AGREEMENT AND PLAN OF MERGER

Exhibit 2.1

AGREEMENT AND PLAN OF MERGER

BY AND BETWEEN

EASTERN VIRGINIA BANKSHARES, INC.

AND

FIRST CAPITAL BANCORP, INC.

April 3, 2009

TABLE OF CONTENTS

 

 

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iii

LIST OF EXHIBITS

 

 

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AGREEMENT AND PLAN OF MERGER

DISCLOSURE SCHEDULES

 

 

 

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EVBS SCHEDULES

 

 

 

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AGREEMENT AND PLAN OF MERGER

BY AND BETWEEN

EASTERN VIRGINIA BANKSHARES, INC.

AND

FIRST CAPITAL BANCORP, INC.

This AGREEMENT AND PLAN OF MERGER, dated as of the 3rd day of April, 2009 (this “Agreement”), by and between EASTERN VIRGINIA BANKSHARES, INC., a Virginia corporation (“EVBS”), and FIRST CAPITAL BANCORP, INC., a Virginia corporation (“FCB”).

WITNESSETH THAT:

WHEREAS, the respective Boards of Directors of EVBS and FCB deem it in the best interests of EVBS and of FCB, respectively, and of their respective shareholders, that EVBS and FCB merge pursuant to this Agreement in a transaction that qualifies as a reorganization pursuant to Section 368 of the Internal Revenue Code of 1986 (as amended, the “Code”); and

WHEREAS, the Boards of Directors of EVBS and FCB have approved this Agreement and the Boards of Directors of EVBS and FCB have directed that this Agreement be submitted to the EVBS and FCB shareholders, respectively, for approval and adoption in accordance with the laws of the Commonwealth of Virginia.

NOW, THEREFORE, in consideration of the premises and the mutual covenants, representations, warranties and agreements herein contained, the parties agree that FCB will be merged with and into EVBS and that the terms and conditions of the Merger, the mode of carrying the Merger into effect, including the manner of converting the shares of common stock of FCB, par value of $4.00 per share, into shares of common stock of EVBS, par value of $2.00 per share, shall be as hereinafter set forth.

ARTICLE 1

THE MERGER

Section 1.1 Consummation of Merger; Closing Date .

(a) Subject to the provisions hereof, FCB shall be merged with and into EVBS (which shall hereinafter be referred to as the “Merger”) pursuant to the laws of the Commonwealth of Virginia, and EVBS shall be the surviving corporation (sometimes hereinafter referred to as “Surviving Corporation” when reference is made to it after the Effective Time of the Merger). Subject to the provisions hereof, EVBS and FCB shall file with the Virginia State Corporation Commission Articles of Merger in substantially the form of Exhibit 1.1(a) attached hereto (the “Articles of Merger”) containing this Agreement and Plan of Merger as an attachment in accordance with all applicable legal requirements. The Merger shall become effective on the date and at the time the parties specify in the Articles of Merger pursuant to the preceding sentence (such time is hereinafter referred to as the “Effective Time of the Merger” or

the “Effective Time”). Unless otherwise agreed upon by EVBS and FCB, the Effective Time of the Merger shall be specified as the tenth (10th) business day following the later to occur of (i) the effective date (including expiration of any applicable waiting period) of the last required Consent of any Regulatory Authority (as defined herein) having authority over the transactions contemplated under this Agreement, (ii) the date on which the shareholders of EVBS approve the transactions contemplated by this Agreement or (iii) the date on which the shareholders of FCB approve the transactions contemplated by this Agreement.

(b) The closing of the Merger (the “Closing”) shall take place at the Richmond offices of Williams Mullen on a date and time as the parties may agree (the “Closing Date”). At the Closing there shall be delivered to each of the parties hereto the opinions, certificates and other documents and instruments required to be so delivered pursuant to this Agreement.

Section 1.2 Effect of Merger . At the Effective Time of the Merger, FCB shall be merged with and into EVBS and the separate existence of FCB shall cease. The Articles of Incorporation and Bylaws of EVBS, as in effect on the date hereof and as otherwise amended prior to the Effective Time of the Merger as contemplated herein, shall be the Articles of Incorporation and the Bylaws of the Surviving Corporation until further amended as provided therein and in accordance with applicable law. The Merger shall have the effects set forth in Section 13.1-721.A of the Code of Virginia, as amended.

Section 1.3 Further Assurances . From and after the Effective Time of the Merger, as and when requested by the Surviving Corporation, the officers and directors of FCB last in office shall execute and deliver or cause to be executed and delivered in the name of FCB such deeds and other instruments and take or cause to be taken such further or other actions as shall be necessary in order to vest or perfect in or confirm of record or otherwise to the Surviving Corporation title to and possession of all of the property, interests, assets, rights, privileges, immunities, powers, franchises and authority of FCB.

Section 1.4 Directors . At the Effective Time of the Merger, the board of directors of EVBS shall have thirteen (13) members, five (5) of whom will be selected from the current directors of FCB and mutually agreed to by the parties prior to the mailing of the Proxy Statement (the “FCB Directors”) and eight (8) of whom will be selected from the current directors of EVBS and mutually agreed to by the parties prior to the mailing of the Proxy Statement (the “EVBS Directors’). The FCB Directors will include Grant S. Grayson, who will serve as Vice Chairman of the Board of the Surviving Corporation, John M. Presley and three (3) additional directors. The EVBS directors will include W. Rand Cook, who will serve as Chairman of the Board of the Surviving Corporation, Joe A. Shearin, and six (6) additional directors. The FCB Directors and the EVBS Directors shall serve and hold such offices until the next annual meeting of shareholders of the Surviving Corporation, until their successors are elected and qualified, or until their resignation or removal, subject to the articles of incorporation and bylaws of the Surviving Corporation. At the effective time of the merger between EVB and First Capital Bank, the EVBS Board of Directors shall cause the board of directors of EVB to have eighteen (18) members and it shall appoint to the board of directors of EVB (i) ten (10) members selected from the current members of the board of directors of EVBS or EVB (the

 

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“EVB Directors”), and (ii) eight (8) members selected from the current members of the board of directors of FCB or the current board of First Capital Bank (the “First Capital Directors”). The EVB Directors will include Joseph H. James, Jr., Joe A. Shearin and eight (8) additional directors. The First Capital Directors will include John M. Presley, Robert G. Watts, Jr. and six (6) additional FCB directors.

Section 1.5 Officers . Joe A. Shearin shall be Chief Executive Officer and President and John M. Presley shall be Managing Director and Chief Financial Officer of EVBS at and after the Effective Time of the Merger. Robert G. Watts, Jr. shall be Chief Executive Officer and President and Joseph H. James, Jr. shall be Chief Operating Officer of EVB at and after the Effective Time of the Merger.

Section 1.6 Subsidiary Bank Merger . After the Effective Time, First Capital Bank, a wholly-owned subsidiary of FCB, shall merge with and into EVB, a wholly-owned subsidiary of EVBS (the “Bank Merger”), the separate existence of First Capital Bank shall cease and EVB shall survive and continue to exist as a Virginia banking corporation. EVBS may at any time prior to the Effective Time change the method of effecting the combination with First Capital Bank (including without limitation the provisions of this Section 1.6) if and to the extent it deems such changes necessary, appropriate or desirable; provided, however that no such change shall (i) alter or change the amount or kind of Merger Consideration, (ii) adversely affect the tax treatment of FCB stockholders as a result of receiving the Merger Consideration or (iii) materially impede or delay consummation of the transactions contemplated by this Agreement; and provided further, that EVBS shall provide FCB with prior written notice of such change and the reasons therefore.

Section 1.7 Creation of EVBS Series B Preferred Shares . At or before the Effective Time, EVBS covenants and agrees to take the necessary steps to create and issue a new series of EVBS preferred stock, with the same rights and preferences as the EVBS Series A Preferred Shares, necessary to convert FCB Series A Preferred Shares pursuant to Section 2.1(b) hereof (the “EVBS Series B Preferred Shares”).

ARTICLE 2

BASIS AND MANNER OF CONVERSION; MANNER OF EXCHANGE

Section 2.1 Conversion of FCB Shares and FCB Series A Preferred Shares .

(a) At the Effective Time, by virtue of the Merger and without any action on the part of a holder of FCB Shares:

(i) Each EVBS Share that is issued and outstanding at the Effective Time shall remain issued and outstanding and shall remain unchanged by the Merger.

(ii) Subject to Sections 2.2 and 2.4, each FCB Share issued and outstanding immediately before the Effective Time shall be converted into, and shall be canceled in exchange for, the right to receive, 0.98 (the “Exchange Ratio”) EVBS Shares.

 

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(b) At the Effective Time, subject to Sections 2.2 and 2.4, by virtue of the Merger and without any action on the part of a holder of FCB Series A Preferred Shares issued and outstanding immediately before the Effective Time shall be converted into, and shall be canceled in exchange for, the right to receive one (the “Preferred Exchange Ratio”) EVBS Series B Preferred Share.

Section 2.2 Exchange Procedures .

(a) Upon the Effective Time, each holder of an outstanding certificate representing shares of FCB Shares prior to the Effective Date (a “FCB Certificate”) who has surrendered such FCB Certificate to the Exchange Agent will, upon acceptance thereof by the Exchange Agent, be entitled to a certificate or certificates representing the number of whole EVBS Shares which the aggregate number of shares of FCB Shares previously represented by such FCB Certificate(s) surrendered shall have been converted pursuant to this Agreement and, if such holder’s shares of FCB Shares have been converted into EVBS Shares, any other distribution on EVBS Shares issuable in the Merger with a record date after the Effective Date, in each case without interest. The Exchange Agent shall accept such FCB Certificates upon compliance with such reasonable terms and conditions as the Exchange Agent may impose to effect an orderly exchange thereof in accordance with normal exchange practices. Upon the Effective Time, each FCB Certificate that is not surrendered to the Exchange Agent in accordance with the procedures provided for herein shall, except as otherwise herein provided, until duly surrendered to the Exchange Agent be deemed to evidence ownership of the number of EVBS Shares into which such FCB Shares shall have been converted. No dividends that have been declared by EVBS will be remitted to any person entitled to receive EVBS Shares hereunder until such person surrenders the FCB Certificate(s) representing FCB Shares, at which time such dividends shall be remitted to such person, without interest.

(b) Upon the Effective Time, each holder of an outstanding certificate representing shares of FCB Series A Preferred Shares prior to the Effective Date (a “FCB Preferred Certificate”) who has surrendered such FCB Preferred Certificate to the Exchange Agent will, upon acceptance thereof by the Exchange Agent, be entitled to a certificate or certificates representing the number of whole EVBS Series B Preferred Shares which the aggregate number of shares of FCB Series A Preferred Shares previously represented by such FCB Preferred Certificate(s) surrendered shall have been converted pursuant to this Agreement and, if such holder’s shares of FCB Series A Preferred Shares have been converted into EVBS Series B Preferred Shares, any other distribution on EVBS Series B Preferred Shares issuable in the Merger with a record date after the Effective Date, in each case without interest. The Exchange Agent shall accept such FCB Preferred Certificates upon compliance with such reasonable terms and conditions as the Exchange Agent may impose to effect an orderly exchange thereof in accordance with normal exchange practices. Upon the Effective Time, each FCB Preferred Certificate that is not surrendered to the Exchange Agent in accordance with the procedures provided for herein shall, except as otherwise herein provided, until duly surrendered to the Exchange Agent be deemed to evidence ownership of the number of EVBS Series B Preferred Shares into which such FCB Series A Preferred Shares shall have been converted. No dividends that have been declared by EVBS will be remitted to any person entitled to receive

 

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EVBS Series B Preferred Shares hereunder until such person surrenders the FCB Preferred Certificate(s) representing FCB Series A Preferred Shares, at which time such dividends shall be remitted to such person, without interest.

(c) The Exchange Agent and EVBS shall not (i) be obligated to deliver a certificate or certificates representing EVBS Shares to which a holder of FCB Shares would otherwise be entitled as a result of the Merger, or (ii) be obligated to deliver a certificate or certificates representing EVBS Series B Preferred Shares to which a holder of FCB Series A Preferred Shares would otherwise be entitled as a result of the Merger, until such holder surrenders the FCB Certificate(s) representing the FCB Shares or the FCB Preferred Certificate(s) representing FCB Series A Preferred Shares, as applicable, for exchange as provided in this Section 2.2, or, in default thereof, an appropriate affidavit of loss and indemnity agreement and/or a bond in an amount as may be reasonably required in each case by EVBS.

(d) Notwithstanding anything in this Agreement to the contrary, FCB Certificates or FCB Preferred Certificates surrendered for exchange by an FCB affiliate shall not be exchanged for certificates representing EVBS Shares or EVBS Series B Preferred Shares, as applicable, to which such FCB affiliate may be entitled pursuant to the terms of this Agreement until EVBS has received a written agreement from such person as specified in Section 5.7.

Section 2.3 No Fractional Securities . No certificates or scrip representing fractional EVBS Shares shall be issued upon the surrender for exchange of FCB Certificates and such fractional shares shall not entitle the owner thereof to vote or to any other rights of a holder of EVBS Shares. A holder of shares of FCB Shares converted in the Merger who would otherwise have been entitled to a fractional EVBS Share shall be entitled to receive a cash payment (without interest) in lieu of such fractional share in an amount determined by multiplying (i) the fractional share interest to which such holder would otherwise be entitled by (ii) the product obtained by multiplying the EVBS Average Price by the Exchange Ratio.

Section 2.4 Certain Adjustments . If, after the date hereof and on or prior to the Effective Time, the outstanding shares of EVBS Shares shall be changed into a different number of shares by reason of any reclassification, recapitalization, split-up, combination or exchange of shares, or any dividend payable in stock or other securities is declared thereon with a record date within such period, or any similar event shall occur, the Merger Consideration or the Preferred Exchange Ratio will be adjusted accordingly to provide to the holders of FCB Shares or FCB Series A Preferred Shares, respectively, the same economic effect as contemplated by this Agreement prior to such reclassification, recapitalization, split-up, combination, exchange or dividend or similar event. In the event that the sum of (i) the number of FCB Shares presented for exchange pursuant to Section 2.2 or otherwise issued and outstanding at the Effective Time, and (ii) the number of FCB Shares issuable upon the exercise of options (whether pursuant to FCB Stock Options or otherwise) as of the Effective Time, shall be greater than the sum of (x) the number of shares of FCB Shares represented in Section 3.2 as being outstanding as of the date hereof, and (y) the number of shares of FCB Shares issuable upon the exercise of FCB Stock Options or FCB Warrants represented in Section 3.2 as being outstanding as of the date hereof, then the Exchange Ratio shall be appropriately and proportionately decreased to take into account such additional issued and outstanding, and issuable FCB Shares.

 

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Section 2.5 Appraisal Rights . Notwithstanding Section 2.1 hereof, any holder of FCB Series A Preferred Shares (if any) who perfects such holder’s appraisal rights in accordance with and as contemplated by Sections 13.1-729 through 13.1-741 of the Virginia Code, as amended, shall be entitled to receive from the Surviving Corporation, in lieu of the EVBS Series B Preferred Shares, the value of such shares as to which appraisal rights have been perfected in cash as determined pursuant to Sections 13.1-729 through 13.1-741 of the Virginia Code, as amended; provided, that no such payment shall be made to any holder of FCB Series A Preferred Shares asserting appraisal rights unless and until such holder of FCB Series A Preferred Shares has complied with all applicable provisions of Sections 13.1-729 through 13.1-741 of the Virginia Code, as amended, and surrendered to the Exchange Agent the certificate or certificates representing the shares for which payment is being made. In the event that after the Effective Time a holder of FCB Series A Preferred Shares who asserts appraisal rights fails to perfect, or effectively withdraws or loses, such holder’s right to appraisal of and payment for such holder’s shares, the Surviving Corporation shall issue and deliver the consideration to which such holder of shares of FCB Series A Preferred Shares is entitled under this Article 2 (without interest) upon surrender by such holder of the certificate or certificates representing such shares of FCB Series A Preferred Shares held by such holder.

Section 2.6 FCB Stock Options and FCB Warrants .

(a) FCB Stock Options. From and after the Effective Time, all options granted under the FCB Stock Option Plan to purchase FCB Shares (each, a “FCB Stock Option”), that are then outstanding and unexercised, shall vest, to the extent not already vested (unless such vesting is otherwise prohibited under applicable law, including but not limited to EESA), and be converted into and become options to purchase EVBS Shares, and EVBS shall assume each such FCB Stock Option in accordance with the terms of the plan and agreement by which it is evidenced; provided, however, that from and after the Effective Time (i) each such FCB Stock Option assumed by EVBS may be exercised solely to purchase EVBS Shares; (ii) the number of EVBS Shares purchasable upon exercise of such FCB Stock Option shall be equal to the number of shares of FCB Shares that were purchasable under such FCB Stock Option immediately prior to the Effective Time multiplied by the Exchange Ratio, rounded down to the nearest whole share, and (iii) the per share exercise price under each such FCB Stock Option shall be adjusted by dividing the per share exercise price of each such FCB Stock Option by the Exchange Ratio, rounded up to the nearest cent. The terms of each FCB Stock Option shall, in accordance with its terms, be subject to further adjustment as appropriate to reflect any stock split, stock dividend, recapitalization or other similar transaction with respect to EVBS Shares on or subsequent to the Effective Time. The adjustment provided in this Section 2.6(a) with respect to any FCB Stock Options (whether or not “incentive stock options” (as defined in Section 422 of the Code)) shall be and is intended to be effected in a manner which is consistent with Section 424(a) of the Code and, to the extent it is not so consistent, the provisions of such Section 424(a) of the Code shall override anything to the contrary contained herein.

(b) FCB Warrants. From and after the Effective Time, all FCB Warrants to purchase FCB Shares, that are then outstanding and unexercised, shall be converted into and become warrants to purchase EVBS Shares, and EVBS shall assume each such FCB Warrant in

 

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accordance with the terms of the warrant by which it is evidenced; provided, however, that from and after the Effective Time (i) each such FCB Warrant assumed by EVBS may be exercised solely to purchase EVBS Shares; (ii) the number of EVBS Shares purchasable upon exercise of such FCB Warrant shall be equal to the number of shares of FCB Shares that were purchasable under such FCB Warrant immediately prior to the Effective Time multiplied by the Exchange Ratio, rounded down to the nearest whole share, and (iii) the per share exercise price under each such FCB Warrant shall be adjusted by dividing the per share exercise price of each such FCB Warrant by the Exchange Ratio, rounded up to the nearest cent. The terms of each FCB Warrant shall, in accordance with its terms, be subject to further adjustment as appropriate to reflect any stock split, stock dividend, recapitalization or other similar transaction with respect to EVBS Shares on or subsequent to the Effective Time.

Section 2.7 Laws of Escheat . If any of the consideration due or other payments to be paid or delivered to the holders of FCB Shares or FCB Series A Preferred Shares is not paid or delivered within the time period specified by any applicable laws concerning abandoned property, escheat or similar laws, and if such failure to pay or deliver such consideration occurs or arises out of the fact that such property is not claimed by the proper owner thereof, EVBS or the Exchange Agent shall be entitled to dispose of any such consideration or other payments in accordance with applicable laws concerning abandoned property, escheat or similar laws. Any other provision of this Agreement notwithstanding, none of FCB, EVBS, the Exchange Agent, nor any other Person acting on their behalf shall be liable to a holder of FCB Shares or FCB Series A Preferred Shares for any amount paid or property delivered in good faith to a public official pursuant to and in accordance with any applicable abandoned property, escheat or similar law.

ARTICLE 3

REPRESENTATIONS AND WARRANTIES OF FCB

FCB has delivered to EVBS schedules (the “Disclosure Schedules”) setting forth, among other things, items the disclosure of which is necessary or appropriate in response to an express disclosure requirement contained in a provision hereof, or as an exception to one or more representations or warranties contained in Article 3 or the covenants and agreements in Section 5.1(c)(i) or Section 5.1(c)(iii). Except for the exceptions listed in the sections of the Disclosure Schedules that correspond to the Sections in this Article 3, FCB hereby represents and warrants to EVBS as of the date hereof and thereafter as of all times up to and including the Effective Time of the Merger (except as otherwise provided):

Section 3.1 Corporate Organization .

(a) Organization and Related Matters of FCB .

(i) FCB is a corporation duly organized, validly existing and in good standing under the laws of the Commonwealth of Virginia. FCB has the corporate power and authority to own or lease all of its properties and assets and to carry on its business as now conducted, or as proposed to be conducted pursuant to this Agreement, and FCB is

 

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licensed or qualified to do business in each jurisdiction in which the nature of the business conducted by FCB, or the character or location of the properties and assets owned or leased by FCB makes such licensing or qualification necessary. FCB is duly registered as a bank holding company under the Bank Holding Company Act of 1956, as amended. True and correct copies of the Articles of Incorporation of FCB and the Bylaws of FCB, each as amended to the date hereof, have been made available to EVBS.

(ii) FCB has in effect all federal, state, local and foreign governmental, regulatory and other authorizations, permits and licenses necessary for it to own or lease its properties and assets and to carry on its business as now conducted, the absence of which, either individually or in the aggregate, would have a Material Adverse Effect on the Condition of FCB on a consolidated basis.

(iii) Disclosure Schedule 3.1(a)(iii) lists each Subsidiary together with the jurisdiction of organization of each such Subsidiary. Each Subsidiary is in compliance in all material respects with all rules and regulations promulgated by any relevant Regulatory Authority. (A) FCB owns, directly or indirectly, all the issued and outstanding equity securities of each of its Subsidiaries, (B) no equity securities of any of the Subsidiaries are or may become required to be issued (other than to it or its wholly-owned Subsidiaries) by reason of any right or otherwise, (C) there are no contracts, commitments, understandings or arrangements by which any of such Subsidiaries is or may be bound to sell or otherwise transfer any equity securities of any such Subsidiaries (other than to it or its wholly-owned Subsidiaries), (D) there are no contracts, commitments, understandings, or arrangements relating to its rights to vote or to dispose of such securities, and (E) all the equity securities of each Subsidiary held by FCB or its Subsidiaries are fully paid and nonassessable and are owned by FCB or its Subsidiaries free and clear of any liens.

(iv) FCB does not own any capital stock of any Person, or have any direct or indirect interest in any partnership or joint venture except as set forth in Disclosure Schedule 3.1(a)(iv). Disclosure Schedule 3.1(a)(iv) lists the owner(s) and percentage ownership (direct or indirect) of each subsidiary, partnership or joint venture disclosed thereon.

(v) The minute books of FCB contain complete and accurate records in all material respects of all meetings and other corporate actions held or taken by their respective shareholders and Boards of Directors (including all committees thereof).

(b) Organization and Related Matters of First Capital Bank .

(i) First Capital Bank is a banking corporation duly organized, validly existing and in good standing under the laws of the Commonwealth of Virginia. First Capital Bank has the corporate power and authority to own or lease all of its properties and assets and to carry on its business as now conducted and First Capital Bank is licensed or qualified to do business in each jurisdiction which the nature of the business conducted or to be conducted by First Capital Bank, or the character or location or the

 

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properties and assets owned or leased by First Capital Bank make such licensing or qualification necessary. True and correct copies of the Articles of Incorporation and Bylaws of First Capital Bank, as each may be amended to the date hereof, have been made available to EVBS.

(ii) First Capital Bank has in effect all federal, state, local and foreign governmental, regulatory or other authorizations, permits and licenses necessary for it to own or lease its properties and assets and to carry on its business as proposed to be conducted.

(iii) First Capital Bank does not own any capital stock of any Person, or have any interest in any partnership or joint venture except as set forth in Disclosure Schedule 3.1(b)(iii). Disclosure Schedule 3.1(b)(iii) lists the owner(s) and percentage ownership of each subsidiary, partnership or joint venture disclosed thereon.

(iv) First Capital Bank is an “insured bank” as defined in the Act and applicable regulations thereunder and its deposits are insured to the fullest extent allowed by law by the Deposit Insurance Fund of the FDIC.

(v) First Capital Bank is a member of the Federal Reserve System.

(vi) The minute books of First Capital Bank contain complete and accurate records in all material respects of all meetings and other corporate actions held or taken by its shareholders and Board of Directors (including all committees thereof).

(c) Organization and Related Matters of FCB’s other Subsidiaries .

(i) Each of FCB’s Subsidiaries is a corporation, limited liability company, limited company or partnership, as the case may be, duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is incorporated or organized and has all requisite corporate or other power and authority necessary to own or lease all of its properties and assets and to carry on its business as it is now being conducted and as currently proposed by its management to be conducted. Each of FCB’s Subsidiaries is duly licensed or qualified to do business and is in good standing in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned or leased by it makes such licensing or qualification necessary.

(ii) Each of FCB’s Subsidiaries has in effect all federal, state, local and foreign governmental, regulatory or other authorizations, permits and licenses necessary for it to own or lease its properties and assets and to carry on its business.

(iii) None of FCB’s Subsidiaries own any capital stock of any Person, or have any interest in any partnership or joint venture except as set forth in Disclosure Schedule 3.1(c)(iii). Disclosure Schedule 3.1(c)(iii) lists the owner(s) and percentage ownership of each subsidiary, partnership or joint venture disclosed thereon.

 

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(iv) The minute books of each of each of FCB’s Subsidiaries contain complete and accurate records in all material respects of all meetings and other corporate actions held or taken by their respective shareholders and Boards of Directors (including all committees thereof).

Section 3.2 Capitalization . The authorized capital stock of FCB consists of (i) 5,000,000 FCB Shares, of which             FCB Shares were issued and outstanding as of December 31, 2008, and (ii) 2,000,000 shares of FCB Preferred Stock, of which no shares of FCB Preferred Stock were issued and outstanding as of the date hereof. No FCB Shares or FCB Preferred Stock have been issued since December 31, 2008 except FCB Shares issued pursuant to the FCB Stock Option Plan. All of the issued and outstanding FCB Shares have been duly authorized and validly issued and all such shares are fully paid and nonassessable. As of the date hereof, there are no outstanding options, warrants, commitments, or other rights or instruments to purchase or acquire any FCB Shares or FCB Preferred Stock, or any securities or rights convertible into or exchangeable for FCB Shares or FCB Preferred Stock, except for options to purchase             FCB Shares (which are described in more detail in Disclosure Schedule 3.2). Except for the holders of FCB Preferred Stock, if any, shareholders of FCB are not entitled to appraisal rights under Sections 13.1-729 through 13.1-741 of the Virginia Code, as amended, or under any other applicable law in connection with the Merger.

Section 3.3 Financial Statements, Condition and Reports .

(a) FCB has made available to EVBS copies of the consolidated financial statements of FCB as of and for the years ended December 31, 2006, 2007, 2008, and for the fiscal quarters ended March 31, 2008, July 30, 2008 and September 30, 2008 and FCB will make available to EVBS, as soon as practicable following the preparation of additional consolidated financial statements for each subsequent calendar quarter or year of FCB, the consolidated financial statements of FCB as of and for such subsequent calendar quarter or year (such consolidated financial statements, unless otherwise indicated, being hereinafter referred to collectively as the “Financial Statements of FCB”).

(b) Each of the Financial Statements of FCB (including the related notes) have been or will be prepared in all material respects in accordance with generally accepted accounting principles, which principles have been or will be consistently applied during the periods involved, except as otherwise noted therein, and the books and records of FCB have been, are being, and will be maintained in all material respects in accordance with applicable legal and accounting requirements and reflect only actual transactions. Each of the Financial Statements of FCB (including the related notes) fairly presents or will fairly present the consolidated financial position of FCB as of the respective dates thereof and fairly presents or will fairly present the results of operations of FCB for the respective periods therein set forth.

(c) Since December 31, 2008, neither FCB nor any of its Subsidiaries has incurred any obligation or liability (contingent or otherwise) that has or might reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on the Condition of FCB on a consolidated basis, except obligations and liabilities (i) which are accrued or reserved

 

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against in the Financial Statements of FCB or reflected in the notes thereto, or (ii) which were incurred after December 31, 2008 in the ordinary course of business consistent with past practices. Since December 31, 2008, and except for the matters described in (i) and (ii) above, neither FCB nor any of its Subsidiaries has incurred or paid any obligation or liability which would be material to the Condition of FCB on a consolidated basis.

(d) Each of the consolidated reports of condition and income for the years ending December 31, 2008, 2007 and 2006 and for the quarters ending March 31, 2008, June 30, 2008, and September 30, 2008, that FCB and each of its Subsidiaries has filed with the appropriate Regulatory Authority, fairly present the financial position, results of operation, changes in stockholder’s equity and changes in cash flows, as the case may be for the periods to which they relate, in each case in accordance with the FFIEC instructions applicable to such reports.

(e) Since January 1, 2006, FCB and each of its Subsidiaries has filed all reports and statements, together with any amendments required to be made with respect thereto, if any, that was required to be filed with (i) the Federal Reserve, (ii) the FDIC and (iii) any other Regulatory Authority with jurisdiction over FCB and each of its Subsidiaries, and have paid all fees and assessments due and payable in connection therewith. As of their respective dates, each of such reports and documents, as amended, including any financial statements, exhibits and schedules thereto, complied with the relevant statutes, rules and regulations enforced or promulgated by the Regulatory Authorities with which they were filed, and did not contain any untrue statement of 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 were made, not misleading.

(f) FCB’s Annual Reports on Form 10-K for the fiscal years ended December 31, 2008, 2007 and 2006, and all other reports, registration statements, definitive proxy statements or information statements filed or to be filed by it or any of its Subsidiaries subsequent to December 31, 2008 under the Securities Act of 1933 (“Securities Act”), or under Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 (“Exchange Act”), in the form filed or to be filed (collectively, the “FCB SEC Documents”) with the Securities and Exchange Commission, as of the date filed, (A) complied or will comply in all material respects as to form with the application requirements under the Securities Act or the Exchange Act, as the case may be, and (B) did not and will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. Copies of the FCB SEC Documents have been made available to EVBS, to the extent not available on the SEC’s Electronic Data Gathering Analysis and Retrieval (“EDGAR”) system.

Section 3.4 Loan Portfolio; Reserves; Mortgage Loan Buy-Backs . Except as set forth in Disclosure Schedule 3.4 and except for any changes hereafter made to the hereinafter described allowances or reserves pursuant to this Agreement, (i) all evidences of indebtedness reflected as assets in the Financial Statements of FCB and the Call Reports of First Capital Bank as of December 31 , 2008 were as of such dates in all material respects the binding obligations of the respective obligors named therein in accordance with their respective terms, and were not

 

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subject to any defenses, setoffs, or counterclaims, except as may be provided by bankruptcy, insolvency or similar laws or by general principles of equity; (ii) the allowances for possible loan losses shown on the Financial Statements of FCB and the Call Reports of First Capital Bank as of December 31 , 2008 were, and the allowance for possible loan losses to be shown on the Financial Statements of FCB, and the Call Reports of First Capital Bank as of any date subsequent to the execution of this Agreement will be, as of such dates, adequate to provide for possible losses, net of recoveries relating to loans previously charged off, in respect of loans outstanding (including accrued interest receivable) of FCB or any of its Subsidiaries and other extensions of credit (including letters of credit or commitments to make loans or extend credit); (iii) the reserve for losses with respect to other real estate owned (“OREO Reserve”) shown on the Financial Statements of FCB, and the Call Reports of First Capital Bank as of December 31 , 2008 were, and the OREO Reserve to be shown on the Financial Statements of FCB and the Call Reports of First Capital Bank as of any date subsequent to the execution of this Agreement will be, as of such dates, adequate to provide for losses relating to the other real estate owned portfolio of FCB and any of its Subsidiaries as of the dates thereof; (iv) the reserve for losses in respect of litigation (“Litigation Reserve”) shown on the Financial Statements of FCB, and the Call Reports of First Capital Bank as of December 31 , 2008 was, and the Litigation Reserve to be shown on the Financial Statements of FCB and the Call Reports of First Capital Bank as of any date subsequent to the execution of this Agreement will be, as of such dates, adequate to provide for losses relating to or arising out of all pending or threatened litigation applicable to FCB or any of its Subsidiaries, as of the dates thereof, (v) each such allowance or reserve described above has been established in accordance with the accounting principles described in Section 3.3(b) and applicable regulatory requirements and guidelines. Disclosure Schedule 3.4.1 sets forth all one to four family residential mortgage loans originated on or after January 1, 2006 by FCB or any of its Subsidiaries (i) that were sold in the secondary mortgage market and have been re-purchased by FCB or any of its Subsidiaries or (ii) that the institutions to whom such loans were sold (or their successors or assigns) have asked FCB or any of its Subsidiaries to purchase back (but have not been purchased back).

Section 3.5 Certain Loans and Related Matters . Except as set forth in Disclosure Schedule 3.5, neither FCB nor any of its Subsidiaries is a party to any written or oral: (i) loan agreement, note or borrowing arrangement, under the terms of which the obligor is sixty (60) days delinquent in payment of principal or interest or in default of any other provision as of the date hereof; (ii) loan agreement, note or borrowing arrangement which has been classified or, in the exercise of reasonable diligence by FCB or any Regulatory Authority, should have been classified by any bank examiner (whether regulatory or internal) as “substandard,” “doubtful,” “loss,” “other loans especially mentioned”, “other assets especially mentioned”, “special mention”, “credit risk assets”, “classified”, “criticized”, “watch list”, “concerned loans” or any comparable classifications by such persons; (iii) loan agreement, note or borrowing arrangement, including any loan guaranty, with any director or executive officer of FCB, First Capital Bank or any five percent (5%) shareholder of FCB or any person, corporation or enterprise controlling, controlled by or under common control with any of the foregoing; or (iv) loan agreement, note or borrowing arrangement in violation of any law, regulation or rule applicable to FCB or any of its Subsidiaries including, but not limited to, those promulgated, interpreted or enforced by any Regulatory Authority.

 

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Section 3.6 Authority; No Violation .

(a) FCB has full corporate power and authority to execute and deliver this Agreement and, subject to the approval of the shareholders of FCB and to the receipt of the Consents of the Regulatory Authorities, to consummate the transactions contemplated hereby. By a unanimous vote, the Board of Directors of FCB has duly and validly approved this Agreement and the transactions contemplated hereby, has authorized the execution and delivery of this Agreement, has directed that this Agreement, the Plan of Merger and the transactions contemplated hereby be submitted to FCB’s shareholders for approval at a meeting of such shareholders and, except for the adoption of such Agreement by its shareholders, no other corporate proceeding on the part of FCB is necessary to consummate the transactions so contemplated. This Agreement, when duly and validly executed by FCB and delivered by FCB (and assuming due authorization, execution and delivery by EVBS), will constitute a valid and binding obligation of FCB and will be enforceable against FCB in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally and except that the availability of the equitable remedy of specific performance or injunctive relief is subject to the discretion of the court before which any proceeding may be brought.

(b) Except as set forth in Disclosure Schedule 3.6(b), neither the execution and delivery of this Agreement by FCB nor the consummation by FCB of the transactions contemplated hereby, nor compliance by FCB with any of the terms or provisions hereof, will (i) violate any provision of the Articles of Incorporation or Bylaws of FCB or any of its Subsidiaries, (ii) assuming that the Consents of the Regulatory Authorities and approvals referred to herein are duly obtained, violate any statute, code, ordinance, rule, regulation, judgment, order, writ, decree or injunction applicable to FCB or any of its Subsidiaries or (iii) violate, conflict with, result in a breach of any provisions of, constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, result in the termination of, accelerate the performance required by or result in the creation of any lien, security interest, charge or other encumbrance upon any of the respective properties or assets of FCB or any of its Subsidiaries under, any of the terms, conditions or provisions of any material note, bond, mortgage, indenture, deed of trust, license, permit, lease, agreement or other instrument or obligation to which FCB or any of its Subsidiaries is a party, or by which any of them or any of their respective properties or assets may be bound or affected.

Section 3.7 Consents and Approvals . Except for (i) the approval of the shareholders of FCB and the shareholders of EVBS pursuant to the joint proxy statement of FCB and EVBS relating to the Merger (the “Proxy Statement”); (ii) the Consents of the Regulatory Authorities; (iii) the filing of Articles of Merger in substantially in the form of Exhibit 1.1(a) (with the Plan of Merger) with the Commonwealth of Virginia; and (iv) as set forth in Disclosure Schedule 3.7, no Consents of any person are necessary in connection with the execution and delivery by FCB of this Agreement, and the consummation by FCB of the Merger and the other transactions contemplated hereby.

 

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Section 3.8 Financial Advisors . Except for Davenport & Company LLC and Burke Capital Group, a Division of Morgan Keegan, neither FCB, any of its Subsidiaries, nor any of its officers or directors, has employed any broker or finder or incurred any liability for any broker’s fees, commissions or finder’s fees in connection with any of the transactions contemplated by this Agreement.

Section 3.9 Absence of Certain Changes or Events . Except as set forth in Disclosure Schedule 3.9, since December 31, 2008, there has not been (i) any declaration, payment or setting aside of any dividend or distribution (whether in cash, stock or property) in respect of FCB Shares or FCB Preferred Stock; (ii) any change or any event involving a prospective change in the Condition of FCB or any of its Subsidiaries or a combination of any such change(s) and any such event(s) which has had, or is reasonably likely to have, a Material Adverse Effect on the Condition of FCB or any of its Subsidiaries taken as a whole; or (iii) any act or omission by FCB or its Subsidiaries prior to the date of this Agreement, which act or omission, if it occurred after the date of this Agreement, would represent or result in a material breach or violation of any of the covenants and agreements of FCB provided in this Agreement, including, without limitation, Section 5.1 hereof.

Section 3.10 Legal Proceedings; etc . Except as set forth in Disclosure Schedule 3.10, neither FCB nor or any of its Subsidiaries is a party to any, and there are no pending or, to the Knowledge of FCB, threatened, judicial, administrative, arbitral or other proceedings, claims, actions, causes of action or governmental investigations against FCB or any of its Subsidiaries and, to the Knowledge of FCB, there is: no proceeding, claim, action or governmental investigation against FCB or any of its Subsidiaries; no judgment, decree, injunction, rule or order of any court, governmental department, commission, agency, instrumentality or arbitrator is outstanding against FCB or any of its Subsidiaries; no default by FCB or any of its Subsidiaries under any contract or agreement to which FCB or any of its Subsidiaries is a party; and neither FCB nor or any of its Subsidiaries is a party to any agreement, order or memorandum in writing by or with any Regulatory Authority restricting the operations of FCB or any of its Subsidiaries and neither FCB nor or any of its Subsidiaries has been advised by any Regulatory Authority that any such Regulatory Authority is contemplating issuing or requesting the issuance of any such order or memorandum in the future.

Section 3.11 Taxes and Tax Returns .

(a) FCB has made available to EVBS copies of the federal, state and local income tax returns of FCB and its Subsidiaries for the years 2006, 2007 and 2008 and all schedules and exhibits thereto, and such returns have not been examined by the Internal Revenue Service or any other taxing authority. Except as reflected in Disclosure Schedule 3.11, FCB and each of its Subsidiaries has duly filed (or obtained extensions to file) in correct form in all material respects all federal, state and local information returns and tax returns required to be filed on or prior to the date hereof, and FCB and each of its Subsidiaries has duly paid or made adequate provisions for the payment of all taxes and other governmental charges which are owed by it to any federal, state or local taxing authorities, whether or not reflected in such returns (including, without limitation, those owed in respect of the properties, income, business, capital stock, deposits, franchises, licenses, sales and payrolls of FCB and each of its Subsidiaries),

 

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other than taxes and other charges which (i) are not yet delinquent or are being contested in good faith or (ii) have not been finally determined. The amounts set forth as liabilities for taxes on the Financial Statements of FCB, and the Call Reports of First Capital Bank are sufficient, in the aggregate, for the payment of all unpaid federal, state and local taxes (including any interest or penalties thereon), whether or not disputed, accrued or applicable, for the periods then ended, and have been computed in accordance with generally accepted accounting principles. Neither FCB nor any of its Subsidiaries is responsible for the taxes of any other Person under Treasury Regulation 1.1502-6 or any similar provision of federal, state or foreign law. Neither FCB nor any of its Subsidiaries is a party to or bound by any tax allocation or tax sharing agreement.

(b) Except as disclosed in Disclosure Schedule 3.11, neither FCB nor any of its Subsidiaries has executed an extension or waiver of any statute of limitations on the assessment or collection of any federal, state or local taxes due that is currently in effect, and deferred taxes of FCB and its Subsidiaries have been adequately provided for in the Financial Statements of FCB.

(c) Except as disclosed in Disclosure Schedule 3.11, neither FCB nor any of its Subsidiaries has made any payment, is obligated to make any payment or is a party to any contract, agreement or other arrangement that could obligate it to make any payment that would be disallowed as a deduction under Section 280G or 162(m) of the Code.

(d) There has not been an ownership change, as defined in Section 382(g) of the Code, of FCB or any of its Subsidiaries that occurred during or after any taxable period in which FCB or any of its Subsidiaries incurred an operating loss that carries over to any taxable period ending after the fiscal year of FCB or any of its Subsidiaries immediately preceding the date of this Agreement.

(e) (i) Proper and accurate amounts have been withheld by FCB and each of its Subsidiaries from its employees and others for all prior periods in compliance in all material respects with the tax withholding provisions of all applicable federal, state and local laws and regulations, and proper due diligence steps have been taken in connection with back-up withholding, (ii) federal, state and local returns have been filed by FCB and each of its Subsidiaries for all periods for which returns were due with respect to withholding, Social Security and unemployment taxes or charges due to any federal, state or local taxing authority and (iii) the amounts shown on such returns to be due and payable have been paid in full or provision therefor has been included by FCB in the Financial Statements of FCB.

(f) In the past five years, neither FCB nor any of its Subsidiaries has distributed stock of another Person, or has had its stock distributed by another Person, in a transaction that was purported or intended to be governed in whole or in part by Code §355 or Code §361.

(g) FCB has no Knowledge that any authority intends to assess any additional taxes for any period for which tax returns have been filed. No foreign, federal, state, or local tax audits or administrative or judicial tax proceedings are pending or being conducted with respect to FCB or any of its Subsidiaries. Neither FCB nor any of its Subsidiaries has received from any

 

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foreign, federal, state, or local taxing authority (including jurisdictions where FCB or its Subsidiaries have not filed tax returns) any (i) notice indicating an intent to open an audit or other review, or (ii) notice of deficiency or proposed adjustment for any amount of tax proposed, asserted, or assessed by any taxing authority against FCB or any of its Subsidiaries.

(h) Neither FCB nor any of its Subsidiaries will be required to include any item of income in, or exclude any item of deduction from, its computation of taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of any (A) change in method of accounting for a taxable period ending on or prior to the Closing Date; (B) “closing agreement” as described in Code §7121 (or any corresponding or similar provision of state, local or foreign income Tax law) executed on or prior to the Closing Date; (C) installment sale or open transaction disposition made on or prior to the Closing Date; or (D) prepaid amount received on or prior to the Closing Date, except to the extent any such item is taken into account in its Financial Statements.

(i) Neither FCB nor any of its Subsidiaries has engaged in a “reportable transaction” as defined in Section 1.6011-4(b) of the Treasury Regulations.

(j) Each of FCB and its Subsidiaries have disclosed on their federal income Tax Returns all positions taken therein that could give rise to a substantial understatement of federal income tax within the meaning of Code §6662.

Section 3.12 Employee Benefit Plans .

(a) Disclosure Schedule 3.12(a) sets forth a complete and correct list of all “employee benefit plans,” as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and all employment, compensation, commission, bonus, stock option, stock purchase, restricted stock, incentive, deferred compensation, retiree medical or life insurance, split dollar life insurance, supplemental retirement, severance, change of control, loans or other benefit plans, agreements, programs, arrangements, or fringe benefits, in each case, which are provided, maintained, contributed to or sponsored by FCB or any of its Subsidiaries on behalf of current or former directors, officers or employees of FCB or any of its Subsidiaries (collectively, the “Benefit Plans”). FCB has, with respect to each Benefit Plan, delivered to EVBS true and complete copies of: (i) all current Benefit Plan texts and agreements and related trust agreements, annuity contracts, insurance contracts or other funding arrangements and any amendments thereto; (ii) the most recent summary plan descriptions and material communications to employees and Benefit Plan participants and beneficiaries; (iii) the Form 5500 filed in each of the most recent three plan years (including all schedules thereto and the opinions of independent accountants); (iv) the most recent actuarial valuation (if any); (v) the most recent annual and periodic accounting of plan assets; (vi) a written summary of any unwritten Benefit Plans; and (vii) all material communications with any governmental entity or agency (including, without limitation, the Department of Labor, Internal Revenue Service and the Pension Benefit Guaranty Corporation (“PBGC”)) since January 1, 2006).

(b) Neither FCB nor any of its Subsidiaries (and any pension plan maintained by any of them) has incurred any liability to the PBGC or the Internal Revenue Service with

 

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respect to any pension plan qualified under Section 401 of the Code, except liabilities to the PBGC pursuant to Section 4007 of ERISA, all which have been fully paid. No reportable event under Section 4043(b) of ERISA (including events waived by PBGC regulation) has occurred with respect to any such pension plan.

(c) Neither FCB nor any ERISA Affiliate has withdrawn in a complete or partial withdrawal from a Multi-Employer Plan as such term is defined in Section 3(37) of ERISA during the six (6) years prior to the Effective Time, nor has any of them incurred any liability during such period due to the termination or reorganization of a Multi-Employer Plan.

(d) All Benefit Plans comply, in all material respects, in operation, administration and form, with the applicable provisions of ERISA and the Code that are applicable, or intended to be applicable, including, but not limited to, COBRA, HIPAA and any applicable, similar state law, to such “employee benefit plans.” The Benefit Plans that provide for payments of “nonqualified deferred compensation” (as defined in Section 409A(d)(1) of the Code comply in form or have been timely amended to comply in form with Section 409A of the Code and have been operated in compliance with Section 409A of the Code.

For purposes of this Agreement, “COBRA” means the provision of Section 4980B of the Code and the regulations thereunder, and Part 6 of the Subtitle B of title I of ERISA and any regulations thereunder, and “HIPAA” means the provisions of the Code and ERISA as enacted by the Health Insurance Portability and Accountability Act of 1996 and the Standards for Privacy of Individually Identifiable Health Information and the Security Standards for the Protection of Electronic Protected Health Information set forth in 45 CFR Parts 160 and 164.

(e) No prohibited transaction (which shall mean any transaction prohibited by Section 406 of ERISA and/or Section 4975 of the Code and not exempt under Section 408 of ERISA) has occurred with respect to any employee benefit plan maintained by FCB or any of its Subsidiaries.

(f) All contributions and all payments and premiums required to have been made to or under any Benefit Plan have been timely and properly made (or otherwise properly accrued, if not yet due), and nothing has occurred with respect to the operation of the Benefit Plans that would cause the imposition of any liability, penalty or tax under ERISA or the Code. No Benefit Plan which is a defined benefit “pension benefit plan” under ERISA has any “unfunded current liability,” as that term is defined in Section 302(d)(8)(A) of ERISA, and the present fair market value of the assets of any such plan exceeds the plan’s “benefit liabilities,” as that term is defined in Section 4001(a)(16) of ERISA, when determined under actuarial factors that would apply if the plan terminated in accordance with all applicable legal requirements. Neither FCB nor any of its Subsidiaries have any material liability under any such plan that is not reflected in the Financial Statements of FCB.

(g) Except as described in Disclosure Schedule 3.12(g), neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (i) result in any material payment (including, without limitation, severance, unemployment compensation, golden parachute or otherwise) becoming due to any director or any officer or

 

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employee of FCB or any of its Subsidiaries under any Benefit Plan or otherwise, (ii) materially increase any benefits otherwise payable under any Benefit Plan or (iii) result in any acceleration of the time of payment or vesting of any such benefits to any material extent.

(h) There are no actions, liens, suits or claims pending or threatened (other than routine claims for benefits) with respect to any Benefit Plan or against the assets of any Benefit Plan. No assets of FCB or any of its Subsidiaries are subject to any lien under Section 302(f) of ERISA or Section 412(n) of the Code.

(i) Each Benefit Plan which is intended to qualify under Section 401(a) or 403(a) of the Code so qualifies and its related trust is exempt from taxation under Section 501(a) of the Code. Each such Benefit Plan has received a favorable determination opinion from the Internal Revenue Service. No event has occurred or circumstance exists that will or could give rise to a disqualification or loss of tax-exempt status of any such plan or trust.

(j) Except as described in Disclosure Schedule 3.12(j), no Benefit Plan is a multiple employer plan within the meaning of Section 413(c) of the Code or Section 4063, 4064 or 4066 of ERISA, and no Benefit Plan is a multiple employer welfare arrangement as defined in Section 3(40) of ERISA.

(k) Each “employee pension benefit plan”, as defined in Section 3(2) of ERISA, that is not qualified under Section 401(a) or 403(a) of the Code is exempt from Part 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 (“Top Hat Plan”). Each Top Hat Plan is in compliance with the filing requirement of 29 CFR §2520.104-23. Except as set forth in Disclosure Schedule 3.12(k), no assets of FCB are allocated to or held in a “rabbi trust” or similar funding vehicle.

(l) Except as set forth on Disclosure Schedule 3.12(l), no Benefit Plan provides benefits to any current or former employee of FCB or any of its Subsidiaries beyond retirement or other termination of service (other than coverage mandated by COBRA, the cost of which is fully paid by the current or former employee or his or her dependents). Any such plan may be amended or terminated at any time by unilateral action of FCB.

(m) FCB and its Subsidiaries have (i) made all bonus and commission payments to which they are committed to make to any Employee under any Benefit Plan (or otherwise) for calendar year 2008, and (ii) accrued all bonus and commission payments which they are committed to make to any Employee under any Benefit Plan (or otherwise) for calendar year 2009.

(n) No stock or other security issued by FCB has formed a material portion of the assets of any Benefit Plan.

(o) Any individual who performs services for FCB or its Subsidiaries (other than through a contract with any organization other than such individual) and who is not treated as an employee of FCB or any of its Subsidiaries for federal income tax purposes is not an employee for such purposes.

 

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(p) All options issued under the FCB Stock Option Plan have an exercise price no less than the fair market value of the underlying FCB Shares on the date of grant.

Section 3.13 Title and Related Matters .

(a) Except as set forth in Disclosure Schedule 3.13(a), FCB and each of its Subsidiaries has good title, and as to owned real property, has good and marketable title in fee simple absolute, to all assets and properties, real or personal, tangible or intangible, reflected as owned by or leased or subleased by or carried under its name on the Financial Statements of FCB or acquired subsequent thereto (except to the extent that such assets and properties have been disposed of for fair value in the ordinary course of business since December 31, 2008), free and clear of all liens, encumbrances, mortgages, security interests, restrictions, pledges or claims, except for (i) those liens, encumbrances, mortgages, security interests, restrictions, pledges or claims reflected in the Financial Statements of FCB or incurred in the ordinary course of business after December 31, 2008 and (ii) statutory liens for amounts not yet delinquent or which are being contested in good faith.

(b) Except as set forth in Disclosure Schedule 3.13(b), all agreements pursuant to which FCB and each of its Subsidiaries leases, subleases or licenses material real or material personal properties from others are valid, binding and enforceable in accordance with their respective terms, and there is not, under any of such leases or licenses, any existing default or event of default, or any event which with notice or lapse of time, or both, would constitute a default or force majeure, or provide the basis for any other claim of excusable delay or nonperformance. Except as set forth in Disclosure Schedule 3.13(b), FCB and each of its Subsidiaries has all right, title and interest as a lessee under the terms of each lease or sublease, free and clear of all liens, claims or encumbrances (other than the rights of the lessor) as of the Effective Time of the Merger, and shall have the right to transfer each lease or sublease pursuant to this Agreement.

(c) Other than real estate that was acquired by foreclosure or voluntary deed in lieu of foreclosure (i) all of the buildings, structures and fixtures owned, leased or subleased by FCB and each of its Subsidiaries are in good operating condition and repair, subject only to ordinary wear and tear and/or minor defects which do not interfere with the continued use thereof in the conduct of normal operations, and (ii) all of the material personal properties owned, leased or subleased by FCB and each of its Subsidiaries are in good operating condition and repair, subject only to ordinary wear and tear and/or minor defects which do not interfere with the continued use thereof in the conduct of normal operations.

Section 3.14 Real Estate .

(a) Disclosure Schedule 3.14(a) identifies and sets forth the address for each parcel of real estate or interest therein owned, leased or subleased by FCB and each of its Subsidiaries or in which FCB or any of its Subsidiaries has any ownership or leasehold interest.

 

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(b) Disclosure Schedule 3.14(b) lists or otherwise describes each and every written or oral lease or sublease, together with the current name, address and telephone number of the landlord or sub-landlord and the landlord’s property manager (if any), under which FCB and each of its Subsidiaries is the lessee of any real property and which relates in any manner to the operation of the businesses of FCB and its Subsidiaries.

(c) Neither FCB nor any of its Subsidiaries has violated, and is not currently in material violation of, any law, regulation or ordinance relating to the ownership or use of the real estate and real estate interests described in Disclosure Schedules 3.14(a) and 3.14(b) including, but not limited to any law, regulation or ordinance relating to zoning, building, occupancy, environmental or comparable matter.

(d) As to each parcel of real property owned or used by FCB or any of its Subsidiaries, neither FCB nor any of its Subsidiaries has received notice of any pending or, to the Knowledge of FCB, threatened condemnation proceedings, litigation proceedings or mechanic’s or materialmen’s liens.

Section 3.15 Environmental Matters .

(a) Each of FCB and its Subsidiaries, the Participation Facilities (as defined below) of FCB, and the Loan Properties of FCB (as defined below) are, and have been, in compliance, and there are no present circumstances that would prevent or interfere with the continuation of such compliance with all applicable federal, state and local laws, including common law, rules, regulations and ordinances, and with all applicable decrees, orders and contractual obligations relating to pollution or the protection of the environment or the discharge of, or exposure to, Hazardous Materials (as defined below) in the environment or workplace.

(b) There is no litigation or other proceeding pending or, to the Knowledge of FCB, threatened before any court, governmental agency or board or other forum in which FCB, its Subsidiaries or any Participation Facility of FCB has been or, with respect to any threatened litigation or other proceeding, may be, named as defendant (i) for alleged noncompliance (including by any predecessor), with respect to any Environmental Law (as defined below) or (ii) relating to the release into the environment of any Hazardous Material (as defined below), whether or not occurring at, on or involving a site owned, leased or operated by FCB, its Subsidiaries or any Participation Facility of FCB.

(c) There is no litigation or other proceeding pending or, to the Knowledge of FCB, threatened before any court, governmental agency or board or other forum in which any Loan Property (or FCB or any of its Subsidiaries in respect of such Loan Property of FCB) has been or, with respect to any threatened litigation or other proceeding, may be, named as a defendant or potentially responsible party (i) for alleged noncompliance (including by any predecessor) with any Environmental Law or (ii) relating to the release into the environment of any Hazardous Material, whether or not occurring at, on or involving a Loan Property of FCB.

 

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(d) To the Knowledge of FCB, there is no reasonable basis for any litigation or other proceeding of a type described in Sections 3.15(b) or 3.15(c) of this Agreement.

(e) During the period of (i) ownership or operation by FCB or any of its Subsidiaries of any of its current properties, (ii) participation by FCB or any of its Subsidiaries in the management of any Participation Facility of FCB, or (iii) holding by FCB or any of its Subsidiaries of a security interest in any Loan Property of FCB, there have been no releases of Hazardous Material in, on, under or affecting any such property, Participation Facility of FCB or Loan Property of FCB.

(f) To FCB’s Knowledge, prior to the period of (i) ownership or operation by FCB or any of its Subsidiaries, (ii) participation by FCB or any of its Subsidiaries in the management of any Participation Facility of FCB, or (iii) holding by FCB or any of its Subsidiaries of a security interest in any Loan Property of FCB there were no releases of Hazardous Material or oil in, on, under or affecting any such property, Participation Facility of FCB or Loan Property of FCB.

(g) Copies of any environmental reports in the possession of FCB or any of its Subsidiaries are described in Disclosure Schedule 3.15.

Section 3.16 Commitments and Contracts .

(a) Except as set forth in Disclosure Schedule 3.16, neither FCB nor any of its Subsidiaries is a party or subject to any of the following (whether written or oral, express or implied):

(i) Any employment contract or understanding (including any understandings or obligations with respect to severance or termination pay liabilities or fringe benefits) with any present or former officer, director, employee, including in any such person’s capacity as a consultant (other than those which either are terminable at will without any further amount being payable thereunder or as a result of such termination by FCB or any of its Subsidiaries);

(ii) Any labor contract or agreement with any labor union;

(iii) Any contract covenants which limit the ability of FCB or any of its Subsidiaries to compete in any line of business or which involve any restriction of the geographical area in which FCB or any of its Subsidiaries may carry on their businesses (other than as may be required by law or applicable regulatory authorities);

(iv) Any lease (other than real estate leases described on Disclosure Schedule 3.14(b)) or other agreements or contracts with annual payments aggregating $50,000 or more; or

(v) Any other contract or agreement which would be required to be disclosed in reports filed by FCB or any of its Subsidiaries with the SEC, the FRB, the Bureau of Financial Institutions of the Virginia State Corporation Commission or the FDIC and which has not been so disclosed.

 

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(b) Except as set forth in Disclosure Schedule 3.16(b), there is not, under any such agreement, lease or contract to which FCB or any of its Subsidiaries is a party, any existing default or event of default, or any event which with notice or lapse of time, or both, would constitute a default or force majeure, or provide the basis for any other claim of excusable delay or non-performance.

Section 3.17 Regulatory and Tax Matters . Neither FCB nor any of its Subsidiaries has taken or agreed to take any action or has any Knowledge of any fact or has agreed to any circumstance that would (i) materially impede or delay receipt of any Consents of any Regulatory Authorities referred to in this Agreement including, matters relating to the Community Reinvestment Act and protests thereunder, or (ii) prevent the transactions contemplated by this Agreement from qualifying as a reorganization within the meaning of Section 368(a) of the Code.

Section 3.18 Registration Obligations . Neither FCB nor any of its Subsidiaries is under any obligation, contingent or otherwise, which will survive the Merger to register any of its securities under the Securities Act or any state securities laws.

Section 3.19 Insurance . FCB and each of its Subsidiaries is presently insured, and during each of the past three calendar years has been insured, for reasonable amounts against such risks as companies or institutions engaged in a similar business would, in accordance with good business practice, customarily be insured. The policies of fire, theft, liability and other insurance maintained with respect to the assets or businesses of FCB and each of its Subsidiaries provide adequate coverage against loss, and the fidelity bonds in effect as to which FCB and each of its Subsidiaries is named an insured are sufficient for their purpose. Such policies of insurance are listed and described in Disclosure Schedule 3.19.

Section 3.20 Labor .

(a) No work stoppage involving FCB or any of its Subsidiaries is pending as of the date hereof or, to the Knowledge of FCB, threatened. Neither FCB nor any of its Subsidiaries is involved in, or, to the Knowledge of FCB, threatened with or affected by, any proceeding asserting that FCB or any of its Subsidiaries has committed an unfair labor practice or any labor dispute, arbitration, lawsuit or administrative proceeding. No union represents or claims to represent any employees of FCB or any of its Subsidiaries and, to the Knowledge of FCB, no labor union is attempting to organize employees of FCB or any of its Subsidiaries.

(b) Set forth on Disclosure Schedule 3.20(b) is a true and complete list of all employees of FCB and each of its Subsidiaries as of the date hereof, together with the employee position, title, salary and date of hire, and all information with respect to all benefit plans or policies, bonus arrangements, commissions, severance plans or policies, compensation arrangements or other benefits provided to such employees.

 

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(c) FCB and each of its Subsidiaries is in compliance in all material respects with all applicable laws and regulations relating to employment or the workplace, including, without limitation, provisions relating to wages, hours, collective bargaining, safety and health, work authorization, equal employment opportunity, immigration and the withholding of income taxes, unemployment compensation, workers compensation, employee privacy and right to know and social security contributions.

(d) Except as set forth on Disclosure Schedule 3.20(d) hereto, there has not been, there is not presently pending or existing and, to the Knowledge of FCB, there is not threatened any proceeding against or affecting FCB or any of its Subsidiaries relating to the alleged violation of any legal requirement pertaining to labor relations or employment matters, including any charge or complaint filed by an employee or union with the National Labor Relations Board, the Equal Employment Opportunity Commission or any comparable governmental body, organizational activity, or other labor or employment dispute against or affecting FCB or any of its Subsidiaries.

Section 3.21 Compliance with Laws . FCB and each of its Subsidiaries has conducted its business in compliance with all applicable federal, foreign, state and local laws, regulations and orders, and is in material compliance with such laws, regulations and orders. Except as disclosed in Disclosure Schedule 3.21, FCB and each of its Subsidiaries:

(a) is not in violation of any laws, orders or permits applicable to its business or the employees or agents or representatives conducting its business; and

(b) has not received a notification or communication from any agency or department of any federal, state or local governmental authority or any Regulatory Authority or the staff thereof (i) asserting that FCB or any of its Subsidiaries is not in compliance with any laws or orders which such governmental authority or Regulatory Authority enforces, (ii) threatening to revoke any permit, (iii) requiring FCB or any of its Subsidiaries to enter into any cease and desist order, formal agreement, commitment or memorandum of understanding, or to adopt any resolutions or similar undertakings, or (iv) directing, restricting or limiting, or purporting to direct, restrict or limit in any manner, the operations of FCB or any of its Subsidiaries, including, without limitation, any restrictions on the payment of dividends, or that in any manner relates to such entity’s capital adequacy, credit policies, management or business.

Section 3.22 Transactions with Management . Except for (a) deposits, all of which are on terms and conditions comparable to those made available to other customers of FCB and each of its Subsidiaries at the time such deposits were entered into, (b) the loans listed on Disclosure Schedule 3.5, (c) the agreements listed on Disclosure Schedule 3.16, (d) obligations under employee benefit plans of FCB and its Subsidiaries set forth in Disclosure Schedule 3.12 and (e) the items described on Disclosure Schedule 3.22 and any loans or deposit agreements entered into in the ordinary course with customers of FCB and its Subsidiaries, there are no contracts with or commitments to present shareholders who own or owned more than one percent (1%) of FCB’s outstanding shares of common stock, directors, officers or employees involving the expenditure of more than $1,000 as to any one individual, including, with respect to any business directly or indirectly controlled by any such person, or $5,000 for all such contracts for commitments in the aggregate for all such individuals.

 

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Section 3.23 Derivative Contracts . Neither FCB nor any of its Subsidiaries is a party to nor has any of them agreed to enter into an exchange-traded or over-the-counter swap, forward, future, option, cap, floor or collar financial contract or agreement, or any other contract or agreement which is a financial derivative contract (including various combinations thereof) (“Derivative Contracts”), except for those Derivative Contracts set forth in Disclosure Schedule 3.23.

Section 3.24 Deposits . Except as set forth on Disclosure Schedule 3.24, none of the deposits of FCB or any of its Subsidiaries are “brokered” deposits or are subject to any encumbrance, legal restraint or other legal process (other than garnishments, pledges, set off rights, escrow limitations and similar actions taken in the ordinary course of business), and no portion of such deposits represents a deposit of any affiliate of FCB or any of its Subsidiaries.

Section 3.25 Accounting Controls . FCB and each of its Subsidiaries has devised and maintained systems of internal accounting control that are sufficient to provide reasonable assurances that: (i) transactions are executed in accordance with general or specific authorization of the Board of Directors and the duly authorized executive officers of FCB and each of its Subsidiaries (as appropriate); (ii) transactions are recorded as necessary to permit the preparation of financial statements in conformity with generally accepted accounting principles consistently applied with respect to institutions such as FCB or any other criteria applicable to such financial statements, and to maintain proper accountability for items therein; (iii) access to the properties and assets of FCB and each of its Subsidiaries is permitted only in accordance with general or specific authorization of the Board of Directors and the duly authorized executive officers of FCB and each of its Subsidiaries (as appropriate); and (iv) the recorded accountability for items is compared with the actual levels at reasonable intervals and appropriate actions taken with respect to any differences.

Section 3.26 Proxy Materials . None of the information relating to FCB or any of its Subsidiaries to be included in the Proxy Statement which is to be mailed to the shareholders of FCB and EVBS in connection with the solicitation of their approval of this Agreement will, at the time such Proxy Statement is mailed or at the time of the meetings of shareholders to which such Proxy Statement relates, be false or misleading with respect to any material fact, or omit to state any material fact necessary in order to make a statement therein not false or misleading.

Section 3.27 Deposit Insurance . The deposit accounts of First Capital Bank are insured by the FDIC in accordance with the provisions of the Act; First Capital Bank has paid all regular premiums and special assessments and filed all reports required under the Act.

 

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Section 3.28 Intellectual Property .

(a) FCB Intangibles.

(i) Disclosure Schedule 3.28(a) lists and identifies all Intellectual Property (as defined below) that is directly owned by FCB or its Subsidiaries and that is material to FCB’s, or any of its Subsidiaries’, business, including, without limitation, the rights to any names used by FCB or its Subsidiaries (the “FCB Intangibles”) and, with respect to the foregoing, specifically identifies the owner and each material license, agreement, or other permission that FCB or its Subsidiaries have granted to any third party with respect to any of the FCB Intangibles.

(ii) FCB has made available to EVBS correct and complete copies of all patent, trademark, and copyright registrations, applications, and written licenses, agreements, and permissions (as any of the foregoing has been amended to date) and correct and complete copies of all other written documentation evidencing ownership and prosecution (if applicable) of each of the FCB Intangibles.

(iii) With respect to the FCB Intangibles, and except as otherwise indicated in Disclosure Schedule 3.28(a):

 

(A)

FCB, or a Subsidiary of FCB, possesses all right, title, and interest in and to the FCB Intangibles free and clear of any security interest, lien, license, or other restriction and such FCB Intangibles are not subject to any outstanding injunction, judgment, order, decree, ruling, or charge; and

 

(B)

no action is pending and, to the Knowledge of FCB, no action is threatened that challenges the legality, validity, enforceability, use, or ownership of the FCB Intangibles.

(b) Third Party Intellectual Property. Disclosure Schedule 3.28(b) lists and identifies any Intellectual Property licensed to FCB or any of its Subsidiaries by a third party (other than Intellectual Property licensed pursuant to shrink-wrap and similar agreements) that is material to FCB’s, or any Subsidiary of FCB’s, business (“Third Party Intellectual Property”) pursuant to a written license, sublicense, agreement or permission (each, a “FCB License”) and identifies the owner or licensor of the Third Party Intellectual Property. FCB has made available to EVBS correct and complete copies of each such FCB License. With respect to each item of Third Party Intellectual Property:

(i) each FCB License covering the item of Third Party Intellectual Property is an enforceable agreement of FCB or the Subsidiary who is a party thereto, and, to FCB’s Knowledge, is enforceable against the other parties thereto;

(ii) no party to a FCB License covering the item of Third Party Intellectual Property is in material breach or default, and no event has occurred that with notice or lapse of time would constitute a material breach or default or permit termination, modification, or acceleration thereunder; and

 

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(iii) no Action is pending or, to FCB’s Knowledge, is threatened that challenges the legality, validity, or enforceability of the underlying item of Third Party Intellectual Property.

(c) No Infringement. Except as set forth in Disclosure Schedule 3.28(c), the use or sale by FCB or any of its Subsidiaries of any products or services in FCB’s or one of its Subsidiaries’ businesses and use by FCB or any of its Subsidiaries of the Intellectual Property (including, without limitation, FCB Intangibles and Third Party Intellectual Property) does not materially interfere with, infringe on, misappropriate or otherwise come into conflict with any Intellectual Property rights of third parties and has not materially interfered with, infringed on, misappropriated or otherwise come into conflict with, any Intellectual Property rights of any third party and no activity of any third party materially infringes upon the rights of FCB or any Subsidiary of FCB with respect to any of the FCB Intangibles. Except as set forth in Disclosure Schedule 3.28(c), no action alleging or relating to any infringement of the rights of FCB or any Subsidiary of FCB or infringement of the rights of any third parties by FCB or any Subsidiary of FCB is currently pending or, to FCB’s Knowledge, threatened. To FCB’s Knowledge, no third party has materially interfered with, infringed upon or misappropriated any Intellectual Property rights of FCB or any of its Subsidiaries in the FCB Intangibles.

(d) Use of Third Party Intellectual Property. Each material item of Intellectual Property owned, licensed or used by FCB or any of its Subsidiaries immediately prior to the Effective Time hereunder will be owned or available for use by Surviving Corporation on identical terms and conditions immediately subsequent to the Closing hereunder.

Section 3.29 Antitakeover Provisions . FCB has taken all actions required to exempt FCB, this Agreement, the Merger from any provisions of an antitakeover nature contained in their organizational documents, and the provisions of any federal or state “antitakeover,” “fair price,” “moratorium,” “control share acquisition” or similar laws or regulations.

Section 3.30 Communications with Shareholders . Disclosure Schedule 3.30 identifies and sets forth all correspondence between FCB and its shareholders since December 1, 2008.

Section 3.31 Claims under Insurance Policies . FCB has no Knowledge of any pending or threatened claim under its directors and officers’ insurance policy or fidelity bond coverage.

Section 3.32 Fairness Opinion . The Board of Directors of FCB has received an opinion from Davenport & Company, LLC dated as of the date that the FCB Board of Directors approved this Agreement stating that the Merger Consideration is fair, from a financial point of view, to the shareholders of FCB.

Section 3.33 Securities Portfolio and Investments . FCB has previously disclosed to EVBS a listing of all securities owned, of record or beneficially, by FCB or First Capital Bank as of December 31, 2008. All securities owned are held free and clear of all mortgages, liens,

 

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pledges, encumbrances, or any other restriction or rights of any other person or entity, whether contractual or statutory (other than customary pledges in the ordinary course of its business to secure public funds deposits or Federal Home Loan Bank borrowings or repurchase agreements entered into in the ordinary course of business), which would materially impair the ability of FCB or First Capital Bank to dispose freely of any such security or otherwise to realize the benefits of ownership thereof at any time. There are no voting trusts or other agreements or undertakings to which FCB or First Capital Bank is a party with respect to the voting of any such securities. With respect to all “repurchase agreements” under which FCB or First Capital Bank has “sold” or “purchased” securities under agreement to repurchase, FCB or First Capital Bank, as applicable, has a valid, perfected first lien or security interest in the government securities or other collateral securing the repurchase agreement, and the value of the collateral securing each such repurchase agreement equals or exceeds the amount of the debt owed by FCB or First Capital Bank, as the case may be, which is secured by such collateral.

Since December 31, 2008, there has been no material deterioration or adverse change in the quality, or any material decrease in the value, of FCB’s or First Capital Bank’s securities portfolio as a whole.

Section 3.34 Untrue Statements and Omissions . No representation or warranty contained in Article 3 of this Agreement or in the Disclosure Schedules contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.

ARTICLE 4

REPRESENTATIONS AND WARRANTIES OF

EVBS

EVBS has delivered to FCB schedules (the “EVBS Schedules”) setting forth, among other things, items the disclosure of which is necessary or appropriate either in response to an express disclosure requirement contained in a provision hereof, or as an exception to one or more representations or warranties contained in Article 4 or the covenants and agreements in Section 5.17. Except for the exceptions listed in the sections of the EVBS Schedule that correspond to the Sections in this Article 4, EVBS hereby represents and warrants to FCB as follows as of the date hereof and thereafter as of all times up to and including the Effective Time of the Merger (except as otherwise provided):

Section 4.1 Corporate Organization .

(a) Organization and Related Matters of EVBS

(i) EVBS is a corporation duly organized, validly existing and in good standing under the laws of Virginia. EVBS has the corporate power and authority to own or lease all of its properties and assets and to carry on its business as now conducted, or as proposed to be conducted pursuant to this Agreement, and EVBS is licensed or

 

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qualified to do business in each jurisdiction in which the nature of the business conducted by EVBS, or the character or location of the properties and assets owned or leased by EVBS makes such licensing or qualification necessary. EVBS is duly registered as a bank holding company under the Bank Holding Company Act of 1956, as amended. True and correct copies of the Articles of Incorporation of EVBS and the Bylaws of EVBS, each as amended to the date hereof, have been made available to FCB.

(ii) EVBS has in effect all federal, state, local and foreign governmental, regulatory and other authorizations, permits and licenses necessary for it to own or lease its properties and assets and to carry on its business as now conducted, the absence of which, either individually or in the aggregate, would have a Material Adverse Effect on the Condition of EVBS on a consolidated basis.

(iii) EVBS Schedule 4.1(a)(iii) lists each Subsidiary of EVBS together with the jurisdiction of organization of each such Subsidiary (“EVBS Subsidiaries”). Each EVBS Subsidiary is in compliance in all material respects with all rules and regulations promulgated by any relevant Regulatory Authority. (A) EVBS owns, directly or indirectly, all the issued and outstanding equity securities of each of the EVBS Subsidiaries, (B) no equity securities of any of the EVBS Subsidiaries are or may become required to be issued (other than to it or its wholly-owned Subsidiaries) by reason of any right or otherwise, (C) there are no contracts, commitments, understandings or arrangements by which any of such EVBS Subsidiaries is or may be bound to sell or otherwise transfer any equity securities of any such EVBS Subsidiaries (other than to it or its wholly-owned Subsidiaries), (D) there are no contracts, commitments, understandings, or arrangements relating to its rights to vote or to dispose of such securities, and (E) all the equity securities of each EVBS Subsidiary held by EVBS or the EVBS Subsidiaries are fully paid and nonassessable and are owned by EVBS or the EVBS Subsidiaries free and clear of any liens.

(iv) EVBS does not own any capital stock of any Person, or have any direct or indirect interest in any partnership or joint venture except as set forth in EVBS Schedule 4.1(a)(iv). EVBS Schedule 4.1(a)(iv) lists the owner(s) and percentage ownership (direct or indirect) of each subsidiary, partnership or joint venture disclosed thereon.

(v) The minute books of EVBS contain complete and accurate records in all material respects of all meetings and other corporate actions held or taken by the shareholders and Boards of Directors (including all committees thereof).

 

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(b) Organization and Related Matters of EVB .

(i) EVB is a banking corporation duly organized, validly existing and in good standing under the laws of Virginia. EVB has the corporate power and authority to own or lease all of its properties and assets and to carry on its business as now conducted and EVB is licensed or qualified to do business in each jurisdiction which the nature of the business conducted or to be conducted by EVB, or the character or location or the properties and assets owned or leased by EVB make such licensing or qualification necessary. True and correct copies of the Articles of Incorporation and Bylaws of EVB, as each may be amended to the date hereof, have been made available to FCB.

(ii) EVB has in effect all federal, state, local and foreign governmental, regulatory or other authorizations, permits and licenses necessary for it to own or lease its properties and assets and to carry on its business as proposed to be conducted.

(iii) EVB does not own any capital stock of any Person, or have any interest in any partnership or joint venture except as set forth in EVBS Schedule 4.1(b)(iii). EVBS Schedule 4.1(b)(iii) lists the owner(s) and percentage ownership of each subsidiary, partnership or joint venture disclosed thereon.

(iv) EVB is an “insured bank” as defined in the Act and applicable regulations thereunder and its deposits are insured to the fullest extent allowed by law by the Deposit Insurance Fund of the FDIC.

(v) EVB is a member of the Federal Reserve System.

(vi) The minute books of EVB contain complete and accurate records in all material respects of all meetings and other corporate actions held or taken by its shareholders and Boards of Directors (including all committees thereof).

(c) Organization and Related Matters of EVBS’s other Subsidiaries .

(i) Each of EVBS’s Subsidiaries is a corporation, limited liability company, limited company or partnership, as the case may be, duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is incorporated or organized and has all requisite corporate or other power and authority necessary to own or lease all of its properties and assets and to carry on its business as it is now being conducted and as currently proposed by its management to be conducted. Each of EVBS’s Subsidiaries is duly licensed or qualified to do business and is in good standing in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned or leased by it makes such licensing or qualification necessary.

 

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(ii) Each of EVBS’s Subsidiaries has in effect all federal, state, local and foreign governmental, regulatory or other authorizations, permits and licenses necessary for it to own or lease its properties and assets and to carry on its business.

(iii) None of EVBS’s Subsidiaries own any capital stock of any Person, or have any interest in any partnership or joint venture except as set forth in EVBS Schedule 4.1(c)(iii). EVBS Schedule 4.1(c)(iii) lists the owner(s) and percentage ownership of each subsidiary, partnership or joint venture disclosed thereon.

(iv) The minute books of each of each of EVBS’s Subsidiaries contain complete and accurate records in all material respects of all meetings and other corporate actions held or taken by their respective shareholders and Boards of Directors (including all committees thereof).

Section 4.2 Capitalization . The authorized capital stock of EVBS consists of 50,000,000 EVBS shares, of which 5,924,629 are issued and outstanding, and 10,000,000 shares of preferred stock, par value $2.00 per share, of which 24,000 Fixed Rate Cumulative Perpetual Preferred Stock, Series A (“EVBS Series A Preferred Shares”) are issued and outstanding. All issued and outstanding EVBS Shares and EVBS Series A Preferred Shares have been duly authorized and validly issued, and all such shares are fully paid and nonassessable. As of the date hereof, other than warrants to purchase 373,832 EVBS Shares (which are described in more detail in EVBS Schedule 4.2) and options to purchase 304,312 EVBS Shares (which are described in more detail in EVBS Schedule 4.2), there are no outstanding options, warrants, commitments, or other rights or instruments to purchase or acquire any EVBS Shares or EVBS Series A Preferred Shares, or any securities or rights convertible into or exchangeable for EVBS Shares or EVBS Series A Preferred Shares.

Section 4.3 Financial Statements, Condition and Reports .

(a) EVBS has made available to FCB copies of the consolidated financial statements of EVBS as of and for the years ended December 31, 2006, 2007 and 2008 and EVBS will make available to FCB, as soon as practicable following the preparation of additional consolidated financial statements for each subsequent calendar quarter or year of EVBS, the consolidated financial statements of EVBS as of and for such subsequent calendar quarter or year (such consolidated financial statements, unless otherwise indicated, being hereinafter referred to collectively as the “Financial Statements of EVBS”).

(b) Each of the Financial Statements of EVBS (including the related notes) have been or will be prepared in all material respects in accordance with generally accepted accounting principles, which principles have been or will be consistently applied during the periods involved, except as otherwise noted therein, and the books and records of EVBS have been, are being, and will be maintained in all material respects in accordance with applicable legal and accounting requirements and reflect only actual transactions. Each of the Financial Statements of EVBS (including the related notes) fairly presents or will fairly present the consolidated financial position of EVBS as of the respective dates thereof and fairly presents or will fairly present the results of operations of EVBS for the respective periods therein set forth.

 

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(c) Since December 31, 2008, neither EVBS nor any of the EVBS Subsidiaries has incurred any obligation or liability (contingent or otherwise) that has or might reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on the Condition of EVBS on a consolidated basis, except obligations and liabilities (i) which are accrued or reserved against in the Financial Statements of EVBS or reflected in the notes thereto, and (ii) which were incurred after December 31, 2008 in the ordinary course of business consistent with past practices. Since December 31, 2008, and except for the matters described in (i) and (ii) above, neither EVBS nor any of the EVBS Subsidiaries has incurred or paid any obligation or liability which would be material to the Condition of EVBS on a consolidated basis.

(d) Each of the consolidated reports of condition and income for the years ending December 31, 2008, 2007 and 2006 and for the quarters ending March 31, 2008, June 30, 2008, September 30, 2008 and December 31, 2008, that EVBS and each of the EVBS Subsidiaries has filed with the appropriate Regulatory Authority, fairly present the financial position, results of operation, changes in stockholder’s equity and changes in cash flows, as the case may be of each such bank for the periods to which they relate, in each case in accordance with the FFIEC instructions applicable to such reports.

(e) Since January 1, 2006, EVBS and each of the EVBS Subsidiaries has filed all reports and statements, together with any amendments required to be made with respect thereto, if any, that was required to be filed with (i) the Federal Reserve, (ii) the FDIC and (iii) any other Regulatory Authority with jurisdiction over EVBS and each of the EVBS Subsidiaries, and have paid all fees and assessments due and payable in connection therewith. As of their respective dates, each of such reports and documents, as amended, including any financial statements, exhibits and schedules thereto, complied with the relevant statutes, rules and regulations enforced or promulgated by the Regulatory Authorities with which they were filed, and did not contain any untrue statement of 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 were made, not misleading.

(f) EVBS’s Annual Reports on Form 10-K for the fiscal years ended December 31, 2008, 2007 and 2006, and all other reports, registration statements, definitive proxy statements or information statements filed or to be filed by it or any of the EVBS Subsidiaries subsequent to December 31, 2008 under the Securities Act, or under Section 13(a), 13(c), 14 or 15(