition and voting, whether acquired directly or indirectly, upon the exercise of options, conversion of convertible securities or otherwise, and any other
securities issued by the Company that are entitled to vote on the approval the Merger Agreement held or acquired by the Shareholder (whether acquired heretofore or hereafter), being collectively referred to herein as the
Shares
);
WHEREAS, obtaining the Requisite Company Vote is a condition to the consummation of the transactions contemplated by the Merger
Agreement; and
WHEREAS, as a condition and an inducement to Parents willingness to enter into the Merger Agreement and incur the
obligations set forth therein, Parent has required that the Shareholder enter into this Agreement.
NOW, THEREFORE, in consideration of
the foregoing, the mutual covenants and agreements set forth herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:
Section 1.
Agreement to Vote; Restrictions on Voting and Dispositions
.
(a)
Agreement to Vote Company Common Stock
. The Shareholder hereby irrevocably and unconditionally agrees that from the date hereof
until the Expiration Time (as defined below), at any meeting (whether annual or special and each adjourned or postponed meeting) of the Companys shareholders, however called, the Shareholder will (x) appear at such meeting or otherwise
cause all of the Shareholders Shares to be counted as present thereat for purposes of establishing a quorum and (y) vote or cause to be voted all of such Shares, (1) in favor of the approval of the Merger Agreement, the First-Step
Merger and the other transactions contemplated by the Merger Agreement, (2) against any Acquisition Proposal, without regard to any recommendation to the shareholders of the Company by the Board of Directors of the Company concerning such
Acquisition Proposal, and without regard to the terms of such Acquisition Proposal, or other proposal made in
opposition to or that is otherwise in competition or inconsistent with the transactions contemplated by the Merger Agreement, (3) against any agreement, amendment of any agreement (including
the Companys articles of incorporation and bylaws), or any other action that is intended or would reasonably be expected to prevent, impede, or interfere with, delay, postpone, or discourage the transactions contemplated by the Merger
Agreement and (4) against any action, agreement, transaction or proposal that would reasonably be expected to result in a breach of any representation, warranty, covenant, agreement or other obligation of the Company in the Merger Agreement.
(b)
Restrictions on Transfers
. The Shareholder hereby agrees that, from the date hereof until the earlier of the receipt of the
Requisite Company Vote or the Expiration Time, the Shareholder shall not, and shall not enter into any agreement, arrangement or understanding to, directly or indirectly, sell, offer to sell, give, pledge, grant a security interest in, encumber,
assign, grant any option for the sale of or otherwise transfer or dispose of (each, a
Transfer
) any Shares (i) other than in connection with bona fide estate planning purposes to his or her affiliates (as defined in the
Merger Agreement) or immediate family members;
provided
that as a condition to such Transfer, such affiliate or immediate family member, as applicable, shall be required to execute an agreement that is identical in form and substance to this
Agreement;
provided
,
further
, that the Shareholder shall remain jointly and severally liable for the breaches by any of his or her affiliates or immediate family members of the terms of such identical agreement, (ii) except in
connection with (A) the exercise of outstanding stock options in order to pay the exercise price of such stock options or satisfy any withholding taxes triggered by such exercise or (B) the withholding or sale of the minimum number of
shares necessary to satisfy withholding taxes triggered by the vesting of outstanding restricted stock awards; or (iii) by will or operation of law, in which case this Agreement shall bind the transferee. Any Transfer in violation of this
Section 1(b) shall be null and void. The Shareholder further agrees to authorize and request the Company to notify the Companys transfer agent that there is a stop transfer order with respect to all of the Shares owned by the Shareholder.
(c)
Transfer of Voting Rights
. The Shareholder hereby agrees that the Shareholder shall not deposit any Shares in a voting trust,
grant any proxy or power of attorney or enter into any voting agreement or similar agreement, arrangement or understanding in contravention of the obligations of the Shareholder under this Agreement with respect to any of the Shares.
(d)
Acquired Shares
. Any Shares or other voting securities of the Company with respect to which beneficial ownership and the sole
rights of disposition and voting are acquired by the Shareholder, including, without limitation, by purchase, as a result of a stock dividend, stock split, recapitalization, combination, reclassification, exchange or change of such Shares or upon
exercise or conversion of any securities of the Company, if any, after the date hereof shall automatically become subject to the terms of this Agreement.
(e)
No Inconsistent Agreements
. The Shareholder hereby agrees that he or she shall not enter into any agreement, arrangement or
understanding with any person prior to the termination of this Agreement, directly or indirectly, to vote, grant a proxy or power of attorney or give instructions with respect to the voting of the Shareholders Shares in any manner which is
inconsistent with this Agreement.
Section 2.
Representations, Warranties and Covenants of the Shareholder
.
(a)
Representations and Warranties
. The Shareholder represents and warrants to Parent as follows:
(i)
Capacity; Consents
. The Shareholder is an individual and has all requisite capacity, power and authority to enter into and perform
his or her obligations under this Agreement. No filing with, and no permit, authorization, consent or approval of, a Governmental Entity is necessary on the part of the Shareholder for the execution, delivery and performance of this Agreement by the
Shareholder or the consummation by the Shareholder of the transactions contemplated hereby.
C-2
(ii)
Due Execution
. This Agreement has been duly executed and delivered by the
Shareholder.
(iii)
Binding Agreement
. Assuming the due authorization, execution and delivery of this Agreement by Parent, this
Agreement constitutes the valid and binding agreement of the Shareholder, enforceable against the Shareholder in accordance with its terms (except in all cases as such enforceability may be limited by the Enforceability Exceptions).
(iv)
Non-Contravention
. The execution and delivery of this Agreement by the Shareholder does not, and the performance by the
Shareholder of his or her obligations hereunder and the consummation by the Shareholder of the transactions contemplated hereby will not, violate or conflict with, or constitute a default under, any agreement, instrument, contract or other
obligation or any order, arbitration award, judgment or decree to which the Shareholder is a party or by which the Shareholder or his or her property or assets is bound, or any statute, rule or regulation to which the Shareholder or his or her
property or assets is subject. Except as contemplated by this Agreement, neither the Shareholder nor any of his or her affiliates (1) has entered into any voting agreement or voting trust with respect to any Shares or entered into any other
contract relating to the voting, transfer or disposition of the Shares or (2) has appointed or granted a proxy or power of attorney with respect to any Shares.
(v)
Ownership of Shares
. Except for restrictions in favor of Parent pursuant to this Agreement, the Shareholder beneficially owns all
of the Shareholders Shares free and clear of any proxy or voting restriction, and has sole voting power and sole power of disposition with respect to such Shares with no restrictions on the Shareholders rights of voting or disposition
pertaining thereto, and no person other than the Shareholder has any right to direct or approve the voting or disposition of any of the Shareholders Shares. As of the date hereof, the number of the Shareholders Shares is set forth below
the Shareholders signature on the signature page hereto.
(vi)
Legal Actions
. There is no action, suit, investigation,
complaint or other proceeding pending against the Shareholder or, to the knowledge of the Shareholder, any other person or, to the knowledge of the Shareholder, threatened against the Shareholder or any other person that restricts or prohibits (or,
if successful, would restrict or prohibit) the exercise by Parent of its rights under this Agreement or the performance by any party of its obligations under this Agreement.
(b)
Covenants
. From the date hereof until the Expiration Time:
(i) The Shareholder agrees not to take any action that would make any representation or warranty of the Shareholder contained herein untrue
or incorrect or have the effect of preventing, impeding, delaying, interfering with or adversely affecting the performance by the Shareholder of his or her obligations under this Agreement.
(ii) The Shareholder hereby agrees to promptly notify Parent of the number of shares of Company Common Stock acquired by the Shareholder and
over which the Shareholder exercises sole rights of disposition and voting, if any, after the date hereof. Any such shares shall be subject to the terms of this Agreement as though owned by the Shareholder on the date hereof and shall be deemed
Shares for all purposes hereof.
(iii) The Shareholder hereby authorizes Parent and the Company to publish and disclose in
any announcement or disclosure required by applicable law and any proxy statement or prospectus filed in connection with the transactions contemplated by the Merger Agreement the Shareholders identity and ownership of the Shares and the nature
of the Shareholders obligation under this Agreement.
Section 3.
Further Assurances
. From time to time, at the request
of Parent and without further consideration, the Shareholder shall execute and deliver such additional documents and take all such further action as may be necessary to consummate and make effective the transactions contemplated by this Agreement.
C-3
Section 4.
Capacity
.
(a) The Shareholder does not make any agreement or understanding herein as a director of the Company. The Shareholder signs this Agreement
solely in the Shareholders capacity as a beneficial owner of the Shares, and nothing herein shall limit or affect any actions taken in the Shareholders capacity as a director of the Company, including complying with or exercising such
Shareholders fiduciary duties as a member of the Board of Directors of the Company.
(b) The term
Shares
shall
not include any securities beneficially owned by the Shareholder as a trustee or fiduciary, and this Agreement is not in any way intended to affect the exercise by the Shareholder of his or her fiduciary responsibility in respect of any such
securities.
Section 5.
Termination
. Other than this Section 5 and Section 6, which shall survive any termination of
this Agreement, this Agreement will terminate upon the earlier of (a) the Effective Time and (b) the date of termination of the Merger Agreement in accordance with its terms (the
Expiration Time
);
provided
that no
such termination shall relieve any party hereto from any liability for any breach of this Agreement occurring prior to such termination.
Section 6.
Miscellaneous
.
(a)
Expenses
. All expenses incurred in connection with this Agreement and the transactions contemplated by this Agreement shall be
paid by the party incurring such expenses.
(b)
Notices
. Any notice required to be given hereunder shall be sufficient if in
writing, and sent by email or facsimile transmission (with confirmation), by reliable overnight delivery service (with proof of service), hand delivery or certified or registered mail (return receipt requested and first-class postage prepaid),
addressed as follows:
(i) If to Parent, to:
Sandy Spring Bancorp, Inc.
17801 Georgia Avenue
Olney, MD 20832
Attention: Ronald E. Kuykendall
EVP, General Counsel & Secretary
Facsimile: 301.774.8434
Email: rkuykendall@sandyspringbank.com
with a copy (which shall not constitute notice) to:
Kilpatrick Townsend & Stockton LLP
607 14
th
Street NW
Washington, DC 20005
Attention: Aaron M. Kaslow
Facsimile: 202.204.5600
Email: akaslow@kilpatricktownsend.com
(ii) If to the Shareholder, to the address of the Shareholder set forth below the Shareholders signature on the signature pages hereto.
(c)
Amendments, Waivers, Etc
. This Agreement may not be amended, changed, supplemented, waived or otherwise modified or
terminated except by an instrument in writing signed by each of the parties hereto.
C-4
(d)
Successors and Assigns
. No party hereto may assign any of its rights or delegate any
of its obligations under this Agreement without the prior written consent of the other party hereto, except Parent may, without the consent of the Shareholder, assign any of Parents rights and delegate any of Parents obligations under
this Agreement to any affiliate of Parent. Subject to the preceding sentence, this Agreement shall be binding upon and shall inure to the benefit of and be enforceable by the parties and their respective successors and assigns, including without
limitation any corporate successor by merger or otherwise. Notwithstanding any Transfer of shares of Company Common Stock consistent with this Agreement, the transferor shall remain liable for the performance of all obligations of transferor under
this Agreement.
(e)
Third Party Beneficiaries
. Nothing expressed or referred to in this Agreement will be construed to give any
person, other than the parties to this Agreement and their respective successors and permitted assigns, any legal or equitable right, remedy or claim under or with respect to this Agreement or any provision of this Agreement.
(f)
No Partnership, Agency, or Joint Venture
. This Agreement is intended to create, and creates, a contractual relationship and is not
intended to create, and does not create, any agency, partnership, group (as such term is used in Section 13(d) of the Exchange Act), joint venture or any like relationship between the parties hereto.
(g)
Entire Agreement
. This Agreement embodies the entire agreement and understanding among the parties hereto relating to the subject
matter hereof and supersedes all prior agreements and understandings relating to such subject matter.
(h)
Severability
. If any
term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule or law, or public policy, all other terms and provisions of this Agreement shall nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party hereto. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced,
the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the
extent possible.
(i)
Specific Performance; Remedies Cumulative
. The parties hereto acknowledge that money damages are not an
adequate remedy for breaches of this Agreement, that any breach of this Agreement would cause irreparable harm to the non-breaching party and that any party, in addition to any other rights and remedies which the parties may have hereunder or at law
or in equity, may, in its sole discretion, apply to a court of competent jurisdiction for specific performance or injunction or such other relief as such court may deem just and proper in order to enforce this Agreement or prevent any violation
hereof and, to the extent permitted by applicable law, each party waives any objection to the imposition of such relief. All rights, powers and remedies provided under this Agreement or otherwise available in respect hereof at law or in equity shall
be cumulative and not alternative, and the exercise or beginning of the exercise of any such right, power or remedy by any party shall not preclude the simultaneous or later exercise of any other such rights, powers or remedies by such party.
(j)
No Waiver
. The failure of any party hereto to exercise any right, power or remedy provided under this Agreement or otherwise
available in respect hereof at law or in equity, or to insist upon compliance by any other party hereto with its obligations hereunder, and any custom or practice of the parties at variance with the terms hereof, shall not constitute a waiver by
such party of its right to exercise any such or other right, power or remedy or to demand such compliance.
(k)
Governing Law
.
This Agreement and all disputes or controversies arising out of or relating to this Agreement or the transactions contemplated hereby shall be governed by, and construed in accordance with, the internal laws of the State of Maryland, without regard
to any applicable conflicts of law principles (except
C-5
that matters relating to the Shareholders fiduciary duties as a member of the Board of the Directors of the Company shall be subject to the laws of the Commonwealth of Virginia).
(l)
Submission to Jurisdiction
. The parties hereto agree that any suit, action or proceeding brought by either party to enforce any
provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby shall be brought in any federal or state court located in the State of Maryland. Each of the parties hereto submits to
the jurisdiction of any such court in any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of, or in connection with, this Agreement or the transactions contemplated hereby, and hereby irrevocably
waives the benefit of jurisdiction derived from present or future domicile or otherwise in such action or proceeding. Each party hereto irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to
the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.
(m)
Waiver of Jury Trial
. EACH PARTY HERETO ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY THAT MAY ARISE UNDER THIS AGREEMENT IS LIKELY
TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH PARTY HEREBY KNOWINGLY, INTENTIONALLY AND VOLUNTARILY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION, DIRECTLY OR
INDIRECTLY, ARISING OUT OF, OR RELATING TO, THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR
OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (B) EACH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER AND (C) EACH PARTY HAS BEEN INDUCED TO ENTER INTO
THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
(n)
Drafting and Representation
.
The parties hereto have participated jointly in the negotiation and drafting of this Agreement. No provision of this Agreement will be interpreted for or against any party because that party or its legal representative drafted the provision.
(o)
Name, Captions, Gender
. Section headings of this Agreement are for reference purposes only and are to be given no effect in the
construction or interpretation of this Agreement. Whenever the context may require, any pronoun used herein shall include the corresponding masculine, feminine or neuter forms.
(p)
Counterparts
. This Agreement may be executed by facsimile or other electronic means and in any number of counterparts, each of
which shall be deemed to be an original, but all of which together shall constitute one instrument. Each counterpart may consist of a number of copies each signed by less than all, but together signed by all, the parties hereto.
[
Signature Pages Follow
]
C-6
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Agreement as of the
date and year first written above.
|
|
|
SANDY SPRING BANCORP, INC.
|
|
|
By:
|
|
|
|
|
Name:
|
|
|
Title:
|
[
Signature Page to Voting Agreement
]
C-7
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Agreement as of the
date and year first written above.
|
|
|
SHAREHOLDER
|
|
|
Signature
|
|
|
|
|
Print name
|
|
Number of Shares of Company Common
|
Stock:
|
|
|
|
|
|
Address:
|
|
|
Facsimile:
|
|
|
Email:
|
|
|
[
Signature Page to Voting Agreement
]
C-8
Annex D
Execution Copy
VOTING AGREEMENT
This VOTING AGREEMENT, dated as of May 15, 2017 (this
Agreement
), is by and between
Sandy Spring Bancorp, Inc., a Maryland corporation (
Parent
), and the undersigned shareholder (the
Shareholder
) of WashingtonFirst Bankshares, Inc., a Virginia corporation (the
Company
).
Capitalized terms used herein and not defined shall have the meanings specified in the Merger Agreement (as defined below).
WHEREAS,
concurrently with the execution of this Agreement, the Company, Parent and Touchdown Acquisition, Inc., a Virginia corporation and wholly-owned subsidiary of Parent (
Merger Sub
), are entering into an Agreement and Plan of Merger
(the
Merger Agreement
) pursuant to which, among other transactions, (i) Merger Sub will merge with and into the Company on the terms and conditions set forth therein, with the Company surviving such merger as a wholly-owned
subsidiary of Parent (the
First-Step Merger
) and (ii) immediately thereafter, the Company will merge with and into Parent, with Parent being the surviving corporation and, in connection therewith, each share of the common
stock, par value $0.01 per share, of the Company (
Company Common Stock
) issued and outstanding immediately prior to the Effective Time will, without any further action on the part of the holder thereof, be automatically converted
into the right to receive the Merger Consideration as set forth in the Merger Agreement, subject to the terms and conditions set forth therein;
WHEREAS, as of the date hereof, the Shareholder is the beneficial owner of, has the sole right to dispose of and has the sole right to vote,
the number of shares of Company Common Stock set forth below the Shareholders signature on the signature page hereto (such Company Common Stock, together with any other capital stock of the Company acquired by the Shareholder after the
execution of this Agreement and over which the Shareholder exercises the sole right of disposition and voting, whether acquired directly or indirectly, upon the exercise of options, conversion of convertible securities or otherwise, and any other
securities issued by the Company that are entitled to vote on the approval the Merger Agreement held or acquired by the Shareholder (whether acquired heretofore or hereafter), being collectively referred to herein as the
Shares
);
WHEREAS, obtaining the Requisite Company Vote is a condition to the consummation of the transactions contemplated by the Merger
Agreement; and
WHEREAS, as a condition and an inducement to Parents willingness to enter into the Merger Agreement and incur the
obligations set forth therein, Parent has required that the Shareholder enter into this Agreement.
NOW, THEREFORE, in consideration of
the foregoing, the mutual covenants and agreements set forth herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:
Section 1.
Agreement to Vote; Restrictions on Voting and Dispositions
.
(a)
Agreement to Vote Company Common Stock
. The Shareholder hereby irrevocably and unconditionally agrees that from the date hereof
until the Expiration Time (as defined below), at any meeting (whether annual or special and each adjourned or postponed meeting) of the Companys shareholders, however called, the Shareholder will (x) appear at such meeting or otherwise
cause all of the Shareholders Shares to be counted as present thereat for purposes of establishing a quorum and (y) vote or cause to be voted all of such Shares, (1) in favor of the approval of the Merger Agreement, the First-Step
Merger and the other transactions contemplated by the Merger Agreement, (2) against any Acquisition Proposal, without regard to any recommendation to the shareholders of the Company by the Board of Directors of the Company concerning such
Acquisition Proposal, and without regard to the terms of such Acquisition Proposal, or other proposal made in
opposition to or that is otherwise in competition or inconsistent with the transactions contemplated by the Merger Agreement, (3) against any agreement, amendment of any agreement (including
the Companys articles of incorporation and bylaws), or any other action that is intended or would reasonably be expected to prevent, impede, or interfere with, delay, postpone, or discourage the transactions contemplated by the Merger
Agreement and (4) against any action, agreement, transaction or proposal that would reasonably be expected to result in a breach of any representation, warranty, covenant, agreement or other obligation of the Company in the Merger Agreement.
(b)
Restrictions on Transfers
. The Shareholder hereby agrees that, from the date hereof until the earlier of the receipt of the
Requisite Company Vote or the Expiration Time, the Shareholder shall not, and shall not enter into any agreement, arrangement or understanding to, directly or indirectly, sell, offer to sell, give, pledge, grant a security interest in, encumber,
assign, grant any option for the sale of or otherwise transfer or dispose of (each, a
Transfer
) any Shares. The Shareholder further agrees to authorize and request the Company to notify the Companys transfer agent that there
is a stop transfer order with respect to all of the Shares owned by the Shareholder.
(c)
Transfer of Voting Rights
. The
Shareholder hereby agrees that the Shareholder shall not deposit any Shares in a voting trust, grant any proxy or power of attorney or enter into any voting agreement or similar agreement, arrangement or understanding in contravention of the
obligations of the Shareholder under this Agreement with respect to any of the Shares.
(d)
Acquired Shares
. Any Shares or other
voting securities of the Company with respect to which beneficial ownership and the sole rights of disposition and voting are acquired by the Shareholder, including, without limitation, by purchase, as a result of a stock dividend, stock split,
recapitalization, combination, reclassification, exchange or change of such Shares or upon exercise or conversion of any securities of the Company, if any, after the date hereof shall automatically become subject to the terms of this Agreement.
(e)
No Inconsistent Agreements
. The Shareholder hereby agrees that he or she shall not enter into any agreement, arrangement or
understanding with any person prior to the termination of this Agreement, directly or indirectly, to vote, grant a proxy or power of attorney or give instructions with respect to the voting of the Shareholders Shares in any manner which is
inconsistent with this Agreement.
Section 2.
Representations, Warranties and Covenants of the Shareholder
.
(a)
Representations and Warranties
. The Shareholder represents and warrants to Parent as follows:
(i)
Capacity; Consents
. The Shareholder is a limited partnership duly organized, validly existing and in good standing under the laws
of the jurisdiction of its formation. The Shareholder has all requisite corporate or other power and authority to enter into and perform its obligations under this Agreement. No filing with, and no permit, authorization, consent or approval of, a
Governmental Entity is necessary on the part of the Shareholder for the execution, delivery and performance of this Agreement by the Shareholder or the consummation by the Shareholder of the transactions contemplated hereby.
(ii)
Due Execution
. This Agreement has been duly executed and delivered by the Shareholder.
(iii)
Binding Agreement
. Assuming the due authorization, execution and delivery of this Agreement by Parent, this Agreement
constitutes the valid and binding agreement of the Shareholder, enforceable against the Shareholder in accordance with its terms (except in all cases as such enforceability may be limited by the Enforceability Exceptions).
(iv)
Non-Contravention
. The execution and delivery of this Agreement by the Shareholder does not, and the performance by the
Shareholder of its obligations hereunder and the consummation by the
D-2
Shareholder of the transactions contemplated hereby will not, violate or conflict with, or constitute a default under, any agreement, instrument, contract or other obligation or any order,
arbitration award, judgment or decree to which the Shareholder is a party or by which the Shareholder or its property or assets is bound, or any statute, rule or regulation to which the Shareholder or its property or assets is subject. Except as
contemplated by this Agreement, neither the Shareholder nor any of its affiliates (1) has entered into any voting agreement or voting trust with respect to any Shares or entered into any other contract relating to the voting, transfer or
disposition of the Shares or (2) has appointed or granted a proxy or power of attorney with respect to any Shares.
(v)
Ownership
of Shares
. Except for restrictions in favor of Parent pursuant to this Agreement, the Shareholder beneficially owns all of the Shareholders Shares free and clear of any proxy or voting restriction, and has sole voting power and sole power
of disposition with respect to such Shares with no restrictions on the Shareholders rights of voting or disposition pertaining thereto, and no person other than the Shareholder has any right to direct or approve the voting or disposition of
any of the Shareholders Shares. As of the date hereof, the number of the Shareholders Shares is set forth below the Shareholders signature on the signature page hereto.
(vi)
Legal Actions
. There is no action, suit, investigation, complaint or other proceeding pending against the Shareholder or, to the
knowledge of the Shareholder, any other person or, to the knowledge of the Shareholder, threatened against the Shareholder or any other person that restricts or prohibits (or, if successful, would restrict or prohibit) the exercise by Parent of its
rights under this Agreement or the performance by any party of its obligations under this Agreement.
(b)
Covenants
. From the date
hereof until the Expiration Time:
(i) The Shareholder agrees not to take any action that would make any representation or warranty of
the Shareholder contained herein untrue or incorrect or have the effect of preventing, impeding, delaying, interfering with or adversely affecting the performance by the Shareholder of its obligations under this Agreement.
(ii) The Shareholder hereby agrees to promptly notify Parent of the number of shares of Company Common Stock acquired by the Shareholder and
over which the Shareholder exercises sole rights of disposition and voting, if any, after the date hereof. Any such shares shall be subject to the terms of this Agreement as though owned by the Shareholder on the date hereof and shall be deemed
Shares for all purposes hereof.
(iii) The Shareholder hereby authorizes Parent and the Company to publish and disclose in
any announcement or disclosure required by applicable law and any proxy statement or prospectus filed in connection with the transactions contemplated by the Merger Agreement the Shareholders identity and ownership of the Shares and the nature
of the Shareholders obligation under this Agreement.
Section 3.
Further Assurances
. From time to time, at the request
of Parent and without further consideration, the Shareholder shall execute and deliver such additional documents and take all such further action as may be necessary to consummate and make effective the transactions contemplated by this Agreement.
Section 4.
Termination
. Other than this Section 4 and Section 5, which shall survive any termination of this
Agreement, this Agreement will terminate upon the earlier of (a) the Effective Time and (b) the date of termination of the Merger Agreement in accordance with its terms (the
Expiration Time
);
provided
that no such
termination shall relieve any party hereto from any liability for any breach of this Agreement occurring prior to such termination.
Section 5.
Miscellaneous
.
(a)
Expenses
. All expenses incurred in connection with this Agreement and the transactions contemplated by this Agreement shall be
paid by the party incurring such expenses.
D-3
(b)
Notices
. Any notice required to be given hereunder shall be sufficient if in writing,
and sent by email or facsimile transmission (with confirmation), by reliable overnight delivery service (with proof of service), hand delivery or certified or registered mail (return receipt requested and first-class postage prepaid), addressed as
follows:
(i) If to Parent, to:
Sandy Spring Bancorp, Inc.
17801 Georgia Avenue
Olney, MD
20832
Attention: Ronald E. Kuykendall
EVP, General
Counsel & Secretary
Facsimile: 301.774.8434
Email: rkuykendall@sandyspringbank.com
with a copy (which shall not constitute notice) to:
Kilpatrick Townsend & Stockton LLP
607 14
th
Street NW
Washington, DC 20005
Attention: Aaron M. Kaslow
Facsimile: 202.204.5600
Email:
akaslow@kilpatricktownsend.com
(ii) If to the Shareholder, to the address of the Shareholder set forth below the Shareholders
signature on the signature pages hereto.
(c)
Amendments, Waivers, Etc.
This Agreement may not be amended, changed, supplemented,
waived or otherwise modified or terminated except by an instrument in writing signed by each of the parties hereto.
(d)
Successors
and Assigns
. No party hereto may assign any of its rights or delegate any of its obligations under this Agreement without the prior written consent of the other party hereto, except Parent may, without the consent of the Shareholder, assign any
of Parents rights and delegate any of Parents obligations under this Agreement to any affiliate of Parent. Subject to the preceding sentence, this Agreement shall be binding upon and shall inure to the benefit of and be enforceable by
the parties and their respective successors and assigns, including without limitation any corporate successor by merger or otherwise. Notwithstanding any Transfer of shares of Company Common Stock consistent with this Agreement, the transferor shall
remain liable for the performance of all obligations of transferor under this Agreement.
(e)
Third Party Beneficiaries
. Nothing
expressed or referred to in this Agreement will be construed to give any person, other than the parties to this Agreement and their respective successors and permitted assigns, any legal or equitable right, remedy or claim under or with respect to
this Agreement or any provision of this Agreement.
(f)
No Partnership, Agency, or Joint Venture
. This Agreement is intended to
create, and creates, a contractual relationship and is not intended to create, and does not create, any agency, partnership, group (as such term is used in Section 13(d) of the Exchange Act), joint venture or any like relationship
between the parties hereto.
(g)
Entire Agreement
. This Agreement embodies the entire agreement and understanding among the
parties hereto relating to the subject matter hereof and supersedes all prior agreements and understandings relating to such subject matter.
D-4
(h)
Severability
. If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any rule or law, or public policy, all other terms and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby
is not affected in any manner materially adverse to any party hereto. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the extent possible.
(i)
Specific Performance; Remedies Cumulative
. The parties hereto acknowledge that money damages are not an adequate remedy for
breaches of this Agreement, that any breach of this Agreement would cause irreparable harm to the non-breaching party and that any party, in addition to any other rights and remedies which the parties may have hereunder or at law or in equity, may,
in its sole discretion, apply to a court of competent jurisdiction for specific performance or injunction or such other relief as such court may deem just and proper in order to enforce this Agreement or prevent any violation hereof and, to the
extent permitted by applicable law, each party waives any objection to the imposition of such relief. All rights, powers and remedies provided under this Agreement or otherwise available in respect hereof at law or in equity shall be cumulative and
not alternative, and the exercise or beginning of the exercise of any such right, power or remedy by any party shall not preclude the simultaneous or later exercise of any other such rights, powers or remedies by such party.
(j)
No Waiver
. The failure of any party hereto to exercise any right, power or remedy provided under this Agreement or otherwise
available in respect hereof at law or in equity, or to insist upon compliance by any other party hereto with its obligations hereunder, and any custom or practice of the parties at variance with the terms hereof, shall not constitute a waiver by
such party of its right to exercise any such or other right, power or remedy or to demand such compliance.
(k)
Governing Law
.
This Agreement and all disputes or controversies arising out of or relating to this Agreement or the transactions contemplated hereby shall be governed by, and construed in accordance with, the internal laws of the State of Maryland, without regard
to any applicable conflicts of law principles.
(l)
Submission to Jurisdiction
. The parties hereto agree that any suit, action or
proceeding brought by either party to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby shall be brought in any federal or state court located in the State
of Maryland. Each of the parties hereto submits to the jurisdiction of any such court in any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of, or in connection with, this Agreement or the
transactions contemplated hereby, and hereby irrevocably waives the benefit of jurisdiction derived from present or future domicile or otherwise in such action or proceeding. Each party hereto irrevocably waives, to the fullest extent permitted by
law, any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.
(m)
Waiver of Jury Trial
. EACH PARTY HERETO ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY THAT MAY ARISE UNDER THIS AGREEMENT IS
LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH PARTY HEREBY KNOWINGLY, INTENTIONALLY AND VOLUNTARILY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION,
DIRECTLY OR INDIRECTLY, ARISING OUT OF, OR RELATING TO, THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (B) EACH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER AND (C) EACH
D-5
PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
(n)
Drafting and Representation
. The parties hereto have participated jointly in the negotiation and drafting of this Agreement. No
provision of this Agreement will be interpreted for or against any party because that party or its legal representative drafted the provision.
(o)
Name, Captions, Gender
. Section headings of this Agreement are for reference purposes only and are to be given no effect in the
construction or interpretation of this Agreement. Whenever the context may require, any pronoun used herein shall include the corresponding masculine, feminine or neuter forms.
(p)
Counterparts
. This Agreement may be executed by facsimile or other electronic means and in any number of counterparts, each of
which shall be deemed to be an original, but all of which together shall constitute one instrument. Each counterpart may consist of a number of copies each signed by less than all, but together signed by all, the parties hereto.
[
Signature Pages Follow
]
D-6
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Agreement as of the
date and year first written above.
|
|
|
|
|
SANDY SPRING BANCORP, INC.
|
|
|
By:
|
|
/s/ Daniel J. Schrider
|
|
|
Name: Daniel J. Schrider
|
|
|
Title: President and Chief Executive Officer
|
[
Signature Page to Voting Agreement
]
D-7
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Agreement as of the
date and year first written above.
|
ENDICOTT OPPORTUNITY PARTNERS III, L.P.
|
By:
W.R. Endicott III, L.L.C., its general partner
|
|
|
|
|
|
|
By:
|
|
/s/ Wayne K. Goldstein
|
|
|
Name: Wayne K. Goldstein
|
|
|
Title: Managing Member
|
|
|
|
Number of Shares of Company Common Stock:
|
|
1,199,032
|
|
|
Address:
|
|
570 Lexington Avenue, 37
th
Floor
|
|
|
|
|
New York, NY 10022
|
|
|
Phone:
|
|
212-450-8070
|
|
|
Facsimile:
|
|
212-450-5530
|
|
|
Email:
|
|
wayne@theendicottgroup.com
|
|
|
|
|
brad@theendicottgroup.com
|
[
Signature Page to Voting Agreement
]
D-8
Annex E
May 15, 2017
The Board of Directors
WashingtonFirst Bankshares, Inc.
11921 Freedom Drive
Suite 250
Reston, VA 20190
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 the common shareholders of WashingtonFirst Bankshares, Inc. (WashingtonFirst) of the Exchange Ratio (as defined below), in the proposed merger of Touchdown Acquisition, Inc. (Merger
Sub), a wholly-owned subsidiary of Sandy Spring Bancorp, Inc. (Sandy Spring), with and into WashingtonFirst, as a result of which WashingtonFirst would be the surviving corporation and a wholly-owned subsidiary of Sandy Spring
(such transaction, the First-Step Merger and, taken together with the immediately subsequent merger of WashingtonFirst with and into Sandy Spring (with Sandy Spring as the surviving corporation), the Transaction), pursuant to
the Agreement and Plan of Merger (the Agreement) to be entered into by and among WashingtonFirst, Merger Sub and Sandy Spring. 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 First-Step Merger, automatically and without any action on the part of any holder of shares of common stock, par value $0.01 per share, of WashingtonFirst (WashingtonFirst Voting
Common Stock) or any holder of shares of non-voting common stock, Series A, of WashingtonFirst (WashingtonFirst Non-Voting Common Stock and, together with WashingtonFirst Voting Common Stock, WashingtonFirst Common
Stock), each share of WashingtonFirst Common Stock issued and outstanding at the Effective Time (other than Dissenting Shares and Excluded Shares (each as defined in the Agreement)) shall become and be converted into 0.8713 of a share of
common stock, par value $1.00 per share, of Sandy Spring (Sandy Spring Common Stock), subject to adjustment (as to which we express no opinion) if the Parent Average Price (as defined in the Agreement) is less than $37.07 or greater than
$50.15. The foregoing ratio of 0.8713 of a share of Sandy Spring Common stock for one share of WashingtonFirst Common Stock is referred to herein as the Exchange Ratio. The terms and conditions of the Transaction are more fully set forth
in the Agreement.
The Agreement further provides that, simultaneously with or immediately following the Effective Time, WashingtonFirst
Bank, a wholly-owned subsidiary of WashingtonFirst, is expected to merge with and into Sandy Spring Bank, a wholly-owned subsidiary of Sandy Spring, pursuant to a separate plan of bank merger (such transaction, the Bank Merger).
KBW has acted as financial advisor to WashingtonFirst 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 our and their broker-dealer businesses, and in the case of
Keefe, Bruyette & Woods, A Stifel Company ● 787 Seventh
Avenue ● New York, NY 10019
(212) 887-7777 ● www.kbw.com
E-1
The Board of Directors WashingtonFirst Bankshares, Inc.
May 15, 2017
Page
2
of 6
WashingtonFirst further to an
existing sales and trading relationship with a KBW affiliate, we and our affiliates may from time to time purchase securities from, and sell securities to, WashingtonFirst and Sandy Spring. In addition, as a market maker in securities, we and our
affiliates may from time to time have a long or short position in, and buy or sell, debt or equity securities of WashingtonFirst or Sandy Spring for our and their own accounts and for the accounts of our and their respective customers and clients.
We have acted exclusively for the board of directors of WashingtonFirst (the Board) in rendering this opinion and will receive a fee from WashingtonFirst 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 Transaction. In addition, WashingtonFirst has agreed to indemnify us for certain liabilities arising out of our engagement.
In addition to this present engagement, in the past two years, KBW has provided investment banking and financial advisory services to
WashingtonFirst and received compensation for such services. KBW acted as an underwriter in connection with WashingtonFirsts December 2015 registered offering of common stock. In addition, KBW acted as placement agent in connection with
WashingtonFirsts October 2015 private placement of subordinated debt securities. In the past two years, KBW has not provided investment banking or financial advisory services to Sandy Spring for which compensation was received. KBW provided
investment banking assistance to Sandy Spring in the past two years in regard to a potential transaction that was considered but not consummated by Sandy Spring, in connection with which KBW did not enter into an engagement agreement or receive
compensation. We may in the future provide investment banking and financial advisory services to WashingtonFirst or Sandy Spring and receive compensation for such services.
In connection with this opinion, we have reviewed, analyzed and relied upon material bearing upon the financial and operating condition of
WashingtonFirst and Sandy Spring and bearing upon the Transaction, including among other things, the following: (i) a draft of the Agreement dated May 15, 2017 (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, 2016 of WashingtonFirst; (iii) the unaudited quarterly financial statements and Quarterly Report on Form 10-Q for the period ended March 31,
2017 of WashingtonFirst; (iv) the audited financial statements and Annual Reports on Form 10-K for the three fiscal years ended December 31, 2016 of Sandy Spring; (v) the unaudited quarterly financial results and Quarterly Report on
Form 10-Q for the period ended March 31, 2017 of Sandy Spring; (vi) certain regulatory filings of WashingtonFirst and Sandy Spring including the quarterly reports on Form FR Y-9C and call reports filed with respect to each quarter during
the three-year period ended March 31, 2017 for Sandy Spring and December 31, 2016 for WashingtonFirst and their respective subsidiaries call reports filed with respect to each quarter during the three-year period ended March 31,
2017; (vii) certain other interim reports and other communications of WashingtonFirst and Sandy Spring to their respective shareholders; and (viii) other financial information concerning the businesses and operations of WashingtonFirst and
Sandy Spring that was furnished to us by WashingtonFirst and Sandy Spring or which we were otherwise directed to use for purposes of our analyses. 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 WashingtonFirst and Sandy Spring; (ii) the assets and liabilities of
WashingtonFirst and Sandy Spring; (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 for WashingtonFirst
and Sandy Spring with similar information for certain other companies the securities of which are publicly traded; (v) financial and operating forecasts and projections of WashingtonFirst that were prepared by, and provided to us and discussed
with us by, WashingtonFirst management and that were used and relied upon by us at the direction of such management and
Keefe, Bruyette & Woods, A Stifel Company ● 787 Seventh Avenue ● New York, NY 10019
(212) 887-7777 ● www.kbw.com
E-2
The Board of Directors WashingtonFirst Bankshares, Inc.
May 15, 2017
Page
3
of 6
with the consent of the Board;
(vi) publicly available consensus street estimates of Sandy Spring for 2017 and 2018, as well as adjustments thereto for 2018 and assumed long-term Sandy Spring growth rates provided to us by Sandy Spring management, all of which
information was discussed with us by Sandy Spring management and used and relied upon by us based on such discussions, at the direction of WashingtonFirst management and with the consent of the Board; and (vii) estimates regarding certain pro
forma financial effects of the Transaction on Sandy Spring (including, without limitation, the cost savings and related expenses expected to result or be derived from the Transaction) that were prepared by, and provided to and discussed with us by,
Sandy Spring management, and used and relied upon by us based on such discussions, at the direction of WashingtonFirst management and 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 held by the managements of WashingtonFirst and Sandy Spring 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 addition, we have considered the results of the efforts undertaken by WashingtonFirst, with our assistance, to solicit indications of interest from third parties regarding a potential transaction
with WashingtonFirst.
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 that was provided to us or that was 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 WashingtonFirst as to the reasonableness and achievability of the financial and operating forecasts and projections of WashingtonFirst referred to above (and the
assumptions and bases therefor), and we have assumed that such forecasts and projections were reasonably prepared and represent the best currently available estimates and judgments of such management and that such forecasts and projections will be
realized in the amounts and in the time periods currently estimated by such management. We have further relied, with the consent of WashingtonFirst, upon Sandy Spring management as to the reasonableness and achievability of the publicly available
consensus street estimates of Sandy Spring (as adjusted for 2018), the assumed Sandy Spring long-term growth rates, and the estimates regarding certain pro forma financial effects of the Transaction on Sandy Spring, all as referred to
above (and the assumptions and bases for all such information, including, without limitation, the cost savings and related expenses expected to result or be derived from the Transaction), and we have assumed that all such information was reasonably
prepared and represents, or in the case of the Sandy Spring street estimates (as adjusted for 2018) referred to above that such estimates are consistent with, the best currently available estimates and judgments of Sandy Spring
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 portion of the foregoing financial information of WashingtonFirst and Sandy Spring that was provided to us was not
prepared with the expectation of public disclosure, that all of the foregoing financial information, including the publicly available consensus street estimates of Sandy Spring, is 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 WashingtonFirst and Sandy Spring and with the consent of the Board, that all such information provides a
Keefe, Bruyette & Woods, A Stifel Company ● 787 Seventh Avenue ● New York, NY 10019
(212) 887-7777 ● www.kbw.com
E-3
The Board of Directors WashingtonFirst Bankshares, Inc.
May 15, 2017
Page
4
of 6
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 assumed that there were no material changes in the assets, liabilities,
financial condition, results of operations, business or prospects of either WashingtonFirst or Sandy Spring 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 WashingtonFirst and Sandy Spring 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 WashingtonFirst or Sandy Spring, 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 WashingtonFirst or
Sandy Spring 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 Transaction and any related transactions
(including the Bank 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 reviewed and
referred to above) with no adjustments to the Exchange Ratio and with no other consideration or payments in respect of the WashingtonFirst Common Stock; (ii) 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; (iii) that each party to the Agreement and all related documents will perform all of the covenants and agreements required to be performed by such party under
such documents; (iv) that there are no factors that would delay or subject to any adverse conditions, any necessary regulatory or governmental approval for the Transaction or any related transactions (including the Bank Merger) and that all
conditions to the completion of the Transaction and any related transaction will be satisfied without any waivers or modifications to the Agreement or any of the related documents; and (v) that in the course of obtaining the necessary
regulatory, contractual, or other consents or approvals for the Transaction and any related transaction (including the Bank Merger), 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 WashingtonFirst, Sandy Spring or the pro forma entity, or the contemplated benefits of the Transaction, including
without limitation the cost savings and related expenses expected to result or be derived from the Transaction. We have assumed that the Transaction 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 of WashingtonFirst that WashingtonFirst 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 WashingtonFirst, Sandy Spring, Merger Sub, the Transaction and any related
transaction (including the Bank Merger), 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 First-Step Merger to the holders of WashingtonFirst Common Stock, without regard to
Keefe, Bruyette & Woods, A Stifel Company ● 787 Seventh Avenue
● New York, NY 10019
(212) 887-7777 ● www.kbw.com
E-4
The Board of Directors WashingtonFirst Bankshares, Inc.
May 15, 2017
Page
5
of 6
differences between
WashingtonFirst Voting Common Stock and WashingtonFirst Non-Voting Common Stock. We express no view or opinion as to any other terms or aspects of the Transaction or any term or aspect of any related transaction (including the Bank Merger),
including without limitation, the form or structure of the Transaction or any such related transaction, any consequences of the Transaction or any such related transaction to WashingtonFirst, its shareholders, creditors or otherwise, or any terms,
aspects, merits or implications of any employment, consulting, voting, support, shareholder or other agreements, arrangements or understandings contemplated or entered into in connection with the 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. For purposes of our analyses, we have not incorporated recently-announced proposed changes to United States tax laws regarding corporate tax rates. Our opinion does not
address, and we express no view or opinion with respect to, (i) the underlying business decision of WashingtonFirst to engage in the Transaction or enter into the Agreement; (ii) the relative merits of the Transaction as compared to any
strategic alternatives that are, have been or may be available to or contemplated by WashingtonFirst or the Board; (iii) the fairness of the amount or nature of any compensation to any of WashingtonFirsts officers, directors or employees,
or any class of such persons, relative to the compensation to the holders of WashingtonFirst Common Stock; (iv) the effect of the Transaction or any related transaction on, or the fairness of the consideration to be received by, holders of any
class of securities of WashingtonFirst (other than the holders of WashingtonFirst Common Stock solely with respect to the Exchange Ratio, as described herein and not relative to the consideration to be received by holders of any other class of
securities) or holders of any class of securities of Sandy Spring or any other party to any transaction contemplated by the Agreement; (v) the relative fairness of the Exchange Ratio as between holders of WashingtonFirst Voting Common Stock and
holders of WashingtonFirst Non-Voting Common Stock; (vi) any adjustment (as provided in the Agreement) to the Exchange Ratio assumed for purposes of our opinion or any other additional consideration (as provided in the Agreement) that could be
paid for WashingtonFirst Common Stock; (vii) the actual value of Sandy Spring Common Stock to be issued in the First-Step Merger; (viii) the prices, trading range or volume at which WashingtonFirst Voting Common Stock or Sandy Spring
Common Stock will trade following the public announcement of the Transaction or the prices, trading range or volume at which Sandy Spring Common Stock will trade following the consummation of the Transaction; (ix) any advice or opinions
provided by any other advisor to any of the parties to the Transaction or any other transaction contemplated by the Agreement; or (x) any legal, regulatory, accounting, tax or similar matters relating to WashingtonFirst, Sandy Spring, their
respective shareholders, or relating to or arising out of or as a consequence of the Transaction or any related transaction (including the Bank Merger), including whether or not the Transaction 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 Transaction. This opinion does not constitute a recommendation to the Board as to how it should vote on the Transaction, or to any holder of WashingtonFirst Voting Common Stock or any
shareholder of any other entity as to how to vote in connection with the Transaction or any other matter, nor does it constitute a recommendation regarding whether or not any such shareholder should enter into a voting, shareholders, or
affiliates agreement with respect to the Transaction 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.
Keefe, Bruyette & Woods, A Stifel Company ● 787 Seventh Avenue ● New York, NY 10019
(212) 887-7777 ● www.kbw.com
E-5
The Board of Directors WashingtonFirst Bankshares, Inc.
May 15, 2017
Page
6
of 6
Based upon and
subject to the foregoing, it is our opinion that, as of the date hereof, the Exchange Ratio in the First-Step Merger is fair, from a financial point of view, to the holders WashingtonFirst Common Stock.
|
Very truly yours,
|
|
|
|
Keefe, Bruyette & Woods, Inc.
|
Keefe, Bruyette & Woods, A
Stifel Company ● 787 Seventh Avenue ● New York, NY 10019
(212) 887-7777 ● www.kbw.com
E-6
Annex F
May 15, 2017
Board of Directors
Sandy Spring Bancorp, Inc.
17801 Georgia Avenue
Olney, MD 20832
Ladies and Gentlemen:
Sandy Spring Bancorp,
Inc. (Parent), Touchdown Acquisition, Inc., a wholly owned subsidiary of Parent (Merger Sub), and WashingtonFirst Bankshares, Inc. (Company) are proposing to enter into an Agreement and Plan of Merger (the
Agreement) pursuant to which (i) Merger Sub will be merged with and into Company (the First-Step Merger), so that Company is the surviving entity in the First-Step Merger and a wholly-owned subsidiary of Parent, and
(ii) immediately thereafter, Company, as the surviving entity in the First-Step Merger, will merge with an into Parent (the Second-Step Merger and, together with the First-Step Merger, the Merger), with Parent as the
surviving entity in the Merger. Pursuant to the terms of the Agreement, at the Effective Time, by virtue of the First-Step Merger, automatically and without any action on the part of the holder thereof, each share of common stock, par value $0.01
per share, of Company and each share of Non-Voting Common Stock, Series A, of Company (together, Company Common Stock) that is issued and outstanding at the Effective Time, except for certain shares of Company Common Stock as specified
in the Agreement, shall become and be converted into the number of shares (the Exchange Ratio) of common stock, par value $1.00 per share, of Parent (Parent Common Stock) as follows: (i) if the Parent Average Price is
greater than $53.23, the Exchange Ratio shall equal 0.8210; (ii) if the Parent Average Price is greater than $50.15 and equal to or less than $53.23, the Exchange Ratio shall equal the quotient of $43.70 divided by the Parent Average Price;
(iii) if the Parent Average Price is equal to or greater than $37.07 and equal to or less than $50.15, the Exchange Ratio shall equal 0.8713; (iv) if the Parent Average Price is equal to or greater than $34.00 and less than $37.07, the
Exchange Ratio shall be equal to the quotient of $32.30 divided by the Parent Average Price; and (v) if the Parent Average Price is less than $34.00, the Exchange Ratio shall equal 0.9500. Capitalized terms used herein without definition shall
have the meanings assigned to them in the Agreement. The terms and conditions of the Merger are more fully set forth in the Agreement. You have requested our opinion as to the fairness, from a financial point of view, of the Exchange Ratio to
Parent.
Sandler ONeill & Partners, L.P. (Sandler ONeill, we or our), 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 and
considered, among other things: (i) an execution version of the Agreement, dated May 15, 2017; (ii) certain publicly available financial statements and other historical financial information of Parent and its bank subsidiary
F-1
that we deemed relevant; (iii) certain publicly available financial statements and other historical financial information of Company and its bank subsidiary that we deemed relevant;
(iv) publicly available consensus analyst earnings per share estimates for Parent for the years ending December 31, 2017 and December 31, 2018, as well as estimated dividends per share and long term earnings per share and asset growth
rates for the years thereafter, as discussed with and confirmed by the senior management of Parent; (v) publicly available consensus analyst earnings per share estimates for Company for the years ending December 31, 2017 and
December 31, 2018, as well as estimated dividends per share and long term earnings per share and asset growth rates for the years thereafter, as discussed with and confirmed by the senior management of Company; (vi) the pro forma financial
impact of the Merger on Parent based on certain assumptions relating to transaction expenses, purchase accounting adjustments and cost savings, as provided by the senior management of Parent; (vii) the publicly reported historical price and
trading activity for Parent Common Stock and Company Common Stock, including a comparison of certain stock trading information for Parent Common Stock, Company 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 Parent and Company with similar bank and thrift institutions for which information is publicly available;
(ix) the financial terms of certain recent business combinations in the bank and thrift industry (on a regional and nationwide basis), to the extent publicly available; (x) the current market environment generally and the banking
environment 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 the senior management of
Parent the business, financial condition, results of operations and prospects of Parent and held similar discussions with certain members of the senior management of Company regarding the business, financial condition, results of operations and
prospects of Company.
In performing our review, we have relied upon the accuracy and completeness of all of the financial and other
information that was available to and reviewed by us from public sources, that was provided to us by Parent, Company or their respective representatives or that was otherwise reviewed by us and we have assumed such accuracy and completeness for
purposes of rendering this opinion without any independent verification or investigation. We have further relied on the assurances of the respective managements of Parent and Company 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 perform an appraisal of the specific assets, the collateral securing assets or the liabilities (contingent or otherwise) of Parent or Company, 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 Parent or Company. We did not make an independent evaluation of the adequacy of the allowance for loan losses of Parent
or Company, or the combined entity after the Merger and we have not reviewed any individual credit files relating to Parent or Company. We have assumed, with your consent, that the respective allowances for loan losses for both Parent and Company
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 analyst earnings per share estimates for Parent for the years ending December 31, 2017 and December 31, 2018, as well as estimated dividends per share and long term earnings per share and
asset growth rates for the years thereafter, as discussed with and confirmed by the senior management of Parent. In addition, in preparing its analyses Sandler ONeill used publicly available consensus analyst earnings per share estimates for
Company for the years ending December 31, 2017 and December 31, 2018, as well as estimated dividends per share and long term earnings per
F-2
share and asset growth rates for the years thereafter, as discussed with and confirmed by the senior management of Company. Sandler ONeill also received and used in its pro forma analyses
certain assumptions relating to transaction expenses, purchase accounting adjustments and cost savings, as provided by the senior management of Parent. With respect to the foregoing information, the respective managements of Parent and Company
confirmed to us that such information reflected (or, in the case of the publicly available consensus analyst earnings per share estimates referred to above, were consistent with) the best currently available estimates and judgments of those
respective managements of the future financial performance of Parent and Company, 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 Parents or Companys assets, financial condition, results of operations, business or prospects since the date of the most recent financial statements made available to
us. We have assumed in all respects material to our analysis that Parent and Company will remain as going concerns for all periods relevant to our analyses.
We have also assumed, with your consent, in all respects material to our analysis, that (i) each of the parties to the Agreement will
comply in all material respects with all material terms and conditions 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 and other obligations required to be performed by such party under such 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
Parent, Company or the Merger or any related transaction, (iii) 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, and (iv) the Merger will qualify as a tax-free reorganization for federal income tax purposes. We express no opinion as to any of the legal,
accounting or tax matters relating to the Merger or any other transactions contemplated in connection therewith.
Our opinion is
necessarily based on financial, economic, 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 opinion. We have not
undertaken to update, revise, reaffirm or withdraw this opinion or otherwise comment upon events occurring after the date hereof. We express no opinion as to the trading values of Parent Common Stock or Company Common Stock at any time or what the
value of Parent Common Stock will be once it is actually received by the holders of Company Common Stock.
We will receive a fee for
rendering this opinion. Parent has also agreed to indemnify us against certain claims and liabilities arising out of our engagement and to reimburse us for certain of our out-of-pocket expenses incurred in connection with our engagement. Sandler
ONeill has not provided any other investment banking services to Parent in the two years preceding the date hereof. As we previously advised you, in the two years preceding the date hereof we have provided certain investment banking services
to, and received investment banking fees from, Company. Most recently, Sandler ONeill acted as placement agent in connection with the offer and sale of Parents subordinated debt in October 2015 and as financial advisor to the board of
directors of Company in connection with Companys acquisition of 1
st
Portfolio Holding Corporation, which transaction closed in July 2015. In the ordinary course of our business as a
broker-dealer, we may purchase securities from and sell securities to Parent, Company and their respective affiliates. We may also actively trade the equity and
F-3
debt securities of Parent, Company or their respective affiliates for our own account and for the accounts of our customers.
Our opinion is directed to the Board of Directors of Parent in connection with its consideration of the Agreement and the Merger and does not
constitute a recommendation to any shareholder of Parent as to how any 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 Parent and does not address the underlying business decision of Parent to engage in the Merger, the form or structure of the Merger or any other transactions contemplated in the Agreement, the relative merits of the
Merger as compared to any other alternative transactions or business strategies that might exist for Parent, or the effect of any other transaction in which Parent might engage. We also do not express any opinion as to the amount or nature of the
compensation to be received in the Merger by any Parent or Company officer, director or employee, or any class of such persons, if any, relative to the amount of compensation to be received by any other shareholder. This opinion has been approved by
Sandler ONeills fairness opinion committee. This opinion shall not be reproduced or summarized 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 Parent from a financial point of view.
Very
truly yours,
F-4
Using a black ink pen, mark your votes with an X as shown in this example. Please do not write outside the designated areas. X 02OFUB 0
2 A V + Special Meeting Proxy Card . C Authorized Signatures This section must be completed for your vote to be counted. Date and Sign Below Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as
attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title. Date (mm/dd/yyyy) Please print date below. Signature 1 Please keep signature within the box. Signature 2 Please keep
signature within the box. + B
Non-Voting
Items A Proposals The Board of Directors recommends you vote FOR Proposals 1 and 2. For Against Abstain 1. Proposal to approve the Agreement and Plan of Merger,
dated as of May 15, 2017, by and among Sandy Spring Bancorp, Inc., Touchdown Acquisition, Inc. (Merger Sub) and WashingtonFirst Bankshares, Inc. (WashingtonFirst) and the first-step merger, pursuant to which Merger Sub
will merge with and into WashingtonFirst (the WashingtonFirst Merger Proposal). For Against Abstain 2. Proposal to adjourn the WashingtonFirst special meeting, if necessary or appropriate, to solicit additional proxies in favor of the
WashingtonFirst Merger Proposal. Change of Address Please print new address below. IMPORTANT SPECIAL MEETING INFORMATION MMMMMMMMMMMM MMMMMMMMMMMMMMM 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext
000000000.000000 ext 000000000.000000 ext 000004 MR A SAMPLE DESIGNATION (IF ANY) ADD 1 ADD 2 ADD 3 ADD 4 ADD 5 ADD 6 ENDORSEMENT_LINE______________ SACKPACK_____________ 1234 5678 9012 345 MMMMMMM 3 4 3 4 5 3 1 MR A SAMPLE (THIS AREA IS SET UP TO
ACCOMMODATE 140 CHARACTERS) MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MMMMMMMMM C 1234567890 J N T C123456789 qIF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE,
FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.q Electronic Voting Instructions Available 24 hours a day, 7 days a week! Instead of mailing your proxy, you may choose one of the voting methods outlined
below to vote your proxy. VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE BAR. Proxies submitted by the Internet or telephone must be received by 1:00 a.m., EST, on October 18, 2017. Vote by Internet Go to www.investorvote.com/WFBI
Or scan the QR code with your smartphone Follow the steps outlined on the secure website Vote by telephone Call toll free
1-800-652-VOTE
(8683) within the USA, US territories & Canada on a touch tone telephone Follow the
instructions provided by the recorded message .
WASHINGTONFIRST BANKSHARES, INC. SPECIAL MEETING OF SHAREHOLDERS October 18, 2017, 10:00 a.m. This Proxy is Solicited on Behalf of the
Board of Directors The undersigned hereby appoints Shaza L. Andersen and Matthew R. Johnson as proxies, each with full power to act alone and with full power of substitution, to represent and vote as designated on the reverse side, all the shares of
Common Stock of WashingtonFirst Bankshares, Inc. held of record by the undersigned on August 31, 2017, at the Special Meeting of Shareholders to be held at its corporate headquarters located at 11921 Freedom Drive, Suite 250, Reston, Virginia
20190, on October 18, 2017 at 10:00 a.m, or any adjournments or postponements thereof. THIS PROXY, WHEN PROPERLY EXECUTED AND SUBMITTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE SHAREHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY WILL
BE VOTED FOR PROPOSALS 1 AND 2. Continued and to be signed on reverse side. Revocable Proxy WashingtonFirst Bankshares, Inc. qIF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM
PORTION IN THE ENCLOSED ENVELOPE.q