AGREEMENT OF MERGER

Exhibit 2.1

AGREEMENT OF MERGER

dated as of

May 12, 2009

between

FIRST BANKSHARES, INC.

and

XENITH CORPORATION

TABLE OF CONTENTS

 

 

i

 

ii

 

iii

APPENDIX A—DEFINITIONS

SCHEDULES:

FBS Disclosure Schedule

Xenith Disclosure Schedule

EXHIBITS:

Exhibit A – Form of Plan of Merger

Exhibit B-1 – Form of FBS Voting Agreement

Exhibit B-2 – Form of Xenith Voting Agreement

Exhibit C – Form of FBS Rule 145 Affiliate Letter

Exhibit D – Form of Tax Representation Letter from Xenith

Exhibit E – Form of Tax Representation Letter from FBS

Exhibit F – Form of Employment Agreement

Exhibit G – Amended and Restated Articles of Incorporation of Surviving Corporation

Exhibit H – Amended and Restated Bylaws of Surviving Corporation

 

iv

AGREEMENT OF MERGER

AGREEMENT OF MERGER (this “ Agreement ”) dated as of May 12, 2009 between First Bankshares, Inc., a Virginia bank holding company incorporated pursuant to the VSCA (“ FBS ”), and Xenith Corporation, a Virginia corporation (“ Xenith ”).

WHEREAS, SuffolkFirst Bank, a Virginia banking corporation (the “ Bank ”), is a wholly-owned subsidiary of FBS;

WHEREAS, the respective Boards of Directors of FBS and Xenith deem it advisable and in the best interests of their respective shareholders and corporations for Xenith to merge with and into FBS (the “ Merger ”) on the terms and subject to the conditions set forth in this Agreement;

WHEREAS, in furtherance thereof, the respective Boards of Directors of FBS and Xenith have approved the Merger and this Agreement, including the Plan of Merger in the form attached as Exhibit A hereto (the “ Plan of Merger ”);

WHEREAS, concurrently with the execution of this Agreement, as a condition of the willingness of FBS and Xenith to enter into this Agreement, certain shareholders of FBS have agreed to enter into a Voting Agreement (the “ FBS Voting Agreement ”) substantially in the form attached hereto as Exhibit B-1 providing for, among other things, the agreement of such shareholders to vote FBS Shares, representing in the aggregate approximately 16% of the outstanding FBS Shares, in favor of the Plan of Merger and the approval and adoption of this Agreement; and

WHEREAS, concurrently with the execution of this Agreement, as a condition of the willingness of FBS and Xenith to enter into this Agreement, certain shareholders of Xenith have agreed to enter into a Voting Agreement (the “ Xenith Voting Agreement ”) substantially in the form attached hereto as Exhibit B-2 providing for, among other things, the agreement of such shareholders to vote shares of Xenith Common Stock, representing in the aggregate 100% of the outstanding Xenith Common Stock as of the date hereof, in favor of the Plan of Merger and the approval and adoption of this Agreement; and

WHEREAS, for U.S. federal income tax purposes, it is intended by FBS and Xenith that the Merger be treated as a reorganization within the meaning of Code Section 368(a) and that no gain or loss shall be recognized in connection with the Merger by any of FBS, Xenith or their shareholders, except with respect to Cash Elections by holders of FBS Shares and cash received by holders of Xenith Common Stock in lieu of a fractional share of Surviving Corporation Common Stock.

NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:

ARTICLE 1

D EFINITIONS

Section 1.01 Definitions.

Certain defined terms used in this Agreement are set forth in Appendix A attached hereto.

Section 1.02 Other Definitional and Interpretative Provisions.

Unless specified otherwise, in this Agreement the obligations of any party consisting of more than one person are joint and several. The words “hereof”, “herein” and “hereunder” and words of like import used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. The captions herein are included for convenience of reference only and shall be ignored in the construction or interpretation hereof. References to Articles, Sections, Exhibits and Schedules are to Articles, Sections, Exhibits and Schedules of this Agreement unless otherwise specified. All Exhibits and Schedules annexed hereto or referred to herein are hereby incorporated in and made a part of this Agreement as if set forth in full herein. Any capitalized terms used in any Exhibit or Schedule but not otherwise defined therein, shall have the meaning as defined in this Agreement. Any singular term in this Agreement shall be deemed to include the plural, and any plural term the singular. Whenever the words “include”, “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation”, whether or not they are in fact followed by those words or words of like import. “Writing”, “written” and comparable terms refer to printing, typing and other means of reproducing words (including electronic media) in a visible form. References to any agreement or contract are to that agreement or contract as amended, modified or supplemented from time to time in accordance with the terms hereof and thereof. References to any Person include the successors and permitted assigns of that Person. References from or through any date mean, unless otherwise specified, from and including or through and including, respectively. References to “law”, “laws” or to a particular statute or law shall be deemed also to include any and all related rules, regulations, ordinances, directives, treaties and judicial or administrative decisions, judgments, decrees or injunctions of any U.S. or non-U.S. federal, state, local or foreign Governmental Entity. Any reference to a statute shall be to such statute, as amended from time to time, and to the rules and regulations promulgated thereunder.

ARTICLE 2

T HE M ERGER ; C ERTAIN R ELATED M ATTERS

Section 2.01 The Merger; Closing.

(a) Within five days following satisfaction or, to the extent permitted hereunder, waiver of all conditions to the Merger, including, without limitation, final determination of the Exchange Ratio as provided in Sections 3.10(b) and (c) hereof, FBS and Xenith shall file articles of merger with the State Corporation Commission of Virginia and make all other filings or recordings required by Virginia law in connection with the Merger. The Merger shall become effective (the “ Effective Time ”) at the time the Certificate of Merger is issued by the State Corporation Commission of Virginia (or at such later time as may be specified in the articles of merger) in accordance with the VSCA. Upon and following the Merger, the separate existence of Xenith shall cease, and FBS shall be the surviving entity resulting from the Merger (the “ Surviving Corporation ”).

 

2

(b) From and after the Effective Time, the Surviving Corporation shall possess all the rights, powers, privileges and franchises and be subject to all of the obligations, liabilities, restrictions and disabilities of FBS and Xenith, all as provided under the VSCA.

(c) The closing of the Merger (the “ Closing ”) shall take place at such time and place as FBS and Xenith shall agree, on the date when the Effective Time is to occur (the “ Closing Date ”).

ARTICLE 3

C ONVERSION OF S HARES ;

C ASH E LECTION ; E XCHANGE OF C ERTIFICATES

Section 3.01 Xenith Common Stock.

At the Effective Time, by virtue of the Merger and without any action on the part of any holder of shares of capital stock of FBS or Xenith, each issued and outstanding share of common stock, par value $1.00 per share, of Xenith (“ Xenith Common Stock ”) outstanding immediately prior to the Effective Time shall be converted into the right to receive that number of shares of common stock, par value $3.20 per share, of FBS, as the Surviving Corporation (“ Surviving Corporation Common Stock ”), equal to one multiplied by the Exchange Ratio, as determined pursuant to Section 3.10 (the “ Xenith Merger Consideration ”).

Section 3.02 Conversion of FBS Shares.

At the Effective Time, by virtue of the Merger and without any action on the part of any holder of shares of capital stock of FBS or Xenith:

(a) each FBS Share outstanding immediately prior to the Effective Time for which a Cash Election has been effectively made and not revoked (a “ Cash Electing FBS Share ”) shall be converted into the right to receive an amount equal to $9.23 in cash without interest, as may be adjusted pursuant to Section 3.10(a) (the “ Cash Election Price ”); and

(b) each FBS Share outstanding immediately prior to the Effective Time that is not a Cash Electing FBS Share shall, following the Effective Time, represent one share of Surviving Corporation Common Stock, as may be adjusted pursuant to Section 3.10(a) (a “ Non-Electing FBS Share ” and, together with the Cash Election Price, the “ FBS Merger Consideration ”).

Section 3.03 Elections.

Each Person who, at the close of business on the date of the FBS Shareholder Meeting or on such other date as FBS and Xenith publicly announce as the election date, is a record holder of FBS Shares will be entitled, with respect to any or all of such FBS Shares, to make an election (a “ Cash Election ”) on or prior to such date to receive the Cash Election Price on the basis hereinafter set forth.

 

3

Section 3.04 Proration of Election Price.

(a) The number of FBS Shares to be converted into the right to receive the Cash Election Price at the Effective Time shall not exceed the number of FBS Shares which is 25% of FBS Shares outstanding at the Effective Time (the “ Cash Election Number ”).

(b) If the number of Cash Electing FBS Shares exceeds the Cash Election Number, then such Cash Electing FBS Shares shall be treated in the following manner: ¹

(i) A cash proration factor (the “ Cash Proration Factor ”) shall be determined by dividing the Cash Election Number by the total number of Cash Electing FBS Shares.

(ii) A number of Cash Electing FBS Shares covered by each shareholder’s Cash Election equal to the product of (x) the Cash Proration Factor and (y) the total number of Cash Electing FBS Shares covered by such Cash Election shall be converted into the right to receive the Cash Election Price; provided that any fractional Cash Electing FBS Shares resulting from such multiplication shall be rounded down to the next whole share.

(iii) Each Cash Electing FBS Share, other than those FBS Shares converted into the right to receive the Cash Election Price in accordance with Section 3.04(b)(ii), shall, following the Effective Time, represent one share of Surviving Corporation Common Stock as if such FBS Shares were not Cash Electing FBS Shares.

Section 3.05 Election Procedures; Exchange Agent.

(a) Prior to the date of the FBS Shareholder Meeting, FBS and Xenith shall prepare a form (an “ Election Form ”) pursuant to which a holder of record of FBS Shares may make a Cash Election with respect to each FBS Share owned by such holder. FBS shall cause an Election Form to be included with the Joint Proxy Statement and mailed to each holder of record of FBS Shares as of the record date for such meeting.

(b) Prior to the record date for the FBS Shareholder Meeting, FBS and Xenith shall appoint an agent (the “ Exchange Agent ”) for the purpose of (i) receiving Election Forms and determining, in accordance with this Article 3, the form of FBS Merger Consideration to be received by each holder of FBS Shares, and (ii) exchanging for the certificates of Xenith Common Stock (the “ Xenith Certificates ”) certificates representing shares of Surviving

1

As an example, if there are 2,276,298 FBS Shares outstanding, the Cash Election Number is 569,074. If the number of Cash Electing FBS Shares is 800,000, then the Cash Proration Factor would be 71.13%. If a shareholder owned 10,000 FBS Shares and made a Cash Election with respect to all 10,000 FBS Shares, he would receive cash for 7,113 FBS Shares (7,113 shares x $9.23 per share = $65,653) and he would retain 2,887 FBS Shares, which represent 2,887 shares of Surviving Corporation Common Stock.

 

4

Corporation Common Stock. At or prior to the Effective Time, (i) FBS shall deposit, or cause to be deposited, with the Exchange Agent, for the benefit of the holders of the Xenith Certificates, for exchange in accordance with this Article 3, subject to Section 3.07(a), certificates representing the shares of Surviving Corporation Common Stock that constitute the Xenith Merger Consideration, and (ii) Xenith shall deposit, or cause to be deposited, with the Exchange Agent, for the benefit of the holders of the Cash Electing FBS Shares, for exchange in accordance with this Article 3, subject to Section 3.06(b), an amount of cash necessary to satisfy the cash portion of the FBS Merger Consideration (collectively (i) and (ii), the “ Exchange Fund ”). The Exchange Fund will be distributed in accordance with the Exchange Agent’s normal and customary procedures established in accordance with merger transactions. At the Effective Time or promptly thereafter, the Surviving Corporation shall send, or shall cause the Exchange Agent to send, to each holder of record at the Effective Time of FBS Shares and each holder of record of Xenith Common Stock, a letter of transmittal and instructions (which shall specify that the delivery shall be effected, and risk of loss and title shall pass, only upon proper delivery of the Cash Electing Certificates or Xenith Certificates, as the case may be, to the Exchange Agent) for use in such exchange.

(c) A Cash Election shall be effective only if the Exchange Agent shall have received no later than 5:00 p.m., Richmond, Virginia time, on the date of the FBS Shareholder Meeting (the “ Election Deadline ”) an Election Form covering the FBS Shares to which such Cash Election applies, executed and completed in accordance with the instructions set forth in such Election Form. Any FBS Share with respect to which the Exchange Agent has not received an effective Cash Election meeting the requirements of this Section 3.05(c) by the Election Deadline shall be deemed to be a Non-Electing FBS Share. A Cash Election may be revoked or changed only by delivering to the Exchange Agent, prior to the Election Deadline, a written notice of revocation or, in the case of a change, a properly completed revised Election Form that identifies FBS Shares to which such revised Election Form applies. Delivery to the Exchange Agent prior to the Election Deadline of a revised Election Form with respect to any FBS Shares shall result in the revocation of all prior Election Forms with respect to all such FBS Shares. Any termination of this Agreement in accordance with Article 11 shall result in the revocation of all Election Forms delivered to the Exchange Agent on or prior to the date of such termination.

(d) FBS and Xenith jointly, not severally, shall have the right to make rules or adopt procedures, not inconsistent with the terms of this Agreement, governing the validity and effectiveness of Election Forms, the manner and extent to which Cash Elections are to be taken into account in making the determinations required by this Section and the payment of the FBS Merger Consideration and the Xenith Merger Consideration.

Section 3.06 Exchange, Surrender and Payment Procedures for FBS Shares.

(a) Each certificate representing one or more Non-Electing FBS Shares prior to the Effective Time shall, by virtue of the Merger and without any action on the part of the holder of such certificate, represent the identical number of shares of the Surviving Corporation Common Stock immediately following the Effective Time.

(b) Each holder of a certificate (a “ Cash Electing Certificate ”) representing one or more Cash Electing FBS Shares shall be entitled to receive, upon surrender to the

 

5

Exchange Agent of a Cash Electing Certificate, together with a properly completed letter of transmittal, the Cash Election Price for each Cash Electing FBS Share represented by such certificate. Until so surrendered, each such Cash Electing Certificate shall represent after the Effective Time for all purposes only the right to receive the Cash Election Price for each Cash Electing FBS Share represented by such certificate.

(c) If by virtue of the provisions of Section 3.04, a holder of FBS Shares holds a certificate as to which some but not all of the shares are Cash Electing FBS Shares, upon surrender of such certificate and the other documentation required by Section 3.06(b) above, the Exchange Agent will deliver to such holder the Cash Election Price for each of the Cash Electing FBS Shares represented by such certificate and a new stock certificate for that number of shares of Surviving Corporation Common Stock equal to the number of FBS Shares represented by the surrendered certificate that were not Cash Electing FBS Shares.

(d) If any portion of the Cash Election Price is to be paid to a Person other than the Person in whose name the surrendered Cash Electing Certificate is registered, it shall be a condition to such payment that (i) either such certificate shall be properly endorsed or shall otherwise be in proper form for transfer and (ii) the Person requesting such payment shall pay to the Exchange Agent any transfer or other Taxes required as a result of such payment to a Person other than the registered holder of such Cash Electing Certificate or establish to the satisfaction of the Exchange Agent that such Tax has been paid or is not payable.

(e) Any FBS Merger Consideration remaining unclaimed by holders of FBS Shares two years after the Effective Time (or such earlier date, immediately prior to such time when the amounts would otherwise escheat to or become property of any Governmental Entity) shall become, to the extent permitted by applicable law, the property of the Surviving Corporation free and clear of any claims or interest of any Person previously entitled thereto.

Section 3.07 Exchange and Surrender Procedures for Xenith Common Stock.

(a) Each holder of Xenith Common Stock that has been converted into the right to receive the Xenith Merger Consideration shall be entitled to receive, upon surrender to the Exchange Agent of a Xenith Certificate, together with a properly completed letter of transmittal, the Xenith Merger Consideration in respect of the Xenith Common Stock represented by a Xenith Certificate. Until so surrendered, each such Xenith Certificate shall represent after the Effective Time for all purposes only the right to receive such Xenith Merger Consideration.

(b) If any portion of the Xenith Merger Consideration is to be paid to a Person other than the Person in whose name the surrendered Xenith Certificate is registered, it shall be a condition to such payment that (i) either such Xenith Certificate shall be properly endorsed or shall otherwise be in proper form for transfer and (ii) the Person requesting such payment shall pay to the Exchange Agent any transfer or other Taxes required as a result of such payment to a Person other than the registered holder of such Xenith Certificate or establish to the satisfaction of the Exchange Agent that such Tax has been paid or is not payable.

 

6

(c) After the Effective Time, there shall be no further registration of transfers of Xenith Common Stock. If, after the Effective Time, Xenith Certificates are presented to the Surviving Corporation, they shall be canceled and exchanged for the Xenith Merger Consideration provided for, and in accordance with, the procedures set forth, in this Article 3.

(d) Any Xenith Merger Consideration remaining unclaimed by holders of Xenith Common Stock two years after the Effective Time (or such earlier date, immediately prior to such time when the amounts would otherwise escheat to or become property of any Governmental Entity) shall become, to the extent permitted by applicable law, the property of the Surviving Corporation free and clear of any claims or interest of any Person previously entitled thereto.

(e) No dividends or other distributions with respect to securities of Surviving Corporation constituting the Xenith Merger Consideration, and no cash payment in lieu of fractional shares as provided in Section 3.11, shall be paid to the holder of any Xenith Certificates not surrendered until such Xenith Certificates are surrendered, as provided in this Section. Following such surrender, there shall be paid, without interest, to the Person in whose name the securities of Surviving Corporation have been registered, (i) at the time of such surrender or transfer, the amount of any cash payable in lieu of fractional shares to which such Person is entitled pursuant to Section 3.11 and the amount of all dividends or other distributions with a record date after the Effective Time previously paid or payable on the date of such surrender with respect to such securities, and (ii) at the appropriate payment date, the amount of dividends or other distributions with a record date after the Effective Time and prior to surrender or transfer and with a payment date subsequent to surrender or transfer payable with respect to such securities.

(f) Notwithstanding any provision contained in this Agreement to the contrary, all shares of Xenith Common Stock outstanding immediately prior to the Effective Time held by a holder who has not voted in favor of the Merger or consented thereto in writing and who has demanded appraisal for such shares (“ Dissenting Shares ”) in accordance with the VSCA (a “ Dissenting Holder ”) shall not be converted into a right to receive any of the Xenith Merger Consideration, but shall, from and after the Effective Time, have only such rights as are afforded to the holders thereof by the provisions of Article 15 of the VSCA, unless such Dissenting Holder fails to perfect or withdraws or loses such Dissenting Holder’s right to appraisal, in which case such shares shall be treated as if they had been converted as of the Effective Time of the Merger into the right to receive the portion of the Xenith Merger Consideration payable in respect of such shares pursuant to Section 3.01. Xenith shall give FBS prompt notice of (i) any demands received by Xenith for appraisal of shares, withdrawals of such demands, and any other instruments served pursuant to the VSCA and received by Xenith, and (ii) all negotiations and proceedings with respect to such demands.

Section 3.08 Stock Options.

(a) Xenith Stock Options . At the Effective Time, each option granted by Xenith to purchase Xenith Common Stock pursuant to Xenith’s 2009 Stock Incentive Plan (the “ Xenith Option Plan ”), (each a “ Xenith Option ”), which is then outstanding and unexercised, whether or not vested, shall cease to represent a right to acquire Xenith Common Stock and shall

 

7

be converted automatically into an option to purchase shares of Surviving Corporation Common Stock (a “ Surviving Corporation Option ”) in an amount and at an exercise price determined as provided below (and otherwise subject to the terms of the Xenith Option Plan under which such Xenith Option was granted, including vesting rights, the agreements evidencing grants thereunder and any other agreements between Xenith and an optionee regarding Xenith Options):

(i) the number of shares of Surviving Corporation Common Stock to be subject to the Surviving Corporation Option shall be equal to the product of the number of shares of Xenith Common Stock subject to the original Xenith Option and the Exchange Ratio; provided that any fractional shares of Surviving Corporation Common Stock resulting from such multiplication shall be rounded down to the next whole share;

(ii) the exercise price per share of Surviving Corporation Common Stock under the Surviving Corporation Option shall be equal to the exercise price per share of Xenith Common Stock under the original Xenith Option divided by the Exchange Ratio; provided that if the exercise price resulting from such division includes a fractional cent, the exercise price shall be rounded up to the next cent; and

(iii) notwithstanding anything else contained in this Section 3.08(a), it is the intention of the parties that the assumption of Xenith Options hereunder shall meet the requirements of Section 424(a) of the Code, and that each Surviving Corporation Option shall qualify immediately after the Effective Time as an incentive stock option (as defined in Section 422 of the Code) to the extent the related Xenith Option so qualified immediately prior to the Effective Time and that each Surviving Corporation Option shall continue to be exempt from Section 409A of the Code, and the foregoing provisions of this Section 3.08(a) shall be interpreted to further such purpose and intention.

(b) FBS Stock Options . At the Effective Time, each option granted by FBS to purchase FBS Shares pursuant to the SuffolkFirst Bank 2003 Stock Option Plan (the “ FBS Option Plan ”), (each an “ FBS Option ”), which is then outstanding and unexercised, whether or not vested, shall cease to represent a right to acquire FBS Shares and shall be converted automatically into a Surviving Corporation Option in an amount and at an exercise price determined as provided below (and otherwise subject to the terms of the FBS Option Plan under which such FBS Option was granted, including vesting rights, the agreements evidencing grants thereunder and any other agreements between FBS and an optionee regarding FBS Options):

(i) the number of shares of Surviving Corporation Common Stock to be subject to the Surviving Corporation Option shall be equal to the number of FBS Shares subject to the original FBS Option;

(ii) the exercise price per share of Surviving Corporation Common Stock under the Surviving Corporation Option shall be equal to the exercise price per FBS Share under the original FBS Option; and

(iii) notwithstanding anything else contained in this Section 3.08(b), it is the intention of the parties that the assumption of FBS Options hereunder shall meet the requirements of Section 424(a) of the Code, and that each Surviving Corporation

 

8

Option shall qualify immediately after the Effective Time as an incentive stock option (as defined in Section 422 of the Code) to the extent the related FBS Option so qualified immediately prior to the Effective Time and that each Surviving Corporation Option shall continue to be exempt from Section 409A of the Code, and the foregoing provisions of this Section 3.08(b) shall be interpreted to further such purpose and intention.

(c) At the Effective Time, the Surviving Corporation shall, as a result of the Merger, automatically assume the Xenith Option Plan, including all rights and obligations thereunder. Following the Effective Time, the Surviving Corporation may grant Surviving Corporation Options in accordance with the terms of the Xenith Option Plan.

(d) Immediately following the Effective Time, Surviving Corporation shall reserve for issuance the number of shares of Surviving Corporation Common Stock necessary to satisfy Surviving Corporation’s obligations under this Section 3.08. Promptly after the Effective Time (but in no event later than ten Business Days thereafter), Surviving Corporation shall file with the SEC a registration statement on an appropriate form under the 1933 Act with respect to the shares of Surviving Corporation Common Stock subject to the Surviving Corporation Options, and shall use its best efforts to maintain the current status of the prospectus contained therein, as well as comply with applicable state securities or “blue sky” laws, for so long as such options remain outstanding.

(e) Prior to the Effective Time, FBS and Xenith shall take all such steps as may be required to cause any dispositions of equity securities of the Surviving Corporation (including derivative securities with respect to any equity securities of the Surviving Corporation) resulting from the transactions contemplated by this Agreement by each individual who following the effective time will be subject to the reporting requirements of Section 16(a) of the 1934 Act with respect to the Surviving Corporation to be exempt under Rule 16b-3 promulgated under the 1934 Act.

Section 3.09 Xenith Warrants.

At the Effective Time, each Xenith Warrant, which is then outstanding, unexercised and vested shall cease to represent a right to acquire Xenith Common Stock and shall be converted automatically into a warrant to purchase shares of Surviving Corporation Common Stock (a “ Surviving Corporation Warrant ”) in an amount and at an exercise price determined as provided below (and otherwise subject to the terms under which such Xenith Warrant was granted, including vesting rights, the agreements evidencing grants thereunder and any other agreements between Xenith and a warrant holder regarding Xenith Warrants):

(a) the number of shares of Surviving Corporation Common Stock to be subject to the Surviving Corporation Warrant shall be equal to the product of the number of shares of Xenith Common Stock subject to the original Xenith Warrant and the Exchange Ratio; provided that any fractional shares of Surviving Corporation Common Stock resulting from such multiplication shall be rounded down to the next whole share; and

(b) the exercise price per share of Surviving Corporation Common Stock under the Surviving Corporation Warrant shall be equal to the exercise price per share of Xenith

 

9

Common Stock under the original Xenith Warrant divided by the Exchange Ratio; provided that if the exercise price resulting from such division includes a fractional cent, the exercise price shall be rounded up to the next cent.

(c) At the Effective Time, the Surviving Corporation shall, as a result of the Merger, automatically assume the Xenith Warrant Agreements, including all rights and obligations thereunder.

Section 3.10 Adjustments.

(a) If, during the period between the date of this Agreement and the Effective Time, any change in the outstanding shares of capital stock of FBS or Xenith shall occur (other than changes resulting from the offering of Xenith Common Stock contemplated by Sections 10.02(f) and 10.03(f) hereof), including by reason of any reclassification, recapitalization, stock split or combination, exchange or readjustment of shares, or any stock dividend thereon with a record date during such period, the FBS Merger Consideration, the Xenith Merger Consideration, the Cash Election Price and any other amounts payable pursuant to this Agreement and, if applicable, their respective determinations shall be appropriately adjusted.

(b) The exchange ratio shall be an amount (carried out four decimal places) equal to the quotient of the Adjusted Xenith Book Value Per Share divided by the Cash Election Price (the “ Exchange Ratio ”). ² The “ Adjusted Xenith Book Value Per Share ” shall be equal to the Final Xenith Shareholders’ Equity divided by the number of shares of Xenith Common Stock outstanding immediately prior to the Effective Time.

(c) The Final Xenith Shareholders’ Equity shall be determined as follows:

(i) No less than ten days prior to the Closing Date, Xenith shall cause to be prepared and delivered to FBS the unaudited balance sheet of Xenith as of the end of the month immediately preceding the Closing Date (or, if the Closing Date occurs during the first fifteen days of a month, as of the end of the month preceding the month immediately preceding the Closing Date) (the “ Estimated Xenith Closing Balance Sheet ”), as well as a good faith estimate, based on a roll-forward of the Estimated Xenith Closing Balance Sheet, of Xenith’s total shareholders’ equity as of the Effective Time (which roll-forward shall include, without limitation, all expenses incurred by Xenith in connection with the transactions contemplated hereby, regardless of whether such expenses are expensed or capitalized pursuant to GAAP), which estimate shall be reasonably acceptable to FBS (the “ Estimated Xenith Shareholders’ Equity ”). Xenith shall make available to FBS access to its books and records, its financial and accounting personnel and all work papers related to the calculation of the Estimated Xenith Shareholders’ Equity. Section 3.10(c)(i) of the Xenith Disclosure Schedule sets forth a draft form of the Estimated Xenith Closing Balance Sheet prepared as if the Closing

2	As an example, if the Final Xenith Shareholders’ Equity is $46,300,000, there are 5,250,000 shares of Xenith Common Stock outstanding immediately prior to the Effective Time and the Cash Election Price is $9.23, then the Exchange Ratio will be 0.9555 (($46,300,000 ÷ 5,250,000) ÷ 9.23).

 

10

occurred on December 31, 2008. The Estimated Xenith Closing Balance Sheet shall be prepared in accordance with GAAP and in a manner consistent with Xenith’s most recent audited financial statements (except for normal year-end audit adjustments and except for lack of notes thereto).

(ii) If FBS has no objections to the Estimated Xenith Shareholders’ Equity (or fails to deliver notice of its objection within the applicable five day period) the Estimated Xenith Shareholders’ Equity shall be the Final Xenith Shareholders’ Equity.

(iii) If FBS has an objection to the Estimated Xenith Shareholders’ Equity, FBS shall deliver a detailed statement describing FBS’s objections to Xenith within five days following FBS’s receipt of the Estimated Xenith Closing Balance Sheet. FBS and Xenith shall use their reasonable best efforts to resolve any such objections. If a final resolution is not obtained within two days after Xenith has received the statement of objections, FBS and Xenith shall select a nationally-recognized accounting firm mutually acceptable to them to promptly resolve any remaining objections within five days following submission of such objections to the accounting firm. If FBS and Xenith are unable to agree on the choice of an accounting firm, FBS and Xenith shall select a nationally-recognized accounting firm by lot (after excluding Ernst & Young and Witt Mares, PLC). Such accounting firm shall consider only those items and amounts set forth in the Estimated Xenith Closing Balance Sheet, or the detailed statement of objections of FBS that remain in dispute and shall base its determinations solely on the submissions of the parties and the definitions and other relevant provisions contained herein. In resolving any disputed item, such accounting firm may not assign a value to any item greater than the greatest value for such item claimed by either party or less than the smallest value for such item claimed by either party. The decision of such accounting firm shall be final and binding on all parties hereto. If any unresolved objections are submitted to an accounting firm for resolution as provided above, the fees and expenses of such accounting firm shall be split 50%/50% between FBS and Xenith.

(iv) The Estimated Xenith Shareholders’ Equity shall be revised to reflect the resolution of any objections and such revised Estimated Xenith Shareholders’ Equity shall be the Final Xenith Shareholders’ Equity for all purposes hereunder.

Section 3.11 Fractional Shares.

No fractional shares of Surviving Corporation Common Stock shall be issued in the Merger. All fractional shares of Surviving Corporation Common Stock that a holder of Xenith Common Stock would otherwise be entitled to receive as a result of the Merger shall be aggregated and if a fractional share results from such aggregation, such holder shall be entitled to receive, in lieu thereof, an amount in cash without interest equal to the Cash Election Price multiplied by the fraction of a share of Surviving Corporation Common Stock to which such holder would otherwise have been entitled.

 

11

Section 3.12 Withholding Rights.

Each of the Exchange Agent and Surviving Corporation shall be entitled to deduct and withhold from the consideration otherwise payable to any Person pursuant to this Section 3.12 such amounts as it is required to deduct and withhold with respect to the making of such payment under any provision of federal, state, local or foreign Tax law. If the Exchange Agent or Surviving Corporation, as the case may be, so withholds amounts, such amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the FBS Shares, or Xenith Common Stock, as the case may be, in respect of which the Exchange Agent or Surviving Corporation, as the case may be, made such deduction and withholding.

Section 3.13 Lost Certificates.

If any Xenith Certificate or certificate evidencing FBS Shares shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such certificate to be lost, stolen or destroyed and, if required by the Surviving Corporation, the posting by such Person of a bond, in such reasonable amount as the Surviving Corporation may direct, as indemnity against any claim that may be made against it with respect to such certificate, the Exchange Agent will issue, in exchange for such lost, stolen or destroyed certificate, the Xenith Merger Consideration or FBS Merger Consideration, as the case may be, to be paid in respect of the FBS Shares or shares of Xenith Common Stock represented by such certificate, as contemplated by this Section 3.13.

ARTICLE 4

T HE S URVIVING C ORPORATION

Section 4.01 Articles of Incorporation.

At the Effective Time, the articles of incorporation of the Surviving Corporation shall be amended and restated by virtue of the Merger to read as set forth in Exhibit G . Thereafter, the articles of incorporation of the Surviving Corporation may be amended in accordance with their terms and as provided by law.

Section 4.02 Bylaws.

At the Effective Time, the bylaws of the Surviving Corporation shall be amended and restated by virtue of the Merger to read as set forth in Exhibit H . Thereafter, the bylaws of the Surviving Corporation may be amended in accordance with their terms and as provided by law.

Section 4.03 Directors and Officers.

(a) From and after the Effective Time, until successors are duly elected or appointed and qualified in accordance with applicable law, (i) the Board of Directors of the Surviving Corporation shall consist of those Persons identified in Section 4.03(a)(i) of the Xenith Disclosure Schedule, which Persons consist of the the directors of Xenith as of the date hereof, along with three additional directors designated by FBS, and (ii) the Chairman of the Board and the executive officers of the Surviving Corporation shall be those Persons identified in Section

 

12

4.03(a)(ii) of the Xenith Disclosure Schedule. Subject to satisfying their fiduciary duties under applicable law, the Persons identified in Section 4.03(a)(i) of the Xenith Disclosure Schedule as the directors of the Surviving Corporation have indicated their intention to nominate for election as directors at the next annual meeting of shareholders two of the directors designated by FBS.

(b) The Surviving Corporation shall take all action necessary so that, after the Effective Time, until successors are duly elected or appointed and qualified in accordance with applicable law, (i) the Board of Directors of the Bank shall consist of those Persons identified in Section 4.03(b)(i) of the Xenith Disclosure Schedule, which Persons consist of five individuals designated by FBS and six individuals designated by Xenith, (ii) the Chairman of the Board shall be T. Gaylon Layfield, III, and (iii) the executive and senior officers of the Bank shall be those Persons identified in Section 4.03(b)(iii) of the Xenith Disclosure Schedule. FBS, as the Surviving Corporation, in its capacity as sole shareholder of the Bank, agrees to reelect at the next annual meeting of shareholders of the Bank those Persons identified in Section 4.03(b) of the Xenith Disclosure Schedule, provided that such Persons meet the standards of conduct and requirements for election.

Section 4.04 Principal Office; Authorized Capital Stock; Other Matters.

The principal banking office of the Surviving Corporation shall be located at One James Center, 901 E. Cary Street, Suite 1700, Richmond, Virginia 23219. The authorized capital stock of the Surviving Corporation shall consist of 100,000,000 shares of common stock, with a par value of $1.00 per share and 25,000,000 shares of preferred stock, with a par value of $1.00 per share. Each share of capital stock of the Surviving Corporation shall be entitled to one vote. No preferred stock will be issued in the Merger.

ARTICLE 5

R EPRESENTATIONS AND W ARRANTIES OF FBS

Except as set forth in the disclosure schedule delivered by FBS to Xenith on or prior to the date hereof (the “ FBS Disclosure Schedule ”), FBS represents and warrants to Xenith that the following representations and warranties are true and correct as of the date hereof:

Section 5.01 Corporate Existence and Power.

(a) FBS is duly incorporated, validly existing and in good standing under the laws of the Commonwealth of Virginia and has all corporate powers and all governmental licenses, authorizations, permits, consents and approvals required to carry on its business as now conducted. FBS is registered as a bank holding company under the U.S. Bank Holding Company Act of 1956, as amended (the “ BHC Act ”). FBS is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction where such qualification is necessary. FBS has heretofore delivered to Xenith true and complete copies of the articles of incorporation and bylaws of FBS as currently in effect.

(b) The Bank is duly incorporated as a banking corporation, validly existing and in good standing under the laws of the Commonwealth of Virginia and has all corporate powers and all governmental licenses, authorizations, permits, consents and approvals required

 

13

to carry on its business as now conducted. The Bank is an “insured bank” as defined in Section 3(h) of the Federal Deposit Insurance Act (“ FDIA ”) and is a member of the Federal Reserve System. The Bank is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction where such qualification is necessary. The Bank has heretofore delivered to Xenith true and complete copies of the articles of incorporation and bylaws of the Bank as currently in effect. With the exception of the Bank, FBS does not have any Subsidiaries.

Section 5.02 Corporate Authorization.

(a) The execution, delivery and performance by FBS of this Agreement and the consummation by FBS of the transactions contemplated hereby are within FBS’s corporate powers and, except for the required approval of FBS’s shareholders in connection with the consummation of the Merger, have been duly authorized by all necessary corporate action on the part of FBS. The affirmative vote of the holders of a majority of the outstanding FBS Shares is the only vote, approval or consent of the holders of any of FBS’s capital stock necessary in connection with the consummation of the Merger. This Agreement constitutes a valid and binding agreement of FBS (assuming the due authorization, execution and delivery hereof by Xenith).

(b) At a meeting duly called and held, FBS’s Board of Directors has (i) unanimously determined that this Agreement, the Plan of Merger and the transactions contemplated hereby are fair to and in the best interests of FBS’s shareholders, (ii) unanimously approved and adopted this Agreement, the Plan of Merger and the transactions contemplated hereby and (iii) unanimously resolved to recommend that the FBS shareholders approve the Plan of Merger.

Section 5.03 Governmental Authorization.

The execution, delivery and performance by FBS of this Agreement and the consummation by FBS of the transactions contemplated hereby require no action by or in respect of, or filing with, any Governmental Entity or with any Third Party other than (i) (A) the filing of articles of merger with respect to the Merger with the State Corporation Commission of Virginia, (B) the issuance by the State Corporation Commission of Virginia of a Certificate of Merger and (C) the filing of appropriate documents with the relevant authorities of other states in which FBS is qualified to do business, (ii) compliance with any applicable requirements of the 1933 Act, the 1934 Act, and any other applicable state or federal securities laws, (iii) the filing with and approval of or notice of the intention not to disapprove by the Board under Section 3 of the BHC Act, with respect to the Merger, (iv) the filing with and approval of the Board under the Bank Merger Act, with respect to the Merger, (v) any other filings and approvals required by the BFI or any other state or the District of Columbia with respect to the Merger and (vi) actions or filings with The Nasdaq Stock Market, Inc. (the filings and approvals set forth in clauses (i) through (vi), the “ FBS Required Filings and Approvals ”).

Section 5.04 Non-contravention.

(a) Except as set forth in Section 5.04(a) of the FBS Disclosure Schedule, the execution, delivery and performance by FBS of this Agreement and the consummation by FBS

 

14

of the transactions contemplated hereby do not and will not (i) contravene, conflict with, or result in any violation or breach of any provision of the articles of incorporation or bylaws of FBS or the Bank, (ii) assuming compliance with the matters referred to in Section 5.03, contravene, conflict with or result in a violation or breach of any provision of any applicable law, (iii) assuming compliance with the matters referred to in Section 5.03, require any consent or other action by any Person under, constitute a default, or an event that, with or without notice or lapse of time or both, would constitute a default, under, or cause or permit the termination, cancellation, acceleration or other change of any right or obligation or the loss of any benefit to which FBS or the Bank is entitled under any provision of any agreement or other instrument binding upon FBS or the Bank or any license, franchise, permit, certificate, approval or other similar authorization affecting, or relating in any way to, the assets or business of FBS or the Bank or (iv) result in the creation or imposition of any Lien on any asset of FBS or the Bank.

(b) As of the date hereof, FBS has no Knowledge of any reason why, if required to meet statutory or other regulatory requirements, the opinion of FBS tax counsel referred to in Section 10.03(b) should not be obtained on a timely basis.

Section 5.05 Capitalization.

(a) The authorized capital stock of FBS consists of 10,000,000 authorized FBS Shares, par value $3.20 per share. As of January 27, 2009, there were outstanding 2,276,298 FBS Shares. As of December 31, 2008, there were outstanding employee stock options to purchase an aggregate of 94,493 FBS Shares (of which options to purchase an aggregate of 94,493 FBS Shares were exercisable). All outstanding shares of capital stock of FBS have been, and all shares that may be issued pursuant to any FBS option plan will be, when issued in accordance with the respective terms thereof, duly authorized and validly issued and are or will be fully paid and nonassessable. No FBS Subsidiary or Affiliate owns any shares of capital stock of FBS.

(b) Except as set forth in this Section 5.05 and for changes since the FBS Balance Sheet Date resulting from the exercise of employee stock options outstanding on such date, there are no outstanding (i) shares of capital stock or voting securities of FBS, (ii) securities of FBS convertible into or exchangeable for shares of capital stock or voting securities of FBS or (iii) options or other rights to acquire from FBS, or other obligation of FBS to issue, any capital stock, voting securities or securities convertible into or exchangeable for capital stock or voting securities of FBS other than pursuant to this Agreement (the items in clauses (i), (ii) and (iii) being referred to collectively as the “ FBS Securities ”). There are no outstanding obligations of FBS or the Bank to repurchase, redeem or otherwise acquire any of FBS Securities.

(c) Except as set forth in Section 5.05(c) of the FBS Disclosure Schedule, there are no outstanding (i) shares of capital stock or voting securities of the Bank, (ii) securities of the Bank convertible into or exchangeable for shares of capital stock or voting securities of the Bank or (iii) options or other rights to acquire from the Bank, or other obligation of the Bank to issue, any capital stock, voting securities or securities convertible into or exchangeable for capital stock or voting securities of the Bank (the items in clauses (i), (ii) and (iii) being referred to collectively as the “ Bank Securities ”). There are no outstanding obligations of the Bank or FBS to repurchase, redeem or otherwise acquire any of the Bank Securities.

 

15

Section 5.06 Regulatory Filings and the Sarbanes-Oxley Act.

(a) FBS or the Bank, as applicable, has filed with or furnished to the SEC or the Board, as applicable, and has made available to Xenith, all reports, schedules, forms, statements, prospectuses, registration statements and other documents required to be filed or furnished by FBS or the Bank since January 1, 2007 (collectively, the “ Historical FBS Regulatory Documents ”) together will all such documents provided after the date hereof pursuant to Section 7.06 (which shall be referred to as the “ Current FBS Regulatory Documents ”, and the Historical FBS Regulatory Documents together with the Current FBS Regulatory Documents shall be collectively referred to as the “ FBS Regulatory Documents ”).

(b) Except as set forth in Section 5.06(b) of the FBS Disclosure Schedule, as of its filing date, each FBS Regulatory Document complied, and each such FBS Regulatory Document filed subsequent to the date hereof will comply, as to form in all material respects with the applicable requirements of the 1933 Act, the 1934 Act and all other statutes, rules and regulations adopted, enforced or promulgated by the SEC or applicable regulatory body, as the case may be.

(c) As of its filing date (or, if amended or superceded by a filing prior to the date hereof, on the date of such filing), each FBS Regulatory Document filed pursuant to the 1934 Act did not, and each such FBS Regulatory Document filed subsequent to the date hereof will not, contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading.

(d) Each FBS Regulatory Document that is a registration statement, as amended or supplemented, if applicable, filed pursuant to the 1933 Act, as of the date such registration statement or amendment became effective, did not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading.

(e) FBS has established and maintains “disclosure controls and procedures” that comply with Rule 13a-15 under the Exchange Act (as such term is defined in paragraph (e) of Rule 13a-15 under the Exchange Act). Such disclosure controls and procedures are effective in timely alerting FBS’s principal executive officer and principal financial officer to material information required to be included in FBS’s periodic reports required under the 1934 Act. FBS and the Bank each maintain accurate books and records reflecting their assets and liabilities and maintain proper and adequate internal accounting controls that in all material respects provide assurance that (a) transactions are executed with management’s authorization; (b) transactions are recorded as necessary to permit preparation of the consolidated financial statements of FBS and to maintain accountability for FBS’s consolidated assets; (c) access to FBS’s assets is permitted only in accordance with management’s authorization; (d) the reporting of FBS’s assets is compared with existing assets at regular intervals; and (e) extensions of credit and other receivables are recorded accurately, and proper and adequate procedures are implemented to effect the collection thereof on a current and timely basis. Except as disclosed in Section 5.06(e) of the FBS Disclosure Schedule, neither FBS’s nor the Bank’s systems, controls, data or information are recorded, stored, maintained, operated or otherwise wholly or partly dependent

 

16

on or held by any means (including any electronic, mechanical or photographic process, whether computerized or not) which (including all means of access thereto and therefrom) are not under the exclusive ownership and direct control of FBS, the Bank or their accountants.

(f) The minute books, stock certificate books and stock transfer ledgers of FBS and the Bank (a) have been kept accurately in the ordinary course of business and (b) are complete and correct in all material respects.

(g) FBS is not deemed an accelerated filer as defined in Rule 12b-2 of the 1934 Act.

(h) Except as set forth in Section 5.06(h) of the FBS Disclosure Schedule, as of March 31, 2009, there are no outstanding loans or other extensions of credit made by FBS or the Bank to any Officer or director or Insider of FBS or its Affiliates pursuant to Regulation O (12 C.F.R. Part 215). FBS has not taken any action prohibited by Section 402 of the Sarbanes-Oxley Act. All outstanding extensions of credit, if any, were at the time they were made and continue to be permitted and in compliance with the provisions of Regulation O (12 C.F.R. Part 215).

(i) FBS has furnished Xenith with true and complete copies of the Reports of Condition and Income for the Bank as of December 31, 2005, December 31, 2006, December 31, 2007 and December 31, 2008 and will continue to furnish true and complete copies of such reports between the date of this Agreement and the Effective Time in accordance with Section 7.06 hereof (the “ Call Reports ”). The Call Reports fairly present, in all material respects, the financial position of the Bank and the results of its operations at the date and for the period indicated in that Call Report in conformity with the then-applicable regulatory accounting principles (“ RAP ”), including the instructions to the Reports of Condition and Income as promulgated by the Federal Financial Institutions Examination Council. The Call Reports do not contain any items of special or nonrecurring income or any other income not earned in the ordinary course of business except as expressly specified therein. The Bank has calculated its allowance for loan losses in accordance with United States generally accepted accounting principles (“ GAAP ”) as applied to banking institutions and in accordance with all applicable rules and regulations. The allowance for loan losses account for the Bank is, and as of the Closing Date will be, adequate in all material respects to provide for all losses, net of recoveries relating to loans previously charged off, on all outstanding loans of the Bank and is consistent with the Interagency Policy Statement regarding the Allowance for Loan and Lease Losses.

Section 5.07 Financial Statements.

The audited consolidated financial statements and unaudited consolidated interim financial statements of FBS included in the FBS Regulatory Documents fairly present, in all material respects, in conformity with GAAP applied on a consistent basis (except as may be indicated in the notes thereto), the consolidated financial position of FBS and the Bank as of the dates thereof and their consolidated results of operations, changes in shareholders’ equity and cash flows for the periods then ended (subject to normal year-end audit adjustments and except for lack of notes thereto in the case of any unaudited interim financial statements).

 

17

Section 5.08 Deposit Summary.

Section 5.08 of the FBS Disclosure Schedule contains a summary of the amounts and types of the deposits held by the Bank as of March 31, 2009 and the weighted average interest rates being paid thereon as of such date (the “ Deposit Summary ”). The Deposit Summary is true, complete and correct in all material respects as of the date thereof.

Section 5.09 Disclosure Documents.

(a) The Joint Proxy Statement and any amendments or supplements thereto will, when filed, comply as to form in all material respects with the applicable requirements of the 1934 Act. At the time the Joint Proxy Statement or any amendment or supplement thereto is first mailed to shareholders of FBS and Xenith, and at the time such shareholders vote on adoption of this Agreement and the Plan of Merger and at the Effective Time, the Joint Proxy Statement, as supplemented or amended, if applicable, will not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. The representations and warranties contained in this Section 5.09(a) will not apply to statements in or omissions from the Joint Proxy Statement made in reliance upon information furnished to FBS by Xenith specifically for use therein.

(b) The FBS Private Placement Memorandum and any amendments or supplements thereto, as of its date, and at all subsequent times through the Effective Time, will not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. The representations and warranties contained in this Section 5.09(b) will not apply to statements in or omissions from the FBS Private Placement Memorandum, and any amendments or supplements thereto, made in reliance upon information furnished to FBS by Xenith specifically for use therein.

(c) The information furnished by FBS to Xenith specifically for use in the Xenith Private Placement Memorandum, and any amendments or supplements thereto, will not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading.

Section 5.10 Absence of Certain Changes.

Since the FBS Balance Sheet Date, the business of FBS and the Bank has been conducted in the ordinary course consistent with past practices and, except as disclosed in Section 5.10 of the FBS Disclosure Schedule, there has not been:

(a) any event, occurrence, development or state of circumstances or facts (other than related to the transactions contemplated by this Agreement) that has had or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on FBS;

 

18

(b) any declaration, setting aside or payment of any dividend or other distribution with respect to any shares of capital stock of FBS, or any repurchase, redemption or other acquisition by FBS or the Bank of any outstanding shares of capital stock or other securities of, or other ownership interests in, FBS or the Bank;

(c) any amendment of any material term of any outstanding security of FBS or the Bank;

(d) any incurrence, assumption or guarantee by FBS or the Bank of any indebtedness for borrowed money other than in the ordinary course of business and in amounts and on terms consistent with past practices and safe and sound banking practices;

(e) any creation or other incurrence by FBS or the Bank of any Lien on any material asset other than in the ordinary course of business consistent with past practices and safe and sound banking practices;

(f) any making of any material loan, advance or capital contributions to or investment in any Person other than (x) loans in the ordinary course of FBS’s or the Bank’s lending business consistent with past practices and (y) loans, advances or capital contributions to or investments in the Bank in the ordinary course of business consistent with past practices and safe and sound banking practices;

(g) any damage, destruction or other casualty loss (whether or not covered by insurance) materially affecting the business or assets of FBS or the Bank;

(h) any material transaction or commitment made, or any material contract or agreement entered into, by FBS or the Bank relating to its assets or business (including the acquisition or disposition of any assets) or any relinquishment by FBS or the Bank of any contract or other right, in either case, material to FBS and the Bank, taken as a whole, other than transactions and commitments, contracts and agreements entered into, and relinquishments in the ordinary course of business consistent with past practices and safe and sound banking practices and those contemplated by this Agreement;

(i) any material change in any method of accounting or accounting principles or practice by FBS or the Bank, except for any such change required by reason of a concurrent change in GAAP, RAP or Regulation S-X under the 1934 Act;

(j) except as described in Sections 9.11(b), 10.02(h), 10.02(i) and 10.03(h) herein, any (i) grant of any severance or termination pay to (or amendment to any existing arrangement with) any director, officer or employee of FBS or the Bank, (ii) increase in benefits payable under any existing severance or termination pay policies or employment agreements, (iii) entering into any employment, deferred compensation or other similar agreement (or any amendment to any such existing agreement) with any director, officer or employee of FBS or the Bank, (iv) establishment, adoption or amendment (except as required by applicable law) of any collective bargaining, bonus, profit-sharing, thrift, pension, retirement, deferred compensation, compensation, stock option, restricted stock or other benefit plan or arrangement covering any director, officer or employee of FBS or the Bank or (v) increase in compensation, bonus or other benefits payable to any director, officer or employee of FBS or the Bank, other than, in the case of clause (v), increases granted to employees (other than officers) in the ordinary course of business consistent with past practice;

 

19

(k) any material labor dispute, other than routine individual grievances, or any activity or proceeding by a labor union or representative thereof to organize any employees of FBS or the Bank, which employees were not subject to a collective bargaining agreement at the FBS Balance Sheet Date, or any material lockouts, strikes, slowdowns, work stoppages or threats thereof by or with respect to such employees;

(l) any material Tax election made (other than elections consistent with FBS’s and the Bank’s past practice) or changed, any annual Tax accounting period changed, any material method of Tax accounting adopted or changed, any material amended Tax Returns or claims for material Tax refunds filed, any material closing agreement entered into, any material Tax claim, audit or assessment settled, or any right to claim a material Tax refund, offset or other reduction in Tax liability surrendered; or

(m) any material increase in FBS’s allowance for loan and lease losses, whether actually made by FBS or reasonably required to be made as a result of circumstances known to FBS, applying the Interagency Policy Statement on the Allowance for Loan and Lease Losses.

Section 5.11 No Undisclosed Material Liabilities.

Except as set forth in Section 5.11 of the FBS Disclosure Schedule, there are no liabilities or obligations of FBS or the Bank of any kind whatsoever, whether accrued, contingent, absolute, determined, determinable or otherwise, and there is no existing condition, situation or set of circumstances that could reasonably be expected to result in such a liability or obligation, other than:

(a) liabilities or obligations disclosed and provided for in the FBS Balance Sheet or in the notes thereto or in the FBS Regulatory Documents filed after the FBS Balance Sheet Date but prior to the date hereof, and

(b) liabilities or obligations incurred after the FBS Balance Sheet Date in the ordinary course of business consistent with past practices and safe and sound banking practices that would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on FBS.

Section 5.12 Compliance with Laws.

Except as set forth in Section 5.12 of the FBS Disclosure Schedule:

(a) FBS and the Bank are and, since January 1, 2004, have been in material compliance with, and to the Knowledge of FBS are not under investigation with respect to and have not been threatened to be charged with or given notice of any violation of, any applicable law.

 

20

(b) The Bank is in material compliance with the Fair Housing Act (42 U.S.C. §3601 et seq. ), the Home Mortgage Disclosure Act (12 U.S.C. §2801 et seq. ) and the Equal Credit Opportunity Act (15 U.S.C. §1691 et seq. ) and all regulations issued thereunder. The Bank has not received any notice of any violation of those acts or any of the regulations issued thereunder, and the Bank has not received any notice of, nor does FBS have any Knowledge of, any threatened administrative inquiry, proceeding or investigation with respect to the Bank’s non-compliance with such acts.

(c) To the Knowledge of FBS, all loans of the Bank have been made in material compliance with all applicable statutes and regulatory requirements at the time of such loan or any renewal thereof, including Regulation Z (12 C.F.R. §226 et seq. ), the Federal Consumer Credit Protection Act (15 U.S.C. §1601 et seq. ), all other applicable fair lending laws and other laws relating to discriminatory business practices and all statutes governing the operation of Virginia banking associations. Each loan on the books of the Bank was made in the ordinary course of its business.

(d) The Bank is in material compliance with the Bank Secrecy Act (12 U.S.C. §§1730(d) and 1829(b)), the United States Foreign Corrupt Practices Act and the International Money Laundering Abatement and Anti-Terrorist Financing Act, otherwise known as the U.S.A. PATRIOT Act, including the “Know Your Customer” requirements thereunder, and all regulations issued thereunder, and the Bank has properly certified all foreign deposit accounts and has made all necessary Tax withholdings on all of its deposit accounts; furthermore, except as disclosed in Section 5.12(d) of the FBS Disclosure Schedule, the Bank has timely and properly filed and maintained all requisite Currency Transaction Reports and other related forms, including any requisite Custom Reports required by any agency of the United States Treasury Department, including the IRS. The Bank has timely filed all Suspicious Activity Reports with the Financial Crimes Enforcement Network (U.S. Department of the Treasury) required to be filed by it under the laws and regulations referenced in this Section.

(e) Section 5.12(e) of the FBS Disclosure Schedule contains a true, complete and accurate list of all written policies of FBS or the Bank, and FBS has provided or made available to Xenith copies of each such policy.

(f) The deposits of the Bank are insured by the FDIC under the FDIA and FBS has made available to Xenith a true, correct and complete copy of the certificate issued by the FDIC to that effect.

Section 5.13 Privacy and Data Protection

(a) FBS and the Bank are in compliance in all material respects with (i) all applicable international, federal, state, provincial and local laws, rules, regulations, directives and governmental requirements relating in any way to the privacy, confidentiality or security of Personal Information including, without limitation, the European Union Directives governing general data protection (Directive 1995/46/EC), electronic commerce (Directive 2002/58/EC), and data retention (Directive 2006/24/EC); the Canadian Personal Information Protection and Electronic Documents Act (PIPEDA); the Gramm-Leach-Bliley Act (“ GLBA ”), 15 U.S.C. §§ 6801-6827, and all regulations implementing GLBA; the Fair Credit Reporting Act (“ FCRA” ),

 

21

15 U.S.C. § 1681 et seq., as amended by the Fair and Accurate Credit Transactions Act, and all regulations implementing the FCRA; the Controlling the Assault of Non-Solicited Pornography and Marketing Act (“ CAN-SPAM ”); security breach notification laws (such as Va. Code Ann. § 18.2—186.6); laws imposing information security requirements (such as Va. Code Ann. § 59.1—443.2); and all other similar international, federal, state, provincial, and local requirements; and (ii) all FBS and Bank privacy policies and notices (collectively, “ Privacy Laws ”).

(b) FBS and the Bank maintain privacy policies and notices that comply with applicable Privacy Laws and govern the collection, use, disclosure and other Processing of Personal Information by FBS and the Bank, copies of which policies have been provided or have been made available to Xenith.

(c) Since January 1, 2004, neither FBS nor the Bank has collected, used, disclosed or otherwise Processed Personal Information in violation of any Privacy Laws.

(d) No applicable Privacy Law, legal requirement or any privacy or information security enforcement action, investigation or litigation prohibits FBS or the Bank from Processing Personal Information in the manner currently conducted by FBS or the Bank. In the event prior to the Effective Time any law or legal requirement, subpoena or other judicial or administrative order, or privacy or information security enforcement action, investigation or litigation is reasonably likely to adversely affect FBS’s or the Bank’s ability to Process Personal Information in the manner currently conducted by FBS or the Bank, FBS shall promptly notify Xenith.

(e) FBS and the Bank each maintain a written information security program that complies with applicable Privacy Laws and includes appropriate administrative, technical, physical, organizational and operational safeguards and other security measures designed to (i) ensure the security and confidentiality of Personal Information; (ii) protect against any anticipated threats or hazards to the security and integrity of Personal Information; and (iii) protect against any actual or suspected material unauthorized Processing, loss, use, disclosure or acquisition of or access to any Personal Information (hereinafter “ Information Security Incident ”).

(f) FBS and the Bank each exercise the necessary and appropriate supervision over their employees, agents, consultants and service providers to maintain appropriate privacy, confidentiality and security of Personal Information.

(g) FBS and the Bank each limit access to Personal Information to those of their employees, agents, consultants and service providers who have a need to know the Personal Information as a condition to fulfilling their business function responsibilities.

(h) To the extent FBS or the Bank provide access to Personal Information to any service provider, FBS and the Bank (i) have verified that such service provider is suitable and capable to fulfill its obligations concerning the Processing of Personal Information; and (ii) have entered with each such service provider into a written agreement that imposes Processing and other applicable obligations with respect to safeguarding the privacy, confidentiality and security of Personal Information. !

 

22

(i) Since January 1, 2004, neither FBS nor the Bank has experienced or been affected by an Information Security Incident involving Personal Information. FBS and the Bank shall immediately inform Xenith, in writing, of any Information Security Incident of which FBS or the Bank become aware prior to the Effective Time. Such notice shall summarize in reasonable detail the effect on FBS, the Bank and Xenith, if known, of the Information Security Incident and the corrective action taken or to be taken by FBS and the Bank. FBS and the Bank shall promptly take all necessary and advisable corrective actions to prevent, mitigate or rectify such Information Security Incident.

Section 5.14 Litigation.

Except as set forth in the FBS Regulatory Documents filed prior to the date hereof and except as set forth in Section 5.14 of the FBS Disclosure Schedule, there is no action, suit, investigation or proceeding (or any basis therefor) pending against, or, to the Knowledge of FBS, threatened against or affecting, FBS, the Bank, any present officer, director or employee of FBS or the Bank (or to the Knowledge of FBS, pending or threatened against or affecting any former officer, director or employee of FBS or the Bank), or any Person or any of their respective properties for whom or which FBS or the Bank may be liable, before any court or arbitrator or before or by any governmental body, agency or official, domestic, foreign or supranational, that, if determined or resolved adversely in accordance with the plaintiffs demands, (i) could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on FBS or the Bank or (ii) as of the date hereof, involve the imposition of permanent injunctive relief.

Section 5.15 Material Contracts.

(a) Except for the agreements, contracts and arrangements set forth in Section 5.15(a) of the FBS Disclosure Schedule (collectively, the “ FBS Material Contracts ”), neither FBS nor the Bank is a party to or, to the Knowledge of FBS, bound by or subject to, any agreement, contract, arrangement, commitment or understanding (whether written or oral) that:

(i) is a “material contract” within the meaning of Item 601(b)(10) of the SEC’s Regulation S-K;

(ii) restricts the conduct of business or any line of business by FBS or the Bank (or, after the consummation of the Merger, Surviving Corporation or the Bank);

(iii) is a note, mortgage, indenture, loan or credit agreement, security agreement (each of which secures indebtedness of not less than $25,000), or other agreement or instrument reflecting obligations for borrowed money or other monetary indebtedness or otherwise relating to the borrowing of money by, or the extension of credit to, FBS or any of it Affiliates;

(iv) is a management, consulting or employment agreement or a binding agreement or commitment to enter into the same;

 

23

(v) is an agreement or purchase order entered into or issued in the ordinary course of business for the purchase or sale of goods, services, supplies or capital assets requiring aggregate future payments of more than $25,000 by FBS or the Bank;

(vi) is an agreement of indemnification or guaranty that may result in an obligation by FBS or the Bank in excess of $25,000;

(vii) is a joint venture or other agreement involving the sharing of profits or losses;

(viii) is an agreement that provides for the disposition or acquisition by FBS or the Bank after the date of this Agreement of assets in excess of $25,000 (excluding dispositions or acquisitions of assets held or to be held in the Securities Portfolio in accordance with the Bank’s investment policy in effect on the date hereof);

(ix) is a contract or agreement with any director or officer of FBS or the Bank, or any person who is an immediate relative of any such person;

(x) is an agreement, contract or commitment relating to the acquisition by FBS or the Bank of the outstanding capital stock or equity interest of any Person; and

(xi) all contracts, commitments or obligations not made in the ordinary course of business and having unexpired terms in excess of one year or requiring aggregate future payments or receipts in excess of $25,000 or otherwise material to FBS or the Bank.

(b) Except as set forth in Section 5.15(b) of the FBS Disclosure Schedule, neither FBS nor the Bank is in breach of or default under any FBS Material Contract and there has not occurred any event that, with the lapse of time or the giving of notice or both, would constitute such a breach or default. No other party to any of the FBS Material Contracts is, to FBS’s Knowledge, in default in respect of any such FBS Material Contract.

(c) Each of the FBS Material Contracts is valid and binding and in full force and effect and, to FBS’s Knowledge, enforceable against the other party or parties thereto in accordance with its terms (except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and similar laws of general applicability relating to or affecting creditors’ rights or by general equity principles). FBS has previously made available to Xenith true and correct copies of each FBS Material Contract set forth in Section 5.15(a) of the FBS Disclosure Schedule.

Section 5.16 Finders’ Fees.

Except as set forth in Section 5.16 of the FBS Disclosure Schedule, there is no investment banker, broker, finder or other intermediary that has been retained by or is authorized to act on behalf of FBS or the Bank who might be entitled to any fee or commission from FBS or any of its Affiliates in connection with the transactions contemplated by this Agreement.

 

24

Section 5.17 Opinion of Financial Advisor.

FBS has received the opinion of Anderson & Strudwick, financial advisor to FBS, to the effect that, as of the date of this Agreement, the FBS Merger Consideration is fair to FBS’s shareholders from a financial point of view (the “ FBS Fairness Opinion ”).

Section 5.18 Taxes.

Except as set forth in Section 5.18 of the FBS Disclosure Schedule:

(a) All Tax Returns required by applicable law to be filed with any Taxing Authority by, or on behalf of, FBS or the Bank have been filed when due (taking into account valid extensions) under all applicable laws, and all such Tax Returns are, or shall be at the time of filing, true and complete in all material respects. Neither FBS nor the Bank currently is the beneficiary of any extension of time within which to file any Tax Return. There are no liens for Taxes (other than Taxes not yet due and payable) upon any of the assets of FBS or the Bank.

(b) FBS and the Bank have each paid (or has had paid on its behalf) or has withheld and remitted to the appropriate Taxing Authority all Taxes due and payable, or, where payment is not yet due, has established (or has had established on its behalf and for its sole benefit and recourse) in accordance with GAAP an adequate accrual for all Taxes through the end of the last period for which FBS and the Bank ordinarily record items on their respective books. The unpaid Taxes of FBS and the Bank (i) did not, as of the most recent audited consolidated financial statements and unaudited consolidated interim financial statements of FBS included in the FBS Regulatory Documents, exceed the reserve for Tax liability (rather than any reserve for deferred Taxes established to reflect timing differences between book and Tax income) set forth on the face of such financial statements (rather than in any notes thereto) and (ii) will not exceed the reserve as adjusted for operations and transactions through the Closing Date in accordance with the past custom and practice of FBS and the Bank in filing their Tax Returns.

(c) The income and franchise Tax Returns of FBS and the Bank through the Tax year ended December 31, 2004 have been examined and closed or are Tax Returns with respect to which the applicable period for assessment under applicable law, after giving effect to extensions or waivers, has expired. FBS has delivered to Xenith correct and complete copies of all federal income Tax Returns, examination reports and statements of deficiencies assessed against, or agreed to by FBS or the Bank since December 31, 2005. Neither FBS nor the Bank have waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency.

(d) There is no claim, audit, action, suit, proceeding or investigation now pending or, to FBS’s Knowledge, threatened against or with respect to FBS or the Bank in respect of any Tax or Tax Return.

(e) Neither FBS nor the Bank is a party to any agreement, contract, arrangement, or plan that has resulted or would result, separately or in the aggregate, in the payment of any “excess parachute payment” within the meaning of Section 280G of the Code (or

 

25

any corresponding provision of state, local, or non-United States Tax law). Neither FBS nor the Bank has been a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code. Neither FBS nor the Bank is a party to or bound by any Tax allocation or sharing agreement. Neither FBS nor the Bank (i) has been a member of an Affiliated Group filing a consolidated federal income Tax Return (other than a group the common parent of which was FBS) or (ii) has any liability for the Taxes of any Person (other than FBS or the Bank) under Treasury Regulations Section 1.1502-6 (or any similar provision of state, local, or non-United States law), as a transferee or successor, by contract, or otherwise.

(f) Neither FBS nor the Bank will be required to include any item of income in or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of any:

(i) change in method of accounting for a taxable period ending on or prior to the Closing Date;

(ii) “closing agreement” as described in Section 7121 of the Code (or any corresponding or similar provision of state, local, or non-United States income Tax law) executed on or prior to the Closing Date;

(iii) intercompany transactions or any excess loss account described in Treasury Regulations under Section 1502 of the Code (or any corresponding or similar provision of state, local, or non-United States income Tax law);

(iv) installment sale or open transaction disposition made on or prior to the Closing Date; or

(v) prepaid amount received on or prior to the Closing Date.

(g) During the five-year period ending on the date hereof, neither FBS nor the Bank was a distributing corporation or a controlled corporation in a transaction intended to be governed by Section 355 of the Code.

(h) Neither FBS nor the Bank is or has been a party to any “listed transaction” as defined in Section 6707A(c)(2) of the Code and Treasury Regulations Section 1.6011-4(b)(2). FBS and the Bank have properly disclosed in their federal income Tax Returns all “reportable transactions” within the meaning of Treasury Regulations Section 1.6011-4(b)(1), any predecessor regulation, or any similar provision of state or foreign law.

(i) Section 5.18(i) of the FBS Disclosure Schedule contains a list of all jurisdictions (whether foreign or domestic) in which FBS or the Bank currently files Tax Returns.

(j) Neither FBS nor the Bank has been a United States real property holding corporation within the meaning of Code Section 897(c)(2) during the applicable period specified in Code Section 897(c)(1)(A)(ii).

 

26

(k) “ Tax ” means (i) any tax, governmental fee or other like assessment or charge of any kind whatsoever (whether disputed or not and including, without limitation, withholding on amounts paid to or by any Person, estimated taxes, alternative or add-on minimum taxes), together with any interest, penalty, addition to tax or additional amount imposed by any governmental authority (a “ Taxing Authority ”) responsible for the imposition of any such tax (domestic or foreign), and any liability for any of the foregoing as transferee, (ii)liability for the payment of any amount of the type described in clause (i) as a result of being or having been before the Effective Time a member of an affiliated, consolidated, combined or unitary group, or a party to any agreement or arrangement, as a result of which liability of such Person to a Taxing Authority is determined or taken into account with reference to the activities of any other Person, and (iii) liability for the payment of any amount as a result of being party to any Tax Sharing Agreement or with respect to the payment of any amount imposed on any Person of the type described in (i) or (ii) as a result of any existing express or implied agreement or arrangement (including an indemnification agreement or arrangement). “ Tax Return ” means any report, return, document, declaration or other information or filing required to be supplied to any Taxing Authority with respect to Taxes, including information returns, any documents with respect to or accompanying payments of estimated Taxes, or with respect to or accompanying requests for the extension of time in which to file any such report, return, document, declaration or other information. “ Tax Sharing Agreements ” means all existing agreements or arrangements (whether or not written) binding a Person that provide for the allocation, apportionment, sharing or assignment of any Tax liability or benefit, or the transfer or assignment of income, revenues, receipts, or gains for the purpose of determining any Person’s Tax liability (excluding any indemnification agreement or arrangement pertaining to the sale or lease of assets or subsidiaries).

Section 5.19 Employees and Employee Benefit Plans.

(a) Except as set forth on Section 5.19(a) of the FBS Disclosure Schedule, neither FBS nor any ERISA Affiliate sponsors or maintains and is not required to contribute to and has not during the preceding five (5) years sponsored, maintained or contributed to any Employee Benefit Plan. Except as disclosed in Section 5.19(a) of the FBS Disclosure Schedule:

(i)(A) Each Employee Benefit Plan and any related funding arrangement is in compliance with all applicable requirements of ERISA, the Code, and other applicable laws, and each Employee Benefit Plan has been administered in accordance with its written terms and applicable law; (B) all benefits due and payable under any Employee Benefit Plan have been paid or are in the process of being paid in accordance with the terms of such Employee Benefit Plan; (C) FBS and each ERISA Affiliate have timely made (and at the Effective Time will have timely made) all contributions and/or premiums required to be made to any Employee Benefit Plan; (D) there are no claims (except for claims for benefits in the ordinary course of plan administration), litigation, arbitration, government investigation or audit or other legal proceeding pending or, to the Knowledge of FBS or any ERISA Affiliate, threatened against or with respect to any Employee Benefit Plan and, to the Knowledge of FBS or any ERISA Affiliate, no facts exist which could give rise to such claims, litigation, arbitration, investigation, audit or other proceeding; (E) all reports, returns, forms, notifications or other disclosure materials required to be filed with any Governmental

 

27

Entity or distributed to employees with respect to any Employee Benefit Plan have been timely filed or distributed and are accurate and complete; (F) no nonexempt “prohibited transaction” (as defined in Section 4975 of the Code or Section 406 of ERISA) has occurred or will occur prior to the Effective Time with respect to any Employee Benefit Plan; (G) no excise Taxes or civil penalties are payable or will become payable prior to the Effective Time with respect to any Employee Benefit Plan; (H) neither FBS nor any ERISA Affiliate is subject to any legal obligation to continue any Employee Benefit Plan after the Effective Time, nor would the Surviving Corporation be subject to any such obligation; and (I) each Employee Benefit Plan may be amended or terminated without the consent of any employee, beneficiary or other party.

(ii) FBS has previously delivered to Xenith complete copies of each written Employee Benefit Plan (or a written summary of the material terms of any Employee Benefit Plan for which there is not a written plan document); all related summary plan descriptions and/or summaries furnished or made available to employees, officers and directors of FBS or any ERISA Affiliate with respect to programs for which a summary plan description is not required; all related trust agreements or other funding arrangements, including, but not limited to, insurance policies; for the three most recent plan years, all annual reports (5500 series) for each Employee Benefit Plan that have been filed with any Governmental Entity; all current registration statements on Form S-8 (or any other applicable registration form); and all other material documents relating to any Employee Benefit Plan as may reasonably be requested by Xenith.

(iii) (A) Any Employee Benefit Plans which are intended to be qualified under Section 401(a) of the Code (collectively, the “ Qualified Plans ”) are so qualified; (B) to the Knowledge of FBS and any ERISA Affiliate, nothing has occurred that could reasonably be expected to adversely affect the tax-qualified status of the Qualified Plans; (C) the Qualified Plans have been amended to comply with all current applicable legislation (including any regulations issued thereunder), and have received a favorable determination letter or are the subject of an opinion letter from the IRS with respect to their tax-qualified status which considers all such current applicable legislation, or are still within a remedial amendment period as announced by the IRS; (D) FBS has delivered to Xenith complete copies of the most recent determination and opinion letters previously received and all correspondence relating to the applications for the most recent determination letters with respect to the Qualified Plans currently in effect; and (E) FBS has delivered to Xenith documentation relating to the correction of any Qualified Plan defects under any governmental correction program or otherwise.

(iv) No Employee Benefit Plan is subject to Section 412 of the Code or Section 302 or Title IV of ERISA, and no Employee Benefit Plan is a multiple employer plan under Code Section 413(c) or a “multiemployer plan” as defined in Section 3(37) of ERISA.

(v) FBS and each ERISA Affiliate do not have any obligation, and have not made any representation, in connection with any medical, death or other welfare benefits for their employees or other service providers after they retire, except to the extent required under the group health plan continuation requirements of Sections 601 through 609 of ERISA, Section 4980B of the Code, or applicable state law.

 

28

(vi) Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (A) result in any payment (including, without limitation, severance, unemployment compensation and golden parachute payments) becoming due to any current or former director or employee of FBS or any ERISA Affiliate under any Employee Benefit Plan or otherwise; (B) increase any benefits otherwise payable by FBS or any ERISA Affiliate, (C) result in the acceleration of the time of payment or vesting of any such benefits under any Employee Benefit Plan or otherwise; or (D) result in any payments or benefits for which any deduction is disallowed or reduced under Sections 162(a)(1), 162(m) or 280G of the Code, as applicable.

(b) Except as set forth in Section 5.19(b) of the FBS Disclosure Schedule, there is no:

(i) collective bargaining agreement (a “ CBA ”) or any other agreement with any labor organization, union, group or association (“ Labor Organization ”) applicable to the employees of FBS or the Bank to which FBS or the Bank are a party to or bound;

(ii) unfair labor practice complaint pending or, to FBS’s Knowledge, threatened against FBS or the Bank before the National Labor Relations Board or any other federal, state local or foreign agency;

(iii) pending or, to FBS’s Knowledge, threatened or affecting FBS or the Bank, strike, slowdown, work stoppage, lockout or other collective labor action or dispute by or with respect to any employees of FBS or the Bank;

(iv) grievance, arbitration or unfair dismissal proceeding arising out of any CBA or other grievance procedure pending against FBS or the Bank;

(v) claim, audit, litigation, government investigation, administrative proceeding or arbitration against FBS or the Bank involving any matter related to employment including, but not limited to, claims of discrimination, claims of unpaid wages, claims of violations of the Family and Medical Leave Act, claims of wrongful discharge, claims of unfair labor practices, workers’ compensation claims, unemployment claims and claims related to occupational safety and health law;

(vi) pending or, to FBS’s Knowledge, threatened representation question or union or labor organizing activities with respect to employees of FBS or the Bank;

(vii) written personnel policy, rule or procedure applicable to employees of FBS or the Bank;

 

29

(viii) individual employment agreement in any form whatsoever including, but not limited to, any agreement for a term of employment, stock option agreement, stock purchase agreement, bonus agreement, or covenant not to compete; or

(ix) policy or agreement in any form whatsoever which alters the at-will status of the employees of FBS or the Bank.

(c) FBS and the Bank have at all times properly classified each of their respective employees as employees and each of their independent contractors as independent contractors, as applicable.

(d) FBS and the Bank have at all times properly classified each of their respective employees as exempt or non-exempt for purposes of the Fair Labor Standards Act.

(e) FBS and the Bank have at all times for each of their respective employees properly withheld and paid all applicable Taxes and all other withholdings required by law.

(f) FBS has previously delivered to Xenith a complete and accurate listing of each employee of FBS and the Bank along with the employee’s job title, 2008 and 2009 annual salary, 2008 bonus and expected 2009 bonus, any other 2008 and 2009 compensation, and current accrued leave.

Section 5.20 Environmental Matters.

(a) (i) No notice, notification, demand, request for information, citation, summons or order has been received, no complaint has been filed, no penalty has been assessed, and no investigation, action, claim, suit, proceeding or review (or any basis therefor) is pending or, to the Knowledge of FBS, is threatened by any Governmental Entity or other Person, in each case, with respect to any matters relating to FBS or the Bank and relating to or arising out of any Environmental Law;

(ii) FBS and the Bank are and have been in material compliance with all applicable Environmental Laws and all Environmental Permits; and

(iii) there are no liabilities of FBS or the Bank of any kind whatsoever, whether accrued, contingent, absolute, determined, determinable or otherwise arising under or relating to any Environmental Law and, to the Knowledge of FBS there are no facts, conditions, situations or set of circumstances that could reasonably be expected to result in or be the basis for any material liability under or relating to any Environmental Law.

(b) There has been no written environmental investigation, study, audit, test, review or other analysis conducted of which FBS or the Bank has Knowledge (and, in the case of any predecessor entity of FBS or the Bank, also in the possession of FBS or the Bank) in relation to the current or prior business of FBS or the Bank or any property or facility now or previously owned, leased or operated by FBS or the Bank that has not been delivered to Xenith at least five Business Days prior to the date hereof.

 

30

(c) Neither FBS nor the Bank own, lease or operate or has owned, leased or operated any real property, or conducts or has conducted any operations, in New Jersey or Connecticut.

(d) For purposes of this Section 5.20, the terms “FBS” and “the Bank” shall include any entity that is, in whole or in part, a predecessor of FBS or the Bank and for which, by contract, agreement or otherwise, FBS or the Bank is the successor to any liabilities of such predecessor that might arise or have arisen under Environmental Law; provided, however , that for purposes of the parenthetical clause in the Section 5.20(b), the terms “FBS” and “the Bank” shall have the meanings given such terms in the preamble and recitals hereto, respectively.

Section 5.21 Tax Treatment.

Neither FBS nor any of its Affiliates has taken or agreed to take any action, or is aware of any fact or circumstance, that would lead to gain or loss being recognized as a result of and in connection with the Merger by any of FBS, Xenith or their shareholders, except with respect to Cash Elections by holders of FBS Shares and cash received by holders of Xenith Common Stock in lieu of a fractional share of Surviving Corporation Common Stock.

Section 5.22 Derivative Instruments; Whole Loan Transactions.

(a) Neither FBS nor the Bank is party to any Derivative Transactions, whether entered into for the account of FBS, or for the account of the Bank or its customers.

(b) Except as disclosed in Section 5.22(b) of the FBS Disclosure Schedule, neither FBS nor the Bank currently participate in or have participated in any Whole Loan Transaction, securitization transactions or “off-balance sheet arrangements” (as defined in Item 303(a)(4) of the SEC’s Regulation S-K).

Section 5.23 Insurance.

Section 5.23 of the FBS Disclosure Schedule contains (i) a complete and correct list of all policies of insurance currently in effect and owned or held by FBS and the Bank and (ii) since December 31, 2004, a complete and accurate description of all claims made against any policies of insurance or banker’s blanket bond held by FBS or the Bank during such period. FBS and the Bank maintain insurance policies that provide coverage in such amounts and against such liabilities, casualties, losses or risks as is customary or reasonable for entities engaged in the business of FBS and the Bank, respectively. Neither FBS nor the Bank have received written notice of cancellation or non-renewal of, and have not failed to pay any premium on, any of their respective insurance policies.

Section 5.24 Capital; Management; CRA Rating.

(a) FBS (i) is “well-capitalized” as that term is defined at 12 C.F.R. § 225.2(r)(2)(i) and (ii) is “well-managed” as that term is defined at 12 C.F.R. § 225.2(s)(1). The Bank is “well capitalized” as that term is defined at 12 C.F.R. §208.43(b)(1).

 

31

(b) The Bank is in material compliance with the Community Reinvestment Act (12 U.S.C. §2901 et seq. ) (the “ CRA ”) and all regulations issued thereunder, and FBS has supplied Xenith with access to copies of the Bank’s current CRA Statement, all support papers therefor, all letters and written comments received by the Bank since January 1, 2005, pertaining thereto and any responses by the Bank to those letters and comments. The Bank has a rating of not less than “satisfactory” as of its most recent CRA compliance examination and FBS has no Knowledge of any reason why the Bank would not receive a rating of “satisfactory” or better in its next CRA compliance examination or why the FDIC or any other Governmental Entity may seek to restrain, delay or prohibit the transactions contemplated hereby as a result of any act or omission of the Bank under the CRA.

Section 5.25 Properties.

Except as set forth in Section 5.25 of the FBS Disclosure Schedule, each of FBS and the Bank has good and marketable title or a valid and enforceable leasehold, as applicable, free and clear of all Liens, to all of the properties and assets, real and personal, tangible or intangible, which are reflected on the FBS Balance Sheet as of the FBS Balance Sheet Date or acquired after such date (other than those properties and assets disposed of for fair value after such date in the ordinary course of business), except (i) Liens for Taxes not yet due and payable or contested in good faith by appropriate proceedings, provided that Taxes are paid as and when required under applicable law notwithstanding any such contest, (ii) pledges to secure deposits incurred in the ordinary course of business, (iii) such imperfections of title, easements and encumbrances, if any, as do not materially impair the use of the respective property as such property is used on the date hereof, and, with respect to all fee-owned property, do not materially impair the fair market value of such property, (iv) mechanics’, materialmen’s, workmen’s, repairmen’s, warehousemen’s, carrier’s and other similar Liens and encumbrances arising in the ordinary course of business, (v) Liens securing obligations that are reflected in such consolidated balance sheet or (vi) the lessor’s interest in any such property that is leased. All material leases pursuant to which FBS or the Bank, as lessee, leases real or personal property are valid and enforceable in accordance with their respective terms and are bona fide, arm’s length leases, at rents that constituted market rents as of the respective dates such leases were entered into. Section 5.25 of the FBS Disclosure Schedule sets forth a true, correct and complete list of all real properties owned or leased by FBS or the Bank. FBS has made available to Xenith copies of all documents creating or evidencing fee or leasehold interests of FBS and the Bank, including all modifications or amendments thereto.

Section 5.26 Securities Portfolio.

Except as set forth in Section 5.26 of the FBS Disclosure Schedule, all securities owned by FBS or the Bank (whether owned of record or beneficially) (the “ Securities Portfolio ”) are held free and clear of all Liens that would materially impair FBS or the Bank’s ability to dispose freely of any such security and/or to otherwise realize the benefits of ownership thereof at any time. Except as set forth in Section 5.26 of the FBS Disclosure Schedule, neither FBS nor the Bank has incurred an impairment in its Securities Portfolio.

 

32

Section 5.27 Affiliate Transactions.

Except as set forth in Section 5.27 of the FBS Disclosure Schedule, FBS is not a party to any agreement, arrangement or understanding (whether oral or written), directly or indirectly (including, without limitation, any purchase, sale, lease, investment, loan, service or management agreement or other transaction), with any “affiliate,” as such term is defined in Section 23A of the Federal Reserve Act. All of FBS’s agreements, arrangements or understandings with “affiliates” comply with Sections 23A and 23B of the Federal Reserve Act and Regulation W (12 C.F.R. 223).

Section 5.28 Antitakeover Statutes; Rights Plans; Appraisal Rights.

(a) The FBS Board of Directors has approved the Merger, this Agreement and the Transaction Documents and the transactions contemplated hereby and thereby and has taken all such other necessary action as required to exempt Xenith and this Agreement from Articles 14 and 14.1 of the VSCA, and, accordingly, neither such Article nor any other antitakeover or similar statute or regulation applies or purports to apply to any such transactions. No other “control share acquisition,” “fair price,” “moratorium” or other antitakeover laws enacted under U.S. state or federal laws apply to the Merger, this Agreement, or the Transaction Documents or any of the transactions contemplated hereby and thereby.

(b) No shareholder rights plan or similar agreement is, or at the Effective Time will be, applicable to Xenith, the Merger, this Agreement, or the Transaction Documents or any of the transactions contemplated hereby and thereby.

(c) No holder of FBS Shares nor any other Person will have any right of appraisal or dissenters’ rights with respect to any FBS Shares, pursuant to the VSCA or any other provision of law, in connection with the Merger, the adoption of this Agreement, the Transaction Documents or any of the transactions contemplated hereby or thereby.

Section 5.29 Regulatory Matters.

(a) Neither FBS nor the Bank is now or has been within the last 5 years subject to any order, decree, written agreement, memorandum of understanding or similar arrangement with, or a commitment letter, determination letter, supervisory letter or similar submission to, or extraordinary supervisory letter from, any Governmental Entity, in each case that is material to FBS.

(b) Neither FBS nor the Bank has been advised by any Governmental Entity that such Governmental Entity is contemplating issuing or requesting (or is considering the appropriateness of issuing or requesting) any such order, decree, written agreement, memorandum of understanding, commitment letter, supervisory letter or similar arrangement or submission, in each case that is material to FBS.

(c) All reports, records, registrations, statements, notices and other documents or information required to be filed by FBS and the Bank with any Governmental Entity have been duly and timely filed and all information and data contained in such reports, records or other documents are true, accurate, correct and complete in all material respects as of the respective dates of such filings.

 

33

Section 5.30 Certain Loan Matters.

(a) Except as set forth in Section 5.30(a) of the FBS Disclosure Schedule, as of March 31, 2009, neither FBS nor the Bank is a party to any written or oral: (i) loan or borrowing arrangement, under the terms of which the obligor is thirty days or more past due in payment of principal or interest or in default of any other material provisions as of the date hereof; or (ii) loan agreement, note or borrowing arrangement which has been classified or, in the exercise of reasonable diligence by FBS or the Bank applying the Bank’s internal loan grading system, should have been classified as “substandard,” “doubtful,” “loss,” “other loans especially mentioned,” “other assets especially mentioned” or any comparable classifications by such persons.

(b) Section 5.30(b) of the FBS Disclosure Schedule contains the “watch list of loans” (“ Watch List ”) of the Bank as of March 31, 2009. To the Knowledge of FBS, there is no loan or borrowing arrangement which should be included on the Watch List in the exercise of reasonable diligence by FBS or the Bank applying the Bank’s internal loan grading system, but which has not been included on the Watch List.

(c) The Bank has kept complete and accurate books and records in connection with its loan agreements, notes or borrowing arrangements, and there are no oral modifications or amendments related to its loan agreements, notes or borrowing arrangements that are not reflected in the Bank’s records, no defenses as to the enforcement of any loan agreement, note or borrowing arrangement have been asserted, and there have been no acts or omissions which would give rise to any claim or right of rescission, set-off, counterclaim or defense.

(d) Each loan agreement, note or borrowing arrangement is (i) represented by evidences of indebtedness which are true, genuine and what they purport to be, (ii) to the extent secured, secured by valid liens and security interests which have been perfected and (iii) the legal, valid and binding obligation of the obligor named therein, enforceable in accordance with its terms, subject to bankruptcy, insolvency, fraudulent conveyance and other laws of general applicability relating to or affecting creditors’ rights and to general equity principles.

(e) No participations or loans have been sold that have buy-back, recourse or guaranty provisions which create contingent or direct liability to FBS or the Bank.

(f) FBS’s allowance for loan and lease losses in its audited consolidated balance sheet at December 31, 2008 and in its unaudited consolidated balance sheet at March 31, 2009 were adequate in all respects and in compliance with the Interagency Policy Statement on the Allowance for Loan and Lease Losses as of such dates.

(g) The credit files of the Bank contain all material information (excluding general, local or national industry, economic or similar conditions) Known to FBS or the Bank that is reasonably required to evaluate the collectibility of the loan portfolio of the Bank (including loans that will be outstanding if the Bank advances funds it is obligated to advance).

 

34

(h) With respect to any loan or other evidence of indebtedness all or a portion of which has been sold to or guaranteed by any Governmental Entity, including the Small Business Administration, each of such loans was made in substantial compliance and conformity with all relevant laws, rules, regulations and procedures such that such Governmental Entity’s guaranty of such loan is effective during the term of such loan in all material respects.

Section 5.31 Forms of Instruments, Etc.

FBS has made, or will make, available to Xenith upon written request copies of all standard forms of notes, mortgages, deeds of trust and other routine documents of a like nature used on a regular and recurring basis by FBS or the Bank in the ordinary course of each of their business.

Section 5.32 Fiduciary Responsibilities.

Neither FBS nor the Bank is directly or indirectly engaged in any fiduciary activities, except for those related to Employee Benefit Plans maintained by FBS or the Bank for the benefit of their eligible employees.

Section 5.33 Guaranties.

Except for items in the process of collection in the ordinary course of the Bank’s business, none of the obligations or liabilities of FBS or the Bank are guaranteed by any other Person, firm or corporation, nor, except in the ordinary course of business, according to past business practices and in compliance with applicable law, has FBS or the Bank guaranteed the obligations or liabilities of any other Person, firm or corporation.

Section 5.34 Absence of Certain Business Practices.

To the Knowledge of FBS, neither FBS nor the Bank, nor any officer, employee or agent of FBS or the Bank, nor any other person acting on their behalf, has, directly or indirectly, within the past five years, given or agreed to give any gift or similar benefit to any customer, supplier, governmental employee or other person who is or may be in a position to help or hinder the business of FBS or the Bank (or assist FBS or the Bank in connection with any actual or proposed transaction) that (a) could reasonably be expected to subject FBS or the Bank to any damage or penalty in any civil, criminal or governmental litigation or proceeding, (b) if not given in the past, might have resulted in a Material Adverse Effect on FBS or the Bank or (c) if not continued in the future might result in a Material Adverse Effect on FBS or the Bank or might subject FBS or the Bank to suit or penalty in any private or governmental litigation or proceeding.

Section 5.35 Intellectual Property.

(a) FBS and/or the Bank each owns, or is licensed or otherwise possesses legally enforceable rights to use all patents, trademarks, trade names, service marks, copyrights, and any applications therefor, technology, know-how, computer software programs or applications, and proprietary information or materials that are used in the business of FBS and the Bank as currently conducted, and to the Knowledge of FBS, all patents and registered trademarks, trade names, service marks and copyrights owned by FBS and/or the Bank are valid and subsisting.

 

35

(b) Except as set forth in Section 5.35(b) of the FBS Disclosure Schedule, FBS and the Bank are not, nor will any of them be as a result of the execution and delivery of this Agreement or the performance of their respective obligations hereunder, in material violation of any material licenses, sublicenses and other agreements as to which FBS or the Bank is a party and pursuant to which FBS or the Bank is authorized to use any third-party patents, trademarks, service marks, and copyrights (“ Third-Party Intellectual Property Rights ”).

(c) No claims with respect to (A) the patents, registered and material unregistered trademarks and service marks, registered copyrights, trade names, and any applications therefor owned by FBS or the Bank (the “ FBS Intellectual Property Rights ”), (B) any material trade secret owned by FBS or the Bank, or (C) to the Knowledge of FBS, Third-Party Intellectual Property Rights licensed to FBS or the Bank, are currently pending or are threatened in writing by any Person.

(d) To the Knowledge of FBS, there are no valid grounds for any bona fide claims (A) to the effect that the sale or licensing of any product as now sold or licensed by FBS or the Bank, infringes on any copyright, patent, trademark, service mark or trade secret of any other Person, (B) against the use by FBS or the Bank of any trademarks, trade names, trade secrets, copyrights, patents, technology, know-how or computer software programs and applications used in the business of FBS or the Bank as currently conducted, (C) challenging the ownership or validity of any FBS Intellectual Property Rights or other material trade secrets owned by FBS or the Bank, or (D) challenging the license or right to use any Third-Party Intellectual Rights by FBS or the Bank.

(e) To the Knowledge of FBS, there is no unauthorized use, infringement or misappropriation of any of the FBS Intellectual Property Rights by any Person, including any employee or former employee of FBS or the Bank.

Section 5.36 Representations Not Misleading.

No representation or warranty by FBS contained in this Agreement, nor any schedule furnished to Xenith by FBS under and pursuant to, or in anticipation of this Agreement, when considered as a whole, contains or will contain on the Closing Date any untrue statement of a material fact necessary to make the statements contained herein or therein, in light of the circumstances under which it was or will be made, not misleading and such representations and warranties would continue to be true and correct after disclosure to any Governmental Entity having jurisdiction over FBS or the Bank or its properties of the facts and circumstances upon which they were based. Except as disclosed herein, there is no matter that would be reasonably likely to have a Material Adverse Effect on FBS or the Bank or their ability to perform the transactions contemplated by this Agreement or the other agreements contemplated hereby.

 

36

ARTICLE 6

R EPRESENTATIONS AND W ARRANTIES OF X ENITH

Except as set forth in the disclosure schedule delivered by Xenith to FBS on or prior to the date hereof (the “ Xenith Disclosure Schedule ”), Xenith represents and warrants to FBS that the following representations and warranties are true and correct as of the date hereof:

Section 6.01 Corporate Existence and Power.

Xenith is duly incorporated as a corporation, validly existing and in good standing under the laws of the Commonwealth of Virginia and has all corporate powers and all governmental licenses, authorizations, permits, consents and approvals required to carry on its business as now conducted. Xenith is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction where such qualification is necessary. Xenith has heretofore delivered to FBS true and complete copies of the articles of incorporation and bylaws of Xenith as currently in effect. Xenith has no Subsidiaries.

Section 6.02 Corporate Authorization.

(a) The execution, delivery and performance by Xenith of this Agreement and the consummation by Xenith of the transactions contemplated hereby are within the corporate powers of Xenith and, except for the required approval of Xenith’s shareholders in connection with consummation of the Merger, have been duly authorized by all necessary corporate action on the part of Xenith. The affirmative vote of the holders of a majority of the outstanding shares of Xenith Common Stock is the only vote, approval or conent of the holders of any of Xenith’s capital stock necessary in connection with the consummation of the Merger. This Agreement constitutes a valid and binding agreement of Xenith (assuming the due authorization, execution and delivery hereof by FBS).

(b) At a meeting duly called and held, Xenith’s Board of Directors has (i) unanimously determined that this Agreement, the Plan of Merger and the transactions contemplated hereby are fair to and in the best interests of Xenith’s shareholders, (ii) unanimously approved and adopted this Agreement, the Plan of Merger and the transactions contemplated hereby and (iii) unanimously resolved to recommend that the Xenith shareholders approve the Plan of Merger.

Section 6.03 Governmental Authorization.

The execution, delivery and performance by Xenith of this Agreement and the consummation by Xenith of the transactions contemplated hereby require no action by or in respect of, or filing with any Governmental Entity or any Third Party other than (i) (A) the filing of articles of merger with respect to the Merger with the State Corporation Commission of Virginia, (B) the issuance by the State Corporation Commission of Virginia of a Certificate of Merger and (C) the filing of appropriate documents with the relevant authorities of other states in which Xenith is qualified to do business, (ii) compliance with any applicable requirements of the 1933 Act, the 1934 Act, and any other applicable state or federal securities laws, (iii) the filing with and approval of the Board under Section 3 of the BHC Act, with respect to the Merger, (iv) the filing with and approval of the Board under the Bank Merger Act, with respect to the Merger,

 

37

and (v) any other filings and approvals required by the BFI or any other state or the District of Columbia with respect to the Merger (the filings and approvals set forth in clauses (i) through (v), the “ Xenith Required Filings and Approvals ”).

Section 6.04 Non-contravention.

(a) Except as set forth in Section 6.04(a) of the Xenith Disclosure Schedule, the execution, delivery and performance by Xenith of this Agreement and the consummation by Xenith of the transactions contemplated hereby do not and will not (i) contravene, conflict with, or result in any violation or breach of any provision of the articles of incorporation or bylaws of Xenith, (ii) assuming compliance with the matters referred to in Section 6.03, contravene, conflict with or result in a violation or breach of any provision of any law, (iii) assuming compliance with the matters referred to in Section 6.03 require any consent or other action by any Person under, constitute a default, or an event that, with or without notice or lapse of time or both, would constitute a default, under, or cause or permit the termination, cancellation, acceleration or other change of any right or obligation or the loss of any benefit to which Xenith is entitled under any provision of any agreement or other instrument binding upon Xenith or any license, franchise, permit, certificate, approval or other similar authorization affecting, or relating in any way to, the assets or business of Xenith or (iv) result in the creation or imposition of any Lien on any asset of Xenith.

(b) As of the date hereof, Xenith has no Knowledge of any reason why, if required to meet statutory or other regulatory requirements, the opinion of Xenith tax counsel referred to in Section 10.02(b) should not be obtained on a timely basis.

Section 6.05 Capitalization.

(a) The authorized capital stock of Xenith consists of (a) 100,000,000 authorized shares of Xenith Common Stock par value $1.00 per share and (b) 25,000,000 authorized shares of Xenith Preferred Stock par value $1.00 per share. As of the date hereof, there were outstanding (w) 10 shares of Xenith Common Stock, (x) no shares of Xenith Preferred Stock, (y) employee and outside director stock options to purchase an aggregate of 258,000 shares of Xenith Common Stock (none of which are currently are exercisable) and (z) warrants outstanding to purchase an aggregate of 648,000 shares of Xenith Common Stock (“ Xenith Warrants ”) under Xenith’s 2009 Stock Warrant Agreement (Officers and Outside Directors) and Xenith’s 2009 Stock Warrant Agreement (BCP Fund), as applicable (collectively, the “ Xenith Warrant Agreements ”).

(b) Except as set forth in this Section 6.05, there are no outstanding (i) shares of capital stock or voting securities of Xenith, (ii) securities of Xenith convertible into or exchangeable for shares of capital stock or voting securities of Xenith or (iii) options or other rights to acquire from Xenith, or other obligation of Xenith to issue, any capital stock, voting securities or securities convertible into or exchangeable for capital stock or voting securities of Xenith (the items in clauses (i), (ii) and (iii) being referred to collectively as the “ Xenith Securities ”). There are no outstanding obligations of Xenith to repurchase, redeem or otherwise acquire any Xenith Securities.

 

38

Section 6.06 Disclosure Documents .

(a) At the time the Joint Proxy Statement or any amendment or supplement thereto is first mailed to shareholders of FBS and Xenith, and at the time such shareholders vote on adoption of this Agreement and the Plan of Merger and at the Effective Time, the Joint Proxy Statement, as supplemented or amended, if applicable, will not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. The representations and warranties contained in this Section 6.06(a) will not apply to statements in or omissions from the Joint Proxy Statement made in reliance upon information furnished to Xenith by FBS specifically for use therein.

(b) The Xenith Private Placement Memorandum and any amendments or supplements thereto, as of its date, and at all subsequent times through the closing of the offering described therein, will not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. The representations and warranties contained in this Section 6.06(b) will not apply to statements in or omissions from the Xenith Private Placement Memorandum, and any amendments or supplements thereto, made in reliance upon information furnished to Xenith by FBS specifically for use therein.

(c) The information furnished by Xenith to FBS specifically for use in the FBS Private Placement Memorandum, and any amendments or supplements thereto, will not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading.

Section 6.07 Financial Statements .

The audited financial statements of Xenith for the period from inception on February 19, 2008 through December 31, 2008 (the “Xenith Financial Statements ”) and the unaudited financial statements of Xenith for the three-month period ended March 31, 2009 fairly present, in all material respects, in conformity with GAAP applied on a consistent basis (except as may be indicated in the notes thereto), the financial position of Xenith as of the dates thereof and its results of operations, changes in shareholders’ equity and cash flows for the periods then ended (subject to normal year-end audit adjustments and except for lack of notes thereto in the case of any unaudited interim financial statements).

Section 6.08 Absence of Certain Changes .

Since December 31, 2008, the business of Xenith has been conducted in the ordinary course consistent with past practices and, except as disclosed in Section 6.08 of the Xenith Disclosure Schedule there has not been:

(a) any event, occurrence, development or state of circumstances or facts (other than related to the transactions contemplated by this Agreement) that has had or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on Xenith;

 

39

(b) any declaration, setting aside or payment of any dividend or other distribution with respect to any shares of capital stock of Xenith, or any repurchase, redemption or other acquisition by Xenith of any outstanding shares of capital stock or other securities of, or other ownership interests in, Xenith;

(c) any amendment of any material term of any outstanding security of Xenith;

(d) any incurrence, assumption or guarantee by Xenith of any indebtedness for borrowed money other than in the ordinary course of business and in amounts and on terms consistent with past practices and safe and sound banking practices;

(e) any creation or other incurrence by Xenith of any Lien on any material asset other than in the ordinary course of business consistent with past practices and safe and sound banking practices;

(f) any making of any material loan, advance or capital contributions to or investment in any Person;

(g) any damage, destruction or other casualty loss (whether or not covered by insurance) materially affecting the business or assets of Xenith;

(h) any material transaction or commitment made, or any material contract or agreement entered into, by Xenith relating to its assets or business (including the acquisition or disposition of any assets) or any relinquishment by Xenith of any contract or other right, in either case, material to Xenith, taken as a whole, other than transactions and commitments, contracts and agreements entered into, and relinquishments in the ordinary course of business consistent with past practices and safe and sound banking practices and those contemplated by this Agreement;

(i) any material change in any method of accounting or accounting principles or practice by Xenith, except for any such change required by reason of a concurrent change in GAAP or Regulation S-X under the 1934 Act;

(j) except as described in Section 6.08(j) of the Xenith Disclosure Schedule, any (i) grant of any severance or termination pay to (or amendment to any existing arrangement with) any director, officer or employee of Xenith, (ii) increase in benefits payable under any existing severance or termination pay policies or employment agreements, (iii) entering into any employment, deferred compensation or other similar agreement (or any amendment to any such existing agreement) with any director, officer or employee of Xenith, (iv) establishment, adoption or amendment (except as required by applicable law) of any collective bargaining, bonus, profit-sharing, thrift, pension, retirement, deferred compensation, compensation, stock option, restricted stock or other benefit plan or arrangement covering any director, officer or employee of Xenith or (v) increase in compensation, bonus or other benefits payable to any director, officer or employee of Xenith, other than, in the case of clause (v), increases granted to employees (other than officers) in the ordinary course of business consistent with past practice;

 

40

(k) any material labor dispute, other than routine individual grievances, or any activity or proceeding by a labor union or representative thereof to organize any employees of Xenith, which employees were not subject to a collective bargaining agreement at December 31, 2008, or any material lockouts, strikes, slowdowns, work stoppages or threats thereof by or with respect to such employees; or

(l) any material Tax election made (other than elections consistent with Xenith’s past practice) or changed, any annual Tax accounting period changed, any material method of Tax accounting adopted or changed, any material amended Tax Returns or claims for material Tax refunds filed, any material closing agreement entered into, any material Tax claim, audit or assessment settled, or any right to claim a material Tax refund, offset or other reduction in Tax liability surrendered.

Section 6.09 No Undisclosed Material Liabilities .

Except as set forth in Section 6.09 of the Xenith Disclosure Schedule, there are no liabilities or obligations of Xenith of any kind whatsoever, whether accrued, contingent, absolute, determined, determinable or otherwise, and there is no existing condition, situation or set of circumstances that could reasonably be expected to result in such a liability or obligation, other than:

(a) liabilities or obligations disclosed and provided for in the Xenith Financial Statements, and

(b) liabilities or obligations incurred after the Xenith Balance Sheet Date in the ordinary course of business consistent with past practices that would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on Xenith.

Section 6.10 Litigation .

Except as set forth in Section 6.10 of the Xenith Disclosure Schedule, there is no action, suit, investigation or proceeding (or any basis therefor) pending against, or, to the Knowledge of Xenith, threatened against or affecting Xenith, any present officer, director or employee of Xenith (or to the Knowledge of Xenith, pending or threatened against or affecting any former officer, director or employee of Xenith), or any other Person or any of their respective properties for whom or for which Xenith may be liable, before any court or arbitrator or any governmental body, agency or official, domestic, foreign or supranational, that, if determined or resolved adversely in accordance with the plaintiff’s demands, could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on Xenith.

Section 6.11 Material Contracts .

(a) Except for the agreements, contracts and arrangements set forth in Section 6.11(a) of the Xenith Disclosure Schedule (collectively, the “ Xenith Material Contracts ”), Xenith is not a party to or, to the Knowledge of Xenith, bound by or subject to, any agreement, contract, arrangement, commitment or understanding (whether written or oral) that:

(i) is a “material contract” within the meaning of Item 601(b)(10) of the SEC’s Regulation S-K;

 

41

(ii) restricts the conduct of business or any line of business by Xenith (or, after the consummation of the Merger, Surviving Corporation or the Bank);

(iii) is a note, mortgage, indenture, loan or credit agreement, security agreement (each of which secures indebtedness of not less than $10,000), or other agreement or instrument reflecting obligations for borrowed money or other monetary indebtedness or otherwise relating to the borrowing of money by, or the extension of credit to, Xenith or any of it Affiliates;

(iv) is a management, consulting or employment agreement or a binding agreement or commitment to enter into the same;

(v) is an agreement or purchase order entered into or issued in the ordinary course of business for the purchase or sale of goods, services, supplies or capital assets requiring aggregate future payments of more than $10,000 by Xenith;

(vi) is an agreement of indemnification or guaranty that may result in an obligation by Xenith in excess of $10,000;

(vii) is a joint venture or other agreement involving the sharing of profits or losses;

(viii) is an agreement that provides for the disposition or acquisition by Xenith after the date of this Agreement of assets in excess of $10,000;

(ix) is a contract or agreement with any director or officer of Xenith, or any person who is an immediate relative of any such person;

(x) except as contemplated hereby, is an agreement, contract or commitment relating to the acquisition by Xenith of the outstanding capital stock or equity interest of any Person; and

(xi) all contracts, commitments or obligations not made in the ordinary course of business and having unexpired terms in excess of one year or requiring aggregate future payments or receipts in excess of $25,000 or otherwise material to Xenith.

(b) Xenith is not in breach of or default under any Xenith Material Contract and there has not occurred any event that, with the lapse of time or the giving of notice or both, would constitute such a breach or default. No other party to any of the Xenith Material Contracts is, to Xenith’s Knowledge, in default in respect of any such Xenith Material Contract.

(c) Each of the Xenith Material Contracts is valid and binding and in full force and effect and, to Xenith’s Knowledge, enforceable against the other party or parties thereto in accordance with its terms (except as enforceability may be limited by applicable

 

42

bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and similar laws of general applicability relating to or affecting creditors’ rights or by general equity principles). Xenith has previously made available to FBS true and correct copies of each Xenith Material Contract set forth in Section 6.11(a) of the Xenith Disclosure Schedule.

Section 6.12 Finders’ Fees .

Except for Baxter Fentriss & Company, whose fees will be paid by Xenith, there is no investment banker, broker, finder or other intermediary that has been retained by or is authorized to act on behalf of Xenith who might be entitled to any fee or commission from Xenith or any of its Affiliates upon consummation of the transactions contemplated by this Agreement.

Section 6.13 Taxes .

(a) All Tax Returns required by applicable law to be filed with any Taxing Authority by, or on behalf of, Xenith have been filed when due (taking into account valid extensions) under all applicable laws, and all such Tax Returns are, or shall be at the time of filing, true and complete in all material respects. Except as set forth in Section 6.13 of the Xenith Disclosure Schedule, Xenith currently is not the beneficiary of any extension of time within which to file any Tax Return. There are no liens for Taxes (other than Taxes not yet due and payable) upon any of the assets of Xenith.

(b) Xenith has paid (or has had paid on its behalf) or has withheld and remitted to the appropriate Taxing Authority all Taxes due and payable, or, where payment is not yet due, has established (or has had established on its behalf and for its sole benefit and recourse) in accordance with GAAP an adequate accrual for all Taxes through the end of the last period for which Xenith ordinarily records items on its books. The unpaid Taxes of Xenith (i) did not, as of the date of the Xenith Financial Statements, exceed the reserve for Tax liability (rather than any reserve for deferred Taxes established to reflect timing differences between book and Tax income) set forth on the face of such financial statements (rather than in any notes thereto) and (ii) will not exceed the reserve as adjusted for operations and transactions through the Closing Date in accordance with the past custom and practice of Xenith in filing its Tax Returns.

(c) There is no claim, audit, action, suit, proceeding or investigation now pending or, to Xenith’s Knowledge, threatened against or with respect to Xenith in respect of any Tax or Tax Return.

(d) Xenith is not a party to any agreement, contract, arrangement, or plan that has resulted or would result, separately or in the aggregate, in the payment of any “excess parachute payment” within the meaning of Section 280G of the Code (or any corresponding provision of state, local, or non-United States Tax law). Xenith has not been a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code. Xenith is not a party to or bound by any Tax allocation or sharing agreement. Xenith (i) has not been a member of an Affiliated Group filing a consolidated federal income Tax Return or (ii) has no liability for the Taxes of any Person under Treasury Regulations Section 1.1502-6 (or any similar provision of state, local, or non-United States law), as a transferee or successor, by contract, or otherwise.

 

43

(e) Xenith will not be required to include any item of income in or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of any:

(i) change in method of accounting for a taxable period ending on or prior to the Closing Date;

(ii) “closing agreement” as described in Section 7121 of the Code (or any corresponding or similar provision of state, local, or non-United States income Tax law) executed on or prior to the Closing Date;

(iii) intercompany transactions or any excess loss account described in Treasury Regulations under Section 1502 of the Code (or any corresponding or similar provision of state, local, or non-United States income Tax law);

(iv) installment sale or open transaction disposition made on or prior to the Closing Date; or

(v) prepaid amount received on or prior to the Closing Date.

(f) During the period beginning with Xenith’s inception and ending on the date hereof, Xenith was not a distributing corporation or a controlled corporation in a transaction intended to be governed by Section 355 of the Code.

(g) Xenith is not and has not been a party to any “listed transaction” as defined in Section 6707A(c)(2) of the Code and Treasury Regulations Section 1.6011-4(b)(2). Xenith has properly disclosed in its federal income Tax Returns all “reportable transactions” within the meaning of Treasury Regulations Section 1.6011-4(b)(1), any predecessor regulation, or any similar provision of state or foreign law.

(h) Xenith has not been a United States real property holding corporation within the meaning of Code Section 897(c)(2) during the applicable period specified in Code Section 897(c)(1)(A)(ii).

(i) Section 6.13 of the Xenith Disclosure Schedule contains a list of all jurisdictions (whether foreign or domestic) in which Xenith currently files Tax Returns.

Section 6.14 Employees and Employee Benefit Plans .

(a) Except as set forth on Section 6.14(a) of the Xenith Disclosure Schedule, Xenith does not sponsor or maintain and is not required to contribute to and has not during the preceding five (5) years sponsored, maintained or contributed to any Employee Benefit Plan. Except as disclosed in Section 6.14(a) of the Xenith Disclosure Schedule:

(i) (A) Each Employee Benefit Plan and any related funding arrangement is in compliance with all applicable requirements of ERISA, the Code, and other applicable laws, and each Employee Benefit Plan has been administered in accordance with its written terms and applicable law; (B) all benefits due and payable

 

44

under any Employee Benefit Plan have been paid or are in the process of being paid in accordance with the terms of such Employee Benefit Plan; (C) Xenith and each ERISA Affiliate have timely made (and at the Effective Time will have timely made) all contributions and/or premiums required to be made to any Employee Benefit Plan; (D) there are no claims (except for claims for benefits in the ordinary course of plan administration), litigation, arbitration, government investigation or audit or other legal proceeding pending or, to the Knowledge of Xenith or any ERISA Affiliate, threatened against or with respect to any Employee Benefit Plan and, to the Knowledge of Xenith or any ERISA Affiliate, no facts exist which could give rise to such claims, litigation, arbitration, investigation, audit or other proceeding; (E) all reports, returns, forms, notifications or other disclosure materials required to be filed with any Governmental Entity or distributed to employees with respect to any Employee Benefit Plan have been timely filed or distributed and are accurate and complete; (F) no nonexempt “prohibited transaction” (as defined in Section 4975 of the Code or Section 406 of ERISA) has occurred or will occur prior to the Effective Time with respect to any Employee Benefit Plan; (G) no excise Taxes or civil penalties are payable or will become payable prior to the Effective Time with respect to any Employee Benefit Plan; (H) neither Xenith nor any ERISA Affiliate is subject to any legal obligation to continue any Employee Benefit Plan after the Effective Time, nor would the Surviving Corporation be subject to any such obligation; and (I) each Employee Benefit Plan may be amended or terminated without the consent of any employee, beneficiary or other party.

(ii) Xenith has previously delivered to FBS complete copies of each written Employee Benefit Plan (or a written summary of the material terms of any Employee Benefit Plan for which there is not a written plan document); all related summary plan descriptions and/or summaries furnished or made available to employees, officers and directors of Xenith or any ERISA Affiliate with respect to programs for which a summary plan description is not required; all related trust agreements or other funding arrangements, including, but not limited to, insurance policies; for the three (3) most recent plan years, all annual reports (5500 series) for each Employee Benefit Plan that have been filed with any Governmental Entity; all current registration statements on Form S-8 (or any other applicable registration form); and all other material documents relating to any Employee Benefit Plan as may reasonably be requested by FBS.

(iii)(A) Any Employee Benefit Plans which are Qualified Plans are so qualified; (B) to the Knowledge of Xenith and any ERISA Affiliate, nothing has occurred that could reasonably be expected to adversely affect the tax-qualified status of the Qualified Plans; (C) the Qualified Plans have been amended to comply with all current applicable legislation (including any regulations issued thereunder), and have received a favorable determination letter or are the subject of an opinion letter from the IRS with respect to their tax-qualified status which considers all such current applicable legislation, or are still within a remedial amendment period as announced by the IRS; (D) Xenith has delivered to FBS complete copies of the most recent determination and opinion letters previously received and all correspondence relating to the applications for the most recent determination letters with respect to the Qualified Plans currently in effect; and (E) Xenith has delivered to FBS documentation relating to the correction of any Qualified Plan defects under any governmental correction program or otherwise.

 

45

(iv) No Employee Benefit Plan is subject to Section 412 of the Code or Section 302 or Title IV of ERISA, and no Employee Benefit Plan is a multiple employer plan under Code Section 413(c) or a “multiemployer plan” as defined in Section 3(37) of ERISA.

(v) Xenith and each ERISA Affiliate do not have any obligation, and have not made any representation, in connection with any medical, death or other welfare benefits for their employees or other service providers after they retire, except to the extent required under the group health plan continuation requirements of Sections 601 through 609 of ERISA, Section 4980B of the Code, or applicable state law.

(vi) Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (A) result in any payment (including, without limitation, severance, unemployment compensation and golden parachute payments) becoming due to any current or former director or employee of Xenith or any ERISA Affiliate under any Employee Benefit Plan or otherwise; (B) increase any benefits otherwise payable by Xenith or any ERISA Affiliate, (C) result in the acceleration of the time of payment or vesting of any such benefits under any Employee Benefit Plan or otherwise; or (D) result in any payments or benefits for which any deduction is disallowed or reduced under Sections 162(a)(1), 162(m) or 280G of the Code, as applicable.

(b) Except as set forth in Section 6.14(b) of the Xenith Disclosure Schedule, there is no:

(i) CBA or any other agreement with any Labor Organization applicable to the employees of Xenith to which Xenith is a party or bound;

(ii) unfair labor practice complaint pending or, to Xenith‘s Knowledge, threatened against Xenith before the National Labor Relations Board or any other federal, state local or foreign agency;

(iii) pending or, to Xenith’s Knowledge, threatened or affecting Xenith, strike, slowdown, work stoppage, lockout or other collective labor action or dispute by or with respect to any employees of Xenith;

(iv) grievance, arbitration or unfair dismissal proceeding arising out of any CBA or other grievance procedure pending against Xenith;

(v) claim, audit, litigation, government investigation, administrative proceeding or arbitration against Xenith involving any matter related to employment including, but not limited to, claims of discrimination, claims of unpaid wages, claims of violations of the Family and Medical Leave Act, claims of wrongful discharge, claims of unfair labor practices, workers’ compensation claims, unemployment claims and claims related to occupational safety and health law;

(vi) pending or, to Xenith’s Knowledge, threatened representation question or union or labor organizing activities with respect to employees of Xenith;

 

46

(vii) written personnel policy, rule or procedure applicable to employees of Xenith;

(viii) individual employment agreement in any form whatsoever including, but not limited to, any agreement for a term of employment, stock option agreement, stock purchase agreement, bonus agreement, or covenant not to compete; or

(ix) policy or agreement in any form whatsoever which alters the at-will status of the employees of Xenith.

(c) Xenith has at all times properly classified each of its employees as employees and each of its independent contractors as independent contractors, as applicable.

(d) Xenith has at all times properly classified each of its employees as exempt or non-exempt for purposes of the Fair Labor Standards Act.

(e) Xenith has at all times for each of its employees properly withheld and paid all applicable taxes and all other withholdings required by law.

(f) Xenith has previously delivered to FBS a complete and accurate listing of each employee of Xenith along with the employee’s job title, 2008 and 2009 annual salary, 2008 bonus and expected 2009 bonus, any other 2008 and 2009 compensation, and current accrued leave.

Section 6.15 Properties .

Except as set forth in Section 6.15 of the Xenith Disclosure Schedule, Xenith has good and marketable title or a valid and enforceable leasehold, as applicable, free and clear of all Liens, to all of the properties and assets, real and personal, tangible or intangible, which are reflected on the Xenith Financial Statements as of the date thereof or acquired after such date (other than those properties and assets disposed of for fair value after such date in the ordinary course of business), except (i) Liens for Taxes not yet due and payable or contested in good faith by appropriate proceedings, provided that Taxes are paid as and when required under applicable law notwithstanding any such contest, (ii) pledges to secure deposits incurred in the ordinary course of business, (iii) such imperfections of title, easements and encumbrances, if any, as do not materially impair the use of the respective property as such property is used on the date hereof, and, with respect to all fee-owned property, do not materially impair the fair market value of such property, (iv) mechanics’, materialmen’s, workmen’s, repairmen’s, warehousemen’s, carrier’s and other similar Liens and encumbrances arising in the ordinary course of business, (v) Liens securing obligations that are reflected in such consolidated balance sheet or (vi) the lessor’s interest in any such property that is leased. All material leases pursuant to which Xenith, as lessee, leases real or personal property are valid and enforceable in accordance with their respective terms and are bona fide, arm’s length leases, at rents that constituted market rents as of the respective dates such leases were entered into. Section 6.15 of the Xenith Disclosure Schedule sets forth a true, correct and complete list of all real properties owned or leased by Xenith. Xenith has made available to FBS copies of all documents creating or evidencing fee or leasehold interests of Xenith, including all modifications or amendments thereto.

 

47

Section 6.16 Affiliate Transactions .

Except as set forth in Section 6.16 of the Xenith Disclosure Schedule, Xenith is not a party to any agreement, arrangement or understanding (whether oral or written), directly or indirectly (including, without limitation, any purchase, sale, lease, investment, loan, service or management agreement or other transaction), with any “affiliate,” as such term is defined in Section 23A of the Federal Reserve Act. All of Xenith’s agreements, arrangements or understandings with “affiliates” comply with Sections 23A and 23B of the Federal Reserve Act and Regulation W.

Section 6.17 Tax Treatment .

Neither Xenith nor any of its Affiliates has taken or agreed to take any action, or is aware of any fact or circumstance, that would lead to gain or loss being recognized as a result of and in connection with the Merger by any of FBS, Xenith or their shareholders, except with respect to Cash Elections by holders of FBS Shares and cash received by holders of Xenith Common Stock in lieu of a fractional share of Surviving Corporation Common Stock.

Section 6.18 Compliance with Laws .

Except as set forth in Section 6.18 of the Xenith Disclosure Schedule, Xenith is and, since inception, has been in material compliance with, and to the Knowledge of Xenith is not under investigation with respect to and has not been threatened to be charged with or given notice of any violation of, any applicable law.

Section 6.19 Intellectual Property .

(a) Xenith owns, or is licensed or otherwise possesses legally enforceable rights to use all patents, trademarks, trade names, service marks, copyrights, and any applications therefor, technology, know-how, computer software programs or applications, and proprietary information or materials that are used in the business of Xenith as currently conducted, and to the Knowledge of Xenith, all patents and registered trademarks, trade names, service marks and copyrights owned by Xenith are valid and subsisting.

(b) Xenith is not, nor will it be as a result of the execution and delivery of this Agreement or the performance of its obligations hereunder, in material violation of any material licenses, sublicenses and other agreements as to which Xenith is a party and pursuant to which Xenith is authorized to use any Third-Party Intellectual Property Rights.

(c) No claims with respect to (A) the patents, registered and material unregistered trademarks and service marks, registered copyrights, trade names, and any applications therefor owned by Xenith (the “ Xenith Intellectual Property Rights ”), (B) any material trade secret owned by Xenith, or (C) to the Knowledge of Xenith, Third-Party Intellectual Property Rights licensed to Xenith, are currently pending or are threatened in writing by any Person.

(d) To the Knowledge of Xenith, there are no valid grounds for any bona fide claims (A) to the effect that the sale or licensing of any product as now sold or licensed by

 

48

Xenith, infringes on any copyright, patent, trademark, service mark or trade secret of any other Person, (B) against the use by Xenith of any trademarks, trade names, trade secrets, copyrights, patents, technology, know-how or computer software programs and applications used in the business of Xenith as currently conducted, (C) challenging the ownership or validity of any Xenith Intellectual Property Rights or other material trade secrets owned by Xenith, or (D) challenging the license or right to use any Third-Party Intellectual Rights by Xenith.

(e) To the Knowledge of Xenith, there is no unauthorized use, infringement or misappropriation of any of the Xenith Intellectual Property Rights by any Person, including any employee or former employee of Xenith.

Section 6.20 Representations Not Misleading.

No representation or warranty by Xenith contained in this Agreement, nor any schedule furnished to FBS by Xenith under and pursuant to, or in anticipation of this Agreement, when considered as a whole, contains or will contain on the Closing Date any untrue statement of a material fact necessary to make the statements contained herein or therein, in light of the circumstances under which it was or will be made, not misleading. Except as disclosed herein, there is no matter that would be reasonably likely to have a Material Adverse Effect on Xenith or its ability to perform the transactions contemplated by this Agreement or the other agreements contemplated hereby.

ARTICLE 7

C OVENANTS OF FBS

FBS agrees that:

Section 7.01 Conduct of FBS and the Bank.

From the date hereof until the Effective Time or such earlier date as this Agreement may be properly terminated in accordance with Article 11, except as expressly contemplated or permitted by this Agreement or with the prior written consent of Xenith, FBS and the Bank shall conduct their business in the ordinary course consistent with past practice and safe and sound banking practices and shall use their commercially reasonable efforts to preserve intact their business organizations and relationships with third parties and to keep available the services of their present officers and employees, except as contemplated by Sections 9.11(b), 10.02(h), 10.02(i) and 10.03(h).

Section 7.02 Required Acts of FBS and the Bank.

Between the date of this Agreement and the Effective Time, FBS shall, and, as applicable, shall cause the Bank to, unless otherwise permitted by Xenith in writing:

(a) Perform all of its obligations under contracts, leases and documents relating to or affecting its assets, properties and business, except such obligations as FBS or the Bank may in good faith reasonably dispute;

 

49

(b) Maintain in full force and effect all insurance policies now in effect or renewals thereof and give all notices and present all claims under all insurance policies in due and timely fashion;

(c) File all reports required to be filed with Governmental Entities and observe and conform, in all material respects, to all applicable laws, except those being contested in good faith by appropriate proceedings;

(d) Withhold from each payment made to each of its employees the amount of all Taxes required to be withheld therefrom and pay the same to the proper Taxing Authority;

(e) Account for all transactions and prepare all financial statements in accordance with GAAP (unless otherwise instructed by RAP in which instance account for such transaction in accordance with RAP); and

(f) Promptly classify and charge off loans and make appropriate adjustments to loss reserves in accordance with the then-applicable instructions for Call Reports and the Uniform Retail Credit Classification and Account Management Policy.

Section 7.03 Prohibited Acts of FBS and the Bank.

Without limiting the generality of the provisions of Section 7.01, from the date hereof until the Effective Time, FBS shall not, and shall not permit the Bank to, do any of the following, except with the prior written consent (or oral consent confirmed promptly by e-mail or another form of writing) of Xenith; provided that (i) Xenith shall act on any specific request made hereunder within five Business Days following receipt of such request from FBS together with all information and documentation reasonably necessary for Xenith to determine if any such consent should be provided ( provided, that notwithstanding the foregoing Xenith shall act on any specific request under subsection (l) of this Section 7.03 within two Business Days, (ii) any such request shall be deemed approved by Xenith in the event that Xenith has failed to specifically deny in writing or orally (confirmed promptly by e-mail or another form of writing) such request or ask for additional information in connection with such request within such period, and (iii) any action by Xenith approved in writing or deemed approved in accordance with clause (ii) above by Xenith shall be deemed to be included in the FBS Disclosure Schedule:

(a) adopt or propose any change to its articles of incorporation or bylaws;

(b) except as otherwise contemplated by this Agreement, merge or consolidate with any other Person or acquire a material amount of stock or assets of any other Person, or reserve for issuance, grant, sell or authorize the issuance of any shares of its capital stock or other securities or subscriptions, options, warrants, calls, rights or commitments of any kind;

(c) sell, lease, license or otherwise dispose of any material subsidiary or any material amount of assets, securities or property;

(d) make any additions to capital other than in the ordinary course of business through results of operations;

 

50

(e) declare, set aside or pay any dividends or make any other distribution to its shareholders (including any stock dividend, dividends in kind or other distribution) whether in cash, stock or other property, or purchase, retire or redeem, or obligate itself to purchase, retire or redeem, any of its shares of capital stock or other securities;

(f) take any action that would make any representation and warranty of FBS hereunder inaccurate in any material respect at, or as of any time prior to, the Effective Time;

(g) except as contemplated by Sections 9.11(b), 10.02(h), 10.02(i) and 10.03(h) hereof, (i) grant any severance or termination pay to (or amend any such existing arrangement with) any director, officer or employee of FBS, (ii) enter into any employment, deferred compensation or other similar agreement (or any amendment to any such existing agreement) with any director, officer or employee of FBS, (iii) increase any benefits payable under any severance or termination pay policies or employment agreements, (iv) permit any director, officer or employee who is not already a party to an agreement or a participant in a plan providing benefits upon or following a change in control to become a party to any such agreement or a participant in any such plan, or (v) amend the terms of any employee or director stock options or other stock based awards, or (vi) increase (or amend the terms of) any other employee benefit plan, program or arrangement of any type for directors, officers or employees of FBS, except for changes required by law;

(h) except as explicitly permitted hereunder, make any change in the personnel constituting the officers or directors of FBS or the Bank;

(i) except as explicitly permitted hereunder or in accordance with applicable law, engage in any transaction with any affiliated person or allow such persons to acquire any assets from FBS or the Bank, except (i) in the form of wages, salaries, fees for services, reimbursement of expenses and benefits accrued or to become accrued under the terms of an Employee Benefit Plan currently in effect and (ii) deposits by, or loans secured by liquid collateral having a fair market value at least equal to the principal balance due on such loan made to, its officers, directors and employees in the ordinary course of business;

(j) except as explicitly permitted hereunder, acquire any capital stock or other equity securities or acquire any equity or ownership interest in any bank, corporation, partnership or other entity except through settlement of indebtedness, foreclosure, or the exercise of creditors’ remedies;

(k) change its material lending, investment, underwriting, risk and asset liability management and other material banking and operating policies, except as required by applicable Law or policies imposed by, or required by official recommendations or pronouncements of, any Governmental Entity or enter into any new material line of business;

(l) make any new loans or other extensions of credit to any borrower which (i) would exceed $1,000,000, individually or in the aggregate with respect to such borrower or (ii) would exceed $250,000 and are not secured by real property or marketable securities (in each case appropriately margined); provided that FBS may renew any existing loans or extensions of credit in excess of such amounts if the terms of such renewals are no less favorable to FBS than the existing terms of such loans or extensions of credit;

 

51

(m) make any capital expenditures, other than those contained in FBS’s annual budget, in an amount in excess of $10,000;

(n) except as provided in the Bank’s investment policy in effect on the date hereof, sell ( provided , however , that payment at maturity or prepayment is not deemed a sale) any investment security or purchase any investment security;

(o) participate in any Whole Loan Transaction, securitization transaction or “off-balance sheet arrangement” (as defined in Item 303(a)(4) of the SEC’s Regulation S-K), other than “off-balance sheet arrangements” of the nature described in Section 5.22(b) of the FBS Disclosure Schedule;

(p) become a party to any Derivative Transaction, whether entered into for the account of FBS, or for the account of the Bank or its customers;

(q) make, commit to make, renew, extend the maturity of or alter any of the material terms of any loan, except in a manner consistent with the Bank’s loan policy in effect on the date hereof;

(r) acquire any real or personal property (except for property acquired through foreclosure or the acquisition of personal property which is budgeted for in FBS’s annual budget) resulting in expenditures in excess of $50,000 in the aggregate; and

(s) agree or commit to do any of the foregoing.

Section 7.04 No Solicitation; Other Offers.

(a) FBS and the Bank shall not, and shall cause their respective officers, directors, employees, investment bankers, attorneys, accountants, consultants and other agents and advisors not to, directly or indirectly, (i) solicit, initiate or take any action to facilitate or encourage any inquiries or the making, submission or announcement of any proposal or offer that constitutes, or could reasonably be expected to lead to, any Acquisition Proposal (other than transactions contemplated by this Agreement), (ii) engage in, enter into, continue or otherwise participate in any discussions or negotiations regarding, or furnish any information relating to FBS or the Bank or afford access to the business, properties, assets, books or records of FBS or the Bank to any Third Party relating to, an Acquisition Proposal, (iii) grant any waiver or release under any standstill or similar agreement with respect to FBS or the Bank, or any class of equity securities thereof, (iv) execute or enter into, or propose to execute or enter into, any letter of intent, memorandum of understanding, agreement in principle, acquisition agreement, share exchange agreement, merger agreement or similar document or any contract, agreement, arrangement or understanding (whether binding or not) with respect to any Acquisition Proposal (other than the transactions contemplated by this Agreement) or transaction contemplated thereby or, (v) in the case of the Board of Directors of FBS, fail to make, withhold, withdraw, qualify or modify (or publicly propose or resolve to withhold, withdraw, qualify or modify), in a manner adverse to Xenith, its recommendation to its shareholders referred to in Section 9.02 hereof.

 

52

(b) Notwithstanding the foregoing, prior to the time that, but not after, the shareholders of FBS approve the Plan of Merger at the FBS Shareholder Meeting, the Board of Directors of FBS, directly or indirectly through advisors, agents or other intermediaries or through FBS, the Bank and their respective officers, directors, employees, investment bankers, attorneys, accountants, consultants and other agents and advisors, may (i) engage in negotiations or discussions with any Third Party that, subject to FBS’s compliance with Section 7.04(a), has made an unsolicited bona fide Acquisition Proposal that the Board of Directors of FBS reasonably believes in good faith, after consultation with its financial advisors, will lead to a Superior Proposal, (ii) furnish to such Third Party nonpublic information relating to FBS or the Bank pursuant to a confidentiality agreement (a copy of which shall be provided to Xenith) with terms no less favorable to FBS than those contained in the Confidentiality Agreement, provided that FBS promptly discloses (and, if applicable, provides copies of) any such information to Xenith to the extent not previously provided, (iii) following receipt of such Acquisition Proposal, fail to make, withhold, withdraw, qualify or modify (or publicly propose or resolve to withhold, withdraw, qualify or modify), in a manner adverse to Xenith, its recommendation to its shareholders referred to in Section 9.02 hereof, or (iv) execute or enter into, or propose to execute or enter into, a letter of intent, memorandum of understanding, agreement in principle, acquisition agreement, share exchange agreement, merger agreement or other agreement (other than a confidentiality agreement entered into in compliance with clause (ii) above) relating to a Superior Proposal after satisfying FBS’s obligations pursuant to Section 11.01(d)(i) hereof; but in each case referred to in the foregoing clauses (i) through (iv) only if the Board of Directors of FBS determines in good faith by a majority vote, after consultation with outside legal counsel to FBS, that taking such action is necessary to comply with its legal duties to the shareholders of FBS under Virginia law.

(c) The Board of Directors of FBS shall not take, or cause to be taken, any of the actions referred to in clauses (i) through (iii) of Section 7.04(b) unless FBS shall have provided Xenith with 24 hours prior written notice advising Xenith that it intends to take such action, and, thereafter, FBS shall continue to advise Xenith of any updates or developments after taking such action. In addition, FBS shall notify Xenith promptly (but in no event later than 24 hours) after receipt by FBS (or any of its advisors) of any Acquisition Proposal, any indication that a Third Party is considering making an Acquisition Proposal or of any request for information relating to FBS or the Bank or for access to the business, properties, assets, books or records of FBS or the Bank by any Third Party that may be considering making, or has made, an Acquisition Proposal. FBS shall provide such notice orally and in writing and shall identify the Third Party making, and the material terms and conditions of, any such Acquisition Proposal, indication or request. FBS shall keep Xenith fully informed, on a current basis, of the status and details of any such Acquisition Proposal, indication or request (including any subsequent changes or amendments thereto and withdrawals thereof) and shall provide Xenith with copies of all written materials provided by all Third Parties in connection with any such Acquisition Proposals, indications or requests.

(d) Nothing contained herein shall prevent the Board of Directors of FBS from complying with Rule 14e-2(a) under the 1934 Act with regard to an Acquisition Proposal;

 

53

provided, however , that if such disclosure has the substantive effect of withholding, withdrawing, qualifying or modifying in a manner adverse to Xenith the recommendation of the Board of Directors of FBS, then Xenith shall have the right to terminate this Agreement as set forth in Section 11.01(c)(i).

(e) FBS shall, and shall cause the Bank and the advisors, employees and other agents of FBS and the Bank to, cease immediately and cause to be terminated any and all existing activities, discussions or negotiations, if any, with any Third Party conducted prior to the date hereof with respect to any Acquisition Proposal and shall use its reasonable best efforts and exercise any applicable rights under any confidentiality or non-disclosure agreements to cause any such Third Party (or its agents or advisors) in possession of confidential information about FBS or the Bank that was furnished by or on behalf of FBS or the Bank to return or destroy all such information.

(f) The following terms shall have the meanings set forth below:

“Acquisition Proposal” means any proposal or offer with respect to (1) a merger, reorganization, share exchange, consolidation, business combination, recapitalization, dissolution, liquidation or similar transaction involving FBS or the Bank, (2) any purchase of an equity interest (including by means of a tender or exchange offer) representing an amount equal to or greater than a 25% voting or economic interest in FBS or the Bank or (3) any purchase of assets, securities or other ownership interests representing an amount equal to or greater than 25% of the consolidated assets of FBS and the Bank, taken as a whole.

“Superior Proposal” means a bona fide, unsolicited written Acquisition Proposal (except that references in the definition of “Acquisition Proposal” to “25%” shall be replaced by “50%”) made by a Third Party that is on terms that the Board of Directors of FBS (after consultation with a financial advisor of recognized reputation) in good faith concludes, taking into account all legal, financial, regulatory and other aspects of the proposal (including, without limitation, any break-up fees, expense reimbursement provisions and conditions to consummation), the likelihood of obtaining financing, and the Third Party making the proposal, would, if consummated, result in a transaction more favorable to the FBS shareholders from a financial point of view than the transaction contemplated by this Agreement, taking into account any changes in the transaction proposed by Xenith.

Section 7.05 Tax Matters.

(a) Neither FBS nor the Bank shall make (other than consistent with FBS’s and the Bank’s past practice) or change any material Tax election, change any annual Tax accounting period, adopt or change any material method of Tax accounting, file any material amended Tax Returns or claims for material Tax refunds, enter into any material closing agreement, surrender any material Tax claim, audit or assessment, surrender any right to claim a material Tax refund, offset or other reduction in Tax liability surrendered, consent to any extension or waiver of the limitations period applicable to any Tax claim or assessment or take or omit to take any other action, if any such action or omission would have the effect of materially increasing the Tax liability or reducing any Tax asset of FBS or the Bank.

 

54

(b) To the extent required by GAAP or RAP, as applicable, FBS and the Bank shall establish or cause to be established in accordance with GAAP or RAP, as applicable, on or before the Effective Time an adequate accrual for all material Taxes of FBS or the Bank due with respect to any period or portion thereof ending prior to or as of the Effective Time.

(c) All transfer, documentary, sales, use, stamp, registration, value added and other such Taxes incurred by FBS in connection with and due before the Merger (including any real property transfer Tax and any similar Tax) shall be paid by FBS when due, and FBS shall, at its own expense, file all necessary Tax Returns and other documentation due before the Merger with respect to all such Taxes and fees, and, if required by applicable law, FBS shall, and shall cause its Affiliates to, join in the execution of any such Tax Returns and other documentation.

Section 7.06 Additional Financial Statements.

FBS shall promptly, but, with respect to clause (iii) below, in no event later than the twentieth day following the last day of the month most recently ended, furnish Xenith with true and complete copies of all (i) Current FBS Regulatory Documents and Call Reports for FBS and the Bank as filed with the SEC and Governmental Entities between the date of this Agreement and the Effective Time, (ii) monthly directors’ reports of FBS and the Bank, (iii) consolidated unaudited month-end financial statements of FBS and the Bank (including the Watch List and the then current allowance for loan and lease losses as of such month-end). The Call Reports shall fairly present, in all material respects, the financial position of the Bank and the results of its operations at the date and for the period indicated in that Call Report in conformity with RAP. The Call Reports shall not contain any items of special or nonrecurring income or any other income not earned in the ordinary course of business except as expressly specified therein.

Section 7.07 Obligations of FBS.

(a) FBS shall take, and shall cause the Bank to take, all action necessary to perform its obligations under this Agreement and to consummate the Merger on the terms and conditions set forth in this Agreement.

(b) Promptly following the execution of this Agreement, FBS shall take, and shall cause the Bank to take, all action necessary to file applications with the BFI and the Board for the Bank to open a branch to be located at One James Center, 901 E. Cary Street, Suite 1700, Richmond, Virginia 23219; provided , that such branch shall not be opened prior to the Effective Time.

Section 7.08 Notice of Changes.

Prior to the Closing Date, FBS shall promptly notify Xenith in writing upon any individual falling within the definition of “Knowledge” with respect to FBS becoming aware of (i) any fact or condition that makes untrue, or shows to have been untrue, in any respect, any representation or warranty made as to FBS or the Bank in or pursuant to this Agreement or that results in failure on the part of FBS or the Bank to comply with any covenant, condition or agreement contained in this Agreement or (ii) any change or event having, or which, insofar as can reasonably be foreseen, could have a Material Adverse Effect on FBS or the Bank. The providing of such information by FBS to Xenith shall not be deemed a waiver by Xenith of the breach of any representation or warranty of FBS contained in this Agreement or the failure to comply with any covenant, condition or agreement contained in this Agreement.

 

55

ARTICLE 8

C OVENANTS OF X ENITH

Xenith agrees that:

Section 8.01 Conduct of Xenith.

From the date hereof until the Effective Time or such earlier date as this Agreement may be properly terminated in accordance with Article 11, except as expressly contemplated or permitted by this Agreement or with the prior written consent of FBS, Xenith shall conduct its business in the ordinary course consistent with past practice and shall use its commercially reasonable efforts to preserve intact its business organizations and relationships with third parties and to keep available the services of its present officers and employees.

Section 8.02 Required Acts of Xenith.

Between the date of this Agreement and the Effective Time, Xenith shall, unless otherwise permitted by FBS in writing:

(a) Perform all of its obligations under contracts, leases and documents relating to or affecting its assets, properties and business, except such obligations as Xenith may in good faith reasonably dispute;

(b) Maintain in full force and effect all insurance policies now in effect or renewals thereof and give all notices and present all claims under all insurance policies in due and timely fashion;

(c) File all reports required to be filed with Governmental Entities and observe and conform, in all material respects, to all applicable laws, except those being contested in good faith by appropriate proceedings;

(d) Withhold from each payment made to each of its employees the amount of all Taxes required to be withheld therefrom and pay the same to the proper Taxing Authority; and

(e) Account for all transactions and prepare all financial statements in accordance with GAAP.

Section 8.03 Prohibited Acts of Xenith.

Without limiting the generality of the provisions of Section 8.01, from the date hereof until the Effective Time, except as set forth in Section 8.03 of the Xenith Disclosure Schedule, Xenith shall not do any of the following, except with the prior written consent (or oral consent confirmed promptly by e-mail or another form of writing) of FBS; provided that (i) FBS shall act

 

56

on any specific request made hereunder within five Business Days following receipt of such request from Xenith together with all information and documentation reasonably necessary for FBS to determine if any such consent should be provided, (ii) any such request shall be deemed approved by FBS in the event that FBS has failed to specifically deny in writing or orally (confirmed promptly by e-mail or another form of writing) such request or ask for additional information in connection with such request within such period, and (iii) any action by FBS approved in writing or deemed approved in accordance with clause (ii) above by FBS shall be deemed to be included in the Xenith Disclosure Schedule:

(a) adopt or propose any change to its articles of incorporation or bylaws;

(b) except as otherwise contemplated by this Agreement, merge or consolidate with any other Person or acquire a material amount of stock or assets of any other Person, or reserve for issuance, grant, sell or authorize the issuance of any shares of its capital stock or other securities or subscriptions, options, warrants, calls, rights or commitments of any kind;

(c) sell, lease, license or otherwise dispose of any material subsidiary or any material amount of assets, securities or property;

(d) take any action that would make any representation and warranty of Xenith hereunder inaccurate in any material respect at, or as of any time prior to, the Effective Time;

(e) enter into a new line of business;

(f) make any additions to capital other than in the ordinary course of business through results of operations;

(g) declare, set aside or pay any dividends or make any other distribution to its shareholders (including any stock dividend, dividends in kind or other distribution) whether in cash, stock or other property, or purchase, retire or redeem, or obligate itself to purchase, retire or redeem, any of its shares of capital stock or other securities;

(h) make any capital expenditures, other than those contained in Xenith’s annual budget, in an amount in excess of $10,000; and

(i) agree or commit to do any of the foregoing.

Section 8.04 Obligations of Xenith.

Xenith shall take all action necessary to perform its obligations under this Agreement and to consummate the Merger on the terms and conditions set forth in this Agreement.

Section 8.05 Notice of Changes.

Prior to the Closing Date, Xenith shall promptly notify FBS in writing upon any individual falling within the definition of “Knowledge” with respect to Xenith becoming aware of (i) any fact or condition that makes untrue, or shows to have been untrue, in any respect, any

 

57

representation or warranty made as to Xenith in or pursuant to this Agreement or that results in failure on the part of Xenith to comply with any covenant, condition or agreement contained in this Agreement or (ii) any change or event having, or which, insofar as can reasonably be foreseen, could have a Material Adverse Effect on Xenith. The providing of such information by Xenith to FBS shall not be deemed a waiver by FBS of the breach of any representation or warranty of Xenith contained in this Agreement or the failure to comply with any covenant, condition or agreement contained in this Agreement.

ARTICLE 9

C OVENANTS OF FBS AND X ENITH

The parties hereto agree that:

Section 9.01 Best Efforts.

Subject to the terms and conditions of this Agreement, FBS and Xenith shall, and FBS shall cause the Bank to, use their best efforts, or in the case of clause (iii) below, commercially reasonable efforts, to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable law to consummate the transactions contemplated by this Agreement, including (i) preparing and filing as promptly as practicable with any Governmental Entity or other Third Party all documentation to effect all necessary filings, notices, petitions, statements, registrations, submissions of information, applications and other documents, (ii) obtaining and maintaining all approvals, consents, registrations, permits, authorizations and other confirmations required to be obtained from any Governmental Entity or other Third Party that are necessary, proper or advisable to consummate the transactions contemplated by this Agreement and (iii) obtaining the consents required from Third Parties pursuant to the contracts listed on Section 9.01 of the FBS Disclosure Schedule.

Section 9.02 Shareholder Meetings; Proxy Material.

(a) Subject to Section 9.02(b), FBS shall take all action necessary in accordance with the VSCA to cause a meeting of its shareholders (the “FBS Shareholder Meeting ”) to be duly called and held as soon as reasonably practicable for the purpose of voting on the approval and adoption of this Agreement and the Plan of Merger and the transactions contemplated hereby and Xenith shall take all action necessary in accordance with the VSCA to cause a meeting of its shareholders (the “Xenith Shareholder Meeting ” and, together with the FBS Shareholder Meeting, the “Shareholder Meetings ”) to be duly called and held as soon as reasonably practicable for the purpose of voting on the approval and adoption of this Agreement, the Plan of Merger and the transactions contemplated hereby. Subject to Section 9.02(b), FBS and Xenith shall (i) comply with all legal requirements applicable to such meetings, (ii) shall coordinate and cooperate with respect to the timing of the Shareholder Meetings and shall use their best efforts to hold the Shareholder Meetings on the same day and (iii) shall use their commercially reasonable efforts to obtain the necessary approvals by their respective shareholders of this Agreement, the Plan of Merger and the transactions contemplated hereby, subject to Section 7.04.

 

58

(b) Subject to Section 7.04, the Board of Directors of FBS shall recommend approval and adoption of this Agreement and the Plan of Merger by FBS’s shareholders. The Board of Directors of Xenith shall recommend approval and adoption of this Agreement and the Plan of Merger by Xenith’s shareholders. Unless this Agreement has been terminated in accordance with the terms of Article 11, this Agreement and the Plan of Merger shall be submitted to FBS’s shareholders at the FBS Shareholder Meeting whether or not the Board of Directors of FBS determines at any time that this Agreement or the Merger is no longer advisable and recommends that the shareholders of FBS reject it; provided, however , if pursuant to, and in compliance with, Section 7.04(b), the Board of Directors of FBS has taken or is taking any of the actions described in clauses (i) through (iv) of Section 7.04(b), then FBS may postpone the date of the FBS Shareholder Meeting, subject to federal securities laws and the VSCA.

(c) In connection with the Shareholder Meetings, FBS and Xenith shall promptly prepare and file with the SEC the Joint Proxy Statement and all other proxy materials for such meeting. FBS and Xenith and their respective counsel shall be given a reasonable opportunity to review and comment on the Joint Proxy Statement before it (or any amendment thereto) is filed with the SEC, and reasonable and good faith consideration shall be given to any comments made by such party and its counsel. FBS and Xenith shall use commercially reasonable efforts to have the Joint Proxy Statement cleared by the SEC and thereafter mail it to their respective shareholders. FBS, after consultation with Xenith, shall respond promptly to any comments made by the SEC with respect to the Joint Proxy Statement; provided, however , that FBS shall not file any amendment or supplement to the Joint Proxy Statement without first furnishing to Xenith a copy thereof for its review and will not file any such proposed amendment or supplement to which Xenith reasonably and promptly objects in writing. FBS shall supply Xenith with copies of all written correspondence between FBS or its representatives, on the one hand, and the SEC or members of its staff, on the other hand, with respect to the Joint Proxy Statement or the Merger. FBS and its counsel shall permit Xenith and its counsel to participate in all communications with the SEC and its staff, including any meetings and telephone conferences, relating to the Joint Proxy Statement, the Merger or this Agreement.

(d) If (i) at any time prior to the Shareholder Meetings, any event should occur relating to FBS or the Bank that should be set forth in an amendment of, or supplement to, the Joint Proxy Statement, FBS shall promptly inform Xenith and (ii) at any time prior to the Shareholder Meetings, any event should occur relating to Xenith that should be set forth in an amendment of, or supplement to, the Joint Proxy Statement, Xenith shall promptly inform FBS, and in the case of (i) or (ii) FBS and Xenith will, upon learning of such event, cooperate as necessary to promptly prepare and file and, if required, mail such amendment or supplement to the FBS shareholders and Xenith shareholders; provided, however , that prior to such filing or mailing, FBS and Xenith shall consult with each other with respect to such amendment or supplement and reasonable and good faith consideration shall be given to any comments made by such party and its counsel.

(e) FBS hereby represents that its financial advisor has consented to the inclusion of references to the FBS Fairness Opinion in the Joint Proxy Statement.

 

59

Section 9.03 Certain Filings.

FBS and Xenith shall cooperate with one another in determining whether any action by or in respect of, or filing with, any Governmental Entity is required, or any actions, consents, approvals or waivers are required to be obtained from parties to any material contracts, in connection with the consummation of the transactions contemplated by this Agreement and in taking such actions or making any such filings, furnishing information required in connection therewith and seeking timely to obtain any such actions, consents, approvals or waivers.

Section 9.04 Public Announcements.

FBS and Xenith shall mutually agree as to the form of press release to be issued with respect to this Agreement and the transactions contemplated hereby, and the form of analyst materials to be used in connection therewith. FBS and Xenith shall consult with each other before issuing any other press release, making any other public statement or scheduling any press conference or conference call with investors or analysts with respect to this Agreement or the transactions contemplated hereby and, except as may be required by applicable law or any listing agreement with or rule of any national securities exchange or association, shall not issue any such press release, make any such other public statement or schedule any such press conference or conference call before such consultation.

Section 9.05 Further Assurances.

At and after the Effective Time, the officers and directors of the Surviving Corporation shall be authorized to execute and deliver, in the name and on behalf of FBS or Xenith, any deeds, bills of sale, assignments or assurances and to take and do, in the name and on behalf of FBS or Xenith, any other actions and things to vest, perfect or confirm of record or otherwise in the Surviving Corporation any and all right, title and interest in, to and under any of the rights, properties or assets of FBS or Xenith acquired or to be acquired by the Surviving Corporation as a result of, or in connection with, the Merger.

Section 9.06 Access to Information.

From the date hereof until the Effective Time and subject to applicable law and the Confidentiality Agreement, FBS and Xenith shall (i) give to the other party, its counsel, financial advisors, auditors and other authorized representatives reasonable access to the offices, properties, books and records of such party, (ii) furnish to the other party, its counsel, financial advisors, auditors and other authorized representatives such financial and operating data and other information as such Persons may reasonably request and (iii) instruct its employees, counsel, financial advisors, auditors and other authorized representatives to cooperate with the other party in its investigation. Any investigation pursuant to this Section shall be conducted in such manner as not to interfere unreasonably with the conduct of the business of the other party. No information or knowledge obtained in any investigation pursuant to this Section shall affect or be deemed to modify any representation or warranty made by any party hereunder.

Section 9.07 Notices of Certain Events.

Each of FBS and Xenith shall promptly notify the other of:

(a) any notice or other communication from any Person alleging that the consent of such Person is or may be required in connection with the transactions contemplated by this Agreement;

 

60

(b) any notice or other communication from any Governmental Entity in connection with the transactions contemplated by this Agreement; and

(c) any actions, suits, claims, investigations or proceedings commenced or, to its Knowledge, threatened against, relating to or involving or otherwise affecting FBS or the Bank or Xenith, as the case may be, that, if pending on the date of this Agreement, would have been required to have been disclosed pursuant to Articles 5 or 6 as the case may be, or that relate to this Agreement, the Merger or the consummation of the transactions contemplated herein.

Section 9.08 Confidentiality.

Prior to the Effective Time and after any termination of this Agreement, each of FBS and Xenith shall hold, and shall use its best efforts to cause its officers, directors, employees, accountants, counsel, consultants, advisors and agents to hold, in confidence, unless compelled to disclose by judicial or administrative process or by other requirements of law, all confidential documents and information concerning the other party furnished to it or its Affiliates in connection with the transactions contemplated by this Agreement, except to the extent that such information can be shown to have been (i) previously known on a nonconfidential basis by such party, (ii) in the public domain through no fault of such party or (iii) later lawfully acquired by such party from sources other than the other party; provided that each of FBS and Xenith may disclose such information to its officers, directors, employees, accountants, counsel, consultants, advisors and agents in connection with the transactions contemplated by this Agreement so long as such party informs such Persons of the confidential nature of such information and directs them to treat it confidentially. Each of FBS and Xenith shall satisfy its obligation to hold any such information in confidence if it exercises the same care with respect to such information as it would take to preserve the confidentiality of its own similar information. If this Agreement is terminated, each of FBS and Xenith shall, and shall use its best efforts to cause its officers, directors, employees, accountants, counsel, consultants, advisors and agents to, destroy or deliver to the other party, upon request, all documents and other materials, and all copies thereof, that it or its Affiliates obtained, or that were obtained on their behalf, from the other party in connection with this Agreement and that are subject to such confidence.

Section 9.09 Tax Treatment.

(a) FBS and Xenith intend to treat the Merger as a reorganization within the meaning of Code Section 368(a). Prior to the Effective Time, neither FBS nor Xenith shall take any action reasonably likely to lead to, for U.S. federal income tax purposes, gain or loss being recognized in connection with the Merger by any of FBS, Xenith or their shareholders, except with respect to Cash Elections by holders of FBS Shares and cash received by holders of Xenith Common Stock in lieu of a fractional share of Surviving Corporation Common Stock. The Surviving Corporation shall not take any action after the Effective Time that is reasonably likely to lead to, for U.S. federal income tax purposes, gain or loss being recognized in connection with the Merger by any of FBS, Xenith or their shareholders, except with respect to Cash Elections by holders of FBS Shares and cash received by holders of Xenith Common Stock in lieu of a fractional share of Surviving Corporation Common Stock.

 

61

(b) Each of FBS and Xenith shall use its best efforts to obtain the opinions referred to in Section 10.02(b) and 10.03(b).

Section 9.10 Affiliates.

Within 30 days following the date of this Agreement, Xenith shall deliver to FBS a letter identifying all known Persons who may be deemed affiliates of Xenith under Rule 145 of the 1933 Act. Xenith shall use its reasonable best efforts to obtain a written agreement from each Person who may be so deemed as soon as practicable and, in any event, at least 30 days prior to the Effective Time, substantially in the form of Exhibit C hereto.

Section 9.11 Employees.

(a) With respect to each Surviving Corporation Employee Benefit Plan in which FBS or Bank employees are eligible to participate for which length of service is taken into account for any purpose, service with FBS or the Bank (or predecessor employers to the extent FBS or an Employee Benefit Plan provides past service credit) shall be treated as service with the Surviving Corporation for purposes of determining eligibility to participate, vesting, and entitlement to benefits, including for severance benefits and vacation entitlement; provided , however , that such service shall not be recognized to the extent that such recognition would result in a duplication of benefits. Such service also shall apply for purposes of satisfying any waiting periods, evidence of insurability requirements, or the application of any pre-existing condition limitations. Each Surviving Corporation Employee Benefit Plan in which FBS or Bank employees are eligible to participate shall waive pre-existing condition limitations to the same extent waived or to the extent that they do not apply under the corresponding Employee Benefit Plan. With respect to each Surviving Corporation plan in which FBS or Bank employees are eligible to participate, such employees shall be given credit for amounts paid under a corresponding Employee Benefit Plan during the same period for purposes of applying deductibles, copayments and out-of-pocket maximums as though such amounts had been paid in accordance with the terms and conditions of the Surviving Corporation plan.

(b) Prior to the Effective Time, FBS shall, and shall cause the Bank, to terminate (“ Termination ”) all employment agreements between FBS or the Bank and any current or former employee, officer or director of FBS or the Bank, copies of which have been provided to Xenith prior to the Effective Time. Prior to the Effective Time, FBS shall (i) pay the individuals listed in Section 9.11(b) of the FBS Disclosure Schedule the amounts set forth on such schedule opposite their names and (ii) satisfy any and all liabilities and obligations resulting from such Terminations (“ Termination Obligations ”) and the affected employees, officers and directors shall each execute a release agreement in form and substance mutually acceptable to FBS and Xenith (collectively, “ Release Agreements ”), which Release Agreement shall contain, without limitation, a release of the Bank and its Affiliates from any liability or responsibility for any adverse tax consequences under Code Section 409A with respect to any benefits payable under the applicable employment agreement.

 

62

Section 9.12 Director and Officer Liability.

(a) For six years after the Effective Time, the Surviving Corporation shall indemnify and hold harmless the present and former officers and directors of FBS (each an “ Indemnified Person ”) in respect of acts or omissions occurring at or prior to the Effective Time to the fullest extent permitted by Virginia law or any other applicable laws or p